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TABLE OF CONTENTS
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
OR | ||
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 |
For the fiscal year ended December 31, 2009
OR
OR | ||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
OR | ||
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 |
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) |
N/A (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) |
(Exact name of registrant as specified in its charter)
Karen Linehan, Senior 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) |
(Translation of registrant’s name into English)
France
(Jurisdiction of incorporation or organization)
174, avenue de France, 75013 Paris, France
(Address of principal executive offices)
Karen Linehan, Senior Vice President Legal Affairs and General Counsel
174, avenue de France, 75013 Paris, France. Fax: 011 + 33 1 53 77 43 03
(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: | ||||
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American Depositary Shares, each
| New York Stock Exchange | ||||
Ordinary shares, par value €2 per share |
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Contingent Value Rights | NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act:
American Depositary Shares, each representing one quarter of a Participating Share Series A, par value €70.89 per share (removed from listing and registration on the New York Stock Exchange effective July 31, 1995).
The number of outstanding shares of each of the issuer’s classes of capital or None
common stock as of December 31, 2009 was:
Ordinary shares: 1,318,479,052
Indicate by check mark if the registrant is a well-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.
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
The number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2012 was: Ordinary shares: 1,340,918,811 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO o. 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 o NO ý. |
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 xý 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 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated"accelerated filer and large accelerated filer”filer" in Rule 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 xý Other ¨o
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 in Rule 12b-2 of the Exchange Act).
YES ¨o NO xý.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
The consolidated financial statements contained in this annual report on Form 20-F have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS as adopted by the European Union, as of December 31, 2009.2012.
Unless the context requires otherwise, the terms “sanofi-aventis,”"Sanofi," the “Company,”"Company," the “Group,” “we,” “our”"Group," "we," "our" or “us”"us" refer to sanofi-aventisSanofi 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-aventisSanofi and/or its affiliates, with the exception of:
Not all trademarks related to investigational agents have been authorized as of the date of this annual report by the relevant health authorities; for instance Lyxumia® trade name has not been approved by the FDA.
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The data relativerelating to market shares and ranking information for pharmaceutical products, in particular as presented in particular in “Item"Item 4. Information on the Company — B. Business Overview — Markets — Marketing and distribution”distribution," are based on sales data from IMS Health MIDAS (IMS), retail and hospital, for calendar year 2009,2012, 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:
Data relative to market shares and ranking information presented herein for our vaccines business are based on internal estimates 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 contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the Securities and Exchange Commission on Form 6-K, in our annual report to shareholders, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Examples of such forward-looking statements include:
and
This information is based on data, assumptions and
statements estimates considered as reasonable by the Company as at the date of assumptions underlyingthis 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 identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve inherent, known and unknown, risks and uncertainties. We caution youuncertainties associated with the regulatory, economic, financial and competitive environment, and other factors that a number of importantcould cause future results and objectives to differ materially from those expressed or implied in the forward-looking statements.
Risk factors which could affect the future results and cause actual results to differ materially from those contained in any forward-looking statements. Such factors, some of whichstatements are discussed under “Item"Item 3. Key Information — D. Risk Factors” below, include but areFactors". Additional risks, not limited to:
approval of generic versions of our products in onecurrently known or moreconsidered immaterial by the Group, may have the same unfavorable effect and investors may lose all or part of their major markets;
product liability claims;
our ability to renew our product portfolio;
the increasingly challenging regulatory environment for the pharmaceutical industry;
uncertainties over the pricing and reimbursement of pharmaceutical products;
fluctuations in currency exchange rates; and
slowdown of global economic growth.
We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements.investment.
Forward-looking statements speak only as of the date they are made. Other than required by law, we do not undertake any obligation to update them in light of new information or future developments.
Item 1. Identity of Directors, Senior Management and Advisers
N/A
Item 2. Offer Statistics and Expected Timetable
N/A
SUMMARY OF SELECTED FINANCIAL DATA
The tables below set forth selected consolidated financial data for sanofi-aventis.Sanofi. These financial data are derived from the sanofi-aventisSanofi consolidated financial statements. The sanofi-aventisSanofi consolidated financial statements for the years ended December 31, 2009, 20082012, 2011 and 20072010 are included in Item 18 of this annual report.
The consolidated financial statements of sanofi-aventisSanofi for the years ended December 31, 2009, 20082012, 2011 and 20072010 have been prepared in compliance with IFRS issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union.Union as of December 31, 2012. 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.
Sanofi-aventisSanofi reports its financial results in euros.
SELECTED CONDENSED FINANCIAL INFORMATION
| As of and for the year ended December 31, | |||||||||||||||
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(€ 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 ($) (d)(f) | 3.65 | (e) | 3.43 | 3.34 | 3.46 | 3.06 | ||||||||||
As of and for the year ended December 31, | ||||||||||||
(€ million, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||
IFRS Income statement data | ||||||||||||
Net sales | 29,306 | 27,568 | 28,052 | 28,373 | 27,311 | |||||||
Gross profit | 22,869 | 21,480 | 21,636 | 21,902 | 20,947 | |||||||
Operating income | 6,366 | 4,394 | 5,911 | 4,828 | 2,888 | |||||||
Net income excluding the held-for-exchange Merial business attributable to equity holders of the Company(a) | 5,090 | 3,731 | 5,112 | 3,918 | 2,198 | |||||||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | 4,006 | 2,258 | |||||||
Basic earnings per share (€)(b): | ||||||||||||
Net income excluding the held-for-exchange Merial business attributable to equity holders of the Company(a) | 3.90 | 2.85 | 3.80 | 2.91 | 1.64 | |||||||
Net income attributable to equity holders of the Company | 4.03 | 2.94 | 3.91 | 2.97 | 1.69 | |||||||
Diluted earnings per share (€)(c): | ||||||||||||
Net income excluding the held-for-exchange Merial business attributable to equity holders of the Company(a) | 3.90 | 2.85 | 3.78 | 2.88 | 1.63 | |||||||
Net income attributable to equity holders of the Company | 4.03 | 2.94 | 3.89 | 2.95 | 1.68 | |||||||
IFRS Balance sheet data | ||||||||||||
Intangible assets and goodwill | 43,480 | 43,423 | 46,381 | 52,210 | 60,463 | |||||||
Total assets | 80,049 | 71,987 | 71,914 | 77,763 | 86,945 | |||||||
Outstanding share capital | 2,618 | 2,611 | 2,657 | 2,701 | 2,686 | |||||||
Equity attributable to equity holders of the Company | 48,188 | 44,866 | 44,542 | 45,600 | 46,128 | |||||||
Long term debt | 5,961 | 4,173 | 3,734 | 4,499 | 4,750 | |||||||
Cash dividend paid per share (€)(d) | 2.40 | (e) | 2.20 | 2.07 | 1.75 | 1.52 | ||||||
Cash dividend paid per share ($) (d)(f) | 3.46 | (e) | 3.06 | 3.02 | 2.31 | 1.80 |
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SELECTED EXCHANGE RATE INFORMATION
The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the euro from 20052008 through February 2010March 2013 expressed in U.S. dollardollars 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 | |||||||||
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| (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 | |||||||||
Period- end Rate | Average Rate(1) | High | Low | |||||
(U.S. dollar per euro) | ||||||||
2005 | 1.18 | 1.24 | 1.35 | 1.17 | ||||
2006 | 1.32 | 1.27 | 1.33 | 1.19 | ||||
2007 | 1.46 | 1.38 | 1.49 | 1.29 | ||||
2008 | 1.39 | 1.47 | 1.60 | 1.24 | ||||
2009 | 1.43 | 1.40 | 1.51 | 1.25 | ||||
Last 6 months | ||||||||
2009 | ||||||||
September | 1.46 | 1.46 | 1.48 | 1.42 | ||||
October | 1.48 | 1.48 | 1.50 | 1.45 | ||||
November | 1.50 | 1.49 | 1.51 | 1.47 | ||||
December | 1.43 | 1.46 | 1.51 | 1.42 | ||||
2010 | ||||||||
January | 1.39 | 1.43 | 1.45 | 1.39 | ||||
February | 1.37 | 1.37 | 1.40 | 1.35 | ||||
March(2) | 1.36 | 1.36 | 1.37 | 1.35 |
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On March 10, 20106, 2013 the European Central Bank Rate was 1.36101.3035 per euro.
B. Capitalization and Indebtedness
N/A
C. Reasons for Offer and Use of Proceeds
N/A
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 and the factors described under “Cautionary Statement Regarding Forward-Looking Statements.”factors. In addition to the risks listed below, we may be subject to other material risks that as of the date of this report are not currently known to us or that we deem immaterial at this time.
Risks Relating to Legal Matters
Generic versions of someWe rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, mayand if such patents and other rights were limited or circumvented, our financial results could be approved for sale in one or more of their major markets.materially and adversely affected.
Competitors may file marketing authorization requests for generic versions of our products. Approval and market entry of a generic product would reduce the price that we receive for these products and/or the volume of the product that we would be able to sell, and could materially adversely affect our business, results of operations and financial condition. The market for our products could also be affected if a competitor’s innovative drug in the same market were to become available as a generic. Additionally, a number of our products acquired through business combinations have substantial balance sheet carrying values, as disclosed at Note D.4. to our consolidated financial statements, which could be substantially impaired by the introduction of a generic competitor, with adverse effects on our financial condition and the value of our assets.
Through patent and other proprietary rights such as supplementary protection certificates in Europe for instance, we hold exclusivity rights for a number of our research-based products. However, the patent protection that we are able to obtain varies from product to product and country to country and may not be sufficient including to maintain effective product exclusivity. Furthermore weexclusivity because of local variations in the patents, differences in national law or legal systems, development in law or jurisprudence, or inconsistent judgments. Moreover, some countries are becoming more likely to consider granting a compulsory license to patents protecting an innovator's product; India's decision of March 2012 granting a compulsory license to a generic company to a Bayer patent is illustrative of this risk. We are involved in litigation worldwide to enforce certain of these patent rights against generics and proposed generics (see Note D.22.b) to our consolidated financial statements included in this annual report at Item 18"Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings" for additional information). Moreover, patent rights are limited in time 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, ormanufacturers 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.
Moreover, evenEven in cases where we do ultimately prevail in our infringement claim, legal remedies available for harm caused to us by infringing products may be inadequate to make us whole. A competitor may launch “at risk”a generic product "at risk" before the initiation or completion of the court proceedings, and the court may decline to grant us a preliminary injunction to halt further “at risk”"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.
Finally,Further, our successful assertion of a given patent against one competing product is not necessarily predictive of our future success or failure in asserting the same patent against a second competing product because of such factors as possible differences in the formulations of the competing products, intervening developments in law or jurisprudence, or inconsistent judgments. Moreover, patents differ from country to country andformulations. Also a successful result in one country may not predict success in another country because of local variations in the patents and differencespatent laws.
To the extent valid third-party patent rights cover our products, we or our partners may be required to obtain licenses from the holders of these patents in national laworder to manufacture, use or legal systems.
A numbersell these products, and payments under these licenses may reduce our profits from these products. We may not be able to obtain these licenses on favorable terms, or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outside the Group’sscope of a third-party patent, we may be unable to market some of our products, are already subject to aggressive generic competition (in particular, in the United States where legislative initiatives to further facilitate the introduction of generic drugs or comparable biologic products through accelerated approval procedureswhich may create further challenges) and additional products of the Group could become subject to generic competition in the future. A few particularly significant products sold by the Group that may face the risk of generic competition in a major market as early as 2010 are described below:
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limit our profitability.
Product liability claims could adversely affect our business, results of operations and financial condition.
Product liability is a significant business risk for any pharmaceutical company, and the Group's ongoing diversification could increase our product liability exposure (see notably "— The diversification of the Group's business exposes us to increased risks." below). Substantial damage awards and/or settlements have been handed down — notably in the United States where product liability claims can be particularly costly. The Group’s recent acquisitions may increase product liability exposure (see “The diversification of the Group’s business exposes us to additional risks” below). Substantial damage awards have been made in certainand other common law jurisdictions — against pharmaceutical companies based uponon claims for injuries allegedly caused by the use of their products. Not all possibleSuch claims can also be accompanied by consumer fraud claims by customers or third-party payers seeking reimbursement of the cost of the product.
Often the side effectseffect profile of a product canpharmaceutical drugs cannot be anticipatedfully 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, restrictionincluding restrictions of therapeutic indications, new contraindications, warnings or precautions, and potentiallyoccasionally even the suspension or withdrawal of a product. See “Item 19. Exhibits — 99.1 Report of the Chairman of the Board of Directors for 2009” for further discussion of these issues.product marketing authorization. Several pharmaceutical companies have recalled or withdrawn products from the market because of actualnewly detected or suspected adverse reactions to their products, and currentlyas a result of such withdrawal now face significant product liability claims. We are currently defending a number of product liability claims (see(See Note D.22.a) to the consolidated financial statements included at Item 18 of this annual report) and there can be no assurance that the Group will be successful in defending against each of these claims or will not face additional claims in the future. Furthermore, we commercialize several devices using new technologies which, in case of malfunction, could cause unexpected damages and lead to our liability (see "— We are increasingly dependent on information technologies and networks." below).
Although we continue to insure parta portion of our product liability with third-party carriers, product liability coverage is increasingly difficult and costly to obtain, particularly in the United States, and in the future it is possible that self-insurance may become the sole commercially reasonable means available for managing the product liability financial risk of our pharmaceutical and vaccines businesses. The availability ofbusinesses (see "Item 4. Information on the Company — B. Business Overview — Insurance and Risk Coverage"). Due to insurance capacityconditions, even when the Group has insurance coverage, recoveries from insurers may also suffer from the possible effects of the global financial crisis on insurers that remain active in this market.not be totally successful. Moreover the insolvency of a carrier could negatively affect our ability to achieve the practical recovery of the coverage for which we have already paid a premium.
Product liability claims, regardless of their merits or the ultimate success of the Group’sGroup's defense, are costly, divert management attention, and may harm our reputation and can impact the demand for our products. Substantial product liability claims, if successful, could adversely affect our business, results of operations and financial condition.
Claims and investigations relating to competition law, marketing practices, and competition lawpricing, compliance issues, as well as other legal matters, could adversely affect our business, results of operations and financial condition.
The marketing of our products is heavily regulated,regulated. The Group's business covers an extremely wide range of activities worldwide and alleged failuresinvolves numerous partners. Despite our efforts any failure to comply fullydirectly or indirectly (including as a result of a business partners' breach) with applicable regulationslaw could subject uslead to substantial fines, penaltiesliabilities. Governments and injunctive or administrative remedies, potentially leading toregulatory authorities around the imposition of additional regulatory controls or exclusion from government reimbursement programs. Sanofi-aventisworld have been strengthening enforcement activities in recent years. Sanofi and certain of its subsidiaries are under investigation by various government entities and are defending a number of lawsuits relating to antitrust and/or pricing and marketing practices, including, for example in the United States, class action lawsuits and whistle blower litigation. See Note D.22.c) to our consolidated financial statements included at Item 18 of this annual report.
Because many of these cases allege substantial unquantified damages, may be subject to treble damages and frequently seek significant punitive damages and penalties, it is possible that any final determination of liability or settlement of these claims or investigations could have a material adverse effect on our business, results of operations or financial condition.
There are other legal matters in which adverse outcomes could have a material adverse effect on our business, results of operations and financial condition.
The Group also faces significant litigation and government investigations or audits, including allegations of securities law violations, corruption, claims related to employment matters, patent and intellectual property disputes, consumer law claims and tax audits. See "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings" and Note D.22. to our consolidated financial statements included at Item 18 of this annual report. Responding to such investigations is costly and distracts management's attention from our business.
Unfavorable outcomes in any of these matters, or in similar matters to be faced in the future, could preclude the commercialization of products, harm our reputation, negatively affect the profitability of existing products and subject us to substantial fines (including treble damages), punitive damages, penalties and injunctive or administrative remedies, potentially leading to the imposition of additional regulatory controls or exclusion from government reimbursement programs. Any such resultprograms and could materially and adversely affecthave a material adverse effect on our business, results of operations or financial condition, or business. See “Item 8. Financial Information — A. Consolidated Financial Statementsconditions. These risks may encourage the company to enter into settlement agreement with governmental authorities including with no admission of wrongdoing. Those settlements may involve large cash payments and Other Financial Information — Information on Legal or Arbitration Proceedings”penalties. Settlement of healthcare fraud cases may require companies to enter into a corporate integrity agreement, which is intended to regulate company behavior for a period of years. For instance in December 2012, Sanofi U.S. entered into a settlement agreement with the U.S. Attorney's Office, District of Massachusetts, the United States Department of Justice and Note D.22.multiple states to our consolidated financial statements included at Item 18resolve all claims arising out of this annual report.an
investigation into sampling of Sanofi's former viscosupplement product, Hyalgan®. As part of the settlement, Sanofi U.S. paid U.S.$109 Million to the settling parties and will enter into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services.
Changes in the laws or regulations that apply to us could affect the Group’sGroup's business, results of operations and financial condition.
Governmental authorities are increasingly looking to facilitate generic and biosimilar competition to existing products through new regulatory proposals intended to, or resulting in, within the major markets, changes to the scope of patent rights or data exclusivity rules.rights and use of accelerated regulatory pathways for generic and biosimilar drug approvals. Such regulatory proposals, if enacted, could make prosecution of patents for new products more difficult and time consuming or could adversely affect the exclusivity period for our products, thereby materially and adversely affecting our financial results.
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”Competition" and “— Regulation”"Item 4. Information on the Company — B. Business Overview — Regulatory framework".
In addition, changes in tax laws or in their application with respect to matters such as tax rates, transfer pricing, dividends, controlled companies or a restriction in certain forms of tax relief, could affect our effective tax rate and our future results.
For more information regarding risks related to changes in environmental rules and regulations, see “— Environmental Risks of our Industrial Activities —"— Environmental liabilities and compliance costs 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 adequately renewrealize all the expected cost savings resulting from these initiatives, which could materially and adversely affect our product portfolio whether through our ownfinancial results.
Our research and development or through the making of acquisitions or strategic alliances.efforts may not succeed in adequately renewing our product portfolio.
To be successful in the highly competitive pharmaceutical industry, we must commit substantial resources each year to research and development in order to develop new products to take the place of products facing expiration of patent and regulatory data exclusivity or competition from new products that are perceived as being superior. In 2009,2012, we spent €4,583€4,922 million on research and development, amounting to approximately 15.6%14.1% of our net sales.
We may not be investing in the right technology platforms, therapeutic area, and products classes in order to build a robust pipeline and fulfill unmet medical needs. Fields of discovery and especially biotechnology are highly competitive and characterized by significant and rapid technological changes. Numerous companies are working on the same targets and a product considered as promising at the very beginning may become less attractive if a competitor addressing the same unmet need reaches the market earlier.
Developing a product is a costly, lengthy and uncertain process. The research and development process typically takes from 10 to 15 years from discovery to commercial product launch. This process is conducted in various stages in order to test, along with other features, the effectiveness and safety of a product. There can be no assurance that any of these compounds will be proven safe or effective. See “Item"Item 4. Information on the Company — B. Business Overview — Pharmaceutical Research & Development”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 that we will not achieve our goals of safety and/or effectiveness including during the course of a development trial and that we will have to abandon a product in which we have invested substantial amounts and human resources, including in late stage development (Phase III). There can be no assurance that our research and development strategy will deliver the expected result in the targeted timeframe or at all, which could affect our profitability in the future.
Decisions concerning the studies to be carried out can have a significant impact on the marketing strategy for a given product. Multiple in-depth studies can demonstrate that a product has additional benefits, facilitating the product's marketing, but such studies are expensive and time consuming and may delay the product's submission to health authorities for approval. Our ongoing investments in new product launches and research and development for future products could therefore result in increased costs without a proportionate increase in revenues. Furthermore each regulatory authorityrevenues which may impose its own requirements 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. Finally, obtainingnegatively affect our operating results.
Obtaining regulatory marketing approval is not a guarantee that the product will achieve commercial success.
As a complement Following each product marketing approval, the medical need served by the product and the corresponding reimbursement rate are evaluated by other governmental agencies which may in some cases require additional studies, including comparative studies, which may both effectively delay marketing of the new product and add to its portfoliodevelopment costs.
The success of products, sanofi-aventis pursues a strategy of acquisitions, in-licensing and partnerships in order to develop new growth opportunities. The implementation of this strategyproduct also depends on our ability to identify businesseducate patients and healthcare providers and provide them with innovative data about the product and its uses. If these education efforts are not effective, then we may not be able to increase the sales of our new products to the market to realize the full value of our investment in its development.
On the same topic, for the research and development opportunitiesof 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 under acceptable conditions of financing. Moreover, entering into these in-licensing or partnership agreements generally requires the payment ofwe may not receive additional manufacturing approvals in sufficient time to meet product demand, which could lead to a significant “milestones” well before the relevant products are possibly placed on the market without any assurance that such investments will ultimately become profitable in the long term. Because of the active competition among pharmaceutical groups for such business development opportunities, there can be no assurance of our success in completing these transactions when such opportunities are identified.
A substantial share of the revenue and income of sanofi-aventis depends on the performance of certain flagship products
Sanofi-aventis generates a substantial share of its revenues from the sale of certain key products (see “Item 5. Operating and Financial Review and Prospects — Results of Operations — Net Sales by Product — Pharmaceuticals”), which represented 45.3% of the Group’s consolidated revenues in 2009. Among these products is Lantus®, which, in 2009, became the Group’s leading product with revenues of €3,080 million, representing 10.5% of the Group’s consolidated revenues. Lantus® is a flagship product of the Diabetes division, one of the Group’s recognized growth platforms. A reduction in sales or in the growthloss of sales of one or more of these flagship products (in particular sales of Lantus®)that drug and could affect theour business, the results of operations and theor financial condition of sanofi-aventis.
condition.
We may lose market share to competing low-cost remedies or generic brands if they are perceived to be equivalent or superior products.
We are faced with intense competition from generic products and brand-name drugs. Doctors or patients may choose these products over ours if they perceive them to be safer, more reliable, more effective, easier to administer or less expensive, which could cause our revenues to decline and affect our results of operations.
In 2012, our patented pharmaceutical business faced important patent expirations and generic competition. For example Avapro®, Plavix®, and Eloxatin® lost their market exclusivity in the U.S in March, May and August 2012, and Aprovel® lost its market exclusivity in the E.U in August 2012.
The diversificationintroduction of a generic version of a branded medicine typically results in a significant and rapid reduction in net sales for the branded product because generic manufacturers typically offer their unbranded
versions at sharply lower prices. Approval and market entry of a generic product often reduces the price that we receive for these products and/or the volume of the Group’sproduct that we would be able to sell and could materially and adversely affect our business, exposes usresults of operations and financial condition. The extent of sales erosion also depends on the number of generic versions of our products that are actually marketed.
Additionally, in many countries such as the United States or France, applicable legislation encourages the use of generic products to additional risks.reduce spending on prescription drugs. Therefore, the market for our products could also be affected if a competitor's innovative drug in the same market were to become available as generic because a certain number of patients can be expected to switch to a lower-cost alternative therapy.
Additional products of the Group could become subject to generic competition in the future as we expect this generic competition to continue and to implicate drug products even those with relatively modest revenues.
A substantial share of the revenue and income of the Group continues to depend on the performance of certain flagship products.
We generate a substantial share of our revenues from the sale of certain key products (see "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year ended December 31, 2012 compared with year ended December 31, 2011 — Net Sales by Product — Pharmaceuticals segment"), which represented 42.2% of the Group's consolidated revenues in 2012. Among these products is Lantus®, which was the Group's leading product with revenues of €4,960 million in 2012, representing 14.2% of the Group's consolidated revenues for the year. Lantus® is a flagship product of the Diabetes division, one of the Group's growth platforms.
In general, if the products referred to above were to encounter problems such as loss of patent protection, material product liability litigation, unexpected side effects, regulatory proceedings, publicity affecting doctor or patient confidence, pressure from existing competitive products, changes in labeling, or if a new, more effective treatment were introduced, or if there were a reduction in sales of one or more of our flagship products or in their growth, the impact on our business, results of operations and financial condition could be significant.
We have undertakenmay fail to transformsuccessfully identify external business opportunities or realize the anticipated benefits from our Group by implementingstrategic 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 includes pursuing external growthsuch 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 to meetare identified.
Once identified, the challenges that we have identified for the future. The inability to quickly or efficiently integrate newly acquired activities or businesses,businesses; a longer integration than expected; the loss of key employees; or integration costs that are 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 these entitiesnewly acquired activities or businesses at the time they are acquired or not have the means to evaluate them properly.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.
In addition toWhile 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 entirely inactive.not present at all. As an example, we have increased exposure to 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 “—(see "— Product liability claims could adversely affect our business, results of operations and financial condition”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’sGroup'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 “— Risks Relating to Our Business —"— Counterfeit versions of our products could harm our business”business," below)), and compliance issues including corruption and fraud. Any difficultiesfraud, as we operate in adaptingmany 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 marketslaws for actions we or they may take with respect to our business.
Failure to comply with domestic or international laws could impair our abilityresult in various adverse consequences, including possible delay in the approval or refusal to take advantageapprove a product, recalls, seizures, withdrawal of these growth opportunitiesan 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 affectresult in adverse consequences to our business results of operationsif we fail to comply with the regulations or financial condition.
The regulatory environment is increasingly challenging formaintain the pharmaceutical industry.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.
Health authorities,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 particularorder to grant a license to market the U.S. Foodproduct, including requiring local clinical studies, and Drug Administration (FDA)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’sproduct's efficacy and safety. MarketedFor the same reasons, the marketed products are also subject to continual review, risk evaluations or comparative effectiveness studies even after regulatory approval. See “Item 19. Exhibit — 99.1 Report ofThese requirements have resulted in increasing the Chairman of the Board of Directorscosts associated with maintaining regulatory approvals and achieving reimbursement for 2009” for a further discussion of these issues.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.
To 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 our Companythe 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 uncertainties over theincreasing pricing and reimbursement ofpressure on our pharmaceutical products.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. Pressure on pricingOur products continue to be subject to increasing price and reimbursement is strongpressure due to:to, amongst others:
schemes (for instance products determined to be less cost-effective than alternatives);
In addition to the pricing pressures they exert, stategovernmental 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 Democrats, who currently holdnew federal health care reform law is increasing the majority in Congress and the presidency, have introduced a reform proposal designedgovernment's role with respect to increase the government’s role in determining the price, reimbursement and the coverage levels for healthcare-related expenses.healthcare services and products within the large government health care sector. This proposal includes notably provisions seeking to expandlaw also imposed cost containment measures and increase rebates to create an independent body to reduce expenditures, and to reinforce the authorityfees on pharmaceutical companies. Implementation of the government agency responsible for regulatinghealth care reform has affected and funding Medicaid and Medicare in particular to experiment with various payments schemes. Since this reform is currently under discussion, its scope and practical implications, in particular for the pharmaceutical industry, are uncertain. Nevertheless, its purpose, which is to reduce healthcare-related expenses and to prevent them from increasing, could result in a decrease instill affect our revenues and/or margins of sanofi-aventis, which could in turn affect its business, operating results, and financial condition (for further details concerning this reform projectlaw and a description of certain regulatory pricing systems that affect our Group see “Item"Item 4. Information on the Company — B. Business Overview — Markets — Pricing & Reimbursement”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.
AThe ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business.business(1)1.
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. This effect may be expected to be particularly strong in markets having significant co-pays or lacking a developed third-party payer system, as individual patients may delay or decrease out-of-pocket healthcare expenditures. Such a slowdown could also reducehas 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.
Additionally, 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 extentglobal 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, may lead to financial difficulties or even 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 couldbut can also cause the Group to experience disruptions in the distribution of its products as well as the adverse effects described below at “— We"We are subject to the risk of non-payment by our customers.”
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.
We market some of our products in collaboration with other pharmaceutical companies. For example, we currently have major collaborative arrangements with Bristol-Myers Squibb (BMS) for the marketing of Plavix® and Aprovel® in the United States and several other countries, with Warner Chilcott for the osteoporosis treatment Actonel®, with Teva for Copaxone®, and with Merck & Co., Inc. for the distribution of vaccines in Europe. See “Item 4. Information on the Company — B. Business Overview”; our major alliances are detailed under “— Main pharmaceutical products”. When we market our products through collaboration arrangements, we are subject to the risk that certain decisions, such as the establishment of budgets and promotion strategies, are subject to the control of our collaboration partners, and that deadlocks may adversely affect the activities conducted through the collaboration arrangements. For example, our alliances with BMS are subject to the operational management of BMS in some countries, including the United States. Any conflicts that we may have with our partners may affect the marketing of certain of our products. Such difficulties may cause a decline in our revenues and affect our results of operations.
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, delay the launch of new products and adversely affect our operating results and financial condition.condition and delay the launch of new products.
Many of our products are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. We must also be able to produce sufficient quantities of the products to satisfy demand. Our vaccinebiologic 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 sterile 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.
Additionally, specific conditions must be respected both by the Group and itsour 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 “— Risks Relating to Legal Matters —(see "— Product liability claims could adversely affect our business, results of operations and financial condition”condition," above). Group products are increasingly reliant on the use of product-specific devices for administration; a technical problem in these devices could jeopardize the approval or the commercialization of the products or require a recall.
Supply shortages are subject to public scrutiny and are subject to even greater public criticism when they occur with respect to life saving medicines with limited therapeutic alternatives. Such shortages can have a negative impact on the image of the Group independent of the level of revenues lost as a result of the shortage of a particular product. The investigation and remediation of any identified manufacturing problems can cause production delays, substantial expense, lost sales and delay the delaylaunch of new product launches and canproducts, 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 supplymarketing of a substantial portionsome of our raw materials, active ingredients and medical devices.products.
Our industry is highly collaborative, whether in the discovery and development of new products, in-licensing, the marketing and distribution of approved products, or manufacturing activities. We expect that the reliance on third parties for key aspects of our business will continue to characterize our activities.
Third parties supply us with a substantial portion of our raw materials, active ingredients and medical devices, which exposes us to the risk of a supply interruption in the event that these suppliers experience financial difficulties or are unable to manufacture a sufficient supply of our products meeting Group quality standards. It also increases the risk of quality issues, even with the most scrupulously selected suppliers. For
Further, some raw materials essential to the manufacture of our products are not widely available from sources we consider reliable; for example, in 2008 we recalledhave approved only a limited number of batchessuppliers of Lovenox®heparins for use in the manufacture of Lovenox®. Heparin purchase prices can also fluctuate. See "Item 4. Information on the Company — B. Business Overview — Production and wrote down significant unused inventory following the discoveryRaw Materials" for a description of quality issues at a Chinese supplierthese outsourcing arrangements. Any of raw materials.these factors could adversely affect our business, operating results or financial condition.
If disruptions or quality concerns were to arise in the third-party supply of raw materials, active ingredients or medical devices, this could adversely affect our ability to sell our products in the quantities demanded by the market and could damage our reputation and relationships with our customers. See also “—"— The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, delay the launch of new products and adversely affect our operating results and financial condition”condition and delay the launch of new products" above. Even though we aim to have backup sources
We also conduct a number 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 sourcessignificant research and manufacturing facilities may require significant time. Some raw materials essential to the manufacturedevelopment programs and market some of our products are not widely available from sources we consider reliable; forin collaboration with other biotechnology and pharmaceutical companies. For example, we currently have approved only a limited numbercollaborative arrangements with Regeneron for the discovery, development and commercialization of supplierstherapies based on monoclonal antibodies, Warner Chilcott for the osteoporosis treatment Actonel®, and with
Merck & Co., Inc. for the distribution of heparins for usevaccines in the manufacture of Lovenox®. Heparin purchase prices can also fluctuate. See “ItemEurope (See "Item 4. Information on the Company — B. Business Overview — ProductionPharmaceutical Products — Main pharmaceutical products" and Raw Materials”"Item 4. Information on the Company — B. Business Overview — Vaccine Products" for a descriptionmore information on our alliances). We may also rely on partners to design and manufacture medical devices, notably for the administration of our products. When we research and market our products through collaboration arrangements, we are subject to the risk that certain decisions, such as the establishment of budgets, development and promotion strategies and specific tasks, are under the control of our collaboration partners, and that deadlocks, failures in the development or differing priorities may adversely affect the activities conducted through the collaboration arrangements. Any conflicts that we may have with our partners during the course of these outsourcing arrangements. Anyagreements or at the time of these factors could adverselytheir renewal or renegotiation may affect the marketing of certain of our products and may cause a decline in our revenues and affect our business, operating results or financial condition.
of operations.
Counterfeit versions of the Group’sour products could harm our business.
The drug supply has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and could harm the business of companies such as sanofi-aventis.Sanofi. Additionally, it is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product. If a Group product werewas the subject of counterfeits, the Group could incur substantial reputational and financial harm. See “Item"Item 4. Information on the Company — B. Business Overview — Competition.”"
Use of biologically derived ingredients may face resistance from patients or the purchasers of these products, which could adversely affect sales and cause us to incur substantial costs.
In line with industry practice, we manufacture our vaccines and many of our prescription pharmaceutical products with ingredients derived from animal or plant tissue. We subject our products incorporating these ingredients to extensive tests and believe them to be safe. There have been instances in the past where the use of biologically derived ingredients by sanofi-aventis or its competitors has been alleged to be an actual or theoretical source of harm, including infection or allergic reaction, or instances where production facilities have been subject to prolonged periods of closure because of possible contamination. Such allegations have on occasion led to damage claims and increased resistance on the part of patients to such ingredients. A substantial claim of harm caused by a product incorporating biologically derived ingredients or a contamination event could lead us to incur potentially substantial costs as a result of, among other things, litigation of claims, product recalls, adoption of additional safety measures, manufacturing delays, investment in patient education, and development of synthetic substitutes for ingredients of biological origin. Such claims could also generate patient resistance, with a corresponding adverse effect on sales and results of operations.
We are subject to the risk of non-payment by our customers.customers(1)1.
We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. This risk is accentuated by the current worldwide financial crisis. The United States which is our largest market in terms of sales, poses particular client credit risk issues, because of the concentrated distribution system in which approximately 78%58% of our consolidated U.S. pharmaceutical sales wereare accounted for by just three wholesalers. In addition, the Group’sGroup's three main customers represent 22%17.0% of our gross total revenues. We are also exposed to large wholesalers in other markets, particularly in Europe. An inability of one or more of these wholesalers to honor their debts to us could adversely affect our financial condition (see Note D.34. to our consolidated financial statements included at Item 18 of this annual report).
Since 2010, some countries of southern Europe have faced important financial difficulties. Some customers in these countries are public or subsidized health systems. The deteriorating economic and credit conditions in these countries may lead to longer payment terms. Because of this trend we may need to reassess the recoverable amount of our debts in these countries during the coming financial years (for more information see "Item 5. Operating and Financial Review and Prospects — Liquidity.").
Our pension liabilities are affected by factors such as the performance of plan assets, interest rates, actuarial data and experience and changes in laws and regulations.
Our future funding obligations for our main defined-benefit pension plans depend on changes in the future performance of assets held in trust for these plans, the interest rates used to determine funding levels (or company liabilities), actuarial data and experience, inflation trends, the level of benefits provided for by the plans, as well as changes in laws and regulations. Adverse changes in those factors could increase our unfunded obligations under such plans, which would require more funds to be contributed and hence negatively affect our cash flow and results (see Note D.18.1D.19.1 to our consolidated financial statements included at Item 18 of this annual report).
Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group's results of operations and financial results.
New or revised accounting standards, rules and interpretations issued from time to time by the IASB (International Accounting Standards Board) could result in changes to the recognition of income and expense that may materially and adversely affect the Group's financial results.
In addition, substantial value is allocated to intangible assets and goodwill resulting from business combinations, as disclosed at Note D.4. to our consolidated financial statements included in this annual report at Item 18, which could be substantially impaired upon indications of impairment (primarily relating to pharmacovigilance, patent litigation and the launch of competing products), with adverse effects on our financial condition and the value of our assets.
Also if any of our strategic equity investments decline in value and remain below cost for an extended duration, we may be required to write down our investment.
In addition the global financial crisis and in particular the ongoing sovereign debt crisis affecting certain European countries could also negatively affect the value of our assets (see "— The ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business" above and "— Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition" below).
We are increasingly dependent on information technologies and networks.
Our business depends on the use of information technologies, which means that certain key areas such as research and development, production and sales are to a large extent dependent on our information technology capabilities. We are commercializing a number of devices using new technologies which, in case of malfunctions could lead to a risk of harm to patients (see "— Product liability claims could adversely affect our business, results of operations and financial condition" above) or the unavailability of our products. While we have invested heavily in the protection of data and information technology, 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. In addition, our associates may use the social media tools and mobile technologies inappropriately which may give rise 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 effect on our business, financial condition and 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:
explosions;
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.
Although we maintain property, business interruption and casualty insurance that we believe is in accordance with customary industry practices, we cannot assure you that this insurance will be adequate to cover fully all potential hazards incidental to our business.
Environmental liabilities and compliance costs may have a significant adverse effect on our results of operations.
The environmental laws of various jurisdictions impose actual and potential obligations on our Group to remediate contaminated sites. These obligations may relate to sites:
These environmental remediation obligations could significantly reduce our operating results. Sanofi-aventisSanofi 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 — Health, Safety and Environment (HSE)”" for additional information regarding our environmental policies. In particular, our provisions for these obligations may be insufficient if the assumptions underlying these provisions prove incorrect or if we are held responsible for additional, currently undiscovered contamination. These judgments and estimates may later prove inaccurate, and any shortfalls could have a material adverse effect on our results of operations and financial condition.
Furthermore, we are or may become involved in claims, lawsuits and administrative proceedings relating to environmental matters. Some current and former sanofi-aventisSanofi's 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, or our subsidiaries that we demerged, divested or may divest. We have disputes outstanding for example, with Rhodia, over costs related to environmental liabilities 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.report and "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings".
Environmental regulations are evolving (i.e.(i.e., in Europe, REACH, CLP/GHS, SEVESO, IPPC,IPPC/IED, the Waste Framework Directive, the Emission Trading Scheme Directive, the Water Framework Directive and the Directive on Taxation of Energy Products and Electricity and several other regulations aiming at preventing global warming). Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to our Group and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants, site restoration and compliance costs to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities, thereby adversely affecting our business, results of operations or financial condition. For more detailed information on environmental issues, see “Item"Item 4. Information on the Company — B. Business Overview — Health, Safety and Environment (HSE).”
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Risks Related to Financial Markets(1)1
Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition.
Because we sell our products in numerous countries, our results of operations and financial condition could be adversely affected by fluctuations in currency exchange rates. We are particularly sensitive to movements in exchange rates between the euro and the U.S. dollar, the British pound, the Japanese yen, and to currencies in emerging countries. In 2009, approximately 32%2012, 31% of our net sales were realized in the United States. 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.”
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In the context of the worldwide financial crisis, our liquidity may be constrained.
As of December 31, 2009,2012, the Group’sGroup's net debt amounted approximately to €4.1€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"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
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sources of financing, including under programs currently in place, or less favorable conditions. While liquidity conditions in the financial markets have improved somewhat in recent months, they could deteriorate once again, in which case our sources of financing could be substantially reduced, and we might find it difficult to refinance existing debt or to incur new debt on terms that we would consider to be commercially reasonable.
Risks Relating to an Investment in our Shares or ADSs
Foreign exchange fluctuations may adversely affect the U.S. dollar value of our ADSs and dividends (if any).
Holders of ADSs face exchange rate risk. Our ADSs trade in U.S. dollars and our shares trade in euros. The value of the ADSs and our shares could fluctuate as the exchange rates between these currencies fluctuate. If and when we do pay dividends, they would be denominated in euros. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar amounts received by owners of ADSs upon conversion by the depositary of cash dividends, if any. Moreover, these fluctuations may affect the U.S. dollar price of the ADSs on the New York Stock Exchange (NYSE), whether or not we pay dividends in addition to the amounts, if any, that a holder would receive upon our liquidation or upon the sale of assets, merger, tender offer or similar transactions denominated in euros or any foreign currency other than U.S. dollars.
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 offerissue new shares and theyexisting 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, to exercise their voting rights, as holders of ADSs they must instruct the depositary how to vote their shares. Because of this extra procedural step involving the depositary, the process for exercising voting rights will take longer for holders of ADSs than for holders of shares. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting.
Recent French tax legislation applicable to the ADSs may affect their attractiveness.
The implementation of new tax legislation such as the French financial transaction tax of 0.2% (Taxe sur les Transactions Financières — TTF) enacted in 2012 (see "Item 10. — E. Taxation"), which applies by its terms to trading in our shares and ADSs without regard to territoriality could increase the costs linked to the issuance, transfer and cancellation of ADSs. Moreover, uncertainties regarding how such a tax would be assessed and collected from beneficial owners or financial intermediaries outside of France could discourage holding of such instruments.
We cannot foresee the extent to which this tax and uncertainty over its technical and practical aspects may reduce the liquidity and economic value of our ADSs.
Our two largest shareholders ownshareholder owns a significant percentage of the share capital and voting rights of sanofi-aventis.Sanofi.
As of December 31, 2009, Total and L’Oré2012, L'Oréal our two largest shareholders, held approximately 7.33% and 8.97%8.91% of our issued share capital, respectively, accounting for approximately 12.36% and approximately 15.32%, respectively,16.13% of the voting rights (excluding treasury shares) of sanofi-aventis.Sanofi. See “Item"Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders.”" Affiliates of each of these shareholders areL'Oréal currently servingserve on our Board of Directors. To the extent these shareholders continueL'Oréal continues to hold a large percentage of our share capital and voting rights, Total and L’Oréalit will remain in a position to exert heightened influence in the electionappointment of the directors and officers of sanofi-aventisSanofi 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.
Neither Total nor L’OréTo our knowledge, L'Oréal is to our knowledge,not subject to any contractual restrictions on the sale of the shares eachit holds in our Company. Both of these shareholders haveL'Oréal announced their intent to sell all or part of their stakesthat it does not consider its stake in our company, and have recently liquidated a significant part of their respective holdings.Company as strategic to it. Sales of large numbers of our shares, or a perception that such sales may occur, could adversely affect the market price for our shares and ADSs.
Risks Relating to our 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 attached as exhibit 4.1 to our Registration Statement on Form F-4 (Registration No. 333-172638), as amended. Pursuant to the CVR agreement, each holder of a CVR is entitled to receive cash payments upon the achievement of certain milestones, based on U.S. regulatory approval of Lemtrada™ (alemtuzumab for treatment of multiple sclerosis), and on achievement of certain aggregate net sales thresholds. See "Item 10. Additional Information — C. Material Contracts — The Contingent Value Rights Agreement."
CVR holders are subject to additional risks, including:
Item 4. Information on the Company
Introduction
We are aan integrated, global pharmaceutical grouphealthcare company focused on patient needs and engaged in the research, development, manufacture and marketing of healthcare products. In 2009,2012, our net sales amounted to €29,306€34,947 million. Based on 2009 sales, weWe are the fourth largest pharmaceutical group in the world and the secondthird largest pharmaceutical group in Europe (source: IMS sales 2009)2012). Sanofi-aventisSanofi is the parent of a consolidated group of companies. A list of the principal subsidiaries included in this consolidation is shown at Note F. to our consolidated financial statements included at Item 18 of this annual report.
The Sanofi Group is organized around three principal activities: Pharmaceuticals, Human Vaccines via Sanofi Pasteur, and Animal Health via Merial Limited (Merial). These activities are operating segments within the meaning of the IFRS 8 accounting standard (see Note D.35. to the consolidated financial statements).
Our business includes two main In parallel, the Group operates through seven growth platforms (see "B. Business Overview — Strategy" below): Emerging Markets1, Diabetes, Vaccines, Consumer Health Care, Animal Health, New Genzyme2, and Other Innovative Products3. Unlike the other growth platforms, the Vaccines and Animal Health growth platforms are also operating segments within the meaning of IFRS 8. The Diabetes Solutions, Consumer Health Care, New Genzyme, and Other Innovative Products growth platforms are units whose performance is monitored primarily on the basis of their net sales; the products they sell are part of our Pharmaceuticals segment. The Emerging Markets growth platform is a unit whose performance is monitored primarily on the basis of its net sales; the products it sells are derived from all three of our principal activities: pharmaceuticals, and human vaccines through sanofi pasteur. The Group is also presentand animal health. For an analysis of the net sales of our growth platforms in animal health products through Merial Limited (“Merial”)2012 and 2011, refer to "Item 5. Results of Operations — Year Ended December 31, 2012 Compared with year Ended December 31, 2011".
In our pharmaceuticalPharmaceuticals activity, which generated net sales of €25,823€28,871 million in 2009, we specialize2012, our major product categories are:
Rare Diseases and multiple sclerosis are the therapeutic areas of the "New Genzyme" growth platform.
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The global pharmaceutical portfolio of sanofi-aventis also comprisesincludes a wide range of other pharmaceutical products in Consumer Health Care (“CHC”)(CHC), a category in which we have become the third largest player in terms of global sales, and other prescription drugs including generics.
We are a world leader in the vaccines industry. Our net sales amounted to €3,483€3,897 million in 2009,2012, with leading vaccines in five areas: pediatric vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines, and travel and endemics vaccines.
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In 2009, our vaccines activity was favorably influenced by the continued uptake of Pentacel® sales following its U.S. launch in 2008, and by the sales growth of Pentaxim® in the international(1) region. Sanofi Pasteur also strengthened its leadership position in both seasonal and pandemic influenza.
Our animal healthAnimal Health activity is managedcarried out through Merial, formerly a joint venture in which we and Merck & Co., Inc. (“Merck”) each held 50%. On September 17, 2009 we acquired Merck’s interest in Merial. On March 8, 2010, sanofi-aventis exercised its contractual right 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-aventis. In addition to execution of final agreements, formation of the new animal health joint venture remains subject to approval by the relevant competition authorities and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial” and Notes D.1 and D.8.1 to our consolidated financial statements included at Item 18 of this annual report). Merial is one of the world’sworld's leading animal healthcare companies, dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers and pet owners. Itsowners and providing a comprehensive line of products to enhance the health, well-being and performance of a wide range of production and companion animals. The net sales for 2009 (which are not included in the Group’s 2009 net sales)of Merial amounted to $2,554 million. The company’s top-selling€2,179 million in 2012.
Partnerships are essential to our business, and many of our products include Frontline®, a topical anti-parasitic fleaon the market or in development have been in-licensed from third parties or rely on third party technologies and tick brand for dogs and cats, Heartgard®, a parasiticide for control of heartworm in companion animals as well as Ivomec®, a parasiticide for the control of internal and external parasites in livestock.rights.
In the description below, the following should be kept in mind:
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A. History and Development of the Company
Sanofi-aventis 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. We operateSince May 2011, we have operated under the commercial name “sanofi-aventis”"Sanofi" (formerly known as sanofi-aventis). Our registered office is located at 174, avenue de France, 7501354, 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:telephone: +1 (908) 981-5000.
We are present in approximately 110100 countries on five continents with about 105,000111,974 employees at year end 2009, not including an additional 5,600 employees2012. As a global diversified healthcare company our business includes a diversified offering of Merial. Our legacy companies, Sanofi-Synthélabo (formed by a merger between Sanofimedicines, consumer healthcare products, generics, animal health and Synthélabo in 1999) and Aventis (formed byhuman vaccines.
History of the combination of Rhône-Poulenc and Hoechst also in 1999), bring to theCompany
The Group has more than a century of experience in the pharmaceutical industry.
Sanofi-Synthélabo (formed in 1999 by the merger of Sanofi, was founded in 1973 by Elf Aquitaine, a French oil company, when it took control of the Labaz group, a pharmaceutical company. Its first significant venture into the U.S. market was the acquisition of the prescription pharmaceuticals business of Sterling Winthrop — an affiliate of Eastman Kodak — in 1994.
and Synthélabo, was founded in 1970 through1970) and Aventis (formed in 1999 by the mergercombination of two French pharmaceutical laboratories, Laboratoires Dausse (foundedRhône-Poulenc, formed in 1834)1928 and Laboratoires Robert & Carrière (foundedHoechst, founded in 1899). In 1973, the French cosmetics group L’Oréal acquired the majority of its share capital.
Hoechst traces its origins to the second half of the 19th century, with19th century) were combined in 2004 and are the German industrial revolutionprincipal 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 the emergencecreated or strengthened various platforms including CHC and Generics.
Rhône-Poulenc was formed in 1928 from theChina) through a merger of two French companies:between BMP Sunstone and a chemical company created by the Poulenc brothers and the Société Chimique des Usines du Rhône, which was founded in 1895. The company’s activities in the first half of the 20th century focused on producing chemicals, textiles and pharmaceuticals. Rhône-Poulenc began to focus its activities on life sciences in the 1990s, which led to the successive purchases of Rorer, a U.S. pharmaceutical company acquired in two stages in 1990 and 1997, Pasteur Mérieux Connaught in the area of vaccines in 1994 and the U.K.-based pharmaceuticals company Fisons in 1995.
Sanofi-Synthélabo took control of Aventis in August 2004 and changed its registered name to “sanofi-aventis”. On December 31, 2004, Aventis merged with and into sanofi-aventis, with sanofi-aventis as the surviving company.
wholly-owned subsidiary;
The Prague-based branded generics group Zentiva was acquired by sanofi-aventis throughreport; and
On February 9, 2010 Sanofi-aventis successfully completed its tender offer for all outstanding shares of common stock of Chattem, Inc., (“Chattem”)Sanofi acquired Genzyme Corporation, a leading U.S. consumer healthcare company. Immediately followingbiotechnology group headquartered in Cambridge, Massachusetts and specialized in the tender offer, sanofi-aventis held approximately 97%treatment of Chattem’s outstanding shares,rare diseases, renal diseases, endocrinology, oncology and acquired the remaining shares in a “short form” merger on March 10, 2010.
Strategy
Sanofi-aventisSanofi is a diversifiedan integrated, global healthcare leader with a numberoffering solutions across areas of core strengths: a stronghistorical strength and long-established presence in emerging markets (1), a portfolio of diabetes drugs including the biggest selling insulinmultiple growth platforms. Like other groups active in the world: Lantus®, a market-leading position in vaccines, a broad range of consumer health care products and research that is increasingly focused on biological products, allied with a track record of adapting cost structures and a solid financial position.
Like most pharmaceutical companies,industry, we arehave been facing competition from generics for several of our major products, in an environment subject to cost containment pressures from both third party payers and healthcare authorities as well as tougher regulatory hurdles.authorities. We have decided to respondresponded to these major challenges by developing our platformsimplementing a strategy with the objective of repositioning Sanofi for more stable and sustainable revenue and earnings growth.
Throughout 2009, Over the past years, we have been engagedtransformed the Group by decreasing our reliance on existing "blockbuster" medicines (medicines with over $1 billion in a wide-ranging transformation program designedglobal sales), optimizing our approach to secure sources of sustainable growth. Our strategy focuses on three key themes:
Increasing innovation in Research & Development (“R&D”)(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:
• Growing a global healthcare leader with synergistic platforms
Our ambition is to offer an integrated set of businesses within the healthcare space with opportunities to create synergies across activities both upstream and R&D level and downstream in the market place.
• Bringing innovative products to market
We conducted a complete and objectiveregularly review of our researchR&D portfolio in 2009, in order to reassessimprove the allocation of our resources. This review led to a rationalization of our portfolio, targeting the most promising projects. In February 2010, 60% of our development portfolio consisted of biological products and vaccines. We also redefinedAlso, our decision-making processes so that newintegrate commercial potential and the scope for value creation are better integrated into our development choices. The result is an ongoing reorganizationrationalization 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 intended to help us become more flexiblenow based on an organizational structure focused on patient needs and innovative, with some of our existing resources being reallocatedencouraging entrepreneurship. This network-based organization, open to external collaborations.opportunities, enables our R&D portfolio to more effectively capitalize on innovation from a wide range of sources.
In line with this policy, we have signed a number ofnew alliance and licensing agreements with partners including Kyowa Hakko Kirin Co. Ltd (“Kyowa Hakko Kirin”), Exelixis, Inc. (“Exelixis”), Merrimack Pharmaceuticals, Inc. (“Merrimack”), Wellstat Therapeutics Corporation (“Wellstat”), Micromet, Inc. (“Micromet”), and Alopexx Pharmaceuticals LLC (“Alopexx”). These agreements are designedin 2012 to give us access to new technologies, and/or to broaden or strengthen our existing fields of research. We have also signed additional agreements with Regeneron Pharmaceuticals, Inc. to broaden and extend our existing collaboration on the research, development and commercialization of fully human therapeutic monoclonal antibodies. In February 2010, 55% of our development portfolio consisted of projects originated by external R&D. Finally, we have made progress on our objective of offering more products that add value for patients: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 example Multaq®, whichlong-term growth and create value for our shareholders. Since January 2009, we have invested a total of approximately €24 billion in 2009 was launched in the United Statesexternal growth. During 2012, we actively pursued this targeted policy, announcing 26 new transactions, including 8 acquisitions and approved in the European Union.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 structures to meet thestructure for future opportunities and challenges of the future
During 2009, weWe have adapted our operating model, previously too focused on the most importantbest-selling prescription drugs in our traditionally importanttraditional 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’sregion's needs, so as to deliver the most appropriate solution to each patient. 25%The result is a dramatic shift in business mix from our top 15 products to key growth platforms. In 2008, 61% of our 2009sales 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.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 strengthened our presence in vaccines and expanded our consumer health care operations, so as to address our customers’ needs more thoroughly and take better advantage of growth opportunities. Wehave also realigned our industrial capacity to reflect our anticipationexpectation of changes in volumes and our analysisanalyses of growth opportunities. Combined with the opportunities for growth. Streamliningstreamlining of our R&D structures and our operating model have also enabledtight control over selling, general and administrative expenses, this has helped us to further improve our operating ratios. In 2009, the initial resultssuccessfully 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 control program fed into a one percentage point reductioncontainment measures in each of the ratios of our research and development expenses and our selling and general expenses to our net sales. Sanofi-aventis generated €480 million of savings in 2009 compared to 2008 cost structures.many markets.
Exploring external growth opportunities
Business development is wholly integrated into our overall strategy, and translates into disciplined acquisitions and alliances that create or strengthen platforms for long-term growth and create value for our shareholders. During 2009, we conducted an active and targeted policy of acquisitions and R&D alliances. We successfully completed our offer for Zentiva N.V. (“Zentiva”), a branded generics group with products tailored to the Eastern and Central European markets, and we also acquired Laboratorios Kendrick (“Kendrick”), one of Mexico’s leading generics manufacturers, and Medley, a leading generics company in Brazil. In R&D, we acquired two companies: BiPar Sciences, Inc. (“BiPar”), an American biopharmaceutical company developing novel tumor-selective approaches for the treatment of different types of cancers, and Fovea Pharmaceuticals SA (“Fovea”), a French biopharmaceutical R&D company specializing in ophthalmology. In consumer health care, we finalized the acquisition of Laboratoire Oenobiol (“Oenobiol”), one of France’s leading players in health and beauty dietary supplements. At the end of the year, we finalized an agreement to acquire Chattem, Inc. (“Chattem”), one of the leading manufacturers and distributors of branded consumer health products, toiletries and dietary supplements in the United States. In human vaccines, we took control of Shantha Biotechnics (“Shantha”), an Indian biotechnology company that develops, produces and markets vaccines to international
standards. We also strengthened our animal health interests by acquiring the remaining 50% of Merial not previously held by us and subsequently exercised on March 8, 2010, our contractual right 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-aventis. In addition to execution of final agreements, formation of the new animal health joint venture remains subject to approval by the relevant competition authorities and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial” and Notes D.1 and D.8.1 to our consolidated financial statements included at Item 18 of this annual report).
Our sound financial position should give us significant potential to create value via external growth opportunities, with the aim of securing a return on investment in excess of our cost of capital.
Pharmaceutical Products
Main Pharmaceutical Products
Within our Pharmaceuticals business, we focus on the following therapeutic areas: diabetes, oncology, thrombosis &rare diseases, multiple sclerosis, oncology. We also have flagship products in such fields as anti-thrombotics, cardiovascular, central nervous systemrenal and internal medicine.biosurgery and have developed leading businesses in Consumer Health Care and generics.
The sections that follow provide additional information on the indications and market position of these products in their principal markets. The Group’sour key products. Our intellectual property relating to itsrights over our pharmaceutical products isare material to our operations and isare described at “—"— Patents, Intellectual Property and other Rights”Other Rights" below. As disclosed in Note D.22.b to our consolidated financial statements included at Item 18"Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Patents" of this annual report, wereport. We are involved in significant litigation concerning the patent protection of a number of these products.
The following table sets forth the net sales of our best sellingmain pharmaceutical products for the year ended December 31, 2009. These products are major contributors to public health.2012.
Therapeutic Area / Product Name | Net Sales (€ million) | Drug Category / Main Areas of Use | ||||||||
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Diabetes Solutions | ||||||||||
| ||||||||||
| 4,960 | Long-acting analog of human insulin | ||||||||
• Type 1 and 2 diabetes mellitus | ||||||||||
| 230 | Rapid-acting analog of human insulin | ||||||||
• Type 1 and 2 diabetes mellitus | ||||||||||
| 135 | Human insulin (rapid and intermediate acting) | ||||||||
| ||||||||||
Amaryl® (glimepiride) | 421 | Sulfonylurea | ||||||||
• Type 2 diabetes mellitus | ||||||||||
Rare Diseases | ||||||||||
| 633 | Enzyme replacement therapy | ||||||||
• Gaucher disease | ||||||||||
| 292 | Enzyme replacement therapy | ||||||||
| ||||||||||
Myozyme®/Lumizyme® (alglucosidase | 462 | Enzyme replacement therapy | ||||||||
alpha) | • Pompe disease | |||||||||
Multiple Sclerosis | ||||||||||
Aubagio® (teriflunomide) | 7 | Oral immunomodulating agent | ||||||||
• Multiple Sclerosis | ||||||||||
Oncology | ||||||||||
Taxotere® (docetaxel) | 563 | Cytotoxic agent | ||||||||
• Breast cancer • Non small cell lung cancer • Prostate cancer • Gastric cancer • Head and | ||||||||||
| 956 | Cytotoxic agent | ||||||||
• Colorectal cancer | ||||||||||
Jevtana® (cabazitaxel) | 235 | Cytotoxic agent | ||||||||
• Prostate cancer | ||||||||||
Mozobil® (plerixafor) | 96 | Hematopoietic stem cell mobilizer | ||||||||
• Hematologic maligancies | ||||||||||
Zaltrap® (aflibercept) | 25 | Recombinant fusion protein | ||||||||
• Oxaliplatin resistant metastatic colorectal cancer |
Therapeutic Area / Product Name | 2012 Net Sales (€ million) | Drug Category / Main Areas of Use | |||||||
---|---|---|---|---|---|---|---|---|---|
| 1,893 | Low molecular weight heparin | |||||||
• Treatment and prevention of deep vein thrombosis • Treatment of acute coronary syndromes | |||||||||
| 2,066 | Platelet adenosine disphosphate receptor antagonist | |||||||
• Atherothrombosis • Acute coronary syndrome with and without ST segment elevation | |||||||||
| 1,151 | Angiotensin II receptor antagonist | |||||||
(irbesartan & hydrochlorothiazide) | • Hypertension | ||||||||
| |||||||||
| |||||||||
| 255 | Anti-arrhythmic drug | |||||||
• Atrial Fibrillation | |||||||||
| 653 | Oral phosphate binders | |||||||
| • High phosphorus levels in patients with chronic kidney disease (CKD) on dialysis | ||||||||
| 363 | Viscosupplements | |||||||
(hylan G-F 20) | • Pain associated with osteoarthritis of the knee | ||||||||
Stilnox® /Ambien®/Myslee® (zolpidem | 497 | Hypnotic | |||||||
tartrate) | • Sleep disorders | ||||||||
| 553 | (1) | Anti-histamine | ||||||
| |||||||||
• Allergic rhinitis • Urticaria | |||||||||
| 410 | Anti-epileptic | |||||||
• Epilepsy | |||||||||
Consumer Health Care | |||||||||
| 3,008 | ||||||||
Generics | |||||||||
| 1,844 | ||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
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The prevalence of diabetes is expected to increase significantly over the next 20 years, as a direct result ofby 2030, reflecting multiple socio-economic factors including sedentary lifestyle, excessivelifestyles, excess weight and obesity, unhealthy diet and an aging population. Our principal diabetes products are Lantus®Lantus®, a long-acting analog of human insulin, Apidra®insulin; Apidra®, a rapid-acting analog of human insulininsulin; Insuman®, a human insulin; and Amaryl®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®, a once-daily prandial GLP-1 receptor agonist.
Lantus®
Lantus®
Lantus®Lantus® (insulin glargine) is a long-acting analog of human insulin, offering improved pharmacokinetic and pharmacodynamic profiles compared to other basal insulins. Lantus®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 sixtwo years (label extension for pediatric use was granted in the EU in 2012) and above with type 1 diabetes mellitus.
Lantus®Lantus® is the most studied basal insulin with over 10 years of clinical evidence in diabetes treatment and a well established treatment with 24 million patient-years exposure since 2000. Over 70,000 patients throughout the world have been involved in Lantus® clinical trials.well-established safety profile.
Lantus®Lantus® can be administered subcutaneously using syringes or specific pens including the Lantusincluding:
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New meta-analyses and new studies have investigated the efficacy and safety of Lantus® in type 2 diabetes mellitus:
Versus detemir:
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Versus NPH (Neutral Protamine Hagedorn):
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Versus Premixes:
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In June 2009, four registry analyses discussing a potential link between the use of Lantus® and an increased risk of breast cancer were published inDiabetologia based on a retrospective follow-up of diabetic patients. Clinical studies have not indicated an association between insulin glargine and cancer, and no conclusion can be drawn from these analyses regarding a possible causal relationship between Lantus® use and the occurrence of malignancies, as their authors pointed out.
Patient safety being the primary concern of sanofi-aventis, we convened a group of fourteen internationally-recognized experts in the fields of endocrinology, oncologyEuropean Union and epidemiologyCanada. It is now available in more than 30 countries worldwide; and
In their 2012 updates, the American Diabetes Association the American Association of Clinical Endocrinologists, and the International Diabetes Federation warning against over-interpretation of and over reaction to these data.
On July 23, 2009, the EMA’s Committee for Medicinal Products for Human Use (“CHMP”) re-confirmed its initial assessment of Lantus®, based on a review of existing evidence and of the recent publications of registry analyses inDiabetologia, and concluded that the available data does not provide a cause for concern and that changes to the prescribing advice were therefore not necessary. All four registry analyses were found to have methodological limitations and to provide inconsistent and inconclusive results regarding a potential link between Lantus® use and an increased risk of cancer.
In September 2009, we announced an action plan to provide methodologically robust research that will contribute to the scientific resolution of the debate over insulin safety, including insulin analogs and Lantus®. The research program encompasses both pre-clinical and clinical programs involving human insulin and insulin glargine and is designed to generate more information on whether there is any association between cancer and insulin use and to assess if there is any difference in risk between insulin glargine and other insulins. The plan is structured to yield short-term and longer-term results. Three epidemiological studies are planned (two retrospectives cohort studies and one case-control study). We expect to complete the two retrospectives cohort studies and analyze their results in time for scientific presentations at medical conferences in 2012. We aim to present the results of the case-control study in 2013. We are also conducting pre-clinical studies that for which we expect to have results in 2010 and in 2011.
The American Diabetes Association (“ADA”)(ADA) and European Association for the Study of Diabetes (“EASD”)(EASD) have maintained their 2008 treatment recommendations for type 2 diabetes. As a reminder, these guidelinesThis consensus statement further established basal insulins such as Lantus®Lantus®, or a sulfonylurea such as Amaryl®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®Lantus® is the world number-one soldselling insulin brand in the world interms of both sales and units (source: IMS, 20092012 sales) and is available in over 70120 countries worldwide. The three leading countries for sales of Lantus® areLantus® in 2012 were the United States, France and Germany.Japan.
International epidemiology program
The epidemiological program sponsored by Sanofi was aimed at evaluating cancer risk in diabetes and generating comprehensive insulin glargine exposure data from large databases. It is the largest observational program designed for this purpose to date. The program results reinforce the robust safety profile of Lantus®, complementing the existing wealth of data already available from more than 80,000 patients enrolled in clinical trials.
The now completed epidemiological program comprised three major studies. These were designed independently of the company by the lead 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:
Apidra®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.
Results showed that Lantus® had no statistically significant positive or negative impact on CV outcomes versus standard care during the study period. Results also showed that insulin glargine delayed progression from pre-diabetes to type 2 diabetes and there was no association between insulin glargine use and increased risk of any cancer. (New England Journal of Medicine, July 2012)
Sanofi is sponsoring a 2-year extension to ORIGIN, called ORIGINALE (Outcome Reduction with an Initial Glargine Intervention and Legacy Effect).
The results of the ORIGIN trial have been filed 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 anddiabetes, 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 associatedin combination with long-acting insulins such as Lantus®Lantus® for supplementary glycemic control at mealtime.
In addition, Apidra®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®Apidra® can be administered subcutaneously using syringes or specific pens including the Apidra® SoloSTAR®Apidra® SoloSTAR® disposable pen and the new ClikSTAR®ClikSTAR® reusable pen:pen.
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Apidra® was launched in Germany in 2004, in other European countries in 2005, in the United States in 2006, and in Canada and Japan in 2009. Apidra® is now available in over 26100 countries worldwide. The top three countries contributing
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 salesfull capacity in the first half of Apidra2012.
®Insuman® are the United States, Germany
Insuman® (human insulin) is a range of insulin solutions and Italy.suspensions for injection and is indicated for diabetes patients where treatment with insulin is required. Human insulin is produced by recombinant DNA technology in
AmarylEscherichia coli®/Amarel®/Solosa®strains.
Insuman® is supplied in vials, cartridges, pre-filled disposable pens (OptiSet® and SoloSTAR®) or reusable pens (ClickSTAR®) containing the active substance human insulin. The Insuman® range is comprised of rapid-acting insulin solutions (Insuman® Rapid and Insuman® Infusat) that contain soluble insulin, an intermediate-acting insulin suspension (Insuman® Basal) that contains isophane insulin, and combinations of fast- and intermediate-acting insulins in various proportions (Insuman® Comb). Insuman® is principally sold in Germany.
Amaryl®Amaryl®/Amarel®/Solosa®
Amaryl® (glimepiride) 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®Amaryl® reduces the body’sbody'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. Amaryl® has a more rapid onset and longer duration of action than first-generation agents, allowing patients to achieve a very good level of control with a lower risk of hypoglycemia.
Amaryl® was the first oral diabetes drug in its class to receive approval for administration in one of three ways: either as a monotherapy or in combination with insulin or metformin.
The combination of metformin (which reduces hepatic glucose production and improvesdecreases insulin resistance) with a sulfonylurea such as Amaryl®Amaryl® is the rational combination for counteractingeffective in combating the two defects seen incauses of type 2 diabetes. It is one of the most prescribed combinationcombinations of diabetes drugs worldwide. Amaryl M®M®, a fixed-dose combination of Amaryl®Amaryl® plus metformin in a single presentation, was launched in 2007. The fixed dose treatment is more effective than either agent alone in patients with type 2 diabetes and has equal efficacy and better compliance than the free combination of glimepiride and metformin. In 2009, Amaryl M® was launched in Chile and in the United Arab Emirates.
Our leading market for Amaryl® is Japan, where it is the leading oral anti-diabetes product by volume (source: IMS 2009 sales). 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 experience 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 vision 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 available in the United States.States and Saudi Arabia.
Lyxumia®
Lyxumia® (lixisenatide) is a once-daily prandial GLP-1 receptor agonist. In February 2013, the European Commission granted marketing authorization in Europe for Lyxumia® indicated for the treatment of adults with type 2 diabetes mellitus to achieve glycemic control in combination with oral glucose-lowering medicinal products and/or basal insulin when these, together with diet and exercise, do not provide adequate glycemic control. On completion of pricing and reimbursement discussions, Sanofi will initiate a phased launch of Lyxumia® throughout the European Union. Applications for regulatory approval were also submitted in several other countries around the world and are being reviewed. The FDA accepted the file for review in February 2013.
Additional Phase IIIb studies have been initiated and the ELIXA cardiovascular outcomes trial is ongoing.
A proof-of-concept study to compare insulin glargine/lixisenatide fixed ratio combination versus insulin glargine on glycemic control over 24 weeks has been fully recruited.
GLP-1 is a naturally-occurring peptide hormone that is released within minutes after eating a meal. It is known to suppress glucagon secretion from pancreatic alpha cells and stimulate glucose-dependent insulin secretion by pancreatic beta cells.
The active ingredient of Lyxumia® is in-licensed from Zealand Pharma.
The main compound currently in Phase III clinical development in the Diabetes field is New Glargine Formulation: A new formulation of insulin glargine with an improved pharmacodynamic profile is now in Phase III clinical testing. In addition to the two Phase III studies started during 2011, in the second half of 2012 the EDITION III and IV Phase III trials were initiated together with two dedicated clinical studies in Japan.
The acquisition of Genzyme in 2011 brought to the Group specific expertise in rare diseases, a sector where there are still many unmet needs, and expanded Sanofi's presence in the biotechnology sector.
Our Rare Disease business is focused on products for the treatment of rare genetic diseases and other chronic debilitating diseases, including lysosomal storage disorders, or LSDs, a group of metabolic disorders caused by enzyme deficiencies. Our principal rare disease products are enzyme replacement therapies: Cerezyme® (imiglucerase for injection) to treat Gaucher disease, Fabrazyme® (agalsidase beta) to treat Fabry disease and Myozyme® / Lumizyme® (alglucosidase alpha) to treat Pompe disease. In January 2013, Kynamro™ (mipomersen), an antisense oligonucleotide that inhibits the synthesis of apolipoprotein B-100, was approved by the FDA for homozygous familial hypercholesterolemia.
Cerezyme®
Cerezyme® (imiglucerase for injection) is an enzyme replacement therapy used to treat Gaucher disease, an inherited, potentially life-threatening LSD. It is estimated that there are approximately 10,000 Gaucher patients worldwide.
Cerezyme® is the only therapy with an 18-year history of reducing, relieving and reversing many of the symptoms and risks of Type 1 and Type 3 (in certain markets) Gaucher disease. Cerezyme® is administered by intravenous infusion over 1-2 hours.
In 2012, significant progress was made in resolving supply challenges encountered starting in 2009, and successfully restoring existing patients in major markets to normal dosing. For more information regarding manufacturing issues related to Cerezyme®, see "Item 4 — Information on the Company — Production and Raw Materials".
The principal markets for Cerezyme® are the United States, Europe and Latin America.
Fabrazyme®
Fabrazyme® (agalsidase beta) is an enzyme replacement therapy used to treat Fabry disease, an inherited, progressive and potentially life-threatening LSD. Fabry disease is estimated to affect between 5,000 and 10,000 people worldwide. Fabrazyme® is administered by intravenous infusion.
Fabrazyme® is available in over 30 countries, including the United States and Europe.
The strong recovery 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) are enzyme replacement therapies used to treat Pompe disease, an inherited, progressive and often fatal LSD. We estimate that there are approximately 10,000 Pompe patients worldwide.
Myozyme® has been marketed since 2006 in the United States and the 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 form of the same human enzyme but are manufactured using different sized bioreactors.
Kynamro™
Kynamro™ (mipomersen) is an antisense oligonucleotide (ASO) that inhibits the synthesis of apoB, a primary protein constituent of atherogenic lipoproteins. Mipomersen is being developed, in collaboration with Isis Pharmaceuticals Inc., for the treatment of patients with homozygous familial hypercholesterolemia (HoFH) and severe heterozygous FH (HeFH). FH is a genetic disorder that causes chronic and lifelong exposure to markedly elevated concentrations and numbers of atherogenic, apoB-containing lipoproteins (LDL, Lp(a)) leading to premature and severe cardiovascular disease. On January 29, 2013, Genzyme and Isis announced the FDA approval of Kynamro™ (Mipomersen sodium) for homozygous familial hypercholesterolemia. On December 14, 2012 Genzyme and Isis announced that the Committee for Medicinal Products for Human Use (CHMP) had adopted a negative opinion for its marketing authorization application submitted in 2011. In January 2013, Genzyme requested a re-examination of the CHMP opinion.
The main compounds currently in Phase II or III clinical development in the DiabetesRare 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.
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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.
PN2034Multiple Sclerosis (MS) (novel
Our Multiple Sclerosis franchise is focused on the development and commercialization of therapies that treat this chronic autoimmune disease of the central nervous system. More than 2 million people suffer from MS worldwide. Our MS franchise consists of Aubagio® (teriflunomide), a once daily, oral insulin sensitizer, type 2 diabetes mellitus; Phase II). As an insulin sensitizer, PN2034immunomodulator that is expected to normalize and therefore enhance insulin actionapproved in the liverUnited States and Australia, and Lemtrada™ (alemtuzumab), a monoclonal antibody that has completed two Phase III pivotal studies and has marketing applications under review by regulatory authorities in the U.S. and Europe.
Aubagio®
Aubagio® (teriflunomide), an immunomodulatory agent with anti-inflammatory properties, 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 diabeticactivated lymphocytes in CNS. Aubagio® has shown significant efficacy across key measures of MS disease activity, including reducing relapses, slowing the progression of physical disability, and reducing the number of brain lesions as detected by MRI. Results of the first pivotal study (TEMSO), indicating that the product had an effect on disease activity in terms of relapse rate, disability progression and brain lesions with a favorable safety profile, were published in the New England Journal of Medicine in October 2011. Results from the second pivotal study (TOWER) were presented at 28th Congress of the European Committee for Treatment and Research
in Multiple Sclerosis (ECTRIMS) in October 2012. These results showed that Aubagio® significantly reduced the annualized relapse rate and slowed progression of disability in patients with relapsing forms of multiple sclerosis compared to placebo. Aubagio® is the first and only oral MS therapy to significantly slow the progression of disability in two Phase III trials.
Aubagio® received FDA approval in the United States in September 2012 for patients with relapsing forms of MS. The product also received regulatory approval in Australia in November 2012. Marketing applications for Aubagio® are currently under review by the European Medicines Agency and other regulatory authorities.
The main compound currently in Phase III clinical development in the multiple sclerosis field is Lemtrada™ (alemtuzumab), a humanized monoclonal antibody targeting CD52 antigen abundant on the surface of B and T lymphocytes leading to changes in the circulating lymphocyte pool. Alemtuzumab has been developed to treat patients with relapsing forms of MS. The two pivotal Phase III studies demonstrating the safety and efficacy of alemtuzumab were completed in 2011 and the results were published in theLancet in November 2012. The first study, CARE-MS I, demonstrated strong and robust treatment effect on the relapse rate co-primary endpoint vs Rebif in treatment-naive MS patients. The initiationco-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 patients who had relapsed on prior therapy. Results from CARE-MS II also showed that patients treated with Lemtrada™ were significantly more likely to experience improvement in disability scores than those treated with Rebif, suggesting a Phase IIb studyreversal of disability in type 2 diabetes mellitus is projectedsome patients. In both pivotal studies, safety results were consistent with previous alemtuzumab use in MS and adverse events continued to be manageable. Marketing applications for the third quarter of 2010. PN2034 is licensed-in from Wellstat.Lemtrada™ are currently under review by regulatory authorities.
Sanofi-aventis is a leader Sanofi has started to diversify its presence in the oncology field primarilybeyond chemotherapy (Eloxatine®, Taxotere® and Jevtana®), and launched an angiogenesis inhibitor, Zaltrap®, in chemotherapy, with two major agents: Taxotere® and Eloxatine®.August 2012 in the U.S.
Taxotere®
Taxotere®
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 resulting in death in somemany cancer cells.
Taxotere®Taxotere® is available in more than 10090 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 gained approvalbeen approved for use in eleven indications in five different tumor types (breast, prostate, gastric, lung, and head and neck). Taxotere®Taxotere® is indicated for early stage and metastatic breast cancer, first-line and second-line metastatic Non-Small Cell Lung Cancer (“NSCLC”)(NSCLC), androgen-independent (hormone-refractory) metastatic prostate cancer, advanced gastric adenocarcinoma including(including adenocarcinoma of the gastroesophageal junctionjunction), and for the induction treatment of patients with locally advanced squamous cell carcinoma of the head and neck.
In June 2009, the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA issued a positive opinion on Roche’s Avastin® (bevacizumab) in combination with Taxotere® as a first line treatment for women with metastatic breast cancer, based on the results of the AVADO study. This combination, which presents a better efficacy (significantly better Progression Free Survival — PFS) than the Taxotere® monotherapy, allows a larger number of patients to be treated with Taxotere®. In the United States, a Taxotere®-bevacizumab combination is being reviewed by the FDA for an expected approval in the second quarter of 2010.
Based on the GEICAM 9805 trial results, which showed significant survival benefit in favor of the Taxotere®-based regimen compared to a fluorouracil-based regimen in 1,100 patients with node negative early stage breast cancer, sanofi-aventis filed a dossier with the EMA in November 2009 for a new indication of Taxotere® in association with doxorubicin and cyclophosphamide for the treatment of patients with node negative early stage breast cancer. In the United States, this Taxotere® regimen is already considered as a standard treatment in this indication.
For patients with androgen-independent (hormone-refractory) metastatic prostate cancer, Taxotere® remains the standard of care for a first-line treatment and new clinical studies on Taxotere® in combination with targeted therapies could lead to more frequent use of Taxotere®.
In November 2009, the European Commission approved a new single vial formulation of Taxotere® in Europe. This new formulation was also filed for approval in the United States in December 2008. A pediatric data dossier on Taxotere® was submitted for regulatory approval in the United States in November 2009, in response to the FDA’s prior written request.
The top four countries contributing to sales of Taxotere®Taxotere® in 2009 are2012 were the United States, France, GermanyJapan, China and Japan.Russia. Generics of docetaxel were launched at the end of 2010 in Europe, in April 2011 in the U.S., and in December 2012 in Japan (see "— Patents, Intellectual Property and Other Rights" below).
Eloxatine®
Eloxatine®
Eloxatine®Eloxatine® (oxaliplatin) is a platinum-based cytotoxic agent. Eloxatine® combinedEloxatine®, in combination with infusional (given(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.
In clinical studies of patients with stage III colon cancer who had their primary tumors surgically removed, Eloxatine® in the FOLFOX regimen has been shown to:
Increase overall survival rates by 5.5% when the recommended dose of 12 cycles of therapy is completed; and
Reduce the risk of colon cancer coming back.
For patients with stage IV colorectal cancer, the FOLFOX regimen is approved by the FDA for the treatment of advanced colorectal cancer (cancer of the colon and/or rectum). The FOLFOX regimen showed the following benefits in clinical trials of patients with advanced colorectal cancer:
Significantly prolonged survival;
Significantly shrank tumors; and
Significantly delayed cancer progression.
Following the end of the Eloxatine® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have received marketing authorization and have been launched throughout Europe. With regard to the United States market, in August and September 2009, a number of oxaliplatin generics received final marketing authorization from the FDA and have since been launched.
Eloxatine®Eloxatine® is in-licensed from Debiopharm and is marketed in more than 70 countries worldwide. The top four countries contributing to the sales of Eloxatine®Eloxatine® in 20092012 were the United States, Canada, China, and South Korea.
Following the end of Eloxatine® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have been launched throughout Europe. Market exclusivity in the United States was lost on August 9, 2012. Several generics of oxaliplatin are available globally, except in Canada where Eloxatine® still has exclusivity.
Jevtana®
Jevtana® (cabazitaxel) is a taxane derivative approved in combination with prednisone for the treatment of patients with hormone-refractory metastatic prostate cancer previously treated with a docetaxel-containing treatment regimen. Jevtana® was the result of a 14-year research and development program to address the significant unmet medical need after taxane-based treatment progression.
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 four countries contributing to sales of Jevtana® in 2012 were the U.S., Germany, Italy and Brazil.
Mozobil®
Mozobil® (plerixafor injection) is a hematopoietic stem cell mobilizer indicated in combination with granulocyte-colony stimulating factor (G-CSF) to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with non-Hodgkin's lymphoma (NHL) and multiple myeloma (MM).
The main countries contributing to Mozobil® sales in 2012 were the U.S., Germany, France, the U.K. and Italy.
Zaltrap®
Zaltrap® (aflibercept) is a recombinant fusion protein which acts as a soluble decoy receptor that binds to Vascular Endothelial Growth Factor-A (VEGF-A), VEGF-B and placental growth factor (PIGF), preventing the bound VEGF from binding to their native receptors. VEGF-A is one of the mediators contributing to angiogenesis. VEGF-B and PlGF, related growth factors in the VEGF family, may contribute to tumor angiogenesis as well. In the U.S., Zaltrap® is a registered trademark of Regeneron Pharmaceuticals, Inc.
In the U.S., Zaltrap® is approved under the U.S. proper name ziv-aflibercept for use in combination with FOLFIRI, in patients with metastatic colorectal cancer (mCRC) that is resistant to or has progressed following an oxaliplatin-containing regimen. Zaltrap® is marketed in the U.S. in August 2012.
In the European Union, Zaltrap® (aflibercept) was approved in February 2013 by the European Commission to treat metastatic colorectal cancer that is resistant to or has progressed after an oxaliplatin-containing regimen.
The marketing of Zaltrap® is organized through our collaboration with Regeneron (see "Item 5 — Alliance Arrangements with 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
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, and/or cancer side-effects, including cytotoxic agents, anti-mitotic agents, anti-angiogenic agents, anti-vascular agents,targeted therapies and monoclonal anti-bodies and supportive care therapies.(unconjugated or conjugated with cytotoxics). Projects are presented from the most advanced to the least advanced stage of development.
BSI-201 (PARP inhibitor, metastatic triple negative breast cancer (TNBC);The main compounds currently in Phase III). Developed by BiPar Sciences, Inc. (“BiPar”), a privately held U.S. biopharmaceutical company and a leaderII or III clinical development in the emergingOncology field are:
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Alvocidib(cyclin-dependent
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:
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AVE8062 (combretastatin derivative), new anti-vascular licensed from Ajinomoto, sarcoma, Phase III). Single agent and combination studies with cisplatin, docetaxel and oxaliplatin have been conducted with AVE8062 over recent years. A Phasephase III study in sarcoma in combination with cisplatin was initiated in 2008 and is currently ongoing;
In May 2009, two compounds were in-licensed from Exelixis:XL147 (PI3K inhibitor) andXL765 (PI3K/mTOR dual inhibitor). Multiple Phase I studies as single agent or in combination are ongoing with both compounds. Besideswhich despite reaching its primary PFS (progression free survival) endpoint, did not demonstrate sufficient clinical benefit to support regulatory submissions; the license, under an exclusive discovery collaboration, sanofi-aventis and Exelixis will combine research efforts to establish several preclinical programs related to isoform-selective inhibitors of P13K (phosphoinositide-3 kinase).
An exclusive worldwide licence and collaboration agreement has been signed with the U.S. biotechnology company Merrimack relating toMM-121, currently in Phase I for solid malignancies.
A collaboration and worldwide license agreement was announced in October 2009 between Micromet and sanofi-aventis for the developmentnegative outcome of a BiTE® antibody, directed against an antigen presentphase II trial in NSCLC; and the early termination of the phase II study in ovarian cancer based on the surfaceresults of tumor cells. BiTEa pre-specified interim analysis. In all these trials there were no substantial safety concerns.® antibodies
Thrombosis and CardiovascularOther Prescription Products
Lovenox®/Clexane®
Thrombosis occurs when a thrombus, or blood clot, forms inside an artery or a vein. Left untreated, a thrombus can eventually grow large enough to block the blood vessel, preventing blood and oxygen from reaching the organ being supplied. Our principal products for the treatment and prevention of thrombosis are Lovenox®/Clexane® and Plavix®/ Iscover®.
