Use these links to rapidly review the documentTABLE OF CONTENTSANNUAL CONSOLIDATED FINANCIAL STATEMENTS
UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM20-F
FORM 20-F(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended December 31, | ||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
Date of event requiring this shell company report
For the transition period from to
Commission File Number:001-31368
Sanofi |
(Exact name of registrant as specified in its charter)
(Translation of registrant’s name into English)
France
(Jurisdiction of incorporation or organization)
54, Rue La Boétie, 75008 Paris, France
(Address of principal executive offices)
Karen Linehan, Executive Vice President Legal Affairs and General Counsel
54, Rue La Boétie, 75008 Paris, France. Fax: 011 + 33 1 53 77 43 03. Tel: 011 + 33 1 53 77 40 00
(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class: | Name of each exchange on which registered: | ||||
American Depositary Shares, each representing one half of one ordinary share, par value | New York Stock Exchange | ||||
Ordinary shares, par value | New York Stock Exchange | ||||
Contingent Value Rights | NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act:None
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2015 was:
Ordinary shares: 1,305,696,759 Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO ¨. If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. YES ¨ NO x.
|
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.
Yes ýx No o¨
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 ofRegulation 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).
Yes o¨ No ý¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of "accelerated“accelerated filer and large accelerated filer"filer” inRule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | Non-accelerated filer |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o International Financial Reporting Standards as issued by the International Accounting Standards Board ý Other o
U.S. GAAP ¨ | International Financial Reporting Standards as issued by the International Accounting Standards Board x | Other ¨ |
If "Other"“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 17 o¨ Item 18 o¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).
Yes YES o¨ NONo ýx.
TablePresentation of Contentsfinancial and other information
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
The consolidated financial statements contained in this annual report onForm 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.
Unless the context requires otherwise, the terms "Sanofi,"“Sanofi,” the "Company,"“Company,” the "Group," "we," "our"“Group,” “we,” “our” or "us"“us” refer to Sanofi and its consolidated subsidiaries.
All references herein to "United States"“United States” or "U.S."“U.S.” are to the United States of America, references to "dollars"“dollars” or "$"“$” are to the currency of the United States, references to "France"“France” are to the Republic of France, and references to "euro"“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® a trademark of Actavis; Afrezza® a trademark of Mannkind Corporation; Aldurazyme® a trademark of the Joint Venture Biomarin/Genzyme LLC; Avilomics® a trademark of Avila Therapeutics Inc.; Cialis® OTC a trademark of Eli Lilly; Copaxone® a trademark of Teva Pharmaceuticals Industries;Cortizone-10® a trademark of Johnson & Johnson (except in the United States where it is a trademark of the Group); Fludara® and Leukine® trademarks of Alcafleu; Flutiform® a trademark of Jagotec AG; Gardasil® and Zostavax® trademarks of Merck & Co.; Hexyon® and Repevax® trademarks of Sanofi Pasteur MSD; RetinoStat® and UshStat®, trademarks of Oxford Biomedica; Spedra™ and Stendra® trademarks of Vivus Inc.; Squarekids® a trademark of Kitasato Daiichi Sankyo Vaccine Co., Ltd.; Zaltrap® a trademark of Regeneron in the United States; |
· | trademarks sold by Sanofi and/or its affiliates to a third party, such as Altace® a trademark of King Pharmaceuticals in the United States; Hyalgan® a trademark of Fidia Farmaceutici S.p.A.; 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 Advantage® and Advantix® trademarks of Bayer; Atelvia® trademark of Actavis 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 theUnited-States and of Wyeth on other geographical areas; GLAAS™ a trademark of Immune |
Design; Humalog®, Humulin™, Miriopen®, Basaglar® and Kwikpen® trademarks of Eli Lilly; iPhone® and iPod Touch® trademarks of Apple Inc.; Lactacyd® a trademark of Omega Pharma NV in the EU and several other European countries; Rituxan® a trademark of Biogen Idec Inc. in the United States and Canada, and Genentech in Japan; Unisom® a trademark of Johnson & Johnson on certain geographical areas (except in the United States and Israël where it is a trademark of the Group and Canada where it is a trademark of Paladin Labs Inc.); and Yosprala™ a trademark of Pozen Inc. |
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®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“Item 4. Information on the Company —– B. Business Overview —– B.6. Markets —– B.6.1. Marketing and distribution,"” are based on sales data from IMS Health MIDAS (IMS), retail and hospital, for calendar year 2012,in Moving Annual Total September 2015, in constant euros (unless otherwise indicated).
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“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 |
(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 Consumer Health Care products, are based on sales as published by IMS excluding Sanofi sales generated by the vaccines business, equating to the scope of our pharmaceutical operations;
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'sproduct’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 containsforward-looking statements. We may also make written or oralforward-looking statements in our periodic reports to the Securities and Exchange Commission onForm 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 suchforward-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"“believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identifyforward-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 theforward-looking statements.
Risk factors which could affect the future results and cause actual results to differ materially from those contained in anyforward-looking statements are discussed under "Item“Item 3. Key Information —– D. Risk Factors"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-lookingForward-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.
ABBREVIATIONS
Abbreviations used in the Form 20-F
ADR/ADS | American Depositary Receipt/American Depositary Share | |
AFEP | Association francaise des entreprises privees´(French association of large companies) | |
AMF | Autorité des marcheś financiers(the French market regulator) | |
ANDA | Abbreviated New Drug Application | |
ECB | European Central Bank | |
BLA | Biologic License Application | |
BMS | Bristol-Myers Squibb | |
CGU | Cash generating unit | |
CHC | Consumer Health Care | |
CHMP | Committee for Medicinal Products for Human Use | |
CNS | Central Nervous System | |
COSO | Committee of Sponsoring Organizations of the Treadway Commission | |
COVALIS | Health risk prevention committee | |
CSR | Corporate Social Responsibility | |
CVMP | Committee for Medicinal Products for Veterinary Use | |
CVR | Contingent Value Right | |
ECHA | European Chemicals Agency | |
ECOVAL | Internal committee for assessing the environmental risks of our pharmaceutical products | |
EMA | European Medicines Agency | |
EMTN | Euro Medium Term Note | |
EPA | U.S. Environmental Protection Agency | |
EPS | Earnings per share | |
EU | European Union | |
FCPA | U.S. Foreign Corrupt Practices Act | |
FCPE | Fonds commun de placement d’entreprise (Corporate investment funds) | |
FDA | U.S. Food and Drug Administration |
GAVI | Global Alliance for Vaccines and Immunisation | |
GLP-1 | Glucagon-like peptide-1 | |
GMP | Good Manufacturing Practice | |
GRI | Global Reporting Initiative | |
HSE | Health, Safety and Environment | |
IASB | International Accounting Standards Board | |
IFRS | International Financial Reporting Standards | |
ILO | International Labor Organisation | |
LEED | Leadership in Energy and Environmental Design | |
LSD | Lysosomal storage disorder | |
MEDEF | Mouvement des entreprises de France(French business confederation) | |
NASDAQ | National Association of Securities Dealers Automated Quotations | |
NDA | New Drug Application | |
OECD | Organisation for Economic Co-operation and Development | |
OTC | Over The Counter | |
PaHO | Pan American Health Organisation | |
PRAC | Pharmacovigilance Risk Assessment Committee | |
R&D | Research & Development | |
REACH | Registration, Evaluation, Authorization and restriction of Chemicals | |
ROA | Return on assets | |
SEC | U.S. Securities and Exchange Commission | |
TRIBIO | Internal biological risk committee | |
TSR | Total Shareholder Return | |
TSU | Therapeutic Strategic Unit | |
UNICEF | United Nations Children’s Fund | |
USDA | United States Department of Agriculture | |
WHO | World Health Organization |
I
TABLE OF CONTENTS
Table of contents
Item 1. Identity of Directors, Senior Management and Advisers
PART I
Item 1. | Identity of Directors, Senior Management and Advisers |
N/A
Item 2. Offer Statistics and Expected Timetable
Item 2. | Offer Statistics and Expected Timetable |
N/A
Item 3. | Key Information |
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, 2012, 20112015, 2014 and 20102013 are included in Item 18 of this annual report.
The consolidated financial statements of Sanofi for the years ended December 31, 2012, 20112015, 2014 and 20102013 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, 2012.2015. The term "IFRS"“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, 2012.2015.
Sanofi reports its financial results in euros.
Item 2. Offer Statistics and Expected Timetable
SELECTED CONDENSED FINANCIAL INFORMATION
| As of and for the year ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million, except per share data) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||
IFRS Income statement data (a) | ||||||||||||||||
Net sales | 34,947 | 33,389 | 32,367 | 29,785 | 27,568 | |||||||||||
Gross profit | 24,839 | 24,156 | 24,638 | 23,125 | 21,480 | |||||||||||
Operating income | 6,337 | 5,731 | 6,535 | 6,435 | 4,394 | |||||||||||
Net income attributable to equity holders of Sanofi | 4,967 | 5,693 | 5,467 | 5,265 | 3,851 | |||||||||||
Basic earnings per share (€) (a)/(b) : | ||||||||||||||||
Net income attributable to equity holders of Sanofi | 3.76 | 4.31 | 4.19 | 4.03 | 2.94 | |||||||||||
Diluted earnings per share (€) (a)/(c) : | ||||||||||||||||
Net income attributable to equity holders of Sanofi | 3.74 | 4.29 | 4.18 | 4.03 | 2.94 | |||||||||||
IFRS Balance sheet data | ||||||||||||||||
Goodwill and other intangible assets | 58,265 | 62,221 | (g) | 44,411 | 43,480 | 43,423 | ||||||||||
Total assets | 100,407 | 100,668 | (g) | 85,264 | 80,251 | 71,987 | ||||||||||
Outstanding share capital | 2,646 | 2,647 | 2,610 | 2,618 | 2,611 | |||||||||||
Equity attributable to equity holders of Sanofi | 57,338 | 56,203 | (g) | 53,097 | 48,322 | 44,866 | ||||||||||
Long term debt | 10,719 | 12,499 | 6,695 | 5,961 | 4,173 | |||||||||||
Cash dividend paid per share (€) (d) | 2.77 | (e) | 2.65 | 2.50 | 2.40 | 2.20 | ||||||||||
Cash dividend paid per share ($) (d)(f) | 3.65 | (e) | 3.43 | 3.34 | 3.46 | 3.06 | ||||||||||
As of and for the year ended December 31, | ||||||||||||||||||||
(€ million, except per share data) | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
IFRS Income statement data(a) | ||||||||||||||||||||
Net sales | 34,542 | 31,694 | 30,966 | 34,947(a) | 33,389(a) | |||||||||||||||
Gross profit | 23,942 | 21,769 | 20,989 | 24,859(a) | 24,193(a) | |||||||||||||||
Operating income | 5,624 | 6,064 | 4,982 | 6,430(a) | 5,861(a) | |||||||||||||||
Net income excluding the held-for-exchange Animal Health business | 4,512 | 4,392 | 3,797 | -(a) | -(a) | |||||||||||||||
Net income attributable to equity holders of Sanofi | 4,287 | 4,390 | 3,716 | 4,888 | 5,646 | |||||||||||||||
Basic earnings per share (€)(b) : | ||||||||||||||||||||
Net income excluding the held-for-exchange Animal Health business | 3.38 | 3.25 | 2.75 | -(a) | -(a) | |||||||||||||||
Net income attributable to equity holders of Sanofi | 3.28 | 3.34 | 2.81 | 3.70 | 4.27 | |||||||||||||||
Diluted earnings per share (€)(c) : | ||||||||||||||||||||
Net income attributable to equity holders of Sanofi | 3.25 | 3.30 | 2.77 | 3.68 | 4.26 | |||||||||||||||
IFRS Balance sheet data | ||||||||||||||||||||
Goodwill and other intangible assets | 51,583(d) | 53,740 | 52,529 | 58,265 | 62,221 | |||||||||||||||
Total assets | 102,321 | 97,392 | 96,055 | 100,399 | 100,672 | |||||||||||||||
Outstanding share capital | 2,603 | 2,620 | 2,641 | 2,646 | 2,647 | |||||||||||||||
Equity attributable to equity holders of Sanofi | 58,049 | 56,120 | 56,904 | 57,352 | 56,193 | |||||||||||||||
Long term debt | 13,118(d) | 13,276 | 10,414 | 10,719 | 12,499 | |||||||||||||||
Cash dividend paid per share (€)(e) | 2.93(f) | 2.85 | 2.80 | 2.77 | 2.65 | |||||||||||||||
Cash dividend paid per share ($)(e)/(g) | 3.19(f) | 3.46 | 3.86 | 3.65 | 3.43 |
(a) | Including the Animal Health business, the net income/loss of which is presented in a separate line item,Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statements for 2015, 2014 and 2013 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). For 2012 and 2011, it is not practicable to provide information excluding the Animal Health business without unreasonable effort or expense. |
(b) | Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to 1,306.2 million shares in 2015, 1,315.8 million shares in 2014, 1,323.1 million shares in 2013, 1,319.5 million shares in 2012 and 1,321.7 million shares in 2011. |
(c) | Based on the weighted average in each period of the number of shares outstanding plus stock options and restricted shares with a potentially dilutive effect; i.e., 1,320.8 million shares in 2015, 1,331.1 million shares in 2014, 1,339.1 million shares in 2013, 1,329.6 million shares in 2012 and 1,326.7 million shares in 2011. |
(d) | Excluding the Animal Health business which is presented in separate line items,Assets held for sale or exchange andLiabilities related to assets held for sale or exchange. |
(e) | Each American Depositary Share, or ADS, represents one half of one share. |
(f) | Dividends for 2015 will be proposed for approval at the annual general meeting scheduled for May 4, 2016. |
(g) | Based on the relevant year-end exchange rate. |
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 20082011 through March 20132016 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“Noon Buying Rate"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“Item 5. Operating and Financial Review and Prospects"Prospects” and "Item“Item 11. Quantitative and Qualitative Disclosures about Market Risk."”
| Period- end Rate | Average Rate (1) | High | Low | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (U.S. dollar per euro) | ||||||||||||
2008 | 1.39 | 1.47 | 1.60 | 1.24 | |||||||||
2009 | 1.43 | 1.40 | 1.51 | 1.25 | |||||||||
2010 | 1.33 | 1.32 | 1.45 | 1.20 | |||||||||
2011 | 1.30 | 1.40 | 1.49 | 1.29 | |||||||||
2012 | 1.32 | 1.29 | 1.35 | 1.21 | |||||||||
Last 6 months | |||||||||||||
2012 | |||||||||||||
September | 1.29 | 1.29 | 1.31 | 1.26 | |||||||||
October | 1.30 | 1.30 | 1.31 | 1.29 | |||||||||
November | 1.30 | 1.28 | 1.30 | 1.27 | |||||||||
December | 1.32 | 1.31 | 1.33 | 1.29 | |||||||||
2013 | |||||||||||||
January | 1.36 | 1.33 | 1.36 | 1.30 | |||||||||
February | 1.31 | 1.33 | 1.37 | 1.31 | |||||||||
March (2) | 1.30 | 1.30 | 1.30 | 1.30 | |||||||||
(U.S. dollar per euro) | Period- end Rate | Average Rate(1) | High | Low | ||||||||||||
2011 | 1.30 | 1.40 | 1.49 | 1.29 | ||||||||||||
2012 | 1.32 | 1.29 | 1.35 | 1.21 | ||||||||||||
2013 | 1.38 | 1.33 | 1.38 | 1.28 | ||||||||||||
2014 | 1.21 | 1.32 | 1.39 | 1.21 | ||||||||||||
2015 | 1.09 | 1.10 | 1.20 | 1.05 | ||||||||||||
Last 6 months | ||||||||||||||||
2015 | ||||||||||||||||
September | 1.12 | 1.12 | 1.14 | 1.11 | ||||||||||||
October | 1.10 | 1.12 | 1.14 | 1.10 | ||||||||||||
November | 1.06 | 1.07 | 1.10 | 1.06 | ||||||||||||
December | 1.09 | 1.09 | 1.10 | 1.06 | ||||||||||||
2016 | ||||||||||||||||
January | 1.08 | 1.09 | 1.10 | 1.07 | ||||||||||||
February | 1.09 | 1.11 | 1.14 | 1.09 | ||||||||||||
March(2) | 1.09 | 1.09 | 1.09 | 1.09 |
(1) | The average of the Noon Buying Rates on the last business day of each month during the relevant period for the full year average, and on each business day of the month for the monthly average. The latest available Noon Buying Rate being February 26, 2016, we have used European Central Bank Rates for the period from February 29, 2016 through March 3, 2016. |
(2) | In each case, measured through March 3, 2016. |
On March 6, 20133, 2016 the European Central Bank Rate was 1.30351.0901 per euro.
B. Capitalization and Indebtedness
N/A
C. Reasons for Offer and Use of Proceeds
N/A
3
Item 3. Key Information
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. Investors should carefully consider all the information set forth in the following risk factors before deciding to invest in any of the Company’s securities. 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 other 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, Moreover, patent and other proprietary rights do not always provide effective protection for our products. Manufacturers of generic products or biosimilars are increasingly seeking to challenge patent validity or coverage before the patent expire, and manufacturers of biosimilars or interchangeable versions of the products are seeking to have their version of the product approved before the exclusivity period ends. Furthermore, in an infringement suit against a third party, we may not prevail and the decision rendered may not consider that our patent or other proprietary rights are valid, enforceable or infringed. Our competitors may also successfully avoid patents, for example, through design innovation, and we may not hold sufficient evidence of infringement to bring suit. In certain cases, to terminate or avoid patent litigation, we or our partners may be required to obtain licenses from the holders ofthird-party intellectual property rights that cover aspects of our existing and future products in order to manufacture, use and/or sell them. Any payments under these licenses may reduce our profits from such products and we may not be able to obtain these licenses on favorable terms or at all. Third parties may also request a preliminary injunction in a country from a court of law to prevent us from marketing a product if they consider that we infringe their patent rights in the country. If they obtain a for instance, we hold exclusivity rights for a number of ourresearch-based products. However, the protection that we are able to obtain varies in its duration and scope from product to product and country to country andcountry. This protection may not be sufficient to maintain effective product exclusivity because of local variationsdifferences in the patents, differences in national lawlaws or applicable legal systems, developmentor developments in law or jurisprudence, which may give rise to inconsistent judgments when we assert or inconsistent judgments. defend our patents.
preliminary or permanent injunction from a court of law or if we fail to obtain a required license for a country where the validthird-party intellectual property right as confirmed by a court of law, exists or are unable to alter the design of our technology to fall outside the scope ofthird-party intellectual property rights, we may be unable to market some of our products in certain countries, which may limit our profitability.
Also, some countries are becoming more likely tomay consider granting a compulsory license to a third party to use patents protecting an innovator's product; India's decision of March 2012 granting a compulsory licenseinnovator’s product, which limits the protection granted to a generic company to a Bayer patent is illustrative of this risk. such products.
We are involved in litigation worldwide to enforce certain of theseour patent rights against generics, and proposed generics and biosimilars of our small molecule and biological pharmaceutical products (see "Item“Item 8. Financial Information —– A. Consolidated Financial Statements and Other Financial Information —– Information on Legal or Arbitration Proceedings"Proceedings” for additional information). Moreover, patent rights are limited in time 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.
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 or a biosimilar product "at risk"“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"“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.
ToWe have increased the extent valid third-party patent rights coverproportion of biological therapeutics in our products, we or our partners may be requiredpipeline relative to obtain licenses from the holders of these patents in order to manufacture, use or sell these products, and payments under these licenses may reduce our profits from thesetraditional small molecule pharmaceutical products. We expect to face increasing competition from biosimilars in the future. With the accelerated regulatory pathways provided in the U.S. and Europe for biosimilar drug approval, biosimilars can be a threat to the exclusivity of any biological therapeutics we sell or may not be able to obtain these licenses on favorable terms,market in the future and can pose the same issues as the small molecule generic threat described hereinabove. Governments may adopt more permissive approval frameworks (for example, shortening the duration of data exclusivity, or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outsidenarrowing the scope of new products receiving data exclusivity) which could allow competitors to obtain broader marketing approval for biosimilars including as a third-party patent, we may be unablesubstitutable product, increasing competition for our products (see also “Changes in the laws or regulations that apply to market someus could affect the Group’s business, results of operations and financial condition”). If a biosimilar version of one of our products which may limitwere approved, it could reduce our profitability.sales of that product.
However, with our presence as a manufacturer of generics and anticipated entry into biosimilars, we will utilize patent
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challenge strategies against other innovators’ patents, similar to those oflong-established generic companies, but there is no assurance that these strategies will be successful.
If our patents and/or proprietary rights to our products were limited or circumvented, our financial results could be materially and adversely affected.
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 diversificationcould increase given that liability claims relating to our 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. 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 orthird-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 companies have withdrawn products from the market because of newly detected or suspected adverse reactions to their products, and as a result of such withdrawal 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.
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 ofpost-marketing safety surveillance and clinical trials provide additional information – for example, potential evidence of rare,population-specific orlong-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. Following a recall or a withdrawal, pharmaceutical companies can face significant product liability claims.
Furthermore, we commercialize several devices using(some of which use new technologiestechnologies) which, in case ofif they malfunction, could cause unexpected damagesdamage and lead to ourproduct liability claims (see "— We are increasingly dependent on“– Breaches of data security, disruptions of information technologiestechnology systems and networks." below)cyber threats could result in financial, legal, business or reputational harm.”).
Although we continue to insure a portion of our product liability withthird-party carriers, product liability coverage is increasingly difficult and costly to obtain, particularly in the United States, and inStates. In the future, it is possible thatself-insurance may become the sole commercially reasonable means available for managing the product liability financial risk of our pharmaceutical and vaccines businesses (see "Item“Item 4.
Information on the Company —– B. Business Overview —– B.9. Insurance and Risk Coverage"Coverage”). In cases where weself-insure, the legal costs that we would bear for handling such claims and potential indemnifications to be paid to claimants could have a negative impact on 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 carrieran insurer could negatively affect our ability to achieve the practical recovery of the coveragerecover claims on policies for which we have already paid a premium.
Product liability claims, regardless of their merits or the ultimate success of the Group'sGroup’s defense, are costly, divert managementmanagement’s attention, may harm our reputation and can impact the demand for our products. Substantial product liability claims could materially 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 successful,we fail to anticipate the regulations, comply with them and/or maintain the required approvals.
Obtaining marketing authorization is a long and highly regulated process requiring us to present extensive documentation and data to the regulatory authorities. Regulatory processes differ from one authority to another. Either at the time of the filing of the application for a marketing authorization or later during its review, each regulatory authority may impose its own requirements which can evolve over time, including requiring local clinical studies, and may delay or refuse to grant approval, even though a product has already been approved in another country.
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 including post-marketing studies to which we have committed as a condition of approval. In addition, following the implementation of European pharmacovigilance legislation in 2012, the Company and the European Regulatory Agencies (under the supervision of the PRAC (Pharmacovigilance Risk Assessment Committee)) have reinforced their systematic and intensive safety signal detection systems, which may detect safety issues even with mature products that have been on the market for considerable time. This system may result in additional market authorization suspensions or withdrawals. All of these requirements have increased the costs associated with maintaining regulatory approvals and achieving reimbursement for our products.Post-regulatory approval
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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. We have received FDA Warning Letters in the past following the inspection of some of our facilities and may receive such letters in the future. If we fail to adequately respond to warning letters identifying a deficiency following an inspection, or fail to comply with applicable regulatory requirements at all or within the targeted timeline, we could be subject to enforcement, remedial and/or punitive actions by the FDA, the EMA or other regulatory authorities. In addition, in order to comply with our duty to report adverse safety signals to regulatory authorities, we must regularly train our employees and third parties (such as external sales forces and distributor employees) on regulatory matters. If we fail to train these people, or fail to train them appropriately, we may be exposed to the risk that safety events are not reported or not reported in a timely manner in breach of our reporting obligations.
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 would be diminished. Approximately 65% 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 regulatory and technical constraints and/or costly investments from an industrial standpoint as biological products are complex to produce. These constraints and costs could adversely affect our business, results of operations and financial condition.
Claims and investigations relating to compliance, competition law, marketing practices, pricing compliance issues, as well asand other legal matters, could adversely affect our business, results of operations and financial condition.
The marketing of our products is heavily regulated. The Group'sGroup’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 also have policies and procedures 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 OECDAnti-Bribery Convention and otheranti-bribery laws and regulations).
Notwithstanding these efforts, anydeviations may occur and there can be no assurance that we, our officers and/or our directors 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'partner’s breach) with lawthe laws and regulations applicable to us could lead to substantial liabilities.liabilities and harm 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 or could become the subject of additional investigations 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, class action lawsuits and whistle blower litigation.whistleblower litigation). 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“Item 8. Financial Information —– A. Consolidated Financial Statements and Other Financial Information —– Information on Legal or Arbitration Proceedings"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'smanagement’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 markets, and could have a material adverse effect on our business, results of operations or financial conditions.
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 in the United States 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 instanceexample in December 2012, Sanofi U.S.2015 we entered into a settlementsuch an agreement with the U.S. Attorney's Office, District of Massachusetts, the United States Department of Justice and multiple states to resolve all claims arising out of an
investigation into sampling of Sanofi's former viscosupplement product, Hyalgan®. Asas part of the settlement, Sanofi U.S. paid U.S.$109 Millionsettlements relating to the settling partiesour Seprafilm® 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.Hyalgan® products.
Changes in the laws or regulations that apply to us could affect the Group'sGroup’s business, results of operations and financial condition.
GovernmentalAll aspects of our business, including research and development, manufacturing, marketing, pricing or sales are
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subject to extensive legislation and regulation. Changes in applicable laws, or in their application, 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 achieve, 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 patent 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“Item 4. Information on the Company —– B. Business Overview — Competition"– B.6. Markets – B.6.2. Competition” and "Item 4. Information on the Company — B. Business Overview —“– B.6.3. Regulatory framework"framework”.
In addition, changes in the various tax laws of the jurisdictions where affiliates of the Group operate, or changes 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. For example, both the OECD’s initiative on Base Erosion and Profits Shifting (BEPS) and the European Union’s initiative on the Code of Conduct for Business Taxation could lead to significant changes to tax laws and regulations in the future. Additionally, due to the complexity of the fiscal environment, 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 costs related to compliance costswith applicable regulations may have a significant adverse effect on our results of operations"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 takecompensate for the placedecreasing sales of our products facing expirationexpiry of patentpatents and regulatory data exclusivity or
competition from new products of competitors that are perceived as being superior. In 2012,2015, we spent €4,922€5,259 million on research and development, amounting to approximately 14.1%14.2% of our aggregate net sales.
WeOur industry is driven by the need for constant innovation, but we may spread ourselves across too many areas of inquiry to be successful and may not be investingable to improve internal research productivity sufficiently to sustain our pipeline. We may also not invest in the right technology platforms, therapeutic area,areas, and productsproduct classes in order to build a robust pipeline and fulfill unmet medical needs. Fields of discovery, and especiallyin particular 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 10can take up 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 compoundsproduct candidates will be proven safe or effective. See "Item“Item 4. Information on the Company —– B. Business Overview — Pharmaceutical– B.5. Global Research & Development" and "Item 4. Information on the Company — B. Business Overview — Vaccines Research and Development"Development”. 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 trialefficacy 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. Multiplein-depth studies can demonstrate that a product has additional benefits, facilitating the product'sproduct’s marketing, but such studies are expensive and time consuming and may delay the product'sproduct’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 guaranteeWe have up to 18 new medicines and vaccines on track to arrive on the market between2014-2020, including six key launches (Toujeo®, Praluent®, Dengvaxia®, sarilumab, LixiLan and dupilumab). However, there can be no assurance that all of these products will be approved, or with the producttargeted indications, and/or within the expected timeline, or that, if approved, they will achieve commercial success.
Following each product marketing approval, the medical need served by the product and the corresponding reimbursement rate are evaluated by other governmental agencies which mayand/or third party payers, requiring in some cases require additional
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studies, including comparative studies, which may both effectively delay marketing of the new product and add to its development costs.
After marketing approval of our products other companies, or investigators whether independently or with our authorization, may conduct studies or analysis beyond our control that may ultimately report results negatively affecting our sales either permanently or temporarily and it may take time for Sanofi to address the reported findings, leading among other things to a material adverse impact on sales.
The pricing and reimbursement of our products is increasingly affected by decisions of governments and other third parties and cost reduction initiatives.
The commercial success of our existing products and our product candidates depends in part on their pricing and the conditions under which our products are reimbursed. Our products continue to be subject to increasing price and reimbursement pressure due inter alia to:
· | price controls imposed by governments in many countries; |
· | removal of a number of drugs from government reimbursement schemes (for example products determined to be lesscost-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; |
· | governmental and private health care provider policies that favor prescription of generic medicines or substitution of branded products with generic medicines; |
· | more demanding evaluation criteria applied by Health Technology Assessment (HTA) agencies when considering whether to cover new drugs at a certain price level; |
· | more governments using international reference pricing to set the price of drugs based on international comparisons; and |
· | aggressive pricing strategies by some of our competitors. |
In addition to the pricing pressures they exert, governmental and privatethird-party payers and purchasers of pharmaceutical products may reduce volumes of sales by restricting access to formularies (including exclusive formulary) or otherwise discouraging physicians from prescribing our products. In the United States, price is increasingly important to managed care organizations (MCOs) and as the MCOs grow in size following market consolidation, competition among pharmaceutical companies to have their product included in the formulary is aggressive. For example, for Lantus®, since 2014, we have increased the level of rebates granted in order to maintain
favorable formulary positions with key payers in the U.S. Exclusion of one of our drugs from a productformulary can significantly reduce sales in the MCO patient population.
Also in the United States, the federal health care reform law is increasing the government’s role with respect to price, reimbursement, and coverage levels for healthcare services and products within the large government healthcare sector. This law also dependsimposed cost containment measures and rebates and fees on pharmaceutical companies and current federal budget proposals would impose further restrictions on pricing and reimbursement. In addition, some U.S. states are considering legislation that would influence the marketing and prices of, and access to, drugs. 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 European Union, China and Canada, the coverage of prescription drugs, pricing and levels of reimbursement are subject to governmental control. For example, in Europe various authorities are developing the use of tenders for expensive products and are considering joint procurement mechanisms to negotiate lower prices. See also below “– Global economic conditions and the unfavorable financial environment could have negative consequences for our business”.
In addition, if we lose patent protection in patent litigation, we face the risk that government and privatethird-party payers and purchasers of pharmaceutical products may claim damages alleging they haveover-reimbursed a drug. For example, in Australia, our patent on clopidogrel was ultimately held invalid. Following this decision, the Australian Government is seeking damages for its allegedover-reimbursement of clopidogrel drugs due to the preliminary injunction we had obtained against the sale of generic clopidogrel during the course of the litigation.
As a consequence of the growing number of mergers of retail chains and distributors and resulting consolidation of the distribution channel, distributors have increased their capacity to negotiate price and other terms. Due to these cost containment policies and pressure on our abilityprices, our revenues and margins are, and could continue to educate patients and healthcare providers and provide thembe, negatively affected.
We are also unable to predict the availability or amount of reimbursement for our product candidates. Price negotiations in a country may be incompatible with innovative data aboutthe global positioning of our products, which may lead us not to launch the product and its uses. If these education efforts are not effective, then wein that country, resulting in a decrease in initially anticipated sales.
Finally, our operating results may notalso be ableaffected by parallel imports, particularly within the European Union, whereby distributors engage in arbitrage based on national price differences to increase the sales of our newbuy products to the market to realize the full value of our investment in its development.low cost markets for resale in higher cost markets.
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.
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Item 3. Key Information
We may lose market share to competing remedies, biosimilar or generic brands if they are perceived to be equivalent or superior products.
We are faced with intense competition from generic products, biosimilars andbrand-name drugs including from retail chains and brand-name drugs. distributors.
Doctors or patients may choose thesecompetitors’ products over ours or alternative therapeutic options such as surgery 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.
In 2012,The success of any product also depends on our patented pharmaceutical business faced important patent expirationsability to educate patients when permissible and generic competition. For example Avapro®, Plavix®,healthcare providers and Eloxatin® lostprovide 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 or realize the full value of our investment in their development.
We may not be able to anticipate precisely the date of market exclusivity inentry of generics or biosimilars or the U.S in March, May and August 2012, and Aprovel® lost its market exclusivity in the E.U in August 2012.
potential impact on our sales, both of which depend on numerous parameters. 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 sharplysignificantly lower prices. Approvalprices, resulting in adverse price and market entryvolume effects for our genericized products. Substitution is often permitted for generic products that are considered to be interchangeable or clinically identical. With respect to biosimilars, in the United States only biosimilars that refer to an innovator drug that was approved under a Biologics License Application may be designated as interchangeable with the original biologic and only in circumstances where specific criteria are met. In many European countries, automatic substitution of biologics is officially prohibited or not recommended. Nevertheless competition even fromnon-substitutable biosimilars would likely result in a decrease in prices, additional rebates, promotion effort and lower margins.
Approval of a generic product often reduces the priceor biosimilar that we receiveis substitutable 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 versionsone of our products would increase the risk of accelerated market penetration by that generic or biosimilar to a greater extent than would be the case for anon-substitutable product.
These trends are actually marketed.
Additionally, in many countries such as the United States or France,exacerbated by applicable legislation which encourages the use of generic products to reduce spending on prescription drugs.drugs in many countries such as the United States and France. Therefore, the market for our products could also be affected if a competitor'scompetitor’s innovative drug in the same market were to become available as a generic because a certain number of patients can be expected to switch to alower-cost alternative therapy.
Additional products of the Group could become subject to generic competition in the future as we We expect this generic competition to continue and to implicate drugaffect more of our products, evenincluding those with relatively modest revenues.sales.
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“Item 5. Operating and Financial Review and Prospects —– Results of Operations —– Year ended December 31, 20122015 compared with year ended December 31, 2011 —2014 – Net Sales by Product —– Pharmaceuticals segment"segment”), which represented 42.2% of the Group's consolidated revenues in 2012. Among these products. Lantus® is Lantus®, whichparticularly important; it was the Group'sGroup’s leading product with revenues of €4,960€6,390 million in 2012,2015, representing 14.2%17.2% of the Group's consolidated revenuesGroup’s aggregate net sales for the year. Lantus®Lantus® is a flagship product of the Diabetes division,business. Accounting for recent market trends, we announced in October 2015 that we project global diabetes sales over the period from 2015 to 2018 to decline at an average annualized rate of between 4% and 8% at constant exchange rate (CER). Nevertheless our actual sales may differ from these expectations given the numerous underlying assumptions (for example the outlook for insulin glargine sales, and expectations for Lyxumia® and BGM (Blood Glucose Monitoring)). Furthermore, the launch of new medicines and vaccines in other therapeutic areas and the performance of our other businesses may not be sufficient to reduce the relative contribution of Lantus® to our overall performance.
Our flagship products benefit from certain intellectual property protections such as patents and exclusivity periods but patent and proprietary rights, even if they are not challenged, are subject to expiration dates. Expiration of effective intellectual property protections for our products typically results in the entry of one or more lower-priced generic competitors, often leading to a rapid and severe decline in revenues on those products (for information on the expected impact of biosimilar entry on the Group's growth platforms.market see “– We may lose market share to competing remedies, biosimilar or generic products.”)
InFurthermore, in general, if theone or more of our flagship products referred to above were to encounter problems such as loss of patent protection, material product liability litigation, unexpected side effects, recall, 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.
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 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 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).
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 objectives 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 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.
While pursuing our objective to become a global and diversified leader within the health industry, we are exposed to a number of new risks inherent in sectors in which, in the past, we have been either less active or not present at all. As an example:
Moreover, losses that may be sustained or caused by these 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 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 may not be adapted to such losses. These risks could affect our business, results of operations or financial condition.
The globalization of the Group's business exposes us to increased risks.
Emerging markets have been identified as one of our growth platforms and are among the pillars of our overall strategy. Difficulties in adapting 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, particularly with respect to their regulatory frameworks, difficulties in recruiting qualified personnel, 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," below)), and compliance issues including corruption and fraud, as we operate in many parts 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 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 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 scope 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.
Government authorities and regulators in the U.S. and in E.U. are considering measures to reduce the risk of supply shortages of live-saving medicine in particular if there are no viable therapeutic alternatives. It cannot be ruled out that these ongoing initiatives may generate additional costs for the Group if they result in a requirement to set-up back up supply channels or to increase the level of the inventories to avoid shortages.
In addition, to the extent that new regulations raise the costs of obtaining and maintaining product authorization, or limit the economic value of a new product to 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 bring in the future new therapeutic responses to current unmet medical needs but which may also lead to more technical constraints and costly investments from an industrial standpoint.
Moreover, we and certain of our third-party suppliers are also required to comply with applicable regulations, known as good manufacturing practices, which govern the manufacture of pharmaceutical products. To monitor our
compliance with those applicable regulations, the FDA, the EMA and comparable agencies in other jurisdictions routinely conduct inspections 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.
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 increasing pricing and reimbursement pressure on our pharmaceutical products that could negatively affect our revenues and/or margins.
The commercial success of our existing products and our products 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:
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. 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 care sector. This law also imposed cost containment measures and rebates and fees on pharmaceutical companies. Implementation of health care reform has affected and could still 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 of 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 EU 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 and Reform Commission set new national retail ceiling prices for 700 formulations of 400 drugs; among them was Lantus® whose price was cut by 12.9% (effective February 1, 2013).
Due to the ongoing cost containment policies being pursued in many jurisdictions in which we operate, we are unable to predict the availability or amount of reimbursement for our product candidates.
In addition, 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 product 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.products and negatively impact our image.
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.Third
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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.3. Key Information
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 shortage or interruption in the event that these suppliers experience financial difficulties or are unable to manufacture a sufficient supply of our products meetingto Group quality standards. It also increases the risk of quality issues, even with the most scrupulously selected suppliers.
standards or experience financial difficulties. 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®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. See “Item 4. Information on the Company – B. Business Overview – B.8. Production and Raw Materials” for a description of these outsourcing arrangements.
Our products are also increasingly reliant on the use of product-specific devices for administration which may result in technical issues. For example in October 2015, we voluntary recalled all Auvi-Q® (epinephrine injection, USP) marketed in the U.S. and Canada as the product has been found to potentially have inaccurate dosage delivery, which may include failure to deliver the drug. Sanofi has ultimately decided to return all U.S. and Canadian rights to the developer of Auvi-Q®. One of our newly launched products, Praluent®, is administered with an auto-injector manufactured by a third party. The success of this product will depend partially on the performance of this device.
We must also be able to produce sufficient quantities of our products to satisfy demand. We may have difficulties transforming and adapting our existing plants to manufacture new products, including biologics, and scaling up production of our products currently under development once they are approved. Our biological products in particular, are subject to the risk of manufacturing stoppages or the risk of loss of inventory because of the difficulties inherent in the processing of biological materials and the potential difficulties in accessing adequate amounts of raw materials meeting required standards. Effective insurance coverage for biologics products in the event of contaminated batches may also be difficult to obtain as the cause of the contamination can be difficult to ascertain (for the impact on our financial statements see “– 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.”)
For example, in the U.S we encountered production issues which caused delays in the supply of Pentacel® vaccine starting from 2012. While these problems have either been remedied or are in the process of being remedied, we continue to face strong demand for our vaccines that requires us in certain cases to manage the supply allocation. We are working to increase our capacities but cannot reasonably estimate how long it will take to address these constraints. 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 biological products, for example, cold storage for certain vaccines andinsulin-based products is required. Failure to adhere to these requirements may result in lost product inventory.
The complexity of these processes, as well as strict internal and health authority standards for the manufacture of our products, subject us to risks because the investigation and remediation of any identified or suspected problems can cause production delays, substantial expense, product recalls, or lost sales and inventories and delay the launch of new products, which could adversely affect our operating results and financial condition, and cause reputational damage and the risk of product liability (see “– Product liability claims could adversely affect our business, results of operations and financial condition”).
When manufacturing disruptions occur, we may not have alternate manufacturing capacity, particularly for certain biologics. In the event of manufacturing disruptions, our ability to use back up facilities or set up new facilities is more limited because biologics are more complex to manufacture. Even though we aim to have backup sources of supply whenever possible, including by manufacturing backup supplies of our principal active ingredients at additional facilities when practicable, we cannot be certain they will be sufficient if our principal sources become unavailable. Switching sources and manufacturing facilities require significant time.
Supply shortages generate even greater negative reactions when they occur with respect to life saving medicines with limited or no viable therapeutic alternatives. Shortages of products lead to lower product revenues but also can have a negative impact on the confidence of patients, customers and professional healthcare providers and the image of the Group. Government authorities and regulators in the United States and in the European Union are also considering measures to reduce 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 establish back up supply channels or to increase inventory levels to avoid shortages.
We are sometimes required to use animals to test our products in the development phase and our vaccines before distributing them. Animal testing activities have been the subject of controversy and adverse publicity. Testing on animals can be vital for the development or commercialization of a product. If applicable regulations were to ban this practice, or if, due to pressure from animal welfare groups, we were no longer able to source animals to perform such tests, it would be difficult and in some cases impossible to develop or distribute our products in certain jurisdictions under the applicable marketing authorizations. In addition, negative publicity regarding our use, or the industry’s use, of animal subjects could harm our reputation.
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Item 3. Key Information
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 we will continue to rely on third parties for key aspects of our business.
We 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 a global strategic collaboration with Regeneron for the discovery, development, commercialization and manufacturing of therapies based on monoclonal antibodies. With Alnylam we have an agreement to develop and commercialize treatments for rare genetic diseases. We also have collaborative arrangements with Merck & Co., Inc. for the distribution of vaccines in Europe (See “Item 4. Information on the Company – B. Business Overview – B.2. Main pharmaceutical products” and “Item 4. Information on the Company – B. Business Overview – B.3. Vaccine Products” for information on our alliances). In addition we may also rely on partners to design and manufacture medical devices, notably for the administration of our products.
If disruptions or quality concerns were to arise in thethird-party supply of raw materials, active ingredients or medical devices or if our partner were unable to manufacture a product, this could also 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" above.products and negatively impact our image”.
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 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, the performance of certain key tasks or functions are the responsibility of our collaboration partners and, therefore we are subject to the risk that certainthey do not perform effectively. We are also subject to the risk that decisions such as the establishment of budgets, development and promotion strategies and specific tasks, aremay be under the control of or subject to the approval of our collaboration partners, and that deadlocks, failureswe may have differing views. 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 negatively affect our results of operations.
We are subject to the risk ofnon-payment by our customers1.
We run the risk of delayed payments or evennon-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. This risk is accentuated by recent concentrations among distributors, as well as by current global credit and economic conditions, including the worldwide economic slowdown, in particular in the emerging markets. The United States poses particular customer credit risk issues, because of the concentrated distribution system in which more than half of our consolidated U.S. pharmaceutical sales are accounted for by three wholesalers. We are also exposed to large wholesalers in other markets, particularly in Europe. Worldwide, the Group’s three main customers represent 24.7% of our gross total revenues. An inability of one or more of these wholesalers to honor their debts to us would adversely affect our financial condition (see Note D.34. to our consolidated financial statements included at Item 18 of this annual report).
In some countries, some customers are public or subsidized health systems. The economic and credit conditions in these countries may lead to an increase in the average length of time needed to collect on accounts receivable or the ability to collect 100% of receivables outstanding. Because of this context, we may need to reassess the recoverable amount of our debts in these countries during the coming financial years (see also “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Liquidity.”).
Global economic conditions and the unfavorable financial environment could have negative consequences for our business2.
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.
Unfavorable economic conditions have reduced the sources of funding for national social security systems, leading to austerity measures including heightened pressure on drug prices, increased substitution of generic drugs, and the exclusion of certain products from formularies.
1 | Information in this section is supplementary to Notes B.8.8. (with respect to information required by IFRS 7), D.10 and D.34 to our consolidated financial statements included at Item 18 of this annual report, and is covered by our independent registered public accounting firms report on the consolidated financial statements. |
2 | Information in this section is in addition 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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Item 3. Key Information
Further, our net sales may be negatively impacted by the continuing challenging global economic environment, as high unemployment, increases inco-pays, and lack of developed third party payer systems 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. In the United States there has been 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 tobrand-name drugs, including ours. Also, as a result of the insurance coverage mandate that came into effect in the United States in 2015, some employers may seek to reduce costs by reducing or eliminating employer group healthcare plans or transferring a greater portion of healthcare costs to their employees.
In emerging markets countries where the economy is highly dependent on oil, a decline in oil prices may impact the ability of those countries to sustain healthcare spending, which could adversely affect our sales in those countries.
Our Consumer Health Care (CHC) and Animal Health businesses could also be adversely impacted as difficult economic conditions may limit the financial resources of people and livestock producers.
If economic conditions worsen, or in the event of default or failure of major players including wholesalers or public sector buyers financed by insolvent states, the financial situation of the Group, its results of operations and the distribution channels of its products may be adversely affected. See also “We are subject to the risk ofnon-payment by our customers”.
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 and could materially adversely affect our business or 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 and Capital Resources – Liquidity.”
Counterfeit versions of our products harm our business.
The drug supply has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeitingCounterfeiting activities and the presence of counterfeit products in a growing number of markets and over the Internet.Internet continue to be a challenge for maintaining a safe drug supply. 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 oralong with increased levels of counterfeiting could materiallybe mistakenly attributed to the authentic product, 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 counterfeitIf one
of our products will mistakenlywere to be attributed to the authentic product. If a Group product was the subject of counterfeits, the Groupwe could incur substantial reputational and financial harm. See "Item“Item 4. Information on the Company —– B. Business Overview —– B.6. Markets – B.6.2. Competition."”
Breaches of data security, disruptions of information technology systems and cyber threats could result in financial, legal, business or reputational harm.
Our business depends heavily on the use of information technologies. Certain key areas such as research and development, production and sales are to a large extent dependent on our information systems, including cloud-based computing, or those of third party providers, including for the storage and transfer of critical, confidential or sensitive information. We are subjectcommercialize a number of devices using new technologies which if they malfunction could lead to thea risk of non-payment by our customers1.
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. 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 exposedharm to large wholesalers in other markets, particularly in Europe. An inability of one or more of these wholesalers to honor their debts to uspatients (see “– Product liability claims could adversely affect our business, results of operations and financial condition”) including the unavailability of our products.
We and ourthird-party service providers are implementing secure information technology systems for the protection of data and threat detection. However, there can be no assurance that our efforts or those of ourthird-party service providers to implement adequate security and control measures would be sufficient to protect against breakdowns, 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 cyber-attack, security breach, industrial espionage attacks or insider threat attacks which could result in financial, legal, business or reputational harm.
The expansion of social media platforms and mobile technologies present risks and challenges for our business and reputation.
We increasingly rely on social media and new technologies to communicate about our products and diseases or to provide health services. The use of these media requires specific attention, monitoring programs and moderation of comments. For example, 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 ofevidence-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 or inaccurate posts or comments about Sanofi, our business, directors or officers on any social networking website could seriously damage our reputation. In addition, our employees and partners may use social media and mobile technologies inappropriately, which may give rise to liability for the Group, or which could lead to
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Item 3. Key Information
breaches of data security, loss of trade secrets or other intellectual property or public disclosure of sensitive information, including information about our employees, clinical trials or customers. Such uses of social media and mobile technologies could have a material adverse effect on our reputation, business, financial condition (seeand results of operations.
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.34.D.4. to our consolidated financial statements included in this annual report at Item 18, which could be substantially impaired upon indications of this annual report).impairment (primarily relating to pharmacovigilance, discontinued research and development projects, patent litigation and the launch of competing products), with adverse effects on our financial condition and the value of our assets.
Since 2010, some countriesIf any of southern Europe have faced important financial difficulties. Some customersour strategic equity investments decline in these countries are public or subsidized health systems. The deteriorating economicvalue and credit conditions in these countries may lead to longer payment terms. Because of this trendremain below cost for an extended period, we may needbe required to reassesswrite down our investment. We own a significant stake in Regeneron Pharmaceuticals Inc. (22.1% of share capital as of December 31, 2015), which is listed on the recoverableNASDAQ and has been accounted for using the equity method since 2014. Any material deterioration in Regeneron’s share price or financial performance would be an indicator that the value of our investment might have become impaired. This would require us to perform an impairment test, which could have a negative impact on our financial statements.
In addition, the inherent variability of biologics manufacturing increases the risk ofwrite-offs of these products. Due to the value of the materials used, the carrying amount of biological products is much higher than that ofsmall-molecule products.
The financial environment and in particular the economic difficulties affecting Russia, Venezuela, Brazil, China and the Middle East could also negatively affect the value of our debtsassets (see “– Global economic conditions and the unfavorable financial environment could have negative consequences for our business” and “– Fluctuations in these countries during the comingcurrency exchange rates could adversely affect our results of operations and financial years (for more information see "Item 5. Operating and Financial Review and Prospects — Liquidity."condition”).
Any new or revised accounting standards, rules and interpretations issued 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 maindefined-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.19.1D.19.1. to our consolidated financial statements included at Item 18 of this annual report).
Risks Relating to the Group Structure and Strategy
Our strategic objectives for long-term growth may not be fully realized.
In November 2015, we outlined our strategic roadmap for the period 2015-2020. Our long term strategy rests on four pillars: reshape our portfolio, deliver outstanding launches, sustain innovation in R&D and simplify our organization.
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 or within the expected timeline.
We will look to reshape our portfolio through acquisitions and divestitures and may not reach this objective if we are unable to identify opportunities, or enter into agreements in a timely manner or on sufficiently attractive terms. In addition, we may fail to (i) adopt the best strategy for our acquisitions/ divestitures or (ii) compete in an intensively competitive, increasingly focused market environment (see “– We may fail to successfully identify external business opportunities or realize the anticipated benefits from our strategic investments” below and “Our research and development efforts may not succeed in adequately renewing our product portfolio” above). We may also not have the necessary flexibility to appropriately reallocate resources towards our priority businesses.
The successful launch of a new pharmaceutical product involves substantial investment in sales and marketing activities. We have up to 18 new medicines and vaccines on track to arrive on the market between2014-2020; including six key launches (Toujeo®, Praluent®, Dengvaxia®, sarilumab, LixiLan and dupilumab). However there can be no assurance that all of these products will be approved, or with the targeted indications, and/or within the expected timeline or that, if approved, they will achieve commercial success. The launch strategy we develop (in terms of timing, pricing, market access, marketing efforts and dedicated sales forces)
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Item 3. Key Information
may not deliver the benefits that we expect. The competitive environment for a given product may also have changed by at the time of the actual launch, modifying our initial expectations. The need to prioritize the allocation of resources may also cause delays in the expected launch of some of our products (see also “– Our research and development efforts may not succeed in adequately renewing our product portfolio” above).
Sustaining innovation in R&D is inherently risky due to the high rate of failure and we may not be able to allocate our resources to obtain optimal results (see also “– Our research and development efforts may not succeed in adequately renewing our product portfolio” above).
Our ongoing simplification of our global organization through the implementation, starting from January 2016 (pending relevant mandatory labor group consultations) of five global business units (GBU) to meet significant growth objectives requires substantial attention from our management. There is no guarantee that we will be able to fully implement this section is complementarynew organization within the targeted timeline, that it will enable the Group to concentrate its efforts around the businesses most likely to deliver growth or that these GBUs will grow in line with anticipated growth rates or will deliver the expected benefits.
Failure to successfully implement and meet our strategic objectives would have an adverse impact on our business, prospects and results of operations.
We may fail to successfully identify external business opportunities or realize the anticipated benefits from our strategic investments.
We pursue a strategy of selective acquisitions,in-licensing and collaborations in order to reinforce our pipeline and portfolio. The implementation of this objective depends on our ability to identify business development opportunities and execute them at reasonable cost and on acceptable financing terms. Moreover, entering intoin-licensing or collaboration agreements generally requires the payment of significant “milestones” well before the relevant products reach the market, without any assurance that such investments will ultimately become profitable in the long term (see Note B.8.8.D.21.1. to ourthe 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”).
For newly acquired activities or businesses 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 those activities or businesses; |
¡ | integration takes longer than expected; |
¡ | key employees leave; or |
¡ | we have higher than anticipated integration costs. |
We may miscalculate the risks associated with respectbusiness development transactions at the time they are made or not have the resources or ability to access all the relevant information required by IFRS 7,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 of an activity or business is covered bycompleted due to lack of historical data. As a result, risk management and coverage of such risks, particularly through insurance policies, may prove to be insufficientor ill-adapted.
Because of the active competition among pharmaceutical groups for such business development activities, there can be no assurance of our independent registered public accounting firms' reportsuccess in completing these transactions when such opportunities are identified.
In December 2015, we announced our intention to acquire Boehringer Ingelheim’s consumer healthcare (CHC) business with an enterprise value of€6.7 billion in exchange for our animal health business (Merial). The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. The transaction would allow Sanofi to become a global leader in CHC but there is no certainty that the transaction will be ultimately completed as contemplated, within the expected time frame or at all. We cannot guarantee that Boehringer Ingelheim’s CHC business will be successfully integrated with ours and that we will be able to retain key personnel. The expected benefits of the transaction may never be fully realized or may take longer to realize than expected.
The globalization of our business exposes us to increased risks in specific areas
We continue to focus 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 downsEmerging Markets. However, difficulties in our books and changesoperating in accounting standards could haveEmerging Markets, a significant adverse effect ondecline in the Group'santicipated 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 andor 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 litigationcondition (see also “– Global economic conditions and the launch of competing products), with adverse effects on ourunfavorable 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 crisisenvironment could have negative consequences for our business" abovebusiness”).
The expansion of our activities in Emerging Markets also exposes us to more volatile economic conditions, political instability, competition from multinational or locally based companies that are already well established in these markets, the inability to adequately respond to the unique characteristics of Emerging Markets (particularly with respect to their underdeveloped judicial systems and "— Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition" below).regulatory
We are increasingly dependent on information technologies and networks.14
Item 3. Key Information
Our business depends on
frameworks) difficulties in recruiting qualified personnel or maintaining the usenecessary internal control systems, potential exchange controls, weaker intellectual property protection, higher crime levels (particularly with respect to counterfeit products (see “– Counterfeit versions of information technologies, which means that certain key areas such as researchour products harm our business”)), and development, productioncompliance issues including corruption and sales arefraud (see “– Claims and investigations relating 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 claimscompliance, competition law, marketing practices, pricing and other legal matters, could adversely affect our business, results of operations and financial condition" above) orcondition”). We may also face compliance and internal control systems issues in mature markets due to increased competition and more complex and stringent regulations.
As a global healthcare leader, we are exposed to a number of risks inherent in sectors in which we were previously less active such as the unavailabilitygenerics and consumer healthcare sectors, whose business models and trade channels are different from our traditional pharmaceutical business, in particular regarding promotional efforts and trade terms.
Our success depends in part on our senior management team and other key employees and our ability to attract, integrate and retain key personnel and qualified individuals in the face of intense competition.
We depend on the expertise of our products. Whilesenior management team and other key employees. In addition, we have investedrely heavily on recruiting and retaining talented people to help us meet our strategic objectives. We face intense competition for qualified individuals for senior management positions, or in the protection of dataspecific geographic regions or in specialized fields such as clinical development, biosciences and information technology, 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 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.
The expansion of social media platforms and mobile technologies presents new risks and challenges.
New technologies are increasingly used to communicate about our products or the diseases they are intended to treat. 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. Negative posts or comments about the Company, its business, its directors or officers on any social networking web site could seriously damage our reputation.devices. In addition, our associates may use the social media tools and mobile technologies inappropriately which may give riseability to liability, 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 effecthire qualified personnel also depends in part on our ability to reward performance, incentivize our employees and to pay competitive compensation. Laws and regulations on executive compensation may restrict our ability to attract, motivate and retain the required level of talented people. The inability to attract, integrate and/or retain highly skilled personnel, in particular those in leadership positions, may weaken our succession plans, may materially adversely affect the implementation of our strategy and our ability to meet our strategic objectives and could ultimately impact our business financial condition andor results of operations.
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 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.
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; or |
¡ | discharges or releases of toxic or pathogen substances. |
These operating risks can cause personal injury, property damage and environmental contamination, and may result in:
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 willmay not be adequate to fully cover fully all potential hazards incidental to our business.
Environmental liabilities and costs related to compliance costswith applicable regulations 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“Item 4. Information on the Company —– B. Business Overview —– B.10. 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, weWe are or may become involved in claims, lawsuits and administrative proceedings relating to environmental matters. Some current and former Sanofi'sSanofi subsidiaries have been named as "potentially“potentially responsible parties"parties” or the equivalent under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (also known as "Superfund"“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,
15
Item 3. Key Information
or ourof 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“Item 8. Financial Information —– A. Consolidated Financial Statements and Other Financial Information —– Information on Legal or Arbitration Proceedings"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 aimingaimed 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“Item 4. Information on the Company —– B. Business Overview —– B.10. 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, floods and hurricanes. In the event of a major disaster we could experience severe destruction or interruption of our operations and production capacity. As a result, our operations and our employees could suffer serious harm which could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Financial Markets13
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.Emerging Markets. In 2012, 31%2015, 36% of our aggregate net sales were realized in the
United States.States, 32% in Emerging Markets (including countries that are, or may in future become, subject to exchange controls), and 6% 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“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 uponin the event of a sale of assets, merger, tender offer or similar transactionstransaction denominated in euros or any foreign currency other than U.S. dollars.
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.
3 | Information in this section is supplementary 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. |
Recent French tax legislation applicable to the ADSs may affect their attractiveness.16
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 be assessed and collected from beneficial owners or financial intermediaries outside of France could discourage holding of such instruments.Item 3. Key Information
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, L'Oré2015, L’Oréal held approximately 8.91%9.05% of our issued share capital, accounting for approximately 16.13%16.36% of the voting rights (excluding treasury shares) of Sanofi. See "Item“Item 7. Major Shareholders and Related Party Transactions —– A. Major Shareholders."” Affiliates of L'OréL’Oréal currently serve on our Board of Directors. To the extent L'OréL’Oréal continues to hold a large percentage of our share capital and voting rights, it will remain in a position to exert heightenedgreater influence in the appointment of the directors and officers of Sanofi and in other corporate actions that require shareholders'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. To our knowledge, L’Oréal, our largest shareholder, is not subject to any contractual restrictions on the sale of the shares it holds in our Company. L’Oréal does not consider its stake in our Company as strategic.
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 onForm 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 approvalthe achievement of Lemtrada™certain cumulative net sales thresholds by Lemtrada® (alemtuzumab for treatment of multiple sclerosis), and on achievement of certain aggregate net sales thresholds.. See "Item“Item 10. Additional Information —– C. Material Contracts —– The Contingent Value Rights Agreement."”
CVR holders are subject to additional risks, including:
· | the public market for the CVRs may not be 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 CVRs; |
· | 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 several occasions (for more information see “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – 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. The two first milestones were not met. On October 29, 2015, Sanofi disclosed that, based upon actual sales trends to date, it does not expect that product sales milestone #1 will be met. There can be no assurance that the other product sales milestones will be achieved. Failure to achieve the sales milestones would have an adverse effect on the value, if any, of the CVRs. |
Item 4. Information on the Company
Item 4. | Information on the Company |
Introduction
We are an integrated,Sanofi is a leading global healthcare company, focused on patient needs and engaged in the research, development, manufacture and marketing of healthcare products. therapeutic solutions.
In 2012,2015, our net sales amounted to €34,947were€34,542 million. This figure excludes net sales of our Animal Health activity. Our aggregate net sales (including Animal Health, see definition at “Item 5 – Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014” below) were€37,057 million. We are the fourthfifth largest pharmaceutical group in the world and the third largest pharmaceutical group in Europe (source: IMSin terms of sales 2012)(IMS data 2015 Moving Annual Total September 2015). Sanofi is
In 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 18remainder of this annual report.section:
· | A product is referred to either by its internationalnon-proprietary name (INN) or its brand name, which is generally exclusive to the company that markets it. In most cases, the brand names of our products, which may vary from country to country, are protected by specific registrations. In this document, products are identified by their brand name used in France, except for Allegra® (sold in France as Telfast®), Tritace® (sold in France as Triatec®), Amaryl® (sold in France as Amarel®) and Ambien® CR (an extended-release formulation of zolpidem tartrate, not sold in France); |
· | For the Pharmaceuticals activity, unless otherwise stated, all market share percentages and rankings are calculated based on net sales figures expressed as the Moving Annual Total (MAT) in September 2015 from IMS Health MIDAS (retail and hospital), except Nicholas Hall for Consumer Health Care; |
· | For the Human Vaccines (Vaccines) activity, market share percentages and rankings are based on our own estimates. These estimates have been made from information in the public domain collated from various sources, including statistical data collected by industry associations and information published by competitors; |
· | For the Animal Health activity, the market share percentages and rankings are calculated based on sales data from Vetnosis. |
The Sanofi Group is organized around three principal activities: Pharmaceuticals, Human Vaccinespharmaceuticals, vaccines via Sanofi Pasteur, and Animal Healthanimal health via Merial Limited (Merial)(1). These activities are operating segments within the meaning of the IFRS 8 accounting standard (see Note D.35. to theour consolidated financial statements)statements included in Item 18 of this annual report).
In parallel,We invest in the Group operates through seven growth platformsfollowing activities (see "B.“B. Business Overview — Strategy"– B.1. Strategy” below): Emerging Markets1, Diabetes, Vaccines,Cardiovascular, Rare Diseases and Multiple Sclerosis (MS), Consumer Health Care, Oncology, Generics, Established Prescription Products(2), Vaccines, and Animal Health, New Genzyme2, and Other Innovative Products3.Health. Unlike the other growth platforms, the Vaccines and Animal Health growth platformsactivities, which are also operating segments within the meaning of IFRS 8. The8, the Diabetes, Solutions,Cardiovascular, Rare Diseases and Multiple Sclerosis (MS), Consumer Health Care, New Genzyme,Oncology, Generics, and Other InnovativeEstablished Prescription Products growth platformsactivities are units whose performance is monitored primarily on the basis of their net sales;sales, and the products they selleach unit sells are partincluded in our Pharmaceuticals operating segment. We are also active in Emerging Markets(3), selling products from all three of our Pharmaceuticals segment.principal activities (pharmaceuticals, vaccines and animal health). The performance of 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 vaccines and animal health. For an analysis of the netsales.
Net sales of our growth platformsactivities for the year 2015 are presented in 2012 and 2011, refer to "Item 5.“Item 5 – Results of Operations —– Year Ended December 31, 20122015 Compared with yearYear Ended December 31, 2011"2014”.
InWithin our Pharmaceuticalspharmaceuticals activity, which generated net sales of €28,871€29,799 million in 2012, our major product categories are:
· | Diabetes: with Lantus®, a long-acting human insulin analog which is theworld-leading brand in the insulin market; Toujeo®, a new formulation of insulin glargine; Amaryl®, an oralonce-daily sulfonylurea; Apidra®, arapid-acting human insulin analog; Insuman®, a range ofrapid-acting orintermediate-acting human insulins; Lyxumia®, aonce-daily GLP-1 receptor agonist administered once daily before breakfast; and a range of integrated care solutions; |
· | Cardiovascular: with Praluent® a cholesterol-lowering drug that inhibits PCSK9, for patients with heterozygous familial hypercholesterolemia or with clinical atherosclerotic cardiovascular disease, and Multaq®(4), an anti-arrhythmic drug in atrial fibrillation (AF); |
(1) | On December 15, 2015, Sanofi and Boehringer Ingelheim signed an exclusivity agreement to exchange Sanofi’s Animal Health business for Boehringer Ingelheim’s Consumer Health Care business. The transaction would also involve a gross cash payment from Boehringer Ingelheim to Sanofi. The two parties aim to close the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances in the fourth quarter of 2016 (see “– B.1. Strategy” below and Note D.2.1. to our consolidated financial statements included in Item 18 of this annual report). |
(2) | Established Prescription Products includes mature products including Plavix®, Lovenox®, Aprovel®, Renagel® and Renvela®. |
(3) | All markets excluding the U.S., Canada, Western Europe (France, Germany, U.K., Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Sweden, Portugal, the Netherlands, Austria, Switzerland, Ireland, Finland, Norway, Iceland and Denmark), Japan, South Korea, Australia, and New Zealand. |
(4) | Consolidated in established prescription products until December 31, 2015, see the Net Sales table below. |
18
Rare Diseases: our principal products are enzyme replacement therapies: Cerezyme®, to treat Gaucher disease; Fabrazyme® to treat Fabry disease; and Myozyme®/Lumizyme® to treat Pompe disease.
Rare Diseases and multiple sclerosis are the therapeutic areas of the "New Genzyme" growth platform.
· | Rare Diseases: with a portfolio of enzyme replacement therapies including Cerezyme® and Cerdelga® for Gaucher disease, Myozyme®/Lumizyme® for Pompe disease, Fabrazyme® for Fabry disease, and Aldurazyme® for mucopolysaccharidosis Type 1 (MPS I); |
· | Multiple sclerosis (MS): with Aubagio® a once-daily oral immunomodulator, and Lemtrada® (alemtuzumab), a monoclonal antibody. Both products have been developed to treat patients with relapsing forms of MS; |
· | Oncology: with Jevtana®, a taxane derivative, indicated for patients with prostate cancer; Thymoglobulin®, a broad immuno-suppressive andimmuno-modulating agent; Eloxatin®, a platinum agent, which is a key treatment for colorectal cancer; Taxotere®, a taxoid representing a cornerstone therapy for several cancer types; Mozobil®, a hematopoietic stem cell mobilizer for patients with hematologic malignancies; 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; |
· | Established Prescription Products: our main thrombosis medicines include Plavix®, ananti-platelet agent indicated for a number of atherothrombotic conditions and Lovenox® |
Our cardiovascular medicines include Multaq®, an anti-arrhythmic agent; and Aprovel®/CoAprovel®, two hypertension treatments. Our renal business includes Renagel®/Renvela®, oral phosphate binders used in patients with chronic kidney disease 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 Vaccines activity is operated through Sanofi Pasteur. Net sales and other prescription drugs including generics.
We are a world leader in thefrom vaccines industry. Our net sales amounted to €3,897€4,743 million in 2012,2015, 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,world leaders in this market. Merial is dedicated to the research, development, manufacture and deliverymarketing of innovative pharmaceuticalspharmaceutical products and vaccines used by
veterinarians, farmers and pet owners and providingowners. It achieved net sales of€2,515 million in 2015 with a comprehensive linewide range of products to enhanceimprove the health, well-being and performance of a wide rangelarge variety of productionanimals (both livestock and companion animals. The net sales of Merial amounted to €2,179 millionpets).
We obtained regulatory approval for three new products in 2012.2015: Toujeo® in the U.S., the E.U. and Japan; Praluent® in the U.S. and the E.U.; and Dengvaxia® in Brazil, Mexico and the Philippines.
Partnerships are essential to our business and manya certain number of our products, either on the market or inunder development, have beenare in-licensed from third partiesproducts relying on third-party rights or rely on third party technologies and rights.technologies.
In the description below, the following should be kept in mind:
A. History and Development of the Company
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"“Sanofi” (formerly known as sanofi-aventis)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'ssubsidiary’s office is located at 55 Corporate Drive, Bridgewater, NJ 08807; telephone: +1 (908) 981-5000.981 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 CompanyMain changes since 2011
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 19th century) were combined in 2004 and are the principal legacy companies of our continuously expanding Group.
Important Corporate Developments 2009-2012
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.
On April 4, 2011, following a tender offer, Sanofiwe acquired control of Genzyme, Corporation, a leading biotechnology group headquartered in Cambridge, Massachusetts (U.S.).
In December, 2015, we announced we had opened exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed transaction would consist of an exchange of the Sanofi Animal Health business (Merial) with an enterprise value of€11.4 billion and specializedthe Boehringer Ingelheim Consumer Healthcare business with an enterprise value of€6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. Until final completion of the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances, expected in the treatmentfourth quarter of rare diseases, renal diseases, endocrinology, oncology2016, we will continue to monitor the performance of the Animal health business (which remains an operating segment) and biosurgery. The agreement is describedto report the performance of that business at "Item 10. AdditionalGroup level.
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Item 4. Information — C. Material Contracts".
B.1. Strategy The market context for Sanofi A number of fundamental trends point to a positive outlook for the pharmaceutical industry. The global population is growing and aging. Unmet medical needs remain high. The industry has increased R&D productivity, with once again over 30 annual New Molecular Entities (NME)/ Biologic License Application (BLA) approvals by the U.S. Food and Drug Administration (FDA). Patients around the world, and a rising middle class in emerging markets, are demanding better care, empowered by access to new information and digital technology. It is a particularly exciting time scientifically, with the promise of genomics being realized and immuno-oncology transforming cancer treatments. At the same time, the industry faces challenges. Economic growth in emerging markets has slowed. Affordability is a key concern globally, with pricing and reimbursement pressure from payers in developed markets, particularly Europe and the U.S.. Biosimilars have entered the U.S. market for the first time. More focused competitors are building leadership positions in their priority therapy areas. In this dynamic market, we have leading positions in four of our main businesses (see below). We have a number of strong products to be launched across multiple therapeutic areas and a track record in building major brands and franchises that have transformed patient care. We have been successful in sourcing external innovation from key partners including Regeneron and Alnylam. We have strong skills for managing mature businesses. We are also clear about the challenges we face, namely a portfolio with a broad set of businesses, a competitive environment and loss of exclusivity for certain products, pressure on margins as we fund product launches and pipeline expansion, and a complex organization. New strategic roadmap To build on these strengths and meet these challenges, Sanofi has developed a new strategic roadmap, announced on November 6, 2015. The Group will continue to be a global healthcare company focused on disease prevention and treatment. The strategic roadmap has four pillars, namely reshape the portfolio, deliver outstanding launches, sustain innovation in R&D, and simplify the organization. Reshape the portfolio To reshape the portfolio, we have segmented our businesses focusing on three targets: to sustain leadership, build competitive positions, and explore strategic options. Below is a brief overview of our strategy in each business. Sustain leadership Diabetes and Cardiovascular. Sanofi remains committed, for the long term, to fighting the global epidemic of diabetes and to treating cardiovascular disease, the leading cause of death globally. Our three priorities to return the diabetes business to growth beginning in 2019 are to develop the insulin franchise, with Lantus®, Toujeo®, and of lixisenatide/insulin glargine association project; strengthen our pipeline; and lead the market shift to managing diabetes outcomes, in part through the new collaboration with our world-class partner Verily (formerly Google Life Sciences). We have taken concrete steps to strengthen our pipeline already through licensing agreements with Lexicon for sotagliflozin, a SGLT-1/2 inhibitor, and with Hanmi for a weekly GLP-1, a long-acting insulin, and a weekly insulin-GLP-1 combination. In cardiovascular, we have the opportunity to transform the management of hypercholesterolemia through Praluent®, developed jointly with Regeneron. Vaccines. Over the next five years, we expect to outgrow the market in vaccines. Our growth will be driven by Dengvaxia®, and our leading products in flu, pediatric combinations, and boosters. Vaccination rates for these products remain below public health targets. Demand typically exceeds supply, so a key priority for us is to produce more. We are investing to secure and expand flu and pediatric capacity. To secure growth for the longer term, we are working on novel vaccines such as Clostridium difficile. Rare Diseases.We intend to sustain our market share through the patient-centered approach unique to Sanofi Genzyme, product differentiation, and market access. Our objective is to grow the market through screening and manufacturing expansion. We also expect to advance our strong pipeline where four of our assets have received breakthrough or fast-track designation from the FDA. Emerging Markets. Sanofi is the leader in emerging markets and is a major multinational player in the BRIC-M countries (Brazil, Russia, India, China and Mexico). We intend to sustain leadership through greater focus on key countries, prioritizing resource allocation, adapting the industrial footprint, and developing market-specific innovations. Build competitive positions Multiple Sclerosis. Sanofi already has a competitive position in multiple sclerosis. In the coming years, we· · · · ·
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Item 4. Information on the Company
intend to complete the global launches of Aubagio® and Lemtrada® and then maximize our support through product life-cycle management. We will also strengthen our portfolio, in high efficacy and in neuroprotection. |
· | Oncology. Sanofi is rebuilding its oncology portfolio. We intend to maximize our clinical assets, particularly isatuximab, an anti-CD38 monoclonal antibody for multiple myeloma, and to build a transformative pipeline in immuno-oncology and cancer-cell dependencies. |
· | Immunology. With sarilumab in rheumatoid arthritis and dupilumab in atopic dermatitis and asthma as the lead indications, developed in collaboration with Regeneron, we have the cornerstones of an important new franchise in immunology. |
· | Consumer Health Care. Our aim is to achieve leadership and we intend to do so by maximizing the value of existing brands, shaping new categories, and building scale through bolt-on acquisitions such as our proposed business swap with Boehringer Ingelheim (see next section). |
Explore strategic options
· | Animal Health. The Animal Health business has made a strong return to growth. We are the world leader in medical products for pets and the fourth player overall. On December 15, 2015, we announced exclusive negotiations with Boehringer Ingelheim to swap businesses. The proposed transaction would consist of an exchange of the Sanofi Animal Health business with an enterprise value of€11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of€6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. The transaction would allow Sanofi to become the number one ranked player in the Over-the-Counter (OTC) drug market. |
· | Generics in Europe. Our European Generics business has approximately€1 billion in sales, including both Western and Eastern Europe. We rank fifth in a consolidating market and have achieved above-average profitability. We are exploring which strategic option will best position the European Generics business for continued success. |
Deliver outstanding launches
Our second strategic priority is to deliver outstanding launches of new medicines and vaccines. We are on track to deliver up to 18 new products to the market by 2020. We have focused the organization on six major product launches among the 18, namely Toujeo®, Praluent®, Dengvaxia®, sarilumab, lixisenatide/insulin glargine, and dupilumab.
These products are described in greater detail in “B. Business Overview – B.2. Main Pharmaceutical Products, and “– B.3. Vaccines”.
Sustain innovation in R&D
Our strategy depends on continued innovation in R&D. Sanofi will continue to strengthen its R&D pipeline, increasing the number of high-quality projects in the early-stage pipeline and replenishing the late-development pipeline as products launch. We will align the R&D organization with the new Global Business Unit structure (see below). Sanofi has a number of anchor collaborations in R&D, most notably with Regeneron for monoclonal antibodies, increasingly focused on immuno-oncology, and with Alnylam for RNAi therapeutics in rare genetic diseases. Fostering these collaborations is an integrated, 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 severalimportant part of our majorR&D strategy.
Our R&D investments will follow our business priorities, focusing on those businesses where we aim to sustain leadership and build competitive positions. We expect to increase our R&D investments up to€6 billion annually by 2020.
Simplify the organization
Our final strategic priority is to drive focus and simplification within our organization. As we launch new products, it is important that Sanofi works together in an environmentintegrated way. That is why, as of January 1, 2016, Sanofi created:
· | Five Global Business Units (GBUs): |
– | the General Medicines & Emerging Markets GBU consists of Sanofi’s Established Prescription Products, Generics, Consumer Healthcare, and all pharmaceutical businesses in Emerging Markets; |
– | the Specialty Care GBU, to be called Sanofi Genzyme consists of Sanofi’s medicines in Rare Diseases, Multiple Sclerosis, Oncology and Immunology; |
– | the Diabetes & Cardiovascular GBU consists of Sanofi’s Diabetes Care medicines as well as Cardiovascular medicines; |
– | Sanofi Pasteur and Merial are both GBUs and continue to manage their current portfolios of vaccines and animal health products. |
· | Centralized global functions, aligned with the GBUs; |
· | The aligned R&D organization referred to above. |
Our new structure will allow us to be more aligned in our strategy and more effective in our execution across R&D and commercial, and from global to country level. Full implementation of the new organizational structure remains subject to cost containment pressures from both third party payers and healthcare authorities.ongoing negotiations with labor unions/employee representatives.
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Item 4. Information on the Company
Reshaping the plant network is a second element in our program of simplification. We respondedwill continue to these major challengesreshape the network to better match our evolving business by implementing a strategy withmore focused approach in Emerging Markets, improving competitiveness and simplifying product lines. At the objectivesame time, we will continue to invest in biologics capacity to support our product launches and growth.
One of repositioning Sanofithe outcomes of simplification will be a reduction in costs. To balance the need for increased resources and to partly offset lower diabetes sales expectations, we expect to generate€1.5 billion in cost savings by 2018. The savings will largely be reinvested in the business. Two-thirds of the cost savings are expected to come from simplification of the organization worldwide and from a more stablefocused portfolio. Of those two-thirds, half is expected to come from improvements in gross margins. The other half is expected to come from Selling, General and sustainable revenue and earnings growth. OverAdministrative expenses (SG&A). The remaining third of the past years, we have transformedcost savings is expected to come from investment prioritization.
The third element of the simplification program is to unite the different parts of the Group by decreasing our reliance on existing "blockbuster" medicines (medicines with over $1 billion in global sales), optimizing our approach to Research & Development (R&D), increasing our diversification, and investing in seven growth platforms (Emerging Markets, Diabetes Solutions, Vaccines, Consumer Health Care, Animal Health, New Genzyme, and Innovative Products).
We regularly review our strategy and its implementation, and are continuing to execute this strategy along four prongs:
• Growingbehind a global healthcare leader with synergistic platforms
Our ambition is to offer an integratedsingle vision, a common set of businesses within the healthcare space with opportunities to create synergies across activities both upstreamvalues, and 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-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, MA 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-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 2012 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 innovative products (NMEs) submitted to regulatory agencies in 2012 and 18 potential new product launches possible between now and the end of 2015.
• Seizing value-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, we actively pursued this targeted policy, announcing 26 new transactions, including 8 acquisitions and 18 major R&D alliances.
In 2012, we strengthened our Emerging Markets growth platform with 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 lines of generic products for Sub Saharan Africa 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 acquisition of Newport Laboratories, a privately held company based in Worthington, Minnesota (United States), a leader in autogenous vaccines 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.
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 geographical reach. In particular, we have tailored our strategy, structure and 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% of our sales were generated by our growth platforms. In addition, 31.9% of our 2012 sales were in 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.
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.shared culture.
Pharmaceutical Products
B.2. Main Pharmaceutical Products
Within the pharmaceuticals business, our Pharmaceuticals business, we focus onmost important marketed products can be grouped into the following therapeutic areas:key fields of diabetes, cardiovascular disease, rare diseases, multiple sclerosis and oncology. We have also have flagship productsdeveloped a significant presence in such fields as anti-thrombotics, cardiovascular, renal and biosurgery and have developed leading businesses in Consumer Health Careconsumer health care and generics.
The sections that followbelow 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 "—“B.7. – Patents, Intellectual Property and Other Rights"Rights” below. As disclosed in "Item“Item 8. Financial Information —– A. Consolidated Financial Statements and Other Financial Information — Patents"– Patents” of this annual report. Wereport, we are involved in significant litigation concerning the patent protection of a number of these products.
The following table sets forthbelow shows the net sales of ourthe main pharmaceutical products for the year ended December 31, 2012.2015.
Therapeutic Area / Product Name | Net Sales (€ million) | Drug Category / Main Areas of Use | ||||||||||
Diabetes Solutions | ||||||||||||
| ||||||||||||
6,390 |
· Type 1 and 2 diabetes | |||||||||||
| 393 | Sulfonylurea · Type 2 diabetes | ||||||||||
Apidra® (insulin glulisine) | ||||||||||||
376 |
· Type 1 and 2 diabetes | |||||||||||
| 164 | Long-acting analog of human insulin · Type 1 and 2 diabetes | ||||||||||
Insuman® (insulin) | Human insulin (rapid and intermediate acting) · Type 1 and 2 diabetes | |||||||||||
Lyxumia® (lixisenatide) | 38 |
| ||||||||||
| ||||||||||||
| ||||||||||||
Rare Diseases | ||||||||||||
| ||||||||||||
757 | Enzyme replacement therapy
| |||||||||||
| 650 | Enzyme replacement therapy · Pompe disease | ||||||||||
Fabrazyme® (agalsidase beta) | ||||||||||||
592 | Enzyme replacement therapy
| |||||||||||
| Enzyme replacement therapy · Mucopolysaccharidosis Type 1 | |||||||||||
| 66 | Enzyme replacement therapy
|
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Item 4. Information on the Company
Therapeutic Area / Product Name | 2015 Net Sales (€ million) | Drug Category / Main Areas of Use | ||||
Multiple Sclerosis | ||||||
| ||||||
871 | Immunomodulating agent
| |||||
Lemtrada® (alemtuzumab) | 243 | Humanized monoclonal antibody · Multiple Sclerosis (MS) | ||||
Oncology | ||||||
| 321 | Cytotoxic agent · Prostate cancer | ||||
Thymoglobulin® (anti-thymocyte globulin) | 256 | Polyclonal anti-human thymocyte antibody preparation · Acute rejection in organ transplantation · Aplastic anemia · Graft-versus-Host Disease | ||||
Eloxatin® (oxaliplatin) | 227 | Cytotoxic agent · Colorectal cancer | ||||
Taxotere® (docetaxel) | ||||||
222 |
·Breast cancer
·Non small cell lung cancer
·Prostate cancer
·Gastric cancer
·Head and neck cancer | |||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
143 | Hematopoietic stem cell mobilizer
| |||||
| ||||||
77 | Recombinant fusion protein
|
| |||||||
| |||||||
| Platelet adenosine disphosphate receptor antagonist | ||||||
·Atherothrombosis
·Acute coronary syndrome with and without ST segment elevation | |||||||
| Low molecular weight heparin · Treatment and prevention of deep vein thrombosis · Treatment of acute coronary syndromes | ||||||
| 935 | Oral phosphate binders · High phosphorus levels in patients with chronic kidney disease (CKD) on dialysis | |||||
Aprovel® (irbesartan) / CoAprovel® (irbesartan & hydrochlorothiazide) | 762 | Angiotensin II receptor antagonist
| |||||
| |||||||
413 |
| ||||||
| |||||||
|
| ||||||
| |||||||
|
| ||||||
| Anti-arrhythmic drug · Atrial Fibrillation (AF) | ||||||
Stilnox® / Ambien® / Myslee® (zolpidem tartrate) | 306 | Hypnotic
| |||||
| 194(1) | Anti-histamine · Allergic rhinitis · Urticaria |
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Item 4. Information on the Company
Therapeutic Area / Product Name | 2015 Net Sales (€ million) |
| ||||||
| ||||||||
9 |
· Heterozygous familial hypercholesterolemia · Clinical atherosclerotic cardiovascular disease | |||||||
Consumer Health Care | ||||||||
Total | ||||||||
Generics | ||||||||
Total |
(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®Lantus®, and Toujeo®, long acting analogs of human insulin; Amaryl®, a long-actingsulfonylurea; Apidra®, a rapid acting analog of human insulin; Apidra®, a rapid-acting analog of human insulin; Insuman®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. In February 2013, the European Commission granted marketing authorisation in Europe for Lyxumia®Lyxumia® (lixisenatide), a once-daily prandialGLP-1 receptor agonist.
Lantus®Lantus®
Lantus®Lantus® (insulin glargine) is a long-acting analog of human insulin, offering 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) and aboveaged two years with type 1 diabetes mellitus.diabetes.
Lantus®Lantus® is the most studiedmost-studied basal insulin with over 10ten years of clinical evidence in diabetes treatment and a well-established safety profile.
Lantus®Lantus® can be administered subcutaneously using syringes or specific pens including:
· | Lantus® SoloSTAR®, a pre-filled disposable pen available in over 120 countries worldwide, that combines a low injection force of up to 80 units per injection with ease of use; |
· | AllSTAR™, the first state of the art reusable insulin pen developed specially for people with diabetes in emerging markets, indicated for use with Sanofi’s insulin portfolio. AllSTAR™ is currently available in a dozen countries, mostly in emerging markets. |
Lantus® SoloSTAR® is a pre-filled disposable pen available in over 120 countries worldwide. It isLantus® remains the only disposable pen that combines a low injection force, up to 80 units per injection, and ease-of-use;
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 alone. These treatment recommendations reinforce the timely use of basal insulin as a core therapy for type 2 diabetes.
Lantus® is the world number-oneworld’s no. 1 selling insulin brand in terms of both sales and units (source: IMS, 2012 sales) and is available in over 120 countries worldwide. The three leading countries for sales of Lantus®Lantus® in 20122015 were the UnitedU.S., China, France and Germany.
2015 sales of Lantus® were€6,390 million, down 10.8% (constant exchange rate). In the U.S., sales of Lantus® decreased 20.5% to€4,023 million, mainly reflecting higher discounts as compared to last year, a slowdown of basal insulin market growth and an unfavorable mix effect towards highly-discounted government channels such as Medicaid (which also included Medicaid delayed bills from multiple States). A biosimilar of Lantus® from Eli Lilly and Company (Lilly) was launched in several European markets in the third quarter (including Germany, the U.K., Spain and eight other countries) and in Japan. In Emerging Markets, 2015 sales of Lantus® were up 17.3% to€1,137 million, driven by China.
In the U.S., Sanofi’s pediatric regulatory exclusivity for the Lantus compound expired in February 2015. The Lantus® compound patent expired in August 2014 in the U.S., and in November 2009 in Europe and Japan. A Patent Term Extension in Japan expired in November 2014. The Supplementary Protection Certificate for Lantus® including pediatric extension expired in major European countries in May 2015. Sanofi also has patents protecting the Lantus® formulation and devices which deliver Lantus®.
On September 28, 2015, Sanofi and Lilly announced that they had agreed to dismiss the patent infringement lawsuit in the U.S. and to discontinue similar disputes worldwide. For more information refer to Item 8 – Consolidated Financial Statements and Other Financial Information – Information on Legal or Abitration Proceedings – Lantus® and Lantus SoloSTAR® Patent Litigation (United States, France and Japan.Japan).
International epidemiology programOn December 16, 2015, the FDA granted approval in the U.S. to Lilly and Boehringer Ingelheim for their insulin glargine product for use with KwikPen®
The epidemiological program sponsored by Sanofi was aimed at evaluating cancer risk, a pre-filled dosing device, under the trade name Basaglar® (NDA 205-692). It is a long-acting human insulin analog to improve glycemic control in adult and pediatric patients with type 1 diabetes and generating comprehensivein adults with type 2 diabetes.
Following this settlement in the U.S. Lilly will not sell its insulin glargine exposure data from large databases. It isproduct before December 15, 2016.
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Item 4. Information on 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.Company
The now completed epidemiological program comprised
Toujeo®
Sanofi’s next generation basal insulin Toujeo (insulin glargine 300 units/mL) has been granted marketing authorization by three major studies. These were designed independentlyregulatory authorities: the FDA (February 25, 2015), the European Commission (April 28, 2015) and the Japanese Ministry of Health, Labor and Welfare (J-MHLW) where its approved brand name is Lantus® XR (June 30, 2015).
Toujeo® is available in the Toujeo® SoloSTAR®, a disposable prefilled pen which contains 450 units of Toujeo® and requires one third of the company byinjection volume to deliver the lead investigators 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:
Toujeo® has now been launched in 20 countries, including the U.S., Germany, the U.K. and France. The study found no increaseJapan. Toujeo® is currently pending marketing authorization with other health authorities around the world and it is expected that an additional 24 countries including France, Italy and Spain will launch Toujeo® in the risk of breast cancer with2016 making this next-generation basal insulin glargine use in diabetes patientstreatment for type 1 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 mellitus and high cardiovascular (CV) risk, with 6,264 participants randomized to receive insulin glargine titrated to achieve fasting normoglycemia. The co-primary endpoints were the composite of CV death, or non-fatal myocardial infarction, or nonfatal stroke; and the composite of CV death, or non-fatal myocardial infarction, or non-fatal stroke, or revascularization procedure, or hospitalization for heart failure.widely available.
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)Apidra®
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 with the FDA and the EMA to update the Lantus® dossier at the end of 2012.
Apidra®Apidra®
Apidra® (insulin glulisine) is a rapid-acting analog of human insulin. Apidra®Apidra® is indicated for the treatment of adults with type 1 diabetes, or in type 2 diabetes for supplementary glycemic control. Apidra®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®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.
Apidra®mealtimes. Apidra® can be administered subcutaneously using syringes or specific pens including the Apidra® SoloSTAR®Apidra® SoloSTAR® disposable pen and the ClikSTAR® reusable pen.
Apidra®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®Insuman®
Insuman® (human insulin) is a range of insulin solutions and suspensions for injection and is indicated for diabetes patients wherewhen treatment with insulin is required. Human insulin is produced by recombinant DNA technology inEscherichia coli strains. Insuman®strains.
Insuman® is supplied in vials, cartridges, and pre-filled disposable pens (OptiSet®(OptiSet® and SoloSTAR®SoloSTAR®) or reusable pens (ClickSTAR®) containing the active substance human insulin.. The Insuman®Insuman® range is comprised of rapid-acting insulin solutions (Insuman®(Insuman® Rapid and Insuman®Insuman® Infusat) that contain soluble insulin, an intermediate-acting insulin suspension (Insuman®(Insuman® Basal) that contains isophane insulin, and combinations of fast-fast-acting and intermediate-acting insulins in various proportions (Insuman®(Insuman® Comb). Insuman®
Insuman® is principally sold in Germany.
Amaryl®/Amarel®/Solosa®Germany and in Emerging Markets. At the end of 2015, limited manufacturing capacity at a Sanofi manufacturing site in Frankfurt, Germany, for
Amaryl® (glimepiride)Insuman pre-filled pens and cartridges caused supply difficulties for some Insuman suspension products. A shortage is a latest-generation, orally administered once-daily sulfonylurea (a glucose-lowering agent) indicated as an adjunct to diet and exercise to improve glycemic control in patients with type 2 diabetes. Amaryl® reduces the body's blood sugar level in two ways: by helping the body to produce more insulin both at mealtime and between meals, and by decreasing insulin resistance.
The combination of metformin (which reduces hepatic glucose production and decreases insulin resistance) with a sulfonylurea such as Amaryl® is effective in combating 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.
A number of generics have received marketing authorization and have been launched in Europe, the United States and Japan.
BGStar® / iBGStar®
Sanofi and its partner AgaMatrix are co-developing intelligent solutions in diabetes care that demonstrate their commitment to simplifying and innovating the diabetes management experiencetherefore expected for people with diabetes and healthcare providers. The blood glucose monitoring solutions are exclusive to Sanofi and are designed to be synergistic with the rest of the diabetes portfolio. BGStar® and iBGStar® are modern and intelligent blood glucose monitoring solutions which are easy to use, accurate, reliable and fit the lifestyle of people with diabetes today:
These monitoring devices are an important step towards Sanofi's visiontemporary supply disruptions of becoming the global leader in diabetes care by integrating intelligent monitoring technology, therapeutic innovations, personalized services and support solutions.
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 availablesome products in the United States and Saudi Arabia.E.U.
Lyxumia®Lyxumia®
Lyxumia®Lyxumia® (lixisenatide) is a once-daily prandialGLP-1 receptor agonist. In February 2013, the European Commission granted marketing authorization in Europe for Lyxumia® agonist and is 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.
In February 2013, the European Commission granted marketing authorization in Europe for Lyxumia®. On completion of pricing and reimbursement discussions, Sanofi will initiateinitiated a phased launch of Lyxumia® throughout the European Union.Lyxumia® in most E.U. countries. Applications for regulatory approval werehave also been submitted in several other countries around the world and are being reviewed. Lyxumia® has been approved in over 60 countries and launched in over 35 countries around the world. The countries with the largest sales are Japan, Spain, the U.K. and Belgium. Recent launches include Russia and Korea. Lyxumia® has been withdrawn from the market in Germany.
Lixisenatide was submitted to the FDA acceptedon July 27, 2015 after the file for reviewresults of ELIXA demonstrated cardiovascular safety in February 2013.type 2 diabetes patients with high cardiovascular risk. A launch is anticipated in the third quarter of 2016. Other major launches expected in 2016 include France in the fourth quarter.
Additional Phase IIIb studies are ongoing including research into the safety and efficacy of Lyxumia® in the pediatric setting.
Afrezza®
Afrezza® is a rapid-acting inhaled insulin indicated to improve glycemic control in adult patients with diabetes. The product was launched in the U.S. at the beginning of February 2015. In January 2016, Sanofi exercised its option to terminate the license and collaboration agreement with MannKind Corporation, the developer of Afrezza, and will transfer the rights for Afrezza back to MannKind on April 4, 2016.
Integrated Care Solutions
Sanofi is committed to developing integrated care solutions to improve diabetes health outcomes for people with diabetes. This approach integrates technology, therapeutic innovations, personalized services and support solutions.
Sanofi and Verily (formerly Google Life Sciences) entered into a collaboration to improve diabetes health outcomes.
25
Item 4. Information on the Company
We will work together on new digital technology and tools for diabetes. The aim is to use data and miniaturized technology to provide patients with more tools to self-manage their disease, and healthcare professionals with the ability to better support and treat patients. Together they will strive to shift from episodic, event-driven diabetes care to continuous, value-based care.
In the framework of their partnership, Sanofi and AgaMatrix have co-developed MyStar Dose Coach®, a dose helper for Insulin Glargine with an integrated blood glucose meter, which has obtained the CE mark. Sanofi and AgaMatrix have alreadyco-developed intelligent solutions in diabetes care such as blood glucose monitoring solutions BGStar®, iBGStar® and MyStar Extra® which are easy to use, accurate, reliable and fit the lifestyle of people with diabetes today.
b) | Cardiovascular |
Praluent®
Praluent® is a human monoclonal antibody (mAb) that blocks the interaction of PSCK9 with LDL receptors, increasing the recycling of LDL receptors and reducing LDL-C levels.
Praluent® has been initiatedextensively studied through the ODYSSEY Phase III program with 16 global trials including more than 23,500 patients in more than 40 countries to evaluate the efficacy and safety of Praluent® across various high cardiovascular risk patients (due to but not limited to diabetes, family hypercholesterolemia or previous events) including patients with Heterozygous Familial Hypercholesterolemia (HeFH), patients with primary hypercholesterolemia uncontrolled on statins and/or other lipid-modifying therapies, post Acute Coronary Syndrome (ACS) patients and as a monotherapy for patients who are unable to tolerate effective dose of statins.
The effect of Praluent® on cardiovascular morbidity and mortality within post ACS patient population is being investigated in the ongoing ODYSSEY OUTCOMES trial. In parallel, the ability of Praluent® to reduce major cardiovascular events is being investigated and results are anticipated in 2017.
Praluent® has been approved by both the FDA in the U.S. 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 weeksEuropean Commission. As of March 2016, Praluent® has been fully recruited.launched in the U.S., Germany, the U.K., Austria and Nordic countries.
GLP-1On August 5, 2015, an application for Praluent® was submitted in Japan and submission in the rest of the world is progressing according to plans.
The main countries contributing to Praluent® sales in 2015 were the U.S. and Germany.
Multaq®
Multaq® (dronedarone) is among the most extensively studied anti-arrhythmic drugs in atrial fibrillation (AF) and has demonstrated a unique cardiovascular outcome benefit in the ATHENA study and effective rhythm control in the EURIDIS and ADONIS studies which was confirmed in real world investigations.
Multaq® is a naturally-occurring peptide hormone thatmultichannel blocker with anti-arrhythmic (prevention of AF recurrences) properties and is released within minutes after eatingthe first and only anti-arrhythmic drug to have shown a meal. It is known to suppress glucagon secretion from pancreatic alpha cellssignificant reduction in cardiovascular hospitalization and stimulate glucose-dependent insulin secretion by pancreatic beta cells.
The active ingredient of Lyxumia® is in-licensed from Zealand Pharma.
death in patients with paroxysmal and persistent AF.
The main compound currentlycountries contributing to Multaq® sales in Phase III clinical development in2015 were 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 IIIU.S., Germany and IV Phase III trials were initiated together with two dedicated clinical studies in Japan.
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.
c) | Rare Diseases |
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®
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 areGaucher disease occurs in approximately 10,000 Gaucher patients worldwide.one in 120,000 newborns in the general population and one in 850 in the Ashkenazi Jewish population worldwide, but the incidence and patient severity vary among regions.
Cerezyme®Cerezyme® is the only therapy with an 18-yeara 20-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®Cerezyme® is administered by intravenous infusion over 1-2one or two hours.
The principal markets for Cerezyme® are the U.S., Europe and Latin America.
Cerdelga®
Cerdelga® (eliglustat) is the only first-line oral therapy for Gaucher disease Type 1.
A potent, highly specific ceramide analogue inhibitor ofGL-1 synthesis with broad tissue distribution, Cerdelga® has demonstrated efficacy in the treatment of naïve Gaucher disease patients and in patients who switch from enzyme replacement therapy (ERT). The Cerdelga® development program is the largest ever in Gaucher disease, with almost 400 patients treated in 29 countries.
The principal market for Cerdelga® currently is the U.S. It received European Medicines Agency (EMA) approval in January 2015 and was approved in Japan in March 2015.
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 —
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Item 4. Information on the Company — Production
Myozyme® / Lumizyme®
Myozyme® / Lumizyme® (alglucosidase alfa) are enzyme replacement therapies used to treat Pompe disease, an inherited, progressive and Raw Materials".often fatal LSD. Pompe disease occurs in approximately one in 40,000 newborns worldwide, but the incidence and patient severity vary among regions.
The principal marketsMyozyme® has been marketed since 2006 in the U.S. and the E.U. and is approved in 76 countries. Outside the U.S., Myozyme® is marketed for Cerezyme®patients with both infantile- and late-onset disease. Lumizyme® has been marketed since June 2010 in the U.S.. Initially designed specifically to treat patients with late-onset Pompe disease and patients over eight years of age without evidence of cardiac hypertrophy, on August 1, 2014 it was approved for infantile-onset Pompe disease.
Myozyme® and Lumizyme® are administered by intravenous infusion. Both products are recombinant forms of the United States, Europe and Latin America.same human enzyme.
Fabrazyme®Fabrazyme®
Fabrazyme®Fabrazyme® (agalsidase beta) is an enzyme replacement therapy used to treat Fabry disease, an inherited, progressive and potentially life-threateninglife threatening LSD.
Fabry disease occurs in approximately one in 35,000 newborns worldwide, but the incidence and patient severity vary among regions.
Fabrazyme® has been marketed in the E.U. since 2001 and in the U.S. since 2003. Fabrazyme®is estimated to affect between 5,000 and 10,000 people worldwide. Fabrazyme®approved in 75 countries.
Fabrazyme® is administered by intravenous infusion.
Fabrazyme®Aldurazyme®
Aldurazyme® (laronidase) is available in over 30 countries, including the United States and Europe.
The strong recovery of 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 dose and the addition of 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®
Myozyme® / Lumizyme® (alglucosidase alpha) arean enzyme replacement therapiestherapy used to treat Pompe disease, an inherited, progressiveMucopolysaccharidosis Type 1 (MPS I). MPS I occurs in approximately one in 85,000 newborns worldwide, but the incidence and often fatal LSD. We estimate that there are approximately 10,000 Pompe patients worldwide.patient severity vary among regions.
MyozymeThe principal markets for Aldurazyme®® are the U.S., Europe and Latin America. has been marketed since 2006
d) | Multiple Sclerosis (MS) |
Multiple sclerosis (MS) is an autoimmune disease in which a person’s immune system attacks the United Statescentral nervous system, damaging myelin, the protective sheath that covers nerve fibers. This causes a break in communication between the brain and the EU and is currently available in 48 markets worldwide. Lumizyme® is the first treatment approved in the United States specifically to treat patients
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 formrest of the same human enzyme but are manufactured using different sized bioreactors.body, ultimately destroying the nerves themselves, and causing irreversible damage. More than two million people suffer from MS worldwide.
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:
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.
Multiple Sclerosis (MS)
Our Multiple Sclerosis franchise is focused on the development and commercialization of therapies thatto treat this chronic autoimmune disease of the central nervous system. More than 2 million people suffer from MS worldwide. OurMS. Genzyme’s MS franchise consists of Aubagio®Aubagio® (teriflunomide), a once daily, once-daily,
oral immunomodulator, that is approved in the United States and Australia, and Lemtrada™Lemtrada® (alemtuzumab), a monoclonal antibody thatantibody. Both products have been developed to treat patients with relapsing forms of MS. In addition to its marketed therapies Lemtrada® and Aubagio®, Genzyme has completed two Phase III pivotal studiesan MS R&D pipeline focused on investigational treatments to address unmet needs for relapsing and has marketing applications under review by regulatory authoritiesprogressive forms of MS. Genzyme’s R&D programs are pursuing research in the U.S.selective immunomodulation, neuroprotection and Europe.remyelination.
Aubagio®Aubagio®
Aubagio®Aubagio® (teriflunomide), an is a 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®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®Aubagio® is the first and only oral MS therapy to significantly slow the progression of disability in two Phase III trials.trials (TEMSO and TOWER) and is the only oral therapy shown to prevent or delay a second clinical attack in patients who have experienced initial neurological symptoms suggestive of MS (TOPIC trial).
Aubagio® received FDA approvalOngoing development efforts include the TeriKIDS study to assess the safety and efficacy of teriflunomide in children(10-17 years old), globalpost-marketing registries for pregnancy, and apost-approval study that will evaluate long-term safety in the United Statesmarketed population using data from selected national health registries in September 2012 for patientsEurope.
Aubagio® was approved in the U.S. in August 2013 and is now approved in more than 60 countries around the world, including the E.U. and Brazil, with relapsing forms of MS. The product also received regulatory approval in Australia in November 2012. Marketingadditional marketing applications for Aubagio® are currently under review by the European Medicines Agency and other regulatory authorities.authorities globally. To date, more than 48,000 people have been treated with Aubagio® worldwide.
The main compound currently in Phase III clinical development in the multiple sclerosis fieldLemtrada®
Lemtrada® (alemtuzumab) is Lemtrada™ (alemtuzumab), a humanized monoclonal antibody targeting the CD52 antigen abundant on the surface of B and T lymphocytes leading to changes in the circulating lymphocyte pool.antigen. Alemtuzumab has beenwas developed to treat patients with relapsing forms of MS. The two pivotal Phase III studies demonstrating
In September 2013, Lemtrada® was granted marketing authorization in the safety and efficacyE.U. for treatment of alemtuzumab were completedadult patients with relapsing forms of MS with active disease defined by clinical or imaging features. Since then, Lemtrada® has been approved by regulatory authorities in 2011 and the results were publishedseveral countries in theLancet in world including Brazil. In November 2012. The first study, CARE-MS I, demonstrated strong and robust2014, the U.S. FDA approved Lemtrada® for the treatment effectof patients with relapsing forms of multiple sclerosis. Because of its safety profile, the FDA approval limited use of Lemtrada® to
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Item 4. Information 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) 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 Company
patients who have had relapsed on prior therapy. Results from CARE-MS II also showed that patients treated with Lemtrada™ were significantlyan inadequate response to two or more likely to experience improvement in disability scores than those treated with Rebif, suggesting a reversaldrugs indicated for the treatment 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. Marketingincluded a black box warning on potential side effects. Lemtrada® is only available in the U.S. through a restricted program called the LEMTRADA Risk Evaluation and Mitigation Strategy (REMS) Program. Lemtrada® is currently approved in more than 45 countries. Additional marketing applications for Lemtrada™Lemtrada® are currently under review by regulatory authorities.agencies around the world.
e) | Oncology |
Sanofi has started to diversify itsWe have a portfolio of 10 marketed products in Oncology, and diversified our presence in the oncology field beyond chemotherapy (Eloxatine®(Taxotere®, Taxotere®Jevtana®, Eloxatin®) with Thymoglobulin® and Jevtana®),Mozobil® and launchedwith an angiogenesis inhibitor, Zaltrap®®, launched in August 2012 in the U.S.United States and in 2013 in the E.U..
Taxotere®Jevtana®
Taxotere®Jevtana® (cabazitaxel), a cytotoxic agent, is a semisynthetic taxane promoting tubulin assembly and stabilizing microtubules, approved in combination with prednisone for the treatment of patients withhormone-refractory metastatic prostate cancer previously treated with adocetaxel-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.
Jevtana® was launched in the U.S. in 2010 and this therapy is now covered by Centers for Medicare and Medicaid Services (CMS), and by most of the private insurance companies that pay for oncology care.
In 2011, Jevtana® received marketing authorization from the European Commission. In July 2014, the Japanese Health Authority (Pharmaceuticals and Medical Devices Agency, or PMDA) granted marketing authorization for Jevtana®, which is now approved in over 80 countries.
Sanofi has initiated a broad development program with Jevtana®. Two post-marketing requirement Phase III studies are ongoing infirst- andsecond-line chemotherapy treatment of metastatic castration resistant prostate cancer patients. The clinical program is also evaluating Jevtana® in pediatric patients with brain cancer (phase I/II ongoing).
The main countries contributing to sales of Jevtana® in 2015 were the U.S., France, Germany, Japan, Italy, Spain and the U.K.
Taxotere®
Taxotere® (docetaxel), a taxoid class derivative, inhibits cancer cell division by essentially "freezing"“freezing” the cell'scell’s internal skeleton, which is comprised of microtubules. Microtubules assemble and disassemble during a cell cycle. Taxotere® Taxotere®
promotes their assembly and blocks their disassembly, thereby preventing many cancer cells from dividing, and resultingwhich ultimately results in death indestroying many cancer cells.
Taxotere®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®Taxotere® in 20122015 were the United States, Japan, China, Taiwan and Russia.South Korea. 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 "—“– B.7. Patents, Intellectual Property and Other Rights"Rights” below).
Eloxatine®Eloxatin®
Eloxatine®Eloxatin® (oxaliplatin) is a platinum-based cytotoxic agent. Eloxatine®Eloxatin®, 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®Eloxatin® 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®Eloxatin® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have been launched throughout Europe. Market exclusivity in the United StatesU.S. was lost on August 9,in 2012. In the second quarter of 2013, Eloxatin® received regulatory approval for advanced Hepatocellular Carcinoma (HCC) in China. Several generics of oxaliplatin are available globally, except inincluding Canada where Eloxatine® still has exclusivity.Eloxatin® lost exclusivity in December 2015.
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.
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 seen 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 78 countries.
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 three countries contributing to sales of Jevtana®Eloxatin® in 20122015 were Canada, China and South Korea.
Thymoglobulin®
Thymoglobulin®(Anti-thymocyte Globulin) is a polyclonalanti-human thymocyte antibody preparation that acts as a broadimmuno-suppressive andimmuno-modulating agent. The product’s primary mechanism of action isT-cell depletion, which is complemented by a host of otherimmuno-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 2015 were the U.S., Germany, ItalyChina, France, Japan and Brazil.South Korea.
Mozobil®28
Item 4. Information on the Company
Mozobil®
Mozobil®
Mozobil® (plerixafor injection) is a hematopoietic stem cell mobilizer indicated in combination withgranulocyte-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'snon-Hodgkin’s lymphoma (NHL) and multiple myeloma (MM).
The main countries contributing to Mozobil®Mozobil® sales in 20122015 were the U.S., Germany, France, the U.K.,Germany and Italy.France.
Zaltrap®Zaltrap®
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)Factor-A(VEGF-A), VEGF-B Vascular Endothelial Growth Factor-B(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 of Regeneron Pharmaceuticals, Inc.
In the U.S., Zaltrap®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® isZaltrap® has been marketed in the U.S. insince August 2012.
In the European Union, Zaltrap® (aflibercept)E.U., Zaltrap® was approved in February 2013 by the European Commission to treat metastatic colorectal cancermCRC that is resistant to or has progressed after an oxaliplatin-containing regimen.
Zaltrap® was approved in a further 18 countries in 2014, and is now approved in over 50 countries worldwide. Marketing authorization applications are under review in several other countries.
The marketingmain countries contributing to sales of Zaltrap® is organized through our collaboration with Regeneron (see "ItemZaltrap® in 2015 were the U.S., Germany, France, Spain, Italy and the U.K..
For additional information on the commercialization of this product, see “Item 5 —– Financial Presentation of Alliances – Alliance Arrangements with Regeneron")Regeneron”.
Concerning the development program 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
f) | Established Prescription Products and Other Products |
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® in combination with docetaxel.
The oncology R&D pipeline includes a broad spectrum of novel agents 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.Plavix® / Iscover®
The main compounds currently in Phase II or III clinical development in the Oncology field are:Plavix®
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.
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.
Three further projects (semuloparin, ombrabulin and clofarabine) that were under regulatory review and in Phase III respectively in 2012, have experienced the following changes:
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.
Two competing generics of enoxaparin 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, Lovenox® was the leading anti-thrombotic in Germany, France, Italy, Spain, and the United Kingdom (source: IMS 2012 sales).
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-termthe prevention of
atherothrombotic events in patients with a history of recent myocardial infarction, recent ischemic stroke or established peripheral arterial disease. Plavix®
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 ofpatients with acute coronary syndrome (ACS) with and without ST segment:
· | For patients with non-ST-segment elevation ACS, including unstable angina/nonQ-wave myocardial infarction (MI), including patients who are to be managed medically and those who are to be managed with percutaneous coronary intervention (with or without stent) or coronary artery bypass grafting, Plavix has been shown to decrease the rate of a combined endpoint of cardiovascular death, MI, or stroke as well as the rate of a combined endpoint of cardiovascular death, MI, stroke, or refractory ischemia; |
· | For patients with ST-segment elevation acute myocardial infarction, Plavix® has been shown to reduce the rate of death from any cause and the rate of a combined endpoint of death, re-infarction or stroke. |
Plavix® is also indicated 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 ASAacetylsalicylic acid (ASA) for the prevention of atherothrombotic and thromboembolic events in Atrial Fibrillation, 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.stroke.
CoPlavix®CoPlavix® / DuoPlavin®DuoPlavin®, a fixed dosefixed-dose combination of clopidogrel bisulfate and acetylsalicylic acid (ASA),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 marketingFor additional information on the commercialization of Plavix® / CoPlavix® / DuoPlavin® is organized through our alliance with BMS which was restructured in 2012 with effect on January 1, 2013 (see "Itemthese products, see “Item 5 —– Financial Presentation of Alliances – Alliance Arrangements withBristol-Myers Squibb") 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 aA number of generics have been launched. Previously, generics had also been launched in Europe.Europe, the U.S. and other markets.
Plavix®Generics were launched in Japan starting in June 2015 (for stroke indication), October 2015 (for MI) and are expected to be launched in the fourth quarter of 2016 for the PAD indication.
Plavix® is the leading anti-platelet in the Chinese market.
The main countries contributing to sales of Plavix® / Iscover® in 2015 were Japan and Japanese markets (source: IMS 2012 sales).China.
Aprovel®Lovenox®/Avapro® /Karvea® Clexane®
Lovenox® (enoxaparin sodium) has been used to treat almost 500 million patients in more than 100 countries since its launch and is registered for a wider range of clinical indications than any other low molecular weight heparin (LMWH). Its comprehensive clinical dossier has demonstrated a favorablerisk-benefit ratio, notably in the prophylaxis and treatment of venous thromboembolism and in the treatment of acute coronary syndrome. In the prevention of venous thromboembolism, the use of Lovenox® continues to grow, particularly in the area of prophylaxis of deep vein thrombosis (DVT) in patients hospitalized for an acute medical condition.
Aprovel®
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Item 4. Information on the Company
In the U.S., three enoxaparin generics have been approved as well as Sanofi’s own Lovenox® generic. No biosimilar of Lovenox® has been authorized in the E.U. yet.
In 2015, Lovenox® was the leading injectable anti-thrombotic in all European countries.
Aprovel® / Avapro® / Karvea®
Aprovel® (irbesartan) is ananti-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®Aprovel®/Avapro® Avapro®/Karvea® Karvea®, we also market CoAprovel®CoAprovel® /Avalide®/Avalide®/Karvezide® Karvezide®, a fixed dosefixed-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®Aprovel® and CoAprovel®CoAprovel® tablets are available in a wide range of dosages to fit the needs of patients with different levels of hypertension severity.
Aprovel®Aprovel® is indicated as a first-line treatment for hypertension and for the treatment of nephropathy in hypertensive patients with type 2 diabetes. CoAprovel®CoAprovel® is indicated in patients whose blood pressure is not adequately controlled with a monotherapy, but also as initial therapy in patients at high risk or with markedly high baseline blood pressure or who are likely to need multiple drugs to achieve their blood pressure goals (in the United States only).goals.
Aprovel®A fixed-dose combination with amlodipine (Aprovasc) has been launched in several emerging markets.
Aprovel® and CoAprovel®CoAprovel® are marketed in more than 80 countries. The marketingFor additional information on the commercialization of Aprovel® and CoAprovel® is organized through an alliance with BMS which was restructured in 2012 (see "Itemthis product, see “Item 5 —– Financial Presentation of Alliances – Alliance Arrangements withBristol-Myers Squibb" below) Squibb”. In Japan, the product is licensed/sub-licensedlicensed to Shionogi Co. Ltd and BMS KK. BMS KK has sublicensed the agreement to Dainippon Sumitomo Pharma Co. Ltd, respectively. Aprovel® U.S. market exclusivity expired in March 2012 and a number of generic versions have been launched.
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 of Aprovel® / Avapro® / Karvea®in 20122015 were the U.S., GermanyChina and Italy.Japan.
Renagel®Renagel® and Renvela®Renvela®
Renagel®Renagel® (sevelamer hydrochloride) and Renvela®Renvela® (sevelamer carbonate) are oral phosphate binders used by chronic kidney disease (CKD) patients on dialysis as well as late-stagelate stage CKD patients in Europe to treat a condition called hyperphosphatemia, or elevated phosphorus levels, which is associated with heart and bone disease. Renvela®Renvela® is a second generation, buffered phosphate binder.
In the United States,U.S., 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, Renvela®E.U., Renvela® is also approved to treat CKD patients not on dialysis.
We market Renagel®Renagel® and Renvela® directly to nephrologists through Sanofi's employee sales force and distribute these products through wholesalers and distributors.Renvela® are marketed in more than 85 countries. In Japan and several Pacific Rim countries, Renagel®Renagel® is marketed by Chugai Pharmaceutical Co., Ltd and its sublicensee, Kyowa Hakko Kirin Co., Ltd.
InAs of January 31, 2016, there have been no approvals of generics in the United States, Genzyme and generic manufacturers have settled pending litigation with regard toU.S.. However, Sanofi expects potential generics approvals in the production and sale of generic formulations of Renvela® tablets, Renvela® for oral suspension and Renagel®. According to the termsU.S. in 2016. Generics of the settlements,product are currently marketed in some European countries.
In Europe, the first-filer for each product can enter the U.S. market on March 16, 2014lost its exclusivity in January 2015 and second-filers can enter the market on September 16, 2014, or earlier under certain circumstances, pending approval of theirgenerics are currently marketed in some countries. Sanofi has launched an authorized generic application.in some markets.
The top fivemain countries contributing to the sales of Renagel®Renagel® and Renvela®Renvela® in 20122015 were the U.S., France, Germany, Italy, France,Brazil and the UK,U.K..
Allegra® / Telfast®
Allegra® (fexofenadine hydrochloride) is a long-lasting (12- and Brazil.
24-hour) non-sedating prescriptionSynvisc®/Synvisc-One®anti-histamine
Synvisc® and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis of certain joints. Synvisc is indicated for the treatment of pain associatedseasonal allergic rhinitis (hay fever) and uncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.
We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with osteoarthritisanextended-release decongestant for effectivenon-drowsy relief of seasonal allergy symptoms, including nasal congestion. This combination is marketed in Japan under the knee, hip, ankle, and shoulder jointDellegra® brand name.
Generics of most forms of Allegra® / Telfast® have been approved 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 pain associated with osteoarthritis of the knee.our major markets.
Synvisc® is a triple-injection product 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.
In 2012, the top five countries contributing to Synvisc® and Synvisc-One® sales were the U.S., Canada, France, Mexicothe Allegra® family moved toover-the-counter (OTC) use in adults and Germany.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 “– g) Consumer Health Care” below).
LeGoo®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”).
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®Stilnox®/Ambien® /Myslee® Ambien® / Myslee®
Stilnox®Stilnox® (zolpidem tartrate) is indicated in theshort-term treatment of insomnia. Stilnox®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
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Item 4. Information on the Company
generally well tolerated, allowing the patient to awaken with a reduced risk ofwithout notably impaired attention, decreased alertness or memory lapses throughout the day.
Stilnox®Stilnox® is marketed in over 100 countries. It is available under the brand name Ambien®Ambien® / Ambien®Ambien®CR in the United StatesU.S. and Myslee®Myslee® in Japan, where it isco-promoted jointly with Astellas.
Stilnox® Stilnox® and Ambien CR®CR® are subject to generic competition in most markets, including the United StatesU.S. and Europe. In Japan, generics of Myslee®Myslee® entered the market in June 2012.
Allegra®In 2015, the main countries contributing to Stilnox®/Telfast® Ambien® / Myslee® sales were Japan and the U.S.
Allegra® (fexofenadine hydrochloride)Synvisc® / Synvisc-One®
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 U.S. Synvisc-One® is approved for use in patients with OA of the knee in U.S. 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.
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 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 episodespain associated with bipolar disorderosteoarthritis of the knee.
Synvisc® is atriple-injection product and Synvisc-One® a single-injection product. Both are administered directly into theintra-articular space of the joint to temporarily restore synovial fluid. The Phase III trial evaluating Synvisc-One®in numerouship osteoarthritis did not reach its primary endpoint in 2015.
In 2015, the main countries incontributing to Synvisc® and Synvisc-One® sales were the prevention of mood episodes.U.S., Mexico, France, Canada, Germany and Brazil.
We provideAuvi-Q® / Allerject®
On October 30, 2015, Sanofi announced 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)voluntary recall for Auvi-Q® 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® is marketed in over 100 countries, and is generally subject to generic competition.
AllerjectAuvi-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. UpCanada.
Sanofi has ultimately decided to six million Americans may be at risk for anaphylaxis, although the precise incidence is unknownreturn all U.S. and likely underreported.
Sanofi US licensed the North American commercializationCanadian rights to Auvi-Q™ from Intelliject,Inc.
Auvi-QMain compounds currently in Phase II or III clinical development:®
In the Metabolic field:
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 exercisedeveloper of two opt-in options in August 2012.Auvi-Q®.
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:
In the Internal Medicine field:
Additional studies in the SARIL-RA phase III clinical program are to be implemented in 2013.
g) | Consumer Health Care (CHC) |
Consumer Health Care (CHC)
is one of the key platforms in Sanofi’s global growth strategy. In 2015, Consumer Health Care is a growth platform identified in our broader strategy. In 2012, we recorded CHC sales of €3,008reached€3,492 million, an increase of 9.9%4.6% (or 2.8 % at constant exchange rates). Nearly half48% of these sales were generated in Emerging Markets, 19.1% in Western Europe and 25.8% in the U.S..
Consumer Health Care activities were consolidated within the Global Consumer Health Care Division at the end of 2013. During 2014, this new division became operational and its development continued in 2015, focusing on meeting consumer needs in terms of health and well-being, and
developing the capacity of our CHC sales were in emerging markets, 22% in Europe, and 21%Group to meet those needs by mobilizing:
· | Our medical and scientific resources, working in close collaboration with healthcare professionals, physicians and pharmacists; |
· | Our regulatory, medical and commercial know-how, in order to launch self-care versions of products previously available only on prescription; and |
· | Our international dedicated sites integrated in the industrial network, manufacturing products to the highest pharmaceutical quality standards. |
Sanofi is the fifth largest player in the United States.global consumer healthcare market and one of the fastest growing companies in this sector.
The sustained growth of our Consumer Health Care business is based on three complementary development priorities:
In March 2011,
· | Maximizing the existing brand portfolio by accelerating our innovation processes and giving priority to the six major global categories (Allergies, Cough & Cold, Digestive Health, Feminine Hygiene, Analgesics, Vitamins, Minerals and Supplements) forming our core business; |
· | Enhancing the strategy of launching self-care versions of products previously available only by prescription. In 2015, Sanofi prepared for the marketing of Cialis® OTC, on the basis of a license agreement signed in 2014 with Lilly granting Sanofi exclusive rights to apply for approval of Cialis® as an OTC product in the U.S., Europe, Canada and Australia, and to market it on the same markets following receipt of all necessary regulatory approvals and once certain patents protecting the product have expired; |
· | Pursuing the external growth strategy via the targeted acquisition of products or companies enabling us to strengthen our consumer offering. On December 15, 2015, we announced exclusive negotiations with Boehringer Ingelheim to enter into a proposed transaction that would consist of an exchange of the Sanofi Animal Health business with an enterprise value of€11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of€6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. The transaction would allow Sanofi to become the leader in the OTC drug market. |
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Item 4. Information on the Allegra® familyCompany
Highlights of allergy medication products was commercially launchedour numerous product launches throughout the world in 2015 include extensions of the U.S. for over-the-counter (OTC) use in adults and children two years of age and older. The Allegra® family of OTC products is 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).brands listed below.
CHC sales are
· | In the U.S.: |
– | Allegra® gelcaps, designed to ease the ingestion of the product. This version of the product is the first extension of the brand since its transition to OTC status in 2011; |
– | The pediatric version of Nasacort® Allergy 24HR, marketed one year after the transition of the brand to OTC status in 2014; |
– | IcyHot SmartRelief® for shoulders and knees, a new version of the innovative drug-free pain-relief device, based on Transcutaneous Electrical Nerve Stimulation (TENS) technology, blocking pain signals and stimulating the production of endorphins, the body’s naturally produced pain relievers. The IcyHot SmartRelief® brand has been available throughout the U.S. since the fall of 2014; |
– | Aspercreme®, a lidocain-based cream providing a new, odorless and non-irritant solution for consumers suffering from pain and constantly looking for new means to attenuate it. |
· | In France, the launch of a wide range of OTC pain-relief products, including DolipraneOrodoz™ 500 mg, an oro-dispersible tablet that may be taken with or without water; DolipraneTabs™, a coated tablet masking the relatively bitter taste of paracetamol (500 mg and 1000 mg formulations); DolipraneCaps™, an easy-to-swallow capsule containing 1000 mg of paracetamol; DolipraneLiquiz™, an oral suspension in liquid, single-dose stick-packs for children. These new products fill out the pain-relief offering of Sanofi, in which Doliprane® plays a central role and covers the needs of patients of all ages, mainly on the French market and in various African countries. |
Growth in 2015 was also supported by our legacy CHC brands, which provide us with a strong presence in the fever & pain and digestive health areas.
· | No Spa® (drotaverine hydrochloride) is an abdominal anti-spasmodic, indicated for intestinal spasms, menstrual pain and bladder spasm. No Spa® is sold mainly in Russia and Eastern Europe where sales volumes have grown steadily; |
· | Enterogermina® is a probiotic in the form of a drinkable suspension in 5 ml bottles or capsules containing two billion Bacillus clausii spores. Enterogermina® is indicated for the maintenance and restoration of intestinal flora in the treatment of acute or chronic intestinal disorders (in babies and adults). Enterogermina® is sold primarily in Europe with strong growth in Latin America, India, Ukraine and Belarus; |
· | Essentiale® is a plant-based product for the treatment of liver problems. It is composed of essential phospholipids |
extracted from highly purified soya and contains a high percentage of phosphatidylcholine, a major component of the cell membrane. Essentiale® is used to alleviate symptoms such as loss of appetite, pressure in the right epigastrium, food-related liver lesions and hepatitis. Essentiale® is sold mainly in Russia (no. 1 CHC product in the market), Eastern Europe, various countries in Southeast Asia and China; |
· | Maalox® is a well-established brand that contains two antacids, aluminum hydroxide and magnesium hydroxide. It is available in various forms, namely tablets, oral suspension and sachets, thus offering consumers a range of suitable solutions. Maalox® is available in 55 countries in Europe, Latin America and Asia; |
· | Magne B6® is a food supplement containing magnesium and vitamin B6. It has a wide range of therapeutic indications, including irritability, anxiety, sleep disorders and women’s health issues (premenstrual syndrome and menopausal problems). Magne B6® is available primarily in Europe and Russia; |
· | The Lactacyd® range covers a number of intimate feminine-hygiene products. Lactacyd® is sold mainly in Brazil and in Asia where the range, enhanced with several new products, has continued to show strong growth in sales. In the fall of 2015, it was launched in Japan with the objective of developing the market for intimate feminine-hygiene products; |
The above, long-standing products for feminine hygiene. Lactacyd® is sold mainly in Brazil and Asia. Lactacyd® was launched in China in May 2011. Complementary to our legacy CHC business, our other products include:•Chattem'sare supplemented by Chattem products in the United States (other thanU.S.. In addition to Allegra® OTC and Nasacort® Allergy 24H, the Allegra® family of OTC products)main products are ACT®, mainly comprising branded consumer healthcare products, toiletries and dietary supplements across niche market segments. Chattem's well-known brands includeAspercreme®, Gold Bond®Bond®, Icy Hot®Hot®, ACT®, Cortizone-10®Cortizone-10®, Selsun Blue®Blue® and Unisom®. In January 2013, Chattem completedUnisom®;
Sanofi is also actively growing in the acquisition ofVitamins, Minerals and Supplements (VMS) market with the worldwide rights toOmnivit® range in various emerging-market countries and with the Rolaids® brand from McNeil Consumer Healthcare Division of McNeil-PPC, Inc. Rolaids® is an over-the-counter antacid that helps relieve heartburnCenovis® and acid indigestion.Nature’s Own®•Oenobiol's products in France: dietary supplements to promote beauty (sun care, weight, hair care, skin care) and well-being (digestive comfort, anti-stress) and to help manage menopausal problems.•BMP Sunstone products in China, including brands on the leading pediatric cough and cold brand Haowawa®.Australian market.•Minsheng products in China, including 21 Super Vita®, one of the leading vitamins & mineral supplements.•Universal Medicare brands in India, comprising a wide range of nutraceutical and lifestyle management products vitamins, antioxidants, mineral supplements and anti-arthritics such as Seacod®, CoQ®10, Collaflex® and Multivit®.
h) | Generics |
The top three countries contributing to our CHC sales in 2012 were the United States, France, and Russia.
Generics
In 2012, business recorded 2015 net sales of€1,917 million, up 7.6% at constant exchange rates (CER).
In Emerging Markets, the genericsGenerics business reached €1,844generated net sales of€1,094 million, an increase of 5.0%. Performance was impacted5.2% CER, driven by lowerEurasia/Middle East and Venezuela. Net sales in Western Europe increased by 4.1% CER to€569 million, boosted by a good performance in Germany. In the U.S., net sales advanced by 15.4% CER to€171 million, mainly due to increased sales of the authorized generic of Lovenox®Lovenox®. In the Rest of the World region, net sales rose by 90.7% CER to€83 million, due mainly to the performance in Japan of the authorized generic of Allegra® and of the authorized generic of Plavix® launched by Sanofi and our partner Nichi-Iko Pharmaceuticals at the end of the second quarter of 2015.
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Item 4. Information on the Company
Sales in the U.S. grew by 15.4% at constant exchange rates, driven by authorized generics of Lovenox®and less favorable market conditions in Brazil (heightened competition coupled with once-off tax changes 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 closing of the transaction is subject to certain conditions precedent and is expected to occur in the first quarter of 2013.
Arava In 2012, Sanofi sales of generic products in Emerging Markets exceeded €1 billion. See "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31st®, 2012 Compared with Year Ended December 31st, 2011 — Net Sales by Product — Pharmaceuticals segment".
In March 2009 we created our European Generics Platform, covering generics activities across Western and Eastern Europe, Russia and Turkey. The rebranding of Sanofi Generics activities under the Zentiva® brand in Western Europe, initiated in 2010, is nearly complete.
B.3. Vaccine Products
Sanofi Pasteur, is a fully integratedthe vaccines division offeringof Sanofi, offers a broad range of vaccines. In 2012,2015, 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€4,743 million. Sales were favorably impacted by strong growth in markets outside North America and Europe, includingrecord sales of influenza vaccines and a strong performance of the IPV (inactivated polio vaccine) Imovax® Polio in Japan, continued growth of Pentaxim® salespediatric combinations, boosters 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."meninge franchises.
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 PasteurPasteur’s 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 Merck vaccines, such Merck & Co. vaccine products as Gardasil®Gardasil® and Zostavax®, in the joint venture's geographic scope.Zostavax®. In 2012,2015, Sanofi Pasteur MSD net sales which are accounted for using the equity method, amounted to €845€824 million.
Sanofi Pasteur has been expandingcontinued to expand 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 "—“B.5.3 – Vaccines Research and Development"Development” below for a presentation of the Sanofi Pasteur R&D portfolio.
The table below showslists net vaccine sales of vaccines by product range:range.
(€ million) | Net Sales | |||||||
---|---|---|---|---|---|---|---|---|
Polio/Pertussis/Hib Vaccines | ||||||||
Influenza Vaccines | ||||||||
Meningitis/Pneumonia Vaccines | ||||||||
Adult Booster Vaccines | 496 | |||||||
Travel and Other | ||||||||
Vaxserve | 481 | |||||||
Other Vaccines | ||||||||
107 | ||||||||
Total |
a) | Pediatric, Combination and Poliomyelitis (Polio) Vaccines |
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 specificities.
Pentacel®Pentaxim®, a vaccine protecting against five diseases (pertussis, diphtheria, tetanus, polio andHaemophilus influenzae type b), was launched in the United States in 2008.
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.
Pentaxim®, apediatric combination vaccine protecting against diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b (Hib), was first marketed in 1997 and was launched in China in May 2011.1997. To date, more than 150230 million doses of Pentaxim®Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the national immunization programs inof more than 2325 countries.
Act-HIB®, for the prevention ofHexaxim®Haemophilus influenzae type b (Hib) infections, 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® is the only fully liquid, ready to use,6-in-1 (hexavalent) pediatric vaccine providingthat provides protection against diphtheria, tetanus, pertussis, polio,Haemophilus influenzae type b infections Hib and hepatitis B. In June 2012, 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 forapproved this hexavalent pediatric vaccine in the 6 in 1 pediatric vaccine. This innovative vacine will be commercializedE.U., where it is sold under the brand name Hexyon™Hexyon® in Western Europe by Sanofi Pasteur MSD and under the brand name Hexacima™Hexacima® in Eastern Europe by Sanofi Pasteur. The roll-out of this new hexavalent vaccine began in July 2013 in Germany and has ramped up significantly with 27 countries having launched Hexaxim® in their public or private immunization programs. In December 2014, the WHO granted prequalification status to Hexaxim®, in aone-dose vial presentation. Hexaxim® is the only combination vaccine including acellular pertussis (acP) and inactivated polio vaccines (IPV) currently prequalified by the WHO.
PR5I isPentacel®, a pediatric combination vaccine designed to help protectprotecting against six diseases: diphtheria,five diseases (diphtheria, tetanus, pertussis, polio (poliovirus type 1, 2 and 3)Hib), invasive disease caused byHaemophilus influenzae type b, and hepatitis B. This product is jointly being developed between Sanofi Pasteur and Merckwas launched in the U.S. and Europe. Phase III studies in 2008. There has been a tight supply of Pentacel® since 2013, which has improved over the U.S. and Europe began in April 2011.
Sanofi Pasteur is one of the world's leading developers and manufacturers of polio vaccines, in both oral (OPV) and enhanced injectable (eIPV) form. The worldwide polio eradication initiative led by the World Health Organization (WHO) and UNICEF has positioned Sanofi Pasteur as a global preferred partner with both OPV and eIPV vaccines.
Sanofi Pasteur is also supporting the introduction of eIPV internationally. With recent progress towards polio eradication in countries such as Brazil and Japan in 2012, Sanofi Pasteur expects the use of eIPV to gradually increase. As a result, Sanofi Pasteur is expanding its production capacitypast two years, yet requires careful supply management to meet strong market demand. Supply constraints are expected to continue throughout the growing demand.first half of 2016.
Shantha Biotechnics (Shantha) in IndiaPediacel® is currently pursuing requalification of Shan5®, a combinationfully liquid pentavalent vaccine protecting against diphtheria, tetanus, pertussis, hepatitis Bpolio and Hib.
Act-HIBHaemophilus influenzae®, for the prevention of Hib, is also an important growth driver within the pediatric product line.
Quadracel® is a combination vaccine against diphtheria, tetanus, pertussis and polio. It is used 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® was already licensed in Canada (1997) and Australia (2002) and was licensed in the U.S. in April 2015. The U.S. commercial launch of Quadracel® is planned for 2016.
Shan5™, developed by Shantha, is afully-liquid type b, with the WHO. Shantha has worked closely with Sanofi Pasteur5-in-1 vaccine, protecting against five diseases (diphtheria, tetanus, pertussis, polio and Hepatitis B). Following improvements made to improve key manufacturing steps in the production of the antigen components of the vaccine. The path backvaccine, Shan5™ regained its prequalification from the WHO in May 2014 and was launched on the Indian market in the last quarter of 2014. Over 22 million doses were delivered to obtaining prequalification status has been discussed extensivelyUNICEF in 2015.
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Item 4. Information on the Company
In Japan, a key milestone was achieved in July 2014 with the WHOlicensure of Squarekids®, a quadrivalent pediatric combination vaccine offering protection against diphtheria, tetanus, pertussis and local Indian regulators. Based onpolio. Squarekids® was co-developed with our partner Kitasato Daiichi Sankyo Vaccine. The commercial launch took place in December 2015.
Sanofi Pasteur is the successful completionworld’s leading developer and manufacturer of clinical studies, Shan5®polio vaccines, with both Oral Polio Vaccines (OPV) and Injectable Polio Vaccines (IPVs) in its portfolio. Sanofi Pasteur’s polio production capacity and historic commitment have enabled us to serve as an important industrial partner in helping to achieve the goal of worldwide polio eradication. In November 2013, GAVI announced its support for the introduction of IPV in the national immunization programs of the world’s 73 poorest countries. The combined use of OPV and IPV is expected to regainimprove the level of protection in countries threatened by the possible resurgence of polio. GAVI support has paved the way for the implementation of the recommendation made by the WHO prequalificationexpert group on immunization that all countries introduce at least one dose of IPV in their routine immunization schedule by the first half of 2016. The end of February 2014 marked an important milestone in the global fight against polio with the UNICEF decision to award Sanofi Pasteur unprecedented quantities of IPV for use in GAVI countries. IPV routine immunization in GAVI countries began in September 2014 in Nepal. Beyond GAVI countries, the expanded use of Sanofi Pasteur’s Imovax® Polio vaccine began with IPV introduction in the Philippines in October 2014. In 2015 and early 2016 there has been significant progress in the global fight against polio, with to date 120 countries using IPV and more than 70 countries expected to introduce IPV by the first half of 2016, including two countries where polio remains endemic: Afghanistan and Pakistan. In 2015, Sanofi Pasteur delivered 27 million doses of IPV standalone to UNICEF for GAVI countries. In India, ShanIPV™ manufactured by Shantha, and reserved for the Indian market, received marketing authorization in 2015 and was launched in December 2015.
Influenza Vaccines
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 than 200with over 220 million doses delivered in 2012 to better meet increasing demand.2015. 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 markets and wider government immunization recommendations.expanded recommendations by governmental and advisory bodies to be vaccinated against seasonal influenza.
Sanofi Pasteur has two distinct influenza vaccines that are sold globally, Fluzone and Vaxigrip. 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. The differentiated product strategy is
In 2012,strengthening the leadership of Sanofi Pasteur expanded its launch of Fluzone® ID 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 in 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.
Fluzone® High-Dose vaccine, launched in the United States 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 shows a weaker immune response, has proven to respond better to the Fluzone® High-Dose vaccine. It continued its strong growth in 2012.
Fluzone® QIV candidate vaccine is a quadrivalent inactivated influenza vaccine containing two antigens of type A (H1N1 and H3N2) and two antigens of type B (one each from Yamagata and Victoria lineage). Selecting the prevailing influenza strains for upcoming seasons is an incredibly difficult task. In the recent past, there have been a number of mismatches of the B strain component in the trivalent vaccine comparedmarket with the circulating B lineage. Sanofi Pasteur expects that increasing the number of strains in the vaccine will give increased protection against the most prevalent strains. Sanofi Pasteur filed a supplemental Biologics License Application (sBLA) withfollowing products:
· | Fluzone®High-Dose vaccine, launched in the U.S. in 2010, was specifically designed to generate a more robust immune response against influenza in people aged 65 and older and provide greater protection against influenza. In November 2014, the FDA changed the prescribing information for FluzoneHigh-Dose vaccine to document the superior clinical benefit for Fluzone® High-Dose vaccine, compared to the standard dose of Fluzone® vaccine (Fluzone® High-Dose vaccine was 24% more effective than Fluzone vaccine in alarge-scale efficacy study). In 2015, Fluzone® High-Dose continued to generate strong sales growth; |
· | Fluzone® Quadrivalent vaccine is a quadrivalent inactivated influenza vaccine containing two type A antigens and two type B antigens. Compared to the trivalent influenza vaccine, the addition of a second B strain to the vaccine provides increased protection against the most prevalent circulating strains. In June 2013, Sanofi Pasteur obtained FDA authorization for Fluzone® Quadrivalent to be commercialized in the U.S. for children over six months, adolescents and adults. Since 2014, Fluzone® Quadrivalent/ FluQuadri® vaccine has launched in over 20 other countries, including Mexico and Canada; |
· | Intradermal (ID) trivalent influenza vaccines (Intanza®/IDflu® launched in 2010 in Australia, Canada, the E.U. and several other countries and Fluzone® ID launched in the U.S. in 2011) also contribute to Sanofi Pasteur’s flu differentiation strategy. The innovative ID vaccines represent new and innovative offer efficiency and provide simplicity of administration. In 2015, Fluzone® ID Quadrivalent was launched in the U.S.; |
· | Vaxigrip vaccine is a trivalent vaccine that is licensed in over 150 countries globally for people at least six months old. Sanofi Pasteur is planning to launch a quadrivalent formulation of Vaxigrip in the coming years. The E.U. license for Vaxigrip quadrivalent influenza vaccine (QIV) + 3 years is expected in the second half of 2016 with a launch starting in 2017. With regards to Vaxigrip QIV 6-35 months, a license application in the E.U. is expected to be submitted in the course of 2018. |
c) | Adult and Adolescent Boosters |
Many countries now recommend pertussis immunization for Fluzone® QIV in October 2012. The sBLA file has been accepted by the FDA for full review, and an action date is anticipated in the second quarter of 2013.
Adult and Adolescent Boosters
Pertussis (whooping cough) affects children, 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 of this product groupincreased pertussis vaccination rates in these populations in recent years.
Adacel®Adacel®, the first trivalent adolescent and adult booster offering protection against diphtheria, tetanus and pertussis, was licensed and launched in the United StatesU.S. in 2005. Since its launch in the U.S. and expansion to over 60 countries, more
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Item 4. Information on the Company
than 140 million 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 transmissionreducing exposure to infants too young to bewho are not immunized or only partially vaccinated. Adacel®immunized.
Repevax® (also marketed under the trademarkAdacel-Polio®) is now registereda combination vaccine that provides the same benefits as Adacel®, but also offers protection against polio. Repevax® is useful in markets that recommend adolescent and/or adult immunizations to protect against both pertussis and polio. This vaccine is licensed in more than 50 countries.30 countries worldwide.
Quadracel®, a quadrivalent booster vaccine (fifth dose) including diphtheria, tetanus, acellular pertussis and IPV, 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 currently in Phase III trials.
d) | Meningitis and Pneumonia Vaccines |
Meningitis and pneumonia vaccines
Sanofi Pasteur is at the forefront of the development of vaccines to prevent bacterial meningitis. In 2014, Sanofi Pasteur celebrated 40 years of providing vaccines protecting against meningitis. In 2005, Sanofi Pasteur introduced Menactra®Menactra®, the first quadrivalent conjugate quadrivalent vaccine against meningococcal meningitis, which is considered by many as the deadliest form of meningitis in the world. By AprilIn 2011, the FDA had granted Sanofi Pasteur a license to expand the indication of Menactra®Menactra® to children as young as 9nine months of age. Menactra®Menactra® is now indicated for people aged 9nine months through 55 years in the United States,U.S., Canada, several Middle Eastern countries such as Saudi Arabia and numerous other countries in Latin America,all regions of the Middle Eastworld. The most recent launches include Russia, South Korea and Asia Pacific regions.Japan in 2015.
Meningitis A, C, Y, W-135 conj. Second Generation is a project targeting a second generation meningococcal vaccine that uses an alternative conjugation technology. In 2011, interim Phase II clinical trial results were obtained and indicated that the product is sufficiently immunogenic for further development in infants.
e) | Travel and Endemic Vaccines |
Travel and Endemics 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 immunoglobulins are used in endemic settings in the developing
world and are the basisfoundation for important partnerships with governments and organizations such as UNICEF. They are also used by thetravelers and military personnel in industrialized countries 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.and benefits from long-term expertise in this domain.
IMOJEV™In 2009, Shantha launched Shanchol™, the first oral cholera vaccine produced in India for use in children and adults. Shanchol™ received WHO prequalification in 2011.
IMOJEV®, a Japanese encephalitis vaccine, is alsothe most recent addition to our travel and endemic vaccines portfolio and was successfully launched in development. The Australian healthcare authorities granted approvalAustralia and Thailand in 2012. In 2014, IMOJEV® obtained an extension of indication for use in children starting from nine months of age and obtained WHO prequalification, which provides access to the products in low-income countries. IMOJEV® is being progressively rolled out in endemic countries throughout Asia.
f) | Dengue |
Dengue fever constitutes a major public-health and economic burden in the endemic areas of Asia-Pacific and in Latin America. More than 100 countries, representing nearly half of the latest variationsworld’s population, are at risk. Over the last 50 years, the incidence of the IMOJEV™ filedisease has increased 30-fold, an alarming rate given there is no specific treatment available. In response to this global threat, which can impact children, adolescents and adults, the WHO has set ambitious objectives to reduce the burden of the disease on September 24, 2012 for individualssociety. One of these objectives is to reduce morbidity by 25% and mortality by 50% by 2020. Following 20 years of innovative research and collaboration with local at-risk communities and dengue scientists around the world, Sanofi Pasteur has developed a dengue vaccine candidate and embarked on a global, multinational clinical development program.
In 2014, the results of twolarge-scale Phase III efficacy studies conducted in 10 countries in Asia and Latin America were published inThe Lancet andThe New England Journal of Medicine, respectively. These studies involved 31,000 participants aged 12two to 16 years living in highly endemic countries. The results showed an overall efficacy against symptomatic dengue of 56.5% in Asia and 60.8% in Latin America, with a favorable safety profile during the25-month active surveillance period. Overall, the results of these studies combined showed efficacy against all four dengue serotypes. Importantly, these studies consistently showed highly significant reductions in severe dengue and hospitalization due to dengue during the 25-month active surveillance periods (80% reduction in severe disease and 67.2% reduction in hospital cases in Asia and 95% protection against severe dengue and 80.3% reduction in risk of hospitalization in Latin America).
The established safety and efficacy profile of this dengue vaccine candidate after 25 months and over, followed by the Thai Food and Drug Administration on November 14, 2012. IMOJEV™ has now been launched in these two countries.large-scale Phase III studies points to the significant public health impact that this vaccine candidate could have in countries where dengue is endemic.
In January 2015, the rolling submission for Dengue vaccine was initiated in several endemic countries in Asia and Latin America, the first licenses for the Dengue vaccine were granted in December 2015 in Mexico, the Philippines and Brazil. The first shipment of doses occurred in the Philippines in February 2016.
A new generation Vero serum-free vaccine (VerorabVax™) will provide
g) | Other Products |
Growth in other products is mainly driven by VaxServe, a worldwide, single rabies vaccine asleading specialty distributor and solutions provider in the U.S. market (sales of€481 million in 2015). VaxServe, a replacementSanofi Pasteur company, offers a broad portfolio of products from Sanofi Pasteur and other manufacturers and is a strategic asset that enables us to position ourselves closer to our current rabies vaccine offerings. Results fromcustomers and better serve their needs.
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Item 4. Information on the 2009 Phase II clinical trial demonstrated non-inferiority of VRVg versus Verorab® in pre-exposure prophylaxis. VRVg was approved in France as a line 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.Company
In December 2009, Shantha launched ShanCholTM, India's first oral vaccine to protect against cholera in children and adults. ShanChol™ was World Health Organization pre-qualified in 2011 and more than 1 million doses of ShanCholTM 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 6 months and older, and commercial launch commenced in July 2012.
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),world leaders in this market. Merial is dedicated to the research, development, manufacture and deliverymarketing of innovative pharmaceuticalspharmaceutical products and vaccines used by veterinarians, farmers and pet owners. It providesThe company offers a comprehensivecomplete range of products to enhanceimprove the health, well-being and performance of a widelarge variety of animals (both livestock and pets).
The range of production and companion animals. Its net sales for 2012 amounted to €2,179 million.
Merial became Sanofi's dedicated animal health division following the joint statement issued by Merck and Sanofi in March 2011 announcing the end of their agreement to create a new animal health joint venture by combining their respective animal health segments. Consequently all Merial financials are consolidated in Group reports. See Note D.2. to our consolidated financial statements included at Item 18 of this annual report.
The animal health product range comprisesveterinary products covers four major segments:main segments, namely parasiticides, anti-infectious drugs, other pharmaceutical productspharmaceuticals (such as anti-inflammatory agents, anti-ulcerousanti-ulcer agents, etc.) and vaccines. Merial'sMerial’s top-selling products include Frontline®are Frontline®, a topical anti-parasitic flea and tick brandanti-parasitic intended for dogs and cats, the highest selling veterinary product in the world (source: Vetnosis); Heartgard®world; Heartgard®, a parasiticide for control of heartworm in companion animals; Ivomec®pets; Nexgard®, a parasiticidean oral anti-parasitic for the treatment and prevention of fleas and ticks in dogs; LongRange® and Ivomec®, two parasiticides for the control of internal and external parasites in livestock; Vaxxitek®Vaxxitek®, a high-technology vector vaccine, protectsprotecting chickens against infectious bursal disease (IBD) and Marek'sMarek’s disease; Previcox®Previcox®, a highly selective anti-inflammatory/COX-2COX 2 inhibitor for relief of pain and control of inflammation in dogs; Eprinex®Eprinex®, a parasiticide for use in cattle;livestock and Circovac®Circovac®, a PCV2 (porcineporcine circovirus type 2) vaccine for swine.2 (PCV2) vaccine. Merial plays a keyan important role in the veterinary public healthpublic-health activities of governments around the world. ItThe company is the world leader in vaccines for Foot-and-Mouthfoot-and-mouth disease, (FMD), rabies and bluetongue (BTV) (source: Vetnosis).catarrhal fever.
Merial’s net sales amounted to€2,515 million in 2015. The performance in 2015 was boosted by the strong sales of Nexgard® which, in the second year following its launch, became one of the ten top-selling animal-health products in the world.
In the Livestock segment, growth at Merial is in line with that of the market as a whole. The Avian sector grew strongly in 2015, particularly in the emerging countries. The Ruminant sector also experienced solid growth, due in large part to the success of LongRange® (eprinomectin, an injectable anti-parasitic against internal and external parasites in cattle) in the U.S.
The Merial range of anti-parasitic products for pets was recently filled out with:
· | The approval in December 2013 in Europe by EMA of Broadline®, a broad-spectrum internal and external anti-parasitic for treatment and prevention in cats, valid throughout the E.U. Broadline® is a combination of four active ingredients and protects cats for one month. The product was launched in Europe in March 2014; |
· | The positive opinion of the 27 E.U. Member States in May 2014, followed by the approval of marketing authorizations starting in June 2014 for Frontline Tri Act®/ |
Frontect® for the treatment and prevention of flea and tick infestations when repellent activity is necessary against sand flies, biting flies and/or mosquitoes; |
· | The approval by the European Commission of NexGard Spectra™, (afoxolaner and milbemycin oxime) on 19 January 2015. This new chewable tablet, building on the success of NexGard® against fleas and ticks, offers additional protection against heartworm and treats infections caused by intestinal worms in dogs. |
Targeted acquisitions have also been made. In the Pet segment, Merial secured the supply of Heartgard® by acquiring the Barceloneta site in Puerto Rico from Merck & Co. Inc. and has since March 2015 made use of the site’s expertise in chewables manufacturing technology. In the Livestock segment, Merial acquired Bayer’s equine portfolio, consisting of Legend®/Hyonate® (hyaluronate sodium) and Marquis® (ponazuril). Legend®/Hyonate® is an injectable solution that treats non-infectious joint dysfunction in horses and Marquis Antiprotozoal Oral Paste is the first FDA-approved treatment for equine protozoal myeloencephalitis (EPM), a disease that affects the central nervous system in horses.
The compound patent protecting fipronil,principal markets for Merial are the active ingredientU.S., France, Italy, Brazil, China, the U.K., Germany, Australia, Korea and Japan. Mature markets represent 74% of Frontline®, expired in 2009 in Japan and in some European countries, including France, Germany, Italy,total net sales and the United Kingdom, andrate of growth exceeds 10% in August 2010 in2015.
In December 2015, we announced we had opened exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed transaction would consist of an exchange of 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 methodSanofi Animal Health business (Merial) with an enterprise value of use patent in the United States€11.4 billion and the European Patent area (Germany, France, Italy and the United Kingdom), expiring March 2018. As for human
pharmaceutical products, patent protection for animal pharmaceutical products extendsBoehringer Ingelheim Consumer Healthcare business with an enterprise value of€6.7 billion. The Boehringer Ingelheim Consumer Health Care business in most cases for 20 yearsChina would be excluded from the filing datetransaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. Until final completion of the priority application.
As regards regulatory exclusivity, the position of veterinary medicinal products in Europe is similar to that of human pharmaceutical products: eight-year data exclusivity and ten-year market exclusivity. In the United States, there is ten-year data exclusivity for products approved by the Environmental Protection Agency and an additional five years duringtransaction, which a generic applicant has to compensate the originator if it cites the originator's data. For FDA approved veterinary medicinal products, a regulatory exclusivity period of five years is granted for a new chemical entity and three years for a previously-approved active ingredient. No data exclusivity exists at present for veterinary vaccines in the United States.
In April 2012, 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 acquire 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. The agreement is subject to execution of definitive agreements and thereafter to regulatory approval and isclearances, expected to finalize sometime in the first halffourth quarter of 2013.
The 20122016, we will continue to monitor the performance of the companion animals franchise was driven by the growth of pet vaccines worldwideAnimal health business (which remains an operating segment) and byto report the performance of Heartgard® in the U.S. For production animals, the performance was mainly driven by the avian segment (notably Vaxxitek®) and the swine segment, thanks to Circovac® sales and the acquisition of Newport.
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% of total Merial sales.
Merial operates through a network of 17 production sites, with major sites located in France, the United States, Brazil and China. The major R&D sites are located in France and in the United States. Merial employs approximately 6,060 people worldwide (see Item 4D "Property, Plant & Equipment").that business at Group level.
B.5. Global Research & Development
The mission of Sanofi'sSanofi’s Global Research & DevelopmentR&D organization is to discover and develop therapies that prevent, treat andor cure diseases. Ourday-to-day commitment is to respond to patients' realpatients’ needs and to provide them with adapted therapeutic solutions in order to improve theirwell-being and extend their life.lives.
To meet these challenges, R&D has evolved towards an integrateda global organization encompassingintegrating all R&D activities across three
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Item 4. Information on the Company
major segments: Pharmaceuticals, Vaccines, and Animal Health. Our therapeutic areas encompass a wide range of therapeutic areasdiseases 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:
To carry out our mission, meet these challenges and maximize our impact, we are strivingstrive to bring innovation to patients and to build a pipeline of high value projects. Our approach is neutral to the source of innovation, whether it comes from internal research or external innovation.
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 added 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 aproject-driven organization, which in 2015 included several units covering different therapeutic areas such as diabetes, cardiovascular, oncology, immune-mediated diseases, rare diseases, multiple sclerosis, neurodegenerative diseases, infectious diseases and ophthalmology. Theseproject-focused units are supported by Scientific Platforms and Enabling Functions, responsible for the operational aspects of R&D, such as Chemistry, Manufacturing and Controls (CMC), toxicology, clinical operations, medical and regulatory affairs, and external innovation; |
· | Sanofi Pasteur R&D, which is responsible for 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; and |
· | Merial R&D, which aims to deliver and support effective, innovative, safe andcost-effective animal health products. |
Although the specifics of animal health are different from human health, some synergies are achieved via support from Scientific Platforms and Enabling Functions. |
Our 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).
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 creating geographically-focused integrated research innovation centers also called "hubs"concentrated in four areas:major hubs: North America, Germany, France and Asia. InWithin these hubs, a regional leadership ensures local resource optimization and effective engagement within the Boston area (United States), which hasecosystems.
B.5.2. Pharmaceuticals
Our pharmaceuticals research and development projects are respectively managed by a high concentrationResearch Working Group (RWG) and a Development Working Group (DWG). These working groups are responsible for the oversight of universitiesall major aspects of the research and innovative biotechnology companies, ourdevelopment portfolios respectively. They drive project prioritization and approval of majorstage-gate transitions as well as project terminations. The RWG is temporarily chaired by a Research transition group and the DWG is chaired by the Development Deputy. Both groups include senior members of Sanofi Global 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 innovationas well as experts from a wide rangevariety of sources.
Portfoliofields necessary for informed decision making.
As in 2011,In addition for all major late stage projects, integrated oversight is provided by an Integrated Development Council (IDC) chaired by the CEO. The IDC includes senior representatives from R&D, again conducted a rigorousGlobal Business Units and comprehensive portfolio review. Industrial Affairs, and is responsible for reviewing and approving project strategies, major phase transitions (Phase III, filing, major label modifications), and assessing the launch readiness (pricing, reimbursement, marketing, medical plans). The IDC also reviews major deviations from approved strategies and plans, including registration issues and project discontinuation. The Executive Committee endorses decisions made by IDC.