Within the cardiovascular market, hypertension remains the most prevalent disease. Hypertension is defined as blood pressure above the normal level and is one of the main causes of severe heart, brain, blood vessel and eye complications. Our principal products for the treatment of cardiovascular diseases are Aprovel®/Avapro®/Karvea® and Tritace®/Triatec®/Delix®/Altace®.
The incidence of atrial fibrillation (“AF”) is growing worldwide in relation to aging populations. It is emerging as a public health concern and affects about 4.5 million people in Europe and 2.5 million people in the United States. AF leads to potential life-threatening complications, and increases the risk of stroke up to five-fold, worsens the prognosis of patients with cardiovascular risk factors, and doubles the risk of mortality and the risk of hospitalization with significant burden on patients, health care providers and payers. 70% of AF management costs are driven by hospital care and interventional procedures in the European Union. In July 2009, we launched Multaq® (dronedarone) in the United States. Multaq® is the first and only anti-arrhythmic drug to have shown a significant reduction in cardiovascular hospitalization or death in patients with AF/ Atrial flutter (“AFL”).
Lovenox®/Clexane®
Lovenox®Lovenox® (enoxaparin sodium) is the most widely studied and used low molecular weight heparin (“LMWH”)available in the world.over 100 countries. It has been used to treat an estimated 200over 350 million patients in 100 countries since its launch and is approved for more clinicallaunch.
Lovenox® has the broadest range of indications than any other LMWH.amongst low molecular weight heparins (LMWH). A comprehensive dossier of clinical studiesdevelopment plan has demonstrated the benefitsefficacy and safety of Lovenox®Lovenox® in the prophylaxisprevention and treatment of deep vein thrombosisvenous thrombo-embolism (VTE) and in treatmentthe management of the full spectrum of acute coronary syndromes (“ACS”)(ACS). It has become the product of reference in clinical trials for the development of new anti-coagulants in both venous and arterial indications.
In the field of venous thromboembolism (“VTE”) prevention, Lovenox® use continuesVTE management, Lovenox® is continuing to grow especially for prevention of VTE in hospitalized patients not undergoing surgery.
In 2009, two publications from the ENDORSE survey further highlighted the prevalence of patients at risk of VTE after undergoing surgery other than orthopedic surgery and the underuse of prophylaxis in those patients. It showed that the use of prophylaxis is even lower across different types of hospitalized patients not undergoing surgery and at risk of VTE, prompting the need to further improve the use of effective prophylaxis, as recommended by international guidelines.
After approvala treatment for the prevention of VTE, mainly in acutely ill patients not undergoing orthopedic surgery of the lower limbs such as total hip replacement, total knee replacement and hip fracture surgery in Japan (January 2008), Lovenox® was approved for VTE prevention in patients undergoing abdominal surgery in February 2009.surgery.
In the cardiovascular area, Lovenox® was approved in 2007Two competing generics of enoxaparin are available in the United States for the treatment of patients with ST-segment elevation myocardial infarction, and since thenU.S. No biosimilar has been approved in more than 40 countries worldwide for this indication.
Lovenox®the European Union. An authorized generic is the leader in anti-thromboticsavailable in the United States,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 20092012 sales).
Plavix®/Iscover®
Plavix® / Iscover®
Plavix®Plavix® (clopidogrel bisulfate), a platelet adenosine diphosphate (“ADP”)(ADP) receptor antagonist with a rapid onset of action that selectively inhibits platelet aggregation induced by ADP, is indicated for long-term prevention of
atherothrombotic events in patients with a history of recent myocardial infarction, recent ischemic stroke or established peripheral arterial disease. Plavix®Plavix® is indicated for the secondary prevention of atherothrombosis regardless of the location of the arteries initially affected (heart, brain, lower limbs). This
indication is supported by the results of the landmark CAPRIE trial, including almost 20,000 patients. CAPRIE demonstrated the superior efficacy of Plavix® over acetylsalicylic acid (ASA, the active ingredient of Aspirin®), with a comparable safety profile.
Following the significant results of several clinical trials, involving almost 62,000 patients altogether, Plavix®Plavix® is now also indicated for the treatment of acute coronary syndrome (“ACS”)(ACS) with and without ST segment elevation in combination with ASA. These indications are incorporated into the guidelines of the American Heart Association, the American College of Cardiology and the European Society of Cardiology.
In addition to the 75 mg tablet,Plavix® is also available in a Plavix® 300 mg tablet was launched in 2008. This 300 mg tabletthat reinforces Plavix® early use by simplifying its approved loading dose administration in patients with ACS.
In December 2009,2011, on the CHMP adopted a positive opinion, recommending grantingbasis of the ACTIVE A study results (7,554 patients), the EMA granted marketing authorization for DuoPlavin®Plavix® in combination with ASA for the prevention of atherothrombotic and thromboembolic events, including stroke, in patients with atrial fibrillation who have at least one risk factor for vascular events, are not suitable for treatment with Vitamin K antagonists (VKA), and have a low bleeding risk.
CoPlavix® / DuoPlavin®, a new fixed dose combination of clopidogrel bisulfate and acetylsalicylic acid. The drugacid (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 benefit of DuoPlavin® is its simplification of treatment. The combination was launched in Australia in December 2009.
The extensive clinical program for Plavix® including all completed, ongoing and planned studies, is among the largest of its kind as it has involved more than 130,000 patients overall. In addition, over 100 million patients worldwide are estimated to have been treated with Plavix® since its launch, providing significant evidence of real-life efficacy and safety experience with this product.
In 2009, ACTIVE-A study results (7,554 patients) demonstrated that, for patients with atrial fibrillation who were at increased risk of stroke and could not take an oral anti-coagulant medication, taking Plavix® (clopidogrel bisulfate) in addition to aspirin significantly reduced major vascular events over aspirin alone. The greatest benefit was seen in the reduction of stroke. Compared to aspirin alone, taking Plavix® in addition to aspirin significantly and as expected increased the rate of major bleeding. A dossier for a new indication was submitted to U.S. and E.U. authorities.
In addition, preliminary data of CURRENT-OASIS 7 trial (25,087 patients) that was designed to assess the efficacy and safety of an intensified clopidogrel regimen, have shown that the primary end-point (cardiovascular death, heart attack, or stroke at thirty days) for the entire study population did not reach statistical significance. For the population with percutaneous coronary interventions, however, the data have shown both a consistent reduction in major cardiovascular events and a significant increase in major bleeding.
The development of a pediatric indication for Plavix® is ongoing. The dose ranging Phase II study has helped determine the right dose to be studied in the Phase III study, study which is ongoing and the results of which are expected in 2010.
In addition to this clinical program, sanofi-aventis and Bristol-Myers Squibb (“BMS”), in close collaboration with the FDA, are conducting additional studies to further understand and characterize the variability of response with Plavix®. The objective of this program is to provide health care professionals with the best possible guidance on the use of Plavix®. Based on this program the label has been updated including new results on the pharmacological interaction with omeprazole. Sanofi-aventis and BMS continue to update the label especially with recent pharmacogenomics data and will make certain existing warnings more prominent.
Plavix® is marketed in over 115 countries. The marketing of Plavix®Plavix® / CoPlavix® / DuoPlavin® is organized through our alliance with BMS which was restructured in 2012 with effect on January 1, 2013 (see “—"Item 5 — Alliance Arrangements with BMS” below)Bristol-Myers Squibb").
Sales of Plavix®Plavix® in Japan are consolidated by sanofi-aventis and are outside the scope of our alliance with BMS. In 2009, Plavix® obtained the highest level recommendationExclusivity for Plavix® in the Japanese strokeU.S. expired on May 17, 2012 and ACS guidelines.a number of generics have been launched. Previously, generics had also been launched in Europe.
Plavix®Plavix® is the leading anti-platelet in the EuropeanChinese and U.S.Japanese markets (source: IMS 20092012 sales) even though European markets have been affected by launches of generic clopidogrel..
Aprovel®/Avapro® /Karvea®
Aprovel®/Avapro®/Karvea®
Aprovel®Aprovel® (irbesartan) is an anti-hypertensive belonging to the class of angiotensin II receptor antagonists. These highly effective and well tolerated antagonists act by blocking the effect of angiotensin II, the hormone
responsible for blood vessel contraction, thereby enabling blood pressure to return to normal. In addition to Aprovel®Aprovel®/Avapro®Avapro®/Karvea®Karvea®, we also market CoAprovel®CoAprovel®/Avalide®Avalide®/Karvezide®Karvezide®, a fixed dose combination of irbesartan and hydrochlorothiazide (“HCTZ”)(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 variousa 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, in both Europe and the United States. CoAprovel®diabetes. CoAprovel® is indicated in patients whose blood pressure is not adequately controlled with a monotherapy, but also as initial therapy in patients who are likely to need multiple drugs to achieve their blood pressure goals (in the United States only).
Several clinical trials have been undertaken in recent years in an effort to demonstrate the effects of Aprovel® beyond blood pressure control including the ACTIVE-I study evaluating the effect of irbesartan in preventing cardiovascular events in patients with atrial fibrillation. The results were presented in September 2009 during the European Society of Cardiology congress. Although the study did not meet its principal goal, irbesartan demonstrated a reduction in hospitalization in heart failure. Irbesartan was also very well tolerated in these patients with atrial fibrillation.
Aprovel®Aprovel® and CoAprovel®CoAprovel® are marketed in more than 80 countries. The marketing of Aprovel®Aprovel® and CoAprovel®CoAprovel® is organized through an alliance with BMS which was restructured in 2012 (see “—"Item 5 — Alliance Arrangements with BMS”Bristol-Myers Squibb" below).
In Japan, where the product is licensed/sub-licensed to Shionogi Co. Ltd and Dainippon Sumitomo Pharma Co. Ltd, respectively, specific 50 mgrespectively. Aprovel® U.S. market exclusivity expired in March 2012 and 100 mg dosages developed for the Japanese market were launched in June 2008.a number of generic versions have been launched.
Irbesartan generics in monotherapy are marketed in Spain and Portugal.
Alliance with BMSMultaq®
Plavix®Multaq® (dronedarone) is the most extensively studied anti-arrhythmic drug (AAD) in Atrial Fibrillation (AF) and Aprovel® are marketed throughhas demonstrated a series of alliances with BMS. The alliance agreements include marketing and financial arrangements that vary depending on the country in which the products are marketed.
There are three principal marketing arrangements that are usedunique cardiovascular (CV) outcome benefit in the BMS alliance:
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Under the alliance arrangements, 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. The BMS alliance does not cover rightsATHENA study in addition to Plavix® in Japan; sales of Plavix® in Japan are consolidated by sanofi-aventis.
In the territory under our operational management, the marketing arrangements are as follows:
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In the territory under BMS operational management, the marketing arrangements are as follows:
We use the co-promotion systemeffective rhythm control in the United StatesEURIDIS and Canada, where the products are sold through the alliances under the operational management of BMS;
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We have the exclusive right to market the products in certain other countries of Latin America.
In countries where the products are marketed by BMS on a co-marketing basis, or through alliances under the operational management of BMS, we often sell the active ingredients for the products to BMS or such entities.ADONIS studies.
The financial impact of our principal alliances on our financial condition or income is significant and is described under “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances”, and see “Item 3. Key Information — D. Risk Factors — We rely on third parties for the marketing of some of our products” for more information relating to risks in connection with our alliance agreements.
Tritace®/Triatec®/Delix®/Altace®
Tritace® (ramipril) is an angiotensin converting enzyme (“ACE”) inhibitor indicated for the treatment of hypertension, congestive heart failure following or in the absence of acute myocardial infarction and nephropathy.
The Heart Outcomes Prevention Evaluation (“HOPE”) study showed it to be effective in reducing the incidence of stroke, heart attacks and cardiovascular-related death in high-risk patients. Tritace® is the only ACE inhibitor approved for the prevention of stroke, myocardial infarction and death in these patients and has the broadest spectrum of indications among ACE inhibitors for the treatment of cardiovascular diseases.
The most recent European Society of Hypertension / European Society of Cardiology guidelines on the management of hypertension highlighted the importance of taking into account global cardiovascular risk and the need to control hypertension. Based on the protective effect confirmed in the ON-TARGET study, the available combinations with diuretics (ramipril + hydrochlorothiazide) and calcium channel blockers (ramipril + felodipine) are listed as preferred combinations in the recent guidelines for physicians to help patients reach their blood pressure goals without worsening their metabolic profile.
Tritace® is available in tablets and capsules. It is marketed in over 70 countries including the United States where it is marketed by King Pharmaceuticals. The top two countries contributing to sales of Tritace® in 2009 are Italy and Canada. A number of generics have received marketing authorization and have been launched worldwide.
Multaq®
Multaq® (dronedarone)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 orand death in patients with paroxysmal and persistent Atrial Fibrillation (“AF”) / Fibrillation/Atrial flutter (“AFL”)Flutter . Multaq®
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 a convenient fixed dose regimencollaborated with health authorities agencies to update prescribing information and include liver function monitoring. Sanofi coordinated the implementation of twice daily 400 mg tabletsthe updated label by disseminating proactively relevant educational materials to be taken with morning and evening meals. Treatment with Multaq® does not require a loading dose and can be initiated in an outpatient setting with minimal monitoring.prescribers.
The most common adverse reactions are diarrhea, nausea, vomiting, abdominal pain, asthenia (weakness) and cutaneous rash.
Multaq® was approved in 2009 by the FDA, by Health Canada, by the Swiss AgencyCommittee for TherapeuticMedicinal Products (Swissmedic), byfor Human Use (CHMP) of the European Commission, Mexico and Brazil.
InMedicines Agency (EMA) confirmed in September 2011 that the United States, Multaq®benefits of Multaq® continue to outweigh the risks with a revised indication for the treatment of a limited, newly defined population: Multaq® is indicated to reducefor the riskmaintenance of cardiovascular hospitalizationsinus rhythm after successful cardioversion in adult clinically stable patients with paroxysmal or persistent AFatrial 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 AFL,to patients with a recent episodecurrent or previous episodes of AF/AFL and associated cardiovascular risk factors.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 Canada, MultaqEurope, updated guidelines were issued by the European Society of Cardiology (ESC) confirming Multaq®'s crucial role in the AF treatment armamentarium as a first line option in a broad range of patients. Multaq® is the only recommended first line AAD for AF patients with hypertensive heart disease and left ventricular hypertrophy. Multaq® is still the only AAD recommended in non-permanent AF with CV risk factors to reduce CV hospitalization.
The main countries contributing to Multaq® sales in 2012 were the U.S., Germany and Italy.
®Renagel® and Renvela®
Renagel® (sevelamer hydrochloride) and Renvela® (sevelamer carbonate) are oral phosphate binders used by chronic kidney disease (CKD) patients on dialysis as well as late-stage CKD patients in Europe to treat a condition called hyperphosphatemia, or elevated phosphorus levels, which is associated with heart and bone disease. Renvela® is a second generation, buffered phosphate binder.
In the United States, there are an estimated 395,000 dialysis patients, approximately 90% of whom receive a phosphate binder. There are an estimated 350,000 dialysis patients in the EU and 65,000 in Brazil. In the EU, Renvela® is also approved to treat CKD patients not on dialysis.
We market Renagel® and Renvela® directly to nephrologists through Sanofi's employee sales force and distribute these products through wholesalers and distributors. In Japan and several Pacific Rim countries, Renagel® is marketed by Chugai Pharmaceutical Co., Ltd and its sublicensee, Kyowa Hakko Kirin Co., Ltd.
In the United States, Genzyme and generic manufacturers have settled pending litigation with regard to the production and sale of generic formulations of Renvela® tablets, Renvela® for oral suspension and Renagel®. According to the terms of the settlements, the first-filer for each product can enter the U.S. market on March 16, 2014 and second-filers can enter the market on September 16, 2014, or earlier under certain circumstances, pending approval of their generic application.
The top five countries contributing to the sales of Renagel® and Renvela® in 2012 were the U.S., Italy, France, the UK, and Brazil.
Synvisc®/Synvisc-One®
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 patientspain associated with a historyosteoarthritis of or with current AF to reduce their risk of cardiovascular hospitalizationthe knee, hip, ankle, and shoulder joint in countries that have adopted CE marking, and for pain due to this condition.
In Switzerland, Multaq® is indicated for the prevention of recurrence of AF/AFL or reduction of ventricular rate and to decrease the occurrence of cardiovascular hospitalizations in this patient population.
In Europe, Multaq® is indicated in adult clinically stable patients with a history of or with current non-permanent AF to prevent recurrence of AF or to lower ventricular rate.
The use of Multaq® in unstable patients with New York Heart Association class III and class IV heart failure is contraindicated.
The landmarkATHENA trial is the only double-blind, anti-arrhythmic study in patients with AF to have assessed morbidity-mortality. The study enrolled a total of 4,628 patients. In this trial, the efficacy and safety of Multaq® was evaluated in patients with AF/AFL or a recent history of these conditions. In this trial, Multaq®, 400mg twice a day, in addition to standard therapy, significantly reduced the risk of first cardiovascular hospitalization or death by 24% (p<0.001) when compared to placebo, meeting the study’s primary end point. In a secondary analysis of the ATHENA trial, Multaq® significantly reduced the total number of hospital days versus placebo.
Multaq® has now been launchedknee osteoarthritis in the United States,States. Currently the main viscosupplementation market is for the treatment of pain associated with osteoarthritis of the knee.
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, Germany, DenmarkFrance, Mexico and Switzerland. LaunchGermany.
LeGoo®
At the end of 2012, Sanofi launched LeGoo®, a gel for temporary endovascular occlusion of blood vessels during surgical procedures in the U.S. LeGoo® is an innovative technology that is expected in 2010 in most other European countries and selected Asian and Latin American countries.to enhance the Sanofi Biosurgery portfolio.
Stilnox®/Ambien® /Myslee®
The main compounds currently in Phase II or III clinical development in the Thrombosis and Cardiovascular field are:
Semuloparin (indirect factor Xa/IIa inhibitor, prevention of VTE; Phase III) is an injectable ultra-low-molecular-weight heparin with a high ratio of anti-factor Xa activity to anti-factor IIa activity, as compared to current low-molecular-weight heparins. It is being developed primarily in the primary prevention of venous thromboembolic events in cancer patients undergoing chemotherapy and in patients undergoing abdominal surgery as well as in patients undergoing knee replacement surgery, hip replacement surgery or hip fracture surgery;
Otamixaban (direct factor Xa inhibitor, interventional cardiology; Phase III initiation). Otamixaban is an injectable, selective direct inhibitor of coagulation factor Xa. It is a synthetic small molecule. Otamixaban exhibits a fast on- and off-set of action. A Phase III program to confirm positive outcome from the SEPIA-ACS Phase II study is scheduled for initiation in 2010;
Celivarone (anti-arrhythmic; Phase IIb). Based upon the results of a previous trial, a new Phase II study in patients fitted with an implantable cardioverter/defibrillator is ongoing; and
XRP0038(NV1FGF, non-viral fibroblast growth factor 1, critical limb ischemia; Phase III). XRP0038 is an injectable non-viral DNA plasmid and gene therapy-based approach for the promotion of angiogenesis in patients with peripheral arterial disease that statistically significantly prolonged time to amputation as compared to placebo in a Phase IIb study in patients with critical limb ischemia. The enrollment and treatment of the Phase III program was completed in 2009, with a total of 526 patients enrolled. The study is now in the follow-up period. The primary objective is to demonstrate the safety and effectiveness of XRP0038 in the prevention of major amputations in critical limb ischemia patients. Phase III results are expected for late 2010. Submission to the FDA and the European Commission is planned for 2011.
Central Nervous System
We have long-standing expertise in the Central Nervous System therapeutic area. Our principal products in this area are:
Stilnox®/Ambien®/Myslee®
Stilnox®Stilnox® (zolpidem tartrate) is the leading hypnotic worldwide (source: IMS 2009 sales) and is indicated in the short-term treatment of insomnia.
Stilnox® is available in 5 mg and 10 mg tablets. 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 generally well tolerated, allowing the patient to awaken with a reduced risk of impaired attention, decreased alertness or memory lapses throughout the day. The risk of dependence is minimal when Stilnox® is used at the recommended dosage and duration of use. Stilnox® is currently the only hypnotic demonstrated to be suitable for “as needed” use based on an extensive program of eight clinical trials, which together enrolled over 6,000 patients. This mode of administration avoids the systematic intake of a hypnotic by patients who suffer only occasionally from insomnia.
We have developed a controlled release formulation of zolpidem tartrate, sold in the United States under the brand name Ambien® CR in 6.25 mg and 12.5 mg tablets. Ambien® CR is marketed only in the United States.
Stilnox®Stilnox® is marketed in over 100 countries. It was launched in Japanis available under the brand name Myslee® in December 2000 and became the leading hypnotic on the market within three years of its launch (source: 2009 IMS sales). Myslee® has been co-promoted jointly with Astellas since 2006.
The top three markets contributing to sales of Stilnox® in 2009 (either immediate or controlled release formulations) are the United States, Japan and Italy. Generic zolpidem tartrate has been available in Europe since 2004. In the United States, generics of the immediate release formulation of Ambien® have been available since 2007.
Copaxone®
Copaxone® (glatiramer acetate) is a non-interferon immunomodulating agent indicated for reducing the frequency of relapses in patients with relapsing-remitting multiple sclerosis. Copaxone® is available as a self-injectable pre-filled syringe storable at room temperature for up to one month. This formulation allows improved product delivery, increased patient comfort and convenient transportation and storage.
This disease-modifying drug is characterized by an original and specific mode of action on multiple sclerosis. Clinical studies have shown that Copaxone® is more effective than placebo at two years, but also that it has a clinical efficacy over 15 years both in reducing relapses and progression of disability. A significant effect on lesions has also been confirmed by nuclear magnetic resonance imaging.
In 2009, the U.K. Medicine and Healthcare Regulatory Agency (“MHRA”) approved an expanded label for Copaxone® to include the treatment of patients with clinically isolated syndrome suggestive of multiple sclerosis. Local approval in France is under evaluation.
In addition, to minimize the patients’ discomfort experience with injection, Copaxone® is now available with a new, thinner needle. This new needle may help to ensure adherence by patients to their treatment.
Copaxone® is marketed through our alliance with Teva (see “— Alliance with Teva” below).
Alliance with Teva
We in-license Copaxone® fromTeva and market it through an agreement with Teva, which was originally entered into in 1995, and has been amended several times, most recently in 2005.
Under the agreement with Teva, marketing and financial arrangements vary depending on the country in which the products are marketed.
Outside the United States and Canada, there are two principal marketing arrangements:
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In the United States and Canada, Copaxone® was sold and distributed by sanofi-aventis but marketed by Teva until March 31, 2008. On March 31, 2008, Teva assumed the Copaxone® business, including sales of the product,Ambien® / Ambien®CR in the United States and Canada. As a result, sanofi-aventis no longer records product sales or shares certain marketing expensesMyslee® in Japan, where it is co-promoted jointly with respectAstellas.
Stilnox® and Ambien CR® are subject to generic competition in most markets, including the United States and CanadaEurope. In Japan, generics of Myslee® entered the market in June 2012.
Allegra®/Telfast®
Allegra® (fexofenadine hydrochloride) is a long-lasting (12- and until March 31, 2010, will receive24-hour) non-sedating prescription anti-histamine for the treatment of seasonal allergic rhinitis (hay fever) and for the treatment of uncomplicated hives. It offers patients significant relief from Teva a royaltyallergy 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 25%seasonal allergy symptoms, including nasal congestion. Generics of salesmost forms of Allegra®/Tefast® have been approved in theseour 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).
UnderAllegra®/Telfast® is marketed in approximately 80 countries. The largest market for prescriptions of Allegra® is Japan, where competing generics entered the terms of our agreement, the Copaxone® businessmarket in countries other than the U.S. and Canada will be transferred to Teva over a period running from the third quarter of 2009 to the first quarter of 2012 at the latest, depending on the country. Following the transfer, sanofi-aventis will receive from Teva a royalty of 6% for a period of two years, on a country-by-country basis. In September 2009, the Copaxone® business was transferred to Teva in Switzerland and Lichtenstein. See “Item 3. Keyearly 2013 (for more information see "Item 8 Financial Information — D. Risk FactorsA. Consolidated Financial Statements and Other Financial Information — We relyInformation on third parties for the marketing of some of our products,” for more information relating to risks in connection with our alliance agreements.Legal or Arbitration Proceedings").
Depakine®
Depakine®
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®Depakine® remains a reference treatment for epilepsy worldwide.
Depakine®Depakine® is also a mood stabilizer, registered in the treatment of manic episodes associated with bipolar disorder and, in numerous countries, in the prevention of mood episodes. Depakine® is recommended as a first-line treatment in these indications by international guidelines such as the guidelines of the World Federation of Societies of Biological Psychiatry Guidelines 2009, the Canadian Network for Mood and Anxiety Treatments 2009, and the British Association for Psychopharmacology 2009.
We provide a wide range of formulations of Depakine®Depakine® enabling it to be adapted to most types of patients: syrup, oral solution, injection, enteric-coated tablets, Depakine® Chrono® (a sustained release formulation in tablets) and Depakine® Chronosphere® (sustained release formulation of Depakine®Depakine® packaged in stick packs, facilitating its use by children, the elderly and adults with difficulties swallowing).
Depakine®Depakine® is marketed in over 100 countries, includingand is generally subject to generic competition.
Auvi-Q™
At the United States, where itend of January 2013, Sanofi launched Auvi-Q™ (epinephrine injection, USP) in the U.S. Auvi-Q™ is licensedthe first-and-only epinephrine auto-injector with audio and visual cues for the emergency treatment of life-threatening allergic reactions in people who are at risk for or have a history of anaphylaxis. Up to Abbott.six million Americans may be at risk for anaphylaxis, although the precise incidence is unknown and likely underreported.
Sanofi US licensed the North American commercialization rights to Auvi-Q™ from Intelliject,Inc.
The top three markets for Depakine®, including both indications, are the United Kingdom, France and Italy.
The mainMain compounds currently in Phase II or III clinical development indevelopment:
In the Central Nervous System field are:Metabolic field:
Nerispirdine(K+ and Na+ Channel Blocker, symptomatic treatment for multiple sclerosis; Phase II). Randomization of patients into the Phase IIb study has been completed and the program for symptomatic treatment of all forms of multiple sclerosis is progressing according to plan with results expected in the second quarter of 2010;for
SSR411298 (FAAH inhibitor; Phase II). A dose finding study in Major Depressive Disorders in elderly patients is ongoing;SAR236553
SAR164877 (anti-NGF (anti-Nerve growth factor) mAb, treatment of moderate to severe pain; Phase II). SAR164877,, co-developed with Regeneron Pharmaceuticals, is(REGN727: anti-PCSK9 mAb), have been obtained confirming a fully human anti-NGF monoclonal antibody. An extensivesignificant reduction in mean LDL-C by 40% to 72% over 8 to 12 weeks in patients with elevated LDL-C in patients on stable dose of statins.
A large phase III clinical program has been initiated (11 trials, 22,000 patients), and the first results are expected during the third quarter of 2013.
In the Ophthalmology field:
Sanofi started establishing its footprint in ophthalmology through the acquisition of Fovea, a French ophthalmology specialist (in October 2009), the ophthalmology assets of Genzyme (acquired in 2011), and a collaboration agreement with Oxford BioMedica (April 2009) that led to the exercise of two opt-in options in August 2012.
One project in Phase II clinical development program(FOV2304 — eye-drop formulation of a bradykinin B1 receptor antagonist evaluated in various typesdiabetic macular edema) was discontinued in October 2012, and the review of moderate to severe pain is ongoing, with firstPhase IIb results expected before mid-2010;forFOV-1101 (eye-drop fixed dose combination of prednisolone acetate and
cyclosporine A global licensing agreement was concluded with The Rockefeller University (New York, U.S.) concerning a novel monoclonal antibody, targeting certain specific forms of the Amyloid Beta parenchymal plaque for the treatment of Alzheimer’s disease.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:
Our main products (direct factor Xa inhibitor, interventional cardiology; Phase III). Otamixaban is an injectable, selective direct inhibitor of coagulation factor Xa. It is a synthetic small molecule. Otamixaban exhibits a fast on- and off-set of action. A Phase III program to confirm the positive outcome from the SEPIA-ACS Phase II study was initiated in 2010 and is now ongoing; results are expected in the internal medicine therapeutic area2nd quarter of 2013.
In the Internal Medicine field:
Additional studies in the fieldsSARIL-RA phase III clinical program are to be implemented in 2013.
Consumer Health Care (CHC)
Allegra®/Telfast®
Allegra® (fexofenadine hydrochloride)Consumer Health Care is a long-lasting (12-growth platform identified in our broader strategy. In 2012, we recorded CHC sales of €3,008 million, an increase of 9.9%. Nearly half of our CHC sales were in emerging markets, 22% in Europe, and 24-hour) non-sedating prescription anti-histamine for21% in the treatmentUnited States.
In March 2011, the Allegra® family of seasonal allergic rhinitis (hay fever) and for the treatment of uncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.
In January 2007, Allegra® Oral Suspension 30 mg/5 ml (6 mg/ml)medication products was commercially launched in the United StatesU.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).
CHC sales are also supported by our legacy CHC brands, which provide us with a strong presence in the treatmentfever & pain and digestive health areas.
Complementary to our legacy CHC business, our other products include:
We also(other than the Allegra® family of OTC products), mainly comprising branded consumer healthcare products, toiletries and dietary supplements across niche market Allegra-D® 12 Hoursegments. Chattem's well-known brands include Gold Bond®, Icy Hot®, ACT®, Cortizone-10®, Selsun Blue® and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant for effective non-drowsy reliefUnisom®. In January 2013, Chattem completed the acquisition of seasonal allergy symptoms, including nasal congestion.
Pursuantthe worldwide rights to a settlement agreement, sanofi-aventis U.S. granted Barr Laboratories,the Rolaids® brand from McNeil Consumer Healthcare Division of McNeil-PPC, Inc., now a subsidiary of Teva Pharmaceuticals U.S., a right to market and distribute a generic version of Allegra-D® 12 Hour, including a right to distribute an authorized generic version of Allegra® D-12 supplied by sanofi-aventis US. Barr Rolaids® is currently marketing and distributing an authorized generic version of Allegra® D-12 supplied by sanofi-aventis US under a Teva label. See Note D.22.b) to our consolidated financial statements included at Item 18 of this annual report.
Winthrop U.S., a division of sanofi-aventis U.S., also signed an agreement with Prasco Laboratories authorizing Prasco to provide sales support and distribution services to Winthrop U.S. for Winthrop U.S.’s authorized generic of Allegra-D® 12 Hour under the Winthrop label. However, Allegra-D® 24 Hour, extended-release tablets have no generic competition.
On December 21, 2009, sanofi-aventis announced that it will seek to convert Allegra® (fexofenadine HCl) in the United States from a prescription medicine to an over-the-counter (OTC) product.antacid that helps relieve heartburn and acid indigestion.
Allegra
Nasacort®AQ Spray (NAQ) (triamcinolone acetonide) is an unscented, water-based metered-dose pump spray formulation unit containing a microcrystalline suspension of triamcinolone acetonideBMP Sunstone products in an aqueous medium that was launchedChina, including the leading pediatric cough and cold brand Haowawa®.
The top three countries contributing to Nasacort® AQ Sprayour CHC sales in 20092012 were the United States, France, and Turkey.Russia.
Generics
In settlement2012, sales of patent litigation, Barr has been granted a license to sell athe generics business reached €1,844 million, an increase of 5.0%. Performance was impacted by lower sales of the authorized generic triamcinolone acetonideof Lovenox® in the United States as early as 2011. See Note D.22.b)U.S. 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 our consolidated financial statements included at Item 18 of this annual report.acquire Genfar S.A., a leading pharmaceuticals manufacturer headquartered in
Xatral®/Uroxatral®
Xatral® (alfuzosin hydrochloride) belongs toBogota, Colombia, and a major player in Colombia and the class of alpha1-blockers. Capable of acting selectively on the lower urinary tract, it was the first alpha1-blocker indicated and marketed exclusively for the treatment of symptoms of benign prostatic hyperplasia (“BPH”). It is also the only alpha1-blocker indicated as an adjunctive therapy with catheterization for acute urinary retention, a painful and distressing complication of BPH. Since 2003, Xatral® has obtained authorizations of this extensionother countries in Latin America. The closing of the indication in 56 countries worldwide including 16 European countries.
Xatral® OD (extended release formulation)transaction is active from the first dose, provides a rapidsubject to certain conditions precedent and lasting symptom relief and improves patient quality of life. Xatral® is the only alpha1-blocker showing no deleterious effect on ejaculation, as shown by the final results of the international ALF-LIFE trial. The once-daily formulation of Xatral® (branded Uroxatral® in the United States) has been registered in over 90 countries and is marketed worldwide, with the exception of Australia and Japan. The top three countries contributing to sales of Xatral® in 2009 are the United States, Italy and France. Generic alfuzosin became available in most European countries in 2009.
Actonel®/Optinate®/Acrel®
Actonel® (risedronate sodium) belongs to the bisphosphonate class that helps to prevent osteoporotic fractures.
Actonel® is the only osteoporosis treatment that reduces the risk of both vertebral and non-vertebral fractures in as little as six months. Actonel® also provides reduced risk of fracture at all key osteoporotic sites: vertebral, hip and non-vertebral sites, studied as a composite end point (hip, wrist, humerus, clavicle, leg and pelvis).
Actonel® is available in various dosage strengths and combination forms to better suit patients’ needs. According to dosage form, Actonel® is indicated for the treatment of post-menopausal osteoporosis, osteoporosis in men, or Paget’s disease.
Actonel® is marketed in more than 75 countries through an alliance with Warner Chilcott (see “— Alliance with Warner Chilcott” below). In Japan, Actonel® is marketed by Eisai.
The top four countries contributing to Actonel® sales in 2009 are the United States, Canada, Spain and France.
Alliance with Warner Chilcott
We originally in-licensed Actonel® from Procter & Gamble (“P&G”) and entered into an alliance agreement with P&G in April 1997 for the co-development and marketing of Actonel®. The 1997 agreements were amended following the acquisition of Aventis by sanofi-aventis, and later with respect to the marketing rights for Actonel® in certain countries in Europe.
The alliance agreement includes the development and marketing arrangements for Actonel® worldwide (except Japan). The ongoing R&D costs for the product are shared equally between the parties, while the marketing arrangements vary depending on the country in which the product is marketed.
On October 30, 2009, P&G sold its pharmaceutical business to Warner Chilcott (“WCRX”), which became the successor in rights and interests to P&G for the Actonel® alliance.
Under the alliance arrangements with WCRX, there are five principal territories with different marketing arrangements:
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The financial impact of our principal alliances on our financial condition or income is significant and is described under “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances”. See “Item 3.D. Risk factors — We rely on third parties for the marketing of some of our products” for more information relating to risk in connection with our alliance agreements.
The main compounds currently in Phase II or III clinical development in the Internal Medicine field are:
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A collaboration agreement and an option for a license have been signed with Alopexx for the development of a first-in-class human monoclonal antibody for the prevention and treatment ofS. aureus, S. epidermidis, E. coli, Y. pestis (the bacterium that causes plague) and other serious infections; and
Kyowa Hakko Kirin and sanofi-aventis have signed a collaboration and licensing agreement for the development of an anti-LIGHT fully human monoclonal antibody which is expected to be the first-in-classoccur in the treatmentfirst quarter of Ulcerative Colitis and Crohn’s disease.
2013.
Ophthalmology
Sanofi-aventis acquired the French company Fovea in October 2009. Products in the pipeline include a Phase II eye-drop combination of prednisolone and cyclosporine for allergic conjunctivitis.
Oxford BioMedica has entered into a new collaboration with sanofi-aventis to develop novel gene-based medicines, utilizing LentiVector® gene delivery technology, for the treatment of ocular disease. The new agreement covers four Lentivector-based product candidates for different ophthalmologic indications such as wet age-related macular degeneration, Stargardt disease, Usher syndrome and corneal graft rejection.
Consumer Health Care (“CHC”)
Consumer Health Care is a core growth platform identified in sanofi-aventis’ broader strategy for achieving sustainable growth. In 2009, the Group recorded CHC2012, Sanofi sales of €1,430 million. We make nearly half of our CHC salesgeneric products in emerging markets.
Organic growth was supported by the solid performance of our eight flagship brands (Doliprane®, Essentiale®, NoSpa®, Enterogermina®, Lactacyd®, Maalox®, Magne B6® and Dorflex®). Our 2009 portfolio focused on over-the-counter (“OTC”) brands that have a strong presence in gastro-intestinal, analgesics and respiratory areas.
Following the acquisition of Symbion in 2008, we conducted several additional acquisitions in 2009 that give the Group access to new market segments (such as beauty food supplements and a broad range of consumer health care products), to strengthen our presence in the U.S. consumer healthcare market, which we estimate to represent 25% of the current worldwide market, in terms of sales, and to enter the largest consumer healthcare segment in China (vitamins and mineral supplements):
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Generics
Sanofi-aventis recorded €1,012 million of Generics sales in 2009 fueled by organic growth and acquisitions.Emerging Markets exceeded €1 billion. See “Item 5 — Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2009 Compared with Year Ended December 31, 2008 — Net Sales by Product — Pharmaceuticals”.
The following recent acquisitions have increased our portfolio of branded generics in emerging markets. In addition to their positions on new market segments, these acquisitions give sanofi-aventis access to new molecules in their respective countries:
In March 2009 sanofi-aventis acquired Zentiva through a voluntary public offer. Zentiva has leading positions in the pharmaceutical markets in the Czech Republic, Slovakia, Romania, and Turkey, and is growing rapidly in Poland, Russia, Bulgaria, Hungary, Ukraine and the Baltic States;
In March 2009, sanofi-aventis acquired Kendrick. Kendrick’s portfolio incorporates active ingredients in the following therapeutic areas: analgesics, anti-histamines, anti-infectives, anti-rheumatics, cardiovascular and central nervous system drugs; and
In April 2009, we acquired Medley in Brazil. Medley has a large generic portfolio.
We are already active in the generic drugs market through the Winthrop® brands, which combine the generic promotion of our own mature molecules with a broad-based portfolio of generic molecules originating from other laboratories.
Vaccines Products
Sanofi Pasteur is a fully integrated vaccines division offering the broadest range of vaccines in the industry (Source: based on internal estimates). In 2009, sanofi pasteur immunized over 500 million people against 20 serious diseases and generated net sales of €3,483 million. Sales were favorably impacted by the strong growth in markets outside of North America and Europe, the continued uptake of Pentacel® sales following its launch in the United States in 2008, the A(H1N1) pandemic influenza sales, the continued growth of Pentaxim® sales in the international region, and the successful seasonal influenza vaccine campaigns. See “Item"Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31 2009st, 2012 Compared with Year Ended December 31 2008st, 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.
Vaccine Products
Sanofi Pasteur is a fully integrated vaccines division offering a broad range of vaccines. In 2012, Sanofi Pasteur provided more than 1 billion doses of vaccine, making it possible to immunize more than 500 million people across the globe against 20 serious diseases, and generated net sales of €3,897 million. Sales were favorably impacted by strong growth in markets outside North America and Europe, including sales of the IPV (inactivated polio vaccine) Imovax® Polio in Japan, continued growth of Pentaxim® sales and successful seasonal influenza vaccine campaigns in both the Northern and Southern hemispheres. See "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2012 Compared with Year Ended December 31, 2011 — Net Sales — Human Vaccines (Vaccines).” segment."
Sanofi Pasteur is a world leader in the vaccine industry in terms of sales. In the United States, and Canada, sanofi pasteurSanofi Pasteur is the market leader in the segments where we compete (source: based on internal estimates).
In Europe, ourSanofi Pasteur vaccine products are developed and marketed by Sanofi Pasteur MSD, a joint venture created in 1994 and held equally by sanofi pasteurSanofi Pasteur and Merck & Co. Inc., which serves 19 countries. Sanofi Pasteur MSD isalso distributes such Merck & Co. vaccine products as Gardasil® and Zostavax®, in the market leader in Europe overall and particularly in France.joint venture's geographic scope. In 2009,2012, Sanofi Pasteur MSD net sales, which are accounted for using the equity method, amounted to €1,132€845 million.
Sanofi Pasteur has established a leading position in the developing world (based on internal estimates). It has been expanding in Asia particularly in China(China, India and India, inJapan), Latin America particularly in Mexico(Mexico and Brazil, inBrazil), Africa, in the Middle-East and in Eastern Europe, andEurope. Sanofi Pasteur is very active in publicly-funded international markets such as UNICEF and the Global Alliance for Vaccines and Immunisation.Immunization (GAVI).
See "— Vaccines Research and Development" below for a presentation of the Sanofi Pasteur R&D portfolio.
In August 2009, sanofi pasteur acquired a majority stake in Shantha, a vaccine company based in Hyderabad, India. Shantha develops, manufactures and markets several important vaccines such as SHAN5™ or SHANVAC-B™. It operates to international standards in a state-of-the-art facility. See Note D.1. to our consolidated financial statements included at Item 18 of this annual report.
The table below detailsshows net sales of vaccines by product range:
(€ million) | Net Sales | ||||||
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Polio/Pertussis/Hib Vaccines | 1,184 | ||||||
Influenza Vaccines * | 884 | ||||||
Meningitis/Pneumonia Vaccines | 650 | ||||||
Adult Booster Vaccines | 496 | ||||||
Travel and Other Endemics Vaccines | 364 | ||||||
Other Vaccines | 319 | ||||||
Total Human Vaccines | |||||||
Pediatric, Combination and Poliomyelitis (Polio) Vaccines
These vaccines vary in composition due to diverse immunization schedules throughout the world. This group
Sanofi Pasteur is one of products — which protectthe key players in pediatric vaccines in both emerging and mature markets with a broad portfolio of standalone and combination vaccines protecting against up to fivesix diseases in a single injection — is anchored by acellular pertussis components.
injection.
Daptacel® Pentacel®, a trivalent vaccine protecting against pertussis,five diseases (pertussis, diphtheria, tetanus, polio and tetanus,Haemophilus influenzae type b), was launched in the United States in 2002 and2008.
Pediacel®, a fully liquid pentavalent vaccine, has become a strong sales contributor due to its adaptation to immunization schedules. Daptacel® is now licensedbeen the standard of care in the United StatesKingdom since 2004 for the entire immunization series to protectprotecting against diphtheria, tetanus, and pertussis enabling health care professionals to administer the same brand(whooping cough), polio andHaemophilus influenzae type b infections. As of DTaP vaccines.December 31, 2011, Pediacel® was approved in 29 countries across Europe in a new syringe presentation.
Pentaxim®, a combination vaccine protecting against diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b, was first marketed in 1997 and was launched in China in May 2011. To date, more than 150 million doses of Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the national immunization programs in more than 23 countries.
Act-HIB® Act-HIB®, for the prevention ofHaemophilus influenzaetype b (“Hib”)(Hib) infections, is also an important growth driver within the pediatric product line. In 2008, Act-HIB®Act-HIB® became the first Hib vaccine to be approved in Japan. In
Hexaxim® is the United States, sanofi pasteur successfully improved its market supplyonly fully liquid, ready to respond to a competitor’s supply shortage.
Pentacel®, ause 6-in-1 (hexavalent) pediatric vaccine protectingproviding protection against five diseases (pertussis, diphtheria, tetanus, pertussis, polio, andHaemophilus influenzaetype b)b infections 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 for the 6 in 1 pediatric vaccine. This innovative vacine will be commercialized under the brand name Hexyon™ in Western Europe by Sanofi Pasteur MSD, and under the brand name Hexacima™ in Eastern Europe by Sanofi Pasteur.
PR5I is a combination vaccine designed to help protect against six diseases: diphtheria, tetanus, pertussis, polio (poliovirus type 1, 2 and 3), was launchedinvasive disease caused byHaemophilus influenzae type b, and hepatitis B. This product is jointly being developed between Sanofi Pasteur and Merck in the United StatesU.S. and Europe. Phase III studies in 2008the U.S. and has been approvedEurope began in ten countries.April 2011.
Pediacel®, another acellular pertussis-based pentavalent vaccine, was launched in the United Kingdom in 2004 and licensed in the Netherlands and Portugal in 2005.
Sanofi Pasteur is one of the world’sworld's leading developers and manufacturers of polio vaccines, in both in oral (“OPV”)(OPV) and enhanced injectable (“eIPV”).(eIPV) form. The worldwide polio eradication initiative led by the World Health Organization (WHO) and UNICEF has positioned sanofi pasteurSanofi Pasteur as a global preferred partner with both OPV and eIPV vaccines.
In 2005, sanofi pasteur developedSanofi Pasteur is also supporting the first newintroduction of eIPV internationally. With recent progress towards polio vaccineeradication in nearly 30 years for usecountries such as Brazil and Japan in eradication, the Monovalent Oral Polio Vaccine-type 1. This product is still being used as part of the WHO strategy to end polio transmission in endemic countries. In 2007, Pentaxim®, an acelluar-based pentavalent vaccine containing eIPV, was launched in the international region including Mexico and Turkey. Mexico is the first Latin American country to integrate eIPV in its pediatric immunization schedule. We expect2012, Sanofi Pasteur expects the use of eIPV to gradually increase given that the global eradication of polio is within reach, with only four countries in the world remaining polio-endemic.increase. As a result, sanofi pasteurSanofi Pasteur is expanding its production capacity to meet thisthe growing demand. In 2008, an eIPV was launched
Shantha Biotechnics (Shantha) in Russia following the decision by the Russian authorities to choose the inactivated polio vaccine from sanofi pasteur for the primary immunizationIndia is currently pursuing requalification of all infants. eIPV is regarded as the vaccine of choice for post-eradication polio immunization programs in the Russian Federation. Pentaxim® was launched in 2009 in South Africa.
SHAN5™Shan5®, which is a combination vaccine protecting against five diseases (diphteria,diphtheria, tetanus, pertussis, tetanus,hepatitis B andhaemophilusHaemophilus influenzae type b, and hepatitis B), was developed bywith the WHO. Shantha and is prequalified byhas worked closely with Sanofi Pasteur to improve key manufacturing steps in the production of the antigen components of the vaccine. The path back to obtaining prequalification status has been discussed extensively with the WHO for supplyingand local Indian regulators. Based on the successful completion of clinical studies, Shan5® is expected to United Nations agencies globally.regain WHO prequalification in 2014.
Influenza Vaccines
Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines. Sales of the influenza vaccines Fluzone®Fluzone® and Vaxigrip®Vaxigrip®/Mutagrip®Mutagrip® have more than tripled since 1995 and annual supply reached more than 180200 million doses in 20092012 to better meet increasing demand. We expect 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 an increased disease awareness, as a result of the A(H1N1) influenza pandemic,growth in emerging markets and wider government immunization recommendations.
In recent years, influenza vaccine demand has experienced strong growth in many countries, particularly in China, South Korea, Brazil and Mexico. This trend is expected to continue over the coming years. Sanofi Pasteur will remainremains focused on maintaining its leadership in the influenza market and on meeting the increasing demand for both pandemic and seasonal vaccines. In November 2007, sanofi pasteur signed an agreement with the Chinese authorities to build an influenza vaccine facility in Shenzhen (Guangdong Province) with the goal of producing influenza vaccines forthrough the Chinese market by 2012. The cornerstonelaunch of this new facility was laidinnovative vaccines.
In 2012, Sanofi Pasteur expanded its launch of Fluzone® ID in October 2008. In November 2008, sanofi pasteur signed an agreement with Birmex and the Mexican Health Authorities for a project to build a new influenza vaccine facilityU.S. in Ocoyoacac. Construction began in 2009.
On February 26, 2009, the European Commission granted marketing authorization for sanofi pasteur’s INTANZA®/IDflu®, the first intradermal (“ID”) microinjection influenza vaccine.adults. The advantages of this vaccine are particularly its convenience and its ease of administration, should help improve the coverage rate in Europe. This new vaccine for seasonal influenza will be marketed as Intanza® or IDflu®. Intanza®administration. Fluzone ID® and Intanza®/IDflu® vaccine isIDflu® vaccines are now approved in the United States, European Union, Canada, Australia and other countries for the prevention of seasonal influenza in both adult (agesadults from 18 and over) and the elderly (ages 60 and over) populations.
In December 2009, the FDA approved sanofi pasteur’s supplemental Biologics License Application (sBLA) for licensure of Fluzone® High-Dose (Influenza Virus Vaccine). This new vaccine, for adults 65to 64 years of age and older, will be available to health-care providers for administration duringage.
Fluzone® High-Dose vaccine, launched in the third quarter ofUnited States in 2010, in preparation for the 2010-2011 influenza season. The Fluzone® High-Dose vaccine 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®Fluzone® High-Dose product.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 September 2009, the FDA approvedrecent past, there have been a number of mismatches of the company’sB strain component in the trivalent vaccine compared 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) with the FDA for licensure of its Influenza A(H1N1) 2009 Monovalent Vaccine, markingFluzone® QIV in October 2012. The sBLA file has been accepted by the FDA for full review, and an important milestoneaction date is anticipated in the pandemic fight. The U.S. licensed vaccine is an inactivated influenza virus vaccine indicated for active immunizationsecond quarter of adults and children six months of age and older against influenza caused by the A(H1N1) 2009 virus. Sanofi Pasteur provides the only influenza vaccine licensed in the United States for populations as young as six months of age.2013.
In 2009, sanofi pasteur received A(H1N1) orders from the U.S. Department of Health and Human Services (“HHS”), totaling 87 million doses. We began shipping the first doses of vaccine to the U.S. government (“HHS”) on September 29, 2009.
In November 2009, Panenza® (our non-adjuvanted vaccine) was registered by theAgence Française de Sécurité Sanitaire des Produits de Santé. The vaccine was made available to the French authorities, and vaccination began in France in November 2009. Panenza® is also registered in Spain, Luxemburg, Germany, Brazil, Hong Kong, Slovakia, Thailand, Tunisia and Turkey. Sanofi Pasteur submitted the final registration file for our adjuvanted vaccine (Humenza™) to the EMA in January 2010; following the positive opinion from the CHMP, we expect regulatory approval during the first half of 2010.
Adult and Adolescent Boosters
The incidence of pertussisPertussis (whooping cough) is on the rise globally, affectingaffects children, adolescents and adults (Source: WHO publication WER 2005). Its resurgence,adults. Resurgence, in particular in the U.S. and other parts of the world, combined with an increased awareness of the dangers of vaccine-preventable diseases in general, has led to higher sales of this product group in recent years. Adacel®
Adacel®, the first trivalent adolescent and adult booster against diphtheria, tetanus and pertussis, was licensed and launched in the United States in 2005. Adacel® has since 2004, been the standard of care in Canada where most provinces provide routine adolescent immunization. This productvaccine plays an important role in efforts to better
control pertussis, not only by preventing the disease in adolescents and adults, but alsoand by breaking the cycle of transmission amongto infants too young to be immunized or only partially vaccinated. Adacel®Adacel® is now registered in more than 50 countries.
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.
Meningitis and pneumonia vaccines
Sanofi Pasteur is at the forefront of the development of vaccines to prevent bacterial meningitis. In 2005, Sanofi Pasteur introduced Menactra®Menactra®, the first conjugate quadrivalent vaccine against meningococcal meningitis, arguablyconsidered by many as the deadliest form of meningitis in the world. In 2009, sales of Menactra® continued to grow in the United States following the implementation of the recommendations of the Advisory Committee on Immunization Practices (“ACIP”) for routine vaccination of pre-adolescents (11-12 years old), adolescents at high school entry (15 years old) and college freshmen living in dormitories. In October 2007,By April 2011, the FDA had granted sanofi pasteur licensureSanofi Pasteur a license to expand the indication of Menactra®Menactra® to children two years through 10 yearsas young as 9 months of age. Menactra®Menactra® is now indicated for people ages 2-55aged 9 months through 55 years in the United States, Canada, Saudi Arabia and numerous other countries in Canada. Additional submission for infants aged 9-12 months is expected inLatin America, the United States in 2010. Sanofi Pasteur has also begun launching Menactra® in other countries. Use of meningococcal meningitis vaccines is expected to grow significantly through anticipated future use in multiple segments of the population.Middle East and Asia Pacific regions.
For over 30 years, sanofi pasteur has supplied vaccines againstMeningitis 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 C meningococcal meningitis used to combat annual epidemics occurringindicated that the product is sufficiently immunogenic for further development in Sub-Saharan countries (African meningitis belt).infants.
Travel and EndemicEndemics Vaccines
Sanofi Pasteur’s Travel/Endemic vaccines provide the widestPasteur provides a wide range of travelertravel and endemic vaccines in the industry, and includeincluding hepatitis A, typhoid, rabies, yellow fever, cholera measles, mumps, rubella (“MMR”)vaccines and anti-venoms. These vaccines are used in the endemic settings in the developing
world and are the basis for important partnerships with governments and organizations such as UNICEF. These vaccinesThey are also used by the military and travelers to endemic areas. As the global market leader in the majority of these vaccine markets, (source: based on our own estimates), sanofi pasteur’sSanofi Pasteur's Travel/EndemicEndemics activity has demonstrated stable growth.
In July 2009, sanofi pasteur submitted Imojev™IMOJEV™, a live attenuated vaccine that confers high level protection against Japanese encephalitis vaccine, is also in just one dose,development. The Australian healthcare authorities granted approval of the latest variations of the IMOJEV™ file on September 24, 2012 for regulatory approvalindividuals aged 12 months and over, followed by the Thai Food and Drug Administration on November 14, 2012. IMOJEV™ has now been launched in Thailand and Australia. Approval is targeted for 2010.these two countries.
A new generation Vero serum-free vaccine (VerorabVax™) will provide a worldwide, single rabies vaccine as a replacement to our current rabies vaccine offerings. Results from 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.
In December 2009, Shantha launched ShanCholTM, India’sIndia'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 vaccinesProducts
ACAM2000Sanofi Pasteur acquired Topaz Pharmaceuticals in October 2011. The integration of Topaz was completed in 2012. The FDA licensed in August 2007Sklice® (ivermectin) lotion, 0.5%, on February 7, 2012 as a live, attenuated vaccine against smallpox that is manufactured using modern cell culture technologies. Its aim is to be used to guard against bioterrorism. In this regard, a warm-based manufacturing contract was entered into with the U.S. governmentone-time treatment for head lice in April 2008persons aged 6 months and older, and commercial launch commenced in order to develop a vaccine stockpile.
In December 2008, sanofi pasteur received approval to market its smallpox VV Lister/CEP vaccine in the United Kingdom.
July 2012.
Animal Health: Merial
Our animal health activity is carried out through Merial, is one of the world’sworld's leading animal healthcare companies (source: Vetnosis), dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers and pet owners (Source: Vetnosis September 2009).owners. It provides a comprehensive range of products to enhance the health, well-being and performance of a wide range of production and companion animals. Its net sales for 20092012 amounted to U.S.$2,554€2,179 million.
Merial was previously a joint-venture in which sanofi-aventis and Merck each held 50%. In September 2009, sanofi-aventis acquired from Merck its 50% stake in Merial and became the 100% owner of this business. On March 8, 2010, sanofi-aventis exercised its contractual right to combine the Intervet/Schering-
Plough Animal Health business with Merial to form anSanofi's dedicated animal health division following the joint venture that would be equally ownedstatement issued by the new Merck and sanofi-aventis. In additionSanofi in March 2011 announcing the end of their agreement to the execution of final agreements, formation of thecreate a new animal health joint venture remains subject to approval by the relevant competition authorities and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial” and Notes D.1 and D.8.1combining 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).report.
The animal healthcarehealth product range comprises four major segments: parasiticides, anti-infectious drugs, other pharmaceutical products (such as anti-inflammatory agents, anti-ulcerous agents, etc.) and vaccines. Merial’sMerial's top-selling products include Frontline®Frontline®, a topical anti-parasitic flea and tick brand for dogs and cats, as well as Ivomec®the highest selling veterinary product in the world (source: Vetnosis); Heartgard®, a parasiticide for control of heartworm in companion animals; Ivomec®, a parasiticide for the control of internal and external parasites in livestock, Heartgard®livestock; Vaxxitek®, a parasiticidehigh-technology vector vaccine, protects chickens against infectious bursal disease (IBD) and Marek's disease; Previcox®, a highly selective anti-inflammatory/COX-2 inhibitor for relief of pain and control of heartworminflammation in companion animals, and Eprinex®dogs; Eprinex®, a parasiticide for use in cattle.cattle; and Circovac® a PCV2 (porcine circovirus type 2) vaccine for swine. Merial plays a key role in the veterinary public health activities of governments around the world. It is the world leader in vaccines for Foot-and-Mouth disease (FMD), rabies, and bluetongue (BTV) (source: Vetnosis).
In 2009, theThe compound patent protecting fipronil, the active ingredient of Frontline®Frontline®, expired in 2009 in Japan and in some European countries, including France, Germany, Italy, and the United Kingdom. However fipronil still enjoys compound patent protectionKingdom, and in August 2010 in the United States until August 2010.States. In those markets where the fipronil compound patent has expired, Frontline®Frontline® products are generally still protected through formulation patents (directed to combinations, methods of use and the like)combinations) which expire at the latest in 2017.
2017 in Europe (August 2016 in the United States). Frontline® is also protected by a method of use patent in the United States and the European Patent area (Germany, France, Italy and the United Kingdom), expiring March 2018. As for human
pharmaceutical products, patent protection for animal pharmaceutical products extends in most cases for 20 years from the filing date of the priority application.
ForAs regards regulatory exclusivity, the position of veterinary medicinal products in Europe is similar to that of human pharmaceutical products, there is anproducts: eight-year data exclusivity and a 10-year marketing exclusivity for veterinary medicinal products.ten-year market exclusivity. In the United States, there is a 10-yearten-year data exclusivity for products approved by the Environmental Protection Agency and an additional 5five years during which a generic applicant has to compensate the originator if it cites itsthe originator's data. For FDA approved veterinary medicinal products, a regulatory exclusivity period of 5five years is granted for a new chemical entity and 3three years for a previously approvedpreviously-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.
Merial’s 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 regulatory approval and is expected to finalize sometime in the first half of 2013.
The 2012 performance of the companion animals franchise was driven by the growth of pet vaccines worldwide and by 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, Brazil, Australia, Germany, Japan, Germany, 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 1617 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 5,600 employees worldwide.6,060 people worldwide (see Item 4D "Property, Plant & Equipment").
Global Research & Development
In December 2009, Merial acquired selected assets in the Netherlands from Lelystad BV that will further strengthen its leadership in Foot & Mouth Disease (FMD) vaccines.
In 2009, Merial sales remained stable despite the general economic slowdown and the decreased concern about the Blue Tongue disease which had driven partThe mission of Merial’s growth in the previous year. In this context, Merial enjoyed continued growth of its vaccines portfolio due to the success of its innovative avian and swine vaccines and to the continued expansion of its vaccines for pet franchise.
PharmaceuticalSanofi's Global Research & Development (“organization is to discover and develop therapies that prevent, treat and cure diseases. Our day-to-day commitment is to respond to patients' real needs and to provide them with adapted therapeutic solutions in order to improve their well-being and extend their life.
To meet these challenges, R&D”)&D has evolved towards an integrated organization, encompassing a wide range of therapeutic areas that represent a large and growing burden on populations and healthcare systems, in line with trends and the most pressing health needs.
These include:
To carry out our mission, meet these challenges and maximize our impact we are striving to bring innovation to patients and to build a pipeline of high value projects.
Medical value, scientific quality and operational effectiveness are the three drivers that underpin our strategy. We focus on projects that have the potential to provide the best medical value differential to patients and payers and to reduce healthcare costs for society.
By using a translational medicine approach, ensuring that research hypotheses are validated in humans as early as possible, we can translate basic research findings into medical practice more quickly and efficiently and improve the scientific quality of our projects. The open innovation and large collaboration processes applied worldwide helped us to deliver the best and most innovative solutions for patients. By implementing new operating models to ensure optimal progress on our projects, especially during clinical development phases, we will improve our operational effectiveness and deliver the right therapeutic solutions to patients more quickly.
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.
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.
Since We are creating geographically-focused integrated research innovation centers also called "hubs" in four areas: North America, Germany, France and Asia. In the startBoston area (United States), which has a high concentration of 2009, sanofi-aventisuniversities and innovative biotechnology companies, our R&D has been engaged in a wide-ranging transformation program designedreorganized to overcomesupport the challenges facingincreasing presence of the pharmaceutical industry.Group.
Our R&D is now organized to promote the first prioritybest use of this program. The rapid developments inour resources within the scientific environment, which are bringing about a veritable revolution in biopharmaceutical research, especially in biology, have generated profound and continuous change in the pharmaceutical environment. To anticipate the consequences of these changes and to maintain its innovative capacities, sanofi-aventis intends to set in place the most effective R&D organization in the pharmaceutical industry by 2013. The new R&D approach aims to foster greater creativity and innovation, while remaining fully focused on patient needs. Streamlined organizational structures are designed to make R&D more flexible and entrepreneurial and hence better adapted to overcome future challenges.
Organization
The resulting structure is focused on addressing patient needs, and not on therapeutic indicationsper se.
The new R&Dlocal ecosystem. Our network-based organization is composedopen to external opportunities, and enables us to more effectively capitalize on innovation from a wide range of three different types of units:sources.
Entrepreneurial Units: Divisions, Therapeutic Strategic Units (“TSU”) and Distinct Project Units (“DPU”) focused on patient needs and driving value in collaboration with the external academic and biotech communities. Two global divisions have been created — Diabetes and Oncology — to further strengthen the Group’s position in these two areas. Five TSUs have been formed with a focus on major pathophysiologies, pressing public health needs (aging) or major geographic areas (Asia Pacific); DPUs have been created to drive projects outside the areas covered by the Divisions and TSUs. In addition, an exploratory unit will deliver early innovation, exploring and incubating new ideas, new technologies and new methodology.
Five Scientific core platforms provide expert scientific support throughout the organization and operate as internal state-of-the-art service providers to the Entrepreneurial Units.
Enabling and Support functions are being realigned to support the new structure and governance arrangements.
This new model will foster a strategy of openness with closer cooperation between sanofi-aventis researchers and external partners, and a more reactive and flexible organization that promotes the emergence of innovation and the grouping of researchers in stronger centers of expertise (oncology, diabetes, aging, etc…). Implementation of this new structure is ongoing.
In line with this approach, a number of alliances and acquisitions were entered into during 2009 with companies including Bipar, Merrimack, Wellstat and Exelixis. See Note D.1. to our consolidated financial statements included at Item 18 of this annual report.
Portfolio
During 2009,As in 2011, R&D undertookagain conducted a rigorous and comprehensive portfolio review. The projectsProjects were assessed using sixtwo key criteria. These criteria which allow management to rapidly understand how the portfolio performs in terms of innovation, unmet medical needs, risk and value. They can be summarized as follows:The two key criteria include:
Science: level of innovation, level of safety, quality and reliability
Execution: likelihood of developmentunmet need, the market dynamics and manufacturing success;
Market: existence of a market, positioning within this market and place of sanofi-aventis;
Reimbursement:the likelihood of achieving the desired price and reimbursement based on Health Authoritiesthe health authorities' positioning and sanofi-aventis competencies;
Regulatory / Legal: dealing with the environment around the project, patent status, regulatory guidelines; and
Financials: predicted return on investment for the project.
A “Portfolio management group” has been created in order to manage data and processes on a continuous basis. A complete R&D pipeline review will be conducted regularly.
At the end of 2009, the currentThe clinical portfolio as of the date of filing of this annual report is the result of a number of decisions taken during these reviews, plus compounds entering the portfolio from the discovery phase or from third parties throughvia acquisition, collaboration or partnership.
As described at "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — We may fail to adequately renew our product portfolio whether through our own research and development or through acquisitions and strategic alliances." our product development efforts are subject to the risks and uncertainties inherent in any new product development program.
The clinical portfolio for new medical entities can be summarized as follows:
Phase I | Phase II | Phase III /registration | ||||||
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Diabetes Solutions | lixisenatide(AVE0010) | |||||||
Cardiovascular diseases | SAR164653 | SAR236553 | ||||||
|
| |||||||
| ||||||||
Oncology |
| SAR245408 |
| |||||
| SAR245409 | SAR302503 | ||||||
SAR260301 | SAR256212 | |||||||
SAR307746 | SAR3419 | |||||||
GZ402674 | ||||||||
SAR405838 | ||||||||
SAR566658 | ||||||||
SAR650984 | ||||||||
SAR100842 | SAR156597 | alemtuzumab | ||||||
(including MS) | SAR113244 | SAR339658 | teriflunomide | |||||
SAR252067 | dupilumab | sarilumab(SAR153191) | ||||||
Age related degenerative | SAR228810 | SAR110894 | ||||||
diseases | SAR391786 | SAR113945 | ||||||
SAR399063 | SAR292833 | |||||||
SAR404460 | ||||||||
Infectious Diseases |
|
| ||||||
|
| |||||||
|
|
|
| |||||
SAR97276 | ||||||||
|
| |||||||
Rare Diseases |
| eliglustat tartrate | ||||||
GZ402671 | ||||||||
|
| |||||||
Ophtalmology | GZ402663 | FOV1101 | ||||||
StarGen™ | ||||||||
UhsStat™ | ||||||||
RetinoStat® | ||||||||
Phase I studies are the first studies performed in humans, in healthy volunteers. Their main objective is to assess the tolerability, the pharmacokinetic profile (the way the product is distributed and metabolized in the body and the manner by which it is eliminated) and where possible the pharmacodynamic profiles of the new drug (i.e. how the product may react on some receptors).
Phase II studies are early controlled studies in a limited number of patients under closely monitored conditions to show efficacy and short-term safety and to determine the dose and regimen for Phase III studies.
Phase III studies have the primary objective of demonstrating or confirming the therapeutic benefit and the safety of the new drug, in the intended indication and population. They are made to provide an adequate basis for registration.
Our Phase II & III compounds are described in the section "— Pharmaceutical Products — Main changesPharmaceutical Products" above. A table summarizing selected key facts concerning our late stage experimental pharmaceutical products follows, at the end of this section.
The remainder of this section focuses on compounds entering Phase I or in Phase II and also lists projects that were terminated in 2012.
Diabetes/Other Metabolic Disorders portfolio
The network of R&D collaborations with world leading academic institutions was significantly extended in 2012. A collaboration with the Charité in Berlin that began in 2010 was further extended to include Diabetes as an anti-PCSK9 monoclonal antibody, SAR 236553 (fromadditional focus. In addition we entered into a research alliance with the Regeneron alliance) developedHelmholtz Zentrum in Munich, and a new collaboration with the Joslin Diabetes Center (affiliate of Harvard Medical School) was formed to promote the development of new medicines for the treatment of hypercholesterolemiadiabetes and a combination of Lantus with AVE0010 was also evaluated inrelated disorders.
Oncology portfolio
One late Phase project was halted:
AVE5530 in hypercholesterolemia for insufficient benefit forIn 2012, we established further collaborations with other companies, universities and institutes to investigate novel oncology agents with partners including the patient
The following approvals were obtained from the health authorities:
|
|
Main changes in Oncology portfolio
Two fast track designations from the FDA have been granted for compounds currently in Phase III development in oncology:
|
BSI-201 (PARP inhibitor), developed by BiPar Sciences, Inc. (“BiPar”) in the treatment of metastatic triple negative breast cancer (TNBC). BiPar, a privately held US biopharmaceutical company, leader in the emerging field of DNA repair, was acquired by sanofi-aventis in 2009. BSI-201 is a potential therapy designed to inhibit poly (ADP-ribose) polymerase (PARP1), an enzyme involved in DNA (deoxyribonucleic acid) damage repair; BSI-201 is currently being evaluated for its potential to enhance the effect of chemotherapy–induced DNA damage. It is the furthest advanced compound that is in clinical development in TNBC. A US phase III study to confirm Phase II data has been initiated in July 09 and is on going. In December 2009, the FDA
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Late phase projects which were terminated:
|
Phase III study evaluating xaliproden in the prevention of severe peripheral sensory neuropathy induced by oxaliplatin (metastatic colorectal cancer patients) did not attain its primary endpoint; consequently, its development was terminated;
Larotaxel, in pancreatic cancer Phase III was terminated due to lack of sufficient efficacy; and
AVE1642 was stopped due to lack of differentiation versus competitive environment
The following approvals were obtained from the health authorities:
|
|
Main Change in Thrombosis and Cardiovascular portfolio
|
After positive results in Phase II, otamixaban (injectable selective direct inhibitor of coagulation factor Xa) is now starting Phase III in moderate to high risk patients with UA/NSTEMI managed invasively.
Late phase projects which were terminated:
In the light of recent therapeutic advances in the field of thromboembolic events prevention in patients with atrial fibrillation, idrabiotaparinux did not appear able to bring significant improvement in the care of these patients and its development in this indication was discontinued.
SAR407899 (rho-kinase inhibitor, Phase II) in erectile dysfunction was stopped due to lack of efficacy.
Approvals from health authorities
|
|
|
Main Change in Central Nervous System portfolio
Teriflunomide (HMR 1726, orally active dihydroorotate dehydrogenase inhibitor, multiple sclerosis, Phase III). An extensive Phase III monotherapy development program in relapsing forms of multiple
|
Late phase projects which were terminated:
Saredutant, Phase III trial did not give expected results in combination with escitalopram in depression;
Following the interim analysis of the Phase II CONNECT study, development of AVE1625 (CB1 antagonist) for schizophrenia was terminated;
Ataciguat, developed in neuropathic pain was stopped due to lack of efficacy;
Further to the complete response letter issued by the FDA in September 2009, and considering the need for significant further clinical development and market access constraints, the eplivanserin submission dossier in insomnia was withdrawnMassachusetts General Hospital (MGH) in the United States and the Institut Gustave-Roussy (IGR) in Europe;France.
Sanofi — Genzyme early stage portfolio
TSU Aging portfolio
Discovery/development partnerships:
TSU Infectious Diseases portfolio
Main changesOZ439 is a synthetic peroxide antimalarial drug candidate from MMV designed to provide a single dose oral cure in Internal Medecine portfoliohumans. 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.
SAR164877 anti-NGF (first-in-class human monoclonal antibody for the prevention and treatment ofS. aureus, S. epidermidis, E. coli, Y. pestis and other serious infections) — The option to acquire an exclusive worldwide license from Regeneron, evaluatedAlopexx Pharmaceuticals LLC for the development and commercialization of SAR279356 was exercised in October 2010. Following the successful completion of a Phase I study in early 2011, a Phase II PK/PD study was initiated. This study was terminated in 4Q2012 in favor of a revised development plan to include more extensive preclinical credentialing prior to conduct of a future phase II proof of concept study.
The Sanofi Fovea ophthalmology pipelinenow includes four projects in clinical-stage development:
Other Projects portfolio
An anti-IL4 monoclonal antibody (Regeneron alliance) for the treatment of asthmachronic pain in cancer patients has been discontinued in light of our positioning in pain treatment and atopic dermatitis enteredthe priorities for our R&D portfolio.
R&D expenditures for late stage development
Expenditures on research and development amounted to €4,922 million in 2012, of which €4,219 million in the Pharmaceuticals segment, €539 million in 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 I.
Approvals from health authorities:
|
|
Ophthalmology portfolio
Several compounds designed forIII in 2012, we set out below the treatment of eye disease were includeddate at which this compound entered into Phase III development, information concerning any compound patent in the portfolio throughprincipal 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 acquisitiontiming of Fovea and collaboration agreement with Oxford BioMedica (see “— Main Pharmaceutical Products — Internal Medicine — Ophthalmology” above)
Other discovery/ development partnerships
The first resultssuch milestones typically depends on a number of factors outside of our transformationcontrol (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 | ||||||||||
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| (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 | ||||||||||
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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 | ||||||||
In November 2009, the collaboration between sanofi-aventis and Regeneron to discover, develop and commercialize fully human therapeutic monoclonal antibodies, was expanded and extended. The aima combination of lixisenatide / Lantus® is to advance an average of four to five antibodies into clinical development per year.
With respect to the compound patent information set out above, investors should bear the following additional factors in mind.
A strategic research alliance agreement with the California Institute
In February 2009, a partnership with the Salk Institute was set up. Designed as close research collaboration, the “sanofi-aventis Regenerative Medicine Program” at the Salk Institute, will support the institute’s stem cell facility, for up to five years.
Vaccines Research and Development
Our human vaccine research and development (“R&D”)(R&D) remains focused on improving existing vaccines, as well as on the development of new prophylactic vaccines.
Portfolio
The sanofi pasteurSanofi Pasteur R&D portfolio includes 1814 vaccines currently in advanced development as shown in the table below. The portfolio is well balanced with 9 vaccinesincludes five vaccines/antibody products for novel targets and 9nine vaccines which are enhancements of existing vaccine products.
Phase I | Phase |
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2nd generation
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ACAM C. diff*
| Quadracel® DTP (1) IPV vaccine 4-6 years U.S. Dengue*
dengue fever vaccine |
Vaxigrip® QIV IM
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Project highlights
This section focuses on Phase I compounds and novel targets. Other vaccines in Phase II or III are described in the section "— Vaccine Products" above.
Influenza
To sustain our global leadership in the development of influenza vaccine, our R&D efforts are focused on innovative approaches for assessing new formulations and alternatealternative delivery systems. We remain actively engaged in pandemic preparedness activities,systems, as evidenced by our response to the H1N1 pandemic in 2009.
Fluzone® High-Dose IM was licensed in the United States in December 2009. Fluzone® High-Dosewell as quadrivalent flu vaccine was specifically designed to generate a more robust immune response in people 65 years of age and older. This age group which typically shows weaker immune response, has proven to respond better to the Fluzone® High- Dose product. Intanza®/IDflu®, the first influenza vaccine delivered by intradermal (ID) microinjection was granted market authorization by the European Commission in February 2009. A regulatory submission to the FDA for the licensure of Fluzone® ID in the United States is planned for 2010.
Pandemic preparedness activities in 2009 focused both on the H5N1 and H1N1 viral strains. The Emerflu® vaccine was licensed in Australia in March 2009 for the prevention of H5N1 influenza in Australia upon official declaration of a pandemic. Emerflu® is intended to be manufactured and distributed with the identified pandemic strain. The approval of the vaccine by the Australian Therapeutic Goods Administration (“TGA”) was based on clinical trials evaluating the safety and immunogenicity of an H5N1 alum-adjuvanted inactivated influenza vaccine candidate.
Sanofi Pasteur quickly responded to the public health efforts to prevent the circulation of the new influenza A(H1N1) virus that emerged during the spring of 2009. Within four months of receiving the new A(H1N1) seed virus, a non-adjuvanted vaccine was manufactured and tested in clinical trials involving 3,478 adults and 2,474 children. Safety was consistent with the traditional seasonal influenza vaccine and protective anti-body levels were observed across all age groups. Influenza A(H1N1) 2009 Monovalentdevelopment (see "— Vaccine was licensed in the United States in September 2009. PanenzaTM (15mcg dose, non-adjuvanted) was registered by the French regulatory agency on November 16 and has also been registered in Spain, Luxemburg, Germany, Brazil, Hong Kong, Slovakia, Thailand, Tunisia and Turkey. HumenzaTM (3.8 mcg dose, adjuvanted H1N1 vaccine) was evaluated in clinical trials in Europe and shown to be safe and induce robust anti-body responses in adult and children. HumenzaTM has been submitted to the European Commission for approval. Following the positive opinion from the CHMP, we expect regulatory approval during the first half of 2010.Products").
ACAM-FLU-A is a universal influenza vaccine approach based on the M2 antigen which is common to all influenza A viruses. The M2 sequence is highly conserved across human, porcine, and avian viruses. Potential opportunities for this vaccine include use as a pre-pandemic vaccine and as an adjunct to the seasonal vaccine to provide increased seasonal coverage in years where a strain mismatch occurs in the trivalent vaccine. Phase I clinical trials have been completed with ACAM-FLU-A in which the safety and immunogenicity of the vaccine candidate were evaluated. This project was moved back to the pre-clinical stage in 2009 in order to optimize the formulation by using proprietary sanofi pasteur adjuvants.
Pediatric Combination & Adolescent/Adult Booster VaccinesBoosters
Several pediatric vaccines are under development. Tailored for specific markets, they are aimed at protecting against five or all six of the following diseases: diphtheria, tetanus, pertussis, poliomyelitis (polio),Haemophilus influenzae type b infections and hepatitis B.B (see "— Vaccine Products").
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Unifive (DTaP-hep B-Hib) — Sanofi Pasteur has decided to focus on the development of its IPV-containing combination vaccines in light of the large demand increase in IPV vaccines and the Global Polio Eradication Initiative’s plan to ensure IPV vaccination in the post-eradication era. As a result the Unifive project, a non-IPV containing pentavalent vaccine, has been discontinued.
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Meningitis Program
Neisseria meningitidis bacteria is a leading cause of meningitis in the United States, Europe and elsewhere, affecting infants and children as well as adolescents. The primary focus of several ongoing projects related to Menactra®Menactra® is to decrease the age at which onethis vaccine can first receive this vaccine.be administered. (see "— Vaccine Products").
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Meninge A, C, Y, W conj. Second Generation— This project targets the infant primary/booster series schedule for introduction of a second generation meningococcal vaccine that uses an alternative conjugation technology. In 2009, an IND was submitted to the FDA in order to conduct the Phase II clinical trial in the United States. This trial started in December of 2009 and will continue throughout 2010.
Meninge B— The MenB project is aimed at preventing severe disease in infants and young adults. This project is currently in the pre-clinical stage of development.
Pneumococcal Vaccine Program
Streptococcus pneumoniae bacteria is the leading etiological agent causing severe infections such as pneumonia, septicemia, meningitis 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.
Sanofi Pasteur is focused on the development of a protein-basedmulti-protein-based pneumococcal vaccine. This approach should result in a vaccine with superior serotype coverage as compared to current polysaccharide or conjugate based vaccines. In 2009, a regulatory submission was madevaccines and should not induce nor be sensitive to Swissmedic to conductserotype replacement. Results from the first Phase I clinical trial in Switzerland. Thisof a bi-component formulation demonstrated safety and immunogenicity. Results from a second Phase I clinical trial which evaluatesto evaluate a new multi-proteinthird antigen also demonstrated safety and immunogenicity (ability to induce an immune response). A third Phase I clinical trial of a tri-component formulation startedbegan in January 2010September 2011 in adults, adolescents, and will continue throughout 2010.infants in Bangladesh.
Rabies Vaccine
VRVg — The Vero serum-free improvement of our current Verorab® rabies vaccine would provide a worldwide, single rabies vaccine as a follow-up to our current rabies vaccine offerings. In 2009, VRVg entered Phase II clinical trials.
Rabies mAb Post Exposure Prophylaxis— This product consists of two rabies monoclonal antibodies (MABs)(mAbs) that will be used in association with the rabies vaccine for post-exposure prophylaxis. It is beingIn 2011, Sanofi Pasteur reviewed the rabies mAb project, developed in collaborationpartnership with Crucell. The Phase II studyCrucell, acquired by Johnson & Johnson in adolescents2011, has taken over full responsibility for the development of the product and children inSanofi Pasteur will market it, when the Philippines showed that the antibody combination was safe and well tolerated. Additional clinical trials are planned for 2010.vaccine is available.
New Vaccine Targets
Dengue— Dengue fever has increasing epidemiological importance due to global socio-climatic changes. It is a major medical and economic burden in the endemic areas of Asia, Pacific,Asia-Pacific, Latin 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 dengue’s four viral serotypes of dengue fever in order to prevent this disease and its severe complications (hemorrhagic fever). Results of a Phase II clinical trial in adults in the United States demonstrated proof of concept of the lead vaccine candidate that is based on the ChimeriVax™ technology. Sanofi Pasteur has maintained its relationship with the WHO and the Pediatric Dengue Vaccine Initiative, a program of the International Vaccine Institute funded by the Gates Foundation to make dengue a vaccine preventable disease and to accelerate vaccine introduction in pediatric populations where the disease is endemic through disease burden evaluation, vaccine advocacy and vaccine access. Sanofi Pasteur’sPasteur's dengue vaccine research program includes ongoing clinical studies (adults and children) in several countries in endemic regions: Mexico, Colombia, Honduras, Puerto Rico, Peru,regions. The complexity of dengue virus infection has hampered vaccine research for decades and it is the Philippines, Vietnam, Singapore, and Thailand.
IMOJEV™— The ChimeriVax™ technology was further leveraged to developfirst time in 50 years of dengue research that a vaccine for protection against infectionwas seen that protected a large group of children from clinical disease caused by the Japanese Encephalitis Virus (“JEV”). Japanese encephalitis is endemic in Southeast Asia. Replacementdengue viruses. The results of the currently available vaccines withworld's first efficacy study confirmed the single dose product is anticipatedexcellent safety profile of Sanofi Pasteur's dengue vaccine candidate. The full analysis of vaccine efficacy against each serotype, reflecting real-life conditions (intent to provide a strong competitive advantagetreat analysis) showed vaccine efficacy to be 61.2% against dengue virus type 1, 81.9% against type 3 and facilitate expansion90% against type 4. One of vaccination programs. In July 2009, marketing authorization applications were filedthe
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 Thailandseveral Latin American and Australia. Regulatory approval is expected in 2010.South East Asian countries.
West Nile virus — Although the West Nile virus vaccine was safe and immunogenic in Phase II studies, the decision was made in 2009 to place this project on hold due to the current low incidence of the disease.Tuberculosis
Tuberculosis — Statens Serum Institute of Denmark (“SSI”)(SSI) has granted sanofi pasteurSanofi 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®IC31® adjuvant. The candidate vaccine is made up of recombinant protein units. EnrollmentResults from the 2008 Phase I trial found that the H4/IC31 candidate 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 following a single dose of the investigational vaccine. A second Phase I trial was initiated in Switzerland in December 2010. A Phase I/II study will be initiated in the Phase I clinical trial was completedRepublic of South Africa in 2008 and analysis of the clinical samples is ongoing. Additional clinical trials are planned for 2010.infants primed with BCG.
MelanomaHIV — The Phase II clinicalA follow-up study was terminated due to low enrollment and the project was cancelled.
HIV — The Phase III clinical trial in Thailand involving more than 16,000 adult volunteers was completedprovided new clues in 2009. The trial was2011 about the types of immune responses that may have played a collaboration betweenrole in the U.S. Army,protection seen in 2009 with our ALVAC®-HIV vaccine. In 2011, Sanofi Pasteur entered into a public-private partnership with Novartis Vaccines, the National Institute of Allergy and Infectious Diseases ofBill & Melinda Gates Foundation, the U.S. National Institutes of Health (“NIH”)(NIH), the MinistryHIV Vaccine Trial Network, and the Military HIV Research Program to substantiate and extend the vector prime/protein subunit boost regimen used in Thailand. Plans are being made to also study the regimen in the Republic of Public Health of Thailand, sanofi pasteur and VaxGen. The prime-boost combination of ALVAC® HIV (from sanofi pasteur) and AIDSVAX® B/E (from VaxGen) vaccines loweredSouth Africa. This collaboration is expected to further the ratefield of HIV infectionvaccine development by 31.2% compared with placebo. Thissharing resources and by providing the manufacturing component of a partnership of funding agencies, research organizations, governments, and experts in the field of HIV vaccine development. Sanofi Pasteur is also looking at its NYVAC-HIV vaccine replicating vectors and a flavivirus-based viral vector, Replivax, by participating in international consortium and under the first concrete evidence, since the discovery of the HIV virus in 1983, that a vaccine against HIV is potentially feasible. Additional work is required to develop and test a vaccine suitableCollaboration for licensure and worldwide use. Future research will be conducted through public-private partnerships.AIDS Vaccine Discovery (CAVD).
ACAM-Cdiff —Clostridium difficile is a major public health concern in North America and Europe. ItIn hospitals, it is the leading cause in hospitals of infectious diarrhea in adults, particularly the elderly. The epidemiology ofC.Clostridium difficile associated disease (CDAD) has been increasing at an alarminga worrying rate since 2003, driven primarily by the emergence of a treatment resistant,treatment-resistant, highly virulent strain CD027. There is currently no vaccine available and the only vaccine candidate currently in development is ACAM- Cdiff.ACAM-Cdiff. ACAM-Cdiff is a toxoid-based vaccine, based onvaccine. Toxoids have been used as the basis of a formalin-inactivated toxin principle similar to the tetanus and diphtheria toxoids used innumber of highly successful licensed vaccines. This vaccine candidate has successfully completed Phase I clinical trials with more than 200 participants in which safety and immunogenicity were evaluated. Sanofi Pasteur received a positive response from the United States FDA's Center for Biologics Evaluation & Research (CBER) on the Fast Track Development Program submission in 2010. In November 2010, ourClostridium difficile vaccine started Phase II of clinical study in the U.S. This trial is focused on evaluating prevention of the first episode ofClostridium difficile infection (CDI) in at-risk individuals, which includes adults with imminent hospitalization or current or impending residence in a long-term care or rehabilitation facility. Results from the first stage of this study showed the vaccine was safe and immunogenic and provided important information for dose selection. Phase II study results are under review. A multinational Phase III trial is planned to start in the third quarter of 2013.
Pseudomonas aeruginosa — In February 2009,2010, Sanofi Pasteur entered into an agreement with KaloBios Pharmaceuticals, a U.S.-based, privately held biotech company, for the development of a Humaneered™ antibody fragment to both treat and preventPseudomonas aeruginosa (Pa) infections. Most seriousPa infections occur in hospitalized and critically or chronically ill patients — primarily affecting the respiratory system in susceptible individuals — and are a serious clinical problem due to their resistance to antibiotics. The two primary target indications for the antibody are prevention ofPa associated pneumonia in mechanically ventilated patients in hospitals, and prevention of relapses and potential improvement of treatment outcomes in patients with an ongoingPa infection. Under the terms of the agreement, Sanofi Pasteur acquired worldwide rights for all disease indications related toPa infections except cystic fibrosis and bronchiectasis, which Sanofi Pasteur has the option to obtain at a later date. KaloBios has already completed Phase I clinical trials — one in healthy volunteers and one in cystic fibrosis patients — and a small proof of concept Phase II clinical trial in mechanically ventilated patients recently infectedusing anE. coli-derived antibody fragment. A Phase I study in healthy adult volunteers has been initiated in December 2012 withC. difficile started 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 United Kingdom. This trial was expandedpoorer countries of the world, with more than 80% of rotavirus-related deaths estimated 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 December 2009. While the target indication for the vaccine is prevention, this trial — with recently infected patients — aims to provide early proof-of-concept of a vaccine approach for the prevention of recurring infection.Phase I/II (dose finding study).
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:
Patent protection for individual products typically extends for 20 years from the patent filing date in countries where we seek patent protection. A substantial part of the 20-year life span of a patent on a new chemical entity 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 States (a Patent Term Extension or PTE) and Japan (also a PTE). The
Additionally, the product may additionally benefit from the protection of patents obtained during development or after the product’sproduct's initial marketing approval.
The protection a patent affords the related product depends upon the type of patent and its scope of coverage, and may also vary from country to country. In Europe for instance, applications for new patents may be submitted to the European Patent Office (“EPO”)(EPO), an intergovernmental organization which centralizes filing and prosecution. As of December 2009,2012, an EPO patent application may cover the 3638 European Patent Convention member states, including all 27 member states of the European Union. 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 may pre-date the EPEuropean Patent Convention accession of some current EPEuropean Patent Convention member states, resulting in different treatment in those countries. See Note D.22.b) to the consolidated financial statements included in Item 18 of this annual report.
We monitor our competitors and vigorously seek to challenge patent infringement when such challenges would further negatively impact our business objectives. See "Item 8 — A. Consolidated Financial Statements and Other Financial Information — Patents" of this annual report.
The expiration or loss of an active ingredienta compound patent may result in significant competition from generic products and can result in a dramatic reduction in sales of the original branded product. See “Item 3.D."Item 3. Key Information — D. Risk
Factors — Generic versions of some of our productsWe may lose market share to competing remedies or generic brands if they are perceived to be approved for sale in oneequivalent or more of their major markets”superior products". In some cases, it is possible to continue to obtain commercial benefits from product
manufacturing trade secrets or from other types of patents, such as patents on processes, intermediates, structure, formulations, methods of treatment, indications or delivery systems. Certain categories of products, such as traditional vaccines and insulin, have been historically relatively less reliant on patent protection and may in many cases have no patent coverage, although it is increasingly frequent for novel vaccines and insulins to be patent protected. See “—"— Focus on Biologics”Biologics" below.
One Patent protection is also an important factor in our animal health business, but is of the main limitationscomparatively lesser importance to our Consumer Health Care and generics businesses, which rely principally on our operations in some countries outside the United States and Europe is the lack of effective intellectual property protection or enforcement for our products. The World Trade Organization’s (“WTO”) Agreement on Trade-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. 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 (see “Item 3.D. Risk Factors — The globalization of the Group’s business exposes us to increased risks.”). Additionally, in recent years a number of countries faced with health crises have waived or threatened to waive intellectual property protection for specific products, for example through compulsory licensing.trademark protection.
Regulatory Exclusivity
In some markets, including the European Union and the United States, many of our pharmaceutical products may also benefit from multi-year regulatory exclusivity periods, during which a generic competitor may not rely uponon our clinical trial and safety data in its drug application. Exclusivity is meant to encourage investment in research and development by providing innovators the exclusive use for a limited time of the innovation represented by a newly approved drug product. This exclusivity operates independently of patent protection and may protect the product from generic competition even if there is no patent covering the product.
In the United States, the FDA will not grant final marketing approval to a generic competitor for a New Chemical Entity (“NCE”)(NCE) until the expiration of the regulatory exclusivity period (generally 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”)(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 and patent-related exclusivities by a pediatric extension. See “—"— Pediatric Extension”Extension", below).below.
Further, in the United States, a different regulatory exclusivity period applies to biological drugs. The Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), was enacted on March 23, 2010 as part of the much larger health care reform legislation known as the Patient Protection and Affordable Care Act ("PPACA"). The BPCIA introduced an approval pathway for biosimilar products. A biosimilar product is a biologic product that is highly similar to the reference (or innovator) product notwithstanding minor differences in clinically inactive components, and which has no clinically meaningful differences from the reference product in terms of the safety, purity, and potency of the product. The BPCIA provides that an application for a biosimilar product that relies on a reference product may not be submitted to the FDA until four years after the date on which the reference product was first licensed, and that the FDA may not approve a biosimilar application until 12 years after the date on which the reference product was first licensed.
In the European Union, regulatory exclusivity is available in two forms: data exclusivity and marketing exclusivity. Generic drug applications will not be accepted for review until eight years after the first marketing authorization (data exclusivity). This eight-year period is followed by a two-year period during which generics cannot be marketed (marketing exclusivity). The marketing exclusivity period can be extended to three years if, during the first eight-year period, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which are deemed to provide a significant clinical benefit over existing therapies. This is known as the “8+"8+2+1”1" rule. While these exclusivities are intended to be applicable throughout the European Union, in a decentralized system, national authorities may act in ways that are inconsistent with EU regulatory exclusivity. For example, although European marketing exclusivity for clopidogrel expired in July 2008, in May 2008 the German Health authority BfArM had already registered a competitor’s clopidogrel product based on a contested interpretation of the law. Furthermore, in 2006, the Polish and Bulgarian authorities registered generics of clopidogrel bisulfate based on these countries’ contested position that EU marketing exclusivities need not be applied by individual countries where generics had been approved prior to their accession date.
In Japan, the regulatory exclusivity period varies from four years (forfor medicinal products with new indications, formulations, dosages, or compositions with related prescriptions)prescriptions, to six years (forfor new drugs
containing a medicinal composition, or requiring a new route of administration)administration, to eight years (forfor drugs containing a new chemical entity)entity, to ten years (forfor orphan drugs or new drugs requiring pharmaco-epidemiological study).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-
Related Aspects of Intellectual Property Rights (TRIP) has required developing countries to amend their intellectual property laws to provide patent protection for pharmaceutical products since January 1, 2005, although it provides a limited number of developing countries an extension to 2016. Additionally, these same countries frequently do not provide non-patent exclusivity for innovative products. While the situation has gradually improved, the lack of protection for intellectual property rights or the lack of robust enforcement of intellectual property rights poses difficulties in certain countries. Additionally, in recent years a number of countries facing health crises have waived or threatened to waive intellectual property protection for specific products, for example through compulsory licensing of generics. See "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — The globalization of the Group's business exposes us to increased risks."
Pediatric Extension
In the United States and Europe, 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, the FDA may ask a company for pediatric studies if it has determined that information related to the use of the drugs in the pediatric population may produce health benefits. The FDA has invited us by written request to provide additional pediatric data on several of our main products. Under the Hatch-Waxman Act, timely provision of data meeting the FDA’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 so-called “pediatric exclusivity”"pediatric exclusivity"). TheOur main products havingwhich have received past FDA grants of pediatric exclusivity at some point are Aprovel®Aprovel®, Lantus®Lantus®, Amaryl®Allegra®, Allegra®Ambien®/Ambien® CR, Plavix®, Eloxatine®Taxotere®, and Ambien®/Ambien® CR. Written requests have also been issued to us with respect to Plavix®, Taxotere® and Lovenox®Actonel®.
In Europe, a regulation on pediatric medicines entered into force on January 26, 2007. This regulation provides for the progressive implementation in 2009 of pediatric research obligations with potential associated possible rewards including an extension of patent protection (for patented medicinal products) and regulatory exclusivity for pediatric marketing authorization (for off-patent medicinal products). For additional details, see “— Regulation” below.
Japanese regulations do not currently offer the possibility of similar extensions in exchangeIn Japan, for pediatric study results.research there is no extension of patent protection (for patented medicinal products), however, it may result in an extension of marketing exclusivity from 8 to 10 years.
Orphan Drug Exclusivity
Orphan drug exclusivity may be granted in the United States to drugs intended to treat rare diseases or conditions (affecting fewer than 200,000 patients in the U.S. or in some cases more than 200,000 with no expectation of recovering costs).
Obtaining orphan drug exclusivity is a two-step process. An applicant must first seek and obtain orphan drug designation from the FDA for its drug. If the FDA approves the drug for the designated indication, the drug will receive orphan drug exclusivity.
Orphan drug exclusivity runs from the time of approval and bars approval of another application (ANDA, 505(b)(2), New Drug Application (NDA) or Biologic License Application (BLA)) from a different sponsor for the same drug in the same indication for a seven-year period. Whether a subsequent application is for the "same" drug depends upon the chemical and clinical characteristics. The FDA may approve applications for the "same" drug for indications not protected by orphan exclusivity.
Orphan drug exclusivities also exist in the European Union and Japan.
Product Overview
We summarize below the intellectual property coverage in our major markets of the marketed products described above at “—"— Pharmaceutical Products — Main Pharmaceutical Products”Products". Concerning animal health products, Merial’sMerial's intellectual property coverage is described above (see “—"— Animal Health: Merial”Merial"). In the discussion of patents below, we focus on active ingredient patents (“compound patents”)(compound patents) and any later filed improvement 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, because theseequivalents. These patents tend to be the most relevant in the event of an application by a competitor to produce a generic version of one of our products or the equivalent of these patents in other countries (see “—"— Challenges to Patented Products”Products" below). In some cases, products may also benefit from pending patent applications andor from patents not eligible for Orange Book listing (e.g., patents claiming industrial processes). In each case below, we specify whether the active ingredient is claimed by an unexpired patent. Where patent terms have been extended to compensate for regulatory delay, the extended dates are presented below. U.S. patent expirations presented below reflect U.S. Patent and Trademark Office dates, and therefore do notalso reflect six-month pediatric extensions to the FDA’sFDA's Orange Book dates for the products concerned (Aprovel®, Lantus®, Amaryl®, Eloxatine®, Stilnox®/Ambien® CRLantus® and Allegra®Actonel®.).
We do not provide later filed improvement patent information relating to formulations already available as an unlicensed generic. References below to patent protection in Europe indicate the existence of relevant patents in most major markets in the European Union. Specific situations may vary country by country, most notably with respect to older patents and to countries having only recently joined the European Union.
We additionally set out any regulatory exclusivity from which these products continue to benefit in the United States, European Union or Japan. Regulatory exclusivities presented below incorporate any pediatric extensions obtained. While EUE.U. regulatory exclusivity is intended to be applied throughout the European Union, in some cases member states have taken positions prejudicial to our exclusivity rights. See “— Regulatory Exclusivity” above.
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Later filed patent: ranging through January 2023 |
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Regulatory exclusivity: September 2014 | Regulatory exclusivity: April 2017 |
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Taxotere® (docetaxel) | ||||
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U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
Generics on the market | Generics on the market | Generics on the market |
Eloxatine® (oxaliplatin) (1) | ||||
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U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: N/A (3) | ||
Generics on the market (2) | Generics on the market |
Jevtana® (cabazitaxel) | ||||
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U.S. | E.U. | Japan | ||
Compound: | Compound: | Compound: | ||
Later filed patents: coverage ranging through September 2024 | ||||
Regulatory exclusivity: June 2015 | Regulatory exclusivity: March 2021 | Regulatory exclusivity: to be determined upon approval of a product in Japan |
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Lovenox® (enoxaparin sodium) | ||||||
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U.S. | E.U. | Japan | ||||
Compound: | Compound: expired | Compound: expired | ||||
Generics on the market | Regulatory exclusivity: January 2016 |
Plavix® (clopidogrel bisulfate) | |||||||
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U.S. | E.U. | Japan | |||||
Compound: Expired | Generics on the market | Compound: expired | |||||
Generics on the market | |||||||
Regulatory exclusivity: January 2014 |
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U.S. | E.U. | Japan | |||||||
Compound: | Compound: |
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Compound: March 2016 | |||||||||
Generics on the market | Regulatory exclusivity: April 2016 |
Tritace® (ramipril) | |||||||
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U.S. | E.U. | Japan | |||||
N/A(1) | Compound: expired | Compound: expired | |||||
U.S. | E.U. | Japan | |||||||
| Compound: expired | Compound: expired | |||||||
Later filed (June 2018) | Later filed patent: formulation June 2018 extended with SPC up to June 2023 in most of the countries | ||||||||
Regulatory exclusivity: July 2014 |
Regulatory exclusivity: November 2019 |
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U.S. | E.U. | Japan | |||||||
Compound patent: expired | Compound patent: expired | Compound patent: expired | |||||||
Generics on the market | |||||||||
Regulatory exclusivity: expired | |||||||||
Later filed patent: Ambien® CR formulation (December 2019); not commercialized. |
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U.S. | E.U. | Japan | |||||
Compound: | Compound: N/A (1) | Compound: N/A (1) | |||||
Depakine® Chronosphere formulation (October 2017) | formulation (October 2017) |
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Allegra® (fexofenadine hydrochloride) | ||||
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U.S. | E.U. | Japan(1) | ||
Compound: expired | Compound: expired | Compound: expired | ||
Generics on the market | Generics on the market | Generics on the market | ||
Converted to Over-the-Counter | Converted to over-the counter | |||
Later filed patents: coverage ranging through January 2016 |
Nasacort® (triamcinolone acetonide) (1) | ||||
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U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
Later filed patents: formulation and method of use July 2016 | ||||
Generics on the market |
Xatral® (alfuzosin hydrochloride) | |||||||
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U.S. | E.U. | Japan | |||||
Compound: expired | Compound: expired | Compound: expired | |||||
Generics on the market |
Actonel® (risedronate sodium) (1) | |||||||||
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U.S. | E.U. | Japan | |||||||
Compound: December 2013, Extended to June 2014 by Pediatric extension | Compound: expired | Compound: | |||||||
Expired | |||||||||
Later filed | Later filed |
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Amaryl® (glimepiride) | ||||
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U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
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Insuman® (human insulin) | ||||
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| ||||
U.S. | E.U. | Japan | ||
N/A | Compound: N/A | Compound: N/A |
Fabrazyme® (agalsidase beta) | ||||
---|---|---|---|---|
U.S. |
| Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed | Later filed | |||
Biologics Regulatory Exclusivity: April 2015 | Orphan regulatory exclusivity: January 2014 |
Cerezyme® (imiglucerase) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: August 2013 | Compound: N/A | Compound: N/A |
Lumizyme® / Myozyme® (alglucosidase alpha) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: N/A Later filed patents: coverage ranging through February 2023 | Compound: N/A Later filed patents: coverage ranging from March 2021 to May 2023 | Compound: N/A Later filed patents: 2021 | ||
Orphan Drug Exclusivity: April 2013 | Orphan Regulatory Exclusivity: March 2016 | Orphan Regulatory Exclusivity: April 2017 | ||
Biologics Regulatory Exclusivity: April 2018 | Biologics Regulatory Exclusivity: March 2016 |
Renagel® (sevelamer hydrochloride) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed patent: coverage ranging through August 2013 and September 2014 | Later filed patent: August 2014 | Later filed patent: August 2014 | ||
SPC coverage to January 2015 in certain EU countries | PTE protection to December 2016 |
Renvela® (sevelamer carbonate) | ||||
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U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed patent: coverage ranging through August 2013 and September 2014 | Later filed patent: August 2014 | Later filed patent: August 2014 | ||
SPC coverage to January 2015 in certain EU countries | ||||
SPC coverage to August 2019 in certain countries (Austria, Greece and Luxembourg) |
Synvisc® (hyaline G-F 20) | ||||
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U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: expired |
Synvisc-One® (hyaline G-F 20) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: expired | ||
Later filed patent: January 2028 |
Lyxumia® (lixisenatide) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: July 2020 | Compound: July 2020 | Compound: July 2020 |
Zaltrap® (aflibercept) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: May 2020 (July 2022 if PTE is granted) | Compound: May 2020 (May 2025 if SPC granted) | Compound: May 2020 | ||
Biologics Regulatory Exclusivity: November 2023 | Regulatory Exclusivity: November 2022 |
Aubagio® (teriflunomide) | ||||
---|---|---|---|---|
U.S. | E.U. | Japan | ||
Compound: October 2014 (2019 if PTE is granted) | Compound: expired | Compound: expired | ||
Regulatory Exclusivity: September 2017 |
Kynamro™ (mipomersen) | ||||
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U.S. | E.U. | Japan | ||
Compound: December 2025 | Compound: pending | Compound: 2023 |
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, listed above competitors have launched generic versions of Eloxatine®Eloxatin® in Europe, andAllegra® in the United States Allegra®(prior to the product being switched to over-the-counter status) and Plavix® in the United States and Plavix® in Europe.
As disclosed in Note D.22.b) to our consolidated financial statements included at Item 18 of this annual report, we are involved in significant litigations concerning the patent protection of a number of products.
We caution the reader that there can be no assurance that we will prevail when we assert a patent in litigation and that there may be instances in which the Group determines that it does not have a sufficient basis to assert one or more of the patents mentioned in this report, for example in cases where a competitor proposes a formulation not appearing to fall within the claims of our formulation patent, a salt or crystalline form not claimed by our composition of matter patent, or an indication not covered by our method of use patent. See “Item 3.D."Item 3. Key Information — D. Risk Factors — Generic versions of someRisks Relating to Legal Matters — We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, mayand if such patents and other rights were limited or circumvented, our financial results could be approved for salematerially and adversely affected."
As disclosed in one or moreItem 8 of their major markets.”this annual report, we are involved in significant litigation concerning the patent protection of a number of our products.
Challenges to Patented Products
In the United States, companies have filed Abbreviated New Drug Applications (ANDAs), containing challenges to patents related to a number of our products. An ANDA is an application by a drug manufacturer to receive authority to market a generic version of another company’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”Biologics" below. An ANDA relies on the safety and other technical data of the original approved product, and does not generally require the generic manufacturer to conduct clinical trials (thus the name “abbreviated”"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 iscan be reduced to four years if the ANDA includes a challenge to a patent listed in the FDA’sFDA's Orange Book, and owned by or licensed to the manufacturer of the original version.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 beingis 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 this 30-month period does not resolve outstanding patent disputes, but it does remove the regulatory impediments to a product launch by a generic manufacturer willing to take the risk of later being ordered to pay damages to the patent holder.
Procedures comparable to the ANDA exist in other major markets.
In the European Union, a generic drug manufacturer may only reference the data of the regulatory file for the original approved product after data exclusivity has expired. However, there is no patent listing system in Europe 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.
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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 canmay seek an injunction against such marketing if it believes its patents are infringed. See Note D.22.b) to our consolidated financial statements included at Item 188 of this annual report.
The accelerated ANDA-type procedures are potentially applicable to most,many, but not all, of the products we manufacture. See “—"— Focus on Biologics”Biologics" and “— Regulation”"— Regulation" below. We seek to defend our patent rights vigorously in these cases. Success or failure in the assertion of a given patent against onea 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 a secondanother 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.D."Item 3. Key Information — D. Risk Factors — Generic versionsRisks Relating to Legal Matters — We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, mayand if such patents and other rights were limited or circumvented, our financial results could be approved for sale in one or more of their major markets.”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 maintain the identity ofidentify our products and services, andto protect the sustainability of our growth. Trademarks are particularly important to the commercial success of our CHC, generics and retail animal health business.
It is our policy to protect and register our trademarks with a strategy adapted to each product or service depending on their countries of commercialization:i.e., on a worldwide basis for worldwide products or services, or on a regional or local basis for regional or local products or services. Our trademarks are monitored and defended based on this policy and in order to prevent infringement and/ or unfair competition.
The process and degree of trademark protection variesvary country by country, as each state implementscountry applies its own trademark laws to trademarks used in its territory.and regulations. In most countries, trademark rights may only be obtained bythrough formal trademark application and registration. In some countries, trademark protection iscan be based primarily based on use. Registrations are granted for a fixed term (in most cases ten years) and are renewable indefinitely, butexcept in some instances may becountries where maintenance of the trademarks is subject to the continued use of the trademark.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.registration certificate. Additionally, in certain cases, we may enter into a coexistence agreement with a third-party that owns potentially conflicting rights in order to better protect and defend our trademarks.
Our trademarks are monitored and defended based on this policy and in order to prevent counterfeit, infringement and/or unfair competition.
Production and Raw Materials
For many years, we have chosen to keep the manufacture of our products in-house in order to have better control of quality and distribution. Our principal manufacturing processes consistproduction process consists of three principal stages: the manufacture of active pharmaceutical ingredients, the incorporationtransformation of thosethese ingredients into products, and packaging.
We generally develop and manufacture theOur general policy is to produce our main active ingredients that we use in our products. We have a general policy of producing the active ingredients for ourand principal products at our own plants in order to minimize our dependence on external manufacturers and to maintain strict and precise control over the product throughout the production cycle. In some cases, however, we rely on third parties for the manufacture and supply of certain active ingredients and medical devices. We have outsourced certainsome of our production, elements, especially as part ofunder supply agreements entered into within the framework ofcontracts associated with plant divestitures. Asdivestitures or to establish a result,local presence to capitalize on growth in emerging markets. In particular, we outsource a portionpart of the production of the active ingredients used in Stilnox®Stilnox® and Xatral®Xatral®, a part of the chemical activity linked with Lovenox® and certain formulations of various pharmaceutical products.product formulations. Our main pharmaceutical subcontractors are Famar, Haupt, Patheon, Famar, Catalent GSK-NDB, Haupt and Sofarimex. These subcontractors are required to follow our guidelines in terms ofgeneral quality and logistics andpolicies, as well as meeting other criteria. See “Item 3.D."Item 3. Key Information — D. Risk Factors — The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, delay the launch of new products and adversely affect our operating results and financial condition.”Risks Relating to Our Business".
Among our other key products, weWe also depend on third parties in connection withfor the manufacture of Eloxatine®. Under the terms of our license agreement with Debiopharm, we purchase the active ingredient from Debiopharm, and the production of the finished lyophilized product is outsourced to two manufacturers. The manufacturing of the liquid form of Eloxatine® is conducted at our facility in Dagenham (United Kingdom).
certain products. Under our partnershipalliance with BMS, a multi-sourcing organizationmulti-vendor supply and securitysafety stock arrangements are in place for Plavix® / clopidogrel bisulfatePlavix® (clopidogrel bisulfate) and Aprovel® / irbesartan.Aprovel® (irbesartan).
Our pharmaceutical production sites are divided into three categories:
Our main European pharmaceutical production facilities are locatedour principal products in France, Germany, Italy, Spain,solid form;
Sanofi Pasteur produces vaccines sanofi pasteur uses a wide industrial operations network, withat sites located in North America, France, Mexico, China, Thailand, Argentina and India. The pharmaceutical sites at Le Trait (France) and Anagni (Italy) also contribute to Sanofi Pasteur's industrial operations by making available their aseptic filling and freeze-drying facilities. 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 health division.
Merial markets pharmaceutical products (Frontline®, Heartgard®, Zactran®, Previcox®) and a broad range of vaccines for different animal species (dogs, cats, horses, ruminants, pigs and fowl). A number of pharmaceutical products are subcontracted (Heartgard®, Eprinex®) but almost all veterinary vaccines are manufactured at its own plants. Merial's dedicated animal health industrial operations cover all activities, from the purchase of raw materials through to the delivery of the finished product, meeting customer needs through a reliable and flexible offering that meets quality expectations. There are 17 production sites spread across nine countries.
All of our pharmaceutical and vaccine facilities are Good Manufacturing Practices (“GMP”)(GMP) compliant, in accordanceline with international guidelines. Our main facilitiesprincipal sites are also FDA approved includingby the U.S. Food & Drug Administration (FDA).
This applies to our pharmaceutical facilities in AmbarèFrance (Ambarès, Tours, Le Trait, Maisons-Alfort, and Compiègne in France, Dagenham and Holmes ChapelLyon); in the United Kingdom Frankfurt(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 Veresegyhaz(Frankfurt); in Hungary Saint Louis(Veresegyhaz); in Italy (Anagni); and in the United States (Saint Louis). Our Vaccines sites with FDA approval are Marcy l'Étoile and LavalLe Trait (Fluzone® ID USA) in CanadaFrance; Swiftwater, Canton and our vaccinesRockville in the United States; and Toronto in Canada.
The Genzyme facilities of Marcy l’Etoile and the Val de Reuil distribution center in France, Swiftwater in the United States (Allston, Framingham, Ridgefield, Cambridge) and Toronto in Canada.Europe (Geel, Belgium) are all FDA approved.
Our animal health facilities in Athens, Worthington, Gainesville, Berlin and Raleigh in the United States are managed by the U.S. Department of Agriculture (USDA), while the sites at Paulinia (Brazil) and Toulouse (France) have FDA approval for some of their operations.
Wherever possible, we seek to have multiple plants approved for the production of key active ingredients and our strategic finished products asproducts. This is the case with Lovenox®, for example.
In February 2011, we received an FDA warning letter concerning our Frankfurt facility following a routine FDA inspection in September 2010. The warning letter cited GMP compliance issues in certain manufacturing processes, without referring to specific products. While believing that the points raised in the caseletter did not compromise the quality of Lovenox® for example.our marketed products, we acted on this warning and worked towards satisfying the recommendations through a "compliance first" action plan at the Frankfurt facility. In October 2011, we notified the FDA that we had completed this plan. The FDA reinspected the site in April 2012, and issued an unqualified report on Form FDA 483. This was confirmed in the FDA Establishment Inspection Report, received August 14, 2012, which officially closed the warning letter procedure.
On May 24, 2010, Genzyme entered into a consent decree with the FDA relating to the facility at Allston in the United States, following FDA inspections at the facility that resulted in observations and a warning letter raising
Current Good Manufacturing Practices (CGMP) deficiencies. A consent decree is a court order entered by agreement between a company and the government (in this case the FDA) that requires the company to take certain actions as set out in the decree. Under the terms of Genzyme's consent decree, Genzyme is permitted to continue manufacturing at the site during the remediation process, subject to compliance with the terms of the consent decree.
The consent decree requires Genzyme to implement a plan to bring the Allston facility operations into compliance with applicable laws and regulations. The plan must address any deficiencies reported to Genzyme or identified as part of an inspection completed by a third-party expert in February 2011. Genzyme has itself retained an expert to monitor and oversee the implementation of the remediation workplan. This workplan was submitted to the FDA in April 2011 and accepted by the FDA in January 2012, and is expected to take a further three years to complete. It includes a timetable of specified milestones. If the milestones are not met in accordance with the timetable, the FDA can require us to pay $15,000 per day, per affected drug, until these compliance milestones are met. Upon satisfying all compliance requirements in accordance with the terms of the consent decree, Genzyme will be required to retain an auditor to monitor and oversee ongoing compliance at the Allston facility for an additional five years. To date, all requirements of the consent decree, including all requirements of the workplan, have been met by Genzyme.
In March 2012, modifications to the workplan were submitted to the FDA to take account of planned changes in manufacturing operations for Fabrazyme® and Cerezyme® at the Allston facility. These modifications were accepted by the FDA. In addition, the U.S. facility at Framingham was approved by the FDA and the EMA in January 2012 for the production of Fabrazyme®.
On July 12, 2012, Sanofi Pasteur received a warning letter from the FDA following routine inspections conducted during 2012 at its facilities in Toronto (Canada) and Marcy l'Étoile (France). The warning letter contains observations about products intended for the U.S. market, and the premises in which they are produced. Sanofi Pasteur takes these observations extremely seriously, and is working actively with the FDA to implement a series of immediate and ongoing measures to address the issues raised in the warning letter and to further strengthen its production tools and quality systems.
More details about our manufacturing sites are set forthfound below at “ — D."— Property, Plant and Equipment”Equipment".
Health, Safety and Environment (“HSE”)(HSE)
The manufacturing and research operations of sanofi-aventisSanofi are subject to increasingly stringent health, safety and environmental (HSE) laws and regulations. These laws and regulations are complex and rapidly changing, and sanofi-aventisSanofi 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 €130€100 million in 2009.2012.
The applicable environmental laws and regulations may require sanofi-aventisSanofi 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’sGroup'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 subsoilgroundwater contamination have been carried out at current and former Group sites. In cooperation with national and local authorities, the Group constantlyregularly assesses the rehabilitation work required and thiscarries out such work has been implemented when appropriate. Long-term rehabilitation work has been completed or 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 VitryToulouse 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-aventis. Sanofi-aventisSanofi. 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”)(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’sBayer'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 2009, sanofi-aventis2012, Sanofi spent €38€45 million on rehabilitating sites previously contaminated by groundsoil or groundwater pollution. During the year ended December 31, 2009,2012, 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 €695€728 million as at December 31, 2009.
Because of Due to changes in environmental regulations governing site remediation, the Group’sGroup'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"Item 3.D. Risk Factors — Environmental Risks of Our Industrial Activity”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 (38(53 in 2009)2012) are carried out by the Group in order to detect possible instances of non-complianceassess compliance with regulationsour standards (which implies compliance with regulations) and to initiate corrective measures. Moreover, 89Additionally, nine specialized audits covering contractors or biosafety and 163 loss prevention technical visits were carried out by our teams in 2009.2012.
Sanofi-aventisSanofi 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, 7778 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-aventisSanofi 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’sGroup's COVALIS committee classifies all chemical and pharmaceutical products handled within the Group and establishes workplace exposure limits for each of them. The Group’sGroup'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.D."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”operations".
Appropriate Industrial Hygieneindustrial hygiene practices and programs are defined and implemented in each site. These practices consist essentially of containment measures offor 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-aventisSanofi has rigorous policies to identify and evaluate safety risks and to develop preventive safety measures, and methods for checking their efficacy. Additionally, sanofi-aventisSanofi 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-aventisSanofi employees as well as our sub-contractors. 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.
The French chemical manufacturing sites in Aramon, Neuville-sur-Saône, Saint-Aubin-lès-Elbeuf, Sisteron Vertolaye and Vitry,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 in light ofdue to the toxic or flammable materials stored on the sites and used in the operating processes.
Risk assessments of processes and their 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 the relevance of thethat our risk assessments.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 material damages,physical damage, are consistent with legal requirements and the best practices in the industry.
Environment
The main objectives of theour environmental policy of sanofi-aventis are to implement clean manufacturing techniques, minimize the use of natural resources and reduce the environmental impact of itsour activities. In order to optimize and improve our environmental performance, sanofi-aventis is committed to progressively obtaining ISO 14001 certification. 39 manufacturing sites and three Research & Development sites are currently certified. This commitment is part ofwe have a strategy of continuous improvement practiced at all Groupour 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 2008 and 2009, six2012, seven of the Group’sour European sites arewere included in the scope of the European CO2 Emissions Credit Trading Scheme aimed at helping to reach the targets set by the Kyoto protocol.
The Our recent efforts of the Group 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. Since 2005In 2012, we have reduced carbon dioxide emissions caused by our sales representation car fleet by 14%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), our direct carbon dioxide emissions by 11 % and our indirect emissions from our production and research facilities (excluding vehicle fleets) have fallen by 16%7.2% overall. We are targeting a 20% reduction in terms of our activity level per unit produced.(1)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-aventis.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 activitybusiness segment and by geographic marketregion for 2007, 20082012, 2011 and 20092010 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 2009,full year 2011, in constant euros (unless otherwise indicated). For more information on market shares and ranking, see “Presentation"Presentation of Financial and Other Information”Information" at the beginning of this document.
Genzyme's sales are included from the acquisition date (April 1, 2011).
Marketing and Distribution
Sanofi-aventisSanofi has a commercial presence in approximately 110100 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.
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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®.
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Europe:Western Europe represents 41%23.8% of the Group’sour net sales; we are the leading pharmaceutical company in France where our market share is 11.5%9.3% (9.9% in 2009 (13.1% in 2008)2011), and we rank secondfourth in Germany with a 5.6% (5.7% in 2008) market share. Key events in 2009 affecting European4.7% market share include:
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Emerging markets (see definition(after the Copaxone® transfer and without taking into account parallel trade). In 2012, sales in “B. Business Overview — Strategy”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®), above) represent 25%impacted by the transfer of the Group’sCopaxone® 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; we are the leading healthcare companyour market share in emerging marketsJapan 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 5.7% market share.full-year basis in 2011).
A breakdown of our sales by geographic market is presented in “Item"Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 20092012 Compared with Year Ended December 31, 2008.”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 CHCConsumer Health Care products, these drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor’sdoctor'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 sales 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, 2009,2012, we havehad a global sales force of some 34,300 representatives, including approximately 11,10032,874 representatives: 9,866 in Europe, 7,1004,866 in the United States, 3,200 in Japan and 3,600 in China.
As is common18,142 in the pharmaceutical industry, we market and promote our products through a varietyrest of advertising, public relations and promotional tools. 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 specific media channels to market our products. National education and prevention campaigns can be used to improve patients’ knowledge of conditions such as deep vein thrombosis, osteoporosis, uncontrolled diabetes, influenza and arterial diseases in markets such as Germany, France and the United States.world.
Although we market most of our products withthrough 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 “— Main pharmaceutical products” above."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 is currently experiencingcontinues to experience significant changes in its competitive environment. Innovative drugs, a broad product range, and a presence in all geographical markets are key factors in maintaining a strong competitive position.
There are four types of competition in the prescription pharmaceutical market:
Competition
Competition
Competition
Competition
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 Abbott in benign prostatic hyperplasia; AstraZeneca in cardiovascular disease, hypertension and oncology; Bayer in thrombosis; Boehringer-Ingelheim in atherothrombosis and benign prostatic hyperplasia; Bristol-Myers Squibb in oncology; Lilly in osteoporosis, diabetes and oncology; GlaxoSmithKline in oncology, allergies, diabetes and thrombosis; Merck in hypertension, osteoporosis, diabetes and benign prostatic hyperplasia; Novartis in hypertension and oncology;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 oncology,rare diseases and oncology; Biogen Idec, Teva and Merck Serono in multiple sclerosis; Bayer in multiple sclerosis and thrombosis and allergies,prevention; Roche in oncology; Johnson & Johnson in oncology and osteoporosis,thrombosis prevention; AstraZeneca in cardiovascular diseases, hypertension and Bayeroncology; Boehringer-Ingelheim in thrombosis.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 of Europe,(outside Europe), GlaxoSmithKline, Wyeth (recently acquired by Pfizer)Pfizer (Wyeth), Novartis and Novartis.Johnson & Johnson (Crucell).
In selected market segments, sanofi pasteurSanofi 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 local 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 alsoincreasingly in international donor markets.
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”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”"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.
Another competitive issue drugDrug manufacturers are facing isalso face competition through parallel trade,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 issuesituation 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 as much asmore 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 sales over the Internet are ofdrugs sold on illegal websites have been found to be counterfeit.
A counterfeit drugs: their development has intensified in 2009.
A medical productmedicine is counterfeit when there is a false representation in relationdeliberately and fraudulently mislabeled with respect to its identity (e.g. name, composition, strength, etc.) or source (e.g. manufacturer, country of manufacturing/origin, marketing authorization holder, etc.) and/or its background (e.g. filingssource. Counterfeiting can apply to both branded and documentation relatedgeneric 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 its distribution channels). Sanofi-aventis is committed to being part ofprotect patient health worldwide. We become involved in any efforts made to overcome drug counterfeiting and hashave implemented the following actions:
Intensification of close
to deliver information and educational programs to raise awareness about the risk related to falsified medicines;
RegulationRegulatory Framework
The pharmaceutical sector isand health-related biotechnology sectors are highly regulated. National and supranational regulatoryhealth authorities administer a vast array of legislativelegal and regulatory requirements that dictate pre-approval testing and quality standards ensureto 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 which the product manufacturer is required to honor.that may include pediatric development.
The submission of an application to a regulatory authority does not guarantee that a license to market the product will be granted. Furthermore, each regulatory authority may impose its own requirements during the course of the product development or during productand application review. It may refuse to grant approval or mayand require additional
data before and also after granting an approval, even though the relevantsame product has already been approved in other countries. Regulatory authorities also have the authority to request product recalls, product withdrawals and other penalties for violations of regulations based on data that are made available to them.
The International Conference on Harmonization (“ICH”) regulatory agencies (the three founder members being the European Union, Japan and the United States), plus Health Canada and Swissmedic as observers, all have high standards for pharmaceutical technical appraisal. Product approval usually takes one to two years, but depending on the country it can vary from six months or less to in some cases, several years from the date of application.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, intensive efforts have been made by the ICH area regulatory agencies(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 thisthese efforts is that many pharmaceutical companies are now able to prepare and submit athe Common Technical Document (“CTD”) that(CTD), which can be used in different ICH regions for a particular product application review, with only local or regional adaptation. Electronic CTD is becoming the standard for worldwide product submission.
Pharmaceutical manufacturers have committed Interestingly, emerging countries are starting to publishing protocolsparticipate in ICH standardization discussions, and results of clinical studies performed with their compounds in publicly accessible registries (Clinical Trials Registry and Clinical Trial Results Registry). In addition, regulatory frameworkscould be more involved in the variousnear future.
International collaboration between regulatory authorities continues to develop with implementation of confidentiality arrangements between ICH countriesregulatory authorities, and with non-ICH countries tend to impose mandatory disclosureregulatory authorities. Examples include work-sharing on Good Manufacturing Practices (GMP) and Good Clinical Practices (GCP) inspections and regular interactions in the form of clinical trials information (protocol-related information as well as results-related information)."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.
However, theThe requirement of many countries, (includingincluding Japan and several Member Statesmember states of the European Union)Union, to negotiate selling prices or reimbursement rates for pharmaceutical products with government regulators can substantially extendsignificantly extends the time for market entry to long afterbeyond the initial marketing approval is granted.approval. While marketing authorizationsapprovals for new pharmaceutical products in the European Union have been substantiallylargely centralized with the European Medicines Agency (“EMA”),EMA, pricing and reimbursement remain a matter of national competence. See “— Pricing & Reimbursement” below.
In the European Union, there are three main procedures by which to apply for marketing authorization:
The co-called « sunset clause » is a provision leading to the cessation of the validity of any marketing authorization which is not followed by the actual placing on the market within 3 years or which does not remain present on the market for a consecutive period of 3 years.
Generic products are subject to a harmonized procedure in all countries of the European Union.same marketing authorization procedures. A generic product containsmust contain the same active medicinal substance as an originator product.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”"bioequivalent" to the originator product —i.e. that it(i.e., works in essentially the same way in the patient’s body,patient's body), but there is nodo not need to submit safety or efficacy data assince regulatory authorities can refer to the originator product’sreference 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 of the originator product 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 EMAE.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 introduced a seriespharmacovigilance system for the collection and evaluation of initiativesinformation 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 openness and the transparency of its activities, such as the publication of the European Public Assessment Report (for approved, withdrawn or rejected products), which will now be more structured and oriented to comparative effectiveness. New initiatives have been proposed with regard to the disclosure of a minimum amount of information on applications that have been submittedE.U. system for marketing authorization. Also the EMA has become more proactive on the disclosure of documents/information throughout the product lifecycle, more specifically in the safety area.monitoring of medicines was approved. In addition patients and consumers are increasingly involved in the work EMA’s scientific committees of the Agency.
A new regulation in pediatric developmentJuly 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 January 2007. It isrecommendation/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 promotingcollecting 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 drugs well adaptedtoday, no PASS or PAES has been requested to children and ensuring safe useSanofi.
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 pediatric population. Incentives are proposed such as extensioncontext of SPC (Supplementary Protection Certificate) or data protection for PUMA (Pediatric Use Marketing Authorization).cumulative information on risks and benefits.
A new regulatory framework has been implemented specifically covering Advanced Therapy Medicinal Products (“ATMPs”). This new legislation provides specific requirements for In the approval, supervision, and pharmacovigilance of ATMPs. A new scientific committee — the Committee for Advanced Therapies (“CAT”) — has been established within the EMA to plays a central role in the scientific assessment of ATMPs.
A new regulatory framework on variations to marketing authorizations is being implemented with a view to rendering the whole system for post-authorization activities simpler, clearer and more flexible without compromising public health.
International collaboration between regulatory authorities is developing with the implementation of the confidentiality arrangements between ICH regulatory authorities, and also with other non-ICH regulatory authorities. Several examples have begun such as work-sharing on Good Clinical Practices (“GCP”) inspections between the United States and the European Union and permanent representatives of the U.S. Food and Drug Administration (FDA) and Japanese Pharmaceutical and Medical Devices Agency (“PMDA”) now based in London, as well as a permanent representative of EMA at the FDA.
In the United States,, applications for drug approval are submitted for review byto the U.S. FDA. The FDA, which has broad regulatory powers over all pharmaceutical and biological products that are intended for sale and marketing in the United States.U.S. To commercialize a product in the United States,U.S., a New Drug Application (“NDA”)(NDA) under the Food, Drug and Cosmetic (FD&C) Act or Biological License Application (BLA) under the Public Health Service (PHS) Act is filed withsubmitted to the FDA with data that sufficiently demonstrate the drug’s quality, safetyfor filing and efficacy.pre-market review. Specifically, the FDA must decide whether the drugproduct is safe and effective for its proposed use, if the benefits of the drug’sdrug's use outweigh its risks, whether the drug’sdrug's labeling is adequate, and if the manufacturing of the drug and the controls used for maintaining quality are adequate to preserve the drug’sdrug's identity, strength, quality and purity. Based upon this review, the FDA can require post-approval commitments.commitments and requirements. Approval for a new indication of a previously registered drugapproved product requires the submission of a supplemental NDA (“sNDA”).(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.
In the United States, Sponsors wishing to market a generic drug manufacturers maycan file an Abbreviated NDA (“ANDA”).(ANDA) under 505(j) of the FD&C Act. These applications are “abbreviated”"abbreviated" because they are generally not required to include preclinical data, such as animal studies and human clinical data to establish safety and effectiveness. Instead, generic manufacturerseffectiveness, but need only demonstrate that their product is bioequivalenti.e. (i.e., that it performs in humans in the same manner as the originator’s product.originator's product). Consequently, the length of time and cost required for development of such productgenerics can be considerably less than for the originator’soriginator's drug. See “— Patents, Intellectual Property and Other Rights” aboveWith effect from October 1, 2012 (FDASIA — GDUFA), an application for additional information.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 procedurespathway in the United States can only be only used for pharmaceutical productsgenerics of drugs approved under an NDA. See “— Focus on Biologics” below.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 the, regulatory authorities can require local development studies;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 animal healthgeneric products, see “—Animal Health: Merial” above.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 are usuallycan be referred to as “biologics”"biologics" when they are derived from plant or animal tissues, (e.g.,including blood products)products or products manufactured within living cells (e.g., anti-bodies, insulins, vaccines)antibodies). Most biologics are complex molecules or mixtures of molecules which are difficult to completely characterize. To characterize and determine the quality, these products require physico-chemical-biological testing, and an understanding of and control over the manufacturing process.
The concept of “generics”"generics" is not scientifically appropriate for biologics due to their complexity. It ishigh level of complexity and therefore the concept of “biosimilar products” that applies."biosimilar" products is more appropriate. A full comparison of the quality,purity, safety and efficacy of the biosimilar product against the reference biological product should be undertaken, and must includeincluding 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. In March 2009, the CHMP adopted a guidelineproducts including guidance on pre-clinicalpreclinical and clinical development of biosimilars of low molecular weight heparins. This means thatheparins (LMWH). However, starting in Europe,2011 and continuing in 2012, the EMA has initiated a potentialrevision 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, candidate claimingbut '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 biologically similarlicensed in the E.U. and therefore clinical trials have to Lovenox® must show therapeutic equivalencebe repeated in termsall three major markets (Japan, E.U. and U.S.). This important change will enter into force after the revision of efficacythe EU so-called "over-arching" biosimilar guideline, already under review and safetyexpected 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 at least one adequately powered, randomized, double-blind, parallel group clinical trial.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 has taken the position is that currently 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 casecase-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 regulations do not currently establish procedures for “biosimilar” versions of a reference drug registered as a biological underPatient 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 but accelerated generic approval proceduresto create an abbreviated licensure pathway (351k) for large-molecule biologicals have been proposedbiological products that would require the laware demonstrated to be revised."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.
However, in The Federal Food, Drug, and Cosmetic Act, as amended by the United States for historical reasons a few biologicals have been registered underBiosimilar User Fee Act of 2012 (Title IV of the Food and Drug & CosmeticAdministration Safety and Innovation Act, (“FDCA”) followingPublic Law 112-144, which was signed by the NDA scheme usedPresident on July 9, 2012), authorizes the FDA to assess and collect user fees for traditional well characterized small molecules. It is currently still technically possiblecertain 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 file an ANDAtalk about development plans and conducted 34. The agency has now
received 12 biosimilar INDs and has many other active programs with respect to those particular products (among the Group’s products Lovenox® is one example). Because an ANDA provides for no clinical trials other than bioequivalence studies, the appropriateness of an ANDA with respect to these NDA-registered biologicals raises significant policy issues for the FDA.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 FDCA providesmain change of this proposal is the replacement of the current three directives by two regulations (one for another abbreviated registration pathwaymedical devices and one for some biosimilar products;in-vitro medical devices).
The objectives of the so-called “505(b)(2)” route. This pathway may in particularlegislation 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 recombinant proteins.high-risk Class III devices (novel technologies or specific public health threats). The registration file may partially refernew 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 existingregulatory 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 reference product butmain 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 completed with data specificconfirmed 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 biosimilar version, in particular with preclinical and clinical data. However the FDA indicated that this pathway should remain limited to relatively simple cases and that taking into consideration the current state of scientific knowledge, it is unlikely that it could be applied to more complex products either from a structural or pharmacological point of view.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 health carehealthcare costs are leading to efforts to curb drug expenditures in most markets in which sanofi-aventisSanofi 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 case of prescriptions purchased or reimbursed by government entities such as Medicaid, Veterans Affairs,public and private health care sectors.
Outside the United States, governments frequently directly controlUK value-based pricing of drugs. The level of evidence requesteddrugs scheme are still to accessbe finalized and it is not clear how or if the market, after regulatory approval is constantly rising. In addition to traditional clinical efficacy and safety criteria, more and more health authorities are asking for relative effectiveness data, and in some cases cost-effectiveness evidence. Cost-containment measures are often used to limit the financial impact of pharmaceuticals on payers who in many emerging markets may be the patients themselves. Across Europe, healthcare systems are continuously under scrutiny in order to strike a balance between funding, organization and the needsemphasis of the population. Incremental Cost Effectiveness Ratio (ICER) used by the National Institute for Clinical Excellence (NICE) will be diminished.
In addition the European Commission’s Directorate General for Competition published its final report on July 8, 2009 in connection with the investigation of the pharmaceutical industry initiated in January 2008. This report contains a number of conclusions and arguments in favor of modifying the regulatory environment, notably in order to improve price negotiation and drug reimbursement levels.
Several countries have announced stronger pricing controls, among them, China, India and Russia. In China, however, this is part of a broader plan to structure its healthcare system: a basic health insurance is to reach 90% of the population by the end of this year and hospitals are to be built to cover rural and remote areas. Centralised purchasing has been on the agenda in China, India and Brazil, while tendering for generics, flourishing in Germany, is now being looked at in several countries, including Italy.
All of these factors, which are specific to each country, represent additional financial and logistical challenges to pharmaceutical companies.
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, sanofi-aventis iswe are taking the necessary steps to defend the accessibility and price of our products which reflectsin order to reflect the value of our innovative product offerings:
products.
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 rewardrewards for innovation. Specifically, we are involved in risk sharing agreements with payers, whereby part of the financial risk related to a treatment's success is carried by the marketing company. Those agreements usually foresee that the clinical efficacy of a drug is followed after its commercialization, for a specified period of time and patient population. The price and reimbursement level of the drug is then either confirmed or revised based on these post-marketing results.
Insurance and Risk Coverage
We are protected by four key insurance programs, relying not only on the traditional corporate insurance and reinsurance market but also on a mutual insurance company established by various pharmaceutical groups and our captive insurance company, Carraig Insurance Ltd (“Carraig”)(Carraig).
These four key programs cover Property & Business Interruption, General & Product Liability, Stock and Transit, and Directors & Officers Liability.
Our captive insurance company, Carraig, participates in our coverage for various lines of insurance mainly including excess property, stock and transit and general & product liability. Carraig is run under the supervision of the Irish regulatory authorities, is wholly ownedwholly-owned by sanofi-aventis,Sanofi, and has sufficient resources to meet thethose portions of our risks that it covers.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 checkedverified 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. A further benefit of this program is that traditional insurance cover is supplemented by specialist cover, thanks to the involvement of an international mutual insurance company established by a number of pharmaceutical groups. 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 kindkinds 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. Over the last three years, weWe have been working with our insurers to developdeveloped a prevention program with assistance from experts, implementing best practices in this area at our distribution sites. This program, which is led by our captive insurance company, has substantial capacity, largely to deal with the growth in sea freight which can lead to a concentration of value in a single ship.
Our General Liability & Product Liability program has been renewed for all our subsidiaries worldwide wherever it was possible to do so, despite the increasing reluctance in the insurance and reinsurance market to cover product liability risks for large pharmaceutical groups. For several years, insurers have been reducing product liability cover because of the difficulty of insuring some products that have been subject to numerous claims. These products are excluded from the cover provided by insurers, and hence from the cover obtained by us on the insurance market. This applies to a few of our products, principally those described in Note D.22.a) to
our consolidated financial statements included at Item 18 in this annual report. Because of these market conditions we have increased, year by year, the extent to which we self-insure.
The principal risk exposure for our pharmaceutical products is covered with low deductibles at the country level, the greatest level of risk being retained by our captive insurance company. The level of risk self-insured by the Group — including our captive reinsurance company — enables us to retain control over the management and prevention of risk. Our negotiations with third-party insurers and reinsurers are tailored to our specific risks. In particular, they allow for differential treatment of products in the development phase, for the discrepancies in risk exposure between European countries and the United States, and for specific issues arising in certain jurisdictions. Coverage is adjusted every year in order to take into account the relative weight of new product liability risks, such as those relating to rare diseases with very low exposure or to healthcare products which do not require marketing approval.
Our cover for risks that are not specific to the pharmaceutical industry (general liability) is designed to address the potential impacts of our operations.
In respect ofFor all lines of business of Carraig, outstanding claims are covered by provisions for the estimated cost of settling all claims incurred up to, 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 offor claims made and settlements,settled, management — with assistance from independent actuaries — prepares an incurred but not reported (IBNR) actuarial technique is developed by management with the assistance of expert external actuaries to determine a reasonable estimate of the captive’scompany's exposure to unassertedunreported claims for those risks.the risks covered. The actuaries perform an actuarial valuation of the company's IBNR loss(incurred but not reported) and ALAE (allocated loss adjustment expense) liabilities of the Company as ofat year end. Two ultimate loss projections (based upon reported losses and paid losses respectively) are computed each year using the Bornhuetter-Ferguson method are computed each year. Provisions are recorded on that basis.method; these projections form the basis for the provisions set.
The Directors & Officers Liability program protects allthe legal entities under our legal entitiescontrol, 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.
These All the insurance programs are backed by best-in-class insurers and reinsurers and they are designed in such a way that we can seamlessly integrate most newly-acquired businessbusinesses on a continuous basis. Our cover has been designed to reflect our risk profile and the capacity available in the insurance market. By centralizing our major programs, not only do we reduce costs, but we also provide world-class coverage for the entire Group.
Significant subsidiaries
Sanofi-aventisSanofi is the holding company of a consolidated group of subsidiaries. The table below sets forth our significant subsidiaries and affiliates as of December 31, 2009.2012. For a complete list of the principal companies in our main consolidated subsidiaries,group, see Note F. to our consolidated financial statements, included in this annual report at Item 18.
Significant Subsidiary or Affiliate | Incorporation | Principal Activity | Financial and Voting Interest | ||||||||||
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Aventis Inc. | 07/01/1998 | United States | 100% | ||||||||||
Aventis Pharma S.A. | 09/24/1974 | France | 100% | ||||||||||
Genzyme Corporation | 11/21/1991 | United States | Pharmaceuticals | 100% | |||||||||
Hoechst GmbH | 07/08/1974 | Germany | 100% | ||||||||||
Merial Ltd | 08/01/1997 | United Kingdom | 100% | ||||||||||
| 02/25/1941 | France | 100% | ||||||||||
| 09/20/1985 | France | Pharmaceuticals | 100% | |||||||||
Sanofi-Aventis Deutschland GmbH | 06/30/1997 | Germany | 100% | ||||||||||
| 07/15/1996 | France | 100% | ||||||||||
| 06/28/2000 | United States | Pharmaceuticals | 100% | |||||||||
Sanofi Pasteur | 02/08/1989 | France | 100% | ||||||||||
| 01/18/1977 | United States | Vaccines | 100% | |||||||||
Sanofi Winthrop Industrie | 12/11/1972 | France | |||||||||||
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Since 2009, we have transformed our Group through numerous acquisitions (see Item 4A "History and Development of the Company"), in particular those of Genzyme in April 2011 and Merial in September 2009. The financial effects of the Genzyme acquisition are presented in Note D.1.2. to our consolidated financial statements, included in this annual report at Item 18. The financial effects of the Merial acquisition are presented in Note D.1.3. to our consolidated financial statements for the year ended December 31, 2010, included in our annual report on Form 20-F for that year.
Sanofi-aventis In certain countries, we carry on some of our business operations through joint ventures with local partners. We have also entered into worldwide marketing arrangements. Two of our major products (Plavix® and Aprovel®) are marketed through an alliance with BMS, Actonel® is marketed through an alliance with Warner Chilcott, and Zaltrap® is marketed through an alliance with Regeneron. See "Item 5 — Financial Presentation of Alliances".
Internal organization of activities
Sanofi and its subsidiaries form a group, organized around twothree activities: pharmaceutical productsPharmaceuticals, Human Vaccines (Vaccines) and human vaccines. The Group is also present in animal health through Merial.
The patents and trademarks of the pharmaceutical activity are primarily owned by the sanofi-aventis parent company, Aventis Pharma S.A. (France), Hoechst GmbH (Germany) and sanofi-aventis Deutschland GmbH (Germany).Animal Health.
Within the Group, the holding company overseesresponsibility for research and development activities, by defining(R&D) in their respective fields rests with Sanofi and Genzyme Corporation (Pharmaceuticals), Sanofi Pasteur and Sanofi Pasteur, Inc. (Vaccines), and Merial Ltd and Merial S.A.S. (Animal Health); these entities define strategic priorities coordinating work, and taking out the industrial property rights under its own name and at its own expense. In order tocoordinate R&D efforts. To fulfill this role, sanofi-aventis subcontracts research and developmentthese entities subcontract R&D work to its specialized French and foreign subsidiaries in many cases licensing itsthat have the necessary resources. They also license patents, manufacturing know-how and trademarks.trademarks to certain French and foreign subsidiaries. In these cases, the licensee subsidiaries manufacture and distribute the Group’sGroup's products, either directly or via local distribution entities.
Our industrial property rights, patents and trademarks are mainly held by the following companies:
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.
In certain countries, sanofi-aventis carries out part of its business operations through ventures with local partners. In addition, the Group has signed worldwide alliances by which two of its products (Plavix® and Aprovel®) are marketed through an alliance with BMS (see “— Pharmaceutical Products — Main Pharmaceutical Products,” above).
For most Group subsidiaries, sanofi-aventis provides financing and centrally manages their cash surpluses. Under the alliance arrangement with BMS, cash surpluses and cash needs arising within alliance entities give rise to symmetrical monthly transfers between the two groups. The holding company also operates a centralized foreign exchange risk management system, which enters into positions to manage the operational risks of its main subsidiaries.
D. Property, Plant and Equipment
D.1. Overview
Our headquarters are located in Paris, France. See "— Office Space" below.
We operate our business through officesoffice premises and research, production and logistics facilities in approximately 110 countries. All100 countries around the world. Our office premises house of all our support functions, operate out ofplus operational representatives from our office premises.subsidiaries and the Group.
A breakdown of these sites by natureuse and ownership/leaseholdby ownership status (owned versus leasehold) is provided below. Breakdowns are based on surface area. All surface area figures are unaudited.
Breakdown of sites by natureuse*
Industrial | |||
Research | |||
Offices | |||
Logistics | |||
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Breakdown of the Group’s sites between owned and leasedby ownership status
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Owned |
We own most of our research and development and production facilities, either freehold or under finance leases with a purchase option exercisable at expiration of the lease.
D.2. Description of our sites
Sanofi industrial sites
We carry out our industrial production at 112 sites in nearly 40 countries (including 40 sites in emerging markets):
In 2012, we produced the following quantities:
We believe that our production plants and research facilities are in full compliance with all regulatory requirements, wellare properly maintained and are generally adequate to meet our needssuitable for the foreseeable future. However,future needs. Nonetheless, we review our productionregularly inspect and evaluate these facilities on a regular basis with regard to environmental, health, safety and security issues,matters, quality compliance and capacity utilization. Because our production lines are specific to a given product, and in many cases cannot be easily switched to another product, while our capacity utilization is considered appropriate as a whole, we are constantly adding capacity for products with increasing volumes while decreasing that of other lines facing reduced demand. See “— Capital Expenditures and Divestitures,” below. For more information about our property, plant and equipment, see Note D.3.D.3 to ourthe consolidated financial statements included at Item 18 of this annual report.statements.
Research and Development Sites for the Pharmaceutical Activity
Research and Development activities are housed at 25 sites:
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In Japan, Research & Development is represented in Tokyo;
In China, the main Research and Development operations are located in Shanghai, with a Clinical Research Unit in Beijing.
Industrial sites for the Pharmaceutical ActivitySites: Pharmaceuticals
Production of chemical and pharmaceutical products is the responsibility of theour Industrial Affairs Management,function, which is also in charge of most of our logistics facilities (distribution and storage centers).
We have 72 industrial sites worldwide. The sites where theour major sanofi-aventis drugs, active ingredients, specialties and medical devices are manufactured are:
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The rare diseases specialist Genzyme became a Sanofi Pasteur Sitessubsidiary in April 2011. This acquisition expanded our presence in biotechnologies, especially rare diseases. Genzyme manages 11 production sites and works with more than 20 subcontractors to manufacture 22 commercial products over a broad range of technological platforms.
Genzyme's sites are as follows:
Industrial Sites: Vaccines (Sanofi Pasteur)
The headquarters of our Vaccines division, sanofi pasteur,Sanofi Pasteur, are located in Lyon, France. Sanofi Pasteur’sPasteur has production and/or ResearchR&D sites at Swiftwater, Cambridge, Rockville, Canton and Development sites are located in Swiftwater, Cambridge*, Rockville* and Canton*Orlando (United States),; Toronto, (Canada),; Marcy l’Etoilel'Étoile, Neuville and Val de Reuil (France),; Shenzhen (China),; Pilar (Argentina),; Chachoengsao (Thailand),; Hyderabad (India); and Hyderabad (India).Ocoyoacac (Mexico.)
In May 2009, sanofi pasteur continued with its policywe began construction of reinforcing its presencea new vaccine manufacturing center at our Neuville-sur-Saône site in emerging marketsFrance. This €300 million investment, the largest ever made by acquiringSanofi, is intended to gradually transition the vaccinesexisting chemical activity of Shantha in India.to vaccine production from 2013 onwards.
In 2010, Sanofi Pasteur acquired VaxDesign, a U.S. company located in Orlando, Florida. VaxDesign's Modular IMmune In-vitro Construct (MIMIC®) System is designed to capture genetic and environmental diversity and predict human immune responses. The MIMIC® platform is expected to accelerate vaccine development, reduce time to market and increase success rates in the pre-clinical and clinical stages.
We own most of sanofi pasteur’s Sanofi Pasteur owns its Research and Development and production sites, either freehold or under finance leases with a purchase option exercisable at expiration.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 17 industrial sites in nine different countries, 9 R&D sites, and numerous administrative offices including its headquarters at Lyon, France.
Merial industrial sites are as follows:
Research & Development sites: Pharmaceuticals
Research and Development activities are conducted at 15 sites:
D.3. Acquisitions, Capital Expenditures and Divestitures
The Real Estate Departmentcarrying amount of our property, plant and equipment at December 31, 2012 was largely involved in the Zentiva combination project. 14 countries were impacted by the project : Bulgaria, the Czech Republic, Estonia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Turkey, Ukraine, and Uzbekistan. The objective of the combination process was to ensure that both Zentiva and sanofi-aventis staff were housed in the same office premises as soon as possible after the acquisition.
Because€10,578 million. During 2012, we intend to contribute Merial to a joint venture and consequently lose our exclusive controlinvested €1,351 million (see Note D.8.1D.3. to our consolidated financial statements, included at Item 18 of this annual report) we have not
included Merial sites in the discussion above notwithstanding the fact that on December 31, 2009, Merial was a wholly owned subsidiary of sanofi-aventis. Merial has approximately 15 industrial sites, 9 research and development sites and numerous administrative offices with its principal headquarters located at Lyon (France) and Duluth (Georgia).
The net book value of our property, plant and equipment at December 31, 2009 was €7,830 million. During 2009, we invested €1,353 million (see Note D.3. to the consolidated financial statements) in increasing capacity and improving productivity at our various production and R&D sites.
The Group’sOur principal capital expenditures and divestments for the years 2007, 2008divestitures in 2010, 2011 and 20092012 are set outdescribed in this annual report at “Item 5. Operating and Financial Review and Prospects — Divestments”, “— Acquisitions” and “— Liquidity and Capital Resources” andNotes D.1. ("Impact of changes in the notes to the consolidated financial statements (Note D.1.scope of consolidation"), Note D.2. ("Merial"), D.3. ("Property, plant and Noteequipment") and D.4. ("Goodwill and other intangible assets") to our consolidated financial statements, included at Item 18 of this annual report).report.
OurAs of December 31, 2012, our firm commitments in respect of future capital expenditures amounted to €323 million. The principal investments in progress are described below:
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We also startedsites involved were (for the conversion of our chemical sites to biotechnologies with a project to create a monoclonal antibody production facilityPharmaceuticals activity) the industrial facilities at the Vitry-sur-Seine site in France from 2012.
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The Vaccines activity invested in the construction of a state-of-the art research facility in Toronto (Canada); the creation of a new vaccines campus in Neuville (France): the construction of formulationFrankfurt (Germany), Framingham and filling facilities in Val de Reuil (France)Allston (United States), of a bacteriological bulk facility in Marcy l’ÉtoileVertolaye (France), and of bulk flu facilities in Shenzhen (China)Hungary; and Ocoyoacac (Mexico); andfor the completion of bulk and filling facilities inVaccines activity, the facility at Swiftwater (United States), mainly dedicated.
In the medium term and assuming no changes in the scope of consolidation, we expect to influenzainvest on average €1.4 billion a year in property, plant and meningitis vaccines.
Other investments related mainly to Research & Development sites.
equipment. We believe that our existingown cash resources and unusedthe undrawn portion of our existing credit facilities will be sufficient to financefund these investments. No individual capital expenditure or divestiture project is considered to be materialexpenditures.
Our principal ongoing investments are described below. During 2012, our industrial network actively contributed to the Groupdevelopment 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
East, 2012 saw Sanofi lay the foundation stone for a facility in Saudi Arabia that will produce solid pharmaceutical formulations, which will be marketed from 2015. In Latin America, where we already have a large industrial footprint, we are building a dedicated hormonal products facility in Brasilia. Also during 2012, the Ankleshwar Pharma site 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 for the local market. The Goa site (India) invested to extend its solid formulation production capacity to around 2.5 billion pills a year. And in Algeria, Sanofi signed an agreement with the local authorities for a major industrial investment that will lead to the construction of our biggest industrial complex in the Africa-Middle East region.
Vaccines (Sanofi Pasteur)
Sanofi Pasteur is undergoing a major investment phase, particularly 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 2012 and began production in time for the Mexican influenza vaccination program 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), Sanofi Pasteur initiated a compliance program to address the quality issues identified.
Animal Health (Merial)
Merial is adapting its industrial capacity to keep pace with the growing animal health market. In 2012, Merial acquired Newport Laboratories, which has an autogenous vaccine production facility at Worthington, Minnesota (United States). In China, Merial is investing in a new site in the Nanchang high-tech development zone, 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). At the Toulouse site (France), Merial is adapting its production capacity to new products by investing in a packaging line for use in the manufacturing ofCertifect® (compliant with European Union Good Manufacturing Practices (GMP), and approved by the U.S. Environmental Protection Agency) and in a building for the production of the injectable form of Zactran®.
Industrial innovation was a key theme in 2012. The fourth "Innovation Trophy" awards again illustrated the striking progress being made in this area, which we regard as a top priority in our industrial strategy. The2012 Pierre Potier Prize was awarded to the 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.
D.4. Office Space
As part of the rationalization of our office sites in the Paris region of France, we have since mid-2009 been carrying out a medium-term review of our office space master plan for the Greater Paris area.
This review will result in all our Group support functions and operating divisions being housed on a smaller number of sites (5 in 2012 on completion of phase 1, and 3 by 2015). All of these sites will meet environmental certification standards, and offer cost-effective space solutions.
Item 4A. Unresolved Staff Comments
N/A
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, 2009.2012.
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 figures in this item are given on a reported basis.
20092012 Overview
SinceDuring 2012, we continued to follow the startstrategic direction established in 2008 and to pursue the objectives for 2012-2015 announced in September 2011 and reiterated in February 2013. The thrust of 2009, we have been engaged in a wide-ranging transformation program designed to meet the challenges facing the pharmaceutical industry to make ourselvesthese objectives is fourfold: grow a global diversified healthcare leader with synergistic platforms, bring innovative products to market, seize value-enhancing growth opportunities, and deliver sustainable growth toadapt our business.structure for future challenges and opportunities.
In 2009, we once again delivered solid performancesOur 2012 full-year results were affected by the loss of exclusivity for Plavix® and Avapro® in a world market experiencing profound change. Ourthe United States in the first half, and by ongoing generic competition for our former flagship products. However, the erosion in our net sales forand profitability was cushioned by our growth platforms, the year were €29,306contribution from Genzyme, and tight cost control.
Our 2012 net sales reached €34,947 million, up 5.3%4.7% higher than in 2011 (0.5% at constant exchange rates, (1) relativesee definition at "— Presentation of Net Sales" below), driven mainly by the performance of the Emerging Markets, Diabetes, Vaccines, Consumer Health Care, Animal Health and Other Innovative Products growth platforms, by advances for the Generics business, and by the contribution from Genzyme (whose net sales have only been consolidated since April 2011). This performance was achieved in spite of the significant impact 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®. Milestones for our research efforts during 2012 included the launch of Zaltrap® (metastatic colorectal cancer) and Aubagio® (multiple sclerosis) in the United States.
The ongoing realignment of our resources cut research and development expenses by 0.4% and limited the rise in selling and general expenses to 2008 and up 6.3%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, with strong performances from our Emerging Markets, Diabetes, Human Vaccinesmainly due to the loss of exclusivity for Plavix® and Consumer Health Care growth platforms more than offsetting the impact of genericization of Eloxatine®Avapro® in the United States and Plavix® in Europe. Other highlights of 2009 included the launch of Multaq® in the United States, and its approval in the European Union.
The ongoing adaptation of our structures and resources was reflected in a further improvement in our operating ratios. The ratio of research and development expenses to net sales improvedcompetition from 16.6% in 2008 to 15.6% in 2009, while the ratio of selling and general expenses to sales fell from 26.0% to 25.0% over the same period. In 2009, the initial benefits of our cost management program were reflected in €480 million of cost savings compared to 2008. Our transformation program is intended to improve the efficiency of our operations, with a target of €2 billion of recurring pre-tax and pre-inflation cost savings in 2013 relative to 2008.
Business net income totaled €8,629 million in 2009 (18.0% higher than in 2008) due to growth in our sales and control over operating costs, plus favorable trends in the U.S. dollar exchange rate over the period.generics. Business earnings per share were €6.61, 18.2% up on the 2008 figure.was €6.20, 6.8% lower than in 2011. 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 at “—"— Business Net Income,”Income" below.
Net income attributable to equity holders of the CompanySanofi came to €4,967 million, down 12.8% on 2011. Basic earnings per share amounted to €3.76, also 12.8% lower than in 2011; diluted earnings per share for 2009 was €5,265 million, up 36.7% from the 2008 figure.2012 were €3.74 (12.8% lower).
During 2009,2012, we deployedcontinued with our strategy of focusing on reorganizing our research efforts and redefining our R&D programs; building on the positions we have acquired in emerging markets; and reinforcing our operations in Vaccines, Consumer Health Care, Generics and Animal Health.
We pursued an active policy of targeted acquisitions and of alliances in research and development (“R&D”) alliances during 2009.
development. In Pharmaceuticals,Generics, we successfully completed our offer for Zentiva N.V., a branded generics group with products tailored to the Eastern and Central European markets. A number of other companies were acquired, including Laboratorios Kendrick, one of the leading manufacturers of genericsannounced in Mexico; Medley, the leading generics company in Brazil; BiPar Sciences, Inc., a U.S. biopharmaceutical company developing novel tumorselective approaches for the treatment of different types of cancers; Fovea Pharmaceuticals SA, a French biopharmaceutical R&D company specializing in ophthalmology; and Laboratoire Oenobiol, one of France’s leading players in health and beauty dietary supplements. At the end of the year,October 2012 that we finalizedhad signed an agreement to acquire Chattem,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. (“Chattem”), one of the leading manufacturers and distributors of branded consumer health care products, toiletries and dietary supplements in the United States.
In Human Vaccines, we took control of Shantha Biotechnics, an Indian biotechnology company that develops, produces and markets vaccines in accordance with international standards.
April 2012. We have significantly reinforcedstrengthened our presence in 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 acquiringentering into an agreement to acquire the remaining 50% of Merial Limited not already held by us. On March 8, 2010, sanofi-aventis exercised its contractual right to combine the Intervet/Schering-Plough Animal Health business with Merial to form an animal health joint venturedivision of Dosch Pharmaceuticals Pvt Ltd that would be equally owned bywill give Merial an entry point into the new Merck
Indian market. We also entered into various alliances and sanofi-aventis. In additionlicensing deals to execution of final agreements, formation of the new animal health joint venture remains subject to approval by the relevant competition authorities and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial” and Notes D.1 and D.8.1 to our consolidated financial statements included at Item 18 of this annual report).
We have also signed a number of alliance and in-licensing agreements, with partners such as Kyowa Hakko Kirin Co. Ltd; Exelixis, Inc.; Merrimack Pharmaceuticals, Inc.; Wellstat Therapeutics Corporation; Micromet, Inc.; and Alopexx Pharmaceuticals LLC. These agreements enable us to gain access to new technologiesextend or to strengthen our existing research fields. We also signed agreements
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 Regeneron Pharmaceuticals, Inc.our desire to broadenfocus on strategic activities.
As of December 31, 2012, we had reduced our debt, net of cash and extendcash 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 duration2012 fiscal year, representing a payout equivalent to 45% of our existing collaboration,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 research, developmentsavings will be reinvested in product launches and commercialization of fully human therapeutic monoclonal antibodies.late-stage clinical trials.
Our operations generate significant cash flow. We recorded €8,515€8,171 million of net cash provided by operating activities in 20092012 compared to €8,523€9,319 million in 2008.2011. During the course of 2009,2012, we paid out €2.9€3.5 billion in dividends and fundedrepaid part of the cost of our acquisitions by contracting new debt. In terms ofWith respect to our financial position, we ended 20092012 with our debt, net of cash and cash equivalents (meaning the sum of short-term debt(see definition at "— Liquidity and long-term debt less cash and cash equivalents)Capital Resources" below) at €4.1 billion (2008: €1.8 billion)€7,719 million (2011: €10,859 million). Debt, net of cash and cash equivalents, is a financial indicator that is used by management and investors to measure the Company’sCompany's overall net indebtedness and to manage the Group's equity capital. In order to assess the Company’sCompany's financing risk, we also use a "gearing ratio", a non-GAAP financial measure, that we define as measured by its gearingthe ratio (debt,of debt, net of cash and cash equivalents, to total equity). Theequity. Our gearing ratio stood at 8.5%was 13.4% at the end of 20092012 versus 3.9%19.3% at the end of 2008.2011. See “—"— Liquidity and Capital ResourcesResources" below.
Impacts from generic competition
Some of our flagship products continued to experience sales erosion in 2012 due to generic competition. While we do not believe it is possible to state with certainty what level of net sales would have been achieved in the absence of generic competition, we are able to estimate the impact of generic competition for each product.
A comparison of our net sales for the years ended December 31, 2012 and 2011 (see "— Results of Operations — Consolidated Balance SheetYear Ended December 31, 2012 Compared with Year Ended December 31, 2011") shows that competition from generics was associated with a decline of €1.2 billion in net sales in 2012 (or €1.3 billion at constant exchange rates). The table below shows the impact by product.
(€ 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 from generic competition to continue in 2013, with a negative impact on net income. The following products are expected to be impacted by generics in 2013:
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, aggregate consolidated net sales generated by all the 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 €1,221 million in the U.S., €880 million in Europe and €
895 million in Japan (Allegra®, Myslee® and Taxotere®). The negative impact on our 2013 net sales is liable to represent a substantial portion of this amount, but the actual impact will depend on a number of factors such as the actual launch dates of generic products in 2013, 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 (primarily the acquisition of Aventis in 2004)
Our results of operations and financial condition for the years ended December 31, 2009,2012, December 31, 20082011 and December 31, 20072010 have been significantly affected by our August 2004 acquisition of Aventis and certain subsequent transactions.transactions, mainly our acquisition of Genzyme on April 4, 2011.
The Aventis acquisition gavehas given rise to significant amortization (€3,1751,489 million in 2009, €3,2982012, €1,788 million in 20082011, and €3,511€3,070 million in 2007)2010) and impairmentsimpairment of intangible assets (€344(reversals of €12 million in 2009, €1,4862012 and of €34 million in 20082011, and €58charges of €127 million in 2007)2010). 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 impactpurchase accounting effects of theseall acquisitions and certain other items, we use as an evaluation tool 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”Income" below. For consistency of application of this principle, business net income also takes into account the impact of our subsequent acquisitions.
Business net income for the years ended December 31, 2009, 20082012, 2011 and 20072010 is presented in “—"— Business Net Income”Income" below.
Sources of Revenues and Expenses
Revenue 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 the arrangements governing those alliances. For more information about our alliances, see “—"— Financial Presentation of Alliances”Alliances" below. When we sell products 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 SalesSales.. Our cost of sales consists primarily of the cost of purchasing 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 distribute products that are patented by other companies and license agreements under which other companies distribute products that we have patented. When we pay royalties, we record them in cost of sales, and when we receive royalties, we record them in “Other revenues”"Other revenues" as discussed above.
Operating IncomeIncome.. 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. We also present our operating income before restructuring, impairment of property, plant and equipment and intangibles, gains and losses on disposals and litigation, which appears on the face of our financial statements in accordance with IFRS, and which reflects our operating income before the impact of a number of items that do not reflect the results of our current business activities. For our business 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
BusinessOperating Segments
In accordance with IFRS 8 “Business"Operating Segments,”" we have defined our segments as “Pharmaceuticals”"Pharmaceuticals", "Human Vaccines" (Vaccines) and “Human Vaccines” (Vaccines)"Animal Health". Our other identified segments are categorized as “Other”"Other".
The Pharmaceuticals segment includes ourcovers research, development, production and salesmarketing of medicines, including activities relating to pharmaceuticalacquired with Genzyme. Sanofi's pharmaceuticals portfolio consists of flagship products, includingplus a broad range of prescription medicines, generic medicines, and consumer health care and generic products. This segment also includes equity affiliatesall associates and joint ventures with pharmaceutical businesswhose activities includingare related to pharmaceuticals, in particular the entities that are majority-heldmajority owned by BMS. See “—"— Financial Presentation of Alliances.”Alliances" below.
The Vaccines segment includes ouris wholly dedicated to vaccines, including research, development, production and sales activities relating to human vaccines.marketing. This segment also includes our Sanofi Pasteur MSD joint venture.venture with Merck & Co., Inc. in Europe.
The Animal Health segment comprises the research, development, production and marketing activities of Merial, which offers a complete range of medicines and vaccines for a wide variety of animal species.
The Other segment includes all segmentsactivities that aredo not qualify as reportable segments under IFRS 8 including in"Operating Segments". In particular, this segment included our interest in the Groupe Yves Rocher group until the date of loss of significant influence (November 2011) (see note D.6. to our animal health business (Merial) andconsolidated financial statements included at Item 18 of this annual report); it also includes the impacteffects of our retained liabilitiescommitments in connection with businesses that we have sold.respect of divested businesses.
Inter-segment transactions are not significant.material.
Business Operating Income of Segments
We measure thereport segment results of operations of our business segments on the basis of “Business"Business Operating Income,” a performance measure that weIncome". This indicator, adopted in accordancecompliance with IFRS 8. Our chief operating decision-maker uses Business Operating Income8, is used internally to evaluate themeasure operational performance of our operating managers and to allocate resources.
“Business"Business Operating Income”Income" is equal to “Operating income before restructuring, impairmentderived from "Operating income", adjusted as follows:
litigation" are eliminated;
The following tables presenttable presents our business operating incomeBusiness 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 to our Income before tax and associates and joint ventures for the years ended December 31, 20092012, 2011 and 2008.2010:
2009 | ||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||||||
Net sales | 25,823 | 3,483 | — | 29,306 | ||||||||
Other revenues | 1,412 | 31 | — | 1,443 | ||||||||
Cost of sales | (6,527 | ) | (1,326 | ) | — | (7,853 | ) | |||||
Research and development expenses | (4,091 | ) | (491 | ) | (1 | ) | (4,583 | ) | ||||
Selling and general expenses | (6,762 | ) | (561 | ) | (2 | ) | (7,325 | ) | ||||
Other operating income and expenses | 387 | (3 | ) | 1 | 385 | |||||||
Share of profit/loss of associates excluding Merial (1) | 792 | 41 | 8 | 841 | ||||||||
Share of profit/loss of Merial (1) | — | — | 241 | 241 | ||||||||
Net income attributable to minority interests | (426 | ) | (1 | ) | — | (427 | ) | |||||
Business operating income | 10,608 | 1,173 | 247 | 12,028 | ||||||||
|
2008 | ||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Others | Total | ||||||||
Net sales | 24,707 | 2,861 | — | �� | 27,568 | |||||||
Other revenues | 1,208 | 41 | — | 1,249 | ||||||||
Cost of sales | (6,231 | ) | (1,104 | ) | — | (7,335 | ) | |||||
Research and development expenses | (4,150 | ) | (425 | ) | — | (4,575 | ) | |||||
Selling and general expenses | (6,662 | ) | (520 | ) | 14 | (7,168 | ) | |||||
Other operating income and expenses | 297 | 1 | (95 | ) | 203 | |||||||
Share of profit/loss of associates excluding Merial (1) | 671 | 28 | 21 | 720 | ||||||||
Share of profit/loss of Merial (1) | — | — | 170 | 170 | ||||||||
Net income attributable to minority interests | (441 | ) | — | — | (441 | ) | ||||||
Business operating income | 9,399 | 882 | 110 | 10,391 | ||||||||
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(€ million) | Year Ended December 31, 2012 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | |||||||
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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 Net Income”"business net 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 businessoperating segments, less net financial expenses and the relevant income tax charges.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’sinvestor's understanding of trends in our dividend policy is enhanced by disclosing business net income.
We have also decided to report “Business Earnings"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 the Company”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)associates and joint ventures); (iv)(v) restructuring costs;
costs (including restructuring costs relating to associates and joint ventures); (vi) other gains and losses, on disposalsand litigation; (vii) the impact of non-current assets; costs or provisions associatedthe non-depreciation of the property, plant and equipment of Merial starting September 18, 2009 and continuing through 2010 (in accordance with litigation; (v)IFRS 5); (viii) the tax effect related to the items listed in (i) through (iv)(vii); as well as (vi)(ix) effects of major tax disputes and, (vii)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 minoritynon-controlling interests onin items (i) through (vi)(ix). Items listed in (iv)(i), (ii), (iii), (v) and (vi) correspond to those reported in the income statement line items “Restructuring costs”"Amortization of intangible assets", "Impairment of intangible assets", "Fair value remeasurement of contingent consideration liabilities", "Restructuring costs" and “Gains"Other gains and losses, on disposals, and litigation”litigation", which areas defined in NoteNotes B.19. and B.20. to our consolidated financial statements.
The following table reconciles our business net income to our Net income attributable to equity holders of the CompanySanofi for the years ended December 31, 2009, 20082012, 2011 and 2007:2010:
(€ million) | | 2012 | 2011 | 2010 | ||||||||
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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 | |||||||||
The following table sets forth the calculation of our business net income for the years ended December 31, 2012, 2011 and 2010:
(€ million) | 2009 | 2008 | 2007 | ||||||
Business net income | 8,629 | 7,314 | 7,060 | ||||||
(i) amortization of intangible assets | (3,528 | ) | (3,483 | ) | (3,654 | ) | |||
(ii) impairment of intangible assets | (372 | ) | (1,554 | ) | (58 | ) | |||
(iii) expenses arising on the workdown of acquired inventories(1) | (27 | ) | (2 | ) | — | ||||
(iv) restructuring costs | (1,080 | ) | (585 | ) | (137 | ) | |||
(iii)/(iv) other items(2) | — | 114 | (61 | ) | |||||
(v) tax effect on the items listed above | 1,629 | 1,904 | 1,939 | ||||||
(iii)/(vi) other tax items(3) | 106 | 221 | 337 | ||||||
(vii) share of minority interests on the items listed above | 1 | — | — | ||||||
(iii) expenses arising from the impact of the Merial acquisition(4) | (66 | ) | (50 | ) | (30 | ) | |||
(iii) expenses arising from the impact of acquisitions on associates(5) | (27 | ) | (28 | ) | (133 | ) | |||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | ||||||
(1) Expenses arising from the impacts of acquisitions on inventories: workdown of inventories remeasured at fair value at the acquisition date. |
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(2) Other items comprise: |
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- harmonization of welfare and healthcare plans for retirees | (61 | ) | |||||||
- gain on sale of investment in Millennium | 38 | ||||||||
- reversal of provisions for major litigation | 76 | ||||||||
(3) Other tax items comprise: | |||||||||
- net charge to/(reversal of) provisions for tax exposures | 221 | 337 | |||||||
- reversal of deferred taxes following ratification of the Franco-American Treaty (see Note D.30. to our consolidated financial statements) | 106 | ||||||||
(4) This line item comprises: until September 17, 2009, amortization and impairment charged against the intangible assets of Merial; and from September 18, 2009 (i) the impact of the discontinuation of depreciation of the property, plant and equipment of Merial in accordance with IFRS 5 (see Note B.7. to our consolidated financial statements) and (ii) the expense arising from the workdown of inventories remeasured at fair value at acquisition date. |
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(5) Expenses arising from the impacts of acquisitions on associates: workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill. |
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(€ million) | 2012 | 2011 | 2010 | |||||||
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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 above relate to the purchase accounting effect of our acquisitions, particularly the amortization and impairment of intangible assets such as acquired research and development.assets. 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:
We believe (subject to the limitations described below) that disclosing business net income enhances the comparability of our operating performance, for the following reasons:
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 the CompanySanofi 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 the CompanySanofi in evaluating our performance, as described below:
paid for certain intangible assets that we have acquired through acquisitions. For example, in connection with our acquisition of Aventis in 2004, we paid an aggregate of €31,279 million for these amortizable intangible assets (which, in general, were to be amortized over their useful lives, representing an average amortization period of eight years) and €5,007 million for in-progress research & development. More recently, in connection with our acquisition of Genzyme in April 2011, we paid an aggregate of €7,877 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.