Projects wereare assessed using two key criteria which allow management to rapidly understand how the portfolio performsis performing in terms of innovation, unmet medical needs, risk and value. The two key criteria include:value:
· | relative medical value: which encompasses the extent of the unmet need, the market dynamics and the likelihood of getting satisfactory market conditions; and |
· | 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“Item 3. Key Information —– D. Risk Factors —– Risks Relating to Our Business —– Our research and
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Item 4. Information on the Company
development efforts may not succeed in adequately renewing our product portfolio and – Risks Relating to the Group Structure and Strategy – We may fail to adequately renewsuccessfully identify external business opportunities or realize the anticipated
benefits from our product portfolio whether through our own research and development or through acquisitions and strategic alliances."investments” our product development efforts are subject to the risks and uncertainties inherent in any new product development program.
The clinical portfolio for new medical entitiesproducts can be summarized as follows:follows as of February 9, 2016.
Phase I | Phase II | Phase III /registration | |||||||||||
Diabetes | SAR425899 SAR438335 SAR438544 SAR440067 (LAPS ins.) | efpeglenatide (SAR439977) | Lyxumia® (lixisenatide) lixisenatide / insulin glargine SAR342434 (insulin lispro) sotagliflozin (SAR439954) | ||||||||||
Oncology | SAR408701 SAR428926 SAR439684 SAR566658 | isatuximab (SAR650984) | |||||||||||
Cardiovascular diseases | |||||||||||||
SAR407899 SAR439152 | |||||||||||||
sarilumab (SAR153191) dupilumab (SAR231893) | |||||||||||||
Multiple Sclerosis | |||||||||||||
Neurodegenerative diseases | |||||||||||||
Infectious diseases | ferroquine (combo OZ439) (SSR97193) | ||||||||||||
Ophthalmology | SAR366234 UshStat® (SAR421869) SAR422459 | ||||||||||||
GZ402666 SAR339375 fitusiran (SAR439774) GZ389988 | olipudase alfa (GZ402665) GZ402671 sarilumab (uveitis) | ||||||||||||
patisiran (SAR438027) revusiran (SAR438714) |
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 andshort-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.
a) | Diabetes Solutions |
OurMain compounds currently in Phase II & III compounds are describedand 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.registration Phase
· | Lyxumia® (Lixisenatide)is already registered in the E.U. and many other countries outside the U.S. and is presented in the section “– B.2. Main Pharmaceutical Products” above. |
The remainder of this section focusesNew Drug Application (NDA) has been submitted in the U.S. in July 2015 and accepted for filing by the FDA.
· | LixiLan: One-daily fixed-ratio combination of insulin glargine 100 Units/mL and lixisenatide. The two Phase III studies, LixiLan®-L and LixiLan®-O, which enrolled more than 1,900 patients worldwide to evaluate the safety and efficacy of the fixed-ratio combination when used in patient populations insufficiently controlled after oral antidiabetic agents and after basal insulin therapy, respectively met their primary endpoints. |
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Item 4. Information on compounds enteringthe Company
The dossier was submitted to the FDA in December 2015. Sanofi redeemed a priority review voucher (PRV) with the submission to designate the NDA for an expedited6-month review. The FDA accepted the LixiLan New Drug Application on February 22, 2016. The FDA decision is expected in August 2016.
The LixiLan regulatory submission is planned in the E.U. in March 2016.
· | Insulin lispro biosimilar (SAR342434):The program entered into Phase III in November 2014. The Phase III clinical program will compare SAR342434 to Humalog® (insulin lispro, Lilly) in addition to Lantus® treatment in patients with type 1 diabetes (SORELLA 1) and in patients with type 2 diabetes (SORELLA 2). The entry into Phase III follows the successful completion of the Phase I study, in which SAR342434 rapid-acting solution demonstrated similar activity and exposure compared to Humalog®. |
· | Sotagliflozin (SAR439954): investigational new oral dual inhibitor of SGLT1/2 which could be a potential treatment option for people with diabetes. The product was in-licensed from Lexicon in November 2015. The product is in Phase III in the treatment of type 1 diabetes and in Phase II in the treatment of type 2 diabetes. |
Main products in early stage
· | Sanofi and Hanmi signed a license agreement to develop a portfolio of long-acting diabetes treatments: |
1. | Efpeglenatide (SAR439977), a long-acting GLP1 receptor agonist currently in Phase II; |
2. | a weekly insulin:SAR440067 (LAPS insulin 115) in Phase I; and |
3. | a fixed-dosed weekly GLP1-R agonist/insulin drug combination. |
· | Finally, thedual GLP-1/glucagon receptor (SAR425899) moved into a multiple ascending dose study, adual GLP-1/GIP receptor agonist (SAR438335) entered Phase I in November 2015, both for the treatment of patients with type 2 diabetes. |
SAR438544 (stable glucagon analog) entered in Phase I or in Phase II and also lists projects that were terminated in 2012.
Diabetes/Other Metabolic Disorders portfolioDecember 2015 is intended for the treatment of diabetes patients with severe hypoglycemia.
TheSanofi Diabetes maintains a significant network of R&D collaborations with world leading academic institutions was significantly extendedand startup companies, including collaborations with Gentofte Hospital (Copenhagen), Gubra (a Danish biotech company specialized in 2012. Agut hormone R&D), and Selecta. Sanofi and the Juvenile Diabetes Research Foundation (JDRF) continue to jointly fund selected innovation projects in the field of type 1 diabetes research.
Sanofi remains strongly committed to bringing integrated care to people with diabetes, and will continue to establish partnerships with a view to creating new solutions to improve patient outcomes.
Sanofi has entered in a strategic research collaboration with Evotec in 2015 in an effort to develop beta cell-modulating diabetes treatments, which may reduce or even eliminate the Chariténeed for insulin injections and may be a step towards a cure for type 1 diabetes.
Sanofi and Verily (formerly Google Life Sciences) started a collaboration to improve care and outcomes for people with type 1 and type 2 diabetes. The collaboration will pair Sanofi’s leadership in Berlindiabetes treatments and devices with Google’s expertise in analytics, miniaturized electronics and low power chip design. This includes health indicators such as blood glucose and hemoglobin A1c levels, patient-reported information, medication regimens and sensor devices.
b) | Oncology |
Main products in Phase II
· | Isatuximab (SAR650984)is a naked humanized immunoglobulin (IgG1) monoclonal antibody (mAb) that has been in licensed from Immunogen Inc. It selectively binds to CD38, a cell surface antigen widely expressed in multiple myeloma cancer cells, and other hematological malignancies. The program is in Phase II with five ongoing studies in multiple myeloma. One as a single agent, and the others are investigating Isatuximab in combinations with: (i) lenalidomide/dexamethasone, (ii) carfilzomib; (iii) pomalidomide, and (iv) cyclophosphamide/ bortezomib/dexamethasone. |
Main products in early stage
· | SAR408701 is an Antibody Drug Conjugate (ADC) that binds toCEACAM-5, a membrane glycoprotein originally identified as a surface marker on adenocarcinomas of the human gastrointestinal tract. The compound entered the Sanofi Phase I pipeline in 2014 with one ongoing study. |
· | SAR566658 is an Antibody Drug Conjugate (ADC) loaded with a maytansinoid derivative DM4(huDS6-SPDB-DM4) targeting CA6. CA6 is a tumor specific epitope highly expressed on some solid tumors. The program is in Phase I with one ongoing study. |
· | SAR428926 is Antibody Drug Conjugate (ADC) that binds to Lysosomal Associated Membrane Protein 1 (LAMP1), a protein localized in the lumen of the lysosomes in normal tissue and which is found aberrantly expressed at the cell surface in a number of tumor tissues. SAR428926 is expected to selectively deliver its cytotoxic to LAMP1-expressing tumor cells. The compound entered the Sanofi Phase I pipeline in 2015 with one ongoing study. |
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Item 4. Information on the Company
· | SAR439684is a PD-1 inhibitor derived from our alliance with Regeneron and is currently in Phase I. |
Projects discontinued in 2015
· | Coltuximab ravtansine (SAR3419) is an Antibody Drug Conjugate (ADC)maytansin-loadedanti-CD19 mAb that has beenin-licensed from Immunogen Inc and was being developed in Phase II inB-cell malignancies. This program has been discontinued in Phase II and the rights returned to Immunogen. |
· | SAR405838 is a potent inhibitor of the HDM2/P53 interaction. The program in Phase I was discontinued in monotherapy as well as in combination with Merck KGaA’s pimasertib. |
· | SAR245409 (XL765) wasin-licensed from Exelixis, Inc. and developed by Sanofi. This oral agent is dual inhibitor of both(i) phosphoinositide-3-kinase (PI3K), and (ii) the mammalian target of rapamycin (mTOR). The product in Phase II has been discontinued. |
· | SAR245408 (XL147) wasin-licensed from Exelixis, Inc. and developed by Sanofi. This oralphosphoinositide-3-kinase (PI3K) inhibitor in a Phase I has been discontinued. |
· | SAR125844 is a potent and selective MET tyrosine kinase inhibitor. The development of this product in Phase I has been discontinued and Sanofi decided to explore out-licensing opportunities. |
c) | Cardiovascular diseases |
Main products in early stage
· | SAR439152 (MYK-461) –myosin inhibitor derived from our partnership with MyoKardia, entered in Phase I in Obstructive Hypertrophic Cardiomyopathy indication. |
· | SAR407899 –Rho-kinase inhibitor has been reactivated in Phase I in the Microvascular Angina (MVA) indication. |
Projects discontinued in 2015
· | Fresolimumab (GZ402669)is aTGF-ß antagonist for the treatment of Focal Segmental Glomerulosclerosis (FSGS). The Phase II clinical trial was terminated, with no further development planned. |
d) | Immune Mediated diseases |
Main products in Phase III
· | Sarilumab (SAR153191), a monoclonal antibody against theInterleukin-6 Receptor derived from our alliance with Regeneron, is under development for moderate to severe rheumatoid arthritis (RA). The U.S. Biological License Application (BLA) was submitted on October 30, 2015 and |
accepted for review on January 8, 2016. The clinical program consists of seven trials of which four have been completed. Two pivotal trials in RA, SARIL-RA-MOBILITY in methotrexate inadequate responders assessing signs and symptoms and inhibition of structural damage, and SARIL-RA-TARGET in inadequate responders to anti-TNF treatment assessing signs and symptoms and effect on physical function, met all primary endpoints. One Phase III trial (SARIL-RA-MONARCH) which evaluates sarilumab versus adalimumab as monotherapy is ongoing with data expected in the second quarter to support the filing in Europe planned for the third quarter of 2016. |
Additional studies are:
· | TheSARIL-RA-EXTEND study, an uncontrolled extension study which enrolled patients from MOBILITY and is enrolling participants by invitation from the TARGET and ASCERTAIN (to benchmark safety against tocilizumab) studies, aims to evaluate the long term safety and efficacy of Sarilumab in combination with disease-modifying anti-rheumatic drugs (DMARD) in patients with active RA; |
· | TheSARIL-RA-EASY is a usability study comparing two devices: theauto-injector and thepre-filled syringe. |
· | Dupilumab (SAR231893) is a monoclonal antibody against theInterleukin-4 alpha Receptor derived from our alliance with Regeneron. Dupilumab modulates signaling of both the IL-4 and IL-13 pathways. It is currently being developed in several indications: atopic dermatitis in Phase III, asthma in Phase III, nasal polyposis with a Positive Phase IIA proof of concept study, and eosinophilic esophagitis in Phase II. |
· | Atopic Dermatitis, the Phase III program consists of: |
· | Two identical16-week monotherapy treatment trials (SOLO 1 & SOLO 2): “Monotherapy Administered to Adult Patients withModerate-to-Severe Atopic Dermatitis”. These are randomized,double-blind,placebo-controlled, parallel group studies to confirm the efficacy and safety of dupilumab monotherapy in adults withmoderate-to-severe atopic dermatitis (AD). Results are expected during the first quarter of 2016. |
· | Along-term treatment trial in combination with topical corticosteroids: “Study to Assess the Efficacy andLong-term Safety of dupilumab in Adult Patients WithModerate-to-Severe Atopic Dermatitis”. This is a randomized,double-blind,placebo-controlled study to demonstrate the efficacy andlong-term safety of dupilumab in adult patients withmoderate-to-severe AD. Interim results are expected during the second quarter of 2016. |
· | Anopen-label extension study of dupilumab in patients with AD. This is a multicenter study to assess thelong-term safety and efficacy of repeat doses of |
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Item 4. Information on the Company
dupilumab in adults withmoderate-to-severe AD who have previously participated in controlled studies of dupilumab. |
The BLA submission in AD for adult treatment is planned for the third quarter of 2016.
· | Asthma, the Phase III program consists of: |
· | A randomized,double-blind,placebo-controlled,dose-ranging study to evaluate dupilumab in patients with moderate to severe uncontrolled asthma completed in May 2015. |
· | A 52-week randomized, double-blind, placebo-controlled, parallel group study to evaluate the efficacy and safety of dupilumab in patients with persistent asthma. |
· | An open-label extension study of dupilumab in patients with asthma who have previously participated in dupilumab asthma clinical studies. |
· | Nasal Polyposis: an evaluation of dupilumab in patients with bilateral nasal polyposis and chronic symptoms of sinusitis. A randomized,double-blind, Phase II, placebo controlled, two-arm study has been completed and further activities are ongoing in preparation for the next stage of development. |
· | Eosinophilic Esophagitis: Phase II study of dupilumab in adult patients with active eosinophilic esophagitis (EoE). A randomized,double-blind, parallel,placebo-controlled study to assess the efficacy, safety and tolerability of dupilumab in this population, has been initiated. |
Main products in Phase II
· | SAR156597 (humanizedbi-specific monoclonal antibody targeting the cytokinesIL-4 andIL-13) is currently in Phase IIA for the treatment of Idiopathic Pulmonary Fibrosis. |
Main products in early stage
· | SAR113244is ananti-CXCR5, afirst-in-class humanized monoclonal antibody in Phase I for the treatment of Systemic Lupus Erythematosus (SLE). A Phase IB multiple ascending dose study in SLE patients is ongoing. |
Projects discontinued in 2015
· | SAR391786 (REGN1033) – Sanofi decided to opt out of the anti-GDF8 monoclonal antibody developed in collaboration with Regeneron and evaluated in Sarcopenia. |
e) | Multiple Sclerosis |
· | GZ402668 (GLD52), an IgG1 monoclonal antibody binding to CD52 a cell surface antigen present at high |
level on T ab B lymphocytes, for the treatment of relapsing forms of Multiple Sclerosis (RMS) is in Phase I, the study end being expected for the first quarter of 2016. |
Projects discontinued in 2015
· | Vatelizumab (SAR339658), a humanized monoclonal antibody directed at theVLA-2 (Very Late Antigen 2) integrin receptor,in-licensed from Glenmark Pharmaceuticals was developed in the treatment of relapsing-remitting multiple sclerosis (RRMS). A prospectively planned interim analysis (IA) completed in October 2015 did not meet the pre-defined primary efficacy endpoint and treatment has been discontinued. No safety concerns prompted this decision. The compound has been discontinued. |
f) | Age Related Degenerative Diseases |
· | SAR228810,ananti-protofibrillar Abeta mAb against Alzheimer’s, completed Phase I in mild to moderate Alzheimer’s patients. Phase I data support moving to next development step. |
g) | Infectious Diseases |
· | Ferroquine (OZ439) is a first in class combination for malaria (collaboration with Medicines for Malaria Venture (MMV)). Ferroquine is a new 4 amino quinoline being developed for the treatment of acute uncomplicated malaria, and is active against chloroquine sensitive and chloroquine resistant Plasmodium strains. Due to its longhalf-life it has the potential to be part of single dose cure regimens for the treatment of both P. vivax and P. falciparum malaria. OZ439 is a synthetic peroxide antimalarial drug candidate from MMV designed to provide a single dose oral cure in humans. A Phase IIB clinical study of the combination of the two products, conducted in adults and children with P. falciparum malaria started in July 2015 in Africa and is expected to start in the second quarter of 2016 in Asia. |
h) | Rare Diseases (Genzyme) |
Main products in Phase III
Alnylam collaboration: In October 2012, Genzyme entered into an exclusive license agreement with Alnylam, coveringALN-TTR programs in theAsia-Pacific-Japan region.ALN-TTR01 andALN-TTR02 Phase I results were published in the New England Journal of Medicine in August 2013. Results showed that beganRNAi therapeutics targeting transthyretin (TTR) achieved rapid,dose-dependent, durable, and specific knockdown of TTR, thedisease-causing protein in 2010 was furtherTTR-mediated amyloidosis (ATTR). Genzyme’s exclusive territory rights for theALN-TTR programs were extended to include Diabetes as an additional focus. In addition we entered into a research alliance with the Helmholtz Zentrumrest of the world excluding North America and Western Europe on January 14, 2014.
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Item 4. Information on the Company
· | patisiran (SAR438027) (mRNA inhibition – Alnylam –ALN-TTR02). The Phase III clinical trial is ongoing in the treatment of Familial Amyloid Polyneuropathy. The Japanese Phase I study has been completed and PMDA (Japanese Health Authority) has granted permission for Japan’s inclusion in the APOLLO trial. |
· | revusiran (SAR438714) (mRNA inhibition – Alnylam –ALN- TTRsc). Revusiran represents a second generation formulation for Alnylam’s RNAi platform. Unlike the lipid nanoparticle formulation utilized by patisiran, the revusiran formulation utilizes a GalNAc(N-acetylgalactosamine) conjugation. This allows for the subcutaneous delivery of the product, as opposed to the intravenous administration of patisiran. Revusiran has shown equivalent knockdown of TTR in studies in both normal healthy volunteers as well as in patients. The Phase III program in the treatment of Familial Amyloidotic Cardiomyopathy is ongoing. |
Main products 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.Phase II
· | GZ402665 (rhASM) olipudase alfa is an enzyme replacement therapy targeting the treatment ofnon-neurological manifestations of acid sphingomyelinase deficiency (ASMD),Niemann-Pick B disease. A Phase I/II study in the pediatric population has dosed four patients to-date. These four patients complete the enrollment of the adolescent cohort (ages 12 years old to less than 18 years old). The child cohort (ages six years old to less than 12 years old) will begin enrollment in the second quarter of 2016. The Phase II/III adult trial started at the end of 2015. |
· | GZ402671 (CGS inhibitor) in Phase II for the treatment of Fabry disease. The Phase II trial in Gaucher disease type 3 is planned for the third quarter of 2016. |
Oncology portfolio
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)Main products in the United States and the Institut Gustave-Roussy (IGR) in France.
Sanofi — Genzyme early stage portfolio
· | GZ402666 (Neo GAA) is a second generation enzyme replacement therapy targeting the treatment of Pompe disease. The program is currently in Phase I with a start planned in the second quarter of 2016 for the pivotal trial in the Late Onset population. |
· | SAR339375 is an anti-miR targeting microRNA-21 for the treatment of Alport syndrome, a life-threatening kidney disease with no approved therapy. The program is currently in Phase I. This program is partnered and led by Regulus Therapeutics. |
· | GZ389988(TrKA) is a small molecule which inhibits binding of nerve growth factor (NGF) to its primary TrkA receptor, and is being developed as a treatment for pain resulting from osteoarthritis. The molecule is currently in Phase I with enrollment completed in October 2015. |
· | fitusiran (SAR439774 – Alnylam –ALN-AT3), siRNA targeting anti-thrombin and derived from our license agreement with Alnylam is in Phase I in the treatment of hemophilia A/B. One pivotal study is expected to start in the third quarter of 2016. |
i) | Ophthalmology |
rhASM — Enzyme replacement therapy targeting the treatment of Niemann-Pick B disease. A Phase Ib study should start early 2013.
· | Aproof-of-concept study is being conducted forSAR153191 – sarilumab (Phase II) in an ophthalmology indication: thisanti-IL-6-receptor monoclonal antibody could be a safe and efficient option for treatingnon-infectious uveitis affecting the posterior segment of the eye at risk of vision loss. Early analysis results are under assessment. |
Main products in early 2013.stage
· | UshStat® (SAR421869): a gene therapy product which uses a lentivector gene delivery technology to introduce a functional MYO7A gene to the photoreceptors and Retinal Pigment Epithelium (RPE) cells in patients with Usher 1B syndrome, an orphan inherited condition that leads to progressive visual field constriction and vision loss from childhood. A Phase I/IIA clinical study is on-going. |
· | SAR422459: a gene therapy product which uses a lentivector gene delivery technology to introduce a functional ABCR gene to photoreceptors in patients with autosomal recessive Stargardt’s disease, an orphan inherited condition that leads to progressive vision loss from childhood. The product is currently in Phase I/IIA. |
· | SAR366234 administered as eye drops, is via its active metabolite, an agonist of EP2 receptor of the prostaglandin E2 which activation induces an increase of the aqueous humor outflow and the reduction of intra ocular pressure (IOP). Elevated IOP is a well-established risk factor for glaucoma characterized by progressive optic nerve degeneration resulting in vision loss. The product is currently assessed in Phase I. |
TSU Aging portfolio42
Discovery/development partnerships:
TSU Infectious Diseases portfolioB.5.3 Vaccines
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 I study of combinations of the two compounds is planned to start in February 2013.
The Sanofi Fovea ophthalmology pipelinenow includes four projects in clinical-stage development:
Other Projects 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 Human 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 | ||||||||
With respect to the compound patent information set out above, investors should bear the following additional factors in mind.
Vaccines Research and Development
Our human vaccine research and development (R&D) remains focused on improving existing vaccines as well asand on the development ofdeveloping new prophylactic vaccines.
Portfolio
The Sanofi Pasteur R&D portfolio includes 1412 vaccines currently in advanced development as shown in the table below. The portfolio includesis well balanced, with five vaccines/antibodyvaccine products for novel targets and nineseven vaccines which are enhancements of existing vaccine products.
Phase I | Phase II | Phase III | Submitted | ||||||||||||
Streptococcus | Men Quad TT | C. difficile toxoid vaccine* | Dengvaxia* | ||||||||||||
Pneumonia and meningitis vaccine | 2 meningococcal ACYW conjugate | Toxoid vaccine againstclostridium difficile | Mild-to-severe dengue fever vaccine | ||||||||||||
Herpes Simplex virus Type 2* HSV-2 vaccine | Rabies VRVg Purified vero rabies vaccine |
| PR5i,DTP-HepB-Polio-Hib Pediatric hexavalent vaccine (U.S.) | ||||||||||||
Fluzone® QIV HD | Japan Penta | Vaxigrip® QIV IM | |||||||||||||
High-dose quadrivalent inactivated influenza vaccine | DTP- Polio-Hib Pediatric | Quadrivalent inactivated influenza vaccine | |||||||||||||
Tuberculosis* | |||||||||||||||
Recombinant subunit vaccine |
(1) | D=Diphtheria, T=Tetanus, P=Pertussis, Hib=Haemophilus influenzae b, HepB=Hepatitis B. |
* | New targets |
This section focuses on Phase I compounds and novel targets. Other vaccines in Phase II or III are described in the section "—Influenza Vaccine Products" 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 “B.3. 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").
Pediatric Combination & Adolescent/Adult Boosters
Several pediatric vaccines are under development. Tailored forapproaches, in order to address specific markets, they are aimed at protecting against five or all six ofpatient needs and to continue to offer innovative solutions in the following diseases: diphtheria, tetanus, pertussis, poliomyelitis (polio),Haemophilus influenzae type b infections and hepatitis B (see "— Vaccine Products").future.
Meningitis Vaccine
Neisseria meningitidis bacteria isare a leading cause of meningitismeningococcal disease in the United States,U.S., Europe, the African meningitis belt and elsewhere, affecting infants and children as well as adolescents. The primary focus of several ongoing projects related to Menactra® is to decrease the age at which this vaccine can first be administered. (see "— Vaccine Products").
Pneumococcal Vaccine
Streptococcus pneumoniae bacteria is the leading etiological agent causing severe infectionsother endemic regions such as pneumonia, septicemia, meningitisBrazil and otitis media, and is responsible for over three million deaths per year worldwide, of which one million are children. 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.Australia.
Sanofi Pasteur is focused ondeveloping a second-generation quadrivalent conjugated meningococcal vaccine. This vaccine uses an alternative conjugation technology. Phase II clinical trial results have demonstrated its safety and immunogenicity. Sanofi Pasteur is continuing the development of this vaccine to suit a multi-protein-based pneumococcal vaccine. This approach should result inwider range of age groups and 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 first Phase I clinical trialflexible range 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 began in September 2011 in adults, adolescents, and infants in Bangladesh.vaccination schedules.
Rabies Vaccine
Rabies mAb Post Exposure ProphylaxisA new generationserum-free — This product consists of two rabies monoclonal antibodies (mAbs) that will be used in association with the Vero cell human rabies vaccine for post-exposure(VerorabVax®) is under development to allow both of our currently available human rabies vaccines, Verorab and Imovax Ravies, to be replaced by a single vaccine. The results of a Phase II clinical trial, demonstrated the non-inferiority of VRVg versus Verorab® in pre-exposure prophylaxis. In 2011, VRVg was approved in France as a line extension of Verorab® in 2011. More recent Phase II data, conducted to license VerorabVax® in countries where Verorab was not previously licensed, has provided data indicating a requirement to adjust the formulation.
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Pediatric Vaccine
Sanofi Pasteur, reviewed the rabies mAb project, developed in partnership with Crucell. Crucell, acquired by Johnson & Johnson in 2011, has taken over full responsibilityKitasato (KDSV) and Daiichi Sankyo (DS), is developing a pediatric pentavalent vaccine for the developmentJapanese market. The vaccine includes diphtheria, tetanus, acP (DTaP) from KDSV, and inactivated polio IPV & Hib from Sanofi Pasteur. It is anticipated that this product, to be distributed by DS, will be the first pentavalent pediatric combination vaccine in the Japanese market. It would serve as a primary series and booster vaccine for Japanese children up to two years old. The project is currently in Phase III.
PR5i (hexavalent vaccine)
Sanofi Pasteur isco-developing, with Merck & Co., Inc., a hexavalent combination vaccine(6-in-1 vaccine PR5i) designed to protect against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. An application for licensure of this vaccine was submitted to the European Medicines Agency in Europe by Sanofi Pasteur MSD in January 2015. On December 17, 2015 the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending the marketing authorization for the product which will be commercialized as Vaxelis in the E.U.. On February 19, 2016, Sanofi Pasteur MSD was granted the marketing authorization for Vaxelis. Likewise, a Biologics License Application was submitted to the U.S. FDA in August 2014, and on November 2, 2015 the FDA issued a Complete Response Letter (CRL) for PR5I, which will be commercialized through a partnership of Merck & Co., Inc. and Sanofi Pasteur. Both Sanofi Pasteur will market it, whenand Merck & Co., Inc. are currently reviewing the CRL and plan to further communicate with the FDA. PR5I is expected to be the first hexavalent vaccine is available.in the U.S. market.
New Vaccine Targets
Dengue — Dengue fever has increasing epidemiological importance due to global socio-climatic changes. ItC.diff Toxoid – Clostridium difficile is a major medical and economic burdenpublic-health concern in the endemic areas of Asia-Pacific, LatinNorth America and Africa. It is also one of the leading causes of fever among travelers. Multiple approaches have been tested to develop a vaccine covering 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 andEurope. In hospitals, it is the leading cause of infectious diarrhea in adults, particularly the elderly. The epidemiology ofClostridium difficile associated disease has been increasing at a worrying rate since 2003, driven primarily by the emergence of atreatment-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 atoxoid-based vaccine. Sanofi Pasteur received a positive response from the FDA 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 timeepisode ofClostridium difficile infection in 50 years of dengue research thatat-risk individuals, including adults with imminent hospitalization or current or impending residence in a long-term care or rehabilitation facility. Phase II results were communicated in May 2014 showing
the C.diff vaccine was seen that protected a large group of children from clinical disease caused by dengue viruses. The results of the world's first efficacy study confirmed the excellent safety profile of Sanofi Pasteur's dengue vaccine candidate. The full analysis of vaccine efficacy against each serotype, reflecting real-life conditions (intent to treat analysis) showed vaccine efficacycandidate to be 61.2% against dengue virus type 1, 81.9% against type 3generally well tolerated and 90% against type 4. One ofimmunogenic in the
dengue virus types (serotype 2) eluded the vaccine. Analyses are ongoing to understand the lack of protection for serotype 2. Phase III efficacy studies are ongoing in several Latin American and South East Asian countries. target population.
Tuberculosis — – Statens Serum Institute (SSI) of Denmark (SSI) has granted Sanofi Pasteur a license to its technology with regard to the use of certain fusion proteins in the development of a tuberculosis vaccine. The license from SSI includes access to the Intercell IC31® adjuvant. The candidate vaccine is made up of recombinant protein units. Results from the 2008 Phase I trial found that the H4/IC31 candidate vaccine was safe when administered to healthy adults living in a region of high endemic tuberculosis. Rapid and poly-functional antigen-specific T cell responses were induced followingA phase I/II study was initiated in July, 2013, in South Africa in infants. A Phase IIproof-of-concept study was initiated in young adolescents in South Africa in March 2014.
Herpes Simplex Virus – Herpes simplex virus type 2 is a single dosemember of the investigational vaccine.herpes virus family and, as such, establisheslife-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. A secondNIH-sponsored Phase I trial was initiated in SwitzerlandOctober 2013 to evaluate the vaccine. In October 2014, Sanofi Pasteur signed a contract with Immune Design Corp. to collaborate on the development of a Herpes simplex virus vaccine.
Pneumococcal Vaccine –Streptococcus pneumoniae bacteria are the leading etiological agent causing severe infections (over three million deaths per year worldwide, including one million children). Diseases caused by Streptococcus pneumoniae (pneumococcus), such as pneumonia, meningitis and febrile bacteraemia, constitute a major, global public-health problem; additionally otitis media, sinusitis and bronchitis are more common but less serious manifestations of infection. The WHO recommends the use of pneumococcal conjugate vaccines (PCV) in December 2010. A Phase I/II study will be initiatedall countries. Theanti-microbial resistance inStreptococcus pneumoniae has complicated the Republictreatment of South Africa in infants primed with BCG.pneumococcal disease and further emphasized the need for vaccination to prevent large-scale morbidity and mortality.
Sanofi Pasteur has entered into a long-term strategic collaboration with SK Chemical Co. to co-develop an innovative PCV. The collaboration agreement includes research & development, production, and commercialization of a preventative pneumococcal disease vaccine.
HIV — A follow-up study toRotavirus – The results of the Phase III evaluating the vaccine against rotavirus lead us not to consider submitting an application for license.
B.5.4. R&D expenditures for late stage development
Aggregate research and development expenditures (including Animal Health) amounted to€5,259 million in 2015, comprising€4,530 million in the Pharmaceuticals
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segment,€552 million in Human Vaccines and€177 million in Animal Health. Research and development expenditures were the equivalent of about 14.2% of net sales in 2015, compared to about 14.3% in 2014 and 14.5% in 2013. 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 achieved despite a greater proportion of products being in late stage development. Preclinical research in the pharmaceutical segment amounted to€1,072 million in 2015 compared to€986 million in 2014 and€951 million in 2013. Of the remaining€3,458 million relating to clinical trialdevelopment in Thailand provided new cluesthe Pharmaceuticals segment (€3,188 million in 20112014 and€3,136 million in 2013), the largest portion was generated by Phase IIIor post-marketing studies, reflecting the cost of monitoring large scale clinical trials.
For each of our current late stage (Phase III in 2015) 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 U.S., the E.U. 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; dossier submitted and withdrawn in the U.S. in December 2013. Re-submitted with complementary Phase III study in July 2015, and accepted for review in September 2015 Expected approval in the third quarter of 2016. | |||||||||||
LixiLan | January 2014 | 2020 | 2020 | 2020 | Phase III program ongoing. Submission in Type 2 diabetes in U.S. done in December 2015, and accepted for review in February 2016 Submission in Type 2 diabetes in E.U. expected in the first quarter of 2016. | |||||||||||
SAR342434 Insulin Lispro | November 2014 | NA | NA | NA | Phase III program ongoing in Type 1 & 2 diabetes. Phase III results expected in the second quarter of 2016. | |||||||||||
sotagliflozin (SAR439954) | November 2015 | 2028 | 2027 | 2027 | Phase III program ongoing in Type 1 diabetes. | |||||||||||
sarilumab (SAR153191) | August 2011 | 2028 | 2027 | 2027 | Phase III program in the treatment of Rheumatoid Arthritis ongoing. Submitted in U.S. in October 2015, and accepted for review in January 2016 Submission expected in the third quarter of 2016 for E.U. | |||||||||||
dupilumab (SAR231893) | October 2014 | 2027 | 2029 | 2029 | Phase III program in the treatment of Atopic Dermatitis & Asthma ongoing. Submission in AD expected in the third quarter of 2016 for U.S. | |||||||||||
patisiran (SAR438027) | December 2013 | 2029 | 2029 | 2029 | Phase III program ongoing in Familial Amyloid Polyneuropathy. | |||||||||||
revusiran (SAR438714) | December 2014 | 2032 | 2032 | 2032 | Phase III program ongoing in Familial Amyloid Cardiomyopathy. |
(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 “– B.7. 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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Item 4. Information on the Company
With respect to the compound patent information set out above, investors should bear in mind the following additional factors:
· | The listed compound patent expiration dates do not reflect possible extensions of up to five years available in the U.S., the E.U., and Japan for pharmaceutical products. See “– B.7. 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 “– B.7. 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. In the E.U. 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 geographical region for 2015, 2014 and 2013 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 at MAT September 2015, 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.
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 aggregate net sales are, respectively:
· | Emerging Markets (see definition in “Item 4. Information on the Company – Introduction” above) represent 32.4% |
of our 2015 aggregate net sales (including Animal Health). Sanofi is the leading healthcare company in emerging markets. In 2015, our sales in emerging markets grew by 7.8% at constant exchange rates. Latin America grew by 4% in 2015. Full-year aggregate net sales, as defined in Item 5, in China, Russia and Brazil were up 19.5%, down 2.8% and down 6.2% respectively. In Africa and the Middle East, aggregate net sales were up 6.8% million sustained by the performance in Middle East; |
· | The U.S. represents 36.2% of our aggregate net sales; we rank twelfth with a market share of 3.7% (3.5% in 2014). Sales in the U.S. were down 1% at constant exchange rates in 2015; |
· | Western Europe represents 21.7% of our aggregate net sales; we are the leading pharmaceutical company in France where our market share is 7.9% (8.3% in 2014), and we rank third in Germany with a 4.5% market share. In 2015, sales in Western Europe were up 0.9% at constant exchange rates; |
· | Other countries represent 9.7% of our aggregate net sales; our market share in Japan is 2.9% (3.2% in 2014). Full-year 2015 aggregate net sales in Japan were down 6.6% at constant exchange rates. |
A breakdown of our aggregate net sales by geographical region is presented in “Item 5. Operating and Financial Review and Prospects – Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014.”
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 products are also sold directly to physicians. With the exception of Consumer Healthcare products, our drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor’s prescription.
We use a range of channels from in-person to digital 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 established prescription products. Established prescription products also satisfy patient needs in some therapy areas. 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 digital channels (such as the internet). National education and prevention campaigns can be used to improve patients’ knowledge of their conditions.
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Our sales representatives, who work closely with healthcare professionals, use their expertise to promote and provide information on our drugs. They represent our values on aday-to-day basis and are required to adhere to a code of ethics and to internal policies in which they receive training. As of December 31, 2015, we had a global sales force of 34,172 people.
Although we market most of our products through our own sales forces, we have entered into and continue to form partnerships toco-promote/co-market certain products in specific geographical 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 discovery, manufacture and 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 andnon-governmental organizations in the public and international donor markets, respectively.
Animal Health products are sold and/or distributed by various channels depending on national legislation applicable to veterinary products. Merial takes into account characteristics specific to each country and thus markets its products to veterinarians, pharmacies or wholesalers. In the event of an epidemic, Merial delivers directly to governments.
B.6.2. Competition
The pharmaceutical industry continues to experience significant changes in its competitive environment.
There are four types of immune responsescompetition in the prescription pharmaceutical market:
· | competition between pharmaceutical companies to research and develop new patented products or address unmet medical needs; |
· | 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 in 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, Boehringer Ingelheim and Merck in diabetes; Lilly in diabetes and oncology; Bristol-Myers Squibb in oncology; Novartis in diabetes, multiple sclerosis, and oncology; Shire in rare diseases; Pfizer in rare diseases and oncology; Biogen Idec, Teva and Merck Serono in multiple sclerosis; Bayer in multiple sclerosis and oncology; Roche and Johnson & Johnson in oncology; AstraZeneca in cardiovascular disease and oncology; Amgen in cardiovascular disease.
Sanofi is the fifth-largest player in the global CHC market and competes with multinational corporations such as Bayer, GSK-Novartis, Johnson & Johnson, Pfizer, as well as local players, especially in emerging markets.
Our generics business is the eighth largest globally by sales and 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, Sanofi is one of the top four players, competing primarily with large multinational players, Merck (outside Europe), GlaxoSmithKline, and Pfizer.
In the Animal Health field in 2015, Sanofi is in competition mainly with major international groups such as Zoetis, Merck and Elanco, Boehringer Ingelheim and Bayer; and with Virbac, Ceva and Vetoquinol, French companies with a global presence.
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 “– B.7. Patents, Intellectual Property and Other Rights” below). 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 relating 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.
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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 E.U., 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 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 andhealth-related biotechnology sectors are highly regulated. National and supranational health authorities administer a vast array of legal and regulatory requirements that dictatepre-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 mandatorypost-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 playedthe authority to request product recalls, product withdrawals and penalties for violations of regulations based on data that are made available to them.
Product review and 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 protection seenlength of time a product is under review.
In 2015, the International Council for Harmonization (ICH), formerly the International Conference on Harmonization
(ICH), launched its reforms building on a 25-year track record of successful delivery of harmonized guidelines for the development and regulation of the pharmaceutical industry.
The aim is to reinforce the foundations of ICH, expand harmonization globally beyond the current ICH Members (the three founding members: E.U., Japan, U.S., plus Canada and Switzerland as observers) and will facilitate the involvement of additional regulators and industry associations around the world. Countries and regional harmonization initiatives can now “automatically” join ICH either as observers or via ICH’s global cooperation group.
International collaboration between regulatory authorities continues to develop with the implementation of confidentiality arrangements and memoranda of understanding between both ICH andnon-ICH regulatory authorities. Examples includework-sharing on Good Manufacturing Practices (GMP) and Good Clinical Practices (GCP) inspections and regular interactions 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,form of “clusters” (i.e. pediatrics, oncology, advanced therapy medicinal products, vaccines, pharmacogenomics, orphan drugs, biosimilars, and blood products) between the U.S. National Institutes of Health (NIH), the HIV Vaccine Trial Network, and the Military HIV Research ProgramE.U.
In addition to substantiatethe joint efforts listed above, Free Trade Agreements (FTAs) have proven to be one of the best ways to open up foreign markets to exporters and extendto allow for discussions on harmonization topics for regulatory authorities. Some agreements, such as the vector prime/protein subunit boost regimen usedAgreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), are international in Thailand. Plansnature, while others are between specific countries.
The Trans-Pacific Partnership, under discussion since 2008, was concluded on October 5, 2015. This free trade agreement, which was negotiated between Australia, New Zealand, the U.S., Peru, Chile, Mexico, Canada, Singapore, Brunei, Malaysia, Vietnam and Japan, affects 40% of the global economy. Provisions which affect the BioPharma industry include patent exclusivity term for biologics.
The Transatlantic Trade and Investment Partnership (TTIP) is still being madenegotiated. The proposed free trade agreement, between the E.U. and the U.S., aims to also studypromote multilateral economic growth. Specifically with respect to the regimenbiopharma industry, the agreement aims to enable regulators to work together more closely to ensure medicines are safe and effective.
The requirement of many countries, including Japan and several Member States of the E.U., 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 RepublicE.U. have been largely centralized with the EMA, pricing and reimbursement remain a matter of South Africa.national competence.
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Item 4. Information on the Company
In the E.U., there are three main procedures by which to apply for marketing authorization:
· | The centralized procedure is mandatory for drugs derived from biotechnologies, new active substances designed for human use to treat HIV, viral diseases, cancer, neurodegenerative diseases, diabetes andauto-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 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., performs in the same manner 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 E.U. only after the originator producteight-year data exclusivity period has expired. Further, generic manufacturers can only market their generic products after a10- or11-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.
In 2015, the EMA recommended 93 medicines for marketing authorization (versus 82 in 2014), including 39 new active substances.
Among the 93 medicines recommended, 18 (19.3%) had an orphan designation (versus 17 in 2014 and 11 in 2013), providing medicines for patients with rare diseases. Five medicines were evaluated under accelerated assessment in 2015 (versus 7 in 2014 and only one in 2013), this mechanism is reserved for medicines that have the potential to address unmet medical needs. Three medicines received a recommendation for a conditional marketing authorization, one of the EMA’s early access routes to patients, intended for medicines that address an unmet medical need and that target seriously debilitating or life-threatening diseases, rare diseases or are intended for use in emergency situations in response to a public health threat.
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 risk-benefit 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 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 collaborationincludes measures relating to the detection, assessment, minimization and communication of the risk of adverse reactions, having due regard to the therapeutic effect of the medicinal product. This committee is expectedalso responsible for the design and evaluation ofpost-authorization safety studies (PASS) and pharmacovigilance audits.
In Europe, the PRAC has performed reviews of marketed products (by class or on ad hoc basis) through various
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Item 4. Information on the Company
procedures. 120 Sanofi products underwent PRAC review through signal and referral procedures from July 2012 to December 2015, generating 73 labeling variations (17 new variations in 2015) and five additional risk minimization measures. In only two cases for Sanofi (Myolastan® and Methadone oral solutions containing povidone) did the review lead to the product being withdrawn from the E.U. market.
The pharmacovigilance legislation was amended in 2012. The amendments aim to further strengthen the fieldprotection of HIV vaccine developmentpatient health by sharing resourcespromoting prompt and by providingappropriate regulatory action on European medicines. In particular, the manufacturing componentamendments 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.
The pharmacovigilance legislation also strengthens the legal basis for regulators to requirepost-authorization safety and efficacy studies throughout the life cycle of a partnershipmedicinal product, with regulatory supervision of funding agencies, research organizations, governments,protocols and expertsresults. 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 PASS andpost-authorization efficacy studies (PAES) into development and life cycle management plans. Sanofi has put in place robust processes to ensure that PASS and PAES can be properly implemented as required, either as part of a Risk Management Plan (RMP) or following a Health Authority request.
The pharmacovigilance legislation also introduced a periodic safety report to be prepared by pharmaceutical companies (Periodic Safety Update Report – PSUR). This is not limited to safety data, but instead presents a critical analysis of therisk-benefit balance of the medicinal product, taking into account new or emerging information in the fieldcontext of HIV vaccine development. Sanofi Pasteur is also looking at its NYVAC-HIV vaccine replicating vectorscumulative information on risks and a flavivirus-based viral vector, Replivax, by participating in international consortium and under the Collaboration for AIDS Vaccine Discovery (CAVD).benefits.
ACAM-Cdiff —Clostridium difficileThere is a major publiclegal requirement for an enhanced adverse reaction collection and management system (EudraVigilance) that delivers better health concernprotection through simplified reporting, better quality data and better searching, analysis and tracking functionalities. It is associated with a legal requirement for MAHs to monitor the EudraVigilance data to the extent to which they have access. Following an EudraVigilance functionalities audit scheduled in North America2016, the move to EMA centralized reporting is planned for mid 2017.
The database of medicinal products aims to deliver structured and Europe. In hospitals, it isquality assured information on medicinal products authorized in the leading causeE.U. that can support E.U. terminologies of infectious diarrhea in adults, particularlyproducts, substances, and organizations
used to power pharmacovigilance and regulatory systems. Since January 1, 2015, Marketing Authorization Holders (MAH) need to notify the elderly. EMA of any new marketing authorizations within 15 calendar days from the date of authorization and notify the EMA of any variation to the terms of the Marketing Authorization as soon as possible and no later than 30 calendar days from the date of which the changes have been authorized.
The epidemiologyEMA’s medical literature monitoring (MLM) service was launched on September 1, 2015 to monitor selected medical literature for reports ofClostridium difficile associated disease (CDAD) has been increasing at a worrying rate since 2003, driven primarily by the emergence of a treatment-resistant, highly virulent strain CD027. suspected adverse drug reactions containing certain active substances and to enter reports into EudraVigilance database.
There is currently no vaccine availablea legal requirement for EMA to set up a repository for Periodic Safety Update Reports (PSURs) and their assessment reports, to allow centralized PSUR reporting and to enhance access to data and information, thereby supporting benefit risk assessments of medicines. In June 2015, the only vaccine candidate currentlyPSUR Repository has achieved its full functionality and its use in development is ACAM-Cdiff. ACAM-Cdiff is a toxoid-based vaccine. Toxoids have been used as the basis of a number of highly successful licensed vaccines. This vaccine candidateE.U. will become mandatory on June 13, 2016.
In the U.S., applications for approval are submitted for review to the FDA, which has successfully completed Phase I clinical trials with more than 200 participants in which safetybroad regulatory powers over all pharmaceutical and immunogenicity were evaluated. Sanofi Pasteur received a positive response from the United States FDA's Centerbiological products that are intended 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 studysale and marketing in the U.S. This trialTo commercialize a product in the U.S., an NDA under the Food, Drug and Cosmetic (FD&C) Act or Biological License Application (BLA) under the Public Health Service (PHS) Act is focused on evaluating preventionsubmitted to the FDA with data for filing andpre-market review. Specifically, the FDA must decide whether the product is safe and effective for its proposed use, if the benefits of the first episodedrug’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 requirepost-approvalClostridium difficile infection (CDI) in at-risk individuals, which includes adults with imminent hospitalization 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 current or impending residence insupplemental BLA (sBLA) for a long-term care or rehabilitation facility. Results frombiological product.
The FD&C Act provides another abbreviated option for NDA approved products, called the first stage of this study showed505(b)(2) pathway. Thispre-market application may rely on the vaccine wasFDA finding that the reference product has been found to be safe and immunogeniceffective by the FDA based upon the innovator’s preclinical and provided important information for dose selection. Phase II study resultsclinical 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 under review. A multinational Phase III trial“abbreviated” because they are generally not required to include data to establish safety and effectiveness, but need only demonstrate that their product is planned to startbioequivalent (i.e., performs in humans in the third quarter of 2013.same manner as the originator’s product). Consequently, the
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length of time and cost required for development of generics can be considerably less than for the originator’s drug. The ANDA pathway in the U.S. can only be used for generics of drugs approved under the FD&C Act.
The FDA Center for Drug Evaluation and Research approved 45 novel drugs in 2015 (versus 41 in 2014, 27 in 2013 and 39 in 2012). A breakdown of designations and pathways to expedite drug development and review includes Fast Track (14=31%), Breakthrough Therapy (10=22%), Accelerated Approval (6=13%), and Priority Review (24=53%). Of the 2015 novel drugs, 27 (60%) were designated in one or more expedited categories.
CDER identified 16 of the 45 novel drugs approved in 2015 (36%) as First-in-Class, one indicator of the innovative nature of a drug. Approximately 47% of the novel drugs approved in 2015 (21 of 45) were approved to treat rare or “orphan” diseases that affect 200,000 or fewer Americans.
Congress encouraged development of new human drugs and biological products for prevention and treatment of certain tropical diseases (FDAAA 2007) and rare pediatric diseases (FDASIA 2012) by offering additional incentives for obtaining FDA approval of such products. To date three tropical disease priority review vouchers (PRVs) and six pediatric rare disease PRVs have been granted. Regeneron purchased in 2014 a pediatric rare disease PRV from BioMarin which was redeemed for the priority review of their PCSK9 product Praluent®, thus cutting short the review time by 4 months. Sanofi purchased a second pediatric rare disease PRV from Retrophin in the summer of 2015, which was redeemed in December 2015 for the priority review of their fixed combination product – Lixisenatide/insulin glargine – Lixilan. On December 18, 2015, Congress extended the rare pediatric disease priority review voucher program to September 30, 2016. The extension was granted as part of the Congressional budget deal. Bills in both the House and Senate have been introduced which could extend the program beyond the September 2016 date.
Pseudomonas aeruginosa — In February 2010, Sanofi Pasteur entered into an agreement with KaloBios Pharmaceuticals,Japan, regulatory authorities can require local clinical studies, though they also acceptmulti-national studies. In some cases, bridging studies have been conducted 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 U.S.-based, privately held biotech company,significant delay in the registration of some innovative products in Japan compared to the E.U. and the U.S.. In order to solve thisdrug-lag problem, the Japanese Ministry of Health, Labor and Welfare (J-MHLW) introduced the new National Health Insurance (NHI) 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 unapproved drugs oroff-label
indications with high medical needs. The pharmaceutical companies concerned are required to file literature-based submission within six months or to submit a Humaneered™ antibody fragmentclinical trial notification for registration within one year after the official development request of unapproved drugs or the off label indications. For unapproved drugs with high medical needs, clinical trials in Japanese patients are generally required. Otherwise, a fine equivalent to both105% (with 5% representing interest) of sales based on the premium would be paid back to the government.
In order to promote the development of innovative drugs in Japan for putting them into early practical use in Japan ahead of the world, SAKIGAKE (which is a Japanese term meaning forerunner) review designation program was implemented from April 2015 on a trial basis. The Pharmaceuticals and Medical Devices Agency (PMDA) will review designated products on a priority basis with the aim of reducing their review time from the normal 12 months to 6 months.
Based on the reform of the NHI price system finalized in 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 prevent9 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 Pharmaceuticals and Medical Devices Act was implemented on November 25, 2014. 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 theJ-MHLW before placing products on the market or when revisions are made. The second objective is to accelerate the development of medical devices. ThePseudomonas aeruginosa (Pa)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.
infections.The term “Regenerative Medicinal Products” used in the law includes cellular andtissue-based products and gene therapies. This concept is similar to “Advanced Therapy
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Medicinal Products (ATMPs)” in the E.U. This law enables conditional regulatory approval based on confirmation of probable efficacy and safety insmall-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.
B.6.3.2 Biosimilars
Products can be referred to as “biologics” when they are derived from natural sources, including blood products or products manufactured within living cells (e.g., antibodies). Most seriousPa infections occur in hospitalizedbiologics are complex molecules or mixtures of molecules which are difficult to characterize and critically or chronically ill patients — primarily affectingrequirephysico-chemical-biological testing, and an understanding of and control over the respiratory system in susceptible individuals — and are a serious clinical problemmanufacturing process.
The concept of “generics” is not scientifically appropriate for biologics due to their resistancehigh 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 E.U., a regulatory framework for developing and evaluating biosimilar products has been in place since 2005. The CHMP has issued several product/disease specific guidelines for biosimilar products including guidance on preclinical and clinical development of biosimilars of LMWH and of insulins. Starting in 2011 and continuing in 2015, the CHMP initiated a revision of the majority of the existing biosimilar guidelines (general overarching guidelines, quality,non-clinical and clinical product specific guidelines).
End of 2014, the CHMP published its revised overarching guideline on biosimilars. The main change introduced by this new guidance is the possibility for biosimilar developers to antibiotics. The two primary target indicationsuse a comparator authorized outside the EEA in certain clinical studies and in vivonon-clinical studies. This concept is expected to facilitate the global development of biosimilars and to avoid unnecessary repetition of clinical trials. This revised guideline came into force as of April 30, 2015.
While the CHMP has adopted a balanced approach for all biosimilars, allowing evaluation on acase-by-case basis in accordance with relevant biosimilar guidelines, the CHMP has expressed that in specific circumstances, a confirmatory clinical trial may not be necessary. This would require that similar efficacy and safety can clearly be deduced from the similarity of physicochemical characteristics, biological activity/potency, and pharmacokinetic and/or pharmacodynamic profiles of the biosimilar and the reference product. 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 acase-by-case basis.
In the U.S., 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 anFDA-licensed biological product.
To date, the FDA has published for consultation seven draft guidance documents concerned with biosimilar development and approval. Four of those seven guidance documents have been finalized. Guidance on labeling and interchangeability has not yet been published.
In Japan, guidelines defining the regulatory approval pathway forfollow-on biologics were finalized in March 2009. These guidelines set out the requirements on preclinical and clinical Chemistry, Manufacturing and Control (CMC) data to be considered for the antibodydevelopment 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 preventionin 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 Generics
PaIn the E.U.the number of positive opinions by centralized procedure for generics has increased from last year (16 in 2013, eight in 2014, 21 in 2015). Most of the generics applications for chemical entities use mutual recognition and decentralized procedures, with about 8% of the procedures relating to nonprescription 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 program (Generic Drug User Fee Amendments) to supplement traditional appropriated funding, focused on safety, access, and transparency. ANDA review performance goals for 2015 state that FDA will review and act on 60 percent of original ANDA submissions within 15 months from the date of submission.
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 U.K..
In Japan, the NHI price system was reformed in 2014, including a new special price reduction rule forlong-listed drugs. The new rule will reduce the NHI prices oflong-listed drugs whose generic replacement rates are less than 20% five years after their first generics join the NHI price list. Reductions are 2.0% in the first NHI price revision, 1.75% if the substitution rate is 20% or higher but less than 40%, and 1.5% if the rate is 40% or higher but less than 60%. The rule was introduced in April 2014.
Under the new price system, NHI prices of first generics (currently set at 70%) will be set at 60% of the price of the originator product. A 50% rule will be applied to oral first generics once more than ten products with the same ingredients have obtained listing.
In addition, a max 20% “Sakigake premium” will be introduced in April 2016 for Sakigake-designated products, which have new mechanisms of action and obtain approval in Japan ahead of the rest of the world.
B.6.3.4 Medical Devices
In the E.U., there is nopre-market authorization 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 theCE-mark allowing them to circulate freely in the EU/EFTA (European Free Trade Association) countries and Turkey. Medical Devices are currently regulated by three core Directives.
In September, 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 European Parliament endorsed in 2013 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 stricterpost-marketfollow-up, and improved stakeholder engagement. A “scrutiny procedure” would be used at least forhigh-risk Class III devices (novel technologies or specific public health threats).
The 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. Sanofi has several “companion diagnostics” in development.
The E.U. Trilogue Negotiations on Medical Device (MD) and In Vitro Diagnostic (IVD) Regulations started in 2015 but will not be fully in force until 2019.
In the U.S., the FDA Center for Devices and Radiological Health (CDRH) is responsible for regulating firms who manufacture, repackage, relabel and/or import medical devices sold in the U.S. In addition, CDRH regulatesradiation-emitting electronic products (medical andnon-medical) such as lasers,x-ray systems, ultrasound equipment, microwave ovens and color televisions.
Medical devices are classified into Class I, II, and III. Regulatory control increases from Class I to Class III. The device classification regulation defines the regulatory requirements for a general device type. Most Class I devices are exempt from Premarket Notification 510(k); most Class II devices require Premarket Notification 510(k); and most Class III devices require Premarket Approval.
The basic regulatory requirements that manufacturers of medical devices distributed in the U.S. must comply with are: Establishment Registration; Medical Device Listing; Premarket Notification 510(k) unless exempt or Premarket Approval; Investigational Device Exemption; Quality System Regulation; Labeling Requirements and Medical Device Reporting.
B.6.3.5 OTC drugs
In the E.U., EllaOne, an emergency contraceptive, become the fourth European CentralizedRx-to-OTC switch in January, 2015. GlaxoSmithKline Consumer Healthcare’s Alli (orlistat) weight-loss medicine was the first in January, 2009, followed by Nycomed’s 20mg pantoprazole tablets in June, 2009, and AstraZeneca’s Nexium Control (esomeprazole) in 2013.
In the U.S., FDA approved oneprescription-to-OTC switch in 2015 for Rhinocort Allergy Spray (budesonide).
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In Japan, theJ-MHLW drug safety committee decided in 2013 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). TheJ-MHLW gives the green light for online sales of such OTC drugs if no safety concerns arise during theirthree-year safety evaluation period (the safety evaluation period is currently four years). During thethree-year evaluation period, drugs that moved from prescription to OTC are categorized as products that require pharmacist consultations when purchasing.
Under the new plan, theJ-MHLW requires marketing authorization holders to submit interim reports upon the completion of their postmarketing surveillance (PMS). Based on these interim reports and other reports on adverse events, theJ-MHLW will evaluate serious adverse events two years after the launch of OTC drugs or later.
In 2016, the J-MHLW will set up a new panel that would pick prescription products candidates that should be switched to nonprescription status, with its first meeting scheduled as early as this summer. Under its plan, the J-MHLW would constantly accept requests for prescription-to-OTC changes from medical societies and other organizations as well as consumers, and then these requests would be publicly reviewed by the new panel. Based on its deliberations, the panel would refer the shortlisted requests to the Pharmaceutical Affairs and Food Sanitation Council’s (PAFSC) committee on nonprescription drugs, which effectively makes decisions on marketing approval for OTCs. The ministry is also planning to seek public comments.
B.6.3.6 Transparency and public access to documents
· | Transparency regarding clinical trials |
Over recent 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 their products in publicly accessible registries. In addition, both ICH andnon-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 andweb-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 the work of the EMA’s scientific committees.
The EMA has committed to continuously extending its approach to transparency. A key goal in this process is the proactive publication of clinical trial data for medicines once the decision-making process on an application for a E.U.-wide marketing authorization is complete.
At the start of October 2014, the EMA adopted the Policy 0070 for publication of clinical trials reports. The policy came into force on January 1, 2015. It applies to clinical reports contained in any new marketing authorization applications for centralized marketing authorizations and article 58 applications (medicines that are intended exclusively for markets outside the E.U.) submitted after that date.
Forpost-authorization procedures for existing centrally authorized medicinal products, the effective date will be July 1, 2015 for extension of indication and line extension applications submitted as of that date.
There is a two-step approach for the implementation of the policy:
· | The first phase concerns the publication of clinical reports only, whereby the data that will be accessible on the EMA website. |
· | In a second phase, the EMA will endeavor to find the most appropriate way to make Individual Patient Data (IPD) available, in compliance with privacy and data protection laws. |
In order to operationalize the EMA Policy 70, a Sanofi internal project has been launched to define, develop, implement and control a sustainable process, associated pneumoniatools and documents as well as resourcing, training and communication plans to manage clinical documents and data redaction in mechanically ventilated patientscompliance with Policy 70.
In the U.S., 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.
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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.
In Japan, theJ-MHLW/PMDA actively publishes information concerning approvals of medicinal products (ethical drugs, nonprescription drugs, andquasi-drugs) and medical devices. For ethical drugs discussed at theJ-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.
· | Transparency regarding Health Care Professionals |
In the E.U., there is no harmonized approach regarding transparency for Health Care Professionals (HCP). There is no common harmonized approach. For transparency purposes, there is increased external scrutiny of interactions between pharmaceutical companies and HCPs at national level, with legal provisions or healthcare industry voluntary undertakings (Pharma Code) in some countries (such as the U.K., Denmark, France, or Portugal).
The European Federation of Pharmaceutical Industries Association (EFPIA) released inmid-2013 a new Code on Disclosure of Transfers of Value from Pharmaceutical Companies to HCPs and Healthcare Organizations (HCOs), the “EFPIA HCP/HCO Disclosure Code”. EFPIA members were required to comply with this new code and transpose it into their national codes in full by December 13, 2013.
This new Code includes stricter rules on hospitality and gifts, with the requirement for member associations to include a threshold on hospitality and the prohibition of gifts in their national codes.
In the U.S., the Physician Payments Sunshine Act, or “Sunshine Act”, was passed as part of the Patient Protection and Affordable Care Act in 2010. The law is designed to bring transparency to financial relationships between physicians, teaching hospitals, and preventionthe pharmaceutical industry. Manufacturers and group purchasing organizations must report all payments or transfers of relapsesvalue – including payments for research, travel, honoraria and potential improvement of treatment outcomesspeaking fees, meals, educational items like textbooks and journal
reprints – whether made directly to a physician or teaching hospital or indirectly through a third party. The law also requires manufacturers and GPOs to report physicians who have an ownership interest in patients with an ongoingthe company. Reports are made to the Centers for Medicare and Medicaid Services, a government agency.
Pa infection.In Japan, the Japan Pharmaceutical Manufacturers Association (JPMA) member companies started releasing information on their funding to healthcare professionals in 2013 and patient groups in 2014 under the trade group’s voluntary guidelines to boost financial transparency. Under the JPMA’s transparency guidelines for the relations between companies and medical institutions, its members currently report their payments in five categories: 1) R&D, 2) academic research support, 3) manuscript/writing fees, 4) information provisioning, and 5) other expenses.
B.6.3.7 Other new legislation proposed or pending implementation
In the U.S., the 21st Century Cares Act (HR 6) Help and Hope for Patients through Biomedical Innovation passed the House by a vote of 344-77 on July 10, 2015. A companion Senate bill has not yet been introduced.
· | Clinical trials regulation in E.U. |
The new Clinical Trials Regulation ((EU) No 536/2014) of the European Parliament and of the Council of 16 April 2014 on clinical trials on medicinal products for human use, and repealing Directive 2001/20/EC was published in the Official Journal of the E.U. on May 28, 2014.
Pharmaceutical companies and academic researchers will be required to post the results of all their European clinical trials in apublicly-accessible database.
The legislation will streamline the rules on clinical trials across Europe, facilitatingcross-border cooperation to enable larger, more reliable trials, as well as trials on products for rare diseases. It simplifies reporting procedures, and gives the European Commission the authority to perform audits. Once a clinical trial sponsor has submitted an application dossier to a Member State, the Member State will have to respond to it within fixed deadlines.
One of the main objectives of the European Commission in introducing the clinical trials regulation was the impact on the competitiveness of the European life sciences industry caused by changes to the conditions of the 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.
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The major points are:
· | The timeline for approving a clinical trial proposal is 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 aUnion-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 thethree-year transition period, both sets of rules will apply in parallel.
· | Adaptive pathways (AP) and Priority medicines (PRIME) scheme |
The adaptive pathways approach is part of the EMA efforts to improve timely access for patients to new medicines. Adaptive pathway is a scientific concept for medicine development and data generation which allows for early and progressive patient access to a medicine. The approach makes use of the existing E.U. regulatory framework for medicines.
EMA AP Pilot project is a new approach to licensing medicines in the form of a “soft” regulatory pathway. Starting in March 2014, this pilot project is to be tested over a limited period of time to collect objective elements for potential new legislation. It is a prospectively planned process, starting with earlier authorization of a medicine in a restricted, well characterized patient population, based on limited clinical development. This will be followed by iterative phases of evidence gathering and adaptations of the marketing authorization to expand access to the medicine to broader patient populations.
AP builds on existing legislative/regulatory tools (scientific advice (SA), parallel SA with HTA bodies, centralized compassionate use, conditional approval, patients’ registries and enhanced pharmacovigilance activities).
Another initiative launched in 2015 is a new scheme for PRIME, to optimize the development and facilitate the accelerated assessment of new priority medicines of major public health interest to benefit patients as early as possible. The scheme is based on enhanced interaction and early dialogue with medicine developers. EMA expects to launch PRIME in the first quarter of 2016.
PRIME will provide enhanced scientific and regulatory support to companies developing medicines that may offer new therapeutic options to patients who currently have no treatment options, or a major therapeutic advantage over existing treatments.
PRIME reinforces early dialogue and builds on regulatory processes already in place within the E.U. legal framework, including scientific advice to optimize the generation of robust data and the accelerated assessment procedure to improve timely access for patients to priority medicines.
· | Falsified medicines |
The E.U. has reformed the rules for importing active substances for medicinal products for human use into the E.U. Directive 2011/62/EU. Since January 2013, all imported active substances must have been manufactured in compliance with GMP standards or standards at least equivalent to GMP. The manufacturing standards in the E.U. for active substances are those of the ICH Q7. With effect from 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.
Several implementing measures for the Falsified Medicines Directive were adopted: the establishment of a common E.U. logo for online pharmacies was adopted in June 2014, giving Member States until July 2015 to prepare for its application. The detailed rules for the safety features appearing on the outer packaging of medicinal products for human use have been adopted, meaning that all prescription drugs or reimbursed drugs commercialized on the European market (CEE) will have to be serialized for December 2018 or February 2019.
· | Nagoya Protocol |
The Nagoya Protocol to the Convention on Biological Diversity on “Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from Their Utilization” was adopted in Nagoya at the tenth Conference of the Parties of the Convention on Biological Diversity (CBD) on October 29, 2010. The Nagoya Protocol has been ratified by 68 countries and the E.U.; the protocol applies in
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91 countries since the end of 2015. The Nagoya Protocol is intended to create greater legal certainty and transparency for both providers and users of genetic resources by:
· | Establishing more predictable conditions for access to genetic resources; and |
· | Helping to ensurebenefit-sharing when genetic resources leave the contracting party providing the genetic resources. |
On April 16, 2014, the European Parliament and the Council adopted the new Regulation ((EU) No 511/2014) on compliance measures for users, based on the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization in the Union (the EU ‘Access and Benefit Sharing’ (ABS) Regulation). It came into force in October 2014.
In October 2015, the European Commission published the implementing Act (Regulation n°2015/1866).
The pharmaceutical industry is due to implement compliance procedures fornon-human biological materials used in the discovery, development, manufacturing and packaging of medicinal products to be submitted in the E.U., starting after 2015. These will also include documentation from the originating country and acquisition date for materials that were acquired before the Regulation came into force. An internal project on implementation of the Nagoya protocol has been put in place.
In Japan, the relevant ministries are currently considering local measures for the ratification of the Nagoya Protocol. The schedule for ratification has yet to be determined. The details of local measures for the implementation of the Nagoya Protocol cannot be disclosed due to ongoing discussion, but the relevant ministries are considering a framework where terms and conditions can be set for mutual agreement Sanofi Pasteur acquired worldwide rightsand a consent can be obtained in advance from providers in accordance with laws and regulations in a source country when genetic resources from the source country are used in Japan.
· | NDA electronic clinical trial data submission |
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 disease indicationstypes of eCTD applications for human medicines, the EMA launched the eSubmission Gateway, which is now mandatory for all eCTD submissions through the centralized procedure, in order to improve efficiency and decrease costs for applicants.
As of July 1, 2015, companies are obliged to use electronic application forms provided by the EMA for all centralized marketing authorization applications for human and
veterinary medicines. From January 2016, the use of electronic application forms will also be mandatory for all other E.U. marketing authorization procedures (i.e. MRP, DCP and national submissions).
In Japan, electronic submission of CDISC-based clinical data may be required for J-NDA from 1st October, 2016. However, a transition period (2016 October to 2020 March) is set. Accordingly, from April 1, 2020, the electronic submission will be mandatory – 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 launched a pilot program in 2014 which ran to the end of 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 2016, it will also consider transitional measures to smooth the way for the full changeover.
Such mandatory electronic submissions are expected to be limited to clinical trial data for new drugs newly filed for regulatory approval. The necessity for electronic submission for Phase I trial data will likely be decided on acase-by-case basis, while pharmaceutical companies will be required to file nonclinical toxicity study data in one of the Standard for the Exchange on Non clinical Data (SEND) formats in due course.
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.
While a drive to expand healthcare coverage has become a noticeable feature in many regions, providing opportunities for industry, it has also brought pressure on these new budgets, bringing with it a wave of price and volume control
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measures. National production, whether through a policy of industrialization, through technology transfer agreements or through preferential conditions for local production, is equally a growing issue.
Significant recent events and trends:
· | In the U.S., mandatory health insurance began on January 1, 2014. To encourage enrollment, individual penalty fees for not enrolling were implemented in 2014 along with special enrollment periods and grace policies, and were further increased in 2015 and 2016. Enrollment in 2015 varied throughout the year but approximated a total of 9 million lives, up from about 6 million lives in 2014 (excluding Medicaid expansion). While individual penalty fees play a role in encouraging growth, they alone may not stimulate substantial future enrollment. |
· | In Europe, the financial crisis of recent years seems to have stabilized. However, the effects of the crisis on the pharmaceutical industry continue to be felt. The lower pricing introduced in many countries has led to governments having to block parallel trade in order to ensure patient supply. In Germany, the price freeze implemented with AMNOG and scheduled to finish at the end of 2013 has now been extended to the end of 2017. The advent of effective Hepatitis C cures has also brought about discussion of greater cooperation among Member States in procurement and price negotiation. |
· | The global 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 expected to be a subject for scrutiny in the future. Competition from national production, whether through preferential conditions for local industry, technology transfer agreements, or industrialization programs, is a prevalent theme in many emerging markets, notable examples being Russia and 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:
· | In compliance with local law 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. |
Conscious of 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 access with appropriate rewards for innovation. Specifically, we are involved in risk-sharing agreements with payers, whereby part of the financial risk related toPa infections except cystic fibrosis 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 bronchiectasis, which Sanofi Pasteur has the option to obtain at a later date. KaloBios has already completed Phase I clinical trials — one in healthy volunteerspatient population. The price and one in cystic fibrosis patients — and a small proof of concept Phase II clinical trial in mechanically ventilated patients using anE. coli-derived antibody fragment. A Phase I study in healthy adult volunteers has been initiated in December 2012 with a Chinese hamster ovary cell-derived antibody fragment.
Rotavirus — Rotavirus is the leading cause of severe, dehydrating diarrhea in children aged under five globally. Estimates suggest that rotavirus causes over 25 million outpatient visits, over 2 million hospitalizations and over 500,000 deaths per year. The burden of severe rotavirus illness and deaths falls heavily upon children in the poorer countriesreimbursement level of the world, with more than 80% of rotavirus-related deaths estimateddrug 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 occur in lower income countries of Asia, and in sub-Saharan Africa. Two vaccines (RotaTeq® and Rotarix®) are licensed worldwide, but production of local vaccines is necessary to achieve wide coverage. Shantha has a non-exclusive license of rotavirus strains from the U.S. NIH and is developing a live-attenuated human bovine (G1-G4) reassortant vaccine. The license excludes Europe, Canada, United States, China and Brazil. The project is currently in Phase I/II (dose finding study).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 the20-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'sproduct’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 StatesU.S. (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'sproduct’s initial marketing approval. The protection a patent affordsprovides 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 2012,2015, an EPO patent
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application may cover the 38 European Patent Convention member states, including all 2728 member states of the European Union.E.U.. The granted "European Patent"“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 maypre-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 nine countries including France have ratified the agreement.
The Unitary Patent will provide a unitary protection within the participating states of the E.U. (when ratified by the member states with the exception of 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.
We monitor our competitors and vigorously seek to challenge patent infringement when such challenges would negatively impact our business objectives. See "Item“Item 8 —– A. Consolidated Financial Statements and Other Financial Information — Patents"– Information on Legal or Arbitration Proceedings – 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“Item 3. Key Information —– D. Risk Factors —– We may lose market share to competing remedies, biosimilar or generic brands if they are perceived to be equivalent or superior products"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 UnionE.U. and the United States,U.S., many of our pharmaceutical products may also benefit frommulti-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,U.S., 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"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 andpatent-related exclusivities by a pediatric extension. See "—“– Pediatric Extension"Extension”, below.
Further, in the United States,U.S., a different regulatory exclusivity period applies to biological drugs. The Biologics Price Competition and Innovation Act of 2009 ("BPCIA"(“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"(“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,E.U., 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). Thiseight-year period is followed by atwo-year period during which generics cannot be marketed (marketing exclusivity). The marketing exclusivity period can be extended to three
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years if, during the firsteight-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+“8+2+1"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 requiringpharmaco-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-
RelatedTrade-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 providenon-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“Item 3. Key Information —– D. Risk Factors —– Risks Relating to Our Business —the Group Structure and Strategy – The globalization of the Group'sour business exposes us to increased risks."risks in specific areas”.
Pediatric Extension
In the United StatesU.S. and Europe,the E.U., under certain conditions, it is possible to extend a product'sproduct’s regulatory exclusivities for an additional period of time by providing data regarding pediatric studies.
In the United States,U.S., 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 theHatch-Waxman Act, timely provision of data meeting the FDA'sFDA’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(the so-called "pediatric exclusivity" “pediatric exclusivity”). Our main products which have received FDA grants of pediatric exclusivity at some point are Aprovel®, Lantus®, Allegra®, Ambien®/Ambien® CR, Plavix®, Taxotere®, and Actonel®.
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 six month regulatory exclusivity for pediatric marketing authorization (for(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 marketingregulatory exclusivity from 8eight to 10ten years.
Orphan Drug Exclusivity
Orphan drug exclusivity may be granted in the United StatesU.S. 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-steptwo 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-yearseven year period. Whether a subsequent application is for the "same"“same” drug depends upon the chemical and clinical characteristics. The FDA may approve applications for the "same"“same” drug for indications not protected by orphan exclusivity.
Orphan drug exclusivities also exist in the European UnionE.U. and Japan.
Product Overview
We summarize below the intellectual property coverage in our major markets of the marketed products described above at "— Pharmaceutical Products —“– B.2. Main Pharmaceutical Products"Products”. Concerning animal health products, Merial'sMerial’s intellectual property coverage is described above (see "—“– B.4. Animal Health: Merial"Merial”). In the discussion of patents below, we focus on active ingredient patents (compound patents) and for the NCEs on any later filed patents listed, as applicable, in the FDA'sFDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations (the
"Orange Book" “Orange Book”) or on their foreign equivalents. For Biologics the Orange Book listing does not apply. 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 or a Biosimilar version of one of our products or the equivalent of these patents in other countries (see "—“– Challenges to Patented Products"Products” below). In some cases, products may also benefit from pending patent applications or from patents not eligible for Orange Book listing (for NCEs) (e.g., patents claiming industrial processes). In each case below, we specify whether the active ingredient is claimed by an unexpired
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Item 4. Information on the Company
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-monthsix month pediatric extensions toas applicable. Where patent terms have expired we indicate such information and mention if generics are on the FDA's Orange Book dates for Lantus® and Actonel®.market.
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.
E.U.. Specific situations may vary by country, most notably with respect to older patents and to countries having only recently joined the European Union.E.U..
We additionally set out any regulatory exclusivity from which these products continue to benefit in the United States, European UnionU.S., E.U. 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,E.U., in some cases member states have taken positions prejudicial to our exclusivity rights.
Aldurazyme® (laronidase)
U.S. | E.U. | Japan | ||
Compound: | Compound: | Compound: | ||
Later filed patents: | ||||
Regulatory |
Allegra® (fexofenadine hydrochloride)
U.S. | E.U. | Japan | ||
Compound: expired | ||||
Compound: expired |
Compound: expired | ||||
Generics on the market | Generics on the market | Generics on the market | ||
Converted toOver-the-Counter | Converted toover-the counter | |||
U.S. | E.U. | Japan | ||
Compound: expired | ||||
Compound: expired |
U.S. | E.U. | Japan | ||
Compound: June 2018 | Compound: September 2019 in most of the E.U. | Compound: May 2022 | ||
Later filed patents: ranging through January 2023 | Later filed patent: March 2022 | Later filed patent: July 2022 | ||
Regulatory exclusivity: expired | Regulatory exclusivity: April 2017 |
Aprovel® (irbesartan)
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: | ||
Generics on the market | Generics on the market |
Aubagio® (teriflunomide)
U.S. | E.U. | Japan | ||||
Compound: expired | Compound: | Compound: expired | ||||
Later filed patents: coverage ranging through | Later filed | Later filed patent: coverage ranging through March 2024 | ||||
Regulatory Exclusivity: September 2017 | Regulatory exclusivity: August 2023 |
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(1)
Cerdelga® (eliglustat)
U.S. | E.U. | Japan | ||
Compound: | Compound: | Compound: | ||
Later filed patents: November 2030 | Later filed patents: November 2030 | Later filed patents: November 2030 | ||
Regulatory exclusivity: August 2019 Orphan Drug Exclusivity: August 2021 | Regulatory/Orphan exclusivity: January 2025 | Regulatory exclusivity: March 2023 |
Cerezyme® (imiglucerase)
U.S. | E.U. | Japan | ||||
Compound: expired | Compound: N/A | Compound: N/A |
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 |
Fabrazyme® (agalsidase beta)
U.S. | E.U. | Japan | ||||
Compound: N/A | Compound: N/A | Compound: N/A | ||||
Later filed patents: expired | Later filed patents: expired | |||||
Biologics Regulatory Exclusivity: expired | Orphan regulatory exclusivity: expired |
Insuman® (human insulin)
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A |
Jevtana® (cabazitaxel)
U.S. | E.U. | Japan | ||
Compound: March 2021 | Compound: March 2016 | Compound: March 2016 (2021 with PTE when granted) | ||
Later filed patents: coverage ranging through October 2030 | Later filed patents: coverage ranging through March 2026 with SPC granted in some E.U. countries | Later filed patents: coverage ranging through October 2030 | ||
Regulatory exclusivity: expired | Regulatory exclusivity: March 2021 | Regulatory exclusivity: July 2022 |
Lantus® (insulin glargine)
U.S. | E.U. | Japan | ||
Compound: expired(1) | Compound: Expired | Compound: expired |
(1) | On September 28, 2015 Sanofi and Lilly announced that they had agreed to dismiss the patent infringement lawsuit in the U.S. and to discontinue similar disputes worldwide. For more information refer to “Item 8 – Consolidated Financial Statements and Other Financial Information – Information on Legal or Arbitration Proceedings – Lantus® and Lantus SoloSTAR® Patent Litigation (United States, France and Japan)”. |
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Item 4. Information on the Company
Lemtrada® (alemtuzumab)
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
Later filed patent: September 2027 (pending) | Later filed patent: September 2027 | Later filed patent: September 2027 (pending) |
Lovenox® (enoxaparin sodium)
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: expired | Compound: expired | ||
Generics on the market | Regulatory exclusivity: expired |
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(1) | Later filed patents: | Later filed patents: July 2021 | ||
Orphan Drug Exclusivity: | Orphan Regulatory Exclusivity: March 2016 | Orphan Regulatory Exclusivity: April 2017 | ||
Biologics Regulatory Exclusivity: April 2018 | Biologics Regulatory Exclusivity: March 2016 |
(1) | Genzyme filed a notice of appeal to the Federal Circuit to challenge successful inter partes review (IPR). For more information refer to Item 8 – Consolidated Financial Statements and other Financial Information – Information on Legal and Arbitration Proceedings – Genzyme Myozyme® Lumizyme Patent Litigation (United States) |
Lyxumia® (lixisenatide)
U.S. | E.U. | Japan | ||
Compound: | Compound: | Compound: | ||
Patent term extension to be determined once product is approved in the U.S. Later filed | ||||
Regulatory Exclusivity: February 2023 Later filed improvement patents: coverage | Regulatory Exclusivity: June 2021 Later filed improvement patents: coverage ranging through November 2030 (pending) |
(1) | Lixisenatide compound patent licensed exclusively from Zealand Pharma |
Mozobil® (plerixafor)
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed | Later filed | Later filed | ||
Orphan Drug Exclusivity: expired | ||||
Multaq® (dronedarone hydrochloride)
U.S. | E.U. | Japan | ||||
Compound: July 2016 with PTE | Compound: expired | Compound: expired | ||||
Later filed patents: coverage ranging through December 2031 | Later filed patent: formulation June 2018 (2023 with SPC in most E.U. countries) | Later filed patent: formulation June 2018 | ||||
Regulatory exclusivity: expired | Regulatory exclusivity: November 2019 |
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Plavix® (clopidogrel bisulfate)
U.S. | E.U. | Japan | ||
Compound: expired | ||||
Compound: expired | Compound: expired | |||
Generics on the market | Generics on the market | Regulatory exclusivity: expired |
Praluent® (alirocumab)
U.S. | E.U. | Japan | ||
Compound: December 2029 | Compound: December 2029 (pending) | Compound: December 2029 | ||
Later filed patents: coverage ranging through July | ||||
Biologics Regulatory Exclusivity: July 2027 | Regulatory exclusivity: December 2025 |
Renagel® (sevelamer hydrochloride)
U.S. | E.U. | Japan | ||
Compound: | ||||
Compound: N/A | ||||
Later filed patent formulation: October 2020 | Later filed patent formulation: October 2020 | Later filed patent formulation: October 2020 |
Renvela® (sevelamer carbonate)
U.S. | E.U. | Japan | ||
Compound: | ||||
Compound: N/A | Compound: N/A | |||
Later filed patents formulation: October 2025 (tablet) and December 2030 (sachet) | Later filed patent formulation: September 2026 (sachet) | Later filed patents formulation: November 2025 (tablet) and September 2026 (sachet) | ||
Generics on the market |
Stilnox® (zolpidem tartrate)
U.S. | E.U. | Japan | ||
Compound patent: expired | ||||
Generics on the market | Generics on the market | |||
Regulatory exclusivity: expired | ||||
Synvisc® (hyalineG-F 20)
U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: expired |
Synvisc-One® (hyalineG-F 20)
U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: expired |
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Toujeo® (insulin glargine)
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
Later filed patents: | Later filed patents: | Later filed patents: | ||
coverage ranging through April 2034 (applications pending) | coverage ranging through April 2034 (applications pending) | coverage ranging through April 2034 (applications pending) | ||
Regulatory exclusivity: July 2019 | ||||
Regulatory exclusivity: February 2018 |
Zaltrap® (aflibercept)
U.S. | E.U. | Japan | ||
Compound: May 2020 (July 2022 if PTE is granted)* | Compound: May 2020 (May 2025 with SPCs)* | Compound: May 2020* (PTE to be determined once product is approved) | ||
Later filed patents: coverage ranging through April 2032 (applications pending) | Later filed patents: coverage ranging through April 2032 (applications pending) | Later filed patents: coverage ranging through April 2032 (applications pending) | ||
Biologics Regulatory Exclusivity: November 2023 | Regulatory Exclusivity: February 2023 |
* | patents under license of REGENERON PHARMACEUTICALS, INC. |
Patents held or licensed by the Group do not in all cases provide effective protection against a competitor'scompetitor’s generic version of our products. For example, notwithstanding the presence of unexpired patents, competitors have launched generic versions of Eloxatin® in Europe, Allegra®Allegra® in the United StatesU.S. (prior to the product being switched toover-the-counter status) and Plavix®Plavix® in Europe.the E.U..
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“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
· | Abbreviated New Drug Applications (ANDAs) |
In the United States,U.S., 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'scompany’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"“– B.6. Regulatory Framework – 6.3.2. Biosimilars” 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"“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"Exclusivity” above. This period can be reduced to four years if the ANDA includes a challenge to a patent listed in the FDA'sFDA’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"“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 this30-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
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The acceleratedANDA-type procedures are potentially applicable to many, but not all, of the products we manufacture. See “–B.6. Regulatory Framework – 6.3.2. Biosimilars” 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”.
· | Section 505(b)(2) New Drug Applications in the U.S. |
Our products and patents are also subject to challenge by competitors via another abbreviated approval pathway, under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. This provision expressly permits an applicant to rely, at least in part, on FDA’s prior findings of safety and effectiveness of a drug that has obtained FDA approval. FDA may still require applicants to provide additional preclinical or clinical data to ensure that differences from the reference drug do not compromise safety and effectiveness. This pathway allows for approval for a wide range of products, especially for those products that represent only a limited change from an existing approved drug. The 505(b)(2) pathway is distinct from the ANDA pathway, which allows for approval of a generic product based on a showing that it is equivalent to a previously approved product.
A 505(b)(2) applicant is required to identify the reference drug on which it relies, as well as to certify to the ANDA existFDA concerning any patents listed for the referenced product in other major markets.the FDA publication,Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book). Specifically, the applicant must certify in the application that, for each patent that claims the drug or a use of the drug for which the applicant is seeking approval:
· | there is no patent information listed for the reference drug (paragraph I certification); |
· | the listed patent has expired for the reference drug (paragraph II certification); |
· | the listed patent for the reference drug has not expired, but will expire on a particular date and approval is sought after patent expiration (paragraph III certification); or |
· | the listed patent for the reference drug is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the product for which the 505(b)(2) NDA is submitted (paragraph IV certification). |
A paragraph III certification may delay the approval of an application until the expiration of the patent. A paragraph IV certification generally requires notification of the patent owner and the holder of the NDA for the referenced product. If the patent owner or NDA holder brings patent litigation against the applicant within the statutory window, a30-month stay is entered on FDA’s ability to grant final approval to the 505(b)(2) applicant unless, before the end of the stay, a court decision or settlement determines the listed patent is invalid, not enforceable, and/or not infringed. A 505(b)(2) application may also be subject tonon-patent exclusivity, and FDA may be prohibited from giving final approval to a 505(b)(2) application until the expiration of all applicablenon-patent exclusivity periods.
In the European Union,E.U., 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 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'sholder’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 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 divisions including 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
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Item 4. Information on the Company
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-partythird party that owns potentially conflicting rights in order to avoid any risk of confusion and 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 ofover quality and distribution. Our production process consists of three principal stages: the manufacture of pharmaceutical active pharmaceutical ingredients, the transformation of thesethose 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 minimizereduce our dependence on external manufacturers and to maintain strict and precise control over the product throughout theentire production cycle. In some cases, however, we rely on third parties for the manufacture and supply of certain active ingredients and medical devices. Active ingredients are manufactured using raw materials sourced from suppliers who have been subject to rigorous selection and approval procedures, in accordance with international standards and internal directives. We have outsourced some of our production under supply contracts associated with acquisitions of products or businesses or 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®Stilnox® and Xatral®Xatral®, and certain pharmaceutical product formulations. Our main pharmaceutical subcontractors are Famar, Haupt, Patheon, CatalentMSD, Unither, Delpharm, and Sofarimex. TheseSaneca. Those subcontractors follow our general quality and logistics policies, as well as meeting other criteria. See "Item‘‘Item 3. Key Information —– D. Risk Factors —– Risks Relating to Our Business"Business’’.
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,the United States, Canada, France, Mexico, China, Thailand, Argentina and India. The pharmaceutical sites at Le Trait (France) and Anagni (Italy) also contribute to Sanofi Pasteur'sPasteur’s industrial operations by making available their aseptic filling and freeze-drying facilities. A new antigen production facility in Mexico for seasonal and pandemic influenza vaccines was approved by the Mexican authorities early in 2012, and began commercial production in time for the Mexican influenza vaccination campaign in September 2012.
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 healthour Animal Health division.
Merial markets the pharmaceutical products (Frontline®Frontline®, Heartgard®Heartgard®, Zactran®NexGard® and Previcox® (companion animals); LongRange®, Previcox®)Ivomec®, Eprinex® (ruminants) and Gastrogard® (equine). It also markets a broad range of vaccines for different animal species (dogs, cats, horses, ruminants, pigsvaccines: Vaxxitek® (avian), FMD vaccine (ruminants), Circovac® (swine) and fowl)Purevax® (companion animals). A number ofSome pharmaceutical products are subcontracted (Heartgard®outsourced (Eprinex®), Eprinex®) but almost all veterinary vaccines are manufactured at its own plants. Merial'sin house. Merial’s dedicated animal healthAnimal 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 1716 production sites spread across nine countries.
All of our pharmaceuticalproduction facilities – Pharmaceuticals, Genzyme and vaccine facilitiesVaccines – are Good Manufacturing Practicesgood manufacturing practice (GMP) compliant, in line with international guidelines.
Our principal sites are approved by the U.S. Food &and Drug Administration (FDA).:
This applies to our pharmaceutical
· | our Pharmaceuticals facilities |
· | the Genzyme facilities in the U.S. (Allston, Framingham, Ridgefield, Northpointe-Lynnwood, Woburn and Northborough) and in Belgium (Geel); and |
· | our Vaccines sites in France (Marcy l’Étoile, and Le Trait which handles filling and packaging of Fluzone® ID for the U.S. market; the U.S. (Swiftwater, Canton and Rockville); and Canada (Toronto). |
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Item 4. Information on the United Kingdom (Haverhill, Holmes Chapel, Dagenham and Fawdon, the last two of which are due to close in 2013 and 2015, respectively); in Ireland (Waterford); in Germany (Frankfurt); in Hungary (Veresegyhaz); in Italy (Anagni); and in the United States (Saint Louis). 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.Company
The Genzyme facilities in the United States (Allston, Framingham, Ridgefield, Cambridge) and in Europe (Geel, Belgium) are all FDA approved.
Our animal healthAnimal Health facilities in Athens, Worthington, Gainesville Berlin and Raleigh (U.S.) and Barceloneta (Puerto Rico, acquired in the United StatesDecember 2014) 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. Thisproducts (this is the case with Lovenox®Lovenox®, for example.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'sthe 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 anyall 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. Modifications to the remediation workplan were accepted by the FDA in March 2012 and is expected to take a further three years to complete. ItApril 2015. The workplan includes a timetable of specified milestones. If the milestones are not met in accordance with the timetable, the FDA cancould require us to pay $15,000 per day, per affected drug, until these compliance milestones are met. Upon satisfying all compliance requirementsDuring 2013, Genzyme was late in accordancecompleting one of the actions specified in the remediation workplan. This was notified to the FDA, which could impose liquidated damages for the late completion. At filing date of this report, the FDA has not yet disclosed whether it intends to do so.
Genzyme recently proposed a third modification to the workplan associated with plans to modernize plant and equipment. The FDA is reviewing this proposed modification. Genzyme has informed the FDA that the remaining actions specified in the workplan are progressing in line with the termsproposed modification. If the FDA rejects Genzyme’s proposal, Genzyme could be subject to liquidated damages of U.S.$15,000 per day in the event that actions in the version of the workplan accepted by the FDA are judged to be incomplete as of March 31, 2016.
Once all the compliance requirements of the consent decree are satisfied, Genzyme will be required to retain an auditor to monitor and oversee ongoing compliance at the Allston facility for an additional period of at least five years. To date, all requirements of
In April 2014, the consent decree, including all requirements ofFDA withdrew the workplan, have been met by Genzyme.
In March 2012, modificationswarning letter relating 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®.
On July 12, 2012, Sanofi Pasteur received a warning letter from the FDA following routine inspections conducted during 2012sites at its facilities in Toronto (Canada) and Marcy l'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 withimplementing an ongoing program to improve compliance at those sites by applying a Global Quality Plan. This has already resulted in further improvements, as acknowledged in the most recent CGMP inspection conducted by the FDA to implement a series of immediate and ongoing measures to addressat the issues raisedMarcy l’Étoile site in the warning letter and to further strengthen its production tools and quality systems.September 2015.
More details about our manufacturing sites are found below at "—section ‘‘D. Property, Plant and Equipment"Equipment’’.
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 million in 2012.
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.
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 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, in 2007 the State of New Jersey initiated a claim against Bayer CropScience seeking compensation for damages caused to natural resources (NRD) at a former Rhône-Poulenc site in the United States, resulting in indemnification claims by Bayer CropScience against the Group 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, Sanofi spent €45 million on rehabilitating sites previously contaminated by soil or groundwater pollution. During the year ended December 31, 2012, 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 million as at December 31, 2012; this figure includes the provisions related to Genzyme.
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 is not currently subject 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 in 2012) 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, nine specialized audits covering contractors or biosafety and 163 loss prevention technical visits were carried out by our teams in 2012.
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".
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, 60 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, seven 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, we reduced carbon dioxide emissions caused by our sales representation car fleet by 10% versus 2011, due to the policy of using energy efficient cars as well as a reduction in 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% 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:
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:
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:
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:
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:
state programs or mandatory enrollment in private plans. Cost-containment pressures affecting pharmaceuticals are also persisting in the public and private health care sectors.
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:
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.
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 LtdDAC (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, stockProperty & Business Interruption, Stock and transitTransit, and generalGeneral & product liability.Product Liability. Carraig is run under the supervision of the Irish regulatory authorities, iswholly-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'scompany’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
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Item 4. Information on the Company
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 whichwe 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 riskself-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-partythird 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.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'scompany’s exposure to unreported claims for the risks covered. The actuaries perform an actuarial valuation of the company'scompany’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 theBornhuetter-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-classbest in class insurers and reinsurers and are designed in such a way that we can integrate most newly-acquirednewly 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 provideworld-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.
Applicable environmental laws and regulations may require Sanofi to eliminate or reduce the effects of chemical substance discharge at our 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. In this regard, Sanofi may be held liable for the costs of removal or remediation of hazardous substances on, under or in the sites concerned, or on sites where waste from activities has been stored, 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.
As is the case for a number of companies in the pharmaceutical, chemical and intense 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 Sanofi’s case, such sites are mainly located in the United States, Germany, France, Hungary, the Czech Republic, 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, Sanofi regularly assesses the rehabilitation work required and carries out such work when appropriate. Long-term rehabilitation work is in progress or planned in Mount Pleasant, East Palo Alto and Portland in the United States; Barceloneta in Puerto Rico, Frankfurt in Germany; Brindisi and Garessio in Italy; Dagenham in the United
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Item 4. Information on the Company
Kingdom; Ujpest in Hungary; Prague in the Czech Republic; Beaucaire, Valernes, Limay, Rousset, Romainville, Neuville, Vitry, Tours and Toulouse in France; 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. Sanofi has established provisions for the sites already identified and to cover contractual guarantees for environmental liabilities for sites that have been divested. In France specifically, Sanofi has provided the financial guarantees for environmental protection required under French regulations.
Potential environmental contingencies arising from certain business divestitures are described in Note D.22.e to the consolidated financial statements. In 2015, Sanofi spent€63 million (including€0.4 million related to the held-for-exchange Animal Health business) on rehabilitating sites previously contaminated by soil or groundwater pollution.
Due to the changes in environmental regulations governing site remediation, Sanofi’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 arising from the past involvement of Aventis 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”.
Sanofi has established, in accordance with our current knowledge and projections, provisions for cases already identified and to cover contractual guarantees for environmental liabilities relating to sites that have been divested. During the year, a comprehensive review was carried out on the legacy of environmental pollution. In light of data collected during this review, the Group adjusted the provisions to approximately€720 million as of December 31, 2015 (including€12 million related to the held-for-exchange Animal Health business) versus€696 million as of December 31, 2014. The terms of certain business divestitures, and the environmental obligations and retained environmental liabilities relating thereto are described in Note D.22. to our consolidated financial statements. In accordance with Group standards, these provisions are reviewed twice a year and updated in light of new information, if applicable.
To our knowledge, the Group did not incur any liability in 2015 fornon-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 (55 in 2015) 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, 11 specialized audits covering biosafety, and 133 prevention visits were carried out by our teams in 2015. Moreover, 63 specific visits were performed together with the experts representing the Group insurers.
Sanofi has implemented a worldwide master policy on health, safety and the environment to promote the health andwell-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 is responsible for the hazard determination and classification of all active pharmaceutical ingredients and synthesis intermediates handled at Sanofi facilities. This covers all active ingredients handled in production at company sites or in processes sub-contracted for manufacture. Any important issues involving raw materials or other substances that lack established occupational exposure limits may also be reviewed. The COVALIS committee determines the occupational exposure limits required within the Group. 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”.
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.
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Item 4. Information on the Company
In addition, dedicated resources have been created to implement the E.U. regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH). To fully comply with the new European regulation on classification, labeling and packaging of chemicals, 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 oursub-contractors.
The French chemical manufacturing sites in Aramon, Sisteron and Vertolaye, as well as the plants located in the Hoechst Industry Park in Frankfurt, Germany, and the chemical production site in Budapest, Hungary, are listed Seveso III (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 thephysico-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 definescale-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 ourthird-party property insurance policies covering anythird-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. We believe that this strategy clearly expresses the commitment of both management and individuals to health, safety and the environment. In 2015, seven 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. Measured against the benchmark year for our targets (2010), direct and indirect emissions from our production and research facilities (excluding vehicle fleets) have fallen by 15.8% 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.
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Item 4. Information on the Company
Significant subsidiaries Sanofi is the holding company of a consolidated group consisting of approximately 400 subsidiaries. The table below sets forth our significant subsidiaries December 31, Financial and Voting Interest Since 2009, we have transformed our Group through numerous acquisitions (see In certain countries, we carry on some of our business operations through joint ventures with local partners. Internal organization of activities Sanofi and its subsidiaries form a group, organized around three activities: Pharmaceuticals, On December 15, 2015, we announced that we had opened exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed deal would see Sanofi exchange its Animal Health business (Merial) for Boehringer Ingelheim’s Consumer Health Care business and a gross cash payment. Until final completion of the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal health business (which remains an operating segment pursuant to IFRS 8) and to report the performance of that business at Group level. Within the Group, responsibility for research and development (R&D) in their respective fields rests with Sanofi and Genzyme Corporation (Pharmaceuticals)and affiliates as of2012.2015. 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 AffiliateDate of
IncorporationCountry of
IncorporationPrincipal Activity Aventis Inc. 07/01/ 19981968 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, LtdInc. 08/01/1997 United KingdomStates 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-Aventis Participations SAS 02/25/2000 France 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% Item 4A "History“A. History and Development of the Company")Company” above), 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 for the year ended December 31, 2013, included in thisour annual report at Item 18.onForm 20-F for that year. 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 onForm 20-F for that year.WeIn addition, we have also entered into worldwide marketing arrangements. Two of our major products (Plavix®collaboration agreements (i) with Regeneron, relating to Zaltrap®, human therapeutic antibodies such as Praluent® and Aprovel®) are marketed through an allianceantibodies in immuno-oncology; and (ii) with BMS, Actonel® is marketed through an alliance with Warner Chilcott, and Zaltrap® is marketed through an alliance with Regeneron. See "Item 5 — Financial Presentation of Alliances"relating to Plavix®. For further information, refer to Note C. to our consolidated financial statements, “Principal Alliances”.Human Vaccines (Vaccines) and Animal Health.,; Sanofi Pasteur and Sanofi Pasteur, Inc. (Vaccines),; and Merial, LtdInc. and Merial S.A.S. (Animal Health); these entities define. However, within the integrated R&D organization, the definition of strategic priorities and coordinatethe coordination of R&D efforts.efforts are done globally. To fulfill this role, these entitiescompanies subcontract R&D work to those of their subsidiaries that have the necessary resources. They also license patents, manufacturingknow-how and trademarks to certain of their French and foreign subsidiaries. In these cases, theThe licensee subsidiaries manufacture and distribute the Group'smajority of the Group’s products, either directly or via local distribution entities.
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Item 4. Information on the Company
Our industrial property rights, patents and trademarks are mainly held by the following companies:
· | Pharmaceuticals: Sanofi, Aventis Pharma S.A., Sanofi Biotechnology S.A.S. (France),Sanofi-Aventis Deutschland GmbH (Germany) and Genzyme Corporation (U.S.); |
· | Vaccines: Sanofi Pasteur (France) and Sanofi Pasteur, Inc. (U.S.); |
· | Animal Health: Merial, Inc. (U.S.) 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
Equipment” below. Our property, plant and equipment is held mainly by the following companies:
· | In France: Sanofi Pasteur S.A., Sanofi Chimie, Sanofi Winthrop Industrie, Sanofi, Merial SAS France andSanofi-Aventis Recherche & Développement; |
· | In the United States: Sanofi Pasteur, Inc., Genzyme Corporation, and Genzyme Therapeutics Products LP; |
· | In Canada: Sanofi Pasteur Limited; |
· | In Germany:Sanofi-Aventis Deutschland GmbH; |
· | In Belgium: Genzyme Flanders BVBA Holding Co; |
· | In Ireland: Genzyme Ireland Limited. |
Financing and financial relationships between Group companies
The Sanofi parent company raises the bulk of the Group’s external financing and uses the funds raised to meet, directly or indirectly, the financing needs of its subsidiaries. The parent company operates a cash pooling arrangement under which any surplus cash held by subsidiaries is managed centrally. There is also a centralized foreign exchange risk management system in place, whereby the parent company contracts hedges to meet the needs of its principal subsidiaries.
Consequently, the Sanofi parent company was carrying 92% of the Group’s external financing and 85% of its surplus cash as of December 31, 2015.
Sanofi European Treasury Center S.A. (SETC), a 100%-owned Sanofi subsidiary incorporated in 2012 under the laws of Belgium, is dedicated to providing financing and various financial services to Group subsidiaries.
D. PROPERTY, PLANT AND EQUIPMENT
D.1. Overview
Our headquarters are located in Paris, France. See "—“– D.4 Office Space"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 all of all our support functions, plus operational representatives from our subsidiaries and the Group.
A breakdown of theseour sites by use and by ownership status (owned versus leasehold) is provided below. Breakdowns areThis breakdown is based on surface area. All surface area figures are unaudited.
Breakdown of sites by use*
Industrial | 58% | |||
Research | 14% | |||
Offices | 13% | |||
Logistics | 9% | |||
Other | 5% |
* | Our Vaccines and Animal Health activities occupy offices and research, production and warehouse facilities. Those sites are allocated between the first four categories in the table above as appropriate. |
Breakdown of sites by ownership status
Leasehold | 28% | |||
Owned | 72% |
We own most of our research and& development and production facilities, either freehold or under finance leases with a purchase option exercisable aton expiration of the lease.
D.2. Description of our sites
Sanofi industrial sites
As part of the process of transforming our Group, we are continuing to adapt the organization of our Industrial Affairs department in support of our new business model. Since June 2013, the Industrial Affairs department has been responsible for all production and quality operations within the Group. The department focuses on customer needs and service quality, the sharing of lean manufacturing practices, the development of a common culture committed to quality and the pooling of expertise within technology platforms, particularly in biological, injectable and pharmaceutical products.
We carry out our industrial production at 112102 sites in nearly 4041 countries (including 40 sites in emerging markets):
· | 74 sites for our Pharmaceuticals activity, including Genzyme; |
· | 12 sites for the industrial operations of Sanofi Pasteur in vaccines; and |
· | 16 sites for the Animal Health activities of Merial. |
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Item 4. Information on the industrial operations of Sanofi Pasteur in vaccines;Company
In 2012,2015, we produced the following quantities:
· | Pharmaceuticals: 4,577 million units, comprising: |
– | units manufactured and packaged: 3,089 million; |
– | units packaged only: 260 million; |
– | bulk products in unit equivalents: 463 million; |
– | outsourced units: 765 million; |
· | Vaccines: 513 million containers (syringes and ampoules) filled, including outsourced production; |
· | Animal Health: 524 million doses of vaccines for all species other than avian, 92 billion doses of avian vaccines, and 76.5 million units of pharmaceutical 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 thesethose 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 section “B.8 Production and Raw Materials” above.
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:
The rare diseases specialist Genzyme became a Sanofi subsidiary in April 2011. This acquisition expanded our presence in biotechnologies, especially rare diseases.
· | France: Ambarès (Plavix®, Aprovel®, Depakine®), Aramon (irbesartan), Compiègne (Aubagio®, Lasix®, Imovane®), Le Trait (Lovenox®), Lisieux (Doliprane®), Lyon Gerland (Thymoglobulin®, Celsior®), Maisons-Alfort (Lovenox®), Sisteron (clopidogrel bisulfate, dronedarone, zolpidem tartrate), Tours (Stilnox®, Aprovel®, Xatral®), Vitry-sur-Seine (docetaxel, aflibercept); |
· | Germany: Frankfurt: insulins (Lantus®, Apidra®, Lyxumia®, Toujeo®), oncology products (Taxotere®, Eloxatin®), medical devices (Click®STAR and Solo STAR®); |
· | Ireland: Waterford (Myozyme®, Lumizyme®, Cholestagel®, Thymoglobulin®, Renagel®, Renvela®, Cerezyme®); |
· | Italy: Scoppito (Tritace®, Amaryl®) and Anagni (Depakine®, Fasturtec®, Rifa antibiotic family); |
· | United Kingdom: Haverhill (sevelamer hydrochloride API (Renagel®), sevelamer carbonate API (Renvela®), Cerezyme®, Fabrazyme®, Thyrogen®, Myozyme®, etc), and Holmes Chapel (Nasacort®, 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). |
Genzyme manages 118 production sites and works with more than 2015 subcontractors to manufacture 2212 commercial products over a broad range of technological platforms.
Genzyme'sGenzyme’s sites are as follows:
· | Belgium: Geel (A1 alpha glucosidase: Myozyme®/Lumizyme®); |
· | United States: Allston (Cerezyme®), Framingham Biologics (Fabrazyme®, Thyrogen®), Framingham Biosurgery (Seprafilm®, hyaluronic acid), Ridgefield (Synvisc®, Hectorol®, Mozobil®, Jonexa®, Kynamro®), Woburn (LeGoo®), Northborough and Lynnwood, Washington State (Leukine®). |
Industrial Sites: Vaccines (Sanofi Pasteur)
The headquarters of our Vaccines division, Sanofi Pasteur, areis located in Lyon, France. Sanofi Pasteur has production and/or R&D12 industrial 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.)in 8 countries:
In May 2009, we began construction of a new vaccine manufacturing center at our Neuville-sur-Saône site in France. This €300 million investment, the largest ever made by Sanofi, is intended to gradually transition the existing chemical activity to vaccine production from 2013 onwards.
· | France: Marcy l’Étoile, Val de Reuil and Neuville; |
In 2010,
· | United States: Swiftwater, Canton and Rockville; |
· | Canada: Toronto; |
· | India: Hyderabad (Shantha); |
· | China: Shenzhen; |
· | Argentina: Pilar; |
· | Mexico: Ocoyoacac; and |
· | Thailand: Chachoengsao. |
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 ownsalso has its Research and Developmentown R&D and production sites, either freehold or under finance leaseslease with a purchase option exercisable aton 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 1716 industrial sites in nine different countries 9 R&D sites, and numerous administrative offices including its headquarters atin Lyon, France.
MerialMerial’s industrial sites are as follows:
· | Brazil: Paulinia(avermectin-based pharmaceutical products, and vaccines againstfoot-and-mouth disease and rabies), and a production unit approved by the FDA and EMA for NexGard®; |
Brazil: Paulinia (avermectin-based pharmaceutical products, and vaccines against foot-and-mouth disease and rabies);74
· | China: Nanchang (live 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 againstfoot-and-mouth disease); |
· | United Kingdom: Pirbright (antigens and vaccines againstfoot-and-mouth disease); |
· | United States: two dedicated facilities for Merial’s avian vaccines at Gainesville (Georgia) and Raleigh (North Carolina), a dedicated facility for mammalian viral and bacterial vaccines at Athens (Georgia), a dedicated facility for autogenous ruminant and swine vaccines at Worthington (Minnesota); |
· | Puerto Rico: a dedicated site at Barceloneta for production and packaging of Heartgard® and Heartgard® Plus; and |
· | New Zealand: Ancare facility, Auckland (pharmaceutical products, mainly for the ruminant market). |
Research & Development sites:sites
In Pharmaceuticals,
Research research and Developmentdevelopment activities are conducted at 15 sites:
· | six operational sites in France: Chilly/Longjumeau, Montpellier, Paris, Strasbourg, Toulouse and Vitry/ Alfortville; |
· | two sites in the rest of Europe (Germany and the Netherlands), the larger of which is in Frankfurt (Germany); |
· | five sites in the United States, the largest being the Bridgewater, Cambridge and Framingham sites; and |
· | two sites in Asia (a clinical research unit in Beijing, China and a unit in Japan). |
Vaccines research and development sites are presented under “Industrial Sites: Vaccines (Sanofi Pasteur)” above.
In Animal Health, research and development activities are conducted at 13 sites. In addition, the Barceloneta site in France: Chilly/Longjumeau, Montpellier, Paris, Strasbourg, Toulouse and Vitry/Alfortville;
D.3. Acquisitions, Capital Expenditures and Divestitures
The carrying amount of our property, plant and equipment at December 31, 20122015 was €10,578€9,943 million. During 2012,2015, we invested €1,351€1,318 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 acquisitions, capital expenditures and divestitures in 2010, 20112013, 2014 and 20122015 are described in Notes D.1. ("(“Impact of changes in the scope of consolidation"), D.2. ("Merial"consolidation”), D.3. ("(“Property, plant and equipment"equipment”) and D.4. ("(“Goodwill and other intangible assets"assets”) to our consolidated financial statements, included at Item 18 of this annual report.
As of December 31, 2012,2015, our firm commitments in respect of future capital expenditures amounted to €323€436 million. The principal siteslocations involved were (forwere: for the Pharmaceuticals activity)segment, the industrial facilities at Frankfurt (Germany), Framingham and Allston (United States), Vertolaye (France)Geel (Belgium), Waterford (Ireland), and in Hungary;Sisteron and Elbeuf (France); and for the Vaccines activity,segment, the facilityfacilities at Swiftwater (United States) and Marcy l’Étoile (France).
In the medium term and assuming no changes in the scope of consolidation, we expect to invest on average €1.4some€2 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, 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), Vaccines, and Animal Health.
Pharmaceuticals
InThe Frankfurt facility, ourDiabetes Solutions growth platform, principal site for the Frankfurt site — the principal manufacturing center for Sanofi Diabetes products — is beingmanufacture of diabetes treatments, will shortly be equipped with a newsecond aseptic processing area that uses isolator technology to significantly improve the aseptic filling process.process and boost productivity. This investment will be operational later in 2016. At the end of 2014, we announced the investment of a further€200 million in sterile filling and manufacturing capacity for medical devices at our Frankfurt site.
The Sanofi Diabetesindustrial network is expanding its footprinthas a solid base in emerging markets, both in Russia with the Orel site (now our second largest insulin pen production site after Frankfurt) and at the Beijing site in China (Beijing), where a new facility inaugurated in 2012 has begunwhich handles assembly and packagingfilling of SoloSTAR®SoloSTAR®, the pre-filled injection system for Lantus®Lantus®.
The pharmaceutical industrial operations of ourConsumer Health Care(CHC) platform are spread across a network of ten sites. Global markets are supplied from our facilities at Origgio (Italy), Cologne (Germany) and Veresegyház (Hungary). Regional markets are supplied from our Suzano facility in Brazil, our Rzeszow facility in Poland and our ACE facility in Vietnam. Our facilities at Lisieux (France, production of Doliprane® for the French market), Hangzhou and Tangshan (China), Virginia (Australia), and the Chattem facility in Tennessee (United States), mainly supply their local markets. We have recently invested heavily in major
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Item 4. Information on the Company
projects intended to build a specialist CHC industrial network. This has included switching some CHC products from non-CHC facilities to the dedicated CHC network, transferring some liquid and effervescent formulations of CHC products to the Cologne site, and transforming the Origgio site into a facility dedicated to a single product family (Enterogermina®).
In 2014, a platform dedicated toBiologics was launched to develop synergies between Pharmaceuticals, Sanofi Pasteur, Sanofi Genzyme and our Biotherapeutics activities. This platform is helping us extend our footprint in biotechnologies by adopting a multi-disciplinary approach and improving capacity utilization. It also enables us to leverage our expertise in the production of biologics, from active ingredient through to integrated manufacturing, including both the medicine itself and associated medical devices.
Three dedicated biotechnology sites have been developed: Paris/Lyon (France), Frankfurt (Germany) and Boston (United States). Piloting this site.
The development of ourEmerging Markets platform is built on a network of over 3040 regional and local industrial sites in 2025 countries, supporting growth in thesethose markets. In addition to our recent investments
At Sidi Abdellah in China in Diabetes and Consumer Health Care, 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,Algeria we are building a dedicated hormonal productsnew facility that will become our largest industrial complex in Brasilia. Also during 2012,Africa, mainly producing dry and liquid formulations. In July 2014, we took a substantial step in growing our Generics business in the Ankleshwar Pharma siteMiddle East by acquiring a significant stake in Gujarat State (India) handled packaging and quality control through to release of the first commercial batches ofAllSTAR™, the first high-quality affordable insulin pen specifically intended forGlobalpharma, the local market.pharmaceuticals subsidiary of Dubai Investments PJSC. The Goa site (India) invested to extend its solid formulation production capacity to around 2.5 billion pills a year. AndGlobalpharma plant in Algeria, Sanofi signed an agreement with the local authorities for a majorDubai was integrated into our industrial investment that will lead to thenetwork during 2015. The main products manufactured there are anti-infective, cardiovascular and gastro-intestinal drugs.
In Vietnam, we have completed construction of our biggest industrial complexnew facility in Ho Chi Minh City, which manufactures specialty pharmaceuticals and CHC products and is supporting the Africa-Middle East region.launch of Lactacyd® in Japan.
The industrial network of our Pharmaceuticals activity continued throughout 2012 with the roll-out of the economic performance improvement plan launched in 2011. This 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 constantlyDepartment has an ongoing policy of adapting our industrial facilities to market needs, as a resultneeds. As part of which a number of sites arethis process, we closed our facility at Fawdon (United Kingdom) in the process of sale or closure, such as2015, and plan to close our facility at Kansas City (United States), Dagenham in 2016. We sold our facility at Quetigny (France) in 2015, and Fawdon (United Kingdom), Romainville (France), and Hlohovec (Slovakia).
TheSanofi Genzyme 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, which was approved by the FDA in January 2012. Finally, the Bayer Healthcare facility at Lynnwood (Washington), specializing in the manufacture of Leukine®, joined the Genzyme industrial network in 2012.
Vaccines (Sanofi Pasteur)
Sanofi Pasteur is undergoingPasteur’s industrial operations are in a major investment phase, particularlyespecially with the new dedicated dengue fever vaccine facility at Neuville (France), which will produce 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 Ocoyoacac (Mexico) was approved by the Mexican authorities at the start of 2012ANSM in 2014 and began production in time for the Mexican influenza vaccination program2015. Also in September 2012. In response to observations made by the FDA during routine inspections conducted in 2012 in Toronto (Canada) and Marcy l'Etoile (France),2015, Sanofi Pasteur initiatedinaugurated a compliance programnew building at Marcy L’Étoile (France), dedicated mainly to addressproduction of the quality issues identified.Haemophilus influenza type b (Hib) vaccine.
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,To support the future growth of avian and other vaccines in the Chinese market, Merial is investinginvested U.S.$70 million in a new site in the Nanchanghigh-tech development zone, which was inaugurated in order to service future growth in vaccines for avian and other species in the local market. In Europe, a substantial portion of the investment in recent years has been directed at the transfer of vaccine production from Lyon Gerland (France) to a new site nearby at Saint Priest (Lyon Porte des Alpes).October 2013. At the ToulousePaulinia site (France),in Brazil, Merial is adaptingnow manufacturing its production capacity to new products by investingNexGard® product, with FDA approval and in a packaging line for use in the manufacturing ofCertifect® (compliantcompliance with European Union Good Manufacturing Practices (GMP), and approved by. In September 2014, Merial began construction of a new facility that will use new technologies to triple the U.S. Environmental Protection Agency) and in a building for the productioncurrent capacity of the injectable form of Zactran®.Paulinia.
In December 2014, Merial acquired the Merck manufacturing facility at Barceloneta (Puerto Rico), which is now operational. This acquisition will enable Merial to expand its industrial operations and capitalize on expertise in chewables production and technology. The site is already producing two of Merial’s flagship products, Heartgard® and Heartgard® Plus.
Innovation and culture of industrial excellence
In 2015, Sanofi highlighted industrial innovation in its various facilities by organizing its seventh annual round of innovation trophies, centered on patient needs, industrial performance and citizen entrepreneurship.
The ambition of our Industrial innovation wasAffairs department is to continue to raise quality standards in the Group’s production activities, and to remain a key themeworld leader and a benchmark in 2012. The fourth "Innovation Trophy" awards again illustrated the striking progress being madeglobal pharmaceutical industry. To achieve this goal, all our activities share a common culture of industrial excellence, enshrined in this area, which we regardthe Sanofi Manufacturing System. This sets out a series of priorities (such as a top priority incustomer service, constant improvement, site network optimization and transverse optimization) that constitute our industrial strategy. The2012 Pierre Potier Prize was awardedvision and will be crucial to our mutual success.
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Item 4. Information on the Chemicals and Biotechnology teams, who developed an innovative industrial process for the production of artemisinin, the basis for antimalarial drugs. Investment is ongoing in the installation of an innovative biosynthesis process at two French sites, Saint-Aubin-lès-Elbeuf (Seine Maritime) and Vertolaye (Puy de Dôme), with the aim of improving the international competitiveness of our corticosteroid production.Company
D.4. Office Space
As part of the rationalization of our office sites in the Paris region of France, we have since mid-20092009 been carrying out a medium-term review of our office space master plan for the Greater Paris area.
This review will result in all our Group support functions and operating divisions being housed onin a smaller number of sites (5buildings (five in 2012, on completion of phase 1, and 3 bywith relocation completed in 2015). All of thesethose sites will meet environmental certification standards, and offercost-effective space solutions.
As part of this process, a new campus site known as “Campus Sanofi Val de Bièvre” (CSVB) was delivered in early March 2015. Relocation to this state-of-the-art workspace was completed in July 2015. By providing dynamic workspaces, the new campus promotes more effective interaction between functions, symbolizing the transformation of the Group. The campus houses the world headquarters of our Industrial Affairs department, our French subsidiary, and global support functions.
A second Master Plan was initiated at the end of 2011; this plan defines the Group’smedium-term office space requirements in the Lyon urban area, and is in the implementation phase. A firstItem 4A. Unresolved Staff Comments
off-plan lease was signed in early 2013 covering some of the “Pooled Services” functions
and was delivered at the end of March 2015 by its owner, Plastic Omnium. Additional space was leased in the same complex in October 2015. A further lease was signed in June 2014 on premises that from 2017 will house our corporate functions in Lyon; this deal involves the sale of an existing freehold site and theoff-plan reconstruction of the Group’s firstenergy-positive building in France. Our Lyon Master Plan aims to rationalize sites along the same lines as the Paris Master Plan: buildings with environmental certification that offer both a reduction in overall occupancy costs and workspace consistent with the new Corporate Charter.
N/ATwo more Master Plans were initiated at the end of 2012 to define office space strategy, one in the Cambridge urban area (Massachusetts, USA) and the other in Frankfurt (Germany). The Cambridge plan went live in 2014 with the start of the preparatory phase, and is scheduled for delivery in 2018. Integrating the U.S. operations of Genzyme will provide opportunities for rationalizing office space in the city.
Further rationalization projects in other parts of the world were completed in 2015, including the installation of our Singapore regional headquarters in a new friendly building featuring dynamic workspaces and the relocation of our Indian subsidiary to a new building in Mumbai. We also sold a number of properties in locations including Mumbai (India), Labège (France) and Dagenham (United Kingdom).
Item 5. Operating and Financial Review and Prospects
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, 2012.2015.
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“Cautionary Statement Regarding Forward-Looking Statements"Statements” at the beginning of this document.
Unless otherwise stated, all change figuresfinancial variations in this item are given on a reported basis.
20122015 Overview
On April 2, 2015, Olivier Brandicourt took office as Chief Executive Officer of Sanofi, further to a unanimous decision by the Board of Directors on February 19, 2015.
During 2012,2015, we continuedaccelerated our policy of research and development alliances and targeted acquisitions. In diabetes, we entered into collaboration agreements with Evotec, Verily (formerly Google Life Sciences), Hanmi Pharmaceuticals Co., Ltd and Lexicon Pharmaceuticals, Inc. In immuno-oncology, we entered into a new global collaboration with Regeneron to followdiscover, develop and commercialize new antibody cancer treatments, alongside a further immuno-oncology collaboration with Evotec and Apeiron Biologics. In rare diseases, we acquired Caprelsa® (vandetanib) from Astra Zeneca. We also entered into a strategic collaboration agreement with Voyager Therapeutics for the strategic direction establisheddiscovery, development and commercialization of new adeno-associated virus (AAV) gene therapies to treat serious disorders of the central nervous system.
In July 2015, we announced our intention to change our business structure by creating five global business units (GBUs): General Medicines & Emerging Markets, Sanofi Genzyme (Specialty Care), Diabetes & Cardiovascular, Sanofi Pasteur (Vaccines), and Merial (Animal Health). This new structure is being implemented effective beginning January 2016. For more information, see “– Results of
Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014 – Presentation of net sales by business segment from 2016 onwards”.
On November 6, 2015, we unveiled our new long-term strategy, which rests on four pillars: reshape the portfolio, deliver outstanding launches, sustain innovation in 2008R&D and simplify the organization (see Item 4. “Information on the Company – B. Business Overview – B.1. Strategy”).
On December 15, 2015, we announced that we had entered into exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed deal, which could complete in the fourth quarter of 2016 once the necessary regulatory clearance is obtained, would see Sanofi exchange its Animal Health business (Merial), valued at€11.4 billion, for Boehringer Ingelheim’s Consumer Health Care business, valued at€6.7 billion. The deal would also involve Boehringer Ingelheim making a gross cash payment of€4.7 billion to Sanofi. Sanofi’s intent is to allocate part of the net proceeds from the exchange to our share repurchase program.
Following this announcement, the net profit or loss of the Animal Health business (Merial) is now presented in a separate line item in the consolidated income statement, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5 (see Notes D.2.1. and D.36. to our consolidated financial statements, included at Item 18 of this annual report). Consequently, the net sales reported in the consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal Health business (which remains an operating segment pursuant to IFRS 8), and to pursuereport the objectivesperformance of that business at the Group level. In our analysis of our financial performance for 2012-2015 announced in September 2011 and reiterated in February 2013. The thrust of these objectives is fourfold: grow a global healthcare leader with synergistic platforms, bring innovative products to market, seize value-enhancing growth opportunities, and adaptthe year ended December 31, 2015 we discuss our structure for future challenges and opportunities.
Our 2012 full-year results were affected by the loss of exclusivity for Plavix® and Avapro® in the United States in the first half, and by ongoing generic competition for our former flagship products. However, the erosion inaggregate net sales, which combines our net sales and profitability was cushioned by our growth platforms,as reported in the contribution from Genzyme, and tight cost control.
Our 2012consolidated income statement with the net sales reached €34,947of the Animal Health business.
Net sales for the year ended December 31, 2015 were€34,542 million, 4.7%9.0% higher than in 2011 (0.5%2014.
Aggregate net sales(1) (including the Animal Health business) for the year ended December 31, 2015 amounted to€37,057 million, up 9.7% compared to 2014 (+2.2% at constant exchange rates, see definition at "—‘‘– Presentation of Net Sales"Sales’’ below), driven mainly by the performance of theour Genzyme, Vaccines and Animal Health businesses, and by growth in 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)(2). This performance was achieved in spite of the significant impact of competition from generics, which cost us €1.2 billion in lost sales (€1.3 billion at constant exchange rates, see "— Impacts from generic competition" below), and the ending of the co-promotion agreement with Teva on Copaxone®. MilestonesSuccesses for our research efforts during 20122015 included, the launch of Zaltrap® (metastatic colorectal cancer) and Aubagio® (multiple sclerosis) in the United States.for our Pharmaceuticals
The ongoing realignment
(1) | Non-GAAP financial measure. For a definition, see “– Presentation of Net Sales” below. |
(2) | World excluding United States, Canada, Western Europe, Japan, South Korea, Australia and New Zealand. Refer to “– Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014 – Net Sales” below. |
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Item 5. Operating and Financial Review and Prospects
segment, the launches of our resources cut research and development expenses by 0.4% and limited the rise in selling and general expenses to 1.8%, after including Genzyme's costs over the full year. Business net income was €8,179 million, 7.0% lower than in 2011 on a reported basis, mainly due to the loss of exclusivity for Plavix® and Avapro®Praluent® (hypercholesterolemia) in the United States and to competition from generics. in some European Countries, and Toujeo® (diabetes) in the United States and Europe; and for our Vaccines business, the approval in Mexico, the Philippines and Brazil of Dengvaxia®, the world’s first ever dengue fever vaccine.
Business earnings per share was €6.20, 6.8% lowernet income(1) reached€7,371 million, 7.7% higher than in 2011. Business net income and2014, while business earnings per share are non-GAAP financial measures which our management uses(1) was€5.64, up 8.5% compared to monitor our operational performance, and which are defined at "— Business Net Income" below.
2014. Net income attributable to equity holders of Sanofi cameamounted to €4,967€4,287 million, down 12.8% on 2011.2.3% lower than in 2014. Basic earnings per share amounted to €3.76, also 12.8% lower than in 2011; diluted earnings per share for 2012 were €3.74 (12.8% lower).
During 2012, we continued with our policy of targeted acquisitions and of alliances in research and development. In Generics, we announced in October 2012 that we had signed an agreement to acquire Genfar S.A., a Colombian pharmaceutical company which is a key generics player not only in Colombia, but also in other Latin American countries. Closing of this acquisition is subject to certain conditions, and is expected to take place during the first half of 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 acquire the animal health division of Dosch Pharmaceuticals Pvt Ltd that will give Merial an entry point into the
Indian market. 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, we had reduced our debt, net of cash and cash equivalents to €7.7 billion, compared with €10.9 billion as of December 31, 2011. The Annual General Meeting of shareholders, to be held on May 3, 2013, will be asked to approve a dividend of €2.77 per share in respect of the 2012 fiscal year, representing a payout equivalent to 45% 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.
Our operations generate significant cash flow. We recorded €8,171 million of net cash provided by operating activities in 2012was€3.28, down 1.8% compared to €9,319 million in 2011. During the course of 2012, we paid out €3.5 billion in dividends and repaid part of our debt. 2014.
With respect to our financial position, we ended 20122015 with our debt, net of cash and cash equivalents (see definition at "—“– Liquidity and Capital Resources"Resources” below) at €7,719€7,254 million (2011: €10,859(2014:€ 7,171 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's our
financing risk, we also use a "gearing ratio"“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 13.4%12.5% at the end of 2012 versus 19.3%2015 compared to 12.7% at the end of 2011.2014. See "—“– Liquidity and Capital Resources"Resources” below.
The Shareholders will be asked at the Annual General Meeting, to be held on May 4, 2016, to approve a dividend of€2.93 per share for the 2015 financial year, representing a payout of 52.0% of business net income.
Impacts from generic competition
Some of our flagship products continued to experience diminishing sales erosion in 20122015 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 had for each product.
A comparison of our consolidated net sales for the years ended December 31, 20122015 and 20112014 (see "—“– Results of Operations —– Year Ended December 31, 20122015 Compared with Year Ended December 31, 2011"2014”) shows that in 2015, generic competition from generics was associated withled to a declineloss of €1.2 billion in€256 million of net sales in 2012 (or €1.3 billion at constant exchange rates).on a reported basis. The table below showssets forth the impact by product.product:
(€ million) Product | 2015 Reported | 2014 Reported | Change on a reported | Change on a reported | ||||||||||||
Aprovel® Western Europe | 143 | 190 | (47) | -24.7% | ||||||||||||
Lantus® Western Europe | 898 | 871 | 27 | +3.1% | ||||||||||||
Plavix® Western Europe | 169 | 217 | (48) | -22.1% | ||||||||||||
Renagel®/Renvela® Western Europe | 111 | 133 | (22) | -16.5% | ||||||||||||
Ambien® U.S. | 74 | 74 | - | 0.0% | ||||||||||||
Lovenox® U.S. | 77 | 130 | (53) | -40.8% | ||||||||||||
Taxotere® U.S. | (1) | 8 | (9) | -100.0% | ||||||||||||
Allegra® Japan | 180 | 178 | 2 | +1.1% | ||||||||||||
Amaryl® Japan | 46 | 54 | (8) | -14.8% | ||||||||||||
Lantus® Japan | 112 | 115 | (3) | -2.6% | ||||||||||||
Myslee® Japan | 121 | 125 | (4) | -3.2% | ||||||||||||
Plavix® Japan | 695 | 759 | (64) | -8.4% | ||||||||||||
Taxotere® Japan | 60 | 87 | (27) | -31.0% | ||||||||||||
Total | 2,685 | 2,941 | (256) | -8.7% |
(1) | 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 under ‘‘– Business Net Income’’ below. |
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Item 5. Operating and Financial Review and Prospects
(€ million) Product | 2012 Reported | 2011 Reported | Change on a reported basis | Change on a reported basis (%) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Plavix® Western Europe | 285 | (1) | 406 | (1) | (121 | ) | -29.8% | ||||||
Aprovel® Western Europe | 542 | (1) | 718 | (1) | (176 | ) | -24.5% | ||||||
Taxotere® Western Europe | 53 | 189 | (136 | ) | -72.0% | ||||||||
Eloxatine® U.S. | 718 | 806 | (88 | ) | -10.9% | ||||||||
Lovenox® U.S. | 319 | 633 | (314 | ) | -49.6% | ||||||||
Plavix® U.S. | 76 | (2) | 196 | (120 | ) | -61.2% | |||||||
Aprovel® U.S. | 45 | (2) | 49 | (4 | ) | -8.2% | |||||||
Taxotere® U.S. | 53 | 243 | (190 | ) | -78.2% | ||||||||
Ambien® U.S. | 85 | 82 | +3 | +3.7% | |||||||||
Xatral® U.S. | 20 | 75 | (55 | ) | -73.3% | ||||||||
Nasacort® U.S. | 21 | 54 | (33 | ) | -61.1% | ||||||||
Xyzal® U.S. | 6 | 13 | (7 | ) | -53.8% | ||||||||
Allegra® U.S. | (1 | ) | 3 | (4 | ) | -133.3% | |||||||
Total | 2,222 | 3,467 | (1,245 | ) | -35.9% | ||||||||
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 erosion fromthe decline caused by generic competition to continue in 2013,2016, with a negative impact on net income. The following products are expectedProducts susceptible to be impacted by generics in 2013:
· | those for which new generic competition can reasonably be expected in 2016 based on expiration dates, patents or other regulatory or commercial exclusivity: Renagel®/Renvela® in the United States; Lovenox® in Western Europe; Aprovel® in Japan; |
· | those which already faced generic competition in 2015, but whose sales can reasonably be expected to be subject to sales decline in 2016: Aprovel®, Lantus®, Plavix® and Renagel®/Renvela® in Western Europe; Ambien®, Lovenox® and Taxotere® in the United States; and Allegra®, Amaryl®, Myslee®, Lantus®, Plavix® and Taxotere® in Japan. |
Specifically as regards Lantus®
Eloxatine® in 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, aggregate2015, the 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) were €2,996 million, including €1,2212016 amounted to€4,411 million; this comprises€873 million in the U.S., €880United States (including€723 million in net sales of Renagel®/Renvela®);€2,230 million in Europe (including€909 million in net sales of Lovenox®); and€
8951,308 million in Japan (Allegra®, Myslee® and Taxotere®(including€94 million in net sales of Aprovel®). The negative impact from generics entering the market on our 20132016 net sales is liablelikely to represent a substantial portionproportion of this amount, but the actual impact will depend on a number of factors such as the actual launch dates of generic products in 2013,2016, 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, December 31, 20112015, 2014 and December 31, 20102013 have been significantly affected by our August 2004 acquisition of Aventis, our April 2011 acquisition of Genzyme and certain subsequent transactions, mainlytransactions. See “– Critical accounting and
reporting policies – Business combinations” below for an explanation of the impact of business combinations on our acquisitionresults of Genzyme on April 4, 2011.operations.
The Aventis acquisitionbusiness combination has given rise to significant amortization (€1,489expenses (€638 million in 2012, €1,7882015,€874 million in 2011,2014 and €3,070€1,199 million in 2010)2013). The Genzyme business combination has given rise to significant amortization of intangible assets (€890 million in 2015,€811 million in 2014 and€930 million in 2013) and impairment of intangible assets (reversals(expenses of €12€214 million in 2012 and2015, net reversal of €34€309 million in 2011,2014 and chargesexpenses of €127€665 million in 2010)2013). The Genzyme acquisition has also given rise to amortization of intangible assets (€981 million in 2012 and €709 million in 2011) and impairment of intangible assets (€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“business net income"income”. For a further discussion and definition of "business“business net income"income”, see "— Business Net Income" below.
Businessand business net income for the years ended December 31, 2012, 20112015, 2014 and 2010 is presented in "—2013, see “– Business Net Income"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”. 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 and human vaccines 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 thecontractual arrangements governing those alliances. For more information about our alliances, see "—“– Financial Presentation of Alliances"Alliances” below. When we sellour products are sold through licensees, we receive royalty income that we record in "Other revenues"“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
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Item 5. Operating and Financial Review and Prospects
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"“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 businessoperating segments, we also measure our results of operations through an indicator referred to as "Business“Business Operating Income,"” which we describe below under "—“– Segment Information —– Business Operating Income of Segments."”
Segment Information
Operating Segments
In accordance with IFRS 8 "Operating“Operating Segments,"” we have defined our operating segments as "Pharmaceuticals"“Pharmaceuticals”, "Human Vaccines"“Human Vaccines” (Vaccines) and "Animal Health"“Animal Health”. OurAll other identified segmentsactivities are combined in a separate segment categorized as "Other"“Other”.
The Pharmaceuticals segment covers research, development, production and marketing of medicines, including activities acquired withthose originating from Genzyme. Sanofi'sThe Sanofi 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 Regeneron and the entities majority owned by BMS. See "—“– Financial Presentation of Alliances"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. (“Merck”) in Europe.
Following the signature of the exclusivity agreement with Boehringer Ingelheim (see Note D.2.1. to our consolidated financial statements included at Item 18 of this annual report) and in accordance with IFRS 5 requirements on the presentation of discontinued operations, the net income/loss of the Animal Health business is presented in a separate line item in the consolidated income statements for 2015 and the prior periods reported. Until final completion of the transaction, expected in the fourth quarter of 2016, Sanofi will continue to monitor the performance of the Animal Health business. As of December 31, 2015, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8.
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". In particular, this8. 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.activities.
Inter-segment transactions are not material.
Business Operating Income of Segments
We report segment results on the basis of "Business“Business Operating Income"Income”. This indicator adopted in complianceis compliant with IFRS 8 and is used internally to measure operational performance and to allocate resources.
"Business“Business Operating Income"Income” is derived from "Operating income"“Operating income”, adjusted as follows:
· | the amounts reported in the line items “Restructuring costs”, “Fair value remeasurement of contingent consideration liabilities”, and “Other gains and losses, and litigation” are eliminated; |
· | amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature) are eliminated; |
· | the share of profits/losses of associates and joint ventures is added; |
· | net income 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; |
· | restructuring costs relating to associates and joint ventures are eliminated; and |
· | the non-recurring adjustment recognized in 2014 for the annual Branded Prescription Drug (BPD) Fee in the United States (following publication by the U.S. Internal Revenue Service in July 2014 of the final regulations on that fee) is also eliminated. |
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Item 5. Operating and Financial Review and Prospects
The table below, presented in the line items "Fair value remeasurement of contingent consideration liabilities", "Restructuring costs" and "Other gains and losses, and litigation" are eliminated;
The following table presentscompliance with IFRS 8, shows a reconciliation between our Business Operating Income for the year ended December 31, 2012.
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 28,871 | 3,897 | 2,179 | — | 34,947 | |||||||||||
Other revenues | 933 | 44 | 33 | — | 1,010 | |||||||||||
Cost of sales | (8,759 | ) | (1,635 | ) | (701 | ) | — | (11,095 | ) | |||||||
Research and development expenses | (4,219 | ) | (539 | ) | (164 | ) | — | (4,922 | ) | |||||||
Selling and general expenses | (7,666 | ) | (611 | ) | (669 | ) | (1 | ) | (8,947 | ) | ||||||
Other operating income and expenses | 98 | (7 | ) | 3 | 14 | 108 | ||||||||||
Share of profit/(loss) of associates and joint ventures | 432 | (1 | ) | (7 | ) | — | 424 | |||||||||
Net income attributable to non-controlling interests | (171 | ) | — | (1 | ) | — | (172 | ) | ||||||||
Business operating income | 9,519 | 1,148 | 673 | 13 | 11,353 | |||||||||||
The following table presents our Business Operating Income for the year ended December 31, 2011.
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 27,890 | 3,469 | 2,030 | — | 33,389 | |||||||||||
Other revenues | 1,622 | 25 | 22 | — | 1,669 | |||||||||||
Cost of sales | (8,368 | ) | (1,404 | ) | (654 | ) | — | (10,426 | ) | |||||||
Research and development expenses | (4,101 | ) | (564 | ) | (146 | ) | — | (4,811 | ) | |||||||
Selling and general expenses | (7,376 | ) | (542 | ) | (617 | ) | (1 | ) | (8,536 | ) | ||||||
Other operating income and expenses | (13 | ) | — | (7 | ) | 24 | 4 | |||||||||
Share of profit/(loss) of associates and joint ventures | 1,088 | 1 | — | 13 | 1,102 | |||||||||||
Net income attributable to non-controlling interests | (246 | ) | — | (1 | ) | — | (247 | ) | ||||||||
Business operating income | 10,496 | 985 | 627 | 36 | 12,144 | |||||||||||
The following table presents our Business Operating Income for the year ended December 31, 2010.
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 26,576 | 3,808 | 1,983 | — | 32,367 | |||||||||||
Other revenues | 1,623 | 28 | 18 | — | 1,669 | |||||||||||
Cost of sales | (7,316 | ) | (1,371 | ) | (615 | ) | — | (9,302 | ) | |||||||
Research and development expenses | (3,884 | ) | (517 | ) | (155 | ) | — | (4,556 | ) | |||||||
Selling and general expenses | (6,962 | ) | (603 | ) | (604 | ) | (2 | ) | (8,171 | ) | ||||||
Other operating income and expenses | 177 | 14 | (6 | ) | (108 | ) | 77 | |||||||||
Share of profit/(loss) of associates and joint ventures | 1,009 | 19 | — | 8 | 1,036 | |||||||||||
Net income attributable to non-controlling interests | (258 | ) | 1 | — | — | (257 | ) | |||||||||
Business operating income | 10,965 | 1,379 | 621 | (102 | ) | 12,863 | ||||||||||
The following table (in accordance with paragraph 28 of IFRS 8) reconciles our Business Operating Income toand our Income before tax and associates and joint ventures for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Business Operating Income(1) | 9,313 | 8,957 | 8,821 | |||||||||
Share of profit/(loss) of associates and joint ventures(2) | (169) | (146) | (89) | |||||||||
Net income attributable to non-controlling interests(3) | 126 | 126 | 161 | |||||||||
Amortization of intangible assets | (2,137) | (2,081) | (2,527) | |||||||||
Impairment of intangible assets | (767) | 31 | (1,387) | |||||||||
Fair value remeasurement of contingent consideration liabilities | 53 | (303) | 314 | |||||||||
Expenses arising from the impact of acquisitions on inventories(4) | - | - | (8) | |||||||||
Restructuring costs | (795) | (404) | (303) | |||||||||
Additional year expense related to US Branded Prescription Drug Fee(5) | - | (116) | - | |||||||||
Operating Income | 5,624 | 6,064 | 4,982 | |||||||||
Financial expense | (559) | (598) | (609) | |||||||||
Financial income | 178 | 192 | 111 | |||||||||
Income before tax and associates and joint ventures | 5,243 | 5,658 | 4,484 |
(1) | Excluding the Animal Health business, the net income/loss of which is presented in a separate line item, “Net income/(loss) of the held-for-exchange Animal Health business”, in the consolidated financial statements for 2015 and prior years (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). Until final completion of the transaction, expected at the end of 2016, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8. |
(2) | Excluding (i) restructuring costs of associates and joint ventures and (ii) expenses arising from the impact of acquisitions on associates and joint ventures. |
(3) | Excluding (i) restructuring costs and (ii) other adjustments attributable to non-controlling interests. |
(4) | This line records the impact of the workdown of acquired inventories remeasured at fair value at the acquisition date. |
(5) | Annual fee related to 2013 sales: the IRS reform of July 2014 altered the date on which the liability is recognized, such that the expense recognized during 2014 was based on both 2013 and 2014 sales. |
(€ million) | Year Ended December 31, 2012 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Business Operating Income | 11,353 | 12,144 | 12,863 | |||||||
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 | |||||||
Amortization of intangible assets | (3,291 | ) | (3,314 | ) | (3,529 | ) | ||||
Impairment of intangible assets | (117 | ) | (142 | ) | (433 | ) | ||||
Fair value remeasurement of contingent consideration liabilities | (192 | ) | 15 | — | ||||||
Expenses arising from the impact of acquisitions on inventories (3) | (23 | ) | (476 | ) | (142 | ) | ||||
Restructuring costs | (1,141 | ) | (1,314 | ) | (1,384 | ) | ||||
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 | |||||||
Operating Income | 6,337 | 5,731 | 6,535 | |||||||
Financial expense | (553 | ) | (552 | ) | (468 | ) | ||||
Financial income | 93 | 140 | 106 | |||||||
Income before tax and associates and joint ventures | 5,877 | 5,319 | 6,173 | |||||||
Business Net Income
In addition to net income, we use a non-GAAP financial measure that we refer to as "business“business net income"income” to evaluate our Group'sGroup’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
investor’s understanding of trends in our dividend policy is enhanced by disclosing business net income.
We have also decided to report "business“business earnings per share"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“Net income attributable to equity holders of Sanofi",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); as well as (ix) effects of major tax disputes 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, and (x) the share of non-controlling interests in items (i) through (ix). Items (i), (ii), (iii), (v) and (vi) correspond to those reported in the income statement line items "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.excluding:
· | amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature); |
· | fair value remeasurements of contingent consideration liabilities related to business acquisitions; |
· | other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); |
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Item 5. Operating and Financial Review and Prospects
· | restructuring costs(1); |
· | other gains and losses (including gains and losses on major disposals of non-current assets(1)); |
· | costs of provisions associated with litigation(1); |
· | tax effects related to the items listed above as well as effects of major tax disputes; |
· | the 3% tax on the distribution of dividends to Sanofi shareholders; |
· | the additional expense relating to the annual U.S. Branded Prescription Drug Fee, booked in 2014 following publication in July 2014 of the final U.S. IRS regulation on this issue; |
· | those Animal Health income statement items that are not included in business net income(2); and |
· | the portion attributable to non-controlling interests of the items listed above. |
The following table reconciles our business net income to our Net income attributable to equity holders of Sanofi for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:
(€ million) | | 2012 | 2011 | 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Business net income | 8,179 | 8,795 | 9,215 | |||||||||
(i) | Amortization of intangible assets | (3,291 | ) | (3,314 | ) | (3,529 | ) | |||||
(ii) | Impairment of intangible assets | (117 | ) | (142 | ) | (433 | ) | |||||
(iii) | Fair value remeasurement of contingent consideration liabilities | (192 | ) | 15 | — | |||||||
(iv) | Expenses arising from the impact of acquisitions on inventories (1) | (23 | ) | (476 | ) | (142 | ) | |||||
(v) | Restructuring costs | (1,141 | ) | (1,314 | ) | (1,384 | ) | |||||
(vi) | Other gains and losses, and litigation (2) | — | (327 | ) | (138 | ) | ||||||
(vii) | Impact of the non-depreciation of the property, plant and equipment of Merial (IFRS 5) | — | — | 77 | ||||||||
(viii) | Tax effects on the items listed above, comprising: | 1,580 | 1,905 | 1,856 | ||||||||
— amortization of intangible assets | 1,159 | 1,178 | 1,183 | |||||||||
— impairment of intangible assets | 42 | 37 | 143 | |||||||||
— fair value remeasurement of contingent consideration liabilities | 2 | 34 | — | |||||||||
— expenses arising from the impact of acquisitions on inventories | 7 | 143 | 44 | |||||||||
— restructuring costs | 370 | 399 | 466 | |||||||||
— other gains and losses, and litigation | — | 114 | 46 | |||||||||
— non-depreciation of property, plant and equipment of Merial (IFRS 5) | — | — | (26 | ) | ||||||||
(iv)/(ix) | Other tax items (3) | — | 577 | — | ||||||||
(x) | Share of items listed above attributable to non-controlling interests | 3 | 6 | 3 | ||||||||
(iv)/(v) | Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures (4) | (31 | ) | (32 | ) | (58 | ) | |||||
Net income attributable to equity holders of Sanofi | 4,967 | 5,693 | 5,467 | |||||||||
(€ million) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Business net income | 7,371 | 6,847 | 6,686 | |||||||||
Amortization of intangible assets | (2,137) | (2,081) | (2,527) | |||||||||
Impairment of intangible assets | (767) | 31 | (1,387) | |||||||||
Fair value remeasurement of contingent consideration liabilities | 53 | (303) | 314 | |||||||||
Expenses arising from the impact of acquisitions on inventories | - | - | (8) | |||||||||
Restructuring costs | (795) | (404) | (303) | |||||||||
Other gains and losses, and litigation(2) | - | 35 | - | |||||||||
Additional year expense related to US Branded Prescription Drug Fee(3) | - | (116) | - | |||||||||
Tax effects on the items listed above, comprising: | 1,331 | 928 | 1,341 | |||||||||
– amortization of intangible assets | 757 | 564 | 801 | |||||||||
– impairment of intangible assets | 262 | (18) | 527 | |||||||||
– fair value remeasurement of contingent consideration liabilities | 39 | 254 | (85) | |||||||||
– expenses arising from the impact of acquisitions on inventories | - | - | 2 | |||||||||
– restructuring costs | 273 | 141 | 96 | |||||||||
– other gains and losses, and litigation | - | (13) | - | |||||||||
Other tax items | (111) | (110) | (109) | |||||||||
Share of items listed above attributable to non-controlling interests | 25 | 8 | 4 | |||||||||
Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures | (191) | (198) | (50) | |||||||||
Animal Health items(4) | (492) | (247) | (245) | |||||||||
Net income attributable to equity holders of Sanofi | 4,287 | 4,390 | 3,716 |
(1) | The Animal Health business is reported separately in accordance with IFRS 5. |
(2) | Profit related to the acquisition of Alnylam shares in 2014, reported in the line item “Financial Income”. |
(3) | Annual fee related to 2013 sales: the IRS reform of July 2014 altered the date on which the liability is recognized, such that the expense recognized during 2014 was based on both 2013 and 2014 sales. |
(4) | Includes the following items: impact of the discontinuation of depreciation and impairment of property, plant & equipment with effect from the start date of IFRS 5 application; impact of the amortization and impairment of intangible assets until the start date of IFRS 5 application; costs incurred as a result of the divestment; and the tax effect of those items. |
(1) | Presented in the income statement line items “Restructuring costs”, and “Other gains and losses, and litigation”, as defined in Note B.20. to our consolidated financial statements. |
(2) | Includes the following items: impact of the discontinuation of depreciation and impairment of property, plant & equipment with effect from the start date of IFRS 5 application (Non-Current Assets Held for Sale and Discontinued Operations); impact of the amortization and impairment of intangible assets until the start date of IFRS 5 application; costs incurred as a result of the divestment; and the tax effect of those items. |
(1)83
This line comprises the workdown of inventories remeasured at fair value at the acquisition date.
The following table sets forth the calculation of our business net income for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Business operating income(1) | 9,313 | 8,957 | 8,821 | |||||||||
Business operating income of the Animal Health business(2) | 635 | 492 | 502 | |||||||||
Aggregate financial income and expenses (including the held-for-exchange Animal Health business) | (390) | (447) | (503) | |||||||||
Aggregate income tax expense (including the held-for-exchange Animal Health business) | (2,187) | (2,155) | (2,134) | |||||||||
Business net income | 7,371 | 6,847 | 6,686 |
(1) | Business operating income from continuing operations. |
(2) | See “– Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014 – Segment results” and at “– Results of Operations – Year Ended December 31, 2014 Compared with Year Ended December 31, 2013 – Segment results” below |
(€ million) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Business operating income | 11,353 | 12,144 | 12,863 | |||||||
Financial income and expenses | (460 | ) | (412 | ) | (362 | ) | ||||
Income tax expense | (2,714 | ) | (2,937 | ) | (3,286 | ) | ||||
Business net income | 8,179 | 8,795 | 9,215 | |||||||
The most significant reconciliation items in the table abovebetween our business net income and 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.assets (other than software). We believe that excluding these non-cash charges enhances an investor'sinvestor’s understanding of our underlying economic performance because we do not consider that the excluded charges reflect the combined entity'sentity’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 (other than software and other rights of an industrial or operational nature), 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; and |
· | charges related to the impairment of 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 other than software and other rights of an industrial or operational nature) 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 (other than software and other rights of an industrial or operational nature). 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 |
The results presented by business net income cannot be achieved without incurring the following costs that the measure excludes:84
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)Item 5. Operating 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 million for amortizable intangible assets (average amortization period of eightFinancial Review 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.Prospects
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. In connection with our acquisition of Genzyme in April 2011, we paid an aggregate of€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. |
We compensate for theabove-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.charges.
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 2012, 20112015, 2014 and 2010.2013. We break downanalyze our net sales among various categories, including by business, segment, product
and geographicgeographical region. We refer to our consolidated net sales as "reported" sales.“reported” sales.
In addition to reported sales, we analyze non-GAAP financial measures designed to (i) include net sales from our Animal Health business in the analysis of the Group’s performance and (ii) isolate the impact on our net sales of currency exchange rates and changes in groupGroup structure.
Following the announcement of exclusive negotiations with Boehringer Ingelheim regarding the divestment of our Animal Health business (Merial), the net profit or loss of that business is now presented in a separate line item in the consolidated income statement, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5 (see Note D.36. to our consolidated financial statements included at Item 18 of this annual report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal Health business (which remains an operating segment pursuant to IFRS 8), and to report the performance of that business at Group level. In our analysis of our financial performance for the year ended December 31, 2015 we discuss our“aggregate” net sales, which combines our net sales as reported in the consolidated income statement with the net sales of the Animal Health business, because we believe it provides comparability of our sales performance with prior periods and such sales will continue to be significant in future periods until the transaction is completed. Aggregate net sales is a non-GAAP financial measure.
When we refer to changes in ournet sales "at“at constant exchange rates"rates” (CER), 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.2B.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 ournet sales on a "constant“constant structure basis"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 |
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Item 5. Operating and Financial Review and Prospects
· | 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 (i) our reported net sales to our net sales at constant exchange rates and (ii) our reported net sales to our aggregate net sales and our aggregate net sales at constant exchange rates is provided at "—“– Results of Operations —– Year Ended December 31, 20122015 Compared with Year Ended December 31, 2011 —2014 – Net Sales"Sales” and at "—“– Results of Operations —– Year Ended December 31, 20112014 Compared with Year Ended December 31, 2010 —2013 – Net Sales"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'sCompany’s income statement is described in "—“– Results of Operations —– Year Ended December 31, 20122015 Compared with Year Ended December 31, 2011"2014” and "—“– Year Ended December 31, 20112014 Compared with Year Ended December 31, 2010"2013”, in particular in "—“– Net sales"sales”, "—“– Other Revenues"Revenues”, "—“– Share of Profit/Loss of Associates and Joint Ventures"Ventures” and "—“– Net Income Attributable to Non-Controlling Interests"Interests”.
Alliance Arrangements with Bristol-Myers Squibb
Our revenues, expenses and operating income are affected significantly by the presentation of our alliance with Bristol-Myers Squibb (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. Under the terms of the revised 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:
The 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:
Under the 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:
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:
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.
Alliance Arrangements with Regeneron
Our relationship with Regeneron began in 2003 with an agreement for the co-development of the anti-angiogenic agent Zaltrap®Zaltrap®. We expanded our relationship in 2007 with the signature of an Investment Agreement and created a strategic R&D collaboration on fully human monoclonal antibodies. In 2015, the parties further expanded the relationship with the creation of a collaboration for antibodies in the field of immuno-oncology.
Collaboration agreement on Zaltrap®Zaltrap® (aflibercept)
Zaltrap®Zaltrap® (aflibercept) is a solution administered by intravenous perfusion, used in association with5-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.
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®Zaltrap® is a registered trademark of Regeneron Pharmaceuticals, Inc.Regeneron. The product was approved by the U.S. Food and Drug Administration ("FDA"(“FDA”) in August 2012, and has been marketed in the United States since that date. On February 5, 2013,Zaltrap® was approved by the European Commission granted marketing authorization in February 2013, and has been marketed in that territory since then.
The collaboration agreement signed by Sanofi and Regeneron in September 2003 on the European Union for Zaltrap®. Regeneron has not electeddevelopment and commercialization of Zaltrap® (aflibercept) was amended and restated in February 2015. That amendment ended Regeneron’s obligation to co-promote Zaltrap® at launch inreimburse 50% of the major market countries defined as United States, France, Italy, Spain, United Kingdom, Germany and Canada.development costs funded by Sanofi. As of December 31, 2014, the balance of outstanding development costs was€0.8 billion.
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 additionalnew agreements under which(amended in November 2009 and further amended in 2015 in connection with the immuno-oncology agreements described below) for the discovery, development and commercialization of fully human therapeutic antibodies. Under the 2009 amended agreements Sanofi committed to funding the discovery and pre-clinical development costs of Regeneron'sfully human monoclonal antibody research program until 2017,therapeutic antibodies by up to a maximum of $160 million aper year (see Note D.21. to our consolidated financial statements included at Item 18 of this annual report).through 2017. Sanofi has an option to license for further development anydevelop and commercialize antibodies discovered by Regeneron pursuant to this collaboration. Following the signature in July 2015 of the immuno-oncology collaboration agreement described below, $75 million (spread over three years) was reallocated to that attain Investigational New Drug (IND) status.new agreement.