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We compensate for the above-described material limitations by using business net income only to supplement our IFRS financial reporting and by ensuring that our disclosures provide sufficient information for a full understanding of all adjustments included in business net income. In addition, subject to applicable law, we may in the future decide to report additional non-GAAP financial measures which, in combination with business net income, may compensate further for some of the material limitations described above.
In determining the level of future dividend payments, and in analyzing dividend policy on the basis of business net income, our management intends to take into account the fact that many of the adjustments reflected in business net income have no effect on the underlying amount of cash available to pay dividends. However,
although the adjustments relating to the elimination of the effect of the purchase accounting treatment of the Aventis acquisition and other acquisitions represent non-cash charges, the adjustments relating to integration and restructuring costs represent significant cash charges in the periods immediately following the closing of the acquisition.
This Item 5 contains a discussion and analysis of business net income on the basis of consolidated financial data. Because our business net income is not a standardized measure, it may not be comparable with the non-GAAP financial measures of other companies using the same or a similar non-GAAP financial measure.
Presentation of Net Sales
In the discussion below, we present our consolidated net sales for 2009, 20082012, 2011 and 2007.2010. We break down our net sales among various categories, such asincluding by business segment, product and geographic region. We refer to our consolidated net sales as “reported”"reported" sales.
In addition to reported sales, we analyze non-GAAP financial measures designed to isolate the impact on our net sales of currency exchange rates and changes in group structure. In 2009, we changed our method of isolating these factors, so that the measures we use for purposes of comparing our net sales in 2009 and 2008 are not the same as the measures we use for purposes of comparing our net sales in 2008 and 2007. For the years ended December 31, 2009 and December 31, 2008, we adjust net sales for changes in exchange rates by applying the exchange rates used for the year ended December 31, 2008 to net sales for the year ended December 31, 2009. As more fully explained below, in our comparison of the years ended December 31, 2008 and December 31, 2007, we adjust net sales by applying exchange rates used for the year ended December 31, 2008 to the net sales for the year ended December 31, 2007. As a result, we use 2008 exchange rates for 2009 and for 2007. Using prior period exchange rates rather than current period exchange rates could modify the result of the calculations of our net sales at constant exchange rates, impacting the sales growth information presented below. This impact could be either positive or negative depending on the currency mix of our net sales for each year.
Years ended December 31, 2009 and 2008
For the years ended December 31, 2009 and December 31, 2008, whenWhen we refer to changes in our net sales “at"at constant exchange rates”rates", we exclude the effect of exchange rates by recalculating net sales for the year ended December 31, 2009relevant period using the exchange rates that were used for the year ended December 31, 2008.previous period. See Note B.2 to our consolidated financial statements for further information relating to the manner in which we translate into euros transactions recorded in other currencies.
When we refer to our net sales on a “constant"constant structure basis”basis", we eliminate the effect of changes in structure by restating the net sales for the previous period (i.e., in this case 2008) as follows:
A reconciliation of our reported net sales to our net sales at constant exchange rates and on a constant structure basis is provided at “—"— Results of Operations — Year Ended December 31, 20092012 Compared with Year Ended December 31, 20082011 — Net Sales” below.
Years ended December 31, 2008Sales" and 2007
For the years ended December 31, 2008 and December 31, 2007, we present and discuss net sales on a comparable basis, a non-GAAP financial measure. When we refer to the change in our net sales on a “comparable” basis, we mean that we exclude the impact of exchange rate fluctuations and changes in our Group structure (due to acquisitions and divestitures of entities and rights to products, and changes in the consolidation
percentage or method for consolidated entities). In contrast to our comparison of 2009 and 2008, where we isolate the impact of changes in exchange rates and changes in structure separately, we generally isolate the two impacts jointly in our discussion of comparable sales in 2008 and 2007.
With respect to the discussion of net sales for the year ended December 31, 2008 and December 31, 2007, we exclude the impact of exchange rates by recalculating net sales for the year ended December 31, 2007 on the basis of exchange rates used for the year ended December 31, 2008.
We exclude the impact of acquisitions, consolidations, divestitures and changes in consolidation method in the same manner as described above for 2009 and 2008.
A reconciliation of our reported net sales to our comparable net sales is provided at “—"— Results of Operations — Year Ended December 31, 20082011 Compared with Year Ended December 31, 20072010 — 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”Operations — Year Ended December 31, 2012 Compared with Year Ended December 31, 2011" and "— Year Ended December 31, 2011 Compared with Year Ended December 31, 2010", in particular in “—"— Net sales”sales", “—"— Other Revenues”Revenues", “—"— Share of Profit/Loss of Associates”Associates and “—Joint Ventures" and "— Net Income Attributable to Minority Interests”Non-Controlling Interests".
Alliance Arrangements with Bristol-Myers Squibb (“BMS”)
Our revenues, expenses and operating income are affected significantly by the presentation of our alliance with BMSBristol-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.
There 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:
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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:
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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®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®Plavix® in Japan, which is marketed by sanofi-aventis.
Sanofi.
Territory under our operational managementmanagement.. In the territory under our operational management, the marketing arrangements and recognition of operations by the Group are as follows:
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Territory under BMS operational managementmanagement.. In the territory under BMS operational management, the marketing arrangements and recognition of operations by the Group are as follows:
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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”"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®. We expanded our relationship in 2007 and created a strategic R&D collaboration on fully human monoclonal antibodies.
Collaboration agreement on Zaltrap® (aflibercept)
Zaltrap® (aflibercept) is a solution administered by intravenous perfusion, used in association with 5-fluorouracil, leucovorin and irinotecan (FOLFIRI) as a treatment for metastatic colorectal cancer that is resistant to or has progressed following an oxaliplatin-containing regimen.
In September 2003, Sanofi and Regeneron signed an agreement to collaborate on the development and commercialization of Zaltrap®. Under the terms of this agreement (as amended in 2005), Sanofi is responsible for funding 100% of the development costs, co-promotion rights are shared between Sanofi and Regeneron, and the profits generated from sales of Zaltrap® worldwide (except Japan) are shared equally. Sales of Zaltrap® made by subsidiaries under the control of Sanofi are recognized in consolidated net sales, and the associated costs incurred by those subsidiaries are recognized as operating expenses in the consolidated income statement. Regeneron's share of the profits is recognized in the line item "Other operating expenses", a component of operating income.
Under the terms of the same agreement, Regeneron agreed to repay 50% of the development costs initially funded by Sanofi. Contractually, this amount represents 5% of the residual repayment obligation per quarter, but may not exceed Regeneron's profit share for the quarter unless Regeneron voluntarily decides to make a larger payment in a given quarter.
The agreement also stipulates milestone payments to be made by Sanofi on receipt of specified marketing approvals for Zaltrap® in the United States, within the European Union and in Japan.
In the United States, Zaltrap® is a registered trademark of Regeneron Pharmaceuticals, Inc. The product was approved by the U.S. Food and Drug Administration ("FDA") in August 2012, and has been marketed in the United States since that date. On February 5, 2013, the European Commission granted marketing authorization in the European Union for Zaltrap®. Regeneron has not elected to co-promote Zaltrap® at launch in the major market countries defined as United States, France, Italy, Spain, United Kingdom, Germany and Canada.
In Japan, Sanofi will develop and commercialize Zaltrap®, with Regeneron entitled to receive a royalty.
Collaboration agreement on the discovery, development and commercialization of human therapeutic antibodies
In November 2007, Sanofi and Regeneron signed additional agreements under which Sanofi committed to funding the development costs of Regeneron's human monoclonal antibody research program until 2017, up to a maximum of $160 million a year (see Note D.21. to our consolidated financial statements included at Item 18 of this annual report). Sanofi has an option to license for further development any antibodies discovered by Regeneron that attain Investigational New Drug (IND) status.
If such an option is exercised, Sanofi is primarily responsible for funding, and co-develops the antibody with Regeneron. Sanofi and Regeneron would share co-promotion rights and profits on sales of the co-developed antibodies. Development costs for the drug candidate are shared between the companies, with Sanofi generally funding these costs up front, except that following receipt of the first positive Phase III trial results for a co-developed drug candidate, subsequent Phase III trial-related costs for that drug candidate are shared 80% by Sanofi and 20% by Regeneron. Once a product begins to be marketed, Regeneron will progressively repay out of its profits 50% of the development costs borne 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 products in any calendar quarter towards reimbursing Sanofi for these development costs. Under the terms of the collaboration agreement, Sanofi may also be required to make milestone payments based on aggregate sales of antibodies. In 2012, six antibodies were in clinical development; two of which were in Phase III.
If Sanofi does not exercise its licensing option for an antibody under development, Sanofi will be entitled to receive a royalty once the antibody begins to be marketed.
Alliance arrangements with Warner Chilcott (previously with Procter & Gamble Pharmaceuticals)
Our agreement with Warner Chilcott (“("the Alliance Partner”Partner") covers the worldwide development and marketing arrangements of Actonel®Actonel®, except Japan for which we hold no rights. Until October 30, 2009, this agreement was between sanofi-aventisSanofi and Procter & Gamble Pharmaceuticals (P&G). Since the sale by P&G of its pharmaceutical business to Warner Chilcott on October 30, 2009, Actonel®Actonel® has been marketed in collaboration with Warner Chilcott. The local marketing arrangements may take various forms.
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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 British pound, 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 2009,2012, we earned 32.2%31.1% of our net sales in the United States. A decrease in the value of the U.S. dollar against the euro has a negative impact on our revenues, which is not offset by an equal reduction in our costs and therefore negatively affects our operating income. A decrease in the value of the U.S. dollar has a particularly significant impact on our operating income, which is higher in the United States than elsewhere, and on the contribution to net income of our alliance with BMS in the United States, which is
under the operational management of BMS, as described at “—"— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb”Squibb" above.
For a description of positions entered into to manage operational foreign exchange rate risks as well as our hedging policy, see “Item"Item 11. Quantitative and Qualitative Disclosures about Market Risk”Risk", and “Item 3.D."Item 3. Key Information — D. Risk factorsFactors — Risks Related to Financial Markets — Fluctuations in currency exchange rates could adversely affect our results of operations and financial conditions”condition".
Divestments
In August 2012, Sanofi sold its 39.1% interest in Société Financière des Laboratoires de Cosmétologie Yves Rocher, in line with the Group's desire to focus on strategic activities.
In December 2011 Sanofi sold the Dermik dermatology business to Valeant Pharmaceuticals International Inc., for €321 million (see Note D.1.3. to our consolidated financial statements included at Item 18 of this annual report).
There were no material divestments during 2009, 2008 or 2007.
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.
On September 17, 2009, and further to the agreement signed on July 29, 2009, sanofi-aventis 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 interest heldbovine and swine markets.
The impact of these two acquisitions on our consolidated financial statements is not material.
In October 2012, Sanofi signed an agreement to acquire Genfar S.A. (Genfar), a Colombian pharmaceutical company that is a major player in Colombia and other countries in Latin America. Genfar is the second-largest generics manufacturer in Colombia by Merck & Co., Inc. (“Merck”) in Merial Limited (“Merial”) for considerationsales, and the leader by volumes sold. Closing of $4 billion in cash. Founded in 1997, Merial was previously held jointly (50/50) by Merck and sanofi-aventis,the deal is subject to certain conditions, and is now 100% held by sanofi-aventis.expected to take place in the first quarter of 2013.
In December 2012, Sanofi announced that an agreement had been reached to acquire the animal health division of Dosch Pharmaceuticals Pvt Ltd, an Indian company, allowing Merial is oneto enter this strategic animal health market. Closing of the world’s leading animal health companies, with salesdeal is subject to regulatory approval, and is expected to take place during the first half of $2.6 billion in 2009. With effect from September 17, 2009, sanofi-aventis has held2013.
In February 2011, Sanofi completed the acquisition of 100% of the sharesshare capital of MerialBMP Sunstone Corporation (BMP Sunstone), a pharmaceutical company that develops a portfolio of branded pharmaceutical and has exercised exclusive control over the company. In accordance with IAS 27, Merial is accounted for by the full consolidation methodhealthcare products in the consolidated financial statements of sanofi-aventis.
In connection with the agreement signed on July 29, 2009, sanofi-aventis also signed an option contract giving it the possibility, once the Merck/Schering-Plough merger is complete, to combine the Merck-owned Intervet/Schering-Plough Animal Health with Merial in a joint venture to be held 50/50 by Merck and sanofi-aventis. The terms of the option contract set a value of $8 billion for Merial. The minimum total value received by Merck and its subsidiaries in consideration for the transfer of Intervet/Schering-Plough to the combined entity would be $9.25 billion, comprising a minimum value of $8.5 billion for Intervet/Schering-Plough (subject to potential upward revision after valuations performed by the two parties) and additional consideration of $750 million. On completion of the valuation of Intervet/Schering-Plough and after taking account of certain adjustments customary in this type of transaction, a balancing payment would be made to establish 50/50 parity between Merck and sanofi-aventis in the combined entity.
Because of the high probability of the option being exercised as of year end 2009, Merial was treated as an asset held for sale or exchange pursuant to IFRS 5 as of December 31, 2009. On March 8, 2010, sanofi-aventis did in fact exercise its contractual right to combine the Intervet/Schering-Plough Animal Health business with Merial. In addition to execution of final agreements, formation of the new animal health joint venture remains subject to approval by the relevant competition authorities and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial”). Detailed information about the impact of Merial on the consolidated financial statements of sanofi-aventis is provided in “Note D.8. — Assets held for sale or exchange”China. See Note D.1.2. to our consolidated financial statements included at Item 18 of this annual report.
On March 11, 2009, sanofi-aventis successfully concluded itsIn April 2011, Sanofi acquired Genzyme Corporation (Genzyme), a major biotechnology company headquartered in Cambridge, Massachussets (United States), with primary areas of focus in rare diseases, renal endocrinology, oncology and biosurgery. The transaction was completed in accordance with the terms of the public exchange offer for Zentiva N.V. (“Zentiva”). Asat a price of December 31, 2009, sanofi-aventis held approximately 99.1%$74 in cash plus the issuance to Genzyme shareholders of Zentiva’s share capital.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 €1,200 million, including acquisition costs. The Zentiva Group reported netmade on completion of the transaction. According to the agreement, future milestone payments may be made upon market approval and depending on the achievement of sales of €735 million in 2008 and has generated net sales of €457 million since the acquisition date.targets. See Note D.1.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.
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.
On March 31, 2009, sanofi-aventis In February 2010, Sanofi acquired Laboratorios Kendrick, onethe U.S.-based company Chattem, Inc. (Chattem) by successfully completing a cash tender offer leading to the acquisition of Mexico’s leading manufacturers of generics, with sales of approximately €26 million in 2008.
On April 27, 2009, sanofi-aventis acquired 100% of the shares of Medley, Brazil’s third largest pharmaceutical company andshare capital. Chattem is a leading generics company, with net sales of approximately €160 million in 2008 (more than two thirds of which were in generics) and €163 million in 2009 since the acquisition date. The purchase price, based on a €500 million enterprise value, was €348 million inclusive of acquisition-related costs.
On April 27, 2009 sanofi-aventis acquired 100% of BiPar Sciences, Inc. (“BiPar”), a U.S. biopharmaceutical company developing novel tumor-selective approaches for the treatment of different types of cancers. BiPar is the leading companymajor consumer health player in the emerging field of DNA (deoxyribonucleic acid) repair using Poly ADP-Ribose Polymerase (PARP) inhibitors. The pivotal Phase III trialUnited 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 BSI-201, BiPar’s lead product candidateSanofi over-the-counter and consumer healthcare products in metastatic triple negative breast cancer, started in July 2009. The purchase price is contingent on the achievement (regarded as probable) of milestones related to the development of BSI-201, and could reach $500 million.United States. See Notes D.1. and D.21.Note D.1.4. to our consolidated financial statements included at Item 18 of this annual report.
On August 31, 2009, sanofi-aventis took controlIn April 2010, Sanofi acquired a controlling interest in the capital of Shantha Biotechnics (Shantha),Bioton Vostok, a biotechnology company based in Hyderabad (India), which develops, manufactures and markets several important vaccinesRussian insulin manufacturer. Under the terms of the agreement, put options were granted to international standards. Shantha generated net sales of approximately €50 million in 2009. The purchase price amounted to €571 million. As of December 31, 2009, sanofi-aventis held approximately 95% of Shantha.non-controlling interests. See Note D.1.D.18. to our consolidated financial statements included at Item 18 of this annual report.
On October 30, 2009, sanofi-aventis took 100% control of FoveaIn May 2010, Sanofi formed a new joint venture with Nichi-Iko Pharmaceuticals SA. (Fovea)Co., Ltd (Nichi-Iko), a privately-owned Frenchleading 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 specializing in ophthalmology. Created in 2005 in Paris, Fovea has a portfoliodeveloping small molecule kinase inhibitors for the treatment of three clinical compounds, a unique technology platformcertain forms of leukemia, lymphoma and several discovery programs dedicated to back of the eye diseases. Under the terms of the agreement, sanofi-aventis has agreed to purchase Fovea for a total enterprise value of up to €370 million, including an immediateother hematological malignancies and blood disorders. An upfront payment of €90$75 million and subsequentwas made on completion of the transaction. Future milestone payments related tomay be made at various stages in the three clinical compounds.
On November 30, 2009, sanofi-aventis completeddevelopment of TG 101348, TargeGen's principal product candidate. The total amount of payments (including the acquisition of Laboratoire Oenobiol, one of France’s leading players in health and beauty dietary supplements.
The principal acquisitions during 2008 are described below:
On September 25, 2008, sanofi-aventis completed the acquisition of Acambis plc for £285 million. Acambis plc became Sanofi Pasteur Holding Ltd, a wholly-owned subsidiary of Sanofi Pasteur Holding SA. This company develops novel vaccines that address unmet medical needs or substantially improve current standards of care. Sanofi Pasteur and Acambis plc were already developing vaccines in a successful partnership of more than a decade: Acambis plc was conducting three of its major projects under exclusive collaboration agreements with sanofi pasteur, for vaccines against dengue, Japanese Encephalitis and West Nile virus. See Note D.1. to our consolidated financial statements included at Item 18 of this annual report.
On September 1, 2008, sanofi-aventis completed the acquisition of the Australian company Symbion CP Holdings Pty Ltd (Symbion Consumer) for AUD560 million. Symbion Consumer manufactures, markets and distributes nutraceuticals (vitamins and mineral supplements) and over the counter brands throughout Australia and New Zealand. Symbion Consumer has a portfolio of brands including Natures Own, Cenovis, Bio-organics, Golden Glow and Microgenics. In 2007, Symbion Consumer sales amounted to approximately AUD190upfront payment) could reach $560 million. See Note D.1.D.1.4. and Note D.18. to our consolidated financial statements included at Item 18 of this annual report.
The principal acquisitions during 2007 are described below:
In June 2007, sanofi-aventis bought preferred shares representingAugust 2010, Sanofi acquired 100% of the share capital of Nepentes S.A. (Nepentes), a financial interestPolish manufacturer of 36.7% in Carderm Capital LPpharmaceuticals and dermocosmetics, for $250 million.a consideration of PLN 425 million (€106 million).
In November 2007, sanofi-aventisOctober 2010, Sanofi Pasteur acquired 12100% 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 newly-issued shareswas 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 biopharmaceuticalChinese consumer healthcare company Regeneron Pharmaceuticals for $312 million, raising its interestHangzhou Sanofi Minsheng Consumer Healthcare Co. Ltd, in Regeneron from approximately 4% to approximately 19%partnership with Minsheng Pharmaceutical Co., Ltd ("Minsheng"). TheseMinsheng was also granted a put option over the remaining shares are classified as an available-for-sale financial asset, and are included in “Financial assets — non-current” (seenot held by Sanofi. See Note D.7.D.18. to our consolidated financial statements included at Item 18).18 of this annual report.
Results of Operations
Year Ended December 31, 20092012 Compared with Year Ended December 31, 20082011
The consolidated income statements for the years ended December 31, 20092012 and December 31, 20082011 break down as follows:
(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 | |||||||||||
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.
(under IFRS) | 2009 | 2008 | ||||||||||
(€ million) | as % of net sales | as % of net sales | ||||||||||
Net sales | 29,306 | 100.0% | 27,568 | 100.0% | ||||||||
Other revenues | 1,443 | 4.9% | 1,249 | 4.5% | ||||||||
Cost of sales | (7,880 | ) | (26.9% | ) | (7,337 | ) | (26.6% | ) | ||||
Gross profit | 22,869 | 78.0% | 21,480 | 77.9% | ||||||||
Research & development expenses | (4,583 | ) | (15.6% | ) | (4,575 | ) | (16.6% | ) | ||||
Selling & general expenses | (7,325 | ) | (25.0% | ) | (7,168 | ) | (26.0% | ) | ||||
Other operating income | 866 | 556 | ||||||||||
Other operating expenses | (481 | ) | (353 | ) | ||||||||
Amortization of intangibles | (3,528 | ) | (3,483 | ) | ||||||||
Operating income before restructuring, impairment of property, plant & equipment and intangibles, gains & losses on disposals, and litigation | 7,818 | 26.7% | 6,457 | 23.4% | ||||||||
Restructuring costs | (1,080 | ) | (585 | ) | ||||||||
Impairment of property, plant & equipment and intangibles | (372 | ) | (1,554 | ) | ||||||||
Gains and losses on disposals, and litigation | — | 76 | ||||||||||
Operating income | 6,366 | 21.7% | 4,394 | 15.9% | ||||||||
Financial expenses | (324 | ) | (335 | ) | ||||||||
Financial income | 24 | 103 | ||||||||||
Income before tax and associates | 6,066 | 20.7% | 4,162 | 15.1% | ||||||||
Income tax expense | (1,364 | ) | (682 | ) | ||||||||
Share of profit/loss of associates | 814 | 692 | ||||||||||
Net income excluding the held-for-exchange Merial business (1) | 5,516 | 18.8% | 4,172 | 15.1% | ||||||||
Net income from the held-for-exchange Merial business(1) | 175 | 120 | ||||||||||
Net income | 5,691 | 19.4% | 4,292 | 15.6% | ||||||||
- attributable to minority interests | 426 | 441 | ||||||||||
- attributable to equity holders of the Company | 5,265 | 18.0% | 3,851 | 14.0% | ||||||||
Average number of shares outstanding (million) | 1,305.9 | 1,309.3 | ||||||||||
Basic earnings per share (in euros) | 4.03 | 2.94 |
|
Net Sales
Net sales for the year ended December 31, 20092012 amounted to €29,306€34,947 million, an increase of 6.3% versus 2008.up 4.7% on 2011. Exchange rate movements had a favorable effect of 1.0 point,4.2 points, mainly reflecting the appreciation inof the U.S. dollar against the euro.euro, and to a lesser extent the appreciation of the yen and the yuan. At constant exchange rates and after taking account of changes in structure (mainly the consolidation of Zentiva and MedleyGenzyme from the second quarter of 2009, and the reversion of Copaxone® to Teva in North America effective April 1, 2008)2011), net sales rose by 5.3%. Excluding changes in structure and at constant exchange rates, organic net sales growth was 4.0%.
The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 20092012 and December 31, 20082011 to our net sales at constant exchange rates:
(€ 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, Human Vaccines (Vaccines) and Animal Health segments.
The following table breaks down our 2012 and 2011 net sales by business segment:
(€ million) | 2012 Reported | 2011 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Pharmaceuticals | 28,871 | 27,890 | +3.5% | -0.4% | |||||||||
Vaccines | 3,897 | 3,469 | +12.3% | +5.7% | |||||||||
Animal Health | 2,179 | 2,030 | +7.3% | +3.1% | |||||||||
Total | 34,947 | 33,389 | +4.7% | +0.5% | |||||||||
Net Sales by Product — Pharmaceuticals segment
Net sales generated by our Pharmaceuticals segment were €28,871 million in 2012, up 3.5% on a reported basis but down 0.4% at constant exchange rates. The year-on-year change 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), net sales for the Pharmaceuticals segment fell by 0.6% in 2012.
Our flagship products (Lantus® and Apidra®, Lovenox®, Plavix®, Aprovel®/CoAprovel®, Taxotere®, Eloxatine®, Cerezyme®, Myozyme®/Lumizyme®, Fabrazyme®, Renagel®/Renvela®, Synvisc®/Synvisc-One®, 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 2012 and 2011 net sales for the Pharmaceuticals segment by product:
(€ million) Product | Indication | 2012 Reported | 2011 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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% | |||||||||||
Diabetes
Net sales for theDiabetes business amounted to €5,782 million, up 16.7% at constant exchange rates, driven by strong growth for Lantus®.
Lantus® posted a 19.3% increase in net sales at constant exchange rates in 2012 to €4,960 million, driven by very strong growth in the United States (up 22.0% at €3,087 million); in Emerging Markets (up 25.4% at €793 million), especially in China (up 35.9%) and Latin America (up 32.3%); and in Japan (up 22.0%). In Western Europe, growth was a more modest 5.3% at constant exchange rates.
Net sales of the rapid-acting insulin analogApidra® advanced by 16.8% (at constant exchange rates) to €230 million in 2012, buoyed by the product's performance in Emerging Markets (up 37.8%).
Amaryl® saw net sales fall by 8.0% at constant exchange rates to €421 million, mainly as a result of competition from generics in Japan (down 31.7%, at €125 million), and in spite of 11.4% growth in Emerging Markets to €263 million.
Oncology
Net sales for theOncology business were €2,394 million, down 14.3% at constant exchange rates.
Net sales ofEloxatine® fell by 17.3% at constant exchange rates to 956 million in 2012, reflecting the loss of exclusivity in the United States on August 9, 2012, which had been expected.
Taxotere® reported a fall in net sales of 41.9% at constant exchange rates, to €563 million. The product is 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® , launched in the United States and Puerto Rico at the end of August 2012, generated net sales of €25 million for the year.
Mozobil® reported net sales of €96 million, up 19.7% on a constant structure basis and at constant exchange rates (i.e., including non-consolidated sales generated by Genzyme in the first quarter of 2011).
Jevtana®, Zaltrap® and Mozobil®, along with Multaq® (see "— Other pharmaceutical products" below), form the "Other Innovative Products" growth platform. This platform generated net sales of €611 million in 2012.
Other pharmaceutical products
Lovenox® recorded a fall in net sales of 12.0% at constant exchange rates to €1,893 million in 2012, as a result of competition from generics in the United States, where sales slipped by 53.1% (at constant exchange rates) to €319 million. Sales generated outside the United States accounted for 83.1% of worldwide net sales and rose by 5.5% at constant exchange rates to €1,574 million, driven by Emerging Markets (up 11.6% at constant exchange rates at €615 million). Sanofi also launched its own generic version of Lovenox® in the United States, sales of which are recognized in the Generics business.
Net sales ofRenagel®/Renvela® rose by 13.0% on a constant structure basis and at constant exchange rates (i.e. including non-consolidated sales generated by Genzyme in the first quarter of 2011) to €653 million, on a fine performance in the United States (up 19.2% on a constant structure basis and at constant exchange rates).
Synvisc®/Synvisc-One® reported sales growth of 4.0% on a constant structure basis and at constant exchange rates (including non-consolidated sales generated by Genzyme in the first quarter of 2011) to €363 million, driven mainly by the Synvisc-One® franchise in the United Sates (€302 million, up 5.7% on a constant structure basis and at constant exchange rates).
Net sales of theAmbien® range fell by 4.5% at constant exchange rates to €497 million, reflecting competition from generics of Ambien® CR in the United States and Western Europe and the introduction of generic versions of Myslee® in Japan during the second half of 2012.
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 2012 and 2011 net sales for the new Genzyme business by product:
(€ million) Product | Indication | 2012 Reported | 2011 Reported | Change on a constant structure basis and at constant exchange rates (%) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Aubagio® | Multiple sclerosis | 7 | — | — | ||||||||
Sub-total Multiple sclerosis | 7 | — | — | |||||||||
Cerezyme® (1) | Gaucher disease | 633 | 441 | +6.0% | ||||||||
Myozyme®/Lumizyme® (1) | Pompe disease | 462 | 308 | +11.4% | ||||||||
Fabrazyme® (1) | Fabry disease | 292 | 109 | +96.4% | ||||||||
Other rare disease products (1) | 391 | 264 | +7.5% | |||||||||
Sub-total Rare diseases (1) | 1,778 | 1,122 | +16.4% | |||||||||
Total: New Genzyme (1) | 1,785 | 1,122 | +16.9% | |||||||||
Cerezyme® recorded net sales growth of 6.0% on a constant structure basis and at constant exchange rates, to €633 million (+0.9% in Western Europe, at €215 million; +6.3% in the United States, at €166 million). Production continued to improve during the year, enabling normal doses to be delivered to patients in the product's principal markets
Net sales ofMyozyme®/Lumizyme® were up 11.4% on a constant structure basis and at constant exchange rates at €462 million (+10,4% in Western Europe, at €257 million; +6.9% in the United States, at €117 million).
Fabrazyme® reported a 96.4% surge in net sales on a constant structure basis.
(€ million) | 2009 | 2008 | Growth (%) | ||||
Net Sales | 29,306 | 27,568 | +6.3% | ||||
Impact of exchange rates | (274 | ) | |||||
Net Sales at constant exchange rates | 29,032 | 27,568 | +5.3% | ||||
Impact of changes in structure | 339 | ||||||
Net Sales on a constant structure basis and at constant exchange rates | 29,032 | 27,907 | +4.0% | ||||
Our net sales are generated by our two business segments: Pharmaceuticalsbasis and Human Vaccines (Vaccines). The following table breaks down our 2009 and 2008 net sales by business segment:
(€ million) | 2009 Reported | 2008 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | Change on a constant structure basis and at constant exchange rates (%) | |||||
Pharmaceuticals | 25,823 | 24,707 | +4.5% | +3.7% | +2.3% | |||||
Vaccines | 3,483 | 2,861 | +21.7% | +19.2% | +18.9% | |||||
Total | 29,306 | 27,568 | +6.3% | +5.3% | +4.0% | |||||
Net Sales by Product — Pharmaceuticals
Net sales generated by our Pharmaceuticals business in 2009 were €25,823 million, an increase of 3.7% at constant exchange rates and of 4.5% on a reported basis.
Net sales of our flagship products (see table below) advanced by 4.6% at constant exchange rates, to €13,278 million, representing 51.4%€292 million. This increase was due mainly to the resumption of Pharmaceuticals net sales, versus 50.5%production at the new facility at Framingham (United States) in 2008. This growth rateMarch 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 adversely affected by competition from generics of Eloxatine®launched in the United States in October 2012, and Europe; without this effect, growth in Pharmaceuticalsrecorded fourth-quarter net sales would have been 2.2 points higher in 2009 (atof €7 million.
Consumer Health Care business
Net sales for theConsumer Health Care business rose by 9.9% at constant exchange rates)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).
NetIn Emerging Markets, net sales of the other products in our portfolio felladvanced by 6.0%19.9% at constant exchange rates to €6,078 million, compared with €6,484 million in 2008. At€1,478 million. In the United States, sales growth was modest (up 2.2% at constant exchange rates, net salesat €606 million) compared with 2011; this reflects the fact that in the early part of these products2011, distributors were down 9.7%building up inventories of the over-the-counter (OTC) version of Allegra®, launched in Europe, at €3,283 million; up 1.2%March 2011. Excluding Allegra® OTC, growth in the United States reached 6.2% at €610 million; and down 1.5%constant exchange rates. Allegra® OTC was also launched in Japan in November 2012.
Generics business
TheGenerics business reported net sales of €1,844 million in 2012, a rise of 5.0% at constant exchange rates. The business was boosted by sales growth in the Other Countries region,United States (up 42.4% at €2,185constant 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"Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products.”"
Our Consumer Health Care business achievedThe following table breaks down net sales growth of 26.8%our Pharmaceutical segment products by geographical region in 20092012:
(€ 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% | |||||||||||||||||
Net Sales — Human Vaccines (Vaccines) segment
Net sales for the Vaccines segment amounted to €3,897 million in 2012, up 12.3% on a reported basis and 5.7% at constant exchange rates.
The following table presents the 2012 and 2011 sales of our Vaccines segment by range of products:
(€ million) | 2012 Reported | 2011 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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% | |||||||||
Polio/Pertussis/Hib vaccines saw net sales increase by 5.0% at constant exchange rates to €1,430€1,184 million. This includes the consolidation of Symbion Consumer (now sanofi-aventis Healthcare Holdings Pty Limited), with effect from September 1, 2008; of Zentiva’s consumer health care products, with effect from April 1, 2009; and of Oenobiol, with effect from December 1, 2009. Onrise reflects a constant structure basis andstrong performance in Japan (€239 million, up 140.9% at constant exchange rates, mainly due to the growth rate was 8.1%.
In 2009, net sales for our Generics business increased almost threefold (by 198%successful launch of Imovax® in September 2012) and a good performance in Emerging Markets (€495 million, up 5.7% at constant exchange rates) to €1,012 million, boosted by the consolidation of Zentiva and Kendrick (each from April 1) and Medley (from May 1). On, but also a constant structure basis and at constant exchange rates, the growth rate was 8.7%.
The following table breaks down ourdrop in net sales for the Pharmaceuticals business by product:
(€ million) | 2009 Reported | 2008 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | Change on a constant structure basis and at constant exchange rates (%) | ||||||||
Product | Indication | ||||||||||||
Lantus® | Diabetes | 3,080 | 2,450 | +25.7% | +22.5% | +22.5% | |||||||
Lovenox® | Thrombosis | 3,043 | 2,738 | +11.1% | +8.8% | +8.8% | |||||||
Plavix® | Atherothrombosis | 2,623 | 2,609 | * | +0.5% | +0.2% | +0.2% | ||||||
Taxotere® | Breast, Non small cell lung, Prostate, Gastric, Head and neck cancers | 2,177 | 2,033 | +7.1% | +6.1% | +6.1% | |||||||
Aprovel®/CoAprovel® | Hypertension | 1,236 | 1,202 | +2.8% | +4.7% | +4.7% | |||||||
Eloxatine® | Colorectal cancer | 957 | 1,345 | * | -28.8% | -34.7% | -34.7% | ||||||
Apidra® | Diabetes | 137 | 98 | +39.8% | +38.8% | +38.8% | |||||||
Multaq® | Atrial fibrillation | 25 | — | — | — | — | |||||||
Sub-total flagship products | 13,278 | 12,475 | +6.4% | +4.6% | +4.6% | ||||||||
Stilnox®/Ambien®/Myslee® | Sleep disorders | 873 | 822 | * | +6.2% | -1.3% | -1.3% | ||||||
Allegra® | Allergic rhinitis, Urticaria | 731 | 666 | * | +9.8% | -2.6% | -2.6% | ||||||
Copaxone® | Multiple sclerosis | 467 | 622 | -24.9% | -23.8% | +20.6% | |||||||
Tritace® | Hypertension, Congestive heart failure, Nephropathy | 429 | 491 | * | -12.6% | -9.2% | -9.2% | ||||||
Amaryl® | Diabetes | 416 | 379 | * | +9.8% | +4.2% | +4.2% | ||||||
Depakine® | Epilepsy | 329 | 322 | * | +2.2% | +7.1% | +7.1% | ||||||
Xatral® | Benign prostatic hypertrophy | 296 | 319 | * | -7.2% | -8.5% | -8.5% | ||||||
Actonel® | Osteoporosis, Paget’s disease | 264 | 330 | -20.0% | -17.6% | -7.5% | |||||||
Nasacort® | Allergic rhinitis | 220 | 240 | -8.3% | -11.7% | -11.7% | |||||||
Other products | 6,078 | 6,484 | -6.3% | -6.0% | -2.5% | ||||||||
Consumer Health Care | 1,430 | 1,203 | +18.9% | +26.8% | +8.1% | ||||||||
Generics | 1,012 | 354 | +185.9% | +198.0% | +8.7% | ||||||||
Total Pharmaceuticals | 25,823 | 24,707 | +4.5% | +3.7% | +2.3% | ||||||||
The table below breaks down sales of our main products by geographic region in 2009:
(€ million) | Total Reported | Europe Reported | Change at constant exchange rates (%) | United States Reported | Change at constant exchange rates (%) | Other countries Reported | Change at constant exchange rates (%) | |||||||
Product | ||||||||||||||
Lantus® | 3,080 | 767 | +12.2% | 1,909 | +23.6% | 404 | +42.8% | |||||||
Lovenox® | 3,043 | 890 | +13.7% | 1,822 | +5.3% | 331 | +14.8% | |||||||
Plavix® | 2,623 | 1,512 | -10.4% | 222 | +28.5% | 889 | +19.3% | |||||||
Taxotere® | 2,177 | 928 | +7.1% | 827 | +5.3% | 422 | +5.1% | |||||||
Aprovel®/CoAprovel® | 1,236 | 916 | +2.6% | 7 | — | 313 | +8.6% | |||||||
Eloxatine® | 957 | 98 | -52.4% | 677 | -37.2% | 182 | -1.6% | |||||||
Apidra® | 137 | 68 | +40.0% | 54 | +27.5% | 15 | +87.5% | |||||||
Multaq® | 25 | — | — | 25 | — | — | — | |||||||
Stilnox®/Ambien®/Myslee® | 873 | 72 | -3.9% | 555 | -4.8% | 246 | +9.1% | |||||||
Allegra® | 731 | 23 | -20.0% | 306 | -15.9% | 402 | +13.9% | |||||||
Copaxone® | 467 | 454 | +20.7% | — | — | 13 | -54.8% | |||||||
Tritace® | 429 | 298 | -8.2% | — | — | 131 | -11.3% | |||||||
Amaryl® | 416 | 83 | -6.4% | 9 | +33.3% | 324 | +7.2% | |||||||
Depakine® | 329 | 204 | +2.8% | — | — | 125 | +15.7% | |||||||
Xatral® | 296 | 93 | -28.9% | 147 | +16.0% | 56 | -10.8% | |||||||
Actonel® | 264 | 162 | -25.0% | — | — | 102 | -2.7% | |||||||
Nasacort® | 220 | 36 | -2.6% | 158 | -15.4% | 26 | 0.0% | |||||||
Flagship Products(1)
Net sales ofLantus®, the world’s leading insulin brand (source: IMS 2009 sales), rose by 22.5% (at constant exchange rates) to €3,080 million in 2009, driven largely by the SoloSTAR® injection pen. Growth was strong across all three geographic regions at 23.6% in the United States 12.2% in Europe and 42.8% in the Other Countries region (all at constant exchange rates). In the Other Countries region, the performance of Lantus® is particularly high in China, Japan and Mexico, with respective growth rates at constant exchange rates of 113.7%, 81.6% and 48.2%.
Net sales of the rapid-acting analog of human insulinApidra® were €137 million, up 38.8% (at constant exchange rates), boosted by the launch of Apidra® SoloSTAR® in the United States.
Lovenox®, the leader in anti-thrombotics in the U.S., Germany, France, Italy, Spain, and the United Kingdom (source: IMS 2009 sales), achieved net sales growth of 8.8% in 2009 (at constant exchange rates) to €3,043 million, driven by double-digit growth in Europe (up 13.7%(down 25.1% at constant exchange rates, at €890€374 million) anddue to order restrictions on Pentacel® following a temporary shutdown in the Other Countries region (up 14.8%production at Sanofi Pasteur.
Net sales ofinfluenza vaccines were flat (down 0.2% at constant exchange rates,rates), at €331 million).€884 million. In the United States, net sales increasedfell by 5.3% to €1,822 million.
Taxotere® posted growth of 6.1% in 20095.5% at constant exchange rates, to €2,177 million, driven by its use€466 million; in adjuvant breast cancer treatment and in prostate cancer. Growth was good across all three geographic regions at 7.1% in Europe, 5.3% in the United States and 5.1% in the Other Countries region (all at constant exchange rates). In Japan, the product made further advances, withEmerging Markets, net sales risingrose by 9.5% to €129 million, in particular due to the prostate cancer indication approved in the second half of 2008.
Eloxatine® saw net sales fall by 34.7% at constant exchange rates in 2009 to €957 million, due to ongoing genericization in Europe and competition from a number of generics in the United States during the second half of the year.
Net sales of the hypnoticStilnox®/Ambien®/Myslee® fell by 1.3% at constant exchange rates. In the United States, Ambien CR® reported growth of 0.9%5.1% at constant exchange rates, to €497€317 million. In Japan,
Meningitis/Pneumonia vaccines posted net sales of Myslee®, the leading hypnotic on the market (source: IMS 2009 sales), totaled €194€650 million, an increase of 15.2% at constant exchange rates.
|
Allegra® saw net sales fall by 2.6%up 18.0% at constant exchange rates, in 2009 to €731driven by a strong performance from Menactra® (€564 million, reflecting the arrival of Allegra® D 12 generics in the United States in the fourth quarter of 2009 (which follows the settlement of the U.S. patent infringement suit related to Barr’s proposed generic version) and ongoing genericization in Europe. In 2009, sales decreased respectively by 15.9% and 20% (atup 21.8% at constant exchange rates). Growth was especially strong in the U.S. and Europe. The product recorded further growth in Japan, with sales up 15.2%Emerging Markets (up 52.9% at constant exchange rates, at €334 million.€165 million) and in the United States (up 10.5% at constant exchange rates, at €473 million).
The end of commercialization ofCopaxone® by sanofi-aventis in North America effective April 1, 2008 resulted in a 23.8% drop in consolidated net Net sales of this product in 2009adult booster vaccines were unchanged year-on-year (at constant exchange rates), to €467at €496 million.
Multaq® was launched in the United States during the third quarter of 2009. Sales of the product in 2009 amounted to €25 million.
Net Sales — Human Vaccines (Vaccines)
In 2009, our Vaccines business generated consolidated net sales of €3,483 million, up 19.2% at constant exchange ratestravel and 21.7% on a reported basis. The main growth drivers were Pentacelother endemics® and A(H1N1) influenza vaccines. Growth at constant exchange rates was robust across all three geographic regions, at 19.1% in the United States (to €2,098 million), 15.9% in Europe (to €448 million) and 20.8% in the Other Countries region (to €937 million). Excluding the impact of sales of pandemic influenza vaccines (A(H1N1) and H5N1), net sales growth was 7.1%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.
Polio/Pertussis/Hib vaccines achieved growth of 22.8% at constant exchange rates to €968 million, reflecting the success ofPentacel® (the first 5-in-1 pediatric combination vaccine against diphtheria, tetanus, pertussis, polio andhaemophilus influenzae type b licensed in the United States in June 2008), which posted net sales of €343 million in 2009 versus €84 million in 2008.
Net sales ofinfluenza vaccines rose by 46.7% at constant exchange rates to €1,062 million, mainly due to the shipment during 2009 of batches of vaccines against the A(H1N1) influenza virus for a total amount of €440 million, including €301 million in the United States.
Meningitis/pneumonia vaccines achieved net sales of €538 million, up 6.1% at constant exchange rates, largely as a result of good growth in sales of vaccines against pneumococcal infections. Net sales ofMenactra® (quadrivalent meningococcal meningitis vaccine) increased by 1.1% at constant exchange rates to €445 million.
Net sales of adult booster vaccines fell by 3.0% at constant exchange rates to €406 million. Net sales ofAdacel® (adult and adolescent tetanus/diphtheria/pertussis booster vaccine) were €267 million, down 1.2% at constant exchange rates.
Shantha, consolidated from September 1, 2009, contributed net sales of €17 million in 2009.
The following table presents the 20092012 sales of our Vaccines activity by range of products:
(€ million) | 2009 Reported | 2008 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | ||||
Influenza Vaccines* (including Vaxigrip® and Fluzone®) ) | 1,062 | 736 | +44.3% | +46.7%** | ||||
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®) | 968 | 768 | +26.0% | +22.8% | ||||
Meningitis/Pneumonia Vaccines (including Menactra®) | 538 | 472 | +14.0% | +6.1% | ||||
Adult Booster Vaccines (including Adacel®) | 406 | 399 | +1.8% | -3.0% | ||||
Travel and Other Endemic Vaccines | 313 | 309 | +1.3% | 0.0% | ||||
Other Vaccines | 196 | 177 | +10.7% | +6.8% | ||||
Total Vaccines | 3,483 | 2,861 | +21.7% | +19.2% | ||||
The following table presents the 2009 sales of our Vaccines businesssegment 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.
(€ million) | Total Reported | Europe Reported | Change at constant exchange rates (%) | United States Reported | Change at constant exchange rates (%) | Other countries Reported | Change at constant exchange rates (%) | |||||||
Influenza Vaccines* (including Vaxigrip® and Fluzone®) | 1,062 | 167 | +80.9% | 618 | +36.2% | 277 | +55.7% | |||||||
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®) | 968 | 135 | -12.5% | 529 | +56.8% | 304 | +5.2% | |||||||
Meningitis/Pneumonia Vaccines (including Menactra®) | 538 | 17 | +63.6% | 437 | 0.0% | 84 | +36.1% | |||||||
Adult Booster Vaccines (including Adacel®) | 406 | 62 | +14.8% | 310 | -8.5% | 34 | +25.0% | |||||||
Travel and Other Endemic Vaccines | 313 | 27 | -9.7% | 69 | -15.8% | 217 | +7.4% | |||||||
Other Vaccines | 196 | 40 | -11.1% | 135 | +13.2% | 21 | +11.1% | |||||||
In addition to the Vaccines activity reflected in our consolidated net sales, sales atof Sanofi Pasteur MSD, our joint venture with Merck & Co., Inc. in Western Europe, reached €1,132amounted to €845 million a fall of 11.0%in 2012, up 6.8% on a reported basis. Full-year net sales of Gardasil®, a vaccine that prevents papillomavirus infections (a cause of cervical cancer), amounted to €395 million, compared with €584 million in 2008. This 32.4% decrease reflects extensive catch-up vaccination campaigns in 2008.
Sales generated by Sanofi Pasteur MSD are not included in our consolidated net sales. The main growth drivers were the performance of Gardasil® (up 13.6% on a reported basis, at €206 million) and sales of the travel and endemics vaccines franchise.
Net Sales — Animal Health segment
The Animal Health segment achieved net sales of €2,179 million in 2012, up 3.1% at constant exchange rates (7.3% on a reported basis), driven by the performance in Emerging Markets and the first-time consolidation of the net sales of Newport Laboratories ("Newport").
The following table presents the 2012 and 2011 sales of our Animal Health segment by range of products:
(€ million) | 2012 Reported | 2011 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||
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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. Erosion in sales of theFrontline®/fipronil range of products was limited to 3.4% at constant exchange rates
(€775 million) despite competitive pressure in the United States (down 7.8% at constant exchange rates, at €411 million), thanks to good performances in Emerging Markets (up 10.5%, at €93 million).
Net sales for theproduction animals franchise were 5.1% higher at constant exchange rates, at €807 million. These figures include the contribution from Newport from April 2012 onwards.
The following table breaks down net sales of our Animal Health segment by product and by geographical region in 2012:
(€ million) Product | Western Europe (1) | Change at constant exchange rates | United States | Change at constant exchange rates | Emerging Markets (2) | Change at constant exchange rates | Other countries (3) | Change at constant exchange rates | |||||||||||||||||
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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 GeographicGeographical Region
We divide our sales geographically into threefour regions: Western Europe, the United States, Emerging Markets and other countries. The following table breaks down our 20092012 and 20082011 net sales by region:
(€ million) | 2012 Reported | 2011 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||
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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% | |||||||||
(€ million) | 2009 Reported | 2008 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | Change on a constant structure basis and at constant exchange rates (%) | |||||
Europe | 12,059 | 12,096 | -0.3% | +3.2% | +0.3% | |||||
United States | 9,426 | 8,609 | +9.5% | +2.8% | +5.4% | |||||
Other countries | 7,821 | 6,863 | +14.0% | +12.1% | +9.1% | |||||
Total | 29,306 | 27,568 | +6.3% | +5.3% | +4.0% | |||||
In 2009, netNet sales in Western Europe grewfell by 0.3% on a constant structure basis and9.3% at constant exchange rates reflectingto €8,335 million, hampered by the effecttransfer of the ongoing genericizationCopaxone® business to Teva; by competition from generics of Eloxatine® and Plavix®. AtTaxotere® (down 72.5% at constant exchange rates, growth in the region reached 3.2%rates), driven by Eastern Europe (34.9% growthAprovel® (down 26.4% at constant exchange rates) where Zentiva’sand 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 have been consolidated since April 1, 2009.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 endfirst quarter of commercialization2011) 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 Copaxone®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 sanofi-aventis effective April 1, 20087.7% at constant exchange rates to €1,530 million, boosted by the Consumer Health Care business and the genericizationcontribution from Genzyme, although growth was hampered by a slowdown in sales of Eloxatine® duringgenerics. The Africa and Middle East zones topped the second half of 2009 slowedbillion-euro mark for the pace of net sales growth to 2.8% (atfirst time (€1,018 million and €1,001 million, respectively). Sales in Russia reached €851 million, up 13.6% at constant exchange rates). Lantus®rates, driven by the Consumer Health Care and Lovenox®Generics businesses and also by Lantus®, with net sales growth of 23.6%Plavix® and 5.3% respectively (at constant exchange rates) were the principal growth drivers in Pharmaceuticals. Growth for the Vaccines business was boosted by sales of pandemic influenza vaccines (A(H1N1) and H5N1)Lovenox®.
In the Other Countries region, net sales rose by 12.1%totaled €4,594 million, up 2.5% at constant exchange rates due largely to(or 0.8% after including Genzyme sales for the performancefirst quarter of the Vaccines business2011). In Japan, net sales were €3,274 million (up 20.8%6.6% at constant exchange rates) and torates, or 4.7% after including Genzyme sales for the dynamismfirst quarter of Latin America2011); positive factors included strong performances from Plavix® (up 15.7%16.0% at constant exchange rates),rates, at €837 million) and from the Middle EastPolio/Pertussis/Hib vaccines franchise (up 16.4%140.9% at constant exchange rates)rates at €239 million, driven by the successful launch of Imovax®), China
(up 28.8%while negative factors included erosion in sales of Allegra® (down 15.2% at constant exchange rates), Russia (up 59.8%rates, at constant exchange rates)€423 million) and Japan. Net sales in Japan reached €1,844 million (up 10.7% at constant exchange rates), driven by the performancesimpact of Plavix®, Myslee® and Allegra®. Net sales in Latin America (€1,913 million) were underpinned by good organic growth and by the acquisition of Medley in the second quarter of 2009.
In emerging markets (see definition under “Item 4. Information on the Company — B. Business Overview”), net sales were €7,356 million, an increase of 19.0% at constant exchange rates.
bi-annual price cuts.
Worldwide Presence of Plavix®Plavix® and Aprovel®Aprovel®
Two of our leading products — Plavix®Plavix® and Aprovel®Aprovel® — were discovered by sanofi-aventisSanofi and jointly developed with Bristol-Myers Squibb (“BMS”("BMS") under an alliance agreement. Worldwide,In all territories except Japan, these products are sold either by sanofi-aventis and/Sanofi or by BMS underin accordance with the terms of this alliance agreement which is describedapplicable in “—2012 and 2011 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb” above, with the exception of Plavix® in Japan which is outside the scope of the alliance.Squibb" above).
The worldwideWorldwide sales of these two products are an important indicator of the global market presence of these sanofi-aventis products, and we believe this information facilitatesbecause they facilitate a financial statement user’suser's understanding and analysis of our consolidated income statement, particularly in terms of understanding our overall profitability in relation to consolidated revenues, and also facilitatesfacilitate a user’suser'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 investorusers to have a clearer understanding of trends in different line itemslines of our income statement, in particular the line items “Other revenues”lines "Other revenues", where we bookrecord royalties received on those sales (see “—"— Other Revenues”Revenues"); “Share"Share of profit/loss of associates”associates and joint ventures" (see “—"— Share of Profit/Loss of Associates”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"Net income attributable to minority interests”non-controlling interests" (see “—"— Net Income Attributable to Minority Interests”Non-Controlling Interests"), where we bookrecord 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®Plavix® and Aprovel®Aprovel® in 20092012 and 2008,2011, by geographic region:
(€ million) | 2012 | 2011 | Change on a reported basis | Change at constant exchange rates | |||||||||||||||||||||
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| 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% | |||||||||||||||||
(€ million) | 2009 | 2008 | Change (%) | |||||||||||
sanofi- aventis (2) | BMS (3) | Total | sanofi- aventis (2) | BMS (3) | Total | |||||||||
Plavix®/Iscover®(1) | ||||||||||||||
Europe | 1,443 | 161 | 1,604 | 1,622 | 211 | 1,833 | -12.5% | |||||||
United States | — | 4,026 | 4,026 | — | 3,351 | 3,351 | +20.1% | |||||||
Other countries | 897 | 255 | 1,152 | 711 | 248 | 959 | +20.1% | |||||||
Total | 2,340 | 4,442 | 6,782 | 2,333 | 3,810 | 6,143 | +10.4% | |||||||
(€ million) | 2009 | 2008 | Change (%) | |||||||||||
sanofi- aventis (5) | BMS (3) | Total | sanofi- aventis (5) | BMS (3) | Total | |||||||||
Aprovel®/Avapro®/Karvea®(4) | ||||||||||||||
Europe | 810 | 172 | 982 | 816 | 176 | 992 | -1.0% | |||||||
United States | — | 524 | 524 | — | 499 | 499 | +5.0% | |||||||
Other countries | 314 | 192 | 506 | 291 | 184 | 475 | +6.5% | |||||||
Total | 1,124 | 888 | 2,012 | 1,107 | 859 | 1,966 | +2.3% | |||||||
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Trends in worldwide sales of Plavix®Plavix® consolidated by Sanofi, excluding sales to BMS (€86 million in 2012 and Aprovel®€208 million in 2009 and 2008 by geographic region are as follows (at constant exchange rates):
(€ million) | 2009 | 2008 | Change at constant exchange rates (%) | |||
Plavix®/Iscover® | ||||||
Europe | 1,604 | 1,833 | -10.3% | |||
United States | 4,026 | 3,351 | +12.8% | |||
Other countries | 1,152 | 959 | +14.4% | |||
Total | 6,782 | 6,143 | +6.2% | |||
Aprovel®/Avapro®/Karvea® | ||||||
Europe | 982 | 992 | +0.8% | |||
United States | 524 | 499 | -1.6% | |||
Other countries | 506 | 475 | +7.2% | |||
Total | 2,012 | 1,966 | +1.7% | |||
In the United States,2011). Net sales of Plavix®/Iscover® (consolidatedAprovel® consolidated by BMS) reported strong growthSanofi, excluding sales to BMS (€111 million in 2012 and €150 million in 2011).
Worldwide sales of 12.8%Plavix®/Iscover® fell by 46.2% at constant exchange rates in 2009, reaching €4,0262012 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® were down 10.3% at constant exchange rates at €1,604 million due to the marketing of generics using alternative salts of clopidogrel, especially in the United Kingdom, Germany and France (where we launched our own generic version, Clopidogrel Winthrop®, in the fourth quarter of 2009). In Japan, Plavix® continued its success, with sales up 58.9%Plavix® fell by 21.2% at constant exchange rates, to €339€453 million.
In a competitive environment, 2009 worldwidethe Other Countries region, net sales of Aprovel®/Avapro®/Karvea®were €2,012 million, an increase of 1.7%down 4.6% at constant exchange rates. In Europe,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 is facingin 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 the monotherapy segment in Spainmost Western European countries. In Japan and Portugal, and recordedChina, net sales growth of 0.8%(consolidated by Sanofi) came to €101 million (up 47.0% at constant exchange rates.
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, amountedfell by 39.5% to €1,443€1,010 million (versus €1,669 million in 2009 compared with €1,249 million in 2008.2011).
Licensing revenuesThe decrease was mainly due to lower licensing revenue under the worldwide alliance with BMS on Plavix®Plavix® and Aprovel®Aprovel®, which totaled €1,155€532 million in 2009, compared with €9852012 versus €1,275 million in 2008 (up 17.3%2011 (down 58.1% on a reported basis), boosted by strong growth in salesdue largely to the loss of Plavix®exclusivity in the United States for Aprovel® (on March 30, 2012) and Plavix® (on May 17, 2012). However, the favorable impact of trends in the exchange rateappreciation of the U.S. dollar against the euro.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 for 2009 was €22,869amounted to €24,839 million (78.0%in 2012 (71.1% of net sales), versus €21,480€24,156 million in 2008 (77.9%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 improvedslipped by 0.52.9 points to 72.9%, reflecting a lower level of a point, reflecting the rise in royalty income (impact: +0.6 of(-2.6 points) and a point) and an unfavorable trenddeterioration in the ratio of cost of sales to net sales (impact: -0.1(-0.3 of a point). This; this latter trend was mainly attributable to the net result of:adverse impact of generics (mainly of Taxotere® in the United States), partially offset by productivity gains and lower raw materials prices for heparins.
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The gross margin ratio for the Vaccines segment was unchanged, withfell by 1.0 point to 59.2%.
The gross margin ratio for the effect of lower royalty income (impact: -0.5Animal Health segment improved by 0.4 of a point) offsetpoint to 69.3%.
In addition, consolidated gross profit for 2012 was adversely affected by an improvement in the ratio of cost of sales to net sales (impact: +0.5a €23 million expense (0.1 of a point) that was largely due to the appreciation of various currencies against the euro.
Consolidated gross profit was also impacted by the expense arising from the workdown during 2009 of acquired inventories remeasured at fair value on completionin connection with the acquisition of acquisitions (mainly Zentiva, impact €27Genzyme. In 2011, this expense was €476 million or 0.1(1.4 points), out of a point).
which €473 million were related to the acquisition of Genzyme.
Research and Development Expenses
Research and development (R&D) expenses were €4,583totaled €4,922 million (versus €4,575€4,811 million in 2008)2011), representing 15.6%14.1% of net sales (versus 16.6%14.4% in 2008); they were down 1.4% year-on-year at constant exchange rates, but up 0.2%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.
Cost savings were achieved inR&D expenses for the Pharmaceuticals segment due to tight cost controlincreased 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 a reduction in clinical trial costs, reflecting the discontinuationrationalization of some projects following the portfolio review.project portfolio.
InR&D expenses for the Vaccines segment research and development expenses increasedfell by €66€25 million up 15.5%to €539 million (down 4.4% on a reported basis), due mainly to trends in particular due to the consolidationcost of Acambis from October 1, 2008 and to clinical trials related to influenza vaccines inon the light ofdengue fever vaccine and various influenza-related projects.
In the pandemic.
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 totaled €7,325amounted to €8,947 million, compared with €7,168€8,536 million in the previous year,2011, an increase of 2.2% (or 1.1% at constant exchange rates).€411 million or 4.8% on a reported basis. The ratio of selling and general expenses to net sales improved from 26.0% in 2008 to 25.0%, mainly because of savings in marketing expenses (in particular, due to the transfer of commercialization of Copaxone® to Teva in North America in April 2008) and cost savings in Europe. The 2009 figure includes the expenses of companies consolidatedwas unchanged year-on-year at 25.6%. After including Genzyme's costs for the first time duringquarter of 2011, selling and general expenses were up 1.8% year-on-year. In addition, the year.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 7.9%. This increase was€69 million (up 12.7% on a reported basis), due primarilypartly to adverse trends in the influenza pandemic,U.S. dollar/euro exchange rate and partly to the consolidationincreased promotional investments.
Table of Acambis with effect from October 1, 2008.Contents
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
OtherIn 2012, other operating income for 2009 cameamounted to €866€562 million (versus €556€319 million in 2008)2011), and other operating expenses amounted to €481€454 million (versus €353€315 million in 2008)2011).
The balance ofOverall, other operating income and expenses represented net income of €385€108 million for 2009,in 2012, compared with net income of €203€4 million for 2008. The €182 millionin 2011. This increase was mainly due to the transferfavorable outcome of commercialization of Copaxone® to Teva in North America effective April 1, 2008. We are entitled to receive a 25% royalty of North American sales of Copaxone® over a two-year period from that date, and recognize this royalty income in “Other operating income”.
We also recognized gains on disposalslitigation relating to our ordinary operations of €56 million (compared with €24 million in 2008), anda license.
This line item also includes a net operating foreign exchange gain of €40 million (compared with a netoperational foreign exchange loss of €94€41 million, against €5 million in 2008).
2011.
Amortization of IntangiblesIntangible Assets
Amortization charged against intangible assets in 2009 amounted to €3,528 million, versus €3,483€3,291 million in the previous year.2012, versus €3,314 million in 2011. The increaseyear-on-year reduction of €23 million was mainly due mainly to trendsto:
Impairment of Intangible Assets
These chargesThis 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 relate to the amortizationdiscontinuation of intangible assets remeasured at fair value atR&D projects in the timePharmaceuticals 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 Aventis acquisition (€3,175terms of the collaboration agreement with Warner Chilcott (see Note C.3. to our consolidated financial statements included at Item 18 of this annual report).
Fair Value Remeasurement of Contingent Consideration Liabilities
Fair value remeasurements of contingent consideration liabilities recognized on acquisitions in accordance with the revised IFRS 3 represented an expense of €192 million in 2009, versus €3,2982012, compared with a net gain of €15 million in 2008).
Operating Income before Restructuring, Impairment2011. This item mainly relates to the contingent value rights (CVRs) issued in connection with the Genzyme acquisition, and to contingent consideration payable to Bayer as a result of Property, Plant & Equipment and Intangibles, Gains and Losses on Disposals, and Litigation
This line item camean acquisition made by Genzyme prior to €7,818 million in 2009, compared with €6,457 million in 2008.
the latter's acquisition by Sanofi (see Note D.18. to our consolidated financial statements included at Item 18 of this annual report).
Restructuring Costs
Restructuring costs amounted to €1,080€1,141 million in 2009, compared with €5852012, versus €1,314 million in 2008.2011, and relate primarily to measures announced in connection with the major transformation program that we initiated in 2009 to adapt our structures to the challenges of the future.
In 2009, our restructuring2012, these costs mainly related primarily to measures taken to improve innovation by transformingadapt our Research & Developmentresources 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, and to streamline our organizational structures by adapting central support functions. These costs consist mainly of employee-related charges, arising from early retirement benefits and termination benefits under the announced voluntary redundancy plans. The 2009 charge also reflects, though to a lesser extent, ongoing measures taken to adapt our industrial facilities in Europe, andadjustments to adjust our sales forces.
The restructuring costs recognizedforces in 2008 related primarily to the adaptationUnited States and Europe, the implementation of industrial facilitiesmulti-country organizations in FranceEurope, and to measures taken in response to the changing economic environment in various European countries, principally France and Spain.
integration of Genzyme entities worldwide.
Impairment of Property, Plant & Equipment Other Gains and IntangiblesLosses, and Litigation
Nothing was recognized on this line in 2012.
Net impairment losses 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 amountedof Merial from September 18, 2009 through December 31, 2010 because these assets were classified as held for sale or exchange during that period in accordance with IFRS 5 (see Note D.8.2. to €372the consolidated financial statements included at Item 18 of this annual report), (ii) a gain of €210 million arising from damages received in 2009,connection with a Plavix® patent; and related primarily to(iii) the impact of changes in the competitive environment and of generic approval dates on our products Benzaclin®, Nasacort® and Actonel®. This item also includes impairment losses of €28 million arising from the decision to discontinue the development of TroVax®, and from the withdrawal of our product Di-Antalvic® from the market in response to a decision by the European Medicines Agency (EMA). With the exception of Trovax®, all of these products were recognized as assets in 2004 upon the acquisition of Aventis.
In 2008, this line item showed impairment losses of €1,554 million charged against intangible assets due to the discontinuation of some research projects and to the genericization of some products marketed by the Group, originating mainly from Aventis. The main discontinued research projects were those relating to larotaxel and cabazitaxel (new taxane derivatives developed in breast cancer, €1,175 million) and the antihypertensive ilepatril (€57 million), both of which were recognized as assets on the acquisition of Aventis; and the oral anti-cancer agent S-1, following terminationdivestiture of the agreement with Taiho Pharmaceutical for the development and commercialization of this product. In addition, an impairment loss of €114 million was charged in respect of Nasacort® (also recognized as an asset on the acquisition of Aventis in 2004) following the settlement agreement with Barr in the United States.
Dermik dermatology business (see Note D.28. to our consolidated financial statements).
Gains and Losses on Disposals, and Litigation
Sanofi-aventis did not make any major disposals in either 2009 or 2008.
In 2008, this item included €76 million of reversal of litigation provisions.
Operating Income
Operating income totaled €6,337 million for 2009 was €6,3662012, versus €5,731 million 44.9% higher than the 2008 figurefor 2011, an increase of €4,394 million.
10.6%.
Financial Income and Expenses
Net financial expense for 20092012 was €300€460 million, compared to €232with €412 million in 2008,for 2011, an increase of €68€48 million.
Interest expenseFinancial expenses directly related to our net debt (short-term and long-term debt, net of cash and cash equivalents) amounted to €222 million, versus €183equivalents (see definition at "— Liquidity and Capital Resources" below) were €349 million in 2008. Although2012 compared to €325 million in 2011. This increase was due to a reduction in financial income resulting from a lower average rate of return on cash.
Because the average level of net debt was lowerand the average rate of interest on debt were relatively stable year-on-year, financial expenses were virtually unchanged in 2009 than2012.
Impairment losses on investments and financial assets amounted to €30 million in 2008, sanofi-aventis was adversely affected by lower interest rates2012 (versus €58 million in 2011). In 2012, these losses related primarily to available-for-sale financial assets; in 2011, they related mainly to Greek government bonds (€49 million, versus €6 million in 2012).
Gains on its cash deposits (which averaged €5.0 billiondisposals of non-current financial assets amounted to €37 million in 2009,2012, compared with €2.4 billion€25 million in 2008)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 2008, we tendered our shares in Millennium Pharmaceuticals, Inc (Millennium) to the public tender offer for Millennium by Takeda Pharmaceuticals Company Ltd. This transaction generated a €38 million gain.August 2012, Sanofi sold this investment.
NetThe effect of the unwinding of discount on provisions was €87 million in 2012 (versus €83 million in 2011), and the net financial foreign exchange losses for the year were €67 million, compared with €74loss was €17 million in 2008.
2012 (versus a net gain of €10 million in 2011).
Net Income before Tax and Associates and Joint Ventures
Net incomeIncome before tax and associates and joint ventures for 20092012 was €6,066€5,877 million 45.7% higher than the 2008 figurein 2011, versus €5,319 million in 2011, an increase of €4,162 million.
10.5%.
Income Tax Expense
Income tax expense amounted to €1,134 million in 2012, versus €455 million in 2011 and €1,430 million in 2010.
The fall 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 2011 (see Note D.30. to our consolidated financial statements).
These effects did not impact income tax expense for 2012. However, the rise in income tax expense during the year was limited by the favorable effects of differential income tax rates applicable to our foreign subsidiaries (including the impact of an Advance Pricing Agreement (APA) with the Japanese authorities covering the period from 2012 through 2014), and also by the settlement of tax inspections and the effects of time-barring.
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 is calculated on the basis of business operating income minus net financial expenses and before the share of profit/loss of associates the share of profit/loss of Merialand joint ventures and net income attributable to minoritynon-controlling interests.
The effective tax rate was 28.0%25.5% in 2009, compared to 29.0%2012, versus 27.0% in 2008, the reduction resulting directly from the entry into force in 2009 of a protocol to the tax treaty between France and the United States that abolished withholding tax between the two countries subject to certain conditions. During 2009, this protocol resulted in the reversal through the consolidated income statement of €106 million in deferred tax liabilities relating to the tax cost of distributions made out of the reserves of Group subsidiaries as of January 1, 2009.
2011. The difference between the effective tax rate andrelative to the standard corporate income tax rate applicable in France for 2009 (34%(34.4%) was mainly due to the impact of theroyalty income being taxed at a reduced rate of income tax on royalties in France.
In 2008, this line item included a gain through the consolidated income statement of €221 million on reversals of tax provisions relatedFrance, and to the settlementdifferential in tax rates applied to profits of tax audits.
our foreign subsidiaries.
Share of Profit/Loss of Associates and Joint Ventures
OurThe share of the profitsprofit/loss of associates and joint ventures in 2012 was €814€393 million, versus €1,070 million in 2009, versus €692 million in 2008.2011. This itemline mainly comprisesincludes our share of after-tax profits from the territories managed by BMS under the Plavix®Plavix® and Avapro®Avapro® alliance, which increasedfell by 26.0% year-on-year from €62360.7% to €420 million (versus €1,070 million in 20082011). The decline in our share was mainly attributable to €785 million in 2009. This increase was a direct result of the growth61.6% drop in sales of Plavix®Plavix® in the United States (up 12.8% at constant exchange rates)due to the loss of exclusivity and of the appreciation of the U.S. dollar against the euro (up 7.0%).
competition from generics.
Net Income from the Held-for-Exchange Merial Business
With effect from September 18, 2009, the date on which sanofi-aventis obtained exclusive control over Merial, the operations of this company have been accounted for using the full consolidation method. As of December 31, 2009, the results of Merial’s operations are reported in the line item “Net income from the held-for-exchange Merial business”, in accordance with IFRS 5 (refer to Note D.8. “Assets held for sale or exchange” to our consolidated financial statements). The net income of the Merial business for the year ended December 31, 2009 was €175 million, compared with €120 million in the previous year.
This growth was attributable to a strong operating performance by Merial and to the appreciation of the U.S. dollar against the euro. The figures cited above include 100% of the net income of Merial with effect from September 18, 2009, compared with 50% prior to that date. The 2009 figure also includes a net expense of €46 million relating to the workdown of inventories remeasured at fair value, as part of the provisional purchase price allocation on the acquisition of the 50% interest in Merial acquired in 2009.
Net Income
Net income (before minority interests) totaled €5,691amounted to €5,136 million in 2009,2012, compared with €4,292€5,934 million in 2008.2011.
Net Income Attributable to MinorityNon-Controlling Interests
Net income attributable to minoritynon-controlling interests for the year ended December 31, 2009 was €426totaled €169 million in 2012, against €441€241 million for the previous year.in 2011. This item includesline mainly comprises the share of pre-tax incomeprofits paid over to BMS from territories managed by sanofi-aventisSanofi (€405149 million, versus €225 million in 2009, versus €422 million2011); this year-on-year fall was directly related to increased competition from generics of clopidogrel (Plavix®) in 2008).
Europe.
Net Income Attributable to Equity Holders of the CompanySanofi
Net income attributable to equity holders of the Company amounted to €5,265Sanofi was €4,967 million in 2009,2012, versus €3,851€5,693 million in 2008. Earnings per share (EPS) for 2009 were €4.03, up 37.1% on the 20082011.
Basic earnings per share for 2012 was €3.76, 12.8% lower than the 2011 figure of €2.94,€4.31, based on an average number of shares outstanding of 1,305.91,319.5 million in 2009 and 1,309.32012 (1,321.7 million in 2008.
On a diluted basis,2011). Diluted earnings per share for 2009 were €4.03, up 37.1% on the 2008 earnings per share figure of €2.94,2012 was €3.74, compared to €4.29 for 2011, based on an average number of shares outstanding after dilution of 1,307.41,329.6 million in 20092012 and 1,310.91,326.7 million in 2008.
2011.
Business Operating Income
Sanofi reports segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources. See "Item 5. Operating and Financial Review and Prospects — Segment information" above for the definition of business operating income and reconciliation to our Income before tax and associates and joint ventures.
Business operating income for 20092012 was €12,028€11,353 million, compared to €10,391€12,144 million in 2008.2011 (down 6.5%). The table below shows trends in business operating income by business segment for 20092012 and 2008:2011:
(€ million) | 2009 | 2008 | ||
Pharmaceuticals | 10,608 | 9,399 | ||
Vaccines | 1,173 | 882 | ||
Other | 247 | 110 | ||
Business operating income | 12,028 | 10,391 | ||
(€ 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’s performance (see “ItemGroup's performance. See "Item 5. Operating and Financial Review and Prospects — Business Net Income” above).Income" above for the definition of business net income and reconciliation to our Net income attributable to equity holders of Sanofi.
Business net income for 2009 was €8,629 million, versus €7,314totaled €8,179 million in 2008, representing growth of 18.0%.
(€ million) Business net income (i) amortization of intangible assets (ii) impairment of intangible assets (iii) expenses arising on the workdown of acquired inventories(1) (iv) restructuring costs (iii)/(iv) other items(2) (v) tax effect on the items listed above (iii)/(vi) other tax items(3) (vii) share of minority interests on the items listed above (iii) expenses arising from the impact of the Merial acquisition(4) (iii) expenses arising from the impact of acquisitions on associates(5) Net income attributable to equity holders of the Company (1) Expenses arising from the impacts of acquisitions on inventories: workdown of inventories remeasured at fair value at the acquisition date. (2) Other items comprise: - gain on sale of Millennium shares - reversal of provisions for major litigation (3) Other tax items include: - net charge to/(reversal of) provisions for tax exposures - reversal of deferred taxes following ratification of the Franco-American Treaty (see Note D.30. to our consolidated financial statements) (4) This line item comprises: until September 17, 2009, amortization and impairment charged against the intangible assets of Merial; and from September 18, 2009 (i) the impact of the discontinuation of depreciation of the property, plant and equipment of Merial in accordance with IFRS 5 (see Note B.7. to our consolidated financial statements) and (ii) the expense arising from the workdown of inventories remeasured at fair value at acquisition date. (5) Expenses arising from the impacts of acquisitions on associates: workdown of acquired inventories, amortization and impairment of intangibles assets, and impairment of goodwill. 2009 2008 8,629 7,314 (3,528 ) (3,483 ) (372 ) (1,554 ) (27 ) (2 ) (1,080 ) (585 ) — 114 1,629 1,904 106 221 1 — (66 ) (50 ) (27 ) (28 ) 5,265 3,851 38 76 221 106
Business net income for 2009 was €8,6292012 versus €8,795 million an increase of 18.0% on the 2008 figure of €7,314 million,in 2011 (down 7.0%), and represented 29.4%23.4% of net sales compared with 26.5%26.3% in 2008.2011.
Business Earnings Per Share
We also report business earnings per share, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding (see "— Business Net Income" above).
Business earnings per share for 2012 were €6.20 versus €6.65 in 2011, down 6.8%, based on an average number of shares outstanding of 1,319.5 million in 2012 (1,321.7 million in 2011). Diluted business earnings per share for 2012 were €6.15 versus €6.63 in 2011, down 7.2%, based on an average number of shares outstanding of 1,329.6 million in 2012 and 1,326.7 million in 2011.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Our consolidated income statements for the years ended December 31, 2011 and December 31, 2010 break down as follows:
(under IFRS) (€ million) | 2011 | as % of net sales | 2010 | as % of net sales | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 33,389 | 100.0% | 32,367 | 100.0% | ||||||||
Other revenues | 1,669 | 5.0% | 1,669 | 5.2% | ||||||||
Cost of sales | (10,902 | ) | (32.7%) | (9,398 | ) | (29.0%) | ||||||
Gross profit | 24,156 | 72.3% | 24,638 | 76.1% | ||||||||
Research & development expenses | (4,811 | ) | (14.4%) | (4,547 | ) | (14.0%) | ||||||
Selling & general expenses | (8,536 | ) | (25.6%) | (8,149 | ) | (25.2%) | ||||||
Other operating income | 319 | 369 | ||||||||||
Other operating expenses | (315 | ) | (292 | ) | ||||||||
Amortization of intangible assets | (3,314 | ) | (3,529 | ) | ||||||||
Impairment of intangible assets | (142 | ) | (433 | ) | ||||||||
Fair value remeasurement of contingent consideration liabilities | 15 | — | ||||||||||
Restructuring costs | (1,314 | ) | (1,384 | ) | ||||||||
Other gains and losses, and litigation (1) | (327 | ) | (138 | ) | ||||||||
Operating income | 5,731 | 17.2% | 6,535 | 20.2% | ||||||||
Financial expenses | (552 | ) | (468 | ) | ||||||||
Financial income | 140 | 106 | ||||||||||
Income before tax and associates and joint ventures | 5,319 | 15.9% | 6,173 | 19.1% | ||||||||
Income tax expense | (455 | ) | (1,430 | ) | ||||||||
Share of profit/(loss) of associates and joint ventures | 1,070 | 978 | ||||||||||
Net income | 5,934 | 17.8% | 5,721 | 17.7% | ||||||||
Net income attributable to non-controlling interests | 241 | 254 | ||||||||||
Net income attributable to equity holders of Sanofi | 5,693 | 17.1% | 5,467 | 16.9% | ||||||||
Average number of shares outstanding (million) | 1,321.7 | 1,305.3 | ||||||||||
Average number of shares outstanding after dilution (million) | 1,326.7 | 1,308.2 | ||||||||||
Basic earnings per share (in euros) | 4.31 | 4.19 | ||||||||||
Diluted earnings per share (in euros) | 4.29 | 4.18 | ||||||||||
Our consolidated income statements include the results of the operations of Genzyme from April 2011. In order to help investors gain a better understanding of our performance, in the narrative discussion of certain income statement line items ("research & development expenses", and "selling & general expenses") we exclude 2011 data for Genzyme in the analyses. In the narrative discussion of Genzyme's products net sales, we used non-consolidated 2010 net sales in additional analyses.
Net Sales
Net sales for the year ended December 31, 2011 totaled €33,389 million, up 3.2% on 2010. Exchange rate fluctuations had an unfavorable effect of 2.1 points, primarily as a result of the depreciation of the U.S. dollar against the euro. At constant exchange rates, and after taking account of changes in structure (mainly the consolidation of Genzyme from April 2011), net sales were up 5.3% year-on-year.
Excluding Genzyme, net sales were down 2.6% in 2011 at constant exchange rates, reflecting the loss in sales associated with competition from generics and the impacts of austerity measures in the European Union. Excluding Genzyme and sales of A/H1N1 vaccines, net sales were down 1.2% at constant exchange rates.
The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 2011 and December 31, 2010 to our net sales at constant exchange rates:
(€ million) | 2011 | 2010 | Change (%) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Net sales | 33,389 | 32,367 | +3.2% | |||||||
Effect of exchange rates | 704 | |||||||||
Net sales at constant exchange rates | 34,093 | 32,367 | +5.3% | |||||||
Our net sales comprise the net sales generated by our Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health segments.
The following table breaks down our 2011 and 2010 net sales by business segment:
(€ million) | 2011 Reported | 2010 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Pharmaceuticals | 27,890 | 26,576 | +4.9% | +6.7% | ||||||||
Vaccines | 3,469 | 3,808 | -8.9% | -5.5% | ||||||||
Animal Health | 2,030 | 1,983 | +2.4% | +4.3% | ||||||||
Total | 33,389 | 32,367 | +3.2% | +5.3% | ||||||||
Net Sales by Product — Pharmaceuticals segment
Net sales generated by our Pharmaceuticals segment were €27,890 million in 2011, up 4.9% on a reported basis and 6.7% at constant exchange rates. This change reflects the positive impact of the first-time consolidation of Genzyme; the negative impacts of competition from generics on sales of Lovenox®, Ambien® CR and Taxotere® in the United States and Plavix® and Taxotere® in the European Union; and the effects of healthcare reform in the United States and austerity measures in Europe. Excluding Genzyme, our Pharmaceuticals segment posted net sales of €25,495 million, down 4.1% on a reported basis and 2.7% at constant exchange rates.
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 acquired with Genzyme; net sales for these Genzyme products have been consolidated since the acquisition date (April 2011).
Other pharmaceutical products
Lovenox® saw net sales decrease by 23.4% at constant exchange rates in 2011 to €2,111 million, as a result of competition from generics in the United States where net sales declined by 54.3% to €633 million. Outside the United States, net sales were up 9.0% at constant exchange rates at €1,478 million (representing 70.0% of worldwide 2011 sales of Lovenox®), with good performances in Western Europe (up 6.4%) and Emerging Markets (up 14.0%).
Net sales of the hypnoticStilnox®/Ambien®/Myslee® fell by 41.4% at constant exchange rates to €490 million, reflecting competition from Ambien® CR generics in the United States. In Japan, Myslee® continued to post a solid performance with net sales up 9.2% at constant exchange rates at €284 million.
Allegra® prescription sales were down 8.6% (at constant exchange rates) at €580 million. In Japan, which represents 80.2% of worldwide sales of Allegra®, net sales totaled €465 million (up 22.1% at constant exchange rates) due to a sharp increase in seasonal allergies. The slump in prescription sales in the United States (down 98.6% at constant exchange rates) was mainly due to the approval of Allegra® as an over-the-counter (OTC) product in the U.S. market effective March 2011. Since this approval, U.S. sales of Allegra® have been recognized in our good operatingConsumer 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 reflectedofSynvisc-One® in the U.S. and Japan. Net sales for this product are recognized as from the Genzyme acquisition date and comparisons are with the net sales reported by Genzyme in 2010 for the same period.
New Genzyme
The "new Genzyme" business consists of products used to treat rare diseases and products for the treatment of multiple sclerosis. The latter did not generate any sales in 2011 and 2010, since Aubagio® was only launched in 2012 and Copaxone® is not included in the new Genzyme business. Net sales of Genzyme's rare diseases products are recognized as from the Genzyme acquisition date and comparisons are with the net sales reported by Genzyme in 2010 for the same period.
Net sales ofCerezyme® were up 11.1% (on a constant structure basis and at constant exchange rates) at €441 million, reflecting higher production volumes in 2011 following a reduction in availability of the product in 2010 due to manufacturing issues.Myozyme®/Lumizyme® posted strong growth (27.4% on a constant structure basis and at constant exchange rates, to €308 million), driven mainly by the performance of Lumizyme® in the United States and volume growth worldwide. Growth inFabrazyme® sales (9.4% on a constant structure basis and at constant exchange rates, to €109 million) was sparked by the increase in the product's availability following partial resolution of manufacturing issues. For more information regarding the manufacturing issues related to Cerezyme® and Fabrazyme® see "Item 4 — Information on the Company — Production and Raw Materials."
Consumer Health Care
TheConsumer Health Care business posted year-on-year growth of 22.8% at constant exchange rates to €2,666 million, supported by the successful launch of Allegra® as an over-the-counter product in the U.S. in the first quarter of 2011 (which generated €211 million in net sales for the year out of a worldwide total of €245 million), and by the performance of Emerging Markets where net sales increased by 20.8% at constant exchange rates to €1,225 million. These figures include the effect of the first-time consolidation of the consumer health products of Chattem in the United States from February 2010, and of BMP Sunstone in China from February 2011.