If such anthe option is exercised, Sanofi is primarily responsible for funding, and co-develops the antibody with Regeneron.Regeneron and is responsible for funding. Sanofi and Regeneron would share co-promotion rights and profits on sales of the co-developed antibodies. Development costs for the drug candidate are shared between the companies, with Sanofi generally funding these costs up front, except that followingOn receipt of the first positive Phase III trial results for a co-developed drug candidate,any such antibody, the subsequent Phase III trial-related costs for that drug candidateantibody are sharedsplit 80% Sanofi, 20% Regeneron. Amounts received from Regeneron under those arrangements are recognized by Sanofi as a reduction in the line item “Research and 20% by Regeneron.development expenses”. Once a product begins to be marketed,commercialized, and provided that the share of quarterly results under the agreement represents a profit, Sanofi is entitled to an additional profit-share (capped at 10% of Regeneron’s share of quarterly profits) until Regeneron will progressively repay out of its profitshas paid 50% of the cumulative development costs borneincurred by Sanofi for all antibodies licensed by Sanofi. However, Regeneron are not required to apply more than 10% of its share of the profits from collaboration productsparties in any calendar quarter towards reimbursing Sanofi for these development costs. Under the terms of the collaboration agreement,collaboration. In addition, Sanofi may also be required to make milestone payments based on aggregatecumulative sales of all antibodies. As of December 31, 2015, the aggregate development costs incurred by both parties were€3.9 billion (including€2.6 billion funded 100% by Sanofi and€1.3 billion funded 80% by Sanofi and 20% by Regeneron).
On the earlier of (i) 24 months before the launch date or (ii) the first positive Phase III trial result Sanofi and Regeneron will share the commercial expenses of the antibodies jointly developed under the license agreement. Sanofi recognizes all the sales of those antibodies. Profits and losses arising from commercial operations in the United States are split 50/50. Outside the United States,
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Item 5. Operating and Financial Review and Prospects
Sanofi is entitled to between 55% and 65% of profits depending on sales of the antibodies, and bears 55% of any losses. The share of profits and losses attributable to Regeneron under the agreement is recognized in the line items “Other operatingincome”or “Other operating expenses”, which are components of operating income. In 2012, six antibodies were in clinical development; twoaddition, Regeneron is entitled to receive payments of which were in Phase III.up to $250 million contingent on the attainment of specified levels of sales outside the United States.
If Sanofi doesopts not to exercise its licensinglicense option for an antibody, under development, Sanofi will be entitled towould receive a royalty oncefrom Regeneron on sales of that antibody.
Collaboration agreement on the discovery, development and commercialization of antibodies in the field of immuno-oncology
On July 28, 2015, Sanofi and Regeneron announced a new global collaboration to discover, develop and commercialize new antibody beginscancer treatments in the emerging field of immuno-oncology. As part of the agreement, the two companies will jointly develop a programmed cell death protein 1 (PD-1) inhibitor antibody currently in Phase I testing, and plan to initiate clinical trials in 2016 with new therapeutic candidates based on ongoing, innovative preclinical programs. Sanofi has made an upfront payment of $640 million to Regeneron. The companies will invest approximately $1 billion from discovery through proof of concept (POC) development (usually a Phase IIa study) of monotherapy and novel combinations of immuno-oncology antibody candidates to be marketed.funded 25% by Regeneron ($250 million) and 75% by Sanofi ($750 million). Under the terms of the discovery program, Sanofi is entitled to an additional profit-share (capped at 10% of Regeneron’s share of quarterly profits) until the progressive payments from Regeneron reach 50% of clinical development costs initially funded by Sanofi.
Sanofi and Regeneron have also committed to equally fund no more than $650 million (or $325 million per company) for development of REGN2810, a PD-1 inhibitor antibody. In addition, Sanofi will make a one-time milestone payment of $375 million to Regeneron in the event that sales of a PD-1 product and any other collaboration antibody sold for use in combination with a PD-1 product were to exceed, in the aggregate, $2 billion in any consecutive 12-month period. Finally, the two companies agreed to reallocate $75 million (spread over three years) to immuno-oncology antibody research and development from Sanofi’s $160 million annual contribution to their existing antibody collaboration, which otherwise continues as announced in November 2009. Beyond the committed funding, additional funding will be allocated as programs enter post-POC development.
In January 2014, Sanofi and Regeneron amended the investor agreement that has existed between the two
companies since 2007 (the “Amended Investor Agreement”). Under the terms of the Amended Investor Agreement, Sanofi retains the right to acquire up to 30% of Regeneron’s capital stock (consisting of the outstanding shares of common stock and the shares of Class A stock). Having passed the threshold of 20% ownership of the capital stock, Sanofi exercised its right under the Amended Investor Agreement to designate an independent director, who has been appointed to the Board of Directors of Regeneron. The interest held by Sanofi in Regeneron has been consolidated by the equity method since the start of April 2014. In December 2015, Sanofi disclosed its intent to purchase, directly or through its subsidiaries, additional shares of Regeneron Common Stock to maintain and opportunistically increase its beneficial ownership without exceeding the maximum allowed under the Amended Investor Agreement entered into in January 2014 (30% of Shares of Then Outstanding Common Stock, as defined therein). Sanofi made no commitments concerning the price and availability of shares of Common Stock, the timing, or any other factors considered relevant to Sanofi. On December 31, 2015, Sanofi had an equity interest of 22.1% in Regeneron. On the conditions set out in the Amended Investor Agreement entered into in January 2014, Sanofi’s right to designate a Regeneron board member is contingent on Sanofi maintaining its percentage share of Regeneron’s outstanding capital stock (measured on a quarterly basis) at a level no lower than the highest percentage level previously achieved, with the maximum requirement capped at 25%.
In November 2015, the Independent Designee (as defined in the Amended Investor Agreement) designated by Sanofi as an independent director, resigned from the Regeneron Board of Directors. Sanofi intends to designate a successor pursuant to the Amended Investor Agreement.
The Amended Investor Agreement also gives Sanofi the right to receive certain reasonable information as may be agreed upon by the parties and which will facilitate Sanofi’s ability to account for their investment in the Company using the equity method of accounting under International Financial Reporting Standards.
Alliance arrangementsArrangements with Warner Chilcott (previouslyBristol-Myers Squibb (BMS)
Two of the Group’s leading products were jointly developed with Procter & Gamble Pharmaceuticals)
BMS: the anti-hypertensive agent irbesartan (Aprovel®/Avapro®/Karvea®) and the anti-atherothrombosis treatment clopidogrel bisulfate (Plavix®/Iscover®).
On September 27, 2012, Sanofi and BMS signed an agreement relating to their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets.
Under the terms of this amended agreement, which took effect on January 1, 2013, BMS returned to Sanofi its rights
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Our agreement
to Plavix® and Avapro®/Avalide® in all markets worldwide with Warner Chilcott ("the Alliance Partner") covers the worldwide development and marketing arrangementsexception 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 marketedPlavix® in collaboration with Warner Chilcott. The local marketing arrangements may take various forms.
In all of the territories managed by Sanofi (including the United States and Puerto Rico for Avapro®/Avalide®) as defined in the new agreement, Sanofi recognizes in its consolidated financial statements the revenue and expenses generated by its own operations. The share of revenues underprofits reverting to BMS subsidiaries is presented within “Net income attributable to non-controlling interests” in the alliance agreement in "Other operating income";income statement.
In the territory managed by BMS (United States and Puerto Rico for Plavix®
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.
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 2012,2015, we earned 31.1%35.5% of our net sales (36.2% of our aggregate net sales) in the United States. An increase in the value of the U.S. dollar against the euro has a positive impact on both our revenues and our operating income. 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 decreasevariation 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 alliancecollaborations with Regeneron and BMS in the United States which is
under the operational management of BMS, as described at "—(see “– Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above.Alliances” above).
For a description of positions entered into to manage operational foreign exchange risks as well as our hedging policy, see "Item“Item 11. Quantitative and Qualitative Disclosures about Market Risk"Risk”, and "Item“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"condition”.
Divestments
There were no material divestments in 2015 and 2014.
In August 2012,2013, Sanofi sold its 39.1% interest in Société Financière des Laboratoires de Cosmétologie Yves Rocher, in line withU.S. commercial rights of five pharmaceutical products to Covis Pharmaceuticals, Inc. The gain on this sale amounted to€165 million.
Acquisitions
· | The impact of acquisitions in 2015 on our consolidated financial statements is not material. |
· | The principal acquisitions during 2014 are described below: |
In 2014, Sanofi acquired 7 million shares of Regeneron. As of December 31, 2014, Sanofi held 22.3% of the Group's desirecompany’s share capital (versus 15.9% on December 31, 2013). The acquisition price amounted to focus on strategic activities.
In December 2011 Sanofi sold the Dermik dermatology business to Valeant Pharmaceuticals International Inc., for €321 million (see€1,629 million. See Note D.1.3.D.1.1. to our consolidated financial statements included at Item 18 of this annual report).report.
There were no material divestments in 2010.
Acquisitions
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 twoother acquisitions in 2014 on our consolidated financial statements is not material.
· | The principal acquisitions during 2013 are described below: |
In October 2012,March 2013, Sanofi signed an agreement to acquireacquired Genfar S.A. (Genfar), a Colombian pharmaceutical company that is a majorsignificant player in Colombia and other countries in Latin America. Genfar is the second-largest generics manufacturer in Colombia by sales, andwith annual sales around€100 million.
In June 2013, Merial announced the leader by volumes sold. Closingcompletion of the deal is subject to certain conditions, and is expected to take place in the first quarterits acquisition of 2013.
In December 2012, Sanofi announced that an agreement had been reached to acquire the animal health division of the Indian company Dosch Pharmaceuticals Pvt Ltd, an Indian company, allowing Merial to enter this strategicPrivate Limited, which markets 86 animal health market. Closingproducts and 50 specialities for ruminants, poultry and companion animals.
Other than Genfar, the impact of the deal is subject to regulatory approval, and is expected to take place during the first half of 2013.
In February 2011, Sanofi completed the acquisition of 100% of the share capital of BMP Sunstone Corporation (BMP Sunstone), a pharmaceutical company that develops a portfolio of branded pharmaceutical and healthcare products in China. See Note D.1.2. toon our consolidated financial statements included at Item 18 of this annual report.is not material.
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
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Item 5. Operating 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. 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 approvalFinancial Review and depending on the achievement of sales targets. See Note D.1.2. 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.Prospects
In November 2011, Sanofi acquired the business of Universal Medicare Private Limited (Universal), a major producer of nutraceuticals in India. An upfront payment of €83 million was made on completion of the transaction. See Note D.1.2. to our consolidated financial statements included at Item 18 of this annual report.
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.
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, 20122015 Compared with Year Ended December 31, 2011
2014
The consolidated income statements for the years ended December 31, 20122015 and December 31, 2011 break down as follows:2014 are presented below:
(under IFRS) (€ million) | 2012 | as % of net sales | 2011 | as % of net sales | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 34,947 | 100.0% | 33,389 | 100.0% | |||||||||
Other revenues | 1,010 | 2.9% | 1,669 | 5.0% | |||||||||
Cost of sales | (11,118 | ) | (31.8% | ) | (10,902 | ) | (32.7% | ) | |||||
Gross profit | 24,839 | 71.1% | 24,156 | 72.3% | |||||||||
Research & development expenses | (4,922 | ) | (14.1% | ) | (4,811 | ) | (14.4% | ) | |||||
Selling & general expenses | (8,947 | ) | (25.6% | ) | (8,536 | ) | (25.6% | ) | |||||
Other operating income | 562 | 319 | |||||||||||
Other operating expenses | (454 | ) | (315 | ) | |||||||||
Amortization of intangible assets | (3,291 | ) | (3,314 | ) | |||||||||
Impairment of intangible assets | (117 | ) | (142 | ) | |||||||||
Fair value remeasurement of contingent consideration liabilities | (192 | ) | 15 | ||||||||||
Restructuring costs | (1,141 | ) | (1,314 | ) | |||||||||
Other gains and losses, and litigation (1) | — | (327 | ) | ||||||||||
Operating income | 6,337 | 18.1% | 5,731 | 17.2% | |||||||||
Financial expenses | (553 | ) | (552 | ) | |||||||||
Financial income | 93 | 140 | |||||||||||
Income before tax and associates and joint ventures | 5,877 | 16.8% | 5,319 | 15.9% | |||||||||
Income tax expense | (1,134 | ) | (455 | ) | |||||||||
Share of profit/(loss) of associates and joint ventures | 393 | 1,070 | |||||||||||
Net income | 5,136 | 14.7% | 5,934 | 17.8% | |||||||||
Net income attributable to non-controlling interests | 169 | 241 | |||||||||||
Net income attributable to equity holders of Sanofi | 4,967 | 14.2% | 5,693 | 17.1% | |||||||||
Average number of shares outstanding (million) | 1,319.5 | 1,321.7 | |||||||||||
Average number of shares outstanding after dilution (million) | 1,329.6 | 1,326.7 | |||||||||||
Basic earnings per share (in euros) | 3.76 | 4.31 | |||||||||||
Diluted earnings per share (in euros) | 3.74 | 4.29 | |||||||||||
(under IFRS) (€ million) | 2015(1) | as % of net sales | 2014(1) | as % of net sales | ||||||||||||
Net sales | 34,542 | 100.0% | 31,694 | 100.0% | ||||||||||||
Other revenues | 319 | 0.9% | 305 | 1.0% | ||||||||||||
Cost of sales | (10,919) | (31.6%) | (10,230) | (32.3%) | ||||||||||||
Gross profit | 23,942 | 69.3% | 21,769 | 68.7% | ||||||||||||
Research & development expenses | (5,082) | (14.7%) | (4,667) | (14.7%) | ||||||||||||
Selling & general expenses | (9,382) | (27.2%) | (8,425) | (26.6%) | ||||||||||||
Other operating income | 254 | 301 | ||||||||||||||
Other operating expenses | (462) | (157) | ||||||||||||||
Amortization of intangible assets | (2,137) | (2,081) | ||||||||||||||
Impairment of intangible assets | (767) | 31 | ||||||||||||||
Fair value remeasurement of contingent consideration liabilities | 53 | (303) | ||||||||||||||
Restructuring costs | (795) | (404) | ||||||||||||||
Other gains and losses, and litigation | - | - | ||||||||||||||
Operating income | 5,624 | 16.3% | 6,064 | 19.1% | ||||||||||||
Financial expenses | (559) | (598) | ||||||||||||||
Financial income | 178 | 192 | ||||||||||||||
Income before tax and associates and joint ventures | 5,243 | 15.2% | 5,658 | 17.9% | ||||||||||||
Income tax expense | (709) | (1,214) | ||||||||||||||
Share of profit/(loss) of associates and joint ventures | (22) | (52) | ||||||||||||||
Net income excluding the held-for-exchange Animal Health business(1) | 4,512 | 13.1% | 4,392 | 13.9% | ||||||||||||
Net income/(loss) of the held-for-exchange Animal Health business | (124) | 117 | ||||||||||||||
Net income | 4,388 | 12.7% | 4,509 | 14.2% | ||||||||||||
Net income attributable to non-controlling interests | 101 | 119 | ||||||||||||||
Net income attributable to equity holders of Sanofi | 4,287 | 12.4% | 4,390 | 13.9% | ||||||||||||
Average number of shares outstanding (million) | 1,306.2 | 1,315.8 | ||||||||||||||
Average number of shares outstanding after dilution (million) | 1,320.7 | 1,331.1 | ||||||||||||||
Basic earnings per share (in euros) | 3.28 | 3.34 | ||||||||||||||
Basic earnings per share excluding the held-for-exchange Animal Health business (in euros) | 3.38 | 3.25 | ||||||||||||||
Diluted earnings per share (in euros) | 3.25 | 3.30 | ||||||||||||||
Diluted earnings per share excluding the held-for-exchange Animal Health business(in euros) | 3.34 | 3.21 |
(1) | The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); refer to Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report. |
89
Item 18 of this annual report.5. Operating and Financial Review and Prospects
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.
Net Sales
Net sales for the year ended December 31, 2012 amounted to €34,9472015 were€34,542 million, up 4.7% on 2011.9.0% higher than in 2014. 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.7.4 percentage points. 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%1.6% year-on-year.
The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 20122015 and December 31, 20112014 to our net sales at constant exchange rates:
(€ million) | 2015 | 2014 | Change | |||||||||
Net sales | 34,542 | 31,694 | +9.0% | |||||||||
Effect of exchange rates | (2,334) | |||||||||||
Net sales at constant exchange rates (CER) | 32,208 | 31,694 | +1.6% |
Net Sales by business
(€ million) | 2012 | 2011 | Change (%) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Net sales | 34,947 | 33,389 | +4.7% | |||||||
Effect of exchange rates | (1,400 | ) | ||||||||
Net sales at constant exchange rates | 33,547 | 33,389 | +0.5% | |||||||
Our net sales comprise the net sales generated by our Pharmaceuticals and Human Vaccines (Vaccines) andsegments, in accordance with IFRS 5.
Following the announcement of exclusive negotiations with Boehringer Ingelheim regarding the divestment of our Animal Health segments.business (Merial), the net profit or loss of that business is now presented in a separate line item in the consolidated income statement, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, expected in the fourth quarter of 2016, we will continue to monitor the
performance of the Animal Health business (which remains an operating segment pursuant to IFRS 8), and to report the performance of that business at the Group level. In our analysis of our financial performance for the year ended December 31, 2015 we discuss our aggregate net sales, which combines our net sales as reported in the consolidated income statement with the net sales of the Animal Health business. Aggregate net sales is a non-GAAP financial measure.
Aggregate net sales for the year were€37,057 million, 9.7% higher than in 2014. Exchange rate movements had a favorable effect of 7.5 percentage points, mainly reflecting the appreciation of the U.S. dollar and the Chinese yuan renminbi against the euro, which more than compensated for the unfavorable effects of the Russian rouble and Brazilian real. At constant exchange rates, aggregate net sales rose by 2.2% year-on-year.
The following table breaks downsets forth a reconciliation of our 2012net sales for the years ended December 31, 2015 and 2011December 31, 2014 to our aggregate net sales at constant exchange rates:
(€ million) | 2015 | 2014 | Change | |||||||||
Net sales(1) | 34,542 | 31,694 | +9.0% | |||||||||
Net sales of the Animal Health business(2) | 2,515 | 2,076 | +21.1% | |||||||||
Aggregate net sales | 37,057 | 33,770 | +9.7% | |||||||||
Effect of exchange rates | (2,549) | |||||||||||
Aggregate net sales at constant exchange rates (CER) | 34,508 | 33,770 | +2.2% |
(1) | In accordance with the presentation requirements of IFRS 5, the consolidated income statement line item “Net sales” does not include the net sales of the Animal Health business. |
(2) | Presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. |
90
Item 5. Operating and Financial Review and Prospects
The following table sets forth our 2015 and 2014 net sales by operating segment, along with our aggregate net sales including the net sales of the Animal Health business segment:(which remains an operating segment pursuant to IFRS 8).
(€ million) | 2012 Reported | 2011 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | 2015 | 2014 | Change | Change at constant exchange rates | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Pharmaceuticals | 28,871 | 27,890 | +3.5% | -0.4% | 29,799 | 27,720 | +7.5% | +0.8% | |||||||||||||||||||||
Vaccines | 3,897 | 3,469 | +12.3% | +5.7% | 4,743 | 3,974 | +19.4% | +7.3% | |||||||||||||||||||||
Net sales(1) | 34,542 | 31,694 | +9.0% | +1.6% | |||||||||||||||||||||||||
Animal Health | 2,179 | 2,030 | +7.3% | +3.1% | 2,515 | 2,076 | +21.1% | +10.8% | |||||||||||||||||||||
Total | 34,947 | 33,389 | +4.7% | +0.5% | |||||||||||||||||||||||||
Aggregate net sales | 37,057 | 33,770 | +9.7% | +2.2% |
(1) | In accordance with the presentation requirements of IFRS 5, the consolidated income statement line item “Net sales” does not include the net sales of the Animal Health business. |
(2) | Presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 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 reflects the positive impact of consolidating Genzyme from April 2011 and the performance of growth platforms, but also the negative effects of generic competition (mainly on sales of Lovenox®, Taxotere® and Eloxatine® in the United States, and of Taxotere®, Plavix® and Aprovel® in Western Europe), the ending of the co-promotion agreement with Teva on Copaxone®, the divestiture of the Dermik business in July 2011, and 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),In 2015, net sales for the Pharmaceuticals segment fell by 0.6% in 2012.were€29,799 million, up 7.5% on a reported basis and 0.8% at constant exchange rates (CER). The year-on-year increase of€2,079 million includes favorable exchange rate effects of€1,854 million, along with the following main effects at constant exchange rates:
· | growth in net sales for Genzyme (up€768 million), Generics (up€138 million), and Consumer Health Care (up€92 million); |
· | lower net sales for the Diabetes division (down€496 million) and for established prescription products (down€259 million). |
Our flagship Pharmaceuticals segment products (Lantus® and Apidra®, Lovenox®, Plavix®, Aprovel®/CoAprovel®, Taxotere®, Eloxatine®, Cerezyme®, Myozyme®/Lumizyme®, Fabrazyme®, Renagel®/Renvela®, Synvisc®/Synvisc-One®, Multaq®, Jevtana®, Aubagio® and Zaltrap®) are discussed below. Sales of Plavix® and Aprovel® are discussed further below under "— Worldwide Presence of Plavix® and Aprovel®".
The following table breaks down our 2012presents 2015 and 20112014 net sales for the Pharmaceuticals segment by product:
(€ million) Product | Indication | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||||||
Lantus® | Diabetes | 6,390 | 6,344 | +0.7% | -10.8% | |||||||||||||
Amaryl® | Diabetes | 393 | 360 | +9.2% | +1.7% | |||||||||||||
Apidra® | Diabetes | 376 | 336 | +11.9% | +4.8% | |||||||||||||
Toujeo® | Diabetes | 164 | - | - | - | |||||||||||||
Insuman® | Diabetes | 141 | 137 | +2.9% | +2.9% | |||||||||||||
Blood glucose monitoring (BGM) | Diabetes | 63 | 64 | -1.6% | -1.6% | |||||||||||||
Lyxumia® | Diabetes | 38 | 27 | +40.7% | +37.0% | |||||||||||||
Afrezza® | Diabetes | 7 | - | - | - | |||||||||||||
Other diabetes products | 8 | 5 | +60,0 % | +60,0 % | ||||||||||||||
Total: Diabetes | 7,580 | 7,273 | +4.2% | -6.8% | ||||||||||||||
Jevtana® | Prostate cancer | 321 | 273 | +17.6% | +9.5% | |||||||||||||
Thymoglobulin® | Organ rejection | 256 | 217 | +18.0% | +6.0% | |||||||||||||
Eloxatin® | Colorectal cancer | 227 | 210 | +8.1% | -0.5% | |||||||||||||
Taxotere® | Breast, lung, prostate, stomach, and head & neck cancer | 222 | 266 | -16.5% | -22.2% | |||||||||||||
Mozobil® | Hematologic malignancies | 143 | 111 | +28.8% | +16.2% | |||||||||||||
Zaltrap® | Colorectal cancer | 77 | 69 | +11.6% | +5.8% | |||||||||||||
Other oncology products | 258 | 255 | +1.2% | -10.6% | ||||||||||||||
Total: Oncology | 1,504 | 1,401 | +7.4% | -1.9% |
91
Item 5. Operating and Financial Review and Prospects
(€ million) Product | Indication | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||||||
Cerezyme® | Gaucher disease | 757 | 715 | +5.9% | +1.3% | |||||||||||||
Cerdelga® | Gaucher disease | 66 | 4 | - | - | |||||||||||||
Myozyme®/Lumizyme® | Pompe disease | 650 | 542 | +19.9% | +12.4% | |||||||||||||
Fabrazyme® | Fabry disease | 592 | 460 | +28.7% | +17.2% | |||||||||||||
Aldurazyme® | Mucopolysaccharidosis | 195 | 172 | +13.4% | +8.7% | |||||||||||||
Other rare diseases products | 290 | 244 | +18.9% | +8.6% | ||||||||||||||
Sub-total: Rare diseases | 2,550 | 2,137 | +19.3% | +11.4% | ||||||||||||||
Aubagio® | Multiple sclerosis | 871 | 433 | +101.2% | +77.8% | |||||||||||||
Lemtrada® | Multiple sclerosis | 243 | 34 | +614.7% | +550.0% | |||||||||||||
Sub-total: Multiple sclerosis | 1,114 | 467 | +138.5% | +112.2% | ||||||||||||||
Total: Genzyme | 3,664 | 2,604 | +40.7% | +29.5% | ||||||||||||||
Plavix® | Atherothrombosis | 1,929 | 1,862 | +3.6% | -4.1% | |||||||||||||
Lovenox® | Thrombosis | 1,719 | 1,699 | +1.2% | -0.5% | |||||||||||||
Renagel®/Renvela® | Hyperphosphatemia | 935 | 684 | +36.7% | +18.9% | |||||||||||||
Aprovel®/CoAprovel® | Hypertension | 762 | 727 | +4.8% | -3.7% | |||||||||||||
Allegra® | Allergic rhinitis, urticaria | 194 | 192 | +1.0% | -3.6% | |||||||||||||
Myslee®/Ambien®/Stilnox® | Sleep disorders | 306 | 306 | 0.0% | -6.2% | |||||||||||||
Synvisc®/Synvisc-One® | Arthritis | 413 | 352 | +17.3% | +2.3% | |||||||||||||
Multaq® | Atrial fibrillation | 341 | 290 | +17.6% | +0.7% | |||||||||||||
Depakine® | Epilepsy | 422 | 395 | +6.8% | +2.8% | |||||||||||||
Tritace® | Hypertension | 274 | 281 | -2.5% | -3.9% | |||||||||||||
Lasix® | Edema, hypertension | 162 | 164 | -1.2% | -3.7% | |||||||||||||
Targocid® | Bacterial infections | 160 | 162 | -1.2% | -4.3% | |||||||||||||
Orudis® | Rheumatoid arthritis, osteoarthritis | 156 | 160 | -2.5% | +3.8% | |||||||||||||
Cordarone® | Arrhythmia | 130 | 129 | +0.8% | -0.8% | |||||||||||||
Xatral® | Benign prostatic hypertrophy | 95 | 94 | +1.1% | -3.2% | |||||||||||||
Actonel® | Osteoporosis, Paget’s disease | 23 | 82 | -72.0% | -70.7% | |||||||||||||
Auvi-Q®/Allerject® | Severe allergies, anaphylaxis | (5) | 72 | -106.9% | -113.9% | |||||||||||||
Other prescription products | 3,617 | 3,649 | -0.9% | -3.0% | ||||||||||||||
Total: established prescription products | 11,633 | 11,300 | +2.9% | -2.3% | ||||||||||||||
Praluent® | Hypercholesterolemia | 9 | - | - | - | |||||||||||||
Consumer Health Care | 3,492 | 3,337 | +4.6% | +2.8% | ||||||||||||||
Generics | 1,917 | 1,805 | +6.2% | +7.6% | ||||||||||||||
Total: Pharmaceuticals | 29,799 | 27,720 | +7.5% | +0.8% |
92
Item 5. Operating and Financial Review and Prospects
Diabetes division
(€ million) Product | 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% | ||||||||||
Apidra® | Diabetes | 230 | 190 | +21.1% | +16.8% | ||||||||||
Amaryl® | Diabetes | 421 | 436 | -3.4% | -8.0% | ||||||||||
Insuman® | Diabetes | 135 | 132 | +2.3% | +3.0% | ||||||||||
Other diabetes products | Diabetes | 36 | 10 | +260.0% | +250.0% | ||||||||||
Total: Diabetes | Diabetes | 5,782 | 4,684 | +23.4% | +16.7% | ||||||||||
Eloxatin® | Colorectal cancer | 956 | 1,071 | -10.7% | -17.3% | ||||||||||
Taxotere® | Breast, lung, prostate, stomach, and head & neck cancer | 563 | 922 | -38.9% | -41.9% | ||||||||||
Jevtana® | Prostate cancer | 235 | 188 | +25.0% | +20.2% | ||||||||||
Zaltrap® | Colorectal cancer | 25 | — | — | — | ||||||||||
Mozobil® (1) | Hematologic malignancies | 96 | 59 | — | — | ||||||||||
Other oncology products (1) | 519 | 389 | — | — | |||||||||||
Total: Oncology | 2,394 | 2,629 | -8.9% | -14.3% | |||||||||||
Lovenox® | 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% | ||||||||||
Allegra® | Allergic rhinitis, urticaria | 553 | 580 | -4.7% | -9.5% | ||||||||||
Stilnox®/Ambien®/Myslee® | 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% | ||||||||||
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 | — | — | ||||||||||
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 | — | — | |||||||||||
Total: New Genzyme (1) | 1,785 | 1,122 | — | — | |||||||||||
Other prescription products | 5,513 | 5,927 | -7.0% | -9.1% | |||||||||||
Consumer Health Care | 3,008 | 2,666 | +12.8% | +9.9% | |||||||||||
Generics | 1,844 | 1,746 | +5.6% | +5.0% | |||||||||||
Total Pharmaceuticals | 28,871 | 27,890 | +3.5% | -0.4% | |||||||||||
Net sales for theDiabetes division were€7,580 million, down 6.8% CER, mainly due to lower sales of Lantus® in the United States. In the United States, Diabetes division net sales totaled€4,316 million, down 17.3% CER. Outside the United States, the division posted 8.9% net sales growth CER, to€3,264 million. The effects of a strong performance in Emerging Markets(1)
Net sales for theglargine franchise (Lantus® and Toujeo®) fell by 8.5% CER to€6,554 million.
Net sales ofLantus® were 10.8% lower CER in 2015, at€6,390 million. This decline in net sales of Genzyme products were recognized fromLantus® during 2015 reflected higher volumes (+4.6%), but also a generally unfavorable price effect (-15.4% CER), primarily in the acquisition date (April 2011)United States. Net sales in the United States decreased by 20.5% CER to€4,023 million, due mainly to three factors: slower growth in the basal insulins market, further rises in the level of rebates compared with 2014, and the fact that a higher proportion of sales passed through governmental channels such as Medicaid. In Emerging Markets, sales increased by 17.3% CER to€1,137 million, driven by growth in China, the Middle East and Latin America. In Western Europe, where a biosimilar of Lantus® was launched in the second half of 2015, net sales growth was modest (+1.8% CER).
Diabetes
Toujeo®, a new-generation basal insulin which saw its first launches in 2015 (late March in the United States, from April onwards in Western Europe, and subsequently in Japan and Canada), posted net sales of€164 million, including€137 million in the United States.
For 2016, we anticipate a generally favorable trend in prescription rates for the glargine franchise. In the medium to long term, trends in Lantus® volumes will depend on various factors such as the number of new rival products reaching the market (including biosimilars in Emerging Markets) and the level of volume growth for Toujeo®. Specifically as regards Lantus® in the United States, in September 2015 we reached an out-of-court settlement with Lilly, who agreed not to sell their insulin glargine before December 15, 2016 (see “– Impacts from generic competition” above).
We expect that the high level of rebates in the United States will perpetuate an unfavorable price effect on sales of Lantus® in 2016. Over the longer term, we are unable to predict price effects in the diabetes market, which will be dictated by the impact of new rival products on the price of diabetes treatments across all regions.
Net sales ofApidra® totaled€376 million in 2015, up 4.8% CER, reflecting a strong performance in Emerging Markets (+23.3% CER, at€89 million) but lower sales in the United States (-7.6% CER, at€145 million).
Net sales ofAmaryl® rose by 1.7% CER to€393 million. On the upside, Emerging Markets performed well (+7.6% CER, at€319 million), but sales were affected by generic competition in Japan (-18.5% CER, at€46 million).
Based on latest market trends, we forecast that overall net sales for the Diabetes division will decline at an average annualized rate in a range from 4% to 8% CER over the period from 2015 through 2018. However, actual net sales may differ from these forecasts given the many assumptions on which our projections are based.
For comments regarding Afrezza®, refer to “Item 4. Information on the Company – B.2. Main Pharmaceutical Products – a) Diabetes Solutions – Afrezza®”.
Oncology business
Net sales for theDiabetesOncology business amountedwere€1,504 million, down 1.9% CER. Good performances from Jevtana® and Mozobil® were offset by the impact of generic versions of Taxotere® in Japan.
Net sales ofJevtana® totaled€321 million in 2015, up 9.5% CER, driven by a strong performance in the United States (+16.5% CER, at€127 million) and by sales in Japan (+533.3% CER, at€20 million) where the product was launched in September 2014.
Net sales ofThymoglobulin® rose by 6.0% CER to €5,782€256 million, as sales advanced in the United States (+12.0% CER, at€145 million) but fell in Emerging Markets (-5.1% CER, at€56 million).
Taxotere® saw net sales fall sharply by 22.2% CER, to€222 million. The product is facing competition from generics in Emerging Markets (-7.7% CER, at€142 million) and in Japan (-34.5% CER, at€60 million).
Eloxatin® net sales decreased by 0.5% CER to€227 million, hit by a sharp decline in U.S. sales (-68.2% CER, at€9 million) but boosted by growth in Emerging Markets (+14.6% CER, at€130 million), especially in China.
Net sales ofMozobil® reached€143 million, up 16.7% at constant exchange rates, driven by strong growth for Lantus®.
Lantus® posted a 19.3% increase in net16.2% CER, mainly on sales at constant exchange rates in 2012 to €4,960 million, driven by very strong growth in the United States (up 22.0%(+11.3% CER, at €3,087€83 million);.
Zaltrap® (aflibercept, developed in collaboration with Regeneron) recorded net sales of€77 million, up 5.8% CER. A surge in sales in Western Europe (+32.4% CER, at
(1) | World excluding United States, Canada, Western Europe, Japan, South Korea, Australia and New Zealand. |
93
Item 5. Operating and Financial Review and Prospects
€49 million) following recent launches more than offset lower sales in the United States (-37.0% CER, at€21 million).
Genzyme business
TheGenzyme business generated net sales of€3,664 million, up 29.5% CER, driven by a solid performance from Aubagio® and the ongoing launch of Lemtrada®.
In Gaucher disease, net sales ofCerezyme® advanced by 1.3% CER to€757 million, as strong growth in Emerging Markets (up (+10.3% CER, at€263 million) more than compensated for lower sales in the United States (-9.1% CER, at€201 million) due to the launch of Cerdelga® in September 2014.Cerdelga® reported net sales of€66 million, of which€60 million were generated in the United States.
Net sales ofMyozyme®/Lumizyme® rose by 12.4% CER to€650 million, driven by further growth in patient numbers in the United States (+20.4% CER, at€205 million) and Emerging Markets (+18.3% CER, at€112 million).
Fabrazyme® achieved net sales growth of 17.2% CER, to€592 million. The product reported growth in all regions on a rise in the number of patients treated, with notable performances in the United States (+14.3% CER, at€305 million), Western Europe (+19.1% CER, at€133 million) and Emerging Markets (+25.4% CER, at€71 million).
The Multiple Sclerosis franchise generated net sales of€1,114 million, up 112.2% CER year-on-year. Net sales ofAubagio® surged by 77.8% CER in 2015 to€871 million. In the United States, net sales reached€618 million, up 59.2% CER. In Western Europe, the product continued to extend its geographical reach, and full-year net sales rose by 130.1% CER at€192 million. Net sales ofLemtrada® amounted to€243 million (+550.0% CER), including€89 million in Western Europe (mainly in Germany and the United Kingdom) and€128 million in the United States, where the product was launched at €793the end of 2014.
Established prescription products
Net sales ofPlavix® declined by 4.1% CER to€1,929 million, impacted by generic competition in Western Europe (-22.6% CER, at€169 million) and also, from June 2015, in Japan (-12.5% CER, at€695 million). In Emerging Markets, Plavix® reported net sales growth of 9.2% CER to€1,006 million, driven by China (+13.1% CER, at€660 million). 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 withBristol-Myers Squibb” above).
Full-year net sales ofLovenox® were virtually unchanged in 2015, slipping just 0.5% CER to€1,719 million. Net sales in Western Europe also saw little change year-on-year, rising by 0.4% CER to€909 million. Lower net sales in the United States due to generic competition (-50.8% CER, at
€77 million) were offset by a good performance in Emerging Markets (+8.8% CER, at€638 million), especially in China (up 35.9%) and Latin America (up 32.3%); and Africa. Sales of the generic version of Lovenox® launched by Sanofi in Japan (up 22.0%)2012 are recorded by our Generics business (see below).
Net sales ofRenagel®/Renvela® rose by 18.9% CER to€935 million on a strong performance in the United States (+30.8% CER, at€723 million), reflecting reduced competition from Impax which for a few months beginning April 2014 had the right to sell a limited number of authorized generics of Renvela®. In Western Europe, growth wassales fell year-on-year (-17.3% CER, at€111 million) as a more modest 5.3% at constant exchange rates.result of competition from generics. We are still anticipating possible approvals of generics in the United States in 2016.
NetAprovel®/Avapro® reported a drop in net sales of the rapid-acting insulin analog3.7% CER to€Apidra® 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 €421762 million, mainly as a result of competition from generics in Japan (down 31.7%, at €125 million), and in spite of 11.4% growthWestern Europe, where sales fell by 25.3% CER to€143 million. Net sales in Emerging Markets rose by 8.2% CER to €263 million.€465 million, mainly on a good performance in China.
Oncology
Net sales for theOncology business were €2,394 million, down 14.3% at constant exchange rates.
Net sales of Auvi-Q®/AllerjectEloxatine®® (epinephrine auto-injectors) fell by 17.3% at constant exchange rates113.9% CER to 956negative€5 million (versus positive€72 million in 2012, reflecting2014) due to the lossvoluntary recall in October 2015 of exclusivity inall batches of 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 facing 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® , launchedmarketed in the United States and Puerto Rico at the endCanada. This recall had a negative effect of August 2012, generated€122 million on net sales, largely as a result of €25 million for the year.reversal of all sales of the product since the start of 2015. It was discovered that the product could potentially have inaccurate dosage delivery, which may include failure to deliver the drug. Sanofi has ultimately decided to return all U.S. and Canadian rights to Auvi-Q® to the developer of Auvi-Q®.
We have no comments on sales of our other established prescription products.
Mozobil®Praluent®
Praluent® reported net sales of €96€9 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.
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 genericsmainly in the United States where the product was launched in July 2015.
Consumer Health Care business
Net sales slippedfor theConsumer Health Care business rose by 53.1% (at constant exchange rates)2.8% CER in 2015 to €319€3,492 million. Sales generated outsideThe main growth drivers were the United States accounted for 83.1%(+6.1% CER, at€902 million) largely due to a strong performance from Allegra® OTC following the launch of worldwidea new formulation, and Australia/New Zealand (+18.5% CER, at€191 million).
Net sales in Emerging Markets reached€1,672 million, up 1.6% CER, as lower sales in Brazil and Eurasia/Middle East were more than offset by growth in Central and Eastern Europe, Asia and Africa. In Western Europe, net sales fell by 1.8% CER to€668 million, as French sales of Doliprane® fell following two price cuts in January 2015 and November 2015. In the Rest of the World region, net sales rose by 5.5% at constant exchange rates15.9% CER to €1,574€250 million, driven by Emerging Markets (up 11.6% at constant exchange rates at €615 million). Sanofi also launched its own generic version of Lovenox®reflecting good performances in the United States, sales of which are recognized in the Generics business.Australia/New Zealand.
94
Net sales ofRenagel®/Renvela® rose by 13.0% on a constant structure basisItem 5. Operating 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 basisFinancial Review and at constant exchange rates).Prospects
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.
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 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® 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 20122015 and 20112014 net sales for the new GenzymeConsumer Health Care business by product:
(€ million) Product | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant exchange rates | ||||||||||||
Allegra® | 424 | 350 | +21.1% | +8.0% | ||||||||||||
Doliprane® | 303 | 310 | -2.3% | -2.3% | ||||||||||||
Essentiale® | 196 | 235 | -16.6% | -6.4% | ||||||||||||
Enterogermina® | 161 | 156 | +3.2% | 1.3% | ||||||||||||
Nasacort® | 122 | 114 | +7.0% | -8.8% | ||||||||||||
No Spa® | 88 | 109 | -19.3% | -5.5% | ||||||||||||
Lactacyd® | 114 | 104 | +9.6% | +10.6% | ||||||||||||
Maalox® | 97 | 98 | -1.0% | +4.1% | ||||||||||||
Dorflex® | 81 | 90 | -10.0% | +6.7% | ||||||||||||
Magné B6® | 82 | 88 | -6.8% | +9.1% | ||||||||||||
Other products | 1,824 | 1,683 | +8.4% | +4.2% | ||||||||||||
Total: Consumer Health Care | 3,492 | 3,337 | +4.6% | +2.8% |
Generics business
(€ 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% | |||||||||
In Emerging Markets, the acquisition date (April 2011).
Cerezyme® recordedGenerics business generated net sales growthof€1,094 million, a rise of 6.0% on a constant structure basis5.2% CER, driven by Eurasia/Middle East and at constant exchange rates, to €633 million (+0.9%Venezuela. Net sales in Western Europe at €215 million; +6.3%increased by 4.1% CER to€569 million, boosted by a good performance in Germany. In the United States, at €166 million). Production continuednet
sales advanced by 15.4% CER to improve during the year, enabling normal doses€171 million, mainly due to be delivered to patients in the product's principal markets
Netincreased 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)authorized generic of Lovenox®.
Fabrazyme® reported a 96.4% surge in In the Rest of the World region, net sales on a constant structure basis and at constant exchange rates,rose by 90.7% CER to €292 million. This increase was€83 million, due mainly to the resumptionperformance in Japan of productionthe authorized generic of Allegra® and of the authorized generic of Plavix® launched by Sanofi and our partner Nichi-Iko Pharmaceuticals Co., Ltd 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 inventoriesend of the over-the-counter (OTC) versionsecond quarter 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 2012.2015.
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."
The following table breaks downpresents the 2015 net sales of our Pharmaceutical segment products by geographical region in 2012:region:
(€ 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® | 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% | |||||||||||||||||
Amaryl® | 28 | -12.5% | 3 | -25.0% | 263 | +11.4% | 127 | -32.6% | |||||||||||||||||
Insuman® | 98 | -4.9% | 1 | — | 37 | +27.6% | (1 | ) | — | ||||||||||||||||
Other diabetes products | 30 | +190.0% | 3 | — | — | — | 3 | — | |||||||||||||||||
Total: Diabetes | 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% | |||||||||||||||||
Taxotere® | 53 | -72.5% | 53 | -80.2% | 270 | -11.2% | 187 | -10.7% | |||||||||||||||||
Jevtana® | 91 | +104.5% | 109 | -23.7% | 33 | +153.8% | 2 | — | |||||||||||||||||
Zaltrap® | — | — | 24 | — | — | — | 1 | — | |||||||||||||||||
Mozobil® (4) | 30 | — | 56 | — | 7 | — | 3 | — | |||||||||||||||||
Other oncology products (4) | 104 | — | 281 | — | 95 | — | 39 | — | |||||||||||||||||
Total: Oncology | 291 | -23.7% | 1,241 | -19.8% | 558 | 0.0% | 304 | -1.7% | |||||||||||||||||
Lovenox® | 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% | ||||||||||||||||
Allegra® | 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% | |||||||||||||||||
Copaxone® | 19 | -95.4% | — | — | — | — | 5 | -81.0% | |||||||||||||||||
Depakine® | 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 | — | |||||||||||||||||
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 | — | |||||||||||||||||
Total: New Genzyme (4) | 616 | — | 564 | — | 369 | — | 236 | — | |||||||||||||||||
Other prescription products | 2,105 | -12.9% | 567 | -16.7% | 2,062 | -2.8% | 779 | -8.4% | |||||||||||||||||
Consumer Health Care | 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% | |||||||||||||||||
Total pharmaceuticals | 7,569 | -9.9% | 7,935 | +0.9% | 9,325 | +7.8% | 4,042 | -0.3% | |||||||||||||||||
(€ million) Product | 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 | ||||||||||||||||||||||||
Lantus® | 898 | +1.8% | 4,023 | -20.5% | 1,137 | +17.3% | 332 | +1.3% | ||||||||||||||||||||||||
Amaryl® | 16 | -15.8% | 2 | -50.0% | 319 | +7.6% | 56 | -16.1% | ||||||||||||||||||||||||
Apidra® | 104 | +6.1% | 145 | -7.6% | 89 | +23.3% | 38 | +8.8% | ||||||||||||||||||||||||
Toujeo® | 14 | - | 137 | - | 9 | - | 4 | - | ||||||||||||||||||||||||
Insuman® | 76 | -8.5% | 2 | +100.0% | 63 | +20.4% | - | - | ||||||||||||||||||||||||
Blood glucose monitoring (BGM) | 59 | +1.7% | - | - | 2 | -33.3% | 2 | -33.3% | ||||||||||||||||||||||||
Lyxumia® | 22 | +40.0% | - | - | 7 | +75.0% | 9 | +12.5% | ||||||||||||||||||||||||
Afrezza® | - | - | 7 | - | - | - | - | - | ||||||||||||||||||||||||
Other diabetes products | - | - | - | - | 1 | 0.0% | 7 | +75.0% | ||||||||||||||||||||||||
Total: Diabetes | 1,189 | +2.9% | 4,316 | -17.3% | 1,627 | +16.4% | 448 | +0.9% | ||||||||||||||||||||||||
Jevtana® | 135 | -5.6% | 127 | +16.5% | 33 | +3.0% | 26 | +257.1% | ||||||||||||||||||||||||
Thymoglobulin® | 36 | +9.4% | 145 | +12.0% | 56 | -5.1% | 19 | 0.0% | ||||||||||||||||||||||||
Eloxatin® | 4 | -20.0% | 9 | -68.2% | 130 | +14.6% | 84 | 0.0% | ||||||||||||||||||||||||
Taxotere® | 6 | -60.0% | (1) | -112.5% | 142 | -7.7% | 75 | -30.0% | ||||||||||||||||||||||||
Mozobil® | 38 | +8.8% | 83 | +11.3% | 15 | +45.4% | 7 | +75.0% | ||||||||||||||||||||||||
Zaltrap® | 49 | +32.4% | 21 | -37.0% | 7 | +40.0% | - | - | ||||||||||||||||||||||||
Other oncology products | 51 | -9.1% | 162 | -10.6% | 23 | -24.1% | 22 | +5.0% | ||||||||||||||||||||||||
Total: Oncology | 319 | -1.6% | 546 | -3.2% | 406 | +0.5% | 233 | -3.5% |
(1)95
France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.
(€ million) Product | 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 | ||||||||||||||||||||||||
Cerezyme® | 245 | +0.8% | 201 | -9.1% | 263 | +10.3% | 48 | -2.2% | ||||||||||||||||||||||||
Cerdelga® | 6 | - | 60 | - | - | - | - | - | ||||||||||||||||||||||||
Myozyme®/Lumizyme® | 289 | +5.2% | 205 | +20.4% | 112 | +18.3% | 44 | +18.9% | ||||||||||||||||||||||||
Fabrazyme® | 133 | +19.1% | 305 | +14.3% | 71 | +25.4% | 83 | +16.2% | ||||||||||||||||||||||||
Aldurazyme® | 70 | +6.3% | 40 | 0.0% | 63 | +20.4% | 22 | 0.0% | ||||||||||||||||||||||||
Other rare diseases products | 46 | +9.3% | 114 | +9.0% | 40 | +25.8% | 90 | +1.2% | ||||||||||||||||||||||||
Sub-total Rare diseases | 789 | +7.0% | 925 | +14.5% | 549 | +15.9% | 287 | +7.5% | ||||||||||||||||||||||||
Aubagio® | 192 | +130.1% | 618 | +59.2% | 29 | +190.0% | 32 | +121.4% | ||||||||||||||||||||||||
Lemtrada® | 89 | +210.7% | 128 | - | 12 | +500,0% | 14 | +600.0% | ||||||||||||||||||||||||
Sub-total Multiple sclerosis | 281 | +150.5% | 746 | +91.2% | 41 | +241.7% | 46 | +181.3% | ||||||||||||||||||||||||
Total: Genzyme | 1,070 | +26.0% | 1,671 | +39.5% | 590 | +21.4% | 333 | +17.8% | ||||||||||||||||||||||||
Plavix® | 169 | -22.6% | 1 | * | 0.0% | 1,006 | +9.2% | 753 | -12.6% | |||||||||||||||||||||||
Lovenox® | 909 | +0.4% | 77 | -50.8% | 638 | +8.8% | 95 | +3.3% | ||||||||||||||||||||||||
Renagel®/Renvela® | 111 | -17.3% | 723 | +30.8% | 77 | +12.3% | 24 | +4.5% | ||||||||||||||||||||||||
Aprovel®/CoAprovel® | 143 | -25.3% | 15 | * | -33.3% | 465 | +8.2% | 139 | -3.8% | |||||||||||||||||||||||
Allegra® | 10 | -10.0% | - | - | 1 | -50.0% | 183 | -2.8% | ||||||||||||||||||||||||
Myslee®/Ambien®/Stilnox® | 38 | -5.0% | 74 | -16.2% | 63 | +8.8% | 131 | -7.4% | ||||||||||||||||||||||||
Synvisc®/Synvisc-One® | 29 | +3.6% | 322 | -1.5% | 49 | +23.1% | 13 | +18.2% | ||||||||||||||||||||||||
Multaq® | 41 | -6.8% | 287 | +2.1% | 10 | +12.5% | 3 | -33.3% | ||||||||||||||||||||||||
Depakine® | 141 | -1.4% | - | - | 267 | +6.3% | 14 | -12.5% | ||||||||||||||||||||||||
Tritace® | 118 | -7.9% | - | - | 151 | +2.1% | 5 | -44.4% | ||||||||||||||||||||||||
Lasix® | 75 | -5.1% | 3 | -33.3% | 58 | +7.8% | 26 | -15.6% | ||||||||||||||||||||||||
Targocid® | 80 | -6.0% | - | - | 72 | 0.0% | 8 | -22.2% | ||||||||||||||||||||||||
Orudis® | 17 | -6.0% | - | - | 135 | +5.8% | 4 | +33.3% | ||||||||||||||||||||||||
Cordarone® | 23 | -4.2% | - | - | 75 | +7.1% | 32 | -14.3% | ||||||||||||||||||||||||
Xatral® | 36 | -5.3% | - | - | 54 | -3.8% | 5 | +25.0% | ||||||||||||||||||||||||
Actonel® | 1 | -94.1% | - | - | 15 | -51.4% | 7 | -80.0% | ||||||||||||||||||||||||
Auvi-Q®/Allerject® | 3 | +50.0% | (6) | -118.0% | - | - | (2) | -122.2% | ||||||||||||||||||||||||
Other prescription products | 1,533 | -1.9% | 314 | -23.0% | 1,414 | +3.5% | 356 | -12.9% | ||||||||||||||||||||||||
Total: established prescription products | 3,477 | -5.3% | 1,810 | -5.7% | 4,550 | +5.9% | 1,796 | -11.4% | ||||||||||||||||||||||||
Praluent® | 1 | - | 9 | - | - | - | (1) | - | ||||||||||||||||||||||||
Consumer Health Care | 668 | -1.8% | 902 | +6.1% | 1,672 | +1.6% | 250 | 15.9% | ||||||||||||||||||||||||
Generics | 569 | +4.1% | 171 | +15.4% | 1,094 | +5.2% | 83 | +90.7% | ||||||||||||||||||||||||
Total: Pharmaceuticals | 7,293 | +0.9% | 9,425 | -4.8% | 9,939 | +7.1% | 3,142 | -3.3% |
(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, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
* | Sales of active ingredient to the entity majority-owned by BMS in the United States. |
(4)96
In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).Item 5. Operating and Financial Review and Prospects
Net Sales —– Human Vaccines (Vaccines) segment
NetIn 2015, net sales for the Vaccines segment amounted to €3,897were€4,743 million, in 2012, up 12.3%19.4% on a reported basis and 5.7%7.3% at constant exchange rates.rates (CER). Year-on-year growth was driven by sales of Polio/Pertussis/Hib vaccines in Emerging Markets, and in the United States by sales of Menactra® and the performance of VaxServe (a Sanofi Pasteur company that distributes vaccines in the United States).
The following table presents the 2012below sets forth 2015 and 20112014 net sales of our Vaccines segment by range of products:product range:
(€ million) | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant | ||||||||||||
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®) | 1,348 | 1,154 | +16.8% | +8.1% | ||||||||||||
Influenza Vaccines (including Vaxigrip® and Fluzone®) | 1,322 | 1,178 | +12.2% | +2.0% | ||||||||||||
Meningitis/Pneumonia Vaccines (including Menactra®) | 614 | 454 | +35.2% | +16.7% | ||||||||||||
Adult Booster Vaccines (including Adacel®) | 496 | 398 | +24.6% | +10.1% | ||||||||||||
Travel and Other Endemics Vaccines | 375 | 377 | -0.5% | -6.9% | ||||||||||||
VaxServe | 481 | 314 | +53.2% | +28.7% | ||||||||||||
Other Vaccines | 107 | 99 | +8.1% | -8.1% | ||||||||||||
Total: Vaccines | 4,743 | 3,974 | +19.4% | +7.3% |
(€ million) | 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% | |||||||||
Influenza Vaccines (including Vaxigrip® and Fluzone®) | 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% | |||||||||
Adult Booster Vaccines (including Adacel®) | 496 | 465 | +6.7% | 0.0% | |||||||||
Travel and Other Endemics Vaccines | 364 | 370 | -1.6% | -4.9% | |||||||||
Other Vaccines | 319 | 223 | +43.0% | +31.8% | |||||||||
Total Vaccines | 3,897 | 3,469 | +12.3% | +5.7% | |||||||||
Net sales ofPolio/Pertussis/Hib vaccines saw netrose by 8.1% CER to€1,348 million, boosted by the performances of Pentaxim® and Hexaxim®. 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 (€495grew strongly by 32.8% CER to€791 million, due to sales of Pentaxim® and polio vaccines in China. The Shan5™ pentavalent pediatric vaccines generated net sales of€33 million, mainly to world healthcare organizations. In the United States, sales declined by 20.2% CER to€393 million, due to lower sales of Pentacel® caused by manufacturing delays.
Net sales ofInfluenzavaccines rose by 2.0% CER to€1,322 million. Sales were strong in the United States (+11.8% CER, at€896 million), reinforcing Sanofi Pasteur’s differentiation strategy in influenza vaccines. In Emerging Markets, sales declined by 15.0% CER to€302 million, due mainly to shipment delays in Brazil and Mexico.
Net sales of Meningitis/Pneumoniavaccines reached€614 million, up 5.7% at constant exchange rates), but also a drop in16.7% CER. Menactra® generated net sales of€563 million, up 18.2% CER, driven by public-sector sales in the United States.
Adult booster vaccines net sales increased by 10.1% CER to€496 million, as strong performances in the United States (down 25.1%
(+9.8% CER, at constant exchange rates,€360 million) and Emerging Markets (+35.4% CER, at €374€65 million) more than offset lower sales in Western Europe (-13.6% CER, at€51 million) due to order restrictions on Pentacel® following a temporary shutdown in production at Sanofi Pasteur.the timing of shipments.
Net sales ofinfluenzaTravel and Other Endemics vaccines were flat (down 0.2% at constant exchange rates), at €884 million. In the United States, net sales felldeclined by 5.5% at constant exchange rates,6.9% CER to €466 million; in Emerging Markets, net sales rose by 5.1% at constant exchange rates, to €317€375 million.
Meningitis/Pneumonia vaccines posted net sales of €650 million, up 18.0% at constant exchange rates, driven byVaxServe, 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) andSanofi Pasteur company that distributes vaccines in the United States, (up 10.5% at constant exchange rates, at €473 million).posted net sales growth of 28.7% CER to€481 million.
Net sales ofOther Vaccines declined by 8.1% CER to€adult booster vaccines were unchanged year-on-year (at constant exchange rates), at €496107 million.
Net sales oftravel and other 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% | |||||||||||||||||
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 ofgenerated by Sanofi Pasteur MSD, our joint venture with Merck & Co., Inc. in Europe, amounted to €845 million in 2012, up 6.8%fell by 2.8% on a reported basis.basis in 2015 to€824 million. The main factors were a decline in sales of Gardasil® (-11.7% on a reported basis) and Adult Booster vaccines (-16.5% on a reported basis), partly offset by a good performance from hepatitis A vaccines. 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)
97
Item 5. Operating and sales of the travelFinancial Review and endemics vaccines franchise.
Net Sales — Animal Health segmentProspects
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 20122015 net sales of our Vaccines segment by product range and 2011by 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®) | 36 | +50.0% | 393 | -20.2% | 791 | +32.8% | 128 | -16.4% | ||||||||||||||||||||||||
Influenza Vaccines (inc. Vaxigrip® and Fluzone®) | 89 | -4.3% | 896 | +11.8% | 302 | -15.0% | 35 | -2.7% | ||||||||||||||||||||||||
Meningitis/Pneumonia Vaccines (inc. Menactra®) | 2 | -33.3% | 496 | +15.0% | 108 | +29.3% | 8 | -11.1% | ||||||||||||||||||||||||
Adult Booster Vaccines (inc. Adacel®) | 51 | -13.6% | 360 | +9.8% | 65 | +35.4% | 20 | +26.7% | ||||||||||||||||||||||||
Travel and Other Endemics Vaccines | 22 | +4.8% | 111 | -2.1% | 188 | -11.2% | 54 | -3.6% | ||||||||||||||||||||||||
VaxServe | - | - | 481 | +28.7% | - | - | - | - | ||||||||||||||||||||||||
Other Vaccines | 3 | -25.0% | 84 | -10.0% | 7 | -25.0% | 13 | +42.9% | ||||||||||||||||||||||||
Total: Vaccines | 203 | -0.5% | 2,821 | +7.2% | 1,461 | +11.9% | 258 | -7.8% |
(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 (our joint venture between Sanofi and Merck) are not included in our consolidated net sales. |
(2) | World excluding United States, Canada, Western Europe, Japan, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
Net Sales – Animal Health segment
Following the announcement of exclusive negotiations with Boehringer Ingelheim regarding the divestment of our Animal Health segment by rangebusiness (Merial), the net profit or loss 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% | |||||||||
Net sales for thecompanion animals franchise rose by 1.8% at constant exchange rates to €1,372 million. Erosionthat business is now presented in sales of theFrontline®/fipronil range of products was limited to 3.4% at constant exchange rates
(€775 million) despite competitive pressurea separate line item 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 forconsolidated income statement, “Net income/(loss) of 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.
The following table breaks down net sales of our held-for-exchange 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 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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% | |||||||||||||||||
Avermectin | 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% | |||||||||||||||||
Total Animal Health | 539 | -3.8% | 880 | +1.4% | 579 | +14.0% | 181 | +0.6% | |||||||||||||||||
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 2012 and 2011 net sales by region:
(€ million) | 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% | |||||||||
Emerging Markets (2) | 11,145 | 10,133 | +10.0% | +8.3% | |||||||||
Of which Eastern Europe and Turkey | 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 Latin America | 3,435 | 3,111 | +10.4% | +11.3% | |||||||||
Of which Africa | 1,018 | 949 | +7.3% | +8.3% | |||||||||
Of which Middle East | 1,001 | 872 | +14.8% | +12.2% | |||||||||
Other Countries (4) | 4,594 | 4,169 | +10.2% | +2.5% | |||||||||
Of which Japan | 3,274 | 2,865 | +14.3% | +6.6% | |||||||||
Total | 34,947 | 33,389 | +4.7% | +0.5% | |||||||||
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)business”, 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®.
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% 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®.
In the Other Countries 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") 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 2012IFRS 5 (see Notes D.2.1. 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 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, 2012, Sanofi and BMS announced the restructuring of their alliance with effect from January 1, 2013 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above).
The table below sets forth the worldwide sales of Plavix® and Aprovel® in 2012 and 2011, by geographic region:
(€ million) | 2012 | 2011 | Change on a reported basis | Change at constant exchange rates | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sanofi (2) | BMS (3) | Total | Sanofi (2) | BMS (3) | Total | |||||||||||||||||||
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% | |||||||||||||||||
Other countries | 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% | |||||||||||||||||
Aprovel®/Avapro® /Karvea®/Avalide® (4) | |||||||||||||||||||||||||
Europe | 527 | 99 | 626 | 694 | 130 | 824 | -24.0% | -24.3% | |||||||||||||||||
United States | 24 | 110 | 134 | — | 374 | 374 | -64.2% | -66.5% | |||||||||||||||||
Other countries | 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% | |||||||||||||||||
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.
Gross Profit
Gross profit amounted to €24,839 million in 2012 (71.1% of net sales), versus €24,156 million in 2011 (72.3% of net sales). This represents an increase of 2.8% in gross profit, but a fall of 1.2 points in the gross margin ratio.
The gross margin ratio for the Pharmaceuticals segment slipped by 2.9 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 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 1.0 point to 59.2%.
The gross margin ratio for the Animal Health segment improved by 0.4 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 million (versus €4,811 million in 2011), representing 14.1% of net sales (versus 14.4% in 2011). Overall, R&D expenses rose by €111 million, or 2.3% on a reported basis. After including Genzyme's costs for the first quarter of 2011, R&D expenses fell by 0.4% 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 million, up 2.9% 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%) 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 million to €539 million (down 4.4% 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 million (up 12.3% on a reported basis) versus 2011.
Selling and General Expenses
Selling and general expenses amounted to €8,947 million, compared with €8,536 million in 2011, an increase of €411 million or 4.8% on a reported basis. The ratio of selling and general expenses to net sales was unchanged year-on-year at 25.6%. After including Genzyme's costs for the first quarter of 2011, selling and general expenses were up 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 million, or 3.9% 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%) 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 million (up 12.7% on a reported basis), due partly to adverse trends in the U.S. dollar/euro exchange rate and partly to increased promotional investments.
In the Animal Health segment, selling and general expenses increased by €52 million (up 8.4% 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 million (versus €315 million in 2011).
Overall, other operating income and expenses represented net income of €108 million in 2012, compared with €4 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:
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.D.36. to our consolidated financial statements included at Item 18 of this annual report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal Health business (which remains an operating segment), and to report the performance of that business at Group level.
Net sales for the Animal Health segment in 2015 amounted to€2,515 million, up 21.1% on a reported basis and 10.8% CER.
The following table presents the 2015 and 2014 net sales of our Animal Health segment(1) by product range:
(€ million) | 2015 | 2014 | Change | Change at constant rates | ||||||||||||
Companion animals | 1,629 | 1,281 | +27.2% | +13.1% | ||||||||||||
Production animals | 886 | 795 | +11.4% | +7.0% | ||||||||||||
Total: Animal Health(1) | 2,515 | 2,076 | +21.1% | +10.8% | ||||||||||||
Of which vaccines | 804 | 720 | +11.7% | +5.7% | ||||||||||||
Of which fipronil-based products | 627 | 597 | +5.0% | -4.5% | ||||||||||||
Of which avermectin-based products | 498 | 398 | +25.1% | +11.1% | ||||||||||||
Of which other products | 586 | 361 | +62.3% | +46.0% |
(1) | Presented in the income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. |
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Net sales for theCompanion Animals franchise rose by 13.1% CER to€1,629 million, reflecting the resilience of thefipronil-based products (-4.5% CER, at€627 million) in the face of competition and the success ofNexGard®, a new product launched in 2014 that generated€288 million in net sales in 2015 (+122.1% CER).
Sales ofProduction Animals franchise products rose by 7.0% CER to€886 million, driven by growth in products for ruminants in the United States and avian products in Emerging Markets.
The following table presents the 2015 sales of our Animal Health segment by product range and by region:
(€ million) Product | 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 | ||||||||||||||||||||||||
Vaccines | 187 | +0.5% | 195 | +5.2% | 361 | +5.7% | 61 | +28.9% | ||||||||||||||||||||||||
Fipronil-based products | 183 | -0.6% | 301 | -8.5% | 110 | +7.8% | 33 | -26.2% | ||||||||||||||||||||||||
Avermectin-based products | 49 | -10.9% | 320 | +18.2% | 58 | +11.3% | 71 | +4.6% | ||||||||||||||||||||||||
Other products | 111 | +15.1% | 344 | +53.5% | 85 | +36.5% | 46 | +161.1% | ||||||||||||||||||||||||
Total: Animal Health | 530 | +1.6% | 1,160 | +15.0% | 614 | +10.1% | 211 | +20.0% |
(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, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
Net Sales and Aggregate 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 presents our 2015 and 2014 net sales by region:
(€ million) | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant rates | ||||||||||||
United States | 12,246 | 10,500 | +16.6% | -2.2% | ||||||||||||
Emerging Markets(1) | 11,400 | 10,469 | +8.9% | +7.7% | ||||||||||||
Of which Eastern Europe and Turkey | 2,366 | 2,484 | -4.8% | +5.1% | ||||||||||||
Of which Asia (excl. Pacific region) | 3,536 | 2,724 | +29.8% | +13.3% | ||||||||||||
Of which Latin America | 3,047 | 3,113 | -2.1% | +3.8% | ||||||||||||
Of which Africa & Middle-East | 2,222 | 2,006 | +10.8% | +6.8% | ||||||||||||
Western Europe(2) | 7,496 | 7,351 | +2.0% | +0.9% | ||||||||||||
Rest of the World(3) | 3,400 | 3,374 | +0.8% | -3.6% | ||||||||||||
Of which Japan | 2,034 | 2,083 | -2.4% | -7,2% | ||||||||||||
Total net sales | 34,542 | 31,694 | +9,0% | +1,6% |
(1) | World excluding United States, Canada, Western Europe, Japan, South Korea, 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, South Korea, Canada, Australia and New Zealand. |
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The following table presents our 2015 and 2014 aggregate net sales (including the Animal Health business) by region:
(€ million) | 2015 | 2014 | Change | Change at constant rates | ||||||||||||
United States | 13,406 | 11,339 | +18.2% | -1.0% | ||||||||||||
Emerging Markets(1) | 12,014 | 11,022 | +9.0% | +7.8% | ||||||||||||
Of which Eastern Europe and Turkey | 2,429 | 2,541 | -4.4% | +5.4% | ||||||||||||
Of which Asia (excl. Pacific region) | 3,732 | 2,881 | +29.5% | +13.2% | ||||||||||||
Of which Latin America | 3,305 | 3,363 | -1.7% | +4.0% | ||||||||||||
Of which Africa & Middle-East | 2,319 | 2,095 | +10.7% | +6.8% | ||||||||||||
Western Europe(2) | 8,026 | 7,865 | +2.0% | +0.9% | ||||||||||||
Rest of the World(3) | 3,611 | 3,544 | +1.9% | -2.5% | ||||||||||||
Of which Japan | 2,082 | 2,119 | -1.7% | -6.6% | ||||||||||||
Total aggregate net sales | 37,057 | 33,770 | +9.7% | +2.2% |
(1) | World excluding United States, Canada, Western Europe, Japan, South Korea, 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, South Korea, Canada, Australia and New Zealand. |
In the United States, net sales declined by 2.2% CER to€12,246 million. Aggregate net sales declined by 1.0% CER to€13,406 million, reflecting reduced sales for the Diabetes division (-17.3% CER), though the effect was partly offset by solid performances by Genzyme (+39.5% CER), Vaccines (+7.2% CER) and Animal Health (+15.0% CER).
In Emerging Markets, net sales reached€11,400 million, up 7.7% CER. Aggregate net sales reached€12,014 million, up 7.8% CER, driven by Diabetes (+16.4% CER), Genzyme (+21.4% CER), Vaccines (+11.9% CER) and Animal Health (+10.1% CER).
Aggregate net sales in Latin America advanced by 4.0% CER to€3,305 million. Growth was boosted by a favorable sequence of purchases in the local market in Venezuela (+22.2% CER, at€457 million), but hampered by Brazil(-6.2% CER, at€1,112 million) due to lower influenza vaccine sales. In Asia, aggregate net sales rose by 13.2% CER to€3,732 million. Aggregate net sales in China reached€2,218 million, up 19.5% CER, reflecting good performances in Diabetes and Vaccines (on strong sales of polio vaccines), and also in established prescription products (especially Plavix®). The Eastern Europe/Turkey region saw aggregate net sales rise by 5.4% CER to€2,429 million, mainly in Diabetes, Generics and Vaccines. Growth in Turkey reached 15.7% CER (to€461 million), while aggregate net sales in Russia declined by 2.8% CER to€596 million due to adverse economic conditions.
Net sales in Western Europe rose by 0.9% CER to€7,496 million. Aggregate net sales rose by 0.9% CER to€8,026 million. The effects of ongoing generic competition for Plavix® and Aprovel® were more than compensated for by
the performances of the Genzyme business (+26.0% CER) and the Diabetes division (+2.9% CER).
In the Rest of the World region, net sales amounted to€3,400 million, down 3.6% CER. Aggregate net sales amounted to€3,611 million, down 2.5% CER. Lower sales of established prescription products (-11.4% CER) and in Vaccines (-7.8% CER) were not fully offset by positive performances from Genzyme, Generics, Consumer Health Care and Animal Health. In Japan, aggregate net sales totaled€2,082 million (-6.6% CER) due to the adverse impact of competition from generics of Taxotere®, Myslee® and Amaryl® combined with lower polio vaccine sales, partly compensated for by good performances in Generics and Animal Health.
Presentation of net sales by business from 2016 onwards
With effect from January 2016, we are streamlining our organization and rolling out our new structure, based on five Global Business Units (GBUs): General Medicines & Emerging Markets, Sanofi Genzyme (Specialty Care), Diabetes & Cardiovascular, Sanofi Pasteur (Vaccines), and Merial (Animal Health). To help investors better understand the net sales figures that we will report under this new structure from 2016 onwards, the tables below present net sales by GBU and geographical region for 2015 and 2014.
Details of our five new GBUs are as follows:
The General Medicines & Emerging Markets GBU brings together our established prescription products (except Multaq®, which has been reclassified to the Diabetes & Cardiovascular GBU); our Consumer Health Care and
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Generics businesses, the scope of which is unchanged; and the Emerging Markets net sales (and only those net sales) of our Diabetes & Cardiovascular and Sanofi Genzyme businesses.
The Sanofi Genzyme GBU combines the net sales of our Oncology, Multiple Sclerosis and Rare Diseases business generated anywhere in the world other than in Emerging Markets.
The Diabetes & Cardiovascular GBU brings together the net sales of our Diabetes business generated anywhere in the world other than Emerging Markets, and the net sales of our Cardiovascular business (comprising sales of Praluent® and Multaq®) generated anywhere in the world other than in Emerging Markets.
The sum total of the net sales of those three GBUs corresponds to the net sales of our Pharmaceuticals segment.
The Vaccines and Animal Health GBUs correspond to our existing Vaccines and Animal Health segments.
We are also making the following changes to geographical regions, starting January 2016:
· | the new “Europe” zone will include both Western Europe and Eastern Europe (excluding Eurasia); |
· | the “Emerging Markets” zone will exclude mature countries in Eastern Europe, but retain the Eurasian countries; and |
· | the “Rest of the World” zone will now also include Puerto Rico, formerly included in the “United States” zone. |
Following the announcement on December 15, 2015 that we had opened exclusive negotiations with Boehringer Ingelheim with a view to the divestment of our Animal Health business (Merial), Merial’s contribution to our net income is now presented in a separate line item, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of our annual report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business (see “– Net sales by business segment” above).
In our analysis of our financial performance for the year ended December 31, 2015 we discuss our aggregate net sales (a non-GAAP financial measure), which combines our net sales as reported in the consolidated income statement with the net sales of the Animal Health business.
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The following table presents our 2015 and 2014 aggregate net sales by Global Business Unit:
(€ million) | 2015 | 2014 | Change | Change at constant | ||||||||||||
Total Established Prescription Products(1) | 11,292 | 11,010 | +2.6% | -2.4% | ||||||||||||
Consumer Health Care | 3,492 | 3,337 | +4.6% | +2.8% | ||||||||||||
Generics | 1,917 | 1,805 | +6.2% | +7.6% | ||||||||||||
Total Emerging Markets(7) Diabetes & Cardiovascular | 1,413 | 1,168 | +21.0% | +16.5% | ||||||||||||
Total Emerging Markets(7) Sanofi Genzyme | 893 | 777 | +14.9% | +12.7% | ||||||||||||
General Medicines & Emerging Markets GBU(7) | 19,007 | 18,097 | +5.0% | +1.4% | ||||||||||||
Total Oncology(2) | 1,120 | 1,040 | +7.7% | -2.5% | ||||||||||||
Total Multiple Sclerosis(3) | 1,080 | 456 | +136.8% | +109.9% | ||||||||||||
Total Rare Diseases(4) | 2,075 | 1,732 | +19.8% | +9.7% | ||||||||||||
Sanofi Genzyme GBU(8) | 4,275 | 3 228 | +32.4% | +19.9% | ||||||||||||
Total Diabetes(5) | 6,173 | 6,110 | +1.0% | -11.3% | ||||||||||||
Total Cardiovascular(6) | 344 | 285 | +20.7% | +3.5% | ||||||||||||
Diabetes & Cardiovascular GBU(8) | 6,517 | 6,395 | +1.9% | -10.6% | ||||||||||||
Total Pharmaceuticals | 29,799 | 27,720 | +7.5% | +0.8% | ||||||||||||
Vaccines GBU | 4,743 | 3,974 | +19.4% | +7.3% | ||||||||||||
Total net sales | 34,542 | 31,694 | +9.0% | +1.6% | ||||||||||||
Animal Health GBU | 2,515 | 2,076 | +21.1% | +10.8% | ||||||||||||
Total aggregate net sales | 37,057 | 33,770 | +9.7% | +2.2% |
(1) | Plavix®, Lovenox®, Renagel®/Renvela®, Aprovel®, Allegra®, Stilnox®/Ambien®/Myslee®, Synvisc®/Synvisc-One®, Depakine®, Tritace®, Lasix®, Targocid®, Orudis®, Cordarone®, Xatral® and other prescription products. |
(2) | Taxotere®, Jevtana®, Eloxatin®, Thymoglobulin®, Mozobil®, Zaltrap® and other oncology products. |
(3) | Aubagio® and Lemtrada®. |
(4) | Cerezyme®, Cerdelga®, Myozyme®, Fabrazyme®, Aldurazyme® and other rare diseases products. |
(5) | Lantus®, Apidra®, Amaryl®, Insuman®, Lyxumia®, Afrezza®, Toujeo® and other diabetes products. |
(6) | Praluent® and Multaq®. |
(7) | World excluding United States, Canada, Western & Eastern Europe (apart from Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
(8) | Excluding Emerging Markets. |
The table below shows the allocation of our 2015 and 2014 net sales to our new geographical regions:
(€ million) | 2015 Reported | 2014 Reported | Change on a reported basis | Change at constant | ||||||||||||
United States | 12,246 | 10,500 | +16.6% | -2.2% | ||||||||||||
Emerging Markets(1) | 10,072 | 9,240 | +9.0% | +7.8% | ||||||||||||
Of which Latin America | 3,047 | 3,113 | -2.1% | +3.8% | ||||||||||||
Of which Asia (excluding South Asia) | 3,101 | 2,375 | +30.6% | +13.9% | ||||||||||||
Of which Africa, Middle-East and South Asia | 2,657 | 2,354 | +12.9% | +7.1% | ||||||||||||
Of which Eurasia(2) | 1,132 | 1,324 | -14.5% | +4.0% | ||||||||||||
Europe(3) | 8,729 | 8,511 | +2.6% | +1.6% | ||||||||||||
Rest of the World(4) | 3,495 | 3,443 | +1.5% | -3.3% | ||||||||||||
Of which Japan | 2,034 | 2,083 | -2.4% | -7.2% | ||||||||||||
Total net sales | 34,542 | 31,694 | +9.0% | +1.6% |
(1) | World excluding United States, Canada, Western & Eastern Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
(2) | Russia, Ukraine, Georgia, Belarus, Armenia and Turkey. |
(3) | Western Europe and Eastern Europe except Eurasia. |
(4) | Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. |
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The table below shows the allocation of our 2015 and 2014 aggregate net sales to our new geographical regions:
(€ million) | 2015 | 2014 | Change | Change at constant | ||||||||||||
United States | 13,406 | 11,339 | +18.2% | -1.0% | ||||||||||||
Emerging Markets(1) | 10,646 | 9,757 | +9.1% | +8.0% | ||||||||||||
Of which Latin America | 3,305 | 3,363 | -1.7% | +4.0% | ||||||||||||
Of which Asia (excluding South Asia) | 3,288 | 2,529 | +30.0% | +13.7% | ||||||||||||
Of which Africa, Middle-East and South Asia | 2,763 | 2,449 | +12.8% | +7.2% | ||||||||||||
Of which Eurasia(2) | 1,156 | 1,344 | -14.0% | +4.7% | ||||||||||||
Europe(3) | 9,299 | 9,062 | +2.6% | +1.6% | ||||||||||||
Rest of the World(4) | 3,706 | 3,612 | +2.6% | -2.1% | ||||||||||||
Of which Japan | 2,082 | 2,119 | -1.7% | -6.6% | ||||||||||||
Total aggregate net sales | 37,057 | 33,770 | +9.7% | +2.2% |
(1) | World excluding United States, Canada, Western & Eastern Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
(2) | Russia, Ukraine, Georgia, Belarus, Armenia and Turkey. |
(3) | Western Europe and Eastern Europe except Eurasia. |
(4) | Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. |
Other Revenues
Other revenues, which mainly comprise royalties under licensing agreements contracted in connection with continuing operations, amounted to€319 million (compared with€305 million in 2014).
Aggregate other revenues (including the Animal Health business) were up 6.2% at€360 million (versus€339 million in 2014) reflecting: (i) favorable currency effects and (ii) a decline in royalties received from Amgen on sales of Enbrel® in the United States.
Gross Profit
Gross profit reached€23,942 million in 2015 (69.3% of net sales), versus€21,769 million in 2014 (68.7% of net sales).
Aggregate gross profit (including the Animal Health business) was€25,613 million in 2015 (69.1% of aggregate net sales), versus€23,080 million in 2014 (68.3% of aggregate net sales). This represents a year-on-year increase of 11.0%, and equates to an improvement of 0.8 of a percentage point in the gross margin ratio based on aggregate net sales.
The gross margin ratio for the Pharmaceuticals segment was 0.4 of a percentage point higher at 71.5%. The main factor was an improvement in the ratio of cost of sales to net sales, due largely to the favorable effect of exchange rates. Other factors included a positive impact from the Genzyme business and a negative impact from the Diabetes division in the United States.
The gross margin ratio for the Vaccines segment rose by 3.9 percentage points to 55.7%, reflecting a more favorable product mix and favorable exchange rate effects.
The gross margin ratio for the Animal Health segment increased by 3.2 percentage points to 66.4%, mainly as a result of favorable exchange rate effects.
Research and Development Expenses
Research and development (R&D) expenses amounted to€5,082 million in 2015, compared with€4,667 million in 2014.
Aggregate R&D expenses (including the Animal Health business) totaled€5,259 million in 2015 (versus€4,824 million in 2014) and represented 14.2% of aggregate net sales (versus 14.3% in 2014). The overall year-on-year increase of€435 million (9.0%) included€356 million for the Pharmaceuticals segment (+8.5%),€59 million for the Vaccines segment (+12.0%) and€20 million for the Animal Health segment (+12.7%).
The majority of this increase was attributable to the adverse impact of exchange rates. At constant exchange rates, aggregate R&D expenses rose only modestly, reflecting increased expenditure on dupilumab and Praluent® and the initiation of the new alliance with Regeneron in immuno-oncology in the second half of 2015.
Selling and General Expenses
Selling and general expenses totaled€9,382 million in 2015, compared with€8,425 million in 2014.
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Item 5. Operating and Financial Review and Prospects
Aggregate selling and general expenses (including the Animal Health business) reached€10,247 million (27.7% of aggregate net sales), compared with€8,991 million in 2014 (26.6% of aggregate net sales). This represents a year-on-year rise of€1,256 million (14.0%).
By segment, the year on-year increase was€964 million (+12.5%) for Pharmaceuticals,€112 million (+18.2%) for Vaccines and€183 million (+26.8%) for Animal Health. In addition to unfavorable exchange rate effects, the overall increase also reflects investment in new product launches in the Genzyme business (multiple sclerosis), Diabetes, Animal Health, and Cardiovascular (Praluent®).
Other Operating Income and Expenses
In 2015, other operating income totaled€254 million (versus€301 million in 2014), and other operating expenses€462 million (versus€157 million in 2014).
On an aggregate basis (including the Animal Health business), other operating income and expenses represented an overall net expense of€203 million in 2015, compared with overall net income of€164 million in 2014. This year-on-year adverse movement of€367 million was attributable mainly to the operating foreign exchange loss on our Venezuelan operations, which reached€240 million in 2015 compared with€47 million in 2014 (see Note D.26. to our consolidated financial statements included at Item 18 of this annual report).
This item also included gains on disposal amounting to€145 million in 2015 on an aggregate basis (versus€229 million in 2014), mainly on intangible assets in the United States.
Amortization of Intangible Assets
Amortization charged against intangible assets totaled€2,137 million in 2015, versus€2,081 million in 2014.
This overall year-on-year increase of€56 million reflects a number of factors: (i) an increase in amortization charged against the intangible assets recognized on the acquisition of Genzyme (€890 million in 2015, versus€811 million in 2014), due to new product launches and unfavorable exchange rate effects; (ii) the amortization in full, in December 2015, of a priority review voucher acquired in May 2015 for $245 million and used for the filing of a new drug application with the FDA for LixiLan; and (iii) a reduction in amortization charged against the intangible assets recognized on the acquisition of Aventis (€637 million in 2015, versus€874 million in 2014) as some products reached the end of their life cycles.
Impairment of Intangible Assets
In 2015, this line item showed impairment losses of€767 million against intangible assets, versus a net reversal of€31 million in 2014.
In 2015, this line item includes (i) a net impairment loss of€340 million on research projects in the Pharmaceuticals and Vaccines segments, primarily Synvisc-One® in osteoarthritis of the hip and the rotavirus vaccine project (Shantha); and (ii) impairment losses of€427 million taken against rights relating to a number of marketed products in the Pharmaceuticals segment, mainly Afrezza® in the United States (following termination of the license and collaboration agreement with MannKind Corporation) and Auvi-Q®/Allerject® in the United States and Canada (following the voluntary recall of this product in the fourth quarter of 2015).
The 2014 figure includes a gain of€356 million arising because the impairment loss taken in 2013 against Lemtrada® (alemtuzumab) was reversed following approval of the product by the FDA in November 2014. It also includes the negative effects of (i) a net impairment loss of€203 million arising from various research projects in Pharmaceuticals and Vaccines, in particular the discontinuation of collaborative development programs with Alopexx (SAR 279 356) and Kalobios (Pseudomonas aeruginosa vaccine), and from revised commercial prospects (especially for the rotavirus vaccine project); and (ii) the impairment losses of€123 million taken against rights to a number of marketed products in the Pharmaceuticals and Vaccines segments (mainly Consumer Health Care assets in the Emerging Markets region).
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€53 million in 2011. This item2015, versus a net expense of€303 million in 2014.
These remeasurements mainly relatesrelate 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'slatter’s acquisition by Sanofi, and to the contingent value rights (CVRs) issued by Sanofi in connection with the Genzyme acquisition (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€795 million in 2012, versus €1,3142015, compared with€404 million in 2011, and relate primarily2014.
In 2015, restructuring costs related mainly 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.
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(i) employee-related expenses arising from headcount adjustment plans in the United States and Europe, the implementationrest of multi-country organizationsthe world; (ii) the reorganization of the Group’s R&D activities, especially in Europe,France following signature of the agreement with Evotec; and (iii) impairment losses taken against industrial assets in Europe. In 2014, these costs mainly comprised employee-related expenses arising from headcount adjustment plans in
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France and the integrationrest 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 (seeEurope. See Note D.8.2.D.27. to theour consolidated financial statements included at Item 18 of this annual report), (ii) a gain of €210 million arising from damages receivedreport.
Other Gains and Losses, and Litigation
Nothing was recognized on this line 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).either 2015 or 2014.
Operating Income
Operating income totaled €6,337€5,624 million for 2012, versus €5,7312015, compared with€6,064 million for 2011, an increase2014. The year-on-year decline of 10.6%.7.3% was attributable mainly to the higher levels of research and development expenses, selling and general expenses, impairment of intangible assets and restructuring costs, which were not wholly offset by the growth in net sales and gross profit.
Financial Income and Expenses
Net financial expenseexpenses for 2012 was €4602015 were€381 million, compared with €412€406 million for 2011,2014. Aggregate net financial expenses (including the Animal Health business) were€390 million in 2015, against€412 million in 2014, a decrease of€22 million.
On an increase of €48 million.
Financialaggregate basis (including the Animal Health business), financial expenses directly related to our debt, net of cash and cash equivalents (see definition at "— Liquidityin “– Consolidated Balance sheet and Capital Resources"debt” below) were €349amounted to€281 million in 2012 compared to €3252015, versus€293 million in 2011. This increase was due to2014, reflecting a slight reduction in financial income resulting from a lower average ratethe cost of returnour debt.
Interest expenses relating to post-employment benefit obligations, on cash.
Becausean aggregate basis including 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 assetsAnimal Health business, amounted to €30€115 million in 2012 (versus €582015 and€142 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).2014.
Income before Tax and Associates and Joint Ventures
Income before tax and associates and joint ventures for 2012 was €5,877amounted to€5,243 million in 2011,2015, versus €5,319€5,658 million in 2011, an increase2014, a fall of 10.5%7.3%.
Income Tax Expense
Income tax expense amounted to €1,134represented€709 million in 2012,2015, versus €455€1,214 million in 2011 and €1,430 million2014, giving an effective tax rate (based on consolidated net income) of 13.5% in 2010.
The fall2015, versus 21.5% in income tax expense in 2011 relative to 2010 was mainly attributable to a reduction in the deferred tax liability relating to the remeasurement of the intangible assets of Merial in response to changes in tax rates and
legislation (primarily in the United Kingdom) and the effect of the Franco-American Advance Pricing Agreement (APA) for the period from 2006 through 20112014 (see Note D.30. to our consolidated financial statements)statements included at Item 18 of this annual report).
These effects did not impactThe level of income tax expense for 2012. However,was significantly impacted by the risepositive tax effects arising on the amortization and impairment of intangible assets (€1,019 million in 2015, versus€546 million in 2014) and on restructuring costs (€273 million in 2015, versus€141 million in 2014). In addition, the tax effect of the fair value remeasurement of
contingent consideration liabilities represented a gain of€39 million in 2015, compared with a gain of€254 million in 2014. Overall, these effects reduced our 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 inspections and the effects of time-barring.€403 million.
This item includes tax gains 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 tointerests, but after adding back the standard corporatebusiness operating income tax rate applicable in France (34.4%) was mainly due to royalty income being taxed at a reduced rate in France, and toof the differential in tax rates applied to profits of our foreign subsidiaries.
Share of Profit/Loss of Associates and Joint Ventures
TheAnimal Health business (before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests for that business) and after subtracting net financial expenses for that business. This effective tax rate was 23.0% in 20122015 and 24.0% in 2014. The main impacts on this tax rate are the geographical mix of the results from Group entities, the tax effects of the elimination of intragroup margin on inventory, and settlements of recent proceedings involving the tax authorities in various countries that had a positive effect in 2014. In 2015, there was €393 million, versus €1,070also a favorable effect as a result of changes in the taxation of dividends in France following a ruling by the Court of Justice of the European Union and the resulting amendments to the 2015 Finance Act.
Share of Profit/Loss of Associates and Joint Ventures
Associates and joint ventures contributed a net loss of€22 million in 2011. This2015, versus a net loss of€52 million in 2014.
Beginning April 2014, this line mainlyitem includes our share of the profits and losses of Regeneron (impact: losses of€54 million in 2015, and€126 million in 2014), including the impact of the fair value remeasurement of our share of the acquired intangible assets of Regeneron. It also includes our share of after-tax profits from territories managed by BMS under the Plavix®Plavix® and Avapro®Avapro® alliance which fell by 60.7% to €420 million (versus €1,070(€36 million in 2011). The decline2015, versus€31 million in 2014), plus immaterial amounts for our share was mainly attributableof profits and losses from other associates and joint ventures.
Net Income Excluding the Held-For-Exchange Animal Health Business
Net income excluding the held-for-exchange Animal Health business amounted to a 61.6% drop€4,512 million in sales2015, versus€4,392 million in 2014.
Net Income/(Loss) of Plavix® in the United States due toHeld-For-Exchange Animal Health Business
In accordance with IFRS 5, the net income or loss of exclusivitythe Animal Health business is presented in a separate line item, “Net income/(loss) of the held-for-exchange Animal Health business” (see Notes D.2.1. and competition from generics.D.36. to our consolidated financial statements included at Item 18 of this annual report). This business reported a net loss of€124 million in
Net Income105
Item 5. Operating and Financial Review and Prospects
2015, compared with net income of€117 million in 2014. In 2015, this line item includes income tax expense of€149 million arising from taxable temporary differences relating to holdings in subsidiaries, because it has become probable that those differences will reverse.
Net Income
Net income amounted to €5,136€4,388 million in 2012,2015, compared with €5,934€4,509 million in 2011.2014.
Net Income Attributable to Non-Controlling Interests
Net income attributable to non-controlling interests totaled €169was€101 million in 2012, against €2412015, versus€119 million in 2011.2014. This line mainly comprises the share of pre-tax profits paid to BMS from territories managed by Sanofi (€149(€94 million, versus €225€109 million in 2011); this2014). The year-on-year falldecrease was directly related to increased competition from generics of clopidogrel (Plavix®(active ingredient of Plavix®) and irbesartan (active ingredient of Aprovel®) in Europe.
Net Income Attributable to Equity Holders of Sanofi
Net income attributable to equity holders of Sanofi was €4,967amounted to€4,287 million, versus€4,390 million in 2012, versus €5,693 million in 2011.2014.
Basic earnings per share for 20122015 was €3.76, 12.8%€3.28, 1.8% lower than the 20112014 figure of €4.31,€3.34, based on an average number of shares outstanding of 1,319.51,306.2 million in 2012 (1,321.72015 (1,315.8 million in 2011)2014). Diluted earnings per share for 20122015 was €3.74, compared to €4.29 for 2011,€3.25, 1.5% lower than the 2014 figure of€3.30), based on an average number of shares outstanding after dilution of 1,329.61,320.7 million in 20122015 and 1,326.71,331.1 million in 2011.2014.
Business Operating IncomeSegment results
Sanofi reportsWe report segment results on the basis of "Business“Business Operating Income"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"information” above for the definition of business operating income and a reconciliation to our Income before tax and associates and joint ventures.
Table of ContentsBusiness Operating Income
Business operating income amounted to€9,313 million in 2015, 4.0% higher than in 2014 (€8,957 million) and represented 27.0% of net sales, versus 28.3% in 2014.
Business operating income for 2012 was €11,353 million, compared to €12,144 million in 2011 (down 6.5%). 2015 and 2014 is set forth below:
(€ million) | 2015 | 2014 | Change | |||||||||
Pharmaceuticals | 8,013 | 8,018 | -0.1% | |||||||||
Vaccines | 1,414 | 994 | +42.3% | |||||||||
Other | (114) | (55) | -107.3% | |||||||||
Business operating income(1) | 9,313 | 8,957 | +4.0% | |||||||||
Animal Health business(2) | 635 | 492 | +29.1% | |||||||||
Total: aggregated basis(3) | 9,948 | 9,449 | +5.3% |
(1) | Business operating income from continuing operations. |
(2) | The net income/(loss) of the Animal Health business is presented in a separate income statement line item, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(3) | Non-GAAP financial measure. |
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Item 5. Operating and Financial Review and Prospects
The following table below shows trends in business operating income by businesspresents our segment results for 2012 and 2011:the year ended December 31, 2015:
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | Total: aggregated basis(2) | ||||||||||||||||||
Net sales | 29,799 | 4,743 | - | 34,542 | 2,515 | 37,057 | ||||||||||||||||||
Other revenues | 288 | 31 | - | 319 | 41 | 360 | ||||||||||||||||||
Cost of sales | (8,788) | (2,131) | - | (10,919) | (885) | (11,804) | ||||||||||||||||||
Research and development expenses | (4,530) | (552) | - | (5,082) | (177) | (5,259) | ||||||||||||||||||
Selling and general expenses | (8,656) | (726) | - | (9,382) | (865) | (10,247) | ||||||||||||||||||
Other operating income and expenses | (121) | 27 | (114) | (208) | 5 | (203) | ||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 146 | 23 | - | 169 | 1 | 170 | ||||||||||||||||||
Net income attributable to non-controlling interests | (125) | (1) | - | (126) | - | (126) | ||||||||||||||||||
Business operating income | 8,013 | 1,414 | (114) | 9,313 | 635 | 9,948 |
(1) | The net income/loss of the Animal Health business is presented in a separate income statements line item, “Net income/(loss) of the held-for-exchange Animal Health business” for 2015 and prior years, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | Non-GAAP financial measure which includes the Animal Health business. |
The following table presents our segment results for the year ended December 31, 2014:
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | Total: aggregated basis(2) | ||||||||||||||||||
Net sales | 27,720 | 3,974 | — | 31,694 | 2,076 | 33,770 | ||||||||||||||||||
Other revenues | 272 | 33 | - | 305 | 34 | 339 | ||||||||||||||||||
Cost of sales | (8,282) | (1,948) | - | (10,230) | (799) | (11,029) | ||||||||||||||||||
Research and development expenses | (4,174) | (493) | - | (4,667) | (157) | (4,824) | ||||||||||||||||||
Selling and general expenses | (7,692) | (614) | (3) | (8,309) | (682) | (8,991) | ||||||||||||||||||
Other operating income and expenses | 194 | 2 | (52) | 144 | 20 | 164 | ||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 106 | 40 | - | 146 | 1 | 147 | ||||||||||||||||||
Net income attributable to non-controlling interests | (126) | - | - | (126) | (1) | (127) | ||||||||||||||||||
Business operating income | 8,018 | 994 | (55) | 8,957 | 492 | 9,449 |
(1) | The net income/loss of the Animal Health business is presented in a separate income statement line item, “Net income/(loss) of the held-for-exchange Animal Health business” for 2015 and prior years, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | Non-GAAP financial measure which includes the Animal Health business. |
(€ million) | 2012 | 2011 | Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Pharmaceuticals | 9,519 | 10,496 | -9.3% | |||||||
Vaccines | 1,148 | 985 | +16,5% | |||||||
Animal Health | 673 | 627 | +7.3% | |||||||
Other | 13 | 36 | -63.9% | |||||||
Business operating income | 11,353 | 12,144 | -6.5% | |||||||
Business Net Income
Business net income is a non-GAAP financial measure that we use to evaluate our Group'sGroup’s performance. See "Item 5. Operating and Financial Review and Prospects —“– Business Net Income"Income” above for the definition of business net income and a reconciliation to our Net income attributable to equity holders of Sanofi.
Business net income totaled €8,179€7,371 million in 20122015, versus €8,795€6,847 million in 2011 (down 7.0%), and2014, an increase of 7.7%; it represented 23.4%21.3% of net sales compared with 26.3% in 2011.2015 (19.9% of aggregate net sales) versus 21.6% of net sales in 2014 (20.3% of aggregate net sales).
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"Income” above).
Business earnings per share for 2012 were €6.20 versus €6.65was€5.64 in 2011, down 6.8%,2015, 8.5% higher than the 2014 figure of€5.20, based on an average number of shares outstanding of 1,319.51,306.2 million in 2012 (1,321.72015 and 1,315.8 million in 2011). Diluted business earnings per share for 2012 were €6.15 versus €6.63 in 2011, down 7.2%, based on an average number of shares outstanding of 1,329.6 million in 20122014.
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Item 5. Operating and 1,326.7 million in 2011.
Table of ContentsFinancial Review and Prospects
Year Ended December 31, 20112014 Compared with Year Ended December 31, 2010
2013
OurThe consolidated income statements for the years ended December 31, 20112014 and December 31, 20102013 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 | ||||||||||
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.
(under IFRS) (€ million) | 2014(1) | as % of net sales | 2013(1) | as % of net sales | ||||||||||||
Net sales | 31,694 | 100.0% | 30,966 | 100.0% | ||||||||||||
Other revenues | 305 | 1.0% | 325 | 1.0% | ||||||||||||
Cost of sales | (10,230) | (32.3%) | (10,302) | (33.2%) | ||||||||||||
Gross profit | 21,769 | 68.7% | 20,989 | 67.8% | ||||||||||||
Research & development expenses | (4,667) | (14.7%) | (4,605) | (14.9%) | ||||||||||||
Selling & general expenses | (8,425) | (26.6%) | (7,950) | (25.7%) | ||||||||||||
Other operating income | 301 | 691 | ||||||||||||||
Other operating expenses | (157) | (240) | ||||||||||||||
Amortization of intangible assets | (2,081) | (2,527) | ||||||||||||||
Impairment of intangible assets | 31 | (1,387) | ||||||||||||||
Fair value remeasurement of contingent consideration liabilities | (303) | 314 | ||||||||||||||
Restructuring costs | (404) | (303) | ||||||||||||||
Other gains and losses, and litigation | - | - | ||||||||||||||
Operating income | 6,064 | 19.1% | 4,982 | 16.1% | ||||||||||||
Financial expenses | (598) | (609) | ||||||||||||||
Financial income | 192 | 111 | ||||||||||||||
Income before tax and associates and joint ventures | 5,658 | 17.9% | 4,484 | 14.5% | ||||||||||||
Income tax expense | (1,214) | (726) | ||||||||||||||
Share of profit/(loss) of associates and joint ventures | (52) | 39 | ||||||||||||||
Net income excluding the held-for-exchange Animal Health business(1) | 4,392 | 13.9% | 3,797 | 12.3% | ||||||||||||
Net income/(loss) of the held-for-exchange Animal Health business | 117 | 77 | ||||||||||||||
Net income | 4,509 | 14.2% | 3,874 | 12.5% | ||||||||||||
Net income attributable to non-controlling interests | 119 | 158 | ||||||||||||||
Net income attributable to equity holders of Sanofi | 4,390 | 13.9% | 3,716 | 12.0% | ||||||||||||
Average number of shares outstanding (million) | 1,315.8 | 1,323.1 | ||||||||||||||
Average number of shares outstanding after dilution (million) | 1,331.1 | 1,339.1 | ||||||||||||||
Basic earnings per share (in euros) | 3.34 | 2.81 | ||||||||||||||
Basic earnings per share excluding the held-for-exchange Animal Health business (in euros) | 3.25 | 2.75 | ||||||||||||||
Diluted earnings per share (in euros) | 3.30 | 2.77 | ||||||||||||||
Diluted earnings per share excluding the held-for-exchange Animal Health business(in euros) | 3.21 | 2.72 |
(1) | The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); refer to Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report. |
Net Sales108
Item 5. Operating and Financial Review and Prospects
Net Sales
Net sales for the year ended December 31, 2011 totaled €33,3892014 amounted to€31,694 million, up 3.2% on 2010.2.4% higher than in 2013. Exchange rate fluctuationsmovements had an unfavorable effect of 2.12.4 percentage points, primarily as a result ofmainly reflecting the depreciation of the U.S. dollarJapanese yen, the Russian rouble, the Brazilian real and the Argentine peso 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%rose by 4.8% year-on-year.
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, 20112014 and December 31, 20102013 to our net sales at constant exchange rates:
(€ million) | 2014 | 2013 | Change | |||||||||
Net sales | 31,694 | 30,966 | +2.4% | |||||||||
Effect of exchange rates | 750 | |||||||||||
Net sales at constant exchange rates (CER) | 32,444 | 30,966 | +4.8% |
Net Sales by business
(€ 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 and Human Vaccines (Vaccines) and Animal Health segments.segments, in accordance with IFRS 5.
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 reflectsFollowing the positive impactannouncement 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.
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% | ||||||||||
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 acquiredexclusive negotiations 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.
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 informationBoehringer Ingelheim 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 growthdivestment 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®".
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% | ||||||||||||||||
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% | |||||||||||||||||
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 (Merial), the net profit or loss of that business is carried on by Merial, which has beennow presented in 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 toline item in 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“Net income/(loss) of the held-for-exchange Animal Health business”, 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 inaccordance with IFRS 5 (see Note D.2. and Note D.8.2.D.36. to our consolidated financial statements included at Item 18 of this annual report.report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, expected in the fourth quarter of 2016, we will continue to monitor the
performance of the Animal Health business (which remains an operating segment pursuant to IFRS 8), and to report the performance of that business at Group level. In our analysis of our financial performance for the year ended December 31, 2014 we discuss our aggregate net sales, which combines our net sales as reported in the consolidated income statement with the net sales of the Animal Health business. Aggregate net sales is a non-GAAP financial measure.
Aggregate net sales for the year were€33,770 million, 2.5% higher than in 2013. Exchange rate movements had an unfavorable effect of 2.4 percentage points mainly reflecting the depreciation of the Japanese yen, the Russian rouble, the Brazilian real and the Argentine peso against the euro. At constant exchange rates, aggregate net sales rose by 4.9% year-on-year.
Merial
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Item 5. Operating and Financial Review and Prospects
The following table sets forth a reconciliation of our net sales for the years ended December 31, 2014 and December 31, 2013 to our aggregate net sales at constant exchange rates:
(€ million) | 2014 | 2013 | Change | |||||||||
Net sales(1) | 31,694 | 30,966 | +2.4% | |||||||||
Net sales of the Animal Health business(2) | 2,076 | 1,985 | +7.2% | |||||||||
Aggregate net sales | 33,770 | 32,951 | +2.5% | |||||||||
Effect of exchange rates | 792 | |||||||||||
Aggregate net sales at constant exchange rates (CER) | 34,562 | 32,951 | +4.9% |
(1) | In accordance with the presentation requirements of IFRS 5, the consolidated income statement line item “Net sales” does not include the net sales of the Animal Health business. |
(2) | Presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. |
The following table breaks down our 2014 and 2013 net sales by operating segment, along with our aggregate net sales including the net sales of the Animal Health business (which remains an operating segment pursuant to IFRS 8).
(€ million) | 2014 | 2013 | Change | Change at constant exchange rates | ||||||||||||
Pharmaceuticals | 27,720 | 27,250 | +1.7% | +4.4% | ||||||||||||
Vaccines | 3,974 | 3,716 | +6.9% | +7.2% | ||||||||||||
Net sales(1) | 31,694 | 30,966 | +2.4% | +4.8% | ||||||||||||
Animal Health(2) | 2,076 | 1,985 | +4.6% | +6.7% | ||||||||||||
Aggregate net sales | 33,770 | 32,951 | +2.5% | +4.9% |
(1) | In accordance with the presentation requirements of IFRS 5, the consolidated income statement line item “Net sales” does not include the net sales of the Animal Health business. |
(2) | Presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. |
Net Sales by Product – Pharmaceuticals segment
In 2014, net sales for the Pharmaceuticals segment were€27,720 million, up 1.7% on a reported basis and 4.4% CER. The year-on-year increase of€470 million included unfavorable exchange rates effects of€739 million, along with the following effects at constant exchange rates:
· | a positive performance from our growth platforms (€1,873 million), mainly for the Diabetes division and our Genzyme and Consumer Health Care businesses (excluding the impact of changes in scope of consolidation in Consumer Health Care); |
· | a recovery in sales for our Generics operations in Brazil (€309 million), by comparison with 2013 when we experienced temporary difficulties with our distribution channels in that country; |
· | negative effects totaling€973 million, including the residual impact of generic competition (primarily for Aprovel®, Allegra® and Taxotere®) and lower sales of other prescription products. |
Our flagship Pharmaceuticals segment products are discussed below.
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Item 5. Operating and Financial Review and Prospects
The following table presents our 2014 and 2013 net sales for the Pharmaceuticals segment by product:
(€ million) Product | Indication | 2014 Reported | 2013 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||||||
Lantus® | Diabetes | 6,344 | 5,715 | +11.0% | +12.1% | |||||||||||||
Amaryl® | Diabetes | 360 | 375 | -4.0% | +0.3% | |||||||||||||
Apidra® | Diabetes | 336 | 288 | +16.7% | +19.1% | |||||||||||||
Insuman® | Diabetes | 137 | 132 | +3.8% | +6.8% | |||||||||||||
Blood glucose monitoring (BGM) | Diabetes | 64 | 48 | +33.3% | +33.3% | |||||||||||||
Lyxumia® | Diabetes | 27 | 9 | +200.0% | +211.1% | |||||||||||||
Other diabetes products | 5 | 1 | - | - | ||||||||||||||
Total: Diabetes | Diabetes | 7,273 | 6,568 | +10.7% | +12.1% | |||||||||||||
Jevtana® | Prostate cancer | 273 | 231 | +18.2% | +19.5% | |||||||||||||
Taxotere® | Breast, lung, prostate, stomach, and head & neck cancer | 266 | 409 | -35.0% | -31.5% | |||||||||||||
Thymoglobulin® | Organ rejection | 217 | 198 | +9.6% | +11.1% | |||||||||||||
Eloxatin® | Colorectal cancer | 210 | 221 | -5.0% | -2.7% | |||||||||||||
Mozobil® | Hematologic malignancies | 111 | 101 | +9.9% | +9.9% | |||||||||||||
Zaltrap® | Colorectal cancer | 69 | 53 | +30.2% | +30.2% | |||||||||||||
Other oncology products | 255 | 252 | +1.2% | +2.4% | ||||||||||||||
Total: Oncology | 1,401 | 1,465 | -4.4% | -2.5% | ||||||||||||||
Cerezyme® | Gaucher disease | 715 | 688 | +3.9% | +8.3% | |||||||||||||
Myozyme®/Lumizyme® | Pompe disease | 542 | 500 | +8.4% | +9.8% | |||||||||||||
Fabrazyme® | Fabry disease | 460 | 383 | +20.1% | +23.0% | |||||||||||||
Aldurazyme® | Mucopolysaccharidosis | 172 | 159 | +8.2% | +11.3% | |||||||||||||
Cerdelga® | Gaucher disease | 4 | - | - | - | |||||||||||||
Other rare diseases products | 244 | 244 | 0.0% | +2.9% | ||||||||||||||
Sub-total: Rare diseases | 2,137 | 1,974 | +8.3% | +11.2% | ||||||||||||||
Aubagio® | Multiple sclerosis | 433 | 166 | +160.8% | +160.8% | |||||||||||||
Lemtrada® | Multiple sclerosis | 34 | 2 | - | - | |||||||||||||
Sub-total: Multiple sclerosis | 467 | 168 | +178.0% | +178.0% | ||||||||||||||
Total: Genzyme | 2,604 | 2,142 | +21.6% | +24.3% | ||||||||||||||
Plavix® | Atherothrombosis | 1,862 | 1,857 | +0.3% | +4.7% | |||||||||||||
Lovenox® | Thrombosis | 1,699 | 1,703 | -0.2% | +2.1% | |||||||||||||
Aprovel®/CoAprovel® | Hypertension | 727 | 882 | -17.6% | -16.6% | |||||||||||||
Renagel®/Renvela® | Hyperphosphatemia | 684 | 750 | -8.8% | -8.7% | |||||||||||||
Depakine® | Epilepsy | 395 | 405 | -2.5% | +0.5% | |||||||||||||
Synvisc®/Synvisc-One® | Arthritis | 352 | 371 | -5.1% | -4.6% | |||||||||||||
Myslee®/Ambien®/Stilnox® | Sleep disorders | 306 | 391 | -21.7% | -18.4% |
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Item 5. Operating and Financial Review and Prospects
(€ million) Product | Indication | 2014 Reported | 2013 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||||||
Multaq® | Atrial fibrillation | 290 | �� | 269 | +7.8% | +7.8% | ||||||||||||
Tritace® | Hypertension | 281 | 307 | -8.5% | -5.9% | |||||||||||||
Allegra® | Allergic rhinitis, urticaria | 192 | 406 | -52.7% | -48.3% | |||||||||||||
Lasix® | Edema, hypertension | 164 | 172 | -4.7% | -0.6% | |||||||||||||
Targocid® | Bacterial infections | 162 | 166 | -2.4% | -0.6% | |||||||||||||
Orudis® | Rheumatoid arthritis, osteoarthritis | 160 | 144 | +11.1% | +17.4% | |||||||||||||
Cordarone® | Arrhythmia | 129 | 141 | -8.5% | -2.8% | |||||||||||||
Xatral® | Benign prostatic hypertrophy | 94 | 101 | -6.9% | -5.0% | |||||||||||||
Actonel® | Osteoporosis, Paget’s disease | 82 | 100 | -18.0% | -14.0% | |||||||||||||
Auvi-Q®/Allerject® | Severe allergies, anaphylaxis | 72 | 60 | +20.0% | +21.7% | |||||||||||||
Other prescription products | 3,649 | 4,221 | -13.6% | -11.2% | ||||||||||||||
Total: established prescription products | 11,300 | 12,446 | -9.2% | -6.7% | ||||||||||||||
Consumer Health Care | 3,337 | 3,004 | +11.1% | +16.5% | ||||||||||||||
Generics | 1,805 | 1,625 | +11.1% | +16.2% | ||||||||||||||
Total: Pharmaceuticals | 27,720 | 27,250 | +1.7% | +4.4% |
Diabetes division
Net sales for theDiabetes division were€7,273 million, up 12.1% CER, driven by double-digit growth for Lantus® and Apidra®.
Lantus® increased its net sales by 12.1% (CER) to€6,344 million in 2014 due to strong performances in the United States (+12.4% CER, at€4,225 million), where Lantus® SoloSTAR® accounted for 62% of full-year sales, and in Emerging Markets (+18.2% CER), especially in China (+33.6% CER), the Africa/Middle East region (+17.3% CER) and in Eastern Europe (+15.9% CER). Western Europe turned in a good performance as net sales rose by 7.7% CER to€871 million.
The product’s sales growth during 2014 reflected both an increase in volume and a generally favorable price effect. In volume terms, sales of Lantus® increased across all geographical areas in 2014 (by 4.8% overall). In the medium to long term, volume growth will depend on various factors. See “Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014”.
Price effects on sales of Lantus® were favorable overall in 2014 (+7.3% CER); the biggest effect was felt in the United States. However, we encountered a tougher pricing
environment in the U.S. basal insulins market in the second half of 2014, which was reflected in mounting price pressure from payers. During that period, we conducted negotiations with payers in the United States, securing favorable positions for Lantus® in the formularies of the key payers. To maintain those positions, we had to significantly increase the level of discounts offered in order to match the substantial rebates offered by our competitors.
We cannot predict the long-term price effects in the diabetes market, as these will depend on the impact of new rival products on the pricing of diabetes treatments across all geographic areas. See “Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014”.
Net sales ofApidra® totaled€336 million in 2014, up 19.1% CER, driven by a strong performance in the United States (+16.1% CER, at€131 million) and in Emerging Markets (+27.9% CER, at€73 million).
Net sales ofAmaryl® were flat year-on-year (+0.3% CER, at€360 million), reflecting the effect of generic competition in Japan (-27.2% CER, at€54 million), but also a good performance in Emerging Markets (+9.2% CER, at€275 million).
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Blood glucose monitoring systemsposted a surge in net sales of 33.3% CER to€64 million, largely as a result of recent launches of MyStar Extra® in Western Europe.
Lyxumia®, which continued to be rolled out worldwide during 2014, generated sales of€27 million. In Germany, the product was withdrawn from the market in April 2014 due to a negative outcome on the pricing level set by the authorities.
Oncology business
Net sales for theOncology business were€1,401 million, down 2.5% CER.
Jevtana® reported net sales of€273 million in 2014, up 19.5% CER, boosted by recent launches in Western Europe where sales rose by 28.2% CER to€142 million.
Net sales ofTaxotere® fell sharply, by 31.5% CER, to€266 million. The product faced competition from generics in Emerging Markets (-24.1% CER, at€143 million), the United States (-81.0% CER, at€8 million) and in Japan(-28.2% CER, at€87 million).
Sales ofEloxatin® were€210 million, down 2.7% CER, mainly as a result of competition from generics in the United States.
Sales ofMozobil® rose by 9.9% CER to€111 million.
Net sales ofZaltrap® (aflibercept, developed in collaboration with Regeneron) totaled€69 million, up 30.2% CER, on the back of recent launches in Western Europe (+146.7%, at€37 million) that more than compensated for lower sales in the United States (-25.0% CER, at€27 million).
Genzyme business
TheGenzyme business generated net sales of €2,030€2,604 million, up 24.3% CER, driven by strong growth in sales of Aubagio® and Fabrazyme®.
Cerezyme® increased its net sales by 8.3% CER to€715 million, driven by Emerging Markets (+14.4% CER, at€242 million) and Western Europe (+6.7% CER, at€241 million).
Net sales ofMyozyme®/Lumizyme® rose by 9.8% CER to€542 million, reflecting the product’s performance in Emerging Markets (+42.3% CER, at€93 million).
Fabrazyme® reported strong net sales growth of 23.0% CER, to€460 million. Net sales were up 13.8% CER in the United States (at€223 million), 26.4% CER in Western Europe (at€110 million), and 50.0% CER in Emerging Markets (at€59 million).
In multiple sclerosis,Aubagio® recorded net sales of€433 million during 2014, including€326 million in 2011,the United States (where the product was launched in October 2012)
and€83 million in Western Europe (where launches began at the end of 2013). Sales ofLemtrada® were€34 million, of which€28 million was generated in Western Europe.
Established prescription products
Net sales ofPlavix® were up 4.7% CER at€1,862 million. Growth was driven by Japan (+10.0% CER, at€759 million) and Emerging Markets (+9.3% CER, at€825 million), especially China (+18.0% CER, at€498 million). However, the effects were mitigated by generic competition in Western Europe (-15.6% CER, at€217 million). Sales of Plavix® in the United States and Puerto Rico are handled by BMS under the terms of theSanofi-BMS alliance (see “– Financial presentation of alliances – Alliance Arrangements withBristol-Myers Squibb” above).
Lovenox® posted net sales growth of 2.1% CER in 2014, to€1,699 million. Lower net sales in the United States, where sales of the branded product fell by 30.5% CER to€130 million in the face of generic competition, were offset by good performances in Western Europe (+4.3% CER, at€898 million) and in Emerging Markets (+10.2% CER, at€581 million), especially in China and Latin America. Sales of the generic version of Lovenox® launched by Sanofi in 2012 are recorded by our Generics business (see below).
Aprovel®/CoAprovel® reported a drop in net sales of 16.6% CER to€727 million, mainly as a result of competition from generics in Western Europe, where sales were 43.8% lower at€190 million. Net sales in Emerging Markets were relatively stable year-on-year, rising by 2.3% CER to€389 million.
Net sales ofRenagel®/Renvela® fell by 8.7% CER to€684 million due to lower sales in the United States(-13.6% CER, at€464 million), reflecting the effects of the agreement whereby Sanofi granted Impax the right to sell a limited number of authorized generics of Renvela® from April 2014.
Allegra® posted a fall in prescription net sales (-48.3% CER, at€192 million), affected by competition from generics in Japan (-30.0% CER, at€178 million) and by the reclassification of sales of the product in some countries of Emerging Markets to our Consumer Health Care business. On a constant exchange ratesstructure basis and 2.4%CER, Emerging Markets net sales were stable year-on-year, but CER they were down 98.3% at€2 million. Net sales of Allegra® OTC in the United States and in Japan are also recorded by our Consumer Health Care business.
Net sales ofStilnox® / Ambien® / Myslee® fell by 18.4% CER to€306 million, reflecting competition from generics of Myslee® (-29.2% CER, at€125 million).
Synvisc®/Synvisc-One® posted net sales of€352 million, down 4.6% CER, on lower sales in the United States(-7.5% CER, at€274 million).
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Net sales ofMultaq® increased by 7.8% CER to€290 million, driven by sales in the United States (+8.8% CER, at€235 million).
Auvi-Q®/Allerject® recorded net sales of€72 million (+21.7% CER), including€61 million in the United States where the product was launched in January 2013.
We have no comments on our other prescription products.
Consumer Health Care business
In 2014, net sales for theConsumer Health Care business segment were€3,337 million, up 11.1% on a reported basis ledand 16.5% CER.
Some products that were accounted for as prescription products in 2013 (combined net sales:€273 million) were reclassified in 2014 to Consumer Health Care. Excluding the effects of this category change, Consumer Health Care net sales rose by the performance1.8% in 2014 (or by 6.8% CER), driven by growth in Emerging Markets.Markets and in the United States, where the Nasacort® Allergy 24H OTC nasal spray has been on the market since February 2014.
The following table breaks down our 2014 and 2013 net sales for the Consumer Health Care business by product:
(€ million) Product | 2014 Reported | 2013 Reported | Change on a reported basis | Change at constant exchange rates | ||||||||||||
Doliprane® | 310 | 290 | +6.9% | +7.2% | ||||||||||||
Allegra® | 350 | 264 | +32.6% | +37.1% | ||||||||||||
Essentiale® | 235 | 207 | +13.5% | +27.1% | ||||||||||||
Enterogermina® | 156 | 130 | +20.0% | +24.6% | ||||||||||||
Nasacort® | 114 | 1 | - | - | ||||||||||||
No Spa® | 109 | 117 | -6.8% | +6.0% | ||||||||||||
Lactacyd® | 104 | 105 | -1.0% | +5.7% | ||||||||||||
Maalox® | 98 | 94 | +4.3% | +9.6% | ||||||||||||
Dorflex® | 90 | 93 | -3.2% | +6.5% | ||||||||||||
Other products | 1,771 | 1,703 | +4.0% | +8.5% | ||||||||||||
Total: Consumer Health Care | 3,337 | 3,004 | +11.1% | +16.5% |
Generics business
TheGenerics business reported net sales of€1,805 million in 2014, up 16.2% CER, reflecting a recovery in sales in Brazil by comparison with 2013 when sales were adversely affected by temporary difficulties in our distribution channels in that country. Excluding Brazil, Generics net sales fell by 2.8% year-on-year CER.
In Emerging Markets, the Generics business generated net sales of€1,106 million, up 38.8% CER (or 2.7% excluding Brazil). In the United States, net sales fell by 31.3% CER to€123 million, reflecting a decline in sales of authorized generics of Lovenox® and Taxotere®.
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The following table presents 2014 net sales of our Pharmaceutical segment products by region:
(€ million) Product | 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 | ||||||||||||||||||||||||
Lantus® | 871 | +7.7% | 4,225 | +12.4% | 934 | +18.2% | 314 | +3.1% | ||||||||||||||||||||||||
Amaryl® | 19 | -13.6% | 4 | +100.0% | 275 | +9.2% | 62 | -24.4% | ||||||||||||||||||||||||
Apidra® | 98 | +16.7% | 131 | +16.1% | 73 | +27.9% | 34 | +19.4% | ||||||||||||||||||||||||
Insuman® | 82 | -8.9% | 1 | 0.0% | 54 | +38.1% | - | -100.0% | ||||||||||||||||||||||||
Blood glucose monitoring (BGM) | 58 | +28.9% | - | - | 3 | +200.0% | 3 | +50.0% | ||||||||||||||||||||||||
Lyxumia® | 15 | +150.0% | - | - | 4 | - | 8 | +200.0% | ||||||||||||||||||||||||
Other diabetes products | - | - | - | - | 1 | 0.0% | 4 | - | ||||||||||||||||||||||||
Total: Diabetes | 1,143 | +8.3% | 4,361 | +12.6% | 1,344 | +17.9% | 425 | +1.3% | ||||||||||||||||||||||||
Jevtana® | 142 | +28.2% | 91 | +5.8% | 33 | +16.1% | 7 | +100.0% | ||||||||||||||||||||||||
Taxotere® | 15 | -31.8% | 8 | -81.0% | 143 | -24.1% | 100 | -27.4% | ||||||||||||||||||||||||
Thymoglobulin® | 32 | +3.2% | 108 | +5.9% | 59 | +27.1% | 18 | +11.8% | ||||||||||||||||||||||||
Eloxatin® | 5 | -16.7% | 22 | +5.3% | 103 | -1.9% | 80 | -4.5% | ||||||||||||||||||||||||
Mozobil® | 34 | +3.1% | 62 | +8.9% | 11 | +22.2% | 4 | +50.0% | ||||||||||||||||||||||||
Zaltrap® | 37 | +146.7% | 27 | -25.0% | 5 | +150.0% | - | - | ||||||||||||||||||||||||
Other oncology products | 55 | 0.0% | 151 | +1.3% | 29 | 0.0% | 20 | +21.1% | ||||||||||||||||||||||||
Total: Oncology | 320 | +17.4% | 469 | -4.9% | 383 | -6.3% | 229 | -11.5% | ||||||||||||||||||||||||
Cerezyme® | 241 | +6.7% | 186 | +4.5% | 242 | +14.4% | 46 | 0.0% | ||||||||||||||||||||||||
Myozyme®/Lumizyme® | 270 | -1.8% | 142 | +14.6% | 93 | +42.3% | 37 | +18.8% | ||||||||||||||||||||||||
Fabrazyme® | 110 | +26.4% | 223 | +13.8% | 59 | +50.0% | 68 | +28.6% | ||||||||||||||||||||||||
Aldurazyme® | 64 | +6.7% | 33 | +13.8% | 54 | +13.7% | 21 | +15.8% | ||||||||||||||||||||||||
Cerdelga® | - | - | 4 | - | - | - | - | - | ||||||||||||||||||||||||
Other rare diseases products | 43 | +7.7% | 89 | -10.1% | 31 | +23.1% | 81 | +10.0% | ||||||||||||||||||||||||
Sub-total Rare diseases | 728 | +5.8% | 677 | +8.0% | 479 | +23.1% | 253 | +14.0% | ||||||||||||||||||||||||
Aubagio® | 83 | +600.0% | 326 | +112.5% | 10 | +550.0% | 14 | - | ||||||||||||||||||||||||
Lemtrada® | 28 | - | 2 | - | 2 | - | 2 | - | ||||||||||||||||||||||||
Sub-total Multiple sclerosis | 111 | +692.9% | 328 | +113.8% | 12 | +650.0% | 16 | - | ||||||||||||||||||||||||
Total: Genzyme | 839 | +19.6% | 1,005 | +28.7% | 491 | +26.0% | 269 | +20.8% | ||||||||||||||||||||||||
Plavix® | 217 | -15.6% | 1 | * | -80.0% | 825 | +9.3% | 819 | +7.2% | |||||||||||||||||||||||
Lovenox® | 898 | +4.3% | 130 | -30.5% | 581 | +10.2% | 90 | -2.0% | ||||||||||||||||||||||||
Aprovel®/CoAprovel® | 190 | -43.8% | 18 | * | +5.9% | 389 | +2.3% | 130 | -5.8% | |||||||||||||||||||||||
Renagel®/Renvela® | 133 | -0.8% | 464 | -13.6% | 65 | +9.4% | 22 | +9.1% | ||||||||||||||||||||||||
Depakine® | 139 | 0.0% | - | - | 240 | +1.2% | 16 | -5.9% | ||||||||||||||||||||||||
Synvisc®/Synvisc-One® | 28 | +12.0% | 274 | -7.5% | 39 | +24.2% | 11 | -29.4% | ||||||||||||||||||||||||
Myslee®/Ambien®/Stilnox® | 40 | -2.4% | 74 | -17.0% | 57 | 0.0% | 135 | -27.9% | ||||||||||||||||||||||||
Multaq® | 44 | +2.3% | 235 | +8.8% | 8 | 0.0% | 3 | +50.0% | ||||||||||||||||||||||||
Tritace® | 127 | -6.6% | - | - | 145 | -3.8% | 9 | -21.4% |
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(€ million) Product | 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 | ||||||||||||||||||||||||
Allegra® | 10 | 0.0% | - | - | 2 | -98.3% | 180 | -29.8% | ||||||||||||||||||||||||
Lasix® | 78 | +4.0% | 3 | 0.0% | 51 | +12.2% | 32 | -22.2% | ||||||||||||||||||||||||
Targocid® | 84 | +5.1% | - | - | 69 | -2.7% | 9 | -23.1% | ||||||||||||||||||||||||
Orudis® | 20 | -16.7% | - | - | 137 | +23.9% | 3 | +33.3% | ||||||||||||||||||||||||
Cordarone® | 24 | -4.0% | - | - | 70 | +2.7% | 35 | -11.6% | ||||||||||||||||||||||||
Xatral® | 38 | -2.6% | - | -100.0% | 52 | 0.0% | 4 | -20.0% | ||||||||||||||||||||||||
Actonel® | 17 | -22.7% | - | - | 35 | -7.5% | 30 | -15.8% | ||||||||||||||||||||||||
Auvi-Q®/Allerject® | 2 | -33.3% | 61 | +21.6% | - | - | 9 | +50.0% | ||||||||||||||||||||||||
Other prescription products | 1,547 | -6.2% | 344 | -29.8% | 1,370 | -7.9% | 388 | -19.7% | ||||||||||||||||||||||||
Total: established prescription products | 3,636 | -6.8% | 1,604 | -15.2% | 4,135 | -1.4% | 1,925 | -9.6% | ||||||||||||||||||||||||
Consumer Health Care | 676 | +1.7% | 708 | +15.4% | 1,739 | +28.7% | 214 | -12.4% | ||||||||||||||||||||||||
Generics | 533 | +4.3% | 123 | -31.3% | 1,106 | +38.8% | 43 | +27.8% | ||||||||||||||||||||||||
Total: Pharmaceuticals | 7,147 | -0.1% | 8,270 | +5.6% | 9,198 | +11.1% | 3,105 | -6.9% |
(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, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
* | Sales of active ingredient to the entity majority-owned by BMS in the United States. |
Net Sales – Human Vaccines (Vaccines) segment
In 2014, net sales for the Vaccines segment were€3,974 million, up 6.9% on a reported basis and 7.2% CER.
The following table presents the 20112014 and 20102013 net sales of our Vaccines segment by product range:
(€ million) | 2014 Reported | 2013 Reported | Change on a reported basis | Change at constant | ||||||||||||
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®) | 1,154 | 1,148 | +0.5% | +1.9% | ||||||||||||
Influenza Vaccines (including Vaxigrip® and Fluzone®) | 1,178 | 929 | +26.8% | +25.2% | ||||||||||||
Meningitis/Pneumonia Vaccines (including Menactra®) | 454 | 496 | -8.5% | -7.5% | ||||||||||||
Adult Booster Vaccines (including Adacel®) | 398 | 391 | +1.8% | +2.0% | ||||||||||||
Travel and Other Endemics Vaccines | 377 | 382 | -1.3% | +1.6% | ||||||||||||
Other Vaccines | 413 | 370 | +11.6% | +9.7% | ||||||||||||
Total: Vaccines | 3,974 | 3,716 | +6.9% | +7.2% |
Polio/Pertussis/Hib vaccines reported net sales up 1.9% CER, at€1,154 million. This reflected a good performance in the United States (€411 million, up 46.9% CER) as shipments of Pentacel® recovered following the supply limitations experienced in 2013. On the downside, negative factors included (i) lower net sales in Japan (-23.5% CER, at€127 million) due to the end of the 2013 catch-up vaccination campaigns that followed the launch of Imovax® and (ii) a fall
in net sales in Emerging Markets (-7.9% CER, at€573 million) due mainly to Pentaxim® and Imovax® in China.
Net sales ofInfluenzavaccines were up 25.2% CER at€1,178 million, helped by a strong performance in the United States (+25.7% at€694 million) as the differentiated vaccine strategy paid off, and also in Emerging Markets (+28.9% CER, at€354 million) on the back of seasonal influenza in Latin America.
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Meningitis/Pneumonia vaccines posted net sales of€454 million, down 7.5% CER, hindered by a poor performance in Emerging Markets (-32.8% CER, at€82 million) due mainly to a drop in sales of Menactra® in the Middle East.
Net sales ofAdult Boostervaccines rose by 2.0% CER to€398 million. Net sales ofTravel and Other Endemics vaccines were up 1.6% CER at€377 million.
Other Vaccines saw net sales rise by 9.7% CER to€413 million, reflecting the growth of VaxServe, a Sanofi
Pasteur company that distributes 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 in Europe, reached€848 million in 2014, down 3.3% (on a reported basis). Sales generated by Sanofi Pasteur MSD are not included in our consolidated net sales. Sales of Gardasil® were down 15.4% on a reported basis, at€186 million. Zostavax®, launched at the end of 2012, posted 50.6% growth in net sales to€77 million (versus€51 million in 2013).
The following table presents the 2014 net sales of our Vaccines segment by product range 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®) | 24 | -31.4% | 411 | +46.9% | 573 | -7.9% | 146 | -22.5% | ||||||||||||||||||||||||
Influenza Vaccines (inc. Vaxigrip® and Fluzone®) | 93 | +12.0% | 694 | +25.7% | 354 | +28.9% | 37 | +18.2% | ||||||||||||||||||||||||
Meningitis/Pneumonia Vaccines (inc. Menactra®) | 3 | -40.0% | 360 | +2.3% | 82 | -32.8% | 9 | -9.1% | ||||||||||||||||||||||||
Adult Booster Vaccines (inc. Adacel®) | 59 | -1.7% | 276 | +2.6% | 48 | +6.5% | 15 | -5.9% | ||||||||||||||||||||||||
Travel and Other Endemics Vaccines | 21 | +16.7% | 95 | -2.1% | 206 | 0.0% | 55 | +9.3% | ||||||||||||||||||||||||
Other Vaccines | 4 | +33.3% | 394 | +11.8% | 8 | -18.2% | 7 | -44.4% | ||||||||||||||||||||||||
Total: Vaccines | 204 | 0.0% | 2,230 | +17.1% | 1,271 | -0.8% | 269 | -12.5% |
(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) are not consolidated. |
(2) | World excluding United States, Canada, Western Europe, Japan, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
Net Sales – Animal Health segment
Following the announcement of exclusive negotiations with Boehringer Ingelheim regarding the divestment of our Animal Health business (Merial), the net profit or loss of that business is now presented in a separate line item in the consolidated income statement, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). Consequently, the net sales reported in our consolidated income statement do not include the net sales of the Animal Health business.
Until final completion of the transaction, expected in the fourth quarter of 2016 once regulatory clearances have been obtained, we will continue to monitor the performance of the Animal Health business (which remains an operating segment), and to report the performance of that business at Group level.
Net sales for the Animal Health segment in 2014 amounted to€2,076 million, up 4.6% on a reported basis and 6.7% CER.
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Item 5. Operating and Financial Review and Prospects
The following table presents the 2014 and 2013 net sales of our Animal Health(1) segment by range of products:product range:
(€ 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% | |||||||||
(€ million) | 2014 | 2013 | Change | Change at constant rates | ||||||||||||
Companion animals | 1,281 | 1,195 | +7.2% | +8.8% | ||||||||||||
Production animals | 795 | 790 | +0.6% | +3.5% | ||||||||||||
Total: Animal Health(1) | 2,076 | 1,985 | +4.6% | +6.7% | ||||||||||||
Of which fipronil-based products | 597 | 611 | -2.3% | -0.2% | ||||||||||||
Of which vaccines | 720 | 727 | -1.0% | +1.2% | ||||||||||||
Of which avermectin-based products | 398 | 413 | -3.6% | -1.7% | ||||||||||||
Of which other products | 361 | 234 | +54.3% | +56.4% |
(1) | Presented in the income statement line item “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. |
Net sales for the companion animalsCompanion Animals franchise were markedrose by moderate8.8% CER to€1,281 million, reflecting the resilience of thefipronil- based products (-0.2% CER, at€597 million) in the face of competition and the success ofNexGard®, a new product launched in 2014 that generated€113 million in net sales.
Net sales for theProduction Animals franchise rose by 3.5% CER to€795 million, driven by 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 competitorsproducts for ruminants 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.States.
The following table breaks downpresents 2014 net sales of our Animal Health segment by product range and by geographical region in 2011:region:
(€ 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% | |||||||||||||||||
(€ million) Product | 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 | ||||||||||||||||||||||||
Fipronil-based products | 181 | +1.1% | 272 | -4.5% | 102 | +12.2% | 42 | -4.3% | ||||||||||||||||||||||||
Vaccines | 185 | +1.1% | 155 | +2.0% | 335 | +3.5% | 45 | -14.8% | ||||||||||||||||||||||||
Avermectin-based products | 55 | -6.9% | 225 | +0.9% | 53 | +1.8% | 65 | -8.1% | ||||||||||||||||||||||||
Other products | 93 | +10.6% | 187 | +129.6% | 63 | +25.9% | 18 | +28.6% | ||||||||||||||||||||||||
Total: Animal Health | 514 | +1.8% | 839 | +13.0% | 553 | +7.1% | 170 | -6.3% |
(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, South Korea, Australia and New Zealand. |
(3) | Japan, South Korea, Canada, Australia and New Zealand. |
(1)118
France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.
Net Sales and Aggregate 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 downpresents our 20112014 and 20102013 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% | |||||||||
(€ million) | 2014 Reported | 2013 Reported | Change on a reported basis | Change at constant rates | ||||||||||||
Emerging Markets(1) | 10,469 | 10,095 | +3.7% | +9.8% | ||||||||||||
Of which Eastern Europe and Turkey | 2,484 | 2,623 | -5.3% | +4.7% | ||||||||||||
Of which Asia (excl. Pacific region) | 2,724 | 2,577 | +5.7% | +7.0% | ||||||||||||
Of which Latin America | 3,113 | 2,752 | +13.1% | +22.7% | ||||||||||||
Of which Africa & Middle-East | 2,006 | 2,012 | -0.3% | +2.3% | ||||||||||||
United States | 10,500 | 9,686 | +8.4% | +7.8% | ||||||||||||
Western Europe(2) | 7,351 | 7,329 | +0.3% | -0.1% | ||||||||||||
Rest of the World(3) | 3,374 | 3,856 | -12.5% | -6.7% | ||||||||||||
Of which Japan | 2,083 | 2,465 | -15.5% | -8.6% | ||||||||||||
Total net sales | 31,694 | 30,966 | +2.4% | +4.8% |
(1) | World excluding United States, Canada, Western Europe, Japan, South Korea, 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, South Korea, Canada, Australia and New Zealand. |
The following table presents our 2014 and New Zealand.
Western Europe posted a 4% decrease in2013 aggregate net sales at constant exchange rates to €9,130 million, hit(including the Animal Health business) 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.region:
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.
(€ million) | 2014 | 2013 | Change | Change at constant rates | ||||||||||||
Emerging Markets(1) | 11,022 | 10,642 | +3.6% | +9.6% | ||||||||||||
Of which Eastern Europe and Turkey | 2,541 | 2,673 | -4.9% | +5.0% | ||||||||||||
Of which Asia (excl. Pacific region) | 2,881 | 2,726 | +5.7% | +7.0% | ||||||||||||
Of which Latin America | 3,363 | 3,013 | +11.6% | +21.1% | ||||||||||||
Of which Africa & Middle-East | 2,095 | 2,099 | +2.5% | -0.2% | ||||||||||||
United States | 11,339 | 10,433 | +8.7% | +8.2% | ||||||||||||
Western Europe(2) | 7,865 | 7,831 | +0.4% | 0.0% | ||||||||||||
Rest of the World(3) | 3,544 | 4,045 | -12.4% | -6.7% | ||||||||||||
Of which Japan | 2,119 | 2,507 | -15.5% | -8.6% | ||||||||||||
Total aggregate net sales | 33,770 | 32,951 | +2.5% | +4.9% |
(1) | World excluding United States, Canada, Western Europe, Japan, South Korea, 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, South Korea, Canada, Australia and New Zealand. |
In Emerging Markets, net sales totaled €10,133reached€10,469 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,9.8% CER. Aggregate net sales hit €1,522reached€11,022 million, up 4.9% at constant exchange rates (21.9% after excluding A/H1N1 vaccines)9.6% CER, driven by Diabetes (+17.4% CER), reflecting the solid performance of genericsGenzyme (+26.7% CER), Consumer Health Care (+28.4% CER) and the contribution made by Genzyme. In China,Generics (+38.8% CER). Aggregate net sales totaled €981 million (up 40.4% at constant exchange rates), supportedin Latin
America surged by 21.1% CER, largely as a result of the effect of the recovery in generics sales on our performance in Brazil (+34.8% CER); excluding generics, aggregate net sales in Brazil advanced by 6.9% CER, reflecting the performance of Plavix®the Consumer Health Care, Genzyme and Lantus®.
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Item 5. Operating and Financial Review and Prospects
Vaccines businesses. In Eastern EuropeChina, aggregate net sales were up 8.8% CER at€1,603 million, reflecting strong performances in Diabetes and Turkey, growth (3.7% at constant exchange rates) suffered fromConsumer Health Care but also lower prices and competition from Taxotere® genericsvaccine sales due mainly to delays in Turkey;shipments of Pentaxim®. Russia posted aggregate net sales of €732€813 million, up 11.2% at constant exchange rates.7.1% CER, propelled by Consumer Health Care and Diabetes.
In the Other Countries region,United States, net sales totaled €4,169 million, up 13.8% at constant exchange rates. Excluding A/H1N1 vaccines and Genzyme,rose by 7.8% CER to€10,500 million. Aggregate net sales increasedrose by 6.2%8.2% CER to€11,339 million on fine performances in Diabetes (+12.6% CER), Genzyme (+28.7% CER) and Vaccines (+17.1% CER). Japan recordedOther growth drivers included Consumer Health Care (+15.4% CER), boosted by the switch of Nasacort® to the OTC market, and the launch of the new animal health product NexGard®. These factors more than compensated for declining sales for Generics (-31.3% CER), Oncology(-4.9% CER), and established prescription products (-15.2% CER).
Net sales in Western Europe were stable at€7,351 million. Aggregate net sales in Western Europe were stable at€7,865 million. Positive factors included the performances of €2,865 million (up 20.2% at constant exchange rates)Genzyme (+19.6% CER) and Diabetes (+8.3% CER), 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 Presencerecent launches of Plavix®Jevtana® and Aprovel®Zaltrap®
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.
Oncology. 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% | |||||||||||||||||
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 bymain negative factor was competition from generics (down 29.8% at constant exchange rates, at €574 million)of Aprovel® (-43.8% CER).
WorldwideIn the Rest of the World, net sales of Aprovel®/Avapro®/Karvea®/Avalide® totaled €1,805were€3,374 million, in 2011, down 11.0% at constant exchange rates,6.7% CER. Aggregate net sales were€3,544 million, down 6.7% CER. In Japan, aggregate net sales came to€2,119 million (-8.6% CER), reflecting the impact of increasing penetrationgeneric competition on sales of generic losartan onAllegra® (-30.0% CER) and Myslee® (-29.2% CER) and lower sales of the market for anti-hypertensives.Imovax® vaccine.
Other Revenues
Other revenues, made up primarily of royalty incomewhich mainly comprise royalties under licensing agreements contracted in connection with ongoingcontinuing operations, remained stable at €1,669fell by 6.1% to€305 million (compared with€325 million in 2011 and 2010.2013).
Revenues from licensing underAggregate other revenues (including the worldwide allianceAnimal Health business) fell by 4.5% to€339 million (compared with BMS on Plavix® and Aprovel® represented €1,275€355 million in 2011 versus €1,303 million2013). The year-on-year change was mainly due to the decline in 2010 (down 2.1%royalties received from Amgen 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®Enbrel® in the United States (up 7.8% at constant exchange rates).during 2013 due to contract termination.
Gross Profit
Gross profit for the year ended December 31, 2011 cameamounted to €24,156€21,769 million (72.3%(68.7% of net sales), versus €24,638€22,989 million (76.1%in 2013 (67.8% of net sales).
Aggregate gross profit (including the Animal Health business) amounted to€23,080 million in 2012.2014 (68.3% of aggregate net sales), versus€22,323 million in 2013 (67.7% of aggregate net sales). This representsrepresented a year-on-year fallincrease of 2.0% in gross profit,3.4%, and an improvement of 0.6 of a deterioration of 3.8 pointspercentage point in the gross margin ratio.
The gross margin ratio offor the Pharmaceuticals segment was down 2.81.3 percentage points higher at 75.8%71.1%, reflecting bothon the downside a decreasedip in royalty income (-0.3revenue (0.1 of a percentage point) and, but on the upside an adverse trendimprovement in the ratio of cost of sales to net sales (-2.5(1.4 percentage points). The latter was primarily due largely to the unfavorable impactrecovery in generics sales in Brazil, a stronger industrial performance by Genzyme and favorable price effects on net sales of new generics (especially Lovenox®, Ambien® CR and Taxotere® in the United States, and Plavix® and Taxotere® in Europe)Lantus®.
The gross margin ratio offor the Vaccines segment was down 4.51.2 percentage points lower at 60.2%. This change was principally due to the absence in 2011 of the margin on pandemic influenza vaccines, which had51.8%, reflecting a less favorable impact in 2010.product mix.
The gross margin ratio offor the Animal Health segment was down 1.0 point3.6 percentage points lower at 68.9%.63.2%, also due to a less favorable product mix.
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 expenses (R&D) expenses totaled €4,811amounted to€4,667 million in 2011 (14.4%2014 (versus€4,605 million in 2013).
Aggregate R&D expenses (including the Animal Health business) amounted to€4,824 million in 2014 (versus€4,770 million in 2013) and represented 14.3% of aggregate net sales), up 5.8% on the 2010 figure of €4,547sales (versus 14.5% in 2013). Overall, aggregate R&D expenses increased by€54 million (14.0% of net sales).(+1.1%) year-on-year.
In the Pharmaceuticals segment, R&D expenses roseincreased by €217€87 million (up 5.6%(+2.1%), driven by investment in the advanced development pipeline (mainly monoclonal antibodies). 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.
Infor the Vaccines segment R&D expenses rosefell by €47€25 million year-on-year to €564 million (up 9.1%(-4.8%), largely due mainly to the end of the Phase III clinical trials on vaccines againstof the dengue fever and Clostridium difficile.vaccine.
In the Animal Health segment, R&D expenses fell by €9were€8 million (5.8%(-4.8%) year-on-year.lower than in 2013.
Selling and General Expenses
Selling and general expenses amounted to €8,536totaled€8,425 million, (25.6% of net sales),versus€7,950 million in 2013, an increase of 4.7% on the prior-year figure of €8,149 million (25.2% of net sales)6.0%.
The Pharmaceuticals segment generated a €414 million increase (+5.9%), due primarily to the first-time consolidation of Genzyme. Excluding Genzyme,Aggregate selling and general expenses showed a single-digit decrease, reflecting lower costs for genericized products(including the Animal Health business) totaled€8,991 million, versus€8,603 million in Europe2013, an increase of€388 million (+4.5%). They represented 26.6% of aggregate net sales, versus 26.1% in 2013.
In the Pharmaceuticals segment, selling and general expenses rose by€330 million (+4.5%) due to promotional spend in the United StatesGenzyme (multiple sclerosis and tight control over general expenses.rare diseases) and Consumer Health Care businesses.
In the Vaccines segment, selling and general expenses were down €61€26 million or 10.1%(+4.4%) higher due to lower sellingincreased promotional spend.
Selling and general expenses for pandemic influenza vaccines.
Inin the Animal Health segment sellingincreased by€29 million (+4.4%) as a result of higher promotional spend on NexGard®.
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Item 5. Operating and general expenses were up €13 million (+2.2%), in line with the increase in net sales.Financial Review and Prospects
Other Operating Income and Expenses
OtherIn 2014, other operating income totaled €319€301 million (versus€691 million in 2011 (versus €369 million in 2010)2013), and other operating expenses amounted to €315€157 million (compared with €292(versus€240 million in 2010)2013).
OtherOverall, aggregate other operating income and expenses (including the Animal Health business) represented a net profitincome of €4€164 million in 2011, compared with €772014, versus net income of€450 million in 2010. The2013. This year-on-year decrease of €73€286 million was essentially duemainly attributable to a€165 million gain recognized in 2013 on the discontinuationsale to Covis Pharma of royalty payments from Teva on North American sales of Copaxone®commercial rights to five pharmaceutical products in the United States, and also to a fall in revenues from the second quarter of 2010.alliance with Warner Chilcott on Actonel®.
This line item also includes expenses incurred in connection with the 2011 acquisition of Genzyme (€65 million), as well as a net operationaloperating foreign exchange loss of €5€102 million, (versus €138versus€64 million in 2010, a year of high volatility in the foreign exchange markets).2013.
Amortization of Intangible Assets
Amortization charged against intangible assets in the year ended December 31, 2011 amounted to €3,314 million, compared with €3,529totaled€2,081 million in the previous year.2014, versus€2,527 million in 2013. The reductionyear-on-year decrease of €215€446 million was mainly due to a decreasereduction in amortization charged against intangible assets recognized on the acquisitionacquisitions of Aventis (€1,788(€874 million in 2011,2014, versus €3,070€1,199 million in 2010,2013) and of Genzyme (€811 million in 2014, versus€930 million in 2013) as some pharmaceutical 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(in particular Actonel®, Lovenox® and on the first-time consolidation of Merial in the first quarter of 2011 (€709 million and €353 million, respectively)Renagel®/Renvela®).
Impairment of Intangible Assets
ThisIn 2014, this line recordeditem showed a net reversal of impairment losses against intangible assets of €142€31 million, versus a net expense of€1,387 million in 2011, compared with €4332013. The 2014 figure included a gain of€356 million arising because the impairment loss taken in 2010. Impairment losses booked2013 against Lemtrada® (alemtuzumab) was reversed following approval of the product by the FDA 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.November 2014. It also included the negative effects of (i) a net impairment loss of€203 million arising from various research projects in Pharmaceuticals and Vaccines, in particular the discontinuation of collaborative development programs with Alopexx (SAR 279 356) and Kalobios (Pseudomonas aeruginosa vaccine), and from revised commercial prospects (especially for the rotavirus vaccine project; and (ii) the impairment losses of€122 million taken against rights to a number of marketed products in the Pharmaceuticals and Vaccines segments (mainly Consumer Health Care assets in the Emerging Markets region).
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 in its then current form (€612 million); (ii) the discontinuation of the iniparib R&D project innon-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).
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 expense of€303 million in 2014, versus a net gain of€314 million in 2013. This item mainly relates to the contingent consideration payable to Bayer as a result of an impairment reversalacquisition made by Genzyme prior to the latter’s acquisition by Sanofi and to the contingent value rights (CVRs) issued by Sanofi in connection with Actonel®, pursuant to confirmation of the terms of the collaboration agreement with Warner ChilcottGenzyme acquisition (see Note C.3.D.18. 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 value2013, these 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, mainlyalso related to contingent purchase consideration that arose on the acquisition of TargeGen to the contingent value rights (CVRs) issued as partbut that was cancelled following discontinuation 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).fedratinib project.
Restructuring Costs
Restructuring costs amounted to €1,314€404 million in 2011, compared with €1,3842014, versus€303 million in 2010.
In 2011, these were mainly employee-related expenses incurred under plans2013, and related primarily to adjust headcountmeasures associated with the major transformation program that we initiated in support functions and sales forces in Europe and in R&D in Europe and the United States, and measures2009 to adapt our manufacturing facilities in Europe.
structures to the challenges of the future. In 2010,both 2014 and 2013, these costs related mainly to measures taken to adapt our industrial operationscomprised employee-related expenses arising from headcount adjustment plans in France and our sales and R&D functions in the United States and some European countries.rest of Europe.
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, whichNothing 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,on 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.either 2014 or 2013.
Operating Income
Operating income totaled €5,731€6,064 million for 2011,2014, versus €6,535€4,982 million for 2010 (down 12.3%); the year-on-year fall2013, an improvement of 21.7% attributable mainly reflected the competition from genericsto lower charges for amortization and the absenceimpairment of A/H1N1 pandemic influenza vaccine sales in 2011.intangible assets.
Financial Income and Expenses
Net financial expenses came to €412for 2014 were€406 million, in 2011 versus €362€498 million in 2010,for 2013. Aggregate net financial expenses (including the Animal Health business) for 2014 were€412 million, versus€503 million for 2013, a decrease of€91 million.
On an increase of €50 million.
Financialaggregate basis (including the Animal Health business), financial expenses directly related to our debt, net of cash and cash equivalents (see definition at "— Liquidityin “– Consolidated Balance sheet and Capital Resources"debt” below) were €325amounted to€293 million in 2011, virtually unchanged from the 2010 figure of €3242014, versus€317 million asin 2013, mainly reflecting a result of contrasting factors:
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Item 5. Operating and a higher average rate of return.
Provisions against investmentsFinancial Review 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.Prospects
Gains
Net gains on disposals of non-current financial assets came to €25totaled€68 million versus €61(versus€42 million in 2010. In 2011, the main item was the impact of the change in the consolidation method2013), and mainly related to divestments by Genzyme.
Net financial expenses 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 item2014 also included net financial foreign exchange gainsa gain of €10€35 million arising on the acquisition of shares in 2011 (versus a net loss of €20 millionAlnylam in 2010).February 2014.
Income before Tax and Associates and Joint Ventures
Income before tax and associates and joint ventures was €5,319amounted to€5,658 million in 2011,2014, versus €6,173€4,484 million in 2010, a decrease2013, an increase of 13.9%26.2%.
Income Tax Expense
Income tax expense totaled €455represented€1,214 million in 2011,2014, versus€726 million in 2013, giving an effective tax rate (based on consolidated net income) of 21.5% in 2014 compared with €1,430 million16.2% 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 20112013 (see Note D.30. to our consolidated financial statements)statements included at Item 18 of this annual report).
This line item also includesThe level of income tax expense was significantly impacted by the positive tax effects ofarising on the amortization and impairment of intangible assets (€1,178(€546 million in 20112014, versus €1,183€1,328 million in 2010)2013) and ofon restructuring costs (€399(€141 million in 20112014, versus €466€96 million in 2010)2013). In addition, the tax effect of the fair value remeasurement of contingent consideration liabilities represented a benefit of€254 million in 2014, compared with an expense of€85 million in 2013. Overall, these effects increased our income tax expense by€413 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 (i) the share of profit/loss of associates and joint ventures and (ii) net income attributable to non-controlling interests. Theinterests, but after adding back the business operating income of the Animal Health business (before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests for that business) and after subtracting net financial expenses for that business. This effective tax rate was 27.0%24.0% in 2011, versus 27.8% in 2010.both 2014 and 2013. The difference relative to the standard corporate income tax rate applicableis mainly impacted by the geographical mix of the results from Group entities, the tax effects of the elimination of intragroup margin on inventory, and settlements and recent proceedings involving the tax authorities in France (34.4%) was mainly due to lower taxes on patent royaltiesvarious countries that had a positive effect in France.both 2013 and 2014.
Share of Profit/Loss of Associates and Joint Ventures
The share of profit/loss of associatesAssociates and joint ventures totaled €1,070contributed a net loss of€52 million in 2011, compared with €9782014, versus net income of€39 million in 2010. This2013.
Since April 2014, this line mainlyitem has included our share of the profits and losses of Regeneron (impact: expense of€126 million), including the impact of the fair value remeasurement of our share of the acquired intangible assets of Regeneron. It also includes our share of after-tax profits generated infrom territories managed by BMS under the Plavix®Plavix® and Avapro®Avapro® alliance which advanced by 9.2%(€31 million in 2014, versus€25 million in 2013), plus immaterial amounts for our share of profits and losses from other associates and joint ventures.
Net Income Excluding the Held-For-Exchange Animal Health Business
Net income excluding the held-for-exchange Animal Health business amounted to €1,070€4,392 million in 2014, versus€3,797 million in 2013.
Net Income/(Loss) of the Held-For-Exchange Animal Health Business
In accordance with IFRS 5, the net income or loss of the Animal Health business is presented in a separate line item, “Net income/(loss) of the held-for-exchange Animal Health business” (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). This business reported net income of€117 million in 2014, compared with €980net income of€77 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%).2013.
Net Income
Net income for the year was €5,934amounted to€4,509 million in 2011, compared with €5,7212014, versus€3,874 million in 2010.2013.
Net Income Attributable to Non-Controlling Interests
Net income attributable tonon-controlling interests amounted to €241was€119 million in 2011, compared with €2542014, versus€158 million in 2010.2013. This line mainly includescomprises the share ofpre-tax profits paid to BMS generated infrom territories managed by Sanofi (€225(€109 million, versus €238€141 million in 2010); the2013). The year-on-year fall isdecrease was directly related to increased competition from generics of clopidogrel (Plavix®(active ingredient of Plavix®) genericsand irbesartan (active ingredient of Aprovel®) in Europe.
Net Income Attributable to Equity Holders of Sanofi
Net income attributable to equity holders of Sanofi totaled €5,693amounted to€4,390 million, versus€3,716 million in 2011, against €5,467 million in 2010.2013.
Basic earnings per share for 20112014 was €4.31, 2.9%€3.34, 18.9% higher than the 20102013 figure of €4.19,€2.81, based on an average number of shares outstanding of 1,321.71,315.8 million in 2011 and 1,305.32014 (1,323.1 million in 2010.2013). Diluted earnings per share for 2014 was €4.29€3.30 (versus€2.77 in 2011, versus €4.18 in 2010,2013), based on an average number of shares outstanding after dilution of 1,326.71,331.1 million in 20112014 and 1,308.21,339.1 million in 2010.2013.
Business122
Item 5. Operating Incomeand Financial Review and Prospects
Sanofi reports
Segment results
We report segment results on the basis of "Business“Business Operating Income"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"information” above for the definition of business operating
income and a reconciliation to Income before tax and associates and joint ventures.
Business operating income amounted to€8,957 million in 2014, 1.5% higher than in 2013 (€8,821 million) and represented 28.3% of net sales, versus 28.5% in 2013.
Business operating income for 2011 was €12,144 million, compared to €12,863 million in 2010. 2014 and 2013 is set forth below:
(€ million) | 2014 | 2013 | Change | |||||||||
Pharmaceuticals | 8,018 | 7,886 | +1.7% | |||||||||
Vaccines | 994 | 909 | +9.4% | |||||||||
Other | (55) | 26 | - | |||||||||
Business operating income(1) | 8,957 | 8,821 | +1.5% | |||||||||
Animal Health business(2) | 492 | 502 | -2.0% | |||||||||
Total: aggregated basis(3) | 9,449 | 9,323 | +1.4% |
(1) | Business operating income of continuing operations. |
(2) | The net income/(loss) of the Animal Health business is presented in a separate income statement line item, “Net income/(loss) of the held-for-exchange Animal Health business”, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(3) | Non-GAAP financial measure. |
The following table below shows trends in business operating income by businesspresents our segment results for 2011the year ended December 31, 2014.