Generics
TheGenerics business reported net sales of €1,746 million in 2011, up 16.2% at constant exchange rates. This growth was underpinned by sales in Emerging Markets (€1,092 million, up 14.0% at constant exchange rates), especially in Latin America (up 21.4% at constant exchange rates), and in the United States (up 79.4% at constant exchange rates) where Sanofi launched its own approved generics of Ambien® CR, Taxotere® and Lovenox®.
Other prescription products
Net sales of the other prescription products in the portfolio were down 0.9% at constant exchange rates, at €5,928 million. For a description of our other pharmaceutical products, see "Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products."
Sales of Plavix® and Aprovel® are discussed further below under "— Worldwide Presence of Plavix® and Aprovel®".
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 is carried on by Merial, which has been a wholly-owned subsidiary of Sanofi since September 18, 2009. On March 22, 2011 Merck and Sanofi announced that they had mutually terminated their agreement to form a new animal health joint venture and had decided to maintain Merial and Intervet/Schering-Plough as two separate entities, operating independently. This decision was mainly due to the increasing complexity of implementing the proposed transaction. Since January 1, 2011 Merial has no longer been presented separately in our consolidated balance sheet and income statement, and net income from Merial has been reclassified and included in income from continuing operations for all periods reported. Detailed information about the impact of Merial on our consolidated financial statements as of December 31, 2011 is provided in Note D.2. and Note D.8.2. to our consolidated financial statements included at Item 18 of this annual report.
Merial generated net sales of €2,030 million in 2011, up 4.3% at constant exchange rates and 2.4% on a reported basis, led by the performance in Emerging Markets.
The following table presents the 2011 and 2010 sales of our Animal Health segment by range of products:
(€ million) | 2011 Reported | 2010 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Frontline® and other fipronil-based products | 764 | 774 | -1.3% | +0.9% | |||||||||
Vaccines | 662 | 627 | +5.6% | +7.2% | |||||||||
Avermectin | 372 | 355 | +4.8% | +6.5% | |||||||||
Other products | 232 | 227 | +2.2% | +4.4% | |||||||||
Total Animal Health | 2,030 | 1,983 | +2.4% | +4.3% | |||||||||
Net sales for the companion animals franchise were marked by moderate growth in sales of the Frontline® product range (up 0.9% at constant exchange rates, to €764 million), reflecting the temporary impact from generic Frontline® Plus competitors in the United States and the arrival of competitor products in the United States and Western Europe. Sales of vaccines showed sustained growth (7.2% at constant exchange rates), especially in Emerging Markets (up 14.2%) with the success of the Vaxxitex® vaccine.
The following table breaks down net sales of our Animal Health segment by product and by geographical region in 2011:
(€ million) Product | Western Europe (1) | Change at constant exchange rates | United States | Change at constant exchange rates | Emerging Markets (2) | Change at constant exchange rates | Other countries (3) | Change at constant exchange rates | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Frontline® and other fipronil-based products | 206 | +4.5% | 411 | -2.1% | 86 | +8.8% | 61 | 0.0% | |||||||||||||||||
Vaccines | 195 | +2.6% | 126 | +2.3% | 325 | +14.2% | 16 | -21.1% | |||||||||||||||||
Avermectin | 64 | +8.5% | 177 | +2.8% | 60 | +8.9% | 71 | +13.6% | |||||||||||||||||
Other products | 89 | -6.4% | 87 | +24.3% | 36 | +11.8% | 20 | -24.0% | |||||||||||||||||
Total Animal Health | 554 | +2.4% | 801 | +2.1% | 507 | +12.4% | 168 | -1.2% | |||||||||||||||||
Net Sales by Geographical Region
We divide our sales geographically into four regions: Western Europe, the United States, Emerging Markets and other countries. The following table breaks down our 2011 and 2010 net sales by region:
(€ million) | 2011 Reported | 2010 Reported | Change on a reported basis | Change at constant exchange rates | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Western Europe (1) | 9,130 | 9,539 | -4.3% | -4.0% | |||||||||
United States | 9,957 | 9,790 | +1.7% | +6.8% | |||||||||
Emerging Markets (2) | 10,133 | 9,533 | +6.3% | +10.1% | |||||||||
Of which Eastern Europe and Turkey | 2,666 | 2,659 | +0.3% | +3.7% | |||||||||
Of which Asia (excl. Pacific region) (3) | 2,416 | 2,095 | +15.3% | +16.5% | |||||||||
Of which Latin America | 3,111 | 2,963 | +5.0% | +11.8% | |||||||||
Of which Africa | 949 | 880 | +7.8% | +9.7% | |||||||||
Of which Middle East | 872 | 825 | +5.7% | +8.6% | |||||||||
Other Countries (4) | 4,169 | 3,505 | +18.9% | +13.8% | |||||||||
Of which Japan | 2,865 | 2,275 | +25.9% | +20.2% | |||||||||
Total | 33,389 | 32,367 | +3.2% | +5.3% | |||||||||
Western Europe posted a 4% decrease in net sales at constant exchange rates to €9,130 million, hit by competition from generics of Taxotere® (down 73.6% at constant exchange rates) and Plavix® (down 35.6% at constant exchange rates), by the transfer of the Copaxone® business to Teva in certain countries, and by the impact of austerity measures. Excluding A/H1N1 vaccines and Genzyme, the decline was 10.5% at constant exchange rates.
The United States posted a 6.8% increase in net sales at constant exchange rates to €9,957 million, but a 5.7% decline after excluding A/H1N1 vaccines and Genzyme. Sales were affected by competition from generic versions of Lovenox®, Taxotere® and Ambien® CR, though the impact was partially offset by the performance of Lantus® and Eloxatine® and by the successful launch of Allegra® as an over-the-counter product.
In Emerging Markets, net sales totaled €10,133 million, up 10.1% at constant exchange rates. Excluding sales of A/H1N1 vaccines reported in 2010 (€361 million, primarily in Latin America) and Genzyme, growth at constant exchange rates reached 10.4%. In Brazil, net sales hit €1,522 million, up 4.9% at constant exchange rates (21.9% after excluding A/H1N1 vaccines), reflecting the solid performance of generics and the contribution made by Genzyme. In China, net sales totaled €981 million (up 40.4% at constant exchange rates), supported by the performance of Plavix® and Lantus®. In Eastern Europe and Turkey, growth (3.7% at constant exchange rates) suffered from lower prices and competition from Taxotere® generics in Turkey; Russia posted sales of €732 million, up 11.2% at constant exchange rates.
In the Other Countries region, net sales totaled €4,169 million, up 13.8% at constant exchange rates. Excluding A/H1N1 vaccines and Genzyme, net sales increased by 6.2%. Japan recorded net sales of €2,865 million (up 20.2% at constant exchange rates), buoyed by solid performances from Plavix® (up 22.9% to €671 million), Allegra® (up 22.2% to 465 million) and Hib vaccines, as well as by the contribution from Genzyme.
Worldwide Presence of Plavix® and Aprovel®
Two of our leading products — Plavix® and Aprovel® — were discovered by Sanofi and jointly developed with Bristol-Myers Squibb ("BMS") under an alliance agreement. In all territories except Japan, these products are sold either by Sanofi or by BMS in accordance with the terms of this alliance agreement applicable in 2010 and 2011 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above).
Worldwide sales of these two products are an important indicator because they facilitate a financial statement user's understanding and analysis of our consolidated income statement, particularly in terms of understanding our overall profitability in relation to consolidated revenues, and also facilitate a user's ability to understand and assess the effectiveness of our research and development efforts.
Also, disclosing sales made by BMS of these two products enables the users to have a clearer understanding of trends in different lines of our income statement, in particular the line items "Other revenues", where we record royalties received on those sales (see "— Other Revenues"); "Share of profit/loss of associates and joint ventures" (see "— Share of Profit/Loss of Associates and Joint Ventures"), where we record our share of profit/loss of entities included in the BMS Alliance and under BMS operational management; and "Net income attributable to non-controlling interests" (see "— Net Income Attributable to Non-Controlling Interests"), where we record the BMS share of profit/loss of entities included in the BMS Alliance and under our operational management.
The table below sets forth the worldwide sales of Plavix® and Aprovel® in 2011 and 2010, by geographic region:
| 2011 | 2010 | Change on a reported basis | Change at constant exchange rates | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Sanofi (2) | BMS (3) | Total | Sanofi (2) | BMS (3) | Total | |||||||||||||||||||
Plavix®/Iscover® (1) | |||||||||||||||||||||||||
Europe | 530 | 44 | 574 | 724 | 98 | 822 | -30.2% | -29.8% | |||||||||||||||||
United States | — | 4,759 | 4,759 | — | 4,626 | 4,626 | +2.9% | +7.8% | |||||||||||||||||
Other countries | 1,370 | 286 | 1,656 | 1,165 | 282 | 1,447 | +14.4% | +13.8% | |||||||||||||||||
Total | 1,900 | 5,089 | 6,989 | 1,889 | 5,006 | 6,895 | +1.4% | +4.5% | |||||||||||||||||
Aprovel®/Avapro®/ Karvea®/Avalide® (4) | |||||||||||||||||||||||||
Europe | 694 | 130 | 824 | 789 | 158 | 947 | -13.0% | -13.0% | |||||||||||||||||
United States | — | 374 | 374 | — | 482 | 482 | -22.4% | -18.8% | |||||||||||||||||
Other countries | 451 | 156 | 607 | 411 | 216 | 627 | -3.2% | -2.1% | |||||||||||||||||
Total | 1,145 | 660 | 1,805 | 1,200 | 856 | 2,056 | -12.2% | -11.0% | |||||||||||||||||
Worldwide sales of Plavix®/Iscover® totaled €6,989 million in 2011, up 4.5% at constant exchange rates. Sales in the U.S. (consolidated by BMS) rose by a robust 7.8% at constant exchange rates, to €4,759 million. In Japan and China, Plavix® continued their success with sales of €671 million (+22.9% at constant exchange rates) and €277 million (+27.7% at constant exchange rates), respectively. These results more than offset the decline in sales of Plavix® in Europe caused by competition from generics (down 29.8% at constant exchange rates, at €574 million).
Worldwide sales of Aprovel®/Avapro®/Karvea®/Avalide® totaled €1,805 million in 2011, down 11.0% at constant exchange rates, reflecting the impact of increasing penetration of generic losartan on the market for anti-hypertensives.
Other Revenues
Other revenues, made up primarily of royalty income under licensing agreements contracted in connection with ongoing operations, remained stable at €1,669 million in 2011 and 2010.
Revenues from licensing under the worldwide alliance with BMS on Plavix® and Aprovel® represented €1,275 million in 2011 versus €1,303 million in 2010 (down 2.1% on a reported basis). These licensing revenues were adversely affected by the depreciation of the U.S. dollar against the euro, despite an increase in sales of Plavix® in the United States (up 7.8% at constant exchange rates).
Gross Profit
Gross profit for the year ended December 31, 2011 came to €24,156 million (72.3% of net sales), versus €24,638 million (76.1% of net sales) in 2012. This represents a year-on-year fall of 2.0% in gross profit, and a deterioration of 3.8 points in the gross margin ratio.
The gross margin ratio of the Pharmaceuticals segment was down 2.8 points at 75.8%, reflecting both a decrease in royalty income (-0.3 of a point) and an adverse trend in the ratio of cost of sales to net sales (-2.5 points). The latter was primarily due to the unfavorable impact of new generics (especially Lovenox®, Ambien® CR and Taxotere® in the United States, and Plavix® and Taxotere® in Europe).
The gross margin ratio of the Vaccines segment was down 4.5 points at 60.2%. This change was principally due to the absence in 2011 of the margin on pandemic influenza vaccines, which had a favorable impact in 2010.
The gross margin ratio of the Animal Health segment was down 1.0 point at 68.9%.
Our consolidated gross profit was also impacted in 2011 by an expense of €476 million (or 1.4 points) arising from the workdown of inventories remeasured at fair value in connection with acquisitions, principally Genzyme (€22,869473 million). In 2010, this expense represented €142 million (0.4 of a point) and related mainly to the workdown of Merial inventories.
Research and Development Expenses
Research and development (R&D) expenses totaled €4,811 million in 2011 (14.4% of net sales), up 5.8% on the 2010 figure of €4,547 million (14.0% of net sales).
In the Pharmaceuticals segment, R&D expenses rose by €217 million (up 5.6%). Excluding Genzyme, R&D expenses showed a single-digit decrease as a result of reorganizations initiated in 2009, versus €21,480and of the streamlining of the project portfolio.
In the Vaccines segment, R&D expenses rose by €47 million year-on-year to €564 million (up 9.1%), due mainly to clinical trials on vaccines against dengue fever and Clostridium difficile.
In the Animal Health segment, R&D expenses fell by €9 million (5.8%) year-on-year.
Selling and General Expenses
Selling and general expenses amounted to €8,536 million (25.6% of net sales), an increase of 4.7% on the prior-year figure of €8,149 million (25.2% of net sales).
The Pharmaceuticals segment generated a €414 million increase (+5.9%), due primarily to the first-time consolidation of Genzyme. Excluding Genzyme, selling and general expenses showed a single-digit decrease, reflecting lower costs for genericized products in Europe and the United States and tight control over general expenses.
In the Vaccines segment, selling and general expenses were down €61 million or 10.1% due to lower selling expenses for pandemic influenza vaccines.
In the Animal Health segment, selling and general expenses were up €13 million (+2.2%), in line with the increase in net sales.
Other Operating Income and Expenses
Other operating income totaled €319 million in 2008)2011 (versus €369 million in 2010), and other operating expenses amounted to €315 million (compared with €292 million in 2010).
Other operating income and expenses represented a net profit of €4 million in 2011, compared with €77 million in 2010. The year-on-year decrease of €73 million was essentially due to the discontinuation of royalty payments from Teva on North American sales of Copaxone® from the second quarter of 2010.
This line item also includes expenses incurred in connection with the 2011 acquisition of Genzyme (€65 million), as well as a net operational foreign exchange loss of €5 million (versus €138 million in 2010, a year of high volatility in the foreign exchange markets).
Amortization of Intangible Assets
Amortization charged against intangible assets in the year ended December 31, 2011 amounted to €3,314 million, compared with €3,529 million in the previous year. The reduction of €215 million was mainly due to a decrease in amortization charged against intangible assets recognized on the acquisition of Aventis (€1,788 million in 2011, versus €3,070 million in 2010, as some products reached the end of their life cycles in the face of competition from generics). This positive impact was partially offset by new amortization charges in 2011 generated by intangible assets recognized on the acquisition of Genzyme in the second quarter of 2011 and on the first-time consolidation of Merial in the first quarter of 2011 (€709 million and €353 million, respectively).
Impairment of Intangible Assets
This line recorded net impairment losses against intangible assets of €142 million in 2011, compared with €433 million in 2010. Impairment losses booked in 2011 were mainly associated with (i) discontinuing a Genzyme research project; (ii) certain Zentiva generics for which the sales outlook was adjusted downward; and (iii) discontinuing a joint development project with Metabolex in the field of diabetes. It also included an impairment reversal in connection with Actonel®, pursuant to confirmation of the terms of the collaboration agreement with Warner Chilcott (see Note C.3. to our consolidated financial statements included at Item 18 of this annual report).
In 2010, impairment losses related primarily to (i) Actonel®, due to proposed changes to the terms of the collaboration agreement with Warner Chilcott; (ii) the pentavalent vaccine Shan5®, for which sales projections were revised to factor in the need for another WHO pre-qualification following a flocculation problem encountered in some batches; (iii) the BSI-201 project, following a revision to the development plan in response to the announcement of the initial Phase III trial results in metastatic triple negative breast cancer; and (iv) certain generics and Zentiva consumer health products for which sales projections in Eastern Europe were revised downwards.
Fair Value Remeasurement of Contingent Consideration Liabilities
This line item records fair value remeasurements of liabilities related to business combinations accounted for in accordance with the revised IFRS 3. These remeasurements generated a new gain of €15 million in 2011, mainly related to contingent purchase consideration on the acquisition of TargeGen, to the contingent value rights (CVRs) issued as part of the Genzyme acquisition, and to contingent consideration payable to Bayer on certain Genzyme products (see Note D.18. to the consolidated financial statements included at Item 18 of this annual report).
Restructuring Costs
Restructuring costs amounted to €1,314 million in 2011, compared with €1,384 million in 2010.
In 2011, these were mainly employee-related expenses incurred under plans to adjust headcount in support functions and sales forces in Europe and in R&D in Europe and the United States, and measures to adapt our manufacturing facilities in Europe.
In 2010, these costs related mainly to measures taken to adapt our industrial operations in France, and our sales and R&D functions in the United States and some European countries.
Other Gains and Losses, and Litigation
This line item showed a net expense of €327 million, mainly comprising (i) the €519 million backlog of depreciation and amortization expense against the tangible and intangible assets of Merial, which was not recognized from September 18, 2009 through December 31, 2010 because these assets were classified as held for sale or exchange during that period in accordance with IFRS 5 (see Note D.8.2. to our consolidated financial statements included at Item 18 of this annual report), (ii) proceeds of €210 million in damages with regard to a Plavix® patent and (iii) the impact of the divestiture of the Dermik dermatology business (see Note D.28. to our consolidated financial statements).
In 2010, this line item showed a net expense of €138 million arising from an adjustment to vendor's guarantee provisions in connection with past business divestitures.
Operating Income
Operating income totaled €5,731 million for 2011, versus €6,535 million for 2010 (down 12.3%); the year-on-year fall mainly reflected the competition from generics and the absence of A/H1N1 pandemic influenza vaccine sales in 2011.
Financial Income and Expenses
Net financial expenses came to €412 million in 2011 versus €362 million in 2010, an increase of €50 million.
Financial expenses directly related to our debt, net of cash and cash equivalents (see definition at "— Liquidity and Capital Resources" below) were €325 million in 2011, virtually unchanged from the 2010 figure of €324 million, as a result of contrasting factors:
Provisions against investments and financial assets totaled €58 million in 2011 (versus €6 million in 2010); in 2011, these provisions were primarily related to the impairment of Greek government bonds.
Gains on disposals of non-current financial assets came to €25 million versus €61 million in 2010. In 2011, the main item was the impact of the change in the consolidation method for the investment in Société Financière des Laboratoires de Cosmétologie Yves Rocher following loss of significant influence (see Note D.6. to our consolidated financial statements); in 2010, the main item was the disposal of the equity interest in Novexel.
This item also included net financial foreign exchange gains of €10 million in 2011 (versus a net loss of €20 million in 2010).
Income before Tax and Associates and Joint Ventures
Income before tax and associates and joint ventures was €5,319 million in 2011, versus €6,173 million in 2010, a decrease of 13.9%.
Income Tax Expense
Income tax expense totaled €455 million in 2011, compared with €1,430 million in 2010. The decrease was mainly due to a reduction in deferred tax liabilities as a result of changes in tax rates and tax legislation (mainly in the United Kingdom), and to the effect of the Franco-American Advance Pricing Agreement (APA) for the period from 2006 through 2011 (see Note D.30. to our consolidated financial statements).
This line item also includes the tax effects of the amortization of intangible assets (€1,178 million in 2011 versus €1,183 million in 2010) and of restructuring costs (€399 million in 2011 versus €466 million in 2010).
The effective tax rate is calculated on the basis of business operating income minus net financial expenses, and before (i) the share of profit/loss of associates and joint ventures and (ii) net income attributable to non-controlling interests. The effective tax rate was 27.0% in 2011, versus 27.8% in 2010. The difference relative to the standard corporate income tax rate applicable in France (34.4%) was mainly due to lower taxes on patent royalties in France.
Share of Profit/Loss of Associates and Joint Ventures
The share of profit/loss of associates and joint ventures totaled €1,070 million in 2011, compared with €978 million in 2010. This line mainly includes our share of after-tax profits generated in territories managed by BMS under the Plavix® and Avapro® alliance, which advanced by 9.2% to €1,070 million compared with €980 million in 2010. The increase in this share in 2011 was partly related to growth in Plavix® sales in the United States (up 2.9%).
Net Income
Net income for the year was €5,934 million in 2011, compared with €5,721 million in 2010.
Net Income Attributable to Non-Controlling Interests
Net income attributable to non-controlling interests amounted to €241 million in 2011, compared with €254 million in 2010. This line mainly includes the share of pre-tax profits paid to BMS generated in territories managed by Sanofi (€225 million, versus €238 million in 2010); the year-on-year fall is directly related to increased competition from clopidogrel (Plavix®) generics in Europe.
Net Income Attributable to Equity Holders of Sanofi
Net income attributable to equity holders of Sanofi totaled €5,693 million in 2011, against €5,467 million in 2010.
Basic earnings per share for 2011 was €4.31, 2.9% higher than the 2010 figure of €4.19, based on an average number of shares outstanding of 1,321.7 million in 2011 and 1,305.3 million in 2010. Diluted earnings per share was €4.29 in 2011, versus €4.18 in 2010, based on an average number of shares outstanding after dilution of 1,326.7 million in 2011 and 1,308.2 million in 2010.
Business Operating Income
Sanofi reports segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources. See "Item 5. Operating and Financial Review and Prospects — Segment information" above for the definition of business operating income and reconciliation to Income before tax and associates and joint ventures.
Business operating income for 2011 was €12,144 million, compared to €12,863 million in 2010. The table below shows trends in business operating income by business segment for 2011 and 2010:
(€ million) | 2011 | 2010 | |||||
---|---|---|---|---|---|---|---|
Pharmaceuticals | 10,496 | 10,965 | |||||
Vaccines | 985 | 1,379 | |||||
Animal Health | 627 | 621 | |||||
Other | 36 | (102 | ) | ||||
Business operating income | 12,144 | 12,863 | |||||
Business Net Income
Business net income is a non-GAAP financial measure that we use to evaluate our performance (see "Item 5. Operating and Financial Review and Prospects — Business Net Income" above for the definition of business net income and reconciliation to Net Income attributable to equity holders of Sanofi.
Business net income totaled €8,795 million in 2011 versus €9,215 million in 2010, a drop of 4.6%. It represented 26.3% of net sales compared with 28.5% in 2010.
Business Earnings Per Share
We also report business earnings per share, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding (see “—"— Business Net Income”Income" above).
Business earnings per share for 20092011 were €6.61, up 18.2% on€6.65, 5.8% lower than the 2008 business earnings per share2010 figure of €5.59. The€7.06, based on a weighted average number of shares outstanding was 1,305.9of 1,321.7 million in 20092011 and 1,309.31,305.3 million in 2008.2010. Diluted business earnings per share for 20092011 were €6.60, up 18.3% on€6.63, 5.8% lower than the 2008 diluted business earnings per share2010 figure of €5.58. On€7.04, based on a diluted basis, the weighted average number of shares outstanding was 1,307.4of 1,326.7 million in 20092011 and 1,310.91,308.2 million in 2008.
Business earnings per share for 2008 were up 6.7% on the 2007 business earnings per share figure of €5.24, boosted by the €3 billion share repurchase program authorized by the Shareholders’ Annual General Meeting of May 2007. The weighted average number of shares outstanding was 1,346.9 million in 2007. Diluted business earnings per share for 2008 were up 7.1% on the 2007 diluted business earnings per share figure of €5.21. On a diluted basis, the weighted average number of shares outstanding was 1,353.9 million in 2007.
Year Ended December 31, 2008 Compared with Year Ended December 31, 2007
In the discussion that follows, we present our sales on a reported basis and on a comparable basis, isolating the impacts of changes in structure and changes in exchange rates. The method we use to do this is different from the method we use in comparing our results of operations for the years ended December 31, 2009 and 2008. See “— Presentation of Net Sales” above for further details.
In addition, we did not classify any our products as “flagship” products until 2009, and as a result our management did not analyze the performance of those products as a group in 2008 compared to 2007 (although each of those products is analyzed individually below, with the exception of Multaq®, which was introduced on the market in 2009).
The consolidated income statements for the years ended December 31, 2008 and December 31, 2007 break down as follows:
(under IFRS) | 2008 | 2007 | ||||||||||
(€ million) | as % of net sales | as % of net sales | ||||||||||
Net sales | 27,568 | 100.0% | 28,052 | 100.0% | ||||||||
Other revenues | 1,249 | 4.5% | 1,155 | 4.1% | ||||||||
Cost of sales | (7,337 | ) | (26.6% | ) | (7,571 | ) | (27.0% | ) | ||||
Gross profit | 21,480 | 77.9% | 21,636 | 77.1% | ||||||||
Research & development expenses | (4,575 | ) | (16.6% | ) | (4,537 | ) | (16.2% | ) | ||||
Selling & general expenses | (7,168 | ) | (26.0% | ) | (7,554 | ) | (26.9% | ) | ||||
Other operating income | 556 | 522 | ||||||||||
Other operating expenses | (353 | ) | (307 | ) | ||||||||
Amortization of intangibles | (3,483 | ) | (3,654 | ) | ||||||||
Operating income before restructuring, impairment of property, plant & equipment and intangibles, gains & losses on disposals, and litigation | 6,457 | 23.4% | 6,106 | 21.8% | ||||||||
Restructuring costs | (585 | ) | (137 | ) | ||||||||
Impairment of property, plant & equipment and intangibles | (1,554 | ) | (58 | ) | ||||||||
Gains and losses on disposals, and litigation | 76 | — | ||||||||||
Operating income | 4,394 | 15.9% | 5,911 | 21.1% | ||||||||
Financial expenses | (335 | ) | (329 | ) | ||||||||
Financial income | 103 | 190 | ||||||||||
Income before tax and associates | 4,162 | 15.1% | 5,772 | 20.6% | ||||||||
Income tax expense | (682 | ) | (687 | ) | ||||||||
Share of profit/loss of associates | 692 | 446 | ||||||||||
Net income excluding the held-for-exchange Merial business(1) | 4,172 | 15.1% | 5,531 | 19.7% | ||||||||
Net income from the held-for-exchange Merial business(1) | 120 | 151 | ||||||||||
Net income | 4,292 | 15.6% | 5,682 | 20.3% | ||||||||
- attributable to minority interests | 441 | 419 | ||||||||||
- attributable to equity holders of the Company | 3,851 | 14.0% | 5,263 | 18.8% | ||||||||
Average number of shares outstanding (million) | 1,309.3 | 1,346.9 | ||||||||||
Basic earnings per share (in euros) | 2.94 | 3.91 |
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Net Sales
Net sales for the year ended December 31, 2008 were €27,568 million, up by 3.7% on a comparable basis versus 2007. Exchange rate movements had a negative effect of 3.9 points, nearly 75% of which was related to the U.S. dollar. Changes in Group structure had a negative effect of 1.5 points. After taking these effects into account, net sales fell by 1.7% on a reported basis.
The following table sets forth a reconciliation of our reported net sales for the year ended December 31, 2007 to our comparable net sales for that year based on 2008 exchange rates and Group structure:
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Our net sales are generated by our two business segments: Pharmaceuticals and Human Vaccines (Vaccines). The following table breaks down our 2008 and 2007 net sales by business segment:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis change (%) | Comparable basis change (%) | |||||
Pharmaceuticals | 24,707 | 25,274 | 23,965 | -2.2% | +3.1% | |||||
Vaccines | 2,861 | 2,778 | 2,611 | +3.0% | +9.6% | |||||
Total | 27,568 | 28,052 | 26,576 | -1.7% | +3.7% | |||||
Net Sales by Product — Pharmaceuticals
Our pharmaceutical business generated net sales of €24,707 million in 2008, up by 3.1% on a comparable basis and down by 2.2% on a reported basis.
Net sales of our top 15 products advanced by 5.2% on a comparable basis to €16,657 million in 2008, representing 67.4% of pharmaceutical net sales versus 66.0% in 2007 (on a comparable basis). The introduction of generics of Ambien® IR in the United States and of Eloxatine® in Europe (i.e. excluding net sales of Ambien® IR in the United States in the first quarter of 2007 and in the first quarter of 2008, and of Eloxatine® in Europe in 2007 and 2008) decreased growth by approximately 2.2 points (on a comparable basis).
Net sales of other pharmaceutical products fell by 1.1% on a comparable basis to €8,050 million in 2008. Sales of these products were down by 4.8% on a comparable basis in Europe (at €4,831 million) and up by 7.7% on a comparable basis in the United States (at €602 million) in 2008. In the “Other Countries” region, these products reported sales growth of 4.4% to €2,617 million.
For a description of our other pharmaceutical products, see “Item 4. Information on the Company — B. Business Overview — Other Pharmaceutical Products.”
The following table breaks down our net sales for the Pharmaceuticals business by product:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis change (%) | Comparable basis change (%) | |||||||
Product | Indication | |||||||||||
Lovenox® | Thrombosis | 2,738 | 2,612 | 2,475 | +4.8% | +10.6% | ||||||
Plavix® | Atherothrombosis | 2,616 | 2,424 | 2,368 | +7.9% | +10.5% | ||||||
Lantus® | Diabetes | 2,450 | 2,031 | 1,918 | +20.6% | +27.7% | ||||||
Taxotere® | Breast, Non small cell lung, Prostate, Gastric, Head and neck cancers | 2,033 | 1,874 | 1,796 | +8.5% | +13.2% | ||||||
Eloxatine® | Colorectal cancer | 1,348 | 1,521 | 1,430 | -11.4% | -5.7% | ||||||
Aprovel®/CoAprovel® | Hypertension | 1,202 | 1,080 | 1,053 | +11.3% | +14.2% | ||||||
Stilnox®/Ambien®/Myslee® | Sleep disorders | 829 | 1,250 | 1,258 | -33.7% | -34.1% | ||||||
Allegra® | Allergic rhinitis, Urticaria | 688 | 706 | 674 | -2.5% | +2.1% | ||||||
Copaxone® | Multiple sclerosis | 622 | 1,177 | 520 | -47.2% | +19.6% | ||||||
Tritace® | Hypertension, Congestive heart failure, Nephropathy | 513 | 741 | 734 | -30.8% | -30.1% | ||||||
Amaryl® | Diabetes | 387 | 392 | 392 | -1.3% | -1.3% | ||||||
Xatral® | Benign prostatic hypertrophy | 331 | 333 | 320 | -0.6% | +3.4% | ||||||
Actonel® | Osteoporosis, Paget’s disease | 330 | 320 | 309 | +3.1% | +6.8% | ||||||
Depakine® | Epilepsy | 329 | 316 | 306 | +4.1% | +7.5% | ||||||
Nasacort® | Allergic rhinitis | 241 | 294 | 274 | -18.0% | -12.0% | ||||||
Sub-total Top 15 products | 16,657 | 17,071 | 15,827 | -2.4% | +5.2% | |||||||
Other products | 8,050 | 8,203 | 8,138 | -1.9% | -1.1% | |||||||
Total Pharmaceuticals | 24,707 | 25,274 | 23,965 | -2.2% | +3.1% | |||||||
The table below breaks down sales of our top 15 products by geographic region in 2008:
(€ million) | Europe | Comparable basis change (%) | United States | Comparable basis change (%) | Other countries | Comparable basis change (%) | ||||||
Product | ||||||||||||
Lovenox® | 815 | +8.1% | 1,625 | +11.7% | 298 | +12.0% | ||||||
Plavix® | 1,732 | +3.5% | 172 | +3.0% | 712 | +34.8% | ||||||
Lantus® | 713 | +16.3% | 1,452 | +30.8% | 285 | +46.2% | ||||||
Taxotere® | 900 | +10.8% | 737 | +15.9% | 396 | +13.8% | ||||||
Eloxatine® | 214 | -42.6% | 948 | +6.2% | 186 | +13.4% | ||||||
Aprovel®/CoAprovel® | 910 | +9.9% | — | — | 292 | +29.8% | ||||||
Stilnox®/Ambien®/Myslee® | 82 | -4.7% | 547 | -44.9% | 200 | +11.1% | ||||||
Allegra® | 39 | -25.0% | 333 | -0.9% | 316 | +10.5% | ||||||
Copaxone® | 381 | +18.3% | 210 | +19.3% | 31 | +40.9% | ||||||
Tritace® | 358 | -29.4% | — | — | 155 | -31.4% | ||||||
Amaryl® | 100 | -15.3% | 6 | -25.0% | 281 | +5.6% | ||||||
Xatral® | 148 | -10.3% | 119 | +20.2% | 64 | +14.3% | ||||||
Actonel® | 220 | +8.9% | — | — | 110 | +2.8% | ||||||
Depakine® | 219 | +3.3% | — | — | 110 | +17.0% | ||||||
Nasacort® | 39 | -9.3% | 175 | -13.8% | 27 | -3.6% | ||||||
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Top 15 Products(1)
Over 2008 as a whole, net sales ofLovenox®,the leader in anti-thrombotics in the U.S., Germany, France, Italy, Spain, and the United Kingdom (source: IMS 2009 sales), were up 10.6% on a comparable basis at €2,738 million. In the United States, the product reported growth of 11.7% on a comparable basis at €1,625 million. In Europe, after two quarters adversely affected by limited product availability (following the withdrawal of certain
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batches in which small quantities of an impurity were present), Lovenox® achieved growth of 8.1% on a comparable basis, to €815 million (double digit growth in the fourth quarter of 11.1% on a comparable basis).
Lantus®, the world’s leading insulin brand (source: IMS 2009 sales), was the biggest contributor to the Group’s top-line growth in 2008. The product achieved strong growth in all three regions: 30.8% in the United States, 16.3% in Europe and 46.2% in the Other Countries region, on a comparable basis. The new-generation Lantus® SoloSTAR® pen was a significant driver of sales growth in the United States.
Full-year sales ofTaxotere®exceeded €2 billion for the first time in 2008 (€2,033 million), with double-digit growth (on a comparable basis) in all three regions: 15.9% in the United States (where net sales were driven by the product’s use in adjuvant breast cancer treatment and in prostate cancer), 10.8% in Europe, and 13.8% in the Other Countries region.
Full-year sales of the hypnoticsAmbien® CR andAmbien® IR in the United States were $681 million and $125 million respectively. In Japan,Myslee®, the leading hypnotic on the market, again performed well: net sales (consolidated by sanofi-aventis since January 1, 2008) increased by 14.9% on a comparable basis to €142 million over the full year.
In the United States, net sales ofEloxatine® rose by 6.2% (on a comparable basis) to €948 million over 2008 as a whole, driven by the adjuvant indication. In the Other Countries region, the product reported robust growth of 13.4% on a comparable basis to €186 million.
Sales ofTritace® were €513 million in 2008, down by 30.1% on a comparable basis. Sales were hampered by competition from generics in Canada in 2007. A generic version of ramipril became available in Italy in 2008, negatively affecting our sales there.
In addition to the blockbuster products described above, each of which registered annual net sales of over €1 billion in 2008, our remaining top 15 pharmaceutical products contributed net sales in the aggregate of approximately €4,270 million in 2008, or about 17.3% of our total pharmaceutical sales for the year.
Net sales ofAcomplia®, which was withdrawn from the market in the fourth quarter of 2008, totaled €72 million in 2008.
Net Sales — Human Vaccines (Vaccines)
Our Vaccines business generated net sales of €2,861 million in 2008, an increase of 9.6% on a comparable basis (3.0% on a reported basis), including €1,683 million in 2008 in the United States (an increase of 9.7% on a comparable basis).
Net sales ofinfluenza vaccines rose by 1.5% (on a comparable basis) in 2008 to €736 million, a figure that includes the shipment during the second quarter of H5N1 vaccine for the U.S. Department of Health and Human Services worth $192.5 million (compared with $113 million in 2007).
Pentacel® (the first 5-in-1 pediatric combination vaccine to protect against diphtheria, tetanus, pertussis, polio andhaemophilus influenzae type b), which was launched in the United States in July 2008, confirmed its success with net sales of €82 million in 2008.
Net sales ofMenactra® (quadrivalent meningococcal meningitis vaccine) were up 7.9% on a comparable basis at €404 million in 2008.
Adacel® (adult and adolescent tetanus-diphtheria-pertussis booster) continued to perform very well in the United States, driving net sales up by 20.0% (on a comparable basis) over 2008 as a whole to €255 million.
Sales ofAct-Hib® increased by 19.9% (on a comparable basis) to €120 million in 2008, driven by a significant commercial and industrial effort to provide additional doses to the U.S. market during a competitor’s supply shortage combined with the launch of Act-Hib® in Japan in December 2008.
2008 sales growth was also driven by the uptake ofPentaxim® (another 5-in-1 pediatric combo vaccine, which protects against diphtheria, tetanus, pertussis, polio andhaemophilus influenzae type b) in the Other Countries region.
The following table presents the 2008 sales of our Vaccines activity by range of products:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis growth (%) | Comparable basis growth (%) | |||||
Pediatric Combination and Polio Vaccines | 768 | 660 | 630 | +16.4% | +21.9% | |||||
Influenza Vaccines* | 736 | 766 | 725 | -3.9% | +1.5% | |||||
Meningitis/Pneumonia Vaccines | 472 | 482 | 441 | -2.1% | +7.0% | |||||
Adult and Adolescent Booster Vaccines | 399 | 402 | 369 | -0.7% | +8.1% | |||||
Travel and Endemic Vaccines | 309 | 327 | 314 | -5.5% | -1.6% | |||||
Other Vaccines | 177 | 141 | 132 | +25.5% | +34.1% | |||||
Total Human Vaccines | 2,861 | 2,778 | 2,611 | +3.0% | +9.6% | |||||
The following table presents the 2008 sales of our Vaccines activity by range of products and by region:
(€ million) | Europe | Comparable basis growth (%) | United States | Comparable basis growth (%) | Other countries | Comparable basis growth (%) | ||||||
Pediatric Combination and Polio Vaccines | 160 | +20.3% | 317 | +36.6% | 291 | +9.8% | ||||||
Influenza Vaccines* | 94 | -8.7% | 459 | +3.1% | 183 | +3.4% | ||||||
Meningitis/Pneumonia Vaccines | 11 | -8.3% | 400 | +7.0% | 61 | +10.9% | ||||||
Adult and Adolescent Booster Vaccines | 54 | +22.7% | 317 | +5.7% | 28 | +12.0% | ||||||
Travel and Endemic Vaccines | 31 | -3.1% | 76 | -8.4% | 202 | +1.5% | ||||||
Other Vaccines | 45 | +181.3% | 114 | +14.0% | 18 | +12.5% | ||||||
In addition to the Vaccines activity reflected in our consolidated net sales, sales of Sanofi Pasteur MSD, the joint venture with Merck & Co. in Western Europe, reached €1,272 million in 2008, an increase of 21.8% on a reported basis. Full-year net sales ofGardasil®, the first vaccine licensed in Europe against papillomavirus infection, a major cause of cervical cancer, were €584 million, compared with €341 million in 2007.
Sales generated by Sanofi Pasteur MSD are not included in our consolidated net sales.
Net Sales by Geographic Region
We divide our sales geographically into three regions: Europe, the United States and other countries. The following table breaks down our 2008 and 2007 net sales by region:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis growth (%) | Comparable basis growth (%) | |||||
Europe | 12,096 | 12,184 | 12,173 | -0.7% | -0.6% | |||||
United States | 8,609 | 9,474 | 8,169 | -9.1% | +5.4% | |||||
Other countries | 6,863 | 6,394 | 6,234 | +7.3% | +10.1% | |||||
Total | 27,568 | 28,052 | 26,576 | -1.7% | +3.7% | |||||
During 2008, sales in France and Germany hampered net sales in Europe, which fell slightly (by 0.6% on a comparable basis). Generics of Eloxatine® (especially in France) pared around 1.3 points off growth in Europe. Since August 2008, sales of Plavix® in Germany have been affected by competition from several clopidogrel besylates in certain indications.
In the United States, sales growth resumed at a healthier pace in the last two quarters of 2008 after having been hampered by competition from generics of Ambien® IR, due to particularly excellent performances from
Lantus® and Taxotere®. Generics of Ambien® IR (i.e. excluding net sales of Ambien® IR in the United States in the first quarter of 2007 and the first quarter of 2008) cost 4.6 points of sales growth over 2008 as a whole (on a comparable basis).
Net sales in the Other Countries region during 2008 were lifted by a particularly strong performance in Japan (up 18.5% on a comparable basis at €1,408 million), driven by the success of Plavix® (net sales reached €182 million in 2008 versus. €66 million in 2007) and Myslee® (net sales reached €142 million in 2008, up 14.9% on a comparable basis).
Worldwide Presence of Plavix® and Aprovel®
Two of our leading products — Plavix® and Aprovel® — were discovered by sanofi-aventis and jointly developed with Bristol-Myers Squibb (“BMS”) under an alliance agreement. Worldwide, these products are sold by sanofi-aventis and/or BMS under the terms of this agreement which is described in “— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb” above, with the exception of Plavix® in Japan which is outside the scope of the alliance.
The worldwide sales of these two products are an important indicator of the global market presence of sanofi-aventis products, and we believe this information facilitates 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 facilitates 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 investor to have a clearer understanding of trends in different line items of our income statement, in particular the line items “Other revenues” where royalties received on those sales are booked (see “— Other Revenues”); “Share of profit/loss of associates” (see “— Share of Profit/Loss of Associates”) where our share of profit/loss of entities included in the BMS Alliance and under BMS operational management is recorded; and “Net income attributable to minority interests” (see “— Net Income Attributable to Minority Interests”) where the BMS share of profit/loss of entities included in the BMS Alliance and under our operational management is recorded.
The table below sets forth the worldwide sales of Plavix® and Aprovel® in 2008 and 2007, by geographic region:
(€ million) | 2008 | 2007 | Change (%) | |||||||||||
sanofi- aventis (2) | BMS (3) | Total | sanofi- aventis (2) | BMS (3) | Total | |||||||||
Plavix®/Iscover®(1) | ||||||||||||||
Europe | 1,622 | 211 | 1,833 | 1,583 | 225 | 1,808 | +1.4% | |||||||
United States | — | 3,351 | 3,351 | — | 2,988 | 2,988 | +12.1% | |||||||
Other countries | 711 | 248 | 959 | 553 | 273 | 826 | +16.1% | |||||||
Total | 2,333 | 3,810 | 6,143 | 2,136 | 3,486 | 5,622 | +9.3% | |||||||
(€ million) | 2008 | 2007 | Change (%) | |||||||||||
sanofi- aventis (5) | BMS (3) | Total | sanofi- aventis (5) | BMS (3) | Total | |||||||||
Aprovel®/Avapro®/Karvea®(4) | ||||||||||||||
Europe | 816 | 176 | 992 | 750 | 172 | 922 | +7.6% | |||||||
United States | — | 499 | 499 | — | 507 | 507 | -1.6% | |||||||
Other countries | 291 | 184 | 475 | 243 | 179 | 422 | +12.6% | |||||||
Total | 1,107 | 859 | 1,966 | 993 | 858 | 1,851 | +6.2% | |||||||
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Comparable-basis trends in worldwide sales of Plavix® and Aprovel® in 2008 and 2007 by geographic region are as follows:
(€ million) | 2008 | 2007 | 2007 Comparable | Comparable basis growth (%) | ||||
Plavix®/Iscover® | ||||||||
Europe | 1,833 | 1,808 | 1,776 | +3.2% | ||||
United States | 3,351 | 2,988 | 2,768 | +21.1% | ||||
Other countries | 959 | 826 | 786 | +22.0% | ||||
Total | 6,143 | 5,622 | 5,330 | +15.3% | ||||
Aprovel®/Avapro®/Karvea® | ||||||||
Europe | 992 | 922 | 912 | +8.8% | ||||
United States | 499 | 507 | 469 | +6.4% | ||||
Other countries | 475 | 422 | 394 | +20.6% | ||||
Total | 1,966 | 1,851 | 1,775 | +10.8% | ||||
Full-year 2008 sales ofPlavix® (clopidogrel bisulfate) in the United States (consolidated by BMS) were significantly higher than in 2007 (growth of 21.1% on a comparable basis), when sales were affected by competition from a generic version in the early part of the year.
In Europe, net sales were €1,833 million in 2008. The product’s 3.2% growth rate reflected competition from several clopidogrel besylates in the monotherapy segment since August in Germany.
In the Other Countries region, growth for Plavix® benefited from its success in Japan, where net sales reached €182 million over 2008 as a whole (versus €66 million in 2007).
Despite a very competitive environment, worldwide sales of Aprovel® achieved double-digit growth in 2008 (10.8% on a comparable basis), to €1,966 million.
Other Revenues
Other revenues, which mainly comprise royalty income under licensing agreements contracted in connection with ongoing operations, amounted to €1,249 million in 2008 compared with €1,155 million in 2007.
License revenues under the worldwide alliance with BMS on Plavix® and Aprovel® amounted to €985 million in 2008, compared with €897 million in 2007. These revenues were boosted by the strong rise in U.S. sales of Plavix® (up 21.1% on a comparable basis in 2008), but were adversely affected by the unfavorable trend in the U.S. dollar/euro exchange rate.
Gross Profit
Gross profit for 2008 was €21,480 million, against €21,636 million in 2007. The gross margin ratio was 77.9% in 2008, compared with 77.1% in 2007.
The 0.8-point increase in the gross margin ratio reflected a 0.4-point increase in royalty income and a 0.4-point improvement in the ratio of cost of sales to net sales.
The main reasons for the improvement in the ratio of cost of sales to net sales were a favorable product mix in addition to, from April 1, 2008, the discontinuation by sanofi-aventis of commercialization of Copaxone® in North America, a product that generated a lower level of contractual gross margin than the average for the portfolio. These effects were partly offset by the introduction of generics of Ambien® IR in the United States as from April 1, 2007 and the weakening of the U.S. dollar against the euro.
Research and Development Expenses
Research and development expenses rose by 0.8% in 2008 to €4,575 million (2007: €4,537 million), and represented 16.6% of net sales (as compared to 16.2% in 2007). Excluding the effect of exchange rates (i.e. at 2007 actual exchange rates), research and development expenses rose by 3.2%. Phase III programs were launched in 2008 in thrombosis, metabolic disorders and oncology. We also incurred costs under clinical programs for further development of existing products (Plavix®, Allegra®), through alliances such as those recently concluded with Regeneron Pharmaceuticals Inc., and from the discontinuation of programs (primarily Acomplia®).
Selling and General Expenses
Selling and general expenses totaled €7,168 million in 2008 (26.0% of net sales), compared with €7,554 million in 2007 (26.9% of net sales). This represented a reduction of 5.1% (or 2.0% after excluding the effect of exchange rates, i.e. at 2007 actual exchange rates), reflecting the impact of our ongoing selective cost adaptation policy. This policy is a response to the local erosion of some product sales in Europe and in the United States, in an environment marked by competition from generic drugs and pressure on selling prices. We have, however, increased spending on resources in emerging markets.
In addition, in accordance with the terms of its agreement with sanofi-aventis, Teva Pharmaceuticals Industries (Teva) took over the selling of Copaxone® on April 1, 2008, in the United States and Canada. As from this date, sanofi-aventis stopped sharing some commercialization costs in these countries.
Other Operating Income and Expenses
In 2008, we recorded other operating income of €556 million (as compared to €522 million in 2007) and other operating expenses of €353 million (as compared to €307 million in 2007). This represents a net other operating income figure of €203 million, compared with €215 million in 2007. Net other operating income generated with pharmaceutical partners (€294 million in 2008 compared with €212 million in 2007) includes from April 1, 2008 onwards the share of profit on Copaxone® following the takeover by Teva of commercialization of this product in the United States and Canada. We also recorded gains on disposals on current operations (€24 million in 2008 against €60 million in 2007) and a net operating foreign exchange loss (€94 million against €33 million in 2007).
The 2007 figures included an expense of €61 million arising from the signature of agreements on welfare and healthcare obligations in France for retirees and their beneficiaries.
Amortization of Intangibles
Amortization charged against intangible assets totaled €3,483 million in the year ended December 31, 2008, compared with €3,654 million in the year ended December 31, 2007. The reduction was mainly due to the weakening of the U.S. dollar against the euro.
These charges mainly relate to the amortization of intangible assets remeasured at fair value at the time of the Aventis acquisition (€3,298 million in 2008 as compared with €3,511 million in 2007).
Operating Income before Restructuring, Impairment of Property, Plant & Equipment and Intangibles, Gains and Losses on Disposals, and Litigation
This line item came to €6,457 million in 2008, compared with €6,106 million in 2007.
Restructuring Costs
Restructuring costs amounted to €585 million in 2008, compared with €137 million in 2007. The 2008 figure relates to costs incurred on the adaptation of industrial facilities in France and measures taken to adjust our sales force in response to the changing pharmaceutical markets in Europe (primarily France, Italy, Spain and Portugal) and in the United States. In 2007, restructuring costs related to the ongoing adaptation plan in France and in Germany.
Impairment of Property, Plant & Equipment and Intangibles
Net impairment losses charged against property, plant and equipment and intangible assets were €1,554 million in 2008. This charge reflected the results of impairment tests conducted following the discontinuation of research projects and to the introduction of generics of existing products commercialized by the Group, originating mainly from Aventis.
The discontinuation of research projects relates to larotaxel and cabazitaxel (new taxane derivatives) in breast cancer (€1,175 million) and the antihypertensive ilepatril (€57 million) (all of which were recognized as assets on the acquisition of Aventis in 2004), plus the oral anti-cancer agent S-1 following the termination of the agreement with Taiho Pharmaceutical for the development and commercialization of the product (€51 million). In addition, Nasacort® (recognized as an asset on the acquisition of Aventis) was impaired following the agreement with Barr in the United States (€114 million).
In 2007, net impairment losses charged against property, plant and equipment and intangible assets were €58 million. This charge reflected the results of impairment tests, which identified impairment losses in respect of intangible assets recognized as part of the allocation of the purchase price of Aventis.
Gains and Losses on Disposals, and Litigation
In 2008, this line item comprised €76 million of reversals of provisions for litigation.
The Group did not make any significant disposals during 2008 and 2007.
Operating Income
Operating income for 2008 was €4,394 million, compared with €5,911 million for 2007.
Financial Income and Expenses
Net financial expense amounted to €232 million in 2008, compared with €139 million in 2007, an increase of €93 million.
Interest expense directly related to our debt, net of cash and cash equivalents (short-term debt plus long-term debt, minus cash and cash equivalents) totaled €183 million in 2008, against €209 million in 2007. This situation reflects two contrasting trends: a reduction in the amount of our debt during the period and the unfavorable interest rate trends.
Sanofi-aventis tendered its shares in Millennium Pharmaceuticals, Inc. (Millennium) to the public tender offer for Millennium by Takeda Pharmaceuticals Company Ltd. This transaction generated a gain of €38 million, recognized in the first half of 2008.
We recorded a net foreign exchange loss for 2008 of €74 million, compared to a net gain of €87 million in 2007. This was mainly due to the impact of the differential in interest rates between the U.S. dollar and the euro on hedges of cash invested by our American subsidiaries. This impact was favorable in 2007.
Income before Tax and Associates
Income before tax and associates for 2008 was €4,162 million, compared with €5,772 million for 2007.
Income Tax Expense
The reported tax rate for 2008 was 16.4%, compared with 11.9% for 2007.
In 2008, this reduced tax rate was a result of a gain of €221 million on reversals of tax provisions, related to the settlement of tax audits. In 2007, this item comprised a net gain of €336 million on net reversals of tax
provisions, related to the settlement of tax audits, and a net gain of €515 million on the change in deferred tax liabilities arising from cuts in tax rates, primarily in Germany, including a gain of €566 million relating to deferred tax liabilities recognized in 2004 on the remeasurement of acquired intangible assets of Aventis.
Share of Profit/Loss of Associates
Our share of the net profits of associates was €692 million in 2008, compared with €446 million in 2007. This item mainly comprises our share of after-tax profits from the territories managed by BMS under the Plavix® and Avapro® alliance (€623 million in 2008, compared to €526 million in 2007). The increase in our profit share was a direct result of the increase in Plavix® sales during the period, despite the unfavorable trends in the euro/U.S. dollar exchange rate.
In addition, Sanofi Pasteur MSD made a positive contribution in 2008.
In 2007, this line item also included an impairment loss of €102 million on the equity-accounted investment in Zentiva.
Net income from the Held-for-Exchange Merial Business
Net income from the held-for-exchange Merial business totaled €120 million in 2008, compared with €151 million in 2007. It was penalized by the unfavorable trends in the euro/U.S. dollar exchange rate.
Net Income
Net income (before minority interests) totaled €4,292 million in 2008, compared with €5,682 million in 2007.
Net Income Attributable to Minority Interests
Net income attributable to minority interests totaled €441 million in 2008, compared to €419 million in 2007. This item includes the share of pre-tax income paid over to BMS from territories managed by sanofi-aventis (€422 million in 2008, compared to €403 million in 2007).
Net Income Attributable to Equity Holders of the Company
Net income attributable to equity holders of the Company for 2008 was €3,851 million, against €5,263 million for 2007. Earnings per share (EPS) were €2.94, compared with €3.91 for 2007, based on an average number of shares outstanding of 1,309.3 million in 2008 (2007: 1,346.9 million).
Business Operating Income
Business operating income was €10,391 million in 2008, against €10,162 million in 2007.
The table below shows trends in business operating income by business segment for 2008 and 2007:
(€ million) | 2008 | 2007 | ||
Pharmaceuticals | 9,399 | 9,084 | ||
Vaccines | 882 | 869 | ||
Other | 110 | 209 | ||
Business operating income | 10,391 | 10,162 | ||
2010.
Liquidity and Capital Resources
Our operations generate significant positive cash flow.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 2009, partaddition, we reduced our net debt during 2012, whereas in 2011 our debt increased significantly to finance the acquisition of Genzyme.
We define "debt, net of cash and cash equivalents" as (i) the costsum total of our acquisitions was also funded
by taking on debt.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, 2009,2012, our debt, net of cash and cash equivalents stood at €4,135€7,719 million (8.5% of our net equity) versus €1,780€10,859 million as of December 31, 2008 (3.9%2011 and €1,577 million as of our net equity).December 31, 2010. See Note D.17. “Debt, cash and cash equivalents” to our consolidated financial statements included at Item 18 of this annual report.
In order to assess the Company's financing risk, we also use the "gearing ratio", a non-GAAP financial measure. The gearing ratio is defined as the ratio of debt, net of cash and cash equivalents, to total equity. As of December 31, 2012, our gearing ratio stood at 13.4% of our net equity versus 19.3% as of December 31, 2011 and 3.0% as of December 31, 2010.
Consolidated Statement of Cash Flows
The table below shows our summarized cash flows for the years ended December 31, 2009, 20082012, 2011 and 2007:2010:
(€ 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 | ||||||
(€ million) | 2009 | 2008 | 2007 | ||||||
Net cash provided by / (used in) operating activities | 8,515 | 8,523 | 7,106 | ||||||
Net cash provided by / (used in) investing activities | (7,287 | ) | (2,154 | ) | (1,716 | ) | |||
Net cash provided by / (used in) financing activities | (787 | ) | (3,809 | ) | (4,820 | ) | |||
Impact of exchange rates on cash and cash equivalents | 25 | (45 | ) | (12 | ) | ||||
Net change in cash and cash equivalents — (decrease) / increase | 466 | 2,515 | 558 | ||||||
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, 2012 Compared with Year Ended December 31, 2011
Net cash provided by operating activities totaled €8,515 amounted to €8,171 million in 2009,2012, compared with €8,523€9,319 million in 2008.2011. Operating cash flow before changes in working capital was €9,362€8,503 million, (versus €8,524versus €9,834 million in 2008)2011. This decrease was largely attributable to erosion in revenues from the territories managed by BMS under the alliance on Plavix® and Avapro®, reflecting our good operating performance.due to competition from generics in the United States. This revenue erosion was reflected in a reduced share of after-tax profits from these territories (€420 million, versus €1,070 million in 2011) and lower license revenue from the worldwide alliance with BMS on Plavix® and Aprovel®/Avapro® (€532 million in 2012, versus €1,275 million in 2011).
Our operating cash flow before changes in working capital is generally affected by the same factors that affect “Operating income before restructuring, impairment of property, plant & equipment and intangibles, gains and losses on disposals, and litigation”"Operating income", which is discussed in detail above under “Results"Results of Operations — Year Ended December 31, 20092012 Compared with Year Ended December 31, 2008” and “Results of Operations — Year Ended December 31, 2008 Compared with Year Ended December 31, 2007”2011". The principal difference is that operating cash flow before changes in working capital reflects our share of the profits and losses of associates and joint ventures, net of dividend and similar income received.
Our workingWorking capital requirements increasedrose by €847€332 million in 2009, having been stable2012, after an increase of €515 million in 2008. This2011. The increase during 2012 was duemainly attributable to an increase in inventories (€445 million, including €315 million for reconstituting inventories at the growth in our operations during 2009, reflected in higher levels of inventories (up €489 million) and trade receivables (up €429 million)Genzyme business).
Net cash used in investing activities was €7,287 amounted to €1,587 million in 2009,2012, versus €2,154€14,701 million in 2008.2011.
Acquisitions of property, plant and equipment and intangible assets totaled €1,785€1,612 million (compared with €1,606 million in 2008), and mainly comprised(2011: €1,782 million). The main items were investments in industrial facilities and research sites, plusfacilities (€1,324 million, versus €1,394 million in 2011) and contractual payments for intangible rights under license and collaboration agreements (€325293 million, versus €245 million in 2009, mainly related to licensing agreements)2011).
FinancialAcquisitions of investments in the period amounted to €328 million, net of cash acquired totaled €5,568 million. These investments, valued atand after including assumed liabilities and commitments. The main items were a totalpayment of €6,334 million inclusivecontingent consideration to Bayer arising from the acquisition of assumed debt, mainly comprised acquisitionsGenzyme, the repurchase of sharessome of the CVRs issued in Merial (€2,829 million), Zentiva (€1,752 million), Shantha (€528 million), Medley (€451 million) and BiPar (€253 million). In 2008, financial investments net of cash acquired totaled €667 million, mainly comprisingconnection with that acquisition, the acquisitions of Pluromed and Newport, and the entire share capitalpurchase 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 U.K. company Acambis Plcacquisitions of Genzyme (€33213,602 million) and of the Australian company Symbion CP Holdings Pty Ltd, now sanofi-aventis Healthcare Holdings Pty LimitedBMP Sunstone (€329374 million).
After-tax proceeds from disposals (€85358 million) related mainlyto divestitures of financial assets (in particular, our equity interests in Société Financière des Laboratoires de Cosmétologie Yves Rocher and Handok), and to disposals of various items of property, plant and equipment and intangible assets, some of which were required as conditions for clearance of our acquisition of Zentiva.assets. In 2008, after-tax2011, proceeds from disposals were €123came to €359 million, mostly arising frommainly generated by the May 2008 disposaldivestiture of our shares in Millennium.
Net Financing activities generated a net cash used in financing activities amounted to €787 million, against €3,809outflow of €4,351 million in 2008.2012, compared with a net cash inflow of €2,893 million in 2011. The 20092012 figure includes a dividend payout€615 million of €2,872 million (versus €2,702 million in 2008), and additional external financingdebt repayments (net increasechange in short-term and long-term debt), as compared with net external debt raised of €1,923€5,283 million in 2011; it also includes the Sanofi dividend payout of €3,487 million (versus €69€1,372 million in 2008)2011). During 2009, we placed five bond issues for a total amount of €4.7 billion (refer to Note D.17. “Debt, cash and cash equivalents” to our consolidated financial statements). In 2008, we acquired 23.9 million of our own shares at a cost of €1,227 million under our share repurchase programs.
After the impact of exchange rates and of the cash and cash equivalents of Merial, the net change in cash and cash equivalents during 2009in 2012 was an increase of €466€2,257 million, compared with an increasea decrease of €2,515€2,341 million in 2008.2011.
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Net cash provided by operating activities totaled €9,319 million in 2011, compared with €9,859 million in 2010. In 2011, operating cash flow before changes in working capital was €9,834 million, versus €10,024 million in 2010.
Our operating cash flow before changes in working capital is generally affected by the same factors that affect "Operating income", which is discussed in detail above under "Results of Operations — Year Ended December 31, 2011 Compared with Year Ended December 31, 2010". The principal difference is that operating cash flow before changes in working capital reflects our share of the profits and losses of associates and joint ventures, net of dividend and similar income received.
Working capital requirements rose by €515 million in 2011, compared with a €165 million increase in 2010. The 2011 increase was related to increased inventories (€232 million) and trade receivables (€257 million), following the first-time consolidation of Genzyme and Merial.
Net cash used in investing activities totaled €14,701 million in 2011, versus €3,475 million in 2010.
Acquisitions of property, plant and equipment and intangible assets amounted to €1,782 million (compared with €1,662 million in 2010) and included Genzyme investments from April 2011. The main items were investments in industrial and research facilities (€1,394 million, compared with €1,261 million in 2010) and contractual payments for intangible rights under licensing or collaboration agreements (€182 million, versus €312 million in 2010).
Acquisitions of investments for 2011 totaled €13,616 million, net of cash from acquired companies. After including assumed liabilities and commitments, they amounted to €14,079 million. The main items were the acquisitions of Genzyme (€13,602 million) and BMP Sunstone (€374 million). In 2010, financial investments were €1,733 million, net of acquired cash; after including assumed liabilities and commitments, they amounted to €2,130 million, and mainly comprised the acquisition of equity interests in Chattem (€1,640 million) and Nepentes (€104 million).
After-tax proceeds from disposals amounted to €359 million, mainly from the divestiture of the Dermik dermatology business (€321 million). In 2010, after-tax proceeds from disposals were €136 million, mainly from the divestment of the equity interest in Novexel (€48 million) and the disposal of various items of property, plant and equipment (€55 million).
Financing activities generated a net cash inflow of €2,893 million in 2011, versus a net cash outflow of €4,646 million in 2010. In 2011, financing cash inflows included €5,283 million of external funding raised (net change in short-term and long-term debt), as opposed to 2010 which saw net debt repayments of €1,165 million. Cash outflows included the dividend payout of €1,372 million to Sanofi shareholders (versus €3,131 million in 2010), and the acquisition of 21.7 million of our own shares for €1,074 million.
After the impact of exchange rates and of the cash and cash equivalents of Merial, the net change in cash and cash equivalents during 2011 was a decline of €2,341 million, versus a €1,793 million increase in 2010.
Consolidated Balance Sheet and Debt
Total assets stood at €80,049€100,407 million as of December 31, 2009, compared with €71,9872012, versus €100,668 million as of December 31, 2008, an increase2011, a decrease of €8,062€261 million.
Ourdebt, net of cash and cash equivalentsas of December 31, 2009 was €4.1 billion, compared with €1.8 billion as of December 31, 2008. We define debt,Debt, net of cash and cash equivalents (see definition above) amounted to €7,719 million as short-term debt plus long-term debt, minus cash and cash equivalents.
of December 31, 2012, compared with €10,859 million as of December 31, 2011. The table below shows changes in the Group’sour financial position overfor the last three years:years ended December 31, 2012, 2011 and 2010:
(€ 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 | |||||||
(€ million) | 2009 | 2008 | 2007 | ||||||
Debt | 8,827 | 6,006 | 5,941 | ||||||
Cash and cash equivalents | (4,692 | ) | (4,226 | ) | (1,711 | ) | |||
Debt, net of cash and cash equivalents | 4,135 | 1,780 | 4,230 | ||||||
TheOur gearing ratio (debt, net of cash and cash equivalents toas a proportion of total equity) rosefell from 3.9% at the end19.3% in 2011 to 13.4% in 2012. Analyses of 2008 to 8.5% at the enddebt as of 2009 (see “—Liquidity and Capital Resources” above). For an analysis of our debt at December 31, 20092012 and 2008December 31, 2011, by type, maturity, interest rate and currency, seeare provided in Note D.17. to our consolidated financial statements included at Item 18 of this annual report.statements.
The financing arrangements in place atas of December 31, 20092012 at theSanofi parent company level of the sanofi-aventis holding company isare not subject to covenants regarding financial ratios and contains no clausedo not contain any clauses linking credit spreads or fees to our credit rating.
Other key movements in balance sheet items for the period under review are summarizeddescribed below.
Total equitystood at €48,446€57,472 million as of December 31, 2009, against €45,0712012, versus €56,373 million a year earlier.as of December 31, 2011. The principal factors underlying this net year-on-year increase in equity were:was attributable primarily to:
reductions: the dividend of €2,872 million distributed to
increases: net income attributable to equity holders of the Company for the year ended December 31, 20092012 (€5,2654,967 million); and
As of stock options, and proceeds from the sale of treasury shares on exercise of stock options: total impact €166 million).
At December 31, 2009,2012, we held 9.43.1 million of our own shares, as treasury shares representing 0.71% of our share capital and recorded as a deduction from shareholders’ equity.
Goodwillequity andintangible assets represented a combined total of €43,480 million as of December 31, 2009, €57 million higher than at the previous year-end. The main underlying factors were:
increases: the impact representing 0.2% of the acquisitions madeshare capital.
Goodwill and other intangible assets (€58,265 million in 2009 (€1,882total) decreased by €3,956 million, largely as a result of goodwill and €2,206 million of intangible assets); and
reductions: amortization and impairment losses charged duringrecognized in the period (€3,950 3,516��million) and a decline in the equivalent value in euros of assets denominated in other currencies (€611 million, mainly relating to the U.S. dollar).
Provisions and other non-current liabilities (€8,31111,036 million) rose by €690 million, as of December 31, 2009) increased by €581 million year-on-year, due mainly to a €274 million net riseincrease in provisions for pensions and other long-term employee benefits andof €874 million, primarily as a €239 million net increase in tax exposures. The impactresult of the first-time consolidation of companies acquired during 2009 (principally Zentiva and Medley)actuarial losses on the total net increase amounted to €250 million. Refer to Note D.18. to our consolidated financial statements for further information.defined-benefit plans.
Net deferred tax liabilities (€2,0211,555 million) fell by €1,342 million as of December 31, 2009) were €727 million lower than at the previous year-end, largely as a result ofyear-on-year, primarily due to the reversal of deferred tax liabilities relating to the remeasurement of acquired intangible assets (€6615,641 million in 2012 versus €6,815 million in 2011, a difference of €1,174 million). An additional factor was a €126
Current and non-current liabilities related to business combinations and to non-controlling interests (€1,450 million) were €106 million reduction in deferred tax liabilitieslower. The main factors were the reversal of the contingent consideration relating to the tax costFovea acquisition, payments to Bayer (relating to contingent consideration arising from our acquisition of distributions made from reserves, mainly as a direct resultGenzyme), and the repurchase (for $70 million) of some of the entry into force of a protocol tocontingent value rights (CVRs) issued in connection with the tax treaty between France and the United States that abolished withholding tax between the two countries subject to certain conditions.
Other current liabilities (€5,445 million) increased by €724 million, mainly as a result of the change in restructuring provisions (net increase of €449 million). For further details, see Note D.19. to our consolidated financial statements included at Item 18 of this annual report.
Net assets held for sale or exchange (€4,909 million) mainly comprise the net assets of Merial, whose operations have been accounted forGenzyme acquisition. These factors were partly offset by the full consolidation method with effect from September 18, 2009 and presented in accordance with IFRS 5 (refer toof fair value remeasurements (see Note D.8. “Assets held for sale or exchange”D.18. to our consolidated financial statements).
Liquidity
We expect that our existing cash resources and cash from operations will be sufficient to finance our foreseeable working capital requirements. At year end 2009,year-end 2012, we held cash and cash equivalents amounting to €4,692€6,381 million, substantially all of which waswere held in euros (see Note D.13. to our consolidated financial statements). As at December 31, 2009, €4302012, €507 million of our cash and cash equivalents waswere held by our captive insurance and reinsurance companies in accordance with insurance regulations.
Since 2010, some countries in Southern Europe have faced severe financial difficulties. 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 and 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 are conducting an active recovery policy, adapted to each country and including intense communication with customers, negotiations of payments plans, charging of interest for late payments, and legal action. See "Item 3.D. Risk Factors — Risks Relating to Our Business — We are subject to the risk of non-payment by our customers" and "— Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group's results of operations and financial results". During 2012, the amount of our trade receivables in Europe decreased, primarily as a result of a reduction in the sums owed to us by public-sector customers in Spain due to payments received. The total consolidated amount of trade receivables overdue by more than 12 months — which primarily consists of amounts due from public-sector customers — fell from €276 million as of December 31, 2011 to €161 million as of December 31, 2012 due to payments received (see Note D.10. to our consolidated financial statements included at Item 18 of this annual report).
In November 2011, Sanofi obtained the necessary corporate authorizations to purchase any or all of the outstanding Contingent Value Rights ("CVR") and subsequently purchased CVRs in 2011. In 2012 following a tender offer initiated in September 2012 on the basis of the same corporate authorization, Sanofi purchased an additional 40,025,805 CVRs (for a total consideration of approximately $70 million). As of year end 2009,December 31, 2012, 249,196,371 CVRs were outstanding out of 291,313,510 issued at the time of the Genzyme acquisition.
At year-end 2012, 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 €12.3€10.0 billion at December 31, 2009.2012. 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 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, 20092012 are shown in NoteNotes D.3., D.17., D.18. and D.21. to our consolidated financial statements included at Item 18 of this annual report, whichreport. Note D.21. to our consolidated financial statements included at Item 18 discloses details of commitments under our principal research and development collaboration agreements as well asagreements. For a description of the financial commitments relatedprincipal contingencies arising from certain business divestitures, refer to BiPar, Fovea, Chattem and Merial. Note D.21.D.22.e) to our 2012 consolidated financial statements describes our principal contractual commitments in respect of divestments.statements.
The Group’sGroup's contractual obligations and other commercial commitments (excluding those of Merial, see Note D.8.1. to our consolidated financial statements) are set forth in the table below:
December 31, 2012 | Payments due by period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | Under 1 year | From 1 to 3 years | From 3 to 5 years | Over 5 years | |||||||||||
• Future contractual cash-flows relating to debt and debt hedging instruments (1) | 15,283 | 3,959 | 4,165 | 4,106 | 3,053 | |||||||||||
• Operating lease obligations | 1,296 | 250 | 367 | 220 | 459 | |||||||||||
• Finance lease obligations (2) | 100 | 20 | 36 | 31 | 13 | |||||||||||
• Irrevocable purchase commitments (3) | ||||||||||||||||
- given | 2,913 | 1,513 | 651 | 368 | 381 | |||||||||||
- received | (209 | ) | (106 | ) | (67 | ) | (14 | ) | (22 | ) | ||||||
• Research & development license agreements | ||||||||||||||||
- Future service commitments (4) | 767 | 181 | 286 | 276 | 24 | |||||||||||
- Potential milestone payments (5) | 2,201 | 149 | 267 | 295 | 1,490 | |||||||||||
• Obligations relating to business combinations (6) | 4,993 | 341 | 1,135 | 560 | 2,957 | |||||||||||
• Firm commitment related to the BMS agreement (7) | 82 | — | — | — | 82 | |||||||||||
• Estimated benefit payments on unfunded pensions and post employment benefits (8) | 1,741 | 60 | 115 | 133 | 1,433 | |||||||||||
Total contractual obligations and other commitments | 29,167 | 6,367 | 6,955 | 5,975 | 9,870 | |||||||||||
Undrawn general-purpose credit facilities | 10,021 | 3,020 | 225 | 6,775 | 1 | |||||||||||
December 31, 2009 | Payments due by period | ||||||||||||||
(€ million) | Total | Under 1 year | From 1 to 3 years | From 3 to 5 years | Over 5 years | ||||||||||
• Debt(1): | |||||||||||||||
— principal | 8,681 | 2,737 | 576 | 2,761 | 2,607 | ||||||||||
— interest | 1,437 | 312 | 452 | 337 | 336 | ||||||||||
— net cash flows related to derivative instruments | (14 | ) | 51 | (1 | ) | (22 | ) | (42 | ) | ||||||
• Operating lease obligations | 1,197 | 278 | 350 | 201 | 368 | ||||||||||
• Irrevocable purchase commitments(2): | |||||||||||||||
— given | 2,628 | 1,484 | 550 | 197 | 397 | ||||||||||
— received | (297 | ) | (203 | ) | (33 | ) | (13 | ) | (48 | ) | |||||
• Commercial commitments | 5,781 | 235 | 546 | 542 | 4,458 | ||||||||||
• Commitments relating to business combinations | 439 | 76 | 268 | 95 | — | ||||||||||
• Commitment related to Chattem offer | 1,319 | 1,319 | — | — | — | ||||||||||
• Commitment related to the combination of Intervet/Schering Plough Animal Health and Merial(3) | 694 | 694 | — | — | — | ||||||||||
Total contractual obligations and other commitments | 21,865 | 6,983 | 2,708 | 4,098 | 8,076 | ||||||||||
Undrawn credit facilities(4) | 12,290 | 590 | 11,700 | — | — | ||||||||||
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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 are 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-aventisSanofi 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-aventisSanofi will actually pay in the future under existing collaboration agreements.
Given the nature of its business, it is highly unlikely that sanofi-aventisSanofi will exercise all options for all products or that all milestones will be achieved.
The main collaborativecollaboration agreements relating to development projects in the Pharmaceuticals segment are described below. Milestone payments relating to development projects under these agreements amounted to €2.0 billion in 2012. These exclude projects in the research phase (€5.0 billion in 2012, €4.2 billion in 2011) and payments contingent upon the attainment of sales targets once a product is on the market (€4.7 billion in 2012, €4.4 billion in 2011).
In October 2009, sanofi-aventis and Wellstat Therapeutics Corporation (Wellstat) signed a worldwide license agreement for PN2034, a novel first-in-class oral insulin sensitizer for the treatment of Type II Diabetes. As a sensitizer, PN2034 is expected to normalize and therefore enhance insulin action in the livers of diabetic patients. The compound is currently in Phase II clinical testing. Total milestone payments could reach $310 million. Wellstat will also receive royalties on worldwide product sales, and additional milestones linked to sales performance.
At the end of September 2009, sanofi-aventisSanofi and Merrimack Pharmaceuticals Inc. (Merrimack) signed an exclusive worldwideglobal licensing and collaboration and licensing agreement forcovering the MM-121 molecule for the management of solid malignancies. MM-121 is a first-in-class fully human monoclonal antibody designed to block signaling of the ErbB3 (also known as HER3) receptor. MM-121 is presently in Phase I of clinical development. Merrimack will receive milestone payments that could reach $410 million, plus royalties on worldwide product sales and additional milestone payments based on worldwide product sales. Merrimack will participate in the clinical development of MM-121.
In May 2009, sanofi-aventis andlicensing agreement with Kyowa Hakko Kirin Co., Ltd, (Kyowa Hakko Kirin) signed a collaboration and licensing agreement under which weSanofi obtained the worldwide rights to the anti-LIGHT fully human monoclonal antibody. This anti-LIGHT antibody is presently at preclinical development stage. Itstage, and is expected to be first-in-class in the treatment of ulcerative colitis and Crohn’sCrohn's disease. Kyowa Hakko Kirin will receive milestone payments which could reach $305 million. Kyowa Hakko Kirin will also be entitled
In February 2008, sanofi-aventis and Dyax Corp. entered into agreements that granted sanofi-aventis an exclusive worldwide license fordevelop the development and commercialization of Dyax’s fully human monoclonal antibody DX-2240, as well as a worldwide non-exclusive license to Dyax’s proprietary Phage Display technology.Vascular Endothelial Growth Factor (VEGF) Trap program. Under the terms of the two agreements, Dyax could receive upagreement, Sanofi will pay 100% of the development costs of the VEGF Trap. Once a VEGF Trap product starts to $270 millionbe marketed, Regeneron will repay 50% of the development costs (originally paid by Sanofi) in license fees and milestone payments. Dyax will also receive royaltiesaccordance with a formula based on salesRegeneron's share of antibody candidates.
the profits.
Sanofi has also entered into the following major agreements, which are currently in a less advanced research phase:
In September 2003, sanofi-aventis signed a
Sanofi-aventis has signed other collaboration agreements with laboratories or universities, under which total contingent payments over the next five years could reach around €129 million.
The main collaborative agreements inIn the Vaccines segment, are described below:
Sanofi Pasteur has entered into a number of collaboration agreements. Milestone payments relating to development projects under those agreements with partners including Crucell, Intercell, Vactech, Maxigen, SSI and Syntiron, under which sanofi pasteur may be requiredamounted to make total contingent payments of around €99 million over the next five years.
In JuneDecember 2009, we announced our intention to donateSanofi Pasteur signed a donation letter to the World Health Organization (WHO). The terms of the agreement committed Sanofi Pasteur to donate 10% of ourits future output of vaccines against A(H1N1), A(H5N1) or any other influenza vaccinestrain with pandemic potential, up to a maximum of 100 million doses to help developing countries deal with the influenza pandemic. This donationdoses. Since this agreement was a responseput in place, Sanofi Pasteur has already donated to the 2009 influenza pandemic causedWHO some of the doses covered by the emergence of the new A(H1N1) influenza strain, and replaces a previous commitment made in 2008 in the context of the H5N1 pandemic threat. However, the 100 million dose donation will be based on A(H1N1) or H5N1 strains, or any other strain that could potentially create an influenza pandemic.
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:
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 ofabout 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".
of intangible assets and property, plant and equipment" to our consolidated financial statements included at Item 18 of this annual report.
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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), the Company haswe have elected to recognize all actuarial gains and losses (including the impact of a change in discount rate) immediately through equity (SoRIE option).equity. A sensitivity analysis to discount rate is performedset forth in Note D.18.1. “ProvisionsD.19.1. "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 assets 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 return is performedset forth in Note D.18.1. “ProvisionsD.19.1. "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.
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
A. Directors and Senior Management
Jean-François Dehecq, the current Chairman of the Board of Directors, will reach the statutory age limit for the office of Chairman at the General Meeting of Shareholders scheduled to take place on May 17, 2010. On December 16, 2009, the Board of Directors stated its intention to name Serge Weinberg to succeed Jean-François Dehecq as non-executive Chairman of the sanofi-aventis Board of Directors. Such an appointment would maintain the Board of Director’s decision to separate theThe offices of Chairman and Chief Executive Officer that hashave been in place at sanofi-aventisseparated since January 1, 2007.
The annual evaluations conducted since have indicated that this governance structure is appropriate to the Group's current configuration. This arrangement was therefore continued with the appointment of Serge Weinberg to the office of Chairman on May 17, 2010 and again with his reappointment on May 6, 2011. The Board of Directors considers that this governance structure is appropriate in the Group's current context.
TheChairman represents the Board of Directors. HeDirectors, organizes and directs the work of the Board, and is accountable for this to the Shareholders’ General Meeting. He is also responsible for ensuring thatthe proper functioning of the corporate decision-making bodies chaired by him (Boardin compliance with good governance practices. The Chairman coordinates the work of the Board of Directors and Shareholders’with its Committees. The Chairman is accountable to the Shareholders' General Meeting) operate properly.Meeting, which he chairs.
BecauseWhen the offices of Chairman and Chief Executive Officer are separated, the Chairman may remain in office until the Ordinary Shareholders' General Meeting called to approve the financial statements and 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 Officeris responsible for the management of the Company, and represents itthe Company in dealings with third parties. Heparties 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.Company, subject to the powers that are attributed by law to the Board of Directors and the Shareholders' General Meeting and within the limits set by the Board of Directors.
The Chief Executive Officer must be lessno more than 65 years old.
Limits placed by the Board 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. The prior authorization of the Board of Directors is required for undertakings in the field ofto commit Sanofi to investments, acquisitions and divestments in the following cases:
When the consideration payable to the contracting parties for such undertakings includeincludes potential installment payments which are subject tocontingent upon the achievement of future results or objectives, such as the registration of one or severalmore products, the caps are calculated by addingaggregating the various payments due from the signature of the contract until (and including) the filing of the first application to obtain afor marketing authorization in the United States or in Europe.
Sanofi-aventisThe Company is administered by a Board of Directors, with sixteencurrently comprising fifteen members.
Since May 14, 2008, the terms of office of thesethe directors have been staggered, in order to ensure that the directors are progressively re-elected.
Each year, the Board of Directors conducts a review to ensure that there is an appropriate balance in its composition and the composition of its Committees. In particular, the Board seeks to ensure a 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.
Under the terms of the AFEP-MEDEF corporate governance code (hereafter referred to as the "AFEP-MEDEF Code"), a director is deemed to be independent when the director has no relationship of any nature whatsoever with the Company, the group it belongs to or its senior management which could compromise the exercise of the director's freedom of decision. More specifically, independent directors are required:
The influence of other factors such that in each year from 2010as length of service on the Board, the ability to 2012 one-thirdunderstand 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 to the independence of the current directors took place during the meeting of the Board willof Directors of March 5, 2013. Of the fifteen directors, nine were deemed to be requiredindependent directors with reference to seek re-election each year.
During its meeting on March 1, 2010,the independence criteria used by the Board discussedof Directors pursuant to the issue of director independence. Out of the sixteen directors, seven were regarded as independent:AFEP-MEDEF Code: Uwe Bicker, Jean-Marc Bruel,Robert Castaigne, Lord Douro, Jean-René Fourtou, Claudie Haigneré, Suet-Fern Lee, Carole Piwnica, Klaus Pohle, and Gérard Van Kemmel.
In 2009, halfparticular, it was determined that the situation of Robert Castaigne had changed. Until 2012, Robert Castaigne was not considered as an independent director due to his past links with the Total Group. Since April 2008, when the independence criteria of the membersAFEP-MEDEF Code were adopted, his situation has changed in two ways:
Consequently, the Board of Directors were independent Directors untilconsidered that the resignation on November 24, 2009links with Total no longer created a presumption of Gunter Thielen, an independent Director. Since his replacementnon-independence.
Moreover, contrary to the independence criteria set by Serge Weinberg,the AFEP-MEDEF Code, the Board of Directors has had 7 independent Directors outdecided that belonging to the Board for more than 12 years would not of 16.itself disqualify 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 temporary situation,legitimate concern, which Sanofi takes very seriously.
However, it is not always appropriate to apply this criterion rigidly, since it does not take full account of the variety 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.
Finally, there was no other reason to determine that Robert Castaigne is not independent.
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 proportionGroup 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's directors who
are classified as independent Directors will be revised in 2010 soor members of their close family were senior managers or employees during 2012. On each occasion, the amounts paid to or received from such companies over the past three years were determined on an arm's length basis and did not represent amounts that at least halfthe Board regarded as undermining the independence of the Directors are independent.
A director is regarded as independent if he or she has no relationshipin question. Similarly, the Board of any kindDirectors did not find the office of trustee held by Uwe Bicker and Klaus Pohle with the Company, the Group or its management that is liableAventis Foundation (Germany) was of such a nature as to impair his or her judgment. It is the responsibilityundermine their independence as members of the Sanofi Board acting upon the recommendation of the Appointments and Governance Committee, to assess the independence of its members.
No more than one-third of the serving members of our Board of Directors may be over 70 years of age.
Subject to the authoritypowers expressly reserved by lawattributed to Shareholders’the Shareholders' General MeetingsMeeting and within the scope of the Company's corporate objects,purpose, the Board of Directors deals with and takes decisions uponDirectors' powers cover all issues relating to the proper management of the Company, and otherthrough its decisions the Board determines all matters concerning the Board.
falling within its authority.
Composition of the Board of Directors as of December 31, 20092012
Positions held in listed companies are flagged by an asterisk.