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | Total: aggregated basis(2) | ||||||||||||||||||
Net sales | 27,720 | 3,974 | - | 31,694 | 2,076 | 33,770 | ||||||||||||||||||
Other revenues | 272 | 33 | - | 305 | 34 | 339 | ||||||||||||||||||
Cost of sales | (8,282) | (1,948) | - | (10,230) | (799) | (11,029) | ||||||||||||||||||
Research and development expenses | (4,174) | (493) | - | (4,667) | (157) | (4,824) | ||||||||||||||||||
Selling and general expenses | (7,692) | (614) | (3) | (8,309) | (682) | (8,991) | ||||||||||||||||||
Other operating income and expenses | 194 | 2 | (52) | 144 | 20 | 164 | ||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 106 | 40 | - | 146 | 1 | 147 | ||||||||||||||||||
Net income attributable to non-controlling interests | (126) | - | - | (126) | (1) | (127) | ||||||||||||||||||
Business operating income | 8,018 | 994 | (55) | 8,957 | 492 | 9,449 |
(1) | The net income/(loss) of the Animal Health business is presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business” for 2015 and prior years, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | Non-GAAP financial measure which includes the Animal Health business. |
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Item 5. Operating and 2010:Financial Review and Prospects
The following table presents our segment results for the year ended December 31, 2013.
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | Total: aggregated basis(2) | ||||||||||||||||||
Net sales | 27,250 | 3,716 | - | 30,966 | 1,985 | 32,951 | ||||||||||||||||||
Other revenues | 295 | 30 | - | 325 | 30 | 355 | ||||||||||||||||||
Cost of sales | (8,518) | (1,776) | - | (10,294) | (689) | (10,983) | ||||||||||||||||||
Research and development expenses | (4,087) | (518) | - | (4,605) | (165) | (4,770) | ||||||||||||||||||
Selling and general expenses | (7,362) | (588) | - | (7,950) | (653) | (8,603) | ||||||||||||||||||
Other operating income and expenses | 422 | 3 | 26 | 451 | (1) | 450 | ||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 48 | 41 | - | 89 | (4) | 85 | ||||||||||||||||||
Net income attributable to non-controlling interests | (162) | 1 | - | (161) | (1) | (162) | ||||||||||||||||||
Business operating income | 7,886 | 909 | 26 | 8,821 | 502 | 9,323 |
(1) | The net income/(loss) of the Animal Health business is presented in a separate income statement line item “Net income/(loss) of the held-for-exchange Animal Health business” for 2015 and prior years, in accordance with IFRS 5. Until final completion of the transaction, the Animal Health business remains an operating segment of the Group pursuant to IFRS 8 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | Non-GAAP financial measure which includes the Animal Health business. |
(€ 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 —Group’s performance. See “– Business Net Income"Income” above for the definition of business net income and a reconciliation to Net Incomeincome attributable to equity holders of Sanofi.
Business net income totaled €8,795€6,847 million in 20112014, versus €9,215€6,686 million in 2010, a drop2013, an increase of 4.6%. It2.4%; it represented 26.3%21.6% of net sales compared with 28.5% in 2010.both 2014 and 2013 (20.3% of aggregate net sales both in both 2014 and 2013).
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"Income” above).
Business earnings per share for 2011 were €6.65, 5.8% lowerwas€5.20 in 2014, 3.0% higher than the 20102013 figure of €7.06,€5.05, based on a weightedan average number of shares outstanding of 1,321.71,315.8 million in 20112014 and 1,305.31,323.1 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 2010.2013.
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 reducedOur net debt increased in 2015, following an increase during 2014 to finance our acquisitions of equity interests in Regeneron and Alnylam, and a reduction in our net debt during 2012, whereas in 2011 our debt increased significantly to finance the acquisition of Genzyme.2013.
We define "debt,“debt, net of cash and cash equivalents"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, 2012,2015, our debt, net of cash and cash equivalents stood at €7,719€7,254 million versus €10,859€7,171 million as of December 31, 20112014 and €1,577€6,043 million as of December 31, 2010.2013. See Note D.17. to our consolidated financial statements included at Item 18 of this annual report.
In order to assess the Company'sCompany’s financing risk, we also use the "gearing ratio"“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, 2012,2015, our gearing ratio stood at 13.4%was 12.5% of our net equity versus 19.3%12.7% as of December 31, 20112014 and 3.0%10.6% as of December 31, 2010.2013.
Item 5. Operating and Financial Review and Prospects
Consolidated Statement of Cash Flows
The table below shows our summarized cash flows for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Net cash provided by / (used in) operating activities excluding the held-for-exchange Animal Health business | 8,290 | 7,165 | 6,558 | |||||||||
Net cash provided by / (used in) investing activities excluding the held-for-exchange Animal Health business | (3,011) | (3,357) | (1,178) | |||||||||
Net cash provided by / (used in) financing activities excluding the held-for-exchange Animal Health business | (3,578) | (5,194) | (3,757) | |||||||||
Impact of exchange rates on cash and cash equivalents | (232) | 34 | (79) | |||||||||
Net change in cash and cash equivalents excluding the Animal Health business | 1,469 | (1,352) | 1,544 | |||||||||
Net cash provided by / (used in) operating activities of the held-for-exchange Animal Health business | 630 | 525 | 396 | |||||||||
Net cash provided by / (used in) investing activities of the held-for-exchange Animal Health business | (246) | (103) | (95) | |||||||||
Net cash provided by / (used in) financing activities of the held-for-exchange Animal Health business | (23) | 14 | 31 | |||||||||
Net change in cash and cash equivalents of the Animal Health business | 361 | 436 | 332 | |||||||||
Impact on cash and cash equivalents of the reclassification of the Animal Health business to “Assets held for sale or exchange” | (23) | - | - | |||||||||
Net change in cash and cash equivalents – (decrease) / increase | 1,807 | (916) | 1,876 |
(€ 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 | ||||||
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, 20122015 Compared with Year Ended December 31, 20112014
Net cash provided by operating activities excluding the held-for-exchange Animal Health business amounted to €8,171€8,290 million in 2012, compared with €9,3192015, versus€7,165 million in 2011. 2014.
Operating cash flow before changes in working capital (excluding the net income or loss of the held-for-exchange Animal Health business) for 2015 was €8,503€7,235 million, versus €9,834€6,257 million in 2011. This decrease was largely attributable to erosion in revenues from the territories managed2014. Working capital requirements fell 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€1,055 million in 2011) and lower license revenue from the worldwide alliance2015, compared with BMS on Plavix® and Aprovel®/Avapro® (€532a reduction of€908 million in 2012, versus €1,275 million2014, due mainly to an increase in 2011).non-current liabilities related to commercial terms of business.
Our operating cash flow before changes in working capital is generally affected by the same factors that affect "Operating income"“Operating income”, which is discussed in detail above under "Results“Results of Operations —– Year Ended December 31, 20122015 Compared with Year Ended December 31, 2011"2014”. The principal difference is that operating cash flow before changes in working capital includes 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 excluding the held-for-exchange Animal Health business amounted to€3,011 million in 2015, compared with€3,357 million in 2014.
Acquisitions of property, plant and equipment and intangible assets totaled€2,772 million, versus€1,453 million in 2014. The main items were investments in industrial and research facilities (€1,163 million in 2015, versus€970 million in 2014) and contractual payments for intangible rights, mainly under license and collaboration agreements (€1,465 million in 2015, versus€354 million in 2014).
Acquisitions of investments during 2015 amounted to€362 million, net of cash acquired and after including assumed liabilities and commitments, compared with€2,294 million in 2014. The main items were our acquisitions of shares in Regeneron (€117 million in 2015,€1,629 million in 2014) and Alnylam (€79 million in 2015,€535 million in 2014).
After-tax proceeds from disposals (€211 million) related mainly to the divestment of our equity interest in Merrimack Pharmaceuticals and the sale of rights in Sklice® to Arbor Pharmaceuticals LLC in the United States. In 2014, after-tax proceeds from disposals (€262 million) related mainly to the divestment of Genzyme’s equity interest in Ionis Pharmaceuticals (formerly Isis Pharmaceuticals) and to a payment received from Tolmar in exchange for the transfer of rights to EligardTM and Aplenzin® in the United States.
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Item 5. Operating and Financial Review and Prospects
Net cash used in financing activities excluding the held-for-exchange Animal Health business amounted to€3,578 million in 2015, compared with€5,194 million in 2014. The 2015 figure includes net external debt finance raised of€1,346 million; this compares with net external debt finance repaid (i.e., net change in short-term and long-term debt) of€390 million in 2014. It also includes the effect of changes in share capital (repurchases of own shares, net of capital increases), amounting to€1,211 million (versus€1,121 million in 2014), and the dividend payout to our shareholders of€3,694 million (versus€3,676 million in 2014).
The net change in cash and cash equivalents excluding the held-for-exchange Animal Health business was an increase of€1,469 million in 2015, compared with a decrease of€1,352 million in 2014.
Net cash flows for the held-for-exchange Animal Health business represented net cash inflows of€361 million in 2015 and€436 million in 2014.
The net change in cash and cash equivalents during 2015 (after the€23 million impact on cash and cash equivalents of the reclassification of the Animal Health business to “Assets held for sale or exchange”), was an increase of€1,807 million; this compares with a reduction of€916 million in 2014.
Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
Net cash provided by operating activities excluding the held-for-exchange Animal Health business amounted to€7,165 million in 2014, versus€6,558 million in 2013.
Operating cash flow before changes in working capital for 2014 was€6,257 million, versus€6,363 million in 2013. Working capital requirements fell by€908 million in 2014, compared with a reduction of€195 million in 2013, due mainly to an increase in trade accounts payable.
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, 2014 Compared with Year Ended December 31, 2013”. 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 €1,587excluding the held-for-exchange Animal Health business totaled€3,357 million in 2012, versus €14,7012014, compared with€1,178 million in 2011.2013.
Acquisitions of property, plant and equipment and intangible assets totaled €1,612€1,453 million, (2011: €1,782 million).versus€1,306 million in 2013. The main items were investments in industrial and research facilities (€1,324(€970 million, versus €1,394€1,026 million in 2011)2013) and contractual payments for intangible rights under license and collaboration agreements (€293(€354 million, versus €245€188 million in 2011)2013).
Acquisitions of investments in the periodduring 2014 amounted to €328€2,294 million, net of cash acquired and after including assumed liabilities and commitments. The main items were a paymentour acquisitions of equity interests in Regeneron (€1,629 million) and Alnylam (€535 million). In 2013, acquisitions of investments totaled€253 million, net of cash acquired and after including assumed liabilities and commitments. The main items were our acquisitions of equity interests in Genfar, and payments 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).Genzyme.
After-tax proceeds from disposals (€358(€262 million) related mainly to divestituresthe divestment of financial assets (in particular, ourGenzyme’s equity interestsinterest in Société Financière des Laboratoires de Cosmétologie Yves RocherIonis Pharmaceuticals (formerly Isis Pharmaceuticals) and Handok)to a payment received from Tolmar in exchange for the transfer of rights to Eligard™ and Aplenzin® in the United States. In 2013, after-tax proceeds from disposals (€408 million) mainly comprised the sale to Covis Pharma of commercial rights to pharmaceutical products in the United States, the receipt of a $125 million payment associated with changes to the contractual terms of the alliance on Actonel®, and to disposals of various items of property, plant and equipment in the United States and intangible assets. In 2011, proceeds from disposals cameFrance.
Net cash used in financing activities excluding the held-for-exchange Animal Health business amounted to €359 million, mainly generated by the divestiture of the Dermik dermatology business (€321 million).
Financing activities generated a net cash outflow of €4,351€5,194 million in 2012,2014, compared with a net cash inflow of €2,893€3,757 million in 2011.2013. The 20122014 figure includes €615 million ofincluded net external debt repayments (netfinance repaid (i.e. net change in short-term and long-term debt), as compared of€390 million; this compares with net external debt finance raised of €5,283€568 million in 2011; it2013. It also includesincluded the Sanofieffect of changes in share capital (repurchases of own shares, net of capital increases), amounting to€1,121 million (versus€637 million in 2013), and the dividend payout to our shareholders of €3,487€3,676 million (versus €1,372€3,638 million in 2011)2013).
After the impact of exchange rates and of the cash and cash equivalents of Merial, theThe net change in cash and cash equivalents excluding the held-for-exchange Animal Health business was a decrease of€1,352 million in 2012 was2014, compared with an increase of €2,257 million, compared with a decrease of €2,341€1,544 million in 2011.2013.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010Net cash flows for the held-for-exchange Animal Health business represented net cash inflows of€436 million in 2014 and€332 million in 2013.
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Item 5. Operating and Financial Review and Prospects
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 20112014 was a declinedecrease of €2,341€916 million, versus a €1,793compared with an increase of€1,876 million increase in 2010.2013.
Consolidated Balance Sheet and Debt
Total assets stood at €100,407were€102,321 million as of December 31, 2012,2015, versus €100,668€97,392 million as of December 31, 2011, a decrease2014, an increase of €261€4,929 million.
Debt, net of cash and cash equivalents (see definition above) amounted to €7,719was€7,254 million as of December 31, 2012, compared with €10,8592015, versus€7,171 million as of December 31, 2011.2014. The table below shows our financial position for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Long-term debt | 13,118 | 13,276 | 10,414 | |||||||||
Short-term debt and current portion of long-term debt | 3,436 | 1,538 | 4,176 | |||||||||
Cash and cash equivalents | (9,148) | (7,341) | (8,257) | |||||||||
Related interest rate and currency derivatives | (152) | (302) | (290) | |||||||||
Debt, net of cash and cash equivalents | 7,254 | 7,171 | 6,043 |
(€ million) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Long-term debt | 10,719 | 12,499 | 6,695 | |||||||
Short-term debt and current portion of long-term debt | 3,812 | 2,940 | 1,565 | |||||||
Cash and cash equivalents | (6,381 | ) | (4,124 | ) | (6,465 | ) | ||||
Related interest rate and currency derivatives | (431 | ) | (456 | ) | (218 | ) | ||||
Debt, net of cash and cash equivalents | 7,719 | 10,859 | 1,577 | |||||||
Our gearing ratio (debt, net of cash and cash equivalents as a proportion of total equity) fell from 19.3%12.7% in 20112014 to 13.4%12.5% in 2012.2015. Analyses of debt as of December 31, 20122015 and December 31, 2011,2014, 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, 20122015 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 €57,472amounted to€58,210 million as of December 31, 2012,2015, versus €56,373€56,268 million as of December 31, 2011.2014. The net year-on-year increase in equity was attributable primarily to:
· | increases: our net income for the year ended December 31, 2015 (€4,388 million), the change in currency translation differences (€1,915 million, mainly on the U.S. dollar), and net movements in actuarial gains and losses during the period (€465 million); |
· | decreases: the dividend payout to our shareholders in respect of the 2014 financial year (€3,694 million) and repurchases of our own shares (€1,781 million). |
As of December 31, 2012,2015, we held 3.14.0 million of our own shares, recorded as a deduction from equity and representing 0.2%0.3% of theour share capital.
Goodwill and otherOther intangible assets (€58,265(€51,583 million in total) decreased by €3,956€2,157 million, largelymainly reflecting:
· | decreases: amortization and impairment losses recognized during the period (€3,532 million), and the reclassification to “Assets held for sale or exchange” of the goodwill (€1,510 million) and other intangible assets (€2,147 million) of the Animal Health business; |
· | increases: acquisitions of other intangible assets (€2,245 million), and currency translation differences on the remeasurement of assets denominated in foreign currencies (€2,895 million, mainly on the U.S. dollar). |
Investments in associates and joint ventures increased by€292 million to€2,676 million, mainly as a result of amortization and impairment losses recognized incurrency translation differences on the period (€3,516��million) and a decline in the equivalent value in eurosremeasurement of assets denominated in other currencies (€611foreign currencies.
Other non-current assets were€150 million higher at€2,725 million, mainly relatingdue to the U.S. dollar).acquisition of shares in Alnylam.
Provisions and othernon-current liabilities (€11,036(€9,169 million) rosedecreased by €690€409 million, due mainly to a net increase in provisions for pensions and other benefits of €874 million, primarily as a result of movements in actuarial gains and losses on defined-benefit plans.pension plans (reduction of€650 million) and currency translation differences (increase of€190 million).
Net deferred tax liabilities (€1,555 million) fell by €1,342Deferred taxes represented a net asset of€1,819 million, a year-on-year primarilyincrease of€1,064 million. This increase was mainly due to the reversalreversals of deferred tax liabilities relating toon the remeasurement of acquired intangible assets (€5,641 million in 2012 versus €6,815 million in 2011, a difference of €1,174(€725 million) and tax losses available for carry-forward (€424 million).
Current
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Item 5. Operating and non-current liabilitiesFinancial Review and Prospects
Liabilities related to business combinations and to non-controlling interests (€1,450 million) were €106decreased by€13 million lower.to€1,251 million. The main factors were the reversalmovements in this item are fair value remeasurements of (i) the contingent consideration relatingpayable to Bayer as a result of an acquisition made by Genzyme prior to the Fovealatter’s acquisition payments to Bayer (relating to contingent consideration arising from our acquisition of Genzyme),by Sanofi and the repurchase (for $70 million) of some of(ii) the contingent value rights (CVRs) issued by Sanofi in connection with the Genzyme acquisition. These factors were partly offset by the effect of fair value remeasurementsacquisition (see Note D.18. to our consolidated financial statements)statements included at Item 18 of this annual report).
Assets held for sale or exchange (€5,752 million) and liabilities related to assets held for sale or exchange (€983 million) mainly comprise the assets and liabilities of the held-for-exchange Animal Health business (see Note D.8. to our consolidated financial statements included at Item 18 of this annual report).
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 2012,2015, we held cash and cash equivalents amounting to €6,381€9,148 million, substantially all of which were held in euros (see Note D.13. to our consolidated financial statements)statements included at Item 18 of this annual report). As at December 31, 2012, €5072015, our subsidiaries based in Venezuela held cash and cash equivalents in bolivars representing€90 million, which are subject to foreign exchange controls (see Note A.4. to our consolidated financial statements included at Item 18 of this annual report). As at December 31, 2015,€385 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 “Item 3.D – Risk Factors – 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 2012,2015, the amount of our trade receivables in Europe decreased,continued to fall, primarily as a result of a reduction in the sums owed to us by public-sectorpublic sector customers in Spain due to payments received. The total consolidatedand Italy. Over the Group as a whole, the amount of trade receivables overdue by more than 12 months —– which primarily consists mainly of amounts due from public-sector customers —public sector bodies – fell from €276€170 million as of December 31, 20112014 to €161€159 million as of December 31, 2012 due to payments received2015 (see Note D.10. to our consolidated financial statements included at Item 18statements), mainly as a result of this annual report).the reclassification of Animal Health receivables to “Assets held for sale or exchange” as of December 31, 2015.
In November 2011, Sanofi obtained the necessary corporate authorizations to purchase any or all of the outstanding Contingent Value Rights ("CVR"(“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)., followed by a further 10,928,075 CVRs (for approximately $9 million) in 2013, 1,879,774 CVRs (for approximately $1 million) in 2014, and none in 2015. As of December 31, 2012, 249,196,3712015, a total of 236,456,456 CVRs were outstanding out of the 291,313,510 issued at the time of the Genzyme acquisition.
At year-end 2012,2015, 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€8.0 billion at December 31, 2012.2015. For a discussion of our treasury policies, see "Item“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“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, 20122015 are shown in Notes D.3., D.17., D.18., D.21. and D.21.D.36. to our consolidated financial statements included at Item 18 of this annual report. Note D.21. 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 20122015 consolidated financial statements.
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Item 5. Operating and Financial Review and Prospects
The Group'sGroup’s contractual obligations and other commercial commitments are set forth in the table below:
December 31, 2015 | Payments due by period(1) | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
· Future contractual cash-flows relating to debt and debt hedging instruments(2) | 17,818 | 3,594 | 3,799 | 3,440 | 6,985 | |||||||||||||||
· Operating lease obligations | 1,604 | 274 | 436 | 263 | 631 | |||||||||||||||
· Finance lease obligations(3) | 89 | 23 | 36 | 8 | 22 | |||||||||||||||
· Irrevocable purchase commitments(4) | ||||||||||||||||||||
– given | 4,228 | 2,324 | 1,305 | 274 | 325 | |||||||||||||||
– received | (269) | (158) | (55) | (33) | (23) | |||||||||||||||
· Research & development license agreements | ||||||||||||||||||||
– Commitments related to R&D and other commitments | 1,957 | 831 | 811 | 216 | 99 | |||||||||||||||
– Potential milestone payments(5) | 3,552 | 335 | 455 | 1,546 | 1,216 | |||||||||||||||
– Obligations related to R&D license agreements reflected on the balance sheet | 683 | 522 | 109 | 52 | - | |||||||||||||||
· Obligations relating to business combinations(6) | 5,073 | 126 | 485 | 362 | 4,100 | |||||||||||||||
· Firm commitment related to the BMS agreement(7) | 114 | - | 114 | - | - | |||||||||||||||
· Estimated benefit payments on unfunded pensions and post employment benefits(8) | 1,399 | 64 | 133 | 155 | 1,047 | |||||||||||||||
Total contractual obligations and other commitments | 36,248 | 7,935 | 7,628 | 6,283 | 14,402 | |||||||||||||||
Undrawn general-purpose credit facilities | 8,008 | 7 | - | 8,000 | 1 |
(1) | Including payments related to contractual obligations and other commercial commitments of the Animal Health business, reclassified to Assets and liabilities held for sale or exchange as of December 31, 2015 in accordance with IFRS 5 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | Of which €17,795 million related to payments excluding the Animal Health business (see Note D.17. to our consolidated financial statements included at Item 18 of this annual report) and €23 million related to the Animal Health business. |
(3) | Of which €83 million related to payments excluding the Animal Health business (see Note D.3. to our consolidated financial statements included at Item 18 of this annual report) and €6 million related to the Animal Health business. |
(4) | These comprise irrevocable commitments to third parties for (i) property, plant and equipment, net of down payments (of which €436 million related to payments excluding the Animal Health business – see Note D.3. to our consolidated financial statements included at Item 18 of this annual report – and €27 million related to the Animal Health business) and (ii) goods and services. |
(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.2. to our consolidated financial statements included at Item 18 of this annual report. |
(8) | Of which €1,352 million related to payments excluding the Animal Health business (see Note D.19.1. to our consolidated financial statements included at Item 18 of this annual report) and €47 million related to the Animal Health business. The table above does not include the ongoing annual employer’s contributions to plan assets, estimated at €177 million in 2016 (of which €175 million excluding the Animal Health business and €2 million related to the Animal Health business). |
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 | |||||||||||
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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Item 5. Operating and Financial Review and Prospects
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.in Note D.21.1. to our consolidated financial statements included at Item 18 of this annual report. Milestone payments relating to development projects under these agreements amounted to €2.0included in the table above exclude projects (€4.7 billion in 2012. These exclude projects in the research phase (€5.02015,€4.2 billion in 2012, €4.2 billion in 2011)2014) and payments contingent upon the attainment of sales targets once a product is on the market (€(€8.0 billion in 2015,€4.7 billion in 2012, €4.4 billion in 2011)2014).
Sanofi has also entered into the following major agreements, which are currently in a less advanced research phase:
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.
In December 2009, Sanofi Pasteur signed a donation letter 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.
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:
· | 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 certainsales-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. |
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"“Other revenues”.
· | 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”, now superseded by IFRS 10 “Consolidated 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). |
· | 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 |
Business combinations.130
As discussed in Note B.3. "Business combinationsItem 5. Operating 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, liabilitiesFinancial Review 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).Prospects
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 of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18 of this annual report. |
· | Pensions and post-retirement benefits. As described in Note B.23. “Employee benefit obligations” to our consolidated financial statements included at Item 18 of this annual report, we recognize our pension and retirement benefit commitments as liabilities on the basis of an actuarial estimate of the potential rights vested in employees and retirees as of the balance sheet date, net of the valuation of funds to meet these obligations. We prepare this estimate at least on an annual basis taking into account financial assumptions (such as discount rates) and demographic assumptions (such as life expectancy, retirement age, employee turnover, and the rate of salary increases). |
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
of intangible assets and property, plant and equipment" to our consolidated financial statements included at Item 18 of this annual report.
Depending on the discount rate used, the pension and post-retirement benefit expense could vary within a range of outcomes and have a material effect on equity because in applying IAS 19 (Employee Benefits), we have elected to recognize all actuarial gains and losses (including the impact of a change in discount rate) immediately through equity. A sensitivity analysis to discount rate is set forth in Note D.19.1. "Provisions“Provisions for pensions and other benefits"benefits” to our consolidated financial statements included at Item 18 of this annual report.
Depending on the expected long term rate of return on plan assetskey assumptions used, the pension and post-retirement benefit expense could vary within a range of outcomes and have a material effect on reported earnings. A sensitivity analysis to expected long term rate of returnthese key assumptions is set forth in Note D.19.1. "Provisions“Provisions for pensions and other benefits"benefits” to our consolidated financial statements included at Item 18 of this annual report. As indicated in Note B.28.1. to our consolidated financial statements, the amended IAS 19 issued by the IASB in June 2011 will be applicable as from January 1, 2013 to our consolidated financial statements. The comparative periods presented in the 2013 financial statements will require retrospective application of the new standard. The application of this change would have reduced business net income by €47 million in 2011 and by €78 million in 2012. The impact of this change on shareholders' equity would have been negligible.
· | Deferred taxes. As discussed in Note B.22. “Income tax expense” to our consolidated financial statements included at Item 18 of this annual report, we account for deferred taxes using the liability method, whereby deferred income taxes are recognized on tax loss |
carry-forwards, and on the difference between the tax base and carrying amount of assets and liabilities. We calculate our deferred tax assets and liabilities using enacted tax rates applicable for the years during which we estimate that the temporary differences are expected to reverse. We do not recognize deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. The recognition of deferred tax assets is determined on the basis of profit forecasts for each tax group, and of the tax consequences of the strategic opportunities available to the Group. |
· | Provisions for risks. Sanofi and its subsidiaries and affiliates may be involved in litigation, arbitration or other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights, compliance and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. As discussed in Note B.12. “Provisions for risks” at Item 18 of this annual report, we record a provision where we have a present obligation, whether legal or constructive, as a result of a past event; when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and when a reliable estimate can be made of the amount of the outflow of resources. For additional details regarding the financial impact of provisions for risks see Notes D.19.3. “Other provisions” and D.22. “Legal and Arbitral Proceedings” to our consolidated financial statements included at Item 18 of this annual report. |
Provisions are estimated on the basis of events and circumstances related to present obligations at the balance sheet date, of past experience, and to the best of management'smanagement’s knowledge at the date of preparation of the financial statements. The assessment of provisions can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Given the inherent uncertainties related to these estimates and assumptions, the actual outflows resulting from the realization of those risks could differ from our estimates.
Item 6. Directors, Senior Management and Employees
Item 6. | Directors, Senior Management and Employees |
A. DirectorsA.Directors and Senior Management
TheSince January 1, 2007, Sanofi has separated the offices of Chairman and Chief Executive Officer have been separated since January 1, 2007.Officer. The annual evaluations conducted since that date have indicated that this governance structure is appropriate to the Group'sGroup’s current configuration. This arrangement was therefore continuedmaintained with the appointment of Serge Weinberg to the office of Chairman on May 17, 2010, and again with his reappointment on May 6, 2011.2011 and again on May 4, 2015. The Board of Directors considerscontinues to consider that this governance structure is appropriate in the Group'sGroup’s current context.
TheChairman representsAs an exception, resulting from the removal of Christopher Viehbacher from office as Chief Executive Officer on October 29, 2014, the Board of Directors asked Serge Weinberg to temporarily occupy the functions of both Chairman and Chief Executive Officer. Upon the appointment of Olivier Brandicourt as Chief Executive Officer on April 2, 2015, the Group’s governance returned to the separation of the offices of Chairman and Chief Executive Officer.
Due to the exceptional and temporary nature of the combination of the two offices, the Board of Directors, on recommendation of the Appointments and Governance Committee, did not consider it necessary or appropriate to appoint a lead independent director. However, the Board of Directors, at its meeting held on November 18, 2014, decided to assign the chairmanship of the Appointments and Governance Committee to an independent director to replace the Chairman of the Board of Directors. With the return to the separation of the two offices, Serge Weinberg resumed the chairmanship of the Appointments and Governance Committee on October 28, 2015.
TheChairman organizes and directs the work of the Board, and is responsible for ensuring the proper functioning of the corporate decision-making bodies in compliance with good governance practices. The Chairman coordinates the work of the Board of Directors with its Committees. The Chairman is accountable to the Shareholders'Shareholders’ General Meeting, which he chairs.
When the offices of Chairman and Chief Executive Officer are separated, the Chairman may remain in office until the Ordinary Shareholders'Shareholders’ General Meeting called to approve the financial statements held during the calendar year in which he reaches the age of 70.
The Board of Directors has not deemed it necessary to appoint a lead independent director, since this role has been broadly assumed by Serge Weinberg. No factor other than his role as Chairman is liable to undermine his independence, especially given that prior to joining the Board he had no links to Sanofi.
TheChief Executive Officer is responsible for the management of the Company, and represents the Company
in dealings with third parties within the limit of the corporate purpose. The Chief Executive Officer has the broadest powers to act in all circumstances in the name of the Company, subject to the powers that are attributed by law to the Board of Directors and to the Shareholders'Shareholders’ General Meeting and within the limits set by the Board of Directors.
The Chief Executive Officer mustmay not be no more than 65 years old.
Limitations on the powers of the Chief Executive Officer set by the Board
The Board of Directors Meeting of July 28, 2009 set limits on the powers of the Chief Executive Officer.Officer in a decision that supplements the Board Charter. The prior authorization of the Board of Directors is required to commit Sanofi to investments, acquisitions and divestments in the following cases:
· | a€500 million cap for each undertaking pertaining to a previously approved strategy; and |
· | a€150 million cap for each undertaking not pertaining to a previously approved strategy. |
When the consideration payable to the contracting parties for such undertakings includes potential installment payments contingent upon the achievement of future results or objectives, such as the registration of one or more products, the caps are calculated by aggregating the various payments due from signature of the contract until (and including) filing of the first application for marketing authorization in the United States or in Europe.
Following the appointment of a new Chief Executive Officer and on the recommendation of the Appointments and Governance Committee, the Board of Directors
reassessed these limitations and decided to maintain them.
Board of Directors
The Company is administered by a Board of Directors, currently comprising fifteen members.fourteen members as of December 31, 2015.
Since May 14, 2008,Subject to the powers expressly attributed to the Shareholders’ General Meeting and within the scope of the Company’s corporate purpose, the Board of Directors’ powers cover all issues relating to the proper management of the Company, and through its decisions the Board determines all matters falling within its authority.
The terms of office of the directors have beenare staggered, such that members of the Board seek reappointment on a regular basis in the most equal proportions possible. Exceptionally, the Shareholders’ Ordinary General Meeting may appoint a director to serve for a term of one, two or three years, in order to ensure that the directors are progressively re-elected.adequate rotation of Board members.
Each year, the Board of Directors conducts a review to ensure that there is an appropriate balance in its
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Item 6. Directors, Senior Management and Employees
composition and in the composition of its Committees. In particular, the Board seeks to ensure a more balanced representation of men and women and diversity of background and country of origin, since the business of the Group is both diversified and global. The Board investigates and evaluates potential candidates whenever individual directors are up for election. Above all, the Board seeks talented directors, who show independence of mind and who are competent, dedicated and committed.
TableIndependence of ContentsBoard Members
Under the terms of the AFEP-MEDEF corporate governance code (hereafter referred to as the "AFEP-MEDEF Code"“AFEP-MEDEF Code”), a director is deemed to be independent when the directorhe or she has no relationship of any nature whatsoever with the Company, the groupGroup it belongs to or its senior management which could compromise the exercise of the director'sdirector’s freedom of decision. More specifically, in order to qualify as independent, directors are required:may not:
· | be an employee or corporate officer of the Company, or a corporate officer of a related company (criterion 1); |
· | be a customer, supplier, or investment banker or corporate banker of the Company (criterion 2); |
· | have close family ties with any corporate officer of the Company (criterion 3); |
· | have acted as auditor for the Company over the course of the last five years (criterion 4); |
· | be representative of a significant shareholder or of a controlling interest of the Company (criterion 5). |
The influence of other factors such as length of service on the Board, the ability to understand challenges and risks, and the courage to express ideas and form a judgment, is also evaluated before a director qualifies as independent.
In compliance with our Board Charter and pursuant to the AFEP-MEDEF Code, a discussion as tothe Board of Directors’ meeting of October 28, 2015 reviewed the independence of the current directors took place during the meeting of the Board of Directors of March 5, 2013.directors. Of the fifteenfourteen directors, nineeleven were deemed to be independent directors with reference to the independence criteria used by the Board of Directors pursuant to the AFEP-MEDEF Code: Serge Weinberg, Bonnie Bassler, Uwe Bicker, Robert Castaigne, Lord Douro, Jean-René Fourtou, Claudie Haigneré, Patrick Kron, Fabienne Lecorvaisier, Suet-Fern Lee, Carole Piwnica and Klaus Pohle, and Gérard Van Kemmel.Pohle.
Criterion 1 | Criterion 2 | Criterion 3 | Criterion 4 | Criterion 5 | Length of service under 12 years | Qualification | ||||||||||||||||||||||
Serge Weinberg | No | (1) | Yes | Yes | Yes | Yes | Yes | Independent | ||||||||||||||||||||
Bonnie Bassler | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Uwe Bicker | Yes | Yes | (2) | Yes | Yes | Yes | Yes | Independent | ||||||||||||||||||||
Robert Castaigne | Yes | Yes | Yes | Yes | Yes | No | (3) | Independent | ||||||||||||||||||||
Jean-René Fourtou | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Claudie Haigneré | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Patrick Kron | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Fabienne Lecorvaisier | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Suet-Fern Lee | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Carole Piwnica | Yes | Yes | Yes | Yes | Yes | Yes | Independent | |||||||||||||||||||||
Klaus Pohle | Yes | Yes | (2) | Yes | Yes | Yes | Yes | Independent |
The Board’s conclusions on particular situations are set out below.
(1) | Serge Weinberg |
In particular, it was determined that2013, the situationrules governing the office of Robert Castaigne had changed. Until 2012, Robert Castaigne was not consideredthe Chairman of the Board changed, allowing the Board to regard the Chairman as an independent director due to his past linksin accordance with the Total Group. Since April 2008, whencontinuous assessment of the independence criteriaBoard of Directors. Until 2013, Serge Weinberg had not been regarded as an independent director only because of the previous version of the AFEP-MEDEF Code were adopted,which in its former article 8.4 did not
distinguish the case where the functions of Chairman and Chief Executive Officer are separated from the case where both functions are combined. Effective June 2013, the AFEP-MEDEF Code (in its new article 9.4) stipulates that if the offices of Chairman and Chief Executive Officer are separated, the Chairman is not automatically regarded asnon-independent, but his (or her) independence has to be scrutinized in the light of the criteria generally used to assess directors’ independence. The Board of Directors took the view that no factor other than his role as Chairman is liable to undermine his independence, especially given that prior to
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Item 6. Directors, Senior Management and Employees
joining the Board he had no relationship with Sanofi. The Board assessment concerning his situation has changedwas reflected in two ways:
Consequently,previous annual reports on Form 20-F. On October 29, 2013 the Board of Directors considereddetermined that Serge Weinberg was an independent director.
When the links with Total no longer created a presumptionoffices of non-independence.
Moreover, contrary toChairman of the independence criteria set by the AFEP-MEDEF Code,Board and Chief Executive Officer were temporarily combined on October 29, 2014, the Board of Directors has decideddetermined that belonging toSerge Weinberg could no longer be regarded as independent. When the two offices were separated again, the Board for more than 12 years would not of itself disqualify a director from being independent.
The lengthDirectors determined that Serge Weinberg could be regarded as independent and could therefore resume the chairmanship of service criterion is intended to address the concern that the passage of time may deprive a director of his ability to challenge senior management. This is a legitimate concern, which Sanofi takes very seriously.
However, it is not always appropriate to apply this criterion rigidly, since itAppointments and Governance Committee. Serge Weinberg does not take full accountreceive any variable compensation, whether in cash or in shares, which complies with the recommendation the AMF published in its 2015 report on corporate governance and compensation of the varietycorporate officers of situations that may exist. Robert Castaigne has always demonstrated a questioning approach, which is fundamentally what the APEF-MEDEF criteria are seeking to check.listed companies.
Finally, there was no other reason to determine that Robert Castaigne is not independent.
(2) | Business Relationships Review |
Consequently, the Board determined on this basis, at its meeting of May 4, 2012, that Robert Castaigne qualified as an independent director.
In addition, the Total group has since that date effectively ceased to have any equity interest in the Company.
In its examination of the independence of each Director, the Board of Directors took into account the various relationships that could exist between Directors and the Group and concluded that no such relationships were of a nature that might undermine their independence. The Board of Directors noted that the Company and its subsidiaries had, in the normal course of business, over the last three years, sold products and provided services to, and/or purchased products and received services from, companies in which certain of the Company'sCompany’s directors who
are classified as independent or members of their close family were senior managers or employees during 2012.2015. On each occasion, the amounts paid to or received from such companies over the past three years were determined on an arm'sarm’s length basis and did not represent amounts that the Board regarded as undermining the independence of the Directors in question. Similarly, the Board of Directors did not find the office of trustee held by Uwe Bicker and Klaus Pohle with the Aventis Foundation (Germany) was of such a nature as to undermine their independence as members of the Sanofi Board of Directors. Appointments to the Board of Trustees as well as the management of the Foundation are made completely independently of Sanofi.
(3) | Robert Castaigne |
The Board of Directors considers that the situation of Robert Castaigne has changed since his first appointment to the Board. Prior to 2012, Robert Castaigne had not been regarded as an independent director due to his past relationship with Total. Since April 2008, when the independence criteria of the AFEP-MEDEF Code were adopted, his situation has changed in two ways:
· | Robert Castaigne retired from Total more than four years ago. |
· | Total passed below the threshold of 5% of our voting rights as per notification of February 16, 2012. In 2012, Total ceased to have any equity interest in our Company. |
Consequently, the Board of Directors took the view that Robert Castaigne’s relationship with Total no longer created a presumption of non-independence.
Moreover, the Board of Directors does not believe that belonging to the Board for more than 12 years of itself disqualifies a director from being independent. The length of service criterion is intended to address the concern that the passage of time may deprive a director of his ability to challenge senior management. This is a legitimate concern, which Sanofi takes very seriously.
This is why the Board of Directors applies this criterion pragmatically in light of the specific circumstances of each case. In the case of Robert Castaigne, the Board considers that this director has demonstrated a questioning approach, which is fundamentally what the AFEP-MEDEF criteria are seeking to check. For more information see “– C. Board Practices –”, below.
Finally, there was no other factor calling into question Robert Castaigne’s independence.
Consequently, the Board determined on this basis, at its meeting of May 4, 2012 and upon the recommendation of its Appointments and Governance Committee, that Robert Castaigne qualified as an independent director. This position was reconfirmed at its meeting of November 18, 2014.
It should be noted that this decision has no detrimental effect on compliance with the independence rules of the AFEP-MEDEF Code, which is the main objective of the Code. The fact that the proportion of independent directors on the Board is over 78% demonstrates that the Board in no way underestimates the importance of having a majority of independent directors in its governance.
No more than one-third of the serving members of our Board of Directors may be over 70 years of age.
SubjectBoard evaluation
Under the terms of the Board Charter, a discussion of the Board’s operating procedures must be included in the agenda of at least one Board meeting every year. The Charter also requires a formal evaluation to be performed every three years.
The terms of office of certain directors came up for renewal in 2015. As part of this process, their contribution to the powers expressly attributedwork of the Board and its committees was assessed, and in each case was judged to have met the Shareholders' General MeetingGroup’s needs and been in line with its expectations.
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In 2015, the Board decided for the first time to retain an independent consultant to perform a formal evaluation of the work of the Board and its committees. This decision was largely motivated by a commitment to ensure that lessons were learned from recent events.
Each Board member completed a questionnaire, and was then interviewed by consultants in late 2015 and early 2016. Issues addressed by these questions included:
· | governance methods and structures; |
· | the effectiveness of the Board; |
· | how the committees are perceived by the Board; |
· | composition of the Board; |
· | Board competencies and working practices; |
· | relations between the Board and senior management, shareholders and other stakeholders. |
A significant improvement in governance was observed following the change of Chief Executive Officer. The new Chief Executive Officer involves the Board in key decisions, and is showing greater commitment to transparency. The quality of interactions between the Executive Committee and the Board has also improved.
In addition, recent experiences have helped enhance the quality of teamwork within the scopeBoard, and encouraged convergence of viewpoints.
The Board identified the following areas for improvement:
· | fuller information about the Company and its operations, about risks, and about human resources policy; |
· | more frequent analysis of disruption scenarios associated with trends in the market and the competitive environment, and the impact of digital technologies. The Board has scheduled a fact-finding mission in the western United States for March 2016 in order to deepen its understanding of digital technology issues. In addition, the expanded Strategy Committee meeting held in October will be extended to a full day in order to address additional issues; |
· | detailed consideration of succession planning for the Chairman of the Board, the Chief Executive Officer and the Executive Committee members. The Appointments and Governance Committee and the Chief Executive Officer started to work together on this project towards the end of 2015. |
Acting on the recommendation of the Company's corporate purpose,Appointments and Governance Committee, the Board decided to raise the number of executive sessions (Board meetings held without the Chief Executive Officer present) to two per year.
The Board reiterated the objective expressed in its roadmap on the future composition of the Board of Directors' powers cover all issues relating tobringing more scientific and pharmaceutical expertise, and more non-French and female directors, onto the proper management ofBoard.
Two candidates whose profile fits these priorities will be submitted for approval by the Company, and through its decisionsshareholders at the Board determines all matters falling within its authority.Annual General Meeting on May 4, 2016.
Composition of the Board of Directors as of December 31, 20122015
Positions held in listed companies are flagged by an asterisk. Each person’s principal position is indicated in bold.
Directorships and appointments of Serge Weinberg
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The composition of the Board of Directors changed in 2012. The term of office of Lindsay Owen-Jones expired at the close of the Shareholders' General Meeting held on May 4, 2012. Laurent Attal was appointed as a Director of our Company at the Shareholders' General Meeting held on May 4, 2012.
The Executive Committee is chaired by the Chief Executive Officer.
The Committee meets once a month, and has the following permanent members:
The name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each of the executive officers of Sanofi are set forth below. The business address and phone number of each such executive officer is c/o Sanofi, 54 rue La Boétie, 75008 Paris, France, +33 1 53 77 40 00. Unless otherwise indicated, each executive officer is a citizen of France.
Christopher ViehbacherChief Executive OfficerChairman of the Executive CommitteeDate of birth: March 26, 1960
Christopher Viehbacher was appointed as Chief Executive Officer on December 1, 2008, and is also a member of the Strategy Committee.
For additional information regarding his professional education and business experience see "Composition of the Board of Directors as of December 31, 2012" in "A. Directors and Senior Management" on this Item 6.
Christopher Viehbacher is a citizen of Germany and Canada.
Olivier CharmeilSenior Vice President VaccinesDate of birth: February 19, 1963
Olivier Charmeil is a graduate of HEC (Ecole des Hautes Etudes Commerciales) and of theInstitut d'Etudes Politiques in Paris. From 1989 to 1994, he worked in the Mergers & Acquisitions department of Banque de l'Union Européenne. He joined Sanofi Pharma in 1994 as head of Business Development. Subsequently, he held various posts within the Group, including Chief Financial Officer (Asia) for Sanofi-Synthélabo in 1999 andAttaché to the Chairman, Jean-François Dehecq, in 2000, before being appointed as Vice President, Development within the Sanofi-Synthélabo International Operations Directorate, where he was responsible for China and support functions. In 2003, Olivier Charmeil was appointed Chairman and Chief Executive Officer of Sanofi-Synthélabo France, before taking the post of Senior Vice President, Business Management and Support within the Pharmaceutical Operations Directorate. In this role, he piloted the operational integration of Sanofi-Synthélabo and Aventis. He was appointed Senior Vice President Asia/Pacific, Pharmaceutical Operations in February 2006 and since January 1, 2008, Operations Japan have reported to him as well as Asia/Pacific and Japan Vaccines since February 2009. Since January 1, 2011, Olivier Charmeil has served as Senior Vice President Vaccines and a member of the Executive Committee.
Jérôme ContamineExecutive Vice President Chief Financial OfficerDate of birth: November 23, 1957
Jérôme Contamine is a Graduate ofÉcole Polytechnique (X),ENSAE, andENA (Ecole Nationale d'Administration). After four years at the"Cour des Comptes", as a Senior State General Auditor, he joined Elf Aquitaine in 1988, as advisor to the Chief Financial Officer, and became Group Finance and Treasury Director in 1991. He became the General Manager of Elf Petroleum Norway in 1995, after being named Deputy Vice President of Elf Upstream Division for Europe and the U.S. In 1999, he was appointed as a member of the taskforce for integration with Total, in charge of the reorganization of the merged entity, TotalFinaElf, and in 2000 became Vice President Europe and Central Asia, Upstream Division of Total. The same year, he joined Veolia Environnement as CFO and Deputy General Manager. In 2003, he was appointed Vice-President Senior Executive, Deputy Chief
Executive Officer, Financial Director of Veolia Environnement. Jérôme Contamine joined Sanofi as Executive Vice President, Chief Financial Officer (CFO) of Sanofi in March 2009.
David-Alexandre GrosChief Strategy OfficerDate of birth: July 23, 1972
David-Alexandre Gros has a B.A. from Darmouth College (1995), an M.D. from Johns Hopkins University School of Medicine (1999), and an M.B.A. from Harvard Business School (2002). He began his career in clinical research at the Department of Urology of the Johns Hopkins Hospital, from 1996 to 1999, and acquiring clinical experience as a Resident Physician at the University of Pennsylvania Health System from 1999 to 2000. He started his advisory career in 2002 at McKinsey & Company as an Associate, was promoted to Engagement Manager in 2004 and to Associate Principal in 2006. In late 2006, he was appointed Vice President at Merrill Lynch, serving healthcare clients on a wide range of strategic, corporate finance and merger & acquisition issues. In 2009, he joined Centerview Partners, in San Franciso, California, as an advisor to healthcare companies as a Principal and founding member of the Healthcare Investment Banking practice. David-Alexandre Gros joined Sanofi as Chief Strategy Officer in September 2011.
Karen LinehanSenior Vice President Legal Affairs and General CounselDate of birth: January 21, 1959
Karen Linehan graduated from Georgetown University with Bachelor of Arts and Juris Doctorate degrees. Prior to practicing law, Ms. Linehan served on the congressional staff of the Speaker of the U.S. House of Representatives from September 1977 to August 1986. Until December 1990, she was an Associate in a mid-size law firm in New York. In January 1991, she joined Sanofi as Assistant General Counsel of its U.S. subsidiary. In July 1996, Ms. Linehan moved to Paris to work on international matters within the Group and she has held a number of positions within the Legal Department, most recently as Vice President — Deputy Head of Legal Operations. She was appointed to her current position in March 2007.
Karen Linehan is a citizen of the United States of America and Ireland.
Philippe LuscanSenior Vice President Industrial AffairsDate of birth: April 3, 1962
Philippe Luscan is a graduate of theÉcole Polytechnique and theÉcole des Mines in Biotechnology in Paris. He began his career in 1987 as a Production Manager at Danone. In 1990, he joined the Group as Director of the Sanofi Chimie plant at Sisteron, France, and subsequently served as Industrial Director of Sanofi in the United States, as Vice President Supply Chain and as Vice President Chemistry in September 2006. He was appointed to his present position in September 2008.
Roberto PucciSenior Vice President Human ResourcesDate of birth: December 19, 1963
Roberto Pucci has a law degree from the University of Lausanne, Switzerland. He started his career in 1985 at Coopers & Lybrand in Geneva, Switzerland as an external auditor. He then joined Hewlett-Packard (HP) in 1987, where he held various positions in Human Resources in Switzerland and Italy including HR Manager for the European Headquarters and Human Resources Director in Italy. In 1999, he became Director, Compensation & Benefits for Agilent Technologies, a spin off from HP, and was appointed Vice President Human Resources Europe in 2003. In 2005 he moved to the United States to join Case New Holland, a subsidiary of the Fiat Group, as Senior Vice President, Human Resources, and was appointed, in 2007, Executive Vice President, Human Resources for the Fiat Group in Torino, Italy. Roberto Pucci joined Sanofi as Senior Vice President Human Resources in October 2009.
Roberto Pucci is a citizen of Italy and Switzerland.
Hanspeter SpekPresident Global OperationsDate of birth: November 5, 1949
Hanspeter Spek graduated from business school in Germany. In 1974, he completed a management training program at Pfizer International, and then joined Pfizer RFA as a junior product manager. He served in various positions at Pfizer RFA, including as manager of the marketing division. Mr. Spek joined Sanofi Pharma GmbH, a German subsidiary of Sanofi, in 1985 as Marketing Director, and served in various positions in Germany and then at Sanofi in France, before being named Senior Vice President Europe following the merger with Synthélabo in 1999. He served as Executive Vice President, International Operations from October 2000, to January 2003, when he was named in charge of worldwide operations of Sanofi-Synthélabo. He was appointed Executive Vice President, Pharmaceutical Operations in August 2004. Since November 2009, he has been President, Global Operations.
Hanspeter Spek has announced his intention to retire by mid-2013.
Hanspeter Spek is a citizen of Germany.
Elias ZerhouniPresident, Global Research and DevelopmentDate of birth: April 12, 1951
Born in Algeria where he completed his initial medical training, Dr. Zerhouni continued his academic career at the Johns Hopkins University and Hospital (United States) in 1975 where he rose to the rank of professor of Radiology and Biomedical engineering. He served as Chair of the Russell H. Morgan Department of Radiology and Radiological Sciences, Vice Dean for Research and Executive Vice Dean of the School of Medicine from 1996 to 2002 before his appointment as Director of the National Institutes of Health of the United States of America from 2002 to 2008. Dr. Zerhouni was received as member of the U.S. National Academy of Sciences' Institute of Medicine in 2000. He was appointed as Chair of Innovation at the College de France, elected member of the French Academy of Medicine in 2010 and received the Transatlantic Innovation Leadership award in December 2011. He is the author of over 200 scientific publications and 8 patents. In February 2009, Sanofi named Dr. Zerhouni Scientific Advisor to the Chief Executive Officer and to the Senior Vice-President Research & Development. He was appointed President Global Research & Development and has served on the Executive Committee of Sanofi, since January 2011. He has just been received as member of the U.S. National Academy of Engineering.
Dr. Zerhouni is a citizen of the United States of America.
As of December 31, 2012, none of the members of the Executive Committee had their principal business activities outside of Sanofi.
The Executive Committee is assisted by the Global Leadership Team, which represents the principal functions of the Group. The Global Leadership Team is made up of the members of the Executive Committee and 38 additional senior managers.
Compensation and pension arrangements for corporate officers
Christopher Viehbacher has held the office of Chief Executive Officer of Sanofi since December 1, 2008. He was an outside appointment and has never had an employment contract with Sanofi distinct from his current office. The compensation of the Chief Executive Officer is determined by the Board of Directors upon the recommendation of the Compensation Committee with reference to compensation paid to the chief executive officers of major global pharmaceutical companies and of major companies in the CAC 40 stock market index. The Chief Executive Officer receives fixed compensation, benefits in kind, and variable compensation. In addition, he may be granted stock options and performance shares. Since 2009, in accordance with the AFEP-MEDEF
corporate governance code, stock options and, when applicable, performance shares granted to the Chief Executive Officer have been subject to performance conditions.
Serge Weinberg has held the office of Chairman of the Board of Directors since May 17, 2010. He was an outside appointment and has never had an employment contract with Sanofi distinct from his current office. The Chairman of the Board also chairs the Strategy Committee and the Appointments and Governance Committee. In accordance with our Board Charter and in close collaboration with the Senior Management, he represents the Company in high-level dealings with governmental bodies and with the Group's key partners, both nationally and internationally, and participates in the defining of the major strategic choices of the Group especially as regards mergers, acquisitions and alliances. The Chairman and the Chief Executive Officer keep each other fully informed of their actions. The compensation of the Chairman of the Board of Directors consists solely of fixed compensation and benefits in kind and excludes any variable compensation, any awards of stock options and performance shares and any directors' attendance fees.
The compensation policy for the corporate officers is established by the Board of Directors upon the recommendation of the Compensation Committee.
The corporate officers do not receive directors' attendance fees in their capacity as directors. Consequently, Christopher Viehbacher does not receive directors' attendance fees in his capacity as a member of the Strategy Committee. Similarly, Serge Weinberg does not receive directors' attendance fees in his capacity as chairman of the Appointments and Governance Committee or as chairman of the Strategy Committee.
The AFEP-MEDEF corporate governance code (hereafter referred to as the "AFEP-MEDEF Code") and the recommendations of theAutorité des marchés financiers (the French market regulator, hereafter referred to as "AMF"), require precise disclosures about the implementation of the recommendations and, if applicable, explanations of the reasons why any of them may not have been implemented. Currently, as reported "— C. Board practices —", there is no divergence from the AFEP-MEDEF Code related to compensation.
Serge Weinberg
1,636 shares
Date of birth: | February 10, 1951 | |||
Nationality: | French | |||
First elected: | December 2009 | |||
Last reappointment: | May 2015 | |||
Term expires: | 2019 |
Directorships and appointments of Serge Weinberg | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
– Chairman of the Board and Chief Executive Officer of Sanofi* – Chairman of the Strategy Committee of Sanofi – Chairman of the Appointments and Governance Committee of Sanofi | • Chairman of Weinberg Capital Partners – Chairman of Financière Piasa, Piasa Holding and Maremma | |||||
– Manager of Alret | ||||||
• Chairman of the Supervisory Board of Financière Climater SAS | ||||||
• Vice Chairman and Director of Financière Sasa | ||||||
• Director of Madrigall | ||||||
In foreign companies | ||||||
None | None | |||||
Past directorships since 2011 | In French companies | |||||
None | • Director of Team Partners Group (until 2011), Alliance Automotive Participations SAS (until 2014) and Schneider Electric* (until 2014) | |||||
• Member of the Supervisory Board of Amplitude Group (until 2011), Alfina (until 2011), Financière BFSA (until 2013), and Schneider Electric* (until 2013) | ||||||
• Weinberg Capital Partners’ permanent representative on the Board of Alliance Industrie (until 2011) and Sasa Industrie (until 2013) | ||||||
• Vice Chairman and Director of Financière Poinsétia (until 2011) | ||||||
In foreign companies | ||||||
None | • Chairman of Corum (Switzerland, until 2013) | |||||
Education and business experience | ||||||
• Graduate in law, degree from theInstitut d’Etudes Politiques | ||||||
• Graduate of ENA (Ecole Nationale d’Administration) | ||||||
Since 2005 | Chairman of Weinberg Capital Partners | |||||
1976-1982 | Sous-préfet and then Chief of Staff of the French Budget Minister (1981) | |||||
1982-1987 | Deputy General Manager of FR3 (French Television Channel) and then Chief Executive Officer of Havas Tourisme | |||||
1987-1990 | Chief Executive Officer of Pallas Finance | |||||
1990-2005 | Various positions at PPR* group including Chairman of the Management Board for 10 years | |||||
2006-2008 | Director of Alliance Industrie | |||||
2007-2008 | Director of Road Holding | |||||
2006-2009 | Chairman of the Board of Accor* | |||||
2006-2010 | Member of the Board of Pharma Omnium International (until 2010) | |||||
2005-2010 | Vice Chairman of the Supervisory Board of Schneider Electric* | |||||
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Item 6. Directors, Senior Management and Employees
Olivier Brandicourt
1,000 shares
Date of birth: | February 13, 1956 | |||
Nationality: | French | |||
First elected: | April 2015 | |||
Term expires: | 2018 |
Directorships and appointments of Olivier Brandicourt | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Director and Chief Executive Officer of Sanofi* – Chairman of the Executive Committee of Sanofi – Member of the Strategy Committee of Sanofi | None | |||||
In foreign companies | ||||||
None | • Member of the Board of Management of the Pharmaceutical Research and Manufacturers of America (PhRMA, United States) and the Board of Directors of the National Committee on U.S.-China Relations (United States) | |||||
• Member of the Council of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA, Switzerland) | ||||||
• Member and Vice-Chair of the Board of Trustees of the Children’s Aid Society of New York (United States) | ||||||
• Honorary Member of the Royal College of Physicians (United Kingdom) | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Bayer Group (Germany): | |||||
– Chief Executive Officer and Chairman of the Executive Committee of Bayer HealthCare AG (until 2015) | ||||||
– Member of the Executive Council of Bayer AG* (until 2015) | ||||||
Education and business experience | ||||||
• Degree in Medical Mycology, Pasteur Institute, France | ||||||
• Master in Human Biology, Paris XII University, France | ||||||
• Medical Degree with subspecialty in Infectious Diseases and Tropical Medicine, Paris V University, France | ||||||
1979-1981 | National Service for Cooperation with theOffice de la recherche scientifique et technique outre-mer (ORSTOM) (Republic of Congo) | |||||
1981-1987 | Research Fellow and Hospital & University Assistant in the Department of Parasitology, Tropical Medicine and Public Health at the Pitié-Salpêtrière Hospital (France) | |||||
1987-2000 | Various operational and commercial positions at Warner-Lambert/Parke-Davis, including Vice-President and General Manager (1998-2000) | |||||
2000-2013 | Various operational and managerial positions at Pfizer Inc.*, including member of the Executive Leadership Team (2010-2013) and President & General Manager Emerging Markets & Established Business Unit (2012-2013) | |||||
2013-2015 | Chief Executive Officer and Chairman of the Executive Committee of Bayer HealthCare AG and Member of the Executive Council of Bayer AG* | |||||
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Item 6. Directors, Senior Management and Employees
Laurent Attal
1,000 shares
Date of birth: | February 11, 1958 | |||
Nationality: | French | |||
First elected: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Laurent Attal | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Director of Sanofi* – Member of the Strategy Committee of Sanofi | – Director ofFondation d’Entreprise L’Oréal | |||||
In foreign companies | ||||||
None | None | |||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | None | |||||
Education and business experience | ||||||
• Doctor in medicine, dermatologist | ||||||
• MBA from INSEAD (Institut Européen d’Administration des Affaires) | ||||||
Since 1986 | Various positions within the L’Oréal* Group notably within the active cosmetics division, and as President and Chief Executive Officer of L’Oréal USA (United States) | |||||
Since 2002 | Member of L’Oréal* Executive Committee | |||||
Since 2010 | Vice President General Manager Research and Innovation at L’Oréal* | |||||
138
Item 6. Directors, Senior Management and Employees
Bonnie Bassler
1,000 shares
Date of birth: | April 21, 1962 | |||
Nationality: | American | |||
First elected: | November 2014 | |||
Last reappointment: | May 2015 | |||
Term expires: | 2019 |
Directorships and appointments of Bonnie Bassler | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
•Independent director of Sanofi* | None | |||||
In foreign companies | ||||||
None | • Member of the National Science Board (National Science Foundation) | |||||
• Board of Director of the American Association for the Advancement of Science | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | None | |||||
Education and business experience | ||||||
• Graduated in biochemistry, University of California, Davis | ||||||
• Doctor in biochemistry, Johns Hopkins University | ||||||
Since 2013 | Squibb Professor and Chair at the Department of Molecular Biology, Princeton University | |||||
Since 2005 | Investigator at the Howard Hughes Medical Institute | |||||
Since 2003 | Professor at the Department of Molecular Biology, Princeton University | |||||
2002-2008 | Director at the Molecular Biology Graduate Program | |||||
2010-2011 | President of the American Society for Microbiology | |||||
2012 | L’Oréal-UNESCO women in Science Award Winner | |||||
2011-2014 | Chair of the Board of Governors of the American Academy of microbiology | |||||
139
Item 6. Directors, Senior Management and Employees
Uwe Bicker
1,000 shares
Date of birth: | June 14, 1945 | |||
Nationality: | German | |||
First elected: | May 2008 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Uwe Bicker | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* – Member of the Strategy Committee of Sanofi | None | |||||
In foreign companies | ||||||
None | • Trustee of the Aventis Foundation(1) (not-for-profit, Germany) | |||||
• Chairman of the Board of Marburg University (Germany) | ||||||
• Member of the Advisory Board of Morgan Stanley (Germany) | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Member of the Board of Trustees of Bertelsmann Stiftung (Bertelsmann Foundation, Germany, until 2011) | |||||
• Chairman of the Supervisory Board of Siemens Healthcare Diagnostics Holding GmbH (Germany, until 2012) | ||||||
• Vice-Chairman of the Supervisory Board of Epigenomics AG (Germany) and of Definiens AG (Germany, until 2012) | ||||||
• Member of the Supervisory Board of Future Capital AG (Germany, until 2013) | ||||||
Education and business experience | ||||||
• Doctorate in chemistry and in medicine | ||||||
• Honorary Doctorate, Klausenburg University | ||||||
• Honorary Senator, Heidelberg University | ||||||
Since 1983 | Professor at the Medical Faculty of Heidelberg (Germany) | |||||
Since 2011 | Dean at the Medical Faculty, Heidelberg University (Germany) | |||||
1975-1994 | Various positions at Boehringer Mannheim GmbH (later Roche AG) (Germany) | |||||
1994-2004 | Various positions at Hoechst group (Germany) | |||||
1997-2007 | Chairman of the Supervisory Board of Dade Behring GmbH (Germany) | |||||
2011-2013 | Managing Director at the University Clinic of Mannheim (Germany) | |||||
(1) | No compensation is paid for this office. Appointments to the Board of Trustees of the Foundation are made independently of Sanofi. |
140
Item 6. Directors, Senior Management and Employees
Robert Castaigne
1,000 shares
Date of birth: | April 27, 1946 | |||
Nationality: | French | |||
First elected: | February 2000 | |||
Last reappointment: | May 2014 | |||
Term expires: | 2018 |
Directorships and appointments of Robert Castaigne | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* – Chairman of the Audit Committee of Sanofi | • Société Générale*: – Director | |||||
– Member of the Audit and Internal Control Committee | ||||||
– Member of the Risk Committee | ||||||
• Vinci*: – Director | ||||||
– Member of the Audit Committee | ||||||
– Chairman of the Remuneration Committee | ||||||
In foreign companies | ||||||
None | • Novatek* (Russia): – Director | |||||
– Member of the Audit Committee | ||||||
– Member of the Remuneration and Nomination Committee | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Director and member of the Audit Committee ofCompagnie Nationale à Portefeuille(Belgium, until 2011) | |||||
Education and business experience | ||||||
• Degree fromEcole Centrale de Lille andEcole Nationale Supérieure du Pétrole et des Moteurs | ||||||
• Doctorate in economics | ||||||
1972-2008 | Various positions at the Total* group, including Chief Financial Officer and member of the Executive Committee (1994-2008) | |||||
141
Item 6. Directors, Senior Management and Employees
Jean-René Fourtou
4,457 shares
Date of birth: | June 20, 1939 | |||
Nationality: | French | |||
First elected: | August 2004 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments ofJean-René Fourtou | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* | • Honorary Chairman of Vivendi* | |||||
– Chairman of the Compensation Committee of Sanofi | ||||||
– Member of the Appointments and Governance Committee of Sanofi | ||||||
– Member of the Strategy Committee of Sanofi | ||||||
In foreign companies | ||||||
None | • Director of Generali* (Italy) | |||||
Past directorships since 2011 | In French companies | |||||
None | • Chairman of the Supervisory Board of Vivendi* (until 2014) | |||||
• Chairman of the Supervisory Board of Canal Plus* Group (until 2011) | ||||||
• Director of AXA Millésimes SAS (until 2011) | ||||||
In foreign companies | ||||||
None | • Member of the Supervisory Board of Maroc Telecom* (Vivendi Group, Morocco, until 2014) | |||||
• Director and member of the Compensation Committee of Nestlé* (Switzerland, until 2012) | ||||||
Education and business experience | ||||||
• Degree fromÉcole Polytechnique | ||||||
1963-1986 | Various positions at the Bossard group, including Chairman and Chief Executive Officer(1977-1986) | |||||
1986-1999 | Chairman and Chief Executive Officer ofRhône-Poulenc* | |||||
1999-2004 | Vice Chairman of the Management Board, then Vice Chairman of the Supervisory Board and member of the Strategy Committee of Aventis* | |||||
2002-2008 | Vice Chairman, Chairman then Honorary Chairman of the International Chamber of Commerce | |||||
2003-2009 | Vice Chairman then member of the Supervisory Board, and member of the Ethics and Governance Committee of Axa* | |||||
2004-2010 | Director of NBC Universal Inc. (United States) | |||||
2002-2010 | Director of Cap Gemini SA* | |||||
2002-2014 | Chairman and Chief Executive Officer of Vivendi*(2002-2005) then Chairman of the Supervisory Board of Vivendi*(2005-2014); currently Honorary Chairman of Vivendi* | |||||
142
Item 6. Directors, Senior Management and Employees
Claudie Haigneré
1,000 shares
Date of birth: | May 13, 1957 | |||
Nationality: | French | |||
First elected: | May 2008 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Claudie Haigneré | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* – Member of the Appointments and Governance Committee of Sanofi – Member of the Compensation Committee of Sanofi | • Orange* (previously France Telecom): | |||||
– Director | ||||||
– Member of the Innovation and Technologies committee | ||||||
• Director ofFondation de l’Université de Lyon, Fondation C-Génial, Fondation d’Entreprise L’Oréal,and Fondation Lacoste | ||||||
• Member ofAcadémie des Technologies, ofAcadémie des Sports, ofAcadémie Nationale de l’Air et de l’Espace, ofAcadémie des Sciences de l’Outre-Mer | ||||||
In foreign companies | ||||||
None | None | |||||
Past directorships since 2011 | In French companies | |||||
None | • Chairman of Universcience(Cité des Sciences et de l’Industrie and Palais de la Découverte) (until 2015) | |||||
• Director of theAéro Club de France (until 2011),Fondation de France (until 2015), of Ecole Normale Supérieure (ENS, until 2015),Campus Condorcet (until 2015), and PRES HESAM(Pôle de Recherche et d’Enseignement Supérieur Hautes Etudes Sorbonne Arts et Métiers, until 2015) | ||||||
• Chairman of the Board of Directors ofLa Géode (until 2015) | ||||||
• Vice President of the IAA (International Academy of Astronautics, until 2011) | ||||||
In foreign companies | ||||||
None | None | |||||
Education and business experience | ||||||
• Rheumatologist, doctorate in sciences majoring in neurosciences | ||||||
• Selected in 1985 by the CNES (French National Space Center) as an astronaut candidate | ||||||
1984-1992 | Rheumatologist, Cochin Hospital (Paris) | |||||
1996 | Scientific space mission to the MIR space station (Cassiopée,Franco-Russian mission) | |||||
2001 | Scientific and technical space mission to the International Space Station (Andromède mission) | |||||
2002-2004 | Deputy Minister for Research and New Technologies in the French government | |||||
2004-2005 | Deputy Minister for European Affairs in the French government | |||||
2005-2009 | Counselor at the European Space Agency (ESA) | |||||
2010-2015 | President CEO of Universcience | |||||
2015 | Senior advisor to the European Space Agency CEO | |||||
143
Item 6. Directors, Senior Management and Employees
Patrick Kron
1,000 shares
Date of birth: | September 26, 1953 | |||
Nationality: | French | |||
First elected: | May 2014 | |||
Term expires: | 2018 |
Directorships and appointments of Patrick Kron | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi*: – Member of the Appointments and Governance Committee of Sanofi – Member of the Compensation Committee of Sanofi – Member of the Strategy Committee of Sanofi | •Chairman and Chief Executive Officer of Alstom* • Director of Bouygues*: • Vice President of the Vocal Group of the AssociationLes Arts Florissants | |||||
In Foreign Companies | ||||||
None | None | |||||
Past directorships since 2011 | In French Companies | |||||
None | • Chairman of Alstom Resources Management SAS (until 2015) | |||||
• Director ofAssociation Française des Entreprises Privées (AFEP, until 2015) | ||||||
In Foreign Companies | ||||||
None | • Alstom*: – Director of Alstom UK Holdings Ltd. (United Kingdom, until 2012) | |||||
– Director and Managing Director of Alstom Asia Pte. Ltd. (Singapore, until 2014) | ||||||
Education and business experience | ||||||
• Degree fromEcole Polytechnique andEcole Nationale Supérieure des Mines de Paris | ||||||
1979-1984 | Various positions at the French Ministry of Industry, including as project officer at theDirection régionale de l’Industrie, de la Recherche et de l’Environnement (DRIRE) and in the Ministry’s general directorate | |||||
1984-1988 | Operational responsibilities in one of the Pechiney Group’s most important factories in Greece then manager of the Greek subsidiary | |||||
1988-1993 | Various senior operational and financial positions within the Pechiney Group | |||||
1993 | Member of the Executive Committee of the Pechiney Group | |||||
1993-1997 | Chairman of the Board of the Carbone Lorraine Company | |||||
1995-1997 | Manager of the Food and Health Care Packaging Sector of Pechiney and Chief Operating Officer of the American National Can Company in Chicago (United States) | |||||
1998-2002 | Chief Executive Officer of Imerys | |||||
Since 2003 | Chief Executive Officer then Chairman and Chief Executive Officer of Alstom* | |||||
144
Item 6. Directors, Senior Management and Employees
Fabienne Lecorvaisier
1,000 shares
Date of birth: | August 27, 1962 | |||
Nationality: | French | |||
First elected: | May 2013 | |||
Term expires: | 2017 |
Directorships and appointments of Fabienne Lecorvaisier | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* – Member of the Audit Committee of Sanofi | • Air Liquide* Group: – Director of Air Liquide International – Chairman and Chief Executive Officer of Air Liquide Finance – Director of Air Liquide France Industries, Air Liquide Eastern Europe and Aqualung International | |||||
In foreign companies | ||||||
None | • Air Liquide* Group: | |||||
– ExecutiveVice-President of Air Liquide International Corporation | ||||||
– Director of American Air Liquide Holdings, Inc. and SOAEO | ||||||
– Manager of Air – Liquide US LLC | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Air Liquide* Group: – Director of Air Liquide Japon (Japan, until 2013) | |||||
Education and business experience | ||||||
• Civil Engineer, graduate fromEcole Nationale des Ponts et Chaussées | ||||||
Since 2008 | Chief Financial Officer and Executive Committee Member of Air Liquide* | |||||
Since 2013 | In charge of the diving activities of Air Liquide* (Aqualung) | |||||
1985-1989 | Member of the Corporate Finance Department, then Mergers and Acquisitions Department of Société Générale* | |||||
1989-1990 | Senior Banking Executive in charge of the LBO Department (Paris)/Corporate Finance Department (Paris and London) at Barclays | |||||
1990-1993 | Assistant General Manager of Banque du Louvre, Taittinger Group | |||||
1993-2007 | Various positions within Essilor* including Group Chief Financial Officer(2001-2007) and Chief Strategy and Acquisitions Officer(2007-2008) | |||||
145
Item 6. Directors, Senior Management and Employees
Suet-Fern Lee
1,000 shares
Date of birth: | May 16, 1958 | |||
Nationality: | Singaporean | |||
First elected: | May 2011 | |||
Last reappointment: | May 2015 | |||
Term expires: | 2019 |
Directorships and appointments ofSuet-Fern Lee | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* | • Axa*: | |||||
– Director | ||||||
– Member of the Finance Committee | ||||||
In foreign companies | ||||||
None | • Director of Rickmers Trust Management Pte Ltd* (Singapore), Stamford Corporate Services Pte Ltd (Singapore), and the World Justice Project (USA) | |||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Director of Sembcorp Industries Ltd* (Singapore, until 2011), Macquarie International Infrastructure Fund Ltd* (Bermuda, until 2015), and National Heritage Board (Singapore, until 2015) | |||||
• Chairman of the Board of directors of the Asian Civilizations Museum (Singapore, until 2015) | ||||||
Education and business experience | ||||||
• Law degree from Cambridge University (1980) | ||||||
• Admitted to London (1981) and Singapore (1982) Bars | ||||||
•Managing Director of Morgan Lewis Stamford LLC (Singapore) | ||||||
Since 2006 | Member of the Board of Trustees of Nanyang Technological University (Singapore) | |||||
Member of the Accounting Advisory Board of National University of Singapore Business School (Singapore) | ||||||
Since 2007 | Member of the Advisory Committee of the Singapore Management University School of Law (Singapore) | |||||
Since 2014 | Member of the Senate of the Singapore Academy of Law where she also chairs the Committee on Legal Education and Studies (Singapore) | |||||
Chairman of the Expert Panel of Centre ofCross-Border Commercial Law in Asia of the Singapore Management University School of Law (Singapore) | ||||||
2000-2007 | Director of ECS Holdings Limited* (Singapore) | |||||
2004-2007 | Director of International Capital Investment Limited (Singapore) | |||||
Director of Media Asia Entertainment Group Limited (Hong Kong) | ||||||
Director of Transpac Industrial Holdings Limited* (Singapore) | ||||||
2005-2008 | Director of China Aviation Oil* (Singapore) | |||||
2006-2008 | Director of Sincere Watch* (Hong Kong) | |||||
2005-2009 | Director of Richina Pacific Limited* (Bermuda) | |||||
2008-2010 | Director of Transcu Group Limited* (Singapore) | |||||
2010-2011 | President of theInter-Pacific Bar Association | |||||
146
Item 6. Directors, Senior Management and Employees
Christian Mulliez
1,494 shares
Date of birth: | November 10, 1960 | |||
Nationality: | French | |||
First elected: | June 2004 | |||
Last reappointment: | May 2014 | |||
Term expires: | 2018 |
Directorships and appointments of Christian Mulliez | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Director of Sanofi* – Member of the Audit Committee of Sanofi – Member of the Compensation Committee of Sanofi | • Chairman of the Board of Directors of Regefi | |||||
• Director of DG 17 Invest | ||||||
In foreign companies | ||||||
None | • Director of L’Oréal USA Inc. (United States) and The Body Shop International (United Kingdom) | |||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Director of Galderma Pharma (Switzerland, until 2014) | |||||
Education and business experience | ||||||
• Degree from ESSEC (Ecole Supérieure des Sciences Economiques et Commerciales) | ||||||
Since 2003 | Executive Vice-President, Chief Financial Officer of L’Oréal* | |||||
1984-2002 | Various positions at Synthélabo and then atSanofi-Synthélabo, including Vice President Finance | |||||
147
Item 6. Directors, Senior Management and Employees
Carole Piwnica
1,000 shares
Date of birth: | February 12, 1958 | |||
Nationality: | Belgian | |||
First elected: | December 2010 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Carole Piwnica | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
• Independent director of Sanofi* – Member of the Audit Committee of Sanofi | • Eutelsat Communications*: | |||||
– Independent Director | ||||||
– Chairman of the Committee of Governance, Compensation and Appointment | ||||||
• Rothschild & Co* (previously Paris Orléans): | ||||||
– Independent member of the Supervisory Board | ||||||
– Member of the Audit Committee and the Strategy Committee | ||||||
In foreign companies | ||||||
None | •Director of Naxos UK Ltd (United Kingdom) | |||||
– Director of Big Red (United States), Elevance (United States) and i2O (United States) | ||||||
• Director of Amyris Inc.* (United States) | ||||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Aviva Plc.* (United Kingdom, until 2011): – Director | |||||
– Chairman of the Corporate Responsibility Committee | ||||||
– Member of the Compensation Committee | ||||||
• Director of Louis Delhaize* (Belgium, until 2013) and of RecyCoal Ltd. (United Kingdom, until 2015) | ||||||
Education and business experience | ||||||
• Degree in law,Université Libre de Bruxelles | ||||||
• Masters in law, New York University | ||||||
• Admitted to Paris and New York Bars | ||||||
Since 2006 | Founder Director of Naxos UK Ltd(United Kingdom) | |||||
1985-1991 | Attorney at Proskauer, Rose (New York) and Shearman & Sterling (Paris) with practice in mergers and acquisitions | |||||
1991-1994 | General Counsel of Gardini & Associés | |||||
1994-2000 | Chief Executive Officer of Amylum France, then Chairman of Amylum Group | |||||
1998-2004 | Director of Spadel (Belgium) | |||||
1996-2006 | Director of Tate & Lyle Plc. (United Kingdom) | |||||
2000-2006 | Director andVice-Chairman of Tate & Lyle Plc. for Governmental Affairs (United Kingdom) | |||||
1996-2006 | Chairman of the Liaison Committee and director of theConfédération Européenne des IndustriesAgro- Alimentaires (CIAA) | |||||
2000-2006 | Chairman of the Export Commission and director of theAssociation Nationale des Industries Alimentaires (ANIA) | |||||
2006-2009 | Member of the Ethical Committee of Monsanto* (United States) | |||||
1996-2010 | Director of Toepfer GmbH (Germany) | |||||
2007-2010 | Director of Dairy Crest Plc.* (United Kingdom) | |||||
148
Item 6. Directors, Senior Management and Employees
Klaus Pohle
2,500 shares
Date of Birth: | November 3, 1937 | |||
Nationality: | German | |||
First appointment: | August 2004 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Klaus Pohle | ||||||
Within the Sanofi Group | Outside the Sanofi Group | |||||
Current directorships and appointments | In French companies | |||||
Independent director of Sanofi* | None | |||||
In foreign companies | ||||||
None | • Trustee of Aventis Foundation1 (not-for-profit, Germany) | |||||
Past directorships since 2011 | In French companies | |||||
None | None | |||||
In foreign companies | ||||||
None | • Director of Labelux Group GmbH* (Switzerland, until 2011) • Coty Inc.* New York (United States, until 2011): | |||||
– Director | ||||||
– Chairman of the Audit Committee | ||||||
Education and business experience | ||||||
• Doctorate in economics from Berlin University (Germany) | ||||||
• Doctorate in law from Frankfurt University (Germany) | ||||||
• LLM from Harvard University (United States) | ||||||
•Professor of Business Administration at the Berlin Institute of Technology (Germany) | ||||||
1966-1980 | Various positions at the BASF group (Germany) | |||||
1981-2003 | Deputy Chief Executive Officer and Chief Financial Officer of Schering AG (Germany) | |||||
2003-2005 | Chairman of the German Accounting Standards Board (Germany) | |||||
2004-2008 | Various positions at Hypo Real Estate Holding AG*, Munich, including Chairman of the Supervisory Board (Germany) | |||||
2005-2009 | Member of the Supervisory Board and Chairman of the Audit Committee at DWS Investment GmbH, Frankfurt (Germany) | |||||
Changes in the Composition of the Board
The composition of the Board of Directors changed in 2015.
The co-opting of Bonnie Bassler and Olivier Brandicourt as Directors of our Company was ratified by the Shareholders’ General Meeting held on May 4, 2015. The appointment of Bonnie Bassler reinforces the scientific and pharmaceutical expertise within our Board and is in line with our policy of onboarding more women, and more international and younger directors.
Two other terms of office were renewed in 2015: those of Serge Weinberg and Suet Fern Lee.
Igor Landau and Gérard Van Kemmel, whose terms of office were up for renewal, did not express any wish to be reappointed.
Consequently, and in line with the medium-term objective set by our Board, the size of the Board of Directors was reduced by one.
Following the enactment of the June 14, 2013 French Employment Protection Act, the Appointments and Governance Committee assessed its impact on Sanofi. The Board of Directors concluded that Sanofi did not fall within the scope of this Act because it has no obligation to set up a works council and indeed has not set one up, the workforce of the parent company being less than 50.
Under current French legislation, given that employees own less than 3% of our share capital, the Board does not include a director representing employee shareholders.
1 | No compensation is paid for this office. Appointments to the Board of Trustees of the Foundation are made independently of Sanofi. |
149
Item 6. Directors, Senior Management and Employees
Nevertheless, five Group employee representatives attend Board meetings without voting rights pursuant to the agreement implemented with the European Works Council signed on February 24, 2005.
One subsidiary falling within the scope of the French Employment Protection Act appointed an employee representative to its Board in 2015.
Following the enactment of the August 17, 2015 French Social Dialogue and Employment Act, a study will be conducted to determine the most appropriate level of employee representation within our Group as well as the most appropriate way to effect such representation.
Executive Committee
The Executive Committee is chaired by the Chief Executive Officer.
The Committee meets at least twice a month, and as of the date of this annual report on Form 20-F, has the following permanent members:
· | Olivier Brandicourt, Chief Executive Officer; |
· | Olivier Charmeil, Executive Vice President, Vaccines; |
· | Jérôme Contamine, Executive Vice President, Chief Financial Officer; |
· | Peter Guenter, Executive Vice President, General Medicines and Emerging Markets; |
· | Carsten Hellmann, Executive Vice President, Merial; |
· | Suresh Kumar, Executive Vice President, External Affairs; |
· | Karen Linehan, Executive Vice President, Legal Affairs and General Counsel; |
· | Philippe Luscan, Executive Vice President, Global Industrial Affairs; |
· | Muzzammil Mansuri, Executive Vice President, Strategy and Business Development; |
· | David P. Meeker, Executive Vice President, Head of Sanofi Genzyme; |
· | Roberto Pucci, Executive Vice President, Human Resources; |
· | Pascale Witz, Executive Vice President, Diabetes and Cardiovascular; and |
· | Elias Zerhouni, President, Global Research and Development. |
The name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each of the executive officers of Sanofi are set forth below. The business
address and phone number of each such executive officer is c/o Sanofi, 54 rue La Boétie, 75008 Paris, France, +33 1 53 77 40 00.
Olivier Brandicourt
Chief Executive Officer
Chairman of the Executive Committee
Date of birth: February 13, 1956
Olivier Brandicourt was appointed Chief Executive Officer on April 2, 2015, and is also a member of the Strategy Committee of Sanofi.
For additional information regarding his professional education and business experience see “Composition of the Board of Directors as of December 31, 2015” in “A. Directors and Senior Management” of this Item 6.
Olivier Brandicourt is a citizen of France.
Olivier Charmeil
Executive Vice President, Vaccines
Date of birth: February 19, 1963
Olivier Charmeil is a graduate of HEC (Ecole des Hautes Etudes Commerciales) and of theInstitut d’Etudes Politiques in Paris. From 1989 to 1994, he worked in the Mergers & Acquisitions department of Banque de l’Union Européenne. He joined Sanofi Pharma in 1994 as head of Business Development. Subsequently, he held various positions within the Group, including Chief Financial Officer (Asia) forSanofi-Synthélabo in 1999 andAttaché to the Chairman,Jean-François Dehecq, in 2000, before being appointed as Vice President, Development within the Sanofi-Synthélabo International Operations Directorate, where he was responsible for China and support functions. In 2003, Olivier Charmeil was appointed Chairman and Chief Executive Officer of Sanofi-Synthélabo France, before taking the position of Senior Vice President, Business Management and Support within the Pharmaceutical Operations Directorate. In this role, he piloted the operational integration of Sanofi-Synthélabo and Aventis. He was appointed Senior Vice President Asia/Pacific, Pharmaceutical Operations in February 2006 and since January 1, 2008, Operations Japan have reported to him, as have Asia/Pacific and Japan Vaccines since February 2009. Since January 1, 2011, Olivier Charmeil has served as Executive Vice President Vaccines and as a member of the Executive Committee. He became the International Federation Pharmaceutical Manufacturers & Associations (IFPMA) representative on the GAVI Board on August 1, 2014 and as a result is also chairman of the CEO Steering Committee of IFPMA uniting the CEOs of the member companies (GSK, Merck, Johnson & Johnson, Pfizer, Takeda, Novartis and Daiichi Sankyo).
In May, 2015, Olivier Charmeil and André Syrota were appointed as Co-Leaders of “Medicine of the Future”, an initiative developed by the French Minister for Economy,
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Item 6. Directors, Senior Management and Employees
Finance, Industry and Digital Affairs, the French Minister for Social Affairs, Health and Women’s Rights and the French Minister for National and Higher Education and Research. They have been tasked with assembling a group of industrialists and academics, with the objective of imagining how French industry can accelerate the development, launch and export of new products and innovation, with an emphasis on medical devices and biotechnology.
Olivier Charmeil is a citizen of France.
Jérôme Contamine
Executive Vice President, Chief Financial Officer
Date of birth: November 23, 1957
Jérôme Contamine is a Graduate ofÉcole Polytechnique (X),ENSAE, andENA (Ecole Nationale d’Administration). After four years at theCour des Comptes, as a Senior State General Auditor, he joined Elf Aquitaine in 1988, as advisor to the Chief Financial Officer, and became Group Finance and Treasury Director in 1991. He became the General Manager of Elf Petroleum Norway in 1995, after being named Deputy Vice President of Elf Upstream Division for Europe and the U.S. In 1999, he was appointed as a member of the taskforce for integration with Total, in charge of the reorganization of the merged entity, TotalFinaElf, and in 2000 became Vice President Europe and Central Asia, Upstream Division of Total. The same year, he joined Veolia Environnement as CFO and Deputy General Manager. In 2003, he was appointedVice-President Senior Executive, Deputy Chief Executive Officer, Financial Director of Veolia Environnement. Since 2006 he has been a Director of Valeo. Jérôme Contamine joined Sanofi as Executive Vice President, Chief Financial Officer (CFO) in March 2009.
Jérôme Contamine is a citizen of France.
Peter Guenter
Executive Vice President, General Medicines and Emerging Markets
Date of birth: September 2, 1962
Peter Guenter holds a Master’s Degree in Physical Education from the Faculty of Medicine and Health Sciences, University of Ghent, Belgium. Peter started his career in Sales at SmithKline in 1986. He joined the Group in 1995 and held various positions in France, Europe and Global Marketing. In 2000, he was appointed General Manager Belgium and then Vice President for Eastern Europe and subsequently Northern Europe. In 2008, he took up the position of General Manager, Commercial Operations for Germany and in 2011, Peter became General Manager for the Multi-Country-Organisation for Germany, Switzerland and Austria. He was appointed Senior Vice President, Europe Global Operations in July 2011. He became a member of the Executive Committee and was appointed as Executive Vice President, Global Commercial operations in July 2013.
In January 2016, he was appointed as head of the General Medicines & Emerging Markets Global Business Unit.
Peter Guenter is a citizen of Belgium.
Carsten Hellmann
Executive Vice President, Merial
Date of birth: April 24, 1964
Carsten Hellmann undertook his first degree in Business Administration in Copenhagen in 1989 before completing an MSc in the UK in Information Management & Technology in 1990.
Carsten Hellmann began his career in 1990 at Radiometer Medical A/S as a product specialist before moving into a product manager role. He joined Novo Nordisk in 1993 and held different roles in marketing, business development, strategic alliances and business intelligence with increasing responsibilities. In 1996 he joined Synthelabo Scandinavia as Sales & Marketing Director and in 1997 Pronosco A/S, a diagnostics start up specialized in osteoporosis as Chief Operating Officer. In 2000 he was named Chief Executive Officer at Nunc Group where he oversaw the P&L and entire value chain of the company, from R&D to sales. Carsten Hellmann oversaw the integration processes during the acquisition of the Apogent Group (Nunc’s owner) by Fisher Scientific and subsequently also became Group Vice President of Fisher. He joined Chr. Hansen Holding A/S in 2006 as Executive Vice President, Global Sales, and member of the executive management and board. He was appointed member of the Executive Committee of Sanofi and CEO of Merial in September 2013. In 2014, he joined the Board of Directors of the International Federation for Animal Health.
Carsten Hellmann is a citizen of Denmark.
Suresh Kumar
Executive Vice President, External Affairs
Date of birth: February 18, 1955
Suresh Kumar has an Economics degree from Delhi University and a Masters in Management from Bombay University. Suresh Kumar has more than 30 years of experience in the healthcare industry beginning in 1978 in India with Johnson and Johnson. At Warner Lambert from 1989 to 1999, he held increasingly senior roles in consumer healthcare in Canada, North America, Latin America and Asia. He again joined Johnson & Johnson in 1999 as a Member of the Group Operating Committee and International Vice President of the Worldwide Consumer Pharmaceuticals business. In 2006, he joined the Clinton Foundation as Special Advisor focused on Sub-Saharan Africa, where he created programs focused on improving lives and livelihoods through improved agricultural performance and food security. In 2010, the United States Senate unanimously confirmed Suresh Kumar as Assistant Secretary of Commerce and Director General of the U.S.
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and Foreign Commercial Service where he spearheaded global trade for the Obama Administration. From 2013, he served as a Partner with Oliver Wyman leading the firm’s Public Sector Practice and as part of the Health and Life Sciences Team. He was appointed to his present position in June 2015.
Suresh Kumar is a citizen of Canada and of the United States of America.
Karen Linehan
Executive Vice President, Legal Affairs and General Counsel
Date of birth: January 21, 1959
Karen Linehan graduated from Georgetown University with Bachelor of Arts and Juris Doctorate degrees. Prior to practicing law, Ms. Linehan served on the congressional staff of the Speaker of the U.S. House of Representatives from September 1977 to August 1986. Until December 1990, she was an Associate in amid-size law firm in New York. In January 1991, she joined Sanofi as Assistant General Counsel of its U.S. subsidiary. In July 1996, Ms. Linehan moved to Paris to work on international matters within the Group and she has held a number of positions within the Legal Department, most recently as Vice President – Deputy Head of Legal Operations. She was appointed to her current position in March 2007.
Karen Linehan is a citizen of the United States of America and Ireland.
Philippe Luscan
Executive Vice President, Global Industrial Affairs
Date of birth: April 3, 1962
Philippe Luscan is a graduate of theÉcole Polytechnique and theÉcole des Mines in Biotechnology in Paris. He began his career in 1987 as a Production Manager at Danone. In 1990, he joined the Group as Director of the Sanofi Chimie plant at Sisteron, France, and subsequently served as Industrial Director of Sanofi in the United States, as Vice President Supply Chain and as Vice President Chemistry in September 2006. He was appointed to his present position in September 2008. Since January 1, 2015, Philippe Luscan is also President of Sanofi in France.
Philippe Luscan is a citizen of France.
Muzammil Mansuri
Executive Vice President, Strategy and Business Development
Date of birth: January 20, 1954
Muzammil Mansuri holds a Bachelor of Science degree in Chemistry and a Ph.D. in Organic Chemistry from University College London. He held post-doctoral positions at the University of California, Los Angeles (UCLA) and Columbia
University. He started his career in 1981 with Shell Research Limited where he began as a research scientist. After Shell, he spent several years with Bristol-Myers Company in various R&D roles with increasing responsibility. From 2007 to 2010, he was Chairman and CEO at CGI Pharmaceuticals. Before joining Sanofi, Muzammil’s most recent position was Senior Vice President, Research & Development Strategy and Corporate Development at Gilead Sciences. He was appointed to his current position in February 2016.
Muzammil Mansuri is a citizen of the Unites States of America and United Kingdom.
David P. Meeker
Executive Vice President, Head of Sanofi Genzyme
Date of birth: October 4, 1954
Dr. Meeker received his M.D. from the University of Vermont Medical School. He completed an Internal Medicine residency at Beth Israel Hospital in Boston and a Pulmonary/Critical Care fellowship at Boston University. He completed the Advanced Management Program at Harvard Business School in 2000.
Prior to joining Genzyme, Dr. Meeker was the Director of the Pulmonary Critical Care Fellowship at the Cleveland Clinic and an assistant professor of medicine at Ohio State University. He is the author of more than 40 articles and multiple book chapters.
Dr. Meeker joined Genzyme in 1994 as Medical Director to work on the Gene Therapy and Cystic Fibrosis program. Subsequently, as Vice President, Medical Affairs, he was responsible for the development of therapeutic products, including treatments in the current rare genetic diseases portfolio.
He was promoted to Senior Vice President in 1998, and in 2000 became the Business Unit Leader for Genzyme’s Lysosomal Storage Disease and Thyrogen programs in Europe. Dr. Meeker was promoted to President of the Global LSD business unit in 2003. In this role, he oversaw the global launches of Aldurazyme®, Fabrazyme® and Myozyme®. In 2008, he was promoted to Executive Vice President of Therapeutics, Biosurgery and Transplant. In 2009, he became Chief Operating Officer. In this role, he was responsible for Genzyme’s commercial organization, overseeing the business units, country management organization and global market access functions. He became Chief Executive Officer of Genzyme in November 2011 and a member of the Executive committee in September 2013.
In January 2016, he was appointed as head of the Specialty Care Global Business Unit.
David P. Meeker is a citizen of the United States of America.
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Roberto Pucci
Executive Vice President, Human Resources
Date of birth: December 19, 1963
Roberto Pucci has a law degree from the University of Lausanne, Switzerland. He started his career in 1985 at Coopers & Lybrand in Geneva, Switzerland as an external auditor. He then joinedHewlett-Packard (HP) in 1987, where he held various positions in Human Resources in Switzerland and Italy including HR Manager for the European Headquarters and Human Resources Director in Italy. In 1999, he became Director, Compensation & Benefits for Agilent Technologies, a spin off from HP, and was appointed Vice President Human Resources Europe in 2003. In 2005 he moved to the United States to join Case New Holland, a subsidiary of the Fiat Group, as Senior Vice President, Human Resources, and was appointed, in 2007, Executive Vice President, Human Resources for the Fiat Group in Torino, Italy. Roberto Pucci joined Sanofi as Executive Vice President Human Resources in October 2009.
Roberto Pucci is a citizen of Italy and Switzerland.
Pascale Witz
Executive Vice President, Diabetes and Cardiovascular
Date of birth: January 27, 1967
Pascale holds a Master’s degree in life sciences /molecular biology fromInstitut National des Sciences Appliquées Lyon and an MBA from INSEAD. Pascale started her career in a research lab before moving to marketing at Becton Dickinson France in 1991. She joined GE Healthcare in 1996, where she had a successful career during 17 years. Pascale Witz headed up a number of businesses, first in Europe, Middle East and Africa (EMEA): she was Vice President Six Sigma and Quality(2000-2001), Vice President Information Technology(2001-2002), General Manager, Nuclear Medicine & PET(2002-2004), Vice President Sales & Marketing Services(2005-2006), and General Manager, Computed Tomography(2006-2007). She then became Vice President & General Manager of the Global Interventional Radiology and Interventional Cardiology Business(2008-2009). In 2009 she was appointed President & CEO of the medical diagnostics business, a pharmaceutical business acquired by GE Healthcare (previously Amersham Health). She became a member of Sanofi’s Executive Committee and was appointed Executive Vice President, Global Divisions & Strategic Commercial Development in July 2013.
In January 2016, she was appointed as head of the Diabetes and Cardiovascular Global Business Unit.
Pascale Witz is a citizen of France.
Elias Zerhouni
President, Global Research and Development
Date of birth: April 12, 1951
Born in Algeria where he completed his initial medical training, Dr. Zerhouni continued his academic career at the Johns Hopkins University and Hospital (United States) in 1975 where he rose to the rank of professor of Radiology and Biomedical engineering. He served as Chair of the Russell H. Morgan Department of Radiology and Radiological Sciences, Vice Dean for Research and Executive Vice Dean of the School of Medicine from 1996 to 2002 before his appointment as Director of the National Institutes of Health of the United States of America from 2002 to 2008. Dr. Zerhouni was received as member of the U.S. National Academy of Sciences’ Institute of Medicine in 2000. He was appointed as Chair of Innovation at the College de France, elected member of the French Academy of Medicine in 2010 and received the Transatlantic Innovation Leadership award in December 2011. He is the author of over 200 scientific publications and has invented 8 patents. In February 2009, Sanofi named Dr. Zerhouni Scientific Advisor to the Chief Executive Officer and to the SeniorVice-President Research & Development. He was appointed President Global Research & Development and has served on the Executive Committee of Sanofi since January 2011. He was appointed as member of the U.S. National Academy of Engineering in 2013.
Dr. Zerhouni is a citizen of the United States of America.
As of December 31, 2015, none of the members of the Executive Committee had their principal business activities outside of Sanofi.
Compensation and arrangements for corporate officers
The compensation policy for corporate officers is established by the Board of Directors upon the recommendation of the Compensation Committee.
The Board of Directors follows the AFEP-MEDEF Code when setting the compensation of our corporate officers.
The AFEP-MEDEF Code and the recommendations of theAutorité des marchés financiers (the French market regulator, hereafter referred to as “AMF”), require specific disclosures about the implementation of the recommendations and, if applicable, explanations of the reasons why any of them may not have been implemented. Currently, there is one divergence from the AFEP-MEDEF Code related to compensation. As an exception to our usual practice (applied since 2009) of awarding stock options and performance shares in March, in 2015 those awards were made in June. For more information see “– C. Board Practices –” below.
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Serge Weinberg
Serge Weinberg has held the office of Chairman of the Board of Directors since May 17, 2010. From October 29, 2014 until April 2, 2015, he was also Chief Executive Officer. He was an outside appointment and has never had an employment contract with Sanofi distinct from his current office.
The Chairman of the Board also chairs the Appointments and Governance Committee and the Strategy Committee.
In accordance with our Board Charter and in close collaboration with the Senior Management, the Chairman represents the Company in high-level dealings with governmental bodies and with the Group’s key partners, both nationally and internationally, and participates in defining the major strategic choices of the Group especially
as regards mergers, acquisitions and alliances. The Chairman and the Chief Executive Officer, when the two offices are separated, keep each other fully informed of one another’s actions.
The compensation of the Chairman of the Board of Directors consists solely of fixed compensation and benefits in kind and excludes any variable compensation, any awards of stock options and performance shares and any directors’ attendance fees.
The corporate officers do not receive directors’ attendance fees in their capacity as directors. Consequently, Serge Weinberg does not receive directors’ attendance fees in his capacity as Chairman of the Board, Chairman of the Appointments and Governance Committee or Chairman of the Strategy Committee.
Compensation awarded to Serge Weinberg (table no. 1 of the AFEP-MEDEF Code)
(in euros) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Compensation payable for the year (details provided in the table below) | 708,115 | 709,463 | 480,158 | |||||||
Value of stock subscription options awarded during the year | N/A | N/A | N/A | |||||||
Value of performance shares awarded during the year | N/A | N/A | N/A | |||||||
Total | 708,115 | 709,463 | 480,158 | |||||||
(in euros) | 2015 | 2014 | 2013 | |||||||||
Compensation payable for the year (details provided in the table below) | 708,218 | 708,174 | 708,040 | |||||||||
Value of stock options awarded during the year | N/A | N/A | N/A | |||||||||
Value of performance shares awarded during the year | N/A | N/A | N/A | |||||||||
Total | 708,218 | 708,174 | 708,040 |
Compensation payable and paid to Serge Weinberg
| 2012 | 2011 | 2010 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in euros) | Payable | Paid | Payable | Paid | Payable | Paid | |||||||||||||
Fixed compensation (1) | 700,000 | 700,000 | 700,000 | 700,000 | 439,748 | 439,748 | |||||||||||||
Variable compensation | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||
Exceptional compensation | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||
Attendance fees (2) | N/A | N/A | N/A | 35,625 | 35,625 | 6,125 | |||||||||||||
Benefits in kind | 8,115 | 8,115 | 9,463 | 9,463 | 4,785 | 4,785 | |||||||||||||
Total | 708,115 | 708,115 | 709,463 | 745,088 | 480,158 | 450,748 | |||||||||||||
The amounts reported are gross amounts before taxes.
Table of ContentsAFEP-MEDEF Code)
Serge Weinberg took office as Chairman of the Board of Directors on May 17, 2010.
2015 | 2014 | 2013 | ||||||||||||||||||||||
(in euros) | Payable | Paid | Payable | Paid | Payable | Paid | ||||||||||||||||||
Fixed compensation(1) | 700,000 | 700,000 | 700,000 | 700,000 | 700,000 | 700,000 | ||||||||||||||||||
Annual variable compensation | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Exceptional compensation | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Attendance fees | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
Benefits in kind | 8,218 | 8,218 | 8,174 | 8,174 | 8,040 | 8,040 | ||||||||||||||||||
Total | 708,218 | 708,218 | 708,174 | 708,174 | 708,040 | 708,040 |
The | amounts reported are gross amounts before taxes. |
(1) | Fixed compensation payable in respect of a given year is paid during that year. |
On March 5, 2012,3, 2015, upon the recommendation of the Compensation Committee, the Board of Directors set the terms of the compensation of Serge Weinberg.Weinberg’s compensation.
For 2012,2015, his fixed compensation was maintained at an annual rateamount of €700,000.€700,000, with no adjustment in consideration of his acting as Chief Executive Officer on a temporary basis. When the Board of Directors asked him to assume the office of Chief Executive Officer, it was decided at his request not to modify his compensation.
He did not receive any variable compensation, stock options, or performance shares. Heshares during 2015, and nor did nothe receive
director’s attendance fees.fees as a member of the Board of Directors.
The amount reported for benefits in kind relates principallymainly to a company car.car with a chauffeur.
Serge Weinberg does not benefit from the Sanofi top-up pension plan.
On March 5, 2013,3, 2016, upon the recommendation of the Compensation Committee, the Board of Directors set the terms of the compensation of Serge Weinberg.Weinberg’s compensation. For 2013,2016, his fixed compensation is maintained at an annual rate of €700,000. He€700,000. Consequently, Serge Weinberg’s compensation
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has remained unchanged since his arrival in 2010. In line with AMF recommendations, he will not receive any variable compensation, stock options, or performance shares. HeNor will he receive any attendance fees.
Compensation policy
The compensation policy of the Chief Executive Officer follows the same structures and principles as the Group compensation policy described later in this section of the report.
The Sanofi compensation policy seeks to be consistent with market and industry practice in order to provide competitive levels of compensation, to create a strong link between company and individual performance, and to maintain a balance between short-term performance and mid-long-term performance.
The compensation of the Chief Executive Officer is set by the Board of Directors upon the recommendation of the Compensation Committee with reference to compensation paid to the chief executive officers of major global pharmaceutical companies and of major companies in the CAC 40 stock market index. Consistency with market practice is fundamental in order to attract and retain the talents necessary to the Group’s success.
Sanofi compensation policy for the Chief Executive Officer aims at achieving a balance in the compensation structure between fixed compensation, short-term variable cash compensation, and medium-term variable equity compensation. The proportions of annual fixed and variable compensation are stable over time. Compensation adjustments based on performance and market practice are carried out through equity compensation, which is medium-term and aims at aligning the interests of the Chief Executive Officer with those of our shareholders and stakeholders.
Our overall compensation policy is designed to motivate and reward performance by ensuring that a significant portion of executive and employee compensation is contingent on the attainment of financial, operational and social criteria aligned with the corporate interest and creation of shareholder value. Variable cash compensation and equity compensation are the two principal levers for action. As an exception and at his request, Serge Weinberg did not receive attendance fees.any such compensation for the period during which he acted as Chief Executive Officer.
Equity compensation is a critical tool for the worldwide attractiveness of Sanofi as an employer, and aims to align employee and shareholder interests and reinforce employees’ ties to the Group.
Upon the recommendation of the Compensation Committee, the Board of Directors determines the performance conditions attached to equity compensation for all beneficiaries at Sanofi and its subsidiaries worldwide,
favoring the attainment of objectives based on the Group’s consolidated results and balance sheet.
Since 2011 our equity compensation plan rules have been made available to our shareholders on the governance page of our website (www.sanofi.com) in the same form as that distributed to our employees.
Since 2011 the Board of Directors has substantially reworked our equity compensation policy to reinforce the link with long-term performance for all beneficiaries and to reduce potential dilution. As a result of very positive shareholder feedback collected through corporate governance roadshows, contacts with governance professionals and the results of votes at Annual General Meetings, the Board decided to maintain and reinforce this policy in 2013.
The current policy can generally be characterized by reduced dilution; diversified, multi-year performance conditions; increased transparency; and specific additional requirements for the Chief Executive Officer.
The policy requires that grants be primarily based on performance shares with only a limited number of high-level executives continuing to receive stock options. In 2015, the Board of Directors decided upon the recommendation of the Compensation Committee that future equity grants would be based on a target value for the award that is linked to the Sanofi share price and to the beneficiary’s base salary, rather than being based on the number of equity instruments awarded. That target value may be subject to change in the period between determination of the list of beneficiaries and the actual award by the Board, as a result of volatility in the price of our shares.
Greater reliance on performance shares allows the Board of Directors to maintain a comparable level of employee incentivization while reducing the dilutive effect for existing shareholders. However, the Board of Directors continues to believe that options remain an appropriate component of the compensation of high level executives, due to their ratchet effect.
The Board of Directors makes any grant of stock options or performance shares contingent on several distinct performance criteria in order to ensure that Sanofi equity compensation incentivizes overall performance and does not encourage excessive risk taking. Failure to achieve these conditions over the entire performance period results in a reduction or loss of the initial grant.
Grants are also contingent on the beneficiary’s continued employment in the Sanofi Group (4 years for options, 3 to 4 years for performance shares).
The exercise price of stock options set by the Board never incorporates a discount, and must be at least equal to the average of the quoted market prices on the 20 trading sessions preceding the date of grant by the Board.
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The Board is not allowed to reset prior grants, for instance with easier performance conditions or a lower exercise price.
Each grant to the Chief Executive Officer takes into account previous grants and his global compensation.
Compensation of the Chief Executive Officer, Olivier Brandicourt
The Board of Directors’ meeting held on February 19, 2015 appointed Olivier Brandicourt as Chief Executive Officer and co-opted him as a Director of Sanofi with effect from April 2, 2015.
He was an outside appointment and has never had an employment contract with Sanofi distinct from his appointment as Chief Executive Officer.
The compensation of Olivier Brandicourt is made up of the following elements:
· | fixed compensation; |
· | benefits in kind; |
· | annual variable compensation subject to annual individual objectives; |
· | equity compensation consisting of stock options and performance shares, contingent on both internal and external performance conditions measured over three years and subject to stringent lock-up obligations. |
In addition, Olivier Brandicourt benefits from:
· | a top-up defined benefit pension plan; |
· | a termination benefit contingent upon performance conditions, only payable if departure is non-voluntary and linked to a change in control or strategy; and |
· | a non-compete indemnity. |
Compensation, options and shares awarded to Olivier Brandicourt (table no. 1 of the AFEP-MEDEF Code)
(in euros) | 2015 | |||
Compensation payable for the year (details provided in the table below) | 4,386,888 | |||
Value of stock options awarded during the year(1) | 3,546,400 | |||
Value of performance shares awarded during the year(2) | 8,826,720 | |||
Total | 16,760,008 |
(1) | Valued at date of grant using the Black & Scholes method assuming fulfillment of the performance conditions. |
(2) | Valued at date of grant assuming fulfillment of the performance conditions. The value is the difference between the quoted market price of the share on the date of grant and the dividends to be paid over the next three years. |
Compensation payable and paid to Olivier Brandicourt (table no. 2 of the AFEP-MEDEF Code)
2015 | ||||||||
(in euros) | Payable | Paid | ||||||
Fixed compensation(1) | 895,455 | 895,455 | ||||||
Annual variable compensation(2) | 1,491,300 | 0 | ||||||
Exceptional compensation(3) | 2,000,000 | 2,000,000 | ||||||
Attendance fees | 0 | 0 | ||||||
Benefits in kind | 133 | 133 | ||||||
Total | 4,386,888 | 2,895,588 |
The | amounts reported are gross amounts before taxes. |
(1) | Fixed compensation payable in respect of a given year is paid during that year and (in 2015) prorated to reflect the period during which he held office. |
(2) | Variable compensation in respect of a given year is determined and paid at the start of the following year. The variable compensation is calculated on the basis of the annual fixed compensation to which a monthly pro rata is applied. |
(3) | Amounts payable in connection on taking up office, as described below. |
Acting on the recommendation of the Compensation Committee, the Board authorized the financial terms of Olivier Brandicourt’s appointment, as summarized below:
· | His annual compensation is made up of the following elements: |
– | fixed annual compensation of€1,200,000 (gross); |
– | variable annual compensation with a target of 150% of his fixed annual compensation, subject to quantitative and qualitative performance conditions and capped at 250% of his fixed annual compensation. |
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Item 6. Directors, Senior Management and Employees
· | As compensation for benefits forfeited upon his departure from his previous employer, Olivier Brandicourt received or will receive: |
– | a lump-sum payment of€2 million (gross), paid upon his taking up office; |
– | a lump-sum payment of€2 million (gross), payable in January 2016 and subject to a condition of continued employment; |
– | a grant of 66,000 performance shares, subject to3-year performance conditions. The vesting of these shares is contingent upon the average of the ratios of business net income to net sales for each financial year being at least 18% over the 3 years of the plan. |
Olivier Brandicourt was also awarded a deemed ten years of service.
These elements were intended to compensate him for the significant benefits he lost because of his departure from Bayer (variable compensation, equity-based compensation).
For obvious confidentiality reasons, Sanofi cannot disclose the amount of the benefits forfeited by Olivier Brandicourt, Bayer not being required to disclose his compensation. Nevertheless, statements made to the newspapers by Dr Marijn Dekker, CEO of Bayer, unequivocally confirm the compensatory nature of certain benefits.
All the short-listed candidates required to be compensated for benefits that would have been forfeited when leaving their previous employer; the terms on which Olivier Brandicourt was hired aim to replicate the diversity of what he forfeited, with a comparable level of risk.
For 2015, the variable compensation of Olivier Brandicourt was in a potential range between 0% and 250% of his fixed compensation, with a target of 150%.
His variable compensation for 2015 was established on the basis of quantitative and qualitative criteria. These criteria were as follows:
· | attainment of financial targets (40%). This objective included sales growth (one-third) and growth in Business Net Income (two-thirds); |
· | improvement of the Diabetes franchise and the successful launch of Toujeo® in the United States (10%); |
· | new product registrations and submissions compared to our budget (15%); |
· | review of our strategic plan (15%) including the definition of a strategy with a particular emphasis on Diabetes and Oncology; |
· | success in assuming his duties (20%). This objective covered inter alia: |
– | establishing an efficient Executive Committee; |
– | simplifying the organizational structure and clarifying accountabilities; |
– | transparent communication with the Chairman of the Board and the Board of Directors; |
– | positive feedback on internal and external corporate communication; |
– | inception of succession planning. |
The objectives based on financial targets, the Diabetes franchise and product registrations and submissions are all quantitative criteria, and accounted for 65% of the variable compensation criteria. The strategic plan review and success in assuming office are qualitative criteria, and accounted for 35% of the variable compensation criteria.
Upon the recommendation of the Compensation Committee and in light of experience, the Board of Directors decided that the percentage of variable compensation linked to quantitative criteria could be reduced regardless of actual performance, in order to give greater weight to the criterion relating to Olivier Brandicourt’s success in assuming his duties. If used, this flexibility would operate solely to reduce the amount of variable compensation, rather than to compensate for underperformance on the quantitative criteria.
In general, the performance criteria apply not only to variable compensation but also to the vesting of stock options and performance shares in compliance with our targets, which are ambitious.
For reasons of confidentiality, the specific targets set for the quantitative and qualitative criteria, even though they have been properly and precisely established, cannot be disclosed. In evaluating these criteria, the performance of major global pharmaceutical companies was taken into account.
Acting on the recommendation of the Compensation Committee, the Board of Directors meeting of March 3, 2016 reviewed the attainment of each criterion and sub-criterion, and determined that:
· | the financial objectives (sales and Business Net Income), which represented 40% of the overall objectives, had been 142% fulfilled relative to the potential range of 0% to 250% and the target of 150%; |
· | the individual objectives (Diabetes franchise, launch of Toujeo®, registrations and submissions, strategic review, and assumption of duties), which represented 60% of the overall objectives, had been 181.5% fulfilled, relative to the potential range of 0% to 250% and the target of 150%. |
The Board was fully satisfied with the way in which Olivier Brandicourt had assumed office and come up to speed during the first nine months of 2015, and also with the major corporate actions initiated and the operational actions already taken.
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Acting on the recommendation of the Compensation Committee, the Board of Directors meeting of March 3, 2016 set Olivier Brandicourt’s variable compensation for 2015 at€1,988,400, equivalent to 165.7% of his fixed compensation and representing an amount of€1,491,300 on a pro rata time basis for the amount of time spent in office during the year.
Olivier Brandicourt’s 2015 variable compensation is to be paid in 2016.
Olivier Brandicourt is subject to, benefits from and contributes to the same health coverage and death & disability plans as are applicable to other employees of the Group based in France.
Olivier Brandicourt received a benefit in kind in 2015 representing social contribution payments of€133 made by Sanofi on his behalf. Sanofi policy is to make these payments (which arise on employer’s pension contributions and are normally payable by the employee) on behalf of all of its employees in France, including Olivier Brandicourt.
Acting on the recommendation of the Compensation Committee, the Board of Directors meeting of March 3, 2016 decided to maintain Olivier Brandicourt’s fixed annual
compensation at the same level as for 2015 (€1,200,000), and also to retain the same variable annual compensation structure whereby 40% is based on financial indicators (sales and Business Net Income) and 60% on specific individual objectives.
Those individual objectives comprise:
· | new product launches (10%); |
· | ongoing transformation of the Group (25%); |
· | research and development (15%); and, |
· | organization and staff relations (10%). |
For 2016, Olivier Brandicourt’s variable compensation is in a potential range between 0% and 250% of his fixed compensation.
Acting on the recommendation of the Compensation Committee, the Board of Directors meeting of March 3, 2016 decided that for 2016, Olivier Brandicourt will be awarded 220,000 stock subscription options and 50,000 performance shares subject to the authorizations submitted to the Shareholders’ General Meeting to be held on May 4, 2016.
Stock options awarded to Olivier Brandicourt in 2015 (table no. 4 of the AFEP-MEDEF Code)
Origin | Date of Board grant | Nature of options | Value (in €) | Number of options awarded in 2015 | Exercise (in €) | Exercise period | ||||||||||||||||||
Sanofi | 06/24/2015 |
| Subscription options |
| 3,546,400 | 220,000 | 89.38 |
| 06/25/2019 06/24/2025 |
|
On June 24, 2015, 220,000 stock subscription options were awarded to Olivier Brandicourt. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon both internal criteria based upon Business Net Income and Return on Assets (“ROA”), and an external criterion based on Total Shareholder Return (“TSR”) in comparison to a reference set of pharmaceutical companies. These criteria were selected because they align medium-term equity-based compensation on the strategy adopted by the Company.
This award is broken down as follows:
· | The performance criterion based on Business Net Income covers 50% of the award and refers to the ratio, at constant exchange rates, between actual Business Net Income and the Business Net Income specified in the budget. This criterion corresponds to average actual achievement of business net income versus budgeted business net income over the entire period. Budgeted business net income is approved by the Board of Directors at the beginning of each year. If the ratio is less than 95%, the corresponding options will lapse. The Business Net Income target may not be lower that the lower range of the guidance published by the Company at the beginning of each year. |
· | The ROA-based criterion covers 30% of the award and includes a target ROA, below which some or all of the options will lapse. |
· | The TSR-based criterion covers 20% of the award. The overall return to shareholders is evaluated both on the value of Sanofi shares (the increase in the share price) and the value distributed to shareholders (dividends), i.e. the two sources of a return on investment in Sanofi shares. Our TSR is compared with a benchmark panel of 10 companies: Astra Zeneca, Bayer, BMS, Eli Lilly, GSK, Johnson & Johnson, Merck, Novartis, Pfizer, and Roche. The number of options exercisable depends upon our position in comparison to the TSR for the other companies of this panel. Below the median, the corresponding options will lapse. |
· | In addition to the three conditions set forth above, an implicit condition exists in the form of the exercise price, as well as the condition of continuing employment. |
· | In order to bring equity-based compensation into line with medium-term performance, performance will be measured over three financial years. |
· | Vesting is now subject to a non-compete clause. |
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· | In the event that Olivier Brandicourt leaves the Company for reasons other than (i) resignation or (ii) dismissal for serious cause or gross misconduct, the overall allocation percentage will be prorated to reflect the amount of time he remained in office during the vesting period. |
The Board regards these performance conditions as good indicators of the development of shareholder value in terms of: the quality of investment decisions in a period where external growth plays a greater role than in the past (ROA condition); a commitment to delivering challenging bottom-line results in a tough business environment (Business Net Income condition); and matching or exceeding our peer group in terms of shareholder returns (TSR condition).
Although for reasons of confidentiality the quantitative measures for the internal criteria cannot be disclosed, even though they have been properly and precisely established, the targets and the level of attainment for the internal criteria will be disclosed at the end of the performance measurement period.
Using the Black & Scholes method, each option awarded on June 24, 2015 was valued at€16.12, valuing the total benefit at €3,546,400.
The Board of Directors had previously decided to limit the number of options that could be awarded to Olivier Brandicourt to 15% of the total limit approved by the Shareholders’ General Meeting held on May 3, 2013 (0.7% of our share capital). The number of options awarded to Olivier Brandicourt in 2015 represents 2.41% of the total limit approved by that Meeting and 50.6% of the total award to all beneficiaries on June 24, 2015.
It is important to note that since 2015, stock options have been restricted to members of the Executive Committee residing outside of France and to beneficiaries in countries where performance shares cannot be granted; they are no longer awarded to all beneficiaries of equity compensation plans. This explains why the proportion of the option plans granted to the Chief Executive Officer is higher than in the past.
Stock options exercised by Olivier Brandicourt in 2015 (table no. 5 of the AFEP-MEDEF Code)
No stock options are currently exercisable.
Stock options held by Olivier Brandicourt
Origin | Date of grant | Nature of options | Value (in €) | Number of options awarded | Exercise (in €) | Exercise period | ||||||||||||||||||
Sanofi | 06/24/2015 |
| Subscription options |
| 3,546,400 | 220,000 | 89.38 |
| 06/25/2019 06/24/2025 |
|
In 2011, as part of its commitment to transparency, Sanofi undertook to publish in its annual report the level of attainment determined by the Board of Directors for performance conditions applicable to futureequity-based compensation plans awarded to the Chief Executive Officer and other members of the Executive Committee. The Board believes that disclosing the level of attainment allows our shareholders to better understand the demanding nature of the performance conditions. The levels of attainment of the 2009, 2011 and 2012 plans were published in our
previous annual reports. The levels of attainment of the 2011 and 2012 plans were below 100%, demonstrating the stringency of the performance conditions imposed on executive officers and employees. Sanofi intends to continue this policy.
The total number of unexercised options held by Olivier Brandicourt represented 0.02% of the share capital as at December 31, 2015.
Performance shares awarded to Olivier Brandicourt in 2015 (table no. 6 of the AFEP-MEDEF Code)
Origin | Date of Board award | Value (in €) | Number of performance shares awarded in 2015 | Vesting date | Availability date | |||||||||||||||
Sanofi | 06/24/2015 | 5,248,320 | 66,000 | 06/25/2019 | 06/26/2019 | |||||||||||||||
Sanofi | 06/24/2015 | 3,578,400 | 45,000 | 06/25/2019 | 06/26/2019 |
On June 24, 2015, 111,000 performance shares were awarded to Olivier Brandicourt. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon performance criteria.
66,000 of those performance shares were awarded as partial compensation for benefits forfeited by Olivier Brandicourt when leaving his previous employer. The vesting of these shares is contingent upon a performance condition
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measured over three years whereby the average of the ratios of business net income (see “Item 5 – Business Net Income”) to net sales for each financial year must be at least 18% over the 3 years of the plan.
The remaining 45,000 performance shares represent his annual award for 2015. Vesting of the shares is contingent upon both internal criteria based on Business Net Income and Return on Assets (“ROA”), and an external criterion based upon Total Shareholder Return (“TSR”) in comparison to a benchmark panel set of pharmaceutical companies. These criteria were selected because they align medium-term equity-based compensation with the strategy adopted by the Company.
This award is broken down as follows:
· | The performance criterion based on Business Net Income covers 50% of the award and refers to the ratio, at constant exchange rates, between actual Business Net Income and the Business Net Income specified in the budget. This criterion corresponds to average actual business net income versus budgeted business net income over the entire period. Budgeted business net income is approved by the Board of Directors at the beginning of each year. If the ratio is less than 95%, the corresponding performance shares will lapse. The Business Net Income target may not be lower that the lower range of the guidance published by the Company at the beginning of each year. |
· | The ROA-based criterion covers 30% of the award and includes a target ROA below which some or all of the performance shares will lapse. |
· | The TSR-based criterion covers 20% of the award. The overall return to shareholders is evaluated both on the value of Sanofi shares (the increase in the share price) and the value distributed to shareholders (dividends), i.e. the two sources of return on investment in Sanofi shares. Our TSR is compared with a benchmark panel comprised of 10 companies: Astra Zeneca, Bayer, BMS, Eli Lilly, GSK, Johnson & Johnson, Merck, Novartis, Pfizer, and Roche. The number of shares vesting depends upon our position in comparison to the TSR for the other companies of this panel. Below the median, the corresponding performance shares will lapse. |
· | In order to bring equity-based compensation into line with medium-term performance, performance will be measured over three financial years. |
· | Vesting is now also subject to a non-compete clause. |
· | In the event that Olivier Brandicourt leaves the Company for reasons other than (i) resignation or (ii) dismissal for serious cause or gross misconduct, the overall allocation percentage will be prorated to reflect the amount of time he remained in office during the vesting period. |
The Board regards these performance conditions as good indicators of the development of shareholder value in terms of: the quality of investment decisions in a period where external growth plays a greater role than in the past (ROA condition); a commitment to delivering challenging bottom-line results in a tough business environment (Business Net Income condition); and matching or exceeding our peer group in terms of shareholder returns (TSR condition).
Although for reasons of confidentiality the quantitative measures for the internal criteria cannot be disclosed, even though they have been properly and precisely established, the targets and the level of attainment for the internal criteria will be disclosed at the end of the performance measurement period.
Each performance share awarded on June 24, 2015, was valued at€79.52, valuing the total benefit at €8,826,720.
The Board of Directors had previously decided to limit the number of performance shares that could be awarded to corporate officers to 5% of the total limit approved by Shareholders’ General Meeting held on May 4, 2015 (1.2% of our share capital). The number of shares awarded to Olivier Brandicourt in 2015 represents 0.71% of this total limit approved by that Meeting and 2.9% of the total award to all beneficiaries on June 24, 2015.
Performance shares awarded to Olivier Brandicourt which became available in 2015 (table no. 7 of the AFEP-MEDEF Code)
No performance shares became available.
Performance shares awarded to Olivier Brandicourt
Origin | Date of Board award | Value (in €) | Number of performance shares awarded | Vesting date | Availability date | |||||||||||||||
Sanofi | 06/24/2015 | 5,248,320 | 66,000 | 06/25/2019 | 06/26/2019 | |||||||||||||||
Sanofi | 06/24/2015 | 3,578,400 | 45,000 | 06/25/2019 | 06/26/2019 |
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In 2011, as part of its commitment to transparency, Sanofi undertook to publish in its annual report the level of attainment determined by the Board of Directors for performance conditions applicable to futureequity-based compensation plans awarded to the Chief Executive Officer and other members of the Executive Committee. The Board believes that disclosing the level of attainment allows our shareholders to better understand the demanding nature of the performance conditions. The levels of attainment of the 2009, 2011 and 2012 plans were published in our previous annual reports. The levels of attainment of the 2011 and 2012 plans were below 100%, demonstrating the stringency of the performance conditions imposed on executive officers and employees. Sanofi intends to continue this policy.
The total number of performance shares awarded to Olivier Brandicourt represented 0.008% of our share capital as of December 31, 2015.
Christopher Viehbacher
On October 29, 2014, Christopher Viehbacher tookwas removed from office as Chief Executive Officer on December 1, 2008.with immediate effect. Serge Weinberg took over as of this date the office of Chief Executive Officer.
Compensation, optionsThe Board considered that the removal of Christopher Viehbacher was the result neither of a change in strategy nor of a change in control. Consequently the Board concluded that the conditions to activate the payment of the severance indemnity were not met and shares awardedthus that there was no need to Christopher Viehbacher
(in euros) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Compensation payable for the year (details provided in the table below) | 3,522,051 | 3,488,287 | 3,605,729 | |||||||
Value of stock subscription options awarded during the year (1) | 2,020,800 | 2,364,000 | 2,499,750 | |||||||
Value of performance shares awarded during the year (2) | 1,938,300 | 1,282,500 | 887 | |||||||
Total | 7,481,151 | 7,134,787 | 6,106,366 | |||||||
Christopher Viehbacher interpreted the situation differently and claimed full payment of the termination benefit, alleging that there had in fact been a change in strategy. The Board of Directors then sought to bring an end to this controversy, which was detrimental to Sanofi. Following negotiations between the respective legal advisers of the two parties, a settlement agreement was signed on January 22, 2015, three months after Christopher Viehbacher’s departure from Sanofi.
The terms agreed when Christopher Viehbacher was originally hired by Sanofi did not include a non-compete clause because at that time, such clauses were not customary. However, at the time of the settlement agreement there was a high risk of competition with Sanofi, given Christopher Viehbacher’s age and the circumstances of his departure. The Board therefore decided that it would be in Sanofi’s interests to include a non-compete clause in the settlement agreement, to apply from January 22, 2015 (the date of grant assuming fulfillmentsignature of the agreement) through June 30, 2015.
The settlement agreement, which was intended to achieve full and final resolution on the controversy, could not contain performance conditions. The value is the difference between the quoted market priceconditions since signature and execution of the shareagreement occurred concomitantly. In addition, the timing of events was such that it would have been pointless to waive application of the non-compete clause given that (i) this rule applies to termination benefits subject to the AFEP-MEDEF Code but not to negotiated settlement agreements and (ii) the non-compete clause was intended to remedy an immediate risk given that Christopher Viehbacher had already left the company.
The termination benefit agreed in 2008 (which was a related party agreement requiring shareholder approval) complied fully with the recommendations of the AFEP-MEDEF Code, but in the event turned out not to be applicable under those same recommendations. Conversely, neither the settlement agreement nor the non-compete clause contained in that agreement fell within the scope of the AFEP-MEDEF Code.
As regards Christopher Viehbacher’s ability to exercise stock options already awarded to him, and the vesting of performance shares already awarded to him, Sanofi has for many years (in line with its fully transparent approach) published the employee plan rules on its corporate governance webpage, along with a separate document describing the TSR and continuing employment criteria that apply specifically to the Chief Executive Officer.
According to that document, “if Mr. Viehbacher’s responsibilities as Chief Executive Officer should terminate, he will retain his right to the performance shares or to exercise his options, except as follows (subject to determination by the Board of Directors): (i) in case of resignation, the loss of his right to exercise the options or of his right to the performance shares will take effect on the date his responsibilities as Chief Executive Officer terminate; and (ii) in case of grantremoval for serious cause or gross misconduct (“faute grave”), the loss of his right to exercise the options or of his right to the performance shares will take effect on the date on which removal is notified”.
Because he was not removed from office for serious cause or gross misconduct, there was no waiver of the continuing employment condition, but rather a strict application of the plan rules. Sanofi complies with the letter and the dividends to be paid over the next three years. Christopher Viehbacher waived the 2010 allocation.
Compensation payable and paid to Christopher Viehbacher
| 2012 | 2011 | 2010 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in euros) | Payable | Paid | Payable | Paid | Payable | Paid | |||||||||||||
Fixed compensation (1) | 1,250,000 | 1,250,000 | 1,200,000 | 1,200,000 | 1,200,000 | 1,200,000 | |||||||||||||
Variable compensation (2) | 2,268,000 | 2,280,000 | 2,280,000 | 2,400,000 | 2,400,000 | 2,400,000 | |||||||||||||
Exceptional compensation (3) | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Attendance fees | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Benefits in kind | 4,051 | 4,051 | 8,287 | 8,287 | 5,729 | 5,729 | |||||||||||||
Total | 3,522,051 | 3,534,051 | 3,488,287 | 3,608,287 | 3,605,729 | 3,605,729 | |||||||||||||
The amounts reported are gross amounts before taxes.
At its meeting on March 5, 2012, uponAMF recommendation no. 2012-02: our 2014 annual report clearly indicates the recommendationlist of the Compensation Committee, the Board of Directors established the terms of the compensation package for Christopher Viehbacher for the financial year 2012. His fixed annual compensation was set at €1,260,000 as from March 5, 2012 i.e. the total fixed compensation
for 2012 amounted to €1,250,000. This represents an increase of 5% compared to the level of fixed compensation set by the Board in 2008 at the time Christopher Viehbacher was recruited.
The variable compensation of Christopher Viehbacher could have represented between 0% and 200% of his fixed compensation. In the event of exceptional performance, it could have exceeded 200% of his fixed compensation.
His variable compensation with respect to 2012 has been established on the basis of quantitative and qualitative criteria. Such criteria include:
The variable compensation structure acts as an incentive for the attainment of financial targets, while also taking into account sustainable growth centered on continuing operations and increasingly on developing countries, and at the same time fostering human capital and encouraging a specific focus on employment policies.
In general, the performance criteria apply not only to variable compensation but also to the vesting of stock options and performance shares in compliance with our targets, which are ambitious.
For reasons of confidentiality, the precise targets set for the quantitative and qualitative criteria, even though they have been properly established in a precise manner, cannot be publicly disclosed. In evaluating these criteria, the performance of the major global pharmaceutical companies was taken into account.
The Board of Directors, pursuant to the above mentioned criteria and taking into account the performance of the Company and the contribution of Christopher Viehbacher during 2012, fixed his variable compensation for 2012 at 2,268,000 euros, i.e., 180% of the fixed portion of his compensation. Christopher Viehbacher's 2012 variable compensation is to be paid in 2013.
The amount reported for benefits in kind relates to a company car.
At its meeting on March 5, 2013, upon the recommendation of the Compensation Committee, the Board of Directors established the terms of the compensation package for Christopher Viehbacher for 2013. His fixed compensation for 2013 is maintained at €1,260,000.
His variable compensation with respect to 2013 has been established on the basis of quantitative and qualitative criteria. These criteria include:
Stock options awardedgranted to Christopher Viehbacher in 2012
Origin | Date of Board grant | Nature of options | Value (in €) | Number of options awarded in 2012 | Exercise price (in €) | Exercise period | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sanofi | 03/05/2012 | Subscription options | 2,020,800 | 240,000 | 56,44 | 03/06/2016 03/05/2022 | |||||||||||
On March 5, 2012, 240,000 share subscriptionat the time of his removal from office (page 166 for the options, were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon both internal criteria based upon Business Net Income and Return on Assets ("ROA"), and external criteria based on Total Shareholder Return ("TSR") in comparison to a reference set of pharmaceutical companies. These criteria were selected because they align medium-term equity-based compensation on the strategy adopted by the Company.
This award is broken down as follows:
Although for reasons of confidentiality the quantitative measures for the internal criteria cannot be publicly disclosed, even though they have been properly established in a precise manner, the targets and the level of achievement for the internal criteria will be publicly disclosed at the end of the performance measurement period.shares).
Using the Black & Scholes method, each option awarded on March 5, 2012 was valued at €8.42, valuing the total benefit at €2,020,800.
The Board of Directors has decided to limit the number of options that could be awarded to Christopher Viehbacher to 10% of the total limit approved by the Shareholders' General Meeting held on May 6, 2011 (1% of our share capital). The number of options awarded to Christopher Viehbacher in 2012 represents 1.81% of the total limit approved by the Shareholders' General Meeting held on May 6, 2011 (1% of our share capital) and 29.48% of the total award to all beneficiaries on March 5, 2012.
Stock options held by Christopher Viehbacher
Origin | Date of Board grant | Nature of options | Value (in €) | Number of options awarded | Exercise price (in €) | Exercise period | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
sanofi-aventis | 03/02/09 | Subscription options | 1,237,500 | 250,000 | 45.09 | 03/04/2013 03/01/2019 | ||||||||||
sanofi-aventis | 03/01/10 | Subscription options | 2,499,750 | 275,000 | 54.12 | 03/03/2014 02/28/2020 | ||||||||||
sanofi-aventis | 03/09/11 | Subscription options | 2,364,000 | 300,000 | 50.48 | 03/10/2015 03/09/2021 | ||||||||||
Sanofi | 03/05/12 | Subscription options | 2,020,800 | 240,000 | 56.44 | 03/06/2016 03/05/2022 | ||||||||||
In 2011, as part of its commitment to transparency, Sanofi undertook to publish in its annual report the level of attainment determined by the Board of Directors for performance conditions applicable to futureequity-based compensation plans awarded to Christopher Viehbacher and the other members of the Executive Committee. The Board considersbelieves that disclosing the level of attainment allows our
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shareholders to better understand the demanding nature of the performance conditions. The 2009 and 2011 stock option plan and the 2011 performance share plan areshare-based plans were the first plans for which the Board of Directors determined the level of fulfillment of the performance conditions.
On March 2, 2009, in accordance with what had been intended on the announcement of his joining the Group, 250,000 subscription options were awarded to Christopher Viehbacher. All of these options were subject to a performance condition. The performance condition, which had to be fulfilled each financial year preceding the vesting of the shares (i.e. 2009, 2010, 2011 and 2012), was based on a ratio of adjusted net income excluding selected items (which was a non-GAAP financial measure used until the end of 2009) to net sales of at least 18%.
On February 6, 2013, the Board of Directors determined that the conditions had been met and that the 250,000 options would be exercisable subject to meeting the condition of continuing employment.
On March 9, 2011, 300,000 subscription options were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, theThe entire award iswas contingent upon both internal criteria based on Business Net Income and Return on Assets ("ROA"), and external criteria based on Total Shareholder Return ("TSR") in comparison to a reference set of twelve pharmaceutical companies.performance conditions.
For the first period (consisting of fiscal years 2011(2011 and 2012) which related to 50% of the March 9, 2011 grant, the performance was as follows:
· | the performance criterion based on Business Net Income (which covered 40% of the award) was fulfilled, being 106% of the target; |
· | the ROA-based criterion (which covered 40% of the award) was fulfilled, being 1.7% above the target; |
· | the TSR-based criterion (which covered 20% of the award) was fulfilled, Sanofi ranking 5th among the panel of 12 peers. |
The Board of Directors, in its meeting of February 6, 2013, determined that the global performance rate for the first period was greater than 100% and therefore, since the performance condition had been fulfilled, 50% of the stock subscription options granted would be exercisable at the end of thefour-year vesting period subject to meeting the condition of continuing employment.
For the second period (2013 and 2014), the performance was as follows:
On
· | the performance criterion based on Business Net Income (which covered 40% of the award) was 97.7% fulfilled; |
· | the ROA-based criterion (which covered 40% of the award) was fulfilled, being 0.2% above the target; |
· | the TSR-based criterion (which covered 20% of the award) was 78.6% fulfilled, Sanofi ranking 8th among the panel of 11 peers. |
The Board of Directors, in its meeting of March 5, 2013, 240,000 share3, 2015, determined that the global performance rate for the second period was 94.8% and therefore, since the performance condition had been partially fulfilled, 94.8% of the stock subscription options were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon both internal criteria based on Business Net Income and Return on Assets ("ROA"), and external criteria based on Total Shareholder Return ("TSR") in comparison to a reference set of eleven pharmaceutical companies. These criteria were maintained because they align medium-term equity-based compensation with the strategy adopted by the Company.
This award is broken down as follows:
The targets and the level of achievement for the internal criteria will be disclosed publicly at the end of the four-year vesting period. The Board of Directors determined that the global performance measurementrate for the March 9, 2011 option plan was 97.4% and therefore 292,200 options would be exercisable at the end of the 4-year vesting period.
Christopher Viehbacher did not exercise any stock options in 2012.
As of the date of publication of this document, the total number of unexercised options held by Christopher Viehbacher represented 0.098% of the share capital as at December 31, 2012.
Performance shares awarded to Christopher Viehbacher in 2012
Origin | Date of Board award | Value (in €) | Number of performance shares awarded in 2012 | Acquisition date | Availability date | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sanofi | 03/05/12 | 1,938,300 | 42,000 | 03/06/2015 | 03/06/2017 | |||||||
On March 5, 2012, 240,000 subscription options and 42,000 performance shares were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, theThe entire award iswas contingent upon both internal criteria based on Business Net Income and Return on Assets ("ROA"), and external criteria based upon Total Shareholder Return ("TSR") in comparison to a reference set of pharmaceutical companies. These criteria were selected because they align medium-term equity-based compensation with the strategy adopted by the Company. Each performance share awarded on March 5, 2012, was valued at €46.15, valuing the total benefit at € €1,938,300.
This award is broken down as follows:
periodTable of Contents2012-2014.
Although for reasons of confidentiality, the quantitative measures for the internal criteria cannot be publicly disclosed, even though they have been properly established in a precise manner, the targets and the level of achievement for the internal criteria will be publicly disclosed at the end of the performance measurement period.
The number of shares awarded to Christopher Viehbacher in 2012 represents 0.31% of the total limit approved by the Shareholders' General Meeting held on April 17, 2009 (1% of our share capital) and 0.89% of the total award to all beneficiaries on March 5, 2012. The Board of Directors has decided to limit the number of performance shares that could be awarded to Christopher Viehbacher to 5% of the total limit approved by Shareholders' General Meeting held on May 4, 2012 (1.2% of our share capital).
Performance shares awarded to Christopher Viehbacher
Origin | Date of Board award | Value (in €) | Number of performance shares awarded | Acquisition date | Availability date | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
sanofi-aventis | 03/02/09 | 2,221,700 | 65,000 | 03/03/2011 | 03/04/2013 | ||||||
sanofi-aventis | 03/09/11 | 1,282,500 | 30,000 | 03/10/2013 | 03/10/2015 | ||||||
Sanofi | 03/05/12 | 1,938,300 | 42,000 | 03/06/2015 | 03/06/2017 | ||||||
On March 9, 2011, 30,000 performance shares were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon both internal criteria based on Business Net Income and Return on Assets ("ROA"), and external criteria based on Total Shareholder Return ("TSR") in comparison to a reference set of twelve pharmaceutical companies.
The performance measure covered fiscal years 2011 and 2012, and the performance was as follows:
The Board of Directors, in its meeting of February 6, 2013,4, 2015, determined that:
· | the performance criterion based on Business Net Income (which covered 40% of the award) was 84.4% fulfilled; |
· | the ROA-based criterion (which covered 40% of the award) was fulfilled, being 0.5% above the target; |
· | the TSR-based criterion (which covered 20% of the award) was 57.6% fulfilled, Sanofi ranking 9th among the panel of 11 peers. |
The Board of Directors, in its meeting of February 4, 2015, determined that the global performance rate was greater than 100%85.3% and therefore, since the performance condition had been partially fulfilled, 100%204,720 options would be exercisable at the end of the performance4-year vesting period and that 35,826 shares granted would vest subject to meeting the condition of continuing employment.vest.
Taking into account the number of shares acquired at the outset of his mandate as well as the lock-up obligations applicable to shares obtained on exercise of stock options, or disposition of performance shares, the Board of Directors has decided not to require Christopher Viehbacher to acquire any further shares at his own expense.
Under Share 2010, the Group's global restricted share plan benefiting each Group employee with at least three months' service, 20 restricted shares were awarded to Christopher Viehbacher on October 27, 2010. This award is not included in the schedule above as Christopher Viehbacher subsequently renounced this award.
On March 5, 2013, 240,000 subscription options and 45,000 performance shares were awarded to Christopher Viehbacher. In compliance with the AFEP-MEDEF Code, theThe entire award iswas contingent upon both internal criteriaperformance conditions for the period2013-2015.
The Board of Directors, in its meeting of February 8, 2016, determined that:
· | the performance criterion based on Business Net Income (which covered 40% of the award) was 83.2% fulfilled; |
· | the ROA-based criterion (which covered 40% of the award) was fulfilled, being 0.2 percentage point above the target; |
· | the TSR-based criterion (which covered 20% of the award) was not fulfilled, Sanofi ranking 9th among the panel of 11 peers. |
The Board of Directors, in its meeting of February 8, 2016, determined that the global performance rate was 73.3% and Return on Assets ("ROA"), and external criteria based on Total Shareholder Return ("TSR") in comparison to a reference set of eleven pharmaceutical companies. These criteria were maintained because they align medium-term equity-based compensation with the strategy adopted by the Company.
This award is broken down as follows:
The targets and the level of achievement of the internal criteria will be disclosed publicly at the end of the performance measurement period.4-year vesting period and that 32,985 shares would vest.
In makingTo qualify for his pension under the 2013 award, the Board of DirectorsSanofi top-up defined-benefit pension plan, Christopher Viehbacher would have had to determine whetherbe able to make these awards contingent upon future share purchases. Taking into accountclaim his pension rights under the number of sharescompulsory schemes. Because he was removed from office and consequently left Sanofi before the age at which he had legally acquired atfull pension rights, he also lost his entire entitlement under the outset of his mandate and the lock-up obligations applicable to shares obtained on exercise of stock options or disposition of performance shares as well as share purchases made spontaneously by Christopher Viehbacher, the Board of Directors decided not to require him to acquire any further shares at his own expense.top-up plan.
As of the date of this annual report, the total number of performance shares awarded to Christopher Viehbacher represents 0.009% of our share capital as of December 31, 2012.
Performance shares awarded to Christopher Viehbacher which became available in 2012Arrangements for corporate officers
No performance shares awarded to Christopher Viehbacher became available in 2012.
Pension arrangements for Christopher Viehbacher
Christopher ViehbacherOlivier Brandicourt is covered by the Sanofi atop-up defined benefit defined-benefit pension plan falling within the scope of Article L. 137-11 of the French Social Security Code, (which has been called the Sanofi plan“Sanofi plan” since the Company changed its name). The plan is offered to all employees of Sanofi and its French subsidiaries who meet the eligibility criteria specified in the plan rules. This plan, which remains open, was set up on October 1, 2008 as the final stage in the process of harmonizing the status of personnel across the French subsidiaries.
The rules of this plan were reviewed on January 1, 2012 in order to apply the 2010 French pension reforms and the French Social Security Financing Act for 2012 (whichinter aliareflected the increase in the statutory retirement age for a full pension). This plan also includes the Merial SAS, Genzyme SAS and Gensyme Polyclonals SAS subsidiaries, for which the eligibility criteria and pension rights calculation take into account length of service from January 1, 2012 at the earliest.
This top-updefined-benefit pension plan is offered to executives (within the meaning of the(as defined by AGIRC, regime —Association Générale des Institutions de Retraite des Cadres, a confederation of executive pension funds) of Sanofi and its French subsidiaries who meet the eligibility criteria specified in the
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Item 6. Directors, Senior Management and Employees
plan rules; the benefit is contingent upon the plan member ending his or her career within the Group. The plan is reserved for executives with at least ten years'years of service whose annual base compensation has for ten years (not necessarily consecutive) exceeded four times the French social security ceiling, and is wholly funded by the Company.Company and outsourced to an insurance company.
Based on the assumptions used in the actuarial valuation of this plan, approximately 550575 executives arewere potentially eligible for this plan almost all(15 retirees, 87 early retirees and 472 active employees) as of them active employees.December 31, 2015.
Table of ContentsThetop-up
The top-up pension, which may not exceed 37.50% (1.5% per year of final salary,service capped at 25 years) of the reference compensation, is in the form of a life annuity, and is transferable as a survivor'ssurvivor’s pension. The annuity is based on the arithmetical average of the three highest years' averageyears’ annual gross compensation (fixed plus variable) paid during any three of the five years (not necessarily consecutive) preceding final cessation of employment. This reference compensation is capped at 60 times the French social security ceiling ("PASS"(“PASS”) applicable in the year in which the rights vest. The annuity varies according
Because Olivier Brandicourt has pursued his career in different countries and in different groups, he has not continuously paid his contribution to lengththe French compulsory industry schemes. Taking into account the award of a deemed ten years of service (capped at 25 years)on taking up office, he had accumulated 10.75 years of service as of December 31, 2015. The reference compensation being limited to 60 PASS (i.e.€2,282,400 in 2015) the amount of the annuity is 16.125% of this amount, i.e.€368,037.
This retirement plan is subject to various charges and supplementscontributions such as CSG, CRDS, CSAM, CASA and a 7% and a 14% contribution on the annuity, 24% on the external financing.
In order to benefit from benefit the Sanofi retirement plan when leaving the Group, Olivier Brandicourt has to be entitled to benefit fully from compulsory industry schemes, which requires that he reach the legal retirement age (taking into account his age, not before 2018) and to have the mandatory number of three-month periods of qualifying employment. Sanofi does not have sufficient information to determine whether retirement in 2018 is a realistic scenario in terms of qualifying employment, since most of his career has been spent outside France.
If Olivier Brandicourt were to retire in 2018, he would have accumulated 13 years of service, entitling him to an annuity equal to 19.5% of his reference compensation. That annuity would supplement the schemes for which he may be eligible in France or abroad, subject to a cap on the total pension from all sources equal toset at 52% of the final levelreference compensation. If the total amount of the annuities paid under all such schemes were to exceed the 52% cap, the amount of the Sanofi top-up defined-benefit pension would be reduced accordingly in order to respect this cap.
The award of a deemed ten years of service to Olivier Brandicourt on his taking up office was intended solely to compensate him for benefits forfeited elsewhere. Given the lack of any internal candidates following the dismissal of the previous Chief Executive Officer, Sanofi had to make an outside appointment; consequently, whichever outside candidate was appointed would have had to be compensated for benefits forfeited elsewhere.
This benefit has been taken into account by the Board of Directors when fixing his global compensation.
The admissioneligibility of Christopher Viehbacher toOlivier Brandicourt for this plan was approved by the Shareholders'Shareholders’ General Meeting of April 17, 2009.
The decision to admit Christopher Viehbacher to the top-up defined benefit pension plan and to award him ten years' service at the outset of his mandate, must be seen within the historical context. These commitments were part of the conditions for the hiring of Christopher Viehbacher negotiated before he accepted the position of Chief Executive Officer of Sanofi, and hence before there could be any conflict of interest. These commitments were intended to replace the pension plan which he had to renounce in order to join the Group. Having conducted his career in different countries, Christopher Viehbacher was unable to meet the requirements of the compulsory industry schemes that exist in France.May 4, 2015.
Commitments in favorTermination arrangement
Any activation of this termination benefit can only be carried out if the Chairman anddeparture of the Chief Executive Officer is forced, i.e. in office as of December 31, 2012
In the event of his removal from office asor resignation linked to a change in strategy or control of the Company. In practice,non-renewal of the term of office of the Chief Executive Officer Christopher Viehbacher would receive aat its expiration date is not applicable as this office is held for an indefinite term.
Any activation of this termination benefit equivalentis excluded:
· | in the event of removal from office for gross or serious cause or misconduct (“faute grave ou faute lourde”); |
· | if he elects to leave the Company in order to hold another position; |
· | if he is assigned to another position within the Group; |
· | if he is able to benefit from pension rights in the near future. |
The amount of this termination benefit is limited to 24 months of total compensation on the basis of histhe fixed compensation effective on the date he ceases to hold office and the last variable compensation received prior to that date, subject to the performance criteria described below.
In accordance with article L.225-42-1 of the French Commercial Code and with theAFEP-MEDEF Code, payment of the termination benefit would beis contingent upon fulfillment of two of the three performance criteria listed below, assessed over the three financial years preceding his ceasing to hold office.
The threetwo criteria are:
· | the average of the ratios of business net income to net sales for each financial year must be at least 15% (see “Item 5 – Business Net Income”); |
· | the average of the ratios of operating cash flow before changes in working capital to net sales for each financial year must be at least 18%. |
The amount of the ratios of adjusted net income excluding selected items (which was a non-GAAP financial measure used until the end of 2009) to net sales for each financial year mustthis benefit will be at least 15%;
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Item 6. Directors, Senior Management and Employees
so that the cumulative amount of net salesthese two benefits may never exceed two years of total fixed and variable compensation.
The Shareholders’ General Meeting of May 4, 2015 approved the section on a comparable basis, must be at least equal to the average of the growth rates of the Pharmaceutical and Vaccines activities of the top 12 global pharmaceutical companies, measured for each financial year in terms of net sales adjusted for the principal effects of exchange rates and changes in scope of consolidation.
The terms for the termination benefit entitlementcontained in the auditors’ special report on related party transactions.
Non-compete undertaking
In the event of Christopher Viehbacher were approvedhis departure from the Company, Olivier Brandicourt undertakes not to join a competitor of the Company as an employee or executive officer, or to provide services to or cooperate with such a competitor, during a12-month period following his departure.
In return for his undertaking, he will receive an indemnity corresponding to one year’s total compensation on the basis of his fixed compensation effective on the day he ceases to hold office and the last individual variable compensation received prior to that date. This indemnity will be payable in 12 monthly installments.
However, the Board of Directors reserves the unilateral right to release him from this undertaking for some or all of that 12-month period. In such a case, the non-compete indemnity would not be due for the period of time waived by the Shareholders' Annualcompany.
The Shareholders’ General Meeting of April 17, 2009.May 4, 2015 approved the section on the non-compete undertaking contained in the auditors’ special report on related party transactions.
Any activationCommitments in favour of this termination benefit will be carried outthe Chairman and Chief Executive Officer in compliance withoffice as of December 31, 2015 (table n°10 of the AFEP-MEDEF Code,i.e. only if the departure is non-voluntary and linked to a change in control or strategy.
Table of ContentsCode)
This termination benefit was negotiated at the time of the recruitment of Christopher Viehbacher, and hence at a time when there was no conflict of interest. Moreover, the terms and conditions of this termination benefit comply with the AFEP-MEDEF Code.
Contract of employment | Top-up pension plan | Compensation or benefits payable or potentially payable on termination of office | Compensation payable under non-competition clause | |||||||||||||
Serge Weinberg | None | None | None | None | ||||||||||||
Olivier Brandicourt | None | Yes | Yes | Yes |
Lock-up obligation for shares obtained on exercise of stock options or on disposition of performance shares by the Chief Executive Officer
Until he ceases to hold office, the Chief Executive Officer will be required to retain, in the form of Sanofi shares, 50% of any capital gains (net of taxes and social contributions) obtained by the exercise of stock options or upon disposition of performance shares awarded by Sanofi. He must hold these shares in registered form.form until he ceases to hold office.
In compliance with the AFEP-MEDEF Code and our Board Charter, Christopher ViehbacherOlivier Brandicourt has undertaken to refrain from entering into speculative or hedging transactions, and, so far as Sanofi is aware, no such instruments have been contracted.
Compensation and pension payments for Directors other than the Chairman and the Chief Executive Officer
Attendance fees (table no. 3 of the AFEP-MEDEF Code)
The table below shows amounts paid to each member of the Sanofi Board of Directors in respect of 20112014 and 2012,2015, including those whose term of office ended during thesethose years.
Attendance fees in respect of 2011,2014, the amount of which was set byapproved at the Board meeting of March 5, 2012,3, 2015 were partially paid in 2012.July 2014. The balance was paid in 2015.
Attendance fees in respect of 2012,2015, the amount of which was set byapproved at the Board meeting of March 5, 2013,3, 2016, were partially paid in July 2015. The balance will be paid in 2013.2016.
For 2012,2015, the basic annual attendance fee was set at €15,000,€15,000, apportioned on a time basis for Directors who assumed or left office during the year.
TheFor 2016, the basic annual attendance fee was set at€30,000, to be apportioned on a time basis for Directors who assume or leave office during the year.
For 2015, the variable portion of the fee is linked to actual attendance by Directors in accordance with the principles described below:
· | Directors resident in France receive€5,000 per Board or Committee meeting attended, except for Audit Committee meetings for which the fee is€7,500 per meeting attended; |
· | Directors resident outside France but within Europe receive€7,000 per Board meeting attended, and€7,500 per Committee meeting attended; |
· | Directors resident outside Europe receive€10,000 per Board meeting attended and per Strategy Committee meeting attended; |
· | the chairman of the Compensation Committee receives€7,500 per Committee meeting; |
· | the chairman of the Audit Committee receives€10,000 per Committee meeting. |
The attendance fee payable to a Director who participates by conference call or by videoconference is equivalent to half of the attendance fee received by a French Director resident in France who attends in person.
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Item 6. Directors, Senior Management and Employees
As an exception, some dualmultiple meetings held on the same day give entitlement to a single attendance fee:
· | if on the day of a Shareholders’ General Meeting, the Board of Directors meets both before and after the Meeting, only one attendance fee is paid for both; |
· | if a Director participates in a meeting of the Compensation Committee and in a meeting of the Appointments and Governance Committee on the same day, only one attendance fee is paid for both. |
Hence, in accordance with the AFEP-MEDEF Code, attendance fees are allocated predominantly on a variable basis.
The introduction of a Shareholders' General Meeting, the Board of Directors meets both before and after the Meeting, only oneseparate attendance fee scale depending on whether or not the director is paid for both;
The Shareholders'Shareholders’ Annual General Meeting of May 6, 2011 approved a proposal to increase the maximum amount of annual attendance fees to €1,500,000.€1,500,000. For 2014, as for 2009 and 2010, this amount was scaled down in order to keep attendance fees within the total attendance fee entitlement.
2015 | 2014 | |||||||||||||||||||||||||||||||||||||
Names | Attendance fees in respect of 2015 | Pensions paid in 2015 | Total Compensation | Attendance fees in respect of 2014 | Pensions paid in 2014 | Total Theoretical | Total Actual | |||||||||||||||||||||||||||||||
(in euros) | Fixed | Variable | Fixed | Variable | ||||||||||||||||||||||||||||||||||
Laurent Attal | 15,000 | 60,000 | 75,000 | 15,000 | 75,000 | 90,000 | 79,662 | |||||||||||||||||||||||||||||||
Bonnie Bassler(1) | 15,000 | 72,500 | 87,500 | 1,250 | 0 | 1,250 | 1,106 | |||||||||||||||||||||||||||||||
Uwe Bicker | 15,000 | 82,000 | 97,000 | 15,000 | 104,500 | 119,500 | 105,773 | |||||||||||||||||||||||||||||||
Robert Castaigne | 15,000 | 110,000 | 125,000 | 15,000 | 95,000 | 110,000 | 97,365 | |||||||||||||||||||||||||||||||
Thierry Desmarest(2) | - | - | - | 12,500 | 75,000 | 87,500 | 77,449 | |||||||||||||||||||||||||||||||
Lord Douro(3) | - | - | - | 6,250 | 60,500 | 66,750 | 66,750 | |||||||||||||||||||||||||||||||
Jean-René Fourtou | 15,000 | 105,000 | 1,720,829 | 1,840,829 | 15,000 | 120,000 | 1,720,829 | 1,855,829 | 1,840,322 | |||||||||||||||||||||||||||||
Claudie Haigneré | 15,000 | 80,000 | 95,000 | 15,000 | 110,000 | 125,000 | 110,641 | |||||||||||||||||||||||||||||||
Patrick Kron(4) | 15,000 | 77,500 | 92,500 | 10,000 | 32,500 | 42,500 | 37,618 | |||||||||||||||||||||||||||||||
Igor Landau(5)(6) | 6,250 | 22,500 | 2,355,970 | 2,384,720 | 15,000 | 55,000 | 2,355,970 | 2,425,970 | 2,417,929 | |||||||||||||||||||||||||||||
Fabienne Lecorvaisier | 15,000 | 90,000 | 105,000 | 15,000 | 95,000 | 110,000 | 97,365 | |||||||||||||||||||||||||||||||
Suet-Fern Lee | 15,000 | 70,000 | 85,000 | 15,000 | 92,500 | 107,500 | 95,152 | |||||||||||||||||||||||||||||||
Christian Mulliez | 15,000 | 125,000 | 140,000 | 15 000 | 142,500 | 157,500 | 139,408 | |||||||||||||||||||||||||||||||
Carole Piwnica(6) | 15,000 | 73,750 | 88,750 | 15,0000 | 92,500 | 107,500 | 95,152 | |||||||||||||||||||||||||||||||
Klaus Pohle | 15,000 | 87,000 | 102,000 | 15,000 | 136,000 | 151,500 | 133,655 | |||||||||||||||||||||||||||||||
Gérard Van Kemmel(5) | 6,250 | 70,000 | 76,250 | 15,000 | 190,000 | 205,000 | 181,452 | |||||||||||||||||||||||||||||||
Total | 192,500 | 1,125,250 | 4,076,799 | 5,394,549 | 210,000 | 1,476,000 | 4,076,799 | 5,762,799 | 5,576,799 | |||||||||||||||||||||||||||||
Total attendance fees (theoretical) | 1,317,750 | 1,686,500 | ||||||||||||||||||||||||||||||||||||
Total attendance fees (actual) | 1,317,750 | 1,500 ,000 |
Amountsreported are gross amounts before taxes.
(1) | Assumed office November 18, 2014. |
(2) | Left office October 23, 2014. |
(3) | Left office May 5, 2014. |
(4) | Assumed office May 5, 2014. |
(5) | Left office May 4, 2015. |
(6) | Board member resident outside France, but treated as a French resident for tax purposes. |
(7) | Before reducing attendance fees pro rata by approximately 0.89%. |
(8) | After reducing attendance fees pro rata by approximately 0.89%. |
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Item 6. Directors, Senior Management and Employees
(in euro) | 2012 | 2011 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Attendance fees in respect of 2012 to be paid in 2013 | Pensions paid in 2012 | Total compensation | Attendance fees in respect of 2011 to be paid in 2012 | Pensions paid in 2011 | Total compensation | |||||||||||||||||||
| fixed | variable | | | fixed | variable | | | |||||||||||||||||
Laurent Attal (1) | 10,000 | 40,000 | 50,000 | 0 | 0 | 0 | |||||||||||||||||||
Uwe Bicker | 15,000 | 89,000 | 104,000 | 15,000 | 71,000 | 86,000 | |||||||||||||||||||
Robert Castaigne | 15,000 | 90,000 | 105,000 | 15,000 | 103,750 | 118,750 | |||||||||||||||||||
Thierry Desmarest | 15,000 | 75,000 | 90,000 | 15,000 | 75,000 | 90,000 | |||||||||||||||||||
Lord Douro | 15,000 | 104,000 | 119,000 | 15,000 | 86,500 | 101,500 | |||||||||||||||||||
Jean-René Fourtou | 15,000 | 85,000 | 1,676,787 | 1,776,787 | 15,000 | 75,000 | 1,640,304 | 1,730,304 | |||||||||||||||||
Claudie Haigneré | 15,000 | 65,000 | 80,000 | 15,000 | 65,000 | 80,000 | |||||||||||||||||||
Igor Landau | 15,000 | 35,000 | 2,295,672 | 2,345,672 | 15,000 | 37,500 | 2,245,724 | 2,298,224 | |||||||||||||||||
Suet-Fern Lee (2) | 15,000 | 64,000 | 79,000 | 10,000 | 35,500 | 45,500 | |||||||||||||||||||
Christian Mulliez | 15,000 | 77,500 | 92,500 | 15,000 | 55,000 | 70,000 | |||||||||||||||||||
Lindsay Owen-Jones (3) | 6,250 | 20,000 | 26,250 | 15,000 | 42,500 | 57,500 | |||||||||||||||||||
Carole Piwnica | 15,000 | 93,750 | 108,750 | 15,000 | 55,000 | 70,000 | |||||||||||||||||||
Klaus Pohle | 15,000 | 131,500 | 146,500 | 15,000 | 135,250 | 150,250 | |||||||||||||||||||
Gérard Van Kemmel | 15,000 | 125,000 | 140,000 | 15,000 | 138,750 | 153,750 | |||||||||||||||||||
Total | 196,250 | 1,094,750 | 3,972,459 | 5,263,459 | 190,000 | 975,750 | 3,886,028 | 5,051,778 | |||||||||||||||||
Total attendance fees | 1,291,000 | 1,165,750 | |||||||||||||||||||||||
|
Pensions
The amount recognized in 20122015 in respect of corporate pension plans for directors with current or past executive responsibilities at Sanofi (or companies whose obligations have been assumed by Sanofi) was €4.3€12.3 million.
As retirees, Jean-René Fourtou and Igor Landau are covered by the "GRCD" “GRCD”top-up pension plan instituted in 1977 for senior executives ofRhône-Poulenc. This plan was amended in 1994, 1996, 1999 and 2003, and currently appliesas of December 31, 2015 applied to 331 beneficiaries (one active executive, two early retirees and 28 retired executives, (including one survivor's pension)including three survivor’s pensions). At its meeting of February 11, 2008, the Board of Directors decided to close this plan to new entrants. Christopher Viehbacher doesdid not benefit from thistop-up pension plan.
Compensation of Senior Management
The compensation of the other Executive Committee members other than the Chief Executive Officer is established upon the recommendation of the Compensation Committee taking into consideration the practices of major global pharmaceutical companies.
In addition to fixed compensation, they receive variable compensation, which is determined as a function of trends in the business areas for which they are responsible.compensation. Variable compensation generally represents 60%70% to 110%100% of their fixed compensation.
Table The amount of Contentsthe individual variable compensation is set pursuant to market practice. It rewards the individual contribution of each Executive Committee member to the Group’s performance as well as the performance of his/her organization.
For 2015, the variable compensation was composed of two elements:
· | meeting quantitative objectives (accounting for 50%), which are measured at Group level (sales growth one-third, business net income two-thirds, and for this year a “booster” that can increase the quantitative portion by up to 10% depending on new product launches) and at the level of the Executive Committee member’s organization or function; and |
· | meeting quantitative and qualitative objectives, both individually (30%) and collectively (20%) within the Executive Committee (together accounting for 50%). |
The objectives are intended to reflect growth (growth in net sales, business net income, registration and submission of new products in the U.S. and in Europe, growth in net sales of new products); cash flow optimization; talent management and critical skills (including selected key recruitments in critical areas for the Group); talent retention; increase in the
number of women in senior management positions; and promotion of high potential individuals.
In addition to cash compensation, Executive Committee members may be awarded share subscription or purchase options and/or performance shares (see "Item 6. Directors, Senior Management and Employees —“ – E. Share Ownership"Ownership” below for details of the related plans).
With respect to 2012,2015, the total gross compensation paid and accrued in respect of members of the Executive Committee (including the Chief Executive Officer)Olivier Brandicourt amounted to €14.9€20.5 million, including €6.3€8.1 million in fixed compensation.
In addition Christopher Viehbacher’s variable compensation for 2014 (€1.3 million), settlement indemnity (€3 million) and non-compete indemnity (€1.3 million) were paid in 2015.
In 2011, the Board of Directors made significant changes to its equity compensation policy. In order to limit the dilutive effect on shareholders, the Board of Directors determined to primarily award performance shares, except for a limited group of senior managershigh level executives who may continue to receive options. The members of the Executive Committee are included in this limited group. Furthermore, whoever the beneficiary is, any award of options or performance shares will henceforth beis now fully contingent upon the performance targets being achieved over several financial years, as well as a condition ofand upon the beneficiary still being an employee when the option is exercised or the performance share is delivered.
On March 5, 2012, 445,500 shareJune 24, 2015, 422,500 stock subscription options were awarded to members of the Executive Committee (including 240,000220,000 options awarded to Christopher Viehbacher)Olivier Brandicourt). TheIn compliance with theAFEP-MEDEF Code, the entire award wasis contingent upon the same internal criteria based onupon Business Net Income and Return on Assets (ROA)(“ROA”). These criteria were selected because they alignmedium-termequity-based compensation on the strategy adopted by the Company.
This award is broken down as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weightingfollows:
· | The performance criterion based on Business Net Income covers 60% of the award and refers to the ratio, at constant exchange rates, between actual Business Net Income and the Business Net Income specified in the budget. This criterion corresponds to average actual business net income versus budgeted business net income over the entire period. Budgeted business net income is approved by the Board of Directors at the beginning of each year. If the ratio is less than 95%, the corresponding options will lapse. The Business Net Income target may not be lower that the lower range of the guidance published by the Company at the beginning of each year. |
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Item 6. Directors, Senior Management and Employees
· | The ROA-based criterion covers 40% of the award and includes a target ROA, below which some or all of the options will lapse. |
· | In addition to the two conditions set forth above, an implicit condition exists in the form of the exercise price, as well as the condition of continuing employment. |
· | In order to bring equity-based compensation into line withmedium-term performance, performance will be measured over three financial years. |
· | Vesting is now also subject to a non-compete clause. |
· | In case of departure for reasons other than resignation and dismissal for gross or serious cause or misconduct, the global allocation rate will be prorated to take into account the effective presence in the Group during the vesting period. |
The Board regards these performance conditions as good indicators of the two criteria is different, with each representing 50%development of shareholder value in terms of: the grant.quality of investment decisions in a period where external growth plays a greater role than in the past (ROA condition), and a commitment to delivering challengingbottom-line results in a tough business environment (Business Net Income condition).
The quantitative measures of performance are the same as for the award of Christopher Viehbacher. Although for reasons of confidentiality the quantitative measures for the internal criteria cannot be publicly disclosed, even though they have been properly and precisely established, in a precise manner, the targets and the level of achievement forextent to which the internal criteria are met will be publicly disclosed at the end of the performance measurement period.
As of December 31, 2012 a total of 2,998,000During 2015, 263,104 stock subscription options had been awarded to members of the Executive Committee (existing plans or plans ending in 2012). As of the same date, members of the Executive Committee held 2,898,000 unexercised options. These figures include the unexercised options awarded to Christopher Viehbacher, who is also a member of the Executive Committee.
The table below summarizes the options awarded towere exercised by individuals who were members of the Executive Committee at the time of the award. For more information on the characteristics of such options see the table "— E. Share Ownership — Existing Options Plans as of December 31, 2012" below.when they exercised.
Origin | Date of shareholder authorization | Date of Board grant | Grant to Executive Committee Members (1) | Start date of exercise period | Expiration date | Exercise price (in €) | Number exercised as of 12/31/2012 | Number canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
sanofi-aventis | 05/31/07 | 12/13/07 | 520,000 | 12/14/11 | 12/13/17 | 62.33 | 0 | 0 | 520,000 | |||||||||||||||||||
sanofi-aventis | 05/31/07 | 03/02/09 | 650,000 | 03/04/13 | 03/01/19 | 45.09 | 0 | 50,000 | 600,000 | |||||||||||||||||||
sanofi-aventis | 04/17/09 | 03/01/10 | 805,000 | 03/03/14 | 02/28/20 | 54.12 | 0 | 50,000 | 755,000 | |||||||||||||||||||
sanofi-aventis | 04/17/09 | 03/09/11 | 577,500 | 03/10/15 | 03/09/21 | 50.48 | 0 | 0 | 577,500 | |||||||||||||||||||
Sanofi | 05/06/11 | 03/05/12 | 445,500 | 03/06/16 | 03/05/22 | 56.44 | 0 | 0 | 445,500 | |||||||||||||||||||
|
During 2012, 70,000 share subscription options were exercised by members of the Executive Committee (Sanofi-Synthélabo subscriptiontwo option plan of December 10, 2003, i.e. beforeplans that pre-date the creation of the Executive Committee (sanofi-aventis subscription option plan of May 31, 2005 with an exercise price of€70.38 and sanofi-aventis subscription option plan of December 14, 2006 with an exercise price of€66.91), and two others thatpost-date the creation of the Executive Committee (sanofi-aventis subscription option plan of March 1, 2010 with an exercise price of €55.74)€54.12 and sanofi-aventis subscription option plan of March 9, 2011 with an exercise price of €50.48).
On March 5, 2012, 137,900 performance shares (including 42,000 performance shares awarded to Christopher Viehbacher)9, 2011, 277,500 stock subscription options were awarded to members of the Executive Committee. TheCommittee (on top of the 300,000 subscription options awarded to Christopher Viehbacher). In compliance with theAFEP-MEDEF Code, the entire award was contingent upon the sametwo internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but
Table of Contents(“ROA”).
excludingFor the TSR-based criterion. Consequently, the weighting of each criterion is different, with each criterion representingfirst period (2011 and 2012) which related to 50% of the grant.March 9, 2011 grant, the performance was as follows:
· | The performance criterion based on Business Net Income (which covered 50% of the award) was fulfilled, being 106% of the target; |
· | TheROA-based criterion (which covered 50% of the award) was fulfilled, being 1.7% above the target; |
The quantitative measuresBoard of Directors, in its meeting of February 6, 2013, determined that the global performance are the same asrate for the first period was greater than 100% and therefore, since the performance condition had been fulfilled, 50% of the stock subscription options granted would be exercisable at the end of thefour-year vesting period subject to meeting the condition of continuing employment.
For the second period (2013 and 2014), the performance was as follows:
· | The performance criterion based on Business Net Income (which covered 50% of the award) was 97.7% fulfilled; |
· | TheROA-based criterion (which covered 50% of the award) was fulfilled, being 0.2% above the target; |
The Board of Directors, in its meeting of March 3, 2015, determined that the global performance rate for the second period was equal to 98.9% and therefore, since the performance condition had been partially fulfilled, 98.9% of the stock subscription options granted would be exercisable at the end of thefour-year vesting period. The Board of Directors determined that the global performance rate for the March 9, 2011 option plan was 99.5% and therefore 276,133 options would be exercisable at the end of the4-year vesting period.
On March 5, 2012, 205,500 subscription options were awarded to members of the Executive Committee (on top of the 240,000 subscription options awarded to Christopher Viehbacher). In compliance with theAFEP-MEDEF Code, the entire award was contingent upon performance conditions for the period2012-2014.
The Board of Directors, in its meeting of February 4, 2015, determined that:
· | The performance criterion based on Business Net Income (which covered 50% of the award) was 84.4% fulfilled; |
· | TheROA-based criterion (which covered 50% of the award) was fulfilled, being 0.5% above the target. |
The Board of Directors, in its meeting of February 4, 2015, determined that the global performance rate was 92.2% and therefore, since the performance condition had been partially fulfilled, 189,471 options would be exercisable at the end of the 4-year vesting period.
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On March 5, 2013, 180,000 stock subscription options were awarded to members of the Executive Committee (on top of the 240,000 subscription options awarded to Christopher Viehbacher. Viehbacher). In compliance with the AFEP-MEDEF Code, the entire award was contingent upon performance conditions for the period 2013-2015.
The Board of Directors, in its meeting of February 8, 2016, determined that:
· | the performance criterion based on Business Net Income (which covered 50% of the award) was 83.2% fulfilled; |
· | the ROA-based criterion (which covered 50% of the award) was fulfilled, being 0.2 percentage point above the target. |
The Board of Directors, in its meeting of February 8, 2016, determined that the global performance rate was 91.6% and therefore, since the performance condition had been partially fulfilled, 164,880 options would be exercisable at the end of the 4-year vesting period.
On June 24, 2015, 364,500 performance shares (including 111,000 performance shares awarded to Olivier Brandicourt) were awarded to members of the Executive Committee. In compliance with the AFEP-MEDEF Code, the entire award is contingent upon both internal criteria based upon Business Net Income and Return on Assets (“ROA”). These criteria were selected because they alignmedium-termequity-based compensation on the strategy adopted by the Company.
This award is broken down as follows:
· | The performance criterion based on Business Net Income covers 60% of the award and refers to the ratio, at constant exchange rates, between actual Business Net Income and the Business Net Income specified in the budget. This criterion corresponds to average actual business net income versus budgeted business net income over the entire period. Budgeted business net income is approved by the Board of Directors at the beginning of each year. If the ratio is less than 95%, the corresponding performance shares will lapse. The Business Net Income target may not be lower that the lower range of the guidance published by the Company at the beginning of each year. |
· | The ROA-based criterion covers 40% of the award and includes a target ROA, below which some or all of the performance shares will lapse. |
· | In order to bringequity-based compensation into line withmedium-term performance, performance will be measured over three financial years. |
· | Vesting is now subject to a non-compete clause. |
· | In the event that a beneficiary leaves the Company for reasons other than (i) resignation or (ii) dismissal for |
serious cause or gross misconduct, the overall allocation percentage will be prorated to reflect the amount of time he or she remained with the Group during the vesting period. |
The Board regards these performance conditions as good indicators of the development of shareholder value in terms of: the quality of investment decisions in a period where external growth plays a greater role than in the past (ROA condition), and a commitment to delivering challengingbottom-line results in a tough business environment (Business Net Income condition).
Although for reasons of confidentiality the quantitative measures for the internal criteria cannot be publicly disclosed, even though they have been properly and precisely established, in a precise manner, the targets and the level of achievementattainment for the internal criteria will be publicly disclosed at the end of the performance measurement period.
As of December 31, 2012, a total of 287,900 performance shares had been awarded to members of the Executive Committee (existing plans or plans ending in 2012). As of the same date, 223,400 performance shares were in the process of vesting. These figures include the performance shares awarded to Christopher Viehbacher, who is also a member of the Executive Committee.
The table below summarizes the performance shares awarded to individuals who were members of the Executive Committee at the time of the award. For more information on the characteristics of such performance shares see the table "— E. Share Ownership — Existing Restricted Shares Plans as of December 31, 2012" below.
Origin | Date of shareholder authorization | Date of Board Decision | Grant to Executive Committee Members (1) | Date of award | Vesting date | Availability date | Number transferred as of 12/31/2012 | Number of rights canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
sanofi-aventis | 5/31/07 | 03/02/09 | 65,000 | 03/02/09 | 03/03/11 | 03/04/13 | 65,000 | 0 | 0 | |||||||||||||||||||
sanofi-aventis | 4/17/09 | 03/09/11 | 85,500 | 03/09/11 | 03/10/13 | 03/10/15 | 0 | 0 | 85,500 | |||||||||||||||||||
Sanofi | 4/17/09 | 03/05/12 | 137,900 | 03/05/12 | 03/06/15 | 03/06/17 | 0 | 0 | 137,900 | |||||||||||||||||||
|
On March 5, 2013, 402,000 share subscription options and 120,6002012, 95,900 performance shares were awarded to members of the Executive Committee (including 240,000 options(in addition to the 42,000 performance shares awarded to Christopher Viehbacher). In compliance with the AFEP-MEDEF Code, the entire award was contingent upon performance conditions for the period2012-2014.
The Board of Directors, in its meeting of February 4, 2015, determined that:
· | the performance criterion based on Business Net Income (which covered 50% of the award) was 84.4% fulfilled; |
· | theROA-based criterion (which covered 50% of the award) was fulfilled, being 0.5% above the target. |
The Board of Directors, in its meeting of February 4, 2015, determined that the global performance rate was 92.2% and therefore, since the performance condition had been partially fulfilled, 88,420 shares would vest.
On March 5, 2013, 84,000 performance shares were awarded to members of the Executive Committee (on top of the 45,000 performance shares awarded to Christopher Viehbacher). TheIn compliance with the AFEP-MEDEF Code, the entire award iswas contingent upon the same internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weighting of the two criteria is different, with each representing 50% of the grant.
The quantitative measures of performance are the same asconditions for the award of Christopher Viehbacher. Although for reasons of confidentiality, the quantitative measures for the internal criteria cannot be publicly disclosed, even though they have been properly established in a precise manner, the targets and the level of achievement for the internal criteria will be publicly disclosed at the end of the performance measurement period.period 2013-2015.
As part of its commitment to transparency, Sanofi has undertaken to publish in its annual report the level of attainment determined by theThe Board of Directors, for performance conditions applicable to future equity-based compensation plans awarded to Christopher Viehbacher and the other membersin its meeting of the Executive Committee. February 8, 2016, determined that:
· | the performance criterion based on Business Net Income (which covered 50% of the award) was fulfilled, reaching 83.2% of the target; |
· | the ROA-based criterion (which covered 50% of the award) was fulfilled, being 0.2 percentage point above the target. |
The Board considersof Directors, in its meeting of February 8, 2016, determined that disclosing the level of attainment allows our shareholders to better understand the demanding nature ofglobal performance rate was 91.6% and
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therefore, since the performance conditions. For disclosures about the level of attainment of the various equity-based compensation plans, see "— B. Compensation — Compensation and pension arrangements for corporate officers — Christopher Viehbacher", bearing in mind that the TSR-based criterion only applies to the Chief Executive Officer and that the criteria based on Business Net Income and the ROA each apply to 50% of the grant.condition had been partially fulfilled, 76,944 shares would vest.
Under French law, Directors may not receive options solely as compensation for service on our Board, and thusconsequently our Company may grant options only to those Directors who are also our officers.
Because some of our non-executive Directors were formerly officers or executive officers of our Company or its predecessor companies, some of our non-executive Directors hold Sanofi stock options.
We do not have separate profit-sharing plans for key executives. As employees, they are able to participate in our voluntary and statutoryprofit-sharing schemes on the same terms as our other employees. These plans are described below under "—“– Employees — –Profit-sharing schemes."
The total amount accrued as of December 31, 20122015 in respect of corporate pension plans for (i) directors with current or past executive responsibilities at Sanofi or at companies whose obligations have been assumed by Sanofi and (ii) members of the Executive Committee was €162.0€127.8 million, including €9.1€18.6 million recognized in the income statement for the year ended December 31, 2012.2015.
This total amount accrued as of December 31, 20122015 included €83.5€52.6 million for members of the Executive Committee collectively, of which €6.0including€17.2 million were recognized in the income statement for the year ended December 31, 2012.2015.
Neither we nor our subsidiaries have entered into service contracts with members of our Board of Directors providing for benefits upon termination of employment. With respect to Christopher Viehbacher,Olivier Brandicourt see also "—“– B. Compensation — Christopher Viehbacher"– Compensation and arrangements for corporate officers” above.
Application of theAFEP-MEDEF Code
The AFEP-MEDEF Code requires us to specifically report on the application of its recommendations and, if applicable, explain why any of them have not been applied. Sanofi follows the guidelines contained in the AFEP-MEDEF Code as amended. Currently our departures from this Code are as follows:
Paragraph of the AFEP-MEDEF Code | Recommendation of the AFEP-MEDEF Code | Sanofi Implementation | ||
4. The Board of Directors and Strategy | The internal rules of the Board should specify the principle that any material transaction outside the scope of the firm’s stated strategy is subject to prior approval by the Board of Directors. | The limitations on the powers of the Chief Executive Officer are not contained in our Board Charter but in a decision of our Board dated July 28, 2009 (see “– A. Directors and Senior Management – Limitations on the powers of the Chief Executive Officer set by the Board”). These limitations, like our Board Charter, are published every year in our annual report. Because the publication and decision making processes are the same, this departure is technical and has no practical repercussions. | ||
9.4. Independent Directors | The criteria to be reviewed by the committee and the Board in order to qualify as independent and to prevent risks of conflicts of interest between the director and the management, the corporation, or its group, are the following: · not to have been a director of the corporation for more than twelve years. | Our Board of Directors does not strictly follow the recommendation according to which being a Board member for more than 12 consecutive years is of itself sufficient to automatically disqualify a director from being regarded as independent. This is only one criterion that must be evaluated on a case by case basis, and not mechanically. It is only after reviewing all the factors that a director can be determined as being independent or non-independent. While length of service may in certain circumstances be associated with a loss of independence, in other circumstances it may enhance the capacity of a director to question senior management and give greater independence of mind. In response to a question asked by theHaut Comité de Gouvernement d’Entreprise (the body in charge of overseeing the implementation of the |
The limitations on the powers of the Chief Executive Officer are not contained in our Board Charter but in a decision of our Board dated July 28, 2009 (see "— A.169
Item 6. Directors, Senior Management and senior management — Limitations on the powers of the Chief Executive Officer set by the Board"). Because the publication and decision-making processes are the same, this departure is technical and has no practical repercussions.Employees
Paragraph of the AFEP-MEDEF Code | Recommendation of the AFEP-MEDEF Code | Sanofi Implementation | ||
AFEP-MEDEF Code), our Board explained that it considers that its Appointments and Governance Committee is best placed to assess the behavior and hence the true independence of a director. The Board of Directors takes the view that it is not favoring competence over independence but rather checking a director’s willingness and ability to form an independent opinion, to ask for further details and question the decisions of Senior Management. Consequently, our Board of Directors provides explanations for the specific cases it reviews (see above, A. Directors and Senior Management — Board Members Independence) | ||||
10.2. Evaluation of the Board of Directors | The evaluation should have three objectives: · assess the way in which the Board operates; · check that the important issues are suitably prepared and discussed; · measure the actual contribution of each director to the Board’s work through his or her competence and involvement in discussions. | The independence qualification is assessed on a yearly basis. The issue of competence and individual contribution to the activities of the Board and its committees is addressed on a continuous basis with a specific review when a director is up for reappointment as a board or committee member and not through the annual assessment. The Chairman of the Board continually assesses the involvement of each Board member; annual assessments include one on one interviews with the Secretary to the Board. | ||
23.2.4. Stock options and performance shares | Awards are made at the same time of year; e.g. after publication of the financial statements for the previous financial year, and on an annual basis, in order to limit any windfall effects. | Since 2009, our Board of Directors has awarded stock options and performance shares in its early March meetings and hence after publication of annual results for the previous year. Exceptionally, the awards for 2015 were made in June, for two main reasons. Firstly, the new Chief Executive Officer had not yet joined the Group in March, and it was considered preferable to make the awards to all beneficiaries on the same date. Secondly, the August 6, 2015 Act on economic growth, business and equal opportunity (the “Macron Act”) had not yet been enacted. In light of the date on which this Act passed into law, a new authorization will be submitted for shareholder approval at the Annual General Meeting on May 4, 2016 in order to implement the provisions of the new Act. Consequently, the awards for 2016 will also be made after the Annual General Meeting. Subsequently, the Board intends to resume the practice of making the awards annually in March. |
During 2012,2015, the Board of Directors met eighteleven times, with an overall attendance rate among Board members of over 95%91%. This attendance rate includes participation by
conference call, though only a limited number of Directors participated in this way. The individual attendance rates varied between 71%80% and 100%.
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Item 6. Directors, Senior Management and Employees
The following persons attended meetings of the Board of Directors in 2012:
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· | the Directors; |
· | the Secretary to the Board; |
· | five employee representatives who attend Board meetings without voting rights, pursuant to the agreement implemented with the European Works Council signed on February 24, 2005; |
· | and frequent attendance of: the Executive Vice President Chief Financial Officer, the Executive Vice President Global Commercial Operations, the Executive Vice President Global Divisions & Strategic Commercial Development and the President, Global Research & Development. |
The agenda for each meeting of the Board is prepared by the Secretary after consultation with the Chairman, taking account of the agendas for the meetings of the specialist Committees and the suggestions of the directors.
Approximately one week prior to each meeting of the Board of Directors, the Directors each receive a file containing the agenda, the minutes for the prior meeting, and documentation relating to the agenda.
The minutes for each meeting are expressly approved at the next meeting of the Board of Directors.
In compliance with our Board Charter, certain issues are examined in advance by the various Committees according to their areas of competence;competence in order for them to make a recommendation; these issues are then submitted for a decision by the Board of Directors.
The Board of Directors meets once a year without the Chairman of the Board and the Chief Executive Officer, in order to carry out the assessment of their performance. Upon the recommendation of the Appointments and Governance Committee and even before the assessment of the Board and of its Committees for 2015 was performed, the Board decided to raise the number of these executive sessions to two per year. These sessions take place at the beginning of Board meetings.
In 2012,2015, the main activities of the Board of Directors related to the following issues:
· | financial statements and financial matters: |
– | review of the individual company and consolidated financial statements for the 2014 financial year, review of the individual company and consolidated financial statements for the first half of 2015 and the consolidated financial statements for the first three quarters of 2015, review of the draft press releases and presentations to analysts with respect to the publication of such financial statements, examination of documents relating to management forecasts; |
– | financial arrangements adopted with respect to Group subsidiaries over the 2014 financial year; |
– | delegation of authority to the Chief Executive Officer to issue bonds and to issue guarantees, and renewal of the share repurchase program; |
– | reviews of the Board of Directors’ Management Report, the Chairman’s Report and the reports of the statutory auditors; |
– | recording the amount of share capital, the reduction in share capital through cancellation of treasury shares and the corresponding amendments to the Articles of Association; |
· | compensation matters: |
– | determination of the financial terms for the appointment of a new Chief Executive Officer and the determination of the variable compensation of the previous Chief Executive Officer for 2014; |
– | determination of the 2015 fixed compensation of the Chairman of the Board and an update of the 2014 and 2015 fixed and variable compensation of the members of the Executive Committee. During the presentation of the report of the Compensation Committee on the compensation of corporate officers, the Board of Directors deliberated in their absence: the Board of Directors first discussed the compensation of the Chairman in his absence, and then the compensation of the Chief Executive Officer with the Chairman present but with the Chief Executive Officer still absent; |
– | allocation of Directors’ attendance fees for 2014, principles of allocation for 2015 and allocation of attendance fees for the first half of 2015, and expenses of Directors and executive officers; |
– | adoption of equity-based compensation plans, consisting of stock subscription option plans and performance share awards in respect of 2015 and the determining fulfillment of the performance conditions of previous share-based plans; |
· | appointments and governance matters: |
– | resignation by the Chairman of the Board from the office of Chief Executive Officer, appointment of a new Chief Executive Officer and his co-opting as a Director, review of limitations on the powers of the Chief Executive Officer; |
– | the co-opting of a new director, composition of the Board, proposed reappointment of Directors at the 2015 Annual General Meeting, independence of Directors, reappointment of the Chairman of the Board |
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Item 6. Directors, Senior Management and consolidated financial statements for the financial year 2011, the review of the individual company and consolidated financial statements for the first half and the consolidated financial statements for the first three quarters of 2012, as well as the review of the draft press releases and presentations to analysts with respect to the publication of such financial statements;
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the draft resolutions, the report of the Board of Directors on the resolutions, and the special reports on the share subscription options and on the restricted shares awarded;
– | appointment of a new Audit Committee chairman, review of the composition of the Committees in view of the new composition of the Board; |
– | reviews of the Board of Directors’ Management Report, the Chairman’s Report and the reports of the statutory auditors; |
– | the notice of meeting for the General Meeting of Shareholders and of Holders of Participating Shares (Series issued in 1983, 1984 and 1987 and Series A participating shares issued in 1989), adoption of the draft resolutions, report of the Board of Directors on the resolutions, and special reports on the awards of stock subscription options and performance shares; |
– | evaluation of the functioning of the Board and its Committees. |
· | a presentation on Toujeo®; |
· | review of significant proposed alliances and acquisitions, and strategic opportunities; |
· | Company policy on equal pay and opportunities; and |
· | approval in principle of a share issue reserved for employees. |
Board Committees
Since 1999, our Board of Directors has been assisted in its deliberations and decisions by specialist committees. MembersChairmen and members of these committees are chosen by the Board from among its members, based on their experience.
The members of these Committees are selected from among the Directors based on their experience and are appointed by the Board of Directors.
The Committees are responsible for the preparation of certain items on the agenda of the Board of Directors. The decisions of the Committees are adopted by a simple majority with the chairman of the Committee having a casting vote. Minutes are established and approved by the Committee members.
The chairmen of the Audit Committee, the Compensation Committee and the Appointments and Governance Committee are appointed by the Board of Directors.
The chairman of each specialist Committee reports to the Board as toon the work of the Committee in question, so that the Board is fully informed whenever it adopts a decision.
The Board of Directors works in close collaboration with the specialist Committees, with a view to ensuring that it carries on its work with maximum transparency and efficiency at all times.
Audit Committee
At December 31, 2012,2015, this Committee was composed of:
Christian Mulliez was appointed as a member of the Audit Committee by the Board of Directors during its meeting of May 4, 2012, following the Shareholders' General Meeting held on the same day.
Robert Castaigne; Chairman, since March 3, 2015; Fabienne Lecorvaisier; Christian Mulliez; and Carole Piwnica. Before this appointment, during its meeting of March 5, 2012, the Audit Committee examined the experience of Christian Mulliez as Vice President, General Manager Administration and Finance of L'Oréal and graduate of theEcole Supérieure des Sciences Economiques et Commerciales (ESSEC). The Audit Committee concluded that Christian Mulliez has the necessary knowledge and experience in finance and accounting, in particular with respect to IFRS standards and internal controls, to be a financial expert. On February 23, 2012 the Appointments and Governance Committee examined the independence of its members and concluded that Christian Mulliez was not an independent Director under the AFEP-MEDEF Code.· Four· · ·
Three members of the Audit Committee are classified as independent pursuant to the criteria adopted by the Board of Directors, i.e.Directors. Robert Castaigne, Fabienne Lecorvaisier, and Carole Piwnica, Klaus Pohle and Gérard Van Kemmel.Piwnica. In addition, all of the members, including Christian Mulliez, fulfill the conditions required to be classified as independent under the Sarbanes-Oxley Act.
All fivefour members of the Committee have financial or accounting expertise as a consequence of their education and professional experience.experience as reflected in their biographies. Furthermore, Robert Castaigne, Fabienne Lecorvaisier, and Christian Mulliez Klaus Pohle and Gérard Van
Kemmel are deemed to be financial experts pursuant to the definition in the Sarbanes-Oxley Act and the definition in Article L.823-19 of the French Commercial Code. See "Item“Item 16A. Audit Committee Financial Expert"Expert”.
The Audit Committee met eightsix times in 2012,2015, including prior to the meetings of the Board of Directors during which the financial statements were approved. In addition to the statutory auditors, the principal financial officers, the Senior Vice President Audit and Evaluation ofGroup Internal ControlAudit and other members of senior management of the Group attended meetings of the Audit Committee.Committee, in particular concerning risk exposure andoff-balance-sheet commitments.
The meetings of the Audit Committee meetings take place at least two days prior to any meetings of the Board of Directors during which the annual or interim financial statements are to be examined.
The members of the Audit Committee have a good attendance record for meetings, with an overall attendance rate among members of more than 96%. Individual attendance rates varied between over 80% and 100%.
The statutory auditors attended all of the meetings of the Audit Committee; they presented their opinions on the annual and half yearly financial statements at the Committee meetings of February 2 and July 27, 2015, respectively.
In 2015, the main activities of the Audit Committee related to:
· | preliminary review of the individual company and consolidated financial statements for the 2014 financial year, review of the individual company and consolidated financial statements for the first half of 2015 and of the consolidated financial statements for the first three quarters of 2015, a review of press releases and analysts presentations relating to the publication of such financial statements; |
· | the financial position of the Group, its indebtedness and liquidity; |
· | investigation and evaluation of internal control for 2014, as certified by the statutory auditors pursuant to Section 404 of the Sarbanes-Oxley Act, and an examination of the 2014 Annual Report on Form 20-F; |
· | reporting on guarantees; |
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· | review of the draft financial resolutions for the May 4, 2015 Shareholders’ General Meeting; |
· | the principal risks facing the Company, including an update on pharmacovigilance, report of the Risk Committee, impairment testing of goodwill, review of whistleblowing and compliance investigations, review of tax risks and deferred tax assets, review of litigation risks, review of the financial risks, update on pension funds and actuarial assumptions (meetings of March 2, April 27, October 26, and December 15, 2015); |
· | conclusions of Group management as internal control procedures, the 2014 Board of Directors’ Management Report, the 2014 Report under the French Financial Security Act, and the 2014 Chairman’s Report, including the description of risk factors contained in the FrenchDocument de Référence; |
· | reporting on the implementation of the internal control and process department, reporting on internal audit activities and computer services; |
· | post-acquisitions review (BMP Sunstone, Genzyme), organization and monitoring of undertakings related to R&D agreements, partnerships (excluding Regeneron and Mannkind), and site divestitures, and progress reports on acquisitions; and |
· | the audit plan, statutory auditors’ allocation and fees, the budget for audit-related services andnon-audit services and the 2015 statutory auditors’ report and fees. |
The Committee did not have recourse to external consultants in 2015.
Compensation Committee
At December 31, 2015, this Committee was composed of:
· | Jean-René Fourtou Chairman since May 4, 2015; |
· | Claudie Haigneré; |
· | Patrick Kron, since May 4, 2015; and |
· | Christian Mulliez. |
Of the four members of the Compensation Committee, three are deemed to be independent.
The Compensation Committee met six times in 2015.
The members of the Compensation Committee have a very good attendance record for meetings, with an overall attendance rate among members of 94%. Individual attendance rates varied between 75% and 100%.
The statutory auditors attended all of the meetings of the Audit Committee; they presented their views as to the annual and half yearly financial statements at the Committee meetings of February 3, and July 23, 2012, respectively.
In 2012, the main activities of the Audit Committee related to:
The Committee did not have recourse to external consultants in 2012.
Compensation Committee
At December 31, 2012, this Committee was composed of:
Lindsay Owen-Jones, whose mandate as Director expired at the close of the May 4, 2012 Shareholders' General Meeting, also left the Compensation Committee. At the end of the Board meeting which followed the Shareholders' General Meeting, Christian Mulliez joined the Compensation Committee.
Of the five members of the Compensation Committee, three are deemed to be independent.
The Compensation Committee met three times in 2012.
The members of the Compensation Committee have an excellent attendance record for meetings, with an overall attendance rate among members of 100%.
In 2012, the main activities of the Compensation Committee related to:
The Committee did not have recourse to external consultants in 2012.
When the Committee discusses the compensation policy for members of senior management who are not corporate officers, i.e. the members of the Executive Committee, the Committee invites the members of senior management who are corporate officers to attend.
In 2015, the main activities of the Compensation Committee related to:
· | a compensation structure for the new Chief Executive Officer; |
· | fixed and variable compensation of corporate officers and senior management; |
· | the terms of the previous Chief Executive Officer’s removal from office, determination of his 2014 variable compensation, determination of fulfillment of the performance conditions of his previous share-based plans; |
· | update on the 2014 and 2015 fixed and variable compensation of the members of the Executive Committee; |
· | establishment of the amount of Directors’ attendance fees for 2014, review of the expenses of Directors and corporate officers for 2014, principles of allocation of Directors attendance fees for 2015; |
· | review of the governance chapter of the 2014 Document de Référence, which contains disclosures about compensation; |
· | determination of fulfillment of the performance conditions of previous share-based plans; |
· | implementation of the equity-based compensation policy, including both stock options and performance shares, which was discussed at several meetings largely because of the need to review clauses relating to departure from the Group; |
· | review of draft compensation-related resolutions to be presented to the shareholders in 2015, in particular Say on Pay, renewal of the delegation of authority to the Board to allocate performance shares and the delegation related to share issues reserved for employees; and |
· | an update on the August 6, 2015 Act on economic growth, business and equal opportunity (the “Macron Act”). |
The Committee did not have recourse to external consultants in 2015.
Appointments and Governance Committee
At December 31, 2012,2015, this Committee was composed of:
Lindsay Owen-Jones, whose mandate as Director expired at the close of the May 4, 2012 Shareholders' General Meeting, also left the Appointments and Governance Committee.
· | Serge Weinberg Chairman since October 28, 2015; |
Of the six
· | Jean-René Fourtou; |
· | Claudie Haigneré; and |
· | Patrick Kron, since May 4, 2015. |
All four members of the Appointments and Governance Committee four are deemed to be independent.
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The Appointments and Governance Committee met twicesix times in 2012.2015.
The members of the Appointments and Governance Committee have an excellenta very good attendance record for meetings, with an overall attendance rate among members of 100%.
In 2012,2015, the main activities of the Appointments and Governance Committee related to:
· | the appointment of a new Chief Executive Officer; |
· | review of limitations on the powers of the Chief Executive Officer; |
· | results of the evaluation of the Board and its Committees; |
· | review of the Board of Directors Management Report, Chairman’s Report, and the chapter of the 2014 Document de Référence containing disclosures about governance; |
· | update on the composition of the Board, appointment of a new Audit Committee Chairman, independence of Directors, proposals about the reappointment of Directors, update on the composition of the Committees after the May 4, 2015 Shareholders’ General Meeting, appointment of the Chairman of the Board as the Chairman of the Appointments and Governance Committee; |
· | establishing the format for the review of succession planning; and |
· | an update on the August 17, 2015 Act on social dialogue and employment, (the “Rebsamen Act”). |
The Committee did not havehad recourse to external consultants in 2012.2015, principally for the evaluation of the Board and its Committees.
Strategy Committee
At December 31, 2012,2015, this Committee was composed of:
Lindsay Owen-Jones, whose mandate as Director expired at the close of the May 4, 2012 Shareholders' General Meeting, also left the Strategy Committee. At the end of the Board meeting which followed the Shareholders' General Meeting, Laurent Attal joined the Strategy Committee.
· | Serge Weinberg, Chairman; |
· | Olivier Brandicourt (since April 2, 2015); |
· | Laurent Attal; |
· | Uwe Bicker; |
· | Jean-René Fourtou; and |
· | Patrick Kron (since May 4, 2015). |
Of the sevensix members of the Strategy Committee, threefour are deemed to be independent.
In 2012,2015, the Strategy Committee met sixfive times, four times in restrictive sessions andincluding twice in expanded sessions.sessions that included other directors.
The members of the Strategy Committee have an excellenta very good attendance record for meetings, with an overall attendance rate among members of over 92%. Individual attendance rates varied between 60% and 100%.
As in 2011, theThe work of the Committee covered in particular researchthe launch of Praluent®, overview of strategy, and developmentseveral proposed external R&D collaborations, acquisitions and proposed acquisitions. Several meetings also covered the development of a strategic plan for 2015-2020, analysis of the risk from generics, macro trends in the market, and the outlook for each of the growth platforms.
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The Committee did not have recourse to external consultants in 2012.2015.
Number of Employees
In 2012,2015, Sanofi employed 111,974115,631 people worldwide, 1,745 fewer2,135 more than in 2011.2014. The tables below give a breakdown of employees by geographic area and function as offor the years ended December 31, 2012.2015, 2014 and 2013.
Employees by geographic area
| As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 | % | 2011 | % | 2010 | % | As of December 31, | ||||||||||||||||||||||||||||||||||||||||
2015 | % | 2014 | % | 2013 | % | 2012 | % | ||||||||||||||||||||||||||||||||||||||||
Europe | 56,265 | 50.2% | 58,339 | 51.3% | 54,815 | 54.0% | 54,375 | 47.0% | 53,341 | 47.0% | 53,880 | 48.0% | 56,265 | 50.2% | |||||||||||||||||||||||||||||||||
North America | 18,994 | 17.0% | 20,233 | 17.8% | 15,106 | 14.9% | 19,263 | 16.7% | 18,627 | 16.4% | 18,795 | 16.8% | 18,994 | 17.0% | |||||||||||||||||||||||||||||||||
Other countries | 36,715 | 32.8% | 35,147 | 30.9% | 31,654 | 31.1% | 41,993 | 36.3% | 41,528 | 36.6% | 39,453 | 35.2% | 36,715 | 32.8% | |||||||||||||||||||||||||||||||||
Total | 111,974 | 100% | 113,719 | 100% | 101,575 | 100% | 115,631 | 100% | 113,496 | 100% | 112,128 | 100% | 111,974 | 100% | |||||||||||||||||||||||||||||||||
|
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Item 6. Directors, Senior Management and Employees
Employees by function
As of December 31, | ||||||||||||||||||||||||||||||||
2015 | % | 2014 | % | 2013 | % | 2012 | % | |||||||||||||||||||||||||
Sales | 34,172 | 29.5% | 34,118 | 30.1% | 33,509 | 29.9% | 32,270 | 28.8% | ||||||||||||||||||||||||
Research and Development | 16,260 | 14.1% | 16,257 | 14.3% | 16,688 | 14.9% | 17,066 | 15.2% | ||||||||||||||||||||||||
Production | 45,744 | 39.6% | 44,366 | 39.1% | 44,031 | 39.3% | 45,035 | 40.2% | ||||||||||||||||||||||||
Marketing and Support Functions | 19,455 | 16.8% | 18,755 | 16.5% | 17,900 | 16.0% | 17,603 | 15.7% | ||||||||||||||||||||||||
Total | 115,631 | 100% | 113,496 | 100% | 112,128 | 100% | 111,974 | 100% |
| As of December 31, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 | % | 2011 | % | 2010 | % | |||||||||
Sales | 32,270 | 28.8% | 32,874 | 28.9% | 32,686 | 32.2% | |||||||||
Research and Development | 17,066 | 15.2% | 18,823 | 16.6% | 16,983 | 16.7% | |||||||||
Production | 45,035 | 40.2% | 44,415 | 39.0% | 37,504 | 36.9% | |||||||||
Marketing and Support Functions | 17,603 | 15.7% | 17,607 | 15.5% | 14,402 | 14.2% | |||||||||
Total | 111,974 | 100% | 113,719 | 100% | 101,575 | 100% | |||||||||
|
Industrial Relations
In all countries where Sanofi operates,we operate, we strive to combine economic and social performance — which we believe are inseparable.
Sanofi's socialOur responsibility towards our employees is based on the basic principles of the Group'sGroup’s Social Charter, which outlines the rights and duties of all Group employees. The Social Charter addresses Sanofi'sSanofi’s key commitments towards its workforce: equal opportunity for all people without discrimination, the right to health and safety, respect for privacy, the right to information and professional training, social protection for employees and their families, freedom of association and the right to collective bargaining, and respect for the principles contained in the Global Compact on labor relations and ILO treaties governing the physical and emotionalwell-being and safety of children.
The Group's socialGroup’s labor relations are based on respect and dialogue. In this spirit, the Company'sCompany’s management and employee representatives meet regularly to exchange views, negotiate, sign agreements and ensure that agreements are being implemented.
SocialEmployee dialogue takes place in different ways from one country to the next, as necessitateddictated by specific local circumstances. Depending on the case, socialcircumstances, employee dialogue relating to information, consultation and negotiation processes may take place at the national, regional or company level. It may be organized on an interprofessional or sectorialsectoral basis, or both. SocialEmployee dialogue may be informal or it may be implemented through a specific formal body, or a combination of both methods. Whatever the situation, Sanofi encourages employees to voice their opinions, help create a stimulating work environment and take part in decisions aiming to improve the way we work. These efforts reflect one of the principles of the Social Charter whereby the improvement of working conditions and the Group'sGroup’s necessary adaptation to its environment gohand-in-hand.
Profit-sharing Schemes, Employee Savings Schemes and Employee Share Ownership
Profit-sharing Schemes
All employees of our French companies belong to voluntary and statutoryprofit-sharing schemes.
Voluntary Scheme (Intéressement des salariés)
These are collective schemes that are optional for the employer and contingent upon performance. The aim is to give employees an interest in the growth of the business and improvements in its performance.
The amount distributed by our French companies during 20122015 in respect of voluntary profit-sharing for the year ended December 31, 20112014 represented 5.2%4.60% of total payroll.
In June 2011,2015, Sanofi entered into a three-yeartwo-year Group-wide agreement, effective from the 20112015 financial year, and applicable to all French companies more than 50% owned by Sanofi. Under the agreement, payments under the Group voluntary profit-sharing scheme dependSanofi will pay collective variable compensation determined on the most favorable criterion betweenbasis of either (i) growth of growth platforms turnover compared toin the previous year's turnover (withGroup’s net sales (at constant exchange raterates and perimeter) andon a constant structure basis) or (ii) the level of business net income.income, whichever is more favorable. For each criterion,of these criteria, a schedule allows tomatrix will determine thewhat percentage of total payroll is to be distributed.allocated to the scheme. This overall allocation is then reduced by the amount required by law to be transferred to a special profit-sharing reserve. The balance is then distributed between the employees, unless the transfer to the reserve exceeds the maximum amount determined under the specified criteria, in which case no profit share is paid to the employees.
Statutory Scheme (Participation des salariés aux résultats de l'entreprisel’entreprise)
The scheme is a French legal obligation for companies with more than 50 employees that made a profit in the previous financial year.
The amount distributed by our French companies during 20122015 in respect of the statutory scheme for the year ended December 31, 20112014 represented 5.7%3.28% of total payroll.
In November 2007, Sanofi entered into a new Group-wide agreement for an indefinite period, covering all the employees of our French companies.
An amendment to this agreement was signed in April 2009, primarily to align the agreement on a change in French legislation (Law(Law 2008-1258 of December 3, 2008) in order to protect against erosion in purchasing power, under which
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Item 6. Directors, Senior Management and Employees
each qualifying employee can elect to receive some or all of his or her profit-sharing bonus without regard to the normally applicable mandatory lock-up period.
Distribution Formula
In order to favorlower-paid employees, the voluntary and statutory profit-sharing agreements entered into since 2005 split the benefit between those entitled as follows:
· | 60% prorated on the basis of time spent in the Company’s employment in the year; and |
· | 40% prorated on the basis of gross annual salary during the year, subject to a lower limit equal to the social security ceiling and an upper limit of three times the social security ceiling. |
Employee Savings Schemes and Collective Retirement Savings Plan
The employee savings arrangements operated by Sanofi are based on a Group savings scheme (Plan Epargne Groupe) and a collective retirement savings plan (Plan Epargne pour la Retraite Collectif). These schemes reinvest the sums derived from the statutory and voluntaryprofit-sharing schemes (compulsory investments), and voluntary contributions by employees.
In June 2012, 77%2015, more than 94% of the employees who benefited from the profit-sharing schemes had opted to invest in the collective savings scheme and more than 86% of the employees who benefited from the profit-sharing schemes had opted to invest in the collective retirement savings plan.
In 2012, €122.92015,€111 million and €57.6€57.3 million were invested in the Group savings scheme and the collective retirement savings plan respectively through the voluntary and statutory schemes for 2010,2014, and throughtop-up contributions.
Employee Share Ownership
At December 31, 2012,2015, shares held by employees of Sanofi and of related companies and by former employees under Group employee savings schemes amounted to 1.31%1.28% of the share capital.
Senior Management
Members of the Executive Committee hold shares of our Company amounting in the aggregate to less than 1% of our share capital.
At December 31, 2011, a total of 2,998,000During 2015, 263,104 stock subscription options had been granted to thewere exercised by individuals who were members of the Executive Committee (plans existing or closed in 2012) and 2,898,000 unexercised optionswhen they exercised.
These exercises related to subscribe for or to purchase Sanofi shares were held by the members of the Executive Committee.
In 2012, 70,000 options were exercised by members of the Executive Committee (December 10, 2003 Sanofi-Synthélabo subscriptiontwo option plan, i.e. beforeplans that pre-date the creation of the Executive Committee (sanofi-aventis subscription option plan of May 31, 2005 with an exercise
price of€70.38 and sanofi-aventis subscription option plan of December 14, 2006 with an exercise price of€66.91), and two others thatpost-date the creation of the Executive Committee (sanofi-aventis subscription option plan of March 1, 2010 with an exercise price of €55.74).
At December 31, 2012, a total€54.12 andsanofi-aventis subscription option plan of 287,900 performance shares had been awarded to the membersMarch 9, 2011 with an exercise price of the Executive Committee (plans existing or closed in 2012) and 223,400 unvested performance shares were held by the members of the Executive Committee.
These figures include the options granted to Christopher Viehbacher, who is a member of the Executive Committee. The terms of these options and performance shares are summarized in the tables below.€50.48).
Existing Option Plans as of December 31, 20122015
As of December 31, 2012,2015, a total of 51,022,01115,867,615 options were outstanding, including 291,537159,851 options to purchase Sanofi shares and 50,730,47415,707,764 options to subscribe for Sanofi shares. Out of this total, 34,622,75613,028,045 were immediately exercisable, including 291,537159,851 options to purchase shares and 34,331,21912,868,194 options to subscribe for shares.
Equity-based compensation, consisting of share subscription option plans and performance share plans, aims to align the employees'employees’ objectives on those of the shareholders and to reinforce the link between employees and the Group. Under French law, this falls within the powers of the Board of Directors. Stock options (which may be options to subscribe for shares or options to purchase shares) are granted to employees and the Chief Executive Officer by the Board of Directors on the basis of recommendations from the Compensation Committee.
Granting options is a way of recognizing the beneficiary'sbeneficiary’s contribution to the Group'sGroup’s development, and also of securing his or her future commitment to the Group.
For each plan, the Compensation Committee and the Board of Directors assess whether it should take the form of options to subscribe for shares or options to purchase shares, based on criteria that are primarily financial.
A list of beneficiaries is proposed by the Senior Management to the Compensation Committee, which reviews the list and then submits it to the Board of Directors, which grantsdecides to grant the options. The Board of Directors also sets the terms for the exercise of the options (including the exercise price) and thelock-up period. The exercise price never incorporates a discount, and must be at least equal to the average of the quoted market prices on the 20 trading days preceding the date of grant by the Board. Stock option plans generally specify a vesting period of four years and a total duration of ten years.
In 2011, the Board of Directors made significant changes to itsequity-based compensation policy. In order to limit the dilutive effect on shareholders, the Board of Directors determined to primarily award performance shares, except for a limited group of senior managers who may continue to receive options. Furthermore, whoever the beneficiary is, any award of options or performance shares will henceforth beis now fully contingent upon the performance targets being met over severalthree financial years.
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Item 6. Directors, Senior Management and Employees
On March 5, 2012, 574,050 shareJune 24, 2015, 215,000 stock subscription options were awarded to 5512 beneficiaries (excluding 240,000220,000 options awarded to Christopher Viehbacher)Olivier Brandicourt). Each option entitles the grantee to the subscription ofsubscribe for one share, in the aggregate representing 0.04%0.03% of our share capital before dilution.
The entire award was contingent upon two of the same internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weighting of each criterion is different, each representing 50%award to members of the grant.Executive Committee. The quantitative measures of performance are the same as for the award to members of Christopher Viehbacher.the Executive Committee. Vesting is now subject to a non-compete clause.
The percentage of options awarded to Christopher ViehbacherOlivier Brandicourt in 20122015 represents 1.81%2.41% of the total limit approved by the Shareholders'
Shareholders’ General Meeting held on May 6, 2011 (1%3, 2013 (0.7% of our share capital) and 29.48%50.6% of the total award to all beneficiaries on March 5, 2012.June 24, 2015.
Not all employees are able to benefit from awards of performance shares, but a new agreement on the voluntary scheme (intéressement des salariés) was concluded in June 20112015 to ensure that all employees have an interest in the performance of the business.business (for more details see “– Profit-sharing Schemes, Employee Savings Schemes and Employee Share Ownership” above).
In addition, pursuant to the French Law of July 28, 2011, all employees in France of the French subsidiaries of the Group benefited from aprofit-sharing bonus amounting to €620€600 gross in July 2012. In total, Sanofi paid out €18.3 million in this regard (including social contributions).October 2015.
On March 5, 2013, the Board of Directors awarded 548,725 share subscription options to 57 beneficiaries (excluding 240,000 options awarded to Christopher Viehbacher). Each option entitles the grantee to the subscription of one share, in the aggregate representing 0.04% of our share capital before dilution.
The entire award was contingent upon two of the same internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weighting of each criterion is different, each representing 50% of the grant.
As part of its commitment to transparency, Sanofi has undertaken to publish in its annual report the level of attainment determined by the Board of Directors for the performance conditions applicable to future equity-based compensation plans awarded to Christopher Viehbacher and the other members of the Executive Committee. The Board considers that disclosing the level of attainment allows our shareholders to better understand the demanding nature of the performance conditions. For disclosures about the level of attainment of the various equity-based compensation plans, see "— B. Compensation — Compensation and pension arrangements for corporate officers — Christopher Viehbacher", bearing in mind that the TSR-based criterion only applies to the Chief Executive Officer and that the criteria based on Business Net Income and the ROA each apply to 50% of the grant.
Share Purchase Option Plans
Origin | Date of shareholder authorization | Date of Board grant | Number of options initially granted | - to corporate officers (1) | - to the 10 employees granted the most options (2) | Start date of exercise period | Expiration date | Purchase price (in €) | Number exercised as of 12/31/2012 | Number canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Synthélabo | 6/28/1990 | 10/18/1994 | 330,200 | 0 | 200,200 | 10/18/1999 | 10/18/2014 | 6.01 | 325,000 | 0 | 5,200 | |||||||||||||||||||||||
Synthélabo | 6/28/1990 | 1/12/1996 | 208,000 | 0 | 52,000 | 1/12/2001 | 1/12/2016 | 8.56 | 199,130 | 0 | 8,870 | |||||||||||||||||||||||
Synthélabo | 6/28/1990 | 4/05/1996 | 228,800 | 0 | 67,600 | 4/05/2001 | 4/05/2016 | 10.85 | 210,300 | 0 | 18,500 | |||||||||||||||||||||||
Synthélabo | 6/28/1990 | 10/14/1997 | 262,080 | 0 | 165,360 | 10/14/2002 | 10/14/2017 | 19.73 | 233,438 | 5,200 | 23,442 | |||||||||||||||||||||||
Synthélabo | 6/28/1990 | 6/25/1998 | 296,400 | 148,200 | 117,000 | 6/26/2003 | 6/25/2018 | 28.38 | 292,900 | 0 | 3,500 | |||||||||||||||||||||||
Synthélabo | 6/23/1998 | 3/30/1999 | 716,040 | 0 | 176,800 | 3/31/2004 | 3/30/2019 | 38.08 | 478,295 | 5,720 | 232,025 | |||||||||||||||||||||||
Sanofi-Synthélabo | 5/18/1999 | 5/22/2002 | 3,111,850 | 145,000 | 268,000 | 5/23/2006 | 5/22/2012 | 69.94 | 61,000 | 3,050,850 | 0 | |||||||||||||||||||||||
Origin | Date of shareholder authorization | Date of Board grant | Number of options initially granted | - to corporate officers(1) | - to the 10 employees granted the most options(2) | Start date of exercise period | Expiry date | Purchase price (in €) | Number exercised as of 12/31/2015 | Number canceled as of 12/31/2015 | Number outstanding | |||||||||||||||||||||||||||||||||
Synthélabo | 6/28/1990 | 1/12/1996 | 208,000 | 0 | 52,000 | 1/12/2001 | 1/12/2016 | 8.56 | 204,330 | 0 | 3,670 | |||||||||||||||||||||||||||||||||
Synthélabo | 6/28/1990 | 4/05/1996 | 228,800 | 0 | 67,600 | 4/05/2001 | 4/05/2016 | 10.85 | 220,700 | 0 |
| 8,100 |
| |||||||||||||||||||||||||||||||
Synthélabo | 6/28/1990 | 10/14/1997 | 262,080 | 0 | 165,360 | 10/14/2002 | 10/14/2017 | 19.73 | 256,880 | 5,200 | 0 | |||||||||||||||||||||||||||||||||
Synthélabo | 6/23/1998 | 3/30/1999 | 716,040 | 0 | 176,800 | 3/31/2004 | 3/30/2019 | 38.08 | 562,239 | 5,720 | 148,081 |
(1) | Includes the Chairman and Chief Executive Officer, the Chief Executive Officer or equivalent officers as of the date of grant. |
(2) | Employed as of the date of grant. |
Share Subscription Option Plans
Origin | Date of shareholder authorization | Date of grant | Number of options initially granted | - to corporate officers(1) | - to the 10 employees granted the most options(2) | Start date of exercise period | Expiry date | Subscription price (in €) | Number exercised as of 12/31/2015 | Number canceled as of 12/31/2015(3) | Number outstanding | |||||||||||||||||||||||||||||||||
sanofi-aventis | 5/31/2005 | 5/31/2005 | 15,228,505 | 400,000 | 550,000 | 6/01/2009 | 5/31/2015 | 70.38 | 12,104,530 | 3,125,075 | 0 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 5/31/2005 | 12/14/2006 | 11,772,050 | 450,000 | 585,000 | 12/15/2010 | 12/14/2016 | 66.91 | 7,353,145 | 1,183,050 | 3,239,355 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 5/31/2007 | 12/13/2007 | 11,988,975 | 325,000 | 625,000 | 12/14/2011 | 12/13/2017 | 62.33 | 7,458,670 | 1,076,070 | 3,454,235 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 5/31/2007 | 3/02/2009 | 7,736,480 | 250,000 | 655,000 | 03/04/2013 | 3/01/2019 | 45.09 | 4,903,429 | 623,415 | 2,209,636 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/01/2010 | 7,316,355 | 0 | 665,000 | 3/03/2014 | 02/28/2020 | 54.12 | 3,433,277 | 647,795 | 3,237,788 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/01/2010 | 805,000 | 275,000 | 805,000 | 3/03/2014 | 02/28/2020 | 54.12 | 606,150 | 50,000 | 148,850 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 574,500 | 0 | 395,000 | 3/10/2015 | 3/09/2021 | 50.48 | 102,916 | 35,454 | 436,130 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 300,000 | 300,000 | 0 | 3/10/2015 | 3/09/2021 | 50.48 | 150,000 | 7,800 | 142,200 | |||||||||||||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2012 | 574,050 | 0 | 274,500 | 3/06/2016 | 3/05/2022 | 56,44 | 0 | 78,425 | 495,625 | |||||||||||||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2012 | 240,000 | 240,000 | 0 | 3/06/2016 | 3/05/2022 | 56,44 | 0 | 35,280 | 204,720 | |||||||||||||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2013 | 548,725 | 0 | 261,000 | 3/06/2017 | 3/05/2023 | 72.19 | 0 | 43,500 | 505,225 | |||||||||||||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2013 | 240,000 | 240,000 | 0 | 3/06/2017 | 3/05/2023 | 72.19 | 0 | 0 | 240,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/03/2013 | 3/05/2014 | 769,250 | 0 | 364,500 | 3/06/2018 | 3/05/2024 | 73.48 | 0 | 49,750 | 719,500 | |||||||||||||||||||||||||||||||||
Sanofi | 5/03/2013 | 3/05/2014 | 240,000 | 240,000 | 0 | 3/06/2018 | 3/05/2024 | 73.48 | 0 | 0 | 240,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/03/2013 | 6/24/2015 | 12,500 | 0 | 12,500 | 6/25/2019 | 6/24/2025 | 89.38 | 0 | 500 | 12,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/03/2013 | 6/24/2015 | 202,500 | 0 | 202,500 | 6/25/2019 | 6/24/2025 | 89.38 | 0 | 0 | 202,500 | |||||||||||||||||||||||||||||||||
Sanofi | 5/03/2013 | 6/24/2015 | 220,000 | 220,000 | 0 | 6/25/2019 | 6/24/2025 | 89.38 | 0 | 0 | 220,000 |
(1) | Includes the Chairman and Chief Executive Officer, the Chief Executive Officer, or equivalent officers as of the date of grant. |
(2) | Employed as of the date of grant. |
(3) | Including 183,640 options canceled due to the partial non-fulfillment of the performance conditions. |
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Item 6. Directors, Senior Management and Employees
Origin | Date of shareholder authorization | Date of grant | Number of options initially granted | - to corporate officers (1) | - to the 10 employees granted the most options (2) | Start date of exercise period | Expiration date | Subscription price (in €) | Number exercised as of 12/31/2012 | Number canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aventis | 5/24/2000 | 3/06/2002 | 1,173,913 | 1,173,913 | 0 | 3/07/2005 | 3/06/2012 | 69.82 | 0 | 1,173,913 | 0 | |||||||||||||||||||||||
Aventis | 5/14/2002 | 11/12/2002 | 11,775,414 | 352,174 | 741,100 | 11/13/2005 | 11/12/2012 | 51.34 | 8,844,395 | 2,931,019 | 0 | |||||||||||||||||||||||
Aventis | 5/14/2002 | 12/02/2003 | 12,012,414 | 352,174 | 715,000 | 12/03/2006 | 12/02/2013 | 40.48 | 8,379,556 | 1,782,670 | 1,850,188 | |||||||||||||||||||||||
Sanofi-Synthélabo | 5/18/1999 | 12/10/2003 | 4,217,700 | 240,000 | 393,000 | 12/11/2007 | 12/10/2013 | 55.74 | 2,630,340 | 227,500 | 1,359,860 | |||||||||||||||||||||||
sanofi-aventis | 5/31/2005 | 5/31/2005 | 15,228,505 | 400,000 | 550,000 | 6/01/2009 | 5/31/2015 | 70.38 | 201,864 | 2,129,105 | 12,897,536 | |||||||||||||||||||||||
sanofi-aventis | 5/31/2005 | 12/14/2006 | 11,772,050 | 450,000 | 585,000 | 12/15/2010 | 12/14/2016 | 66.91 | 1,031,435 | 1,149,310 | 9,591,305 | |||||||||||||||||||||||
sanofi-aventis | 5/31/2007 | 12/13/2007 | 11,988,975 | 325,000 | 625,000 | 12/14/2011 | 12/13/2017 | 62.33 | 2,318,000 | 1,038,645 | 8,632,330 | |||||||||||||||||||||||
sanofi-aventis | 5/31/2007 | 3/02/2009 | 7,736,480 | 250,000 | 655,000 | 03/04/2013 | 3/01/2019 | 45.09 | 18,755 | 574,265 | 7,143,460 | |||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/01/2010 | 7,316,355 | 0 | 665,000 | 3/03/2014 | 02/28/2020 | 54.12 | 440 | 473,670 | 6,842,245 | |||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/01/2010 | 805,000 | 275,000 | 805,000 | 3/03/2014 | 02/28/2020 | 54.12 | 0 | 50,000 | 755,000 | |||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 574,500 | 0 | 395,000 | 3/10/2015 | 3/09/2021 | 50.48 | 0 | 30,000 | 544,500 | |||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 300,000 | 300,000 | 0 | 3/10/2015 | 3/09/2021 | 50.48 | 0 | 0 | 300,000 | |||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2012 | 574,050 | 0 | 274,500 | 3/06/2016 | 3/05/2022 | 56,44 | 0 | 0 | 574,050 | |||||||||||||||||||||||
Sanofi | 5/06/2011 | 3/05/2012 | 240,000 | 240,000 | 0 | 3/06/2016 | 3/05/2022 | 56,44 | 0 | 0 | 240,000 | |||||||||||||||||||||||
The main characteristics of our stock options are also described in Note D.15.8D.15.8. to our consolidated financial statements, included in Item 18 of this annual report.
Existing Restricted Share Plans as of December 31, 20122015
Since 2009, the Board of Directors has awarded restricted shares to certain employees in order to give them a direct stake in the Company'sCompany’s future and performances via trends in the share price, as a partial substitute for the granting of stock options.
Restricted shares are awarded to employees on the basis of a list submitted to the Compensation Committee. This Committee then submits this list to the Board of Directors, which awardsdecides to award the shares. The Board of Directors sets the vesting conditions for the award, and anylock-up conditions for the shares.
In 2011, the Board of Directors made significant changes to itsequity-based compensation policy. In order to limit the dilutive effect on shareholders, the Board of Directors determined to primarily award performance shares, except for a limited group of senior managers who may continue to receive options. Furthermore, whoever the beneficiary is, any award of options or performance shares will henceforth beis now fully contingent upon the performance targets being achievedattained over severalthree financial years.
On March 5, 2012,June 24, 2015, the Board of Directors set up two plans in addition to the award made to the Chief Executive Officer:
· | a French plan awarding 1,286,420 performance shares to 2,441 beneficiaries, subject to a vesting period of three years followed by alock-up period of two years; and |
· | an international plan awarding 2,435,420 restricted shares to 4,951 beneficiaries, subject to a vesting period of four years. |
The entire award was contingent upon two of the same internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weightingaward of each criterion is different, each representing 50%members of the grant.Executive Committee. The quantatitivequantitative measures of performance are the same as for the award of Christopher Viehbacher.members of the Executive Committee. Vesting is now subject to a non-compete clause.
The 20122015 awards represent a dilution of 0.35%0.29% of our share capital before dilution as of December 31, 2012.2015.
Not all employees are able to benefit from awards of performance shares, but a new agreement on the voluntary scheme (intéressement des salariés) was concluded in June 20112015 to ensure that all employees have an interest in the performance of the business.business (for more details see “– Profit-Sharing Schemes, Employee Savings Schemes and Employee Share Ownership” above).
In addition, pursuant to the French Act of July 28, 2011, all employees in France of the French subsidiaries of the Group benefited from aprofit-sharing bonus amounting to €620€600 gross in July 2012. In total, Sanofi paid out €18.3 million in this regard (including social contributions).October 2015.
On March 5, 2013, the Board of
178
Item 6. Directors, set up two plans:
The entire award was subject to two of the same internal criteria based on Business Net Income and Return on Assets (ROA) as Christopher Viehbacher, but excluding the TSR-based criterion. Consequently, the weighting of each criterion is different, each representing 50% of the grant.
As part of its commitment to transparency, Sanofi has undertaken to publish in its annual report the level of attainment determined by the Board of Directors for the performance conditions applicable to future equity-based compensation plans awarded to Christopher Viehbacher and the other members of the Executive Committee. The Board considers that disclosing the level of attainment allows our shareholders to better understand the demanding nature of the performance conditions. For disclosures about the level of attainment of the various equity-based compensation plans, see "— B. Compensation — Compensation and pension arrangements for corporate officers — Christopher Viehbacher", bearing in mind that the TSR-based criterion only applies to the Chief Executive Officer and that the criteria based on Business Net Income and the ROA apply to 50% of the grant each.
Restricted Share Plans
Origin | Date of shareholder authorization | Date of award | Number of shares initially awarded | - to corporate officers(1) | - to the 10 employees awarded the most shares(2) | Date of award(3) | Vesting date | Availability date | Number transferred as of 12/31/2015 | Number of rights canceled as of 12/31/2015(4) | Number outstanding | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 1,366,040 | 0 | 71,000 | 3/09/2011 | 3/10/2013 | 3/10/2015 | 1,346,090 | 19,950 | 0 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 1,934,610 | 0 | 103,300 | 3/09/2011 | 3/10/2015 | 3/10/2015 | 1,673,120 | 261,490 | 0 | |||||||||||||||||||||||||||||||||
sanofi-aventis | 4/17/2009 | 3/09/2011 | 30,000 | 30,000 | 0 | 3/09/2011 | 3/10/2013 | 3/10/2015 | 30,000 | 0 | 0 | |||||||||||||||||||||||||||||||||
Sanofi | 4/17/2009 | 3/05/2012 | 1,519,430 | 0 | 126,700 | 3/05/2012 | 3/06/2015 | 3/06/2017 | 1,377,886 | 141,744 | 0 | |||||||||||||||||||||||||||||||||
Sanofi | 4/17/2009 | 3/05/2012 | 5,670 | 0 | 5,670 | 3/05/2012 | 3/06/2016 | 3/06/2016 | 0 | 438 | 5,232 | |||||||||||||||||||||||||||||||||
Sanofi | 4/17/2009 | 3/05/2012 | 3,127,160 | 0 | 96,300 | 3/05/2012 | 3/06/2016 | 3/06/2016 | 6,191 | 631,575 | 2,496,032 | |||||||||||||||||||||||||||||||||
Sanofi | 4/17/2009 | 3/05/2012 | 42,000 | 42,000 | 0 | 3/05/2012 | 3/06/2015 | 3/06/2017 | 35,826 | 6,174 | 0 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2013 | 1,410,360 | 0 | 97,300 | 3/05/2013 | 3/06/2016 | 3/06/2018 | 1,600 | 27,850 | 1,380,910 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2013 | 1,550 | 0 | 1,550 | 3/05/2013 | 3/06/2017 | 3/06/2017 | 0 | 0 | 1,550 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2013 | 2,838,795 | 0 | 85,100 | 3/05/2013 | 3/06/2017 | 3/06/2017 | 3,550 | 253,935 | 2,585,510 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2013 | 45,000 | 45,000 | 0 | 3/05/2013 | 3/06/2016 | 3/06/2018 | 0 | 0 | 45,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2014 | 1,257,620 | 0 | 28,060 | 3/05/2014 | 3/06/2017 | 3/06/2019 | 0 | 16,050 | 1,241,570 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2014 | 2,605,515 | 0 | 35,400 | 3/05/2014 | 3/06/2017 | 3/06/2019 | 1,100 | 130,400 | 2,476,015 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2012 | 3/05/2014 | 45,000 | 45,000 | 0 | 3/05/2014 | 3/06/2017 | 3/06/2019 | 0 | 0 | 45,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 1,157,420 | 0 | 63,000 | 6/24/2015 | 6/25/2018 | 6/25/2020 | 0 | 4,650 | 1,152,770 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 129,000 | 0 | 129,000 | 6/24/2015 | 6/25/2018 | 6/25/2020 | 0 | 0 | 129,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 2,310,920 | 0 | 84,500 | 6/24/2015 | 6/25/2019 | 6/26/2019 | 200 | 31,250 | 2,282,170 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 124,500 | 0 | 124,500 | 6/24/2015 | 6/25/2019 | 6/26/2019 | 0 | 0 | 124,500 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 66,000 | 66,000 | 0 | 6/24/2015 | 6/25/2019 | 6/26/2019 | 0 | 0 | 66,000 | |||||||||||||||||||||||||||||||||
Sanofi | 5/04/2015 | 6/24/2015 | 45,000 | 45,000 | 0 | 6/24/2015 | 6/25/2019 | 6/26/2019 | 0 | 0 | 45,000 |
(1) | Includes the Chief Executive Officer as of the date of grant. |
(2) | Employed as of the date of grant. |
(3) | Subject to vesting conditions. |
(4) | Including 684,672 rights canceled due to the partial non-fulfillment of the performance conditions. |
Origin | Date of shareholder authorization | Date of award | Number of shares initially awarded | - to corporate officers (1) | - to the 10 employees awarded the most shares (2) | Date of award (3) | Vesting date | Availability date | Number transferred as of 12/31/2012 | Number of rights canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
sanofi-aventis | 5/31/07 | 3/02/09 | 590,060 | 65,000 | 13,900 | 3/02/09 | 3/03/11 | 3/04/13 | 585,782 | 4,278 | 0 | |||||||||||||||||||||||
sanofi-aventis | 5/31/07 | 3/02/09 | 604,004 | 0 | 13,200 | 3/02/09 | 3/04/13 | 3/04/13 | 2,564 | 59,071 | 542,369 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 3/01/10 | 531,725 | 0 | 12,600 | 3/01/10 | 3/02/12 | 3/03/14 | 523,767 | 7,958 | 0 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 3/01/10 | 699,524 | 0 | 16,530 | 3/01/10 | 3/02/14 | 3/03/14 | 2,686 | 65,294 | 631,544 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 10/27/10 | 556,480 | 20 | 200 | 10/27/10 | 10/27/12 | 10/28/14 | 533,200 | 23,280 | 0 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 10/27/10 | 1,544,860 | 0 | 200 | 10/27/10 | 10/27/14 | 10/28/14 | 1,080 | 72,800 | 1,470,980 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 3/09/11 | 1,366,040 | 0 | 71,000 | 3/09/11 | 3/10/13 | 3/10/15 | 200 | 18,050 | 1,347,790 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 3/09/11 | 1,934,610 | 0 | 103,300 | 3/09/11 | 3/10/15 | 3/10/15 | 12,000 | 116,160 | 1,806,450 | |||||||||||||||||||||||
sanofi-aventis | 4/17/09 | 3/09/11 | 30,000 | 30,000 | 0 | 3/09/11 | 3/10/13 | 3/10/15 | 0 | 0 | 30,000 | |||||||||||||||||||||||
Sanofi | 4/17/09 | 3/05/12 | 1,525,100 | 0 | 126,700 | 3/05/2012 | 3/06/15 | 3/06/17 | 100 | 4,980 | 1,520,020 | |||||||||||||||||||||||
Sanofi | 4/17/09 | 3/05/12 | 3,127,160 | 0 | 96,300 | 3/05/2012 | 3/06/16 | 3/06/16 | 0 | 104,260 | 3,022,900 | |||||||||||||||||||||||
Sanofi | 4/17/09 | 3/05/12 | 42,000 | 42,000 | 0 | 3/05/2012 | 3/06/15 | 3/06/17 | 0 | 0 | 42,000 | |||||||||||||||||||||||
As of December 31, 2012,2015, a total of 10,414,05314,076,259 restricted shares were outstanding as the vesting period of the plans had not yet expired.and contingent upon performance conditions.
Shares Owned by Members of the Board of Directors
As of December 31, 2012,2015, members of our Board of Directors held in the aggregate 113,08020,087 shares, or under 1% of the share capital and of the voting rights, excluding the beneficial ownership of 118,227,307 shares held by L'OréL’Oréal as of such date which may be attributed to Laurent Attal or Christian Mulliez (who disclaim beneficial ownership of such shares).
Transactions in Shares by Members of the Board of Directors and comparableequivalent persons in 2012
· | On March 10, 2015, Elias Zerhouni, President Global Research and Development, sold 4,196 shares at a price of€83.18 per share. |
· | On March 26, 2015, Karen Linehan, Executive Vice President Legal Affairs and General Counsel, exercised |
50,000 options to subscribe for shares at a price of€54.12 per share (sanofi-aventis subscription option plan of March 1, 2010) and 14,000 options to subscribe for shares at a price of €66.91 per share (sanofi-aventis subscription option plan of December 14, 2006), and sold the resulting 64,000 shares at a price of€88 per share. |
· | On May 20, 2015, Peter Guenter, Executive Vice President Global Commercial Operations, sold 6,190 shares at a price of€90.93 per share. |
· | On May 20, 2015, Jérôme Contamine, Executive Vice President Chief Financial Officer, exercised 22,854 options to subscribe for shares at a price of€54.12 per share (sanofi-aventis subscription option plan of March 1, 2010), and sold the resulting 22,854 shares at a price of€90.92 per share. |
· | On June 15, 2015, Bonnie Bassler, Director, purchased 1,000 shares at a price of€88.52 per share. |
· | On June 29, 2015, Patrick Kron, Director, purchased 1,000 shares at a price of€89.41 per share. |
Item 7. Major Shareholders and Related Party Transactions
Item 7. | Major Shareholders and Related Party Transactions |
The table below shows the ownership of our shares as of January 31, 2013,2016, indicating the beneficial owners of our shares. To the best of our knowledge and on the basis of the
notifications received as disclosed below, except for L'OréL’Oréal and BlackRock, Inc., no other shareholder currently holds more than 5% of our share capital or voting rights.
Total number of issued shares | Number of actual voting rights (excluding treasury shares)(4) | Theoretical number of voting rights (including treasury shares)(5) | ||||||||||||||||||||||
Number | % | Number | % | Number | % | |||||||||||||||||||
L’Oréal | 118,227,307 | 9.05 | 236,454,614 | 16.51 | 236,454,614 | 16.31 | ||||||||||||||||||
BlackRock(1) | 69,772,145 | 5.34 | 69,772,145 | 4.87 | 69,772,145 | 4.81 | ||||||||||||||||||
Treasury shares(2) | 17,232,244 | 1.32 | — | — | 17,232,244 | 1.19 | ||||||||||||||||||
Employees(3) | 16,661,761 | 1.28 | 32,159,761 | 2.25 | 32,159,761 | 2.22 | ||||||||||||||||||
Public | 1,083,814,518 | 83.01 | 1,093,682,598 | 76.37 | 1,093,682,598 | 75.47 | ||||||||||||||||||
Total | 1,305,707,975 | 100 | 1,432,069,118 | 100 | 1,449,301,362 | 100 |
(1) | Based on BlackRock’s declaration as of December 17, 2015. |
(2) | Includes net position of share repurchases under the Group’s liquidity contract which amounted to 15,500 shares as of January 31, 2016. Amounts held under this contract vary over time. |
(3) | Shares held via the Sanofi Group Employee Savings Plan. |
(4) | Based on the total number of voting rights as of January 31, 2016. |
(5) | Based on the total number of voting rights as of January 31, 2016 as published in accordance with article 223-11 and seq. of the General Regulations of the Autorité des Marchés Financiers (i.e., calculated including suspension of the voting rights of treasury shares). |
| Total number of issued shares | Number of actual voting rights (excluding own shares) (3) | Theoretical number of voting rights (including own shares) (4) | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number | % | Number | % | Number | % | |||||||||||||
L'Oréal | 118,227,307 | 8.91 | 236,454,614 | 16.13 | 236,454,614 | 16.10 | |||||||||||||
Treasury shares (1) | 3,193,787 | 0.24 | — | — | 3,193,787 | 0.22 | |||||||||||||
Employees (2) | 17,191,116 | 1.30 | 34,062,116 | 2.32 | 34,062,116 | 2.32 | |||||||||||||
Public | 1,187,958,233 | 89.55 | 1,195,268,262 | 81.55 | 1,195,268,262 | 81.36 | |||||||||||||
Total | 1,326,570,443 | 100 | 1,465,784,992 | 100 | 1,468,978,779 | 100 | |||||||||||||
Ourstatuts (Articles of Association) provide for double voting rights for shares held in registered form for at least two years. All of our shareholders may benefit from double voting rights if these conditions are met, and no shareholder benefits from specific voting rights. For more information relating to our shares, see "Item“Item 10. Additional Information —– B. Memorandum and Articles of Association."”
L'OréL’Oréal isand BlackRock Inc. are the only entityentities known to hold more than 5% of the outstanding Sanofi ordinary shares. L'Oréal reduced its holding from 2007 to 2011 after no significant changes in 2006 and 2005. At year-end 2007, its holding was 8.66% of our share capital compared to 8.91% on
For the year ended December 31, 2012.
On February 16, 2012, Total2015, we received a share ownership declaration informing us that a legal threshold had been passed. BlackRock Inc, acting on behalf of several funds and portfolios managed by its group, declared following a loss of double voting rights resulting from the conversion of its shares into bearer shares, that it had passed belowabove the legal threshold of 5% of our voting rights.
Total also declared that, following sales of shares on the stock market and conversion of shares into bearer shares with a view to selling them, it had passed below the thresholds of 3%, 2%, 1% of our share capital (declarations of January 19, 2012, May 10, 2012, and July 30, 2012), and of 5%, 3%, 2% and 1% of our voting rights (declarations of February 16, 2012, June 11, 2012, July 2, 2012, and August 7, 2012) and as of its last declarationthat it held 0.56%5.34% of our share capital and 0.5%4.82% of our voting rights (declaration of August 7, 2012)December 23, 2015). Total subsequently announced that it had sold the remainder of its shareholding in Sanofi during September 2012.
In accordance with ourstatuts, Articles of Association, shareholders are required tomust notify us once they have passed the threshold of 1% of our share capital or our voting rights and each time they cross an incremental 1% threshold (see "Item“Item 10. Additional Information —– B. Memorandum and Articles of Association —– Requirements for Holdings Exceeding Certain Percentages"Percentages”).
For the year ended December 31, 2012,2015, in accordance with our Articles of Association, we were informed that the
following share ownership declaration thresholds had been passed:
AmundiDodge & Cox declared that through its mutual funds, it had passed above (declaration of March 19, 2015) and then below the threshold of 3% of the share capitalour voting rights (declaration of February 8, 2012)March 31, 2015), then passed successivelyagain above (declaration of July 19, 2012) and below the threshold of 3% of our voting rights and as of its last declaration held 3.16%3.30% of our share capital and 2.98%3.01% of our voting rights (declaration of December 21, 2012).
Table of ContentsApril 8, 2015);
BNP Paribas declared that, through its mutual funds, it had successively passed above (declaration of April 27, 2012) and below (declaration of May 22, 2012) the threshold of 1% of our share capital and as of its last declaration held 0.95% of our share capital and 0.80% of our voting rights (declaration of May 22, 2012).
The Caisse des dépôts et consignations declared that it had passed below the threshold of 2% of our share capital and as of its last declaration held 1.99% of our share capital and 1.74% of our voting rights (declaration of January 20, 2012).
Crédit Suisse declared that the Crédit Suisse Group had passed above the threshold of 1% of our share capital (declaration of January 5, 2012), then successively above and below the thresholds of 2% and 1% of our share capital and as of its last declaration held 1.34% of our capital (declaration of July 24, 2012).
Franklin Resources Inc. declared that it had successively passed below (declaration of January 6, 2012), above (declaration of April 24, 2012)March 16, 2015) and againthen below (declaration of November 13, 2012) the threshold of 2% of our share capital, then above (declaration of May 9, 2012) and below (declaration of August 24, 2012) the threshold of 2% of our voting rights and as of its last declaration held 1.98%1.99% of our share capital and 1.79% of our voting rights (declaration of November 13, 2012).July 31, 2015);
L'OréL’Oréal declared that due to the reduction of the number of our voting rights, it had passively passed above the threshold of 16%9% of our share capital and as of its last declaration held 9.03% of our share capital and 16.28% of our voting rights (declaration of May 27, 2015);
Natixis Asset Management declared that it had passed above (declaration of April 20, 2015) and then below the threshold of 1% of our voting rights and as of its last declaration held 16.01%0.98% of our voting rights (declaration of July 16, 2012)June 10, 2015).
Natixis Asset Management declared that on several occasions it had passed below the threshold of 2% of our share capital (declaration of February 21, 2012) and as of its last declaration held 1.98% of our share capital (declarationAs of December 4, 2012).
Individual31, 2015, individual shareholders (including employees of Sanofi and its subsidiaries, as well as retired employees holding shares via the sanofi-aventisSanofi Group Employee Savings Plan), hold held approximately 8.7%7.2% of our share capital. Institutional shareholders (excluding L'OréL’Oréal) hold held
180
Item 7. Major Shareholders and Related Party Transactions
approximately 78.3%75.7% of our share capital. Such shareholders are primarily American (27.9%(29.4%), French (16.3%(13.6%) and British (14.1%(12.6%). German institutions hold 3.0%held 3.5% of our share capital, Swiss institutions hold 2.2%held 2.5%, institutions from other European countries hold 8.5%held 7.1% and Canadian institutions holdheld 1.4% of our share capital. Other international institutional investors (excluding those from Europe and the United States) holdNorth America) held approximately 4.9%5.5% of our share capital. In France, our home country, we have 14,88723,785 identified shareholders of record. In the United States, our host country, we have 6253 identified shareholders of record and 11,32218,460 identified ADS holders of record.
(source:(Source: a survey conducted by Euroclear France as of December 31, 2012,2015, and internal information).
Shareholders'Shareholders’ Agreement
We are unaware of any shareholders'shareholders’ agreement currently in force.
In the ordinary course of business, we purchase or provide materials, supplies and services from or to numerous companies throughout the world. Members of our Board of Directors are affiliated with some of these companies. We conduct our transactions with such companies on an arm's-length basis and do not consider the amounts involved in such transactions to be material.
On September 17, 2009, Sanofi acquired the interest held by Merck & Co., Inc. (Merck) in Merial Limited (Merial) and Merial has been a wholly-owned subsidiary of Sanofi since that date. As per the terms of the agreement signed on July 29, 2009, Sanofi also had an option, following the closing of the Merck/Schering-Plough merger, to combine the Intervet/Schering-Plough Animal Health business with Merial to form an animal health joint venture that would be equally owned by the new Merck and Sanofi. On March 8, 2010, Sanofi exercised its contractual right to combine the Intervet/Schering-Plough Animal Health business with Merial. On March 22, 2011, Merck and Sanofi jointly announced the mutual termination of their agreement to form a new animal health joint venture. As a result, Merial and Intervet/Schering-Plough continue to operate as separate businesses.
Consequently, the assets and liabilities of Merial, which previously were classified in Sanofi's balance sheet as assets or liabilities held for sale or exchange, have been reclassified to the relevant balance sheet line items with no restatement of comparative periods. At the same time, results from the Merial business were included in continuing operations for all the periods reported (for more information on these and other impacts of the termination of the agreement on Sanofi's financial statements, see Notes D.2 and D.8.2See Note D.33. to our consolidated financial statements included at Item 18 of this annual report).report.
On October 2, 2010, in order to fund a significant part of its proposed acquisition of Genzyme Corporation, Sanofi executed a Facilities Agreement (the "Facilities Agreement", described at "Item 10. Additional Information — C. Material Contracts" herein) with J.P. Morgan plc, Société Générale Corporate & Investment Banking and BNP Paribas for unsecured term loan facilities of up to $15,000,000,000. Because Robert Castaigne serves on the boards of both Société Générale and Sanofi, Sanofi submitted the Facilities Agreement and certain non-material ancillary agreements, as well as a subsequent amendment, to the prior approval of its Board of Directors with Robert Castaigne abstaining from the vote. In April 2011, $4,000,000,000 were borrowed by Sanofi under the Facilities Agreement to partially fund the acquisition of Genzyme; these amounts were fully reimbursed during the course of 2011. The Facilities Agreement expired as a consequence of such reimbursement.
On February 21, 2012, Sanofi European Treasury Center (SETC), a 100% subsidiary of the Sanofi Group, was incorporated under the laws of Belgium, with the purpose of providing financing and some financial services to Group subsidiaries. In addition, cash management agreements exist between Sanofi and certain of its subsidiaries.
The Sanofi parent company transferred the Genzyme Corporation shares acquired in April 2011 to Aventis, Inc. on June 28, 2012. This transfer consisted of two principal operations:
C. Interests of Experts and Counsel
N/A
Item 8. | Financial Information |
A. Consolidated Financial Statements and Other Financial Information
Our consolidated financial statements as of and for the years ended December 31, 2012, 2011,2015, 2014, and 20102013 are included in this annual report at "Item“Item 18. Financial Statements."”
Dividends on Ordinary Shares
We paid annual dividends for the years ended December 31, 2007, 2008, 2009, 20102011, 2012, 2013 and 20112014 and our shareholders will be asked to approve the payment of an annual dividend of €2.77€2.93 per share for the 20122015 fiscal year at our next annual shareholders'shareholders’ meeting. If approved, this dividend will be paid on May 14, 2013.12, 2016.
We expect that we will continue to pay regular dividends based on our financial condition and results of operations. The proposed 20122015 dividend equates to a distribution of 45%52% of our business earnings per share. For information on thenon-GAAP financial measure, "business“business earnings per share"share”, see "Item“Item 5. Operating and Financial Review and Prospects —– Business Net Income."” The proposed dividend distribution will subject Sanofi to a 3% additional corporate tax charge on the amount distributed.
The following table sets forth information with respect to the dividends paid by our Company in respect of the 2008, 2009, 20102011, 2012, 2013 and 20112014 fiscal years and the dividend that will be proposed for approval by our shareholders in respect of the 20122015 fiscal year at our May 3, 2013 shareholders'4, 2016 shareholders’ meeting.
| 2012 (1) | 2011 | 2010 | 2009 | 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Dividend per Share (in €) | 2.77 | 2.65 | 2.50 | 2.40 | 2.20 | |||||||||||
Net Dividend per Share (in $) (2) | 3.65 | 3.43 | 3.34 | 3.46 | 3.06 | |||||||||||
2015(1) | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Dividend per Share (in €) | 2.93 | 2.85 | 2.80 | 2.77 | 2.65 | |||||||||||||||
Dividend per Share (in $)(2) | 3.19 | 3.46 | 3.86 | 3.65 | 3.43 |
(1) | Proposal, subject to shareholder approval. |
(2) | Based on the relevantyear-end exchange rate. |
The declaration, amount and payment of any future dividends will be determined by majority vote of the holders of our shares at an ordinary general meeting, following the recommendation of our Board of Directors. Any declaration will depend on our results of operations, financial condition, cash requirements, future prospects and other factors deemed relevant by our shareholders. Accordingly, we cannot assure you that we will pay dividends in the future on a continuous and regular basis. Under French law, we are required to pay dividends approved by an ordinary general meeting of shareholders within nine months following the meeting at which they are approved.
Disclosure pursuant to Section 21913(r) of the Iran Threat Reduction & Syria Human RightsUnited States Exchange Act (ITRA)of 1934
Sanofi conducts limited business relating to human and animal health products with Iran contributing well under 1% of the Group'sGroup’s consolidated net sales in 2012. Although these2015. These activities, which are compliant with applicable law and not financially material to the Group, are being disclosed pursuant to Section 13(r) of the Iran Threat Reduction and Syria Human RightsUnited States Exchange Act of 2012 (the "Act") requires us to include the following disclosures in this report.1934, as amended. Sales consisted of bulk and branded pharmaceuticals, vaccines, and animal health supplies. U.S. affiliates of Sanofi, or foreign affiliates controlled by U.S. affiliates of Sanofi, are either not involved in these activities or operate under humanitarian licenses issued by the U.S. Treasury Department'sDepartment’s Office of Foreign Assets Control, and the Group has not knowingly conducted a transaction or dealing with a person or entity designated in U.S. Executive Orders No. 13224 and 13382.Control. Limited business not exceeding €10.2amounting to approximately€11.9 million in gross revenues has been conducted by foreignnon-U.S. subsidiaries of Sanofi not requiring an OFAC license with entities such as public hospitals or distributors tied to the Ministry of Health or Ministry of Agriculture. It is estimated that this activity contributed no
more than €3.7€4.8 million to net profits. A representative office in Tehran incurs incidental expenses from state-owned utilities. Otherwise, no business has been transacted
In January 2016, Sanofi and the Iran Food and Drug Administration, affiliated with the GovernmentMinistry of Health and Medical Education of the Islamic Republic of Iran, as defined insigned a Memorandum of Cooperation (MoC) regarding (i) potential future projects to reinforce current partnerships with reputable Iranian manufacturers (in particular to enhance industrial quality standards), (ii) collaborating with the Act. Ministry of Health on programs for the prevention and control of certain chronic and non-communicable diseases (in particular diabetes) and (iii) potential future collaboration on epidemiological studies. The MOC did not generate any revenue, nor any net profit.
The Group does not believe any ofbelieves its activities to be sanctionable under the Iran Sanctions Act or the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010.are compliant with applicable law. In light of the nature of the productsactivities concerned, Sanofi does not currentlyand its affiliates intend to cease its commercial operationscontinue their activities in Iran.
Information on Legal or Arbitration Proceedings
This Item 8 incorporates by reference the disclosures found at Note D.22D.22. to the consolidated financial statements found at Item 18 of this annual report; material updates thereto as of the date of this annual report are found below under the heading "—“– Updates to Note D.22"D.22”.
Sanofi and its affiliatessubsidiaries are involved in litigation, arbitration and other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights (particularly claims against generic companies seeking to
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Item 8. Financial Information
limit the patent protection of Sanofi products), competition law and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. As a result, the Group may become subject to substantial liabilities that may not be covered by insurance and could affect our business and reputation. While we do not currently believe that any of these legal proceedings will have a material adverse effect on our financial position, litigation is inherently unpredictable. As a consequence, we may in the future incur judgments or enter into settlements of claims that could have a material adverse effect on results of operations, cash flows and/or our reputation.
• Plavix® Patent Litigation
United States. Sanofi and Bristol-Myers Squibb sought damages from Apotex, in reparation of harm caused by that company's "at risk" marketing and sale of an infringing generic version of Plavix® in 2006. In October 2010, the U.S. District Court awarded Sanofi and Bristol-Myers Squibb damages in the amount of U.S.$442,209,362, plus U.S.$107,930,857 in pre-judgment interest, as well as costs and post-judgment interests as set by statute. Apotex secured the amount of the award by cash deposit and filed a notice of appeal. On October 18, 2011, the U.S. Court of Appeals for the Federal Circuit upheld the U.S. District Court ruling regarding the amount of damages but did not uphold the District Court decision regarding the pre-judgment interest. Sanofi's and Bristol-Myers Squibb's petition for rehearing en banc with respect to the Court of Appeals decision concerning pre-judgment interest was denied on January 13, 2012. The order of payment of the damages was issued in February 2012. On February 7, 2012 Sanofi collected its share of the Plavix® patent infringement damage award, post-judgment interest and awarded litigation costs (totaling U.S.$272,828,073.10).
Canada. On April 22, 2009, Apotex filed an impeachment action against Sanofi in the Federal Court of Canada alleging the invalidity of Sanofi's Canadian Patent No. 1,336,777 (the '777 Patent) claiming clopidogrel bisulfate. On June 8, 2009, Sanofi filed its defense to the impeachment action and filed a suit against Apotex for infringement of the '777 Patent. The actions were combined and the trial was completed in June 2011. In December 2011, the Federal Court issued a decision that the '777 Patent is invalid, and subsequently generic companies entered the market with generic clopidogrel products. Sanofi filed an appeal with the Federal Court of Appeal in 2012, which is still pending.
• Apotex Settlement Claim
On November 13, 2008, Apotex filed a complaint before a state court in New Jersey against Sanofi and Bristol-Myers Squibb claiming the payment of a U.S.$60 million break-up fee, pursuant to the terms of the initial settlement agreement of March 2006 relating to the U.S. Plavix® patent litigation. On April 8, 2011, the New Jersey state court granted Sanofi and Bristol-Myers Squibb a motion for summary judgment that was reversed in November 2012.
In January 2011, Apotex filed a lawsuit in Florida State Court, Broward County, alleging breach of contract relating to the parties' March 2006 proposed settlement agreement. Sanofi was granted a motion for summary judgment in 2012, removing Sanofi from the case. BMS's summary judgment motion was denied. Apotex appealed the summary judgment as to Sanofi in December 2012.
· | Co-Aprovel® Patent Infringement Actions in Europe |
• Allegra® Patent Litigation
Japan. In late 2010, Takata Seiyaku Co. Ltd. ("Takata") and Sawai Pharmaceutical Co. Ltd. ("Sawai") filed patent invalidation actions at the Japan Patent Office ("JPO") against two fexofenadine hydrochloride (the active ingredient in Allegra®) method of treatment patents. In December 2011, the JPO found all claims in both patents invalid and Sanofi appealed. In July 2012, during the appeal process, Sanofi entered into settlement agreements with Takata and Sawai. As a result of the settlement agreements, Takata and Sawai withdrew their legal challenges to the validity of the '954 and '697 patents. This caused the validity of these two patents to be reinstated by the JPO.
In August 2012, Elmed Eisai Co., Ltd. ("Eisai"), Kobayashi Kako Co., Ltd. ("Kobayashi"), and Taisho Pharm. Ind., Ltd. ("Taisho") obtained approvals to manufacture and market generic fexofenadine hydrochloride products in Japan, despite the existence and validity of the two fexofenadine hydrochloride patents. In August and September 2012, patent invalidation actions against those two patents were filed at the JPO by Eisai, Daiko Pharmaceutical Co. Ltd., Kyorin Rimedio Co. Ltd., Nihon Generic Co., Ltd., Nihon Pharmaceutical Industry Co. Ltd., Nippon Chemiphar Co., Ltd., Nissin Pharmaceutical Co., Ltd., Shiono Chemical Co. Ltd., Teva Pharma Japan Inc., and Yoshindo Inc. The invalidation actions are in preliminary stages.
In October 2012, Sanofi filed patent infringement lawsuits against Eisai, Taisho and Kobayashi. Those lawsuits are in an early stage. In December 2012, the previously approved generic fexofenadine hydrochloride products of Eisai and Kobayashi were added to Japan's National Health Insurance (NHI) price list. Since February 2013, Allegra® as a prescription medicine has been subject to generic competition in this country.
• Eloxatin® (oxaliplatin) Patent Litigation
United States. In February 2011, the U.S. District Court for the District of New Jersey granted Sanofi's request for a preliminary injunction prohibiting Sun Pharmaceuticals from launching an unauthorized generic product of oxaliplatin. On September 16, 2011, the U.S. District Court for the District of New Jersey ruled in favor of Sanofi, requiring that Sun's unauthorized generic oxaliplatin remain off the U.S. market until August 9, 2012. Sun's appeal of the District Court's ruling was dismissed in September 2012.
• Synvisc-One® Patent Litigation
In April 2011, Genzyme filed suit in the U.S. District Court for the District of Massachusetts against generic manufacturers Seikagaku Corporation (Seikagaku), Zimmer Holdings, Inc., Zimmer, Inc. and Zimmer U.S., Inc. (collectively, "Zimmer") for the infringement of U.S. Patent No. 5,399,351 (the '351 patent) and U.S. Patent No. 7,931,030 (the '030 patent), upon Seikagaku's and Zimmer's launch of generic versions of Synvisc-One® in the United States.
On December 30, 2011, the U.S. District Court granted, in part, Genzyme's Motion for a preliminary injunction, enjoining Seikagaku and Zimmer from selling generic versions of Synvisc-One®, pending a decision in the infringement action, except on limited and specific pricing conditions. In August 2012, a federal jury in Massachusetts found that Seikagaku Corp's recently approved product Gel-One®, distributed in the US by Zimmer, did not infringe the '030 patent. The jury also found that the '030 patent claims were invalid due to obviousness. A motion for judgment as a matter of law and a motion for new trial were filed in September 2012.
• Co-Aprovel® Patent Infringement Actions in Europe
Sanofi has been involved since early 2012 in a number of legal proceedings involving generic companies that attempted to launch or launched generic versions of Sanofi's Co-Aprovel®Sanofi’sCo-Aprovel® in several European countries including United Kingdom, Belgium, France, Germany, the Netherlands, Italy and Norway. Sanofi filed for and was granted preliminary injunctions (PI) against several generic companies based on Sanofi'sSanofi’s Supplemental Protection Certificate (SPC) covering Co-Aprovel®. However, Sanofi was not granted PIs against threeCo-Aprovel® until October 15, 2013. The U.K. Court referred the question on the validity of theCo-Aprovel® SPC to the Court of Justice of the European Union (CJEU) in October 2012.
Following the CJEU decision on December 12, 2013, deciding the invalidity ofCo-Aprovel® SPC, generic companies Sandoz, Mylan(which were withdrawn from the market due to national preliminary injunction or cross undertaking) have filed damages claims in several countries against Sanofi. The cases are currently pending. In the U.K., the cases have been settled with the generic companies in 2015.
· | Lantus® and Lantus® SoloSTAR® Patent Litigation (United States, France and Japan) |
In December 2013, January 2014 and Arrow,May 2014, Sanofi received notifications from Eli Lilly and Company (Lilly), stating that it had filed two NDAs (505(b)(2) New Drug Application) with the FDA for two insulin glargine drug products. Lilly’s NDAs also included Paragraph IV certifications directed to Sanofi patents listed in France.the FDA Orange Book for Sanofi’s Lantus® and/or Lantus® SoloStar® products. In 2014, Sanofi appealed this decision in August 2012. Sanofi followed its PI actions with mainfiled patent infringement suits against some of the generic companies. A few of the generic companies have filed revocation actions seeking to revoke Sanofi's Co-Aprovel® SPC. Some of these revocation actions were denied
(Italy), others have been suspended (United Kingdom, Belgium), in France, theTribunal de Grande Instance of Paris held the SPC and the patent invalid at the end of February 2013. Sanofi and BMS have appealed that decision.
• Lovenox® Regulatory Litigation
In July 2010, Sanofi learned that the Food and Drug Administration (FDA) had approved a generic enoxaparin ANDA filed by Sandoz. Sanofi subsequently filed suit against the FDALilly in the U.S.United States District Court for the District of Columbia and requested preliminary injunctive relief against the FDA. Delaware. The second of these two lawsuits was dismissed in May 2015 in light of Lilly’s withdrawal of its second 505(b)(2) New Drug Application from FDA review.
In August 2010,2014, Sanofi filed patent infringement law suits against Lilly in France, based on different patents (protecting the insulin glargine, a manufacturing process and a device).
In June 2015, Sanofi unilaterally withdrew the lawsuit in France against Lilly regarding the compound and the process patent.
On December 8, 2014, Sanofi filed a petition for a preliminary injunction against Lilly’s insulin glargine biosimilarpre-loaded in its MirioPen® with the Tokyo District Court based on a Japanese device patent that Sanofi subsequently withdrew. In January 2015, Lilly filed an invalidation action concerning this Sanofi Japanese device patent with the Japanese Patent Office.
In September 2015, Sanofi entered into a settlement agreement with Lilly with respect to certain Sanofi patents relating to the Lantus® SoloStar® (insulin glargine) product. The settlement resolves the U.S. patent infringement lawsuit regarding Lilly’s application for marketing approval for a competing product to Lantus® SoloStar®. Sanofi and Lilly agreed to dismiss this U.S. patent infringement lawsuit and to discontinue similar disputes worldwide. Under the terms of the settlement, Lilly will make royalty payments to Sanofi in exchange for a license to certain Sanofi patents. In the U.S. Lilly will not sell its insulin glargine product before December 15, 2016. The agreement does not extend to the Lantus® vial product, Toujeo® or combination products.
Following the settlement with Lilly, all of the U.S., French and Japanese disputes with Lilly with respect to Lantus® SoloStar® were discontinued.
· | Humalog® MirioPen® and Humulin® MirioPen® Patent Litigation (Japan) |
On October 7, 2014, Sanofi filed a patent infringement lawsuit against Lilly Japan at the Tokyo District Court deniedclaiming that Lilly’s Humalog® MirioPen® and Humulin® MirioPen® products infringe a Japanese device patent. Sanofi sought damages from Lilly. Following the September 2015 settlement with Lilly (see above), this request. Ascase is now closed.
· | Multaq® Patent Litigation (United States) |
From January 2014 to November 2014, several generic manufacturers notified Sanofi that they had filed Abbreviated New Drug Applications (ANDAs) seeking FDA approval to market generic versions of Multaq® (dronedarone hydrochloride) in the U.S. In April 2015, Sanofi received a resulttenth notice directed to Multaq from Lupin. The notices challenged some, but not all, of this ruling, the generic versionpatents listed by Sanofi in the FDA’s Orange Book in connection with Multaq®. None of enoxaparin can continuethe ANDA filers challenged the patent directed to be marketedthe active ingredient in Multaq®, U.S. Patent No. 5,223,510 (the ‘510 patent).
Sanofi brought suit against all of the ANDA filers in the United States. On February 7, 2012,States District Court for the Court ruledDistrict of Delaware for patent infringement. Depending on the contents of the particular Paragraph IV Certification, Sanofi has brought suit
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Item 8. Financial Information
for infringement of at least three and sometimes four of its Orange Book listed patents. In all but two cases, the30-month stay expires on the earlier of (1) January 1, 2017 or (2) a court decision in favor of the FDA regarding the approvalone or more of the defendants on all patents that support the stay. In the Sandoz enoxaparin ANDA.case, the 30-month stay expires on the earlier of (1) May 14, 2017 or (2) a court decision in favor of one or more of the defendants on all patents that support the stay. In the Lupin case, the 30-month stay expires on the earlier of (1) October 2017 or (2) a court decision in favor of one or more of the defendants on all patents that support the stay.
On October 13, 2015, Sanofi amended its complaint against Lupin to include U.S. Patent 9,107,900 which was listed in the Orange Book in September 2015. In December 2015, Sanofi filed separate patent infringement actions against six of the other defendants based on this patent.
· | Genzyme Myozyme®/Lumizyme® Patent Litigation (United States) |
BioMarin filed petitions with PTAB (Patent Trial and Appeal Board) requesting institution of an IPR (Inter Partes Review – IPR) of the patentability of all claims of U.S. Patent No. 7,351,410 and all but one claims of U.S. Patent No. 7,655,226 regarding Myozyme®/Lumizyme®. Those petitions were granted. In February 2015, the PTAB orderedinter alia that claim 1 of the ‘410 patent and that claims 1 and 3-6 of the ‘226 patent are determined to be un-patentable. Genzyme filed a Notice of Appeal to the Federal Circuit in April 2015. The USPTO filed a Notice of Intervention in September 2015.
From time to time, subsidiaries of Sanofi are subject to governmental investigations and information requests from regulatory authorities inquiring as to the practices of Sanofi with respect to the sales, marketing, and promotion of its products.
For example, Sanofi is cooperating with the U.S. Department of Justice in its respective investigations into the promotion of Seprafilm®Seprafilm® and Sculptra®,Plavix®.
In December 2013, Genzyme entered into a settlement agreement to resolve civil claims arising out of the investigation into promotional practices of Seprafilm® and settledpaid in that respect approximately $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 allrelating to civil claims arising out of an investigation into sampling of its former product Hyalgan®. In that respect,Hyalgan® for which Sanofi U.S. paid U.S.$109$109 million, to the settling parties and expects to entercompanies entered into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services.Services in September 2015. Also in September 2015, Genzyme entered into a Deferred Prosecution
Agreement with the U.S. Department of Justice and paid in that respect approximately $33 million to resolve the Seprafilm® matter completely.
In June 2012, Sanofi U.S. became aware that the U.S. Department of Justice is investigating disclosures to the FDA regarding the variability of response to Plavix®Plavix®. Sanofi U.S. is cooperating with the U.S. Department of Justice in this matter.
In France, Sanofi is involved in athe claim before the French Antitrust Authority (Autorité de la Concurrence) concerning allegations brought by Teva Santé that Sanofi's communicationsSanofi’s communication and promotional practices inhibited the entry on the market of Plavix® generics.generics of clopidogrel (the active ingredient of Plavix®
), the French Antitrust Authority issued its decision on May 14, 2013, imposing on Sanofi a fine of€40.6 million. In Germany, followingDecember 2014, the Paris Court of Appeal rejected Sanofi’s appeal and confirmed in totality the decision. Sanofi filed a criminal complaint filed by Sanofi against one of its distributors, a criminal investigation was initiated against three current and two retired Sanofi employees in connection“pourvoi” with the French Supreme Court (Cour de Cassation) in January 2015. As a consequence to the May 2013 ruling, claims were filed respectively by Sandoz in August 2014 and by Teva in September 2014 before the Commercial Court of Paris for compensation of their alleged saledamages: loss of margin and other ancillary damages (legal fees to external counsels, image and reputation).
Sanofi is engaged in Germany of medications originally destined for humanitarian aid outside of the European Union. The criminal proceedings are ongoing.
Sanofi has received information that improper payments may have been made in connectiondiscussions with the sale of pharmaceutical products in two small markets within the Emerging Markets region. Sanofi currently is assessing whether these payments were made and, if so, whether they fall within the U.S. Foreign Corrupt Practices Act. In connection with its review, Sanofi has provided information to the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding allegations that certain subsidiaries outside the United States made improper payments in connection with the sale of pharmaceutical products and is cooperatingwhether those payments, if made, fall within the U.S. Foreign Corrupt Practices Act. Sanofi also received anonymous allegations of wrongdoing related to improper payments to healthcare professionals in connection with these agencies.
Glossarythe sale of Terminology
A number of technical terms whichpharmaceutical products that may be used abovehave occurred between 2007 and 2014 in Item 8 are defined below for the conveniencecertain parts of the reader.
ANDA or Abbreviated New Drug Application (United States): An application by a drug manufacturer to receive authority fromMiddle East and Africa. Sanofi proactively notified the U.S. FDA to market a generic versionDepartment of another company's approved product, by demonstrating thatJustice and the purportedly generic version has the same properties (bioequivalence) as the original approved product. As a resultU.S. Securities and Exchange Commission of data exclusivity, the ANDA may be filed only several years after the initial market authorizationall of the original product.allegations. The Company has voluntarily provided and will continue to provide information to the DOJ and SEC, and will cooperate with the agencies’ reviews of these matters.
Summary judgment: A judgment granted on a claim or defense about which there is no genuine issue of material fact and upon which the movant is entitled to prevail as a matter of law. This procedural device allows the speedy disposition of a controversy without the need for trial.
Updates to Note D.22
B. Significant Changes
• Rhodia Retained LiabilitiesAn indemnity amount of approximately€
On200 million pursuant to a final arbitration was granted to Sanofi in February 5, 2013, Rhodia's motion for reconsideration2016 as consequence of a contractual dispute. Other details of the Sao Paolo's Courtarbitration are confidential.
At its meeting held on March 3, 2016, the Board of Appeal's decision (of September 2011) was rejected byDirectors of Sanofi proposed the appointment of Diane Souza and Thomas Südhof, MD as new independent Directors during the General Shareholders’ meeting of May 4, 2016.
Diane D. Souza is the former CEO of UnitedHealthcare Specialty Benefits, an ancillary and voluntary health insurance business, which serves more than 75,000 employers and 21 million members. With over 25 years of
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en bancItem 8. Financial Information decision
managed care and health benefits experience, she led healthcare operations and business and large-scale systems transformation at UnitedHealthcare and Aetna, as well as delivery of the same Court. Rhodia may still initiate some recourse againstintegrated market strategy for the Affordable Care Act. A certified public accountant, Ms. Souza was also Chief Financial Officer of Aetna’s Guaranteed Products business, where she was regularly involved in complex financial transactions and dealings with the Securities and Exchange Commission. Diane has also held senior leadership positions at Deloitte and PricewaterhouseCoopers.
Thomas Südhof, MD, is the Avram Goldstein Professor in the School of Medicine of Stanford University, as well as a
Professor of Molecular & Cellular Physiology, Psychiatry, and Neurology. Prior to this decision toposition, he spent 25 years at the Brazilian Supreme Court.University of Texas, Southwestern, where he acted as Chairman of the Department of Neuroscience. Most of his research at that time focused on the mechanisms of synaptic information transmission which have pharmacological consequences for the treatment of neuro-degenerative and neuro-psychiatric diseases. Dr. Südhof won the Nobel Prize in Physiology or Medicine, (shared with James Rothman and Randy Shekman) in 2013, the Albert Lasker Medical Basic Research Award (together with Richard Scheller), as well as the Bernhard Katz Award of the Biophysical Society (shared with Reinhard Jahn).
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Item 9. | The Offer and Listing |
We have one class of shares. Each American Depositary Share, or ADS, representsone-half of one share. The ADSs are evidenced by American Depositary Receipts, or ADRs, which are issued by JPMorgan Chase Bank, N.A..N.A.
Our shares trade on Compartment A of NYSE Euronext Paris, orthe regulated market of Euronext Paris, and our ADSs trade on the New York Stock Exchange, or NYSE.
In April 2011, in connection with our acquisition of Genzyme, we issued contingent value rights ("CVRs"(“CVRs”) under a CVR
agreement entered into by and between us and the American Stock Transfer & Trust Company, LLC, as trustee (see Item 10.C. Material Contracts —– The Contingent Value Rights Agreement). Our CVRs trade on the NASDAQ Global Market.
Trading History
The table below sets forth, for the periods indicated, the reported high and low market prices of our shares on Euronext Paris and our ADSs on the NYSE (source: Bloomberg).
| Shares, as traded on Euronext Paris | ADSs, as traded on the NYSE | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Calendar period | High | Low | High | Low | |||||||||
| (price per share in €) | (price per ADS in $) | |||||||||||
Monthly | |||||||||||||
February 2013 | 74.20 | 65.91 | 49.70 | 44.50 | |||||||||
January 2013 | 74.29 | 71.50 | 49.56 | 47.43 | |||||||||
December 2012 | 72.38 | 68.43 | 47.97 | 44.82 | |||||||||
November 2012 | 69.95 | 66.46 | 45.26 | 42.20 | |||||||||
October 2012 | 69.86 | 65.63 | 45.72 | 42.52 | |||||||||
September 2012 | 69.46 | 64.52 | 44.97 | 40.52 | |||||||||
2012 | |||||||||||||
First quarter | 59.56 | 54.86 | 39.19 | 34.92 | |||||||||
Second quarter | 59.74 | 53.20 | 39.33 | 33.03 | |||||||||
Third quarter | 69.46 | 59.45 | 44.97 | 36.53 | |||||||||
Fourth quarter | 72.38 | 65.63 | 47.97 | 42.20 | |||||||||
Full Year | 72.38 | 53.20 | 47.97 | 33.03 | |||||||||
2011 | |||||||||||||
First quarter | 52.23 | 46.04 | 36.29 | 31.45 | |||||||||
Second quarter | 56.50 | 49.64 | 40.75 | 35.34 | |||||||||
Third quarter | 56.82 | 42.85 | 40.58 | 30.98 | |||||||||
Fourth quarter | 56.75 | 47.00 | 37.66 | 31.61 | |||||||||
Full Year | 56.82 | 42.85 | 40.75 | 30.98 |
Shares, as traded on Euronext Paris | ADSs, as traded on the NYSE | |||||||||||||||
Calendar period | High | Low | High | Low | ||||||||||||
(price per share in €) | (price per ADS in $) | |||||||||||||||
Monthly | ||||||||||||||||
February 2016 | 77.11 | 66.44 | 41.88 | 37.63 | ||||||||||||
January 2016 | 79.13 | 70.94 | 42.34 | 38.58 | ||||||||||||
December 2015 | 84.66 | 74.59 | 44.63 | 41.13 | ||||||||||||
November 2015 | 93.82 | 79.81 | 50.95 | 42.79 | ||||||||||||
October 2015 | 93.77 | 83.47 | 51.88 | 47.05 | ||||||||||||
September 2015 | 91.81 | 82.01 | 51.35 | 46.02 | ||||||||||||
2015 | ||||||||||||||||
First quarter | 94.40 | 72.94 | 51.47 | 43.57 | ||||||||||||
Second quarter | 99.23 | 84.90 | 53.00 | 48.23 | ||||||||||||
Third quarter | 101.10 | 80.19 | 54.98 | 46.02 | ||||||||||||
Fourth quarter | 93.82 | 74.59 | 51.88 | 41.13 | ||||||||||||
Full Year | 101.10 | 72.94 | 54.98 | 41.13 | ||||||||||||
2014 | ||||||||||||||||
First quarter | 77.70 | 68.29 | 52.76 | 47.06 | ||||||||||||
Second quarter | 80.42 | 73.86 | 54.64 | 50.84 | ||||||||||||
Third quarter | 89.95 | 75.40 | 57.42 | 50.74 | ||||||||||||
Fourth quarter | 89.74 | 69.58 | 56.39 | 44.24 | ||||||||||||
Full Year | 89.95 | 68.29 | 57.42 | 44.24 | ||||||||||||
2013 | ||||||||||||||||
Full Year | 87.03 | 65.91 | 55.94 | 44.50 | ||||||||||||
2012 | ||||||||||||||||
Full Year | 72.38 | 53.20 | 47.97 | 33.03 | ||||||||||||
2011 | ||||||||||||||||
Full Year | 56.82 | 42.85 | 40.75 | 30.98 |
Item 9. The Offer and Listing
| Shares, as traded on Euronext Paris | ADSs, as traded on the NYSE | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Calendar period | High | Low | High | Low | |||||||||
| (price per share in €) | (price per ADS in $) | |||||||||||
2010 | |||||||||||||
Full Year | 58.90 | 44.01 | 41.59 | 28.01 | |||||||||
2009 | |||||||||||||
Full Year | 56.78 | 38.43 | 40.80 | 24.59 | |||||||||
2008 | |||||||||||||
Full Year | 66.90 | 36.055 | 49.04 | 23.95 | |||||||||
Fluctuations in the exchange rate between the euro and the U.S. dollar will affect any comparisons of euro share prices and U.S. ADS prices.
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Shares and ADSs
Our shares are listed on Euronext Paris under the symbol "SAN"“SAN” and our ADSs are listed on the NYSE under the symbol "SNY"“SNY”.
As of the date of this annual report, our shares are included in a large number of indices, including the "CAC“CAC 40 Index"Index”, the principal French index published by Euronext Paris. This index contains 40 stocks selected among the top 100 companies based onfree-float capitalization and the most active stocks listed on the Euronext Paris market. The CAC 40 Index indicates trends in the French stock market as a whole and is one of the most widely followed stock price indices in France. Our shares are also included in the S&P Global 100 Index, the Dow Jones EuroSTOXXEuro STOXX 50, the Dow Jones STOXX 50, the FTS Eurofirst 100, the FTS Eurofirst 80 and the MSCIPan-Euro Index, among other indices.
CVRs
Our CVRs trade on the NASDAQ Global Market under the symbol "GCVRZ"“GCVRZ”.
Trading by Sanofi in our own Shares
Under French law, a company may not issue shares to itself, but it may purchase its own shares in the limited cases described at "Item“Item 10. Additional Information —– B. Memorandum and Articles of Association —– Trading in Our Own Shares."”
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Item 10. Additional Information
Item 10. | Additional Information |
N/A
B. Memorandum and Articles of Association
General
Our Company is asociété anonyme, a form of limited liability company, organized under the laws of France.
In this section, we summarize material information concerning our share capital, together with material provisions of applicable French law and our Articles of Association (statuts), an English translation of which has been filed as an exhibit to this annual report. For a description of certain provisions of ourstatuts Articles of Association relating to our Board of Directors and statutory auditors, see "Item“Item 6. Directors, Senior Management and Employees."” You may obtain copies of ourstatuts Articles of Association in French from thegreffe (Clerk) of theRegistre du Commerce et des Sociétés de Paris (Registry of Commerce and Companies of Paris, France, registration number: 395 030 844). Please refer to that full document for additional details.
Ourstatuts Articles of Association specify that our corporate affairs are governed by:
· | applicable laws and regulations (in particular, Title II of the French Commercial Code); and |
· | the Articles of Association themselves. |
Article 3 of ourstatuts Articles of Association specifies that the Company'sCompany’s corporate purpose, in France and abroad, is:
· | acquiring interests and holdings, in any form whatsoever, in any company or enterprise, in existence or to be created, connected directly or indirectly with the health and fine chemistry sectors, human and animal therapeutics, nutrition andbio-industry; |
in the following areas:
· | purchase and sale of all raw materials and products necessary for these activities; |
· | research, study and development of new products, techniques and processes; |
· | manufacture and sale of all chemical, biological, dietary and hygiene products; |
· | obtaining or acquiring all intellectual property rights related to results obtained and, in particular, filing all patents, trademarks and models, processes or inventions; |
· | operating directly or indirectly, purchasing, and transferring – for free or for consideration – pledging or |
securing all intellectual property rights, particularly all patents, trademarks and models, processes or inventions; |
· | obtaining, operating, holding and granting all licenses; |
· | within the framework of agroup-wide policy and subject to compliance with the relevant legislation, participating in treasury management transactions, whether as lead company or otherwise, in the form of centralized currency risk management orintra-group netting, or any other form permitted under the relevant laws and regulations; |
and, more generally:
· | all commercial, industrial, real or personal property, financial or other transactions, connected directly or indirectly, totally or partially, with the activities described above and with all similar or related activities or having any other purposes likely to encourage or develop the Company’s activities. |
Directors
Transactions in Which Directors Are Materially Interested
Under French law, any agreement entered into (directly or through an intermediary) between our Company and any one of the members of the Board of Directors that is not entered into (i) in the ordinary course of our business and (ii) under normal conditions is subject to the prior authorization of the disinterested members of the Board of Directors. The same provision applies to agreements between our Company and another company if one of the members of the Board of Directors is the owner, general partner, manager, director, general manager or member of the executive or supervisory board of the other company, as well as to agreements in which one of the members of the Board of Directors has an indirect interest.
The Board of Directors must also authorize any undertaking taken by our Company for the benefit of our Chairman, Chief Executive Officer (directeur général) or his delegates (directeurs généraux délégués) pursuant to which such persons will or may be granted compensation, benefit or any other advantage as a result of the termination of or a change in their offices or following such termination or change.
In addition, except with respect to anynon-compete indemnity or certain pension benefits, any such termination package: (i) must be authorized by our shareholders through the adoption of a separate general shareholders meeting resolution for each such beneficiary, which authorization must be renewed at each renewal of such beneficiary'sbeneficiary’s mandate, and (ii) cannot be paid to such beneficiary unless (a) the Board of Directors decides that such beneficiary has satisfied certain conditions, linked to such beneficiary'sbeneficiary’s performance measured by our Company'sCompany’s performance, that must have been defined by the Board of Directors when granting such package, and (b) such decision is publicly disclosed.
Directors'Item 10. Additional Information
Directors’ Compensation
The aggregate amount of attendance fees (jetons de présence) of the Board of Directors is determined at the Shareholders'Shareholders’ Ordinary General Meeting. The Board of Directors then divides this aggregate amount among its members by a simple majority vote. In addition, the Board of Directors may grant exceptional compensation (rémunérations exceptionnelles) to individual directors on a case-by-case basis for special assignments following the procedures described above at "—“– Transactions in Which Directors Are Materially Interested."” The Board of Directors may also authorize the reimbursement of travel and accommodation expenses, as well as other expenses incurred by Directors in the corporate interest. See also "Item“Item 6. Directors, Senior Management and Employees."”
Board of Directors'Directors’ Borrowing Powers
All loans or borrowings on behalf of the Company may be decided by the Board of Directors within the limits, if any, imposed by the Shareholders'Shareholders’ General Meeting. There are currently no limits imposed on the amounts of loans or borrowings that the Board of Directors may approve.
Directors'Directors’ Age Limits
For a description of the provisions of ourstatuts Articles of Association relating to age limits applicable to our Directors, see "Item“Item 6. Directors, Senior Management and Employees."”
Directors'Directors’ Share Ownership Requirements
Pursuant to the Board Charter, our Directors are required to hold at least 1,000 shares during the term of their appointment.
Share Capital
As of December 31, 2012,2015, our share capital amounted to €2,652,685,918,€2,611,393,518, divided into 1,326,342,9591,305,696,759 outstanding shares with a par value of €2€2 per share. All of our outstanding shares are of the same class and are fully paid. Of these shares, we or entities controlled by us held 3,150,2873,956,708 shares (or 0.24%0.30% of our outstanding share
capital), as treasury shares as of such date. As of December 31, 2012,2015, the carrying amount of such shares was €207€306 million.
At an extraordinary general meeting held on May 6, 2011,4, 2015, our shareholders authorized our Board of Directors to increase our share capital, through the issuance of shares or other securities giving access to the share capital with or without preemptive rights, by an aggregate maximum nominal amount of €1.3€1.3 billion. See "—“– Changes in Share Capital —– Increases in Share Capital,"” below.
The maximum total number of authorized but unissued shares as of December 31, 20122015 was 321160 million, reflecting the unused part of the May 6, 20113, 2013 and May 4, 2012 2015
shareholder authorizations to issue shares without preemptive rights, outstanding options to subscribe for shares, and awards of shares.
Stock Options
We have two types of stock options outstanding: options to subscribe for shares (options de souscription d'actionsd’actions) and options to purchase shares (options d'achat d'actionsd’achat d’actions). Upon exercise of an option to subscribe for shares, we issue new shares, whereas upon exercise of an option to purchase shares, the option holder receives existing shares. We purchase our shares on the market prior to the vesting of the options to purchase in order to provide the option holder with shares upon exercise.
Because the exercise of options to purchase shares will be satisfied with existing shares repurchased on the market or held in treasury, the exercise of options to purchase shares has no impact on the amount of our share capital.
Our combined general meeting held on May 6, 20113, 2013 authorized our Board of Directors for a period of 2638 months to grant, on one or more occasions, options to subscribe for shares and options to purchase shares in favor of persons to be chosen by the Board of Directors from among the salaried employees and corporate officers of our Company or of companies or groupings of economic interest of the Group in accordance with Article L.225-180 of the French Commercial Code.
The aggregate number of options to subscribe for shares and options to purchase shares that may be granted under this authorization may not give entitlement to a total number of shares exceeding 1%0.7% of the share capital as of the date of the decision by the Board of Directors to grant such options.
The Board of Directors sets the exercise price of options to subscribe for shares and options to purchase shares. However, the exercise price never incorporates a discount and must be at least equal to the average of the quoted market prices on the 20 trading sessions preceding the date of grant by the Board of Directors.
Stock option plans generally provide for a lock-up period of four years and have a duration of ten years.
Under such authorization the shareholders expressly waive, in favor of the grantees of options to subscribe for shares, their preemptive rights in respect of shares that are to be issued as and when options are exercised.
The Board of Directors is granted full power to implement this authorization and to set the terms and conditions on which options are granted and the arrangements with respect to the dividend entitlement of the shares.
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Item 10. Additional Information
See "Item“Item 6. Directors, Senior Management and Employees —– E. Share Ownership"Ownership” for a description of our option plans currently in force.
Awards of Shares
Our combined general meeting held on May 4, 20122015 authorized our Board of Directors for a period of 38 months to allot, on one or more occasions, existing or new restricted shares in favor of persons to be chosen by the Board of Directors from among the salaried employees and corporate officers of our Company or of companies or economic interest groupings of the Group in accordance with Articles L.225-197-1et seq. of the French Commercial Code.
The existing or new shares allotted under this authorization may not represent more than 1.2% of theour share capital as of the date of the decision by the Board of Directors to allot such shares.
The authorization provides that allotment of shares to the allottees will become irrevocable either (i) at the end of a minimum vesting period of three years, in which case the allottees will also be required to retain their shares for a minimum period of two years from the irrevocable allotment thereof, or (ii) after a minimum vesting period of four years, in which case allottees may not be subject to any minimum retention period.
In the case of newly issued shares, the authorization entails the express waiver by the shareholders, in favor of the allottees of restricted shares, of their preemptive rights in respect of shares that are to be issued as and when restricted shares vest.
The Board of Directors sets the terms on which restricted shares are granted and the arrangements with respect to the dividend entitlement of the shares.
See "Item“Item 6. Directors, Senior Management and Employees —– E. Share Ownership"Ownership” for a description of our restricted shares plans currently in force.
Changes in Share Capital in 20122015
See Note D.15.1. to our consolidated financial statements included at Item 18 of this annual report.
Voting Rights
In general, each shareholder is entitled to one vote per share at any shareholders'shareholders’ general meeting. Ourstatuts Articles of Association do not provide for cumulative voting rights. However, ourstatuts Articles of Association provide that any fully paid-up shares that have been held in registered form under the name of the same shareholder for at least two years acquire double voting rights. The double voting rights cease automatically for any share converted into bearer form or transferred from one owner to another, subject to certain exceptions permitted by law.
As of December 31, 2012,2015, there were 142,585,235143,355,987 shares that were entitled to double voting rights, representing 10.75%10.98% of our total share capital, and approximately 9.73%19.84% of ourthe voting rights held by holders other than us andwhich can be cast at our subsidiaries, and 9.71%shareholders’ general meeting as of our total voting rights.that date.
Double voting rights are not taken into account in determining whether a quorum exists.
Under the French Commercial Code, treasury shares or shares held by entities controlled by that company are not entitled to voting rights and do not count for quorum purposes.
Ourstatuts Articles of Association allow us to obtain from Euroclear France the name, nationality, address and number of shares held by holders of our securities that have, or may in the future have, voting rights. If we have reason to believe that a person on any list provided by Euroclear France holds securities on behalf of another person, ourstatuts Articles of Association allow us to request information regarding beneficial ownership directly from such person. See "—“– B. Memorandum and Articles of Association —– Form, Holding and Transfer of Shares,"” below.
Ourstatuts Articles of Association provide that Board members are elected on a rolling basis for a maximum tenure of four years.
Shareholders'Shareholders’ Agreement
We are not aware of any shareholder'sshareholder’s agreement currently in force concerning our shares.
Shareholders'Shareholders’ Meetings
In accordance with the provisions of the French Commercial Code, there are three types of shareholders'shareholders’ meetings: ordinary, extraordinary and special.
Ordinary general meetings of shareholders are required for matters such as:
· | electing, replacing and removing directors; |
· | appointing independent auditors; |
· | approving the annual financial statements; |
· | declaring dividends or authorizing dividends to be paid in shares, provided the Articles of Association contain a provision to that effect; and |
· | approving share repurchase programs. |
Extraordinary general meetings of shareholders are required for approval of matters such as amendments to ourstatuts, Articles of Association, including any amendment required in connection with extraordinary corporate actions. Extraordinary corporate actions include:
· | changing our Company’s name or corporate purpose; |
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changing our Company's name or corporate purpose;Item 10. Additional Information
· | increasing or decreasing our share capital; |
· | creating a new class of equity securities; |
· | authorizing the issuance of: |
– | shares giving access to our share capital or giving the right to receive debt instruments, or |
– | other securities giving access to our share capital; |
· | establishing any other rights to equity securities; |
· | selling or transferring substantially all of our assets; and |
· | the voluntary liquidation of our Company. |
Special meetings of shareholders of a certain category of shares or shares with certain specific rights (such as shares with double voting rights) are required for any modification of the rights derived from that category of shares. The resolutions of the shareholders'shareholders’ general meeting affecting these rights are effective only after approval by the relevant special meeting.
The French Commercial Code requires the Board of Directors to convene an annual ordinary general shareholders'shareholders’ meeting to approve the annual financial statements. This meeting must be held within six months of the end of each fiscal year. This period may be extended by an order of the President of the Commercial Court. The Board of Directors may also convene an ordinary or extraordinary general shareholders'shareholders’ meeting upon proper notice at any time during the year. If the Board of Directors fails to convene a shareholders'shareholders’ meeting, our independent auditors may call the meeting. In case of bankruptcy, the liquidator or court-appointed agent may also call a shareholders'shareholders’ meeting in some instances. In addition, any of the following may request the court to appoint an agent for the purpose of calling a shareholders'shareholders’ meeting:
· | one or several shareholders holding at least 5% of our share capital; |
· | duly qualified associations of shareholders who have held their shares in registered form for at least two years and who together hold at least 1% of our voting rights; |
· | the works council in cases of urgency; or |
· | any interested party in cases of urgency. |
Notice of Shareholders'Shareholders’ Meetings
All prior notice periods provided for below are minimum periods required by French law and cannot be shortened, except in case of a public tender offer for our shares.
We must announce general meetings at leastthirty-five days in advance by means of a preliminary notice (avis deréunion), which is published in theBulletin des Annonces Légales Obligatoires, orBALO. The preliminary notice must
first be sent to the French Financial markets authority (Autorité des marchés financiers, the "AMF"“AMF”), with an indication of the date on which it will be published in the BALO. It must be published on our website at least twenty-one days prior to the general meeting. The preliminary notice must contain, among other things, the agenda, a draft of the resolutions to be submitted to the shareholders for consideration at the general meeting and a detailed description of the voting procedures (proxy voting, electronic voting or voting by mail), the procedures permitting shareholders to submit additional resolutions or items to the agenda and to ask written questions to the Board of Directors. The AMF also recommends that, prior to or simultaneously with the publication of the preliminary notice, we publish a summary of the notice indicating the date, time and place of the meeting in a newspaper of national circulation in France and on our website.
At least fifteen days prior to the date set for a first convening, and at least ten days prior to any second convening, we must send a final notice (avis de convocation) containing the final agenda, the date, time and place of the meeting and other information related to the meeting. Such final notice must be sent by mail to all registered shareholders who have held shares in registered form for more than one month prior to the date of the final notice and by registered mail, if shareholders have asked for it and paid the corresponding charges. The final notice must also be published in a newspaper authorized to publish legal announcements in the local administrative department (département) in which our Company is registered as well as in theBALO, with prior notice having been given to the AMF for informational purposes. Even if there are no proposals for new resolutions or items to be submitted to the shareholders at the meeting, we must publish a final notice in a newspaper authorized to publish legal announcements in the local administrative department (départment) in with our Company is registered as well as in theBALO.
In general, shareholders can only take action at shareholders'shareholders’ meetings on matters listed on the agenda. As an exception to this rule, shareholders may take action with respect to the appointment and dismissal of directors even if this action has not been included on the agenda.
Additional resolutions to be submitted for approval by the shareholders at the shareholders'shareholders’ meeting may be proposed to the Board of Directors, for recommendation to the shareholders at any time from the publication of the preliminary notice in theBALO until twenty-five days prior to the general meeting and in any case no later than twenty days following the publication of the preliminary notice in theBALO by:
· | one or several shareholders together holding a specified percentage of shares; |
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Item 10. Additional Information
· | a duly qualified association of shareholders who have held their shares in registered form for at least two years and who together hold at least 1% of our voting rights; or |
· | the works council. |
Within the same period, the shareholders may also propose additional items (points) to be submitted and discussed during the shareholders'shareholders’ meeting, without a shareholders'shareholders’ vote. The shareholders must substantiate the reasons for proposing their proposals of additional items.
The resolutions and the list of items added to the agenda of the shareholders'shareholders’ meeting must be promptly published on our website.
The Board of Directors must submit the resolutions to a vote of the shareholders after having made a recommendation thereon. The Board of Directors may also comment on the items that are submitted to the shareholders'shareholders’ meeting.
Following the date on which documents must be made available to the shareholders (including documents to be submitted to the shareholders'shareholders’ meeting and resolutions proposed by the Board of Directors, which must be published on our website at least twenty-one days prior to the general meeting), shareholders may submit written questions to the Board of Directors relating to the agenda for the meeting until the fourth business day prior to the general meeting. The Board of Directors must respond to these questions during the meeting or may refer to a Q&A section located on our website in which the question submitted by a shareholder has already been answered.
Attendance at Shareholders'Shareholders’ Meetings; Proxies and Votes by Mail
In general, all shareholders may participate in general meetings either in person or by proxy. Shareholders may vote in person, by proxy or by mail.
The right of shareholders to participate in general meetings is subject to the recording (enregistrement comptableinscription en compte) of their shares on the thirdsecond business day, zero hour (Paris time), preceding the general meeting:
· | for holders of registered shares: in the registered shareholder account held by the Company or on its behalf by an agent appointed by it; and |
· | for holders of bearer shares: in the bearer shareholder account held by the accredited financial intermediary with whom such holders have deposited their shares; such financial intermediaries shall deliver to holders of bearer shares a shareholding certificate (attestation de participation) enabling them to participate in the general meeting. |
��Any shareholder may attend ordinary general meetings and extraordinary general meetings and exercise its voting rights subject to the conditions specified in the French Commercial Code and ourstatuts. Articles of Association.
Proxies are sent to any shareholder upon a request received between the publication of the final notice of meeting and six days before the general meeting and must be made available on our website at leasttwenty-one days before the general meeting. In order to be counted, such proxies must be received at our registered office, or at any other address indicated on the notice of the meeting or by any electronic mail indicated on the notice of the meeting, prior to the date of the meeting (in practice, we request that shareholders return proxies at least three business days prior to the meeting; electronic proxies must be returned before 3 p.m. Paris time, on the day prior to the general meeting). A shareholder may grant proxies to any natural person or legal entity. The agent may be required to disclose certain information to the shareholder or to the public.
Alternatively, the shareholder may send us a blank proxy without nominating any representative. In this case, the chairman of the meeting will vote the blank proxies in favor of all resolutions proposed or approved by the Board of Directors and against all others.
With respect to votes by mail, we must send shareholders a voting form upon request or must make available a voting form on our website at least twenty-one days before the general meeting. The completed form must be returned to us at least three days prior to the date of the shareholders'shareholders’ meeting. For holders of registered shares, in addition to traditional voting by mail, instructions may also be given via the internet.
Quorum
The French Commercial Code requires that shareholders holding in the aggregate at least 20% of the shares entitled to vote must be present in person, or vote by mail or by proxy, in order to fulfill the quorum requirement for:
of free share warrants in the event of a public offer for our shares (article L. 233-32 of the French Commercial Code).
· | an ordinary general meeting; and |
· | an extraordinary general meeting where the only resolutions pertain to either (a) a proposed increase in our share capital through incorporation of reserves, profits or share premium, or (b) the potential issuance of free share warrants in the event of a public tender offer for our shares (article L. 233-32 of the French Commercial Code). |
For any other extraordinary general meeting the quorum requirement is at least 25% of the shares entitled to vote, held by shareholders present in person, voting by mail or by proxy.
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Item 10. Additional Information
For a special meeting of holders of a certain category of shares, the quorum requirement is one third of the shares entitled to vote in that category, held by shareholders present in person, voting by mail or by proxy.
If a quorum is not present at a meeting, the meeting is adjourned. However, only questions that were on the agenda of the adjourned meeting may be discussed and voted upon once the meeting resumes.
When an adjourned meeting is resumed, there is no quorum requirement for meetings cited in the first paragraph of this "“Quorum"” section. In the case of any other reconvened extraordinary general meeting or special meeting, the quorum requirement is 20% of the shares entitled to vote (or voting shares belonging to the relevant category for special meetings of holders of shares of such specific category), held by shareholders present in person or voting by mail or by proxy. If a quorum is not met, the reconvened meeting may be adjourned for a maximum of two months with the same quorum requirement. No deliberation or action by the shareholders may take place without a quorum.
Votes Required for Shareholder Action
The affirmative vote of a simple majority of the votes cast may pass a resolution at either an ordinary general meeting or an extraordinary general meeting where the only resolution(s) pertain to either (a) a proposed increase in our share capital through incorporation of reserves, profits or share premium, or (b) the potential issuance of free share warrants in the event of a public tender offer for our shares (article L. 233-32 of the French Commercial Code). At any other extraordinary general shareholders'shareholders’ meeting and at any special meeting of holders of a specific category of shares, the affirmative vote oftwo-thirds of the votes cast is required.
Abstention from voting by those present or those represented by proxy or voting by mail is counted as a vote against the resolution submitted to a shareholder vote.
Changes to Shareholders'Shareholders’ Rights
Under French law, the affirmative vote of two-thirds of the votes cast at an extraordinary shareholders'shareholders’ meeting is required to change ourstatuts, Articles of Association, which set out the rights attached to our shares, except for capital increases through incorporation of reserves, profits or share premium, or through the issuance of free share warrants in the event of a public tender offer for our shares (article L. 233-32 of the French Commercial Code).
The rights of a class of shareholders can be amended only after a special meeting of the class of shareholders affected has taken place. The voting requirements applicable to this type of special meeting are the same as those applicable to an extraordinary general shareholders'shareholders’ meeting. The quorum requirements for a special meeting are one-third of the voting shares, or 20% upon resumption of an adjourned meeting.
A unanimous shareholders'shareholders’ vote is required to increase the liabilities of shareholders.
Financial Statements and Other Communications with Shareholders
In connection with any shareholders'shareholders’ meeting, we must provide a set of documents includingwhich includes our annual report and a summary of the financial results of the five previous fiscal years to any shareholder who so requests.report.
We must also provide on our website at leasttwenty-one days before a shareholders'shareholders’ meeting certain information and a set of documents that includes the preliminary notice, the proxies and voting forms, the resolutions proposed by the Board of Directors, and the documents to be submitted to the shareholders'shareholders’ meeting pursuant to articles L. 225-15225-115 and R. 225-83 of the French Commercial Code, etc. The resolutions and the list of items added to the agenda of the shareholders'shareholders’ meeting must be promptly published on our website.
Dividends
We may only distribute dividends out of our "distributable“distributable profits,"” plus any amounts held in our reserves that the shareholders decide to make available for distribution, other than those reserves that are specifically required by law or ourstatuts. "Distributable profits" Articles of Association. “Distributable profits” consist of our unconsolidated net profit in each fiscal year, as increased or reduced by any profit or loss carried forward from prior years, less any contributions to the reserve accounts pursuant to law or our Articles of Association.
statuts.Legal Reserve
The French Commercial Code requires us to allocate 5% of our unconsolidated net profit for each year to our legal reserve fund before dividends may be paid with respect to that year. Funds must be allocated until the amount in the legal reserve is equal to 10% of the aggregate par value of the issued and outstanding share capital. This restriction on the payment of dividends also applies to each of our French subsidiaries on an unconsolidated basis. At December 31, 2012,2015, our legal reserve amounted to €282,280,863,€282,280,863, representing 10.64%10.81% of the aggregate par value of our issued and outstanding share capital as of that date. The legal reserve of any company subject to this requirement may serve to allocate losses that may not be allocated to other reserves, or may be distributed to shareholders upon liquidation of the company.
According to the French Commercial Code, our Board of Directors may propose a dividend for approval by shareholders at the annual general shareholders'shareholders’ meeting. If we have earned distributable profits since the end of the preceding fiscal year, as reflected in an interim income statement certified by our independent auditors, our Board of Directors may distribute interim dividends to the extent of the
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Item 10. Additional Information
distributable profits for the period covered by the interim income statement. Our Board of Directors exercises this authority subject to French law and regulations and may do so without obtaining shareholder approval.
Dividends are distributed to shareholderspro rata according to their respective holdings of shares. In the case of interim dividends, distributions are made to shareholders on the date set by our Board of Directors during the meeting in which the distribution of interim dividends is approved. The actual dividend payment date is decided by the shareholders at an ordinary general shareholders'shareholders’ meeting or by our Board of Directors in the absence of such a decision by the shareholders. Shareholders that own shares on the actual payment date are entitled to the dividend.
Dividends may be paid in cash or, if the shareholders'shareholders’ meeting so decides, in kind, provided that all shareholders receive a whole number of assets of the same nature paid in lieu of cash. Ourstatuts Articles of Association provide that, subject to a decision of the shareholders'shareholders’ meeting taken by ordinary resolution, each shareholder may be given the choice to receive his dividend in cash or in shares.
According to the French Commercial Code, we must pay any existing dividends within nine months of the end of our fiscal year, unless otherwise authorized by court order. Dividends on shares that are not claimed within five years of the date of declared payment revert to the French State.
Changes in Share Capital
As provided for by the French Commercial Code, our share capital may be increased only with shareholders'shareholders’ approval at an extraordinary general shareholders'shareholders’ meeting following the recommendation of our Board of Directors. The shareholders may delegate to our Board of Directors either the authority(délégation de compétence) or the power(délégation de pouvoir) to carry out any increase in share capital. Our Board of Directors may further delegate this power to our Chief Executive Officer or, subject to our Chief Executive Officer'sOfficer’s approval, to his delegates(directeurs généraux délégués).
Increases in our share capital may be effected by:
· | issuing additional shares; |
· | increasing the par value of existing shares; |
· | creating a new class of equity securities; or |
· | exercising the rights attached to securities giving access to the share capital. |
Increases in share capital by issuing additional securities may be effected through one or a combination of the following:
· | in consideration for cash; |
· | in consideration for assets contributed in kind; |
· | through an exchange offer; |
· | by conversion of previously issued debt instruments; |
· | by capitalization of profits, reserves or share premium; or |
· | subject to various conditions, in satisfaction of debt incurred by our Company. |
Decisions to increase the share capital through the capitalization of reserves, profits and/or share premium or through the issuance of free share warrants in the event of a public tender offer for our shares (article L. 233-32 of the French Commercial Code) require shareholders'shareholders’ approval at an extraordinary general shareholders'shareholders’ meeting, acting under the quorum and majority requirements applicable to ordinary shareholders'shareholders’ meetings. Increases effected by an increase in the par value of shares require unanimous approval of the shareholders, unless effected by capitalization of reserves, profits or share premium. All other capital increases require shareholders'shareholders’ approval at an extraordinary general shareholders'shareholders’ meeting acting under the regular quorum and majority requirements for such meetings. See "— Quorum"“– Quorum” and "—“– Votes Required for Shareholder Action"Action” above.
On May 6, 2011,4, 2015, our shareholders approved various resolutions delegating to the Board of Directors the authority to increase our share capital through the issuance of shares or securities giving access to the share capital, subject to an overall cap set at €1.3€1.3 billion. This cap applies to all the resolutions whereby the extraordinary shareholders'shareholders’ meeting delegated to the Board of Directors the authority to increase the share capital, it being also specified that:
· | the maximum aggregate par value of capital increases that may be carried out with preemptive rights maintained was set at€1.3 billion; |
· | the maximum aggregate par value of capital increases that may be carried out by public offering without preemptive rights was set at€260 million; |
· | the maximum aggregate par value of capital increases that may be carried out by private placement without preemptive rights was set at€260 million; |
· | capital increases resulting in the issuance of securities to members of employee savings plans are limited to 1% of the share capital as computed on the date of the Board of Directors’ decision to issue such securities, and such issuances may be made at a discount of 20% (or 30%) if certain French law restrictions on resales were to apply, i.e. a lock up period of five years (or 10 years). |
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Item 10. Additional Information
On May 6, 2011,4, 2015, our shareholders also approved resolutions delegating to the Board of Directors the authority to increase the share capital by granting options to our employees and/or corporate officers, subject to the overall cap mentioned above and under the following terms and conditions:
On May 4, 2012, our shareholders approved resolutions delegating to the Board of Directors the authority to increase the share capital by granting existing or new restricted shares to our employees and/or corporate officers, subject to the overall cap mentioned above and under the following terms and conditions:
· | the authorization is valid for a period of 38 months, and is subject to a limit of 1.2% of the share capital as computed on the date of the decision of the Board of Directors to allot such shares; see “– Awards of Shares” above. |
On May 3, 2013, our shareholders also approved resolutions delegating to the Board of Directors the authority to allot such shares; see "— Awards of Shares" above.
· | the authorization is valid for a period of 38 months, and any options granted may not give entitlement to a total number of shares exceeding 0.7% of the share capital as computed on the date of the decision of the Board of Directors to grant such options; see “– Stock Options” above; |
See also "Item“Item 6. Directors, Senior Management and Employees —– E. Share Ownership"Ownership”.
In accordance with the provisions of the French Commercial Code, any decrease in our share capital requires approval by the shareholders entitled to vote at an extraordinary general meeting. The share capital may be reduced either by decreasing the par value of the outstanding shares or by reducing the number of outstanding shares. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and cancellation of shares. Holders of each class of shares must be treated equally unless each affected shareholder agrees otherwise.
In addition, specific rules exist to permit the cancellation of treasury shares, by which the shareholders'shareholders’ meeting may authorize the cancellation of up to a maximum of 10% of a company'scompany’s share capital within any24-month period. On May 6, 2011,4, 2015, our shareholders delegated to our Board of Directors for 26 months the right to reduce our share capital by canceling our own shares.
Preemptive Rights
According to the French Commercial Code, if we issue additional securities to be paid in cash, current shareholders will have preemptive rights to these securities on apro rata basis. These preemptive rights require us to give priority treatment to current shareholders. The rights entitle the individual or entity that holds them to subscribe to the issuance of any securities that may increase the share capital of our Company by means of a cash payment or a set-off of cash debts. Preemptive rights are transferable
during the subscription period relating to a particular offering. These rights may also be listed on Euronext Paris Stock Exchange.
Preemptive rights with respect to any particular offering may be waived by the affirmative vote of shareholders holding two-thirds of the shares entitled to vote at an extraordinary general meeting. Our Board of Directors and our independent auditors are required by French law to present reports that specifically address any proposal to waive preemptive rights. In the event of a waiver, the issue of securities must be completed within the period prescribed by law. Shareholders may also notify us that they wish to waive their own preemptive rights with respect to any particular offering if they so choose.
The shareholders may decide at extraordinary general meetings to give the existing shareholders anon-transferable priority right to subscribe to the new securities, for a limited period of time.
In the event of a capital increase without preemptive rights to existing shareholders, French law requires that the capital increase be made at a price equal to or exceeding the weighted average market prices of the shares for the last three trading days on Euronext Paris Stock Exchange prior to the determination of the subscription price of the capital increase less 5%.
Form, Holding and Transfer of Shares
Ourstatuts Articles of Association provide that the shares may be held in either bearer form or registered form at the option of the holder.
In accordance with French law relating to the dematerialization of securities, shareholders'shareholders’ ownership rights are represented by book entries instead of share certificates. We maintain a share account with Euroclear France (a French clearing system, which holds securities for its participants) for all shares in registered form, which is administered by BNP Paribas Securities Services. In addition, we maintain separate accounts in the name of each shareholder either directly or, at a shareholder'sshareholder’s request, through the shareholder'sshareholder’s accredited intermediary. Each shareholder account shows the name of the holder and the number of shares held. BNP Paribas Securities Services issues confirmations (attestations d'inscriptiond’inscription en compte) to each registered shareholder as to shares registered in the shareholder'sshareholder’s account, but these confirmations are not documents of title.
Shares of a listed company may also be issued in bearer form. Shares held in bearer form are held and registered on the shareholder'sshareholder’s behalf in an account maintained by an accredited financial intermediary and are credited to an
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account at Euroclear France maintained by such intermediary. Each accredited financial intermediary maintains a record of shares held through it and provides the account holder with a securities account statement. Transfers of shares held in bearer form may only be made through accredited financial intermediaries and Euroclear France.