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February 10, 1951 | ||
1,636 shares | Nationality: | French | ||
First elected: | December 2009 | |||
Last reappointment: | May
2011 | |||
Term expires: | 2015 |
Directorships and appointments of Serge Weinberg
Within the Sanofi Group | Outside the Sanofi Group | |
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In French companies | ||
•
– Chairman of the Strategy Committee of | • Member of the Supervisory Board of Schneider Electric* • Chairman of Weinberg Capital Partners – Chairman of Financière Piasa and Piasa Holding – Director of – Manager of Alret and
Member of the Supervisory Board of Financière BFSA – Vice Chairman and Director of
Weinberg Capital Partners' representative on the Board of | |
In foreign companies | ||
| •
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Past directorships since 2008 | ||||
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Chairman of the Board of Accor* (until 2009) • Director of Rasec (until 2010), of Fnac (until 2010), of Rothschild Concordia (until 2010) and of Team Partners Group (until 2011) • Member of the Supervisory Board of Rothschild & Cie (until 2010) • Member of the Board of Pharma Omnium International (until 2010) • Vice Chairman of the Supervisory Board of Schneider Electric* (until 2010) • Member of the Supervisory Board of Amplitude Group and of Alfina (until 2011) | |||
In foreign companies | ||||
None | • Member of the Supervisory Board of Gucci Group (Netherlands, until 2010) |
Education and business experience
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
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Since 2005 | Chairman of Weinberg Capital Partners |
Christopher Viehbacher
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March 26, 1960 | ||
95,442 shares | Nationality: | German and Canadian | ||
First elected: | December 2008 | |||
Last reappointment: | May 2010 | |||
Term expires: | 2014 |
Directorships and appointments of Christopher Viehbacher
Within the Sanofi Group | Outside the Sanofi Group | |
| ||
In French companies | ||
• Director and Chief Executive Officer of Sanofi*
Chairman of the Executive Committee and
Member of the Strategy Committee of | None |
In foreign companies | ||
• Chairman of Genzyme (United States) | • Vice Chairman of European Federation of Pharmaceutical Industries and Associations (EFPIA, Belgium) •
• Member of the Board of Business Roundtable (United States) • Member of the International Business Council, World Economic Forum (Switzerland) • Chairman of the CEO Roundtable on Cancer (United States) • Member of PhRMA | |
Past directorships since 2008 | ||
None | None | |
In foreign companies | ||
• Chairman and | • Member of Advisory Council of Center for Healthcare Transformation (United States, until 2010) • Chairman and member of the • Chairman of the Board of Directors of PhRMA (United States, until 2012) |
Education and business experience
Various positions at the GSK group, including President Pharmaceutical Operations for North America | ||
2004-2008 | Member of the Cardinal Club (United States) |
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February 11, 1958 | ||
500 shares | Nationality: | French | ||
First elected: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Laurent Attal
Within the Sanofi Group | Outside the Sanofi Group | |
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In French companies | ||
• Director of Sanofi*
Member of the Strategy Committee of | • Director ofFondation d'Entreprise L'Oréal | |
In foreign companies | ||
None | None | |
Past directorships held since 2008 | ||
In French Companies | ||
None | None |
In foreign companies | ||
None | • President and Chief Executive Officer of L'Oréal USA (United States, until 2009) |
Education and business experience
Since 1986 | Various positions within the L'Oréal* Group notably within the active cosmetics division | |
Since 2002 | Member of L'Oréal* Executive Committee | |
Since 2010 | Executive Vice-President Research and Innovation at L'Oréal* |
Uwe Bicker | Date of birth: | June 14, 1945 | ||
600 shares | 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) • Member of the Supervisory Board of Future Capital AG (Germany) • Chairman of the Board of Marburg University (Germany) • Member of the Advisory Board of Morgan Stanley (Germany) | |
Past directorships since 2008 | ||
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 • Vice-Chairman of the Supervisory Board of Epigenomics AG (Germany)
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Education and business experience
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Since 1983 | Professor at the Medical Faculty of Heidelberg (Germany) | |
Since 2011 | Dean at the Medical Faculty, Heidelberg University (Germany) Managing Director at the University Clinic of Mannheim (Germany) | |
1975-1994 | Various positions at Boehringer Mannheim GmbH (later Roche AG) (Germany) | |
1994-2004 | Various positions at Hoechst group
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1997-2007 | Chairman of the |
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April 27, 1946 | ||
1,000 shares | Nationality: | French
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First elected: | February 2000 | |||
Last reappointment: | May 2010 | |||
Term expires: | 2014 |
Directorships and appointments of Robert Castaigne
Within the Sanofi Group | Outside the Sanofi Group | |
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In French companies | ||
• Independent director of Sanofi*
| ||
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Société Générale*: – Director – Member of the • Vinci*: – Director – Member of the – Member of |
In foreign companies | ||
None | None | |
Past directorships since 2008 | ||
In French companies | ||
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In foreign companies | ||
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Education and business experience
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1972-2008 | Various positions at the | |
1995-2008 | Director of Hutchinson | |
1996-2008 | Director of Omnium Insurance & Reinsurance Company Ltd (Bermuda) |
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December 18, 1945 | ||
1,017 shares | Nationality: | French | ||
First elected: | February 2000 | |||
Last reappointment: | May
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Term expires: | 2015 |
Directorships and appointments of Thierry Desmarest
Within the Sanofi Group | Outside the Sanofi Group | |
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| Director of Sanofi* – Member of the – Member of the Appointments and |
Member of the Strategy Committee of Sanofi |
Chairman of the Nominating and Governance Committee – Member of the Compensation Committee – Member of the Strategy Committee – Chairman ofFondation Total • L'Air Liquide*: – Director – Member of the Appointments and Governance Committee – Member of the Compensation Committee | |||
• Renault group: – Director of Renault SA* – Director of Renault SAS – Chairman of the International Strategy Committee of Renault SA – Member of the Remuneration Committee of Renault SA – Member of the Industrial Strategy Committee of Renault SA • Member of the Board of Directors of l'Ecole Polytechnique and Chairman ofFondation de l'Ecole Polytechnique • Director ofMusée du Louvre | ||||
In foreign companies | ||||
None | •
–
–
|
Past directorships since 2008 | ||||
In French companies | ||||
| •
•
| |||
In foreign companies | ||||
None | None |
Education and business experience
2000-2007 | CEO and Chairman of the Board of Elf Aquitaine | |
|
Since 1981 | Various positions at the |
Lord Douro
|
|
August 19, 1945 | ||
2,000 shares | Nationality: | British | ||
First elected: | May 2002 | |||
Last reappointment: | May 2010 | |||
Term expires: | 2014 |
Directorships and appointments of Lord Douro
Within the Sanofi Group | Outside the Sanofi Group | |
| ||
In French companies | ||
•
– Member of the Strategy Committee of Sanofi | None | |
In foreign companies | ||
None | • Chairman of Richemont Holdings UK Ltd (United Kingdom) and Kings College London (United Kingdom) • Compagnie Financière Richemont AG* (Switzerland): – Director – Member of the Appointments Committee and of the Compensation Committee • Director of GAM Worldwide (United Kingdom) • Member of the International Advisory Board of Abengoa SA* (Spain) • RIT Capital* (United Kingdom): – Director – Chairman of the Remuneration Committee and the Conflicts Committee – Member of the Nominations Committee | |
Past directorships since 2008 | ||
In French companies | ||
None | • Pernod Ricard*: – Director (until 2011) – Member of the Compensation Committee and
| |
In foreign companies | ||
| • Director of Abengoa Bioenergy (Spain, until 2011) •
|
Education and business experience
1979-1989
| Member of the European Parliament | |
1995-2000 | Chairman of Sun Life & Provincial Holdings | |
1993-2005 | Chairman of Framlington Ltd (United Kingdom) | |
2003-2007 | Commissioner of English Heritage (United Kingdom) |
Jean-René Fourtou
|
|
June 20, 1939 | ||
4,457 shares | Nationality: | French | ||
First elected: | August 2004 | |||
Last reappointment: | May 2012 | |||
Term expires: | 2016 |
Directorships and appointments of Jean-René Fourtou
Within the Sanofi Group | Outside the Sanofi Group | |
| ||
In French companies | ||
• Independent director of Sanofi*
– Member of the Appointments and Governance Committee – Member of the Strategy Committee of | • Chairman of the Supervisory Board of Vivendi* | |
In foreign companies | ||
| •
| |
Past directorships since 2008 | ||
In French companies | ||
None | • Chairman of the Supervisory Board of Group Canal+* (until 2011) • Axa*: – Vice President, then member of the Supervisory Board (until 2009) – Member of the Ethics and Governance Committee (until 2009) – Director of AXA Millésimes SAS (until 2011) • Director of Cap Gemini SA* (until 2009) | |
In foreign companies | ||
None | • Director of NBC Universal Inc. (United States, until 2010) • Director and member of the Compensation Committee of Nestlé* (Switzerland, until 2012) |
Education and business experience
1963-1986 | Various positions at the Bossard group, including Chairman and Chief Executive Officer (1977-1986) | |
1986-1999
| Chairman and Chief Executive Officer of Rhô ne-Poulenc* | |
1999-2004 | Vice Chairman of the Management Board, then Vice Chairman of the Supervisory Board and member of the Strategy Committee of | |
2002-2005 | Chairman and Chief Executive Officer of | |
2002-2008 | Vice Chairman, Chairman then Honorary Chairman of the International Chamber of Commerce |
Claudie Haigneré
|
|
May 13, 1957 | ||
500 shares | 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 | |
| ||
In French companies | ||
• Independent director of Sanofi* – Member of the Appointments and Governance Committee of Sanofi – Member of the Compensation Committee of Sanofi | • France Telecom*: – Director – Member of the Strategy Committee • Chairman of the Board of Directors ofLa Géode • Chairman of Universcience • Director ofFondation de France • Director ofFondation CGénial • Director ofFondation d'Entreprise L'Oréal • Director ofFondation Lacoste • Member ofAcadémie des Technologies, ofAcadémie des Sports, ofAcadémie Nationale de l'Air et de l'Espace • Director ofEcole Normale Supérieure (ENS), Campus Condorcet, and PRES HESAM(Pôle de Recherche et d'Enseignement Supérieur Hautes-Etudes-Sorbonne-Arts-et-Métiers) | |
In foreign companies | ||
None | None | |
Past directorships since | ||
In French companies | ||
None | • Counselor at the European Space Agency (until 2009) • Director and Chairman of theCité des Sciences et de l'Industrie (until 2009) • Chairman ofPalais de la Découverte (until 2009) • Director of the Aéro Club de France (until 2011) • Vice President of the IAA (International Academy of | |
In foreign companies | ||
None | None |
Education and business experience
| ||
|
1984-1992 | Rheumatologist, Cochin Hospital (Paris) | |
1996 | Scientific space mission to the MIR space station (Cassiopée, Franco-Russian mission) | |
2001 | ||
2002-2004 | Deputy Minister for Research and New Technologies in French government | |
2004-2005 | Deputy Minister for European Affairs | |
2005-2009 | Counselor to at the European Space Agency (ESA) |
Igor Landau
|
|
July 13, 1944 | ||
500 shares | Nationality: | French | ||
First elected: | August 2004 | |||
Last reappointment: | May 2011 | |||
Term expires: | 2015 |
Directorships and appointments of Igor Landau
Within the Sanofi Group | Outside the Sanofi Group | |
| ||
In French companies | ||
• Director of Sanofi* | • Director of INSEAD (Institut Européen d'Administration des Affaires) | |
In foreign companies | ||
None | • Chairman of the Supervisory Board of •
– Member of the Supervisory Board – Member of the Audit Committee | |
Past directorships since 2008 | ||
In French companies | ||
None | • Director of HSBC France (until 2012) | |
In foreign companies | ||
None | • Allianz – Member of the Steering Committee – Member of the General Committee – Member of the Mediation Committee – Member of the Nomination Committee |
Education and business experience
|
1968-1970 | Chief Executive Officer of the German subsidiary of La Compagnie du Roneo | |
1971-1975 | Management consultant at McKinsey | |
1975-2004 | Various positions at the Rhône-Poulenc group, including member of the Management Board of Aventis (1999-2002) and Chairman of the Management Board of Aventis (2002-2004) | |
2001-2005 | Director of Essilor* | |
2002-2005 | Director of Thomson* (later Technicolor*) | |
2003-2006 | Member of the Supervisory Board of Dresdner Bank (Germany) |
|
|
May
| ||
500 shares | Nationality: | Singaporean | ||
First elected: | May 2011 | |||
Term expires: | 2015 |
Directorships and appointments of Suet-Fern Lee
Within the Sanofi Group | Outside the Sanofi Group | |
| ||
In French companies | ||
• Independent director of Sanofi* | • Axa*: – Director – Member of the Finance Committee | |
In foreign companies | ||
None | • Director of Macquarie International Infrastructure Fund Ltd* (Bermuda) • Director of National Heritage Board (Singapore) • Director of Rickmers Trust Management Pte Ltd* (Singapore) • Director of Stamford Coporate Services Pte Ltd (Singapore) • Chairman of the Board of directors of the Asian Civilizations Museum (Singapore) | |
Past directorships since 2008 | ||
In French companies | ||
None | None | |
In foreign companies | ||
None | • Director of Richina Pacific Limited* (Bermuda, until 2009) • Director of Transcu Group Limited* (Singapore, until 2010) • Director of Sembcorp Industries Ltd* (Singapore, until 2011) |
Education and business experience
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) | |
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) | |
2010-2011 | President of the Inter-Pacific Bar Association |
Christian Mulliez | Date of birth: | November 10, 1960 | ||
1,423 shares | Nationality: | French | ||
First elected: | June 2004 | |||
Last reappointment: | May 2010 | |||
Term expires: | 2014 |
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 | • Vice President, General Manager Administration and Finance of • Chairman of the Board of Directors of Regefi • Director of DG 17 Invest | |
In foreign companies | ||
None | • Director of L'Oréal USA Inc. • Director of Galderma Pharma (Switzerland) • Director of The Body Shop International (United Kingdom) | |
Past directorships since | ||
In French companies | ||
None | None | |
In foreign companies | ||
None | None |
Education and business experience
Since 2003 | Executive Vice President Administration and Finance at L'Oréal* | |
| ||
1984-2002 | Various positions at Synthélabo and then at Sanofi-Synthélabo, including Vice President Finance | |
Since 2003
Carole Piwnica | Date of birth: | February 12, 1958 | ||
500 shares | 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 | ||
•
Member of the Audit Committee of Sanofi |
Chairman of the Committee of Governance, Compensation and Appointment |
In foreign companies | ||
None | •
–
–
•
•
| |
Past directorships since 2008 | ||
In French companies | ||
None | None | |
In foreign companies | ||
None | • Director of Toepfer GmbH (Germany, until 2010) • Director of Dairy Crest Plc.* (United Kingdom, until 2010) • Member of the Ethical Committee of Monsanto* (United States, until 2009) • Aviva Plc.* (United Kingdom, until 2011): – Director – Chairman of the Corporate Responsibility Committee – Member of the Compensation Committee |
Education and business experience
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 and Vice-Chairman of Tate & Lyle Plc. for Governmental Affairs (United Kingdom) | |
1996-2006 | Chairman of the Liaison Committee and director of theConfédération Européenne des Industries Agro-Alimentaires (CIAA) | |
2000-2006 | Chairman of the Export Commission and director of theAssociation Nationale des Industries Alimentaires (ANIA) |
Klaus Pohle | 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
Sanofi Group | ||||||
|
|
|
| ||||
In French companies | ||||
• Independent director of Sanofi*
Chairman of the Audit Committee of | None | |||
In foreign companies | ||||
None | •
| |||
Past directorships since 2008 | ||||
In French companies | ||||
None | None | |||
In foreign companies | ||||
None | • DWS Investment GmbH,
Member of the Supervisory Board – Chairman of the Audit Committee • Director of Labelux Group GmbH* (Switzerland, until 2011) • Coty Inc. |
–
|
Education and business experience
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) |
Gérard Van Kemmel
|
|
August 8, 1939 | ||
1,005 shares | Nationality: | French | ||
First elected: | May 2003 | |||
Last reappointment: | May 2011 | |||
Term expires: | 2015 |
Directorships and appointments of Gérard Van Kemmel
Within the Sanofi Group | Outside the Sanofi Group | |||
| ||||
In French companies | ||||
• Independent director of Sanofi* – Chairman of the Compensation Committee of Sanofi – Member of the Audit Committee of Sanofi – Member of the Appointments and Governance Committee of Sanofi | • Europacorp*: – Director – Member of the Audit Committee | |||
In foreign companies | ||||
None | None | |||
Past directorships since 2008 | ||||
In French companies | ||||
None | • Director of Groupe | |||
In foreign companies | ||||
None | • Director of Eurotunnel NRS Holders Company Limited (United
|
Education and business experience |
1966-1995 | Various positions including President of Arthur Andersen and Andersen Consulting in France (1976-1995) and Chairman of the Board of Arthur Andersen Worldwide (1989-1994) | |
1996-1997 | ||
1997-2006 | Various positions at Cambridge Technology Partners |
Officer | ||||
|
|
|
| ||
|
Various positions at |
Gunter Thielen was an independent Director and member of the Compensation Committee of sanofi-aventis until November 24, 2009.
During 2009, the Board of Directors met ten times, with an overall attendance rate among Board members of more than 89%.
The Board of Directors’ meeting held on March 1, 2010 discussed the reappointment of five memberscomposition of the Board of Directors whose termschanged in 2012. The term of office expireof Lindsay Owen-Jones expired at the endclose of the Shareholders' General Shareholders’ meeting to beMeeting held on May 17, 2010.
The Board of Directors decided to propose that the General Shareholders’ meeting reappoint Christopher Viehbacher, Robert Castaigne, Lord Douro and Christian Mulliez4, 2012. Laurent Attal was appointed as Directors.
Jean-Marc Bruel is not seeking reappointment. The Board of Directors is proposing that the General Shareholders’ meeting appoint a new director: Catherine Bréchignac.
Catherine Bréchignac is a physicist, and holds a doctorate in science. She is currently Director of Researchour Company at the CNRS (the French national center for scientific research); the French Ambassador at large for science, technology and innovation; President of the French High Commission on Biotechnology; and President of the International Council for Science (ICSU). She was DirectorShareholders' General of the CNRS from 1997 to 2000, and its President from 2006 to 2010. She is a member of the French Academy of Sciences and the French Academy of Technologies, and holds doctorateshonoris causa from a number of universities. She is also a director of Renault, and an Officer of theLégion d’honneur (Legion of Honor) and of theOrdre National du Mérite (National Order of Merit).
Assuming shareholder approval, at the end of the General Shareholders’ meeting to beMeeting held on May 17, 2010, the new Board of Directors would consist of the following members (year term of office ends):4, 2012.
Out of the sixteen Directors on the new Board, seven would be regarded as independent: Uwe Bicker, Catherine Bréchignac, Lord Douro, Jean-René Fourtou, Claudie Haigneré, Klaus Pohle and Gérard Van Kemmel.
The Executive Committee is chaired by the Chief Executive Officer.
The Committee meets twiceonce a month, and has the following permanent members:
Marc Cluzel, Executive
Laurence Debroux,
Wayne Pisano, Senior Vice President Vaccines;
Management Committee
The Management Committeename, 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 chaired by the Chief Executive Officer.
At the beginningc/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 March 2010, the Management Committee comprised:France.
Christopher Viehbacher
Chief Executive Officer
Chairman of the Management Committee and the Executive Committee
Date of birth: March 26, 1960
Age: 49
Christopher Viehbacher was appointed as Chief Executive Officer on December 1, 2008, and is bothalso a graduate in Commercemember of the Queens University (Ontario — Canada) and a certified public accountant. After beginning his career at Price Waterhouse, he spent the major part ofStrategy Committee.
For additional information regarding his professional life (1988-2008) in the GlaxoSmithKline (GSK) company where he acquired broad internationaleducation and business experience in different positions across Europe, in the United States and Canada. In his last position, he was President Pharmaceutical Operations North America, Co-Chairman of the Portfolio Management Board and a membersee "Composition of the Board of Directors as of GSK plc. He was appointed to his present position effective December 1, 2008.31, 2012" in "A. Directors and Senior Management" on this Item 6.
Christopher Viehbacher is a citizen of Germany and Canada.
Jean-François BrinOlivier Charmeil
Member of the Management Committee
Senior Vice President Pharmaceutical Customer SolutionsVaccinessince October 2009Date of birth: February 19, 1963
Age: 45
Jean-François Brin, a Doctor of Medicine, has a degree in Clinical Pharmacology & Toxicology and also is a graduate of HEC (Ecole des Hautes Etudes Commerciales). In 1995, he started his career as a Sales Representative and then held various posts within the Marketing Division of Rhône-Poulenc Rorer, where he became Marketing Director Central Nervous System and Bone Metabolism. In 1999, he was appointed Sales Director in the Cardio-Diabetes Business Unit in the French affiliate, subsequently becoming Cardio-Thrombosis Business Unit Head. Jean-François Brin was appointed sanofi-aventis Thrombosis Franchise Head in 2004. In this post, he was responsible for defining long-term marketing and medical strategy and he chaired the Lovenox® Strategic Steering Committee. He was appointed to his present position in October 2009.
Pierre Chancel
Member of the Management Committee
Senior Vice President Global Diabetes since September 2009
Age: 53
Pierre Chancel, a pharmacist, is a graduate of theInstitut de Pharmacie Industrielle in Paris. At Rhône-Poulenc, from 1994 to 1996, he was Marketing Director for Théraplix. From 1997 to 1999, Mr. Chancel served as Business Unit Manager in charge of products in the central nervous system, rheumatology and hormone replacement therapy fields. From 2003, he served as Managing Director of Aventis Operations in the United Kingdom and Ireland. Before being appointed to this position, he was in charge of global strategy development at Aventis, which led to the launch of the new diabetes treatment Lantus®. He was appointed Senior Vice President Global Marketing and Access in August 2004 and to his present position in September 2009.
Olivier Charmeil
Member of the Management Committee
Senior Vice President Pharmaceutical Operations, Asia / Pacific & Japan
Age: 47
Olivier Charmeil is a graduate of HEC (Ecole des Hautes Etudes Commerciales) and of theInstitut d’Etudesd'Etudes Politiques in Paris. From 1989 to 1994, he worked in the Mergers & Acquisitions department of Banque de l’Union europél'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 to his current positionSenior Vice President Asia/Pacific, Pharmaceutical Operations in February 2006. Since2006 and since January 1, 2008, Operations Japan hashave reported to Olivier Charmeil,him as haswell as Asia/Pacific &and Japan Vaccines since February 2009.
Marc Cluzel
Member of the Management Committee and the Executive Committee
Executive Vice President Research & Development since November 2009
Age: 54
Marc Cluzel is a Doctor of Medicine and a Doctor of Science. He began his career in hospital medicine before carrying out research at Johns Hopkins University (Baltimore) and Guy’s Hospital (London). In 1991, he joined Sanofi Recherche Since January 1, 2011, Olivier Charmeil has served as a clinical pharmacologist, and was then appointed successively as Senior Project Director in 1993, Vice President, Research Projects Management in 1996 (retaining this position after the 1999 merger with Synthélabo) and Vice President, International Development in 2001 (retaining this position after the 2004 merger with Aventis). Marc Cluzel was appointed Senior Vice President Research & Development in January 2007Vaccines and to his current position in November 2009.a member of the Executive Committee.
Jérôme Contamine
Member of the Management Committee and the Executive Committee
Executive Vice President Chief Financial Officer since March 16, 2009Date of birth: November 23, 1957
Age: 52
Jérôme Contamine is a Graduate ofEcoleÉcole Polytechnique (X),ENSAE, and ENSAE, the national statistics and economics engineering school, affiliated with the Ministry of Finance. He graduated from the ENA—ENA (Ecole Nationale d’Administrationd'Administration). After 4four years at the"Cour des ComptesComptes", 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 & Treasurer 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 became, 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 becamewas appointed Vice-President Senior Executive, Deputy Chief
Executive Officer, Financial Director of Veolia Environnement. Jérôme Contamine joined Sanofi as Executive Vice President, Deputy General Manager, Chief Financial Officer (CFO) of Veolia Environnement and Director of Valeo. He was appointed to his current positionSanofi in March 2009.
Laurence DebrouxDavid-Alexandre Gros
MemberChief Strategy Officer
Date of the Management Committee and the Executive Committee
Senior Vice President Chief Strategic Officer since February 11, 2009birth: July 23, 1972
Age: 40
Laurence Debroux is a graduate of HEC (Ecole des Hautes Etudes Commerciales). She began her career with Merrill Lynch in London, and then worked in the Finance Department of the Elf Aquitaine Group from 1993 to 1996. She joined the Sanofi Group as Corporate Treasurer in 1996, and was appointed Head of Financing/Treasury in 1997. From 2000 to 2004, she served as Head of Strategic Planning, before becoming Deputy Chief Financial Officer, and then Chief Financial Officer in March 2007. She was appointed to her present position in February 2009.
Belén Garijo
Member of the Management Committee
Senior Vice President Pharmaceutical Operations, Europe
Age: 49
Belén GarijoDavid-Alexandre Gros has a degree in medicine, majoring in clinical pharmacology. Her career in the pharmaceutical industry began at Abbott, where she was Medical DirectorB.A. from Darmouth College (1995), an M.D. from Johns Hopkins University School of the Spanish subsidiary before being appointed Director of International Medical Affairs at Abbott’s United States headquarters in Illinois. In 1996, she joined Rhône-Poulenc Rorer in Spain as Head of the OncologyMedicine (1999), and an M.B.A. from Harvard Business Unit. She was subsequently responsible for Aventis’ global marketing and medical strategy in Oncology, based in New Jersey, United States. She returned to Spain in 2003 as Managing Director of the Group’s Spanish subsidiary. She was appointed to her current position in July 2006.
Gregory Irace
Member of the Management Committee
Senior Vice President Pharmaceutical Operations, United States and Canada
Age: 51
Gregory Irace holds a B.S. in accounting from Albany State University (New York)School (2002). He began his career in clinical research at Price Waterhousethe 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 1980 and received his CPA in 1982. He spent 11 years2002 at Price Waterhouse becoming a
Senior AuditMcKinsey & Company as an Associate, was promoted to Engagement Manager in 1988,2004 and to Associate Principal in 2006. In late 2006, he was appointed Vice President at Merrill Lynch, serving healthcare clients on a Senior Manager in the Corporate Finance Department in 1989.wide range of strategic, corporate finance and merger & acquisition issues. In 1991,2009, he joined Sterling Winthrop Inc.Centerview Partners, in San Franciso, California, as Regional Controlleran advisor to healthcare companies as a Principal and in 1993 he became Director of Financial Planning and Analysis for Sanofi Winthrop L.P. From October 1994 to January 2007, he was Chief Financial Officer of Sanofi’s Pharmaceutical Operations in the United States, most recently serving as Senior Vice President, Finance and Administration and Chief Financial Officer of sanofi-aventis US. He was appointed to his present position in February 2007.
Marie-Hélène Laimay
Memberfounding member of the Management Committee
Senior Vice President Audit and Internal Control Assessment
Age: 51
Marie-Hélène Laimay has a degree in business from a French business school (Ecole Supérieure de Commerce et d’Administration des Entreprises) and a DECS (an accounting qualification). She spent three yearsHealthcare Investment Banking practice. David-Alexandre Gros joined Sanofi as an auditor with Ernst & Young before joining Sanofi in 1985. Mrs. Laimay served in a variety of financial positions, including Financial Director of Sanofi’s beauty division and Deputy Financial Director of Sanofi-Synthélabo following the merger with Synthélabo in 1999. From November 2000 to May 2002, she served as Vice President, Internal Audit, and from May 2002 to August 2004 as Senior Vice President, Chief FinancialStrategy Officer before being appointed to her present position.
Christian Lajoux
Member of the Management Committee
President France since June 2009
Age: 62
Christian Lajoux has a degree (DEUG) in psychology, a bachelor degree (maîtrise) in philosophy and a post-graduate degree (DESS) in personnel management from theInstitut d’Administration des Entreprises (IAE Paris). He served in a variety of positions at Sandoz, including Division Director, before joining Sanofi Winthrop in 1993. He then served in various positions, including Director of Operations and Managing Director of Sanofi Winthrop France, before being appointed Senior Vice President France just prior to the merger with Synthélabo in 1999. He served in that position until being named as Senior Vice President Europe in January 2003, and then as Senior Vice President Pharmaceutical Operations France in August 2004. He was appointed as Chairman of Leem(Les entreprises du médicament) in July 2006 and Chairman of FEFIS (Fédération Française des Industries de Santé) in December 2008, Chairman of sanofi-aventis France and to his current position in June 2009.
Jean-Pierre Lehner
Member of the Management Committee
Senior Vice President Chief Medical Officer since February 11, 2009
Age: 62
Jean-Pierre Lehner holds a Medical degree from the School of Medicine, University of Paris, France. After spending four years asChef de Clinique, Paris Hospitals, Department of Cardiology (Prof. Tricot), Bichat Hospital, Paris, France, Jean-Pierre Lehner joined Roussel Laboratories in 1981 as Medical Director (1981-1986), and was then appointed Medical Director of Roussel-Uclaf (1986-1992). He served successively as Senior Director of Clinical Investigations of Sanofi Recherche (1992-1996), as Scientific Senior Director of Sanofi Winthrop (1996-2002), as Vice President Medical Affairs Europe of sanofi-aventis (2003-2005), and as Senior Vice-President, Medical & Regulatory Affairs (2005-February 2009). He was appointed to his present position in February 2009.
Gilles Lhernould
Member of the Management Committee
Senior Vice President Corporate Social Responsibility since October 2009
Age: 54
Gilles Lhernould has a diploma in pharmacy and a master’s degree (DEA) in industrial pharmacy. He began his career as a manufacturing supervisor at Laboratoires Bruneau, and in 1983, joined one of Sanofi’s subsidiaries where he managed production and later the factory. Mr. Lhernould then served in a variety of positions within the Sanofi Group, including Director of Human Resources — Pharmaceuticals for Sanofi Pharma and Director of Operational Human Resources for Sanofi. Following the merger with Synthélabo in
1999, he served as Vice President in charge of integration and then Vice President of Information Systems, before being named as Senior Vice President, Industrial Affairs and Senior Vice President Industrial Affairs of sanofi-aventis. He was appointed Senior Vice President Human Resources in September 2008 and to his present position in October 2009.2011.
Karen Linehan
Member of the Management Committee and the Executive Committee
Senior Vice President Legal Affairs and General Counsel
Date of birth: January 21, 1959
Age: 51
Karen Linehan graduated from Georgetown University with bachelorBachelor of artsArts andjuris doctorate Juris Doctorate degrees. Prior to practicing law, sheMs. 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, New York. In January 1991, she joined Sanofi as Assistant General Counsel of its U.S. subsidiary. In July 1996, KarenMs. 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
Member of the Management Committee and the Executive Committee
Senior Vice President Industrial Affairs
Date of birth: April 3, 1962
Age: 47
Philippe Luscan is a graduate in Biotechnology of theEcoleÉcole Polytechnique and theEcoleÉcole 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.Chemistry in September 2006. He was appointed to his present position in September 2008.
Antoine Ortoli
Member of the Management Committee
Senior Vice President Pharmaceutical Operations, Intercontinental
Age: 56
Antoine Ortoli is a graduate of theEcole Supérieure de Commerce in Rouen, France, and of INSEAD. He also holds a law degree and an accountancy qualification. He began his career in 1980 as a financial and systems auditor with Arthur Young and Co. In December 1981, he joined the Sanofi Group, where he served in a variety of positions, including Finance Director of the Pharmaceuticals Division and Director of the Latin America region. Following the merger with Synthélabo in 1999, he was named as Vice President, Latin America, and then as Senior Vice President, Asia Middle East in June 2001. In June 2003, he took on the role of Vice President, Intercontinental region at Sanofi-Synthélabo. He was appointed to his present position in January 2005.
Philippe Peyre
Member of the Management Committee
Senior Vice President Corporate Affairs
Age: 59
Philippe Peyre is a graduate of theEcole Polytechnique, and began his career in management consultancy with Bossard before being appointed as a member of the General Management Committee of Bossard Gemini Consulting. In 1998, he joined Rhône-Poulenc Rorer as Senior Vice President Special Projects, and then served as Head of Integration at Aventis Pharma, and as Company Secretary and Senior Vice President, Business Transformation of Aventis. He was appointed to his present position in August 2004.
Wayne Pisano
Member of the Management Committee and the Executive Committee since November 2009
Senior Vice President Vaccines
Age: 55
Wayne Pisano holds a bachelor’s degree in biology from St. John Fisher College, Rochester, New York, and an MBA from the University of Dayton, Ohio. Prior to sanofi pasteur he held various marketing and sales
positions with Reed and Carnrick Pharmaceuticals and Sandoz/Novartis. He joined sanofi pasteur as Vice President, U.S. Marketing in May 1997 and then served as Senior Vice President of U.S. Marketing & Sales, Executive Vice President of sanofi pasteur North America and Senior Vice President, Global Commercial Operations & Corporate Strategy. He was appointed Senior Vice President Vaccines in August 2007. Since November 2009, he has been a member of the Executive Committee.
Roberto Pucci
Member of the Management Committee and the Executive Committee
Senior Vice President Human Resourcessince October 2009Date of birth: December 19, 1963
Age: 46
Roberto Pucci has a Lawlaw 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 Turin,Torino, Italy. He was appointed to his present positionRoberto Pucci joined Sanofi as Senior Vice President Human Resources in October 2009.
Debasish Roychowdhury
MemberTable of the Management Committee
Senior Vice President Global Oncologysince August 2009
Age: 48
Debasish Roychowdhury received his medical training and doctorate of Medicine from the All India Institute of Medical Sciences, New Delhi. and then moved to the United States in 1989 to specialize in internal medicine, hematology and oncology (at the University of California at San Francisco), and subsequently as faculty at the University of Cincinnati, where he directed a number of clinical programs. In 1999, he moved to Eli-Lilly’s R&D Department to work in Oncology Clinical Research and later in Regulatory Affairs, and was appointed Vice President for Clinical Development at GlaxoSmithKline in 2005. In 2008, he was part of the team that created GSK’s new Oncology R&D Unit, uniting all of the teams working on the subject. He was appointed to his present position in August 2009.
Jean-Philippe Santoni
Member of the Management Committee
Senior Vice President Industrial Development and Innovationsince June 2009
Age: 55
Jean-Philippe Santoni holds a doctorate in Medicine and a masters’ degree in Human Biology. He began his career as a clinician specializing in hospital medicine and biology at various Academic Hospitals from the“Assistance Publique — Hôpitaux de Paris” (APHP group). From 1985, he held various posts with responsibility for international clinical development and medical/regulatory affairs, first with Servier and subsequently with American Cyanamid/Lederlé. In 1990, he joined Synthélabo as International Medical Director. Following the merger with Sanofi in 1999, he served successively as Associate Vice President Medical and Regulatory Affairs, Vice President International Clinical Operations and Vice President International Clinical Development, a position he retained after the merger with Aventis in 2004. He was appointed Senior Vice President International Development in January 2007 and to his present position in June 2009.Contents
Roberto Pucci is a citizen of Italy and Switzerland.
Hanspeter Spek
Member of the Management Committee and the Executive Committee
President Global OperationssinceDate of birth: November 20095, 1949
Age: 60
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, untilto January 2003, when he was named in charge of worldwide operations of Sanofi-Synthélabo. He was appointed Executive Vice President, Pharmaceutical Operations in August 20042004. 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 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 8 patents. In February 2009, Sanofi named Dr. Zerhouni Scientific Advisor to the Chief Executive Officer and to his present position in November 2009.
Laure Thibaud
Memberthe 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 Management Committee
Senior Vice President Communicationssince June 2009
Age: 51U.S. National Academy of Engineering.
Laure Thibaud started her career asDr. Zerhouni is a Public Relations consultant before working for Alain Afflelou as Communication Manager. In 1990, she joined the GSK Group, where she remained for 17 years during which she successively held the following positions: in France, Head of Public Relations and Director of Communications; in London, Vice President Communications Europe; and in Brussels, Vice President External Affairs Europe. From 2007, Laure Thibaud was global Executive Vice President Communications and Sustainable Developmentcitizen of the Axa Group. She was appointed to her current position in June 2009.United States of America.
As of December 31, 2009,2012, none of the members of the ManagementExecutive Committee had anytheir principal business activities outside of sanofi-aventis.Sanofi.
CompositionThe Executive Committee is assisted by the Global Leadership Team, which represents the principal functions of the ManagementGroup. The Global Leadership Team is made up of the members of the Executive Committee at the beginning of March 2010and 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
Jean-François Dehecqcorporate governance code, stock options and, when applicable, performance shares granted to the Chief Executive Officer have been subject to performance conditions.
Serge Weinberg has beenheld the office of Chairman of the Board of Directors since January 1, 2007.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 the Internal Rules of theour 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’sGroup's key partners, both nationally and internationally; he plays a roleinternationally, and participates in the defining of the major strategic choices of the Group especially as regards mergers, acquisitions and alliances. He maintains regular contact withThe Chairman and the Chief Executive Officer so thatkeep each is keptother fully informed of the other’stheir actions. The compensation of the Chairman of the Board receives compensation in the formof Directors consists solely of fixed compensation and benefits in kind and excludes any variable compensation.compensation, any awards of stock options and performance shares and any directors' attendance fees.
The overall compensation packagepolicy for the corporate officers is determinedestablished by the Board of Directors onupon the recommendation of the Compensation Committee.
Christopher Viehbacher has been the Chief Executive Officer since December 1, 2008. The compensation of the Chief Executive Officer is determined by reference to the compensation paid to the chief executivecorporate officers of the leading global pharmaceutical companies and of the leading companies in the CAC 40 index. The Chief Executive Officer receives compensation in the form of fixed compensation, benefits in kind, and variable compensation. In addition, he may be granted stock options and performance shares. The overall compensation package is determined by the Board of Directors on the recommendation of the Compensation Committee. With effect from 2009, stock options granted to the Chief Executive Officer will be subject to performance conditions.
On March 2, 2009, 250,000 options to subscribe for shares were granted to Christopher Viehbacher: 200,000 in accordance with what was contemplated on the announcement of his appointment in September 2008 and 50,000 more as part of the 2009 stock option plan. All of his stock options are subject to a performance condition. The performance condition must be fulfilled each financial year preceding the exercise period (2009, 2010, 2011 and 2012), and requires the ratio of adjusted net income excluding selected items (which was a non-GAAP financial measure used until the end of 2009) to net sales to be at least 18%.
The Board of Directors decided that no performance shares would be awarded to executive Directors, members of the Executive Committee or members of the Management Committee in 2009.
Nevertheless, in line with the undertakings made to him on September 10, 2008, at the time of the announcement of his appointment as Chief Executive Officer effective December 1, 2008, an exception was made in favor of Christopher Viehbacher. On March 2, 2009, 65,000 performance shares were awarded to him as compensation for loss of the benefits to which he had been entitled from his previous employer. All of his performance shares are subject to a performance condition. The performance condition must be fulfilled each financial year preceding the exercise period (2009 and 2010), and requires the ratio of adjusted net income excluding selected items (which was a non-GAAP financial measure used until the end of 2009) to net sales to be at least 18%.
On March 1, 2010, the Board of Directors granted 275,000 options to subscribe for shares to Christopher Viehbacher. All of his stock options are subject to a performance condition. The performance condition must be fulfilled each financial year preceding the exercise period (2010, 2011, 2012 and 2013), and requires the ratio of business net income to net sales to be at least 18% (see “Item 5. Operating and Financial Review and Prospects — Sources of Revenues and Expenses — Business Net Income”).
Executive directors do not receive directors' attendance fees in connection with their rolecapacity as directorsdirectors. 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 membersas 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 committees of sanofi-aventis.
Jean-François Dehecqpractices —", there is no divergence from the AFEP-MEDEF Code related to compensation.
Serge Weinberg
Compensation options and shares awarded to Jean-François DehecqSerge Weinberg
(in euros) | 2008 | 2009 | ||
Compensation payable for the year (details provided in the table below) | 2,279,853 | 2,279,995 | ||
Value of stock subscription options awarded during the year | 0 | 0 | ||
Value of performance shares awarded during the year | 0 | 0 | ||
Total | 2,279,853 | 2,279,995 | ||
(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 | |||||||
Compensation payable and paid to Jean-François DehecqSerge Weinberg
2008 | 2009 | |||||||
(in euros) | Payable | Paid | Payable | Paid | ||||
Fixed compensation(1) | 1,300,000 | 1,300,000 | 1,300,000 | 1,300,000 | ||||
Variable compensation(2) | 975,000 | 910,000 | 975,000 | 975,000 | ||||
Exceptional compensation | 0 | 0 | 0 | 0 | ||||
Attendance fees | 0 | 0 | 0 | 0 | ||||
Benefits in kind | 4,853 | 4,853 | 4,995 | 4,995 | ||||
Total | 2,279,853 | 2,214,853 | 2,279,995 | 2,279,995 | ||||
| 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.
Serge Weinberg took office as Chairman of the Board of Directors on May 17, 2010.
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On March 5, 2012, upon the recommendation of the Compensation Committee, the Board of Directors set the terms of the compensation of Serge Weinberg.
For 2012, his fixed compensation was maintained at an annual rate of €700,000.
He did not receive any variable compensation, stock options, or performance shares. He did not receive attendance fees.
The amount reported for benefits in kind relates principally to a company car.
For 2009,Serge Weinberg does not benefit from the variable compensation of Jean-François Dehecq was based 25% on a quantitative criterion and 75% on qualitative criteria.Sanofi top-up pension plan.
The quantitative criterion used is linked to adjusted earnings per share excluding selected items (which was a non-GAAP financial measure used untilOn March 5, 2013, upon the end of 2009).
The qualitative criteria are essentially based on the support provided to the Chief Executive Officer, leadershiprecommendation of the Board of Directors, input on the Group’s global strategy, and representation of the high-level interests of the Group.
The variable compensation may represent between 60% and 75% of his fixed compensation.
Taking into account the abovementioned criteria, the performance of the Company and the input of the Chairman of the Board of Directors during 2009,Compensation Committee, the Board of Directors set the terms of the compensation of Serge Weinberg. For 2013, his fixed compensation is maintained at an annual rate of €700,000. He will not receive any variable compensation, of Jean-François Dehecq for 2009 at €975,000, i.e., 75% of the fixed portion of his compensation.
His variable compensation is to be paid in 2010.
No stock options, and no shares were granted in 2009. The basic characteristics of previously granted options are set out in the table below.
For 2010, the fixed compensation and the terms and conditions of the variable compensation of Jean-François Dehecq have been maintained on apro rata basis for the remainder of his term as Chairman of the Board of Directors.
Stock options held by Jean-François Dehecq
Origin | Date of shareholder authorization | Date of Board grant | Number of options granted | Start date of exercise period | Expiration date | Exercise price (in €) | Number of options exercised as of 12/31/2009 | Number of options cancelled or lapsed | Number of options outstanding | |||||||||
Sanofi-Synthélabo | 05/18/99 | 05/24/00 | 160,000 | 05/25/04 | 05/24/10 | 43.25 | 153,586 | 0 | 6,414 | |||||||||
Sanofi-Synthélabo | 05/18/99 | 05/10/01 | 145,000 | 05/11/05 | 05/10/11 | 64.50 | 0 | 0 | 145,000 | |||||||||
Sanofi-Synthélabo | 05/18/99 | 05/22/02 | 145,000 | 05/23/06 | 05/22/12 | 69.94 | 0 | 0 | 145,000 | |||||||||
Sanofi-Synthélabo | 05/18/99 | 12/10/03 | 150,000 | 12/11/07 | 12/10/13 | 55.74 | 0 | 0 | 150,000 | |||||||||
Sanofi-aventis | 05/31/05 | 05/31/05 | 250,000 | 06/01/09 | 05/31/15 | 70.38 | 0 | 0 | 250,000 | |||||||||
Sanofi-aventis | 05/31/05 | 12/14/06 | 250,000 | 12/15/10 | 12/14/16 | 66.91 | 0 | 0 | 250,000 | |||||||||
Sanofi-aventis | 05/31/07 | 12/13/07 | 125,000 | 12/14/11 | 12/13/17 | 62.33 | 0 | 0 | 125,000 | |||||||||
Total | 1,225,000 | 1,071,414 | ||||||||||||||||
As of December 31, 2009, the number of outstanding options held by Jean-François Dehecq represented 0.08% of the share capital. Jean-François Dehecq didor performance shares. He will not exercise any stock options in 2009.
Pension arrangements for Jean-François Dehecq
Jean-François Dehecq is covered by the Sanofi-Synthélabo top-up defined-benefit pension plan established in 2002 (and amended January 1, 2008) offered to executives of sanofi-aventis and its French subsidiaries, who meet the eligibility criteria specified in the plan rules. Under this plan, the benefits offered supplement the annuities payable under compulsory industry schemes, but are contingent upon the plan member ending his career within the Group. The plan is reserved for executives with at least ten years’ service whose annual base compensation has for ten years exceeded four times the French social security ceiling, and is wholly funded by the Company.
Based on the assumptions used in the actuarial valuation of this plan, in terms of salary increases, employee turnover and life expectancy, 82 executives are potentially eligible for this plan.
Effective October 1, 2008, this plan was closed to any new eligible executive following the harmonization of the top-up defined-benefit pension plans of the French subsidiaries of the Aventis Group (including the Vaccine Division) and the Sanofi-Synthélabo Group, which merged in 2005. Nevertheless, a totally identical plan, the “sanofi-aventis” plan, replaced it. It is offered to all executives within the meaning of the AGIRC regime (Association Générale des Institutions de Retraite des Cadres, i.e. a confederation of executive pension funds) of sanofi-aventis and its French subsidiaries, extended to corporate officers, including Christopher Viehbacher (see below). Approximately 400 executives are potentially eligible for this regime, almost all being active executives.
The top-up pension, which may not exceed 37.50% of final salary, is in the form of a life annuity, and is transferable as a survivor’s pension. The annuity is based on the arithmetical average of the three highest years’ average annual gross compensation (fixed plus variable) paid during 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”) applicable in the year in which the rights vest. The annuity varies according to length of service (capped at 25 years) and supplements the compulsory industry schemes, subject to a cap equal to 52% of final salary on the total pension from all sources.
In accordance with the common rules of the French compulsory pension schemes (social security,Association pour le Régime de Retraite Complémentaire des salariés, “ARRCO”, i.e. a confederation of employee pension funds, and AGIRC), Jean-François Dehecq, who is over 65 years old, may, provided that he ceases to exercise his duties, decide at any time to receive these compulsory pension benefits and fix the date of vesting. The application for compulsory pension benefits may only be made by the beneficiary, who may then subsequently request the vesting of the collective top-up defined-benefit pension plan in accordance with the plan rules.attendance fees.
Taking into account the final salary caps specified in the plan rules (60 x PASS, i.e. €2,077,200 for 2010), the length of service (25 years), and the rate (37.5%), if Jean-François Dehecq elects to receive all of his pension benefits at the end of his current term of office, the maximum annuity (gross amount before taxes) deriving from the top-up defined-benefit pension plan would be €778,950, in addition to the annuities due under the compulsory legal regimes.
Christopher Viehbacher
Christopher Viehbacher took office as Chief Executive Officer on December 1, 2008.
Compensation, options and shares awarded to Christopher Viehbacher
(in euros) | 2008 | 2009 | ||
Compensation payable for the year (details provided in the table below) (1) | 100,000 | 3,669,973 | ||
Value of stock subscription options awarded during the year(2) | 0 | 1,237,500 | ||
Value of performance shares awarded during the year (3) | 0 | 2,221,700 | ||
Total | 100,000 | 7,129,173 | ||
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(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 | |||||||
Compensation payable and paid to Christopher Viehbacher
2008 | 2009 | |||||||
(in euros) | Payable | Paid | Payable | Paid | ||||
Fixed compensation(1) | 100,000 | 100,000 | 1,200,000 | 1,200,000 | ||||
Variable compensation(2) | 0 | 0 | 2,400,000 | 0 | ||||
Exceptional compensation(3) | 2,200,000 | 0 | 0 | 2,200,000 | ||||
Attendance fees | 0 | 0 | 0 | 0 | ||||
Benefits in kind | 6,016 | 6,016 | 69,973 | 69,973 | ||||
Total | 2,306,016 | 106,016 | 3,669,973 | 3,469,973 | ||||
| 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.
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The amount reported for benefits in kind relates primarily, pending the relocation of his family to France, to payment of his housing costs and the cost of healthcare cover for his family in the United States. The amount reported for benefits in kind also relates to a company car.
The fixedAt its meeting on March 5, 2012, upon the recommendation of the Compensation Committee, the Board of Directors established the terms of the compensation ofpackage for Christopher Viehbacher for 2009the financial year 2012. His fixed annual compensation was maintainedset at €1,200,000.€1,260,000 as from March 5, 2012 i.e. the total fixed compensation
The variablefor 2012 amounted to €1,250,000. This represents an increase of 5% compared to the level of fixed compensation ofset by the Board in 2008 at the time Christopher Viehbacher was based half on quantitative criteria and half on qualitative criteria.recruited.
The quantitative criteria included trends in our net sales relative to the objectives set by us and by our competitors, trends in our current operating income (operating income before restructuring, impairment of property, plant and equipment and intangibles, gains/losses on disposals, and litigation) relative to the objectives set by us and by our competitors, and trends in our adjusted earnings per share excluding selected items (which was a non-GAAP financial measure used until the end of 2009). These criteria were assessed by reference to the performances of the leading global pharmaceutical companies.
The qualitative criteria related to leadership and strategic choices, adaptation of our structures to the industry’s environment, reconfiguration of our research efforts, commitment in terms of organic and external growth, and the quality of investor communications.
The variable compensation of Christopher Viehbacher could representhave represented between 0% and 200% of his fixed compensation. In casethe event of exceptional performance, it could exceedhave exceeded 200% of thehis fixed compensation.
His variable compensation with respect to 2012 has been established on the basis of quantitative and qualitative criteria. Such criteria include:
Taking 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 inputcontribution of Christopher Viehbacher during 2009, the Board of Directors2012, fixed his variable compensation for 20092012 at €2,400,000,2,268,000 euros, i.e., 200%180% of the fixed portion of his compensation. HisChristopher Viehbacher's 2012 variable compensation is to be paid in 2010.2013.
The amount reported for benefits in kind relates to a company car.
For 2010, 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 the termsqualitative criteria. These criteria include:
Table of Christopher Viehbacher have been maintained.Contents
Stock options awarded to Christopher Viehbacher in 20092012
Origin | Date of Board grant | Nature of options | Value (in €) | Number of options awarded in 2012 | Exercise price (in €) | Exercise period | |||||||||||
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Sanofi | 03/05/2012 | Subscription options | 2,020,800 | 240,000 | 56,44 | 03/06/2016 03/05/2022 | |||||||||||
Origin | Date of Board grant | Nature of the options | Value (in €) | Number of options awarded in 2009 | 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 |
On March 2, 2009, 250,0005, 2012, 240,000 share subscription options to subscribe for shares were grantedawarded to Christopher Viehbacher: 200,000Viehbacher. 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 accordance with what was contemplatedcomparison to a reference set of pharmaceutical companies. These criteria were selected because they align medium-term equity-based compensation on the announcement of his appointment in September 2008 and 50,000 morestrategy adopted by the Company.
This award is broken down as partfollows:
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 2012), and requires the ratiolevel of adjusted net income excluding selected items (which was a non-GAAP financial measure used untilachievement for the internal criteria will be publicly disclosed at the end of 2009) to net sales to be at least 18%.the performance measurement period.
Using the Black & Scholes method, each option awarded on March 5, 2012 was valued at €4.95,€8.42, valuing the total benefit at €1,237,500.€2,020,800.
StockThe Board of Directors has decided to limit the number of options exercisedthat 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 20092012 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.
Christopher Viehbacher did not exercise any stock option in 2009 as no stock option was yet exercisable.
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 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. The 2011 stock option plan and the 2011 performance share plan are the first plans for which the Board of Directors determined the level of fulfillment of the performance conditions.
On March 1, 2010, 275,0002, 2009, in accordance with what had been intended on the announcement of his joining the Group, 250,000 subscription options to subscribe for shares were awarded to Christopher Viehbacher. All the stockof these options arewere subject to a performance condition. The performance condition, which musthad to be fulfilled each financial year preceding the exercise period (2010, 2011, 2012 and 2013), requires the ratio of business net income to net sales to be at least 18% (see “Item 5. Operating and Financial Review and Prospects — Sources of Revenues and Expenses — Business Net Income”).
As of the date of this annual report including the March 1, 2010 grant, the number of outstanding options held by Christopher Viehbacher represented 0.04% of the share capital.
Performance shares awarded to Christopher Viehbacher in 2009
Origin | Date of Board award | Number of performance shares awarded in 2009 | Value (in €) | Acquisition date | Availability date | |||||
Sanofi-aventis | 03/02/09 | 65,000 | 2,221,700 | 03/03/2011 | 03/04/2013 |
On March 2, 2009, in accordance with what was contemplated on the announcement of his appointment in September 2008, 65,000 performance shares were awarded to Christopher Viehbacher. All of his performance shares are subject to a performance condition. The performance condition must be fulfilled each financial year
preceding the vesting of the shares (2009(i.e. 2009, 2010, 2011 and 2010)2012), and requires thewas 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 to beof 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, 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.
For the first period (consisting of fiscal years 2011 and 2012) which related to 50% of the March 9, 2011 grant, the performance was as follows:
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 the four-year vesting period subject to meeting the condition of continuing employment.
On March 5, 2013, 240,000 share 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 performance measurement 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, 42,000 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 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 amounts €34.18,awarded on March 5, 2012, was valued at €46.15, valuing the total benefit at €2,221,700.€ €1,938,300.
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.
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, determined that the global performance rate was greater than 100% and therefore, since the performance condition had been fulfilled, 100% of the performance shares granted would vest subject to meeting the condition of continuing employment.
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, 45,000 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 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.
In making the 2013 award, the Board of Directors had to determine whether to make these awards contingent upon future share purchases. Taking into account the number of shares acquired at 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.
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 20092012
No performance shares awarded to Christopher Viehbacher became available in 2009.2012.
Performance shares awarded to Christopher Viehbacher
At year end 2009 and as of the date of this annual report, the number of performance shares awarded to Christopher Viehbacher represented 0.005% of the share capital.
Pension arrangements for Christopher Viehbacher
Christopher Viehbacher is covered by the sanofi-aventisSanofi top-up defined benefit pension plan identical to(which has been called the Sanofi-SynthélaboSanofi plan (see above)since the Company changed its name). The plan is offered to executives, within the meaningall employees of AGIRC, of sanofi-aventisSanofi and its French subsidiaries who meet the eligibility criteria specified in the plan rules. This plan 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-up defined-benefit pension plan is offered to executives (within the meaning of the 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 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' service whose annual base compensation has for ten years exceeded four times the French social security ceiling, and is wholly funded by the Company.
Based on the assumptions used in the actuarial valuation of this plan, approximately 400550 executives are potentially eligible for this plan, almost all of them active executives. Its features are identical to thoseemployees.
The top-up pension, which may not exceed 37.50% of final salary, is in the form of a life annuity, and is transferable as a survivor's pension. The annuity is based on the arithmetical average of the Sanofi-Synthélabo plan described above for Jean-François Dehecq.three highest years' average annual gross compensation (fixed plus variable) paid during 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") applicable in the year in which the rights vest. The annuity varies according to length of service (capped at 25 years) and supplements the compulsory industry schemes, subject to a cap on the total pension from all sources equal to 52% of the final level of compensation.
The admission of Christopher Viehbacher to this plan was approved by the 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.
Commitments in favor of executive directorsthe Chairman and the Chief Executive Officer in postoffice as of December 31, 20092012
Executive director | Contract of employment | Top-up pension plan | Compensation or benefits payable or potentially payable on termination of office | Compensation payable under non-competition clause | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| No | No | No | No | |||||||||||||
Christopher Viehbacher | No | Yes | Yes | No | |||||||||||||
|
Jean-François Dehecq’s termination benefit was approved at successive Shareholders’ Annual General Meetings, and most recently that of May 14, 2008. Payment of the termination benefit, which is equivalent to 20 months of his last total compensation (fixed plus variable), is contingent upon fulfillment of two out of three performance criteria.
The first criterion is that the sanofi-aventis share price has outperformed the CAC 40 index since he first took office as Chairman and Chief Executive Officer of the Company on February 15, 1988.
The two other criteria, the fulfillment of which will be assessed over the three financial years preceding his ceasing to hold office, are:
the average 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 must be at least 15%.
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%.
This commitment was approved in May 2008, before the adoption of the AFEP-MEDEF corporate governance code. Payment of the termination benefit is not limited to non-voluntary departure linked to a change in control or strategy, but also covers retirement. Jean-François Dehecq is in a position to retire and claim his pension rights at short notice. Nevertheless, taking into account the major role he has played in the creation and expansion of sanofi-aventis, it has been decided not to modify the terms and conditions of his termination benefit.
In the event of his removal from office as Chief Executive Officer, Christopher Viehbacher would receive a termination benefit equivalent to 24 months of total compensation on the basis of his 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, payment of the termination benefit would be contingent upon fulfillment of two of the three performance criteria, assessed over the three financial years preceding his ceasing to hold office or, if he leaves office prior to the end of the 2011 financial year, the most recently ended financial years.office.
The three criteria are:
The terms for the termination benefit entitlement of Christopher Viehbacher were approved by the Shareholders’Shareholders' Annual General Meeting of April 17, 2009.
Any activation of this termination benefit will be carried out in compliance with the AFEP-MEDEF corporate governance code, Code,i.e. only if the departure is non-voluntary and linked to a change in control or strategy.
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.
Lock-up periodobligation for shares obtained on exercise of stock options by, or disposition of performance shares by the Chairman of the Board of Directors and the Chief Executive Officer
The Chairman andUntil he ceases to hold office, the Chief Executive Officer will be required to retain, in the form of sanofi-aventisSanofi shares, 50% of any capital gains (net of taxes and social contributions) obtained by the exercise of stock options awarded under the 2007 and later plans until they cease to hold office.
The Chief Executive Officer will be required to retain, in the form of sanofi-aventis shares, 50% of any capital gains (net of taxes and social contributions)or upon the disposition of the performance shares awarded in 2009.
Theyby Sanofi. He must continue to hold these shares asin registered shares until they ceaseform.
In compliance with the AFEP-MEDEF Code and our Board Charter, Christopher Viehbacher has undertaken to hold office.
Under the Internal Rules of the sanofi-aventis Board of Directors, they may not contract anyrefrain from entering into speculative or hedging instruments in respect of their own interests,transactions, and, asso far as sanofi-aventisSanofi is aware, no such instruments have been contracted.
Compensation and pension arrangementspayments for directorsDirectors other than the Chairman and the Chief Executive Officer
Attendance fees
The table below shows amounts paid to each member of the sanofi-aventisSanofi Board of Directors in respect of 20082011 and 2009,2012, including those whose term of office ended during the year.these years.
Attendance fees in respect of 2008, the amount of which was set by the Board meeting of February 10, 2009, were paid in 2009.
Attendance fees in respect of 2009,2011, the amount of which was set by the Board meeting of March 1, 2010,5, 2012, were paid in 2010.
Attendance fees in respect of 2012, the amount of which was set by the Board meeting of March 5, 2013, will be paid in 2013.
For 2009,2012, the basic annual attendance fee was set at €15,000, apportioned on a time basis for directorsDirectors who assumed or left office during the year.
The variable portion of the fee is linked to actual attendance by directorsDirectors in accordance with the principles described below:
directors
directors
However,The attendance fee payable to a reduction coefficientDirector who participates by conference call or by videoconference is equivalent to half of 0.56% was applied in order to keep the attendance fees withinfee received by a French Director who attends in person.
As an exception, some dual meetings give entitlement to a single attendance fee:
The Shareholders' Annual General Meeting of May 6, 2011 approved a proposal to increase the maximum amount of annual attendance fees to €1,500,000.
(in euros) | 2008 | 2009 | ||||||||||||||||||
Name | Attendance fees in respect of 2008 to be paid in 2009 | Pension paid in 2008 | Total gross compensation | Attendance fees in respect of 2009 to be paid in 2010 | Pension paid in 2009 | Total theoretical compensation (5) | Total actual compensation (6) | |||||||||||||
Fixed | Variable | Fixed | Variable | |||||||||||||||||
René Barbier de La Serre(1) | 6,250 | 47,500 | 53,750 | — | — | — | — | |||||||||||||
Uwe Bicker(2) | 10,000 | 42,000 | 52,000 | 15,000 | 71,000 | 86,000 | 85,519 | |||||||||||||
Jean-Marc Bruel | 15,000 | 72,500 | 373,700 | 461,200 | 15,000 | 90,000 | 376,189 | 481,189 | 480,601 | |||||||||||
Robert Castaigne | 15,000 | 42,500 | 57,500 | 15,000 | 107,500 | 122,500 | 121,814 | |||||||||||||
Patrick de La Chevardière(2) | 10,000 | 25,000 | 35,000 | 15,000 | 27,500 | 42,500 | 42,262 | |||||||||||||
Thierry Desmarest | 15,000 | 80,000 | 95,000 | 15,000 | 62,500 | 77,500 | 77,066 | |||||||||||||
Jürgen | 6,250 | 29,000 | 1,593,750 | 1,629,000 | — | — | — | — | ||||||||||||
Lord Douro | 15,000 | 56,000 | 71,000 | 15,000 | 79,000 | 94,000 | 93,474 | |||||||||||||
Jean-René Fourtou | 15,000 | 80,000 | 1,590,040 | 1,685,040 | 15,000 | 62,500 | 1,602,013 | 1,679,513 | 1,679,079 | |||||||||||
Claudie Haigneré (2) | 10,000 | 30,000 | 40,000 | 15,000 | 60,000 | 75,000 | 74,580 | |||||||||||||
Igor Landau | 15,000 | 35,000 | 2,176,098 | 2,226,908 | 15,000 | 47,500 | 2,193,300 | 2,255,800 | 2,255,450 | |||||||||||
Hubert Markl(1) | 6,250 | 14,000 | 20,250 | — | — | — | — | |||||||||||||
Christian Mulliez | 15,000 | 40,000 | 55,000 | 15,000 | 47,500 | 62,500 | 62,150 | |||||||||||||
Lindsay Owen-Jones | 15,000 | 65,000 | 80,000 | 15,000 | 47,500 | 62,500 | 62,150 | |||||||||||||
Klaus Pohle | 15,000 | 126,000 | 141,000 | 15,000 | 141,000 | 156,000 | 155,127 | |||||||||||||
Gunter | 10,000 | 35,500 | 45,500 | 12,500 | 22,000 | 34,500 | 34,307 | |||||||||||||
Gérard Van Kemmel | 15,000 | 125,000 | 140,000 | 15,000 | 127,500 | 142,500 | 141,702 | |||||||||||||
Serge Weinberg(4) | — | — | — | 1,250 | 5,000 | 6,250 | 6,215 | |||||||||||||
Bruno | 6,250 | 10,000 | 16,250 | — | — | — | — | |||||||||||||
Total | 215,000 | 955,000 | 5,734,398 | 6,904,398 | 208,750 | 998,000 | 4,171,502 | 5,378,252 | 5,371,496 | |||||||||||
Total attendance fees | 1,170,000 | 1,206,750 (5) 1,199,994 (6) | ||||||||||||||||||
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(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 20092012 in respect of corporate pension plans for corporate officersdirectors with current or past executive responsibilities at sanofi-aventisSanofi (or companies whose obligations have been assumed by sanofi-aventis)Sanofi) was €4€4.3 million.
As retirees, Jean-Marc Bruel, Jean-René Fourtou and Igor Landau are covered by the “GRCD”"GRCD" top-up pension plan instituted in 1977 for senior executives of Rhône-Poulenc. This plan was amended in 1994, 1996, 1999 and 2003, and currently applies to 2 active executives, 43 early retirees and 2528 retired executives.executives (including one survivor's pension). At its meeting of February 11, 2008, the Board of Directors decided to close this plan to new entrants.
This is a defined-benefit plan, which covers the differential between the benefits available to members under other schemes and the overall defined Christopher Viehbacher does not benefit level. It aims to provide a replacement income of 60%-65% of salary, depending on length of service and the age at which the benefit is claimed. The benefit takes the form of a life annuity, indexed to the average revaluation of the basic Social Security annuity and to trends in the INSEE retail price index.
from this top-up pension plan.
Compensation of senior managementSenior Management
The compensation of the other Management Committee and Executive Committee members is based on an analysisestablished upon the recommendation of the Compensation Committee taking into consideration the practices of major global pharmaceutical companies and the opinion of the Compensation Committee.companies.
In addition to fixed compensation, these key executivesthey receive variable compensation, the amount of which is determined by the actual performance and growthas a function of trends in the business areas for which he or she isthey are responsible. Variable compensation generally represents 50%60% to 110% of their fixed compensation.
TheseIn addition to cash compensation, packagesExecutive Committee members may be supplemented by the granting of stockawarded share subscription or purchase options andand/or performance shares (see “Item"Item 6. Directors, Senior Management and Employees — E. Share Ownership”)Ownership" for details of the related plans).
In 2009,With respect to 2012, the total gross compensation before social charges paid to orand accrued for the membersin respect of our Management Committee in post in 2009, including the Chief Executive Officer, amounted to €19 million, including €10 million for the members of the Executive Committee. Fixed compensation represented €12Committee (including the Chief Executive Officer) amounted to €14.9 million, including €7€6.3 million in fixed compensation.
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 managers 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 be fully contingent upon the performance targets being achieved over several financial years, as well as a condition of still being an employee when the option is exercised or the performance share is delivered.
On March 5, 2012, 445,500 share subscription options were awarded to members of the Executive Committee (including 240,000 options awarded to Christopher Viehbacher). The entire award was 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 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 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.
As of December 31, 2012 a total of 2,998,000 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.
In 2009, 1,205,400 stockThe table below summarizes the options were grantedawarded to the 23individuals who were members of our Management Committee, including 650,000 stock options granted to the 9 members of our Executive Committee (includingat the 250,000 stock options granted to Christopher Viehbacher).
In 2009, no restricted shares or performance shares were awarded to the members of our Executive Committee or to the members of our Management Committee with the exception of Christopher Viehbacher, who was awarded 65,000 performance shares.
As of December 31, 2009, 4,319,959 options had been granted to the members of our Management Committee, including 1,876,168 options to the members of our Executive Committee. Astime of the same date, 4,066,217 options granted toaward. For more information on the members of our Management Committee were outstanding, including 1,771,211 options granted to the members of our Executive Committee. These figures include the options granted to Christopher Viehbacher, who is a member of our Management Committee and our Executive Committee. The exercise date and other basic characteristics of such options are set out insee the table “—"— E. Share Ownership — Existing Options Plans as of December 31, 2009”2012" below.
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 subscription option plan of December 10, 2003, i.e. before the creation of the Executive Committee, with an exercise price of €55.74).
On March 5, 2012, 137,900 performance shares (including 42,000 performance shares awarded to Christopher Viehbacher) were awarded to members of the Executive Committee. The entire award was 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 each criterion is different, with each criterion representing 50% of the grant.
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 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.
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 120,600 performance shares were awarded to members of the Executive Committee (including 240,000 options and 45,000 performance shares awarded to Christopher Viehbacher). The entire award is 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 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 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.
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 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.
Under French law, directorsDirectors may not receive options solely as compensation for service on our Board, and thus our Company may grant options only to those directorsDirectors who are also our officers.
Because some of our non-executive directorsDirectors were formerly officers or executive officers of our Company or its predecessor companies, some of our non-executive directorsDirectors hold sanofi-aventisSanofi stock options.
We do not have separate profit-sharing plans for key executives. As employees, they are able to participate in our voluntary and statutory profit-sharing schemes on the same terms as our other employees. These plans are described below under “—"— Employees — Profit-sharing schemes.”"
The total amount accrued and recognized in the income statement for the year endedas of December 31, 20092012 in respect of corporate pension plans for (i) directors with current or past executive responsibilities at sanofi-aventisSanofi or at companies whose obligations have been assumed by sanofi-aventisSanofi and (ii) members of the Executive Committee and Management Committee was €14 million.
This total amount accrued€162.0 million, including €9.1 million recognized in the income statement for the year ended December 31, 20092012.
This total amount accrued as of December 31, 2012 included €6.6 million for members of the Management Committee collectively (including €4€83.5 million for members of the Executive Committee collectively).
collectively of which €6.0 million were recognized in the income statement for the year ended December 31, 2012.
Neither we nor our subsidiaries have entered into service contracts with members of our Board of Directors providing for benefits.benefits upon termination of employment. With respect to Christopher Viehbacher, and Jean-François Dehecq, see also “Item 6. Directors, Senior Management and Employees —"— B. Compensation — Compensation and pension arrangements for Jean-François Dehecq”; and “Item 6. Directors, Senior Management and Employees — B. Compensation — Compensation and pension arrangements for Christopher Viehbacher”Viehbacher" above.
Sanofi-aventis appliesThe AFEP-MEDEF Code requires us to specifically report on the guidanceapplication 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:
During 2012, the Board of Directors met eight times, with an overall attendance rate among Board members of over 95%. 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% and 100%.
The following persons attended meetings of the Board of Directors in 2012:
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; these issues are then submitted for a decision by the Board of Directors.
In 2012, the main activities of the Board of Directors related to the following issues:
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;
Board Committees
Since 1999, our Board of Directors has been assisted in its deliberations and decisions by specialist committees.
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 to 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, 2009,2012, this Committee was composed of:
Christian Mulliez was appointed as a member of the Audit Committee comprised:by the Board of Directors during its meeting of May 4, 2012, following the Shareholders' General Meeting held on the same day.
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.
Klaus Pohle, Chairman;
Jean-Marc Bruel;
Robert Castaigne; and
Gérard Van Kemmel.
Three of the fourFour members of the Audit Committee are classified as independent Directors. All itspursuant to the criteria adopted by the Board of Directors, i.e. Robert Castaigne, Carole Piwnica, Klaus Pohle and Gérard Van Kemmel. In addition, all of the members, including Robert Castaigne, areChristian Mulliez, fulfill the conditions required to be classified as independent withinunder the termsSarbanes-Oxley Act.
All five members of the Sarbanes-Oxley Act. All four members of this committeeCommittee have financial or accounting expertise as a resultconsequence of their trainingeducation and workprofessional experience. Two members qualify asFurthermore, Robert Castaigne, Christian Mulliez, Klaus Pohle and Gérard Van
Kemmel are deemed to be financial experts withinpursuant to the termsdefinition in the Sarbanes-Oxley Act and the definition in Article L. 823-19 of the French Commercial Code. See "Item 16A. Audit Committee Financial Expert".
The Audit Committee met eight times in 2012, 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 of Internal Control and other members of senior management of the Group attended meetings of the Audit Committee.
The meetings of the Audit Committee 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 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 rolesan examination of the Audit Committee are to review:
2011 Annual Report on Form 20-F;
the effectivenessreview of the draft resolution to the May 4, 2012 Shareholders' General Meeting on the dividend;
(quality and consent decree), impairment testing of goodwill, pharmacovigilance, update on retirement funds and actuarial assumptions, review of tax litigation and other litigation (meetings of January 25, April 24, May 25, July 23, October 22, and December 13, 2012);
the independencemandate of the statutory auditors.
The roleone of the Committee is not so much to examine the financial statements in detail as to monitor the process of preparing them and to assess the validity of elective accounting treatments used for significant transactions.
In fulfilling its role, the Committee interviews the statutory auditors and of its deputy;
Officer being present if the Committee sees fit. The Committee may also visit or interview managers of operational entitiesdid not have recourse to external consultants in furtherance of its role, having given prior notice to the Chairman of the Board and to the Chief Executive Officer.
The Committee interviews the person responsible for internal audit, and gives its opinion on the organization of the internal audit function.
The Committee is able to call upon external experts.
Sufficient time must be allowed for the financial statements to be examined (at least two days prior to the examination of the financial statements by the Board).
The examination of the financial statements by the Audit Committee is accompanied by a presentation by the statutory auditors highlighting key issues not only regarding the financial results but also the elective accounting treatments used, along with a presentation by the Chief Financial Officer describing the Group’s risk exposure and significant off balance sheet commitments.
In addition, the Committee:
directs the selection process for the statutory auditors when their mandates are due for renewal, submits the results of this process to the Board of Directors, and issues a recommendation;
is informed of the fees paid to the statutory auditors, ensures that the signatory partners are rotated every five years, and oversees compliance with other rules relating to auditor independence;
in conjunction with statutory auditors, assesses any risk to their independence and any measures taken to mitigate such risk;
approves in advance any request to the statutory auditors to provide services unrelated to the audit of the financial statements, in compliance with the relevant laws;
ensures that internal early warning procedures relating to accounting, internal accounting controls and audit are in place and applied; and
ensures that independent Directors receive no compensation other than attendance fees.
During 2009, the Audit Committee met eight times.
2012.
Compensation Committee
At December 31, 2009,2012, this Committee was composed of:
Lindsay Owen-Jones,.
The whose mandate as Director expired at the close of the May 4, 2012 Shareholders' General Meeting, also left the Compensation Committee is composedCommittee. At the end of fourthe Board members, two of whom are independent. Gunter Thielen, an independent Director, was also a member of this Committee until November 24, 2009.meeting which followed the Shareholders' General Meeting, Christian Mulliez joined the Compensation Committee.
The rolesOf the five members of the Compensation Committee, are:three are deemed to be independent.
to make recommendations and proposals to the Board about the compensation, pension and welfare plans, top-up pension plans, benefits in kind and other pecuniary benefits of the executive directors of sanofi-aventis, and about the granting of performance shares and stock options;
to define the methods used to set the variable portion of the compensation of the executive directors, and check that these methods are applied;
to formulate general policy on the granting of performance shares and stock options, and to determine the frequency of grants for each category of grantee;
to review the system for allocating attendance fees between Directors; and
to advise the Chief Executive Officer on the compensation of key senior executives.
The Compensation Committee met twicethree times in 2009.2012.
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.
Appointments and Governance Committee
At December 31, 2009,2012, this Committee was composed of:
Lindsay Owen-Jones; and
TheLindsay 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 is composed of seven Board members, four of whom are independent.Committee.
The rolesOf the six members of the Appointments and Governance Committee, are:four are deemed to be independent.
to recommend suitable candidates to the Board for appointment as Directors or executive officers;
to establish corporate governance rules for the Company, and to oversee the application of those rules;
to ensure that there is adequate succession planning for the Company’s executive bodies;
to oversee compliance with ethical standards within the Company and in its dealings with third parties;
to determine whether each Director qualifies as being independent, both on his or her initial appointment and annually prior to publication of the Reference Document, and report its conclusions to the Board of Directors;
to propose methods for evaluating the operating procedures of the Board, and oversee the application of these methods; and
to examine the Chairman’s report on corporate governance.
The Appointments and Governance Committee met twice in 2009.2012.
The members of the Appointments and Governance Committee have an excellent attendance record for meetings, with an overall attendance rate among members of 100%.
In 2012, the main activities of the Appointments and Governance Committee related to:
The Committee did not have recourse to external consultants in 2012.
Strategy Committee
At December 31, 2009,2012, 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 Strategy Committee. At the end of the Board meeting which followed the Shareholders' General Meeting, Laurent Attal joined the Strategy Committee.
TheOf the seven members of the Strategy Committee, is composed of six Board members, two of whomthree are deemed to be independent.
The In 2012, the Strategy Committee is taskedmet six times, four times in restrictive sessions and twice in expanded sessions.
The members of the Strategy Committee have an excellent attendance record for meetings, with assessing major strategic options with a view toan overall attendance rate among members of 100%.
As in 2011, the work of the Committee covered, in particular, research and development and proposed acquisitions. Several meetings also covered the development of a strategic plan for 2015-2020, analysis of the Company’s business.
It briefsrisk from generics, macro trends in the Boardmarket, and the outlook for each of Directors on issuesthe growth platforms.
Table of major strategic interest, such as:
acquisition, merger and alliance opportunities;
development priorities;
financial and stock market strategies, and compliance with key financial ratios;
potential diversification opportunities; and
more generally, any course of action judged essential to the Company’s future.
The Strategy Committee met twice in 2009.
ContentsD. Employees
The Committee did not have recourse to external consultants in 2012.
Number of Employees
As of December 31, 2009, sanofi-aventisIn 2012, Sanofi employed 104,867111,974 people worldwide.worldwide, 1,745 fewer than in 2011. The tables below give a breakdown of employees by geographic area and function as of December 31, 2009. Central and Eastern European countries are included in Other Europe.
2012.
Employees by geographic area
As of December 31, | |||||||||||||||
2009 | % | 2008 | % | 2007 | % | ||||||||||
France | 27,694 | 26.41 | % | 28,223 | 28.74 | % | 28,592 | 28.7 | % | ||||||
Other Europe | 30,202 | 28.80 | % | 25,292 | 25.75 | % | 26,785 | 27.0 | % | ||||||
United States | 14,517 | 13.84 | % | 15,228 | 15.50 | % | 15,921 | 16.0 | % | ||||||
Japan | 3,198 | 3.05 | % | 3,121 | 3.18 | % | 2,989 | 3.0 | % | ||||||
Other countries | 29,256 | 27.90 | % | 26,349 | 26.83 | % | 25,208 | 25.3 | % | ||||||
Total | 104,867 | 100 | % | 98,213 | 100 | % | 99,495 | 100 | % | ||||||
| As of December 31, | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 | % | 2011 | % | 2010 | % | |||||||||
Europe | 56,265 | 50.2% | 58,339 | 51.3% | 54,815 | 54.0% | |||||||||
North America | 18,994 | 17.0% | 20,233 | 17.8% | 15,106 | 14.9% | |||||||||
Other countries | 36,715 | 32.8% | 35,147 | 30.9% | 31,654 | 31.1% | |||||||||
Total | 111,974 | 100% | 113,719 | 100% | 101,575 | 100% | |||||||||
|
Employees by function
As of December 31, | |||||||||||||||
2009 | % | 2008 | % | 2007 | % | ||||||||||
Sales | 34,292 | 32.70 | % | 33,507 | 34.12 | % | 35,115 | 35.3 | % | ||||||
Research and Development | 19,132 | 18.24 | % | 18,976 | 19.32 | % | 19,310 | 19.4 | % | ||||||
Production | 36,849 | 35.14 | % | 31,903 | 32.48 | % | 31,292 | 31.5 | % | ||||||
Marketing and Support Functions | 14,594 | 13.92 | % | 13,827 | 14.08 | % | 13,778 | 13.8 | % | ||||||
Total | 104,867 | 100 | % | 98,213 | 100 | % | 99,495 | 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% | |||||||||
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Industrial Relations
In all countries where Sanofi operates, we strive to combine economic and social performance — which we believe are inseparable.
Industrial Sanofi's social responsibility is based on the basic principles of the Group's Social Charter, which outlines the rights and duties of all Group employees. The Social Charter addresses Sanofi'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 within sanofi-aventisand ILO treaties governing the physical and emotional well-being and safety of children.
The Group's social relations are foundedbased on respect and dialogue. In this spirit, the Company's management and employee representatives and management meet frequentlyregularly to exchange views, to negotiate, sign agreements and to sign agreements.ensure that agreements are being implemented.
During 2009,Social dialogue takes place in different ways from one country to the forums fornext, as necessitated by specific local circumstances. Depending on the case, social dialogue with ourrelating to information, consultation and negotiation processes may take place at the national, regional or company level. It may be organized on an interprofessional or sectorial basis, or both. Social 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 that existto voice their opinions, help create a stimulating work environment and take part in mostdecisions aiming to improve the way we work. These efforts reflect one of the countries where we operate were kept regularly informed aboutprinciples of the Group’s progressSocial Charter whereby the improvement of working conditions and the transformation program launched by management at the start of the year.
At European level, the employee representatives on the sanofi-aventis European Works Council (40 members and 40 alternates, drawn from the 27 European Union member states) were re-elected in
September 2009 for an additional four-year term, as were the nine Committee officers. The Council met in April, June, July, October and November 2009Group's necessary adaptation to give the employee representatives regular updates on initiatives associated with the transformation program (R&D, Commercial Operations, Vaccines, Industrial Affairs and Support Functions). The five employee representatives on the Board of Directors of the sanofi-aventis parent company were also re-elected, at the European Works Council meeting of that took place on October 1, 2009.its environment go hand-in-hand.
In Europe, negotiations were conducted during 2009 in association with the reorganization programs required in a number of countries — in particular within our commercial operations — largely in response to changes in government healthcare policies and to the genericization of some of our products.
In France, the employee representatives on the Group Works Council (25 members and 25 alternates) were re-elected for an additional two-year term in June 2009. The representatives designated by the trade unions were reappointed at the same time, also for a two-year term. The French Group Works Council met in June, July, November and December 2009. At these meetings, the Committee was updated on our activities and financial position, employment trends within the Group, and initiatives associated with the transformation program launched by management in January 2009.
A number of agreements applicable to all our French companies were signed or amended in 2009:
Health, Safety and Environment agreement;
Occupational Health agreement;
Amendment no. 3 to the agreement on the Group savings scheme (“PEG”);
Amendments nos. 2 & 3 to the agreement on the collective retirement savings plan (“PERCO”).
In addition, management has prepared an action plan on the employment of seniors, which will be implemented in January 2010 and last three years. This plan covers areas such as:
career development planning;
enhancement of skills and qualifications, and access to training;
knowledge and skills transfer, and the development of mentoring.
Other specific agreements were signed within individual group companies (sanofi-aventis Recherche et Développement, Sanofi Winthrop Industrie, Sanofi Chimie, sanofi-aventis France, sanofi pasteur and sanofi-aventis Groupe).
Profit-sharing Schemes, Employee Savings Schemes and Employee Share Ownership
Profit-sharing Schemes
All employees of our French companies belong to voluntary and statutory profit-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 20092012 in respect of voluntary profit-sharing for the year ended December 31, 20082011 represented 3.9%5.2% of total payroll.
In June 2008, sanofi-aventis signed2011, Sanofi entered into a three-year Group-wide agreement, effective from the 20082011 financial year, and applicable to all French companies more than 50% owned by sanofi-aventis.Sanofi. Under the agreement, payments under the Group voluntary profit-sharing scheme are linkeddepend on the most favorable criterion between growth of growth platforms turnover compared to growth in our adjustedthe previous year's turnover (with constant exchange rate and perimeter) and the level of business net income excluding selected items (which wasincome. For each criterion, a non-GAAP financial measure used untilschedule allows to determine the endpercentage of 2009).
total payroll to be distributed.
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 20092012 in respect of the statutory scheme for the year ended December 31, 20082011 represented 7.4%5.7% of total payroll.
In November 2007, sanofi-aventis signedSanofi 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 bringalign the agreement into line withon a change in French legislation (Law 2008-1258 of December 3, 2008) designedin order to protect against erosion in the purchasing power, of income from employment, under which each qualifying employee can elect to receive some or all of his or her profit-sharing bonus immediately.
without regard to the normally applicable mandatory lock-up period.
Distribution Formula
In order to favor lower-paid employees, the voluntary and statutory profit-sharing agreements entered into since 2005 split the benefit between those entitled as follows:
Employee Savings Schemes and Collective Retirement Savings Plan
The employee savings arrangements operated by sanofi-aventisSanofi 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 voluntary profit-sharing schemes (compulsory investments), and voluntary contributions by employees.
Since June 1, 2008, all of these arrangements have been open to all the employees of our French companies.
In June 2009, 75.8%2012, 77% of the employees who benefited from the profit-sharing schemes had opted to invest in the collective retirement savings plan.
In 2009, €114.72012, €122.9 million and €54.1€57.6 million were invested in the Group savings scheme and the collective retirement savings plan respectively through the voluntary and statutory schemes for 2008,2010, and through top-up contributions.
Employee Share Ownership
At December 31, 2009,2012, shares held by employees of sanofi-aventisSanofi and of related companies and by former employees under Group employee savings schemes amounted to 1.38%1.31% of the share capital.
Senior Management
Members of the ManagementExecutive Committee hold shares of our Company amounting in the aggregate to less than 1% of the Company’sour share capital.
At December 31, 2009,2011, a total of 4,319,9592,998,000 options had been granted to the members of the Executive Committee (plans existing or closed in 2012) and 2,898,000 unexercised options to subscribe for or to purchase sanofi-aventisSanofi shares were held by the 23 members of the Management Committee of sanofi-aventis, including the 1,876,168 unexercisedExecutive Committee.
In 2012, 70,000 options to subscribe for or to purchase sanofi-aventis shares heldwere exercised by the 9 members of the Executive Committee (including 250,000(December 10, 2003 Sanofi-Synthélabo subscription option plan, i.e. before the creation of the Executive Committee, with an exercise price of €55.74).