Shares held by persons who are not domiciled in France may be registered in the name of intermediaries who act on behalf of one or more investors. When shares are so held, we are entitled to request from such intermediaries the names of the investors. Also, we may request any legal entity (personne morale) which holds more than 2.5% of our shares or voting rights to disclose the name of any person who owns, directly or indirectly, more than one-third of its share capital or of its voting rights. A person not providing the complete requested information in time, or who provides incomplete or false information, will be deprived of its voting rights at shareholders'shareholders’ meetings and will have its payment of dividends withheld until it has provided the requested information in strict compliance with French law. If such person acted willfully, the person may be deprived by a French court of either its voting rights or its dividends or both for a period of up to five years.
Ourstatuts Articles of Association do not contain any restrictions relating to the transfer of shares.
Registered shares must be converted into bearer form before being transferred on the Euronext Paris Stock Exchange on the shareholders'shareholders’ behalf and, accordingly, must be registered in an account maintained by an accredited financial intermediary on the shareholders'shareholders’ behalf. A shareholder may initiate a transfer by giving instructions to the relevant accredited financial intermediary.
A fee or commission is payable to the broker involved in the transaction, regardless of whether the transaction occurs within or outside France. Registration duty is currently payable in France if a written deed of sale and purchase (acte) is executed in France or outside France with respect to the shares of the Company.
Redemption of Shares
Under French law, our Board of Directors is entitled to redeem a set number of shares as authorized by the extraordinary shareholders'shareholders’ meeting. In the case of such an authorization, the shares redeemed must be cancelled within one month after the end of the offer to purchase such shares from shareholders. However, shares redeemed on the open market do not need to be cancelled if the company redeeming the shares grants options on or awards those shares to its employees within one year following the acquisition. See also "—“– Trading in Our Own Shares"Shares” below.
Sinking Fund Provisions
Ourstatuts Articles of Association do not provide for any sinking fund provisions.
Liability to Further Capital Calls
Shareholders are liable for corporate liabilities only up to the par value of the shares they hold; they are not liable to further capital calls.
Liquidation Rights
If we are liquidated, any assets remaining after payment of our debts, liquidation expenses and all of our remaining obligations will first be distributed to repay in full the par value of our shares. Any surplus will be distributedpro rata among shareholders in proportion to the par value of their shareholdings.
Requirements for Holdings Exceeding Certain Percentages
The French Commercial Code provides that any individual or entity, acting alone or in concert with others, that becomes the owner, directly or indirectly, of more than 5%, 10%, 15%, 20%, 25%, 30%, 331/3%, 50%, 662/3%, 90% or 95% of the outstanding shares or voting rights of a listed company in France, such as our Company, or that increases or decreases its shareholding or voting rights above or below any of those percentages, must notify the company, before the end of the fourth trading day following the date it crosses the threshold, of the number of shares it holds and their voting rights. The individual or entity must also notify the AMF before the end of the fourth trading day following the date it crosses any such threshold. The AMF makes the notice public.
Pursuant to the French Commercial Code and the AMF General Regulation, the participation thresholds shall be calculated on the basis of the shares and voting rights owned, and shall take into account the shares and voting rights which are deemed to be shares and voting rights owned, even if the individual or entity does not itself hold shares or voting rights. In accordance with this deemed ownership principle, the individual or entity must take into account specific situations where shares and voting rights are deemed to be shares and voting rights owned when calculating the number of shares owned to be disclosed in the notifications to the Company and to the AMF. It includes among others situations where an individual or entity is entitled to acquire issued shares at its own initiative, immediately or at the end of a maturity period, under an agreement or a financial instrument, without set-off against the number of shares that this individual or entity is entitled to sell under another agreement or financial instrument. The individual or entity required to make such notification shall also take into account issued shares covered by an agreement or cash-settled financial instrument and having
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an economic effect for said individual or entity that is equivalent to owning such shares. In the cases of deemed ownership described above, the notification shall mention the type of deemed ownership and include a description of the main characteristics of the financial instrument or agreement with specific details required by the AMF General Regulation.
The AMF General Regulation provides that shares and voting rights subject to multiple cases of deemed ownership shall only be counted once.
When an individual or entity modifies the allocation between the shares it owns and its financial instruments or agreements deemed to be owned shares, it must disclose that change in a new notification. However, the change must only be disclosed if the acquisition of owned shares due to the settlement of the financial instruments or agreements causes the investor to cross a threshold.
Subject to certain limited exceptions, French law and AMF regulations impose additional reporting requirements on persons who acquire more than 10%, 15%, 20%, or 25% of the outstanding shares or voting rights of a company listed in France. These persons must file a report with the company and the AMF before the end of the fifth trading day following the date they cross any such threshold.
In the report, the acquirer will have to specify its intentions for the following six months including:
· | whether it acts alone or in concert with others; |
· | the means of financing of the acquisition (the notifier shall indicate in particular whether the acquisition is being financed with equity or debt, the main features of that debt, and, where applicable, the main guarantees given or received by the notifier. The notifier shall also indicate what portion of its holding, if any, it obtained through securities loans); |
· | whether or not it intends to continue its purchases; |
· | whether or not it intends to acquire control of the company in question; |
· | the strategy it contemplatesvis-à-vis the issuer; |
· | the way it intends to implement its strategy, including: (i) any plans for a merger, reorganization, liquidation, or partial transfer of a substantial part of the assets of the issuer or of any other entity it controls within the meaning of article L.233-3 of the French Commercial Code, (ii) any plans to modify the business of the issuer, (iii) any plans to modify articles of association of the issuer, (iv) any plans to delist a category of the issuer’s financial instruments, and (v) any plans to issue the issuer’s financial instruments; |
· | any agreement for the temporary transfer of shares or voting rights of the issuer; |
· | the way it intends to settle its agreements or instruments on the shares or voting rights of the issuer mentioned in Article L.233- 9,4° and 4° bis of the French Commercial Code; and |
· | whether it seeks representation on the Board of Directors. |
The AMF makes the report public. Upon any change of intention within the six-month period following the filing of the report, it will have to file a new report for the followingsix-month period.
In order to enable shareholders to give the required notice, we must each month publish on our website and send the AMF a written notice setting forth the total number of our shares and voting rights (including treasury shares) whenever they vary from the figures previously published.
If any shareholder fails to comply with an applicable legal notification requirement, the shares in excess of the relevant threshold will be deprived of voting rights for all shareholders'shareholders’ meetings until the end of atwo-year period following the date on which the owner complies with the notification requirements. In addition, any shareholder who fails to comply with these requirements may have all or part of its voting rights suspended for up to five years by the Commercial Court at the request of our Chairman, any shareholder or the AMF, and may be subject to criminal fines.
Under AMF regulations, and subject to limited exemptions granted by the AMF, any person or entity, acting alone or in concert, that crosses the threshold of 30% of the share capital or voting rights of a French listed company must initiate a public tender offer for the balance of the shares and securities giving access to the share capital or voting rights of such company. Cash-settled derivative instruments or agreements mentioned in Article L. 233-9, 4° bis of the French Commercial Code are not included in the calculation of the number of shares related to the mandatory public tender offer.
In addition, ourstatuts Articles of Association provide that any person or entity, acting alone or in concert with others, who becomes the owner of 1%, or any multiple of 1% of our share capital or our voting rights, even beyond the minimum declaration limits permitted by the legal and regulatory provisions, must notify us by certified mail, return receipt requested, within five trading days, of the total number of shares and securities giving access to our share capital and voting rights that such person then owns. The same provisions of ourstatuts Articles of Association apply whenever such owner increases or decreases its ownership of our share capital or our voting rights to such extent that it goes above or below one of the thresholds described in the preceding sentence. Any person or entity that fails to comply with such notification requirement will, upon the request of one or more shareholders holding at least 5% of our share capital or of our voting rights made at the general shareholders'
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shareholders’ meeting, be deprived of voting rights with respect to the shares in excess of the relevant threshold for all shareholders'shareholders’ meetings until the end of a two-year period following the date on which such person or entity complies with the notification requirements.
Change inControl/Anti-takeover
Change in Control/Anti-takeover
There are no provisions in ourstatuts Articles of Association that would have the effect of delaying, deferring or preventing a change in control of our Company or that would operate only with respect to a merger, acquisition or corporate restructuring involving our Company or any of our subsidiaries. Further, there are no provisions in ourstatuts Articles of Association that
allow the issuance of preferred stock upon the occurrence of a takeover attempt or the addition of other "anti-takeover"“anti-takeover” measures without a shareholder vote.
Ourstatuts Articles of Association do not include any provisions discriminating against any existing or prospective holder of our securities as a result of such shareholder owning a substantial number of shares.
Trading in Our Own Shares
Under French law, Sanofi may not issue shares to itself. However, we may, either directly or through a financial intermediary acting on our behalf, acquire up to 10% of our issued share capital within a maximum period of 18 months, provided our shares are listed on a regulated market. Prior to acquiring our shares, we must publish a description of the share repurchase program (descriptif du programme de rachat d'actionsd’actions).
We may not cancel more than 10% of our issued share capital over any24-month period. Our repurchase of shares must not result in our Company holding, directly or through a person acting on our behalf, more than 10% of our issued share capital. We must hold any shares that we repurchase in registered form. These shares must be fully paid up. Shares repurchased by us continue to be deemed "issued"“issued” under French law but are not entitled to dividends or voting rights so long as we hold them directly or indirectly, and we may not exercise the preemptive rights attached to them.
The shareholders, at an extraordinary general shareholders meeting, may decide not to take these shares into account in determining the preemptive rights attached to the other shares. However, if the shareholders decide to take them into account, we must either sell the rights attached to the shares we hold on the market before the end of the subscription period or distribute them to the other shareholders on apro rata basis.
On May 4, 2012,2015, our shareholders approved a resolution authorizing us to repurchase up to 10% of our shares over an 18-month period. Under this authorization, the purchase price for each Sanofi ordinary share may not be greater than €80.00€120.00 and the maximum amount that Sanofi may pay for the repurchases is €10,727,350,480.€12,248,051,000. This authorization was granted for a period of 18 months from May 4, 20122015 and
cancelled and replaced the authorization granted to the Board of Directors by the combined general meeting held on May 6, 2011.5, 2014. A description of this share repurchase program as adopted by the Board of Directorscombined general meeting held on May 4, 2012,2015 ((descriptif du programme de rachat d'actionsd’actions) was published on March 5, 2012.11, 2015.
Purposes of Share Repurchase Programs
Under the European regulation 2273/2003, dated December 22, 2003 (which we refer to in this section as the "Regulation"“Regulation”), in application of European directive 2003/6/EC, dated January 28, 2003, known as the "Market“Market Abuse Directive"Directive”, an issuer will benefit from a safe harbor for share transactions that comply with certain conditions relating in particular to the pricing, volume and timing of transactions (see below) and that are made in connection with a share repurchase program the purpose of which is:
· | to reduce the share capital through the cancellation of treasury shares; and/or |
· | to meet obligations arising from debt instruments exchangeable into equity instruments and/or the implementation of employee share option programs or other employee share allocation plans. |
Safe harbor transactions will by definition not be considered market abuses under the Regulation. Transactions that are carried out for other purposes than those mentioned above do not qualify for the safe harbor. However, as permitted by the Directive, which provides for the continuation of existing practices that do not constitute market manipulation and that conform with certain criteria set forth in European directive 2004/72, dated April 29, 2004, the AMF published exceptions on March 22, 2005, October 1, 2008, March 21, 2011, and March 10, 2012, and April 24, 2013 to permit the following existing market practices:
· | transactions pursuant to a liquidity agreement entered into with a financial services intermediary that complies with the ethical code (charte de déontologie) approved by the AMF; and |
· | the purchase of shares that are subsequently used as acquisition currency in a business combination transaction. |
The AMF confirmed that all transactions directed at maintaining the liquidity of an issuer'sissuer’s shares must be conducted pursuant to a liquidity agreement with a financial services intermediary acting independently.
Pricing, Volume and Other Restrictions
In order to qualify for the safe harbor, the issuer must generally comply with the following pricing and volume restrictions:
· | a share purchase must not be made at a price higher than the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out; |
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· | subject to certain exceptions for illiquid securities, the issuer must not purchase more than 25% of the average daily volume of the shares in any one day on the regulated market on which the purchase is carried out. The average daily volume figure must be based on the average daily volume traded in the month preceding the month of public disclosure of the share repurchase program and fixed on that basis for the authorized period of that program. If the program does not make reference to this volume, the average daily volume figure must be based on the average daily volume traded in the 20 trading days preceding the date of purchase. |
In addition, an issuer must not:
· | sell treasury shares during the period of the repurchase program (without prejudice to the right of the issuer to meet its obligations under employee share option programs or other employee share allocation plans or to use shares as acquisition currency as mentioned above); it being further specified that such prohibition is not applicable in the event ofoff-market block trades or if the share repurchase program is implemented by a financial services intermediary pursuant to a liquidity agreement as mentioned above; and |
· | effect any transaction during a “blackout period” imposed by the applicable law of the Member State in which the transaction occurs (i.e., under French law, during the period between the date on which the company has knowledge of insider information and the date on which such information is made public and during the30-day period preceding the date of publication of annual andhalf-year financial statements and the15-day period preceding the date of publication of quarterly financial information), without prejudice to transactions carried out pursuant to a liquidity agreement as mentioned above; or |
· | effect any transaction in securities with respect to which the issuer has decided to defer disclosure of any material,non-public information. |
Use of Share Repurchase Programs
Pursuant to the AMF rules, issuers must immediately allocate the repurchased shares to one of the purposes provided for in the Regulation and must not subsequently use the shares for a different purpose. As an exception to the foregoing, shares repurchased with a view to covering stock option plans may, if no longer needed for this purpose, bere-allocated for cancellation or sold in compliance with AMF requirements relating in particular to blackout periods. Shares repurchased in connection with one of the market practices authorized by the AMF (see above) may also be re-allocated to one of the purposes contemplated by the Regulation or sold in compliance with AMF requirements. Shares repurchased with a view to their cancellation must be cancelled within 24 months following their acquisition.
During the year ended December 31, 2012,2015, we used the authority delegated by our shareholders to repurchase our shares on the stock market.
Pursuant to our share repurchase programs authorized by our shareholders on May 3, 20115, 2014 and on May 4, 2012,2015, we repurchased 13,573,64320,275,940 of our shares for a weighted average price of €60.59,€87.67, i.e. a total cost of €823 million, €596,000 of which were incurred on brokerage€1,779 million. Brokerage fees and financial transaction taxes (net of income taxes).
amounted toTable of Contents€2.4 million.
On April 26, 2012,29, 2015, the Board of Directors cancelled 21,159,445 treasury shares, as follows:
On October 24, 2012, the Board of Directors cancelled 6,435,92418,482,786 treasury shares repurchased between April 1,November 2014 and September 30, 2012March 2015 pursuant to the share repurchase program of the Company.
On October 29, 2015, the Board of Directors cancelled 7,259,200 treasury shares repurchased between April 2015 and August 2015 pursuant to the share repurchase program of the Company.
During 2012,2015, pursuant to the liquidity contract, Exane BNP Paribas purchased 6,254,8683,416,317 of our shares at an average weighted price of €61.36€88.15 for a total amount of €383,803,530€301,137,412 and sold 6,254,8683,416,317 of our shares at an average weighted price of €61.48€88.18 for a total amount of €384,536,260.€301,266,554.
In 2012,2015, of the 5,766,116193,331 shares allocated to stock purchase option plans outstanding at December 31, 2011, 53,7902014, 33,480 shares were transferred to grantees of options.
As a result, as of December 31, 2012,2015, out of the 3,150,2873,956,708 treasury shares, representing 0.24%0.30% of our share capital, 159,851 were all allocated to outstanding stock purchase option plans.plans and 3,796,857 were allocated to the purpose of cancellation. At the same date, none of the shares was allocated to the liquidity account, even though the liquidity contract was outstanding.
As of December 31, 2012,2015, we directly owned 3,150,2873,956,708 Sanofi shares with a par value of €2€2 representing around 0.24%0,30% of our share capital and with an estimated value of €213,000,157,€306 million, based on the share price at the time of purchase.
Pursuant to the AMF Regulation and the French Commercial Code, issuers trading in their own shares are subject to the following reporting obligations:
· | issuers must report all transactions in their own shares on their web site within seven trading days of the transaction in a prescribed format, unless such transactions are carried out pursuant to a liquidity agreement that complies with the ethical code approved by the AMF; and |
· | issuers must declare to the AMF on a monthly basis all transactions completed under the share repurchase program unless they provide the same information on a weekly basis. |
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Ownership of Shares byNon-French Persons
The French Commercial Code and ourstatuts Articles of Association currently do not limit the right ofnon-residents of France ornon-French persons to own or, where applicable, to vote our securities. However,non-residents of France must file an administrative notice with the French authorities in connection with certain direct and indirect investments in us, including the acquisition of a controlling interest in our Company. Under existing administrative rulings, ownership of 331/3% or more of our share capital or voting rights is regarded as a controlling interest, but a lower percentage might be held to be a controlling interest in certain circumstances depending upon factors such as:
· | the acquiring party’s intentions; |
· | the acquiring party’s ability to elect directors; or |
· | financial reliance by the company on the acquiring party. |
Moreover, certain foreign investments in companies incorporated under French laws are subject to the acquiring party's intentions;
Enforceability of Civil Liabilities
We are a limited liability company (société anonyme) organized under the laws of France, and most of our officers and directors reside outside the United States. In addition, a substantial portion of our assets is located in France.
As a result, investors may find it maydifficult or be difficult for investorsunable to effect service of process within the United States upon or obtain jurisdiction over our Company or our officers and directors in U.S. courts in actions predicated on the civil liability provisions of U.S. securities law. It may also be difficult to enforce against them, either inside or outside the United States, judgments obtained against them in U.S. courts, or to enforce in U.S. courts, judgments obtained against them in courts in jurisdictions outside the United States, in any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in France, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws. Actions for enforcement of foreign judgments against such persons would require such persons who are of French nationality to waive their right under Article 15 of the French Civil Code to be sued only in France. We believe that no such French persons have waived such right with respect to actions predicated solely upon U.S. federal securities laws. In addition, actions in the United States under the U.S. federal securities laws could be affected under certain circumstances by the French law No. 68-678 of July 26, 1968 as amended by French LawNo. 80-538 of July 16, 1980, which may preclude or restrict the obtaining of evidence in France or from French persons in connection with suchthose actions. Additionally, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in France.
The Facilities Agreement
In connection with the launch of its public tender offer for Genzyme, Sanofi executed on October 2, 2010 a Term Facilities Agreement (the "Facilities Agreement") with J.P. Morgan plc, Société Générale Corporate & Investment Banking and BNP Paribas (the "Initial Mandated Lead Arrangers") which was further syndicated by the Initial Mandated Lead Arrangers among other financial institutions, for two unsecured term loan facilities available for drawdowns of up to $15,000,000,000 in the aggregate for the purpose of financing part of the acquisition of Genzyme Corporation, composed of:
The interest rate on each facility was equal to the London Inter-Bank Overnight Rate (or Libor), plus an applicable margin.
On March 29, 2011, available commitments under Facility A were reduced by an amount equivalent to the proceeds of an SEC-registered U.S. bond issue (approximately $7 billion). The remaining unused commitments of this facility were cancelled on April 1, 2011. On April 5, 2011, Sanofi drew down $4 billion under Facility B, and cancelled the remaining balance of $1 billion. On June 28, August 5 and November 3, 2011 Sanofi made early repayments of respectively $1 billion, $1 billion, $2 billion of the Facility B drawdown.
As a result, the Facility B drawdown was fully repaid as of November 3, 2011 and as a consequence, the entire Facilities Agreement expired.
A copy of the Facilities Agreement and an amendment dated February 15, 2011 are on file with the SEC as exhibits 4.1 and 4.2 hereto. Reference should be made to such exhibits for a more complete description of the terms and conditions of the Acquisition Facility as amended, and the foregoing summary of such terms and conditions is qualified in its entirety by such exhibits.
The Agreement and Plan of Merger
On February 16, 2011, Sanofi and its wholly owned subsidiary GC Merger Corp. signed an Agreement and Plan of Merger governed by the laws of the Commonwealth of Massachusetts, and subject to the jurisdiction of the courts of the Commonwealth of Massachusetts (the "Merger Agreement"), with Genzyme Corporation ("Genzyme"). Pursuant to the Merger Agreement, among other things, Sanofi and GC Merger Corp. agreed to amend the outstanding tender offer to acquire all of the outstanding shares of common stock of Genzyme (the "Genzyme Shares") in order to increase the price per share from $69 to $74 in cash (the "Cash Consideration")
plus one contingent value right (a "CVR") to be issued by Sanofi subject to and in accordance with a CVR Agreement described below (collectively, the "Merger Consideration") per Genzyme Share. The Merger Agreement also provided that, subject to the satisfaction or waiver of certain conditions, following consummation of the Amended Offer, GC Merger Corp. would be merged with and into Genzyme, with Genyzme surviving the Merger as a wholly-owned subsidiary of Sanofi (the "Merger").
The transaction was completed on April 8, 2011 in accordance with the terms of the Merger Agreement and the public exchange offer at a price of $74 in cash plus the issuance to Genzyme shareholders of one contingent value right ("CVR") per Genzyme share. The CVRs are listed on the NASDAQ Global Market and Genzyme is now a wholly-owned subsidiary of Sanofi.
The Contingent Value Rights Agreement.Agreement
In connection with its acquisition of Genzyme Corporation, now awholly-owned subsidiary of Sanofi, Sanofi issued one CVR per Genzyme share. On March 30, 2011, Sanofi and the American Stock Transfer & Trust Company, LLC, as trustee, entered into a Contingent Value Rights agreement governed by the laws of the State of New York and subject to the jurisdiction of the courts of the State of New York ("CVR Agreement"(the “CVR Agreement”) governing the terms of the CVRs.
Pursuant to the terms of the CVR Agreement, a holder of a CVR is entitled to cash payments upon the achievement of contractually defined milestones.
The two first milestone relatedmilestones (related, respectively, to manufacturing of Cerezyme®Cerezyme® and Fabrazyme® had to be met by December 31, 2011 in order for the payment to be triggered. This milestone was not metFabrazyme® and therefore lapsed. The remaining milestone payments are triggered by timely U.S. regulatory approval of alemtuzumab for treatment of multiple sclerosis ("Lemtrada™"), and on achievement of certain aggregate Lemtrada™ sales thresholds within defined periods ("Product Sales Milestones"), as summarized below:
The CVRs will expire and noremaining milestone payments will be due undertriggered on achievement of certain Lemtrada® sales thresholds within certain defined periods, as summarized below:
· | Product Sales Milestone #2 Payment.$3 per CVR upon the first instance in which Lemtrada® sales (as defined in the CVR Agreement) for a four calendar quarter period are equal to or in excess of $1.8 billion. Given that the Approval Milestone was not achieved, an additional $1 per CVR will be paid should Product Sales Milestone #2 be achieved, totaling $4 per CVR. |
· | Product Sales Milestone #3 Payment.$4 per CVR upon the first instance in which Lemtrada® sales (as defined in the CVR Agreement) for a four calendar quarter period are equal to or in excess of $2.3 billion (however, no quarter in which Lemtrada® sales (as defined in the CVR Agreement) were used to determine the achievement of Product Sales Milestone #1 or #2 shall be included in the calculation of sales for determining whether Product Sales Milestone #3 has been achieved). |
· | Product Sales Milestone #4 Payment.$3 per CVR upon the first instance in which Lemtrada® sales (as defined in the CVR Agreement) for a four calendar quarter period are equal to or in excess of $2.8 billion (however, no quarter in which Lemtrada® sales (as defined in the CVR Agreement) were used to determine the achievement of Product Sales Milestone #1, #2 or #3 shall be included in the calculation of sales for determining whether Product Sales Milestone #4 has been achieved). |
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The CVR agreementAgreement will terminate on the earlier of (a) December 31, 2020 and (b) the date that Product Sales Milestone #4 is paid.paid (the “Termination Date”), provided that if any milestone has been achieved prior to the Termination Date, but the associated CVR payment has not been paid on or prior to the Termination Date, the CVR Agreement shall not terminate until such payment has been paid in full in accordance with the terms of the CVR Agreement.
Sanofi has agreed to use diligent efforts (as defined in the CVR Agreement), until the CVR Agreement is terminated, to achieve each of the remaining milestones. For more information on Lemtrada™ see "Item 4.B Business Overview — Pharmaceutical Products — Multiple Sclerosis".
However, we are not required to take all possible actions to achieve these goals. Based upon actual sales trends to date, Sanofi does not expect that Product Sales Milestone #1 will be met. There can be no assurance that the other product sales milestones will be achieved. Sanofi has also agreed to use its commercially reasonable efforts to maintain a listing for trading of the CVRs on the NASDAQ market.
For more information on Lemtrada® see “Item 4.B Business Overview – Pharmaceutical Products – Multiple Sclerosis”.
The CVR Agreement does not prohibit Sanofi or any of its subsidiaries or affiliates (as defined in the CVR Agreement) from acquiring the CVRs, whether in open market transactions, private transactions or otherwise;otherwise. Sanofi has certain disclosure obligations in connection with such acquisitions under the CVR Agreement. On or after the third anniversary of the launch of Lemtrada™,April 1, 2017, Sanofi may also, subject to certain terms and conditions as set forth in the CVR Agreement, optionally purchase and cancel all (but not less than all) of the outstanding CVRs at a cash price as set forth in the CVR Agreement if (i) thevolume-weightedaverage price paid per CVR for all CVRs traded over theforty-fivetrading price of the CVRs if the volume-weighted average CVR trading pricedays prior to such date is less than fifty cents over forty-five trading days and Lemtrada™(ii) Lemtrada® sales (as defined in the CVR Agreement) in the four calendar quarters ended immediately prior four quarter period wereto such date are less than one$1 billion U.S. dollars in the aggregate.
A copy of the Merger Agreement and the form of CVR Agreement areis on file with the SEC as exhibits 4.3Annex B to Amendment No. 2 to the Registration Statement onForm F-4 filed with the Securities and 4.4 hereto, respectively.Exchange Commission on March 24, 2011. Reference is made to such exhibitsexhibit for a more complete description of the terms and conditions of the Merger Agreement and the CVR Agreement, and the foregoing summary of such terms and conditions is qualified in its entirety by such exhibits.exhibit.
French exchange control regulations currently do not limit the amount of payments that we may remit tonon-residents of France. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to anon-resident be handled by an accredited intermediary.
General
The following generally summarizes the material French and U.S. federal income tax consequences to U.S. holders (as defined below) of purchasing, owning and disposing of our ADSs and ordinary shares (collectively the "Securities"“Securities”). This discussion is intended only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects of the purchase, ownership or disposition of our Securities. All of the following is subject to change. Such changes could apply retroactively and could affect the consequences described below.
This summary does not constitute a legal opinion or tax advice. Holders are urged to consult their own tax advisers regarding the tax consequences of the purchase, ownership and disposition of Securities in light of their particular circumstances, including the effect of any U.S. federal, state, local or other national tax laws.
France has recently introduced a comprehensiveA set of new tax rules is applicable to French assets that are held by or in foreign trusts. These rules provideinter alia for the inclusion of trust assets in the settlor'ssettlor’s net assets for purpose of applying the French wealth tax, for the application of French gift and death duties to French assets held in trust, for a specific tax on capital on the French assets of foreign trusts not already subject to the French wealth tax and for a number of French tax reporting and disclosure obligations. The following discussion does not address the French tax consequences applicable to Securities held in trusts.If Securities are held in trust, the grantor, trustee and beneficiary are urged to consult their own tax adviser regarding the specific tax consequences of acquiring, owning and disposing of Securities.
The description of the French and U.S. federal income tax consequences set forth below is based on the laws (including, for U.S. federal income tax purposes, the Internal Revenue Code of 1986, as amended (the "Code"“Code”), final, temporary and proposed U.S. Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof) in force as of the date of this annual report, the Convention Between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital of August 31, 1994 (the "Treaty"“Treaty”), which entered into force on December 30, 1995 (as amended by any subsequent protocols, including the protocol of January 13, 2009), and the tax regulations issued by the French tax authorities within theBulletin Officiel des FinancesPubliques- Impôts(the "Regulations"“Regulations”) in force as of the date of this report.U.S. holders are advised to consult their own tax advisers regarding their eligibility for Treaty
benefits, especially with regard to the "Limitations“Limitations on Benefits"Benefits” provision, in light of their own particular circumstances.
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Item 10. Additional Information
For the purposes of this discussion, a U.S. holder is a beneficial owner of Securities that is (i) an individual who is a U.S. citizen or resident for U.S. federal income tax purposes, (ii) a U.S. domestic corporation or certain other entities created or organized in or under the laws of the United States or any state thereof, including the District of Colombia, or (iii) otherwise subject to U.S. federal income taxation on a net income basis in respect of Securities. Anon-U.S. holder is a person other than a U.S. holder.
If a partnership holds Securities, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership.If a U.S. holder is a partner in a partnership that holds Securities, the holder is urged to consult its own tax adviser regarding the specific tax consequences of acquiring, owning and disposing of Securities.
This discussion is intended only as a general summary and does not purport to be a complete analysis or listing of all potential tax effects of the acquisition, ownership or disposition of the Securities to any particular investor, and does not discuss tax considerations that arise from rules of general application or that are generally assumed to be known by investors. The discussion applies only to investors that hold our Securities as capital assets that have the U.S. dollar as their functional currency, that are entitled to Treaty benefits under the "Limitation“Limitation on Benefits"Benefits” provision contained in the Treaty, and whose ownership of the Securities is not effectively connected to a permanent establishment or a fixed base in France. Certain holders (including, but not limited to, U.S. expatriates, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, banks, insurance companies, regulated investment companies,tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, persons who acquired the Securities pursuant to the exercise of employee stock options or otherwise as compensation, persons that own (directly, indirectly or by attribution) 5% or more of our voting stock or 5% or more of our outstanding share capital, dealers in securities or currencies, persons that elect to mark their securities to market for U.S. federal income tax purposes, persons that acquire ADSs in“pre-release” transactions (i.e., prior to deposit of the relevant ordinary shares) and persons holding Securities as a position in a synthetic security, straddle or conversion transaction) may be subject to special rules not discussed below.Holders of Securities are advised to consult their own tax advisers with regard to the application of French tax law and U.S. federal income tax law to their particular situations, as well as any tax consequences arising under the laws of any state, local or other foreign jurisdiction.
French Taxes
Estate and Gift Taxes and Transfer Taxes
In general, a transfer of Securities by gift or by reason of death of a U.S. holder that would otherwise be subject to French gift or inheritance tax, respectively, will not be subject to such French tax by reason of the Convention between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritances and Gifts, dated November 24, 1978, unless the donor or the transferor is domiciled in France at the time of making the gift or at the time of his or her death, or the Securities were used in, or held for use in, the conduct of a business through a permanent establishment or a fixed base in France.
Pursuant to Article 235 ter ZD of the French General Tax Code, purchases of Securities are subject to a 0.2% French tax on financial transactions (the “FTFF”) provided that Sanofi'sSanofi’s market capitalization exceeds 1 billion euros as of December 1 of the year preceding the taxation year. A list of companies whose market capitalization exceeds 1 billion euros as of December 1 of the year preceding the taxation year isused to be published annually by the French state.Ministry of Economy. It is now published by the French tax authorities, and could be amended at any time. Pursuant to a ministerial regulation (RegulationsBOI-ANNX-000467-20151221 issuedarrêté) dated January 11, 2013, Sanofi is included on December 21, 2015, purchases of Sanofi’s Securities in such list2016 should be subject to the FTFF as a company whosethe market capitalization exceedsof Sanofi exceeded 1 billion euros as of December 1, 2012 and therefore,2015. In accordance withArticle 726-II of the French General Tax Code, purchases of Sanofi's Securitieswhich are subject to such tax.the FTFF should however not be subject to transfer taxes (droits d’enregistrement) in France.
Wealth Tax
The French wealth taximpôt de solidarité sur la fortune applies only to individuals and does not generally apply to the Securities if the holder is a U.S. resident, as defined pursuant to the provisions of the Treaty, provided that the individual does not own directly or indirectly a shareholding exceeding 25% of the financial rights.
U.S. Taxes
Ownership of the Securities
Deposits and withdrawals by a U.S. holder of ordinary shares in exchange for ADSs, will not be taxable events for U.S. federal income tax purposes. For U.S. tax purposes, holders of ADSs will be treated as owners of the ordinary shares represented by such ADSs. Accordingly, the discussion that follows regarding the U.S. federal income tax consequences of acquiring, owning and disposing of ordinary shares is equally applicable to ADSs.
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Item 10. Additional Information
Information Reporting and Backup Withholding Tax
Distributions made to holders and proceeds paid from the sale, exchange, redemption or disposal of Securities may be subject to information reporting to the Internal Revenue Service. Such payments may be subject to backup withholding taxes unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of itsnon-U.S. status in connection with payments received within the United States or through aU.S.-related financial intermediary to establish that it is an exempt recipient. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder'sholder’s U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.
Foreign Asset Reporting
In addition, a U.S. holder that is an individual (and, to the extent provided in future regulations, an entity), may be subject torecently-enacted reporting obligations with respect to ordinary shares and ADSs if the aggregate value of these and certain other "specified“specified foreign financial assets"assets” exceeds $50,000. If required, this disclosure is made by filing Form 8938 with the U.S. Internal Revenue Service. Significant penalties can apply if holders are required to make this disclosure and fail to do so. In addition, a U.S. holder should consider the possible obligation to file online a FinCEN Form TD F 90-22.1 —114 – Foreign Bank and Financial Accounts Report as a result of holding ordinary shares or ADSs. Holders are thus encouraged to consult their U.S. tax advisors with respect to these and other reporting requirements that may apply to their acquisition of ordinary shares and ADSs.
State and Local Taxes
In addition to U.S. federal income tax, U.S. holders of Securities may be subject to U.S. state and local taxes with respect to such Securities.Holders of Securities are advised to consult their own tax advisers with regard to the application of U.S. state and local income tax law to their particular situation.
ADSs-Ordinary Shares
French Taxes
Taxation of Dividends
Under French law, dividends paid by a French corporation, such as Sanofi, tonon-residents of France are generally
subject to French withholding tax at a rate of 30% (21% for distributions made to individuals that are resident in the European Economic Area, and 15% for distributions made tonot-for-profit organizations with a head office in a Member State of the European Economic Area which would be subject to the tax regime set forth underarticle 206-5 of the French General Tax Code if its head office were located in France and which meet the criteria set forth in the administrative guidelines BOI-RPPM-RCM-30-30-10-70-20120912, n°BOI-RPPM-RCM-30-30-10-70-20120912, no130). Dividends
paid by a French corporation, such as Sanofi, towardsnon-cooperative States or territories, as defined inArticle 238-0 A of the French General Tax Code, will generally be subject to French withholding tax at a rate of 75%, irrespective of the tax residence of the beneficiary of the dividends if the dividends are received in such States or territories; however, eligible U.S. holders entitled to Treaty benefits under the "Limitation“Limitation on Benefits"Benefits” provision contained in the Treaty who are U.S. residents, as defined pursuant to the provisions of the Treaty and who receive dividends innon-cooperative States or territories, will not be subject to this 75% withholding tax rate.
Under the Treaty, the rate of French withholding tax on dividends paid to an eligible U.S. holder who is a U.S. resident as defined pursuant to the provisions of the Treaty and whose ownership of the ordinary shares or ADSs is not effectively connected with a permanent establishment or fixed base that such U.S. holder has in France, is reduced to 15%, or to 5% if such U.S. holder is a corporation and owns directly or indirectly at least 10% of the share capital of the issuing company; such U.S. holder may claim a refund from the French tax authorities of the amount withheld in excess of the Treaty rates of 15% or 5%, if any. For U.S. holders that are not individuals but are U.S. residents, as defined pursuant to the provisions of the Treaty, the requirements for eligibility for Treaty benefits, including the reduced 5% or 15% withholding tax rates contained in the "Limitation“Limitation on Benefits"Benefits” provision of the Treaty, are complicated, and certain technical changes were made to these requirements by the protocol of January 13, 2009. U.S. holders are advised to consult their own tax advisers regarding their eligibility for Treaty benefits in light of their own particular circumstances.
Dividends paid to an eligible U.S. holder may immediately be subject to the reduced rates of 5% or 15% provided that such holder establishes before the date of payment that it is a U.S. resident under the Treaty by completing and providing the depositary with a treaty form (Form 5000). Dividends paid to a U.S. holder that has not filed the Form 5000 before the dividend payment date will be subject to French withholding tax at the rate of 30% and then reduced at a later date to 5% or 15%, provided that such holder duly completes and provides the French tax authorities with the treaty forms Form 5000 and Form 5001 before December 31 of the second calendar year following the year during which the dividend is paid. Pension funds and certain othertax-exempt entities are subject to the same general filing
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Item 10. Additional Information
requirements as other U.S. holders except that they may have to supply additional documentation evidencing their entitlement to these benefits.
The depositary agrees to use reasonable efforts to follow the procedures established, or that may be established, by the French tax authorities (i) to enable eligible U.S. holders to qualify for the reduced withholding tax rate provided by the Treaty, if available at the time the dividends are paid, or (ii) to recover any excess French withholding taxes initially withheld or deducted with respect to dividends and other distributions to which such U.S. holders may be eligible from the French tax authorities and (iii) to recover any other available tax credits. In particular, associated forms (including Form 5000 and Form 5001, together with instructions,their instructions), will be providedmade available by the depositary to all U.S. holders registered with the depositary, and are also generally available from the U.S. Internal Revenue Service. The depositary will arrange for the filing with the French Tax authorities of all such forms properly completed and executed by U.S. holders of ordinary shares or ADSs and returned to the depositary in sufficient time that they may be filed with the French tax authorities before the distribution so as to obtain immediately a reduced withholding tax rate.
The withholding tax refund, if any, ordinarily is paid within 12 months of filing the applicable French Treasury Form, but not before January 15 of the year following the calendar year in which the related dividend is paid.
Tax on Sale or Other Disposition
In general, under the Treaty, a U.S. holder who is a U.S. resident for purposes of the Treaty will not be subject to French tax on any capital gain from the redemption (other than redemption proceeds characterized as dividends under French domestic law), sale or exchange of ordinary shares or ADSs unless the ordinary shares or the ADSs form part of the business property of a permanent establishment or fixed base that the U.S. holder has in France. Special rules apply to holders who are residents of more than one country.
U.S. Taxes
Taxation of Dividends
For U.S. federal income tax purposes, the gross amount of any distribution paid to U.S. holders (that is, the net distribution received plus any tax withheld therefrom) will be treated as ordinary dividend income to the extent paid or deemed paid out of the current or accumulated earnings and profits of Sanofi (as determined under U.S. federal income tax principles). Dividends paid by Sanofi will not be eligible for thedividends-received deduction generally allowed to corporate U.S. holders.
Subject to certain exceptions forshort-term and hedged positions, the U.S. dollar amount of dividends received by an individual U.S. holder with respect to the ADSs or our ordinary shares is currently subject to taxation at a maximum rate of 20% if the dividends are "qualified dividends"“qualified dividends”. Dividends paid on the ordinary shares or ADSs will be treated as qualified dividends if (i) the issuer is eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service has
approved for the purposes of the qualified dividend rules and (ii) the issuer was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company ("PFIC"(“PFIC”). The Treaty has been approved for the purposes of the qualified dividend rules. Based on our audited financial statements and relevant market and shareholder data, we believe Sanofi was not a PFIC for U.S. federal income tax purposes with respect to its 20122014 taxable year. In addition, based on its current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, we do not anticipate that Sanofi will become a PFIC for its 20132015 taxable year.Holders of ordinary shares and ADSs should consult their own tax advisers regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.
If you are a U.S. holder, dividend income received by you with respect to ADSs or ordinary shares generally will be treated as foreign source income for foreign tax credit purposes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. Distributions out of earnings and profits with respect to the ADSs or ordinary shares generally will be treated as "passive category"“passive category” income (or, in the case of certain U.S. holders, "general category"“general category” income). Subject to certain limitations, French income tax withheld in connection with any distribution with respect to the ADSs or ordinary shares may be claimed as a credit against the U.S. federal income tax liability of a U.S. holder if such U.S. holder elects for that year to credit all foreign income taxes. Alternatively, such French withholding tax may be taken as a deduction against taxable income. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certainshort-term or hedged positions in Securities and may not be allowed in respect of certain arrangements in which a U.S. holder'sholder’s expected economic profit is insubstantial.The U.S. federal income tax rules governing the availability and computation of foreign tax credits are complex. U.S. holders should consult their own tax advisers concerning the implications of these rules in light of their particular circumstances.
To the extent that an amount received by a U.S. holder exceeds the allocable share of our current and accumulated earnings and profits, such excess will be applied first to reduce such U.S. holder'sholder’s tax basis in its ordinary shares or ADSs and then, to the extent it exceeds the U.S. holder'sholder’s tax basis, it will constitute capital gain from a deemed sale or exchange of such ordinary shares or ADSs (see "—“– Tax on Sale or Other Disposition"Disposition”, below).
The amount of any distribution paid in euros will be equal to the U.S. dollar value of the euro amount distributed, calculated by reference to the exchange rate in effect on the date the dividend is received by a U.S. holder of ordinary shares (or by the depositary, in the case of ADSs) regardless of whether the payment is in fact converted into
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Item 10. Additional Information
U.S. dollars on such date.U.S. holders should consult their own tax advisers regarding the treatment of foreign currency gain or loss, if any, on any euros received by a U.S. holder or depositary that are converted into U.S. dollars on a date subsequent to receipt.
Distributions to holders of additional ordinary shares (or ADSs) with respect to their ordinary shares (or ADSs) that are made as part of a pro rata distribution to all ordinary shareholders generally will not be subject to U.S. federal income tax. However, if a U.S. holder has the option to receive a distribution in shares (or ADSs) or to receive cash in lieu of such shares (or ADSs), the distribution of shares (or ADSs) will be taxable as if the holder had received an amount equal to the fair market value of the distributed shares (or ADSs), and such holder'sholder’s tax basis in the distributed shares (or ADSs) will be equal to such amount.
Tax on Sale or Other Disposition
In general, for U.S. federal income tax purposes, a U.S. holder that sells, exchanges or otherwise disposes of its ordinary shares or ADSs will recognize capital gain or loss in an amount equal to the U.S. dollar value of the difference between the amount realized for the ordinary shares or ADSs and the U.S. holder'sholder’s adjusted tax basis (determined in U.S. dollars and under U.S. federal income tax rules) in the ordinary shares or ADSs. Such gain or loss generally will beU.S.-source gain or loss, and will be treated as long-termlong – term capital gain or loss if the U.S. holder'sholder’s holding period in the ordinary shares or ADSs exceeds one year at the time of disposition. If the U.S. holder
is an individual, any capital gain generally will be subject to U.S. federal income tax at preferential rates (currently a maximum of 20%) if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
Medicare Tax
Recently-enacted legislation requires certainCertain U.S. holders who are individuals, estates or trusts are now required to pay a Medicare tax of 3.8% (in addition
to taxes they would otherwise be subject to) on their "net“net investment income"income” which would include, among other things, dividends and capital gains from the ordinary shares and ADSs.
F. Dividends and Paying Agents
N/A
N/A
We are subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, or Exchange Act, and, in accordance therewith, we are required to file reports, including this annual report onForm 20-F, and other information with the U.S. Securities and Exchange Commission, or Commission, by electronic means.
You may review a copy of our filings with the Commission, as well as other information furnished to the Commission, including exhibits and schedules filed with it, at the Commission'sCommission’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-03301-800-SEC- 0330 for further information. In addition, the Commission maintains an Internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the Commission (these documents are not incorporated by reference in this annual report).
N/A
Item 11. Quantitative and Qualitative Disclosures about Market Risk
Item 11. | Quantitative and Qualitative Disclosures about Market Risk (1) |
General Policy
Liquidity risk, foreign exchange risk and interest rate risk, as well as related counterparty risk,risks, are managed centrally by our dedicated treasury team within the Group Finance Department. Where it is not possible to manage thesethose risks centrally – in particular due to regulatory restrictions (such as foreign exchange controls) or local tax restrictions – credit facilities and/or currency lines, guaranteed whenever necessary by the parent company, are contracted by our subsidiaries locally with banks, under the supervision of the central treasury team.
Our financing and investment and financing strategies, as well asand our interest rate and currency hedging strategies, are reviewed monthly by the Group Finance Department.
Our policy onprohibits the use of derivatives prohibitsfor speculative exposure.purposes.
Liquidity Risk
We operate a centralized treasury platform whereby all surplus cash and financing needs of our subsidiaries are invested with or funded by the parent company (where permitted by local legislation). The central treasury department manages the Group'sGroup’s current and projected financing, (debt, net of cash and cash equivalents), and ensures that the Group is able to meet its financial commitments by maintaining sufficient cash and confirmed credit facilities for the size of our operations and the maturity of our debt (see Notes D.17.c and D.17.g to the consolidated financial statements).
The Group diversifies its We diversify ourshort-term investments with leading bankscounterparties usingmoney-market products with instant access or with a maturity lowerof less than three months. As of December 31, 2012,2015, cash and cash equivalents amounted to €6,381€9,148 million, and ourshort-term investments mainlypredominantly comprised:
· | collective investments in‘short-term money market’ and ‘money market’euro-denominated funds based on the European classification used by theAutorité des Marchés Financiers. All such funds can be traded on a daily basis |
and the amount invested in each fund may not exceed 10% of the aggregate amount invested in such funds; |
· | amounts invested directly with banks in the form of instant access deposits, term deposits, and certificates of deposit with a maturity of no more than three months; |
· | amounts invested directly withnon-financial institutions in the form of commercial paper and euro commercial paper with a maturity of no more than three months. |
As of December 31, 2012,2015, the Group also had €10€8 billion of undrawn general corporate purpose confirmed credit facilities, of which €3 billion expire inexpiring December 2013, €0.25 billion in July 2015 and €6.75 billion in July 2017. Our2020. Those credit facilities are not subject to financial covenant ratios.
Our policy is to diversify our sources of funding through public or private issuances of debt securities, in the United States (shelf registration statement) and in FranceEurope (Euro Medium Term Note program), and by issuing. In addition, ourA-1+/P-1 short-term rating gives us access to commercial paper programs in the United States and, to a lesser extent, in France. The average durationmaturity of theour total debt was 3.24.5 years as of December 31, 2012,2015, compared to 3.5with 4.6 years as of December 31, 2011. Short-term commercial paper programs (U.S. dollar-denominated commercial paper swapped into euro and euro-denominated commercial paper) are used to meet2014. During 2015, we did not draw down on our short-term financing needs. In 2012, the French commercial paper program was not drawn down, whereas averageprogram. Average drawdowns under the U.S. commercial paper program during 2015 were €2.3€2.1 billion (maximum €3.3€3.7 billion). Drawdowns under these programs are generally renewed for periods; the average maturity of one and a halfthose drawdowns was two months. As of December 31, 2012, these2015, neither of those programs were not drawn down.was being utilized.
In the event of a market-wide liquidity crisis, the Groupwe could be exposed to difficulties in calling up itsour available cash, a scarcity of sources of funding including theabove-mentioned programs, and/or a deterioration in their terms. This situation could damage theour capacity of the Group to refinance itsour debt or to issue new debt on reasonable terms.
Interest Rate Risk
Since the financing of the Genzyme acquisition in 2011, the Group has managed itsWe manage our net debt mainly in two currencies,currencies: the euro and the U.S. dollar (see note D.17 to the consolidated financial statements). Thefloating-rate portion of this debt exposes the Group to rises in interest rates, primarily in the Eonia and Euribor benchmark rates (for the euro) and in the U.S. Libor and Federal Fund Effective rates (for the U.S. dollar). In order toTo optimize (or reduce the amount and/or volatility of theof) our cost of debt, the Group has contracted derivative instruments (interestwe use interest rate swaps,cross-currency swaps and where appropriate interest rate options). These have the effect of alteringoptions, that alter the fixed/floating rate split of theour debt. TheseThose derivative instruments are predominantly denominated in euros orand in U.S. dollars.
(1) | The disclosures in this section supplement those provided in Note B.8.8. to the consolidated financial statements as regards the disclosure requirements of IFRS 7, and are covered by the statutory auditors’ opinion on the consolidated financial statements. |
As
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Item 11. Quantitative and Qualitative Disclosures about Market Risk
The projectedfull-year sensitivity to interest rate fluctuations of December 31, 2012, the sensitivity of the totalour debt, net of cash and cash equivalents to interest rate fluctuations over a full yearfor 2016 is as follows:
Change in EUR and USD short-term interest rates | Impact on pre-tax net income (€ million) | Impact on pre-tax (€ million) | ||||||
+100 bp | 32 | 9 | ||||||
+25 bp | 8 | 2 | ||||||
-25 bp | (8) | (2) | ||||||
-100 bp | (32) | (9) |
Change in 3-month Euribor | Impact on pre-tax net income (€ million) | Impact on income/(expense) recognized directly in equity, before tax (€ million) | |||||
---|---|---|---|---|---|---|---|
+100 bp | (10 | ) | (3 | ) | |||
+25 bp | (2 | ) | (1 | ) | |||
-25 bp | 2 | 1 | |||||
-100 bp | 10 | 3 | |||||
Foreign Exchange Risk
a. OperationalOperating Foreign Exchange Risk
A substantial portion of our net sales is generated in countries in whichwhere the euro, which is our reporting currency, is not the functional currency. In 2012,2015, for example, 31%36% of our consolidatedaggregate net sales were generated in the United States.States, 32% in Emerging Markets (including countries that are, or may in future become, subject to exchange controls), and 6% in Japan. Although we also incur expenses in those countries, the impact of those expenses is not enough wholly to offset the impact of exchange rates on our net sales. Consequently, our operating income may be materially affected by fluctuations in the exchange raterates between the euro and other currencies, primarily the U.S. dollar.currencies.
We operate a foreign exchange risk hedging policy to reduce the exposure of our operating income to exchange rate
movements. This policy involves regular assessments of our worldwide foreign currency exposure, based onforeign-currency transactions to be carried out by the parent company and its subsidiaries. TheseThose transactions mainly comprise sales, purchases, research costs,co-marketing andco-promotion expenses, and royalties. To reduce the exposure of thesethose transactions to exchange rate movements, we may contract currency hedges using liquid financialderivative instruments, mainly forward currency purchases and forward sales, of currencies, and also currency swaps.
The table below shows operationaloperating currency hedging derivativesinstruments in place as of December 31, 2012,2015, with the notional amount translated into euros at the relevant closing exchange rate. See alsorate (see Note D.20D.20. to the consolidated financial statements for the accounting classification of thesethose instruments as of December 31, 2012.2015).
OperationalOperating foreign exchange derivatives as of December 31, 2012 (1):2015
(€ million) | Notional amount | Fair value | ||||||
Forward currency sales | 2,142 | 27 | ||||||
of which U.S. dollar | 672 | (2) | ||||||
of which Chinese yuan renminbi | 339 | 1 | ||||||
of which Japanese yen | 159 | (1) | ||||||
of which Russian rouble | 130 | 22 | ||||||
of which Singapore dollar | 114 | |||||||
Forward currency purchases | 905 | (11) | ||||||
of which U.S. dollar | 204 | |||||||
of which Russian rouble | 109 | (9) | ||||||
of which Singapore dollar | 104 | (1) | ||||||
of which Hungarian forint | 90 | (1) | ||||||
of which Chinese yuan renminbi | 86 | 2 | ||||||
Total | 3,047 | 16 |
(€ million) | Notional amount | Fair value | |||||||
---|---|---|---|---|---|---|---|---|---|
Forward currency sales | 2,972 | 21 | |||||||
Of which | • U.S. dollar | 972 | 6 | ||||||
• Japanese yen | 485 | 15 | |||||||
• Russian rouble | 368 | (3 | ) | ||||||
• Singapore dollar | 271 | — | |||||||
• Chinese yuan renminbi | 255 | 1 | |||||||
Forward currency purchases | 944 | (4 | ) | ||||||
Of which | • Singapore dollar | 231 | (4 | ) | |||||
• Hungarian forint | 166 | (3 | ) | ||||||
• Swiss franc | 110 | — | |||||||
• Chinese yuan renminbi | 94 | — | |||||||
• U.S. dollar | 69 | — | |||||||
Total | 3,916 | 17 | |||||||
As of December 31, 2012, none of these instruments had an expiry date after February 28, 2013 except for a specific forward currency purchase position for a total of £33 million expiring between 2013 and 2015.
TheseThe above positions mainly hedge future materialforeign-currency cash flows arising after the balance sheet dateend of the
reporting period in relation to transactions carried out during the year ended December 31, 20122015 and recognized in the
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Item 11. Quantitative and Qualitative Disclosures about Market Risk
balance sheet at that date. Gains and losses on derivativehedging instruments (forward contracts) have been and will continue to be calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Due to this hedging relationship, the commercial foreign exchange profit andgain or loss on these items (derivative(hedging instruments and underlying assets as of December 31, 2012)hedged transactions) will be close to zeroimmaterial in 2013.2016.
b. Financial Foreign Exchange Risk
Some of our financing activities, such as theThe cash pooling arrangements for our foreign subsidiaries outside the euro zone, and some of our U.S. commercial paper issues,financing activities, expose certain of our entities to financial foreign exchange risk (i.e., the risk of changes in the value of loansborrowings and borrowingsloans denominated in a currency other than the functional currency of the lenderborrower or borrower)lender). The netThat foreign exchange
exposure is hedged by the holdingparent company withusing firm financial instruments usually forward contracts and(usually currency swaps dealtor forward contracts) contracted with banking counterparties.
TableAlthough we incur more of Contentsour costs in euros than in any other currency, the U.S. dollar accounts for a higher proportion of our revenues than any other currency. Consequently, we maintain a significant portion of our indebtedness in U.S. dollars.
The table below shows financial currency hedging instruments in place as of December 31, 2012,2015, with the notional amountamounts translated into euros at the relevant closing exchange rate. Seerate (see also Note D.20 to the consolidated financial statements for the accounting classification of these instruments as of December 31, 2012.2015).
Financial foreign exchange derivatives as of December 31, 2012 (1):2015
(€ million) | Notional amount | Fair value | Expiry | |||||||||
Forward currency sales | 3,472 | (44) | ||||||||||
of which U.S. dollar | 2,171 | (30) | 2016 | |||||||||
of which Japanese yen | 612 | (9) | 2016 | |||||||||
of which Australian dollar | 266 | (4) | 2016 | |||||||||
Forward currency purchases | 2,623 | 9 | ||||||||||
of which U.S. dollar(1) | 610 | 5 | 2016 | |||||||||
of which Swiss franc | 363 | (1) | 2016 | |||||||||
of which Singapore dollar | 310 | 2016 | ||||||||||
Total | 6,095 | (35) |
(1) | Includes U.S.$84 million designated as a cash flow hedge as of December 31, 2015. |
(€ million) | Notional amount | Fair value | Expiry | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Forward currency sales | 3,970 | 38 | ||||||||||
Of which | • U.S. dollar | 1,897 | 1 | 2013 | ||||||||
• Japanese yen | 1,272 | 34 | 2013 | |||||||||
• Czech koruna | 191 | — | 2013 | |||||||||
Forward currency purchases | 2,638 | (12 | ) | |||||||||
Of which | • Pound sterling | 549 | (3 | ) | 2013 | |||||||
• U.S. dollar | 521 | 1 | 2013 | |||||||||
• Singapore dollar | 492 | (4 | ) | 2013 | ||||||||
Total | 6,608 | 26 | ||||||||||
These forward contracts generate a net financial foreign exchange gain or loss arising from the interest rate differential between the hedged currency and the euro, given that the foreign exchange gain or loss on theforeign-currency liabilities borrowing and receivablesloans is offset by the change in the intrinsic value of the hedging instruments.
As of December 31, 2012, none of the instruments had an expiry date after March 31, 2013.
We may also hedge some futureforeign-currency investment or divestment cash flows.
c. Other Foreign Exchange Risks
A significant proportion of our consolidated net assets is denominated in U.S. dollars. For a breakdown of net assets seedollars (see Note D.35D.35. to the consolidated financial statements.statements). As a result, any fluctuation in the exchange rate of the U.S. dollar against the euro affectsautomatically impacts the amount of our equity.equity as expressed in euros. As of December 31, 2012,2015, we had no derivative instruments in place to limit the effect of such fluctuations.
The Group operates a substantial portion of its activity within the euro zone and holdsfluctuations, but a significant partproportion of its cash and cash equivalent in this currency, whereas its indebtednessour debt is still denominated in the euro and the U.S. dollar (for more information, see Note D.17.e to the consolidated financial statements). The euro is also the reporting currency of the Group. dollars.
In the specific context of the sovereign debt crisis affecting certain European countries, the threatened or actual withdrawal ofaddition, we use the euro as currency inour reporting currency. Consequently, if one or more European Monetary Union countries andmember states were to abandon the associatedeuro as a currency, the resulting economic upheavals – in particular, fluctuations in currency exchange rates – could have a material effectsignificant impact on the terms under which we can obtain financing and on our financial condition and earnings,results, the magnitudeextent and consequences of which are unpredictable.not currently foreseeable.
Counterparty Risk
Our financing and investing operations, as well astransactions, and our currency and interest rate hedges, are contracted with leading banks.counterparties. We set limits for investment and derivative transactions with individual banks,financial institutions, depending on the rating of each bank.institution. Compliance with these limits, which are based on notional amounts weighted by the residual maturity and the nature of the commitment, is monitored on a daily basis.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
The table below shows our total exposure as of December 31, 20122015 by rating and in terms of our percentage exposure to the dominant counterparty.
(€ million) | Cash and cash equivalents (excluding mutual funds)(1) | Notional amounts of currency hedges(2) | Notional amounts of interest rate hedges(2) | General corporate purpose credit facilities | ||||||||||||
AA- | 4 | 922 | 392 | 500 | ||||||||||||
A+ | 1,337 | 1,076 | 1,818 | 1,500 | ||||||||||||
A | 1,848 | 4,632 | 1,507 | 3,500 | ||||||||||||
A | 320 | 1,840 | 400 | 1,500 | ||||||||||||
BBB+ | 257 | 451 | 546 | 1,000 | ||||||||||||
BBB | 170 | |||||||||||||||
Unallocated | 170 | 223 | ||||||||||||||
Total | 4,106 | 9,144 | 4,663 | 8,000 | ||||||||||||
% / rating of dominant counterparty | 20% / A+ | 13% / A | 26% / A+ | 6% / BBB+ |
(1) | Cash equivalents include mutual fund investments of €5,042 million. |
(2) | The notional amounts are translated into euros at the relevant closing exchange rate as of December 31, 2015. |
(€ million) | Cash and cash equivalent (excluding mutual funds) (1) | Notional amounts of currency hedges (2) | Notional amounts of interest hedges (2) | General corporate purpose credit facilities | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
AA- | 608 | 1,095 | 300 | 690 | |||||||||
A+ | 1,029 | 4,452 | 2,016 | 3,195 | |||||||||
A | 1,019 | 5,512 | 2,102 | 5,175 | |||||||||
A- | 100 | — | — | — | |||||||||
BBB+ | 215 | — | — | 250 | |||||||||
BBB | 301 | 262 | 600 | 690 | |||||||||
Not splitted | 145 | — | — | — | |||||||||
Total | 3,417 | 11,321 | 5,018 | 10,000 | |||||||||
% / rating of the dominant counterparty | 18% / AA- | 16% / A | 16% / A | 7% / A | |||||||||
Mutual fund investments are made by the Sanofi parent company. These mutual fund investments are in 'short-term money market'market’ and 'money market' ‘money market’euro-denominated funds based on the European classification used by theAutorité des Marchés Financiers, and 'money market' U.S. dollar-denominated funds subject to U.S. Securities and Exchange Commission regulation 2a-7. They show. Those instruments have low volatility, low sensitivity to interest rate risk, and a very low probability of loss of principal. The depositary banks of the mutual funds, and of Sanofi itself, arehave along-term rating of at least A rated.A.
Realization of counterparty risk could impact our liquidity in certain circumstances.
Stock Market Risk
It is our policy not to trade on the stock market for speculative purposes.
Item 12. Description of Securities other than Equity Securities
Item 12. | Description of Securities other than Equity Securities |
12.A Debt Securities
Not applicable.
12.B Warrants and Rights
Not applicable.
12.C Other Securities
Not applicable.
12.D American Depositary Shares
General
JPMorgan Chase Bank, N.A. ("JPMorgan"(“JPMorgan”), as depositary, issues Sanofi ADSs in certificated form (evidenced by an American depositary receipt, or ADR) orbook-entry form. Each ADR is a certificate evidencing a specific number of Sanofi ADSs. Each Sanofi ADS representsone-half of one Sanofi ordinary share (or the right to receiveone-half of one Sanofi ordinary share) deposited with the Paris, France office of BNP Paribas, as custodian. Each Sanofi ADS also represents an interest in any other securities, cash or other property that may be held by the depositary under the deposit agreement. The depositary'sdepositary’s office is located at 1 Chase Manhattan4 New York Plaza, 12thFloor, 58, New York, New York 10005-1401.10004.
A holder may hold Sanofi ADSs either directly or indirectly through his or her broker or other financial institution. The following description assumes holders hold their Sanofi ADSs directly, in certificated form evidenced by ADRs. Holders who hold the Sanofi ADSs indirectly must rely on the procedures of their broker or other financial institution to assert the rights of ADR holders described in this section. Holders should consult with their broker or financial institution to find out what those procedures are.
Holders of Sanofi ADSs do not have the same rights as holders of Sanofi shares. French law governs shareholder rights. The rights of holders of Sanofi ADSs are set forth in the deposit agreement between Sanofi and JPMorgan and in the ADR. New York law governs the deposit agreement and the ADRs.
The following is a summary of certain terms of the deposit agreement, as amended. TheOur form of oursecond amended and restated deposit agreement has beenwas filed as an exhibit to our Form F-6 filed on August 7, 2007, and the amendment to our deposit agreement has been filed as an exhibit to Post-Effective Amendment No. 1 to our Form F-6 filed on April 30, 2011. EachFebruary 13, 2015. To the extent any portion of the formamendment and restatement would prejudice any substantial existing right of holders of ADSs under the amendment is incorporated by reference into this document.first amended and restated deposit agreement, such portion shall not
become effective as to such holders until 30 days after holders have received notice thereof. For more complete information, holders should read the entire second amended and restated deposit agreement (including the amendment) and the ADR itself. Holders may also inspect a copy of the current deposit agreement at the depositary'sdepositary’s office.
Share Dividends and Other Distributions
Receipt of dividends and other distributions
The depositary has agreed to pay to holders of Sanofi ADSs the cash dividends or other distributions that it or the custodian receives on the deposited Sanofi ordinary shares and other deposited securities after deducting its fees and expenses. Holders of Sanofi ADSs will receive these distributions in proportion to the number of Sanofi ADSs that they hold.
Cash. The depositary will convert any cash dividend or other cash distribution paid on the shares into U.S. dollars if, in its judgment, it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If the depositary determines that such a conversion and transfer is not possible, or if any approval from the French government is needed and cannot be obtained within a reasonable period, then the depositary may (1) distribute the foreign currency received by it to the holders of Sanofi ADSs or (2) hold the foreign currency distribution (uninvested and without liability for any interest) for the account of holders of Sanofi ADSs.
In addition, if any conversion of foreign currency, in whole or in part, cannot be effected to some holders of Sanofi ADSs, the deposit agreement allows the depositary to distribute the dividends only to those ADR holders to whom it is possible to do so. It will hold the foreign currency it cannot convert into U.S. dollars for the account of the ADR holders who have not been paid. It will not invest the funds it holds and it will not be liable for any interest.
Before making a distribution, any withholding taxes that must be paid under French law will be deducted. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents down to the nearest whole cent.Exchange rate fluctuations during a period when the depositary cannot convert euros into U.S. dollars may result in holders losing some or all of the value of a distribution.
Shares. The depositary may, and at our request will, distribute new ADRs representing any shares we distribute as a dividend or free distribution, if we furnish it promptly with satisfactory evidence that it is legal to do so. At its option, the depositary may distribute fractional Sanofi ADSs. If the depositary does not distribute additional Sanofi ADSs, the outstanding ADRs will also represent the new shares. The depositary may withhold any tax or other governmental charges, or require the payment of any required fees and expenses, prior to making any distribution of additional Sanofi ADSs.
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Item 12. Description of Securities other than Equity Securities
Rights to Receive Additional Shares. If we offer holders of Sanofi ordinary shares any rights to subscribe for additional shares or any other rights, the depositary, after consultation with us, will, in its discretion, either (1) make these rights available to holders or (2) dispose of such rights on behalf of holders and make the net proceeds available to holders. The depositary may make rights available to certain holders but not others if it determines it is lawful and feasible to do so. However, if, under the terms of the offering or for any other reason, the depositary may not make such rights available or dispose of such rights and make the net proceeds available, it will allow the rights to lapse. In that case, holders of Sanofi ADSs will receive no value for them.
In circumstances where rights would not otherwise be distributed by the depositary to holders of Sanofi ADSs, a holder of Sanofi ADSs may nonetheless request, and will receive from the depositary, any instruments or other documents necessary to exercise the rights allocable to that holder if the depositary first receives written notice from Sanofi that (1) Sanofi has elected, in its sole discretion, to permit the rights to be exercised and (2) such holder has executed the documents Sanofi has determined, in its sole discretion, are reasonably required under applicable law.
If the depositary makes rights available to holders of Sanofi ADSs, upon instruction from such holders, it will exercise the rights and purchase the shares on such holder'sholder’s behalf. The depositary will then deposit the shares and deliver ADRs to such holders. It will only exercise rights if holders of Sanofi ADSs pay it the exercise price and any other charges the rights require such holders to pay.
U.S. securities laws may restrict the sale, deposit, cancellation or transfer of ADRs issued upon exercise of rights. For example, holders of Sanofi ADSs may not be able to trade Sanofi ADSs freely in the United States. In this case, the depositary may deliver Sanofi ADSs under a separate restricted deposit agreement that will contain the same provisions as the deposit agreement, except for changes needed to implement the required restrictions.
Other Distributions. The depositary will distribute to holders of Sanofi ADSs anything else we may distribute on deposited securities (after deduction or upon payment of fees and expenses or any taxes or other governmental charges) by any means it thinks is legal, equitable and practical. If, for any reason, it cannot make the distribution in that way, the depositary may sell what we distributed and distribute the net proceeds of the sale in the same way it distributes cash dividends, or it may choose any other method to distribute the property it deems equitable and practicable.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of Sanofi ADSs. We have no obligation to register Sanofi ADSs, shares, rights or other securities under the U.S. Securities Act of 1933, as amended. We also have no
obligation to take any other action to permit the distribution of ADRs, shares, rights or anything else to holders of Sanofi ADSs. This means that holders may not receive the distribution we make on our shares or any value for them if it is illegal or impractical for the depositary to make them available to such holders.
Elective Distributions. Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will give prior notice thereof to the depositary and will indicate whether we wish the elective distribution to be made available to holders of Sanofi ADSs. In that case, we will assist the depositary in determining whether that distribution is lawful and reasonably practicable. The depositary will make the election available to holders of Sanofi ADSs only if it is reasonably practicable and if we have provided all the documentation contemplated in the deposit agreement. In that case, the depositary will establish procedures to enable holders of Sanofi ADSs to elect to receive either cash or additional ADSs, in each case as described in the deposit agreement. If the election is not made available to holders of Sanofi ADSs, such holders will receive either cash or additional Sanofi ADSs, depending on what a shareholder in France would receive for failing to make an election, as more fully described in the deposit agreement.
Deposit, Withdrawal and Cancellation
The depositary will deliver ADRs if the holder or his or her broker deposit shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of Sanofi ADSs in the names the holder requests and will deliver the ADRs to the persons the holder requests at its office.
Obtaining Sanofi ordinary shares
A holder may turn in his or her ADRs at the depositary'sdepositary’s office. Upon payment of its fees and expenses and any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver (1) the underlying shares to an account designated by the holder and (2) any other deposited securities underlying the ADR at the office of a custodian or, at the holder'sholder’s request, risk and expense, the depositary will deliver the deposited securities at its office.
Voting Rights
A holder may instruct the depositary to vote the Sanofi ordinary shares underlying his or her Sanofi ADSs at any meeting of Sanofi shareholders, but only if we request that the depositary ask for holder instructions. Otherwise, holders will not be able to exercise their right to vote unless they withdraw the underlying ordinary shares from the ADR
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Item 12. Description of Securities other than Equity Securities
program and vote as an ordinary shareholder. However, holders may not know about the meeting sufficiently in advance to timely withdraw the underlying ordinary shares.
If we ask for holder instructions in connection with a meeting of Sanofi shareholders, the depositary will mailprovide materials to holders of Sanofi ADSs in the manner described under the heading "Notices“Notices and Reports; Rights of Holders to Inspect Books"Books” below. For any instructions to be valid, the depositary must receive them on or before the date specified in the materials distributed by the depositary. The depositary will endeavor, in so far as practical, subject to French law and the provisions of ourstatuts, to vote or to have its agents vote the shares or other deposited securities as holders may validly instruct. The depositary will only vote or attempt to vote shares as holders validly instruct.
We cannot assureguarantee holders that they will receive the voting materials inwith sufficient time to ensure that holders can instructenable them to return any voting instructions to the depositary in a timely manner to vote their shares. As long as they act in good faith, neither the depositary nor its agents will be responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.This means that holders may not be able to exercise their right to vote and there may be nothing holders can do if their shares are not voted as they requested.
Similar to our shares, Sanofi ADSs evidenced by ADRs that are registered in the name of the same owner for at least two (2) years are eligible for double voting rights so long as certain procedures are followed, as set out in the deposit agreement. For additional information regarding double voting rights, see "Item“Item 10. Additional Information —– B. Memorandum and Articles of Association —– Voting Rights"Rights”.
The deposit agreement allows the depositary and Sanofi to change the voting procedures or require additional voting procedures in addition to the ones described above if necessary or appropriate to comply with French or
United States law or ourstatuts.appropriate.For example, holders might be required to arrange to have their Sanofi ADSs deposited in a blocked account for a specified period of time prior to a shareholders'shareholders’ meeting in order to be allowed to give voting instructions.
Notices and Reports; Rights of Holders to Inspect Books
On or before the first date on which we give notice, by publication or otherwise, of any meeting of holders of shares or other deposited securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any
cash or other distributions or the offering of any rights, we will transmit to the depositary a copy of the notice.
Upon notice of any meeting of holders of shares or other deposited securities, if requested in writing by Sanofi, the depositary will, as soon as practicable, mail to the holders of Sanofi ADSs a notice, the form of which is in the discretion of the depositary, containing (1) a summary in English of the information contained in the notice of meeting provided by Sanofi to the depositary, (2) a statement that the holders as of the close of business on a specified record date will be entitled, subject to any applicable provision of French law and of ourstatuts, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the amount of shares or other deposited securities represented by their respective ADSs and (3) a statement as to the manner in which such instructions may be given. Notwithstanding the above, the depositary may, to the extent not prohibited by law or regulations, or by the requirements of the NYSE, in lieu of distribution of the materials provided to the depositary as described above, distribute to the holders a notice that provides holders with, or otherwise publicizes to holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).
The depositary will make available for inspection by ADS holders at the depositary'sdepositary’s office any reports and communications, including any proxy soliciting material, received from us that are both (1) received by the depositary as the holder of the deposited securities and (2) made generally available to the holders of such deposited securities by us. The depositary will also, upon written request, send to ADS holders copies of such reports when furnished by us pursuant to the deposit agreement. Any such reports and communications, including any such proxy soliciting material, furnished to the depositary by us will be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the SEC.
The depositary will keep books for the registration of ADRs and transfers of ADRs that at all reasonable times will be open for inspection by the holders provided that such inspection is not for the purpose of communicating with holders in the interest of a business or object other than our business or a matter related to the deposit agreement or the ADRs.
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Item 12. Description of Securities other than Equity Securities
Fees and Expenses
Fees Payable By ADS Holders
Pursuant to the deposit agreement, holders of our ADSs may have to pay to JPMorgan, either directly or indirectly, fees or charges up to the amounts set forth in the table below.
Associated Fee | Depositary Action | ||||
$5.00 or less per 100 ADSs (or portion thereof) | Execution and delivery of ADRs for distributions and dividends in shares and rights to subscribe for additional shares or rights of any other nature and surrender of ADRs for the purposes of withdrawal, including the termination of the deposit agreement | ||||
$ | Any cash distribution made pursuant to the deposit agreement, including, among other things: | ||||
·cash distributions or dividends, | |||||
·distributions other than cash, shares or rights, | |||||
·distributions in shares, and | |||||
·rights of any other nature, including rights to subscribe for additional shares. |
Registration fees in effect for the registration of transfers of shares generally on the share register of the company or foreign registrar and applicable to transfers of shares to or from the name of JPMorgan or its nominee to the custodian or its nominee on the making of deposits and withdrawals | As applicable | |
A fee equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities | Distributions of securities other than cash, shares or rights | |
Expenses incurred by JPMorgan |
·Cable, telex and facsimile transmission (where expressly provided for in the deposit agreement) | |
·Foreign currency conversion into U.S. dollars | ||
In addition to the fees outlined above, each holder will be responsible for any taxes or other governmental charges payable on his or her Sanofi ADSs or on the deposited securities underlying his or her Sanofi ADSs. The depositary may refuse to transfer a holder'sholder’s Sanofi ADSs or allow a holder to withdraw the deposited securities underlying his or her Sanofi ADSs until such taxes or other charges are paid. It may apply payments owed to a holder or sell deposited securities underlying a holder'sholder’s Sanofi ADSs to pay any taxes owed, and the holder will remain liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of Sanofi ADSs to reflect the sale and pay to the holder any proceeds, or send to the holder any property, remaining after it has paid the taxes. For additional information regarding taxation, see "Item“Item 10. Additional Information —– E. Taxation"Taxation”.
Fees Paid to Sanofi by the Depositary
JPMorgan, as depositary, has agreed to reimburse Sanofi for certain expenses (subject to certain limits) Sanofi incurs relating to legal fees, investor relations servicing,investor-related presentations,ADR-related advertising and public relations in those jurisdictions in which the ADRs may be listed or otherwise quoted, investor relations channel, perception studies, accountants'accountants’ fees in relation to our annual report onForm 20-F or any other expenses directly or indirectly relating to managing the program or servicing the shareholders.ADR holders. The depositary has also agreed to provide additional paymentsamounts to Sanofius based on certain performance indicators relating to the ADR facility.facility and fees collected by it. From January 1, 20122015 to December 31, 2012, Sanofi2015, we received a total amount of $16,159,254 from JPMorgan reimbursements of $4,250,000 for expenses and no additional payments based on performance of the ADR facility were made.JPMorgan. In addition to such amounts,these payments, JPMorgan has agreed to waive servicing
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Item 12. Description of Securities other than Equity Securities
fees Sanofiwe may incur in connection with routine corporate actions such as annual general meetings and dividend distributions, as well as for other assistance JPMorgan may provide Sanofi,to us, such as preparation of tax and regulatory compliance documents for holders and investor relations advisory services.
Changes Affecting Deposited Securities
If we:
· | change the nominal or par value of our Sanofi ordinary shares; |
· | recapitalize, reorganize, merge or consolidate, liquidate, sell assets, or take any similar action; |
· | reclassify, split up or consolidate any of the deposited securities; or |
· | distribute securities on the deposited securities that are not distributed to holders; |
then either:
· | the cash, shares or other securities received by the depositary will become deposited securities and each Sanofi ADS will automatically represent its equal share of the new deposited securities; or |
· | the depositary may, and will if we ask it to, distribute some or all of the cash, shares or other securities it receives. It may also deliver new ADRs or ask holders to surrender their outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |
Disclosure of Interests
The obligation of a holder or other person with an interest in our shares to disclose information under French law and under ourstatuts also applies to holders and any other persons, other than the depositary, who have an interest in the Sanofi ADSs. The consequences for failing to comply with these provisions are the same for holders and any other persons with an interest as a holder of our ordinary shares. For additional information regarding these obligations, see "Item“Item 10. Additional Information —– B. Memorandum and Articles of Association —– Requirements for Holdings Exceeding Certain Percentages"Percentages”.
Amendment and Termination
We may agree with the depositary to amend the deposit agreement and the ADRs without the consent of the ADS holders for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses, or prejudices a substantial right of holders of Sanofi ADSs, it will only become effective 30 days after the depositary notifies such holders of the amendment. However, we may not be
able to provide holders of Sanofi ADSs with prior notice of the effectiveness of any modifications or supplements that are required to accommodate compliance with applicable provisions of law, whether or not those modifications or supplements could be considered to be materially prejudicial to the substantial rights of holders of Sanofi ADSs.At the time an amendment becomes effective, such holders will be considered, by continuing to hold their ADR, to have agreed to the amendment and to be bound by the ADR and the deposit agreement as amended.
The depositary will terminate the agreement if we ask it to do so. The depositary may also terminate the agreement if the depositary has told us that it would like to resign and we have not appointed a new depositary bank within 90 days. In both cases, the depositary must notify holders of Sanofi ADSs at least 30 days before termination.
After termination, the depositary and its agents will be required to do only the following under the deposit agreement: (1) collect distributions on the deposited securities, (2) sell rights and other property as provided in the deposit agreement and (3) deliver shares and other deposited securities upon cancellation of ADRs. Six months or more after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it receives on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the holders of Sanofi ADSs that have not surrendered their Sanofi ADSs. It will have no liability for interest. Upon termination of the deposit agreement, the depositary'sdepositary’s only obligations will be to account for the proceeds of the sale and other cash and with respect to indemnification. After termination, our only obligation will be with respect to indemnification and to pay certain amounts to the depositary.
Limitations on Obligations and Liability to Holders of Sanofi ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary, and it limits our liability and the liability of the depositary. We andIn particular, please note the depositary:following:
· | we and the depositary are obligated only to take the actions specifically set forth in the deposit agreement without gross negligence or bad faith; |
· | we and the depositary are not liable if either is prevented or delayed by law or circumstances beyond its control from performing its obligations under the deposit agreement; |
· | we and the depositary are not liable if either exercises, or fails to exercise, any discretion permitted under the deposit agreement; |
· | we and the depositary have no obligation to become involved in a lawsuit or other proceeding related to the |
Item 12. Description of ContentsSecurities other than Equity Securities
Sanofi ADSs or the deposit agreement on holders’ behalf or on behalf of any other party, unless indemnity satisfactory to it against all expense and liability is furnished as often as may be required; |
· | we and the depositary are not liable for the acts or omissions made by, or the insolvency of, any securities depository, clearing agency or settlement system or the custodian, subject to certain exceptions and to the extent the custodian is not a branch or affiliate of JPMorgan; |
· | the depositary is not liable for the price received in connection with any sale of securities, the timing thereof or any delays, acts, omissions to act, errors, defaults or negligence on the part of the party so retained in connection with any such sale or proposed sale; |
· | we and the depositary may rely without any liability upon any written notice, request, direction, instruction or other document believed by either of us to be genuine and to have been signed or presented by the proper parties; and |
· | we and the depositary are not liable for any action or nonaction taken in reliance upon the advice of or information from legal counsel, accountants, any person presenting ordinary shares for deposit, any ADS holder, or any other person believed in good faith to be competent to give such advice or information. |
In addition, the depositary will not be liable for any acts or omissions made by a successor depositary. Moreover, neither we nor the depositary nor any of our respective agents will be liable to any holder of Sanofi ADSs for any indirect, special, punitive or consequential damages.
Pursuant to the terms of the deposit agreement, we and the depositary have agreed to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register the transfer of Sanofi ADSs, make a distribution on Sanofi ADSs or process a withdrawal of shares, the depositary may require:
· | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; |
· | production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and |
· | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
The depositary may refuse to deliver Sanofi ADSs, register transfers of Sanofi ADSs or permit withdrawals of shares when the transfer books of the depositary or our transfer books are closed, or at any time if the depositary or we think it advisable to do so.
Right to Receive the Shares Underlying the Sanofi ADSs
Holders have the right to cancel their Sanofi ADSs and withdraw the underlying Sanofi ordinary shares at any time except:
· | when temporary delays arise when we or the depositary have closed our transfer books or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends; |
· | when the holder or other holders of Sanofi ADSs seeking to withdraw shares owe money to pay fees, taxes and similar charges; or |
· | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to Sanofi ADSs or to the withdrawal of shares or other deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-Release of Sanofi ADSs
Unless we instruct the depositary not to, the deposit agreement permits the depositary to deliver Sanofi ADSs before deposit of the underlying shares. This is called apre-release of the Sanofi ADSs. The depositary may also deliver shares upon cancellation ofpre-released Sanofi ADSs (even if the Sanofi ADSs are cancelled before thepre-release transaction has been closed out). Apre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive Sanofi ADSs instead of shares to close out apre-release. Unless otherwise agreed in writing, the depositary maypre-release Sanofi ADSs only under the following conditions: (1) before or at the time of thepre-release, the person to whom thepre-release is being made must represent to the depositary in writing that it or its customer (i) owns the shares or Sanofi ADSs to be deposited, (ii) assigns all beneficial rights, title and interest in such shares or ADRs to the depositary in its capacity as depositary and (iii) will not take any action with respect to such shares or ADRs that is inconsistent with the transfer of beneficial ownership, other than in satisfaction of suchpre-release; (2) thepre-release must be fully collateralized with cash, U.S. government securities or other collateral that the depositary considers appropriate; (3) the depositary must be able to close out thepre-release on not more than five business days'days’ notice; and (4) the depositary may require such further indemnities and credit regulations as it deems appropriate. In addition, the depositary will limit the number of Sanofi ADSs that may be outstanding at any time as a result ofpre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate to do so. The depositary may retain for its own account any compensation received by it in connection with the foregoing. Any holder ofpre-release ADRs should consult its tax and other advisors about the implications ofpre-release for its particular situation.
Item 13. Defaults, Dividend Arrearages and Delinquencies
PART II
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
N/A
Item 14. Material Modifications to the Rights of Security Holders
Item 14. | Material Modifications to the Rights of Security Holders |
N/A
Item 15. Controls and Procedures
Item 15. | Controls and Procedures |
(a) Our Chief Executive Officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that material information relating to Sanofi was timely made known to them by others within the Group.
(a) | Our Chief Executive Officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that material information relating to Sanofi was timely made known to them by others within the Group. |
(b) Report of Management on Internal Control Over Financial Reporting
(b) | Report of Management on Internal Control Over Financial Reporting |
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRule 13a-15(f). Management assessed the effectiveness of internal control over financial reporting as of December 31, 20122015 based on the framework in "Internal“Internal Control —– Integrated Framework"Framework” (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on that assessment, management has concluded that the Company'sCompany’s internal control over financial reporting was effective as of December 31, 20122015 to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements for external purposes, in accordance with generally accepted accounting principles.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and can only provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of the Company'sCompany’s internal control over financial reporting has been audited by PricewaterhouseCoopers Audit and Ernst & Young et Autres, independent registered public accounting firms, as stated in their report on the Company'sCompany’s internal control over financial reporting as of December 31, 2012,2015, which is included herein. See paragraph (c) of the present Item 15, below.
(c) See report of PricewaterhouseCoopers Audit and Ernst & Young et Autres, independent registered public accounting firms, included under "Item 18. Financial Statements"
(c) | See report of PricewaterhouseCoopers Audit and Ernst & Young et Autres, independent registered public accounting firms, included under “Item 18. Financial Statements” on page F-3. |
(d) | There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |
Item 16. |
[Reserved]
(d) There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16A. | Audit Committee Financial Expert |
[Reserved]
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that Klaus Pohle, Robert Castaigne, Fabienne Lecorvaisier and Christian Mulliez, and Gérard Van Kemmel, directors serving on the Audit Committee, are independent
financial experts within the meaning of paragraph 407 of theSarbanes-Oxley Act of 2002.
The Board of Directors deemed Klaus Pohle to be a financial expert taking into account his education and professional experience in financial matters, accountancy and internal control. Item 16A. Audit Committee Financial Expert
The Board of Directors determined that Robert Castaigne qualifies as a financial expert based on his education and his experience as Chief Financial Officer of Total, a major corporation. The Board of Directors deemed Fabienne Lecorvaisier to be a financial expert taking into account her experience in corporate finance in various international banks and as Chief Financial Officer of Essilor and now Air Liquide. The Board of Directors deemed Christian Mulliez to be a financial expert taking into account his experience as Vice President, General Manager Administration and
Finance of L'OréL’Oréal and graduate of theEcole Supérieure des Sciences Economiques et Commerciales (ESSEC). The Board of Directors determined that Gérard Van Kemmel qualifies as a financial expert based on his experience as a partner at an international accounting firm.
The Board of Directors has determined that all fivefour directors meet the independence criteria of U.S. Securities and Exchange CommissionRule 10A-3,10A- 3, although only Mrs.Robert Castaigne Fabienne Lecorvaisier and Carole Piwnica Mr. Castaigne, Mr. Pohle and Mr. Van Kemmel meet the FrenchAFEP-MEDEF Code criteria of independence applied by the Board of Directors for general corporate governance purposes. (Seepurposes (see Item 16.G, below.)16G, below).
Item 16B. | Code of Ethics |
We have adopted a financial code of ethics, as defined in Item 16B. ofForm 20-F under the Exchange Act. Our financial code of ethics applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and other officers performing similar functions, as designated from time to time. Our financial code of ethics is available on our Website at www.sanofi.com (information on our website
is not incorporated by reference in this annual report). A copy of our financial code of ethics may also be obtained without charge by addressing a written request to the attention of Individual Shareholder Relations at our headquarters in Paris. We will disclose any amendment to the provisions of such financial code of ethics on our website.
Item 16C. | Principal Accountants’ Fees and Services |
See Note E. to our consolidated financial statements included at Item 18 of this annual report.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
N/A
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
In 2015, Sanofi made the following purchases of its ordinary shares.
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | (d) Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) | ||||||||||||
January 2015 | 2,729,605 | € | 75.95 | 2,729,605 | 12,041 | |||||||||||
February 2015 | 250,000 | € | 81.15 | 250,000 | 12,021 | |||||||||||
March 2015 | 6,240,278 | € | 90.58 | 6,240,278 | 11,456 | |||||||||||
April 2015 | 4,528,689 | € | 96.00 | 4,528,689 | 11,022 | |||||||||||
June 2015 | 150,000 | € | 89.61 | 150,000 | 11,009 | |||||||||||
July 2015 | 1,270,000 | € | 89.32 | 1,270,000 | 10,896 | |||||||||||
August 2015 | 1,310,511 | € | 93.95 | 1,310,511 | 10,773 | |||||||||||
December 2015 | 3,796,857 | € | 79.01 | 3,796,857 | 10,474 |
(1) | The Company was authorized to repurchase up to €12,248,051,000 of shares for a period of eighteen months (i.e., through November 4, 2016) by the Annual Shareholders’ Meeting held on May 4, 2015. |
(2) | Millions of euros. |
217
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In 2012, Sanofi made the following purchases of its ordinary shares.
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | (d) Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
February 2012 | 5,184,555 | € | 56.31 | 5,184,555 | € | 10,435,395,454 | |||||||
March 2012 | 1,953,164 | € | 57.60 | 1,953,164 | € | 10,322,886,122 | |||||||
April 2012 | 375,774 | € | 55.65 | 375,774 | € | 10,301,973,191 | |||||||
May 2012 | 257,373 | € | 57.08 | 257,373 | € | 10,287,283,561 | |||||||
June 2012 | 243,983 | € | 56.58 | 243,983 | € | 10,285,903,172 | |||||||
July 2012 | 2,274,000 | € | 65.61 | 2,274,000 | € | 10,136,695,283 | |||||||
August 2012 | 3,000,206 | € | 66.85 | 3,000,206 | € | 9,936,144,522 | |||||||
September 2012 | 284,588 | € | 65.84 | 284,588 | € | 9,917,407,277 | |||||||
This schedule does not include purchases and sales conducted by Exane under a liquidity contract entered into in 2010 and that is still in effect. For more information see
Item 10.BMemorandum and Articles of Association —– Use of Share Repurchase Programs.
Item 16F. Change in Registrant's Certifying Accountant
Item 16F. | Change in Registrant’s Certifying Accountant |
N/A
Item 16G. Corporate Governance
Item 16G. | Corporate Governance |
Sanofi is incorporated under the laws of France, with securities listed on regulated public markets in the United States (New York Stock Exchange) and France (Euronext Paris). Consequently, as described further in our annual report, our corporate governance framework reflects the mandatory provisions of French corporate law, the securities laws and regulations of France and the United States and the rules of the aforementioned public markets. In addition, we generally follow the "AFEP-MEDEF"“AFEP-MEDEF” corporate governance recommendations for French listed issuers (hereafter referred to as the "AFEP-MEDEF Code"“AFEP-MEDEF Code”). As a result, our corporate governance framework is similar in many respects to, and provides investor protections that are comparable to —– or in some cases, more stringent than —– the corresponding rules of the New York Stock Exchange. Nevertheless, there are important differences to keep in mind.
In line with New York Stock Exchange rules applicable to domestic issuers, Sanofi maintains a board of directors of which at least half of the members of which are independent. Sanofi evaluates the independence of members of our Board of Directors using the standards of the French AFEP-MEDEF Code as the principal reference. We believe that AFEP-MEDEF'sAFEP-MEDEF’s overarching criteria for independence —– no relationship of any kind whatsoever with the Company, its group or the management of either that is such as to color a Board member'smember’s judgment —– are on the whole consistent with the goals of the New York Stock Exchange'sExchange’s rules although the specific tests proposed under the two standards may vary on some points. We note that under the AFEP-MEDEF Code, our non-executive Chairman of the Board has automatically been classified as non-independent although he has no relationship with Sanofi that would cause him to be non-independent under the rules of the New York Stock Exchange. Additionally, we have complied with the audit committee independence and other requirements of theRule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended, adopted pursuant to theSarbanes-Oxley Act of 2002. Our Compensation Committee includes onenon-independent members, member, Christian Mulliez, which is permitted under the AFEP-MEDEF Code but would not be compliant with the rules of the New York Stock Exchange for domestic issuers.
Under French law, the committees of our Board of Directors are advisory only, and where the New York Stock Exchange Listed Company Manual would vest certaindecision-making powers with specific committees by delegation (e.g., appointment or audit committees), under French law our Board of Directors remains the only competent body to
take such decisions, albeit taking into account the recommendation of the relevant committees. Additionally, under French corporate law, it is the Shareholders'Shareholders’ General Meeting of Sanofi that is competent to appoint our auditors upon the proposal of our Board of Directors, although our Board Charter provides that the Board of Directors will make its proposal on the basis of the recommendation of our Audit Committee. We believe that this requirement of French law, together with the additional legal requirement that two sets of statutory auditors be appointed, share the New York Stock Exchange'sExchange’s underlying goal of ensuring that the audit of our accounts be conducted by auditors independent from company management.
In addition to the oversight role of our Compensation Committee for questions of management compensation including by way of equity, under French law any option or restricted share plans or other share capital increases, whether for the benefit of senior management or employees, may only be adopted by the Board of Directors pursuant to and within the limits of a shareholder resolution approving the related capital increase and delegating to the Board the authority to implement such operations.
As described above, a number of issues, which could be resolved directly by a board or its committees in the United States, require the additional protection of direct shareholder consultation in France. On the other hand, there is not a tradition of non-executive Board of Directors sessions. Our Audit Committee is entirely composed of independent directors as that term is defined inRule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended, adopted pursuant to theSarbanes-Oxley Act of 2002. The composition of our Audit Committee, Compensation Committee, and Appointments and Governance Committee includes directors who are also officers of our largest shareholder.
As a 'foreign‘foreign private issuer'issuer’ under the U.S. securities laws, our Chief Executive Officer and our Chief Financial Officer issue the certifications required by §302 and §906 of the Sarbanes Oxley Act of 2002 on an annual basis (with the filing of our annual report onU.S. Form 20-F) rather than on a quarterly basis as would be the case of a U.S. corporation filing quarterly reports onU.S. Form 10-Q.
French corporate law provides that the Board of Directors must vote to approve a broadly defined range of transactions that could potentially create conflicts of interest between
218
Item 16G. Corporate Governance
Sanofi on the one hand and its Directors and Chief Executive Officer on the other hand, which are then presented to shareholders for approval at the next annual meeting. This legal safeguard provides shareholders with an
opportunity to approve significant aspects of the Chief Executive Officer'sOfficer’s compensation package, even in the absence of "say on pay" legislation in France, and it operates in place of certain provisions of the NYSE Listed Company Manual.
N/A
Item 16H. | Mine Safety Disclosure |
N/A
219
Item 17. Financial Statements
PART III
Item 17. | Financial Statements |
See Item 18.
Item 18. | Financial Statements |
Seepages F-1 through F-122F-1through F-108 incorporated herein by reference.
Item 19. | Exhibits |
1.1 | Articles of association (statuts) of Sanofi (English translation) |
1.2 | Board Charter (Règlement Intérieur) of Sanofi (English translation) |
2. | |||
4.1 | |||
Form of Contingent Value Rights Agreement by and among Sanofi and Trustee ( |
8.1 | List of significant subsidiaries, see |
12.1 | Certification by |
12.2 | Certification by Jérôme Contamine, Principal Financial Officer, required by Section 302 of theSarbanes-Oxley Act of 2002 |
13.1 | Certification by |
13.2 | Certification by Jérôme Contamine, Principal Financial Officer, required by Section 906 of theSarbanes-Oxley Act of 2002 |
23.1 | Consent of Ernst & Young et Autres dated March |
23.2 | Consent of PricewaterhouseCoopers Audit dated March |
99.1 | Report of the Chairman of the Board of Directors for |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Sanofi | ||||
By: |
| |||
Name: | ||||
Title: | Chief Executive Officer | |||
Date: March 3, 2016 |
Date: March 6, 2013
2015 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
The financial statements are presented in accordance with
International Financial Reporting Standards (IFRS).
CONSOLIDATED BALANCE SHEETS – ASSETS | F-4 | ||
CONSOLIDATED BALANCE SHEETS – LIABILITIES AND EQUITY | F-5 | ||
CONSOLIDATED INCOME STATEMENTS | F-6 | ||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | F-7 | ||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | F-8 | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS | F-10 | ||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |||
| |||
A/ BASISOFPREPARATION
| |||
B/ SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES
| |||
C/ PRINCIPAL ALLIANCES
| |||
D/ PRESENTATIONOFTHEFINANCIALSTATEMENTS
| |||
E/ PRINCIPALACCOUNTANTS’FEESANDSERVICES
| |||
F/ LISTOFPRINCIPALCOMPANIESINCLUDEDINTHECONSOLIDATIONFORTHEYEARENDED DECEMBER 31, 2015 | F-104 | ||
G/ EVENTSUBSEQUENTTO DECEMBER 31, 2015 | F-108 |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRMSSANOFI
To the Board of Directors and Shareholders of Sanofi,
We have audited the accompanying consolidated balance sheets of Sanofi and its subsidiaries (together the "Group"“Group”) as of December 31, 2012, 20112015, 2014 and 2010,2013, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2012.2015. These financial statements are the responsibility of the Group'sGroup’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States),of the United States of America (the "PCAOB"“PCAOB”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2012, 20112015, 2014 and 2010,2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012,2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the PCAOB, the effectiveness of the Group'sGroup’s internal control over financial reporting as of December 31, 2012,2015, based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated March 6, 20133, 2016 expressed an unqualified opinion thereon.
Neuilly-sur-Seine andParis-La Défense, March 6, 20133, 2016
PricewaterhouseCoopers Audit | Ernst & Young et Autres | |||
/s/ Nicolas Pfeuty |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS SANOFI
To the Board of Directors and Shareholders of Sanofi,
We have audited internal control over financial reporting of Sanofi and its subsidiaries (together "the Group"“the Group”) as of December 31, 2012,2015, based on criteria established inInternal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). The Group'sGroup’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company'scompany’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States),of the United States of America (the "PCAOB"“PCAOB”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012,2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the PCAOB, the consolidated balance sheets of the Group as of December 31, 2012, 20112015, 2014 and 2010,2013, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 20122015 and our report dated March 6, 20133, 2016 expressed an unqualified opinion thereon.
Neuilly-sur-Seine andParis-La Défense, March 6, 20133, 2016
PricewaterhouseCoopers Audit | Ernst & Young et Autres | |||
/s/ François Guillon | /s/ Nicolas Pfeuty |
F- 3
(€ million) | Note | December 31, 2015 | December 31, 2014 | December 31, 2013 | ||||||||||||
Property, plant and equipment | D.3. | 9,943 | 10,396 | 10,182 | ||||||||||||
Goodwill | D.4. | 39,557 | 39,197 | 37,134 | ||||||||||||
Other intangible assets | D.4. | 12,026 | 14,543 | 15,395 | ||||||||||||
Investments in associates and joint ventures | D.6. | 2,676 | 2,384 | 448 | ||||||||||||
Other non-current assets | D.7. | 2,725 | 2,575 | 4,826 | ||||||||||||
Deferred tax assets | D.14. | 4,714 | 4,860 | 4,144 | ||||||||||||
Non-current assets | 71,641 | 73,955 | 72,129 | |||||||||||||
Inventories | D.9. | 6,516 | 6,562 | 6,352 | ||||||||||||
Accounts receivable | D.10. | 7,386 | 7,149 | 6,831 | ||||||||||||
Other current assets | D.11. | 1,767 | 2,157 | 2,287 | ||||||||||||
Current financial assets | D.12. | 111 | 218 | 185 | ||||||||||||
Cash and cash equivalents | D.13. - D.17. | 9,148 | 7,341 | 8,257 | ||||||||||||
Current assets | 24,928 | 23,427 | 23,912 | |||||||||||||
Assets held for sale or exchange | D.8. - D.36. | 5,752 | 10 | 14 | ||||||||||||
TOTAL ASSETS | 102,321 | 97,392 | 96,055 |
(€ million) | Note | December 31, 2012 | December 31, 2011 (1) | December 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||
Property, plant and equipment | D.3. | 10,578 | 10,750 | 8,155 | ||||||||
Goodwill | D.4. | 38,073 | 38,582 | 31,932 | ||||||||
Other intangible assets | D.4. | 20,192 | 23,639 | 12,479 | ||||||||
Investments in associates and joint ventures | D.6. | 487 | 807 | 924 | ||||||||
Non-current financial assets | D.7. | 3,799 | 2,399 | 1,644 | ||||||||
Deferred tax assets | D.14. | 4,377 | 3,633 | 3,051 | ||||||||
Non-current assets | 77,506 | 79,810 | 58,185 | |||||||||
Inventories | D.9. | 6,379 | 6,051 | 5,020 | ||||||||
Accounts receivable | D.10. | 7,507 | 8,042 | 6,507 | ||||||||
Other current assets | D.11. | 2,355 | 2,401 | 2,000 | ||||||||
Current financial assets | D.12. | 178 | 173 | 51 | ||||||||
Cash and cash equivalents | D.13.–D.17. | 6,381 | 4,124 | 6,465 | ||||||||
Current assets | 22,800 | 20,791 | 20,043 | |||||||||
Assets held for sale or exchange (2) | D.8. | 101 | 67 | 7,036 | ||||||||
TOTAL ASSETS | 100,407 | 100,668 | 85,264 | |||||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(€ million) | Note | December 31, 2012 | December 31, 2011 (1) | December 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
LIABILITIES & EQUITY | ||||||||||||
Equity attributable to equity holders of Sanofi | D.15. | 57,338 | 56,203 | 53,097 | ||||||||
Equity attributable to non-controlling interests | D.16. | 134 | 170 | 191 | ||||||||
Total equity | 57,472 | 56,373 | 53,288 | |||||||||
Long-term debt | D.17. | 10,719 | 12,499 | 6,695 | ||||||||
Non-current liabilities related to business combinations and to non-controlling interests | D.18. | 1,350 | 1,336 | 388 | ||||||||
Provisions and other non-current liabilities | D.19. | 11,036 | 10,346 | 9,326 | ||||||||
Deferred tax liabilities | D.14. | 5,932 | 6,530 | 3,808 | ||||||||
Non-current liabilities | 29,037 | 30,711 | 20,217 | |||||||||
Accounts payable | 3,190 | 3,183 | 2,800 | |||||||||
Other current liabilities | D.19.4. | 6,758 | 7,221 | 5,624 | ||||||||
Current liabilities related to business combinations and to non-controlling interests | D.18. | 100 | 220 | 98 | ||||||||
Short-term debt and current portion of long-term debt | D.17. | 3,812 | 2,940 | 1,565 | ||||||||
Current liabilities | 13,860 | 13,564 | 10,087 | |||||||||
Liabilities related to assets held for sale or exchange (2) | D.8. | 38 | 20 | 1,672 | ||||||||
TOTAL LIABILITIES & EQUITY | 100,407 | 100,668 | 85,264 | |||||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED INCOME STATEMENTS
(€ million) | Note | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | D.34.–D.35. | 34,947 | 33,389 | 32,367 | ||||||||
Other revenues | 1,010 | 1,669 | 1,669 | |||||||||
Cost of sales | (11,118 | ) | (10,902 | ) | (9,398 | ) | ||||||
Gross profit | 24,839 | 24,156 | 24,638 | |||||||||
Research and development expenses | (4,922 | ) | (4,811 | ) | (4,547 | ) | ||||||
Selling and general expenses | (8,947 | ) | (8,536 | ) | (8,149 | ) | ||||||
Other operating income | D.25. | 562 | 319 | 369 | ||||||||
Other operating expenses | D.26. | (454 | ) | (315 | ) | (292 | ) | |||||
Amortization of intangible assets | (3,291 | ) | (3,314 | ) | (3,529 | ) | ||||||
Impairment of intangible assets | D.5. | (117 | ) | (142 | ) | (433 | ) | |||||
Fair value remeasurement of contingent consideration liabilities | D.18. | (192 | ) | 15 | — | |||||||
Restructuring costs | D.27. | (1,141 | ) | (1,314 | ) | (1,384 | ) | |||||
Other gains and losses, and litigation (1) | D.28. | — | (327 | ) | (138 | ) | ||||||
Operating income | 6,337 | 5,731 | 6,535 | |||||||||
Financial expenses | D.29. | (553 | ) | (552 | ) | (468 | ) | |||||
Financial income | D.29. | 93 | 140 | 106 | ||||||||
Income before tax and associates and joint ventures | 5,877 | 5,319 | 6,173 | |||||||||
Income tax expense | D.30. | (1,134 | ) | (455 | ) | (1,430 | ) | |||||
Share of profit/(loss) of associates and joint ventures | D.31. | 393 | 1,070 | 978 | ||||||||
Net income | 5,136 | 5,934 | 5,721 | |||||||||
Attributable to non-controlling interests | D.32. | 169 | 241 | 254 | ||||||||
Net income attributable to equity holders of Sanofi | 4,967 | 5,693 | 5,467 | |||||||||
Average number of shares outstanding (million) | D.15.9. | 1,319.5 | 1,321.7 | 1,305.3 | ||||||||
Average number of shares outstanding after dilution (million) | D.15.9. | 1,329.6 | 1,326.7 | 1,308.2 | ||||||||
– Basic earnings per share (in euros) | 3.76 | 4.31 | 4.19 | |||||||||
– Diluted earnings per share (in euros) | 3.74 | 4.29 | 4.18 | |||||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 (1) | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Net income | 5,136 | 5,934 | 5,721 | |||||||
Attributable to equity holders of Sanofi | 4,967 | 5,693 | 5,467 | |||||||
Attributable to non-controlling interests | 169 | 241 | 254 | |||||||
Other comprehensive income: | ||||||||||
Actuarial gains (losses) | (1,555 | )(3) | (677 | )(3) | (311 | ) | ||||
Tax effect (2) | 492 | 138 | 172 | |||||||
Items not subsequently reclassifiable to profit or loss | (1,063 | ) | (539 | ) | (139 | ) | ||||
• Available-for-sale financial assets | 1,451 | 250 | 141 | |||||||
• Cash flow hedges | (4 | ) | 5 | 17 | ||||||
• Change in currency translation differences | (532 | ) | (95 | ) | 2,654 | |||||
Tax effect (2) | (117 | ) | 4 | (20 | ) | |||||
Items subsequently reclassifiable to profit or loss | 798 | 164 | 2,792 | |||||||
Other comprehensive income for the period, net of taxes | (265 | ) | (375 | ) | 2,653 | |||||
Comprehensive income | 4,871 | 5,559 | 8,374 | |||||||
Attributable to equity holders of Sanofi | 4,709 | 5,330 | 8,109 | |||||||
Attributable to non-controlling interests | 162 | 229 | 265 | |||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(€ million) | Share capital | Additional paid-in capital and retained earnings | Treasury shares | Stock options and other share-based payment | Other comprehensive income (1) | Attributable to equity holders of Sanofi | Attributable to non-controlling interests | Total equity | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2010 | 2,637 | 48,448 | (526 | ) | 1,696 | (3,933 | ) | 48,322 | 258 | 48,580 | |||||||||||||||
Other comprehensive income for the period | — | (139 | ) | — | — | 2,781 | 2,642 | 11 | 2,653 | ||||||||||||||||
Net income for the period | — | 5,467 | — | — | — | 5,467 | 254 | 5,721 | |||||||||||||||||
Comprehensive income for the period | — | 5,328 | — | — | 2,781 | 8,109 | 265 | 8,374 | |||||||||||||||||
Dividend paid out of 2009 earnings (€2.40 per share) | — | (3,131 | ) | — | — | — | (3,131 | ) | — | (3,131 | ) | ||||||||||||||
Payment of dividends and equivalents to non-controlling interests | — | — | — | — | — | — | (307 | ) | (307 | ) | |||||||||||||||
Share repurchase program (3) | — | — | (321 | ) | — | — | (321 | ) | — | (321 | ) | ||||||||||||||
Reduction in share capital (3) | (16 | ) | (404 | ) | 420 | — | — | — | — | — | |||||||||||||||
Share-based payment plans: | |||||||||||||||||||||||||
• Exercise of stock options | 1 | 17 | — | — | — | 18 | — | 18 | |||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 56 | — | — | 56 | — | 56 | |||||||||||||||||
• Value of services obtained from employees | — | — | — | 133 | — | 133 | — | 133 | |||||||||||||||||
• Tax effects on the exercise of stock options | — | — | — | — | — | — | — | — | |||||||||||||||||
Non-controlling interests generated by acquisitions | — | — | — | — | — | — | 1 | 1 | |||||||||||||||||
Changes in non-controlling interests without loss of control | — | (89 | ) | — | — | — | (89 | ) | (26 | ) | (115 | ) | |||||||||||||
Balance at December 31, 2010 | 2,622 | 50,169 | (371 | ) | 1,829 | (1,152 | ) | 53,097 | 191 | 53,288 | |||||||||||||||
Other comprehensive income for the period (2) | — | (539 | ) | — | — | 176 | (363 | ) | (12 | ) | (375 | ) | |||||||||||||
Net income for the period | — | 5,693 | — | — | — | 5,693 | 241 | 5,934 | |||||||||||||||||
Comprehensive income for the period (2) | — | 5,154 | — | — | 176 | 5,330 | 229 | 5,559 | |||||||||||||||||
Dividend paid out of 2010 earnings (€2.50 per share) | — | (3,262 | ) | — | — | — | (3,262 | ) | — | (3,262 | ) | ||||||||||||||
Payment of dividends and equivalents to non-controlling interests | — | — | — | — | — | — | (252 | ) | (252 | ) | |||||||||||||||
Increase in share capital – dividends paid in shares (3) | 76 | 1,814 | — | — | — | 1,890 | — | 1,890 | |||||||||||||||||
Share repurchase program (3) | — | — | (1,074 | ) | — | — | (1,074 | ) | — | (1,074 | ) | ||||||||||||||
Reduction in share capital (3) | (21 | ) | (488 | ) | 509 | — | — | — | — | — | |||||||||||||||
Share-based payment plans: | — | — | — | — | — | — | — | — | |||||||||||||||||
• Exercise of stock options | 4 | 66 | — | — | — | 70 | — | 70 | |||||||||||||||||
• Issuance of restricted shares | 1 | (1 | ) | — | — | — | — | — | — | ||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 3 | — | — | 3 | — | 3 | |||||||||||||||||
• Value of services obtained from employees | — | — | — | 143 | — | 143 | — | 143 | |||||||||||||||||
• Tax effects on the exercise of stock options | — | — | — | 8 | — | 8 | — | 8 | |||||||||||||||||
Change in non-controlling interests without loss of control | — | (2 | ) | — | — | — | (2 | ) | 2 | — | |||||||||||||||
Balance at December 31, 2011 (2) | 2,682 | 53,450 | (933 | ) | 1,980 | (976 | ) | 56,203 | 170 | 56,373 | |||||||||||||||
Other comprehensive income for the period | — | (1,063 | ) | — | — | 805 | (258 | ) | (7 | ) | (265 | ) | |||||||||||||
Net income for the period | — | 4,967 | — | — | — | 4,967 | 169 | 5,136 | |||||||||||||||||
Comprehensive income for the period | — | 3,904 | — | — | 805 | 4,709 | 162 | 4,871 | |||||||||||||||||
Dividend paid out of 2011 earnings (€2.65 per share) | — | (3,487 | ) | — | — | — | (3,487 | ) | — | (3,487 | ) | ||||||||||||||
Payment of dividends and equivalents to non-controlling interests | — | — | — | — | — | — | (178 | ) | (178 | ) | |||||||||||||||
Share repurchase program (3) | — | — | (823 | ) | — | — | (823 | ) | — | (823 | ) | ||||||||||||||
Reduction in share capital (3) | (55 | ) | (1,493 | ) | 1,548 | — | — | — | — | — | |||||||||||||||
Share-based payment plans: | |||||||||||||||||||||||||
• Exercise of stock options (3) | 24 | 621 | — | — | — | 645 | — | 645 | |||||||||||||||||
• Issuance of restricted shares (3) | 2 | (2 | ) | — | — | — | — | — | — | ||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 1 | — | — | 1 | — | 1 | |||||||||||||||||
• Value of services obtained from employees | — | — | — | 155 | — | 155 | — | 155 | |||||||||||||||||
• Tax effects on the exercise of stock options | — | — | — | 25 | — | 25 | — | 25 | |||||||||||||||||
Change in non-controlling interests without loss of control (4) | — | (90 | ) | — | — | — | (90 | ) | (20 | ) | (110 | ) | |||||||||||||
Balance at December 31, 2012 | 2,653 | 52,903 | (207 | ) | 2,160 | (171 | ) | 57,338 | 134 | 57,472 | |||||||||||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(€ million) | Note | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Net income attributable to equity holders of Sanofi | 4,967 | 5,693 | 5,467 | |||||||||
Non-controlling interests, excluding BMS (1) | D.32. | 20 | 15 | 17 | ||||||||
Share of undistributed earnings of associates and joint ventures | 37 | 27 | 52 | |||||||||
Depreciation, amortization and impairment of property, plant and equipment and intangible assets | 4,907 | 5,553 | 5,129 | |||||||||
Gains and losses on disposals of non-current assets, net of tax (2) | (86 | ) | (34 | ) | (111 | ) | ||||||
Net change in deferred taxes | (916 | ) | (1,865 | ) | (1,511 | ) | ||||||
Net change in provisions (3) | (710 | ) | 40 | 461 | ||||||||
Cost of employee benefits (stock options and other share-based payments) | D.15.2.–D.15.8. | 155 | 143 | 133 | ||||||||
Impact of the workdown of acquired inventories remeasured at fair value | D.35.1. | 23 | 476 | 142 | ||||||||
Unrealized (gains)/losses recognized in income | 106 | (214 | ) | 245 | ||||||||
Operating cash flow before changes in working capital | 8,503 | 9,834 | 10,024 | |||||||||
(Increase)/decrease in inventories | (445 | ) | (232 | ) | (386 | ) | ||||||
(Increase)/decrease in accounts receivable | 368 | (257 | ) | (96 | ) | |||||||
Increase/(decrease) in accounts payable | 67 | (87 | ) | 59 | ||||||||
Net change in other current assets, current financial assets and other current liabilities | (322 | ) | 61 | 258 | ||||||||
Net cash provided by/(used in) operating activities (4) | 8,171 | 9,319 | 9,859 | |||||||||
Acquisitions of property, plant and equipment and intangible assets | D.3.–D.4. | (1,612 | ) | (1,782 | ) | (1,662 | ) | |||||
Acquisitions of investments in consolidated undertakings, net of cash acquired (7) | D.1.–D.18. | (282 | ) | (13,590 | ) | (1,659 | ) | |||||
Acquisitions of available-for-sale financial assets | D.7. | (46 | ) | (26 | ) | (74 | ) | |||||
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax (5) | 358 | 359 | 136 | |||||||||
Net change in loans and other financial assets | (5 | ) | 338 | (216 | ) | |||||||
Net cash provided by/(used in) investing activities | (1,587 | ) | (14,701 | ) | (3,475 | ) | ||||||
Issuance of Sanofi shares (6) | D.15.1. | 645 | 70 | 18 | ||||||||
Dividends paid: | ||||||||||||
• to shareholders of Sanofi (6) | (3,487 | ) | (1,372 | ) | (3,131 | ) | ||||||
• to non-controlling interests, excluding BMS (1) | (10 | ) | (17 | ) | (7 | ) | ||||||
Transactions with non-controlling interests, other than dividends | (62 | ) | — | (97 | ) | |||||||
Additional long-term debt contracted | D.17. | 1,178 | 8,359 | 505 | ||||||||
Repayments of long-term debt | D.17. | (1,345 | ) | (2,931 | ) | (1,984 | ) | |||||
Net change in short-term debt | (448 | ) | (145 | ) | 314 | |||||||
Acquisition of treasury shares | D.15.4. | (823 | ) | (1,074 | ) | (321 | ) | |||||
Disposals of treasury shares, net of tax | D.15. | 1 | 3 | 57 | ||||||||
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 Merial cash and cash equivalents (8) | D.8.2. | — | 147 | — | ||||||||
Net change in cash and cash equivalents | 2,257 | (2,341 | ) | 1,793 | ||||||||
Cash and cash equivalents, beginning of period | 4,124 | 6,465 | 4,692 | |||||||||
Cash and cash equivalents, end of period | D.13. | 6,381 | 4,124 | 6,465 | ||||||||
– Income tax paid | (2,735 | ) | (2,815 | ) | (3,389 | ) | ||||||
– Interest paid | (495 | ) | (447 | ) | (475 | ) | ||||||
– Interest received | 68 | 100 | 62 | |||||||||
– Dividends received from non-consolidated entities | 6 | 7 | 3 | |||||||||
CONSOLIDATED BALANCE SHEETS – LIABILITIES AND EQUITY |
(€ million) | Note | December 31, 2015 | December 31, 2014 | December 31, 2013 | ||||||||||||
Equity attributable to equity holders of Sanofi | D.15. | 58,049 | 56,120 | 56,904 | ||||||||||||
Equity attributable to non-controlling interests | D.15.10. | 161 | 148 | 129 | ||||||||||||
Total equity | 58,210 | 56,268 | 57,033 | |||||||||||||
Long-term debt | D.17. | 13,118 | 13,276 | 10,414 | ||||||||||||
Non-current liabilities relating to business combinations and to non-controlling interests | D.18. | 1,121 | 1,133 | 884 | ||||||||||||
Provisions and other non-current liabilities | D.19. | 9,169 | 9,578 | 8,735 | ||||||||||||
Deferred tax liabilities | D.14. | 2,895 | 4,105 | 5,060 | ||||||||||||
Non-current liabilities | 26,303 | 28,092 | 25,093 | |||||||||||||
Accounts payable | 3,817 | 3,651 | 3,003 | |||||||||||||
Other current liabilities | D.19.4. | 9,442 | 7,712 | 6,725 | ||||||||||||
Current liabilities relating to business combinations and to non-controlling interests | D.18. | 130 | 131 | 24 | ||||||||||||
Short-term debt and current portion of long-term debt | D.17. | 3,436 | 1,538 | 4,176 | ||||||||||||
Current liabilities | 16,825 | 13,032 | 13,928 | |||||||||||||
Liabilities related to assets held for sale or exchange | D.8. - D.36. | 983 | - | 1 | ||||||||||||
TOTAL LIABILITIES AND EQUITY | 102,321 | 97,392 | 96,055 |
F- 5
|
(€ million) | Note | 2015(1) | 2014(1) | 2013(1) | ||||||||||||
Net sales | D.35.1. | 34,542 | 31,694 | 30,966 | ||||||||||||
Other revenues | 319 | 305 | 325 | |||||||||||||
Cost of sales | (10,919) | (10,230) | (10,302) | |||||||||||||
Gross profit | 23,942 | 21,769 | 20,989 | |||||||||||||
Research and development expenses | (5,082) | (4,667) | (4,605) | |||||||||||||
Selling and general expenses | (9,382) | (8,425) | (7,950) | |||||||||||||
Other operating income | D.25. | 254 | 301 | 691 | ||||||||||||
Other operating expenses | D.26. | (462) | (157) | (240) | ||||||||||||
Amortization of intangible assets | (2,137) | (2,081) | (2,527) | |||||||||||||
Impairment of intangible assets | D.5. | (767) | 31 | (1,387) | ||||||||||||
Fair value remeasurement of contingent consideration liabilities | D.18. | 53 | (303) | 314 | ||||||||||||
Restructuring costs | D.27. | (795) | (404) | (303) | ||||||||||||
Other gains and losses, and litigation | D.28. | - | - | - | ||||||||||||
Operating income | 5,624 | 6,064 | 4,982 | |||||||||||||
Financial expenses | D.29. | (559) | (598) | (609) | ||||||||||||
Financial income | D.29. | 178 | 192 | 111 | ||||||||||||
Income before tax and associates and joint ventures | D.35.1. | 5,243 | 5,658 | 4,484 | ||||||||||||
Income tax expense | D.30. | (709) | (1,214) | (726) | ||||||||||||
Share of profit/(loss) of associates and joint ventures | D.31. | (22) | (52) | 39 | ||||||||||||
Net income excluding the held-for-exchange Animal Health business | 4,512 | 4,392 | 3,797 | |||||||||||||
Net income/(loss) of the held-for-exchange Animal Health business | D.36. | (124) | 117 | 77 | ||||||||||||
Net income | 4,388 | 4,509 | 3,874 | |||||||||||||
Net income attributable to non-controlling interests | D.32. | 101 | 119 | 158 | ||||||||||||
Net income attributable to equity holders of Sanofi | 4,287 | 4,390 | 3,716 | |||||||||||||
Average number of shares outstanding (million) | D.15.9. | 1,306.2 | 1,315.8 | 1,323.1 | ||||||||||||
Average number of shares outstanding after dilution (million) | D.15.9. | 1,320.7 | 1,331.1 | 1,339.1 | ||||||||||||
– Basic earnings per share (in euros) | 3.28 | 3.34 | 2.81 | |||||||||||||
– Basic earnings per share (in euros) excluding the held-for-exchange Animal Health business | 3.38 | 3.25 | 2.75 | |||||||||||||
– Diluted earnings per share (in euros) | 3.25 | 3.30 | 2.77 | |||||||||||||
– Diluted earnings per share (in euros) excluding the held-for-exchange Animal Health business | 3.34 | 3.21 | 2.72 |
The results of the Animal Health business are reported separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Notes D.2.1. and D.36. |
F- 6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
(€ million) | Note | 2015 | 2014 | 2013 | ||||||||||||
Net income | 4,388 | 4,509 | 3,874 | |||||||||||||
Attributable to equity holders of Sanofi | 4,287 | 4,390 | 3,716 | |||||||||||||
Attributable to non-controlling interests | 101 | 119 | 158 | |||||||||||||
Other comprehensive income: | ||||||||||||||||
· Actuarial gains/(losses) | D.15.7. | 652 | (869) | 810 | ||||||||||||
· Tax effects | D.15.7. | (187) | 303 | (152) | ||||||||||||
Sub-total: items not subsequently reclassifiable to profit or loss (a) | 465 | (566) | 658 | |||||||||||||
· Available-for-sale financial assets | (37) | (2,760) | 1,208 | |||||||||||||
· Cash flow hedges | (3) | - | (3) | |||||||||||||
· Change in currency translation differences | D.15.7. | 1,915 | 2,506 | (1,804) | ||||||||||||
· Tax effects | D.15.7. | 20 | 250 | (208) | ||||||||||||
Sub-total: items subsequently reclassifiable to profit or loss (b) | 1,895 | (4) | (807) | |||||||||||||
Other comprehensive income for the period, net of taxes (a+b) | 2,360 | (570) | (149) | |||||||||||||
Comprehensive income | 6,748 | 3,939 | 3,725 | |||||||||||||
Attributable to equity holders of Sanofi | 6,641 | 3,810 | 3,581 | |||||||||||||
Attributable to non-controlling interests | 107 | 129 | 144 |
F- 7
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
(€ million) | Share capital | Additional paid-in capital and retained earnings | Treasury shares | Stock options and other share-based payment | Other comprehensive income | Attributable to equity- holders of Sanofi | Non-controlling interests | Total equity | ||||||||||||||||||||||||
Balance at January 1, 2013 per the published financial statements | 2,653 | 52,916 | (207) | 2,160 | (170) | 57,352 | 134 | 57,486 | ||||||||||||||||||||||||
Other comprehensive income for the period | - | 658 | - | - | (793) | (135) | (14) | (149) | ||||||||||||||||||||||||
Net income for the period | - | 3,716 | - | - | - | 3,716 | 158 | 3,874 | ||||||||||||||||||||||||
Comprehensive income for the period | - | 4,374 | - | - | (793) | 3,581 | 144 | 3,725 | ||||||||||||||||||||||||
Dividend paid out of 2012 earnings (€2.77 per share) | - | (3,638) | - | - | - | (3,638) | - | (3,638) | ||||||||||||||||||||||||
Payment of dividends to non-controlling interests | - | - | - | - | - | - | (140) | (140) | ||||||||||||||||||||||||
Share repurchase program(1) | - | - | (1,641) | - | - | (1,641) | - | (1,641) | ||||||||||||||||||||||||
Reduction in share capital(1) | (42) | (1,560) | 1,602 | - | - | - | - | - | ||||||||||||||||||||||||
Share-based payment plans: | ||||||||||||||||||||||||||||||||
· Exercise of stock options(1) | 31 | 875 | - | - | - | 906 | - | 906 | ||||||||||||||||||||||||
· Issuance of restricted shares(1) | 4 | (4) | - | - | - | - | - | - | ||||||||||||||||||||||||
· Employee share ownership plans(1) | 3 | 95 | - | - | - | 98 | - | 98 | ||||||||||||||||||||||||
· Proceeds from sale of treasury shares on exercise of stock options | - | - | 2 | - | - | 2 | - | 2 | ||||||||||||||||||||||||
· Value of services obtained from employees | - | - | - | 200 | - | 200 | - | 200 | ||||||||||||||||||||||||
· Tax effects of the exercise of stock options | - | - | - | 30 | - | 30 | - | 30 | ||||||||||||||||||||||||
Changes in non-controlling interests without loss of control | - | 14 | - | - | - | 14 | (9) | 5 | ||||||||||||||||||||||||
Balance at December 31, 2013 | 2,649 | 53,072 | (244) | 2,390 | (963) | 56,904 | 129 | 57,033 | ||||||||||||||||||||||||
Other comprehensive income for the period | - | (566) | - | - | (14) | (580) | 10 | (570) | ||||||||||||||||||||||||
Net income for the period | - | 4,390 | - | - | - | 4,390 | 119 | 4,509 | ||||||||||||||||||||||||
Comprehensive income for the period | - | 3,824 | - | - | (14) | 3,810 | 129 | 3,939 | ||||||||||||||||||||||||
Dividend paid out of 2013 earnings (€2.80 per share) | - | (3,676) | - | - | - | (3,676) | - | (3,676) | ||||||||||||||||||||||||
Payment of dividends to non-controlling interests | - | - | - | - | - | - | (125) | (125) | ||||||||||||||||||||||||
Share repurchase program(1) | - | - | (1,801) | - | - | (1,801) | - | (1,801) | ||||||||||||||||||||||||
Reduction in share capital(1) | (36) | (1,314) | 1,350 | - | - | - | - | - | ||||||||||||||||||||||||
Share-based payment plans: | ||||||||||||||||||||||||||||||||
· Exercise of stock options(1) | 22 | 658 | - | - | - | 680 | - | 680 | ||||||||||||||||||||||||
· Issuance of restricted shares(1) | 4 | (4) | - | - | - | - | - | - | ||||||||||||||||||||||||
· Proceeds from sale of treasury shares on exercise of stock options | - | - | 1 | - | - | 1 | - | 1 | ||||||||||||||||||||||||
· Value of services obtained from employees | - | - | - | 202 | - | 202 | - | 202 | ||||||||||||||||||||||||
· Tax effects of the exercise of stock options | - | - | - | 7 | - | 7 | - | 7 | ||||||||||||||||||||||||
Change in non-controlling interests without loss of control | - | (7) | - | - | - | (7) | 15 | 8 | ||||||||||||||||||||||||
Balance at December 31, 2014 | 2,639 | 52,553 | (694) | 2,599 | (977) | 56,120 | 148 | 56,268 |
F- 8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) |
(€ million) | Share capital | Additional paid-in capital and retained earnings | Treasury shares | Stock options and other share-based payment | Other comprehensive income | Attributable to equity- holders of Sanofi | Non-controlling interests | Total equity | ||||||||||||||||||||||||
Balance at December 31, 2014 | 2,639 | 52,553 | (694) | 2,599 | (977) | 56,120 | 148 | 56,268 | ||||||||||||||||||||||||
Other comprehensive income for the period | - | 465 | - | - | 1,889 | 2,354 | 6 | 2,360 | ||||||||||||||||||||||||
Net income for the period | - | 4,287 | - | - | - | 4,287 | 101 | 4,388 | ||||||||||||||||||||||||
Comprehensive income for the period | - | 4,752 | - | - | 1,889 | 6,641 | 107 | 6,748 | ||||||||||||||||||||||||
Dividend paid out of 2014 earnings (€2.85 per share) | - | (3,694) | - | - | - | (3,694) | - | (3,694) | ||||||||||||||||||||||||
Payment of dividends to non-controlling interests | - | - | - | - | - | - | (110) | (110) | ||||||||||||||||||||||||
Share repurchase program(1) | - | - | (1,781) | - | - | (1,781) | - | (1,781) | ||||||||||||||||||||||||
Reduction in share capital(1) | (52) | (2,124) | 2,176 | - | - | - | - | - | ||||||||||||||||||||||||
Share-based payment plans: | ||||||||||||||||||||||||||||||||
· Exercise of stock options(1) | 18 | 555 | - | - | - | 573 | - | 573 | ||||||||||||||||||||||||
· Issuance of restricted shares(1) | 6 | (6) | - | - | - | - | - | - | ||||||||||||||||||||||||
· Proceeds from sale of treasury shares on exercise of stock options | - | - | 1 | - | - | 1 | - | 1 | ||||||||||||||||||||||||
· Value of services obtained from employees | - | - | - | 205 | - | 205 | - | 205 | ||||||||||||||||||||||||
· Tax effects of the exercise of stock options | - | - | - | 10 | - | 10 | - | 10 | ||||||||||||||||||||||||
Change in non-controlling interests without loss of control | - | (26) | - | - | - | (26) | 16 | (10) | ||||||||||||||||||||||||
Balance at December 31, 2015 | 2,611 | 52,010 | (298) | 2,814 | 912 | 58,049 | 161 | 58,210 |
(1) | See Notes D.15.1., D.15.3., D.15.4. and D.15.5. |
F- 9
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(€ million) | Note | 2015(1) | 2014(1) | 2013(1) | ||||||||||||
Net income attributable to equity holders of Sanofi | 4,287 | 4,390 | 3,716 | |||||||||||||
Net (income)/loss from the held-for-exchange Animal Health business | 124 | (117) | (77) | |||||||||||||
Non-controlling interests, excluding BMS(2) | D.32. | 7 | 10 | 17 | ||||||||||||
Share of undistributed earnings of associates and joint ventures | 115 | 142 | (2) | |||||||||||||
Depreciation, amortization and impairment of property, plant and equipment and intangible assets(3) | 4,276 | 3,280 | 5,095 | |||||||||||||
Gains and losses on disposals of non-current assets, net of tax(4) | (136) | (249) | (276) | |||||||||||||
Net change in deferred taxes | (1,253) | (1,151) | (901) | |||||||||||||
Net change in provisions(5) | (13) | (374) | (1,333) | |||||||||||||
Cost of employee benefits (stock options and other share-based payments) | D.15.2. - D.15.3. - D.15.8. | 193 | 192 | 192 | ||||||||||||
Impact of the workdown of acquired inventories remeasured at fair value | D.35.1. | - | - | 8 | ||||||||||||
Unrealized (gains)/losses recognized in income | (365) | 134 | (76) | |||||||||||||
Operating cash flow before changes in working capital and excluding the held-for-exchange Animal Health business | 7,235 | 6,257 | 6,363 | |||||||||||||
(Increase)/decrease in inventories | (466) | (8) | (48) | |||||||||||||
(Increase)/decrease in accounts receivable | (493) | (20) | 133 | |||||||||||||
Increase/(decrease) in accounts payable | 241 | 459 | (124) | |||||||||||||
Net change in other current assets, current financial assets and other current liabilities(6) | 1,773 | 477 | 234 | |||||||||||||
Net cash provided by/(used in) operating activities excluding the held-for-exchange Animal Health business | 8,290 | 7,165 | 6,558 | |||||||||||||
Net cash provided by/(used in) operating activities of the held-for-exchange Animal Health business(6) | 630 | 525 | 396 | |||||||||||||
Acquisitions of property, plant and equipment and intangible assets | D.3.-D.4. | (2,772) | (1,453) | (1,306) | ||||||||||||
Acquisitions of investments in consolidated undertakings, net of cash acquired(7) | D.1. - D.18. | (220) | (1,723) | (235) | ||||||||||||
Acquisitions of available-for-sale financial assets | D.7. | (142) | (571) | (18) | ||||||||||||
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax(8) | 211 | 262 | 408 | |||||||||||||
Net change in loans and other financial assets | (88) | 128 | (27) | |||||||||||||
Net cash provided by/(used in) investing activities excluding the held-for-exchange Animal Health business | (3,011) | (3,357) | (1,178) | |||||||||||||
Net cash provided by/(used in) investing activities of the held-for-exchange Animal Health business | (246) | (103) | (95) |
F- 10
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
(€ million) | Note | 2015(1) | 2014(1) | 2013(1) | ||||||||||||
Issuance of Sanofi shares | D.15.1. | 573 | 680 | 1,004 | ||||||||||||
Dividends paid: | ||||||||||||||||
· to shareholders of Sanofi | (3,694) | (3,676) | (3,638) | |||||||||||||
· to non-controlling interests, excluding BMS(2) | (12) | (10) | (12) | |||||||||||||
Transactionswith non-controlling interests, other than dividends | (8) | 2 | (40) | |||||||||||||
Additional long-term debt contracted | D.17. | 2,253 | 2,980 | 3,119 | ||||||||||||
Repayments of long-term debt | D.17. | (708) | (3,032) | (2,822) | ||||||||||||
Net change in short-term debt | (199) | (338) | 271 | |||||||||||||
Acquisition of treasury shares | D.15.4. | (1,784) | (1,801) | (1,641) | ||||||||||||
Disposals of treasury shares, net of tax | D.15. | 1 | 1 | 2 | ||||||||||||
Net cash provided by/(used in) financing activities excluding the held-for-exchange Animal Health business | (3,578) | (5,194) | (3,757) | |||||||||||||
Net cash provided by/(used in) financing activities of the held-for-exchange Animal Health business | (23) | 14 | 31 | |||||||||||||
Impact of exchange rates on cash and cash equivalents | (232) | 34 | (79) | |||||||||||||
Impact on cash and cash equivalents of the reclassification of the Animal Health business to “Assets held for sale or exchange” (9) | D.36. | (23) | - | - | ||||||||||||
Net change in cash and cash equivalents excluding the Animal Health business | 1,469 | (1,352) | 1,544 | |||||||||||||
Net change in cash and cash equivalents of the Animal Health business | 361 | 436 | 332 | |||||||||||||
Net change in cash and cash equivalents | 1,807 | (916) | 1,876 | |||||||||||||
Cash and cash equivalents, beginning of period | 7,341 | 8,257 | 6,381 | |||||||||||||
Cash and cash equivalents, end of period | D.13. | 9,148 | 7,341 | 8,257 |
(1) | Cash flows of the Animal Health business are presented separately in accordance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations). |
(2) | See Note C.2. |
(3) |
|
(4) | Includes available-for-sale financial assets. |
(5) | This line item includes contributions paid to pension funds (see Note D.19.1.). |
(6) | Including: |
– Income tax paid | (1,784) | (2,697) | (2,370) | |||||||||||
– Interest paid (excluding cash flows on derivative instruments used to hedge debt) | (415) | (445) | (491) | |||||||||||
– Interest received (excluding cash flows on derivative instruments used to hedge debt) | 58 | 68 | 49 | |||||||||||
– Dividends received from non-consolidated entities | 10 | 5 | 5 |
(7) | This line item includes payments made in respect of contingent consideration identified and recognized as a liability in business combinations. |
(8) | This line item includes proceeds from disposals of investments in consolidated entities and of other non-current financial assets. |
(9) | Cash and cash equivalents of | |||||||||||
| ||||||||||||
The accompanying notes on pages F-10 to F-122 are an integral part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
YEAR ENDED DECEMBER 31, 2015
Sanofi, together with its subsidiaries (collectively "Sanofi"“Sanofi” or "the Group"“the Group”), is a diversified global healthcare leader engaged in the research, development and marketing of therapeutic solutions focused on patient needs. Sanofi has fundamental strengths in the healthcare field, operating via seven growth platforms: Emerging Markets, Diabetes Solutions, Human Vaccines, Consumer Health Care (CHC), Animal Health, New Genzyme and Other Innovative Products. Sanofi, the parent company, is asociété anonyme (a form of limited liability company) incorporated under the laws of France. The registered office is at 54, rue La Boétie, 75008 Paris, France.
Sanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY).
The consolidated financial statements for the year ended December 31, 2012,2015, and the notes thereto, were adoptedsigned off by the Sanofi Board of Directors on February 6, 2013.8, 2016.
A. BASIS OF PREPARATION
A/ Basis of preparation
A.1. International Financial Reporting StandardsINTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The consolidated financial statements cover the twelve-month periods ended December 31, 2012, 20112015, 2014 and 2010.2013.
In accordance with Regulation No. 1606/2002 of the European Parliament and Council of July 19, 2002 on the application of international accounting standards, Sanofi has presented its consolidated financial statements in accordance with IFRS since January 1, 2005. The term "IFRS"“IFRS” refers collectively to international accounting and financial reporting standards (IASs and IFRSs) and to interpretations of the interpretations committees (SIC and IFRIC) with mandatory application as of December 31, 2012.2015.
The consolidated financial statements of Sanofi as of December 31, 20122015 have been prepared in compliance with IFRS as issued by the International Accounting Standards Board (IASB) and with IFRS as endorsed by the European Union as of December 31, 2012.2015.
IFRS as endorsed by the European Union as of December 31, 20122015 are available under the heading "IAS/IFRS Standards and Interpretations"“IFRS Financial Statements” via the following web link:
http://ec.europa.eu/internal_market/accounting/ias/index_en.htm
The consolidated financial statements have been prepared in accordance with the IFRS general principles of fair presentation, going concern, accrual basis of accounting, consistency of presentation, materiality, and aggregation.
New standards, amendments and interpretations applicable in 20122015 with an impact on the consolidated financial statements are described in Note A.2. For standards, amendments and interpretations issued by the IASB that do not have mandatory application in 2012,apply from 2016 onwards, refer to Note B.28.
A.2. New standards, amendments and interpretations applicable in 2012NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLICABLE IN 2015
TheThere are no new standards, amendments to standards, andor interpretations issued by the IASBapplicable with mandatory application for the Group aseffect from the 2012 fiscal2015 financial year are listed below. These pronouncementsthat have noan impact on the consolidated financial statements of the Group.
IFRIC 21 (Levies) has been endorsedapplied by the European Union. It is intended to provide better financial information about transfers of financial assets, in particular securitizations. The amendment does not alter the way securitizations are accounted for, but clarifies the disclosure requirements. The relevant disclosures relating to transfers of trade receivables are provided in Note D.10. to the consolidated financial statements.
Table of ContentsGroup since 2014.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A.3. Use of estimatesUSE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements requires management to make reasonable estimates and assumptions based on information available at the date of the finalization of the financial statements. TheseThose estimates and assumptions may affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and disclosures of contingent assets and contingent liabilities as atof the date of the review of the financial statements. Examples of estimates and assumptions include:
· | amounts deducted from sales for projected sales returns, chargeback incentives, rebates and price reductions (see Notes B.14. and D.23.); |
· | impairment of property, plant and equipment, intangible assets, and investments in associates and joint ventures (see Notes B.6. and D.5.); |
· | the valuation of goodwill and the valuation and useful life of acquired intangible assets (see Notes B.3., B.4.3., D.4. and D.5.); |
· | the amount ofpost-employment benefit obligations (see Notes B.23. and D.19.1.); |
· | the amount of provisions for restructuring, litigation, tax risks and environmental risks (see Notes B.12., B.22., D.19. and D.22.); |
· | the amount of deferred tax assets resulting from tax losses available forcarry-forward and deductible temporary differences (see Notes B.22. and D.14.); |
· | the measurement of contingent consideration (see Notes B.3. and D.18.); and |
· | which exchange rate to use at the end of the reporting period for the translation of accounts denominated in foreign currencies, and of financial statements of foreign subsidiaries, in cases where more than one exchange rate exists for a given currency (see Note A.4.). |
Actual results could differ from these estimates.
Management is also required to exercise judgment in assessing whether the criteria specified in IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations) are met, and hence whether a non-current asset or asset group should be classified as “held for sale or exchange” and whether a discontinued operation should be reported separately. Such assessments are reviewed at each reporting date based on the facts and circumstances.
F- 12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
A.4. CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION OF THE FINANCIAL STATEMENTS OF VENEZUELAN SUBSIDIARIES
In 2015, the Group continued to account for subsidiaries based in Venezuela using the full consolidation method, on the basis that the criteria for control as specified in IFRS 10 (Consolidated Financial Statements) are met.
As of December 31, 2015, the foreign exchange system consists of three exchange rates:
· | an official exchange rate remaining unchanged (the “CENCOEX” rate) at a fixed rate of 6.3 bolivars per U.S. dollar, which is restricted to essential goods; |
· | an administered exchange rate (the “SICAD” rate), which was 13.5 bolivars per U.S. dollar as of December 31, 2015 and is applied to certain specific business sectors; |
· | the “SIMADI” rate, of approximately 200 bolivars per U.S. dollar, which is applied to specified transactions. |
For the purposes of preparing the consolidated financial statements as of December 31, 2015, the financial statements of the Venezuelan subsidiaries were translated into euros using the “SICAD” official exchange rate, which is the estimated rate at which the profits generated by the operations of those subsidiaries will be remitted to the parent. This estimate reflects transactions carried out in the fourth quarter of 2015 that were translated into euros on the basis of a rate close to the “SICAD” rate. Previously, the Group used the official “CENCOEX” rate, which was the rate mainly applied early in 2015 to settle transactions with other consolidated Group entities.
In 2015, the Venezuelan subsidiaries contributed€455 million to consolidated net sales, including the restatement made in respect of the application of a general price index in accordance with IAS 29. The net cash position as of December 31, 2015 was€95 million, of which€90 million was subject to exchange controls compared with€242 million as of December 31, 2014 (see Note D.13.). The net foreign exchange loss recognized in 2015 was€240 million. That loss arose mainly on the settlement and remeasurement of foreign currency liabilities of the Venezuelan subsidiaries.
The Group continues to be exposed to a risk of devaluation of the Venezuelan bolivar. The table below shows, for information purposes, the amounts that would have been reported for consolidated net sales and the net cash position if the “SIMADI” rate had been applied in translating the local financial statements for the purpose of preparing the consolidated financial statements:
Estimated amounts in millions of euros based on an application of “SIMADI” exchange rate (200 bolivars per U.S. dollar) | 2015 | |||
Contribution to consolidated net sales | 37 | |||
Cash | 11 |
In February 2016, the Venezuelan government announced changes to the foreign exchange system, which now consists of only two categories:
· | essential goods, involving an exchange rate of one U.S. dollar for 10 bolivars (as opposed to 6.3 previously); |
· | all other transactions, for which a floating exchange rate between the U.S. dollar and the bolivar will apply (as opposed to the fixed rate of 200 bolivars per U.S. dollar previously applied). |
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
B/ Summary of significant accounting policies
B.1. Basis of consolidationBASIS OF CONSOLIDATION
In accordance with IAS 27IFRS 10 (Consolidated and Separate Financial Statements), the consolidated financial statements of Sanofi include the accountsfinancial statements of the Sanofi parent company and those of its subsidiaries, using the full consolidation method. Subsidiaries are entities whichthat the Group controls (i.e. itdirectly or indirectly, regardless of the level of the Group’s equity interest in the entity. An entity is controlled when the Group has power over the entity, exposure or rights to variable returns from its involvement with the entity, and the ability to affect those returns through its power to govern their financial and operating activities). The existence of effectively exercisable or convertibleover the entity. In determining whether control exists, potential voting rights ismust be taken into account if those rights are substantive, in determining whether control exists. Control is presumed to exist whereother words they can be exercised on a timely basis when decisions about the Group holds more than 50% of an entity's voting rights.
Equity interests in entities are consolidated from the date on which exclusive controlrelevant activities of the entity is obtained; divested equity interests are deconsolidated onto be taken.
Entities consolidated by the date on which exclusive control ceases. The Group's share of post-acquisition profits or losses is takenGroup are referred to as “subsidiaries”. Entities that the income statement, while post-acquisition movementsGroup controls by means other than voting rights are referred to as “consolidated structured entities”.
In accordance with IFRS 11 (Joint Arrangements), Sanofi classifies its joint arrangements (i.e. arrangements in the acquiree's reserves are taken to consolidated reserves.
Entities over which Sanofi exercises joint control are knownwith one or more other parties) either as "joint ventures"a joint operation or a joint venture. In the case of a joint operation, Sanofi recognizes the assets and are accounted for usingliabilities of the equity methodoperation in accordance with the option in IAS 31 (Interests inproportion to its rights and obligations relating to those assets and liabilities. Joint Ventures).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Entities over which Sanofi exercises significant influenceventures are accounted for by the equity method in accordancemethod.
F- 13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Sanofi exercises joint control over a joint arrangement when decisions relating to the relevant activities of the arrangement require the unanimous consent of Sanofi and the other parties with IAS 28 (Investments in Associates). Significantwhom control is shared.
Sanofi exercises significant influence exists where Sanofiover an entity when it has the power to participate in the financial and operating policy decisions of the investee,that entity, but withoutdoes not have the power to exercise control or joint control over those policies. Significant influence
In accordance with IAS 28 (Investments in Associates and Joint Ventures), the equity method is presumedused to exist whereaccount for joint ventures (i.e. entities over which Sanofi exercises joint control) and for associates (i.e. entities over which Sanofi exercises significant influence).
Under the Group owns, directly or indirectly via its subsidiaries, between 20%equity method, the investment is initially recognized at cost, and 50%subsequently adjusted to reflect changes to the net assets of the voting rightsassociate or joint venture. IAS 28 does not specify the treatment to be adopted onfirst-time application of the investee.
Acquisition-related costs are included asequity method to an investee following a componentstep acquisition. Consequently, by reference to paragraph 10 of IAS 28, Sanofi has opted to apply the cost method, whereby the carrying amount of the investment represents the sum of the historical cost amounts for each step in the acquisition. As of acquiringthe date on which the equity method was first applied, goodwill (which is included in the carrying amount of the investment) is determined for each acquisition step. The same applies to subsequent increases in the percentage interest in the associate or joint ventures and associates.venture.
Material transactions between consolidated companies are eliminated, as are intragroup profits.
A list of the principal companies included in the consolidation as of December 31, 2015 is presented in Note F to the consolidated financial statements.
B.2. Foreign currency translationFOREIGN CURRENCY TRANSLATION
B.2.1. Accounting for foreign currency transactions in foreign currencies in individual company accountsthe financial statements of consolidated entities
Non-current assets (other than receivables) and inventories acquired in foreign currencies are translated into the functional currency using the exchange rate prevailing at the acquisition date.
Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.end of the reporting period. The resulting gains and losses resulting from foreign currency translation are recorded in the income statement. However, foreign exchange gains and losses arising from the translation of advances between consolidated subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are recognized directly in equity, in the line itemCurrencyChange in currency translation difference.
B.2.2. Foreign currency translation of the financial statements of foreign subsidiariesentities
Sanofi presents its consolidated financial statements in euros (€(€).
In accordance with IAS 21 (The Effects of Changes in Foreign Exchange Rates), each Group subsidiary translates foreign currencyaccounts for its transactions intoin the currency that is most representative of its economic environment (the functional currency).
All assets and liabilities are translated into euros using the exchange rate of the subsidiary'ssubsidiary’s functional currency prevailing at the balance sheet date.end of the reporting period. Income statements are translated using a weighted average exchange rate for the period.period, except in the case of foreign subsidiaries in a hyperinflationary economy. The resulting currency translation difference is recognized as a separate component of equity in the consolidated statement of comprehensive income, and is recognized in the income statement only when the subsidiary is sold or is wholly or partially liquidated.
Under the exemptions allowed by IFRS 1, the Sanofi Group elected to eliminate, through equity, all currency translation differences for foreign operations at the January 1, 2004 IFRS transition date.
B.3. Business combinations and transactions with non-controlling interestsBUSINESS COMBINATIONS AND TRANSACTIONS WITHNON-CONTROLLING INTERESTS
B.3.1. Accounting for business combinations, transactions withnon-controlling interests and loss of control
Business combinations are accounted for in accordance with IFRS 3 (Business Combinations) and IFRS 10 (Consolidated Financial Statements).
Business combinations are accounted for using the acquisition method. Under this method, the acquiree'sacquiree’s identifiable assets and liabilities that satisfy the recognition criteria of IFRS 3 (Business Combinations) are measured initially at their fair values as atof the date of acquisition, except for(i) non-current assets classified as held for sale (which are measured at fair value less costs to sell) and (ii) assets and liabilities that fall within the scope of IAS 12 (Income Taxes) and IAS 19 (Employee Benefits). Restructuring liabilities are recognized as a liability of the acquiree only if the acquiree has an obligation as of the acquisition date to carry out the restructuring.
Business combinations completed on or after January 1, 2010 are accounted for in accordance with the revised IFRS 3 (Business Combinations) and the amended IAS 27 (Consolidated and Separate Financial Statements). These revised standards are applied prospectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The principal accounting rules applicable to business combinations and transactions withnon-controlling interests include:
· | acquisition-related costs are recognized as an expense on the acquisition date, as a component ofOperating income; |
· | contingent consideration is recognized in equity if the contingent payment is settled by delivery of a fixed number of the acquirer’s equity instruments; otherwise, it is recognized in Liabilities related to business combinations. Contingent consideration is recognized at |
Operating incomeF- 14
.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Under the exemptions allowed by IFRS 1, the Sanofi Group elected not to restate in accordance with IFRS 3 any business combinations completed prior to the January 1, 2004 transition date. This includes the combination between Sanofi and Synthélabo that took place in 1999.
fair value at the acquisition date irrespective of the probability of payment. If the contingent consideration was originally recognized as a liability, subsequent adjustments to the liability are recognized in profit or loss in the line itemFair value remeasurement of contingent consideration liabilities, unless the adjustment is made within the twelve months following the acquisition date and relates to facts and circumstances existing as of that date. Subsequent contingent consideration adjustments in respect of business combinations completed before January 1, 2010 continue to be accounted for in accordance with thepre-revision IFRS 3 (i.e. through goodwill); |
· | in the case of a step acquisition, thepreviously-held equity interest is remeasured at itsacquisition-date fair value. The difference between this fair value and the carrying amount is recorded in profit or loss, along with any gains or losses relating to thepreviously-held interest that were recognized in other comprehensive income and are reclassifiable to profit or loss; |
· | goodwill may be calculated on the basis of either (i) the entire fair value of the acquiree, or (ii) a share of the fair value of the acquiree proportionate to the interest acquired. This option may be elected for each acquisition individually; |
· | the effects of (i) a buyout ofnon-controlling interests in a subsidiary already controlled by the Group, and (ii) a decrease of a percentage interest without loss of control, are recognized in equity; |
· | in a partial disposal resulting in loss of control, the retained equity interest is remeasured at fair value at the date of loss of control. The gain or loss recognized on the disposal includes the effect of that remeasurement, and items that were initially recognized in equity and are required to be reclassified to profit or loss; |
· | adjustments to the values of assets and liabilities initially determined provisionally (pending the results of independent valuations or further analysis) are recognized as a retrospective adjustment to goodwill if they are made within twelve months of the acquisition date. Once thistwelve-month period has elapsed, the effects of any adjustments are recognized directly in profit or loss, unless they qualify as an error correction. |
Purchase price allocations are performed under the responsibility of management, with assistance from an independent valuer in the case of major acquisitions. The revised IFRS 3 does not specify an accounting treatment for contingent consideration arising from a business combination made by an entity prior to the acquisition of control in that entity and carried as a liability in the acquired entity'sentity’s balance sheet. The accounting treatment applied by the Group to such a liability is to measure it at fair value as of the acquisition date and to report it in the line itemlines items
Liabilities related to business combinations and tonon-controlling interests. interests, with subsequent remeasurements recognized in profit or loss. This treatment is consistent with thatthe accounting applied to contingent consideration in the books of the acquirer.
B.3.2. Goodwill
The excess of the cost of an acquisition over the Group'sGroup’s interest in the fair value of the identifiable assets and liabilities of the acquiree is recognized as goodwill at the date of the business combination.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Goodwill arising on the acquisition of subsidiaries is shown as a separate line inon the balance sheet in intangible assets underGoodwill, whereas goodwill arising on the acquisition of associates and joint ventures is recorded inInvestments in associates and joint ventures.
Goodwill arising on the acquisition of foreign entities is measured in the functional currency of the acquired entity and translated into euros using the exchange rate prevailing at the balance sheet date.end of the reporting period.
In accordance with IAS 36 (Impairment of Assets), goodwill is carried at cost less accumulated impairment (see Note B.6.).
Goodwill is tested for impairment annually for eachcash-generating unit (CGU) and whenever events or circumstances indicate that impairment might exist. Such events or circumstances include significant changes liablemore likely than not to have another-than-temporary impact on the substance of the original investment.
B.4. Other intangible assetsOTHER INTANGIBLE ASSETS
Other intangible assets are initially measured at acquisition cost or production cost, including any directly attributable costs of preparing the asset for its intended use, or (in the case of assets acquired in a business combination) at fair value as atof the date of the business combination. TheyIntangible assets are amortized on a straight line basis over their useful lives.
The useful lives of other intangible assets are reviewed at the end of each reporting date.period. The effect of any adjustment to useful lives is recognized prospectively as a change ofin accounting estimate.
Amortization of other intangible assets is recognized in the income statement underwithinAmortization of intangible assets except for amortization charged against (i) acquired orinternally-developed with the exception software and (ii) other rights of amortization of acquiredan industrial or internally-developed software,operational nature, which is recognized onin the relevant lineclassification of the income statement according to the purpose for which the software is used.expense by function.
The Group does not own any other intangible assets with an indefinite useful life.
Intangible assets (other than goodwill) are carried at cost less accumulated amortization and accumulated impairment, if any, in accordance with IAS 36 (see Note B.6.).
F- 15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
B.4.1. Research and development not acquired in a business combination
Internally generated research and development
In accordance with IAS 38 (Intangible Assets), internally generated research expenditure is expensed as incurred underResearch and development expenses.
Under IAS 38, internallyresearch expenses are recognized in profit or loss when incurred.
Internally generated development expenses are recognized as an intangible asset if, and only if, all the following six criteria can be demonstrated: (a) the technical feasibility of completing the development project; (b) the Group'sGroup’s intention to complete the project; (c) the Group'sGroup’s ability to use the project; (d) the probability that the project will generate future economic benefits; (e) the availability of adequate technical, financial and other resources to complete the project; and (f) the ability to measure the development expenditure reliably.
Due to the risks and uncertainties relating to regulatory approval and to the research and development process, the six criteria for capitalization are usually considered not to have been met until the product has obtained marketing approval has been obtained from the regulatory authorities. Consequently, internally generated development expenses arising before marketing approval has been obtained, mainly the cost of clinical trials, are generally expensed as incurred underwithinResearch and development expenses.
ChemicalSome industrial development expenses (such as those incurred to developin developing asecond-generation process synthesis process) are incurred after initial regulatorymarketing approval has been obtained, in order to improve the industrial process for an active
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
ingredient. To the extent that the six IAS 38 criteria are considered as beinghaving been met, thesesuch expenses are capitalized underrecognized as an asset on the balance sheet withinOther intangible assets as incurred. Similarly, some clinical trials, for example those undertaken to obtain a geographical extension for a molecule that has already obtained marketing approval in a major market, may in certain circumstances meet the six capitalization criteria under IAS 38, in which case the related expenses are recognized as an asset on the balance sheet withinOther intangible assets.