At December 31, 2012, a total of 287,900 performance shares had been awarded to the members 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).Viehbacher, who is a member of the Executive Committee. The terms of these options and performance shares are summarized in the tables below.
At December 31, 2009, Christopher Viehbacher was the only member of the Management Committee and the only member of the Executive Committee of sanofi-aventis who had been awarded shares. He had been awarded 65,000 performance shares. The terms of this award are summarized in the tables below.
On March 2, 2009, Christopher Viehbacher was (i) granted 250,000 options to subscribe for shares, exercisable at a price of €45.09 per share from March 4, 2013 until March 1, 2019 and subject to a performance condition; and (ii) awarded 65,000 performance shares to be transferred on March 3, 2011 and available on March 4, 2013, subject to a performance condition.
During 2009, the members of the Management Committee of sanofi-aventis exercised 476 options to purchase or to subscribe for shares.
On December 11, 2009, Jean-René Fourtou, a member of the Board of Directors, exercised 234,782 options to subscribe for 234,782 shares at a price of €50.04 per share.
Existing Option Plans as of December 31, 20092012
As of December 31, 2009,2012, a total of 87,870,34151,022,011 options were outstanding, including 7,380,442291,537 options to purchase sanofi-aventisSanofi shares and 80,489,89950,730,474 options to subscribe for sanofi-aventisSanofi shares. Out of this total, 57,717,31634,622,756 were immediately exercisable, including 7,380,442291,537 options to purchase shares and 50,336,87434,331,219 options to subscribe for shares.
Equity-based compensation, consisting of share subscription option plans and performance share plans, aims to align the 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 corporate officersthe 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 grantee’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 granteesbeneficiaries is submittedproposed by the Senior Management to the Compensation Committee, which reviews the list and then submits it to the Board of Directors, which grants the options. The Board of Directors also sets the terms for the exercise of the options (including the exercise price) and the lock-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 lock-upvesting period of four years and a total duration of ten years.
At its meeting of March 2, 2009, in addition to the 250,000 stock options granted to Christopher Viehbacher,In 2011, the Board of Directors granted 5,591made significant changes to its equity-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 be fully contingent upon the performance targets being met over several financial years.
On March 5, 2012, 574,050 share subscription options were awarded to 55 beneficiaries a total(excluding 240,000 options awarded to Christopher Viehbacher). Each option entitles the grantee to the subscription of 7,486,480 options, each giving entitlement to subscribe for one sanofi-aventis share, (representing 0.57%in the aggregate representing 0.04% of our share capital before dilution)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. The quantitative measures of performance are the same as for the award of Christopher Viehbacher.
The percentage 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.
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 2011 to ensure that all employees have an interest in the performance of the business.
In addition, pursuant to the French Law of July 28, 2011, all employees in France of the French subsidiaries of the Group benefited from a profit-sharing bonus amounting to €620 gross in July 2012. In total, Sanofi paid out €18.3 million in this regard (including social contributions).
In accordance withOn March 5, 2013, the AFEP-MEDEF corporate governance code, the grantBoard of Directors awarded 548,725 share subscription options to 57 beneficiaries (excluding 240,000 options awarded to Christopher Viehbacher). Each option entitles the Chiefgrantee 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 Officer made on March 2, 2009 (the firstCommittee. The Board considers that disclosing the level of attainment allows our shareholders to take place afterbetter understand the code came into effect) was subject to ademanding nature of the performance condition (see “Item 6. Directors, Senior Management and Employees —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”).
Options grantedofficers — Christopher Viehbacher", bearing in mind that the TSR-based criterion only applies to the Chief Executive Officer represented 0.8%and that the criteria based on Business Net Income and the ROA each apply to 50% of the maximum total grant approved at the Shareholders’ Annual General Meetinggrant.
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 12/31/2009 | Number canceled as of 12/31/2009 | Number outstanding | |||||||||||
Synthélabo | 6/28/1990 | 12/15/1993 | 364,000 | 130,000 | 104,000 | 12/15/1998 | 12/15/2013 | 6.36 | 350,800 | 5,200 | 8,000 | |||||||||||
Synthélabo | 6/28/1990 | 10/18/1994 | 330,200 | 0 | 200,200 | 10/18/1999 | 10/18/2014 | 6.01 | 313,600 | 16,600 | ||||||||||||
Synthélabo | 6/28/1990 | 1/12/1996 | 208,000 | 0 | 52,000 | 1/12/2001 | 1/12/2016 | 8.56 | 188,730 | 19,270 | ||||||||||||
Synthélabo | 6/28/1990 | 4/05/1996 | 228,800 | 0 | 67,600 | 4/05/2001 | 4/05/2016 | 10.85 | 191,830 | 36,970 | ||||||||||||
Synthélabo | 6/28/1990 | 10/14/1997 | 262,080 | 0 | 165,360 | 10/14/2002 | 10/14/2017 | 19.73 | 225,906 | 5,200 | 30,974 | |||||||||||
Synthélabo | 6/28/1990 | 6/25/1998 | 296,400 | 148,200 | 117,000 | 6/26/2003 | 6/25/2018 | 28.38 | 284,530 | 11,870 | ||||||||||||
Synthélabo | 6/23/1998 | 3/30/1999 | 716,040 | 0 | 176,800 | 3/31/2004 | 3/30/2019 | 38.08 | 382,565 | 5,720 | 327,755 | |||||||||||
Sanofi-Synthélabo | 5/18/1999 | 5/24/2000 | 4,292,000 | 310,000 | 325,000 | 5/25/2004 | 5/24/2010 | 43.25 | 2,697,186 | 118,800 | 1,476,014 | |||||||||||
Sanofi-Synthélabo | 5/18/1999 | 5/10/2001 | 2,936,500 | 145,000 | 286,000 | 5/11/2005 | 5/10/2011 | 64.50 | 275,061 | 109,700 | 2,551,739 | |||||||||||
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 | 149,600 | 2,901,250 |
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Hoechst GmbH Share Purchase Option Plans
A total of 128,974 Hoechst GmbH options to purchase shares had not been exercised on December 31, 2009.
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 | Expiration date | Subscription price (in €) | Number exercised as of 12/31/2009 | Number canceled as of 12/31/2009 | Number outstanding | |||||||||||
Aventis | 5/26/1999 | 12/15/1999 | 5,910,658 | 586,957 | 463,485 | 1/06/2003 | 12/15/2009 | 50.04 | 4,816,991 | 1,093,667 | 0 | |||||||||||
Aventis | 5/26/1999 | 5/11/2000 | 877,766 | 0 | 86,430 | 5/11/2003 | 5/11/2010 | 49.65 | 558,935 | 95,459 | 223,372 | |||||||||||
Aventis | 5/24/2000 | 11/14/2000 | 13,966,871 | 1,526,087 | 1,435,000 | 11/15/2003 | 11/14/2010 | 67.93 | 1,272,007 | 2,354,953 | 10339,911 | |||||||||||
Aventis | 5/24/2000 | 3/29/2001 | 612,196 | 0 | 206,000 | 3/30/2004 | 3/29/2011 | 68.94 | 28,476 | 36,964 | 546,756 | |||||||||||
Aventis | 5/24/2000 | 11/07/2001 | 13,374,051 | 1,068,261 | 875,200 | 11/08/2004 | 11/07/2011 | 71.39 | 880,241 | 2,843,019 | 9,650,791 | |||||||||||
Aventis | 5/24/2000 | 3/06/2002 | 1,173,913 | 1,173,913 | 0 | 3/07/2005 | 3/06/2012 | 69.82 | 0 | 7 | 1,173,906 | |||||||||||
Aventis | 5/14/2002 | 11/12/2002 | 11,775,414 | 352,174 | 741,100 | 11/13/2005 | 11/12/2012 | 51.34 | 4,637,561 | 1,806,871 | 5,330,982 | |||||||||||
Aventis | 5/14/2002 | 12/02/2003 | 12,012,414 | 352,174 | 715,000 | 12/03/2006 | 12/02/2013 | 40.48 | 4,650,275 | 1,657,153 | 5,704,986 | |||||||||||
Sanofi-Synthélabo | 5/18/1999 | 12/10/2003 | 4,217,700 | 240,000 | 393,000 | 12/11/2007 | 12/10/2013 | 55.74 | 188,780 | 193,850 | 3,835,070 | |||||||||||
Sanofi-aventis | 5/31/2005 | 5/31/2005 | 15,228,505 | 400,000 | 550,000 | 6/01/2009 | 5/31/2015 | 70.38 | 6,500 | 1,690,905 | 13,531,100 | |||||||||||
Sanofi-aventis | 5/31/2005 | 12/14/2006 | 11,772,050 | 450,000 | 585,000 | 12/15/2010 | 12/14/2016 | 66.91 | 0 | 740,430 | 11,031,620 | |||||||||||
Sanofi-aventis | 5/31/2007 | 12/13/2007 | 11,988,975 | 325,000 | 625,000 | 12/14/2011 | 12/13/2017 | 62.33 | 0 | 512,990 | 11,475,985 | |||||||||||
Sanofi-aventis | 5/31/2007 | 03/02/2009 | 7,736,480 | 250,000 | 655,000 | 03/04/2013 | 03/01/2019 | 45.09 | 0 | 91,060 | 7,645,420 |
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At its meeting of March 1, 2010, in addition to the 275,000 stock options granted to Christopher Viehbacher, the Board of Directors granted 5,727 beneficiaries a total of 7,846,355 options to subscribe for one sanofi-aventis share each (representing 0.6% of our share capital before dilution). Half the stock options granted to the members of the Executive Committee and all the stock options granted to Christopher Viehbacher are subject to a performance condition. The performance condition must be fulfilled each financial year preceding the exercise period (2010, 2011, 2012 and 2013), and requires the ratio of business net income to net sales to be at least 18% (see “Item 5. Operating and Financial Review and Prospects — Sources of Revenues and Expenses — Business Net Income”).
Options granted to the Chief Executive Officer, in 2010 represented 0.8%or equivalent officers as of the maximum total grant approved at the Shareholders’ Annual General Meetingdate of April 17, 2009 (2.5% of our share capital) and 3%grant.
The main characteristics of our stock options are also described in Note D.15.8 to our consolidated financial statements, included in Item 18 of this annual report.
Awards of SharesExisting Restricted Share Plans as of December 31, 20092012
For the first time inSince 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.
SharesRestricted shares are awarded to employees on the basis of a list submitted to the Compensation Committee. This Committee which then submits thethis list to the Board of Directors, which awards the shares. The Board of Directors sets the vesting conditions for the award, and any lock-up conditions for the shares. No
In 2011, the Board of Directors made significant changes to its equity-based compensation policy. In order to limit the dilutive effect on shareholders, the Board of Directors determined to primarily award performance conditions are attached.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 be fully contingent upon the performance targets being achieved over several financial years.
At its meeting ofOn March 2, 2009,5, 2012, the Board of Directors set up two plans:plans in addition to the award made to the Chief Executive Officer:
No shares were awarded to executive Directors, membersThe entire award was contingent upon two of the Executive Committee or memberssame 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 Management Committee in 2009.
However, an exception was made in favorgrant. The quantatitive measures of performance are the same as for the award of Christopher Viehbacher, who was awarded 65,000 performance shares on March 2, 2009, in line with the undertakings made to him on September 10, 2008, at the timeViehbacher.
The 2012 awards represent a dilution of the announcement of his appointment as Chief Executive Officer effective December 1, 2008. These undertakings were made as compensation for loss of the benefits to which he had been entitled from his previous employer. All of his performance shares are awarded subject to a performance condition. The performance condition, which must be fulfilled each financial year before the transfer of the shares (i.e., 2009 and 2010), requires the ratio of adjusted net income excluding selected items (which was a non-GAAP financial measure used until the end of 2009) to net sales to be at least 18%.
Performance shares awarded to the Chief Executive Officer in 2009 represented 0.49% of the maximum total grant approved at the Shareholders’ Annual General Meeting of May 31, 2007 (1%0.35% of our share capital) and 5.44% of the total grant made to all of the beneficiaries on March 2, 2009.
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 | Acquisition date | Availability date | Number transferred as of 12/31/2009 | Number of rights canceled as of 12/31/2009 | Number outstanding | |||||||||||
Sanofi-aventis | 5/31/2007 | 03/02/2009 | 590,060 | 65,000 | 13,900 | 03/02/2009 | 03/03/2011 | 03/04/2013 | 0 | 965 | 589,095 | |||||||||||
Sanofi-aventis | 5/31/2007 | 03/02/2009 | 604,004 | 0 | 13,200 | 03/02/2009 | 03/04/2013 | 03/04/2013 | 0 | 12,050 | 591,954 |
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As of December 31, 2009,2012.
Not all employees are able to benefit from awards of performance shares, but a totalnew agreement on the voluntary scheme (intéressement des salariés) was concluded in June 2011 to ensure that all employees have an interest in the performance of 1,181,049 shares were outstanding as the acquisition period of each plan had not yet expired.business.
In addition, pursuant to the French Act of July 28, 2011, all employees in France of the French subsidiaries of the Group benefited from a profit-sharing bonus amounting to €620 gross in July 2012. In total, Sanofi paid out €18.3 million in this regard (including social contributions).
At its meeting of On March 1, 2010,5, 2013, the Board of 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.
No shares were 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 executive Directors,Christopher Viehbacher and the other members of the Executive Committee or membersCommittee. The Board considers that disclosing the level of attainment allows our shareholders to better understand the demanding nature of the Management Committee as partperformance conditions. For disclosures about the level of attainment of the March 2010 plan.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 12/31/2012 | Number of rights canceled as of 12/31/2012 | Number outstanding | |||||||||||||||||||||||
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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, a total of 10,414,053 restricted shares were outstanding, as the vesting period of the plans had not yet expired.
Shares Owned by Members of the Board of Directors
As of December 31, 2009,2012, members of our Board of Directors held in the aggregate 452,936113,080 shares, or under 1% of the share capital and of the voting rights, excluding the beneficial ownership of 96,692,473 shares held by Total as of such date which may be attributed to Thierry Desmarest (who disclaims beneficial ownership of such shares) and excluding the beneficial ownership of 118,227,307 shares held by L’OréL'Oréal as of such date which may be attributed to Lindsay Owen-JonesLaurent Attal or Christian Mulliez (who disclaimsdisclaim beneficial ownership of such shares).
Transactions in Shares by Members of the Board of Directors and comparable persons in 20092012
share;
share;
share;
Item 7. Major Shareholders and Related Party Transactions
The table below shows the ownership of our shares as of January 31, 2010,2013, 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 as described belowfor L'Oréal, no other shareholder currently holds more than 5% of our share capital or voting rights.
Total number of issued shares | Number of real voting rights (excluding own shares) (2) | Theoretical number of voting rights (including own shares) (3) | ||||||||||
Number | % | Number | % | Number | % | |||||||
L’Oréal | 118,227,307 | 8.97 | 236,454,614 | 15.36 | 236,454,614 | 15.27 | ||||||
Total | 91,760,293 | 6.96 | 180,967,806 | 11.76 | 180,967,806 | 11.69 | ||||||
Treasury shares | 9,332,455 | 0.71 | — | — | 9,332,455 | 0.60 | ||||||
- of which held directly by sanofi-aventis | 9,203,481 | 0.70 | — | — | — | — | ||||||
Employees(1) | 18,146,041 | 1.37 | 32,291,732 | 2.10 | 32,291,732 | 2.09 | ||||||
Public | 1,081,123,913 | 81.99 | 1,089,427,232 | 70.78 | 1,089,427,232 | 70.35 | ||||||
Total | 1,318,590,009 | 100 | 1,539,141,384 | 100 | 1,548,473,839 | 100 | ||||||
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| Total number of issued shares | Number of actual voting rights (excluding own shares) (3) | Theoretical number of voting rights (including own shares) (4) | ||||||||||||||||
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| 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 (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 and Total areis the only two entitiesentity known to hold more than 5% of the outstanding sanofi-aventisSanofi ordinary shares. As described below, these entitiesL'Oréal reduced their holdings inits holding from 2007 2008 and 2009to 2011 after no significant changes in 2006 and 2005. At year end 2006, their respective holdings were 10.52% and 13.13%year-end 2007, its holding was 8.66% of our share capital compared to 8.97% and 6.96%8.91% on JanuaryDecember 31, 2010.2012.
On February 16, 2012, Total declared, following a loss of double voting rights resulting from the conversion of its shares into bearer shares, that it had passed below the legal threshold of 5% of our voting rights.
L’Oréal disclosed Total also declared that, following the modification of the total numbersales 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 it had exceeded the 15% legal voting rights threshold(declarations of February 16, 2012, June 11, 2012, July 2, 2012, and August 7, 2012) and as of its last declaration held an interest of 8.99%0.56% of our share capital and 15.10%0.5% of our voting rights (notification dated(declaration of August 7, 2012). Total subsequently announced that it had sold the remainder of its shareholding in Sanofi during September 21, 2009).
2012.
In accordance with ourstatuts, shareholders are required to 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, 2009,2012, we were informed that the following share ownership declaration thresholds had been passed:
Amundi declared that, through its mutual funds, it had passed above the threshold of 3% of the share capital (declaration of February 8, 2012), then passed successively 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% of our share capital and 2.98% of our voting rights (declaration of December 21, 2012).
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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).
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Since January 1, 2010 we have been informed Crédit Suisse declared that the followingCrédit Suisse Group had passed above the threshold of 1% of our share ownershipcapital (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 thresholds have been passed: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) and again 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% of our share capital and 1.79% of our voting rights (declaration of November 13, 2012).
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L'Oréal declared that, due to the reduction of the number of our voting rights, it had passively passed above the threshold of 16% of our voting rights and as of its last declaration held 16.01% of our voting rights (declaration of July 16, 2012).
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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 (declaration of December 4, 2012).
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Individual shareholders (including employees of sanofi-aventisSanofi and its subsidiaries, as well as retired employees holding shares via the sanofi-aventis Group Employee Savings Plan), hold approximately 8%8.7% of our share capital. Institutional shareholders (excluding L’Oréal and Total)L'Oréal) hold approximately 72%78.3% of our share capital. Such shareholders are primarily American (26.1%(27.9%), French (19%(16.3%) and British (10.7%(14.1%). German institutions hold 3.4%3.0% of our share capital, Swiss institutions hold 1.3%2.2%, institutions from other European countries hold 7.1%8.5% and Canadian institutions hold 0.6%1.4% of our share capital. Other international institutional investors (excluding those from Europe and the United States) hold approximately 3.6%4.9% of our share capital. In France, our home country, we have 14,887 identified shareholders of record. In the United States, our host country, we have 62 identified shareholders of record and 11,322 identified ADS holders of record.
(source:(source: a survey conducted by Euroclear France as of December 31, 2009,2012, 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-lengtharm's-length basis and do not consider the amounts involved in such transactions to be material.
On September 17, 2009, sanofi-aventisSanofi acquired the interest held by Merck & Co., Inc. (Merck) in Merial Limited (Merial) and Merial is nowhas been a wholly-owned subsidiary of sanofi-aventis.Sanofi since that date. As per the terms of the agreement signed on July 29, 2009, sanofi-aventisSanofi 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-aventis.Sanofi. On March 8, 2010, sanofi-aventis did in fact exerciseSanofi exercised its contractual right to combine the Intervet/Schering-Plough Animal Health business with Merial. In additionOn March 22, 2011, Merck and Sanofi jointly announced the mutual termination of their agreement to execution of final agreements, formation of theform a new animal health joint venture remains subjectventure. As a result, Merial and Intervet/Schering-Plough continue to operate as separate businesses.
approval byConsequently, 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 competition authorities and other closing conditionsbalance 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 “Item 8 — B. Significant Changes — Merial”Notes D.2 and Notes D.1 and D.8.1D.8.2 to our consolidated financial statements included at Item 18 of this annual report). Other than this agreement, during 2009
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 throughBNP Paribas for unsecured term loan facilities of up to $15,000,000,000. Because Robert Castaigne serves on the dateboards of this annual report, we have not been involved in,both Société Générale and we do not currently anticipate becoming involved in, any transactions with related parties that are materialSanofi, Sanofi submitted the Facilities Agreement and certain non-material ancillary agreements, as well as a subsequent amendment, to us or to anythe prior approval of our related parties and that are unusual in their nature or conditions. We have not made any outstanding loans to or for the benefit of:
enterprises that, directly or indirectly, control or are controlled by, or are under common control with us;
enterprises or associates in which we have significant influence or that have significant influence over us;
shareholders beneficially owning a 10.0% or greater interest in our voting power;
any member of our Management Committee orits Board of Directors or close memberswith 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 individuals’ families; orreimbursement.
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.
enterprises The Sanofi parent company transferred the Genzyme Corporation shares acquired in which persons described above own, directly or indirectly,April 2011 to Aventis, Inc. on June 28, 2012. This transfer consisted of two principal operations:
C. Interests of Experts and Counsel
N/A
A. Consolidated Financial Statements and Other Financial Information
Our consolidated financial statements as of and for the years ended December 31, 2009, 2008,2012, 2011, and 20072010 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, 2004, 2005, 2006, 2007, 2008, 2009, 2010 and 20082011 and our shareholders will be asked to approve the payment of an annual dividend of €2.40€2.77 per share for the 20092012 fiscal year at our next annual shareholders’shareholders' meeting. If approved, this dividend will be paid on May 25, 2010.14, 2013.
We expect that we will continue to pay regular dividends based on our financial condition and results of operations. The proposed 20092012 dividend equates to a distribution of 36.3%45% of our business earnings per share. For information on the non-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 2005, 2006, 2007,2008, 2009, 2010 and 20082011 fiscal years and the dividend that will be proposed for approval by our shareholders in respect of the 20092012 fiscal year at our May 17, 2010 shareholders’3, 2013 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 | |||||||||||
2009(1) | 2008 | 2007 | 2006 | 2005 | ||||||
Net Dividend per Share (in €) | 2.40 | 2.20 | 2.07 | 1.75 | 1.52 | |||||
Net Dividend per Share (in $)(2) | 3.46 | 3.06 | 3.02 | 2.31 | 1.80 |
|
|
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.
Annual Payments on Participating Share Series A (“PSSA”)Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act (ITRA)
The table below sets forth, forSanofi conducts limited business relating to human and animal health products with Iran contributing well under 1% of the years indicated,Group's consolidated net sales in 2012. Although these activities are compliant with applicable law and not financially material to the amountGroup, the Iran Threat Reduction and Syria Human Rights Act of dividends paid per PSSA (see “Item 9. The Offer2012 (the "Act") requires us to include the following disclosures in this report. Sales consisted of bulk and Listing” for further detail). Inbranded pharmaceuticals, vaccines, and animal health supplies. U.S. affiliates, or foreign affiliates controlled by U.S. affiliates, are either not involved in these activities or operate under humanitarian licenses issued by the United States,U.S. Treasury Department's Office of Foreign Assets Control, and the PSSAs existGroup has not knowingly conducted a transaction or dealing with a person or entity designated in U.S. Executive Orders No. 13224 and 13382. Limited business not exceeding €10.2 million in gross revenues has been conducted by foreign subsidiaries 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 million to net profits. A representative office in Tehran incurs incidental expenses from state-owned utilities. Otherwise, no business has been transacted with the Government of Iran as defined in the formAct. The Group does not believe any of American Depositary Shares issued by The Bankits activities to be sanctionable under the Iran Sanctions Act or the Comprehensive Iran Sanctions, Accountability, and Divestment Act of New York Mellon, formerly known as The Bank of New York, as depositary, each representing one-quarter of a PSSA (“PSSA-ADSs”). The PSSAs are generally entitled to receive an annual payment determined according to a specific formula and subject to certain conditions.
The annual payments on the PSSAs are equal to the sum of a fixed portion (€1.14 per PPSA) and a variable portion equal to the greater of 704%2010. In light of the dividend per ordinary share or 150%nature of an amount calculated pursuantthe products concerned, Sanofi does not currently intend to a formula which takes into account changescease its commercial operations in consolidated sales and consolidated net income.Iran.
Such amounts have been translated in each case into dollars and adjusted for the one-to-four ratioTable of PSSAs to PSSA-ADSs. Annual payments paid to holders of PSSA-ADSs will generally be exempt from French withholding tax.Contents
In 2009, the annual payment per PSSA in respect of 2008 was equal to €16.6390.
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||
Annual payment per PSSA | € | 16.6390 | € | 15.7234 | € | 13.4695 | € | 12.9929 | € | 0 | |||||
Annual payment per PSSA-ADS | $ | 6.0204 | $ | 5.8550 | $ | 4.5877 | $ | 4.1438 | $ | 0 |
Information on Legal or Arbitration Proceedings
Our principal legal proceedings are described inThis Item 8 incorporates by reference the disclosures found at Note D.22 to the consolidated financial statements includedfound at Item 18 of this annual report, which we incorporate herein by reference, and are further updated below to reflectreport; material developments throughupdates thereto as of the date of this document.annual report are found below under the heading "— Updates to Note D.22".
WeSanofi and its affiliates are also involved from timein litigation, arbitration and other legal proceedings. These proceedings typically are related to time in a number of legal proceedings incidental to the normal conduct of our business, including proceedings involving product liability claims, intellectual property rights (particularly claims byagainst generic product manufacturerscompanies seeking to limit the patent protection of sanofi-aventisSanofi products), compliancecompetition 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.
• 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® in several European countries including, United Kingdom, Belgium, France, Germany, Netherlands, Italy and Norway. Sanofi filed for and was granted preliminary injunctions (PI) against several generic companies based on Sanofi's Supplemental Protection Certificate (SPC) covering Co-Aprovel®. However, Sanofi was not granted PIs against three generic companies, Sandoz, Mylan and Arrow, in France. Sanofi appealed this decision in August 2012. Sanofi followed its PI actions with main 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 FDA in the U.S. District Court for the District of Columbia and requested preliminary injunctive relief against the FDA. In August 2010, the U.S. District Court denied this request. As a result of this ruling, the generic version of enoxaparin can continue to be marketed in the United States. On February 7, 2012, the Court ruled in favor of the FDA regarding the approval of the Sandoz enoxaparin ANDA.
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® and Sculptra®, and settled in December 2012 all claims arising out of an investigation into sampling of its former product Hyalgan®. In that respect, Sanofi U.S. paid U.S.$109 million to the settling parties and expects to enter into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services.
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®. Sanofi U.S. is cooperating with the U.S. Department of Justice in this matter.
In France, Sanofi is involved in a claim before the French Antitrust Authority (Autorité de la Concurrence) concerning allegations brought by Teva Santé that Sanofi's communications and promotional practices inhibited the entry on the market of Plavix® generics.
In Germany, following 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 with the alleged sale 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 connection 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 and is cooperating with these agencies.
A number of technical terms which may be used above in Item 8 are defined below for the convenience of the reader.
ANDA or Abbreviated New Drug Application (United States): An application by a drug manufacturer to receive authority from the U.S. FDA to market a generic version of another company's approved product, by demonstrating that the purportedly generic version has the same properties (bioequivalence) as the original approved product. As a result of data exclusivity, the ANDA may be filed only several years after the initial market authorization of the original product.
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.
• Rhodia LitigationRetained Liabilities
On February 5, 2013, Rhodia's motion for reconsideration of the Sao Paolo's Court of Appeal's decision (of September 2011) was rejected by an(Updateen banc decision of the same Court. Rhodia may still initiate some recourse against this decision to the caption “Rhodia” at Note D.22.e) to our consolidated financial statements included herein at Item 18.)Brazilian Supreme Court.
On February 10, 2010, Rhodia submitted its pleadings brief (conclusions récapitulatives) in connection with the complaint it had filed with the Commercial Court of Paris against sanofi-aventis in July 2007. In its brief, Rhodia has asked the Court to hold that sanofi-aventis was at fault in failing to provide Rhodia with sufficient capital to meet its pension obligations and environmental liabilities, and has claimed indemnification in the amount of €1.3 billion for retirement commitments and approximately €311 million for environmental liabilities. Sanofi-aventis will submit its answer in the coming weeks. The case should be decided in 2010.
N/A
In addition to the information included elsewhere in this annual report, we bring to your attention the following developments since the end of 2009.
• MerialTable of Contents
On March 8, 2010, sanofi-aventis exercised its option to combine Merial with Intervet/Schering-Plough, Merck’s animal health business. This option was granted to sanofi-aventis in the Merial acquisition agreement signed July 29, 2009. See Note D.1 to our consolidated financial statements included at Item 18 of this annual report.
The new joint venture will be equally-owned by Merck and sanofi-aventis. Its formation is subject to execution of final agreements, antitrust review in the United States, Europe and other countries and other customary closing conditions. The completion of the transaction is expected to occur in approximately the next 12 months, and each of Merial and Intervet/Schering-Plough will continue to operate independently until the closing of the transaction.
The enterprise value of Merial has been fixed at $8 billion and the enterprise value of Intervet/Schering-Plough at $8.5 billion, leading to a true-up payment of $250 million to Merck to establish a 50/50 joint venture. An additional amount of $750 million will be paid by sanofi-aventis, as per the terms of the agreement signed on July 29, 2009. All payments, including adjustments for debt and certain other liabilities will be made upon closing of the transaction.
On January 11, 2010, sanofi-aventis launched its tender offer for all outstanding shares of Chattem, Inc (Chattem), subject to customary closing conditions. On February 9, 2010, sanofi-aventis acquired 89.8% of Chattem’s shares on a fully-diluted basis (or approximately 97% of outstanding shares) by accepting all validly tendered shares. The remaining shares were acquired in a “short form” merger on March 10, 2010.
On January 29, 2010, sanofi-aventis signed agreements with Minsheng Pharmaceuticals Co., Ltd to establish a new Consumer Health Care joint venture. Subject to certain conditions precedent and to regulatory approvals, sanofi-aventis is to obtain a majority equity stake in the future venture.
On February 23, 2010, the petition by sanofi-aventis to squeeze-out the remaining minority holders of Zentiva N.V. was ratified by the Dutch courts.
We have one class of shares. Each American Depositary Share, or ADS, represents one-half of one share. The ADSs are evidenced by American Depositary Receipts, or ADRs, which are issued by TheJPMorgan Chase Bank, of New York.N.A..
Our shares trade on the Eurolist marketCompartment A of NYSE Euronext Paris, (Compartment A)or Euronext Paris, and our ADSs trade on the New York Stock Exchange. There can be no assurancesExchange, or NYSE.
In April 2011, in connection with our acquisition of Genzyme, we issued contingent value rights ("CVRs") under a CVR agreement entered into by and between us and the American Stock Transfer & Trust Company, LLC, as totrustee (see Item 10.C. Material Contracts — The Contingent Value Rights Agreement). Our CVRs trade on the establishment or continuity of a public market for our shares or ADSs.NASDAQ Global Market.
Trading History
The table below sets forth, for the periods indicated, the reported high and low quotedmarket prices of our shares on the Eurolist market of NYSE Euronext Paris and our ADSs on the New York Stock ExchangeNYSE (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 $) | |||||||||||
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 | |||||||||
NYSE Euronext | NYSE | |||||||||
Calendar period | High | Low | High | Low | ||||||
(price per share in €) | (price per ADS in $) | |||||||||
Monthly | ||||||||||
February 2010 | 54.88 | 51.68 | 37.93 | 34.90 | ||||||
January 2010 | 58.90 | 52.18 | 41.59 | 36.32 | ||||||
December 2009 | 56.78 | 50.47 | 40.80 | 38.25 | ||||||
November 2009 | 52.46 | 48.35 | 39.53 | 35.83 | ||||||
October 2009 | 53.90 | 49.25 | 40.17 | 36.00 | ||||||
September 2009 | 51.68 | 46.11 | 38.00 | 32.91 | ||||||
2009 | ||||||||||
First quarter | 49.93 | 38.43 | 32.80 | 24.59 | ||||||
Second quarter | 48.67 | 39.32 | 33.83 | 25.57 | ||||||
Third quarter | 51.68 | 40.91 | 38.00 | 28.60 | ||||||
Fourth quarter | 56.78 | 48.35 | 40.80 | 35.83 | ||||||
Full Year | 56.78 | 38.43 | 40.80 | 24.59 | ||||||
2008 | ||||||||||
First quarter | 66.90 | 44.30 | 49.04 | 35.06 | ||||||
Second quarter | 51.24 | 41.27 | 39.70 | 32.11 | ||||||
Third quarter | 51.25 | 41.61 | 37.11 | 31.14 | ||||||
Fourth quarter | 50.98 | 36.055 | 34.32 | 23.95 | ||||||
Full Year | 66.90 | 36.055 | 49.04 | 23.95 | ||||||
2007 | ||||||||||
First quarter | 71.80 | 62.50 | 46.60 | 41.37 | ||||||
Second quarter | 71.95 | 59.65 | 48.30 | 39.97 | ||||||
Third quarter | 63.19 | 56.20 | 43.56 | 37.90 | ||||||
Fourth quarter | 65.93 | 58.09 | 48.30 | 41.54 | ||||||
Full Year | 71.95 | 56.20 | 48.30 | 37.90 | ||||||
2006 | ||||||||||
First quarter | 79.85 | 69.50 | 48.32 | 41.91 | ||||||
Second quarter | 79.10 | 69.80 | 49.25 | 44.21 | ||||||
Third quarter | 79.25 | 66.90 | 50.05 | 42.43 | ||||||
Fourth quarter | 70.90 | 64.85 | 46.60 | 41.65 | ||||||
Full Year | 79.85 | 64.85 | 50.05 | 41.65 | ||||||
2005 | ||||||||||
Full Year | 76.70 | 56.40 | 45.87 | 36.60 | ||||||
2004 | ||||||||||
Full Year | 63.25 | 49.42 | 40.48 | 29.22 | ||||||
2003 | ||||||||||
Full Year | 60.00 | 41.50 | 37.92 | 22.53 | ||||||
2002 | ||||||||||
Full Year (NYSE beginning on July 1) | 84.30 | 49.78 | 32.80 | 24.90 |
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.
N/A
Shares and ADSs
Our shares are listed on the Euronext Paris Market (Compartment A) under the symbol “SAN”"SAN" and our ADSs are listed on the New York Stock Exchange, or NYSE under the symbol “SNY”"SNY". At
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 on free-float capitalization and the most active stocks listed on the Euronext Paris Market.market. The CAC 40 Index indicates trends onin 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 EuroSTOXX 50, the Dow Jones STOXX 50, the FTS Eurofirst 100, the FTS Eurofirst 80 and the MSCI Pan-Euro Index.Index, among other indices.
CVRs
The Euronext Paris Market
The Euronext Paris Market is a regulated market operated and managed by Euronext Paris, a market operator (entreprise de marché) responsible for the admission of securities and the supervision of trading in listed securities on Euronext Paris. Euronext Paris publishes a daily official price list that includes price information on listed securities. The Euronext Paris Market is divided into three capitalization compartments: “A” for issuers with a market capitalization over €1 billion, “B” for issuers with a market capitalization between €1 billion and €150 million, and “C” for issuers with a market capitalization under €150 million.
TradingOur CVRs trade on the Euronext ParisNASDAQ Global Market
Securities admitted to trading on the Euronext Paris Market are officially traded through authorized financial institutions that are members of Euronext Paris. Euronext Paris places securities admitted to trading on the Euronext Paris Market in one of two categories (continuous (“continu”) or fixing), depending on whether they belong to certain indices or compartments and/or on their historical and expected trading volume. Our shares trade in the category known ascontinu, which includes the most actively traded securities. Securities belonging to thecontinu category are traded on each trading day from 9:00 a.m. to 5:30 p.m. (Paris time), with a pre-opening session from 7:15 a.m. to 9:00 a.m. and a post-closing session from 5:30 p.m. to 5:35 p.m. (during which pre-opening and post-closing sessions trades are recorded but not executed until the opening auction at 9:00 a.m. and the closing auction at 5:35 p.m., respectively). In addition, from 5:35 p.m. to 5:40 p.m., trading can take place at the closing auction price. Trading in a share belonging to thecontinu category after 5:40 p.m. until the beginning of the pre-opening session of the following trading day may take place at a price that must be within a range of plus or minus 1% of the closing auction price.
Euronext Paris may temporarily interrupt trading in a security admitted to trading on the Euronext Paris Market if matching a bid or ask offer recorded in the system would inevitably result in a price beyond a certain threshold, determined on the basis of a percentage fluctuation above or below a set reference price. With respect to equity securities included in the CAC 40 Index and trading in thecontinu category, once trading has commenced, volatility interruptions for a reservation period of 2 minutes (subject to extension by Euronext Paris) are possible if the price fluctuates by more than 3% above or below the relevant reference price. Euronext Paris may also suspend trading of a security admitted to trading on the Euronext Paris Market in certain circumstances including at the request of the issuer or the occurrence of unusual trading activity in a security. In addition, in exceptional cases, including, for example, upon announcement of a takeover bid, the French market regulator (Autorité des marchés financiers or “AMF”) may also require Euronext Paris to suspend trading.
Trades of securities admitted to trading on the Euronext Paris Market are settled on a cash basis on the third trading day following the trade. For certain liquid securities, market intermediaries which are members of Euronext Paris are also permitted to offer investors the opportunity to place orders through a deferred settlement service (Ordres Stipulés à Règlement-Livraison Différés — OSRD). The deferred settlement service is only available for trades in securities that have both a total market capitalization of at least €1 billion and a daily average volume of trades of at least €1 million. Investors can elect on or before the determination date (jour de liquidation), which is the fourth trading day before the end of the month, either to settle by the last trading day of the month or to postpone the settlement decision to the determination date of the following month. At the date of this annual report, our shares are currently eligible for the deferred settlement service.
Equity securities traded on a deferred settlement basis are considered to have been transferred only after they have been recorded in the purchaser’s account. Under French securities regulations, if the sale takes place before, but during the month of, a dividend payment date, the purchaser’s account will be credited with an amount equal to the dividend paid.
Prior to any transfer of securities listed on the Euronext Paris Market held in registered form, the securities must be converted into bearer form and accordingly recorded in an account maintained by an accredited intermediary with Euroclear France S.A., a registered central security depositary. Transactions in securities are initiated by the owner giving the instruction (through an agent, if appropriate) to the relevant accredited intermediary. Trades of securities listed on the Euronext Paris Market are cleared through LCH.Clearnet and settled through Euroclear France S.A. using a continuous net settlement system. A fee or commission is payable to the accredited intermediary or other agent involved in the transaction.
Participating Shares Series A
Further to a public offer to exchange ordinary shares for PSSAs in 1993, a tender offer to purchase for cash all of the outstanding PSSA-ADSs in 1995 and repurchases in private transactions since that date, there are only 3,271 PSSAs outstanding as of December 31, 2009. In view of the small number of PSSAs that remain outstanding, at some time in the future, sanofi-aventis intends to terminate the Deposit Agreement for the PSSA-ADSs and apply to the U.S. Securities and Exchange Commission to terminate registration of the PSSAs and the PSSA-ADSs under the Securities Exchange Act of 1934, as amended.
We are not aware of any non-U.S. trading market for our Participating Shares Series A. In the United States, the PSSAs exist in the form of American Depositary Shares issued by The Bank of New York Mellon, formerly known as the Bank of New York, as depositary, each representing one-quarter of a PSSA. We are not aware of any U.S. trading market for the PSSA-ADSs since their suspension from trading on the NYSE on May 18, 1995, and their subsequent removal from listing on the NYSE on July 31, 1995. Prior to their delisting, the PSSA-ADSs traded on the NYSE under the symbol RP PrA."GCVRZ".
Trading Practices and Tradingby 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.”
"
N/A
N/A
N/A
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 ourstatuts, an English translation of which has been filed as an exhibit to this annual report. For a description of certain provisions of ourstatutsrelating to our Board of Directors and statutory auditors, see “Item"Item 6. Directors, Senior Management and Employees.”" You may obtain copies of ourstatutsin French from thegreffe(Clerk) of theRegistre du Commerce et des Sociétés de Paris(Registry (Registry of Commerce and Companies of Paris, France, registration number: 395 030 844). Please refer to that full document for additional details.
Ourstatutsspecify that our corporate affairs are governed by:
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Article 3 of ourstatuts specifies that the Company’sCompany's corporate purposes,purpose, in France and abroad, are:is:
Acquiring
in the following areas :areas:
Purchase
Research,
Manufacture
Obtaining
Operating
Obtaining,
Within
And,and, more generally:
All
Directors
Transactions in whichWhich 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, such termination package, except with respect to any non-compete indemnity andor certain pension benefits:benefits, any such termination package: (i) must be authorized by our shareholders by adoptingthrough the adoption of a separate general shareholders meeting resolution for each such beneficiary, which has toauthorization 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’s performancesbeneficiary's performance measured by our Company’s performances,Company's performance, that must have been defined by the Board of Directors when granting such package, and (b) such decision is made publicly available.
disclosed.
Directors’Directors' Compensation
The aggregate amount of attendance fees (jetons de présence) of the Board of Directors is determined at the ordinary general meeting of the shareholders.Shareholders' Ordinary General Meeting. The Board of Directors then divides this aggregate amount up among its members by a simple majority vote. In addition, the Board of Directors may grant exceptional compensation (rémunérations exceptionnelles) may be granted to individual directors on a case-by-case basis for special assignments.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, duly authorizedimposed by the general meetingShareholders' General Meeting. There are currently no limits imposed on the amounts of loans or borrowings that the shareholders.
Board of Directors may approve.
Directors’Directors' Age Limits
For a description of the provisions of ourstatutsrelating 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 one share1,000 shares during the term of their appointment.
Share Capital
As of December 31, 2009,2012, our share capital amounted to €2,636,958,104,€2,652,685,918, divided into 1,318,479,0521,326,342,959 outstanding shares with a par value of €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 9,422,7163,150,287 shares (or 0.71 %0.24% of our outstanding share
capital), as treasury shares as of such date. As of December 31, 2009,2012, the book valuecarrying amount of such shares was €526€207 million.
At an extraordinary general meeting held on April 17, 2009,May 6, 2011, 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 billion. See “Changes"— Changes in Share Capital — Increases in Share Capital”,Capital," below.
The maximum total amountnumber of authorized but unissued shares as of December 31, 20092012 was 581.7321 million, reflecting the unused part of the April 17, 2009May 6, 2011 and May 4, 2012 shareholder authorization,authorizations to issue shares without preemptive rights, outstanding options to subscribe for shares, and awards of shares.
Stock Options
Types of 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 grantvesting of the options to purchase in order to provide the option holder with shares upon exercise. Following the merger of Aventis with and into sanofi-aventis, all previously granted options for the shares of Aventis were converted into options for our shares.
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 equityshare capital.
Our combined general meeting of April 17, 2009held on May 6, 2011 authorized our Board of Directors for a period of 26 months to grant, on one or more occasions, options to subscribe for shares and options to purchase shares in favor of persons to membersbe chosen by the Board of ourDirectors from among the salaried staff and/or corporate officers as well as to members of salaried staff and/oremployees and corporate officers of our Company or of companies or groupings of economic interest groups related to our Company underof the conditions referred toGroup 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 2.5%1% of the share capital as of the daydate of the decision by the Board of Directors to grant options is made by the Board. Under such a resolution, the price payable onoptions.
The Board of Directors sets the exercise price of options may notto subscribe for shares and options to purchase shares. However, the exercise price never incorporates a discount and must be lower thanat least equal to the average of the first quoted market prices of sanofi-aventis ordinary shares on the Euronext Paris Market during the 20 consecutive trading dayssessions preceding the date on which the options are granted.
The authorization entails the express waiverof 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, of their preemptive rights in respect of shares that are to be issued as and when options are exercised.
The Board of Directors setsis granted full power to implement this authorization and to set the terms and conditions on which options are granted and the arrangements as regardswith 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 option plans currently in force.
Awards of Shares
Our combined general meeting held on April 17, 2009May 4, 2012 authorized our Board of Directors for a period of 38 months to allot, on one or more occasions, existing or new consideration freerestricted shares in favor of persons to some or allbe chosen by the Board of Directors from among the salaried employees and corporate officers of theour Company or of companies or economic interest groupings of the Group in accordance with Articles L. 225-197-1etseq. of the French Commercial Code.
The existing or new shares allotted under this authorization may not represent more than 1%1.2% of the share capital as of the date of the decision by the Board of Directors.
The authorization provides that allotment of shares to the allottees will become irrevocable either (i) at the end of a minimum vesting period of twothree years, in which case the allottees beingwill 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 are exercised.vest.
The Board of Directors sets the terms on which restricted shares are granted and the arrangements as regardswith 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 20092012
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' general shareholders’ meeting. Ourstatuts do not provide for cumulative voting rights. However, ourstatutsprovide 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, 2009,2012, there were 234,852,104142,585,235 shares that were entitled to double voting rights, representing 17.81%10.75% of our total share capital, approximately 15.21%9.73% of our voting rights held by holders other than us and our subsidiaries, and 15.12%9.71% of our total voting rights.
Double voting rights are not taken into account in determining whether a quorum exists.
Under the French Commercial Code, treasury shares of a companyor shares held in treasury or by entities controlled by that company are not entitled to voting rights and do not count for quorum purposes.
Ourstatuts 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 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”,Shares," below.
Ourstatutsprovide that Board members are elected on a rolling basis for a maximum tenure of four years. Ourstatuts do not provide for cumulative voting rights.
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:
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Extraordinary general meetings of shareholders are required for approval of matters such as amendments to ourstatuts, including any amendment required in connection with extraordinary corporate actions. Extraordinary corporate actions include:
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' meeting of shareholders for approval ofto 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' meeting of shareholders 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:
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 offer for our shares.
We must announce general meetings at least 35thirty-five days in advance by means of a preliminary notice (avis de réunion), which is published in theBulletin des Annonces Légales Obligatoires, orBALO. The preliminary notice must first be sent to the AMF.French Financial markets authority (Autorité des marchés financiers, the "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. The preliminary notice must contain, among other things, the agenda, a draft of the resolutions to be submitted to the shareholders and the procedure for voting by mail.
At least 15fifteen days prior to the date set for a first call,convening, and at least sixten days prior to any second call,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 forrelated 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. IfAMF for informational purposes. Even if there are no shareholder has proposed anyproposals for new resolutions or items to be submitted to the vote of the shareholders at the meeting, and provided that the Board of Directors has not altered the draft resolutions included in the preliminary notice, we are not required tomust publish the final notice; publishing a preliminary notice that stipulates that it shall be deemed to be equivalent to a final notice will be deemed sufficient.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 thoughif this action has not been included on the agenda.
Additional resolutions to be submitted for approval by the shareholders at the shareholders' meeting may be proposed to the Board of Directors, for recommendation to the shareholders asat any time from the publication of the preliminary notice in theBALO and until 25twenty-five days prior to the general meeting or, alternatively within 20and in any case no later than twenty days following the publication of the preliminary notice in theBALO if such preliminary notice was published more than 45 days prior to the general meeting: by:
Within the same period, the shareholders may also propose additional items (points) to be submitted and discussed during the shareholders' meeting, without a 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' meeting must be promptly published on our website.
The Board of Directors must submit thesethe 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' meeting.
Following the date on which documents must be made available to the shareholders (including documents to be submitted to the 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.
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 comptable) of their shares on the third business day, zero hour (Paris time), preceding the general meeting:
Attendance in Person
��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.
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 least twenty-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 conveningof 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 only to hisany natural person or her spouselegal entity. The agent may be required to disclose certain information to the shareholder or to another shareholder. A shareholder that is a corporation may grant proxies to a legal representative.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.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 together 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).
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, or voting by mail or by proxy.
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, or 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.
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 present,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
AThe affirmative vote of a simple majority of shareholdersthe 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 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, athe affirmative vote of two-thirds majority of the shareholder 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, athe affirmative vote of two-thirds majority voteof the votes cast at thean extraordinary shareholders’shareholders' meeting is required to change ourstatuts, 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 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 including our annual report and a summary of the financial results of the five previous fiscal years to any shareholder who so requests.
We must also provide on our website at least twenty-one days before a 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' meeting pursuant to articles L. 225-15 and R. 225-83 of the French Commercial Code, etc. The resolutions and the list of items added to the agenda of the 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”"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 ourstatuts.
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, 2009,2012, our legal reserve amounted to €282,280,863, representing 10.7%10.64% 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 onlyserve 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 meeting of 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 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. Ourstatutsprovide 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 the 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's approval, to his delegates(directeurs généraux délégués).
Increases in our share capital may be effected by:
Increases in share capital by issuing additional securities may be effected through one or a combination of the following:
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 offer for our shares (article L. 233-32 of the French Commercial Code) require theshareholders' approval ofat 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 theshareholders' approval ofat 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.
Since the entry into force of order 2004-604 of June 24, 2004, 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’s approval, to his delegates(directeurs généraux délégués).
On April 17, 2009,May 6, 2011, 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 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:
On April 17, 2009,May 6, 2011, 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 freecorporate 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:
See also “Item"Item 6. Directors, Senior Management and Employees — E. Share Ownership”Ownership".
According toIn 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 perwithin any 24-month period. On April 17, 2009,May 6, 2011, 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 athe affirmative vote of shareholders holding a two-thirds majority 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 may 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 a non-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
Ourstatutsprovide 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 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 personentity (personne morale) whowhich 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.
Ourstatutsdo 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 MarketStock 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. No registrationRegistration duty is normallycurrently payable in France unlessif a transfer instrument has beenwritten deed of sale and purchase (acte) is executed in France.
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.Provisions
Ourstatuts 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 rataamong 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 theany 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 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 company 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 theany such threshold.
In the report, the acquirer will have to specify its intentions for the following six monthmonths including:
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 following six-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 a two-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 33 1/3%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, ourstatutsprovide 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 ourstatutsapply 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’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 in Control/Anti-takeover
There are no provisions in ourstatuts 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 ourstatutsthat
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 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-aventisSanofi 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 any 24-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 April 17, 2009,May 4, 2012, 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-aventisSanofi ordinary share may not be greater than €80.00 and the maximum amount that sanofi-aventisSanofi may pay for the repurchases is €10,524,203,680.€10,727,350,480. This authorization was granted for a period of 18 months from May 4, 2012 and cancelled and replaced the authorization granted to the Board of Directors by the general meeting held on May 6, 2011. A description of this share repurchase program as adopted by the Board of Directors on April 17, 2009May 4, 2012,(descriptif du programme de rachat d’actions)d'actions) was published on March 4, 2009.5, 2012.
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” (the “Directive”) relating to share repurchase programs and the stabilization of financial instruments, came into effect on October 13, 2004.
The entry into force of the Regulation has resulted in changes in the manner in which share repurchase programs are implemented. Under the Regulation,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:
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 to permit the following existing market practices:
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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.
Additionally, our program could be used for any purpose that is authorized or could be authorized under applicable laws and regulations.
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:
In addition, an issuer must not:
resell
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and
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, be re-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, 2009,2012, we did not useused the authority delegated by our shareholders to repurchase our shares on the stock market.
As of December 31, 2009,Pursuant to our share repurchase programs authorized by our shareholders on May 3, 2011 and on May 4, 2012, we directly owned 9,293,742 sanofi-aventis shares with an aggregate par value of €18,587,484 (representing around 0.70 %repurchased 13,573,643 of our share capitalshares for a weighted average price of €60.59, i.e. a total cost of €823 million, €596,000 of which were incurred on brokerage fees and with a value estimated atfinancial transaction taxes (net of income taxes).
On April, 26, 2012, the Board of Directors cancelled 21,159,445 treasury shares, as follows:
In 2009,repurchase program of the 8,193,471Company;
On October 24, 2012, the Board of Directors cancelled 6,435,924 treasury shares repurchased between April 1, and September 30, 2012 pursuant to the share repurchase program of the Company.
During 2012, pursuant to the liquidity contract, Exane BNP Paribas purchased 6,254,868 of our shares at an average weighted price of €61.36 for a total amount of €383,803,530 and sold 6,254,868 of our shares at an average weighted price of €61.48 for a total amount of €384,536,260.
In 2012, of the 5,766,116 shares allocated to stock purchase option plans outstanding at December 31, 2008, 592,2552011, 53,790 shares were transferred to grantees of options, comprising:options.
354,059As a result, as of December 31, 2012, the 3,150,287 treasury shares, transferred directly by us; and
238,196 shares transferred indirectly (by Hoechst GmbH).
Following these transfers, the shares owned directly or indirectly by usrepresenting 0.24% of our share capital, were allocated as follows:
7,601,216 shares wereall allocated to outstanding stock purchase option plans comprising:
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1,821,500plans. At the same date, none of the shares werewas allocated to cancellation,the liquidity account, even though the liquidity contract was outstanding.
As of December 31, 2012, we directly owned 3,150,287 Sanofi shares with a par value of €2 representing 0.14%around 0.24% of our share capital.
capital and with an estimated value of €213,000,157, based on the share price at the time of purchase.
There has been no reallocation and no cancellation of repurchased shares.
Pursuant to the AMF Regulation and the French Commercial Code, issuers trading in their own shares are subject to the following reporting obligations:
Ownership of Shares by Non-French Persons
The French Commercial Code and ourstatuts currently do not limit the right of non-residents of France or non-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 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:
Enforceability of Civil Liabilities
We are a limited liability company (société anonyme) organized under the laws of France, and most of our directorsofficers and officersdirectors reside outside the United States. In addition, a substantial portion of our assets is located in France.
As a result, it may be difficult for investors 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 such persons.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. 80-538 of July 26, 1968, as amended,16, 1980, which may preclude or restrict the obtaining of evidence in France or from French persons in connection with such 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.
In connection with its acquisition of Genzyme Corporation, now a wholly-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") 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 first milestone related to manufacturing of Cerezyme® and Fabrazyme® had to be met by December 31, 2011 in order for the payment to be triggered. This milestone was not met 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 no payments will be due under the CVR agreement on the earlier of (a) December 31, 2020 and (b) the date that Product Sales Milestone #4 is paid.
Sanofi has agreed to use diligent efforts (as defined in the CVR Agreement) to achieve each of the remaining milestones. For more information on Lemtrada™ see "Item 4.B Business Overview — Pharmaceutical Products — Multiple Sclerosis".
Sanofi has also agreed to use its commercially reasonable efforts to maintain a listing for trading of the CVRs on the NASDAQ market.
The CVR Agreement does not prohibit Sanofi or any of its subsidiaries or affiliates from acquiring the CVRs, whether in open market transactions, private transactions or 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™, 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 the average trading price of the CVRs if the volume-weighted average CVR trading price is less than fifty cents over forty-five trading days and Lemtrada™ sales in the prior four quarter period were less than one billion U.S. dollars in the aggregate.
A copy of the Merger Agreement and the form of CVR Agreement are on file with the SEC as exhibits 4.3 and 4.4 hereto, respectively. Reference is made to such exhibits 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.
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French exchange control regulations currently do not limit the amount of payments that we may remit to non-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 a non-resident be handled by an accredited intermediary. In France, all registered banks and most credit establishments are accredited intermediaries.
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 PSSAs and PSSA-ADSs (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 comprehensive set of new tax rules 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'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 (the “Regulations”"Regulations") in force as of the date of this report. All of the foregoing is subject to change. Such changes could apply retroactively and could affect the consequences described below.
In particular, the United States and France signed a protocol on January 13, 2009, that made several changes to the Treaty, including changes to the “Limitation on Benefits” provision. The protocol entered into force on December 23, 2009; its provisions became effective in respect of withholding taxes for amounts paid or credited
on or after January 1, 2009 and in respect of other taxes for taxable years beginning on or after January 1, 2010.U.S. holders are advised to consult their own tax advisers regarding the effect the protocol may have on their eligibility for Treaty
benefits, especially with regard to the "Limitations on Benefits" provision, in light of their own particular circumstances.
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. A non-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 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.
Generally, transfers Pursuant to Article 235 ter ZD of the French General Tax Code, purchases of Securities (other than ordinary shares) are not subject to a 0.2% French registration or stamp duty. Generally, transferstax on financial transactions provided that Sanofi's market capitalization exceeds 1 billion euros as of ordinary shares will not beDecember 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 is published annually by the French state. Pursuant to a ministerial regulation (arrêté) dated January 11, 2013, Sanofi is included in such list as a company whose market capitalization exceeds 1 billion euros as of December 1, 2012 and therefore, purchases of Sanofi's Securities are subject to French registration or stamp duty if such transfers are not evidenced by a written agreement or if such an agreement is executed outsidetax.
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.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, or of PSSAs in exchange for PSSA-ADSs (including in connection with the intended termination of the deposit agreement with respect to the PSSA-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, and holders of PSSA-ADSs will be treated as owners of the PSSAs represented by such PSSA-ADSs.ADSs. Accordingly, the discussion that follows regarding the U.S. federal income tax consequences of acquiring, owning and disposing of ordinary shares and PSSAs is equally applicable to ADSs and PSSA-ADSs, respectively.ADSs.
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 its non-U.S. status in connection with payments received within the United States or through a U.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 to recently-enacted reporting obligations with respect to ordinary shares and ADSs if the aggregate value of these and certain other "specified foreign financial 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 a Form TD F 90-22.1 — 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-aventis,Sanofi, to non-residents of France are generally subject to French withholding tax at a rate of 25% (18%30% (21% for distributions made as from January 1, 2008 to individuals that are resident in the European Economic Area, except Liechtenstein)and 15% for distributions made to not-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 under article 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°130). From March 1, 2010, dividends Dividends
paid by a French corporation, such as sanofi-aventis,Sanofi, towards non-cooperative States or territories, as defined in Article 238-0 A of the French General Tax Code, will generally be subject to French withholding tax at a rate of 50%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 receivingwho receive dividends in non-cooperative States or territories, will not be subject to this 50%75% withholding tax.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 aowns 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 raterates 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 rate,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 new protocol.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 aremay immediately be subject to the reduced raterates 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 25%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 other tax-exempt entities are subject to the same general filing requirements as other U.S. holders except that they may have to supply additional documentation evidencing their entitlement to these benefits.
Form 5000 and Form 5001, together with instructions, will be provided by the depositary to all U.S. holders registered with the depositary and isare also 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 individualsholders 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-aventisSanofi (as determined under U.S. federal income tax principles). Dividends paid by sanofi-aventisSanofi will not be eligible for the dividends-received deduction generally allowed to corporate U.S. holders.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual U.S. holder with respect to taxable years beginning before January 1, 2011, with respect to the ADSs or our ordinary shares will beis currently subject to taxation at a maximum rate of 15%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-aventisSanofi was not a PFIC for U.S. federal income tax purposes with respect to its 20092012 taxable year. In addition, based on its audited financial statements and 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-aventisSanofi will become a PFIC for its 20102013 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 certain short-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 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'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 be U.S. -sourceU.S.-source gain or loss, and will be treated as long-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 15%20%) if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
Participating Shares Series “A” (PSSAs) and PSSA-ADSs
French Taxes
Taxation of Annual Payments and Any Reorganization PaymentMedicare Tax
Under French law, no French withholding tax is imposed on Annual Payments on the Participating Shares Series “A” (PSSAs) owned by U.S. holders. Pursuant to Article 131 quater of the French General Tax Code, the withholding tax exemption on Annual Payments is not subject to any filing requirement because the PSSAs have been offered exclusively outside France before March 1, 2010. In the event that French law should change and a French withholding tax becomes applicable to the Annual Payments, (i) sanofi-aventis or an affiliate shall be obligated, to the extent it may lawfully do so, to gross up such payments (with certain exceptions relating to the holder’s connection with France, failure to claim an exemption or failure to present timely such shares for payment) so that, after the payment of such withholding tax, the holder will receive an amount equal to the amount which the holder would have received had there been no withholding or (ii) sanofi-aventis may redeem the PSSAs.
Taxation of Redemption
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, sale or exchange of PSSAs or PSSA-ADSs. Special rules apply to individuals who are residents of more than one country.
U.S. Taxes
Taxation of Annual Payments
For U.S. federal income tax purposes, the gross amount of the annual payments paid to U.S. holders entitled thereto will be treated as ordinary dividend income (in an amount equal to the cash or fair market value of the property received) to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividends generally will be foreign-source income and generally will be treated as “passive category” (or, in the case ofRecently-enacted legislation requires certain U.S. holders “general category”) income for foreignwho are individuals, estates or trusts to pay a Medicare tax credit purposes. Dividends paid by sanofi-aventis will not be eligible for the dividends-received deduction generally allowedof 3.8% (in addition to corporate U.S. holders.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by a U.S. holder that is an individual with respect to taxable years beginning before January 1, 2011 with respect to the PSSAs or PSSA-ADSs willtaxes they would otherwise be subject to taxation at a maximum rate of 15% ifto) on their "net investment income" which would include, among other things, dividends and capital gains from the dividends are “qualified dividends.” Dividends paid on the PSSAs or PSSA-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 rulesordinary shares 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). 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 we were not a PFIC for U.S. federal income tax purposes with respect to our 2009 taxable year. In addition, based on our audited financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate that we will become a PFIC for our 2010 taxable year.Holders of PSSAs and PSSA-ADSs should consult their own tax advisers regarding the availability of the reduced dividend tax rate in light of their own 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’s tax basis in its PSSAs or PSSA-ADSs and then, to the extent it exceeds the U.S. holder’s tax basis, it will constitute gain from a deemed sale or exchange of such PSSAs or PSSA-ADSs (see “— Tax on Sale or Other Disposition (Including Redemption)”, below).
ADSs.
The amount of any distribution paid in euros will be equal to the U.S. dollar value of the distributed euros, calculated by reference to the exchange rate in effect on the date the dividend is received by a U.S. holder of PSSAs (or by the depositary, in the case of PSSA-ADSs), regardless of whether the payment is in fact converted into 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.
Tax on Sale or Other Disposition (Including Redemption)
In general, for U.S. federal income tax purposes, a U.S. holder that sells, exchanges or otherwise disposes of PSSAs or PSSA-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 PSSAs or PSSA-ADSs and the holder’s adjusted tax basis (determined in U.S. dollars) in the PSSAs or PSSA-ADSs. Such gain or loss generally will be U.S. -source gain or loss, and will be treated as long-term capital gain or loss if the U.S. holder’s holding period in the PSSAs or PSSA-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 15%) if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
If, however, a U.S. holder’s PSSAs or PSSA-ADSs are redeemed and it has a direct or indirect stock interest in sanofi-aventis after such redemption, then amounts received in a redemption could, under applicable U.S. tax rules, be treated as a distribution taxable as a dividend that is measured by the full amount of cash received by such U.S. holder (to the extent of the current and accumulated earnings and profits of sanofi-aventis, as described above in “Taxation of Annual Payments”).U.S. holders should consult their own tax advisers as to the application of these rules to any such redemption.
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 on Form 20-F, and other information with the U.S. Securities and Exchange Commission, or Commission, by electronic means. Our public
You may review a copy of our filings are availablewith the Commission, as well as other information furnished to the public over the InternetCommission, including exhibits and schedules filed with it, at the Commission’s WebsiteCommission's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-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(1)
General Policy
Liquidity risk, foreign exchange risk and interest rate risk, as well as related counterparty risk, are managed centrally by our dedicated treasury team within the Group Finance Department. Where it is not possible to manage these 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 investment and financing strategies, as well as our interest rate and currency hedging strategies, are reviewed monthly by the Group Finance Department.
Our policy on derivatives prohibits speculative exposure.
Liquidity Risk
We operate a centralized treasury platform according to whichwhereby all surplus cash and financing needs of our subsidiaries are invested with or funded by the parent company (where permitted by local legislation), at market conditions.. 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.debt (see Notes D.17.c and D.17.g to the consolidated financial statements).
As of December 31, 2009, cash and cash equivalents amounted to €4,692 million. The Group tends to diversifydiversifies its short termshort-term investments with leading banks on monetary supports whichusing money-market products with instant access or with a maturity is lower than three months. As of December 31, 2009, these short2012, cash and cash equivalents amounted to €6,381 million and short-term investments mainly comprised:
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Bank are entered into with leading financial institutions;
As of December 31, 2009,2012, the Group had €12.3€10 billion of undrawn general corporate purpose confirmed credit facilities, of which €7.7€3 billion expire in 2012, €4.0December 2013, €0.25 billion in 2011, €0.6July 2015 and €6.75 billion in 2010.July 2017. Our 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 particular under our Eurothe United States and in France (Euro Medium Term Note program,program), and by issuing commercial paper in France and the United States. Debt securities issuedStates and in 2009 (for more information, see Note D.17 toFrance. The average duration of the consolidated financial statements) helped extend the average term of our total debt to 4.1was 3.2 years as of December 31, 2009,2012, compared to 2.33.5 years as of December 31, 2008.2011. Short-term commercial paper programs (U.S. dollar-denominated commercial paper swapped into euroseuro and euro-denominated commercial paper) are used to meet our short-term financing needs. In 2012, the French commercial paper program was not drawn down, whereas average drawdowns under the U.S. commercial paper program were €2.3 billion (maximum €3.3 billion). Drawdowns under these programs are generally renewed for periods of twoone and a half months. The commercial paper programs are backed by confirmed short term credit facilities (see description above), to permit the Group to continue to access financing if raising funds via commercial paper is no longer possible (for more information, see Note D.17 to the consolidated financial statements). None of these programs was drawn asAs of December 31, 2009.2012, these programs were not drawn down.
In the event of a market-wide liquidity crisis, the Group could be exposed to difficulties in calling up its available cash, a scarcity of its sources of funding including the above-mentioned programs, or to a deterioration in their terms. This situation could damage the capacity of the Group to refinance its debt or to issue new debt on reasonable terms.
Interest Rate Risk
OurSince the financing of the Genzyme acquisition in 2011, the Group has managed its net debt in two currencies, the euro and the U.S. dollar (see note D.17 to the consolidated financial statements). The floating-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 to reduce the amount and/or volatility of the cost of debt, is influenced by trends in interest rates as regards the floating-rate portion of our total debt (credit facilities, commercial paper) linked to Eonia, US Libor and Euribor, in proportion to the amounts drawn under these programs. To optimize the cost of our short-term and medium-term debt or reduce its volatility, we use interestGroup has contracted derivative instruments (interest rate swaps, cross-currency swaps and if necessary interest rate options, to alteroptions). These have the fixed rate / effect of altering the fixed/floating rate mixsplit of ourthe debt. These derivative instruments are denominated in euros or in U.S. dollars.
As of December 31, 2009, 67% of our total debt (amounting to €8,796 million), was fixed-rate and 33% was floating-rate after taking account of interest rate derivatives. Our cash and cash equivalents (amounting to €4,692 million) are entirely floating-rate.
As of December 31, 2009,2012, the sensitivity of ourthe total debt, net of cash and cash equivalents to interest rate fluctuations over a full year is detailed in the table below:as follows:
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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. Operational Foreign Exchange Risk
A substantial proportionportion of our net sales is generated in countries in which the euro, which is our reporting currency, is not the functional currency. In 2009,2012, for example, 32%31% of our consolidated net sales were generated in the United States. 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 net sales. Consequently, our operating income may be materially affected by fluctuations in the exchange rate between the euro and other currencies, primarily the U.S. dollar.
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 on budget estimates of foreign-currency transactions to be carried out by the parent company and its subsidiaries. These transactions mainly comprise sales, purchases, research costs, co-marketing and co-promotion expenses, and royalties. To reduce the exposure of these transactions to exchange rate movements, we may contract currency hedges using liquid financial instruments, such asmainly forward purchases and forward sales of currency as well as callcurrencies, and put options, and combinationsswaps.
Table of currency options (collars).
The table below shows operational currency hedging derivatives in place as of December 31, 2009,2012, with the notional amount translated into euros at the relevant closing exchange rate. See also Note D.20 to the consolidated financial statements for the accounting classification of these instruments as of December 31, 2009.
2012.
Operational foreign exchange derivatives as of December 31, 20092012 (1):
(in € million) | Notional amount | Fair value | |||
Forward currency sales | 2 800 | (51 | ) | ||
of which: U.S. dollar | 1,757 | (41 | ) | ||
Japanese yen | 269 | 1 | |||
Russian rouble | 132 | (4 | ) | ||
Pound Sterling | 111 | — | |||
Hungarian forint | 104 | (1 | ) | ||
Forward currency purchases | 377 | 6 | |||
of which: Hungarian forint | 114 | 3 | |||
U.S dollar | 69 | — | |||
Pound Sterling | 68 | 1 | |||
Canadian dollar | 42 | 1 | |||
Swiss franc | 20 | — | |||
Put options purchased | 448 | 14 | |||
of which: U.S. dollar | 278 | 8 | |||
Call options written | 881 | (17 | ) | ||
of which: U.S. dollar | 555 | (10 | ) | ||
Put options written | 278 | (8 | ) | ||
of which: U.S. dollar | 278 | (8 | ) | ||
Call options purchased | 555 | 10 | |||
of which: U.S. dollar | 555 | 10 | |||
Total | 5,339 | (46 | ) |
|
(€ 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 December 31, 2010.February 28, 2013 except for a specific forward currency purchase position for a total of £33 million expiring between 2013 and 2015.
These positions hedge:
mainly hedge future foreign-currency cash flows arising after the balance sheet date in relation to transactions carried out during the year ended December 31, 20092012 and recognized in the balance sheet at that date. Gains and losses on derivative 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 foreign exchange gain orprofit and loss on these items (derivative instruments and underlying assets)assets as of December 31, 2012) will be close to zero in 2010; and
forecast foreign-currency cash flows relating to commercial transactions to be carried out in 2010. These hedges (forward contracts and options) cover approximately 8% to 40% of the expected net cash flows for 2010 in currencies subject to budgetary hedging. The portfolio of derivatives relating to 2010 U.S. dollar denominated cash flows consists entirely of forward contracts and accounts for around 8% of the 2010 expected cash flows. Given that these forward contracts were designated as cash flow hedges as of December 31, 2009, the sensitivity of the foreign exchange gain or loss and the impact on equity related to these instruments over 2010 would be as follows:
Constant euro/U.S. dollar exchange rate over 2010 | Foreign exchange gain/(loss) on U.S. dollar hedging in € million | Impact on equity | ||||
Depreciation of 10% in the U.S. dollar (€1 = $1.5847) | 28 | 33 | ||||
Exchange rate maintained at the December 31, 2009 rate (€1 = $1.4406) | (5 | ) | — | |||
Appreciation of 10% in the U.S. dollar (€1 = $1.2965) | (46 | ) | (41 | ) |
b. Financial Foreign Exchange Risk
Some of our financing activities, such as the cash pooling arrangements for foreign subsidiaries outside the euro zone and our U.S. commercial paper issues, expose certain entities to financial foreign exchange risk (i.e., the risk of changes in the value of loans and borrowings denominated in a currency other than the functional currency of the lender or borrower). The net foreign exchange exposure mainly affects the sanofi-aventis parent company on the U.S. dollar and is hedged by the holding company with firm financial instruments, usually forward contracts and currency swaps.swaps, dealt with banking counterparties.
The table below shows financial currency hedging instruments in place as of December 31, 2009, calculated using2012, with the notional amount translated into euros at the relevant closing exchange rates prevailing as of that date.rate. See also Note D.20 to the consolidated financial statements for the accounting classification of these instruments as of December 31, 2009.
2012.
Financial foreign exchange derivatives as of December 31, 20092012 (1):
(€ 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 | ||||||||||
(in € million) | Notional amount | Fair value | Expiry | ||||
Forward currency purchases | 6,760 | 185 | |||||
of which: U.S. dollar(*) | 5,634 | 180 | 2010 | ||||
Pound sterling | 433 | 2 | 2010 | ||||
Swiss franc | 152 | 1 | 2010 | ||||
Forward currency sales | 3,169 | (7 | ) | ||||
of which: U.S. dollar | 1,634 | (28 | ) | 2010 | |||
Japanese yen | 837 | 18 | 2010 | ||||
Czech koruna | 394 | 7 | 2010 | ||||
Total | 9,929 | 178 |
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These swapsforward contracts generate a net financial foreign exchange gain or loss arising from the interest rate differential between the interest rates of the hedged currency and the euro, given that the foreign exchange gain or loss on the foreign-currency assetsliabilities and liabilitiesreceivables is offset by the change in the intrinsic value of the hedging instruments. As regards the U.S. dollar, the interest rate differential on forward currency purchases had a negative impact of €24 million on the foreign exchange gain/loss in 2009, compared to a negative impact of €51 million in 2008.
As of December 31, 2009,2012, none of the instruments had an expiry date after DecemberMarch 31, 2010.2013.
We may also hedge some future foreign-currency cash flows relating to investment or divestment transactions.
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 see Note D.35 to ourthe consolidated financial statements. As a result, any fluctuation in the exchange rate of the U.S. dollar against the euro affects shareholders’ equity as expressed in euros.our equity. As of December 31, 2009,2012, 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 holds a significant part of its cash and cash equivalent in this currency, whereas its indebtedness is 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. 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.
Counterparty Risk
Our financing and investing operations, as well as our currency and interest rate hedges, are contracted with leading banks. As regards investing operationsWe set limits for investment and derivative instruments, a limit is set for each financial institution,transactions with individual banks, depending on its rating.the rating of each bank. Compliance with these limits, which are computedbased on notional amounts weighted by reference to the notional amount of the transaction and weighted to reflect the residual maturity and the nature of the commitment, is monitored on a daily basis.
AsThe table below shows our total exposure as of December 31, 2009, the distribution of our exposure2012 by rating and thein terms of our percentage committedexposure to the dominant counterparty were as follows:counterparty.
Cash and cash equivalents (excluding mutual funds) (1) | Notional amounts of currency hedges (2) | Notional amounts of interest rate hedges (2) | Credit facilities | |||||
AA | 304 | 2,538 | 981 | 2,560 | ||||
AA- | 104 | 2,551 | — | 3,465 | ||||
A+ | 427 | 8,812 | 1,124 | 4,899 | ||||
A | — | — | — | 881 | ||||
A- | — | — | — | 485 | ||||
BBB ratings and not rated | — | — | — | — | ||||
Unallocated | 40 | — | — | — | ||||
Total | 875 | 13,901 | 2,105 | 12,290 | ||||
% / rating of the dominant counterparty | 28% / AA | 15% / A+ | 21% / AA | 11% /A+ |
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(€ 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 fundsfund investments are mainly made by the sanofi-aventisSanofi parent company. These mutual fund investments are in 'short-term money market' and 'money market' euro-denominated funds investments, classified as Euro Money-Market Fundsbased 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 low volatility, low sensitivity to interest rate risk and a very low probability of loss of principal. DepositaryThe depositary banks of the mutual funds, as well as depositariesand of sanofi-aventisSanofi itself, are at least A+A rated.
CrystallizationRealization of counterparty risk could impact the Group’sour 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
12.A Debt Securities
N/A
12.B Warrants and Rights
Not applicable.
12.C Other Securities
Not applicable.
12.D American Depositary Shares
Fees Payable By ADS HoldersGeneral
A copy of our Form of Amended and Restated Deposit Agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”("JPMorgan") (including, as depositary, issues Sanofi ADSs in certificated form (evidenced by an American depositary receipt, or ADR) or book-entry form. Each ADR is a certificate evidencing a specific number of Sanofi ADSs. Each Sanofi ADS represents one-half of one Sanofi ordinary share (or the Formright to receive one-half of American Depositary Receipt or “ADR”) was filedone Sanofi ordinary share) deposited with the SECParis, 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's office is located at 1 Chase Manhattan Plaza, Floor 58, New York, New York 10005-1401.
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. The form of our deposit agreement has been filed as an exhibit to our Form F-6 filed on August 7, 2007, (the “Deposit Agreement”)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. Each of the form and the amendment is incorporated by reference into this document. For more complete information, holders should read the entire deposit agreement (including the amendment) and the ADR itself. Holders may also inspect a copy of the deposit agreement at the depositary'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.
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'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'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'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 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 mail materials to holders of Sanofi ADSs in the manner described under the heading "Notices and Reports; Rights of Holders to Inspect 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 assure holders that they will receive the voting materials in time to ensure that holders can instruct the depositary 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 10. Additional Information — B. Memorandum and Articles of Association — Voting 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.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' 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.
The depositary will make available for inspection by ADS holders at the depositary'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.
Fees and Expenses
Fees Payable By ADS Holders
Pursuant to the Deposit Agreement,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 | ||||
$0.02 or less per ADS (or portion thereof) |
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•
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•
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•
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•
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Associated Fee | Depositary Action | ||||
---|---|---|---|---|---|
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 | ||||
Any other charges payable by JPMorgan, its agents (and their agents), including BNP Paribas, as custodian (by deductions from cash dividends or other cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them) | Servicing of shares or other deposited securities | ||||
Expenses incurred by JPMorgan | • Cable, telex and facsimile transmission (where expressly provided for in the | ||||
•
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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'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'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 10. Additional Information — E. Taxation".
Fees Paid to sanofi-aventisSanofi by the Depositary
JPMorgan, as depositary, has agreed to reimburse sanofi-aventis upSanofi for certain expenses (subject to $4,000,000 per year for expenses sanofi-aventiscertain 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 on
Form 20-F or any other expenses directly or indirectly relating to managing the program or servicing the shareholders. The depositary has also agreed to provide additional payments to Sanofi based on certain performance indicators relating to the ADR facility. From January 1, 20092012 to March 1, 2010, sanofi-aventis has obtainedDecember 31, 2012, Sanofi received from JPMorgan reimbursements correspondingof $4,250,000 for expenses and no additional payments based on performance of the ADR facility were made. In addition to the ceiling of $4,000,000 for 2009. Furthermore,such amounts, JPMorgan has agreed to waive up to $425,000 each year in servicing fees forSanofi may incur in connection with routine corporate actions such as annual general meetings and divideddividend distributions, as well as for other assistance JPMorgan may provide Sanofi, such as preparation of tax and regulatory compliance fees,documents for holders and investor relations advisory services, etc.
Changes Affecting Deposited Securities
If we:
then either:
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 10. Additional Information — B. Memorandum and Articles of Association — Requirements for Holdings Exceeding Certain 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.PART IIAt 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'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 and the depositary:
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:
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:
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 a pre-release of the Sanofi ADSs. The depositary may also deliver shares upon cancellation of pre-released Sanofi ADSs (even if the Sanofi ADSs are cancelled before the pre-release transaction has been closed out). A pre-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 a pre-release. Unless otherwise agreed in writing, the depositary may pre-release Sanofi ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-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 such pre-release; (2) the pre-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 the pre-release on not more than five business 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 of pre-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.
Item 13. Defaults, Dividend Arrearages and Delinquencies
N/A
Item 14. Material Modifications to the Rights of Security Holders
N/A
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-aventisSanofi was timely made known to them by others within the Group.
(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 Act Rule 13a — 15(f)13a-15(f). Management assessed the effectiveness of internal control over financial reporting as of December 31, 20092012 based on the framework in “Internal"Internal Control — Integrated Framework”Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Business combinations that have been consummated during the year 2009 have been excluded from the scope of management’s assessment of and conclusion on internal control over financial reporting as of December 31, 2009. The acquired businesses comprise essentially Zentiva, Medley, and Merial, whose respective contributions to the Company’s consolidated financial statements as of and for the year ended December 31, 2009 are presented in the following table (the other acquired businesses are not significant):
As a % of total sales | As a % of total assets | As a % of consolidated net income | |||||||
Zentiva | 1.6 | % | 3.3 | % | (1.3 | %) | |||
Medley | 0.6 | % | 1.1 | % | 0.3 | % | |||
Merial | N/A | (1) | 7.9 | % | 3.1 | % |
|
Based on that assessment, management has concluded that the Company’sCompany's internal control over financial reporting was effective as of December 31, 20092012 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 Audit,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, 2009,2012, which is included herein. See paragraph (c) of the present Item 15, below.
(c) See report of PricewaterhouseCoopers Audit and Ernst & Young Audit,et Autres, independent registered public accounting firms, included under “Item"Item 18. Financial Statements”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.
[Reserved]
[Reserved]
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that Klaus Pohle, Robert Castaigne, Christian Mulliez and Gérard Van Kemmel, and Klaus Pohle, independent directors serving on the Audit Committee, are independent financial experts.experts within the meaning of paragraph 407 of the Sarbanes-Oxley Act of 2002.
The Board of Directors determined that Gérard Van Kemmel qualifies as an independent financial expert based on his experience as a partner at an international accounting firm. The Board of Directors also deemed Klaus Pohle to be an independenta financial expert taking into account his education and professional experience in financial matters, accountancy and internal control. 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 a major corporation. 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'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 five directors meet the independence criteria of U.S. Securities and Exchange Commission Rule 10A-3, although only Mrs. Piwnica, Mr. Castaigne, Mr. Pohle and Mr. Van Kemmel meet the French AFEP-MEDEF Code criteria of independence applied by the Board of Directors for general corporate governance purposes. (See Item 16.G, below.)
We have adopted a financial code of ethics, as defined in Item 16.B.16B. of Form 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-aventis.comwww.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’Accountants' Fees and Services
See Note EE. to our consolidated financial statements included at Item 18 of this annual report.
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 2009, neither sanofi-aventis nor affiliated purchasers2012, Sanofi made the following purchases of equity securitiesits 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. Additional Information — Trading in Our Own SharesItem 10.BMemorandum and Articles of Association — Use of Share Repurchase Programs”.Programs.
Item 16F. Change in Registrant’sRegistrant's Certifying Accountant
N/A
Item 16G. Corporate Governance
Sanofi-aventisSanofi 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 so-called “AFEP-MEDEF”"AFEP-MEDEF" corporate governance recommendations for French listed issuers.issuers (hereafter referred to as the "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-aventis aims to maintainSanofi maintains a board of directors at least half of the members of which are independent. Sanofi-aventisSanofi evaluates the independence of members of our Board of Directors using the standards of the French AFEP-MEDEF corporate governance recommendationsCode 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 the Rule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended, adopted pursuant to the Sarbanes-Oxley Act of 2002.
Our Compensation Committee includes non-independent members, 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 certain decision-making powers with specific committees by delegation (e.g., nominating appointment or audit committees), under French law our Board of Directors remains under French law 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 shareholder meetingShareholders' General Meeting of sanofi-aventisSanofi that is competent to appoint our auditors upon the proposal of our Board of Directors, although our internal rules provideBoard 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 topsenior 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 DirectorDirectors sessions. Our audit committeeAudit Committee is entirely composed of independent directors as that term is defined in Rule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended, adopted pursuant to the Sarbanes-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 principal shareholders.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 on U.S. Form 20-F) rather than on a quarterly basis as would be the case of a U.S. corporation filing quarterly reports on U.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 sanofi-aventisSanofi on the one hand and its directorsDirectors and officersChief Executive Officer on the other hand.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'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.
PART III
Item 16H. Mine Safety Disclosure
N/A
See Item 18.
See pages F-1 through F-121F-122 incorporated herein by reference.