Separately acquired research and development
Payments for separately acquired research and development are capitalized underwithinOther intangible assets provided that they meet the definition of an intangible asset: a resource that is (i) controlled by the Group, (ii) expected to provide future economic benefits for the Group, and (iii) identifiable (i.e. it is either separable or arises from contractual or legal rights). Under paragraph 25 of IAS 38, the first condition for capitalization (the probability that the expected future economic benefits from the asset will flow to the entity) is considered to be satisfied for separately acquired research and development. Because the amount of the payments is determinable, the second condition for
capitalization (the cost can be measured reliably) is also met. Consequently, upfront and milestone payments to third parties related to pharmaceutical products for which regulatory marketing approval has not yet been obtained are recognized as intangible assets, and amortized on a straight line basis over their useful lives from the date on whichbeginning when regulatory approval is obtained.
Payments under research and development arrangements relating to access to technology or to databases and payments made to purchase generics files are also capitalized, and amortized over the useful life of the intangible asset.
Subcontracting arrangements, payments for research and development services, and continuous payments under research and development collaborations thatwhich are unrelated to the outcome of the research and development efforts,that collaboration, are expensed over the service term.
B.4.2. IntangibleOther intangible assets not acquired in a business combination
Licenses other than those related to pharmaceutical products and research projects, in particular software licenses, are capitalized at acquisition cost, including any directly attributable cost of preparing the software for its intended use. Software licenses are amortized on a straight line basis over their useful lives for the Group (three to five years).
Internally generated costs incurred to develop or upgrade software are capitalized if the IAS 38 criteria for recognition as an intangible assetcriteria are satisfied, and amortized on a straight line basis over the useful life of the software from the date on which the software is ready for use.
B.4.3. IntangibleOther intangible assets acquired in a business combination
IntangibleOther intangible assets acquired in a business combination which relate toin-process research and development and currently marketed products and are reliably measurable are identified separately from goodwill, measured at fair value and capitalized inwithinOther intangible assets in accordance with IFRS 3 (Business Combinations) and IAS 38 (Intangible Assets). The related deferred tax liability is also recognized.recognized if a deductible or taxable temporary difference exists.
In-process research and development acquired in a business combination is amortized on a straight line basis over its useful life from the date of receipt of regulatory approval.
Rights to products currently marketed by the Group are amortized on a straight line basis over their useful lives, determined based on the basis of cash flow forecasts thatwhich take into account of, among other factors, the patent protection period of legal protection of the related patents.marketed product.
F- 16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
B.5. Property, plant and equipmentPROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is initially measured and recognized at acquisition cost, including any directly attributable cost of preparing the asset for its intended use, or (in the case of assets acquired in a business combination) at fair value as atof the date of the business combination. Thecomponent-based approach to accounting for property, plant and equipment is applied. Under this approach, each component of an item of property, plant and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equipment with a cost which is significant in relation to the total cost of the item and which has a different useful life from the other components must be depreciated separately.
After initial measurement, property, plant and equipment is carried at cost less accumulated depreciation and impairment, except for land which is carried at cost less impairment.
Subsequent costs are not recognized as assets unless (i) it is probable that future economic benefits associated with thesethose costs will flow to the Group and (ii) the costs can be measured reliably.
Day-to-day maintenance costs of property, plant and equipment are expensed as incurred.
Borrowing costs attributable to the financing of items of property, plant and equipment, and incurred during the construction period, of such items, are capitalized as part of the acquisition cost of the item.
Government grants relating to non-current assetsproperty, plant and equipment are deducted from the acquisition cost of the asset to which they relate.
In accordance with IAS 17 (Leases), items of property, plant and equipment leased by Sanofi as lessee under finance leases are recognized as an asset inon the balance sheet, with the related lease obligation recognized as a liability. A lease qualifies as a finance lease if it transfers substantially all of the risks and rewards of ownership of the asset to the Group. Assets held under finance leases are carried at the lower of the fair value of the leased asset or the present value of the minimum lease payments, and are depreciated over the shorter of the useful life of the asset or the term of the lease.
The depreciable amount of items of property, plant and equipment, net of any residual value, is depreciated on a straight line basis over the useful life of the asset. The useful life of an asset is usually equivalent to its economic life.
The useful lives of property, plant and equipment are as follows:
Buildings | 15 to 40 years | |||
Fixtures | 10 to 20 years | |||
Plant and equipment | 5 to 15 years | |||
Other property, plant and equipment | 3 to 15 years |
Useful lives and residual values of property, plant and equipment are reviewed annually. The effect of any adjustment to useful lives or residual values is recognized prospectively as a change ofin accounting estimate.
Depreciation of property, plant and equipment is recognized as an expense in the income statement, in the relevant classification of expense by function.
B.6. Impairment of property, plant and equipment, intangible assets, and investments in associates and joint venturesIMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS, AND INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
B.6.1. Impairment of property, plant and equipment and intangible assets
Assets
In accordance with IAS 36 (Impairment of Assets), assets that generate separate cash flows and assets included incash-generating units (CGUs) are assessed for impairment in accordance with IAS 36 (Impairment of Assets), when events or changes in circumstances indicate that the asset or CGU may be impaired.
A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Under IAS 36, each CGU to which goodwill is allocated must (i) represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, and (ii) not be larger than an operating segment determined in accordance with IFRS 8 (Operating Segments), before application of the IFRS 8 aggregation criteria.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consequently, the CGUs used by the Group to test goodwill for impairment correspond to the geographicalsub-segments of each operating segment.
Quantitative and qualitative indications of impairment (primarily relating to the status of the research and development portfolio, pharmacovigilance, patent litigation, and the launch of competing products) are reviewed at the end of each reporting date.period. If there is any internal or external indication of impairment, the Group estimates the recoverable amount of the asset or CGU.
IntangibleOther intangible assets not yet available for use (such as capitalizedin-process research and development), and CGUs that include goodwill, are tested for impairment annually whether or not there is any indication of impairment, and more frequently if any event or circumstance indicates that they might be impaired. TheseSuch assets are not amortized.
When there is an internal or external indication of impairment, the Group estimates the recoverable amount of the asset and recognizes an impairment loss if the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of the asset is the higher of its fair value less costs to sell or its value in use. To determine the value in use, the Group uses estimates of future cash flows generated by the asset or CGU, prepared using the same methods as those used in the initial measurement of the asset or CGU on the basis ofmedium-term plans.
F- 17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In the case of goodwill, estimates of future cash flows are based on a five-yearmedium-term strategic plan, plus an extrapolation of the cash flows beyond the five-year plan, plusand a terminal value. In the case of other intangible assets, the period used is based on the economic life of the asset.
Estimated cash flows are discounted atlong-term market interest rates that reflect the best estimate by Sanofi of the time value of money, the risks specific to the asset or CGU, and economic conditions in the geographical regions in which the business activity associated with the asset or CGU is located.
Certain assets and liabilities that are not directly attributable to a specific CGU are allocated between CGUs on a basis that is reasonable, and consistent with the allocation of the corresponding goodwill.
Impairment losses arising on property, plant and equipment, on software and on intangible assets of an industrial or operational nature are recognized in the relevant classification of expense by function.
Impairment losses arising on other intangible assets are recognized underwithinImpairment of intangible assets in on the income statement.
B.6.2. Impairment of investments in associates and joint ventures
In accordance with IAS 28 (Investments in Associates), the Group applies the criteria specified in IAS 39 (Financial Instruments: Recognition and Measurement) to determine whether an investment in an associate or joint venture may be impaired (see Note B.8.2.). If an investment is impaired, the amount of the impairment loss is determined by applying IAS 36 (see Note B.6.1.) and recognized inShare of profit/loss(loss) of associates and joint ventures.
B.6.3. Reversals of impairment losses charged against property, plant and equipment, intangible assets, and investments in associates and joint ventures
At the end of each reporting date,period, the Group assesses ifwhether events or changes in circumstances indicate that an impairment loss recognized in a prior period in respect of an asset (other than goodwill) or an investment in an associate or joint venture can be reversed. If this is the case, and the recoverable amount as determined based on the new estimates exceeds the carrying amount of the asset, the Group reverses the impairment loss only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset.
Reversals of impairment losses in respect of other intangible assets are recognized in the income statement line itemImpairment of intangible assets, while reversals of impairment losses in respect of investments in associates and joint ventures are recognized in the income statement line itemShare of profit/loss(loss) of associates and jointventures. Impairment losses taken against goodwill are never reversed, unless the goodwill is part of the carrying amount of an investment in an associate or joint venture.
Table of ContentsB.7. ASSETS HELD FOR SALE OR EXCHANGE AND LIABILITIES RELATED TO ASSETS HELD FOR SALE OR EXCHANGE
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.7. Assets held for sale or exchange
In accordance with IFRS 5 (Non-Current(Non-Current Assets Held for Sale and Discontinued Operations),non-current assets and groups of assets must beare classified as held for sale in the balance sheet if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Within the meaning of IFRS 5, the term "sale"“sale” also includes exchanges for other assets.
Non-current assets or asset groups held for sale must be available for immediate sale in their present condition, subject only to terms that are usual and customary for sales of such assets, and a sale must be highly probable. Criteria used to determine whether a sale is highly probable include:
· | the appropriate level of management must be committed to a plan to sell; |
· | an active program to locate a buyer and complete the plan must have been initiated; |
· | the asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value; |
· | completion of the sale should be foreseeable within the twelve months following the date of reclassification as held for sale or exchange; |
· | and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. |
Before initial reclassification of management must be committed to a plan to sell;thenon-current
Before the initial classification of the non-current asset (or asset group) as "held“held for sale or exchange"exchange”, the carrying amounts of the asset (or of all the assets and liabilities in the asset group) must be measured in accordance with the applicable standards.
Subsequent to classificationreclassification as "held“held for sale or exchange"exchange”, thenon-current asset (or asset group) is measured at the lower of carrying amount or fair value less costs to sell, with anywrite-down recognized by means of an impairment loss. Once anon-current asset has been classifiedreclassified as "held“held for sale or exchange"exchange”, it is no longer depreciated or amortized.
F- 18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In a disposal of an equity interest leading to loss of control, all the assets and liabilities of the entity involved are classified as “held for sale” assets or liabilities "held for sale" inwithin the balance sheet line itemsAssets held for sale or exchange orLiabilities related to assets held for sale or exchange, provided that the disposal satisfies the IFRS 5 classification criteria.
The profit or loss generated by a held for sale asset group is reported on a separate line in the income statement for the current period and for the comparative periods presented, provided that the asset group:
· | represents a separate major line of business or geographical area of operations; or, |
· | is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or, |
· | is a subsidiary acquired exclusively with a view to resale. |
Events or circumstances beyond the Group'sGroup’s control may extend the period to complete the sale or exchange beyond one year without precluding classification of the asset (or disposal group) inAssets held for sale or exchange provided that there is sufficient evidence that the Group remains committed to the planned sale or exchange.
Finally, in the event of changes to a plan of sale that require an asset no longer to be classified as held for sale, IFRS 5 specifies the following treatment:
· | the assets and liabilities previously classified as held for sale are reclassified to the appropriate balance sheet line items, with no restatement of comparative periods; |
· | each asset is measured at the lower of (a) its carrying amount before the asset was reclassified as held for sale, adjusted for any depreciation, amortization or revaluation that would have been recognized if the asset had not been reclassified as held for sale, or (b) its recoverable amount at the date of the reclassification; |
· | the backlog of depreciation, amortization and impairment not recognized whilenon-current assets were classified as held for sale must be reported in the same income statement line item that was used to report impairment losses arising on initial reclassification of assets as held for sale and gains or losses arising on the sale of such assets. In the consolidated income statement, these impacts are reported in the line itemOther gains and losses, and litigation; |
· | the net income of a business previously classified as discontinued or held for exchange and reported on a separate line in the income statement must be reclassified and included in net income from continuing operations, for all periods presented; |
· | in addition, segment information relating to the income statement and the statement of cash flows (acquisitions of |
non-current assets) must be disclosed in the notes to the financial statements in accordance with IFRS 8 (Operating Segments), and must also be restated for all prior periods presented. |
Table of ContentsB.8. FINANCIAL INSTRUMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)B.8.1.Non-derivative
B.8. Financial instruments
B.8.1. Non-derivative financial assets
Under IFRS, and in
In accordance with IAS 39 (Financial Instruments: Recognition and Measurement) and IAS 32 (Financial Instruments: Presentation), Sanofi has adopted the following classification fornon-derivative financial assets, based on the type of asset and on management intentintention at the date of initial recognition (except for assets already held at the transition date and reclassified at that date in accordance with IFRS 1).recognition. The designation and classification of such financial assets are subsequently reassessed at the end of each reporting date.period.
Non-derivative financial assets are recognized on the date when Sanofi becomes party to the contractual terms of the asset. On initial recognition, financial assets are measured at fair value, plus direct transaction costs in the case of financial assets not designatedclassified as fair value through profit or loss.
Classification, presentation and subsequent measurement ofnon-derivative financial assets are as follows:
Financial assets at fair value through profit or loss
These assets are classified inon the balance sheet in the line itemsNon-current financialOthernon-current assets,Current financial assets andCash and cash equivalents.equivalents.
Financial assets at fair value through profit or loss comprise assets held for trading (financial assets acquired principally for the purpose of reselling them in the near term, usually within less than 12 months), and financial instruments designated as fair value through profit and loss on initial recognition in accordance with the conditions for application of the fair value option.
TheseSuch financial assets are carried at fair value without any deduction for transaction costs that may be incurred on sale. Realized and unrealized gains and losses resulting from changes in the fair value of these assets are recognized in the income statement, inFinancial income orFinancial expenses.
Realized and unrealized foreign exchange gains and losses on financial assets in currencies other than the euro are recognized in the income statement inFinancial income orFinancial expenses.
Available-for-sale financial assets
Available-for-sale financial assets arenon-derivative financial assets that are (i) designated by management asavailable-for-sale or (ii) not classified as "financial“financial assets at fair value through profit or loss"loss”, "held-to-maturity investments" or "loans and receivables". This category includes participating
Table of Contents“held-to-maturity
F- 19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—STATEMENTS – (Continued)
investments” or “loans and receivables”. This category includes equity interests in quoted or unquoted companies (otherother than investments in associates and joint ventures) that management intends to hold on a long-term basis. ventures.Available-for-sale financial assets are classified inNon-current financial assets.Othernon-current assets.
Available-for-sale financial assets are measured at fair value without any deduction for transaction costs that may be incurred on sale. Gains and losses arising from changes in the fair value of these assets, including unrealized foreign exchange gains and losses, are recognized directly in equity in the consolidated statement of comprehensive income in the period in which they occur, except for impairment losses and foreign exchange gains and losses on debt instruments. On derecognition of anavailable-for-sale financial asset, or on recognition of an impairment loss on such an asset, the cumulative gains and losses previously recognized in equity are recognized in the income statement for the period underwithinFinancial income orFinancial expenses.expenses.
Interest income and dividends on equity instruments are recognized in the income statement underwithinFinancial income when the Group is entitled to receive payment.
Available-for-sale financial assets in the form of participatingequity interests in companies not quoted in an active market are measured at cost if their fair value cannot be measured reliably; an impairment loss is recognized when there is objective evidence that such an asset is impaired.
Realized foreign exchange gains and losses are recognized in the income statement underHeld-to-maturityFinancial income orFinancial expenses. investments
Held-to-maturity investments
Held-to-maturity investments arenon-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity.
TheseSuch investments are measured at amortized cost using the effective interest method.
Sanofi did not hold any such investments during the years ended December 31, 2012, 20112015, 2014 or 2010.2013.
Loans and receivables
Loans and receivables arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented in current assets, underwithinOther current assets in the case of loans and underAccounts receivable in the case of trade receivables. Loans with a maturity of more than 12 months are presented in "Long-term“Long-term loans and advances" underadvances” withinNon-currentOthernon-current assets. Those financial assets. Loans and receivables are measured at amortized cost using the effective interest method.
Realized and unrealized foreign exchange gains and losses are recognized in the income statement underFinancial income orFinancial expenses.
B.8.2. Impairment ofnon-derivative financial assets
Indicators of impairment are reviewed for allnon-derivative financial assets at the end of each reporting date.period. Such indicators include default in contractual payments, significant financial difficulties of the issuer or debtor, probability of
bankruptcy, or a prolonged or significant decline in quoted market price. An impairment loss is recognized in the income statement if there is objective evidence of impairment resulting from one or more events after the initial recognition of the asset (a "loss event"“loss event”) and thisthat loss event has a reliably measurable impact on the estimated future cash flows of the financial asset (or group of financial assets).
The impairment loss on loans and receivables, which are measured at amortized cost, is the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the financial asset'sasset’s original effective interest rate.
When an impairment loss is identified on anavailable-for-sale financial asset, the cumulative losses previously recognized directly in equity are recorded in the income statement. The loss recognized in the income
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
statement is the difference between the acquisition cost (net of principal repayments and amortization) and the fair value at the time of impairment, less any impairment loss previously recognized in the income statement.
The impairment loss on investments in companies not quoted in an active market and measured at cost is the difference between the carrying amount of the investment and the present value of its estimated future cash flows, discounted at the current market interest rate for similar financial assets.
Impairment losses in respect of loans are recognized underwithinFinancial expenses in the income statement.
Impairment losses in respect of trade receivables are recognized underwithinSelling and general expenses in the income statement.
Impairment losses on investments in companies that are not quoted in an active market and are measured at cost, and on equity instruments classified asavailable-for-sale financial assets, cannot be reversed through the income statement.
B.8.3. Derivative instruments
Derivative instruments that do not qualify for hedge accounting are initially and subsequently measured at fair value, with changes in fair value recognized inon the income statement inOther operating income or inFinancial income orFinancial expenses, depending on the nature of the underlying economic item which they are intended to hedge.is hedged.
Derivative instruments that qualify for hedge accounting are measured in accordance with the hedge accounting requirements of IAS 39 (see Note B.8.4.).
IFRS 13 (Fair Value Measurement) requires counterparty credit risk to be taken into account when measuring the fair value of financial instruments. This risk is estimated on the basis of observable,publicly-available statistical data.
F- 20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Policy on offsetting
In order for a financial asset and a financial liability to be presented as a net amount on the balance sheet under IAS 32, there must be (a) a legally enforceable right to offset and (b) the intention either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
In addition, IFRS 7 (Financial Instruments: Disclosures) requires the notes to the financial statements to include a schedule showing a list of any offsets recognized under IAS 32 and of transactions for which only criterion (a) is met, i.e. potential offsets such as those specified in close out netting agreements (positions offset only in the event of default, as specified in the International Swaps and Derivatives Association (ISDA)).
B.8.4. Hedging
Hedging involves the use of derivative financial instruments. Changes in the fair value of thesesuch instruments are intended to offset the exposure of the hedged items to changes in fair value.
As part of its overall interest rate risk and foreign exchange risk management policy, the Group enters into various transactions involving derivative instruments. Derivative instruments used in connection with the Group'sGroup’s hedging policy may include forward exchange contracts, currency options, interest rate swaps and interest rate options.
Derivative financial instruments qualify as hedging instruments for hedge accounting purposes when (a) at the inception of the hedge there is formal designation and documentation of the hedging relationship and of the risk management strategy and objective; (b) the hedge is expected by management to be highly effective in offsetting the risk; (c) the forecast transaction being hedged is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss; (d) the effectiveness of the hedge can be reliably measured; and (e) the effectiveness of the hedge is assessed on an ongoing basis and the hedge is determined actually to have been highly effective throughout the reporting periods for which the hedge was designated.
TheseThose criteria are applied when the Group uses derivative instruments designated as a fair value hedge, a cash flow hedge or a hedge of a net investment in a foreign operation.
Fair value hedge
A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or unrecognized firm commitment that could affect profit or loss.
Changes in fair value of the hedging instrument and changes in fair value of the hedged item attributable to the hedged
risk are recognized in the income statement, underwithinOther operating income for hedges of operating activities, and underwithinFinancial income orFinancial expenses for hedges of investing or financing activities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecast transaction, which could affect profit or loss.
Changes in fair value of the hedging instrument attributable to the effective portion of the hedge are recognized directly in equity in the consolidated statement of comprehensive income. Changes in fair value attributable to the ineffective portion of the hedge are recognized in the income statement underwithinOther operating income for hedges of operating activities, and underwithinFinancial income orFinancial expenses for hedges of investing or financing activities.
Cumulative changes in fair value of the hedging instrument previously recognized in equity are reclassified to the income statement when the hedged transaction affects profit or loss. These transferred gains and losses are recorded underwithinOther operating income for hedges of operating activities, and withinFinancial income orFinancial expenses for hedges of investing or financing activities.
When a forecast transaction results in the recognition of anon-financial asset or liability, cumulative changes in the fair value of the hedging instrument previously recognized in equity are included in the initial measurement of thethat asset or liability.
When the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss previously recognized in equity remains separately recognized in equity and is not reclassified to the income statement until the forecast transaction occurs. However, if the Group no longer expects the forecast transaction to occur, the cumulative gain or loss previously recognized in equity is recognized immediately in the income statement.profit or loss.
Hedge of a net investment in a foreign operation
In the case of a hedge of a net investment in a foreign operation, changes in the fair value of the hedging instrument attributable to the effective portion of the hedge are recognized directly in equity in the consolidated statement of comprehensive income. Changes in fair value attributable to the ineffective portion of the hedge are recognized in the income statement underwithinFinancial income orFinancial expenses.expenses. When the investment in the foreign operation is sold, the changes in the fair value of the hedging instrument previously recognized in equity are reclassified to the income statement underwithinFinancial income orFinancial expenses.expenses.
F- 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS –
Discontinuation of hedge accounting
Hedge accounting is discontinued when (a) the hedging instrument expires or is sold, terminated or exercised, or (b) the hedge no longer meets the criteria for hedge accounting, or (c) the Group revokes the hedge designation, or (d) management no longer expects the forecast transaction to occur.
B.8.5.Non-derivative financial liabilities
Borrowings and debt
Bank borrowings and debt instruments are initially measured at fair value of the consideration received, net of directly attributable transaction costs.
Subsequently, they are measured at amortized cost using the effective interest method. All costs related to the issuance of borrowings or debt instruments, and all differences between the issue proceeds net of transaction costs and the value on redemption, are recognized underwithinFinancial expenses in the income statement over the term of the debt using the effective interest method.
Liabilities related to business combinations and tonon-controlling interests
Liabilities related to business combinations and tonon-controlling interests are splitclassified as applicable into a
current portion and anon-current portion. These line items are used to recognize contingent consideration payable in connection with business combinations (see Note B.3.1. for a description of the relevant accounting policy), and the fair value of put options granted tonon-controlling interests.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair value adjustments to put options granted tonon-controlling interests are recognized with a matching entry in equity.
Othernon-derivative financial liabilities
Othernon-derivative financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
B.8.6. Fair value of financial instruments
Under
The disclosures required under IFRS 7 (Financial Instruments: Disclosures), fair value measurements must be classified using a fair value hierarchy with the following levels:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table below sets forth the principles used13 relating to measure the fair value of the principal financial assets and liabilities recognized byreported in the Group in its consolidated balance sheet:sheet and in the notes to the consolidated financial statements, and to the level of these instruments in the fair value hierarchy, are presented in Note D.16. The disclosures required under IFRS 13 relating to the sensitivity of level 3 fair value measurements are presented in Note D.18.
F- 22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows the disclosures required under IFRS 7 relating to the measurement principles applied to financial instruments.
Method used to determine fair value | |||||||||||||||||||||||||
Market data | |||||||||||||||||||||||||
Note | Type of financial instrument | Measurement principle | Valuation | model | Exchange rate | Interest | Volatility | ||||||||||||||||||
D.7. | Available-for-sale financial assets (quoted equity securities) | Fair value | Quoted market price | N/A | |||||||||||||||||||||
D.7. | Available-for-sale financial assets (unquoted debt securities) | Fair value | Present value of future cash flows | N/A | Mid swap + z-spread for bonds of comparable risk and maturity | N/A | |||||||||||||||||||
D.7. | Long-term loans and advances | Amortized cost | The amortized cost of long-term loans and advances at the | ||||||||||||||||||||||
D.7. | Financial assets recognized under the fair value option(1) | Fair value | Market value | N/A | |||||||||||||||||||||
D.20. | Forward currency contracts | Fair value | Present value of future cash flows | ECB Fixing | < 1 year: Mid Money Market > 1 year: Mid Zero Coupon | N/A | |||||||||||||||||||
D.20. | Currency options | Fair value | Options: Garman & Kohlhagen | ECB Fixing | < 1 year: Mid Money Market > 1 year: Mid Zero Coupon | Mid | |||||||||||||||||||
D.20. | Interest rate swaps | Fair value | Present value of future cash flows | N/A | < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon | N/A | |||||||||||||||||||
D.20. | Cross-currency swaps | Fair value | Present value of future cash flows | ECB Fixing | < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon | N/A | |||||||||||||||||||
D.13. | Investments in | Fair value | Market value | N/A | |||||||||||||||||||||
D.13. | Negotiable debt instruments, commercial paper, | Amortized cost | Because these instruments have a maturity of less than 3 months, amortized cost is regarded as an acceptable approximation of fair value as disclosed in the notes to the consolidated financial statements. | ||||||||||||||||||||||
D.17. | Debt | Amortized cost(2) | For | ||||||||||||||||||||||
D.18. | Liabilities related to business combinations and to non-controlling interests (CVRs) | Fair value | Quoted market price | N/A | |||||||||||||||||||||
D.18. | Liabilities related to business combinations and to non-controlling interests | Fair value(3) |
(1) | These assets are held to fund a deferred compensation plan offered to certain employees. |
(2) | In the case of debt designated as a hedged item in a fair value hedging relationship, the carrying amount in the consolidated balance sheet includes changes in fair value attributable to the hedged risk(s). |
(3) | For business combinations completed prior to application of the revised IFRS 3, contingent consideration is recognized when payment becomes probable (see Note B.3.1.). |
F- 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—STATEMENTS – (Continued)
The other financial assets and liabilities included in the consolidated balance sheet are:
· | Non-derivative current financial assets and liabilities: because these items have a maturity close to the end of the reporting period, the Group regards their carrying amount (i.e. historical cost less any credit risk allowance) as a reasonable approximation of their fair value; |
· | Equity interests in companies not quoted in an active market and the fair value of which cannot be measured reliably, which are measured at amortized cost in accordance with IAS 39. |
B.8.7. Derecognition of financial instruments
Sanofi derecognizes a financial asset when the contractual rights to cash flows from the asset have ended or have been transferred and when the Group has transferred substantially all risks and rewards of ownership of the asset. If the Group has neither transferred nor retained substantially all the risks and rewards of ownership of a financial asset, it is derecognized if the Group does not retain the control of the asset.
A financial liability is derecognized when the Group'sGroup’s contractual obligations in respect of the liability isare discharged, cancelled or extinguished.
B.8.8. Risks relating to financial instruments
Market risks in respect ofnon-current financial assets, cash equivalents, derivative instruments and debt are described in the risk factors presented in Item 3.D. and Item 11.
Credit risk is the risk that customers may fail to pay their debts. This risk also arises as a result of the concentration of the Group'sGroup’s sales with its largest customers, in particular certain wholesalers in the United States. Customer credit risk is described in the risk factors presented in Item 3.D.
B.9. InventoriesINVENTORIES
Inventories are measured at the lower of cost or net realizable value. Cost is calculated using the weighted average cost method or thefirst-in,first-out method, depending on the nature of the inventory.
The cost of finished goods inventories includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
B.10. Cash and cash equivalentsCASH AND CASH EQUIVALENTS
Cash and cash equivalents as shown in the consolidated balance sheet and statement of cash flows comprise cash, plus liquidshort-term investments that are (i) readily convertible into cash and (ii)are subject to an insignificant risk of changes in value in the event of movements in interest rates.
B.11. Treasury sharesTREASURY SHARES
In accordance with IAS 32, Sanofi treasury shares are deducted from equity, irrespective of the purpose for which they are held. No gain or loss is recognized in the income statement on the purchase, sale, impairment or cancellation of treasury shares.
B.12. Provisions for risksPROVISIONS FOR RISKS
In accordance with IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), Sanofi records a provision where it haswhen there is a present obligation, whether legal or constructive, as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the outflow of resources.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
If the obligation is expected to be settled more than twelve months after the balance sheet date,end of the reporting period, or has no definite settlement date, the provision is recorded underwithinProvisions and othernon-current liabilities.
Provisions relating to the insurance programs in which the Group'sGroup’s captive insurance company participates are based on risk exposure estimates calculated by management, with assistance from independent actuaries, using IBNR (IncurredIncurred But Not Reported)Reported (IBNR) techniques. TheseThose techniques use past claims experience, within the Group andor in the market, to estimate future trends in the cost of claims.
Contingent liabilities are not recognized, but are disclosed in the notes to the financial statements unless the possibility of an outflow of economic resources is remote.
Provisions are estimated on the basis of events and circumstances related to present obligations at the balance sheet date,end of the reporting period and of past experience, and to the best of management'smanagement’s knowledge at the date of preparation of the financial statements.
Reimbursements offsetting the probable outflow of resources are recognized as assets only if it is virtually certain that they will be received. Contingent assets are not recognized.
Restructuring provisions are recognized if the Group has a detailed, formal restructuring plan at the balance sheet dateend of the reporting period and has announced its intention to implement this plan to those affected by it.
No provisions are recorded for future operating losses.
F- 24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Sanofi recordsnon-current provisions for certain obligations, such as legal or constructive environmental obligations and litigation, where an outflow of resources is probable and the amount of the outflow can be reliably estimated. Where the effect of the time value of money is material, these provisions are measured at the present value of the expenditures expected to be required to settle the obligation, calculated using a discount rate that reflects an estimate of the time value of money and the risks specific to the obligation.
Increases in provisions to reflect the effects of the passage of time are recognized inFinancial expenses.
B.13. Emission rightsEMISSION RIGHTS
Under international agreements, the European Union has committed to reducing greenhouse gas emissions and instituted an emissions allowance trading scheme. Seven SanofiLess than ten of the Group’s European sites in Europe are directly coveredaffected by thethis scheme. Sanofi accounts for emission allowances as follows: the annual allowances allocated by government are recognized as intangible assets measured at fair value at the date of initial recognition, with a matching liability recognized to reflect the government grant effectively arising from the fact that allowances are issued free of charge. As and when allowances are consumed, they are transferred to "Deliverable allowances" in order to recognize the liability to government in respect of actual CO2 emissions. If the allocated allowances areat Group level were to be insufficient to cover actual emissions, an expense iswould be recognized in order to reflect the additional allowances deliverable; this expense isdeliverable, measured at the market value of the allowances.
B.14. Revenue recognitionREVENUE RECOGNITION
Revenue arising from the sale of goods is presented in the income statement underwithinNet sales. Net sales comprise revenue from sales of pharmaceutical products, vaccines,active ingredients, and active ingredients,vaccines, net of sales returns, of customer incentives, and discounts, and of certainsales-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, in accordance with IAS 18 (Revenue). In particular,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the contracts between Sanofi Pasteur and government agencies specify termsconditions for the supply and acceptance of batches of vaccine;vaccines; revenue is recognized when thesethose conditions are met.achieved.
The Group offers various types of price reductions on its products. In particular, products sold in the United States are covered by various governmental programs (such as Medicare and Medicaid) under which products are sold at a discount. RebatesIn addition, 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.
Returns, discounts, incentives and rebates, as described above, are recognized in the period in which the underlying sales are recognized as a reduction of sales revenue.
These amounts are calculated as follows:
· | provisions for chargeback incentives are estimated on the basis of the relevant subsidiary’s standard sales terms and conditions, and in certain cases on the basis of specific contractual arrangements with the customer. They represent management’s best estimate of the ultimate amount of chargeback incentives that will eventually be claimed by the customer; |
· | provisions for rebates based on attainment of sales targets are estimated and accrued as each of the underlying sales transactions is recognized; |
· | provisions for price reductions under Government and State programs, largely in the United States, are estimated on the basis of the specific terms of the relevant regulations or agreements, and accrued as each of the underlying sales transactions is recognized; and |
· | provisions for sales returns are calculated on the basis of management’s best estimate of the amount of product that will ultimately be returned by customers. In countries where product returns are possible, the Group operates a returns policy that allows the customer to return products within a certain period on either side of the expiry date (usually 6 months before and 12 months after the expiry date). The provision is estimated on the basis of past experience of sales returns. |
The Group also takes into account of factors such as levels of inventory in its various distribution channels, product expiry dates, information about potential discontinuation of products, the entry of competing generics into the market, and the launch ofover-the-counter medicines.
In each case, the provisions are subject to continuous review and adjustment as appropriate based on the most recent informationdata available to management.
The Group believes that it has the ability to measure each of the above provisions reliably, using the following factors in developing its estimates:
· | the nature and patient profile of the underlying product; |
· | the applicable regulations or the specific terms and conditions of contracts with governmental authorities, wholesalers and other customers; |
· | historical data relating to similar contracts, in the case of qualitative and quantitative rebates and chargeback incentives; |
· | past experience and sales growth trends for the same or similar products; |
F- 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—STATEMENTS – (Continued)
· | actual inventory levels in distribution channels, monitored by the Group using internal sales data and externally provided data; |
· | the shelf life of the Group’s products; and |
· | market trends including competition, pricing and demand. |
Non-product revenues, mainly comprising royalty income from license arrangements that constitute ongoingcontinuing operations of the Group (see Note C.), are presented inOther revenues.
B.15. COST OF SALES
Cost of sales
Cost of sales consists primarily of the industrial cost of goods sold, payments made under licensing agreements, and distribution costs. The industrial cost of goods sold includes the cost of materials, depreciation of property, plant and equipment and software, personnel costs, and other expenses attributable to production.
B.16. Research and development expensesRESEARCH AND DEVELOPMENT
Internally generated research costs are expensed as incurred.
Internally generated pharmaceutical development costs are also expensed as incurred; they are not capitalized, because the criteria for capitalization are considered not to have been met until marketing approval for the related product has been obtained from the regulatory authorities. Recharges to or contributions from alliance partners are recorded as a reduction inResearch and development expenses.
Note B.4.1. "Research“Research and development not acquired in a business combination"combination” and Note B.4.3. "Intangible“Other intangible assets acquired in a business combination"combination” describe the principles applied to the recognition of separately acquired research and development.
Contributions or reimbursements received from alliance partners are recorded as a reduction ofResearch and development expenses.
B.17. Other operating income and expensesOTHER OPERATING INCOME AND EXPENSES
B.17.1. Other operating income
Other operating income includes the share of profits that Sanofithe Group is entitled to receive from alliance partners in respect of product marketing agreements. It also includes revenues generated under certain complex agreements, which may include partnership andco-promotion agreements. arrangements.
Upfront payments received are deferred for as long as auntil the service obligation remains.is met. Milestone payments are assessed on a case by case basis, and recognized in the income statement on delivery of the products and/or provision of the services in question. Revenue generated in connection with these services is recognized on the basis of delivery of the goods or provision of the services to the other contracting party.
This line item also includes realized and unrealized foreign exchange gains and losses on operating activities (see Note B.8.4.), and operating gains on disposals not regarded as major disposals (see Note B.20.).
B.17.2. Other operating expenses
Other operating expenses mainly comprise the share of profits that alliance partners are entitled to receive from Sanofithe Group under product marketing agreements.
B.18. Amortization and impairment of intangible assetsAMORTIZATION AND IMPAIRMENT OF INTANGIBLE ASSETS
B.18.1. Amortization of intangible assets
The expenses recorded in this line item mainly comprise amortization of product rights (see Note D.4.), which are presented as a separate item because the benefit of thesethose rights to the Group'sGroup’s commercial, industrial and development functions cannot be separately identified.
Amortization of software, and of other rights of an industrial or operational nature, is recognized as an expense in the income statement, in the relevant line items of expense by function.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.18.2. Impairment of intangible assets
This line item recordsincludes impairment losses (other than those associated with restructuring) recognized against intangible assets (including goodwill)goodwill, but excluding software and other rights of an industrial or operational nature), and any reversals of such impairment losses.
B.19. Fair value remeasurement of contingent consideration liabilitiesFAIR VALUE REMEASUREMENT OF CONTINGENT CONSIDERATION LIABILITIES
Changes in the fair value of contingent consideration that was (i) already carried in the books of an acquired entity, or (ii) granted in connection with a business combination and initially recognized as a liability in accordance with the revised IFRS 3, are reported in profit or loss in accordance with the principles described in Note B.3.1. Such adjustments are reported separately in the income statement, in the line itemFair value remeasurement of contingent consideration liabilities.liabilities. This line item also includes the effect of the unwinding of discount,discounting, and of exchange rate movements where the liability is expressed in a currency other than the functional currency of the reporting entity.
B.20. Restructuring costs and Other gains and losses, and litigationRESTRUCTURING COSTS AND OTHER GAINS AND LOSSES, AND LITIGATION
B.20.1. Restructuring costs
Restructuring costs include early retirement benefits, compensation for early termination of contracts, and rationalization costs relating to restructured sites. Asset impairment losses directly attributable to restructuring are also recorded on this line. Restructuring costs included on this line relate only to unusual and major restructuring plans.
F- 26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
B.20.2. Other gains and losses, and litigation
This line item includes the impact of material transactions of an unusual nature or amount which the Group believes it is necessary to report separately in the income statement in order to improve the relevance of the financial statements.
The line itemOther gains and losses, and litigationincludes the following:
· | gains and losses on major disposals of property, plant and equipment, of intangible assets, of assets (or groups of assets and liabilities) held for sale, or of a business within the meaning of the revised IFRS 3, other than those considered to be restructuring costs; |
· | impairment losses and reversals of impairment losses on assets (or groups of assets and liabilities) held for sale, other than those considered to be restructuring costs; |
· | gains on bargain purchases; |
· | costs and provisions relating to major litigation; and |
· | certain exceptional items, as described in Note D.35. |
B.21. Financial expenses and incomeFINANCIAL EXPENSES AND INCOME
B.21.1. Financial expenses
Financial expenses mainly comprise interest charges on debt financing, negative changes in the fair value of financial instruments (where changes in fair value are taken to the income statement)recorded in profit or loss), realized and unrealized foreign exchange losses on financing and investing activities, and impairment losses on financial instruments. They also include anyinstruments, and reversals of impairment losses on financial instruments.
Financial expenses also include the expenses arising from the unwinding of discountdiscounts on non-currentlong-term provisions, except provisions for retirement benefits and other long-termthe net interest cost related to employee benefits. This line item does not include commercial cash discounts, which are deducted fromincluded in net sales.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.21.2. Financial income
Financial income includes interest and dividend income, positive changes in the fair value of financial instruments (where changes in fair value are taken to the income statement)recorded in profit or loss), realized and unrealized foreign exchange gains on financing and investing activities, and gains or losses on disposals of financial assets.
B.22. Income tax expenseINCOME TAX EXPENSE
Income tax expense includes all current and deferred taxes of consolidated companies.
The Sanofi Group accounts for deferred taxes in accordance with IAS 12 (Income Taxes), using the methods described below.below:
· | Deferred tax assets and liabilities are recognized on taxable and deductible temporary differences, and on tax losscarry-forwards. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. |
Deferred tax assets and liabilities are recognized on taxable and deductible temporary differences, and on tax loss carry-forwards. Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base.
Reforms to French business taxes came into force on January 1, 2010, introducing a new tax known as the “CET” (Contribution Economique Territoriale) Given that Deferred tax assets and liabilities are calculated using the tax rate expected to apply in the period when Deferred tax assets are recognized in respect of deductible temporary differences, tax losses available forcarry-forward and unused tax credits to the extent that future recovery is regarded as probable. The recoverability of deferred tax assets is assessed on acase-by-case basis, taking into account The No deferred tax is recognized on eliminations of intragroup transfers of interests in subsidiaries, associates or joint ventures. Reforms to French business taxes were enacted on December 31, 2009 and apply as from January 1, 2010. The new tax, the CET (· ,. This tax has two components: the CFE“CFE” (Cotisation Foncière des Entreprises) and the CVAE“CVAE” (Cotisation sur la Valeur Ajoutée des Entreprises). The second component is determined by applying a rate to the amount of value added generated by the business during the year.part of(i) the CVAE component is calculated as the amount by which certain revenues exceed certain expenses and given that(ii) this tax will be borne primarily by companies that own intellectual property rights on income derived from those rights (royalties and margin on sales to third parties and to other Group companies), the Group regards the CVAE component as meeting the definition of income taxes specified in IAS 12, paragraph 2 ("(“taxes which are based on taxable profits"profits”).· athe corresponding temporary difference isdifferences are expected to reverse, based on tax rates enacted or substantively enacted at the balance sheet date.end of the reporting period.· of the profit forecasts contained in the Group's long-termGroup’smedium-term business plan.plan, and the tax consequences of the strategic opportunities available to the Group.· Sanofi Group recognizes a deferred tax liability for temporary differences relating to interests in subsidiaries, associates and joint ventures except when the Group is able to control the timing of the reversal of the temporary differences. This applies in particular when the Group is able to control dividend policy and it is probable that the temporary differences will not reverse in the foreseeable future.· · For consolidation purposes, eachEach tax entity calculates its own net deferred tax position. All net deferred tax asset and liability positions are then aggregated and shown asin separate line items on the assets and liabilities sidesrelevant side of the consolidated balance sheet respectively.sheet. Deferred tax assets and liabilities can beare offset only if (i) the Group has a legally enforceable right to set offoffset current tax assets and current tax liabilities, and (ii) the deferred tax
F- 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. |
· | Withholding taxes on intragroup royalties and dividends, and on royalties and dividends collected from third parties, are accounted for as current income taxes.
|
In accounting for business combinations, the Group complies with the revised IFRS 3 in regards to the recognition of deferred tax assets after the initial accounting period. Consequently, any deferred tax assets recognized by the acquiree after the end of this period in respect of temporary differences or tax losscarry-forwards existing at the acquisition date are recognized by the Group in profit or loss.
The positions adopted by the Group on tax matters are based on our interpretation of tax laws and regulations. Some of those positions may be subject to uncertainty. In such cases, the Group assesses the amount of the tax liability on the basis of the following assumptions: that our position will be examined by one or more tax authorities on the basis of all relevant information; that a technical assessment is carried out with reference to legislation, case law, regulations, and established practice; and that each position is assessed individually, with no offset or aggregation between positions. Those assumptions are assessed on the basis of facts and circumstances existing at the end of the reporting period. When an uncertain tax position is considered probable, a tax liability is recognized (or a deferred tax asset is not recognized) measured using the Group’s best estimate. The amount of the liability includes any penalties and late payment interest. The line itemIncome tax expense includes the effects of tax disputes, and any penalties and late payment interest arising from such disputes.
B.23. EMPLOYEE BENEFIT OBLIGATIONS
Sanofi offers retirement benefits to employees and retirees of the Group. Such benefits are accounted for in accordance with IAS 19 (Employee Benefits), the revised version of which was mandatorily applicable for the first time in 2013.
Benefits are provided in the form of either defined contribution plans or defined benefit plans. In the case of defined contribution plans, the cost is recognized immediately in the period in which it is incurred, and equates to the amount of the contributions paid by the Group. For defined benefit plans, the Group generally recognizes its obligations to pay pensions and similar benefits to employees as a liability, based on an actuarial estimate of the rights vested or currently vesting in employees and retirees, using the projected unit credit method. Estimates are performed at least once a year, and rely on financial
assumptions (such as discount rates) and demographic assumptions (such as life expectancy, retirement age, employee turnover, and the rate of salary increases).
Obligations relating to otherpost-employment benefits (healthcare and life insurance) offered by Group companies to employees are also recognized as a liability based on an actuarial estimate of the rights vested or currently vesting in employees and retirees at the end of the reporting period.
These liabilities are recognized net of the fair value of plan assets.
In the case ofmulti-employer defined benefit plans where plan assets cannot be allocated to each participating employer with sufficient reliability, the plan is accounted for as a defined contribution plan, in accordance with paragraph 34 of IAS 19.
The benefit cost for the period consists primarily of current service cost, past service cost, net interest cost, gains or losses arising from plan settlements not specified in the terms of the plan, and actuarial gains or losses arising from plan curtailments. Net interest cost for the period is determined by applying the discount rate specified in IAS 19 to the net liability (i.e. the amount of the obligation, net of plan assets) recognized in respect of defined benefit plans. Past service cost is recognized immediately in profit or loss in the period in which it is incurred, regardless of whether or not the rights have vested at the time of adoption (in the case of a new plan) or of amendment (in the case of an existing plan).
Actuarial gains and losses on defined benefit plans (pensions and otherpost-employment benefits), also referred to as “Remeasurements of the net defined benefit liability (asset)”, arise as a result of changes in financial and demographic assumptions, experience adjustments, and the difference between the actual return and interest cost on plan assets. The impacts of these remeasurements are recognized inOther comprehensive income, net of deferred taxes; they are not subsequently reclassifiable to profit or loss.
B.24.SHARE-BASED PAYMENT
Share-based payment expense is recognized as a component of operating income, in the relevant classification of expense by function. In measuring the expense, the level of attainment of any performance conditions is taken into account.
B.24.1. Stock option plans
The Group has granted a number ofequity-settledshare-based payment plans (stock option plans) to some of its employees. The terms of those plans may make the award contingent on the attainment of performance criteria for some of the grantees.
F- 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In accordance with IFRS 2(Share-Based Payment), services received from employees as consideration for stock options are recognized as an expense in the income statement, with the opposite entry recognized in equity. The expense corresponds to the fair value of the stock option plans and is charged to income on astraight-line basis over thefour-year vesting period of the plan.
The fair value of stock option plans is measured at the date of grant using theBlack-Scholes valuation model, taking into account the expected life of the options. The resulting expense also takes into account the expected cancellation rate of the options. The expense is adjusted over the vesting period to reflect actual cancellation rates resulting from option holders leaving the Group.
B.24.2. Employee share ownership plans
The Group may offer its employees the opportunity to subscribe to reserved share issues at a discount to the reference market price. Shares allotted to employees under these plans fall within the scope of IFRS 2. Consequently, an expense is recognized at the subscription date, based on the value of the discount offered to employees.
B.24.3. Restricted share plans
The Group may award restricted share plans to certain of its employees. The terms of those plans may make the award contingent on the attainment of performance criteria for some of the grantees.
In accordance with IFRS 2, an expense equivalent to the fair value of such plans is recognized on a straight line basis over the vesting period of the plan, with the opposite entry recognized in equity. Depending on the country, the vesting period of such plans is either three or four years. Plans with atwo-year orthree-year vesting period are subject to atwo-yearlock-up period.
The fair value of stock option plans is based on the fair value of the equity instruments granted, representing the fair value of the services received during the vesting period. The fair value of an equity instrument granted under a plan is the market price of the share at the grant date, adjusted for expected dividends during the vesting period.
B.25. EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted average number of shares outstanding during the reporting period, adjusted on atime-weighted basis from the acquisition date to reflect the number of Sanofi shares held by the Group. Diluted earnings per share is calculated on the basis of the weighted average number of ordinary shares, computed using the treasury stock method.
This method assumes that (a) all outstanding dilutive options and warrants are exercised and (b) the Group acquires its own shares at the quoted market price for an amount equivalent to the cash received as consideration for the exercise of the options or warrants plus the expense arising on unamortized stock options.
B.26. SEGMENT INFORMATION
In accordance with IFRS 8 (Operating Segments), the segment information reported by the Group is prepared on the basis of internal management data provided to the Chief Executive Officer, who is the Group’s chief operating decision maker. The performance of those segments is monitored individually using internal reports and common indicators.
The segments reported by the Group correspond to its operating segments, with no aggregation. The Group consists of three operating segments: Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health. All other activities are combined in a separate segment, Other. Those segments reflect the Group’s internal organizational structure and are used internally for performance measurement and resource allocation.
Information on operating segments is provided in Note D.35.
B.27. MANAGEMENT OF CAPITAL
In order to maintain or adjust the capital structure, the Group can adjust the amount of dividends paid to shareholders, repurchase its own shares, issue new shares, or issue securities giving access to its capital.
The following objectives are defined under the terms of the Group’s share repurchase programs:
· | the allotment or sale of shares to employees under statutory |
· | the |
· | the cancellation of some or all of the repurchased shares; |
· | market-making in the secondary market |
the delivery of shares on the exercise of rights attached to securities giving access to the capital by redemption, conversion, exchange, presentation of a warrant or any other means; |
· | the delivery of shares (in exchange, as payment, or otherwise) in connection with mergers and acquisitions; |
F- 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
· | the execution by an investment services provider of purchases, sales or transfers by any means, in particular viaoff-market trading; or |
· | any other purpose that is or may in the future be authorized under the applicable laws and regulations.
|
The Group is not subject to any constraints on equity capital imposed by third parties.
Total equity includesEquity attributable to equity holders of Sanofi andEquity attributable tonon-controllingEquity attributable to equity holders of Sanofi andEquity attributable to non-controlling interests, as shown on the consolidated balance sheet. We define “Debt, net of cash and cash equivalents” as (i) the sum ofshort-term debt,long-term debt and interest rate derivatives and currency derivatives used to hedge debt, minus (ii) the sum of cash and cash equivalents and interest rate derivatives and currency derivatives used to hedge cash and cash equivalents.
B.28. NEW PRONOUNCEMENTS ISSUED BY THE IASB AND APPLICABLE FROM 2016 ONWARDS
The note below describes standards, amendments and interpretations issued by the IASB that will have mandatory application in 2016 or subsequent years, and the Group’s position regarding future application. None of those standards, amendments or interpretations has been early adopted by the Group.
B.28.1. Standards
At the end of May 2014 the IASB issued IFRS 15 (Revenue from Contracts with Customers). This standard relates to the recognition and measurement of revenue arising in the course of an entity’s ordinary activities from contracts with customers (i.e. net sales). IFRS 15 is a converged standard common to both IFRS and U.S. generally accepted accounting principles (U.S. GAAP), and will replace IAS 18 (Revenue) and IAS 11 (Construction Contracts).First-time application of IFRS 15, which has not yet been accepted by the European Union, is scheduled for annual accounting periods beginning on or after January 1, 2018. IFRS 15 sets out five successive steps that must be applied in all cases, regardless of the nature of the transaction (sales of goods, sales of services, licensing, etc). These steps are:
· | identify the contract(s); |
· | identify the performance obligations incumbent on the |
· | determine the transaction price; |
· | allocate the transaction price to the performance obligations in the contract; |
· | recognize the corresponding revenue. |
Since the publication of IFRS 15 in June 2014, the Group has been actively involved in working sessions on this issue, such as the working group established by the ANC (the French accounting standard-setter) and at the international level, the Transition Resource Group (TRG) set up by the IASB and the U.S. Financial Accounting Standards Board (FASB) to provide feedback on issues raised by preparers of financial statements and to help educate the markets about the new standard. An analysis of the impacts of IFRS 15 on the Group is currently in progress. Due to the organizational structure of the Group, the IFRS 15 implementation project will be split into three phases: a diagnostic phase in ten pilot countries, an implementation phase conducted within each business activity, and finally preparation of the financial statements for the year ended December 31, 2018.
In July 2014 the IASB issued IFRS 9 (Financial Instruments). This standard is intended to replace IAS 32 and IAS 39, the standards that currently apply to the presentation, recognition and measurement of financial instruments. IFRS 9 combines the three phases of the IASB’s financial instruments project: classification and measurement, impairment, and hedge accounting. The changes introduced by IFRS 9 relate to:
· | the |
First-time application of IFRS 9, which has not yet been endorsed by the European Union, is scheduled for annual accounting periods beginning on or after January 1, 2018. The impacts of IFRS 9 are currently under review.
The European Union endorsement process for IFRS 15 and IFRS 9 was ongoing as of the end of the reporting period.
In January 2016, the IASB issued IFRS 16 (Leases), which is effective for annual periods beginning on or after January 1, 2019. This new standard aligns the accounting treatment of operating leases with that already applied to finance leases (i.e. recognition in the balance sheet of future lease payments and the associated rights of use).
B.28.2. Amendments, annual improvements and interpretations
In May 2014, the IASB issued “Clarification of Acceptable Methods of Depreciation and Amortization”, an amendment to IAS 16 and IAS 38 applicable from 2016 onwards. This
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
amendment clarifies the methods that may be applied in depreciating or amortizing certain assets on the basis of the economic benefits they generate, and will not affect the depreciation and amortization policies applied by the Group.
In May 2014, the IASB issued “Accounting for Acquisitions of Interests in Joint Operations”, an amendment to IFRS 11 applicable from 2016 onwards. This amendment applies in cases where an existing business is contributed to a joint operation, or where an entity acquires items constituting a joint operation that meets the definition of a business, and clarifies that in such cases the principles described in IFRS 3 (Business Combinations) must be applied in accounting for the transaction.
In September 2014, the IASB issued “Annual Improvements to IFRSs:2012-2014 Cycle”. This standard lists various amendments applicable no earlier than 2016. The Group does not expect a material impact on the financial statements from those amendments, which apply mainly to the following standards:
|
All of the amendments and annual improvements described above have been endorsed by the European Union.
C.1. ALLIANCE ARRANGEMENTS WITH REGENERON
Collaboration agreement on Zaltrap® (aflibercept)
The collaboration agreement signed by Sanofi and Regeneron Pharmaceuticals, Inc. in September 2003 on the development and commercialization of Zaltrap® (aflibercept) was amended and restated in February 2015. That amendment ended Regeneron’s obligation to reimburse 50% of the development costs funded by Sanofi. As of December 31, 2014, the balance of outstanding development costs was€0.8 billion.
Collaboration agreement on the discovery, development and commercialization of human therapeutic antibodies
In November 2007, Sanofi and Regeneron signed new agreements (amended in November 2009 and further amended in 2015 in connection with the immuno-oncology agreements described below) for the discovery, development and commercialization of fully human therapeutic antibodies. Under the 2009 amended agreements Sanofi committed to funding the discovery and pre-clinical development of fully human therapeutic antibodies by up to $160 million per year through 2017. Sanofi has an option to develop and commercialize antibodies discovered by Regeneron pursuant to this collaboration. Following the signature in July 2015 of the immuno-oncology collaboration agreement described below, $75 million (spread over three years) was reallocated to that new agreement.
If the option is exercised, Sanofi co-develops the antibody with Regeneron and is responsible for funding. Sanofi and Regeneron share co-promotion rights and profits on sales of the co-developed antibodies. On receipt of the first positive Phase III trial results for any such antibody, the subsequent Phase III costs for that antibody are split 80% Sanofi, 20% Regeneron. Amounts received from Regeneron under those arrangements are recognized by Sanofi as a reduction in the line item “Research and development expenses”. Once a product begins to be commercialized, and provided that the share of quarterly results under the agreement represents a profit, Sanofi is entitled to an additional profit-share (capped at 10% of Regeneron’s share of quarterly profits) until Regeneron has paid 50% of the cumulative development costs incurred by the parties in the collaboration. In addition, Sanofi may be required to make milestone payments based on cumulative sales of all antibodies. As of December 31, 2015, the aggregate development costs incurred by both parties was€3.9 billion (including€2.6 billion funded 100% by Sanofi and€1.3 billion funded 80% by Sanofi and 20% by Regeneron).
On the earlier of (i) 24 months before the launch date or (ii) the first positive Phase III trial result Sanofi and Regeneron will share the commercial expenses of the antibodies jointly developed under the license agreement. Sanofi recognizes all the sales of those antibodies. Profits and losses arising from commercial operations in the United States are split 50/50. Outside the United States, Sanofi is entitled to between 55% and 65% of profits depending on sales of the antibodies, and bears 55% of any losses. The share of profits and losses attributable to Regeneron under the agreement is recognized in the line items “Other operatingincome”or “Other operating expenses”, which are components of operating income. In addition, Regeneron is entitled to receive payments of up to $250 million contingent on the attainment of specified levels of sales outside the United States.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
If Sanofi opts not to exercise its license option for an antibody, Sanofi would receive a royalty from Regeneron on sales of that antibody.
Collaboration agreement on the discovery, development and commercialization of antibodies in the field of immuno-oncology
On July 28, 2015, Sanofi and Regeneron announced a new global collaboration to discover, develop and commercialize new antibody cancer treatments in the emerging field of immuno-oncology. As part of the agreement, the two companies will jointly develop a programmed cell death protein 1 (PD-1) inhibitor antibody currently in Phase I testing, and plan to initiate clinical trials in 2016 with new therapeutic candidates based on ongoing, innovative preclinical programs. Sanofi has made an upfront payment of $640 million to Regeneron. The companies will invest approximately $1 billion from discovery through proof of concept (POC) development (usually a Phase IIa study) of monotherapy and novel combinations of immuno-oncology antibody candidates to be funded 25% by Regeneron ($250 million) and 75% by Sanofi ($750 million). Under the terms of the discovery program, Sanofi is entitled to an additional profit-share (capped at 10% of Regeneron’s share of quarterly profits) until the progressive payments from Regeneron reach 50% of clinical development costs initially funded by Sanofi.
Sanofi and Regeneron have also committed to equally fund no more than $650 million (or $325 million per company) for development of REGN2810, a PD-1 inhibitor antibody. In addition, Sanofi will make a one-time milestone payment of $375 million to Regeneron in the event that sales of a PD-1 product and any other collaboration antibody sold for use in combination with a PD-1 product were to exceed, in the aggregate, $2 billion in any consecutive 12-month period. Finally, the two companies agreed to reallocate $75 million (spread over three years) to immuno-oncology antibody research and development from Sanofi’s $160 million annual contribution to their existing antibody collaboration, which otherwise continues as announced in November 2009. Beyond the committed funding, additional funding will be allocated as programs enter post-POC development.
C.2. ALLIANCE ARRANGEMENTS WITH BRISTOL-MYERS SQUIBB (BMS)
Two of the Group’s leading products were jointly developed with BMS: the anti-hypertensive agent irbesartan (Aprovel®/Avapro®/Karvea®) and the anti-atherothrombosis treatment clopidogrel bisulfate (Plavix®/Iscover®).
On September 27, 2012, Sanofi and BMS signed an agreement relating to their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets.
Under the terms of this new agreement, which took 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 United States and Puerto Rico, giving Sanofi sole control and freedom to operate commercially in respect of those products. In exchange, BMS will receive royalty payments on Sanofi’s sales of branded and unbranded Plavix® and Avapro®/Avalide® worldwide (except for Plavix® in the United States and Puerto Rico) until 2018, and will also receive a payment of $200 million from Sanofi in December 2018, part of which will be used to buy out the non-controlling interests (see Note D.18.). Rights to Plavix® in the United States and Puerto Rico remain unchanged and continue to be governed by the terms of the original agreement until December 2019.
In all of the territories managed by Sanofi (including the United States and Puerto Rico for Avapro®/Avalide®) as defined in the new agreement, Sanofi recognizes in its consolidated financial statements the revenue and expenses generated by its own operations. The share of profits reverting to BMS subsidiaries is presented withinNet income attributable to non-controlling interests in the income statement.
In the territory managed by BMS (United States and Puerto Rico for Plavix®), Sanofi recognizes its share of profits and losses within the line itemShare of profit/(loss) of associates and joint ventures.
D/ Presentation of the financial statements
D.1. IMPACT OF CHANGES IN THE SCOPE OF CONSOLIDATION DUE TO ACQUISITIONS
D.1.1. Regeneron Pharmaceuticals Inc. (Regeneron)
During 2015, Sanofi acquired further shares in the biopharmaceutical company Regeneron at a cost of€117 million. As of December 31, 2015, the Group’s investment in Regeneron had a carrying amount of€2,245 million (see Note D.6.) and represented an equity interest of 22.1%.
During 2014, Sanofi acquired 7 million Regeneron shares, raising its equity interest in that company to 22.3% as of December 31, 2014, versus 15.9% as of December 31, 2013. With effect from the start of April 2014, this interest is accounted for by the equity method, following the nomination of a Sanofi designee to the Regeneron Board of Directors. Previously, the investment in Regeneron was reported in the balance sheet in the “Available-for-sale financial assets”category and measured at market value in accordance withIAS 39 (Financial Instruments: Recognition and Measurement). As of the date on which the equity method was first applied, the investment was measured at acquisition cost in accordance with IAS 28 (Investments in Associates and Joint Ventures). Under IAS 28, the cost of
F- 32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
the investment is equivalent to the aggregate amount of the successive acquisition prices paid (including acquisition-related costs) for the interests in Regeneron (see Note B.1.).Consequently, the changes in the market value of the investment in Regeneron that had previously been recognized inOther comprehensive income were reversed out on first-time application of the equity method. Goodwill is
calculated on each successive acquisition of shares; it represents the excess of the acquisition price over the share of the identifiable net assets acquired, measured in accordance with IFRS 3 (Business Combinations).
The main effects of the change to the equity method in accounting for the Regeneron investment are set forth below:
(€ million) | December 31, 2013 | Reclassification from available- for-sale financial assets(2) | Acquisitions during 2014(3) | Other movements(4) | December 31, 2014 | |||||||||||||||
Investments in associates and joint ventures | - | 256 | 1,629 | 57 | 1,942 | |||||||||||||||
Available-for-sale financial assets | 3,157 | (3,157) | - | - | - | |||||||||||||||
Shareholders’ equity(1) | 2,607 | (2,607) | - | 57 | 57 | |||||||||||||||
Deferred tax liabilities | 294 | (294) | - | - | - | |||||||||||||||
Historical cost of acquisition | 256 | - | 1,629 | - | 1,885 |
(1) | Amount net of taxes. |
(2) | Reversal of changes in the value of the |
(3) | Acquisition price (including acquisition-related costs) of the |
(4) | Mainly comprises €(126) million for Sanofi’s share of net losses (including the effect of amortizing fair value
|
D.1.2. Other changes in the scope of consolidation due to acquisitions
The impacts of acquisitions made during 2015 are not material to the Group.
In 2014, Sanofi took control of Globalpharma Co. LLC, a pharmaceutical company based in Dubai, with the intention of using it as a platform for the manufacture and marketing of the Group’s generics portfolio in the Middle East, to include anti-infective, cardiovascular and gastro-intestinal products. The impacts of this acquisition are not material to the Group.
On March 20, 2013, Sanofi completed the acquisition of 100% of Genfar S.A., the leading manufacturer of pharmaceutical products in Colombia. Genfar S.A. is also the second-largest generics company in Colombia in terms of sales, generating annual revenue of approximately€100 million. The provisional purchase price allocation resulted in the recognition of goodwill amounting to€119 million (see Note D.4.). The provisional purchase price allocation also included the fair value of the other intangible assets identified in the acquisition, amounting to€59 million at the acquisition date. The impacts of this acquisition on the Group’s business operating income and consolidated net income for the year ended December 31, 2013 are not material. The final purchase price allocation for this acquisition was completed in 2014, and was not materially different from the provisional allocation in 2013. The impacts
of the other acquisitions made during 2013 are not material to the Group.
D.2. IMPACT OF CHANGES IN SCOPE OF CONSOLIDATION DUE TO DIVESTMENTS
D.2.1. Exchange of the Animal Health Business
On December 15, 2015, Sanofi and Boehringer Ingelheim signed an exclusivity agreement with a view to exchanging Sanofi’s Animal Health business (valued at€11.4 billion) for Boehringer Ingelheim’s Consumer Health Care business (valued at€6.7 billion). The transaction would also involve a gross cash payment from Boehringer Ingelheim to Sanofi of€4.7 billion. The two parties are aiming to close the transaction in the fourth quarter of 2016.
Completion of the transaction is regarded as highly probable. In accordance with the classification and presentation requirements of IFRS 5 (see Note B.7.), all assets of the Animal Health business included in the exchange and all liabilities directly related to those assets are classified in the line itemsAssets held for sale or exchange andLiabilities related to assets held for sale or exchange, respectively, in the consolidated balance sheet as of December 31, 2015. Because the Animal Health business is an operating segment of the Group (see Note D.35., “Segment Information”), it qualifies as a discontinued operation under IFRS 5 (see Note B.7.). Consequently, the net income or loss from that business is presented separately in the
F- 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
consolidated income statement asNet income/(loss) of theheld-for-exchange Animal Health business. This presentation in a separate line item in the income statement applies to operations for the year ended December 31, 2015 and for the comparative periods presented.
Finally, the cash flows arising from operating, investing and financing activities of the Animal Health business are presented in separate line items in the consolidated statements of cash flows for the year ended December 31, 2015 and for the comparative periods presented.
For detailed information about the contribution of the Animal Health business to the consolidated financial statements refer to Note D.36., “Held-for-exchange Animal Health Business”.
D.2.2. Other divestments
No other disposals were made by the Group in 2015 that materially affected the scope of consolidation.
No disposals were made by the Group in 2014 or 2013 that materially affected the scope of consolidation.
D.3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (including assets held under finance leases) comprise:
(€ million) | Land | Buildings | Plant & equipment | Fixtures, fittings & other | Property, plant and equipment in process | Total | ||||||||||||||||||
Gross value at January 1, 2013 | 384 | 6,281 | 8,306 | 2,118 | 2,035 | 19,124 | ||||||||||||||||||
Changes in scope of consolidation | 3 | 12 | 11 | - | - | 26 | ||||||||||||||||||
Acquisitions and other increases | 1 | 1 | 67 | 43 | 970 | 1,082 | ||||||||||||||||||
Disposals and other decreases | (6) | (19) | (15) | (128) | (9) | (177) | ||||||||||||||||||
Currency translation differences | (20) | (215) | (187) | (46) | (40) | (508) | ||||||||||||||||||
Transfers(1) | 2 | 437 | 567 | 120 | (1,112) | 14 | ||||||||||||||||||
Gross value at December 31, 2013 | 364 | 6,497 | 8,749 | 2,107 | 1,844 | 19,561 | ||||||||||||||||||
Changes in scope of consolidation | - | (3) | 2 | - | 3 | 2 | ||||||||||||||||||
Acquisitions and other increases | - | 6 | 60 | 47 | 980 | 1,093 | ||||||||||||||||||
Disposals and other decreases | (9) | (16) | (30) | (116) | (17) | (188) | ||||||||||||||||||
Currency translation differences | 16 | 233 | 191 | 41 | 54 | 535 | ||||||||||||||||||
Transfers(1) | 1 | 198 | 447 | 136 | (905) | (123) | ||||||||||||||||||
Gross value at December 31, 2014 | 372 | 6,915 | 9,419 | 2,215 | 1,959 | 20,880 | ||||||||||||||||||
Changes in scope of consolidation | (4) | 1 | (8) | 1 | (22) | (32) | ||||||||||||||||||
Acquisitions and other increases | - | 11 | 76 | 59 | 1,172 | 1,318 | ||||||||||||||||||
Disposals and other decreases | (3) | (4) | (17) | (126) | (23) | (173) | ||||||||||||||||||
Currency translation differences | 5 | 144 | 122 | 24 | 25 | 320 | ||||||||||||||||||
Transfers(1) | (1) | 269 | 463 | 228 | (1,083) | (124) | ||||||||||||||||||
Reclassification of the Animal Health business(2) | (33) | (604) | (313) | (54) | (76) | (1,080) | ||||||||||||||||||
Gross value at December 31, 2015 | 336 | 6,732 | 9,742 | 2,347 | 1,952 | 21,109 | ||||||||||||||||||
Accumulated depreciation & impairment at January 1, 2013 | (15) | (2,232) | (4,723) | (1,431) | (145) | (8,546) |
F- 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(€ million) | Land | Buildings | Plant & equipment | Fixtures, fittings & other | Property, plant and equipment in process | Total | ||||||||||||||||||
Changes in scope of consolidation | - | 4 | 1 | - | 1 | 6 | ||||||||||||||||||
Depreciation expense | - | (356) | (600) | (184) | (1) | (1,141) | ||||||||||||||||||
Impairment losses | (5) | (13) | 2 | - | (10) | (26) | ||||||||||||||||||
Disposals | - | 14 | 8 | 119 | 9 | 150 | ||||||||||||||||||
Currency translation differences | 1 | 71 | 96 | 29 | (1) | 196 | ||||||||||||||||||
Transfers(1) | (1) | (77) | 50 | 11 | (1) | (18) | ||||||||||||||||||
Accumulated depreciation & impairment at December 31, 2013 | (20) | (2,589) | (5,166) | (1,456) | (148) | (9,379) | ||||||||||||||||||
Changes in scope of consolidation | - | 4 | 2 | - | - | 6 | ||||||||||||||||||
Depreciation expense | - | (356) | (577) | (192) | - | (1,125) | ||||||||||||||||||
Impairment losses | (2) | (37) | (26) | (4) | (28) | (97) | ||||||||||||||||||
Disposals | 3 | 9 | 23 | 113 | 15 | 163 | ||||||||||||||||||
Currency translation differences | (1) | (64) | (78) | (24) | (2) | (169) | ||||||||||||||||||
Transfers(1) | 3 | 54 | 42 | 14 | 4 | 117 | ||||||||||||||||||
Accumulated depreciation & impairment at December 31, 2014 | (17) | (2,979) | (5,780) | (1,549) | (159) | (10,484) | ||||||||||||||||||
Changes in scope of consolidation | 6 | 5 | 12 | - | 22 | 45 | ||||||||||||||||||
Depreciation expense | - | (376) | (607) | (208) | - | (1,191) | ||||||||||||||||||
Impairment losses | - | (38) | (42) | (11) | (41) | (132) | ||||||||||||||||||
Disposals | - | 3 | 15 | 122 | 13 | 153 | ||||||||||||||||||
Currency translation differences | - | (33) | (49) | (17) | - | (99) | ||||||||||||||||||
Transfers(1) | - | 34 | 90 | (4) | (1) | 119 | ||||||||||||||||||
Reclassification of the Animal Health business(2) | - | 252 | 145 | 26 | - | 423 | ||||||||||||||||||
Accumulated depreciation & impairment at December 31, 2015 | (11) | (3,132) | (6,216) | (1,641) | (166) | (11,166) | ||||||||||||||||||
Carrying amount at December 31, 2013 | 344 | 3,908 | 3,583 | 651 | 1,696 | 10,182 | ||||||||||||||||||
Carrying amount at December 31, 2014 | 355 | 3,936 | 3,639 | 666 | 1,800 | 10,396 | ||||||||||||||||||
Carrying amount at December 31, 2015 | 325 | 3,600 | 3,526 | 706 | 1,786 | 9,943 |
|
Acquisitions during 2015 amounted to€1,318 million. The Pharmaceuticals segment made acquisitions totaling€964 million, primarily investments in industrial facilities (€594 million excluding Genzyme in 2015, compared with€452 million in 2014 and€444 million in 2013) and in constructing and equipping research sites (€82 million in 2015, versus€55 million in 2014 and€88 million in 2013). Genzyme accounted for€80 million of Pharmaceuticals segment acquisitions in 2015 (versus€113 million in 2014 and€116 million in 2013). The Vaccines segment made€260 million of acquisitions in 2015 (versus€202 million in 2014 and€210 million in 2013). Acquisitions of property, plant and equipment during the year included€15 million of capitalized interest costs (versus€20 million in 2014 and€25 million in 2013).
Firm orders for property, plant and equipment stood at€436 million as of December 31, 2015 (€348 million as of December 31, 2014 and€324 million as of December 31, 2013). Property, plant and equipment pledged as security for liabilities amounted to€249 million as of December 31, 2015 (versus€242 million as of December 31, 2014 and€196 million as of December 31, 2013).
Impairment tests of property, plant and equipment conducted using the method described in Note B.6. resulted in the recognition during 2015 of net impairment losses of€132 million. In 2014, net impairment losses totaled€97 million, primarily in the Pharmaceuticals segment. In 2013, net impairment losses were€26 million, primarily in the Vaccines segment.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows amounts for items of property, plant and equipment held under finance leases:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Land | 3 | 3 | 3 | |||||||||
Buildings | 101 | 99 | 85 | |||||||||
Other property, plant and equipment | 8 | 4 | 3 | |||||||||
Total gross value | 112 | 106 | 91 | |||||||||
Accumulated depreciation and impairment | (69) | (55) | (41) | |||||||||
Carrying amount | 43 | 51 | 50 |
Future minimum lease payments due under finance leases as of December 31, 2015 were€83 million (versus€74 million as of December 31, 2014 and€78 million as of
December 31, 2013), including€15 million of interest (versus€12 million as of December 31, 2014 and€15 million as of December 31, 2013).
The payment schedule is as follows:
December 31, 2015 | Payments due by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
Finance lease obligations | ||||||||||||||||||||
· principal | 67 | 18 | 30 | 4 | 15 | |||||||||||||||
· interest | 16 | 5 | 5 | 3 | 3 | |||||||||||||||
Total | 83 | 23 | 35 | 7 | 18 |
D.4. GOODWILL AND OTHER INTANGIBLE ASSETS
Movements in goodwill comprise:
(€ million) | Goodwill | |||
Balance at January 1, 2013 | 38,073 | |||
Acquisitions during the period | 134 | |||
Currency translation differences | (1,073) | |||
Balance at December 31, 2013 | 37,134 | |||
Acquisitions during the | 23 | |||
Currency translation differences | 2,040 | |||
Balance at December 31, 2014 | 39,197 | |||
Reclassification of the | (1,510) | |||
Currency translation differences | 1,870 | |||
39,557 |
(1) | Mainly comprises €119 million arising on Genfar (see Note D.1.2.). |
(2) | The goodwill on the |
Genzyme acquisition (2011)
The Genzyme final purchase price allocation resulted in the recognition of intangible assets (other than goodwill) totaling€10,059 million at the acquisition date. That figure included€7,727 million for marketed products in the fields of rare diseases (primarily Cerezyme®, Fabrazyme® and
Myozyme®), renal endocrinology (primarily Renagel®), biosurgery (primarily Synvisc®) and oncology. Also included were intangible assets valued at€2,148 million at the acquisition date relating to Genzyme’s in-process research and development projects, primarily Lemtrada® (alemtuzumab) and eliglustat. The Genzyme brand was attributed a fair value of€146 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2015, the carrying amount of marketed products and the Genzyme brand represented more than 99% of the intangible assets of Genzyme (other than goodwill), and in-process research and development represented less than 1%.
During 2015, some of the Genzyme acquired research and development (€474 million) came into commercial use, and started being amortized from the date of marketing approval. The main product involved was Cerdelga® (eliglustat) outside the United States.
During 2014, some of the Genzyme acquired research and development (€778 million) came into commercial use, and started being amortized from the date of marketing approval. The main products involved were Cerdelga® (eliglustat) and Lemtrada® (alemtuzumab) in the United States.
During 2013, some of the Genzyme acquired research and development (€415 million) came into commercial use, and started being amortized from the date of marketing approval. The main such item was Lemtrada® (alemtuzumab) in Europe.
Aventis acquisition (2004)
On August 20, 2004, Sanofi acquired Aventis, a global pharmaceutical group created in 1999 by the merger betweenRhône-Poulenc and Hoechst.
As part of the process of creating the new Group, the two former parent companies –Sanofi-Synthélabo (renamed Sanofi) and Aventis – were merged on December 31, 2004.
The total purchase price as measured under IFRS 3 (Business Combinations) was€52,908 million, of which€15,894 million was settled in cash.
Goodwill arising from the acquisition of Aventis amounted to €30,587 million as of December 31, 2015 (versus€29,143 million as of December 31, 2014 and€27,608 million as of December 31, 2013).
Rights to marketed products and goodwill arising on the Aventis acquisition were allocated on the basis of the split of the Group’s operations into business and geographical segments, and valued in the currency of the relevant geographical segment (mainly euros and U.S. dollars) with assistance from an independent valuer.
During 2014, some of the Aventis acquired research and development (€47 million) came into commercial use, and started being amortized from the date of marketing approval. The main product involved was Jevtana® in Japan.
During 2013, some of the acquired Aventis research and development (€118 million) came into commercial use, and started being amortized from the date of marketing approval. The main products involved were the multiple sclerosis treatment Aubagio® (teriflunomide) in Europe and other countries outside the United States, and Zaltrap® (aflibercept) in Europe.
Movements in other intangible assets comprise:
(€ million) | Acquired R&D | Products, trademarks and | Software | Total other intangible | ||||||||||||
Gross value at January 1, 2013 | 5,896 | 49,303 | 1,028 | 56,227 | ||||||||||||
Changes in scope of consolidation | 6 | 59 | - | 65 | ||||||||||||
Acquisitions and other increases | 90 | 118 | 102 | 310 | ||||||||||||
Disposals and other decreases | (628) | (46) | (51) | (725) | ||||||||||||
Currency translation differences | (159) | (2,038) | (31) | (2,228) | ||||||||||||
Transfers(1) | (703) | 707 | 4 | 8 | ||||||||||||
Gross value at December 31, 2013 | 4,502 | 48,103 | 1,052 | 53,657 | ||||||||||||
Changes in scope of consolidation | - | 61 | - | 61 | ||||||||||||
Acquisitions and other increases | 164 | 281 | 138 | 583 | ||||||||||||
Disposals and other decreases | (175) | (95) | (46) | (316) | ||||||||||||
Currency translation differences | 230 | 3,541 | 42 | 3,813 | ||||||||||||
Transfers(1) | (1,239) | 1,239 | 54 | 54 | ||||||||||||
Gross value at December 31, 2014 | 3,482 | 53,130 | 1,240 | 57,852 | ||||||||||||
Acquisitions and other increases | 1,179 | 912 | 154 | 2,245 | ||||||||||||
Disposals and other decreases | (204) | (1,321) | (27) | (1,552) | ||||||||||||
Currency translation differences | 189 | 3,610 | 35 | 3,834 | ||||||||||||
Transfers(1) | (741) | 653 | 11 | (77) | ||||||||||||
Reclassification of the Animal Health business(3) | (51) | (4,982) | (182) | (5,215) | ||||||||||||
Gross value at December 31, 2015 | 3,854 | 52,002 | 1,231 | 57,087 |
F- 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(€ million) | Acquired R&D | Products, trademarks and other rights | Software | Total other intangible assets | ||||||||||||
Accumulated amortization & impairment at January 1, 2013 | (1,813) | (33,461) | (761) | (36,035) | ||||||||||||
Amortization expense | - | (2,914) | (96) | (3,010) | ||||||||||||
Impairment losses, net of reversals(2) | (1,397) | (66) | (2) | (1,465) | ||||||||||||
Disposals and other decreases | 626 | 39 | 51 | 716 | ||||||||||||
Currency translation differences | 73 | 1,439 | 23 | 1,535 | ||||||||||||
Transfers(1) | 2 | (5) | - | (3) | ||||||||||||
Accumulated amortization & impairment at December 31, 2013 | (2,509) | (34,968) | (785) | (38,262) | ||||||||||||
Amortization expense | - | (2,482) | (92) | (2,574) | ||||||||||||
Impairment losses, net of reversals(2) | 153 | (127) | - | 26 | ||||||||||||
Disposals and other decreases | 175 | 87 | 45 | 307 | ||||||||||||
Currency translation differences | (161) | (2,561) | (28) | (2,750) | ||||||||||||
Transfers(1) | 301 | (301) | (56) | (56) | ||||||||||||
Accumulated amortization & impairment at December 31, 2014 | (2,041) | (40,352) | (916) | (43,309) | ||||||||||||
Amortization expense | - | (2,651) | (108) | (2,759) | ||||||||||||
Impairment losses, net of reversals(2) | (343) | (427) | (3) | (773) | ||||||||||||
Disposals and other decreases | 204 | 1,257 | 27 | 1,488 | ||||||||||||
Currency translation differences | (124) | (2,662) | (23) | (2,809) | ||||||||||||
Transfers(1) | - | 39 | (6) | 33 | ||||||||||||
Reclassification of the Animal Health business(3) | 3 | 2,908 | 157 | 3,068 | ||||||||||||
Accumulated amortization & impairment at December 31, 2015 | (2,301) | (41,888) | (872) | (45,061) | ||||||||||||
Carrying amount at December 31, 2013 | 1,993 | 13,135 | 267 | 15,395 | ||||||||||||
Carrying amount at December 31, 2014 | 1,441 | 12,778 | 324 | 14,543 | ||||||||||||
Carrying amount at December 31, 2015 | 1,553 | 10,114 | 359 | 12,026 |
(2) | See Note D.5. |
Comprises the other intangible assets of
|
The item “Products, trademarks and other rights” (excluding items relating to the Animal Health business, reported within the line itemAssets held for sale or exchange, see Note D.36.), mainly comprise:
|
|
· |
|
F- 38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below provides information about the principal marketed products, representing 90% of the carrying amount of that item as of December 31, 2015:
(€ million) | Gross value | Accumulated amortization & impairment | Carrying amount December 31, 2015 | Amortization (years)(1) | Residual amortization period (years)(2) | Carrying amount December 31, 2014 | Carrying amount December 31, 2013 | |||||||||||||||||||||
Genzyme | 10,845 | (5,086) | 5,759 | 10 | 7 | 5,788 | 5,489 | |||||||||||||||||||||
Aventis | 33,116 | (31,568) | 1,548 | 9 | 4 | 1,993 | 2,695 | |||||||||||||||||||||
Chattem | 1,375 | (419) | 956 | 22 | 18 | 910 | 859 | |||||||||||||||||||||
Zentiva | 909 | (722) | 187 | 9 | 5 | 249 | 335 | |||||||||||||||||||||
Total: principal marketed products | 46,245 | (37,795) | 8,450 | 8,940 | 9,378 |
(1) | Weighted averages. The |
(2) | Weighted averages. |
Acquisitions of other intangible assets (excluding software) during 2015 amounted to€2,091 million. This mainly relates to license agreements entered into during the year in diabetes, in particular the agreements with Hamni Pharmaceuticals Co, Ltd (upfront payment of€400 million) and Lexicon Pharmaceuticals, Inc (upfront payment of $300 million), and to a new collaboration agreement with Regeneron in immuno-oncology under which Sanofi made an upfront payment of $640 million. For details of the Group’s commitments under those agreements, refer to Note D.21. In addition, Sanofi paid $245 million to Retrophin for the priority review voucher, which was used in filing a new drug application with the U.S. Food and Drug Administration (FDA) for a combination of an investigational insulin glargine fixed dose of 100 units/ml with lixisenatide. The intangible asset was amortized in full when the right was used.
During 2015, some of the acquired research and development came into commercial use, and started being amortized from the date of marketing approval. The main such item was the dengue fever vaccine (€230 million).
During 2014, some of the acquired research and development derived from collaboration agreements came into commercial use, and started being amortized from the date of marketing approval. The main such item was AplewayTM (tofogliflozin) in Japan (€35 million).
During 2013, some of the acquired research and development derived from collaboration agreements came into commercial use, and started being amortized from the date of marketing approval. The main products involved were Lyxumia® (lixisenatide) in Europe (€26 million), and Kynamro® (mipomersen sodium, in collaboration with Ionis Pharmaceuticals) in the United States (€19 million).
Amortization of other intangible assets is recognized in the income statement within the line itemAmortization of intangible assets, except for amortization of software and other rights of an industrial or operational nature which is recognized in the relevant classification of expense by function as shown in the table below:
(€ million) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Cost of sales | 25 | 18 | 24 | |||||||||
Research and development expenses | 13 | 12 | 13 | |||||||||
Selling and general expenses | 52 | 46 | 44 | |||||||||
Other operating expenses | 4 | 2 | 1 | |||||||||
Total | 94 | 78 | 82 |
(1) | Income statement items relating to the Animal Health
|
D.5. IMPAIRMENT OF INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
Goodwill
The recoverable amount of cash generating units (CGUs) is determined by reference to the value in use of each CGU,
based on discounted estimates of the future cash flows from the CGU, in accordance with the policies described in Note B.6.1.
F- 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The allocation of goodwill as of December 31, 2015 is shown below:
(€ million) | Pharmaceuticals Europe | Pharmaceuticals North America | Pharmaceuticals Other Countries | Vaccines United States | Vaccines Other Countries | Group Total | ||||||||||||||||||
Goodwill | 15,021 | 16,752 | 6,537 | 910 | 337 | 39,557 |
The value in use of each CGU was determined by applying an after-tax discount rate to estimated future after-tax cash flows.
A separate discount rate is used for each CGU to reflect the specific economic conditions of the CGU.
The rates used for impairment testing in 2015 were in a range from 5.5% to 9.0% (principally 7.0% for Pharmaceuticals North America and Pharmaceuticals Europe); an identical value in use for the Group would be obtained by applying a uniform 8% rate to all of the CGUs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The pre-tax discount rates applied to estimated pre-tax cash flows are calculated by iteration from the previously-determined value in use. They range from 12.4% to 14.0%, and equate to a uniform rate of 13% for the Group as a whole.
The assumptions used in testing goodwill for impairment are reviewed annually. Apart from the discount rate, the principal assumptions used in 2012 were as follows:
The assumptions used in testing goodwill for impairment are reviewed annually. Apart from the discount rate, the principal assumptions used in 2015 were as follows:
· | the perpetual growth rates applied to future cash flows were in a range from 0% |
· | the Group also applies assumptions on the probability of success of |
Value in use (determined as described above) is compared with the carrying amount, and this comparison is then subjected to sensitivity analyses with reference to the principal parameters, including:
· |
|
· | changes in the perpetual growth |
· |
|
No impairment of goodwill would need to be recognized for any CGU in the event of a reasonable change in the assumptions used in 2015.
A value in use calculation for each CGU would not result in an impairment loss using:
· | a discount rate up to |
· | a perpetual growth rate up to |
· |
|
No impairment losses were recognized against goodwill in the years ended December 31, 2015, 2014 or 2013.
Other intangible assets
When there is evidence that an asset may have become impaired, the asset’s value in use is calculated by applying an after-tax discount rate to the estimated future after-tax cash flows from that asset. For the purposes of impairment testing, the tax cash flows relating to the asset are determined using a notional tax rate incorporating the notional tax benefit that would result from amortizing the asset if its value in use were regarded as its depreciable amount for tax purposes. Applying after-tax discount rates to after-tax cash flows gives the same values in use as would be obtained by applying pre-tax discount rates to pre-tax cash flows.
The after-tax discount rates used in 2015 for impairment testing of other intangible assets in the Pharmaceuticals, Vaccines and Animal Health segments were obtained by adjusting the Group’s weighted average cost of capital to reflect specific country and business risks, giving after-tax rates in a range from 6% to 10%.
In most instances, there are no market data that would enable fair value less costs to sell to be determined other than by means of a similar estimate based on future cash flows. Consequently, the recoverable amount is in substance equal to the value in use.
In 2015, impairment testing of other intangible assets (excluding software) resulted in the recognition of a€767 million net impairment loss, comprising:
· | €340 million on research and development projects in the Pharmaceuticals and Vaccines
|
· | €427 million on a number of |
The amount of net impairment losses reclassified toNet income/(loss) of the held-for-exchange Animal Health business for the year ended December 31, 2015 was€3 million.
F- 40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In 2014, impairment testing of other intangible assets (excluding software) resulted in a net reversal of impairment losses of€31 million, mainly comprising:
· | the partial reversal (amounting to€356 million) of the impairment loss recognized in 2013 on Lemtrada®, following FDA approval of the product in the United States in November 2014; |
· | a net impairment loss of€203 million arising from various research projects in the Pharmaceuticals and Vaccines segments, whether following the discontinuation of development programs, in particular collaborations in anti-infectives with Alopexx (SAR 279 356) and Kalobios (KB001-A) or on the basis of revised commercial prospects in particular on the rotavirus vaccine project (Shantha); and |
· | impairment losses of€123 million taken against rights to a number of marketed products in the Pharmaceuticals and Vaccines segments (mainly Consumer Health Care assets in the Emerging Markets region). |
The amount of net impairment losses reclassified toNet income/(loss) of the held-for-exchange Animal Health business for the year ended December 31, 2014 was€4 million.
In 2013, impairment testing of other intangible assets (excluding software) resulted in the recognition of net impairment losses totaling€1,387 million, mainly comprising:
· | an impairment loss |
in its then current form; the residual recoverable amount for the North America CGU was€164 million, representing the recoverable amount determined for Canada and the residual recoverable amount determined for the United States after taking into account Genzyme’s intention to appeal against |
· | an impairment loss of€384 million on the intangible assets of BiPar following |
· |
|
Property, plant and equipment
Impairment losses taken against property, plant and equipment are disclosed in Note D.3.
D.6. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
For definitions of the terms “associate” and “joint venture”, refer to Note B.1.
Investments in associates and joint ventures comprise:
(€ million) | % interest | 2015 | 2014 | 2013 | ||||||||||||
Regeneron Pharmaceuticals, Inc.(1) | 22.1 | 2,245 | 1,942 | - | ||||||||||||
Sanofi Pasteur MSD(2) | 50.0 | 252 | 261 | 277 | ||||||||||||
Infraserv GmbH & Co. Höchst KG(2) | 31.2 | 85 | 90 | 88 | ||||||||||||
Entities and companies managed byBristol-Myers Squibb(3) | 49.9 | 43 | 42 | 43 | ||||||||||||
Other investments | - | 51 | 49 | 40 | ||||||||||||
Total | 2,676 | 2,384 | 448 |
(1) | See Note |
Joint-ventures. |
For definitions of the terms "associate" and "joint venture", refer to Note B.1.
Investments in associates and joint ventures break down as follows:
(€ million) | % interest | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sanofi Pasteur MSD | 50.0 | 287 | 313 | 343 | |||||||||
Infraserv GmbH and Co. Höchst KG | 31.2 | 79 | 87 | 92 | |||||||||
Entities and companies managed by Bristol-Myers Squibb (1) | 49.9 | 74 | 307 | 265 | |||||||||
Financière des Laboratoires de Cosmétologie Yves Rocher | — | — | — | 128 | |||||||||
Other investments | — | 47 | 100 | 96 | |||||||||
Total | 487 | 807 | 924 | ||||||||||
Under the terms of the agreements with BMS (see Note |
F- 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
With effect from the start of April 2014, the investment in Regeneron Pharmaceuticals, Inc. is accounted for by the equity method (see Note D.1.).
The table below shows the Group’s overall share of (i) profit or loss and (ii) other comprehensive income of associates and joint ventures, showing the split between associates and joint ventures according to IFRS 12 (the amounts for each individual associate or joint venture are not material):
2015 | 2014 | 2013 | ||||||||||||||||||||||
(€ million) | Joint ventures | Associates | Joint ventures | Associates | Joint ventures | Associates | ||||||||||||||||||
Share of profit/(loss) of associates and joint ventures(1) | 27 | (49) | 48 | (100) | 16 | 23 | ||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | 1 | 235 | (5) | 179 | 1 | - | ||||||||||||||||||
Total | 28 | 186 | 43 | 79 | 17 | 23 |
(1)
| The results of the |
The financial statements include arm’s length commercial transactions between the Group and some associates and joint ventures that are classified as related parties. The
principal transactions and balances with related parties (including Regeneron with effect from the start of April 2014) are summarized below:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Sales | 218 | 210 | 213 | |||||||||
Royalties and other income | 91 | 25 | 22 | |||||||||
Accounts receivable | 81 | 57 | 28 | |||||||||
Purchases and other expenses (including research expenses) | 762 | 613 | 280 | |||||||||
Accounts payable | 196 | 216 | 27 | |||||||||
Other liabilities | 10 | 9 | 18 |
Funding commitments to associates and joint ventures amounted to€274 million as of December 31, 2015.
For off balance sheet commitments of an operational nature involving joint ventures, see note D.21.1.
Regeneron
Key items from the consolidated financial statements of Regeneron, after adjustments to comply with IFRS but before fair value remeasurements, are set forth below:
(€ million) | From January 1 to December 31, 2015 | From April 1 to December 31, 2014 | ||||||
Net sales and other revenues | 3,698 | 1,659 | ||||||
Net income/(loss) | 232 | (149) | ||||||
Other comprehensive income for the period, net of taxes | (39) | 37 | ||||||
Comprehensive income | 193 | (112) |
(€ million) | December 31, 2015 | December 31, 2014 | April 1, 2014 | |||||||||
Current assets | 2,704 | 1,748 | 1,330 | |||||||||
Non-current assets | 4,529 | 2,727 | 1,792 | |||||||||
Total assets | 7,233 | 4,475 | 3,122 | |||||||||
Current liabilities | 745 | 543 | 221 | |||||||||
Non-current liabilities | 1,903 | 1,348 | 1,210 | |||||||||
Total liabilities | 2,648 | 1,891 | 1,431 | |||||||||
Consolidated shareholders’ equity of Regeneron | 4,585 | 2,584 | 1,691 |
F- 42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows a reconciliation to the carrying amount of the investment as of the date of first-time application of the equity method and as of December 31, 2015:
(€ million) | December 31, 2015 | December 31, 2014 | April 1, 2014 | |||||||||
% interest | 22% | 22% | 20% | |||||||||
Share of equity attributable to Sanofi | 1,012 | 577 | 336 | |||||||||
Goodwill | 742 | 667 | 394 | |||||||||
Fair value remeasurements of assets and liabilities at the acquisition date | 1,021 | 975 | 661 | |||||||||
Other items(1) | (530) | (277) | (181) | |||||||||
Carrying amount of the investment in Regeneron | 2,245 | 1,942 | 1,210 |
(1) | Primarily Sanofi’s share of
|
As of December 31, 2015, the market value of Sanofi’s investment in Regeneron was€11,523 million (based on a quoted stock market price of $542.87 per share as of that date), versus€7,724 million as of December 31, 2014 (based on a quoted stock market price of $410.25 per share). As of December 31, 2013, the market value of the investment was€3,157 million (based on a quoted stock market price of $275.24 per share); that amount was recognized as an available-for-sale financial asset within Other non-current assets.
Per the January 2014 amended and restated investor agreement, Sanofi’s right to designate a Regeneron board member is contingent upon Sanofi maintaining a specific percentage share of Regeneron’s outstanding capital stock (measured on a quarterly basis) at a level no lower than the highest percentage level previously achieved, with the maximum requirement capped at 25%.
D.7. OTHER NON-CURRENT ASSETS
Other non-current assets comprise:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Available-for-sale financial assets | 1,609 | 1,361 | 3,699 | |||||||||
Pre-funded pension obligations (Note D.19.1.) | 49 | 59 | 15 | |||||||||
Long-term loans, advances and other non-current receivables | 671 | 711 | 676 | |||||||||
Financial assets recognized under the fair value option | 276 | 225 | 167 | |||||||||
Derivative financial instruments (Note D.20.) | 120 | 219 | 269 | |||||||||
TOTAL | 2,725 | 2,575 | 4,826 |
Available-for-sale financial assets
Quoted equity securities
Equity interests classified as available-for-sale financial assets include the following publicly traded investments:
· | an investment in
|
· | an equity interest of 4.69% in Nichi-Iko Pharmaceuticals Co. Ltd., valued at€63 million as of December 31, 2015 based on the quoted market price as of that date (versus |
€37 million as of December 31, |
· | an equity injection into Voyager Therapeutics, Inc. carried out under the February 2015 collaboration agreement with that company, valued at€50 million as of December 31, |
· | financial assets held to meet obligations, amounting to€353 million as of December 31, |
Sanofi’s investment in Regeneron Pharmaceuticals Inc. is included inInvestments in associates and joint ventures with effect from April 2014 (see Notes D.1. and D.6.).
A 10% fall in the stock prices of quoted equity investments classified as available-for-sale financial assets would have had the following impact as of December 31, 2012:
F- 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Sanofi’s equity interest in Merrimack Pharmaceuticals, Inc, was divested in full during 2015. The carrying amount of that investment in the balance sheet was€49 million as of December 31, 2014, and€20 million as of December 31, 2013.
Sanofi’s equity interest in Ionis Pharmaceuticals (formerly Isis Pharmaceuticals) acquired as part of the Genzyme acquisition, was divested in full during 2014. The carrying amount of that investment in the balance sheet was€82 million as of December 31, 2013.
A 10% decline in stock prices of quoted equity investments classified as available-for-sale financial assets would have had the following impact as of December 31, 2015:
(€ million) | Sensitivity | |||
Other comprehensive income before tax | (115) | |||
Income before tax | - | |||
Total | (115) | |||
A 10% decline in the quoted market prices of other quoted equity investments classified as available-for-sale financial assets combined with a simultaneous 0.5% rise in the yield curve would have had the following impact as of December 31, 2015:
(€ million) | Sensitivity | |||
Other comprehensive income before tax | (16) | |||
Income before tax | - | |||
Total(1) | (16) | |||
(1) | ||||
As regards other available-for-sale financial assets, a 10% fall in stock prices combined with a simultaneous 0.5% rise in the yield curve would have had the following impact as of December 31, 2012:
Available-for-sale financial assets also include equity investments not quoted in an active market. These investments had a carrying amount of €82 million as of December 31, 2012, €260 million as of December 31, 2011, and €47 million as of December 31, 2010. The reduction in 2012 is related to the sale of the investment in Yves Rocher.
Unquoted equity investments Available-for-sale financial assets also include equity investments not quoted in an active market. The carrying amount of those investments was€102 million as of December 31, 2015, and€79 million as of December 31, 2014 and 2013. Other disclosures about available-for-sale financial assets Other comprehensive income recognized in respect of available-for-sale financial assets represented unrealized gains (net of taxes) amounting to€213 million as of December 31, 2015 (including an immaterial amount relating to the Animal Health business),€234 million as of December 31, 2014 and€2,744 million (including €2,625 million on the investment in Regeneron) as of December 31, 2013. Long-term loans and advances and other non-current receivables Long-term loans, advances and other non-current receivables include tax receivables due after more than one year. Financial assets recognized under the fair value option Financial assets recognized under the fair value option represent a portfolio of financial investments held to fund a deferred compensation plan provided to certain employees. D.8. ASSETS AND LIABILITIES HELD FOR SALE OR EXCHANGE Assets held for sale or exchange, and liabilities related to assets held for sale or exchange, comprise: F- 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued) D.9. INVENTORIES Inventories comprise the following: Write-downs include inventories of products on hand pending marketing approval. Inventories pledged as security for liabilities amounted to€25 million as of December 31, 2015 (compared with€46 million as of December 31, 2014 and€24 million as of December 31, 2013). D.10. ACCOUNTS RECEIVABLE An analysis of accounts receivable is set forth below: The impact of allowances against accounts receivable in the year ended December 31, 2015 was a net expense of€53 million (versus€37 million in 2014 and€28 million in 2013). The gross value of overdue receivables was€677 million as of December 31, 2015, versus€849 million as of December 31, 2014 and€952 million as of December 31, 2013. Amounts overdue by more than one month relate mainly to public-sector customers. Some Group subsidiaries have assigned receivables to factoring companies or banks, without recourse. The amount of receivables that met the conditions described in Note B.8.7. and were therefore derecognized was€414 million as of December 31, 2015 (€428 million as of December 31, 2014;€348 million as of December 31, 2013). The residual guarantees relating to such transfers were immaterial as of December 31, 2015. D.11. OTHER CURRENT ASSETS An analysis of other current assets is set forth below: The carrying amount of Greek government bonds as of December 31, 2012 was €16 million, of which €8 million are reported ininvolved.Current financial assets (see Note D.12.). Assets recognized under the fair value option represent a portfolio of financial investments held to fund a deferred compensation plan offered to certain employees.D.8. Assets and liabilities held for sale or exchange A breakdown as of December 31, 2012 of assets held for sale or exchange, and of liabilities related to assets held for sale or exchange, is shown below:(€ million) December 31,
2012 December 31,
2011 December 31,
2010 Merial (1) D.8.2. — — 7,019 Other D.8.1. 101 67 17 Total assets held for sale or exchange 101 67 7,036 Merial (1) D.8.2. — — 1,672 Other D.8.1. 38 20 — Total liabilities related to assets held for sale or exchange 38 20 1,672 (1)The assets of Merial, classified inAssets held for sale or exchange in 2010, were reclassified in 2011 to the relevant balance sheet line items, in accordance with paragraph 26 of IFRS 5.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)D.8.1. Other assets held for sale As of December 31, 2012, other assets held for sale mainly comprised certain assets of BMP Sunstone held for sale; Zentiva's industrial site at Hlohovec (Slovakia); and research and development sites in the United States and France. As of December 31, 2011, other assets held for sale mainly comprised assets of the BMP Sunstone sub-group that had been held for sale since the acquisition date, plus research and development sites in France and industrial or tertiary sites in Europe. As of December 31, 2010, other assets held for sale comprised research and development sites in France.D.8.2. Merial As explained in Note D.2., the assets and liabilities of Merial have been reported in the relevant balance sheet line item since January 1, 2011. The table below shows the assets and liabilities of Merial classified inAssets held for sale or exchange andLiabilities related to assets held for sale or exchange as of December 31, 2010, after elimination of intercompany balances between Merial and other Group companies.(€ million) December 31,
2015 December 31,
2014 December 31,
2013 Animal Health business D.36. 5,626 - - Other 126 10 14 Assets held for sale or exchange 5,752 10 14 Animal Health business D.36. 983 - - Other - - 1 Liabilities related to assets held for sale or exchange 983 - 1 2015 2014 2013 (€ million) Gross
value Write-
down Carrying
amount Gross
value Write-
down Carrying
amount Gross
value Write-
down Carrying
amount Raw materials 1,050 (90) 960 1,053 (79) 974 971 (86) 885 Work in process 4,043 (561) 3,482 4,021 (488) 3,533 3,926 (362) 3,564 Finished goods 2,282 (208) 2,074 2,258 (203) 2,055 2,082 (179) 1,903 Total 7,375 (859) 6,516 7,332 (770) 6,562 6,979 (627) 6,352 (€ million) December 31, 2015 December 31, 2014 December 31, 2013 Gross value 7,553 7,326 6,968 Allowance (167) (177) (137) Carrying amount 7,386 7,149 6,831 Overdue
accounts Overdue Overdue Overdue Overdue Overdue (€ million) Gross value <1 month 1 to 3
months 3 to 6
months 6 to 12
months > 12 months December 31, 2015 677 171 147 117 83 159 December 31, 2014 849 277 189 126 87 170 December 31, 2013 952 265 222 173 124 168 (€ million) 2015 2014 2013 Taxes recoverable 1,006 1,391 1,556 Other receivables(1) 461 470 467 Prepaid expenses 300 296 264 Total 1,767 2,157 2,287 (1) (€ million)December 31,2010Assets• Property, plant and equipment and financial assets811• Goodwill1,210• Other intangible assets3,961• Deferred tax assets92• Inventories344• Accounts receivable405• Other current assets49• Cash and cash equivalents147Total assets held for sale or exchange7,019Liabilities• Long-term debt4• Non-current provisions70• Deferred tax liabilities1,132• Short-term debt24• Accounts payable161• Other current liabilities281Total liabilities related to assets held for sale or exchange1,672NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)D.9. Inventories Inventories break down as follows: December 31, 2012 December 31, 2011 December 31, 2010 (€ million) Gross Impairment Net Gross Impairment Net Gross Impairment Net Raw materials 969 (72 ) 897 973 (93 ) 880 838 (88 ) 750 Work in process 3,755 (294 ) 3,461 3,444 (209 ) 3,235 2,940 (255 ) 2,685 Finished goods 2,171 (150 ) 2,021 2,107 (171 ) 1,936 1,714 (129 ) 1,585 Total 6,895 (516 ) 6,379 6,524 (473 ) 6,051 5,492 (472 ) 5,020 The value of inventories related to Genzyme was €925 million at the acquisition date (see note D.1.2.) and €540 million at December 31, 2011. Merial inventories reclassified as of January 1, 2011 amounted to €344 million (see note D.8.2.). The impact of changes in provisions for impairment of inventories was a net expense of €28 million in 2012, compared with €6 million in 2011 and €22 million in 2010. Inventories pledged as security for liabilities amounted to €16 million as of December 31, 2012.D.10. Accounts receivable Accounts receivable break down as follows:(€ million) December 31,
2012 December 31,
2011 December 31,
2010 Gross value 7,641 8,176 6,633 Impairment (134 ) (134 ) (126 ) Net value 7,507 8,042 6,507 The value of trade receivables related to Genzyme totaled €764 million at the acquisition date (see Note D.1.2.). Merial trade receivables reclassified as of January 1, 2011 amounted to €405 million (see Note D.8.2.). Impairment losses (net of reversals) against accounts receivable (see Note B.8.2.) amounted to €11 million in 2012, compared with €32 million in both 2011 and 2010. The gross value of overdue receivables as of December 31, 2012 was €1,057 million, compared with €1,103 million as of December 31, 2011 and €887 million as of December 31, 2010.(€ million) Overdue accounts
Gross value Overdue
<1 month Overdue from
1 to 3 months Overdue from
3 to 6 months Overdue from
6 to 12 months Overdue
>12 months December 31, 2012 1,057 371 247 152 126 161 December 31, 2011 1,103 278 227 187 135 276 December 31, 2010 887 255 207 127 97 201 Amounts overdue by more than one month relate mainly to public-sector customers. Some Sanofi subsidiaries have assigned receivables to factoring companies or banks, without recourse. Because these receivables were assigned without recourse, they have been derecognized from the balance sheet as of December 31, 2012; the amount involved is €53 million. The residual guarantees relating to these transfers are immaterial.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)D.11. Other current assets Other current assets break down as follows:(€ million) December 31,
2012 December 31,
2011 December 31,
2010 Taxes recoverable 1,575 1,455 1,188 Other receivables (1) 522 690 626 Prepaid expenses 258 256 186 Total 2,355 2,401 2,000 (1)sales commission receivable, and amounts due from employees.
F- 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.12. CURRENT FINANCIAL ASSETS
An analysis of current financial assets is set forth below:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Interest rate derivatives measured at fair value (see Note D.20.) | 39 | 98 | 24 | |||||||||
Currency derivatives measured at fair value (see Note D.20.) | 59 | 111 | 102 | |||||||||
Other current financial assets | 13 | 9 | 59 | |||||||||
Total | 111 | 218 | 185 |
D.13. CASH AND CASH EQUIVALENTS
(€ million) | 2015 | 2014 | 2013 | |||||||||
Cash | 1,361 | 1,843 | 953 | |||||||||
Cash equivalents(1) | 7,787 | 5,498 | 7,304 | |||||||||
Cash and cash equivalents(2) | 9,148 | 7,341 | 8,257 |
|
|
(2) | Includes |
D.14. NET DEFERRED TAX POSITION
An analysis of the net deferred tax position is set forth below:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Deferred taxes on: | ||||||||||||
Consolidation adjustments (intragroup margin in inventory) | 1,074 | 1,205 | 1,209 | |||||||||
Provision for pensions and other employee benefits | 1,522 | 1,661 | 1,329 | |||||||||
Remeasurement of other acquired intangible assets(1) | (3,370) | (4,095) | (4,182) | |||||||||
Recognition of acquired property, plant and equipment at fair value | (48) | (59) | (63) | |||||||||
Equity interests in subsidiaries and investments in other entities(2) | (833) | (906) | (1,346) | |||||||||
Tax losses available for carry-forward | 1,162 | 738 | 600 | |||||||||
Stock options and other share-based payments | 131 | 119 | 112 | |||||||||
Accrued expenses and provisions deductible at the time of payment(3) | 2,061 | 1,970 | 1,642 | |||||||||
Other | 120 | 122 | (217) | |||||||||
Total net deferred tax asset/(liability) | 1,819 | 755 | (916) |
(1) |
|
(2) | In some countries, the Group is liable |
(3) | Includes deferred tax assets related to restructuring provisions, amounting to
|
The reserves of Sanofi subsidiaries that would be taxable if distributed but for which no distribution is planned, and for which no deferred tax liability has therefore been recognized,
totaled€23.9 billion as of December 31, 2015, compared with€20.1 billion as of December 31, 2014 and€20.4 billion as of December 31, 2013.
F- 46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Most of the Group’s tax loss carry-forwards are available indefinitely. For a description of policies on the recognition of deferred tax assets, refer to Note B.22. The recognition of deferred tax assets is determined on the basis of profit forecasts for each tax group, and of the tax consequences of the strategic opportunities available to the Group. Those forecasts are consistent with the Group’s medium-term
business plan, and are based on time horizons that take account of the period of availability of tax losscarry-forwards and the specific circumstances of each tax group. Deferred tax assets relating to tax losscarry-forwards as of December 31, 2015 amounted to€1,721 million, of which€559 million were not recognized.
The table below shows when the tax losses available for carry-forward are due to expire:
(€ million) | Tax losses available for carry-forward(1) | |||
2016 | 15 | |||
2017 | 49 | |||
2018 | 165 | |||
2019 | 28 | |||
2020 | 26 | |||
2021 and later | 4,926 | |||
Total as of December 31, 2015 | 5,209 | |||
Total as of December 31, 2014 | 3,753 | (2) | ||
Total as of December 31, 2013 | 2,527 | (3) |
(1) | Excluding tax loss carry-forwards on asset disposals. Such carry-forwards amounted to zero as of December 31, 2015 and 2014 and to €158 million as of December 31, 2013. |
(2) | Deferred tax assets relating to tax loss carry-forwards as of December 31, |
Deferred tax assets relating to tax loss carry-forwards as of December 31, |
Use of tax losscarry-forwards is limited to the entity in which they arose. In jurisdictions where tax consolidations are in place, tax losses can be netted against taxable income generated by entities in the same consolidated tax group.
Deferred tax assets not recognized because their future recovery was not regarded as probable given the expected results of the entities in question amounted to€666 million in 2015,€586 million in 2014 and€506 million in 2013.
D.15. CONSOLIDATED SHAREHOLDERS’ EQUITY
D.15.1. Share capital
As of December 31, 2015, the share capital was€2,611,393,518 consisting of 1,305,696,759 shares with a par value of€2. Treasury shares held by the Group are as follows:
Number of shares (million) | % of share capital for the period | |||||||
December 31, 2015 | 4.0 | 0.30% | ||||||
December 31, 2014 | 9.5 | 0.72% | ||||||
December 31, 2013 | 3.6 | 0.27% | ||||||
January 1, 2013 | 3.1 | 0.24% |
Treasury shares are deducted from shareholders’ equity. Gains and losses on disposals of treasury shares are
recorded directly in equity and are not recognized in net income for the period.
F- 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Movements in the share capital of the Sanofi parent company over the last three years are set forth below:
Date | Transaction | Number of shares | Share capital(1) | Additional paid-in capital(1) | ||||||||||
December 31, 2012 | 1,326,342,959 | 2,653 | 6,868 | |||||||||||
During 2013 | Capital increase by exercice of stock subscription options | 15,194,601 | 31 | 875 | ||||||||||
During 2013 | Capital increase by issuance of restricted shares | 1,927,099 | 4 | (4) | ||||||||||
Board meeting of April 30, 2013 | Reduction in share capital by cancellation of treasury shares | (8,387,236) | (17) | (585) | ||||||||||
Board meeting of July 31, 2013 | Reduction in share capital by cancellation of treasury shares | (5,885,439) | (12) | (488) | ||||||||||
Board meeting of December 19, 2013 | Reduction in share capital by cancellation of treasury shares | (6,543,301) | (13) | (487) | ||||||||||
During 2013 | Capital increase reserved for employees | 1,672,198 | 3 | 95 | ||||||||||
December 31, 2013 | 1,324,320,881 | 2,649 | 6,274 | |||||||||||
During 2014 | Capital increase by exercice of stock subscription options | 10,974,771 | 22 | 658 | ||||||||||
During 2014 | Capital increase by issuance of restricted shares | 1,856,847 | 4 | (4) | ||||||||||
Board meeting of April 28, 2014 | Reduction in share capital by cancellation of treasury shares | (8,136,828) | (16) | (588) | ||||||||||
Board meeting of October 27, 2014 | Reduction in share capital by cancellation of treasury shares | (9,648,226) | (20) | (726) | ||||||||||
December 31, 2014 | 1,319,367,445 | 2,639 | 5,614 | |||||||||||
During 2015 | Capital increase by exercice of stock subscription options | 9,000,127 | 18 | 555 | ||||||||||
During 2015 | Capital increase by issuance of restricted shares | 3,071,173 | 6 | (6) | ||||||||||
Board meeting of April 29, 2015 | Reduction in share capital by cancellation of treasury shares | (18,482,786) | (37) | (1,454) | ||||||||||
Board meeting of October 28, 2015 | Reduction in share capital by cancellation of treasury shares | (7,259,200) | (15) | (670) | ||||||||||
December 31, 2015 | 1,305,696,759 | 2,611 | 4,039 |
|
|
For the disclosures about the management of capital required under IFRS 7, refer to Note B.27.
A total of 9,000,127 shares were issued in 2015 as a result of the exercise of Sanofi stock subscription options.
In addition, a total of 3,071,173 shares vested and were issued in 2015 under restricted share plans.
F- 48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.15.2. Restricted share plans
Restricted share plans are accounted for in accordance with the policies described in Note B.24.3. The principal characteristics of these plans are as follows:
Type of plan | 2015 Performance share plan | 2014 Performance share plan | 2013 Performance share plan | |||||||||
Date of Board meeting approving the plan | June 24, 2015 | March 5, 2014 | March 5, 2013 | |||||||||
Total number of shares awarded | 3,832,840 | 3,908,135 | 4,295,705 | |||||||||
Of which subject to a 4-year service period | 2,546,420 | 2,605,515 | 2,838,795 | |||||||||
Fair value per share awarded(1) | 79.52 | 59.68 | 58.29 | |||||||||
Of which subject to a 3-year service period | 1,286,420 | 1,302,620 | 1,456,910 | |||||||||
Fair value per share awarded(1) | 82.96 | 63.26 | 62.19 | |||||||||
Fair value of plan at the date of grant (€ million) | 309 | 238 | 256 |
In addition, a total of 1,074,063 shares vested and were issued in 2012 under restricted share plans. This total includes 523,477 shares issued in March 2012 under the March 1, 2010 plan, and 533,000 shares issued in October 2012 to grantees in France under the global plan under which all employees were entitled to 20 shares each.
|
The total expense recognized for all restricted share plans in the year ended December 31, 2015 amounted to€198 million (including€22 million for the Vaccines segment and€11 million for the Animal Health segment), versus€187 million in the year ended December 31, 2014 and€155 million in the year ended December 31, 2013.
The number of restricted shares not yet fully vested as of December 31, 2015 was 14,076,259, comprising 3,799,440 under the 2015 plans; 3,762,585 under the 2014 plans; 4,012,970 under the 2013 plans; and 2,501,264 under the 2012 plans.
The number of restricted shares not yet fully vested was 14,025,905 as of December 31, 2014 and 12,473,621 as of December 31, 2013.
On March 5, 2014, the Board of Directors approved a performance share unit (PSU) plan, vesting at the end of a three-year service period and subject to performance conditions.
Because PSUs are cash-settled instruments, they are measured at the grant date, at the end of each reporting period, and at the settlement date. The fair value is determined on the basis of the quoted market price per share as of the measurement date, adjusted for expected dividends during the vesting period.
The fair value of the PSU plan (based on vested rights and inclusive of social security charges) as of December 31, 2015, and recognized as a liability as of that date, was€22 million.
D.15.3. Capital increases
There were no capital increases reserved for employees in either 2015 or 2014.
On October 29, 2013, the Sanofi Board of Directors approved an employee share ownership plan in the form of a
capital increase reserved for employees. Group employees were offered the opportunity to subscribe to the capital increase at a price of€59.25 per share, representing 80% of the average of the quoted market prices of Sanofi shares during the 20 trading days preceding the date of the Board meeting. A total of 1.7 million shares were subscribed during the subscription period, which was open from November 7 through November 24, 2013. An expense of€21 million was recognized for this plan in the year ended December 31, 2013 (see Note B.24.2.).
Capital increases arising from the exercise of Sanofi stock subscription options and restricted share plans are described in Note D.15.1.
D.15.4. Repurchase of Sanofi shares
On May 4, 2015, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under that program (and that program alone), the Group repurchased 6,527,368 of its own shares during 2015 for a total amount of€551 million.
On May 5, 2014, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under that program (and that program alone), the Group repurchased during 2015 13,748,572 of its own shares during 2015 for a total amount of€1,230 million and 15,662,113 shares during 2014 for a total amount of€1,201 million.
On May 3, 2013, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under that program (and that program alone), the Group repurchased 8,007,926 of its own shares during 2014 for a total amount of€600 million and 15,806,658 shares during 2013 for a total amount of€1,241 million.
F- 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Group also repurchased 5,528,486 of its own shares during the first half of 2013 for a total amount of€400 million, and 6,060,150 of its own shares during 2012 for a total amount of€397 million, under the share repurchase program authorized in 2012.
D.15.5. Reductions in share capital
Reductions in share capital for the accounting periods presented are described in the table included in Note D.15.1 above.
The reduction due to cancellations of treasury shares had no effect on shareholders’ equity.
D.15.6. Currency translation differences
Currency translation differences comprise the following:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Attributable to equity holders of Sanofi | 701 | (1,211) | (3,707) | |||||||||
Attributable to non-controlling interests | (22) | (28) | (38) | |||||||||
Total | 679 | (1,239) | (3,745) |
The balance as of December 31, 2015 includes an after-tax amount of€66 million relating to hedges of a net investment in a foreign operation (refer to Note B.8.4. for a description of the relevant accounting policy), compared with€72 million as of December 31, 2014 and 2013.
That balance also includes€195 million of currency translation differences relating to the Animal Health
business, presented inAssets held for sale or exchange andLiabilities related to assets held for sale or exchange as of December 31, 2015.
The movement inCurrency translation differences is mainly attributable to the U.S. dollar.
F- 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.15.7. Other comprehensive income
Movements within other comprehensive income are shown below:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Balance, beginning of period | �� | (2,315) | (1,745) | (1,596) | ||||||||
Attributable to equity holders of Sanofi | (2,287) | (1,707) | (1,572) | |||||||||
Attributable to non-controlling interests | (28) | (38) | (24) | |||||||||
Actuarial gains/(losses): | ||||||||||||
· Impact of asset ceiling | - | - | - | |||||||||
· Actuarial gains/(losses) excluding associates and joint ventures (see Note D.19.1.) | 650 | (863) | 809 | |||||||||
· Actuarial gains/(losses) on associates and joint ventures, net of taxes | 2 | (6) | 1 | |||||||||
· Tax effects | (187) | 303 | (152) | |||||||||
Items not subsequently reclassifiable to profit or loss(1) | 465 | (566) | 658 | |||||||||
Available-for-sale financial assets: | ||||||||||||
· Change in fair value excluding associates and joint ventures(2)(3) | (29) | (2,768) | 1,208 | |||||||||
· Change in fair value on associates and joint ventures net of taxes | (8) | 8 | - | |||||||||
· Tax effects | 16 | 250 | (209) | |||||||||
Cash flow hedges: | ||||||||||||
· Change in fair value excluding associates and joint ventures(4) | (3) | - | (3) | |||||||||
· Change in fair value on associates and joint ventures net of taxes | - | - | - | |||||||||
· Tax effects | 1 | - | 1 | |||||||||
Change in currency translation differences: | ||||||||||||
· Currency translation differences on foreign subsidiaries, excluding associates and joint ventures(4) | 1,681 | 2,334 | (1,804) | |||||||||
· Currency translation differences on associates and joint ventures | 243 | 172 | - | |||||||||
· Hedges of net investments in foreign operations | (9) | - | - | |||||||||
· Tax effects | 3 | - | - | |||||||||
Items subsequently reclassifiable to profit or loss(5) | 1,895 | (4) | (807) | |||||||||
Balance, end of period | 45 | (2,315) | (1,745) | |||||||||
Attributable to equity holders of Sanofi | 68 | (2,287) | (1,707) | |||||||||
Attributable to non-controlling interests | (23) | (28) | (38) |
The fair value of this plan is €192 million. This amount is being recognized in
(1) | Items not subsequently reclassifiable to profit or loss
|
Capital increases arising from the exercise of Sanofi stock subscription options and restricted share plans are described in Note D.15.1.
There were no share issues reserved for employees in 2010, 2011 or 2012.
|
(3) | The movements in 2013 and 2014 relate mainly to Regeneron. |
(4) | Includes €(3) million reclassified to profit and loss in 2015 (the amounts reclassified in 2014 and 2013 were immaterial). |
(5) | Items subsequently reclassifiable to profit or loss |
F- 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.15.8. Stock options
Stock option plans awarded
On June 24, 2015, the Board of Directors granted 435,000 stock subscription options at an exercise price of€89.38 per share. The vesting period is four years, and the plan expires on June 24, 2025.
On March 5, 2014, the Board of Directors granted 1,009,250 stock subscription options at an exercise price of€73.48 per share. The vesting period is four years, and the plan expires on March 5, 2024.
On March 5, 2013, the Board of Directors granted 788,725 stock subscription options at an exercise price of€72.19 per share. The vesting period is four years, and the plan expires on March 5, 2023.
Measurement of stock option plans
The fair value of the stock subscription option plan awarded in 2015 is€7 million. That amount is recognized as an expense over the vesting period, with the opposite entry recognized directly in equity. On this basis, an expense of€0.9 million was recognized in the year ended December 31, 2015.
The fair value of the stock subscription option plan awarded in 2014 is€13 million.
The following assumptions were used in determining the fair value of the plans:
|
·
|
|
· | risk-free interest rate: |
· | plan maturity: 7 years
|
Fair value per option awarded are€16.12,€12.61 and€12.02 for the 2015, 2014 in 2013 plans, respectively.
The expense recognized for stock option plans, and the amounts recognized in equity, are€6 million for 2015,€15 million for 2014 (including€0.3 million for the Vaccines segment), and€24 million for 2013 (including€2 million for the Vaccines segment).
As of December 31, 2015, the total unrecognized cost of unvested stock options was€12 million (compared with€12 million as of December 31, 2014 and€16 million as of December 31, 2013), to be recognized over a weighted average period of three years. The current tax benefit related to the exercise of stock options in 2015 was€38 million (versus€30 million in 2014 and€32 million in 2013).
Stock purchase option plans
The table shows all Sanofi stock purchase option plans still outstanding or under which options were exercised in the year ended December 31, 2015.
Source | Date of grant | Number of options granted | Start date of exercise period | Expiry date | Exercise price (€) | Number of options oustanding as of December 31, 2015 | ||||||||||||||||||
Synthélabo | 01/12/1996 | 208,000 | 01/12/2001 | 01/12/2016 | 8.56 | 3,670 | ||||||||||||||||||
Synthélabo | 04/05/1996 | 228,800 | 04/05/2001 | 04/05/2016 | 10.85 | 8,100 | ||||||||||||||||||
Synthélabo | 10/14/1997 | 262,080 | 10/14/2002 | 10/14/2017 | 19.73 | - | ||||||||||||||||||
Synthélabo | 03/30/1999 | 716,040 | 03/31/2004 | 03/30/2019 | 38.08 | 148,081 | ||||||||||||||||||
Total | 159,851 |
Sanofi shares acquired to cover stock purchase option plans are deducted from shareholders’ equity. The exercise of all outstanding stock purchase options would increase shareholders’ equity by€6 million.
Stock subscription option plans
Details of the terms of exercise of stock subscription options granted under the various plans are presented below in Sanofi share equivalents. These options were awarded to certain corporate officers and employees of Group companies.
F- 52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table shows all Sanofi stock subscription option plans still outstanding or under which options were exercised in the year ended December 31, 2015.
Source | Date of grant | Number of options granted | Start date of exercise period | Expiry date | Exercise price (€) | Number of options oustanding as of December 31, 2015 | ||||||||||||||||||
Sanofi-aventis | 12/14/2006 | 11,772,050 | 12/15/2010 | 12/14/2016 | 66.91 | 3,239,355 | ||||||||||||||||||
Sanofi-aventis | 12/13/2007 | 11,988,975 | 12/14/2011 | 12/13/2017 | 62.33 | 3,454,235 | ||||||||||||||||||
Sanofi-aventis | 03/02/2009 | 7,736,480 | 03/04/2013 | 03/01/2019 | 45.09 | 2,209,636 | ||||||||||||||||||
Sanofi-aventis | 03/01/2010 | 8,121,355 | 03/03/2014 | 02/28/2020 | 54.12 | 3,386,638 | ||||||||||||||||||
Sanofi-aventis | 03/09/2011 | 874,500 | 03/10/2015 | 03/09/2021 | 50.48 | 578,330 | ||||||||||||||||||
Sanofi | 03/05/2012 | 814,050 | 03/06/2016 | 03/05/2022 | 56.44 | 700,345 | ||||||||||||||||||
Sanofi | 03/05/2013 | 788,725 | 03/06/2017 | 03/05/2023 | 72.19 | 745,225 | ||||||||||||||||||
Sanofi | 03/05/2014 | 1,009,250 | 03/06/2018 | 03/05/2024 | 73.48 | 959,500 | ||||||||||||||||||
Sanofi | 06/24/2015 | 435,000 | 06/24/2019 | 06/24/2025 | 89.38 | 434,500 | ||||||||||||||||||
Total | 15,707,764 |
The exercise of all outstanding stock subscription options would increase shareholders’ equity by approximately
€947 million. The exercise of each option results in the issuance of one share.
F- 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Summary of stock option plans
A summary of stock options outstanding at each balance sheet date, and of changes during the relevant periods, is presented below:
Number of options | Weighted average exercise price per share (€) | Total (€ million) | ||||||||||
Options outstanding at January 1, 2013 | 51,022,011 | 60.17 | 3,070 | |||||||||
Options exercisable | 34,622,756 | 64.93 | 2,248 | |||||||||
Options granted | 788,725 | 72.19 | 57 | |||||||||
Options exercised | (15,262,957) | 59.46 | (908) | |||||||||
Options cancelled(1) | (264,160) | 58.44 | (15) | |||||||||
Options forfeited | (574,772) | 43.96 | (25) | |||||||||
Options outstanding at December 31, 2013 | 35,708,847 | 61.01 | 2,179 | |||||||||
Options exercisable | 25,813,742 | 63.15 | 1,630 | |||||||||
Options granted | 1,009,250 | 73.48 | 74 | |||||||||
Options exercised | (11,001,611) | 61.84 | (681) | |||||||||
Options cancelled(1) | (114,230) | 60.66 | (7) | |||||||||
Options forfeited | - | - | - | |||||||||
Options outstanding at December 31, 2014 | 25,602,256 | 61.14 | 1,565 | |||||||||
Options exercisable | 22,225,731 | 60.79 | 1,351 | |||||||||
Options granted | 435,000 | 89.38 | 39 | |||||||||
Options exercised | (9,033,607) | 63.50 | (573) | |||||||||
Options cancelled(1) | (179,634) | 60.04 | (11) | |||||||||
Options forfeited | (956,400) | 70.38 | (67) | |||||||||
Options outstanding at December 31, 2015 | 15,867,615 | 60.03 | 953 | |||||||||
Options exercisable | 13,028,045 | 57.56 | 750 |
(1) | Mainly due to the |
F- 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below provides summary information about options outstanding and exercisable as of December 31, 2015:
Outstanding | Exercisable | |||||||||||||||||||
Range of exercise prices per share | Number of options | Average residual life (years) | Weighted average exercise price per share (€) | Number of options | Weighted average exercise price per share (€) | |||||||||||||||
From€1.00 to€10.00 per share | 3,670 | 0.03 | 8.56 | 3,670 | 8.56 | |||||||||||||||
From€10.00 to€20.00 per share | 8,100 | 0.26 | 10.85 | 8,100 | 10.85 | |||||||||||||||
From€30.00 to€40.00 per share | 148,081 | 3.25 | 38.08 | 148,081 | 38.08 | |||||||||||||||
From€40.00 to€50.00 per share | 2,209,636 | 3.17 | 45.09 | 2,209,636 | 45.09 | |||||||||||||||
From€50.00 to€60.00 per share | 4,665,313 | 4.59 | 54.02 | 3,964,968 | 53.59 | |||||||||||||||
From€60.00 to€70.00 per share | 6,693,590 | 1.47 | 64.55 | 6,693,590 | 64.55 | |||||||||||||||
From€70.00 to€80.00 per share | 1,704,725 | 7.75 | 72.92 | - | - | |||||||||||||||
From€80.00 to€90.00 per share | 434,500 | 9.49 | 89.38 | - | - | |||||||||||||||
Total | 15,867,615 | 13,028,045 |
D.15.9. Number of shares used to compute diluted earnings per share
Diluted earnings per share is computed using the number of shares outstanding plus stock options with dilutive effect and restricted shares.
(million) | 2015 | 2014 | 2013 | |||||||||
Average number of shares outstanding | 1,306.2 | 1,315.8 | 1,323.1 | |||||||||
Adjustment for stock options with dilutive effect | 6.0 | 6.3 | 8.9 | |||||||||
Adjustment for restricted shares | 8.5 | 9.0 | 7.1 | |||||||||
Average number of shares outstanding used to compute diluted earnings per share | 1,320.7 | 1,331.1 | 1,339.1 |
In 2015, 0.4 million stock options were not taken into account in calculating diluted earnings per share because they had no dilutive effect, compared with 1.7 million stock options in 2014 and 0.8 million in 2013.
D.15.10. Non-controlling interests
Non-controlling interests did not represent a material component of the Group’s consolidated financial statements in the years ended December 31, 2015, 2014 and 2013.
D.16. FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
Under IFRS 7 (Financial Instruments: Disclosures), fair value measurements must be classified using a fair value hierarchy with the following levels:
· level 1: | quoted prices in active markets for identical assets and liabilities (without modification or repackaging); | |
· level 2: | quoted prices in active markets for similar assets and liabilities, and valuation techniques in which all important inputs are derived from observable market data; | |
·�� level 3: | valuation techniques in which not all important inputs are derived from observable market data. |
The valuation techniques used are described in Note B.8.6.
F- 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows the balance sheet amounts of assets and liabilities measured at fair value:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||
Level in the fair value hierarchy | Level in the fair value hierarchy | Level in the fair value hierarchy | ||||||||||||||||||||||||||||||||||||||
(€ million) | Note | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
Financial assets measured at fair value in the balance sheet: | ||||||||||||||||||||||||||||||||||||||||
Quoted equity investments | D.7. | 1,451 | - | - | 1,282 | - | - | 3,620 | - | - | ||||||||||||||||||||||||||||||
Unquoted equity investments | D.7. | - | - | 102 | - | - | 79 | - | - | 79 | ||||||||||||||||||||||||||||||
Debt securities | D.7. | 56 | - | - | - | - | - | 8 | - | - | ||||||||||||||||||||||||||||||
Financial assets recognized under the fair value option | D.7. | 276 | - | - | 225 | - | - | 167 | - | - | ||||||||||||||||||||||||||||||
Non-current derivatives | D.7. | - | 120 | - | - | 219 | - | - | 269 | - | ||||||||||||||||||||||||||||||
Current derivatives | D.12. | - | 98 | - | - | 209 | - | - | 126 | - | ||||||||||||||||||||||||||||||
Mutual fund investments | D.13. | 5,042 | - | - | 2,537 | - | - | 2,929 | - | - | ||||||||||||||||||||||||||||||
Financial assets measured at fair value | 6,825 | 218 | 102 | 4,044 | 428 | 79 | 6,724 | 395 | 79 | |||||||||||||||||||||||||||||||
Financial liabilities measured at fair value in the balance sheet: | ||||||||||||||||||||||||||||||||||||||||
CVRs issued in connection with the acquisition of Genzyme | D.18. | 24 | - | - | 154 | - | - | 59 | - | - | ||||||||||||||||||||||||||||||
Bayer contingent purchase consideration arising from the acquisition of Genzyme | D.18. | - | - | 1,040 | - | - | 896 | - | - | 650 | ||||||||||||||||||||||||||||||
Other contingent consideration arising from business combinations | D.18. | - | - | 6 | - | - | 36 | - | - | 51 | ||||||||||||||||||||||||||||||
Liabilities related to non-controlling interests | D.18. | - | - | 181 | - | - | 178 | - | - | 148 | ||||||||||||||||||||||||||||||
Non-current derivatives | - | 3 | - | - | 1 | - | - | 3 | - | |||||||||||||||||||||||||||||||
Current derivatives | D.19.4. | - | 82 | - | - | 216 | - | - | 17 | - | ||||||||||||||||||||||||||||||
Financial liabilities measured at fair value | 24 | 85 | 1,227 | 154 | 217 | 1,110 | 59 | 20 | 849 |
No transfer between the different levels of the fair value hierarchy occurred during 2015.
D.17. DEBT, CASH AND CASH EQUIVALENTS
The table below shows changes in the Group’s financial position over the last three years:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Long-term debt | 13,118 | 13,276 | 10,414 | |||||||||
Short-term debt and current portion of long-term debt | 3,436 | 1,538 | 4,176 | |||||||||
Interest rate and currency derivatives used to hedge debt | (156) | (295) | (290) | |||||||||
Total debt | 16,398 | 14,519 | 14,300 | |||||||||
Cash and cash equivalents | (9,148) | (7,341) | (8,257) | |||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 4 | (7) | - | |||||||||
Debt, net of cash and cash equivalents | 7,254 | 7,171 | 6,043 |
“Debt, net of cash and cash equivalents” is a financial indicator used by management and investors to measure the Group’s overall net indebtedness.
F- 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Reconciliation of carrying amount to value on redemption
Value on redemption: | ||||||||||||||||||||||||
(€ million) | Carrying amount: December 31, 2015 | Amortized cost | Adjustment to debt measured at fair value | December 31, 2015 | December 31, 2014 | December 31, 2013 | ||||||||||||||||||
Long-term debt | 13,118 | 58 | (153) | 13,023 | 13,125 | 10,276 | ||||||||||||||||||
Short-term debt and current portion of long-term debt | 3,436 | - | (14) | 3,422 | 1,536 | 4,157 | ||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (156) | - | 121 | (35) | (121) | (119) | ||||||||||||||||||
Total debt | 16,398 | 58 | (46) | 16,410 | 14,540 | 14,314 | ||||||||||||||||||
Cash and cash equivalents | (9,148) | - | - | (9,148) | (7,341) | (8,257) | ||||||||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 4 | - | - | 4 | (7) | - | ||||||||||||||||||
Debt, net of cash and cash equivalents | 7,254 | 58 | (46) | 7,266 | 7,192 | 6,057 |
a) Principal financing transactions during the year
In September 2015, the Group carried out a€2 billion bond issue in three tranches:
· | €750 million of |
· | €500 million
|
· | €750 million of bonds maturing September 2025, bearing interest at an annual rate of 1.50%. |
In addition, in November 2015, the Group tapped its€1,25bn bond, issued in September 2014 and maturing in September 2026, with an additional€260 million. This bond bears a fixed annual interest rate of 1.75%.
These bond issues were carried out under a Euro Medium Term Note (EMTN) public bond issue program.
Two bond issues were redeemed on maturity:
· | a CHF 400 million fixed-rate bond issue carried out in
|
· |
|
The Group also exercised one-year extension options for each of its two€4 billion syndicated credit facilities. Those facilities now expire in December 2020. The Group retains a further one-year extension option for one of the two facilities.
b) Debt, net of cash and cash equivalents by type, at value on redemption
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||
(€ million) | non- current | current | Total | non- current | current | Total | non- current | current | Total | |||||||||||||||||||||||||||
Bond issues | 12,484 | 2,991 | 15,475 | 12,579 | 843 | 13,422 | 9,726 | 3,111 | 12,837 | |||||||||||||||||||||||||||
Other bank borrowings | 477 | 176 | 653 | 486 | 355 | 841 | 487 | 578 | 1,065 | |||||||||||||||||||||||||||
Finance lease obligations | 49 | 18 | 67 | 47 | 15 | 62 | 50 | 13 | 63 | |||||||||||||||||||||||||||
Other borrowings | 13 | 9 | 22 | 13 | 4 | 17 | 13 | 4 | 17 | |||||||||||||||||||||||||||
Bank credit balances | - | 228 | 228 | - | 319 | 319 | - | 451 | 451 | |||||||||||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (11) | (24) | (35) | (32) | (89) | (121) | (113) | (6) | (119) | |||||||||||||||||||||||||||
Total debt | 13,012 | 3,398 | 16,410 | 13,093 | 1,447 | 14,540 | 10,163 | 4,151 | 14,314 | |||||||||||||||||||||||||||
Cash and cash equivalents | - | (9,148) | (9,148) | - | (7,341) | (7,341) | - | (8,257) | (8,257) | |||||||||||||||||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | - | 4 | 4 | - | (7) | (7) | - | - | - | |||||||||||||||||||||||||||
Debt, net of cash and cash equivalents | 13,012 | (5,746) | 7,266 | 13,093 | (5,901) | 7,192 | 10,163 | (4,106) | 6,057 |
F- 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Bond issues carried out by Sanofi under the EMTN program comprise:
May 2009 issue [ISIN: XS0428037740] of |
· | October 2009 issue [ISIN: XS0456451771] of |
· |
|
· |
|
November 2013 issue [ISIN: FR0011625433] of€1 billion, maturing November 2023, bearing annual interest at 2.5%; |
· | September 2014 issue [ISIN: FR0012146751] of€750 million, maturing September 2018, bearing annual interest at 3-month Euribor +0.23%; |
· | September 2014 issue [ISIN: FR0012146777] of€1 billion, maturing March 2022, bearing annual interest at 1.125%; |
· | September 2014 issue [ISIN: FR0012146801] of€1.51 billion (including€260 million issued in November 2015), maturing September 2026, bearing annual interest at 1.75%; |
· | September 2015 issue [ISIN: FR0012969012] of€750 million, maturing March 2019, bearing annual interest at 3-month Euribor +0.30%; |
· | September 2015 issue [ISIN: FR0012969020] of€500 million, maturing September 2021, bearing annual interest at 0.875%; |
· | September 2015 issue [ISIN: FR0012969038] of€750 million, maturing September 2025, bearing annual interest at 1.5%. |
Bond issues carried out by Sanofi under the public bond issue program (shelf registration statement) registered with the U.S. Securities and Exchange Commission (SEC) comprise:
· | March 2011 issue [ISIN: US80105NAD75] of $1.5 billion, maturing March 2016, bearing annual interest at 2.625%; |
· | March 2011 issue [ISIN: US80105NAG07] of $2 billion, maturing March 2021, bearing annual interest at 4%; |
· | April 2013 issue [ISIN:
|
The U.S. dollar issues have been retained in that currency and have not been swapped into euros.
The only outstanding bond issue carried out by Genzyme Corp. is the June 2010 issue [ISIN: US372917AS37] of $500 million, maturing June 2020, bearing annual interest at 5%.
The line “Other borrowings” mainly comprises:
Bond issues made by Genzyme Corp. comprise:
· |
|
series A participating shares issued in 1989, of which 3,271 remain outstanding, |
In order to manage its liquidity needs for current operations, the Group has:
· |
|
· | a syndicated credit facility of€4 billion, drawable in euros and in U.S. dollars, now due to expire on December
|
The Group also has two commercial paper programs, of€6 billion in France and $10 billion in the United States. In 2015, only the U.S. program was utilized, with an average drawdown of€2.1 billion and a maximum drawdown of€3.7 billion. As of December 31, 2015, neither of those programs was being utilized.
The financing in place as of December 31, 2015 at the level of the holding company (which manages most of the Group’s financing needs centrally) is not subject to any financial covenants, and contains no clauses linking credit spreads or fees to the credit rating.
F- 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
c) Debt by maturity, at value on redemption
December 31, 2015 | Current | Non-current | ||||||||||||||||||||||||||
(€ million) | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 and later | |||||||||||||||||||||
Bond issues | 15,475 | 2,991 | 750 | 2,128 | 1,550 | 1,459 | 6,597 | |||||||||||||||||||||
Other bank borrowings | 653 | 176 | 438 | 8 | 12 | 14 | 5 | |||||||||||||||||||||
Finance lease obligations | 67 | 18 | 17 | 14 | 7 | 2 | 9 | |||||||||||||||||||||
Other borrowings | 22 | 9 | - | - | - | - | 13 | |||||||||||||||||||||
Bank credit balances | 228 | 228 | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (35) | (24) | (1) | (1) | (6) | (3) | - | |||||||||||||||||||||
Total debt | 16,410 | 3,398 | 1,204 | 2,149 | 1,563 | 1,472 | 6,624 | |||||||||||||||||||||
Cash and cash equivalents | (9,148) | (9,148) | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 4 | 4 | - | - | - | - | - | |||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,266 | (5,746) | 1,204 | 2,149 | 1,563 | 1,472 | 6,624 |
December 31, 2014 | Current | Non-current | ||||||||||||||||||||||||||
(€ million) | Total | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 and later | |||||||||||||||||||||
Bond issues | 13,422 | 843 | 2,735 | 750 | 1,985 | 800 | 6,309 | |||||||||||||||||||||
Other bank borrowings | 841 | 355 | 16 | 437 | 17 | 7 | 9 | |||||||||||||||||||||
Finance lease obligations | 62 | 15 | 15 | 16 | 10 | - | 6 | |||||||||||||||||||||
Other borrowings | 17 | 4 | - | - | - | - | 13 | |||||||||||||||||||||
Bank credit balances | 319 | 319 | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (121) | (89) | (23) | (1) | - | (6) | (2) | |||||||||||||||||||||
Total debt | 14,540 | 1,447 | 2,743 | 1,202 | 2,012 | 801 | 6,335 | |||||||||||||||||||||
Cash and cash equivalents | (7,341) | (7,341) | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | (7) | (7) | - | - | - | - | - | |||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,192 | (5,901) | 2,743 | 1,202 | 2,012 | 801 | 6,335 |
December 31, 2013 | Current | Non-current | ||||||||||||||||||||||||||
(€ million) | Total | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 and later | |||||||||||||||||||||
Bond issues | 12,837 | 3,111 | 688 | 2,588 | 750 | 1,088 | 4,612 | |||||||||||||||||||||
Other bank borrowings | 1,065 | 578 | 5 | 6 | 433 | 5 | 38 | |||||||||||||||||||||
Finance lease obligations | 63 | 13 | 13 | 13 | 13 | 8 | 3 | |||||||||||||||||||||
Other borrowings | 17 | 4 | - | - | - | - | 13 | |||||||||||||||||||||
Bank credit balances | 451 | 451 | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (119) | (6) | (82) | (22) | (2) | - | (7) | |||||||||||||||||||||
Total debt | 14,314 | 4,151 | 624 | 2,585 | 1,194 | 1,101 | 4,659 | |||||||||||||||||||||
Cash and cash equivalents | (8,257) | (8,257) | - | - | - | - | - | |||||||||||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | - | - | - | - | - | - | - | |||||||||||||||||||||
Debt, net of cash and cash equivalents | 6,057 | (4,106) | 624 | 2,585 | 1,194 | 1,101 | 4,659 |
F- 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2015, the main undrawn confirmed general-purpose credit facilities at holding company level amounted to€8 billion, expiring in 2020.
As of December 31, 2015, no single counterparty represented more than 6% of the Group’s undrawn confirmed credit facilities.
d) Debt by interest rate, at value on redemption
The tables below split debt, net of cash and cash equivalents between fixed and floating rate, and by maturity or contractual repricing date, as of December 31, 2015. The figures shown are the value on redemption, before the effects of derivative instruments:
(€ million) | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 and later | |||||||||||||||||||||
Fixed-rate debt | 14,361 | 2,960 | 1,177 | 1,377 | 794 | 1,456 | 6,597 | |||||||||||||||||||||
of which EUR | 9,272 | |||||||||||||||||||||||||||
of which USD | 5,087 | |||||||||||||||||||||||||||
% fixed-rate | 88% | |||||||||||||||||||||||||||
Floating-rate debt (maturity based on contractual repricing date) | 2,049 | 2,049 | - | - | - | - | - | |||||||||||||||||||||
of which EUR | 1,590 | |||||||||||||||||||||||||||
of which USD | 82 | |||||||||||||||||||||||||||
% floating-rate | 12% | |||||||||||||||||||||||||||
Debt | 16,410 | 5,009 | 1,177 | 1,377 | 794 | 1,456 | 6,597 | |||||||||||||||||||||
Cash and cash equivalents | (9,144) | (9,144) | - | - | - | - | - | |||||||||||||||||||||
of which EUR | (7,243) | |||||||||||||||||||||||||||
of which USD | (1,040) | |||||||||||||||||||||||||||
% floating-rate | 100% | |||||||||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,266 | (4,135) | 1,177 | 1,377 | 794 | 1,456 | 6,597 |
The Group manages its net debt in mainly two currencies: the euro and the U.S. dollar. Thefloating-rate portion of this debt exposes the Group to rises in interest rates, primarily in the Eonia and Euribor benchmark rates (for the euro) and in the U.S. Libor and Federal Fund Effective rates (for the U.S. dollar).
To optimize the cost of debt and/or reduce the volatility of debt, the Group uses derivative instruments (interest rate swaps, cross currency swaps and – where appropriate – interest rate options) that alter the fixed/floating rate split of debt and the maturity based on contractual repricing dates, as shown below:
(€ million) | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 and later | |||||||||||||||||||||
Fixed-rate debt | 10,435 | 1,459 | 751 | 1,378 | - | 1,459 | 5,388 | |||||||||||||||||||||
of which EUR | 5,804 | |||||||||||||||||||||||||||
of which USD | 4,629 | |||||||||||||||||||||||||||
% fixed-rate | 64% | |||||||||||||||||||||||||||
Floating-rate debt (maturity based on contractual repricing date) | 5,975 | 5,975 | - | - | - | - | - | |||||||||||||||||||||
of which EUR | 5,058 | |||||||||||||||||||||||||||
of which USD | 540 | |||||||||||||||||||||||||||
% floating-rate | 36% | |||||||||||||||||||||||||||
Debt | 16,410 | 7,434 | 751 | 1,378 | - | 1,459 | 5,388 | |||||||||||||||||||||
Cash and cash equivalents | (9,144) | (9,144) | - | - | - | - | - | |||||||||||||||||||||
of which EUR | (7,506) | |||||||||||||||||||||||||||
of which USD | (948) | |||||||||||||||||||||||||||
% floating-rate | 100% | |||||||||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,266 | (1,710) | 751 | 1,378 | - | 1,459 | 5,388 |
F- 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows the fixed/floating rate split at value on redemption after taking account of derivative instruments as of December 31, 2014 and 2013:
(€ million) | 2014 | % | 2013 | % | ||||||||||||
Fixed-rate debt | 9,103 | 63% | 8,323 | 58% | ||||||||||||
Floating-rate debt | 5,437 | 37% | 5,991 | 42% | ||||||||||||
Debt | 14,540 | 100% | 14,314 | 100% | ||||||||||||
Cash and cash equivalents | (7,348) | (8,257) | ||||||||||||||
Debt, net of cash and cash equivalents | 7,192 | 6,057 |
The weighted average interest rate on debt as of December 31, 2015 was 2.3% before derivative instruments and 1.8% after derivative instruments. All cash and cash equivalents were invested at an average rate of 0.5% as of December 31, 2015.
The projectedfull-year sensitivity to interest rate fluctuations of the Group’s debt, net of cash and cash equivalents for 2016 is as follows:
Change in EUR, USD short-term interest rates | Impact on pre-tax net income (€ million) | Impact on pre-tax income/(expense) recognized directly in equity (€ million) | ||||||
+100 bp | 32 | 9 | ||||||
+25 bp | 8 | 2 | ||||||
-25 bp | (8) | (2) | ||||||
-100 bp | (32) | (9) |
e) Debt by currency, at value on redemption
The table below shows debt, net of cash and cash equivalents by currency at December 31, 2015, before and after derivative instruments contracted to convert third party debt into the functional currency of the borrower entity:
(€ million) | Before derivative instruments | After derivative instruments | ||||||
EUR | 3,619 | 3,356 | ||||||
USD | 4,129 | 4,221 | ||||||
JPY | (194) | (23) | ||||||
INR | (139) | (139) | ||||||
DZD | 122 | 122 | ||||||
Other currencies | (271) | (271) | ||||||
Debt, net of cash and cash equivalents | 7,266 | 7,266 |
The table below shows debt, net of cash and cash equivalents by currency at December 31, 2014 and 2013, after derivative instruments contracted to convert third party debt into the functional currency of the borrower entity:
(€ million) | 2014 | 2013 | ||||||
EUR | 3,446 | (455) | ||||||
USD | 3,863 | 6,207 | ||||||
Other currencies | (117) | 305 | ||||||
Debt, net of cash and cash equivalents | 7,192 | 6,057 |
F- 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
f) Market value of debt
The market value of debt, net of cash and cash equivalents and of derivatives and excluding accrued interest, amounted to€7,633 million as of December 31, 2015 (versus€7,730 million as of December 31, 2014 and€6,224 million as of December 31, 2013). This compares with a value on redemption of€7,266 million as of December 31, 2015
(versus€7,192 million as of December 31, 2014 and€6,057 million as of December 31, 2013).
The fair value of debt is determined by reference to quoted market prices at the balance sheet date in the case of quoted instruments (level 1 in the IFRS 7 hierarchy, see Note D.16.), and by reference to the fair value of interest rate and currency derivatives used to hedge debt (level 2 in the IFRS 7 hierarchy, see Note D.16.).
g) Future contractual cash flows relating to debt and debt hedging instruments
The table below shows the amount of future contractual undiscounted cash flows (principal and interest) relating to debt and to derivative instruments designated as hedges of debt:
December 31, 2015 | Contractual cash flows by period | |||||||||||||||||||||||||||
(€ million) | Total | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 and later | |||||||||||||||||||||
Debt | 17,960 | 3,653 | 1,471 | 2,389 | 1,794 | 1,668 | 6,985 | |||||||||||||||||||||
principal | 16,325 | 3,308 | 1,215 | 2,146 | 1,564 | 1,472 | 6,620 | |||||||||||||||||||||
interest(1) | 1,635 | 345 | 256 | 243 | 230 | 196 | 365 | |||||||||||||||||||||
Net cash flows related to derivative instruments | (165) | (78) | (38) | (26) | (21) | (2) | - | |||||||||||||||||||||
Total | 17,795 | 3,575 | 1,433 | 2,363 | 1,773 | 1,666 | 6,985 |
|
|
Future contractual cash flows are shown on the basis of the carrying amount in the balance sheet at the reporting date, without reference to any subsequent management decision that might materially alter the structure of the Group’s debt or its hedging policy.
The tables below show the amount of future contractual undiscounted cash flows (principal and interest) relating to debt and to derivative instruments designated as hedges of debt as of December 31, 2014 and 2013:
December 31, 2014 | Contractual cash flows by period | |||||||||||||||||||||||||||
(€ million) | Total | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 and later | |||||||||||||||||||||
Debt | 16,199 | 1,702 | 3,080 | 1,422 | 2,216 | 1,003 | 6,776 | |||||||||||||||||||||
principal | 14,464 | 1,348 | 2,771 | 1,196 | 2,007 | 804 | 6,338 | |||||||||||||||||||||
interest(1) | 1,735 | 354 | 309 | 226 | 209 | 199 | 438 | |||||||||||||||||||||
Net cash flows related to derivative instruments | (217) | (71) | (72) | (33) | (21) | (19) | (1) | |||||||||||||||||||||
Total | 15,982 | 1,631 | 3,008 | 1,389 | 2,195 | 984 | 6,775 |
Maturities used for credit facility drawdowns are those of the facility, not the drawdown.
The tables below show the amount of future contractual undiscounted cash flows (principal and interest) relating to debt and to derivative instruments designated as hedges of debt as of December 31, 2011 and 2010:
| December 31, 2011 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual cash flows by maturity | |||||||||||||||||||||
(€ million) | Total | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 and later | |||||||||||||||
Debt | 16,726 | 3,193 | 3,184 | 3,426 | 877 | 2,852 | 3,194 | |||||||||||||||
– principal | 14,748 | 2,783 | 2,814 | 3,134 | 639 | 2,654 | 2,724 | |||||||||||||||
– interest (1) | 1,978 | 410 | 370 | 292 | 238 | 198 | 470 | |||||||||||||||
Net cash flows related to derivative instruments | (231 | ) | (72 | ) | (66 | ) | (48 | ) | (21 | ) | (28 | ) | 4 | |||||||||
Total | 16,495 | 3,121 | 3,118 | 3,378 | 856 | 2,824 | 3,198 | |||||||||||||||
(1) | Interest 2014. |
December 31, 2013 | Contractual cash flows by period | |||||||||||||||||||||||||||
(€ million) | Total | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 and later | |||||||||||||||||||||
Debt | 15,891 | 4,457 | 930 | 2,859 | 1,367 | 1,258 | 5,020 | |||||||||||||||||||||
principal | 14,245 | 4,096 | 633 | 2,601 | 1,191 | 1,096 | 4,628 | |||||||||||||||||||||
interest(1) | 1,646 | 361 | 297 | 258 | 176 | 162 | 392 | |||||||||||||||||||||
Net cash flows related to derivative instruments | (203) | (85) | (56) | (52) | (14) | (3) | 7 | |||||||||||||||||||||
Total | 15,688 | 4,372 | 874 | 2,807 | 1,353 | 1,255 | 5,027 |
| December 31, 2010 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual cash flows by maturity | |||||||||||||||||||||
(€ million) | Total | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 and later | |||||||||||||||
Debt | 9,354 | 1,699 | 875 | 2,418 | 1,360 | 462 | 2,540 | |||||||||||||||
– principal | 8,150 | 1,447 | 632 | 2,200 | 1,208 | 347 | 2,316 | |||||||||||||||
– interest (1) | 1,204 | 252 | 243 | 218 | 152 | 115 | 224 | |||||||||||||||
Net cash flows related to derivative instruments | (229 | ) | (5 | ) | (83 | ) | (49 | ) | 3 | (89 | ) | (6 | ) | |||||||||
Total | 9,125 | 1,694 | 792 | 2,369 | 1,363 | 373 | 2,534 | |||||||||||||||
(1) | Interest |
F- 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.18. LIABILITIES RELATED TO BUSINESS COMBINATIONS AND TO NON-CONTROLLING INTERESTS
For a description of the nature of the liabilities reported in the line itemLiabilities related to business combinations and to non-controlling interests, refer to Note B.8.5. The principal acquisitions are described in Note D.1.
The liabilities related to business combinations and to non-controlling interests shown in the table below are classified as level 3 instruments under the IFRS 7 fair value hierarchy (see Note D.16.), except for the CVRs issued in connection with the acquisition of Genzyme, which are classified as level 1 instruments.
Movements in liabilities related to business combinations and to non-controlling interests are shown below:
(€ million) | Liabilities related to non-controlling interests(1) | CVRs issued in connection with the acquisition of Genzyme(2) | Bayer contingent consideration arising from the acquisition of Genzyme | Other(3) | Total(5) | |||||||||||||||
Balance at January 1, 2013 | 192 | 321 | 632 | 305 | 1,450 | |||||||||||||||
New business combinations | 1 | - | - | - | 1 | |||||||||||||||
Payments made | (39) | (6) | (24) | (34) | (103) | |||||||||||||||
Fair value remeasurements through profit or loss: gain/(loss) (including unwinding of discount) | - | (246) | 60 | (128) | (314) | |||||||||||||||
Other movements | (6) | - | - | (82) | (88) | |||||||||||||||
Currency translation differences | - | (10) | (18) | (10) | (38) | |||||||||||||||
Balance at December 31, 2013 | 148 | 59 | 650 | 51 | 908 | |||||||||||||||
New business combinations | 43 | - | - | - | 43 | |||||||||||||||
Payments made | (1) | (1) | (7) | (3) | (12) | |||||||||||||||
Fair value remeasurements through profit or loss: gain/(loss) (including unwinding of discount) | - | 82 | 238 | (17) | 303 | |||||||||||||||
Other movements | (19) | - | - | - | (19) | |||||||||||||||
Currency translation differences | 7 | 14 | 15 | 5 | 41 | |||||||||||||||
Balance at December 31, 2014 | 178 | 154 | 896 | 36 | 1,264 | |||||||||||||||
New business combinations | - | - | - | - | - | |||||||||||||||
Payments made | - | - | (63) | (7) | (70) | |||||||||||||||
Fair value remeasurements through profit or loss: gain/(loss) (including unwinding of discount)(4) | - | (143) | 104 | (14) | (53) | |||||||||||||||
Other movements | (5) | - | - | (11) | (16) | |||||||||||||||
Currency translation differences | 8 | 13 | 103 | 2 | 126 | |||||||||||||||
Balance at December 31, 2015 | 181 | 24 | 1,040 | 6 | 1,251 |
|
(2) | Based on the quoted market price per CVR of |
(3) | In 2013, includes the reversal through profit or loss of the contingent consideration liabilities relating to the acquisitions of TargeGen and BiPar; those liabilities amounted to €156 million and €73 million, respectively, as of December 31, 2012 |
Portion due after more than one year: |
F- 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Bayer contingent consideration liability was assumed on the acquisition of Genzyme in 2011.
In a business combination completed in May 2009, prior to Sanofi’s acquisition of control over Genzyme, Genzyme acquired from Bayer Schering Pharma A.G. (Bayer) the worldwide development and marketing rights to alemtuzumab (under the brand name LemtradaTM), a molecule under development for multiple sclerosis, as well as the rights to the products Campath®, Fludara® and Leukine®. In exchange, Bayer is entitled to receive the following payments:
· |
|
· | a percentage of aggregate sales of |
· |
|
· | milestone payments based on specified levels of worldwide sales of alemtuzumab beginning in 2021, unless Genzyme exercises its right to buy out
|
The fair value of the Bayer contingent consideration liability was measured at€1,040 million as of December 31, 2015, versus€896 million as of December 31, 2014 and€650 million as of December 31, 2013.
The fair value of this liability is determined by applying the above contractual terms to sales projections that have been weighted to reflect the probability of success, and discounted. If the discount rate were to be reduced by one percentage point, the fair value of the Bayer contingent consideration liability would increase by approximately 4%.
The table below sets forth the maximum amount of contingent consideration payable and firm commitments to buy out non-controlling interests:
December 31, 2015 | Payments due by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
Commitments relating to contingent consideration in connection with business combinations(1) and buyouts of non-controlling interests(2) | 5,073 | 126 | 485 | 362 | 4,100 |
As of December 31, 2012, the other liabilities related to business combinations mainly comprised contingent consideration related to the acquisitions of TargeGen (€156 million, versus €159 million as of December 31, 2011 and €94 million as of December 31, 2010) and of BiPar (€73 million, versus €74 million as of December 31, 2011 and €70 million as of December 31, 2010). Having reviewed the results of the Phase IIb trial of FOV-1101, which led to a reassessment of its commercial prospects, Sanofi decided to pursue development of this product via a sub-licensing agreement with an as yet unidentified third party. Consequently, the Fovea contingent consideration liability (€151 million as of December 31, 2011, €155 million as of December 31, 2010) was reversed during 2012 as an adjustment to goodwill, in accordance with the pre-revision IFRS 3.
The table below sets forth the maximum amount of contingent consideration payable and firm commitments to buy out non-controlling interests:
December 31, 2012 | ||||||||||||||||
Payments due by period | ||||||||||||||||
(€ million) | Total | Less than 1 year | From 1 to 3 years | From 3 to 5 years | More than 5 years | |||||||||||
Commitments relating to contingent consideration in connection with business combinations (1) and buyouts of non-controlling interests (2) | 4,993 | 341 | 1,135 | 560 | 2,957 | |||||||||||
(1) | Includes |
(2) | This line does not include put options granted to non-controlling interests.
|
Total commitments relating to contingent consideration in connection with business combinations and buyouts of non-controlling interests were€4,745 million and€4,416 million as of December 31, 2014 and 2013, respectively. The increase in such commitments during 2015 was mainly due to the effect of foreign exchange rates on commitments denominated in U.S. dollars.
F- 64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.19. PROVISIONS AND OTHER LIABILITIES
Provisions and other non-current liabilities comprise the following:
(€ million) | Provisions for pensions & other post- employment (D.19.1.) | Provisions for other long-term benefits | Restructuring provisions (D.19.2.) | Other Provisions (D.19.3.) | Other non- current liabilities | Total | ||||||||||||||||||
Balance at January 1, 2013 | 5,242 | 531 | 1,461 | 3,711 | 98 | 11,043 | ||||||||||||||||||
Changes in scope of consolidation | - | - | - | 17 | - | 17 | ||||||||||||||||||
Increases in provisions and other liabilities | 243 | (1) | 83 | 153 | 373 | (2) | 4 | 856 | ||||||||||||||||
Provisions utilized | (724) | (1) | (58) | (74) | (163) | - | (1,019) | |||||||||||||||||
Reversals of unutilized provisions | (3) | (1) | - | (29) | (669) | (3) | - | (701) | ||||||||||||||||
Transfers | 6 | (11) | (480) | (196) | (1) | (682) | ||||||||||||||||||
Net interest related to employee benefits, and unwinding of discount | 150 | 9 | 32 | 40 | - | 231 | ||||||||||||||||||
Unrealized gains and losses | - | - | - | (7) | - | (7) | ||||||||||||||||||
Currency translation differences | (80) | (11) | (2) | (98) | (3) | (194) | ||||||||||||||||||
Actuarial gains and losses on defined-benefit plans(4) | (809) | - | - | - | - | (809) | ||||||||||||||||||
Balance at December 31, 2013 | 4,025 | 543 | 1,061 | 3,008 | 98 | 8,735 | ||||||||||||||||||
Changes in scope of consolidation | - | - | - | 1 | - | 1 | ||||||||||||||||||
Increases in provisions and other liabilities | 225 | (1) | 145 | 140 | 352 | (2) | 35 | 897 | ||||||||||||||||
Provisions utilized | (486) | (1) | (69) | (13) | (203) | - | (771) | |||||||||||||||||
Reversals of unutilized provisions | (52) | (1) | - | (8) | (207) | (3) | - | (267) | ||||||||||||||||
Transfers | 31 | (6) | (372) | (28) | - | (375) | ||||||||||||||||||
Net interest related to employee benefits, and unwinding of discount | 133 | 9 | 22 | 50 | - | 214 | ||||||||||||||||||
Unrealized gains and losses | - | - | - | 1 | - | 1 | ||||||||||||||||||
Currency translation differences | 134 | 28 | 5 | 102 | 11 | 280 | ||||||||||||||||||
Actuarial gains and losses on defined-benefit plans(4) | 863 | - | - | - | - | 863 | ||||||||||||||||||
Balance at December 31, 2014 | 4,873 | 650 | 835 | 3,076 | 144 | 9,578 | ||||||||||||||||||
Changes in scope of consolidation | - | - | - | 13 | - | 13 | ||||||||||||||||||
Increases in provisions and other liabilities | 290 | (1) | 108 | 265 | 475 | (2) | 114 | 1,252 | ||||||||||||||||
Provisions utilized | (366) | (1) | (73) | (16) | (130) | - | (585) | |||||||||||||||||
Reversals of unutilized provisions | (39) | (1) | (7) | (12) | (256) | (3) | (1) | (315) | ||||||||||||||||
Transfers | 43 | 3 | (317) | (57) | - | (328) | ||||||||||||||||||
Reclassification of the Animal Health business(5) | (76) | (34) | (3) | (34) | (2) | (149) | ||||||||||||||||||
Net interest related to employee benefits, and unwinding of discount | 109 | 5 | 5 | 37 | 2 | 158 | ||||||||||||||||||
Unrealized gains and losses | - | - | - | - | 5 | 5 | ||||||||||||||||||
Currency translation differences | 124 | 26 | 5 | 22 | 13 | 190 | ||||||||||||||||||
Actuarial gains and losses on defined-benefit plans(4) | (650) | - | - | - | - | (650) | ||||||||||||||||||
Balance at December 31, 2015 | 4,308 | 678 | 762 | 3,146 | 275 | 9,169 |
(1) | In the case of
|
(2) | Amounts charged during the period mainly comprise provisions to cover tax exposures in various |
(3) | Reversals relate mainly to provisions for tax exposures, reversed either because (i) the |
(4) | Amounts recognized |
(5) |
F- 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other current liabilities are described in Note D.19.4.
D.19.1. Provisions for pensions and other post-employment benefits
The Group offers its employees pension plans and other post-employment benefit plans. The specific features of the plans (benefit formulas, fund investment policy and fund assets held) vary depending on the applicable laws and regulations in each country where the employees work. These employee benefits are accounted for in accordance with the revised IAS 19 (see Note B.23.).
The Group’s pension obligations in four major countries represented over 91% of the total value of the defined-benefit liability and over 90% of the total value of plan assets as of December 31, 2015. The features of the principal defined-benefit plans in each of these four countries are described below.
France
Lump-sum retirement benefit plans
All employees working for Sanofi in France are entitled on retirement to a lump-sum payment, the amount of which depends both on their length of service in the Group and on the rights guaranteed by collective and internal agreements. The employee’s final salary is used in calculating the amount of these lump-sum retirement benefits. These plans represent approximately 30% of the Group’s total obligation in France.
Defined-benefit pension plans
These plans provide benefits from the date of retirement. Employees must fulfil a number of criteria to be eligible for these benefits. All but one of these plans are closed to new entrants. These plans represent approximately 67% of the Group’s total obligation in France.
Germany
Top-up defined-benefit pension plan
The benefits offered under this pension plan are estimated on the basis of an average career salary, and are wholly funded by the employer (there are no employee contributions) via a Contractual Trust Agreement (CTA), under which benefits are estimated on the basis of an average career salary. Employees are entitled to receive an annuity under this plan if their salary exceeds the social security ceiling. The amount of the pension is calculated by reference to a range of vesting rates corresponding to salary bands. The plan also includes disability and death benefits; it represents approximately 73% of the Group’s total obligation in Germany.
Sanofi-Aventis plus (SAV plus)
Starting April 2015, a new top-up pension plan (SAV plus) has replaced the previous top-up defined-benefit plan. New entrants joining the plan after April 1, 2015 contribute to a defined-contribution plan that is partially funded via the company’s CTA.
All employees whose salary exceeds the social security ceiling are automatically covered by the plan. The employer’s contribution is 15% of the amount by which the employee’s salary exceeds the social security ceiling.
Multi-employer plan (Pensionkasse)
This is a defined-benefit plan that is treated as a defined-contribution plan, in accordance with the accounting policies described in Note B.23. Currently, contributions cover the level of annuities. Only the portion relating to the future revaluation of the annuities is included in the defined-benefit pension obligation. The obligation relating to this revaluation amounted to€670 million as of December 31, 2015, versus€745 million as of December 31, 2014 and€638 million as of December 31, 2013. This plan represents approximately 19% of the Group’s total defined-benefit obligation in Germany.
United States
Defined-benefit pension plans
In the United States, there are two types of defined-benefit plan:
“Qualified” plans within the
|
· | “Non-qualified” plans
|
F- 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Healthcare cover and life insurance
Group companies provide some eligible employees with healthcare cover and life insurance during the retirement period (the Group’s contributions are capped at a specified level). This plan represents approximately 22% of the Group’s total obligation in the United States.
United Kingdom
Defined-benefit pension plans
Sanofi operates a number of pension plans in the United Kingdom that reflect the Group’s past acquisitions. The two most significant arrangements are the Sanofi plan and the Genzyme Limited plan; both are defined-benefit plans, and both have been closed since October 1, 2015. With effect from that date, employees can no longer pay into these plans.
Under these defined-benefit plans, an annuity is paid from the retirement date. This annuity is calculated on the basis of the employee’s length of service as of September 30, 2015, and of the employee’s final salary (or salary on the date he or she leaves the Group).
The rates used for the vesting of rights vary from member to member. For most members, rights vest at the rate of 1.25% or 1.50% of final salary for each qualifying year of service giving entitlement. The notional retirement age varies
according to the category to which the member belongs, but in most cases retirement is at age 65. Members may choose to retire before or after the notional retirement age (60 years), in which case the amount of the annual pension is adjusted to reflect the revised estimate of the length of the retirement phase. Pensions are usually indexed to the Retail Price Index (RPI). Members paid a fixed-percentage contribution into their pension plan (the percentage varied according to the employee category), and the employer topped up the contribution to the required amount. These plans currently represent approximately 99% of the Group’s total obligation in the United-Kingdom.
Until closure of the plans, members paid a fixed-percentage contribution into their pension plan (the percentage varied according to the employee category), and the employer topped up the contribution to cover the cost of benefit accrual which was revised regularly (at least every three years) as part of statutory funding valuation.
For future service periods subsequent to October 1, 2015, employees will belong to a new defined-contribution plan.
Actuarial assumptions used to measure the Group’s obligations
Actuarial valuations of the Group’s benefit obligations were computed by management with assistance from external actuaries as of December 31, 2015, 2014 and 2013.
Those calculations were based on the following financial and demographic assumptions:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
France | Germany | USA | UK | France | Germany | USA | UK | France | Germany | USA | UK | |||||||||||||||||||||||||||||||||||||
Discount rate(1)/(2) | | 1.50% or 2.25% | | | 1.50% or 2.25% | | 4.00% | 4.00% | | 1.25% or 1.75% | | | 1.25% or 1.75% | | 3.75% | 3.75% | | 2.50% or 3.25% | | | 2.50% or 3.25% | | 4.75% | 4.50% | ||||||||||||||||||||||||
General inflation rate | 1.75% | 1.75% | 2.25% | 3.15% | 1.75% | 1.75% | 2.50% | 3.20% | 2.00% | 2.00% | 2.50% | 3.35% | ||||||||||||||||||||||||||||||||||||
Pension benefit indexation | | 1.25% to 2.25% | | 1.75% | - | 3.15% | | 1.25% to 2.25% | | 1.75% | - | 3.20% | | 3.00% to 5.00% | | 2.00% | - | 3.35% | ||||||||||||||||||||||||||||||
Healthcare cost inflation rate | 2.00% | - | (3) | 6.10% | 1.50% | 2.00% | - | (3) | 6.80% | 1.25% | 2.00% | - | (3) | 7.00% | 1.25% | |||||||||||||||||||||||||||||||||
Retirement age |
| 62 to 67 |
| 62 |
| 55 to 70 |
| 60 |
| 61 to 67 |
| 62 |
| 55 to 70 |
| 60 |
| 61 to 67 |
| 62 |
| 55 to 70 |
| 60 | ||||||||||||||||||||||||
Mortality table | | TGH/ TGF 05 | |
| Heubeck RT 2005 G |
| | RP2015 G. Scale MP2015 | | | SAPS S2 | | | TGH/ TGF 05 | |
| Heubeck RT 2005 G |
| | RP2014 G. Scale MP2014 | | SAPS | | TGH/ TGF 05 | |
| Heubeck RT 2005 G |
| | RP2000 Proj BB | | SAPS |
(1) | The discount rates used are based on market rates for high quality corporate bonds with a duration close to the expected benefit payments |
Sensitivity analysis
(2) | Rate depends on the duration of |
(3) | No post-employment healthcare benefits are provided in Germany. |
F- 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Weighted average duration of obligation for pensions and other long-term benefits in principal countries
The table below shows the duration of the Group’s obligations in the principal countries:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
(in years) | France | Germany | USA | UK | France | Germany | USA | UK | France | Germany | USA | UK | ||||||||||||||||||||||||||||||||||||
Weighted average duration in main countries | 13 | 14 | 14 | 17 | 14 | 14 | 14 | 17 | 14 | 13 | 13 | 17 |
Sensitivity analysis
The table below shows the sensitivity of the Group’s obligations for pensions and other post-employment benefits to changes in the key actuarial assumptions:
(€ million) | Pensions and other post-employment benefits, by principal country | |||||||||||||||||||
Measurement of defined-benefit obligation | Change in assumption | France | Germany | USA | UK | |||||||||||||||
Discount rate | -0.50% | +146 | +228 | +164 | +256 | |||||||||||||||
General inflation rate | +0.50% | +160 | +300 | (34) | +173 | |||||||||||||||
Pension benefits indexation | +0.50% | +92 | +290 | (37) | +140 | |||||||||||||||
Healthcare cost inflation rate | +0.50% | +3 | - | (11) | - | |||||||||||||||
Mortality table | +1 year | +54 | +93 | +29 | +79 |
F- 68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below reconciles the net obligation in respect of the Group’s pension and other post-employment benefit plans with the amounts recognized in the consolidated financial statements:
Pensions and other post-employment benefits | ||||||||||||
(€ million) | 2015 | 2014 | 2013 | |||||||||
Measurement of the obligation: | ||||||||||||
Beginning of period | 13,302 | 11,251 | 12,014 | |||||||||
Reclassification of the Animal Health business(1) | (266) | - | - | |||||||||
Current service cost | 262 | 214 | 233 | |||||||||
Interest cost | 362 | 418 | 384 | |||||||||
Actuarial losses/(gains) due to changes in demographic assumptions | (37) | (25) | 13 | |||||||||
Actuarial losses/(gains) due to changes in financial assumptions | (679) | 1,618 | (555) | |||||||||
Actuarial losses/(gains) due to experience adjustments | (13) | (30) | 30 | |||||||||
Plan amendments | 18 | 5 | 5 | |||||||||
Plan curtailments | (39) | (16) | (8) | |||||||||
Plan settlements specified in the terms of the plan | (61) | (54) | (62) | |||||||||
Plan settlements not specified in the terms of the plan | (6) | (110) | - | |||||||||
Benefits paid | (556) | (507) | (547) | |||||||||
Changes in scope of consolidation and transfers | 36 | (2) | 2 | |||||||||
Currency translation differences | 502 | 540 | (258) | |||||||||
Obligation at end of period | 12,825 | 13,302 | 11,251 | |||||||||
Fair value of plan assets: | ||||||||||||
Beginning of period | 8,488 | 7,241 | 6,778 | |||||||||
Reclassification of the Animal Health business(1) | (208) | - | - | |||||||||
Interest income on plan assets | 254 | 285 | 234 | |||||||||
Difference between actual return and interest income on plan assets | (79) | 700 | 297 | |||||||||
Administration costs | (13) | (11) | (10) | |||||||||
Plan settlements specified in the terms of the plan | (61) | (54) | (62) | |||||||||
Plan settlement not specified in the terms of the plan | (6) | (63) | - | |||||||||
Contributions from plan members | 4 | 5 | 5 | |||||||||
Employer’s contribution | 225 | 354 | 525 | |||||||||
Benefits paid | (415) | (375) | (348) | |||||||||
Changes in scope of consolidation and transfers | - | - | - | |||||||||
Currency translation differences | 377 | 406 | (178) | |||||||||
Fair value of plan assets at end of period | 8,566 | 8,488 | 7,241 | |||||||||
Net amount shown in the balance sheet: | ||||||||||||
Net obligation | 4,259 | 4,814 | 4,010 | |||||||||
Net amount shown in the balance sheet at end of period | 4,259 | 4,814 | 4,010 |
(1) | This line comprises the
|
F- 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Pensions and other post-employment benefits | ||||||||||||
(€ million) | 2015 | 2014 | 2013 | |||||||||
Amounts recognized in the balance sheet: | ||||||||||||
Pre-funded obligations (see Note D.7.) | (49) | (59) | (15) | |||||||||
Obligations provided for | 4,308 | 4,873 | 4,025 | |||||||||
Net amount recognized at end of period | 4,259 | 4,814 | 4,010 | |||||||||
Benefit cost for the period: | ||||||||||||
Current service cost | 262 | 214 | 233 | |||||||||
Past service cost | 18 | 5 | 5 | |||||||||
Net interest (income)/cost | 108 | 133 | 150 | |||||||||
(Gains)/losses on plan settlements not specified in the terms of the plan | - | (47) | - | |||||||||
Actuarial (gains)/losses on plan curtailments | (39) | (16) | (8) | |||||||||
Contributions from plan members | (4) | (5) | (5) | |||||||||
Administration costs and taxes paid during the period | 13 | 11 | 10 | |||||||||
Expense recognized directly in profit or loss | 358 | 295 | 385 | |||||||||
Remeasurement of net defined-benefit (asset)/liability (actuarial gains and losses) | (650) | 863 | (809) | |||||||||
Expense/(gain) for the period | (292) | 1,158 | (424) |
The table below shows the Group’s net liability in respect of pension plans and other post-employment benefits by geographical region:
December 31, 2015 | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
(€ million) | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Measurement of obligation | 2,270 | 3,502 | 2,986 | 2,948 | 1,119 | 12,825 | ||||||||||||||||||
Fair value of plan assets | 841 | 2,216 | 1,806 | 2,852 | 851 | 8,566 | ||||||||||||||||||
Net amount shown in balance sheet at end of period | 1,429 | 1,286 | 1,180 | 96 | 268 | 4,259 | ||||||||||||||||||
December 31, 2014 | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
(€ million) | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Measurement of obligation | 2,522 | 3,809 | 2,819 | 2,996 | 1,156 | 13,302 | ||||||||||||||||||
Fair value of plan assets | 865 | 2,207 | 1,837 | 2,745 | 834 | 8,488 | ||||||||||||||||||
Net amount shown in balance sheet at end of period | 1,657 | 1,602 | 982 | 251 | 322 | 4,814 | ||||||||||||||||||
December 31, 2013 | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
(€ million) | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Measurement of obligation | 2,243 | 3,398 | 2,144 | 2,499 | 967 | 11,251 | ||||||||||||||||||
Fair value of plan assets | 643 | 2,084 | 1,527 | 2,288 | 699 | 7,241 | ||||||||||||||||||
Net amount shown in balance sheet at end of period | 1,600 | 1,314 | 617 | 211 | 268 | 4,010 |
F- 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows the fair value of plan assets relating to the Group’s pension and other post-employment plans, split by asset category:
2015 | 2014 | 2013 | ||||||||||
Securities quoted in an active market | 97.0% | 96.8% | 97.8% | |||||||||
Cash and cash equivalents | 2.7% | 1.0% | 0.7% | |||||||||
Equity instruments | 35.6% | 40.7% | 43.9% | |||||||||
Bonds and similar instruments | 52.8% | 50.1% | 48.1% | |||||||||
Real estate | 3.5% | 3.7% | 3.5% | |||||||||
Derivatives | 0.3% | (0.1)% | 0.4% | |||||||||
Commodities | 1.0% | 1.1% | 0.7% | |||||||||
Other assets | 1.1% | 0.3% | 0.5% | |||||||||
Other securities | 3.0% | 3.2% | 2.2% | |||||||||
Investment funds | 1.5% | 1.5% | 1.6% | |||||||||
Insurance policies | 1.5% | 1.7% | 0.6% | |||||||||
Total | 100% | 100% | 100% |
The Group has a long-term objective of maintaining or increasing the extent to which its obligations are covered by assets. To this end, the Group uses an asset-liability management strategy, matching plan assets to its pension obligations. This policy aims to ensure the best fit between the assets held on the one hand, and the associated liabilities and expected future payments to plan members on the other. To meet this aim, the Group operates a risk monitoring and management strategy (mainly focused on interest rate risk and inflation risk), while investing a growing proportion of assets in high-quality bonds with comparable maturities to those of the underlying obligations.
The Group did not alter its asset-liability management strategy or its key risk monitoring policy during 2015.
The tables below show the service cost for the Group’s pension and other post-employment benefit plans, by geographical region:
(€ million) | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
Service cost for 2015 | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Current service cost | 78 | 47 | 74 | 14 | 49 | 262 | ||||||||||||||||||
Past service cost | 16 | 1 | - | - | 1 | 18 | ||||||||||||||||||
Net interest cost/(income) including administration costs and taxes paid during the period | 28 | 23 | 44 | 13 | 13 | 121 | ||||||||||||||||||
(Gains)/losses on plan settlements not specified in the terms of the plan | - | - | - | - | - | - | ||||||||||||||||||
Actuarial (gains)/losses on plan curtailments | (38) | - | - | - | (1) | (39) | ||||||||||||||||||
Contributions from plan members | - | - | - | (1) | (3) | (4) | ||||||||||||||||||
Expense recognized directly in profit or loss | 84 | 71 | 118 | 26 | 59 | 358 | ||||||||||||||||||
Remeasurement of net defined-benefit (asset)/liability (actuarial gains and losses) | (235) | (211) | (30) | (144) | (30) | (650) | ||||||||||||||||||
Expense for the period | (151) | (140) | 88 | (118) | 29 | (292) |
F- 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(€ million) | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
Service cost for 2014 | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Current service cost | 72 | 35 | 50 | 17 | 40 | 214 | ||||||||||||||||||
Past service cost | 1 | 4 | - | - | - | 5 | ||||||||||||||||||
Net interest cost/(income) including administration costs and taxes paid during the period | 49 | 36 | 34 | 12 | 13 | 144 | ||||||||||||||||||
(Gains)/losses on plan settlements not specified in the terms of the plan | (19) | - | (28) | - | - | (47) | ||||||||||||||||||
Actuarial (gains)/losses on plan curtailments | (11) | 3 | - | - | (8) | (16) | ||||||||||||||||||
Contributions from plan members | - | - | - | (1) | (4) | (5) | ||||||||||||||||||
Expense recognized directly in profit or loss | 92 | 78 | 56 | 28 | 41 | 295 | ||||||||||||||||||
Remeasurement of net defined-benefit (asset)/liability (actuarial gains and losses) | 175 | 338 | 225 | 60 | 65 | 863 | ||||||||||||||||||
Expense for the period | 267 | 416 | 281 | 88 | 106 | 1,158 | ||||||||||||||||||
(€ million) | Pensions and other post-employment benefits by geographical region | |||||||||||||||||||||||
Service cost for 2013 | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Current service cost | 77 | 33 | 58 | 17 | 48 | 233 | ||||||||||||||||||
Past service cost | 5 | - | - | - | - | 5 | ||||||||||||||||||
Net interest cost/(income) including administration costs and taxes paid during the period | 51 | 40 | 33 | 22 | 14 | 160 | ||||||||||||||||||
(Gains)/losses on plan settlements not specified in the terms of the plan | - | - | - | - | - | - | ||||||||||||||||||
Actuarial (gains)/losses on plan curtailments | (5) | 4 | - | - | (7) | (8) | ||||||||||||||||||
Contributions from plan members | - | - | - | (1) | (4) | (5) | ||||||||||||||||||
Expense recognized directly in profit or loss | 128 | 77 | 91 | 38 | 51 | 385 | ||||||||||||||||||
Remeasurement of net defined-benefit (asset)/liability (actuarial gains and losses) | (237) | (179) | (127) | (210) | (56) | (809) | ||||||||||||||||||
Expense for the period | (109) | (102) | (36) | (172) | (5) | (424) |
There were no significant events affecting the Group’s pension and other post-employment benefit plans in 2015.
An analysis of “the remeasurement of the net defined-benefit (asset)/liability (actuarial gains and losses)” line in the preceding tables is set forth below:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
(€ million) | France | Germany | USA | UK | France | Germany | USA | UK | France | Germany | USA | UK | ||||||||||||||||||||||||||||||||||||
Actuarial gains/(losses) arising during the period(1) | 235 | 210 | 30 | 144 | (175) | (338) | (225) | (60) | 237 | 179 | 127 | 210 | ||||||||||||||||||||||||||||||||||||
Comprising: | ||||||||||||||||||||||||||||||||||||||||||||||||
Gains/(losses) on experience adjustments(2) | 26 | 16 | (116) | 9 | 132 | 130 | 147 | 238 | 70 | 77 | (47) | 138 | ||||||||||||||||||||||||||||||||||||
Gains/(losses) on demographic assumptions | 10 | - | 46 | (21) | 88 | - | (62) | - | 7 | - | (106) | 101 | ||||||||||||||||||||||||||||||||||||
Gains/(losses) on financial assumptions | 199 | 194 | 100 | 156 | (395) | (468) | (310) | (298) | 160 | 102 | 280 | (29) |
(1) | Gains and losses arising from changes in assumptions are due primarily to changes in the |
(2) | Experience adjustments are mainly due to the effect of |
F- 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The net post-tax actuarial loss (excluding associates and joint ventures) recognized directly in equity in the year ended December 31, 2015 was€2,898 million, compared with€3,548 million for the year ended December 31, 2014 and€2,687 million for the year ended December 31, 2013.
As of December 31, 2015, the present value of the Group’s wholly or partially funded obligations in respect of pension plans and other post-employment benefit plans was€11,473 million, versus€11,933 million as of December 31, 2014 and€10,214 million as of December 31, 2013. The present value of the Group’s unfunded obligations as of December 31, 2015 was€1,352 million versus€1,369 million as of December 31, 2014 and€1,037 million as of December 31, 2013.
The total expense for pensions and other post-employment benefits is allocated between income statement line items as follows:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Cost of sales | 73 | 73 | 79 | |||||||||
Research and development expenses | 58 | 45 | 52 | |||||||||
Selling and general expenses | 132 | 108 | 111 | |||||||||
Other operating (income)/expenses, net | - | (56) | (7) | |||||||||
Restructuring costs | (13) | (8) | - | |||||||||
Financial expenses | 108 | 133 | 150 | |||||||||
Total | 358 | 295 | 385 |
The estimated amounts of employer’s contributions to plan assets in 2016 are as follows:
(€ million) | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Employer’s contributions in 2016 (estimate): | ||||||||||||||||||||||||
2016 | 3 | 42 | - | 48 | 49 | 142 |
The table below shows the expected timing of payments under pension and other post-employment benefit plans for the next ten years:
(€ million) | France | Germany | USA | UK | Other | Total | ||||||||||||||||||
Estimated future benefit payments: | ||||||||||||||||||||||||
2016 | 108 | 209 | 145 | 121 | 46 | 629 | ||||||||||||||||||
2017 | 130 | 212 | 151 | 124 | 46 | 663 | ||||||||||||||||||
2018 | 91 | 216 | 153 | 128 | 51 | 639 | ||||||||||||||||||
2019 | 85 | 220 | 160 | 132 | 57 | 654 | ||||||||||||||||||
2020 | 123 | 225 | 165 | 136 | 66 | 715 | ||||||||||||||||||
2021 to 2025 | 609 | 1,144 | 866 | 751 | 345 | 3,715 |
The table below shows estimates as of December 31, 2015 for the timing of future payments in respect of unfunded pension and other post-employment benefit plans:
Payments due by period | ||||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
Estimated payments | 1,352 | 62 | 128 | 148 | 1,014 |
F- 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.19.2. Restructuring provisions
The table below shows movements in restructuring provisions classified in non-current and current liabilities:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Balance, beginning of period | 1,399 | 1,801 | 2,213 | |||||||||
of which : | ||||||||||||
· Classified in non-current liabilities | 835 | 1,061 | 1,461 | |||||||||
· Classified in current liabilities | 564 | 740 | 752 | |||||||||
Change in provisions recognized in profit or loss for the period | 508 | 287 | 186 | |||||||||
Provisions utilized | (570) | (740) | (616) | |||||||||
Transfers | - | 14 | - | |||||||||
Reclassification of the Animal Health business(1) | (12) | - | - | |||||||||
Unwinding of discount | 6 | 25 | 32 | |||||||||
Currency translation differences | 12 | 12 | (14) | |||||||||
Balance, end of period | 1,343 | 1,399 | 1,801 | |||||||||
of which : | ||||||||||||
· Classified in non-current liabilities | 762 | 835 | 1,061 | |||||||||
· Classified in current liabilities | 581 | 564 | 740 |
(1) | This line comprises the restructuring provisions of the Animal Health business, reclassified toLiabilities related to assets
|
Provisions for employee termination benefits as of December 31, 2015 amounted to€1,030 million (compared with€1,235 million as of December 31, 2014 and€1,611 million as of December 31, 2013), and mainly covered redundancy programs announced as part of the reallocation of sales forces, R&D and industrial operations in France, the United States, and some other European countries. The provision relating to France was€772 million as of December 31, 2015, versus€1,087 million as of December 31, 2014 and€1,375 million as of December 31, 2013.
The provision for France includes the present value of gross annuities under early retirement plans (including those already in place, and those provided for in 2012) not outsourced as of the balance sheet date, plus social security charges and levies associated with those annuities and with outsourced annuities. The average residual holding periods under these plans were 2.64 years, 3.08 years and 3.3 years as of December 31, 2015, 2014 and 2013, respectively. During 2015, premiums paid in connection with the outsourcing of annuities amounted to€4.4 million (most of which related to an increase in the holding period for existing annuities in response to the raising of the statutory retirement age); this compares with€18 million in 2014 and€12 million in 2013.
The timing of future termination benefit payments is as follows:
December 31, 2015 | Benefit payments by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | From 1 to 3 years | From 3 to 5 years | More than 5 years | |||||||||||||||
Employee termination benefits | ||||||||||||||||||||
· France | 772 | 286 | 351 | 120 | 15 | |||||||||||||||
· Other countries | 258 | 197 | 56 | 2 | 3 | |||||||||||||||
Total | 1,030 | 483 | 407 | 122 | 18 |
December 31, 2014 | Benefit payments by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | From 1 to 3 years | From 3 to 5 years | More than 5 years | |||||||||||||||
Employee termination benefits | ||||||||||||||||||||
· France | 1,087 | 378 | 447 | 212 | 50 | |||||||||||||||
· Other countries | 148 | 94 | 48 | 5 | 1 | |||||||||||||||
Total | 1,235 | 472 | 495 | 217 | 51 |
F- 74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 31, 2013 | Benefit payments by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | From 1 to 3 years | From 3 to 5 years | More than 5 years | |||||||||||||||
Employee termination benefits | ||||||||||||||||||||
· France | 1,375 | 511 | 510 | 271 | 83 | |||||||||||||||
· Other countries | 236 | 153 | 69 | 8 | 6 | |||||||||||||||
Total | 1,611 | 664 | 579 | 279 | 89 |
Restructuring provisions as of December 31, 2015 also include€199 million relating to a five-year commitment to Evotec regarding the Toulouse R&D site in France.
D.19.3. Other provisions
Other provisions include provisions for risks and litigation relating to environmental, tax, commercial and product liability matters.
(€ million) | 2015 | 2014 | 2013 | |||||||||
Tax exposures | 1,530 | 1,469 | 1,515 | |||||||||
Environmental risks and remediation | 708 | 696 | 698 | |||||||||
Product liability risks, litigation and other | 908 | 911 | 795 | |||||||||
Total | 3,146 | 3,076 | 3,008 |
Provisions for tax exposures are recorded when the Group is exposed to a probable risk resulting from a tax position adopted by the Group or a subsidiary, and the risk has been quantified at the balance sheet date, in accordance with the principles described in Note B.22.
Provisions for environmental risks and remediation mainly relate to contingencies arising from business divestitures.
Identified environmental risks are covered by provisions estimated on the basis of the costs the Group believes it will be obliged to meet over a period not exceeding (other than in exceptional cases) 30 years. The Group expects that€154 million of those provisions will be utilized in 2016, and€408 million over the period from 2017 through 2020.
“Product liability risks, litigation and other” mainly comprises provisions for risks relating to product liability (including IBNR provisions as described in Note B.12.), government investigations, regulatory or antitrust law claims, or contingencies arising from business divestitures (other than environmental risks).
The main pending legal and arbitral proceedings and government investigations are described in Note D.22.
A full risk and litigation assessment is performed with the assistance of the Group’s legal advisers, and provisions are recorded as required by circumstances in accordance with the principles described in Note B.12.
D.19.4. Other current liabilities
Other current liabilities comprise the following:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Taxes payable | 1,044 | 948 | 978 | |||||||||
Employee-related liabilities | 1,920 | 1,912 | 1,813 | |||||||||
Restructuring provisions (see Note D.19.2.) | 581 | 564 | 740 | |||||||||
Interest rate derivatives (see Note D.20.) | 4 | 2 | - | |||||||||
Currency derivatives (see Note D.20.) | 78 | 214 | 17 | |||||||||
Amounts payable for acquisitions of non-current assets | 684 | 306 | 214 | |||||||||
Other liabilities | 5,131 | 3,766 | 2,963 | |||||||||
Total | 9,442 | 7,712 | 6,725 |
F- 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other liabilities include in particular the current portion of provisions for litigation, sales returns and other risks; amounts due to associates and joint ventures (see Note D.6.); and amounts due to governmental agencies and healthcare authorities (see Note D.23.).
D.20. DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS
The table below shows the fair value of derivative instruments as of December 31, 2015, 2014 and 2013:
(€ million) | Non- current assets | Current assets | Total assets | Non- current | Current liabilities | Total liabilities | Fair value at December 31, 2015 (net) | Fair value at December 31, 2014 (net) | Fair value at December 31, 2013 (net) | |||||||||||||||||||||||||||
Currency derivatives | - | 59 | 59 | - | (78) | (78) | (19) | (91) | 85 | |||||||||||||||||||||||||||
operating | - | 41 | 41 | - | (25) | (25) | 16 | 4 | 31 | |||||||||||||||||||||||||||
financial | - | 18 | 18 | - | (53) | (53) | (35) | (95) | 54 | |||||||||||||||||||||||||||
Interest rate derivatives | 120 | 39 | 159 | (3) | (4) | (7) | 152 | 302 | 290 | |||||||||||||||||||||||||||
Total | 120 | 98 | 218 | (3) | (82) | (85) | 133 | 211 | 375 |
Objectives of the use of derivative financial instruments
The Group uses derivative instruments to manage operating exposure to movements in exchange rates, and financial exposure to movements in interest rates and exchange rates (where the debt or receivable is not contracted in the functional currency of the borrower or lender entity). On occasion, the Group uses equity derivatives in connection with the management of its portfolio of equity investments.
The Group performs periodic reviews of its transactions and contractual agreements in order to identify any embedded derivatives, which are accounted for separately from the host contract in accordance with IAS 39. The Group had no material embedded derivatives as of December 31, 2015, 2014 or 2013.
Counterparty risk
As of December 31, 2015, all currency and interest rate hedges were contracted with leading banks, and no single
counterparty accounted for more than 11% of the notional amount of the Group’s overall currency and interest rate positions.
a) Currency derivatives used to manage operational risk exposures
The Group operates a foreign exchange risk hedging policy to reduce the exposure of operating income to exchange rate movements. This policy involves regular assessments of the Group’s worldwide foreign currency exposure, based on foreign currency transactions carried out by the parent company and its subsidiaries. Those transactions mainly comprise sales, purchases, research costs,co-marketing andco-promotion expenses, and royalties. To reduce the exposure of those transactions to exchange rate movements, the Group contracts hedges using liquid derivative instruments, mainly forward currency purchases and sales, and also currency swaps.
F- 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows operating currency hedging instruments in place as of December 31, 2015, with the notional amount translated into euros at the relevant closing exchange rate:
December 31, 2015 | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||||||||||||||||
(€ million) | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||||||||||||
Forward currency sales | 2,142 | 27 | - | - | - | 2,142 | 27 | |||||||||||||||||||||
of which U.S. dollar | 672 | (2) | - | - | - | 672 | (2) | |||||||||||||||||||||
of which Chinese yuan renminbi | 339 | 1 | - | - | - | 339 | 1 | |||||||||||||||||||||
of which Japanese yen | 159 | (1) | - | - | - | 159 | (1) | |||||||||||||||||||||
of which Russian rouble | 130 | 22 | - | - | - | 130 | 22 | |||||||||||||||||||||
of which Singapore dollar | 114 | - | - | - | - | 114 | - | |||||||||||||||||||||
Forward currency purchases | 905 | (11) | - | - | - | 905 | (11) | |||||||||||||||||||||
of which U.S. dollar | 204 | - | - | - | - | 204 | - | |||||||||||||||||||||
of which Russian rouble | 109 | (9) | - | - | - | 109 | (9) | |||||||||||||||||||||
of which Singapore dollar | 104 | (1) | - | - | - | 104 | (1) | |||||||||||||||||||||
of which Hungarian forint | 90 | (1) | - | - | - | 90 | (1) | |||||||||||||||||||||
of which Chinese yuan renminbi | 86 | 2 | - | - | - | 86 | 2 | |||||||||||||||||||||
Total | 3,047 | 16 | - | - | - | 3,047 | 16 |
The above positions mainly hedge future materialforeign-currency cash flows arising after the end of the reporting period in relation to transactions carried out during the year ended December 31, 2015 and recognized in the balance sheet at that date. Gains and losses on hedging instruments (forward contracts) are calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Due to this hedging relationship, the commercial foreign exchange profit or loss on these items (hedging instruments and hedged transactions) will be immaterial in 2016.
The table below shows operating currency hedging instruments in place as of December 31, 2014, with the notional amount translated into euros at the relevant closing exchange rate:
December 31, 2014 | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||||||||||||||||
(€ million) | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||||||||||||
Forward currency sales | 2,981 | 4 | - | - | - | 2,981 | 4 | |||||||||||||||||||||
of which U.S. dollar | 1,409 | (34) | - | - | - | 1,409 | (34) | |||||||||||||||||||||
of which Japanese yen | 273 | 5 | - | - | - | 273 | 5 | |||||||||||||||||||||
of which Chinese yuan renminbi | 237 | (6) | - | - | - | 237 | (6) | |||||||||||||||||||||
of which Russian rouble | 211 | 51 | - | - | - | 211 | 51 | |||||||||||||||||||||
of which Singapore dollar | 126 | (1) | - | - | - | 126 | (1) | |||||||||||||||||||||
Forward currency purchases | 1,137 | - | - | - | - | 1,137 | - | |||||||||||||||||||||
of which U.S. dollar | 377 | 6 | - | - | - | 377 | 6 | |||||||||||||||||||||
of which Singapore dollar | 139 | 2 | - | - | - | 139 | 2 | |||||||||||||||||||||
of which Japanese yen | 109 | - | - | - | - | 109 | - | |||||||||||||||||||||
of which Hungarian forint | 99 | (2) | - | - | - | 99 | (2) | |||||||||||||||||||||
of which Mexican peso | 69 | 2 | - | - | - | 69 | 2 | |||||||||||||||||||||
Total | 4,118 | 4 | - | - | - | 4,118 | 4 |
F- 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows operating currency hedging instruments in place as of December 31, 2013, with the notional amount translated into euros at the relevant closing exchange rate:
December 31, 2013 | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||||||||||||||||
(€ million) | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||||||||||||
Forward currency sales | 2,943 | 32 | - | - | - | 2,943 | 32 | |||||||||||||||||||||
of which U.S. dollar | 1,379 | 14 | - | - | - | 1,379 | 14 | |||||||||||||||||||||
of which Singapore dollar | 345 | 1 | - | - | - | 345 | 1 | |||||||||||||||||||||
of which Russian rouble | 184 | 1 | - | - | - | 184 | 1 | |||||||||||||||||||||
of which Japanese yen | 118 | 9 | - | - | - | 118 | 9 | |||||||||||||||||||||
of which Chinese yuan renminbi | 118 | - | - | - | - | 118 | - | |||||||||||||||||||||
Forward currency purchases | 537 | (1) | - | - | - | 537 | (1) | |||||||||||||||||||||
of which Hungarian forint | 119 | 1 | - | - | - | 119 | 1 | |||||||||||||||||||||
of which Russian rouble | 64 | (1) | - | - | - | 64 | (1) | |||||||||||||||||||||
of which Japanese yen | 54 | (1) | - | - | - | 54 | (1) | |||||||||||||||||||||
of which U.S. dollar | 51 | - | - | - | - | 51 | - | |||||||||||||||||||||
of which Mexican peso | 32 | - | - | - | - | 32 | - | |||||||||||||||||||||
Total | 3,480 | 31 | - | - | - | 3,480 | 31 |
b) Currency and interest rate derivatives used to manage financial exposure
The cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of the Group’s financing activities, expose certain Group entities to financial foreign exchange risk (i.e., the risk of changes in the value of borrowings and loans denominated in a currency other than the functional currency of the borrower or lender). That foreign exchange exposure is hedged by Sanofi using firm financial instruments (usually currency swaps or forward contracts) contracted with banking counterparties.
The table below shows financial currency hedging instruments in place, with the notional amount translated into euros at the relevant closing exchange rate:
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||
(€ million) | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | |||||||||||||||||||||||||||
Forward currency sales | 3,472 | (44) | 5,869 | (111) | 1,860 | 63 | ||||||||||||||||||||||||||||||
of which U.S. dollar | 2,171 | (30) | 2016 | 4,840 | (111) | 2015 | 833 | 8 | 2014 | |||||||||||||||||||||||||||
of which Japanese yen | 612 | (9) | 2016 | 571 | 11 | 2015 | 698 | 50 | 2014 | |||||||||||||||||||||||||||
of which Australian dollar | 266 | (4) | 2016 | 22 | (1) | 2015 | 123 | 4 | 2014 | |||||||||||||||||||||||||||
Forward currency purchases | 2,623 | 9 | 2,686 | 16 | 2,197 | (9) | ||||||||||||||||||||||||||||||
of which U.S. dollar(1) | 610 | 5 | 2016 | 498 | 2 | 2015 | 389 | (1) | 2014 | |||||||||||||||||||||||||||
of which Swiss franc | 363 | (1) | 2016 | 368 | - | 2015 | 375 | (1) | 2014 | |||||||||||||||||||||||||||
of which Singapore dollar | 310 | - | 2016 | 563 | 5 | 2015 | 485 | (6) | 2014 | |||||||||||||||||||||||||||
Total | 6,095 | (35) | 8,555 | (95) | 4,057 | 54 |
(1) | Includes $84 million designated as cash flow hedge as of December 31, |
F- 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
These forward currency contracts generate a net financial foreign exchange gain or loss arising from the interest rate differential between the hedged currency and the euro, given that the foreign exchange gain or loss on the foreign-currency borrowings and loans is offset by the change in the intrinsic value of the hedging instruments. The Group may also hedge some futureforeign-currency investment or divestment cash flows.
Since the financing of the Genzyme acquisition, the Group has managed its net debt in two currencies: the euro and the U.S. dollar (see Note D.17.). Thefloating-rate portion of this debt exposes the Group to rises in interest rates, primarily in the Eonia and Euribor benchmark rates (for the euro) and in the U.S. Libor and Federal Fund Effective rates (for the U.S. dollar). To optimize the cost of debt and/or reduce the volatility of debt, the Group uses interest rate swaps, cross-currency swaps and (where appropriate) interest rate options that alter the fixed/floating rate split of debt. Those derivative instruments are predominantly denominated in euros and in U.S. dollars.
The table below shows instruments of this type in place as of December 31, 2015:
Notional amounts by expiry date as of December 31, 2015 | Of which designated as fair value hedges | Of which designated as cash flow hedges | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(€ million) | 2016 | 2017 | 2019 | 2020 | 2021 | 2022 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
pay 1-month Euribor + 0.26% / receive 2.73% | 500 | - | - | - | - | - | 500 | 14 | 500 | 14 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay capitalized Eonia / receive 1.90% | 1,000 | - | 1,550 | - | - | - | 2,550 | 128 | 2,550 | 128 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month Euribor / receive 1.15% | - | 428 | - | - | - | - | 428 | 3 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month US dollar Libor / receive 2.22% | - | - | - | 459 | - | - | 459 | 14 | 459 | 14 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 1.22% / receive 3-month and6-month US dollar Libor | - | 459 | - | - | - | - | 459 | (2) | - | - | 459 | (2) | (1) | |||||||||||||||||||||||||||||||||||||||||||
Currency swaps hedging short-term investments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pay JPY / receive € | 175 | - | - | - | - | - | 175 | (4) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
Pay USD / receive € | 92 | - | - | - | - | - | 92 | (1) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
Total | 1,767 | 887 | 1,550 | 459 | - | - | 4,663 | 152 | 3,509 | 156 | 459 | (2) | (1) |
F- 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows instruments of this type in place as of December 31, 2014:
Notional amounts by expiry date as of December 31, 2014 | Of which designated as fair value hedges | Of which designated as cash flow hedges | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(€ million) | 2015 | 2016 | 2017 | 2019 | 2020 | 2021 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
pay 1-month Euribor + 0.26% / receive 2.73% | - | 500 | - | - | - | - | 500 | 26 | 500 | 26 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay capitalized Eonia / receive 1.90% | - | 1,000 | - | 1,550 | - | - | 2,550 | 169 | 2,550 | 169 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month Euribor / receive 1.15% | - | - | 428 | - | - | - | 428 | 3 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month US dollar Libor / receive 2.22% | - | - | - | - | 412 | - | 412 | 10 | 412 | 10 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 1.22% / receive 3-month and6-month US dollar Libor | - | - | 412 | - | - | - | 412 | (2) | - | - | 412 | (2) | - | |||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pay€ 4.87% / receive CHF 3.38% | 244 | - | - | - | - | - | 244 | 89 | - | - | 244 | 89 | 1 | |||||||||||||||||||||||||||||||||||||||||||
Currency swaps hedging short-term investments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pay JPY / receive € | 530 | - | - | - | - | - | 530 | 7 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
Total | 774 | 1,500 | 840 | 1,550 | 412 | - | 5,076 | 302 | 3,462 | 205 | 656 | 87 | 1 |
F- 80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below shows instruments of this type in place as of December 31, 2013:
Notional amounts by expiry date as of December 31, 2013 |
| Of which designated as fair value hedges | Of which designated as cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(€ million) | 2014 | 2015 | 2016 | 2017 | 2019 | 2020 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
pay 1-month Euribor + 0.26% / receive 2.73% | - | - | 500 | - | - | - | 500 | 33 | 500 | 33 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay capitalized Eonia / receive 2.38% | 1,200 | - | 1,000 | - | 800 | - | 3,000 | 174 | 3,000 | 174 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month Euribor / receive 1.15% | - | - | - | 428 | - | - | 428 | 3 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay US dollar Federal Fund effective/ receive 0.34% | 363 | - | - | - | - | - | 363 | 1 | 363 | 1 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 3-month US dollar Libor / receive 2.22% | - | - | - | - | - | 363 | 363 | (2) | 363 | (2) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
pay 1.22% / receive 3-month and6-month US dollar Libor | - | - | - | 363 | - | - | 363 | (1) | - | - | 363 | (1) | - | |||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pay€ 4.87% / receive CHF 3.38% | - | 244 | - | - | - | - | 244 | 82 | - | - | 244 | 82 | 1 | |||||||||||||||||||||||||||||||||||||||||||
Total | 1,563 | 244 | 1,500 | 791 | 800 | 363 | 5,261 | 290 | 4,226 | 206 | 607 | 81 | 1 |
F- 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
c) Actual or potential effects of netting arrangements
The table below is prepared in accordance with the accounting policies described in Note B.8.3.:
2015 | 2014 | 2013 | ||||||||||||||||||||||
(€ million) | Derivative financial assets | Derivative financial liabilities | Derivative financial assets | Derivative financial liabilities | Derivative assets | Derivative financial liabilities | ||||||||||||||||||
Gross carrying amounts before offset (a) | 218 | (85) | 428 | (217) | 395 | (20) | ||||||||||||||||||
Gross amounts offset (in accordance with IAS 32) (b) | - | - | - | - | - | - | ||||||||||||||||||
Net amounts as reported in the balance sheet (a) – (b) = (c) | 218 | (85) | 428 | (217) | 395 | (20) | ||||||||||||||||||
Effects of other netting arrangements (not fulfilling the IAS 32 criteria for offsetting) (d): | ||||||||||||||||||||||||
Financial instruments | (66) | 66 | (192) | 192 | (20) | 20 | ||||||||||||||||||
Fair value of financial collateral |
| not applicable |
|
| not applicable |
|
| not applicable |
|
| not applicable |
| | not applicable | |
| not applicable |
| ||||||
Net exposure (c) + (d) | 152 | (19) | 236 | (25) | 375 | - |
D.21. OFF BALANCE SHEET COMMITMENTS
The off balance sheet commitments presented below are shown at their nominal value; the figures reported as of December 31, 2015 do not include the commitments of the held-for-exchange Animal Health business.
D.21.1. Off balance sheet commitments relating to operating activities
Off balance sheet commitments relating to the Group’s operating activities comprise the following:
December 31, 2015 | Payments due by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
Operating leases(1) | 1,567 | 262 | 424 | 257 | 624 | |||||||||||||||
Irrevocable purchase commitments(2) | ||||||||||||||||||||
· given(3) | 4,007 | 2,129 | 1,282 | 271 | 325 | |||||||||||||||
· received | (268) | (157) | (55) | (33) | (23) | |||||||||||||||
Research and development license agreements | ||||||||||||||||||||
· commitments related to R&D and other commitments(4) | 1,932 | 826 | 807 | 212 | 87 | |||||||||||||||
· potential milestone payments(5) | 3,536 | 324 | 450 | 1,546 | 1,216 | |||||||||||||||
Firm commitments under the agreement with BMS(6) | 114 | - | 114 | - | - | |||||||||||||||
Total | 10,888 | 3,384 | 3,022 | 2,253 | 2,229 |
(1) |
|
|
|
(3) | Irrevocable purchase commitments given as of December 31, |
(4) | Commitments related to R&D, and |
This line includes only potential milestone payments on projects regarded as reasonably possible, i.e. on projects in the development phase. Potential milestone payments as of December 31, |
See note
|
F- 82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Operating leases
The Group leases some property and equipment used in the ordinary course of business under operating leases. Future minimum lease payments due under non-cancelable operating leases as of December 31, 2015 were€1,567 million (€1,235 million as of December 31, 2014,€1,265 million as of December 31, 2013).
Total rental expense recognized in the year ended December 31, 2015 was€340 million (versus€317 million in the year ended December 31, 2014 and€338 million in the year ended December 31, 2013).
Research and development license agreements
In pursuance of its strategy, the Group may acquire technologies and rights to products. Such acquisitions may be made in various contractual forms: acquisitions of shares, loans, license agreements, joint development, and co-marketing. These arrangements generally involve upfront payments on signature of the agreement, development milestone payments, and royalties. Some of these complex agreements include undertakings to fund research programs in future years and payments contingent upon achieving specified development milestones, the granting of approvals or licenses, or the attainment of sales targets once a product is commercialized.
The “Research and development license agreements” line comprises future service commitments to fund research and development or technology, and potential milestone payments regarded as reasonably possible (i.e. all potential milestone payments relating to projects in the development phase, for which the future financial consequences are known and considered as probable and for which there is a sufficiently reliable estimate). It excludes commitments relating to projects in the research phase (€4.7 billion in 2015,€4.2 billion in 2014,€3.8 billion in 2013), and payments contingent upon attainment of sales targets once a product is commercialized (€8.0 billion in 2015,€4.7 billion in 2014,€3.6 billion in 2013).
The major agreements entered into during 2015 were as follows:
· | On November 6, 2015, Sanofi and Lexicon Pharmaceuticals, Inc. announced a collaboration and license agreement to develop and commercialize sotagliflozine, an investigational orally-administered dual inhibitor of sodium-glucose cotransporters 1 and 2 (SGLT-1 and SGLT-2) that could be a potential treatment option for people with diabetes. |
· | On November 5, 2015, Sanofi announced a worldwide license agreement with Hanmi Pharmaceutical, Co., Ltd. to develop a portfolio of experimental, long-acting diabetes treatments. The license relates to the development and |
commercialization of efpeglenatide (a late-stage GLP1-RA receptor agonist), a weekly-administered insulin, and a fixed-dose combination of those two treatments. |
· | On November 3, 2015, Sanofi and BioNTech A.G. announced an exclusive collaboration and license agreement to discover and develop up to five cancer immunotherapies. Under the terms of the agreement, |
· | On August 10, 2015, Sanofi, Evotec AG and |
· | On August 7, 2015, Sanofi announced a strategic research
|
· |
|
· | In February 2015, the September 2003 collaboration agreement between Sanofi |
· | On February 18, 2015, Sanofi announced a |
· | On February 11, 2015, Voyager Therapeutics and Genzyme announced a
|
Other major agreements entered into by Sanofi in prior years are described below:
· | Immune Design (2014): license agreement for the |
· | Eli Lilly and |
Alnylam Pharmaceuticals, Inc. |
F- 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
· | UCB (2014): scientific and
|
· | Selecta Biosciences |
Ascendis (2010): licensing and patent transfer agreement |
· | Avila Therapeutics, |
· | Regulus Therapeutics, Inc. (2010): discovery, development and commercialization of |
· | Exelixis, Inc. (2009): global license agreement |
Sanofi and its alliance partners have decided to terminate the following agreements (the related commitments are no longer disclosed as of December 31, 2015):
· | Ionis Pharmaceuticals, Inc. (formerly Isis Pharmaceuticals, Inc.): collaboration agreement to |
· |
|
· |
|
· | CureDM Group Holdings, LLC: global license agreement for Pancreate, a novel human peptide which could restore a patient’s ability to |
In December 2009, Sanofi Pasteur signed a donation letter 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.
|
|
· |
license agreement under which Sanofi
|
Other agreements
Sanofi has entered into two agreements, with Royalty Pharma (December 2014) and Novaquest (December 2015), which have similar characteristics in that the partners jointly bear a portion of the remaining development cost of the project on a quarterly basis, in return for a share of future sales. These transactions are co-investments, whereby the partner acquires an interest in the jointly-developed product by providing funding towards the development program. Consequently, the amounts received by Sanofi will be recorded as a reduction in development costs, to the extent that the development costs incurred by Sanofi are recognized in profit or loss in accordance with the policies described in Note B.4.1.
In 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 World Health Organization (WHO) signed a “Standard Material Transfer Agreement” (SMTA 2). This 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. The agreement cancels and replaces all preceding commitments to donate pandemic vaccines to the WHO.
D.21.2. Off balance sheet commitments relating to financing activities
Credit facilities
Undrawn credit facilities are as follows:
December 31, 2015 | Expiry | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
General-purpose credit facilities | 8,000 | - | - | 8,000 | - |
F- 84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2015, total credit facilities amounted to€8,000 million (versus€8,013 million as of December 31, 2014 and€10,021 million as of December 31, 2013).
Guarantees
The table below shows the amount of guarantees given and received:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Guarentees given | 3,972 | 3,727 | 4,267 | |||||||||
· Guarantees provided to banks in connection with credit facilities | 2,260 | 2,694 | 2,852 | |||||||||
· Other guarantees given | 1,712 | 1,033 | 1,415 | |||||||||
Guarentees received | (187) | (181) | (176) |
D.21.3. Off balance sheet commitments relating to business combinations
Funding commitments to associates and joint ventures are disclosed in Note D.6.
The maximum amount of contingent consideration relating to business combinations is disclosed in Note D.18.
D.22. LEGAL AND ARBITRAL PROCEEDINGS
Sanofi and its affiliates are involved in litigation, arbitration and other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights (particularly claims against generic companies seeking to limit the patent protection of Sanofi products), competition law and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. Provisions related to legal and arbitral proceedings are recorded in accordance with the principles described in Note B.12.
Most of the issues raised by these claims are highly complex and subject to substantial uncertainties; therefore, the probability of loss and an estimation of damages are difficult to ascertain. Contingent liabilities are cases for which either we are unable to make a reasonable estimate of the expected financial effect that will result from ultimate resolution of the proceeding, or a cash outflow is not probable. In either case, a brief description of the nature of the contingent liability is disclosed and, where practicable, an estimate of its financial effect, an indication of the uncertainties relating to the amount and timing of any outflow, and the possibility of any reimbursement are provided in application of paragraph 86 of IAS 37.
In the cases that have been settled or adjudicated, or where quantifiable fines and penalties have been assessed, we have indicated our losses or the amount of provision accrued that is the estimate of the probable loss.
In a limited number of ongoing cases, while we are able to make a reasonable estimate of the expected loss or range of the possible loss and have accrued a provision for such loss, we believe that publication of this information on acase-by-case basis or by class would seriously prejudice the Company’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in those cases, we have disclosed information with respect to the nature of the contingency but have not disclosed our estimate of the range of potential loss, in accordance with paragraph 92 of IAS 37.
These assessments can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Our assessments are based on estimates and assumptions that have been deemed reasonable by management. We believe that the aggregate provisions recorded for the above matters are adequate based upon currently available information. However, given the inherent uncertainties related to these cases and involved in estimating contingent liabilities, we could in the future incur judgments that could have a material adverse effect on our net income in any particular period.
Long term provisions are disclosed in Note D.19. They include:
· |
|
Provisions for environmental risks and remediation amount to |
F- 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
a) Products
Sanofi Pasteur Hepatitis B Vaccine Product Litigation
Since 1996, more than 180 lawsuits have been filed in various French civil courts against Sanofi Pasteur and/or Sanofi Pasteur MSD S.N.C., the former a French subsidiary of Sanofi, and the latter a joint venture company with Merck & Co., Inc. In such lawsuits, the plaintiffs allege that they suffer from a variety of neurological disorders and autoimmune diseases, including multiple sclerosis andGuillain-Barré
Since 1996, more than 180 lawsuits have been filed in various French civil courts against Sanofi Pasteur and/or Sanofi Pasteur MSD S.N.C., the former a French subsidiary of Sanofi, and the latter a joint venture company with Merck & Co., Inc. In such lawsuits, the plaintiffs allege that they suffer from a variety of neurological disorders and autoimmune diseases, including multiple sclerosis and Guillain-Barré syndrome as a result of receiving the hepatitis B vaccine. To date, only one claim decided against the company has been upheld by the French Supreme Court (Cour de Cassation).
In January 2008, both the legal entity Sanofi Pasteur MSD S.N.C., and a corporate officer of this company, as well as, a former corporate officer of Sanofi Pasteur, were placed under investigation in an ongoing criminal inquiry in France relating to alleged side effects caused by the hepatitis B vaccine. In March 2012, Sanofi Pasteur and the former pharmacist in charge, deputy chief executive officer of Sanofi Pasteur were placed under an “advised witness” status.
Plavix® Product Litigation
As of December 31, 2015, around 1,095 lawsuits, involving approximately 5,520 claimants have been filed against affiliates of the Group andBristol-Myers Squibb seeking recovery under U.S. state law for personal injuries allegedly sustained in connection with the use of Plavix®. The actions are held in several jurisdictions, including the federal and/or state courts of New Jersey, New York, California, Delaware, and Illinois. It is not possible, at this stage, to assess reliably the outcome of these lawsuits or the potential financial impact on the Company.
b) Patents
Ramipril Canada Patent Litigation
Sanofi has been involved in a number of legal proceedings involving companies which market generic Altace® (ramipril) in Canada. Notwithstanding proceedings initiated by Sanofi, eight manufacturers obtained marketing authorizations from the Canadian Minister of Health for generic versions of ramipril in Canada. Following the marketing of these products, Sanofi filed patent infringement actions against all those companies. In a patent infringement action, the Federal Court of Canada ruled on June 29, 2009 that the patent asserted by Sanofi was invalid. Sanofi’s leave to appeal the judgment was denied in 2012. Each of Teva, Apotex and Riva initiated Section 8 damages claims against Sanofi, seeking compensation for their alleged inability to market a generic ramipril during the time taken to resolve the proceedings against the Canadian Ministry of Health. The Teva and Apotex Section 8 trials were heard early 2012 respectively and the Court issued its decision on May 11, 2012 setting
down the parameters for calculating total damages owed. Sanofi and Teva reached an agreement in June 2012 on a confidential amount to satisfy Teva’s claim and in November 2012, Apotex was awarded CAD221 million.
Sanofi appealed both rulings. In March 2014, the Federal Court of Appeal dismissed Sanofi’s appeal with respect to Teva and issued a decision in the appeal with respect to Apotex increasing Apotex’s damages award, and costs of all appeals (not including costs associated with underlying trial). In May 2014, Sanofi and Apotex executed a settlement agreement in satisfaction of the Federal Court of Appeal’s increased damages judgment. On April 20, 2015, the Supreme Court of Canada dismissed Sanofi’s appeal of the Court of Appeal decision with respect to Apotex, thereby affirming the decision of the Court of Appeal. The Riva Section 8 case, which had been stayed pending resolution of the Supreme Court Appeal, was settled following court-sponsored mediation in September 2015.
Plavix® Patent Litigation in Australia
In August 2007, GenRX (a subsidiary of Apotex) obtained registration of a generic clopidogrel bisulfate product on the Australian Register of Therapeutic Goods. At the same time, GenRX filed a patent invalidation action with the Federal Court of Australia, seeking revocation of Sanofi’s Australian enantiomer patent claiming clopidogrel salts (a “nullity action”). In September 2007, Sanofi obtained a preliminary injunction from the Federal Court preventing commercial launch of this generic clopidogrel bisulfate product until judgment on the substantive issues of patent validity and infringement. In February 2008, Spirit Pharmaceuticals Pty. Ltd. also filed a nullity action against Sanofi’s Australian enantiomer patent. The Spirit proceeding was consolidated with the Apotex proceeding.
In August 2008, the Australian Federal Court confirmed that the claim in Sanofi’s Australian enantiomer patent directed to clopidogrel bisulfate (the salt form in Plavix®) was valid and the patent infringed. On appeal, the Full Federal Court of Australia held in September 2009 that all claims in the patent are invalid. Sanofi’s appeal to the Australia High Court was denied in March 2010. The security bond posted by Sanofi in connection with the preliminary injunction obtained in 2007 was subsequently increased from Australian $40 million to Australian $204 million (€27 million to€137 million as of December 31, 2015). Apotex sought damages in the range of Australian $20 million to Australian $236 million (€13 million to€158 million as of December 31, 2015), plus interest for having been subject to an injunction.
On April 8, 2013, the Australian Department of Health and Ageing filed an application before the Federal Court of Australia seeking payment of damages from Sanofi related to the Apotex preliminary injunction amounting to a range of Australian $375 million to Australian $529 million (€252 million to€355 million), plus interest.
F- 86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Sanofi and BMS settled the patent litigation with Apotex in November 2014. In light of the Apotex settlement, the Commonwealth has requested that the Court consider a set of legal issues separate from trial that could simplify the trial. In December 2015, the Court held that the relevant statute does not preclude the Commonwealth from seeking damages in cases such as this. Sanofi and BMS have applied for special leave to appeal against this decision.
Sanofi’s special appeal to the High Court on the issue of the invalidity of the patent was denied in November 2015.
Alirocumab Patent Litigation in the U.S.
Amgen filed four separate complaints against Sanofi in the U.S. asserting patent infringement on October 17, October 28, November 11, and November 18, 2014 based on Sanofi and Regeneron plans to submit a U.S. Biologic License Application for alirocumab. Together these complaints allege that Sanofi’s alirocumab product infringes seven patents and seek injunctive relief and unspecified damages. These cases were consolidated into one case in December 2014 and a trial date was set for March 7, 2016.
Alirocumab-Related Genentech Patent Litigation in the U.S.
In July 2015, Sanofi and Regeneron filed administrative and judicial actions against Genentech, Inc. and City of Hope (COH) concerning certain patents on making recombinant antibodies. The administrative action (anInter Partes Review (IPR)) was filed in the United States Patent & Trademark Office against U.S. Patent No. 6,331,415 (“Cabilly II”) and asserts that prior art anticipates or renders obvious the claims of the noted patent. The judicial action was filed in the United States District Court for the Central District of California and contends that U.S. Patent No. 7,923,221 (“Cabilly III”) is invalid.
In September 2015, Genentech/COH filed a response to Sanofi’s judicial action and asserted counterclaims of infringement of Cabilly III and seeks injunctive relief and unspecified damages.
Lixisenatide-Related Patent Litigation in the U.S.
In July 2015, Sanofi filed a judicial action against AstraZeneca Pharmaceuticals LP (AZ) and Amylin Pharmaceuticals, LLC (Amylin) in relation to certain patents concerning GLP-1 agonists and formulations thereof. The action was filed in the United States District Court for the District of Delaware and contends that U.S. Patent Nos. 6,902,744; 7,399,489; and 7,521,423 assigned to AZ/Amylin are invalid and/or not infringed. In addition, in December 2015, Sanofi filed fourInter PartesReviews (IPRs) in the U.S. Patent & Trademark Office against four separate patents (U.S. Patent Nos. 7,297,761; 7,691,963; 8,445,647;
8,951,962) assigned to AZ/Amylin, asserting that prior art anticipates or renders obvious the claims of the noted patents.
In December 2015, AZ/Amylin filed a response to Sanofi’s judicial action and asserted counterclaims of infringement of four U.S. patents (U.S. Patent Nos. 7,399,489; 7,691,963; 8,445,647; 8,951,962) and seek injunctive relief and unspecified damages.
c) Government Investigations, Competition Law and Regulatory Claims
Lovenox® Antitrust Litigation
In August 2008, Eisai Inc. (Eisai) brought suit against Sanofi U.S. LLC and Sanofi U.S. Inc. (collectively, Sanofi U.S.) in the U.S. District Court for the District of New Jersey alleging that certain contracting practices for Lovenox® violate federal and state antitrust laws. In March 2014, the Court issued an order granting Sanofi U.S.’s motion for summary judgment on liability and dismissing the case. In April 2014, Eisai filed a notice of appeal to the Court of Appeals. Eisai’s appeal remains pending.
Sanofi U.S. filed a separate state court lawsuit against Eisai and two individuals who are current employees of Eisai and former employees of Sanofi U.S. and/or its predecessors. Sanofi U.S. alleges that the individuals took confidential information from Sanofi U.S. predecessors to Eisai in breach of their employment agreements with Sanofi, and that such confidential information has been utilized by them and by Eisai to the detriment of Sanofi U.S. This litigation is stayed.
U.S. Antitrust/Menactra® Vaccine Pasteur
In December 2011, a class action was filed in the New Jersey Federal District Court alleging that Sanofi Pasteur Inc. violated Sections 1 and 2 of the Sherman Act by unlawfully monopolizing and restraining trade in the meningococcal market and seeking treble damages and other remedies for alleged anticompetitive overcharges. On August 6, 2012, the Court denied Sanofi Pasteur’s motion to dismiss. In September 2015, the Court certified a class, which (subject to certain exclusions), consists of all persons or entities in the United States that purchased Menactra directly from Sanofi Pasteur or its affiliates after March 1, 2010. Proceedings are ongoing.
d) Other litigation and arbitration
U.S. Shareholder Securities Class Action
In December 2014, a putative class action lawsuit was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of Sanofi American Depositary Shares. The complaint, which named Sanofi and certain of its current and former officers as defendants and asserted claims under the Securities Exchange Act of 1934, alleged that Sanofi’s
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public disclosures failed to disclose that Sanofi (i) was making improper payments to healthcare professionals in violation of federal law and (ii) lacked internal controls over financial reporting, which allegedly inflated the price of its securities. In February 2015, a related putative class action lawsuit was filed in the Southern District of New York, alleging the same misconduct, but asserting claims under the Securities Act of 1933. In March 2015, the cases were consolidated, and in May 2015, the plaintiffs filed a consolidated amended complaint, naming Sanofi and its former CEO as defendants and asserting claims under the Exchange Act. In August 2015, the defendants moved to dismiss the consolidated amended complaint, and in January 2016, the Court granted that motion. On February 4, 2016, the plaintiffs filed a motion for reconsideration of the Court’s January 6, 2016 dismissal order and for leave to amend the consolidated amended complaint, which motion remains pending before the Court.
CVR Class Action
In December 2013, two putative class action lawsuits were filed in the U.S. District Court for the Southern District of New York on behalf of holders of contingent value rights (“CVRs”) issued in connection with Sanofi’s acquisition of Genzyme in 2011. The complaints, which named Sanofi and certain of its officers as defendants and asserted claims under the Exchange Act, alleged that Sanofi’s public disclosures materially misrepresented (i) the efficacy and safety of Lemtrada® (alemtuzumab) and (ii) the design of two Lemtrada® clinical trials,CARE-MS I andCARE-MS II. Such alleged misrepresentations, according to the complaints, caused an artificial inflation in the price of the CVRs. In March 2014, the cases were consolidated. Also in March 2014, an additional group of 32 purported CVR holders filed a lawsuit in the Southern District of New York against Sanofi, Genzyme and certain of their officers (the “AG Funds Action”), asserting claims under the Exchange Act, the Securities Act and California, Massachusetts and Minnesota state law, based on alleged material misrepresentations and omissions regarding Lemtrada®, its development and likelihood of success before the U.S. Food and Drug Administration. In April 2014, the plaintiff in the consolidated putative class action (the “Consolidated Action”) filed an amended shareholder class action complaint, which named Sanofi and certain of its officers as defendants and asserted claims under the Exchange Act. In June 2014, the defendants in the Consolidated andAG Funds Actions filed a motion to dismiss the complaints, and on January 28, 2015, the court granted that motion. The plaintiffs appealed the dismissals to the U.S. Court of Appeals for the Second Circuit.
CVR Trustee Claim
In November 2015, American Stock Transfer & Title Company LLC (“AST”), the Trustee of the CVR Agreement between AST and Sanofi-Aventis, dated March 30, 2011, filed a complaint
against Sanofi in the U.S. District Court for the Southern District of New York, alleging that Sanofi breached the CVR Agreement and the implied covenant of good faith and fair dealing, including by allegedly failing to use “Diligent Efforts,” as defined in the CVR Agreement, with respect to the regulatory approval and sale of Lemtrada®.
e) Contingencies arising from certain Business Divestitures
Sanofi and its subsidiaries, Hoechst and Aventis Agriculture, divested a variety of mostly chemical, includingagro-chemical, businesses as well as certain health product businesses in previous years. As a result of these divestitures, the Group is subject to a number of ongoing contractual and legal obligations regarding the state of the sold businesses, their assets, and their liabilities.
Aventis Behring Retained Liabilities
The divestment of Aventis Behring and related protein therapies assets became effective on March 31, 2004. The purchase agreement contained customary representations and warranties running from Sanofi as seller to CSL Limited as purchaser. Sanofi has indemnification obligations that generally expired on March 31, 2006 (the second anniversary of the closing date). However, some indemnification obligations, having a longer duration, remain in effect, for example, indemnification obligations relating to the due organization, capital stock and ownership of Aventis Behring Companies ran through March 31, 2014, and product liability indemnification runs through March 31, 2019, subject to an extension for claims related to certain types of product liability notified before such date. Furthermore, fortax-related issues, the indemnification obligation of Sanofi covers all taxable periods that end on or before the closing date and expires thirty days after the expiration of the applicable statute of limitations. In addition, the indemnification obligations relating to certain specified liabilities, including HIV liability, survive indefinitely.
Under the indemnification agreement, Sanofi is generally obligated to indemnify CSL Limited, only to the extent indemnifiable, losses exceeding $10 million and up to a maximum aggregate amount of $300 million. For environmental claims, the indemnification due by Sanofi equals 90% of the indemnifiable losses. Product liability claims are generally treated separately, and the aggregate indemnification is capped at $500 million. Certain indemnification obligations, including those related to HIV liability, as well as tax claims, are not capped in amount.
Aventis CropScience Retained Liabilities
The sale by Aventis Agriculture S.A. and Hoechst GmbH (both legacy companies of Sanofi) of their aggregate 76% participation in Aventis CropScience Holding (ACS) to Bayer and Bayer CropScience AG (BCS), the wholly owned subsidiary of Bayer which holds the ACS shares, was effective
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
on June 3, 2002. The Stock Purchase Agreement (SPA) dated October 2, 2001, contained customary representations and warranties with respect to the sold business, as well as a number of indemnifications, in particular with respect to: environmental liabilities (the representations and warranties and the environmental indemnification are subject to a cap of€836 million, except for certain legal representations and warranties and specific environmental liabilities); taxes; certain legal proceedings; claims related to StarLink® corn; and certainpre-closing liabilities, in particular, product liability cases (which are subject to a cap of€418 million). There are various periods of limitation depending upon the nature or subject of the indemnification claim. Further, Bayer and BCS are subject to a number of obligations regarding mitigation and cooperation.
Starting with a first settlement agreement signed in December 2005, Aventis Agriculture and Hoechst GmbH have resolved a substantial number of disputes with Bayer and BCS, including the termination of arbitration proceedings initiated in August 2003 for an alleged breach of a financialstatement-related representation contained in the stock purchase agreement, and numerous other warranty and indemnification claims asserted under the SPA, including claims relating to certain environmental and product liabilities. A number of other outstanding claims remain unresolved.
LLRICE601 and LLRICE604 — U.S. Litigation
On December 19, 2014, BCS initiated a claim for arbitration seeking indemnification under various provisions of the SPA, with a demand for€787.5 million.
These claims relate to several hundred individual complaints that have been filed since August 2006 by rice growers, millers, and distributors in U.S. state and federal courts against a number of current and former subsidiaries (collectively the “CropScience Companies”) which were part of the ACS group prior to Bayer’s acquisition of the ACS shares.
Plaintiffs in these cases seek to recover damages in connection with the detection of trace amounts of the genetically modified rice called “Liberty Link® Rice 601” (also known as “LLRICE601”) or “Liberty Link® Rice 604” (also known as “LLRICE604”) in samples of commerciallong-grain rice. LLRICE601 and LLRICE604, each a variety of long grain rice genetically altered to resist Liberty® Herbicide, were grown in field tests in the United States from the years 1998 to 2001. Plaintiffs assert a number of causes of action, alleging that the CropScience Companies failed to take adequate measures to preventcross-pollination or commingling of LLRICE601 and/or LLRICE604 with conventional rice. Bayer alleges it has paid out over $1.2 billion in judgments, settlements and litigation costs.
Sanofi does not consider that these claims constitute indemnifiable losses under the SPA.
The FDA concluded that the presence of LLRICE601 in the food and feed supply poses no safety concerns and, the United States Department of Agriculture (USDA) deregulated LLRICE601. With respect to LLRICE604, the USDA announced, in March 2007, that the PAT protein contained in LLRICE604 has a long history of safe use and is present in many deregulated products. Further to an investigation regarding the causation chain that led to contamination, in October 2007, the USDA declined to pursue enforcement against BCS.
Aventis Animal Nutrition Retained Liabilities
Aventis Animal Nutrition S.A. and Aventis (both legacy companies of Sanofi) signed an agreement for the sale to Drakkar Holdings S.A. of the Aventis Animal Nutrition business effective in April 2002. The sale agreement contained customary representations and warranties. Sanofi’s indemnification obligations ran through April 2004, except for environmental indemnification obligations (which ran through April 2012), tax indemnification obligations (which run through the expiration of the applicable statutory limitation period), and antitrust indemnification obligations (which extend indefinitely). The indemnification undertakings are subject to an overall cap of€223 million, with a lower cap for certain environmental claims. Indemnification obligations for antitrust and tax claims are not capped.
Celanese AG Retained Liabilities
The demerger of the specialty chemicals business from Hoechst to Celanese AG (now trading as “Celanese GmbH”) became effective on October 22, 1999. Under the demerger agreement between Hoechst and Celanese, Hoechst expressly excluded any representations and warranties regarding the shares and assets demerged to Celanese. Celanese subsequently contributed rights and obligations relating to environmental liabilities resulting from the demerger agreement to a subsidiary CCC Environmental Management and Solutions GmbH & Co. KG. The French Supreme Court (Cour de Cassation), in July 2009, upheld a decision of the Court of Appeals of Lyon ordering Sanofi Pasteur MSD S.N.C. to pay damages of €120,000 to a claimant whose multiple sclerosis appeared shortly after her vaccination against the hepatitis B virus; however, in several cases before and after the July 2009 decision, theCour de Cassation upheld several decisions of various Courts of Appeals (including the Court of Appeals of Paris), rejecting claims alleging such causal link.
In January 2008, both the legal entity Sanofi Pasteur MSD S.N.C., and a corporate officer of this company, as well as a former corporate officer of Sanofi Pasteur, were placed under investigation in an ongoing criminal inquiry in France relating to alleged side effects caused by the hepatitis B vaccine. Since March 2012, Sanofi Pasteur and the former chief executive officer of Sanofi Pasteur have been placed under an "advised witness" status.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• Plavix® Product Litigation
Around 444 lawsuits, involving approximately 2,857 claimants have been filed against affiliates of the Group and Bristol-Myers Squibb seeking recovery under state law for personal injuries allegedly sustained in connection with the use of Plavix®. The actions are venued in several jurisdictions, including the federal and/or state courts of New Jersey, New York, California, Pennsylvania, and Illinois. The defendants have exercised their right to terminate the tolling agreement (agreement which tolls or suspends the running of the statute of limitations), effective September 1, 2012, with respect to unfiled claims by potential additional plaintiffs. It is not possible, at this stage, to assess reliably the outcome of these lawsuits or the potential financial impact on the Company.
b) Patents
• Ramipril Canada Patent Litigation
Sanofi is involved in a number of legal proceedings involving companies which market generic Altace® (ramipril) in Canada. Notwithstanding proceedings initiated by Sanofi, eight manufacturers obtained marketing authorizations from the Canadian Minister of Health for generic versions of ramipril in Canada. Following the marketing of these products, Sanofi filed patent infringement actions against all those companies. In a patent infringement action, the Federal Court of Canada ruled on June 29, 2009 that the patent asserted by Sanofi was invalid. Sanofi's leave to appeal the judgment was denied in 2012. Each of Teva, Apotex and Riva initiated Section 8 damages claims against Sanofi, seeking compensation for their alleged inability to market a generic ramipril during the time taken to resolve the proceedings against the Canadian Ministry of Health. The Teva and Apotex Section 8 trials were heard early 2012 respectively and the Court issued its decision on May 11, 2012 setting down the parameters for calculating total damages owed. Sanofi and Teva reached an agreement in June 2012 on a confidential amount to satisfy Teva's claim and in November 2012, Apotex was awarded CAD 221 million. Sanofi has appealed the Court's decisions in both the Apotex and Teva Section 8 cases to the Federal court of Appeal. The Riva Section 8 trial has been stayed until the Apotex and Teva cases are decided on appeal.
• Plavix® Patent Litigation in Australia
In August, 2007, GenRX (a subsidiary of Apotex) obtained registration of a generic clopidogrel bisulfate product on the Australian Register of Therapeutic Goods. At the same time, GenRX filed a patent invalidation action with the Federal Court of Australia, seeking revocation of Sanofi's Australian enantiomer patent claiming clopidogrel salts (a "nullity action"). In September 2007, Sanofi obtained a preliminary injunction from the Federal Court preventing commercial launch of this generic clopidogrel bisulfate product until judgment on the substantive issues of patent validity and infringement. In February 2008, Spirit Pharmaceuticals Pty. Ltd. also filed a nullity action against Sanofi's Australian enantiomer patent. The Spirit proceeding was consolidated with the Apotex proceeding.
In August, 2008, the Australian Federal Court confirmed that the claim in Sanofi's Australian enantiomer patent directed to clopidogrel bisulfate (the salt form in Plavix®) was valid and the patent infringed. On appeal, the Full Federal Court of Australia held in September 2009 that all claims in the patent are invalid. Sanofi's appeal to the Australia Supreme Court was denied in March 2010. The security bond posted by Sanofi in connection with the preliminary injunction obtained in 2007 was subsequently increased from Australian $40 million to Australian $204 million (€160 million as of December 31, 2012). Apotex is now seeking damages for having been subject to an injunction.
The Australia Department of Health and Ageing (the "Department") has notified Sanofi that it claims to be entitled to money damages from Sanofi related to the Apotex preliminary injunction. The Department has not yet taken any formal legal action associated with this claim.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
c) Government Investigations, Competition Law and Regulatory Claims
• Cipro® Antitrust Litigation
Since August 2000, Aventis Pharmaceuticals Inc. (API) has been a defendant in several related cases in U.S. state and federal courts alleging that API and certain other pharmaceutical manufacturers violated U.S. antitrust laws and various state laws by settling a patent dispute regarding the brand-name prescription drug Cipro® in a manner which allegedly delayed the arrival of generic competition.
In March 2005, the U.S. District Court for the Eastern District of New York granted Sanofi's summary judgment motions, and issued a judgment in favor of API and the other defendants in this litigation. By Order entered October 15, 2008, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court's ruling in the appeal by indirect purchaser plaintiffs; the direct purchaser plaintiffs' appeal was heard by the U.S. Court of Appeals for the Second Circuit in April 2009. On April 29, 2010, the Federal Circuit affirmed the District Court's ruling dismissing the direct purchasers' case on summary judgment. The direct purchaser plaintiffs requested a rehearing en banc, which was denied by the Federal Circuit in September 2010. Following an appeal to the U.S. Supreme Court by the direct purchaser plaintiffs, on March 7, 2011, the U.S. Supreme Court denied the direct purchaser plaintiff's petition for a writ of certiori, thus ending the federal litigation relating to Cipro®.There is one case remaining in California which is stayed pending the decision of the US Supreme Court inIn re. K-Dur Antitrust Litigation.
• DDAVP® Antitrust Litigation
Subsequent to the decision of the U.S. District Court for the Southern District of New York in February 2005 holding the patent rights at issue in the DDAVP® tablet litigation to be unenforceable as a result of inequitable conduct, eight putative class actions have been filed claiming injury as a result of Ferring B.V. and Aventis Pharmaceuticals Inc.'s alleged scheme to monopolize the market for DDAVP® tablets in violation of the Sherman Act and the antitrust and deceptive trade practices statutes of several states. In August 2011, Aventis Pharmaceuticals and Ferring reached an agreement with direct purchaser plaintiffs resolving their claims. Aventis Pharmaceuticals Inc. agreed to resolve these claims for U.S. $3.5 million. In December 2012, Aventis Pharmaceuticals reached a settlement with the indirect purchasers for U.S. $800 000.
• Lovenox® Antitrust Litigation
In August 2008, Eisai Inc. (Eisai) brought suit against Sanofi U.S. LLC and Sanofi U.S. Inc. in the U.S. District Court for the District of New Jersey alleging that certain contracting practices for Lovenox® violate federal and state antitrust laws. The proceedings are in the discovery phase. An estimate of the financial effect of this case is not practicable at this stage of the litigation.
Sanofi U.S. LLC and Sanofi U.S. Inc. filed a separate state court lawsuit against Eisai and two individuals who are current employees of Eisai and former employees of Sanofi U.S. and/or its predecessors. Sanofi U.S. alleges that the individuals took confidential information from Sanofi U.S. predecessors to Eisai in breach of their employment agreements with Sanofi, and that such confidential information has been utilized by them and by Eisai to the detriment of Sanofi U.S. This litigation is stayed.
d) Other litigation and arbitration
• Hoechst Shareholder Litigation
On December 21, 2004, the extraordinary general meeting of Sanofi's German subsidiary Hoechst AG (now Hoechst GmbH) approved a resolution transferring the shares held by minority shareholders to Sanofi for compensation of €56.50 per share. Certain minority shareholders filed claims contesting the validity of the resolution, preventing its registration with the commercial register of Frankfurt and its entry into effect.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On July 12, 2005, this litigation was settled. As a consequence, the squeeze out has been registered in the commercial register making Sanofi the sole shareholder of Hoechst AG.
According to the settlement agreement, the cash compensation has been increased to €63.80 per share. The cash compensation was further increased by another €1.20 per share for those outstanding shareholders whointer alia waived in advance any increase of the cash compensation obtained through a judicial appraisal proceeding(Spruchverfahren) brought by former minority shareholders. Minority shareholders representing approximately 5 million shares did not accept such offer.
Subsequently, a number of former minority shareholders of Hoechst initiated a judicial appraisal proceeding with the District Court of Frankfurt (Landgericht Frankfurt-am-Main) contesting the amount of the cash compensation paid in the squeeze out. In its decision dated January 27, 2012, the District Court of Frankfurt ruled in favor of Sanofi, confirming the amount of €63.80 per share as adequate cash compensation. A number of opt-out shareholders have filed an appeal with the Appeals Court of Frankfurt.
• Zimulti®/Acomplia® (rimonabant) Class Action
In November 2007, a purported class action was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of Sanofi shares. The complaint charged Sanofi and certain of its current and former officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleged that defendants' statements regarding rimonabant (a product withdrawn from the market, formerly registered under the trademark Acomplia® in Europe and Zimulti® in the US) were materially false and misleading when made because defendants allegedly concealed data concerning certain alleged secondary effects of rimonabant, in particular, suicidality in patients suffering from depression. In September 2009, the motion was dismissed with prejudice. The plaintiffs filed a motion for reconsideration. On July 27, 2010, the U.S. District Court for the Southern District of New York granted plaintiff's motion to reconsider and authorized plaintiffs to submit an amended complaint. In November 2010, the District Court heard arguments on Sanofi's motion to dismiss plaintiffs' amended complaint. By Order dated March 31, 2011, the U.S. District Court for the Southern District of New York dismissed a number of individual defendants, however, denied Sanofi's request to dismiss the company, as well as one of its current officers and one of its former officers. On November 11, 2011, plaintiffs filed a motion for class certification. Oral argument on plaintiff's motion for class certification took place on September 19, 2012. Discovery is on-going. A reliable measure of potential liabilities arising from this purported class action is not possible at this stage of the litigation.
• Merial Heartgard® Advertisement Claim
On August 31, 2009, a putative class action lawsuit was filed against Merial before the U.S. District Court for the Northern District of Mississippi, alleging that Merial engaged in false and misleading advertising of Heartgard® and Heartgard® Plus by claiming 100% efficacy in the prevention of heartworm disease, as well as the prevention of zoonotic diseases. Plaintiffs also request punitive damages and a permanent injunction with respect to the alleged advertising. The proceedings are ongoing and the class has not been certified yet. Merial filed a motion for summary judgment. A reliable measure of potential liabilities arising from this putative class action is not possible at this stage of the litigation.
• Merial Frontline® Advertisement Claim
From October 2011 through January 2012, ten putative class actions were filed against Merial in various U.S. federal courts, each alleging that the plaintiffs sustained damages after purchasing defendants' products (Merial's Frontline® and /or Certifect® brands and Bayer's Advantage® and Advantix® brands) for their pets' flea problems. These actions have been transferred to the U.S. District Court for the Northern District of Ohio and consolidated in a multi-district litigation.
The complaints seek injunctive relief and contain counts for violations of consumer protection or deceptive trade practices acts, false advertising, breach of implied and express warranty and violations of the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Magnuson-Moss Warranty Act. Four of the complaints seek U.S.$32 billion in damages, two complaints seek greater than U.S.$4 billion in damages, and the remaining four complaints seek damages in excess of U.S.$5 million. No class has been certified yet. In October 2012, defendants filed a motion for summary judgment. Discovery is ongoing. A reliable measure of potential liabilities arising from this putative class action litigation is currently not possible.
e) Contingencies arising from certain Business Divestitures
Sanofi and its subsidiaries, Hoechst and Aventis Agriculture, divested a variety of mostly chemical, including agro-chemical, businesses as well as certain health product businesses in previous years. As a result of these divestitures, the Group is subject to a number of ongoing contractual and legal obligations regarding the state of the sold businesses, their assets, and their liabilities.
• Aventis Behring Retained Liabilities
The divestment of Aventis Behring and related protein therapies assets became effective on March 31, 2004. The purchase agreement contained customary representations and warranties running from Sanofi as seller to CSL Limited as purchaser. Sanofi has indemnification obligations that generally expired on March 31, 2006 (the second anniversary of the closing date). However, some indemnification obligations, having a longer duration, remain in effect, for example, indemnification obligations relating to the due organization, capital stock and ownership of Aventis Behring Companies runs through March 31, 2014, and product liability indemnification through March 31, 2019, subject to an extension for claims related to certain types of product liability notified before such date. Furthermore, for tax-related issues, the indemnification obligation of Sanofi covers all taxable periods that end on or before the closing date and expires thirty days after the expiration of the applicable statute of limitations. In addition, the indemnification obligations relating to certain specified liabilities, including HIV liability, survive indefinitely.
Under the indemnification agreement, Sanofi is generally obligated to indemnify CSL Limited, only to the extent indemnifiable, losses exceeding U.S.$10 million and up to a maximum aggregate amount of U.S.$300 million. For environmental claims, the indemnification due by Sanofi equals 90% of the indemnifiable losses. Product liability claims are generally treated separately, and the aggregate indemnification is capped at U.S.$500 million. Certain indemnification obligations, including those related to HIV liability, as well as tax claims, are not capped in amount.
• Aventis CropScience Retained Liabilities
The sale by Aventis Agriculture S.A. and Hoechst GmbH (both legacy companies of Sanofi) of their aggregate 76% participation in Aventis CropScience Holding (ACS) to Bayer and Bayer CropScience AG (BCS), the wholly owned subsidiary of Bayer which holds the ACS shares, was effective on June 3, 2002. The stock purchase agreement dated October 2, 2001, contained customary representations and warranties with respect to the sold business, as well as a number of indemnifications, in particular with respect to: environmental liabilities (the representations and warranties and the environmental indemnification are subject to a cap of €836 million, except for certain legal representations and warranties and specific environmental liabilities); taxes; certain legal proceedings; claims related to StarLink® corn; and certain pre-closing liabilities, in particular, product liability cases (which are subject to a cap of €418 million). There are various periods of limitation depending upon the nature or subject of the indemnification claim. Further, Bayer and BCS are subject to a number of obligations regarding mitigation and cooperation.
Starting with a first settlement agreement signed in December 2005, Aventis Agriculture and Hoechst GmbH have resolved a substantial number of disputes with Bayer and BCS, including the termination of arbitration proceedings initiated in August 2003 for an alleged breach of a financial statement-related representation contained in the stock purchase agreement, and numerous other warranty and indemnification claims asserted under the stock purchase agreement, including claims relating to certain environmental and product liabilities. A number of other outstanding claims remain unresolved.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
LLRICE601 and LLRICE604 — U.S. Litigation: BCS has sent Sanofi notice of potential claims for indemnification under various provisions of the stock purchase agreement. These potential claims relate to several hundred individual complaints that have been filed since August 2006 by rice growers, millers, and distributors in U.S. state and federal courts against a number of current and former subsidiaries (collectively the "CropScience Companies") which were part of the ACS group prior to Bayer's acquisition of the ACS shares.
Plaintiffs in these cases seek to recover damages in connection with the detection of trace amounts of the genetically modified rice called "Liberty Link® Rice 601" (also known as "LLRICE601") or "Liberty Link® Rice 604" (also known as "LLRICE604") in samples of commercial long-grain rice. LLRICE601 and LLRICE604, each a variety of long grain rice genetically altered to resist Liberty® Herbicide, were grown in field tests in the United States from the years 1998 to 2001. Plaintiffs assert a number of causes of action, alleging that the CropScience Companies failed to take adequate measures to prevent cross-pollination or commingling of LLRICE601 and/or LLRICE604 with conventional rice.
In July 2011, BCS reached settlement agreements with attorneys representing U.S. long-grain rice growers at a total amount of U.S.$750 million, thus settling cases that were part of the U.S. federal multi-district litigation, as well as those cases before state courts. The settlement agreement with state court grower plaintiffs does not include certain cases which reached verdicts in Arkansas State Court, as well as certain grower cases that were settled separately from the global settlement, where BCS has paid in judgement or settlement a collective total of approximately U.S.$67 million.
With respect to one of those cases, the Arkansas Supreme Court upheld the state court jury award of U.S.$42 million in punitive damages, ruling that the statutory cap on punitive damages is unconstitutional. BCS has reached settlement with a number of non-grower plaintiffs, primarily millers and European importers, for a total of approximately U.S.$203 million. In March 2011, an Arkansas State Court jury awarded Riceland Foods U.S.$11.8 million in compensatory damages and U.S.$125 million in punitive damages. In June 2011 (prior to the above-mentioned Arkansas Supreme Court decision) punitive damages were reduced to U.S.$1 million in application of the statutory cap. Both BCS and Riceland appealed the decision, and in January 2013, reached a settlement resolving Riceland's claims. Non-grower trials are scheduled for 2013.
Sanofi denies direct or indirect liability for these cases, and has so notified BCS.
In a related development, the FDA has concluded that the presence of LLRICE601 in the food and feed supply poses no safety concerns and, on November 24, 2006, the United States Department of Agriculture (USDA) announced it would deregulate LLRICE601. With respect to LLRICE 604, the USDA announced, in March 2007, that the PAT protein contained in LLRICE604 has a long history of safe use and is present in many deregulated products. Further to an investigation regarding the causation chain that led to contamination, in October 2007, the USDA declined to pursue enforcement against BCS.
• Aventis Animal Nutrition Retained Liabilities
Aventis Animal Nutrition S.A. and Aventis (both legacy companies of Sanofi) signed an agreement for the sale to Drakkar Holdings S.A. of the Aventis Animal Nutrition business effective in April 2002. The sale agreement contained customary representations and warranties. Sanofi's indemnification obligations ran through April 2004, except for environmental indemnification obligations (which run through April 2012), tax indemnification obligations (which run through the expiration of the applicable statutory limitation period), and antitrust indemnification obligations (which extend indefinitely). The indemnification undertakings are subject to an overall cap of €223 million, with a lower cap for certain environmental claims. Indemnification obligations for antitrust and tax claims are not capped.
• Celanese AG Retained Liabilities
The demerger of the specialty chemicals business from Hoechst to Celanese AG (now trading as "Celanese GmbH") became effective on October 22, 1999. Under the demerger agreement between Hoechst and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Celanese, Hoechst expressly excluded any representations and warranties regarding the shares and assets demerged to Celanese. However, the following obligations of Hoechst are ongoing:
· | While all obligations of Hoechst (i) resulting from public law or (ii) pursuant to current or future environmental laws or(iii) vis-à-vis third parties pursuant to private or public law related to contamination (as defined) |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
· | To the extent Hoechst is liable to purchasers of certain of its divested businesses (as listed in the demerger agreement),
|
Compensation paid to third parties by Celanese and CCC through December 31, 2015 was significantly below the first threshold of€250 million.
Rhodia Retained Liabilities
In connection with the initial public offering of Rhodia in 1998,Rhône-Poulenc (later named Aventis, to which Sanofi is the legal successor in interest) entered into an environmental indemnification agreement with Rhodia on May 26, 1998 under which, subject to certain conditions, Rhodia was entitled to claim indemnification from Aventis with respect to direct losses resulting fromthird-party claims or public authority injunctions for environmental damages. Aventis and Rhodia entered into a settlement agreement on March 27, 2003 under the terms of which the parties settled all environmental claims in connection with the environmental indemnification agreement.
• Rhodia Retained Liabilities
In connection with the initial public offering of Rhodia in 1998, Rhône-Poulenc (later named Aventis, to which Sanofi is the legal successor in interest) entered into an environmental indemnification agreement with Rhodia on May 26, 1998 under which, subject to certain conditions, Rhodia was entitled to claim indemnification from Aventis with respect to direct losses resulting from third-party claims or public authority injunctions for environmental damages. Aventis and Rhodia entered into a settlement agreement on March 27, 2003 under the terms of which the parties settled all environmental claims in connection with the environmental indemnification agreement.
Notwithstanding this settlement agreement, Rhodia and certain of its subsidiaries have unsuccessfully sought indemnification for environmental costs in the United States and Brazil. In both instances, the suits were decided in favor of Sanofi, with the court holding that the settlement precluded the indemnification claims. The decision in Brazil was under appeal by Rhodia. On September 6, 2011, the Court of Appeals rendered a decision favorable to Sanofi, confirming that the Environmental Settlement concluded in March 2003 precludes any claim from Rhodia in these matters. In 2012, Rhodia filed a motion for reconsideration of this decision before the Court of Appeals in Sao Paulo which was ultimately denied by anen banc decision of the same Court in February 2013. To date, the admissibility of Rhodia’s recourse initiated against this decision is under consideration by the Court of Appeals in Sao Paulo.
On April 13, 2005, Rhodia initiated anad hoc arbitration procedure seeking indemnification from Sanofi for the financial consequences of the environmental liabilities and pension obligations that were allocated to Rhodia through the various operations leading to the formation of Rhodia in 1997, amounting respectively to€125 million and€531 million. Rhodia additionally sought indemnification for future costs related to transferred environmental liabilities and coverage of all costs necessary to fully fund the transfer of pension liabilities out of Rhodia’s accounts.
The arbitral tribunal determined that it has no jurisdiction to rule on pension claims and that Rhodia’s environmental
claims are without merit. In May 2008, the Paris Court of Appeals rejected the action initiated by Rhodia to nullify the 2006 arbitral award in favor of Sanofi.
On July 10, 2007, Sanofi was served with a civil suit brought by Rhodia before the Commercial Court of Paris (Tribunal de Commerce de Paris) seeking indemnification on the same grounds as described above. The allegations before the Commercial Court of Paris were comparable to those asserted in Rhodia’s arbitration demand. On February 10, 2010, Rhodia submitted its pleadings brief (conclusions récapitulatives) in which it asked the Court to hold that Sanofi was at fault in failing to provide Rhodia with sufficient capital to meet its pension obligations and environmental liabilities, and claimed indemnification in the amount of€1.3 billion for retirement commitments and approximately€311 million for environmental liabilities. On December 14, 2011, the Commercial Court of Paris ruled in favor of Sanofi, rejecting all of Rhodia’s allegations and claims. The Court of Appeals of Paris fully confirmed this decision in September 2013.
In December 2013, Rhodia lodged a special appeal against this decision before the Supreme Court in France (Cour de Cassation).
The French Supreme Court’s decision was rendered in Sanofi’s favor in May 2015. The case is over.
Rhodia Shareholder Litigation
In January 2004, two minority shareholders of Rhodia and their respective investment vehicles filed two claims before the Commercial Court of Paris (Tribunal de Commerce de Paris) against Aventis, to which Sanofi is successor in interest, together with other defendants including former directors and statutory auditors of Rhodia from the time of the alleged events. The claimants seek a judgment holding the defendants collectively liable for alleged management errors and for alleged publication of misstatements between 1999 and 2002, andinter alia regarding Rhodia’s acquisition of the companies Albright & Wilson and ChiRex. These shareholders seek a finding of joint and several liability for damages to be awarded to Rhodia in an amount of€925 million for alleged harm to it (a derivative action), as well as personal claims of€ 4.3 million and€125.4 million for their own alleged individual losses. Sanofi contests both the substance and the admissibility of these claims.
Sanofi is also aware of three criminal complaints filed in France by the same plaintiffs and of a criminal investigation order issued by the Paris public prosecutor following the submission of the report issued by the AMF regarding Rhodia’s financial communications. In 2006, the Commercial Court of Paris accepted Sanofi’s and the other defendants’ motion to stay the civil litigation pending the conclusion of the criminal proceedings.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Clariant Retained Liabilities — Specialty Chemicals Business
Hoechst conveyed its specialty chemicals business to Clariant AG (Clariant) pursuant to a 1997 agreement. Clariant has undertaken to indemnify Hoechst for all costs incurred for environmental matters relating to purchased sites. However, certain indemnification obligations of Hoechst for environmental matters in favor of Clariant remain with Hoechst.
Hoechst must indemnify Clariant indefinitely (i) with respect to sites taken over by Clariant, for costs which relate to environmental pollutions attributable to certain activities of Hoechst or of third parties, (ii) for costs attributable to four defined waste deposit sites in Germany which are located outside the sites taken over by Clariant (to the extent exceeding an indexed amount of approximately€20.5 million), (iii) for costs from certain locally concentrated pollutions in the sites taken over by Clariant but not caused by specialty chemicals activities in the past, and (iv) for 75% of the costs relating to a specific waste deposit site in Frankfurt, Germany.
Infraserv Höchst Retained Liabilities
By the Asset Contribution Agreement dated December 19/20, 1996, as amended in 1997, Hoechst contributed all lands, buildings, and related assets of the Hoechst site at Frankfurt Höchst to Infraserv GmbH & Co. Höchst KG. Infraserv Höchst undertook to indemnify Hoechst against environmental liabilities at the Höchst site and with respect to certain landfills. As consideration for the indemnification undertaking, Hoechst transferred to Infraserv Höchst approximately€57 million to fund reserves. In 1997, Hoechst also agreed it would reimburse current and future Infraserv Höchst environmental expenses up to€143 million. As a former owner of the land and as a former user of the landfills, Hoechst may ultimately be liable for costs of remedial action in excess of this amount.
D.23. PROVISIONS FOR DISCOUNTS, REBATES AND SALES RETURNS
Adjustments between gross sales and net sales, as described in Note B.14., are recognized either as provisions or as reductions in accounts receivable, depending on their nature.
The table below shows movements in these items:
(€ million) | Government State | Managed GPO | Chargeback incentives | Rebates and discounts | Sales returns | Other deductions | Total | |||||||||||||||||||||
Balance at January 1, 2013 | 1,000 | 171 | 158 | 806 | 442 | 43 | 2,620 | |||||||||||||||||||||
Current provision related to current period sales | 1,756 | 403 | 2,636 | 4,846 | 405 | 31 | 10,077 | |||||||||||||||||||||
Net change in provision related to prior period sales | (77) | - | - | 55 | 25 | (4) | (1) | |||||||||||||||||||||
Payments made | (1,804) | (393) | (2,594) | (4,796) | (522) | (22) | (10,131) | |||||||||||||||||||||
Currency translation differences | (32) | (8) | (9) | (60) | (22) | (6) | (137) | |||||||||||||||||||||
Balance at December 31, 2013 | 843 | 173 | 191 | 851 | 328 | 42 | 2,428 | |||||||||||||||||||||
Current provision related to current period sales | 2,792 | 665 | 3,078 | 5,026 | 429 | 7 | 11,997 | |||||||||||||||||||||
Net change in provision related to prior period sales | (60) | 26 | (1) | (36) | (2) | - | (73) | |||||||||||||||||||||
Payments made | (2,273) | (586) | (3,070) | (4,977) | (400) | (45) | (11,351) | |||||||||||||||||||||
Currency translation differences | 137 | 34 | 23 | 12 | 38 | 2 | 246 | |||||||||||||||||||||
Balance at December 31, 2014 | 1,439 | 312 | 221 | 876 | 393 | 6 | 3,247 | |||||||||||||||||||||
Current provision related to current period sales | 4,912 | 1,954 | 4,131 | 5,913 | 585 | 31 | 17,526 | |||||||||||||||||||||
Net change in provision related to prior period sales | (35) | - | (20) | (45) | 35 | - | (65) | |||||||||||||||||||||
Payments made | (4,295) | (1,636) | (4,001) | (5,672) | (541) | (31) | (16,176) | |||||||||||||||||||||
Currency translation differences | 152 | 42 | 18 | 11 | 29 | - | 252 | |||||||||||||||||||||
Reclassification of the Animal Health business(3) | - | - | - | (139) | (21) | (1) | (161) | |||||||||||||||||||||
Balance at December 31, 2015 | 2,173 | 672 | 349 | 944 | 480 | 5 | 4,623 |
(1) | Primarily the U.S. government’s Medicare and Medicaid programs. |
(2) | Mainly rebates and other price reductions granted to healthcare authorities in the United |
(3) | This line comprises the
|
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.24. PERSONNEL COSTS
Total personnel costs include the following items:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Salaries | 6,879 | 6,056 | 6,040 | |||||||||
Social security charges (including defined-contribution pension plans) | 2,083 | 1,896 | 1,880 | |||||||||
Stock options and other share-based payment expense | 217 | 217 | 200 | |||||||||
Defined-benefit pension plans | 293 | 288 | 261 | |||||||||
Other employee benefits | 244 | 208 | 226 | |||||||||
Total(1) | 9,716 | 8,665 | 8,607 |
| December 31, 2012 | December 31, 2011 | December 31, 2010 (1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Production | 45,035 | 44,415 | 37,504 | |||||||
Research and development | 17,066 | 18,823 | 16,983 | |||||||
Sales force | 32,270 | 32,874 | 32,686 | |||||||
Marketing and support functions | 17,603 | 17,607 | 14,402 | |||||||
Total | 111,974 | 113,719 | 101,575 | |||||||
(1) |
|
The total number of registered employees, including those of the Animal Health business, was 115,631 as of December 31, 2015, compared with 113,496 as of December 31, 2014 and 112,128 as of December 31, 2013.
Employee numbers by function as of December 31 are shown below:
2015 | 2014 | 2013 | ||||||||||
Production | 45,744 | 44,366 | 44,031 | |||||||||
Research and Development | 16,260 | 16,257 | 16,688 | |||||||||
Sales force | 34,172 | 34,118 | 33,509 | |||||||||
Marketing and Support Functions | 19,455 | 18,755 | 17,900 | |||||||||
Total | 115,631 | 113,496 | 112,128 |
D.25. OTHER OPERATING INCOME
Other operating income totaled€254 million in 2015, versus€301 million in 2014 and€691 million in 2013.
This line item includes income arising under alliance agreements in the Pharmaceuticals segment (€59 million in 2015, versus€47 million in 2014 and€191 million in 2013), in particular the agreement with Regeneron.
Other operating income also includes net operating foreign exchange gains and losses (representing net losses of€98 million in 2015,€105 million in 2014 and€66 million in 2013), and proceeds from disposals relating to ongoing operations (amounting to€146 million in 2015,€230 million in 2014 and€346 million in 2013). The 2013 figure includes a payment of $125 million received in connection with
the expiry of the collaboration agreement with Warner Chilcott, and a€165 million gain arising from the sale to Covis Pharma of the commercial rights to some pharmaceutical products in the United States.
D.26. OTHER OPERATING EXPENSES
Other operating expenses totaled€462 million in 2015, compared with€157 million in 2014 and€240 million in 2013. In 2015, Sanofi recorded a foreign exchange loss of€240 million on the operations of the Group’s Venezuelan subsidiaries (see Note A.4.). This line item also includes shares of profits due to alliance partners (other than Warner Chilcott under the Actonel® agreement and BMS) under product marketing agreements (€52 million in 2015, versus€23 million in 2014 and€30 million in 2013).
D.27. RESTRUCTURING COSTS
Restructuring costs totaled€795 million in 2015,€404 million in 2014 and€303 million in 2013, and comprise the following items:
(€ million) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Employee-related expenses | 307 | 255 | 173 | |||||||||
Expenses related to property, plant and equipement | 132 | 89 | 45 | |||||||||
Compensation for early termination of contracts ( other than contracts of employment) | 7 | 22 | 26 | |||||||||
Decontamination costs | 1 | (1) | 12 | |||||||||
Other restructuring costs | 348 | 39 | 47 | |||||||||
Total | 795 | 404 | 303 |
This line includes income arising under alliance agreements in the Pharmaceuticals segment (€258 million in 2012, versus €202 million in 2011 and €315 million in 2010), in particular the agreement on the worldwide development and marketing of Actonel® (see Note C.3.) and the Group's share of profits on Copaxone®.
In 2012, it also included the impact of the favorable outcome of litigation
(1) | Income statement items relating to
|
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In 2015, restructuring costs related mainly to (i) employee-related expenses arising from headcount adjustment plans in the United States, Japan, and the rest of the world and (ii) the reorganization of the Group’s R&D activities, especially in France following signature of the agreement with Evotec. Expenses related to property, plant and equipment mainly reflect impairment losses taken against industrial assets in Europe.
In 2014 and 2013, restructuring costs mainly comprisedemployee-related expenses arising from headcount adjustment plans in France and the rest of Europe.
D.28. OTHER GAINS AND LOSSES, AND LITIGATION
There were no material transactions of this nature in any of the periods presented.
D.29. FINANCIAL INCOME AND EXPENSES
An analysis of financial income and expenses is set forth below:
(€ million) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Cost of debt(2) | (331) | (357) | (365) | |||||||||
Interest income | 57 | 67 | 48 | |||||||||
Cost of debt, net of cash and cash equivalents | (274) | (290) | (317) | |||||||||
Non-operating foreign exchange gains/(losses) | - | 2 | 8 | |||||||||
Unwinding of discounting of provisions(3) | (44) | (74) | (72) | |||||||||
Net interest cost related to employee benefits | (114) | (140) | (157) | |||||||||
Gains/(losses) on disposals of financial assets | 46 | 83 | (4) | 50 | ||||||||
Impairment losses on financial assets, net of reversals | (50) | (15) | (8) | |||||||||
Other items | 55 | 28 | (5) | (2) | ||||||||
Net financial income/(expense) | (381) | (406) | (498) | |||||||||
comprising: Financial expenses | (559) | (598) | (609) | |||||||||
Financial income | 178 | 192 | 111 |
|
|
| Includes a
|
Primarily on provisions for environmental risks and restructuring provisions (see Note D.19.). |
Mainly comprises a gain on the sale of an equity interest in Ionis Pharmaceuticals (formerly Isis Pharmaceuticals; refer to Note D.7.). |
(5) | Includes a €35 million
|
In 2015, 2014 and 2013, the impact of the ineffective portion of hedging relationships was not material.
F- 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.30. INCOME TAX EXPENSE
The Group has elected for tax consolidations in a number of countries, principally France, Germany, the United Kingdom and the United States.
The table below shows the allocation of income tax expense between current and deferred taxes:
(€ million) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Current taxes | (1,978) | (2,345) | (1,629) | |||||||||
Deferred taxes | 1,269 | 1,131 | 903 | |||||||||
Total | (709) | (1,214) | (726) | |||||||||
Income before tax and associates and joint ventures | 5,243 | 5,658 | 4,484 |
(1) | Income statement items relating to the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and |
The difference between the effective tax rate and the standard corporate income tax rate applicable in France is explained as follows:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Current taxes | (2,050 | ) | (2,359 | ) | (2,929 | ) | ||||
Deferred taxes | 916 | 1,904 | 1,499 | |||||||
Total | (1,134 | ) | (455 | ) | (1,430 | ) | ||||
(as a percentage) | 2015(1) | 2014(1) | 2013(1) | |||||||||
Standard tax rate applicable in France | 34.4 | 34.4 | 34.4 | |||||||||
Difference between the standard French tax rate and the rates applicable to the Group(2) | (17.7) | (12.2) | (11.7) | |||||||||
Tax rate differential on intragroup margin on inventory(3) | 1.7 | (0.5) | 1.3 | |||||||||
Tax effects of the share of profits reverting to BMS (see Note D.32.) | (0.6) | (0.7) | (1.1) | |||||||||
Contribution on distributed income (3%)(4) | 2.1 | 1.9 | 2.4 | |||||||||
CVAE tax in France(5) | 1.3 | 0.9 | 1.2 | |||||||||
Revisions to tax exposures and settlements of tax disputes | 0.3 | (2.8) | (6.7) | |||||||||
Fair value remeasurement of contingent consideration liabilities | (1.1) | 0.4 | (2.9) | |||||||||
Other items(6) | (6.9) | 0.1 | (0.7) | |||||||||
Effective tax rate | 13.5 | 21.5 | 16.2 |
(1) | Income statement items relating to the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); refer to Notes D.2.1. and D.36. |
(2) | The difference between the
|
(3) | When internal margin included in inventory is eliminated, a deferred tax asset is recognized on the basis of the tax rate applicable to the subsidiary that holds the inventory, which may differ from the tax rate of the subsidiary that generated the eliminated intragroup margin. |
(4) |
|
(5) | Net impact on the
|
(6) | In 2015, the “Other items” line includes the impact (€161 million) of changes in
|
For the periods presented, the amount of deferred tax assets recognized in profit or loss that were initially subject to impairment losses on a business combination is immaterial.
The contribution on distributed income, for which the triggering event is the decision by the Annual General Meeting to approve the distribution, is not taken into account in the determination of deferred tax assets and liabilities.
D.31. SHARE OF PROFIT/LOSS OF ASSOCIATES AND JOINT VENTURES
With effect from the beginning of April 2014, this line item includes the Group’s share of the profits and losses of Regeneron, which represented a net loss of€54 million in 2015 and a net loss of€126 million in 2014. That amount includes the impact of amortization charged on the fair value remeasurement of the Group’s share of the acquired intangible assets and inventories of Regeneron.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
This line item also includes the share of co-promotion profits attributable to Sanofi for territories covered by entities majority owned by BMS (see Note C.2.). The impact of the BMS alliance in 2015 was€57 million, before deducting the tax effect of€21 million (compared with€50 million in 2014 with a tax effect of€19 million, and€40 million in 2013 with a tax effect of€15 million).
Finally, this line item also includes the share of profits or losses from other associates and joint ventures, the amount of which was immaterial in 2015, 2014 and 2013.
D.32. NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
This line item includes the share of co-promotion profits attributable to BMS for territories covered by entities majority owned by Sanofi (see Note C.2.). The amounts involved were€94 million in 2015,€109 million in 2014 and€141 million in 2013. There is no tax effect, because BMS receives its share before tax.
This line also includes the share of net income attributable to other non-controlling interests:€7 million in 2015,€10 million in 2014 and€17 million in 2013.
D.33. RELATED PARTY TRANSACTIONS
The principal related parties of Sanofi are companies over which the Group has control or significant influence, joint ventures, key management personnel, and principal shareholders.
The Group has not entered into any transactions with any key management personnel. Financial relations with the Group’s principal shareholders fall within the ordinary course of business and were immaterial in the years ended December 31, 2015, 2014 and 2013.
A list of the principal companies the Group controls is presented in Note F.1. Those companies are fully consolidated as described in Note B.1. Transactions between those companies, and between the parent company and its subsidiaries, are eliminated when preparing the consolidated financial statements.
Transactions with companies over which the Group has significant influence, and with joint ventures, are presented in Note D.6.
Key management personnel include corporate officers (including two directors during 2015, 2014 and 2013 who were covered by supplementary pension plans, see Item 6.B.) and the members of the Executive Committee (an average of 11 members in 2015, 12 members in 2014, and 10 members in 2013).
The table below shows, by type, the compensation paid to key management personnel:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Short-term benefits(1) | 32 | 29 | 22 | |||||||||
Post-employment benefits(2) | 20 | 10 | 11 | |||||||||
Share-based payment | 14 | 22 | 9 | |||||||||
Total recognized in profit or loss | 66 | 61 | 42 |
Transactions with companies over which the Group has significant influence and with joint ventures are presented in Note D.6.
Key management personnel include corporate officers (including two directors during 2012 and 2011, and three directors in 2010, who were covered by supplementary pension plans, see Item 6.B.) and the members of the Executive Committee (9 members during 2012, 2011 and 2010).
The table below shows, by type, the compensation paid to key management personnel:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Short-term benefits (1) | 24 | 21 | 23 | |||||||
Post-employment benefits | 10 | 10 | 12 | |||||||
Share-based payment (2) | 8 | 5 | 6 | |||||||
Total recognized in the income statement | 42 | 36 | 41 | |||||||
(1) | Compensation, |
(2) | The 2015 figure includes an expense
|
The aggregate supplementary pension obligation in favor of certain corporate officers and of members of the Executive Committee was€128 million as of December 31, 2015, versus€124 million as of December 31, 2014 and€125 million as of December 31, 2013. The aggregate amount of termination benefits payable to key management personnel was€6 million as of December 31, 2015, compared with€9 million as of December 31, 2014 and€5 million as of December 31, 2013.
D.34. INFORMATION ABOUT MAJOR CUSTOMERS AND CREDIT RISK
Credit risk is the risk that customers (wholesalers, distributors, pharmacies, hospitals, clinics or government
agencies) may fail to pay their debts. The Group manages credit risk by vetting customers in order to set credit limits and risk levels and asking for guarantees or insurance where necessary, performing controls, and monitoring qualitative and quantitative indicators of accounts receivable balances such as the period of credit taken and overdue payments.
Customer credit risk also arises as a result of the concentration of the Group’s sales with its largest customers, in particular certain wholesalers in the United States. The Group’s three largest customers respectively accounted for approximately 10.5%, 7.2% and 7.0% of revenues in 2015 mainly in the Pharmaceuticals segment (versus 9.5%, 7.5% and 5.5% in 2014 and 7.2%, 5.6% and 5.2% in 2013).
F- 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.35. SEGMENT INFORMATION
As indicated in Note B.26., the Group has the following operating segments: Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health. All other activities are combined in a separate segment Other.
The Pharmaceuticals segment covers research, development, production and marketing of medicines, including those originating from Genzyme. The Sanofi 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 whose activities are related to pharmaceuticals, in particular Regeneron Pharmaceuticals, Inc. and the entities majority owned by BMS.
The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes the Sanofi Pasteur MSD joint venture.
Following the signature of the exclusivity agreement with Boehringer Ingelheim (see Note D.2.1.) and in accordance with IFRS 5 requirements on the presentation of discontinued operations, the net income/loss of the Animal Health business is presented in a separate line item in the consolidated income statements for 2015 and the prior periods reported. Until final completion of the transaction, expected in the fourth quarter of 2016, Sanofi will continue to monitor the Animal Health business was identified as an operating segment on the basis of information now used internally by management to measure operational performance of the Animal Health business. As of December 31, 2015, the Animal Health business remains an operating segment of the Group within the meaning of IFRS 8.
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. This segment
includes the effects of retained commitments in respect of divested activities.
Inter-segment transactions are not material.
D.35.1. Segment results
The Group reports segment results on the basis of “Business operating income”. This indicator is compliant with IFRS 8 and to allocate resources.
The Pharmaceuticals segment covers research, development, production and marketing of medicines, including those originating from Genzyme (see D.1.2.). The Sanofi 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 whose activities are related to pharmaceuticals, in particular the entities majority owned by BMS.
The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes the Sanofi Pasteur MSD joint venture.
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. This segment includes Sanofi's interest in the Yves Rocher group until the date of loss of significant influence (see Note D.6.), and the effects of retained commitments in respect of divested activities.
Inter-segment transactions are not material.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.35.1. Segment results
Sanofi reports segment results on the basis of "Business operating income". This indicator (compliant with IFRS 8) is used internally to measure operational performance and allocate resources.
Business operating income is derived fromOperating income, adjusted as follows:
| the amounts reported in the line itemsRestructuring costs,Fair value remeasurement of contingent consideration liabilities andOther gains and losses, and litigation are eliminated; |
amortization and impairment losses charged against intangible assets (other than |
· | the share of profits/losses of associates and joint ventures is added; |
· | net income attributable to non-controlling interests is deducted; |
· | otheracquisition-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; |
restructuring costs relating to associates and joint ventures are |
· |
|
F- 96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Segment results are shown in the table below:
2015 | ||||||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | |||||||||||||||
Net Sales | 29,799 | 4,743 | - | 34,542 | 2,515 | |||||||||||||||
Other revenues | 288 | 31 | - | 319 | 41 | |||||||||||||||
Cost of sales | (8,788) | (2,131) | - | (10,919) | (885) | |||||||||||||||
Research and development expenses | (4,530) | (552) | - | (5,082) | (177) | |||||||||||||||
Selling and general expenses | (8,656) | (726) | - | (9,382) | (865) | |||||||||||||||
Other operating income and expenses | (121) | 27 | (114) | (208) | 5 | |||||||||||||||
Share of profit/(loss) of associates and joint ventures | 146 | 23 | - | 169 | 1 | |||||||||||||||
Net income attributable to non-controlling interests | (125) | (1) | - | (126) | - | |||||||||||||||
Business Operating Income | 8,013 | 1,414 | (114) | 9,313 | 635 |
(1) |
The |
2014 | ||||||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | |||||||||||||||
Net Sales | 27,720 | 3,974 | - | 31,694 | 2,076 | |||||||||||||||
Other revenues | 272 | 33 | - | 305 | 34 | |||||||||||||||
Cost of sales | (8,282) | (1,948) | - | (10,230) | (799) | |||||||||||||||
Research and development expenses | (4,174) | (493) | - | (4,667) | (157) | |||||||||||||||
Selling and general expenses | (7,692) | (614) | (3) | (8,309) | (682) | |||||||||||||||
Other operating income and expenses | 194 | 2 | (52) | 144 | 20 | |||||||||||||||
Share of profit/(loss) of associates and joint ventures | 106 | 40 | - | 146 | 1 | |||||||||||||||
Net income attributable to non-controlling interests | (126) | - | - | (126) | (1) | |||||||||||||||
Business Operating Income | 8,018 | 994 | (55) | 8,957 | 492 |
(1) | The net |
2013 | ||||||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total Group | Animal Health(1) | |||||||||||||||
Net Sales | 27,250 | 3,716 | - | 30,966 | 1,985 | |||||||||||||||
Other revenues | 295 | 30 | - | 325 | 30 | |||||||||||||||
Cost of sales | (8,518) | (1,776) | - | (10,294) | (689) | |||||||||||||||
Research and development expenses | (4,087) | (518) | - | (4,605) | (165) | |||||||||||||||
Selling and general expenses | (7,362) | (588) | - | (7,950) | (653) | |||||||||||||||
Other operating income and expenses | 422 | 3 | 26 | 451 | (1) | |||||||||||||||
Share of profit/(loss) of associates and joint ventures | 48 | 41 | - | 89 | (4) | |||||||||||||||
Net income attributable to non-controlling interests | (162) | 1 | - | (161) | (1) | |||||||||||||||
Business Operating Income | 7,886 | 909 | 26 | 8,821 | 502 |
(1) | The net income/loss of the Animal Health business is presented in a separate line item, |
F- 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below, presented in compliance with IFRS 8, shows a reconciliation between “Business operating income” and Income before tax and associates and joint ventures:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Business operating income(1) | 9,313 | 8,957 | 8,821 | |||||||||
Share of profit/(loss) of associates and joint ventures(2) | (169) | (146) | (89) | |||||||||
Net income attributable to non-controlling interests(3) | 126 | 126 | 161 | |||||||||
Amortization of intangible assets | (2,137) | (2,081) | (2,527) | |||||||||
Impairment of intangible assets | (767) | 31 | (1,387) | |||||||||
Fair value remeasurement of contingent consideration liabilities | 53 | (303) | 314 | |||||||||
Expenses arising from the impact of acquisitions on inventories(4) | - | - | (8) | |||||||||
Restructuring costs | (795) | (404) | (303) | |||||||||
Additional year expense related to U.S. Branded Prescription Drug Fee(5) | - | (116) | - | |||||||||
Operating income | 5,624 | 6,064 | 4,982 | |||||||||
Financial expenses | (559) | (598) | (609) | |||||||||
Financial income | 178 | 192 | 111 | |||||||||
Income before tax and associates and joint ventures | 5,243 | 5,658 | 4,484 |
(1) | Excluding the Animal Health business, the net income/loss of which is presented in a separate line item,Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statements for 2015 and prior years (see Notes D.2.1. and D.36.). |
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Business operating income | 11,353 | 12,144 | 12,863 | |||||||
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 | |||||||
Amortization of intangible assets | (3,291 | ) | (3,314 | ) | (3,529 | ) | ||||
Impairment of intangible assets | (117 | ) | (142 | ) | (433 | ) | ||||
Fair value remeasurement of contingent consideration liabilities | (192 | ) | 15 | — | ||||||
Expenses arising from the impact of acquisitions on inventories (3) | (23 | ) | (476 | ) | (142 | ) | ||||
Restructuring costs | (1,141 | ) | (1,314 | ) | (1,384 | ) | ||||
Other gains and losses, and litigation (4) | — | (327 | ) | (138 | ) | |||||
Impact of the discontinuation of depreciation of the property, plant and equipment of Merial (IFRS 5) | — | — | 77 | |||||||
Operating income | 6,337 | 5 731 | 6,535 | |||||||
Financial expense | (553 | ) | (552 | ) | (468 | ) | ||||
Financial income | 93 | 140 | 106 | |||||||
Income before tax and associates and joint ventures | 5,877 | 5,319 | 6,173 | |||||||
Excluding (i) restructuring costs of associates and joint ventures and (ii) expenses arising from the impact of acquisitions on associates and joint ventures. |
Excluding |
This |
|
F- 98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.35.2. Other segment information
The tables below show the split by operating segment of (i) the carrying amount of investments in associates and joint ventures, (ii) acquisitions of property, plant and equipment, and (iii) acquisitions of other intangible assets.
The principal associates and joint ventures are: for the Pharmaceuticals segment, Regeneron Pharmaceuticals, Inc. (see Note D.1.), the entities majority owned by BMS (see Note C.2.), and Infraserv GmbH & Co. Höchst KG; and for the Vaccines segment, Sanofi Pasteur MSD.
Acquisitions of intangible assets and property, plant and equipment correspond to acquisitions paid for during the period.
2015 | ||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Total | ||||||||||||
Investments in associates and joint ventures(1) | 2,422 | 254 | 6 | 2,682 | ||||||||||||
Acquisition of property, plant and equipment | 945 | 258 | 90 | 1,293 | ||||||||||||
Acquisition of other intangible assets | 1,533 | 36 | 144 | 1,713 |
(1) | The assets of Merial, which in 2013 and 2014 were presented in the relevant balance sheet line item for each asset class, were reclassified in 2015 toAssets held for sale or exchangein accordance with IFRS 5 (see Notes D.2.1. and D.36.) |
2014 | ||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Total | ||||||||||||
Investments in associates and joint ventures | 2,115 | 264 | 5 | 2,384 | ||||||||||||
Acquisition of property, plant and equipment | 787 | 217 | 81 | 1,085 | ||||||||||||
Acquisition of other intangible assets | 435 | 49 | 23 | 507 |
2013 | ||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Total | ||||||||||||
Investments in associates and joint ventures | 163 | 281 | 4 | 448 | ||||||||||||
Acquisition of property, plant and equipment | 820 | 205 | 71 | 1,096 | ||||||||||||
Acquisition of other intangible assets | 264 | 17 | 21 | 302 |
F- 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.35.3. Information by geographical region
The geographical information on net sales provided below is based on the geographical location of the customer. In accordance with IFRS 8, the non-current assets reported below exclude financial instruments, deferred tax assets, and pre-funded pension obligations.
2015 | ||||||||||||||||||||||||
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | ||||||||||||||||||
Net sales(1) | 34,542 | 9,861 | 2,248 | 12,851 | 12,246 | 11,830 | ||||||||||||||||||
Non-current assets : | ||||||||||||||||||||||||
· property, plant and equipement(2) | 9,943 | 5,956 | 3,480 | 2,879 | 2,498 | 1,108 | ||||||||||||||||||
· goodwill | 39,557 | 15,021 | 17,663 | 6,873 | ||||||||||||||||||||
· other intangible assets(2) | 12,026 | 3,719 | 5,980 | 2,327 |
(1) | Excluding the Animal Health business, the net income/loss of which is presented in a separate line item,Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statement (see Notes D.2.1 and D.36). |
(2) | The assets and liabilities of Merial, which in 2013 and 2014 were presented in the relevant balance sheet line item for each class of asset or liability, were reclassified in 2015 toAssets held for sale or exchange and Liabilities related to assets held for sale or exchange in accordance with IFRS 5 (see Notes D.2.1. and D.36.) |
2014 | ||||||||||||||||||||||||
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | ||||||||||||||||||
Net sales(1) | 31,694 | 9,835 | 2,311 | 11,049 | 10,500 | 10,810 | ||||||||||||||||||
Non-current assets : | ||||||||||||||||||||||||
· property, plant and equipement | 10,396 | 6,330 | 3,848 | 2,830 | 2,428 | 1,236 | ||||||||||||||||||
· goodwill(2) | 37,841 | 15,021 | 15,939 | 6,881 | ||||||||||||||||||||
· other intangible assets | 14,543 | 2,907 | 8,600 | 3,036 |
(1) | Excluding the Animal Health business, the net income/loss of which is presented in a separate line item,Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statement (see Notes D.2.1 and D.36). |
(2) | Excluding the goodwill allocated in full to the Animal Health cash generating unit (see Note D.5.). |
2013 | ||||||||||||||||||||||||
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | ||||||||||||||||||
Net sales(1) | 30,966 | 9,952 | 2,409 | 10,235 | 9,686 | 10,779 | ||||||||||||||||||
Non-current assets : | ||||||||||||||||||||||||
· property, plant and equipement | 10,182 | 6,509 | 3,969 | 2,553 | 2,186 | 1,120 | ||||||||||||||||||
· goodwill(2) | 35,939 | 15,023 | 14,072 | 6,844 | ||||||||||||||||||||
· other intangible assets | 15,395 | 3,531 | 8,256 | 3,608 |
(1) | Excluding the Animal Health business, the net income/loss of which is presented in a separate line item,Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statement (see Notes D.2.1 and D.36). |
(2) | Excluding the goodwill allocated in full to the Animal Health cash generating unit (see Note D.5.). |
As stated in Notes B.6.1. and D.5. to the consolidated financial statements, France is not an individual cash-generating unit. Consequently, information about goodwill is provided for Europe.
F- 100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
D.36. HELD-FOR-EXCHANGE ANIMAL HEALTH BUSINESS
In accordance with IFRS 5 (see Notes B.7. and D.2.), all assets of the Animal Health business and all liabilities directly related to those assets are classified as of December 31, 2015 in the line itemsAssets held for sale or exchangeandLiabilities related to assets held for sale or exchange, respectively, in the consolidated balance sheet as of that date (see Note D.8.). An analysis of those line items is provided below:
2015 | ||||
Assets | ||||
Property, plant and equipment | 657 | |||
Goodwill | 1,510 | |||
Other intangible assets | 2,147 | |||
Investments in associates and joint ventures | 6 | |||
Other non-current assets | 46 | |||
Deferred tax assets | 177 | |||
Inventories | 526 | |||
Accounts receivable | 479 | |||
Other current assets | 55 | |||
Cash and cash equivalents | 23 | |||
Total assets held for sale or exchange | 5,626 | |||
Liabilities | ||||
Long-term debt | 4 | |||
Non-current provisions | 149 | |||
Deferred tax liabilities | 163 | |||
Short-term debt | 18 | |||
Accounts payable | 218 | |||
Other current liabilities | 431 | |||
Total liabilities related to assets held for sale or exchange | 983 |
Merial acquisition (2009)
When the Group took control of Merial in 2009, the acquired assets and liabilities were remeasured at fair value; this resulted in the recognition of intangible assets amounting to€3,980 million, including€3,104 million for marketed products.
In accordance with IFRS 5, the net income/loss of the Animal Health business is presented in a separate line item for 2015 and comparative periods (see Notes B.7. and D.2.). The table below provides an analysis of the main items included in the line itemNet income/(loss) of the held-for-exchange Animal Health business:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Net sales | 2,515 | 2,076 | 1,985 | |||||||||
Gross profit | 1,671 | 1,311 | 1,326 | |||||||||
Operating income | 101 | 80 | 123 | |||||||||
Income before tax and associates and joint ventures | 92 | 74 | 120 | |||||||||
Income tax expense | (216) | 43 | (38) | |||||||||
Net income/(loss) of the held-for-exchange Animal Health business | (124) | 117 | 77 |
F- 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below presents basic and diluted earnings per share for the held-for-exchange Animal Health business, in accordance with IAS 33 (Earnings per Share):
(€ million) | 2015 | 2014 | 2013 | |||||||||
Net income/(loss) of the held-for-exchange Animal Health business | (124) | 117 | 77 | |||||||||
Average number of shares outstanding (million) | 1,306.2 | 1,315.8 | 1,323.1 | |||||||||
Average number of shares outstanding after dilution (million) | 1,320.7 | 1,331.1 | 1,339.1 | |||||||||
· Basic earnings per share (in euros) | (0.10) | 0.09 | 0.06 | |||||||||
· Diluted earnings per share (in euros) | (0.09) | 0.09 | 0.05 |
The table below provides a reconciliation between “Business operating income” for the Animal Health business andNet income/(loss) of the held-for-exchange Animal Health business:
(€ million) | 2015 | 2014 | 2013 | |||||||||
Business operating income(1) | 635 | 492 | 502 | |||||||||
Discontinuation of depreciation and amortization(2) | 23 | - | - | |||||||||
Amortization of intangible assets | (521) | (401) | (387) | |||||||||
Impairment of intangible assets | (3) | (4) | - | |||||||||
Restructuring costs | (6) | (7) | 3 | |||||||||
Costs associated with the exchange transaction | (27) | - | - | |||||||||
Financial income and expenses | (9) | (6) | (3) | |||||||||
Income tax expense(3) | (216) | 43 | (38) | |||||||||
Net income/(loss) of the held-for-exchange Animal Health business | (124) | 117 | 77 |
(1) | See Note D.35.1. |
(2) | Discontinuation of depreciation and amortization from the date of reclassification of property, plant and equipment and
|
(3) | This line includes income tax expense of €149 million arising from taxable temporary differences relating to holding in subsidiaries, insofar as it has become probable that those differences will reverse. |
Off balance sheet commitments relating to Animal Health business’ operating activities break down as follows:
December 31, 2015 | Payments due by period | |||||||||||||||||||
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | |||||||||||||||
Operating lease obligations | 37 | 13 | 12 | 5 | 7 | |||||||||||||||
Irrevocable purchase commitments(1) | ||||||||||||||||||||
· given | 221 | 195 | 23 | 3 | - | |||||||||||||||
· received | (1) | (1) | - | - | - | |||||||||||||||
Research & development license agreements | 41 | 16 | 9 | 4 | 12 | |||||||||||||||
Total | 298 | 223 | 44 | 12 | 19 |
(1) | These comprise irrevocable commitments to third parties supplying (i) property, plant and equipment
|
F- 102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
E/ Principal accountants’ fees and services
PricewaterhouseCoopers Audit and Ernst & Young et Autres served as independent auditors of the Group for the year ended December 31, 2015 and for all other reporting periods presented. The table below shows fees charged by those firms and member firms of their networks to Sanofi and consolidated subsidiaries in the years ended December 31, 2015 and 2014:
Ernst & Young | PricewaterhouseCoopers | |||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||
(€ million) | Amount | % | Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||
Audit: | ||||||||||||||||||||||||||||||||
Audit opinion, review of statutory and consolidated financial statements(1) | 17.0 | 96% | 16.3 | 92% | 18.2 | 97% | 15.7 | 93% | ||||||||||||||||||||||||
· Sanofi SA | 4.4 | 4.0 | 4.2 | 4.2 | ||||||||||||||||||||||||||||
· Fully consolidated subsidiaries | 12.6 | 12.3 | 14.0 | 11.5 | ||||||||||||||||||||||||||||
Other audit-related services(2) | 0.8 | 4% | 1.5 | 8% | 0.3 | 2% | 1.0 | 6% | ||||||||||||||||||||||||
· Sanofi SA | 0.2 | 0.5 | - | 0.2 | ||||||||||||||||||||||||||||
· Fully consolidated subsidiaries | 0.6 | 1.0 | 0.3 | 0.8 | ||||||||||||||||||||||||||||
Sub-total | 17.8 | 100% | 17.8 | 100% | 18.5 | 99% | 16.7 | 99% | ||||||||||||||||||||||||
Non-audit services: | ||||||||||||||||||||||||||||||||
Tax | - | - | 0.2 | 0.2 | ||||||||||||||||||||||||||||
Other | - | - | - | - | ||||||||||||||||||||||||||||
Sub-total | - | - | - | - | 0.2 | 1% | 0.2 | 1% | ||||||||||||||||||||||||
Total | 17.8 | 100% | 17.8 | 100% | 18.7 | 100% | 16.9 | 100% |
|
(2) | Services that are normally performed by the independent accountants, ancillary to audit services. |
Audit Committee Pre-approval and Procedures
The Group Audit Committee has adopted a policy and established certain procedures for the approval of audit and other permitted audit-related services, and for the pre-approval of permitted non-audit services to be provided by
the independent auditors. In 2012,2015, the Audit Committee established a budget breaking downshowing permitted audit-related services and non-audit services by type of service, and the related fees to be paid.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—STATEMENTS – (Continued)
F. LIST OF PRINCIPAL COMPANIES INCLUDED IN THE CONSOLIDATION FOR THE YEAR ENDED DECEMBERF/ List of principal companies included in the consolidation for the year ended December 31, 2012
2015
F.1. Principal fully consolidated companies
The principal companies in the Group's areas of operations and business segments are:
Financial interest % | ||||||||||
Sanofi-Aventis | ||||||||||
100 | ||||||||||
Genzyme | Belgium | 100 | ||||||||
100 | ||||||||||
Sanofi European Treasury Center | Belgium | 100 | ||||||||
Czech. Rep | 100 | |||||||||
Zentiva Group, a.s. | Czech. Rep | 100 | ||||||||
Sanofi-Aventis, s.r.o. | Czech. Rep | 100 | ||||||||
Merial Norden A/S | Denmark | 100 | ||||||||
Sanofi-Aventis Denmark A/S | ||||||||||
Denmark | ||||||||||
100 | ||||||||||
Aventis Agriculture | France | 100 | ||||||||
Aventis Pharma S.A. (France) | France | 100 | ||||||||
Fovea Pharmaceuticals | France | 100 | ||||||||
Francopia | France | 100 | ||||||||
France | 100 | |||||||||
Genzyme SAS | France | 100 | ||||||||
Merial S.A.S France | France | 100 | ||||||||
Sanofi | France | 100 | ||||||||
sanofi aventis Recherche et Développement | France | 100 | ||||||||
Sanofi Chimie | France | 100 | ||||||||
Sanofi | France | |||||||||
50.1 | ||||||||||
Sanofi Pasteur (France) SA | France | 100 | ||||||||
Sanofi Winthrop Industries | France | 100 | ||||||||
Sanofi-Aventis Am Nord S.A.S. | France | 100 | ||||||||
sanofi-aventis Europe SAS | France | 100 | ||||||||
Sanofi-Aventis France | France | 100 | ||||||||
Sanofi-Aventis Groupe | France | 100 | ||||||||
sanofi-aventis Participations SAS | France | 100 | ||||||||
Winthrop Medicaments | France | 100 | ||||||||
Sanofi Oy | Finland | 100 | ||||||||
Aventis Beteiligungsverwaltung GmbH | Germany | 100 | ||||||||
Genzyme GmbH | Germany | 100 | ||||||||
Hoechst GmbH | Germany | 100 | ||||||||
Merial GmbH | Germany | 100 | ||||||||
Sanofi-Aventis | Germany | 100 | ||||||||
Germany | 100 | |||||||||
Germany | 100 |
F- 104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
F/ List of principal companies included in the consolidation for the year ended December 31, 2015
F.1. Principal fully consolidated companies
Europe | ||||||||
Chattem Greece S.A. | Greece | 100 | ||||||
sanofi-aventis A.E.B.E. | Greece | 100 | ||||||
SANOFI-AVENTIS Private Co, Ltd |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Hungary | ||||||||
99.6 | ||||||||
Chinoin Private Co. Ltd | Hungary | 99.6 | ||||||
Ireland | ||||||||
100 | ||||||||
Sanofi-Aventis Ireland | Ireland | 100 | ||||||
Genzyme Ireland Limited | Ireland | 100 | ||||||
Sanofi Spa | Italy | 100 | ||||||
Merial Italia S.p.A. | Italy | 100 | ||||||
Luxembourg | 100 | |||||||
Sanofi-aventis Norge AS | ||||||||
Norway | ||||||||
100 | ||||||||
Sanofi-Aventis | Netherlands | 100 | ||||||
Genzyme Europe BV | Netherlands | 100 | ||||||
Sanofi-Aventis Sp. z.o.o. | Poland | 100 | ||||||
Winthrop Farmaceutica Portugal Lda | Portugal | 100 | ||||||
Sanofi | Portugal | |||||||
100 | ||||||||
Sanofi-Aventis Romania SRL | Romania | 100 | ||||||
Russia | 100 | |||||||
CJSC Sanofi-Aventis Vostok | Russia | 74 | ||||||
AO Sanofi Russia | Russia | 100 | ||||||
Zentiva a.s. | Slovakia | 98.9 | ||||||
sanofi-aventis Pharma Slovakia s.r.o. | Slovakia | 100 | ||||||
Merial Laboratorios S.A. | Spain | 100 | ||||||
Sanofi-Aventis SA | Spain | 100 | ||||||
Sanofi AB | Sweden | 100 | ||||||
Sanofi SA (Sanofi AG) | Switzerland | 100 | ||||||
Sanofi-Aventis (Suisse) SA | Switzerland | 100 | ||||||
Sanofi-Synthelabo Ilac As | Turkey | 100 | ||||||
Zentiva Saglik Urunleri Sanayi ve Ticaret A.S. | Turkey | 100 | ||||||
Sanofi-Aventis Ilaclari Limited Sirketi | Turkey | 100 | ||||||
Sanofi Pasteur Asi Ticaret A.S | Turkey | 100 | ||||||
Sanofi-Synthelabo Ltd | United Kingdom | 100 | ||||||
Sanofi Pasteur Holding Limited | United Kingdom | 100 | ||||||
Chattem Limited | United Kingdom | 100 | ||||||
Sanofi-Aventis UK Holdings Limited | United Kingdom | 100 | ||||||
United Kingdom | 100 | |||||||
United Kingdom | 100 | |||||||
United Kingdom | 100 |
F- 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Europe | Financial interest % | |||||||
May and Baker Limited | United Kingdom | 100 | ||||||
United Kingdom | 100 | |||||||
Fisons Limited | ||||||||
United Kingdom | ||||||||
100 | ||||||||
Sanofi-aventis | ||||||||
100 | ||||||||
United States | ||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial interest % | ||||||||
---|---|---|---|---|---|---|---|---|
Sanofi US Services | United States | 100 | ||||||
Sanofi-Aventis US LLC | United States | 100 | ||||||
Sanofi Pasteur Biologics, LLC | ||||||||
United States | ||||||||
100 | ||||||||
TargeGen Inc. | United States | 100 | ||||||
Chattem, Inc. | United States | 100 | ||||||
Sanofi Pasteur VaxDesign Corporation | United States | 100 | ||||||
BMP Sunstone Corporation | United States | 100 | ||||||
Sanofi-Topaz, Inc. | United States | 100 | ||||||
Carderm Capital L.P. | United States | 100 | ||||||
Aventisub LLC | United States | 100 | ||||||
Genzyme Corporation | United States | 100 | ||||||
United States | 100 | |||||||
Armour Pharmaceutical Company | United States | 100 | ||||||
Sanofi Pasteur Inc. | United States | 100 | ||||||
Aventis Inc. | United States | 100 | ||||||
VaxServe, Inc. | United States | 100 | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other | Financial interest % | |||||||||||||
Sanofi-Aventis | ||||||||||||||
100 | ||||||||||||||
Winthrop Pharma | Algeria | 70 | ||||||||||||
Sanofi-Aventis | Argentina | 100 | ||||||||||||
Genzyme de Argentina SA | Argentina | 100 | ||||||||||||
Merial Argentina | Argentina | |||||||||||||
100 | ||||||||||||||
Sanofi-aventis Healthcare Holdings Pty Ltd | Australia | 100 | ||||||||||||
Sanofi-aventis Healthcare Pty Ltd | ||||||||||||||
Australia | ||||||||||||||
100 | ||||||||||||||
MCP Direct Pty Ltd | Australia | 100 | ||||||||||||
Australia | 100 | |||||||||||||
Merial Australia Pty Ltd | Australia | 100 | ||||||||||||
Brazil | ||||||||||||||
100 | ||||||||||||||
Sanofi-Aventis Farmaceutica Ltda | ||||||||||||||
Brazil | ||||||||||||||
100 | ||||||||||||||
Merial | Brazil | 100 | ||||||||||||
Canada | ||||||||||||||
100 | ||||||||||||||
Sanofi Consumer Health | Canada | 100 | ||||||||||||
Merial Canada, Inc. | Canada | 100 |
F- 106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other Countries | Financial interest % | |||||||
Sanofi Pasteur Limited (Canada) | Canada | 100 | ||||||
Sanofi-Aventis de Chile SA | Chile | |||||||
100 | ||||||||
Sanofi (Hangzhou) Pharmaceuticals Co., Ltd | China | |||||||
100 | ||||||||
Hangzhou Sanofi Minsheng Consumer Healthcare Co., Ltd | China | 60 | ||||||
China | 100 | |||||||
Merial Animal Health Co Ltd China | China | 99 | ||||||
China | 100 | |||||||
Shenzhen Sanofi pasteur Biological Products Co, Ltd | China | 100 | ||||||
Winthrop Pharmaceuticals de Colombia SA | Colombia | 100 | ||||||
Genfar S.A. | Colombia | 100 | ||||||
Sanofi-Aventis de Colombia S.A | Colombia | |||||||
100 | ||||||||
Sanofi-Aventis | Dominican Rep. | 100 | ||||||
Sanofi Aventis del Ecuador S.A | Ecuador | 100 | ||||||
Sanofi Egypt S.A.E | Egypt | 99.8 | ||||||
100 | ||||||||
Sunstone China limited | Hong Kong | 100 | ||||||
Sanofi-aventis | Hong Kong | 100 | ||||||
Sanofi-Synthelabo (India) Private Ltd | India | 100 | ||||||
Sanofi India Limited | India | 60.4 | ||||||
Shantha Biotechnics Private Ltd | India | |||||||
PT Aventis Pharma | Indonesia | 75 | ||||||
Indonesia | 100 | |||||||
Sanofi-Aventis Israël Ltd |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Israel | ||||||||
100 | ||||||||
Japan | 100 | |||||||
Japan | 100 | |||||||
Merial | Japan | |||||||
100 | ||||||||
Winthrop Pharmaceuticals (Malaysia) | Malaysia | 100 | ||||||
Sanofi-aventis (Malaysia) SDN. BHD. | Malaysia | 100 | ||||||
Sanofi-Aventis | Mexico | 100 | ||||||
100 | ||||||||
Merial de Mexico | Mexico | 100 | ||||||
Sanofi Pasteur SA de CV (Mexico) | Mexico | 100 | ||||||
Morocco | 99.3 | |||||||
sanofi-aventis Maroc | Morocco | 100 | ||||||
52.9 | ||||||||
Sanofi-Aventis de Panama S.A. | Panama | 100 | ||||||
Sanofi-Aventis Latin America SA | Panama | 100 | ||||||
sanofi-aventis del Peru SA | Peru | 100 | ||||||
Peru | 100 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other Countries | Financial interest % | |||||||
Sanofi-Aventis Philippines Inc | Philippines | |||||||
100 | ||||||||
Sanofi-Aventis Singapore Pte Ltd | Singapore | 100 | ||||||
Aventis Pharma (Manufacturing) PTE LTD | Singapore | 100 | ||||||
Sanofi-Aventis South Africa (Pty) Ltd | South Africa | 100 | ||||||
Zentiva South Africa (Pty) Ltd | South Africa | 100 | ||||||
sanofi-aventis Korea Co. Ltd | South Korea | 100 | ||||||
Genzyme Korea Co Ltd | South Korea | 100 | ||||||
Sanofi Taiwan Co Ltd | Taiwan | 100 | ||||||
Thailand | 100 | |||||||
sanofi-aventis | Thailand | 100 | ||||||
Sanofi-Aventis Pharma Tunisie | Tunisia | 100 | ||||||
Winthrop Pharma Tunisie | Tunisia | 100 | ||||||
Sanofi-Aventis Gulf FZE | United Arab Emirates | 100 | ||||||
Sanofi-Aventis de Venezuela SA | Venezuela | 100 | ||||||
Vietnam | 70 | |||||||
Vietnam | 100 | |||||||
The Group has also consolidated Merial and its subsidiaries since September 18, 2009, the date on which control was acquired (see Note D.8.2.).
F.2. Principal associates and joint ventures
Bristol-Myers | Canada | |||||||
49.9 | ||||||||
Sanofi Pasteur MSD S.N.C.(France) | France | 50 | ||||||
Infraserv GmbH & Co. Höchst KG | Germany | 31.2 | ||||||
Bristol-Myers Squibb / Sanofi Pharmaceuticals Holding Partnership | United States | 49.9 | ||||||
Bristol-Myers Squibb / Sanofi Pharmaceuticals Partnership | United States | 49.9 | ||||||
Bristol-Myers Squibb / Sanofi Pharmaceuticals Partnership Puerto Rico | United States | 49.9 | ||||||
Bristol-Myers Squibb / Sanofi-Synthélabo Partnership | United States | 49.9 | ||||||
Bristol-Myers Squibb / Sanofi-Synthélabo Puerto Rico Partnership | United States | 49.9 | ||||||
Regeneron Pharmaceuticals, Inc. | United States | 22.1 |
G/ Event subsequent to December 31, 2015
On February 2, 2016, management announced a voluntary redundancy program as part the of the 2020 strategic plan. This program could result in a net loss of approximately 600 jobs in France, with no plant closures and no impact on R&D headcount. The program is intended to focus primarily on an early retirement plan wholly funded by the Group, accompanied by various other measures. The overall cost is estimated at approximately€500 million.
This program does not apply to the Animal Health business (Merial), given that (as announced on December 15, 2015) Sanofi is in exclusive negotiations with Boehringer Ingelheim with a view to exchanging Merial for Boehringer Ingelheim’s Consumer Health Care business.
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