1.1 | Articles of association | ||
1.2 | Board Charter (Règlement Intérieur) of Sanofi (English translation) | ||
2.1 | Form of Deposit Agreement between | ||
2.2 | Amendment No.1 to Deposit Agreement between Sanofi and JPMorgan Chase Bank, N.A., as depositary(incorporated herein by reference to Exhibit (a)(2) to Post-Effective Amendment No.1 to Form F-6 dated April 30, 2011 relating to our American Depositary Shares, SEC File No. 333-145177) | ||
2.3 | Instrument defining rights of holders of American Depositary Shares each representing one quarter of a Participating Share Series A (incorporated by reference to Item. 3 Exhibit (a) of the Registration Statement on Form F-6 (Registration No. 33-31904) dated November 21, 1989) | ||
4.1 | Facilities Agreement, dated October 2, 2010, by and among Sanofi-Aventis, BNP Paribas, J.P. Morgan plc and Société Générale Corporate & Investment Banking acting as Initial Mandated Lead Arrangers, Société Générale acting as Facilities Agent, the Companies listed as Additional Borrowers thereto and the Financial Institutions included as Lenders therein. (incorporated by reference to Exhibit (b)(A) of the Tender Offer Statement on Schedule TO filed on October 4, 2010.) | ||
4.2 | Amendment dated February 15, 2011 to the Facilities Agreement, dated October 2, 2010, by and among Sanofi-Aventis, BNP Paribas, J.P. Morgan plc and Société Générale Corporate & Investment Banking acting as Initial Mandated Lead Arrangers, Société Générale acting as Facilities Agent, the Companies listed as Additional Borrowers thereto and the Financial Institutions included as Lenders therein. (incorporated by reference to Exhibit (b)(B) of Amendment No. 15 to the Tender Offer Statement on Schedule TO filed on February 16, 2011) | ||
4.3 | Agreement and Plan of Merger, dated as of February 16, 2011, among Sanofi-Aventis, GC Merger Corp., and Genzyme Corporation (incorporated by reference to Exhibit (d)(1) of Amendment No. 15 to the Tender Offer Statement on Schedule TO filed on February 16, 2011) | ||
4.4 | Form of Contingent Value Rights Agreement by and among Sanofi and Trustee (incorporated by reference to Exhibit (d)(2) of Amendment No. 15 to the Tender Offer Statement on Schedule TO filed on February 16, 2011) | ||
8.1 | List of significant subsidiaries, see | ||
12.1 | Certification by Christopher Viehbacher, Chief Executive Officer, required by Section 302 of the Sarbanes-Oxley Act of 2002 | ||
12.2 | Certification by Jérôme Contamine, Principal Financial Officer, required by Section 302 of the Sarbanes-Oxley Act of 2002 | ||
13.1 | Certification by Christopher Viehbacher, Chief Executive Officer, required by Section 906 of the Sarbanes-Oxley Act of 2002 | ||
13.2 | Certification by Jérôme Contamine, Principal Financial Officer, required by Section 906 of the Sarbanes-Oxley Act of 2002 | ||
23.1 | Consent of Ernst & Young | ||
23.2 | Consent of PricewaterhouseCoopers Audit dated March | ||
99.1 | Report of the Chairman of the Board of Directors for |
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
by: | /s/CHRISTOPHER VIEHBACHER Christopher Viehbacher
|
Date: March 12, 20106, 2013
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
The financial statements are presented in accordance with
International Financial Reporting Standards (IFRS)
| |||
F-6 | |||
F-7 | |||
F-8 | |||
F-9 | |||
F-10 | |||
– A.Basis of preparation | F-10 – F-11 | ||
F-11 – F-36 | |||
| F-36 – F-39 | ||
| F-39 – F-116 | ||
| F-117 | ||
| F-118 |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRMS
SANOFI
SANOFI-AVENTIS
To the Board of Directors and Shareholders of sanofi-aventis,Sanofi,
We have audited the accompanying consolidated balance sheets of sanofi-aventisSanofi and its subsidiaries (together the “Group”"Group") as of December 31, 2009, 20082012, 2011 and 2007,2010, and the related consolidated statements of income, comprehensive income, changes in equity and cash-flowscash flows for each of the three years in the period ended December 31, 2009.2012. 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), (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, 2009, 20082012, 2011 and 2007,2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2012, 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, 2009,2012, based on criteria established in Internal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 20106, 2013 expressed an unqualified opinion thereon.
Neuilly-sur-Seine and Paris-La Défense, March 9, 20106, 2013
PricewaterhouseCoopers Audit |
Young et Autres | ||||||
Xavier Cauchois | Christian Chiarasini |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRMS
SANOFI
SANOFI-AVENTIS
To the Board of Directors and Shareholders of sanofi-aventis,Sanofi,
We have audited internal control over financial reporting of sanofi-aventisSanofi and its subsidiaries (together “the Group”"the Group") as of December 31, 2009,2012, based on criteria established in Internal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (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), (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.
As described in the accompanying Report of Management on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting excluded the internal controls of business combinations that have been consummated during 2009. The acquired businesses comprise essentially Zentiva, Medley and Merial. We have also excluded the 2009 business combinations from our audit of internal control over financial reporting of the Group. Zentiva, Medley and Merial’s respective contributions to the Group’s consolidated financial statements as of and for the year ended December 31, 2009 are presented in the following table:
As a % of total sales | As a % of total assets | As a % of consolidated net income | |||||||
Zentiva | 1.6 | % | 3.3 | % | (1.3 | )% | |||
Medley | 0.6 | % | 1.1 | % | 0.3 | % | |||
Merial | N/A | 7.9 | % | 3.1 | % |
In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2012, 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, 2009, 20082012, 2011 and 2007,2010, 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, 20092012 and our report dated March 9, 20106, 2013 expressed an unqualified opinion thereon.
Neuilly-sur-Seine and Paris-La Défense, March 9, 20106, 2013
PricewaterhouseCoopers Audit |
Young et Autres | ||||||
Xavier Cauchois | Christian Chiarasini |
[THIS PAGE INTENTIONALLY LEFT BLANK]
(€ million) | Note | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||
ASSETS | ||||||||
Property, plant and equipment | D.3. | 7,830 | 6,961 | 6,538 | ||||
Goodwill | D.4. | 29,733 | 28,163 | 27,199 | ||||
Intangible assets | D.4. | 13,747 | 15,260 | 19,182 | ||||
Investments in associates | D.6. | 955 | 2,459 | 2,493 | ||||
Financial assets — non-current | D.7. | 998 | 821 | 1,037 | ||||
Deferred tax assets | D.14. | 2,912 | 2,920 | 2,912 | ||||
Non-current assets | 56,175 | 56,584 | 59,361 | |||||
Inventories | D.9. | 4,444 | 3,590 | 3,729 | ||||
Accounts receivable | D.10. | 6,015 | 5,303 | 4,904 | ||||
Other current assets | D.11. | 2,104 | 1,881 | 2,126 | ||||
Financial assets — current | D.12. | 277 | 403 | 83 | ||||
Cash and cash equivalents | D.13. - D.17. | 4,692 | 4,226 | 1,711 | ||||
Current assets | 17,532 | 15,403 | 12,553 | |||||
Assets held for sale or exchange | D.8. | 6,342 | — | — | ||||
TOTAL ASSETS | 80,049 | 71,987 | 71,914 | |||||
(€ 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-12F-10 to F-121F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(€ million) | Note | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||
LIABILITIES & EQUITY | ||||||||
Equity attributable to equity holders of the Company | D.15. | 48,188 | 44,866 | 44,542 | ||||
Minority interests | D.16. | 258 | 205 | 177 | ||||
Total equity | 48,446 | 45,071 | 44,719 | |||||
Long-term debt | D.17. | 5,961 | 4,173 | 3,734 | ||||
Provisions and other non-current liabilities | D.18. | 8,311 | 7,730 | 6,857 | ||||
Deferred tax liabilities | D.14. | 4,933 | 5,668 | 6,935 | ||||
Non-current liabilities | 19,205 | 17,571 | 17,526 | |||||
Accounts payable | 2,654 | 2,791 | 2,749 | |||||
Other current liabilities | D.19. | 5,445 | 4,721 | 4,713 | ||||
Short-term debt and current portion of long-term debt | D.17. | 2,866 | 1,833 | 2,207 | ||||
Current liabilities | 10,965 | 9,345 | 9,669 | |||||
Liabilities related to assets held for sale or exchange | D.8. | 1,433 | — | — | ||||
TOTAL LIABILITIES & EQUITY | 80,049 | 71,987 | 71,914 | |||||
(€ 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-12F-10 to F-121F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED INCOME STATEMENTS
(€ million) | Note | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||||||
Net sales | D.34. - D.35. | 29,306 | 27,568 | 28,052 | |||||||
Other revenues | 1,443 | 1,249 | 1,155 | ||||||||
Cost of sales | (7,880 | ) | (7,337 | ) | (7,571 | ) | |||||
Gross profit | 22,869 | 21,480 | 21,636 | ||||||||
Research and development expenses | (4,583 | ) | (4,575 | ) | (4,537 | ) | |||||
Selling and general expenses | (7,325 | ) | (7,168 | ) | (7,554 | ) | |||||
Other operating income | D.25. | 866 | 556 | 522 | |||||||
Other operating expenses | D.26. | (481 | ) | (353 | ) | (307 | ) | ||||
Amortization of intangibles | (3,528 | ) | (3,483 | ) | (3,654 | ) | |||||
Operating income before restructuring, impairment of property, plant and equipment and intangibles, gains and losses on disposals, and litigation | 7,818 | 6,457 | 6,106 | ||||||||
Restructuring costs | D.27. | (1,080 | ) | (585 | ) | (137 | ) | ||||
Impairment of property, plant and equipment and intangibles | D.5. | (372 | ) | (1,554 | ) | (58 | ) | ||||
Gains and losses on disposals, and litigation | D.28. | — | 76 | — | |||||||
Operating income | 6,366 | 4,394 | 5,911 | ||||||||
Financial expenses | D.29. | (324 | ) | (335 | ) | (329 | ) | ||||
Financial income | D.29. | 24 | 103 | 190 | |||||||
Income before tax and associates | 6,066 | 4,162 | 5,772 | ||||||||
Income tax expense | D.30. | (1,364 | ) | (682 | ) | (687 | ) | ||||
Share of profit/loss of associates | D.31. | 814 | 692 | 446 | |||||||
Net income excluding the held-for-exchange Merial business(1) | 5,516 | 4,172 | 5,531 | ||||||||
Net income from the held-for-exchange Merial business(1) | D.8. | 175 | 120 | 151 | |||||||
Net income | 5,691 | 4,292 | 5,682 | ||||||||
Net income attributable to minority interests | D.32. | 426 | 441 | 419 | |||||||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | ||||||||
Average number of shares outstanding (million) | D.15.9. | 1,305.9 | 1,309.3 | 1,346.9 | |||||||
Average number of shares outstanding after dilution (million) | D.15.9. | 1,307.4 | 1,310.9 | 1,353.9 | |||||||
- Basic earnings per share (in euros) | 4.03 | 2.94 | 3.91 | ||||||||
- Diluted earnings per share (in euros) | 4.03 | 2.94 | 3.89 | ||||||||
|
(€ 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-12F-10 to F-121F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Net income | 5,691 | 4,292 | 5,682 | ||||||
Income (expense) recognized directly in equity: | |||||||||
• Available-for-sale financial assets | 110 | (132 | ) | (5 | ) | ||||
• Cash flow hedges | (175 | ) | 104 | 8 | |||||
• Remeasurement of previously-held equity interests: | |||||||||
• Merial | 1,215 | — | — | ||||||
• Zentiva | 108 | — | — | ||||||
Actuarial gains/(losses) | (169 | ) | (829 | ) | 282 | ||||
Change in cumulative translation difference | (301 | ) | 948 | (2,764 | ) | ||||
Tax effect of income and expenses recognized directly in equity(1) | (241 | ) | 132 | (119 | ) | ||||
Total income/(expense) recognized directly in equity | 547 | 223 | (2,598 | ) | |||||
Total recognized income/(expense) for the period | 6,238 | 4,515 | 3,084 | ||||||
Attributable to equity holders of the Company | 5,811 | 4,090 | 2,666 | ||||||
Attributable to minority interests | 427 | 425 | 418 | ||||||
|
(€ 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-12F-10 to F-121F-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 items recognized directly in equity | Attributable to equity holders of the Company | Attributable to minority interests | Total equity | ||||||||||||||||
Balance at January 1, 2007 | 2,719 | 43,776 | (492 | ) | 1,369 | (1,772 | ) | 45,600 | 220 | 45,820 | ||||||||||||||
Income/(expense) recognized directly in equity (1) | — | 176 | — | — | (2,773 | ) | (2,597 | ) | (1 | ) | (2,598 | ) | ||||||||||||
Net income for the period | — | 5,263 | — | — | — | 5,263 | 419 | 5,682 | ||||||||||||||||
Total recognized income/(expense) for the period | — | 5,439 | — | — | (2,773 | ) | 2,666 | 418 | 3,084 | |||||||||||||||
Dividend paid out of 2006 earnings (€1.75 per share) | — | (2,364 | ) | — | — | — | (2,364 | ) | — | (2,364 | ) | |||||||||||||
Payment of dividends and equivalents to minority shareholders | — | — | — | — | — | — | (459 | ) | (459 | ) | ||||||||||||||
Share repurchase program | — | — | (1,806 | ) | — | — | (1,806 | ) | — | (1,806 | ) | |||||||||||||
Share-based payment: | ||||||||||||||||||||||||
• Exercise of stock options | 10 | 201 | — | — | — | 211 | — | 211 | ||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 23 | — | — | 23 | — | 23 | ||||||||||||||||
• Value of services obtained from employees | — | — | — | 115 | — | 115 | — | 115 | ||||||||||||||||
• Tax effect of exercise of stock options | — | — | — | (16 | ) | — | (16 | ) | — | (16 | ) | |||||||||||||
Capital increase reserved for employees (excluding stock option plans) | 3 | 92 | (2) | — | — | — | 95 | — | 95 | |||||||||||||||
Buyout of minority shareholders | — | — | — | — | — | — | (2 | ) | (2 | ) | ||||||||||||||
Other movements | — | 18 | — | — | — | 18 | — | 18 | ||||||||||||||||
Balance at December 31, 2007 | 2,732 | 47,162 | (2,275 | ) | 1,468 | (4,545 | ) | 44,542 | 177 | 44,719 | ||||||||||||||
Income/(expense) recognized directly in equity (1) | — | (693 | ) | — | — | 932 | 239 | (16 | ) | 223 | ||||||||||||||
Net income for the period | — | 3,851 | — | — | — | 3,851 | 441 | 4,292 | ||||||||||||||||
Total recognized income/(expense) for the period | — | 3,158 | — | — | 932 | 4,090 | 425 | 4,515 | ||||||||||||||||
Dividend paid out of 2007 earnings (€2.07 per share) | — | (2,702 | ) | — | — | — | (2,702 | ) | — | (2,702 | ) | |||||||||||||
Payment of dividends and equivalents to minority shareholders | — | �� | — | — | — | — | — | (397 | ) | (397 | ) | |||||||||||||
Share repurchase program | — | — | (1,227 | ) | — | — | (1,227 | ) | — | (1,227 | ) | |||||||||||||
Reduction in share capital (3) | (103 | ) | (2,843 | ) | 2,946 | — | — | — | — | — | ||||||||||||||
Share-based payment: | ||||||||||||||||||||||||
• Exercise of stock options | 2 | 37 | — | — | — | 39 | — | 39 | ||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 4 | — | — | 4 | — | 4 | ||||||||||||||||
• Value of services obtained from employees | — | — | — | 125 | — | 125 | — | 125 | ||||||||||||||||
• Tax effect of exercise of stock options | — | — | — | (12 | ) | — | (12 | ) | — | (12 | ) | |||||||||||||
Other movements | — | 7 | — | — | — | 7 | — | 7 | ||||||||||||||||
Balance at December 31, 2008 | 2,631 | 44,819 | (552 | ) | 1,581 | (3,613 | ) | 44,866 | 205 | 45,071 | ||||||||||||||
Income/(expense) recognized directly in equity (1) | — | 869 | — | — | (323 | ) | 546 | 1 | 547 | |||||||||||||||
Net income for the period | — | 5,265 | — | — | — | 5,265 | 426 | 5,691 | ||||||||||||||||
Total recognized income/(expense) for the period | — | 6,134 | — | — | (323 | ) | 5,811 | 427 | 6,238 | |||||||||||||||
Dividend paid out of 2008 earnings (€2.20 per share) | — | (2,872 | ) | — | — | — | (2,872 | ) | — | (2,872 | ) | |||||||||||||
Payment of dividends and equivalents to minority shareholders | — | — | — | — | — | — | (418 | ) | (418 | ) | ||||||||||||||
Share-based payment: | ||||||||||||||||||||||||
• Exercise of stock options | 6 | 134 | — | — | — | 140 | — | 140 | ||||||||||||||||
• Proceeds from sale of treasury shares on exercise of stock options | — | — | 26 | — | — | 26 | — | 26 | ||||||||||||||||
• Value of services obtained from employees | — | — | — | 114 | — | 114 | — | 114 | ||||||||||||||||
• Tax effect of exercise of stock options | — | — | — | 1 | — | 1 | — | 1 | ||||||||||||||||
Step acquisition (4) | — | 102 | — | — | — | 102 | 31 | 133 | ||||||||||||||||
Other movements | — | — | — | — | — | — | 13 | 13 | ||||||||||||||||
Balance at December 31, 2009 | 2,637 | 48,317 | (526 | ) | 1,696 | (3,936 | ) | 48,188 | 258 | 48,446 | ||||||||||||||
|
|
|
|
(€ 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-12F-10 to F-121F-122 are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(€ million) | Note | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||||||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | ||||||||
Net income from the held-for-exchange Merial business | (175 | ) | (120 | ) | (151 | ) | |||||
Dividends received from Merial | 179 | 116 | 145 | ||||||||
Minority interests, excluding BMS(1) | 21 | 19 | 16 | ||||||||
Share of undistributed earnings of associates | 34 | 23 | 139 | ||||||||
Depreciation, amortization and impairment of property, plant and equipment and intangible assets | 5,011 | 5,985 | 4,664 | ||||||||
Gains and losses on disposals of non-current assets, net of tax (2) | (25 | ) | (45 | ) | (64 | ) | |||||
Net change in deferred taxes | (1,169 | ) | (1,473 | ) | (1,476 | ) | |||||
Net change in provisions | 161 | 56 | (247 | ) | |||||||
Cost of employee benefits (stock options and other share-based payments) | 114 | 125 | 134 | ||||||||
Impact of the workdown of acquired inventories remeasured at fair value | 27 | — | — | ||||||||
Unrealized (gains)/losses recognized in income | (81 | ) | (13 | ) | (506 | )(5) | |||||
Operating cash flow before changes in working capital | 9,362 | 8,524 | 7,917 | ||||||||
(Increase)/decrease in inventories | (489 | ) | (84 | ) | (89 | ) | |||||
(Increase)/decrease in accounts receivable | (429 | ) | (309 | ) | (60 | ) | |||||
Increase/(decrease) in accounts payable | (336 | ) | (28 | ) | (156 | ) | |||||
Net change in other current assets, financial assets (current) and other current liabilities | 407 | 420 | (506 | ) | |||||||
Net cash provided by/(used in) operating activities (3) | 8,515 | 8,523 | 7,106 | ||||||||
Acquisitions of property, plant and equipment and intangible assets | D.3. - D.4. | (1,785 | ) | (1,606 | ) | (1,610 | ) | ||||
Acquisitions of investments in consolidated undertakings, net of cash acquired | D.1. | (5,563 | ) | (661 | ) | (214 | ) | ||||
Acquisitions of available-for-sale financial assets | D.1. | (5 | ) | (6 | ) | (221 | ) | ||||
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax (4) | D.2. | 85 | 123 | 329 | |||||||
Net change in loans and other non-current financial assets | (19 | ) | (4 | ) | — | ||||||
Net cash provided by/(used in) investing activities | (7,287 | ) | (2,154 | ) | (1,716 | ) | |||||
Issuance of sanofi-aventis shares | D.15. | 142 | 51 | 271 | |||||||
Dividends paid: | |||||||||||
• to sanofi-aventis shareholders | (2,872 | ) | (2,702 | ) | (2,364 | ) | |||||
• to minority shareholders, excluding BMS(1) | (6 | ) | (6 | ) | (9 | ) | |||||
Additional long-term borrowings | D.17. | 4,697 | 765 | 1,639 | |||||||
Repayments of long-term borrowings | D.17. | (1,989 | ) | (1,253 | ) | (2,065 | ) | ||||
Net change in short-term borrowings | D.17. | (785 | ) | 557 | (509 | ) | |||||
Acquisition of treasury shares | D.15.4. | — | (1,227 | ) | (1,806 | ) | |||||
Disposals of treasury shares, net of tax | D.15. | 26 | 6 | 23 | |||||||
Net cash provided by/(used in) financing activities | (787 | ) | (3,809 | ) | (4,820 | ) | |||||
Impact of exchange rates on cash and cash equivalents | 25 | (45 | ) | (12 | ) | ||||||
Net change in cash and cash equivalents | 466 | 2,515 | 558 | ||||||||
Cash and cash equivalents, beginning of period | 4,226 | 1,711 | 1,153 | ||||||||
Cash and cash equivalents, end of period | D.13. | 4,692 | 4,226 | 1,711 | |||||||
(€ 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 | |||||||||
| 1,773 | |||||||||||
– Net change in cash and cash equivalents of Merial | 20 | |||||||||||
– Net change in cash and cash equivalents including Merial | 1,793 | |||||||||||
|
|
Income tax paid | (2,981 | ) | (2,317 | ) | (3,030 | ) | |||
Interest paid | (269 | ) | (317 | ) | (315 | ) | |||
Interest received | 88 | 132 | 88 | ||||||
Dividends received from non-consolidated entities | 5 | 5 | 3 |
|
|
The accompanying notes on pages F-12F-10 to F-121F-122 are an integral part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
Sanofi-aventis Sanofi, together with its subsidiaries (collectively "Sanofi" or "the Group"), is a diversified global healthcare groupleader engaged in the research, development manufacture and marketing of therapeutic solutions focused on patient needs. Sanofi has fundamental strengths in the healthcare products, drugsfield, operating via seven growth platforms: Emerging Markets, Diabetes Solutions, Human Vaccines, Consumer Health Care (CHC), Animal Health, New Genzyme and vaccines. The sanofi-aventis pharmaceutical portfolio includes flagship products, together with a broad range of prescription and generic drugs and consumer health products.
Sanofi-aventis,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 174, avenue de France, 7501354, rue La Boétie, 75008 Paris, France.
Sanofi-aventisSanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY).
The consolidated financial statements for the year ended December 31, 2009,2012, and the notes thereto, were adopted by the sanofi-aventisSanofi Board of Directors on February 9, 2010.6, 2013.
A.1. International Financial Reporting Standards (IFRS)
The consolidated financial statements cover the twelve-month periods ended December 31, 2009, 20082012, 2011 and 2007.2010.
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-aventisSanofi 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), mandatorily applicable with mandatory application as of December 31, 2009.2012.
The consolidated financial statements of sanofi-aventisSanofi as of December 31, 20092012 have been prepared in compliance with IFRS as issued by the International Accounting Standards Board (IASB) and with IFRS adoptedas endorsed by the European Union as of December 31, 2009.2012.
IFRS adoptedas endorsed by the European Union as of December 31, 20092012 are available under the heading “IASs/IFRSs,"IAS/IFRS Standards and Interpretations”Interpretations" via the following web linklink:
http://ec.europa.eu/internal_market/accounting/ias_en.htmias/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 appliedapplicable in 2012 with an impact on the consolidated financial statements for the first time in the year ended December 31, 2009 are described in Note A.2. Standards,For standards, amendments and interpretations issued by the IASB butthat do not mandatorily applicablehave mandatory application in 2009 are described in2012, refer to Note B.28.
A.2. New standards, amendments and interpretations applicable in 20092012
In 2009,The new standards, amendments to standards and interpretations issued by the IASB issued an amendmentwith mandatory application for the Group as from the 2012 fiscal year are listed below. These pronouncements have no impact on the consolidated financial statements of the Group.
DuringD.10. to the period, the IASB issued amendments to IFRIC 9 (Reassessment of Embedded Derivatives) and to IAS 39 (Financial Instruments: Recognition and Measurement) relating to embedded derivatives. These amendments, which have been adopted by the European Union, are applicable to financial periods ending on or after June 30, 2009. They specify the treatment to be applied to embedded derivatives where non-derivative financial assets are reclassified out of the held-for-trading category. Because sanofi-aventis does not make such reclassifications, these amendments do not apply to its consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In 2009, sanofi-aventis applied forAmendment ("Deferred Tax: Recovery of Underlying Assets") to IAS 12 (Income Taxes). This amendment relates to investment property measured using the first time the following standards and standards amendments, all of which were issued by the IASB in 2008 and earlier and have been adopted by the European Union:
IFRS 8, (Operating Segments), which replaces IAS 14. Under IFRS 8, published segment information must be prepared on the basis of data used internally to measure the performance of segments and to allocate resources between segments. Sanofi-aventis reviewed its operating segments during 2009, and now reports information for two operating segments, Pharmaceuticals and Human Vaccines (Vaccines). All other activities are combined in a separate segment, Other. Previously, sanofi-aventis reported two segments, Pharmaceuticals and Vaccines,fair value model under IAS 14. Operating segment information40, and is disclosed in Note D.34. “Split of net sales” and Note D.35. “Segment information”.
The revised version ofnot applicable to the Group.
Amendment to IAS 23 (Borrowing Costs). Under this amendment, entities are now required to capitalize borrowing costs directly attributable to the acquisition or in-house construction of items of property, plant and equipment. The optional treatment of recognizing such costs as an expense is no longer permitted. Because sanofi-aventis elected to capitalize such costs on first-time adoption of IFRS, application of this amendment in 2009 had no impact on the consolidated financial statements.
Amendment to IFRS 2 (Share-Based Payment).was early adopted by Sanofi with effect from 2011. This amendment relates to the definition of vesting conditions, and to the accounting treatment of cancellations. Application of this amendment in 2009 had no impact on the consolidated financial statements.
The first “Annual Improvements to IFRSs” standard, issued in 2008. The most relevant amendments to sanofi-aventis are described below. They are not inconsistent with the standards they amend, because they merely provide clarification to the existing text; and they have no impact on the consolidated financial statements of sanofi-aventis, because the accounting treatment applied by sanofi-aventis already complied with the treatment proposed in the amendments.
Amendments to IAS 28 (Investments in Associates), IAS 32 (Financial Instruments: Presentation) and IFRS 7 (Financial Instruments: Disclosures), relating to impairment of an investment in an associate. These amendments specify that if an investment in an associate is impaired, the impairment loss cannot be allocated to any asset (in particular, goodwill) that forms part of the carrying amount of the investment. Consequently, the impairment loss may be reversed in the event of a subsequent improvement in the recoverable amount of the investment.
Amendment to IAS 38 (Intangible Assets), relating to advertising and promotional activities. Under this amendment, promotional expenses involving the supply of goods are recognized when the Group has a right to access those goods, and promotional expenses involving the supply of services are recognized when the Group receives that service. Prepayments are recognized as an asset until the Group obtains access to the goods or receives the service.
The following interpretations have been adoptedwas endorsed by the European Union and are mandatorily applicable, according to the IASB, with effect from 2009:
IFRIC 13 (Customer Loyalty Programmes), which sets out the accounting treatment for awards granted by entities to their customers in connection with the sale of goods or services. Because sanofi-aventis does not grant awards of this nature at present, this interpretation has no impact on the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
IFRIC 15 (Agreements for the Construction of Real Estate), which clarifies whether revenue arising from sales of real estate assets (in particular off-plan sales) should be recognized using the percentage of completion method or on completion. This interpretation does not apply to the activities carried on by sanofi-aventis.
IFRIC 16 (Hedges of a Net Investment in a Foreign Operation), which clarifies the nature of the hedged risk and the accounting treatment of this type of hedge. The only risk to which hedge accounting may be applied is the risk relating to differences arising between the functional currency of the foreign operation and the functional currency of the intermediate or ultimate parent entity. In the event of disposal of the hedged foreign operation, the effective portion of the hedge initially recognized in other comprehensive income is reclassified to profit or loss, as is the portion of the foreign currency translation reserve that relates to the divested operation. The first-time application of IFRIC 16 did not generate a material impact on the consolidated financial statements of sanofi-aventis.
IFRIC 18 (Transfer of Assets from Customers). This interpretation, which has been adopted by the European Union, specifies the treatment of transfers of items of property, plant and equipment from a customer to a public service operator; it has no impact on the consolidated financial statements of sanofi-aventis, since the Group is not involved in this type of activity.
A.3. Use of estimates
The preparation of financial statements requires management to make reasonable estimates and assumptions based on information available at the date of preparationthe finalization of the financial statements, thatstatements. These 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.
liabilities as at the date of the review of the financial statements. Examples of estimates and assumptions include:
provisions relating to product liability claims (see note D.22.);
Actual results could differ from these estimates.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
B.1. Basis of consolidation
TheIn accordance with IAS 27 (Consolidated and Separate Financial Statements), the consolidated financial statements include the accounts of sanofi-aventisthe Sanofi parent company and those of its subsidiaries, controlled by sanofi-aventis, using the full consolidation method. Subsidiaries are entities which the Group controls (i.e. it has the power to govern their financial and operating activities). The existence of effectively exercisable or convertible potential voting rights is taken into account in determining whether control exists. Control is presumed to exist where the Group holds more than 50% of an entity's voting rights.
Equity interests in entities are consolidated from the date on which exclusive control of the entity is obtained; divested equity interests are deconsolidated on the date on which exclusive control ceases. The Group's share of post-acquisition profits or losses is taken to the income statement, while post-acquisition movements in the acquiree's reserves are taken to consolidated reserves.
Joint ventures Entities over which Sanofi exercises joint control are known as "joint ventures" and are accounted for byusing the equity method in accordance with the option in IAS 31 (Interests in Joint Ventures).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CompaniesEntities over which sanofi-aventisSanofi exercises significant influence are accounted for by the equity method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009method in accordance with IAS 28 (Investments in Associates). Significant influence exists where Sanofi has the power to participate in the financial and operating policy decisions of the investee, but without the power to exercise control or joint control over those policies. Significant influence is presumed to exist where the Group owns, directly or indirectly via its subsidiaries, between 20% and 50% of the voting rights of the investee.
Acquisition-related costs are included as a component of the cost of acquiring joint ventures and associates.
Material transactions between consolidated companies andare eliminated, as are intragroup profits are eliminated.
Companies are consolidated from the date on which control (exclusive or joint) or significant influence is transferred to the Group. The Group’s share of post-acquisition profits or losses is taken to the income statement, and post-acquisition movements in the acquiree’s reserves are taken to consolidated reserves. Companies are excluded from consolidation from the date on which the Group transfers control or significant influence.
profits.
B.2. Foreign currency translation
B.2.1. Accounting for transactions in foreign currencies in individual company accounts
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 date of acquisition.
acquisition date.
All amounts receivable or payable Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. The resulting gains and losses 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 inCumulativeCurrency translation difference.
B.2.2. Foreign currency translation of the financial statements of foreign subsidiaries
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 currency transactions into 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. Income statements are translated using a weighted average exchange rate for the period. The resulting currency translation difference is recordedrecognized 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, sanofi-aventisthe Sanofi Group elected to eliminate, through equity, all cumulativecurrency translation differences for foreign operations at the January 1, 2004 IFRS transition date.
B.3. Business combinations and transactions with non-controlling interests
B.3.1. Accounting treatmentfor business combinations, transactions with non-controlling interests and loss of control
Business combinations consummated subsequent to the IFRS transition date (January 1, 2004) are accounted for byusing the purchase method in accordance with IFRS 3 (Business Combinations).
acquisition method. Under this method, the acquiree’sacquiree's identifiable assets liabilities and contingent liabilities that satisfy the recognition criteria of IFRS 3 are measured initially at their fair values as at the date of acquisition, except for (i) non-current assets classified as held for sale which(which are measured at fair value less costs to sell.
Only identifiablesell) and (ii) assets and liabilities that satisfyfall within the criteria for recognition as a liability by the acquiree are recognized in a business combination. Consequently, restructuringscope of IAS 12 (Income Taxes) and IAS 19 (Employee Benefits). Restructuring liabilities are not recognized as a liability of the acquiree unlessonly if the acquiree has an obligation as at the date 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 with non-controlling interests include:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Where the contractual arrangements for a business combination include an adjustment to the cost of the combination contingent upon future events, this adjustment is included in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably.
If the adjustment is not probable or cannot be measured reliably, it is not included in the cost of the combination on initial recognition of the combination. If the adjustment subsequently becomes probable and reliably measurable, the additional consideration is treated as an adjustment to the cost of the combination (i.e. as an adjustment to goodwill).
Where control is acquired in stages, goodwill is determined at each stage as the excess of the cost of the transaction over the fair value of the share of assets acquired at each successive transaction date. The remeasurement of the fair value of the previously-held equity interest is recognized in equity on the lineRemeasurement of previously-held equity interests.
Under the exemptions allowed by IFRS 1, sanofi-aventisthe Sanofi Group elected not to restate in accordance with IFRS 3 any business combinations that were consummatedcompleted prior to the January 1, 2004 transition date. This includes the combination between Sanofi and Synthélabo that took place in 1999.
New accounting rules for business combinations will apply from 2010. The principal changes arising from these rules are described in Note B.28.
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'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 itemLiabilities related to business combinations and to non-controlling interests. This treatment is consistent with that applied to contingent consideration in the books of the acquirer.
B.3.2. Goodwill
The difference betweenexcess of the cost of an acquisition (including any costs directly attributable toover the acquisition) and the Group’sGroup's interest in the fair value of the identifiable assets liabilities and contingent 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 in 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 using the exchange rate prevailing at the balance sheet date.
In accordance with IFRS 3 and with IAS 36 (Impairment of Assets), goodwill is carried at cost less accumulated impairment.impairment (see Note B.6.).
Goodwill is tested for impairment annually for each cash-generating unit (CGU) and whenever events or circumstances indicate that impairment might exist. Such events or circumstances include significant changes liable to have an other-than-temporary impact on the substance of the original investment.
B.4. IntangibleOther intangible assets
IntangibleOther 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 at the date of the combination. They are amortized on a straight line basis over their useful lives.
The useful lives of intangible assets are reviewed at each reporting date. The effect of any adjustment to useful lives is recognized prospectively as a change of accounting estimate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Amortization of other intangible assets is recognized in the income statement underAmortization of intangiblesintangible assets with the exception of amortization of acquired or internally-developed software, which is recognized on the relevant line of the income statement according to the purpose for which the software is used.
Sanofi-aventisThe 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.).
B.4.1. Research and development not acquired in a business combination
In accordance with IAS 38 (Intangible Assets), internally generated research expenditure is expensed as incurred underResearch and development expenses.
Under IAS 38, 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 considered not to have been met until 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 expensed as incurred underResearch and development expenses.
Chemical industrial development expenses incurred to develop a second-generation process are incurred after initial regulatory 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 being met, these expenses are capitalized underIntangibleOther intangible assetsas incurred.
Payments for separately acquired research and development are capitalized underIntangibleOther 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, and (iii) identifiable i.e.(i.e. is either separable or arises from contractual or legal rights.rights). Under paragraph 25 of IAS 38, the first condition for capitalization (the probability that the expected future economic benefits 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 which 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 that are unrelated to the outcome of the research and development efforts, are expensed over the service term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009B.4.2. Intangible assets not acquired in a business combination
B.4.2. Other intangible assets
Patents are capitalized at acquisition cost and amortized over the shorter of the period of legal protection or their useful life.
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 asset 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. Intangible assets acquired in a business combination
Intangible assets acquired in a business combination which relate to in-process research and development and are reliably measurable are identified separately identified from goodwill and capitalized inIntangibleOther intangible assets in accordance with IFRS 3 (Business Combinations) and IAS 38 (Intangible Assets). The related deferred tax liability is also recognized.
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 for the product derived from the research and development work.approval.
Rights to products soldmarketed by the Group are amortized on a straight line basis over their useful lives, which are in a range from 5 to 20 years. Useful lives are determined on the basis of cash flow forecasts that take account of, (amongamong other factors)factors, the period of legal protection of the related patents.
B.5. Property, 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 at the date of the acquisition.combination. The component-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 these 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 assets 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-aventisSanofi as lessee under finance leases are recognized as an asset in the balance sheet, with the related lease obligation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
recognized as a liability. A lease qualifies as a finance lease if it transfers substantially all 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 | 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 of 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, goodwill, intangible assets, and investments in associates and joint ventures
B.6.1. Impairment of property, plant and equipment goodwill and intangible assets
Assets that generate separate cash flows and assets included in cash-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 geographical sub-segments of each operating segment.
Quantitative and qualitative indications of impairment (primarily relating to the status of the research and development portfolio, pharmacovigilance, patent protectionlitigation, and the launch of competing products) are reviewed at each reporting date. If there is any internal or external indication of impairment, the Group estimates the recoverable amount of the asset or CGU.
Property, plant and equipment and intangibleIntangible assets not yet available for use (such as capitalized in-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. These 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 whenif the carrying amount of the asset exceeds its recoverable amount. Where it is not possible to estimate the recoverable amount of any particular asset, the Group determines the recoverable amount of the CGU to which the asset belongs. 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 of the medium-term plans of each business activity.plans.
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
segment determined in accordance with IFRS 8 (Operating Segments), before application of the IFRS 8 aggregation criteria. Consequently, the CGUs used by sanofi-aventis to test goodwill for impairment correspond to the geographical sub-segments of each operating segment.
In the case of goodwill, estimates of future cash flows are based on a five-year strategic plan plus an extrapolation of the cash flows forbeyond the next seven years,five-year plan, plus a terminal value. In the case of other intangible assets, the period used is based on the shorter of the period of patent protection or the economic life of the asset. Any cash flows beyond this period are estimated by applying a positive or negative growth rate to future periods.
Estimated cash flows are discounted at long-term market interest rates that reflect the best estimate by sanofi-aventisSanofi 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 in respect of property, plant and equipment andon intangible assets are recognized underImpairment of property, plant and equipment and intangiblesintangible assets in 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 (see Note B.8.2.)(Financial Instruments: Recognition and Measurement) to determine whether an investment in an associate or joint venture may be impaired.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 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 each reporting date, the Group assesses if 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 property, plant and equipment andother intangible assets are recognized in the income statement underline itemImpairment of property, plant and equipment and intangiblesintangible assets, while reversals of impairment losses in respect of investments in associates and joint ventures are recognized in the income statement underline itemShare of profit/loss of associates and joint ventures. Impairment losses taken against goodwill are never reversed, unless the goodwill relates tois part of the carrying amount of an investment in an associate.associate or joint venture.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.7. Assets held for sale or exchange
In accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations), non-current assets and groups of assets must be 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:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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 classification as “held"held for sale or exchange”exchange", the non-current asset (or asset group) is measured at the lower of carrying amount or fair value less costs to sell, with any write-down recognized by means of an impairment loss. Once a non-current asset has been classified as “held"held for sale or exchange”exchange", it is no longer depreciated or amortized.
In the absence of any specific indication in the current IFRS 5 as to how to account for a partial disposal of an equity interest leading to loss of control, sanofi-aventis has adopted the following treatment: all the assets and liabilities included in a partial disposal of an equity interest leading to loss of controlthe entity involved are classified as assets or liabilities "held for sale" in the balance sheet line itemsAssets held for sale or exchange orLiabilities related to assets held for sale or exchange, provided that the partial disposal satisfies the IFRS 5 classification criteria. This presentation is consistent with that adopted by the IASB in the amendment to IFRS 5 (IFRS 5, paragraph 8A), issued in May 2008 as part of the “Annual Improvements to IFRSs” standard, relating to a disposal resulting in loss of exclusive control. This amendment will be mandatorily applicable effective January 1, 2010 (see Note B.28.).
The profit or loss generated by a held-for-saleheld 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:
Events or circumstances beyond the Group'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:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.8. Financial instruments
B.8.1. FinancialNon-derivative financial assets
Under IFRS, and in accordance with IAS 39 and IAS 32 sanofi-aventis(Financial Instruments: Presentation), Sanofi has adopted the following classification for participating interestsnon-derivative financial assets, based on the type of asset and investment securities, based on management intent at the date of acquisitioninitial recognition (except for investmentsassets already held at the transition date and reclassified at that date in accordance with IFRS 1). The designation and classification of these investments is carried out at initial recognition andsuch financial assets are subsequently reassessed at each reporting date.
Purchases of investmentsNon-derivative financial assets are recognized on the date when sanofi-aventisSanofi becomes party to the contractual terms of such investments.the asset. On initial recognition, financial assets are measured at fair value, plus direct transaction costs in the case of financial assets not designated as fair value through profit or loss.
Classification, presentation and subsequent measurement of non-derivative financial assets are as follows:
These assets are classified in the balance sheet underin the line itemsFinancialNon-current financial assets, — currentCurrent financial assets andCash and cash equivalentsequivalents..
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Financial assets at fair value through profit or loss comprise financial 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. This category consists of financial assets acquired principally for the purpose of selling them in the near term (usually within less than 12 months). Derivative instruments are classified as held for trading unless they are designated as hedging instruments.
These 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 incomeorFinancial 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 incomeorFinancial expenses.
Available-for-sale financial assets are non-derivative financial assets that are (i) designated by management as available-for-sale or (ii) not classified as “financial"financial assets at fair value through profit or loss”loss", “held-to-maturity investments”"held-to-maturity investments" or “loans"loans and receivables”receivables". This category includes participating
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
interests in quoted or unquoted companies (other than investments in associates and joint ventures) that management intends to hold on a long-term basis. Available-for-sale financial assets are classified in non-current assets underFinancial assets — non-currentNon-current financial 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 an available-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 underFinancial income orFinancial expensesexpenses..
Interest income and dividends on equity instruments are recognized in the income statement underFinancial income when the Group is entitled to receive payment.
Available-for-sale financial assets in the form of participating interests in companies not quoted in an active market are measured at cost if their fair value cannot be measured reliably.
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 underFinancial income orFinancial expensesexpenses..
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity.
These investments are measured at amortized cost using the effective interest method.
Sanofi-aventisSanofi did not hold any such investments during the years ended December 31, 2009, 20082012, 2011 or 2007.2010.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented in current assets, underOther current assets in the case of loans and underAccounts receivable in the case of receivables. Loans with a maturity of more than 12 months are presented in “Long-term"Long-term loans and advances”advances" under FinancialNon-current financial assets — non current. 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 expensesincome orFinancial income.expenses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
B.8.2. Impairment of non-derivative financial assets
Indicators of impairment are reviewed for all non-derivative financial assets at each reporting date. Such indicators include default in contractual payments, significant financial difficulties of the issuer or debtor, probability of bankruptcy, or prolonged or significant decline in quoted market price. An impairment loss is recognized in the income statement whenif there is objective evidence that anof impairment resulting from one or more events after the initial recognition of the asset is impaired.(a "loss event") and this 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 an available-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 repaymentrepayments 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 that are not quoted in an active market and are 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 underFinancial expenses in the income statement.
Impairment losses in respect of trade receivables are recognized underSelling 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 as available-for-sale financial assets, cannot be reversed through the income statement.
B.8.3. Derivative instruments
Derivative instruments that do not designated as hedges of operating transactionsqualify for hedge accounting are initially and subsequently measured at fair value, with changes in fair value recognized in the income statement underinOther operating income or inFinancial income orFinancial expenses, in depending on the period whennature of the underlying economic item which they arise.are intended to hedge.
Derivative instruments qualifying as hedging instrumentsthat qualify for hedge accounting are measured in accordance with the hedge accounting requirements of IAS 39 (see Note B.8.4.).
B.8.4. Hedging
Hedging involves the use of derivative financial instruments. Changes in the fair value of these 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 hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the reporting periods for which the hedge was designated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
These 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.
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, underOther operating incomefor hedges of operating activities and underFinancial 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, thatwhich 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 underOther operating incomefor hedges of operating activities, and underFinancial income orFinancial expenses for hedges of investing or financing activities.
Cumulative changes in fair value of the hedging instrument previously recognized in equity are transferredreclassified to the income statement when the hedged transaction affects profit or loss. These transferred gains and losses are recorded underOther operating incomefor hedges of operating activities andFinancial income orFinancial expenses for hedges of investing or financing activities.
When a forecast transaction results in the recognition of a non-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 the 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 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.
AIn the case of a hedge of a net investment in a foreign operation, is accounted forchanges in the same way as a cash flow hedge. 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 underFinancial incomeorFinancial expenses. When the investment in the foreign operation is sold, or wholly or partially liquidated, the changes in the fair value of the hedging instrument previously recognized in equity are transferredreclassified to the income statement underFinancial incomeorFinancial expenses.
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. FinancialNon-derivative financial liabilities
Bank borrowings and debt instruments are initially measured at fair value of the consideration received, net of directly attributable transaction costs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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 underFinancial expensesin the income statement over the term of the debt using the effective interest method.
Liabilities related to business combinations and to non-controlling interests are split into a current portion and a non-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 to non-controlling interests.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair value adjustments to put options granted to non-controlling interests are recognized with a matching entry in equity.
Other non-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 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)
Year ended December 31, 2009
The table below sets forth the principles used to measure the fair value of the principal financial assets and liabilities recognized by sanofi-aventisthe Group in its consolidated balance sheet:
|
|
| Method used to determine fair value
| ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Market data | |||||||||||||||||||||||||||||
Level in IFRS 7 fair value hierarchy | |||||||||||||||||||||||||||||
Note | Type of financial instrument | Measurement principle | Valuation model | ||||||||||||||||||||||||||
Exchange | Interest rate | Volatility | |||||||||||||||||||||||||||
D.7. | Available-for-sale financial assets (quoted equity securities) | Fair value | 1 | Quoted market price | N/A | ||||||||||||||||||||||||
D.7. | Available-for-sale financial assets (unquoted debt securities) | Fair value | 2 | 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 | N/A | The amortized cost of long-term loans and advances at the balance sheet date is not materially different from their fair value. | |||||||||||||||||||||||||
D.7. | Fair value | 1 | Market value
| N/A | |||||||||||||||||||||||||
D.20. | Forward currency contracts | Fair value | 2 | Present value of future cash flows | ECB Fixing | < 1 year: Mid Money Market
| N/A | ||||||||||||||||||||||
D.20. | Currency options | Fair value | 2 |
knock-out feature:
Kohlhagen
| ECB Fixing |
| Mid money | ||||||||||||||||||||||
D.20. | Interest rate swaps | Fair value | 2 | Present value of future cash flows | N/A | < 1 year: Mid Money Market and LIFFE interest rate futures
| N/A | ||||||||||||||||||||||
D.20. | Cross-currency swaps | Fair value | 2 | Present value of future cash flows | ECB Fixing | < 1 year: Mid Money Market and LIFFE interest rate futures
| N/A | ||||||||||||||||||||||
D.13. | Investments in collective investment schemes | Fair value | 1 | Market value
| N/A | ||||||||||||||||||||||||
D.13. | Negotiable debt instruments, commercial paper, sight deposits and term deposits | Amortized cost | N/A | 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 | |||||||||||||||||||||||||
D.17. | Financial liabilities | Amortized cost(2) | N/A |
statements. |
D.18. | Liabilities related to business combinations and to non-controlling interests (CVRs) | Fair value | 1 | Quoted market price | N/A | |||||||||
D.18. | Liabilities related to business combinations and to non-controlling interests (except CVRs) | Fair value |
| 3 | Contingent consideration payable in a | |||||||||
|
The other financial assets and liabilities included in the Groupconsolidated balance sheet are the following:are:
allowance).NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Contingent considerations as part of business combinations:reliably, which are measured at amortized cost in accordance with IFRS 3, a financial liability is recognized if payment is more likely than not and a reliable estimate is determinable. The fair value of these financial liabilities is determined by discounting this estimate at the balance sheet date.
B.8.7. Derecognition of financial instruments
Sanofi-aventisSanofi derecognizes a financial assetsasset when the contractual rights to cash flows from these assetsthe asset have ended or have been transferred and when the Group has transferred substantially all risks and rewards of ownership of these assets.the asset. If the Group has neither transferred nor retained substantially all the risks and rewards of ownership of these assets, they area financial asset, it is derecognized if the Group does not retain the control of these assets.the asset.
Financial liabilities areA financial liability is derecognized when the Group’sGroup's contractual obligations in respect of such liabilities arethe liability is discharged, or cancelled or expired.
extinguished.
B.8.8. Risks relating to financial instruments
Market risks in respect of non-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. Inventories
Inventories are measured at the lower of cost or net realizable value. Cost is calculated using the weighted average cost method or the first-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 equivalents
Cash and cash equivalents as shown in the consolidated balance sheet and statement of cash flows comprise cash, plus liquid short-term investments that are (i) readily convertible into cash, and (ii) subject to an insignificant risk of changes in value in the event of movements in interest rates.
B.11. Treasury shares
In accordance with IAS 32, sanofi-aventisSanofi 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 risks
In accordance with IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), sanofi-aventisSanofi records a provision where it has 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
settled more than twelve months after the balance sheet date, or has no definite settlement date, the provision is recorded underProvisions and other non-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 (Incurred But Not Reported) techniques. These techniques use past claims experience, within the Group and 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, 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 date and has announced its intention to implement this plan to those affected by it.
No provisions are recorded for future operating losses.
Sanofi-aventisSanofi records long-termnon-current provisions for certain obligations such as legal environmental obligations and litigation where an outflow of resources is probable.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 rights
Under international agreements, the European Union has committed to reducing greenhouse gas emissions and instituted an emissions allowance trading scheme. Approximately ten sanofi-aventisSeven Sanofi sites in Europe are directly covered by the scheme. Sanofi-aventisSanofi 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”"Deliverable allowances" in order to recognize the liability to government in respect of actual CO2 emissions. If the allocated allowances are insufficient to cover actual emissions, an expense is recognized in order to reflect the additional allowances deliverable; this expense is measured at the market value of the allowances.
B.14. Revenue recognition
Revenue arising from the sale of goods is presented in the income statement underNet sales. Net sales comprise revenue from sales of pharmaceutical products, vaccines, and active ingredients, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities.
Revenue is recognized when all of the following conditions have been met: the risks and rewards of ownership have been transferred to the customer; the Group no longer has effective control over the goods sold; the amount of revenue and costs associated with the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction will flow to the Group, in accordance with IAS 18 (Revenue). In particular,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
(Revenue). In particular, the contracts between sanofi pasteurSanofi Pasteur and government agencies specify terms for the supply and acceptance of batches of vaccine; revenue is recognized when these conditions are met.
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. 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:
The Group also takes 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 of over-the-counter medicines.
In each case, the provisions are subject to continuous review and adjustment as appropriate based on the most recent information 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:
and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Non-product revenues, mainly comprising royalty income from license arrangements that constitute ongoing operations of the Group (see Note C.), are presented inOther revenues.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
B.15. 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 expenses
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"Intangible assets acquired in a business combination”,combination" describe the principles applied to the recognition of separately acquired research and development.
B.17. Other operating income and expenses
B.17.B.17.1. Other operating income
Other operating incomeincludes the share of profits that sanofi-aventisSanofi 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 and co-promotion agreements.
Upfront payments received are deferred for as long as a service obligation remains. 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 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.18.B.17.2. Other operating expenses
Other operating expenses mainly comprise the share of profits that alliance partners are entitled to receive from sanofi-aventisSanofi under product marketing agreements.
B.18. Amortization and impairment of intangible assets
B.19.B.18.1. Amortization of intangiblesintangible assets
The expenses recorded onin this line item mainly comprise amortization of product rights (see Note D.4.), which are presented as a separate item because the benefit of these rights to the Group’sGroup's commercial, industrial and development functions cannot be separately identified.
Amortization of software is recognized as an expense in the income statement, in the relevant line items of expense by function.
B.20. Operating income before restructuring, impairmentTable of property, plant and equipment and intangibles, gains and losses on disposals, and litigationContents
Operating income before restructuring, impairment of property, plant and equipment and intangibles, gains and losses on disposals, and litigation is presented as a separate line item in the consolidated income statement in accordance with paragraph 85 of the revised IAS 1 (Presentation of Financial Statements), because it is relevant to an understanding of the Group’s financial performance. This line item allows the Group to present
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009B.18.2. Impairment of intangible assets
separately items which, although they are components of operating income, nonetheless have a low degree of predictability because of their nature, frequency and/or materiality, and which if not presented separately would impair the understanding of the Group’s financial performance.
This line item corresponds to operatingrecords impairment losses (other than those associated with restructuring) recognized against intangible assets (including goodwill), and any reversals of such impairment losses.
B.19. Fair 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 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 beforestatement, in the three items described below:line itemFair value remeasurement of contingent consideration liabilities. This line item also includes the effect of the unwinding of discount, 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 litigation
B.20.1. Restructuring costs
Restructuring costsinclude 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.
Impairment of property, plantB.20.2. Other gains and equipment and intangibles
This line includes major impairment losses, (other than those directly attributable to restructuring) on property, plant and equipment and intangibles, including goodwill. It also includes any reversals of such losses.
Gains and losses on disposals, and litigation
This line comprises item includes the impact of material transactions of an unusual nature or amount which the Group believes it 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 litigation includes the following:
B.21. Financial expenses/expenses and income
B.21.1. Financial expenses
Financial expensesmainly 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), realized and unrealized foreign exchange losses on financing and investing activities, and impairment losses on financial instruments. They also include any reversals of impairment losses on financial instruments.
Financial expenses also include the expenses arising from the unwinding of discount on long-termnon-current provisions, except provisions for retirement benefits and other long-term employee benefits. This line does not include cash discounts, which are deducted from 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), realized and unrealized foreign exchange gains on financing and investing activities, and gains or losses on disposals of financial assets.
B.22. Income tax expense
Income tax expense includes all current and deferred taxes of consolidated companies.
Sanofi-aventisThe Sanofi Group accounts for deferred taxes in accordance with IAS 12 (Income Taxes), using the methods described below.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended Reforms to French business taxes were enacted on December 31, 2009 and apply as from January 1, 2010. The new tax, the CET (Contribution Economique Territoriale), has two components: the CFE (Cotisation Foncière des Entreprises) and the 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.
Given that part of the CVAE component is calculated as the amount by which certain revenues exceed certain expenses, and given that 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").
Deferred tax assets and liabilities are calculated using the tax rate expected to apply in the period when a temporary difference is expected to reverse, based on tax rates enacted or substantively enacted at the balance sheet date.
UnusedDeferred tax assets are recognized in respect of deductible temporary differences, tax losses available for carry-forward and unused tax credits are recognized as deferred tax assets to the extent that itfuture recovery is probable that future taxable profits will be available against which they can be utilized.regarded as probable. The recoverability of deferred tax assets is assessed on a case-by-case basis, taking account of the profit forecasts contained in the Group's long-term business plan.
Sanofi-aventisThe Sanofi Group recognizes a deferred tax liability for temporary differences relating to investmentsinterests in subsidiaries, and associates and to interests in 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.
No deferred tax is recognized on eliminations of intragroup transfers of investmentsinterests in subsidiaries, associates or associates.joint ventures.
For consolidation purposes, each tax entity calculates its own net deferred tax position. All net deferred tax asset and liability positions are then aggregated and shown as separate line items on the assets and liabilities sides of the consolidated balance sheet respectively. Deferred tax assets and liabilities can be offset only if (i) the Group has a legally enforceable right to set off current tax assets and current tax liabilities, and (ii) the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
Deferred taxes are not discounted, except implicitly in the case of deferred taxes on assets and liabilities which are themselves discounted.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, sanofi-aventisthe Sanofi Group complies with the revised IFRS 3 as regards the recognition of deferred tax assets after the initial accounting period. This means that ifthe Group recognizes in profit or loss for the period any deferred tax assets are recognized by the acquiree after the end of this period on temporary differences or tax loss carry-forwards existing at the dateacquisition date.
The positions adopted by the Group in tax matters are based on its interpretation of the combination, a corresponding reduction is madetax laws and regulations. Some of these positions may be subject to uncertainty. The Group assesses the amount of goodwill.
the tax liability to be recognized on the basis of the following assumptions: that its 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. The line itemIncome tax expense includes the effect of tax disputes, and any penalties and late payment interest arising from such disputes.
B.23. Employee benefit obligations
Sanofi-aventisThe Sanofi Group offers retirement benefits to employees and retirees of the Group. These benefits are accounted for in accordance with IAS 19 (Employee Benefits).
These benefits are in the form of either defined-contribution plans or defined-benefit plans.
In the case of defined-contribution plans, the contributions paid by sanofi-aventisSanofi are expensed in the period in which they occur, and no actuarial estimate is performed.
In the case of defined-benefit plans, sanofi-aventisSanofi recognizes its obligations to employees as a liability, based on an actuarial estimate of the rights vested and/or currently vesting in employees and retirees using the projected unit credit method. The amount of the liability is recognized net of the fair value of plan assets.
These estimates are performed at least once a year, and rely on demographic and financial assumptions aboutsuch as life expectancy, employee turnover, and salary increases. The estimated obligation is discounted.
In the case of multi-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 30 of IAS 19.
Obligations in respect of other post-employment benefits (healthcare, 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 balance sheet date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Actuarial gains and losses relating to defined-benefit plans (pensions and other post-employment benefits), arising from the effects of changes in actuarial assumptions and experience adjustments, are recognized in equity net of deferred taxes via the consolidated statement of comprehensive income, under the option allowed by the amendment to IAS 19.
All unrecognized actuarial gains and losses at the transition date, (JanuaryJanuary 1, 2004)2004, were recognized in retained earningsEquity attributable to equity holders of Sanofi at that date in accordance with the optional treatment allowed in IFRS 1 (First-time Adoption of International Financial Reporting Standards).1.
Past service cost is recognized as an expense on a straight-line basis over the average period until the benefits become vested. If benefits are already vested on the introduction of, or changes to, a defined benefitdefined-benefit plan, past service cost is recognized immediately as an expense.
Actuarial gains and losses and past service cost relating to other long-term employee benefits are recognized immediately in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.24. Share-based payment
B.24.1. Stock option plans
Sanofi-aventisSanofi has granted a number of equity-settled, share-based payment plans (stock option plans) to some of its employees.
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 matching entry recognized in equity. The expense corresponds to the fair value of the stock option plans, and is charged to income on a straight-line basis over the four-year vesting period of the plan.
The fair value of stock option plans is measured at the date of grant using the Black-Scholes valuation model, taking into account the expected life of the options. The expense recognized in this evaluation takes into account the expected cancellation rate of the options. The expense is adjusted over the vesting period to reflect the actual cancellation rates resulting from the departure of the holders of the options.
B.24.2. Employee share ownership plans
The sanofi-aventisSanofi 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. The discount is measured at the subscription date and recognized as an expense, with no reduction for any lock-up period.
B.24.3. Restricted share plans
Sanofi-aventisSanofi may award restricted share plans to certain of its employees. The terms of these plans may make the award contingent on performance criteria for some 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. Performance conditions are vesting conditions, and are built intoplan, with the fair value of the plan.matching entry credited to equity. Depending on the country, the vesting period of such plans is eitherbetween two orand four years. Plans with a two-year or three-year vesting period are subject to a two-year lock-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 a time-weighted basis from the acquisition date to reflect the number of sanofi-aventisSanofi 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
B.26. Segment information
In accordance with IFRS 8 (Operating Segments), the segment information reported by sanofi-aventisSanofi is prepared on the basis of internal management data provided to the Chief Executive Officer, who is the Group’sGroup's chief operating decision maker. The performance of these segments is monitored individually using internal reports and common indicators.
Sanofi-aventis reports information for twoThe segments reported by the Group correspond to its operating segments, with no aggregation. The Group consists of three operating segments: Pharmaceuticals, and humanHuman Vaccines (Vaccines). and Animal Health. All other activities are combined in a separate segment, Other. These segments reflect the Group’sGroup's internal organizational structure, and are used internally for performance measurement and resource allocation.
Information on operating segments is provided in Note D.34. “Split"Split of net sales”sales" and Note D.35. “Segment information”"Segment information".
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, or repurchase its own shares, or issue new shares, or issue securities giving access to its capital.
The following objectives are defined under the terms of the Group’sGroup's share repurchase programs:
The Group is not subject to any constraints on equity capital imposed by third parties.
The gearing ratio (the ratio of debt, net of cash and cash equivalents to total equity) is a non-GAAP financial indicator used by management to measure overall net indebtedness and to manage the Group’s equity capital.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Total equity includesEquity attributable to equity holders of the CompanySanofi andMinorityEquity attributable to non-controlling interests, as shown on the consolidated balance sheet. Debt,We define "Debt, net of cash and cash equivalents is definedequivalents" as (i) the sum total of short-term debt, plus 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.
For trends in this ratio, see Note D.17.
B.28. New pronouncements issued by the IASB standards, amendments and interpretations applicable from 20102013 onwards
New standards and interpretations appliedpronouncements applicable in 2012 with an impact on the consolidated financial statements for the first time in 2009 are described in Note A.2. “New standards, amendments and interpretations applicable in 2009”.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The note below describes standards, amendments and interpretations issued by the IASB that will be mandatorily applicablehave mandatory application in 20102013 or subsequent years, and the Group’sGroup's position regarding future application.
None of these standards, amendments or interpretations has been early adopted by the Group.
B.28.1. Standards and amendments applicable to the sanofi-aventisSanofi consolidated financial statements
At the start of 2008,In May 2011, the IASB issued revised versionsfive standards (or amendments to standards) designed to improve the principles applied in the preparation of consolidated financial statements and the disclosure requirements for joint arrangements and for any type of entity in which an interest is held. In June 2012, the Accounting Regulatory Committee (ARC) issued a recommendation that these five pronouncements (the first five listed below) should have mandatory application within the European Union no later than annual periods beginning on or after January 1, 2014, with an option for early adoption. The Sanofi Group will apply these standards and amendments (all of which were endorsed by the European Union in December 2012) with effect from January 1, 2013.
The revised IFRS 3 (Business Combinations), which is applicable to financial periods beginning on or after July 1, 2009, changes the way inaccounting for arrangements that give joint control, which the acquisition method is applied. Firstly, the revised standard introduces an option to calculate goodwill 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. Secondly, in the case of a step acquisition, the previously-held equity interest in the acquiree must be remeasured at its acquisition-date fair value, with the difference between this fair value and the carrying amount taken to profit or loss, along with any gains or losses relating to the previously-held interest that were initially recognized directly in equity (other comprehensive income) and are reclassifiable to profit or loss. Thirdly, contingent purchase consideration must be recognized at fair value at the acquisition date irrespective of the probability of payment, with the obligation to pay recognizedclassified either as a liability"joint operation" or as equity; if this obligationa "joint venture". Whether an arrangement is initially recognizedclassified as a liability, subsequent adjustments must be recognizedjoint operation or a joint venture depends on the rights to the assets of the arrangement, and obligations for the liabilities of the arrangement, of each of the parties under the terms of the contractual arrangement establishing joint control. Under IFRS 11, proportionate consolidation is no longer a permitted option; the Group has not made use of this option. The Group has completed its assessment of IFRS 11, which will have no impact on the scope of consolidation.
The amendments toTwo standards — IAS 27 (Consolidated and SeparateSeparated Financial Statements) applyand IAS 28 (Investments in Associates) were amended, to bring them into line with the changes introduced by the publication of IFRS 10, IFRS 11 and IFRS 12.
In 2008,October 2012, the IASB issued an amendment to IAS 39 (Financial Instruments: RecognitionIFRS 10, IFRS 11 and Measurement), applicable to financial periods beginningIFRS 12 on or after July 1, 2009, relating to eligibility for hedge accounting. In particular, the amendment specifies (i) the conditions under which the inflation risk on a debt instrument is eligible for hedge accounting, and (ii) the treatment to be applied to the ineffectiveness of the time value element of options designated as hedges.Investment Entities. This amendment has no impact on the consolidated financial statements of sanofi-aventis because (i) the Groupis applicable from January 1, 2014, and has not issued any inflation-linked debt instruments and (ii) the accounting treatment applied by the Group to the time value element of options designated as hedges already complies with the treatment specified by the amendment. This amendment hasyet been adoptedendorsed by the European Union. The Group does not expect this amendment to have an impact on its consolidated financial statements. An investment entity is an entity meeting specific criteria; in particular its corporate purpose is to invest funds in order to obtain returns in the form of capital appreciation or investment income. The amendment requires investment entities to account for their investment in the entities they control at fair value through profit or loss; this is an exception to the IFRS 10 consolidation requirements. The Group does not expect this amendment to have an impact on its consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
In May 2011, the IASB and the FASB jointly issued a standard proposing a common definition of fair value, and application guidance. The first “Annual Improvementsstandard — IFRS 13 (Fair Value Measurement) under IFRS — also specifies the disclosures to IFRSs”be made to help users of financial statements understand how fair value is measured. The standard issued in 2008, includes an amendment to IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations), mandatorily applicable simultaneously withdoes not change the scope of application of the revised IAS 27. This amendment clarifies the treatment under IFRS 5 of partial disposals resulting in loss of control,fair value accounting. It will have mandatory application as from January 1, 2013 and specifies that in such cases all assets and liabilities of the subsidiary must be classified as “held for sale”. This standard has been adoptedwas endorsed by the European Union andin December 2012. The Group is applicable to financial periods beginning on or after July 1, 2009. The practice applied by sanofi-aventis already complies withcurrently assessing this amendment (see Note B.7.).
In April 2009, the IASB issued the second “Annual Improvements to IFRSs” standard. The most relevant amendments to sanofi-aventis are described below. They are not inconsistent with the standards they amend, because they merely provide clarification to the existing text, and sanofi-aventisnew standard, but does not expect their applicationit to have a material impact. This standard has not yet been adoptedimpact on the financial statements.
In June 2011, the IASB issued an amended version of IAS 19, which will have mandatory application from January 1, 2013 and was endorsed by the European Union.Union on June 5, 2012. The amendment must be applied retrospectively, which means that it must be applied to comparative periods as though it had always been applied.
Applying the amendments to IAS 19 would have had an overall negative impact on net income of €78 million in 2012 and €47 million in 2011. The main components of the impact are:
In December 2011, the IASB issued two amendments on the offsetting of financial assets and financial liabilities:
IFRS 8 (Operating Segments). This amendment isIAS 32 (Financial Instruments: Presentation), applicable retrospectively to financialannual periods beginning on or after January 1, 2010,2014, which clarified the requirements relating to offsetting.
These amendments, which do not alter the current accounting treatment of offsetting, have no impact on the Group's financial statements. They were endorsed by the European Union in December 2012.
In May 2012, the IASB issued Annual Improvements to IFRSs: 2009-2011 Cycle, as part of its annual process of revising and clarifies that segment information about total assets is only required if this information is regularly provided toimproving existing standards. This pronouncement has not yet been endorsed by the entity’s chief operating decision maker.
IAS 18 (Revenue).European Union. The appendix to IAS 18 has been supplemented by examples to help determine whether an entity is acting as principal or agent in a transaction.
Amendment to IAS 36 (Impairment of Assets). This amendment isamendments it contains will be applicable to financialannual periods beginning on or after January 1, 2010,2013. The Group does not expect these amendments to have a material impact on its financial statements. The principal amendments are:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In late 2009, the IASB issued IFRS 8 before aggregation.
Amendment to IAS 38 (Intangible Assets)9 (Financial Instruments), on measuringwhich has not yet been endorsed by the fair value of intangible assets acquired in a business combination. The amendment,European Union. This standard is applicable to financial periods beginning on or after July 1, 2009, clarifies the criteria for the identification of intangible assets acquired in a business combination and accounted for separately from goodwill. A further change clarifies the scope of fair value measurement techniques for intangible assets for which there is no active market.
Amendment to IAS 39 (Financial Instruments: Recognition and Measurement) on cash flow hedge accounting. These changes, which apply to financialannual periods beginning on or after January 1, 2010, confirm that gains or losses on a hedged item must be reclassified from equity to profit or loss in the same period as that in which the hedged forecast cash flows affect profit or loss.
In late 2009, the IASB issued the following standards2015, and amendments, of which only the amendment to IAS 32 had been adopted by the European Union at the balance sheet date:
Amendment to IAS 24 (Related Party Disclosures). This amendment, applicable to financial periods beginning on or after January 1, 2011, sets out the disclosure requirements in respect of future commitments related to a particular event involving related parties. Sanofi-aventis already discloses such information. The amendment also aims to simplify the disclosure requirements for entities that are related to a government department or agency; this part of the amendment does not apply to sanofi-aventis.
IFRS 9 (Financial Instruments). This standard is intended to replace IAS 39 (Financial Instruments: Recognition and Measurement); it completes the first of the three phases of the IASB financial instruments project,project. The next two phases will deal with "Financial Instruments: Amortized Cost and Impairment" and "Hedge Accounting". The three phases of IFRS 9 are intended to replace IAS 39 (Financial Instruments: Recognition and Measurement). The Group will assess the overall impact of IFRS 9 once all the phases have been published.
In March 2012, the IASB issued "Government Loans", an amendment to IFRS 1. Because IFRS 1 deals solely with the classification and measurementfirst-time adoption of financial assets. This standard will be applicable to financial periods beginning on or after January 1, 2013.
Amendment to IAS 32 (Financial Instruments: Disclosure), on the classification of rights issues. ThisIFRS, this amendment is applicable to financial periods beginning on or after February 1, 2010, and deals
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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Standards and amendments not applicable to the sanofi-aventis consolidated financial statementsGroup.
B.28.2. New interpretations
The IASB has issued IFRIC 20 (Stripping Costs in the following amendments (not yet adopted by the European Union) in 2009 and early 2010:
Amendment to IFRS 2 (Share-Based Payment), relating to group cash-settled share-based payment transactions.Production Phase of a Surface Mine). This amendment,interpretation will be applicable from January 1, 2010, clarifies how the subsidiary of a group (within the meaning of IAS 27, Consolidated and Separate Financial Statements) should account for some group and treasury share-based payment transactions in its individual financial statements. These amendments relate solely to individual financial statements or to the financial statements of sub-groups reporting under IFRS, and hence have no impact on the consolidated financial statements of sanofi-aventis. The amendments to IFRS 2 also incorporate guidance previously included in IFRIC 8 (Scope of IFRS 2) and IFRIC 11 (IFRS 2 — Group and Treasury Share Transactions).
Amendments to IFRS 1 (First-Time Adoption of IFRS), one allowing additional exemptions for first-time adopters, the other relating to IFRS 7. These amendments are applicable from 2010, but relate solely to first-time adopters of IFRS and hence have no impact on the consolidated financial statements of sanofi-aventis.
New interpretations
The IASB has also issued the following interpretations, which are mandatorily applicable from 2010 onwards:
IFRIC 17 (Distributions of Non-cash Assets to Owners). This interpretation, which has been adopted by the European Union and is applicable to financial periods beginning on or after July 1, 2009, specifies that a distribution of non-cash assets as dividend must be recognized when it has been duly authorized by the competent body, and measured at the fair value of the assets distributed. At the end of each reporting period and at the date of settlement, the fair value of these assets is reviewed, and the amount of dividend payable is adjusted via equity. When the dividend is settled, any difference between the carrying amount of the assets distributed and the carrying amount of the dividend payable is recognized in profit or loss. Because sanofi-aventis does not distribute non-cash assets as dividend, this interpretation is not applicable to its consolidated financial statements.
IFRIC 19 (Extinguishing Financial Liabilities with Equity Instruments). This interpretation, which applies to financial periods beginning on or after July 1, 20102013, and has not yet been adoptedendorsed by the European Union, addresses the classification and measurement methods to be used by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor to extinguish all or part of the financial liability. Given the absence of any transaction falling within the scope of this interpretation, IFRIC 19Union. It does not apply to the consolidated financial statementsactivities of sanofi-aventis.
Amendment to IFRIC 14 (IAS19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction). This amendment, applicable to financial periods beginning on or after January 1, 2011 and not yet adopted by the European Union, is intended to clarify the scope and terms of IFRIC 14. It specifies the conditions for the application of IFRIC 14 to contributions intended to meet minimum funding requirements, and will be applicable from 2011 onwards. Sanofi-aventis does not expect this interpretation to have a material effect on its consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Group.
C.1. Alliance arrangements with Bristol-Myers Squibb (BMS)
Two of the Group’sGroup's leading products were jointly developed with BMS: the antihypertensiveanti-hypertensive agent irbesartan (Aprovel®(Aprovel®/Avapro®Avapro®/Karvea®Karvea®) and the anti-atherothrombosis treatment clopidogrel bisulfate (Plavix®(Plavix®/Iscover®Iscover®).
As inventor of the two molecules, sanofi-aventisSanofi is paid a royalty on alla portion of sales generated by these products. Thisproducts in the co-promotion and co-marketing territories. The portion of this royalty received by Sanofi on sales generated by BMS in territories under the operational management of BMS (see below) is recorded inOther revenues.
As co-developers of the products, sanofi-aventisSanofi and BMS each receive equal development royalties from their two licensees, which have been responsible, since 1997, for marketing the products using their local distribution networks, composed of subsidiaries of both groups. These licensees operate in two separate territories: (i) Europe, Africa, Asia and Asia,the Middle East, under the operational management of sanofi-aventis;Sanofi; and (ii) other countries (excluding Japan), under the operational management of BMS. In Japan, Aprovel®Aprovel® has since June 2008 been marketed jointly by Shionogi Pharmaceuticals and Dainippon Sumitomo Pharma Co. Ltd.Ltd since June 2008. The alliance with BMS does not cover the rights to Plavix®Plavix® in Japan, where the product is marketed by sanofi-aventis.Sanofi.
The products are marketed in different ways in different countries.
Co-promotion consists of a pooling of sales resources under a single brand name, and is preferably achieved through contracts or through appropriate tax-transparent legal entities. Each partner records directly its share of taxable income.
Co-marketing consists of separate marketing of the products by each local affiliate using its own name and resources under different brand names for the product.
In certain countries of Eastern Europe, Africa, Asia, Latin America and the Middle East, the products are marketed on an exclusive basis either by sanofi-aventis or by BMS.Sanofi.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the territory managed by sanofi-aventis,Sanofi, operations are recognized by the Group as follows:
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The presentation ofline itemMinorityNon-controlling interests, excluding BMS in the consolidated statement of cash flows takes account of the specific terms of the alliance agreement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
In the territory managed by BMS, operations are recognized by the Group as follows:
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 will return 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, 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 to buy out the non-controlling interests (see Notes D.16. and 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.
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In addition, under the terms of the 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 as compensation for the loss caused by the Avalide® supply disruption in the United States in 2011.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
C.2. Alliance arrangements with Regeneron
Zaltrap® (aflibercept) is a solution administered by intravenous perfusion, used in association with 5-fluorouracil, leucovorin and irinotecan (FOLFIRI) as a treatment for metastatic colorectal cancer.
In September 2003, Sanofi and Regeneron signed an agreement to collaborate on the development and commercialization of Zaltrap® (see Note D.21.). 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 itemOther 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® is a registered trademark of Regeneron Pharmaceuticals, Inc. The product was approved by the U.S. Food and Drug Administration (FDA) in August 2012, and has been marketed in the United States since that date.
In Japan, Sanofi will develop and commercialize Zaltrap®, with Regeneron entitled to receive a royalty.
In November 2007, Sanofi and Regeneron signed additional agreements under which Sanofi committed to funding the development costs of Regeneron's human monoclonal antibody research program until 2017, up to a maximum of $160 million a year (see Note D.21.). Sanofi has an option to license for further development any antibodies discovered by Regeneron that attain Investigational New Drug (IND) status.
If such an option is exercised, Sanofi is primarily responsible for funding, and co-develops the antibody with Regeneron. Sanofi and Regeneron would share co-promotion rights and profits on sales of the co-developed antibodies. Development costs for the drug candidate are shared between the companies, with Sanofi generally funding these costs up front, except that following receipt of the first positive Phase III trial results for a co-developed drug candidate, subsequent Phase III trial-related costs for that drug candidate are shared 80% by Sanofi and 20% by Regeneron. Once a product begins to be marketed, Regeneron will progressively repay out of its profits 50% of the development costs borne 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 products in any calendar quarter towards reimbursing Sanofi for these development costs. Under the terms of the collaboration agreement, Sanofi may also be required to make milestone payments based on aggregate sales of antibodies. In 2012, six antibodies were in clinical development; two of which were in Phase III.
If Sanofi does not exercise its licensing option for an antibody under development, Sanofi will be entitled to receive a royalty once the antibody begins to be marketed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
C.3. Alliance agreements with Warner Chilcott (previously with Procter & Gamble Pharmaceuticals) (the “Alliance Partner”Pharmaceuticals, the "Alliance Partner")
Actonel®Actonel® (risedronate sodium) is a new-generation biphosphonate indicated for the treatment and prevention of osteoporosis. Historically, Actonel®Actonel® was developed and marketed in collaboration with Procter & Gamble Pharmaceuticals. Procter & Gamble sold its pharmaceuticals interests to Warner Chilcott on October 30, 2009. Consequently, Actonel®Actonel® has, since that date, been marketed in collaboration with Warner Chilcott.
This alliance agreement covers the worldwide development and marketing of the product, except for Japan for which sanofi-aventisthe Group holds no rights.
Local marketing arrangements may take various forms:
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Co-marketing, which applies in Italy, whereby each party to the alliance agreement sells the product in the country under its own name, and recognizes all revenue and expenses from its own operations in its income statement. Each company also markets the product independently under its own brand name in Spain, although Spain is not included in the co-marketing territory.
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 entail the termination of the Actonel® Alliance. Pursuant to this decision, the alliance will remain in effect until January 1, 2015.
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D.1.1. Business combinations during 2012
During the year, Sanofi completed the acquisitions of Pluromed, Inc. (Biosurgery) and Newport (Animal Health). The impact of these acquisitions was not material at Group level (see Note D.4.).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009D.1.2. Final purchase price allocation for 2011 acquisitions
– Genzyme
Sanofi acquired control of Genzyme Corporation (Genzyme) at a cash price of $74 per share or $20.4 billion (€14.3 billion) on April 4, 2011, the completion date of the public exchange offer for all of the outstanding shares of common stock of Genzyme. Genzyme, a wholly-owned subsidiary of Sanofi, is a biotechnology group headquartered in Cambridge, Massachusetts (United States). Genzyme's primary areas of focus were rare diseases, renal endocrinology, oncology and biosurgery.
D. DETAILED NOTES TO THE FINANCIAL STATEMENTS
D.1. Significant acquisitions
Acquisitions are accounted for using the accounting policies described in Note B.3. “Business combinations”.
The principal acquisitions during 2009 were as follows:
- Merial
Further to the agreement signed July 29, 2009, sanofi-aventis completed on September 17, 2009As part of the acquisition, Sanofi issued one contingent value right (CVR) per Genzyme share held by Genzyme shareholders. Sanofi issued 291 million CVRs.
The CVRs (representing a maximum commitment of $4.1 billion at the acquisition date) are listed on the NASDAQ market under the ticker "GCVRZ". As of April 4, 2011, the quoted price per CVR was $2.35, equivalent to $685 million (€481 million) for all the CVRs issued. This price was used as the basis for determining the overall fair value of the interest held by Merck & Co., Inc. (Merck) in Merial Limited (Merial) for a consideration of $4 billion in cash. Founded in 1997, Merial was previously held jointly (50/50) by Merck and sanofi-aventis, and is now 100% held by sanofi-aventis. Merial is one of the world’s leading animal health companies, with sales of $2.6 billion in 2009. With effect from September 17, 2009, sanofi-aventis has held 100% of the shares of Merial and has exercised exclusive control over the company.contingent consideration. In accordance with IAS 27, Merial is accounted for by the full consolidation methodrevised IFRS 3, this contingent consideration was measured at fair value at the acquisition date and included in the consolidated financial statementsprice paid to acquire control of sanofi-aventis.
In connection with the agreement signed on July 29, 2009, sanofi-aventis also signed a call option agreement giving it the possibility, once the Merck/Schering-Plough merger is completed, of combining Intervet/Schering-Plough Animal Health and Merial in a joint venture held 50/50 by Merck and sanofi-aventis. The terms of the option contract set a value of $8 billion for Merial. The minimum total value received by Merck and its subsidiaries in considerationGenzyme for the transferpurposes of Intervet/Schering-Ploughdetermining goodwill. The liability related to the combined entity would be $9.25 billion, comprising a minimum value of $8.5 billion for Intervet/Schering-Plough (subject to potential upward revision after valuations performed by the two parties) and an additionalthis contingent consideration of $750 million. On completion of the valuation of Intervet/Schering-Plough and after taking account of certain adjustments customary in this type of transaction, a balancing payment would be made to establish 50/50 parity between Merck and sanofi-aventisis recognized in the combined entity.balance sheet line itemLiabilities related to business combinations and to non-controlling interests (see Note D.18.).
Detailed information about the impact of Merial on the consolidated financial statements of sanofi-aventis at December 31, 2009 is provided in Note D.8. “Assets held for sale or exchange”.
The provisionalfinal purchase price allocation of Merial is shown below:
($ million) | Historical cost | Fair value remeasurement | Fair value | |||||||
Intangible assets | 147 | 4,670 | 4,817 | |||||||
Property, plant and equipment | 740 | 130 | 870 | |||||||
Deferred taxes | 53 | (1,343 | ) | (1,290 | ) | |||||
Inventories | 492 | 241 | 733 | |||||||
Other assets and liabilities | 264 | (46 | ) | 218 | ||||||
Net assets of Merial as of September 17, 2009 | a | 1,696 | 3,652 | 5,348 | ||||||
Share of net assets acquired as of September 17, 2009 (50%) | b | 2,674 | ||||||||
Goodwill (September 17, 2009 transaction) | c | 1,362 | ||||||||
Purchase price | d = b+c | 4,036 | (1)(2) |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The value of Merial in the consolidated financial statements of sanofi-aventis breaks down as follows:
(€ million) | acquisition date | ||||||
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| 1,933 | ||||||
Other intangible assets | 10,059 | ||||||
| 103 | ||||||
Inventories | 925 | ||||||
| 764 | ||||||
Cash and cash equivalents | 1,267 | ||||||
Long-term and short-term debt | (835 | ) | |||||
Liability related to the "Bayer" contingent consideration | (585 | ) | |||||
Accounts payable | (315 | ) | |||||
Deferred taxes | (2,911 | ) | |||||
Other assets and liabilities | (166 | ) | |||||
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Goodwill | |||||||
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On August 31, 2009, sanofi-aventis acquired ShanH, a company that controls
Shantha has generated net sales of €17 million since the acquisition date.
TheOn completion of the valuations carried out during the measurement period, the deferred tax liability was €489 million higher than in the provisional purchase price allocation is shown below:
(€ million) | Historical cost | Fair value remeasurement | Fair value | ||||||
Intangible assets | — | 374 | 374 | ||||||
Property, plant and equipment | 26 | 96 | 122 | ||||||
Deferred taxes | (3 | ) | (160 | ) | (163 | ) | |||
Other assets and liabilities | 1 | (1 | ) | — | |||||
Net assets of Shantha as of August 31, 2009 | 24 | 309 | 333 | ||||||
Assets and liabilities attributable to minority interests | 12 | ||||||||
Share attributable to equity holders of the Company | 321 | ||||||||
Goodwill | 250 | ||||||||
Purchase price | 571 |
- BiPar
On April 27, 2009, sanofi-aventis acquired 100%as of BiPar Sciences (BiPar), an American biopharmaceutical company developing novel tumorselective approachesDecember 31, 2011 (see Note D.1.1 to the financial statements for the treatment of different types of cancers. BiPar is the leading company in the emerging field of DNA (DeoxyriboNucleic Acid) repair using Poly ADP-Ribose Polymerase (PARP) inhibitors. The pivotal Phase III trial for BSI-201, BiPar’s lead product candidate in metastatic triple negative breast cancer, started in July 2009.
The purchase price is contingent on the achievement (regarded as probable) of milestones relatedyear ended December 31, 2011). This increase was mainly due to the finalization of the assessment of the tax regimes applicable to the €10,059 million of intangible assets. This assessment was finalized within the measurement period, in accordance with paragraph 45 of the revised IFRS 3. Consequently, the comparative amounts reported for 2011 have been revised, in accordance with paragraph 49 of the revised IFRS 3.
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009alemtuzumab (under the brand name LemtradaTM), a molecule currently under development for multiple sclerosis, as well as the rights to the products Campath®, Fludara® and Leukine®.
This pre-existing contingent consideration was measured at its fair value as of April 4, 2011, and was recognized as a liability in the balance sheet line itemLiabilities related to business combinations and to non-controlling interests. The amount is remeasured at fair value at each reporting date. The impact of the resulting fair value adjustment is recognized in profit or loss in the line itemFair value remeasurement of contingent consideration liabilities, in the same way as other contingent consideration on business combinations (see Note D.18.).
Acquisition-related costs recognized in profit or loss in 2011 amounted to €65 million, mostly recorded in the line itemOther operating expenses.
The impact of this acquisition, as reflected in the statements of cash flows in the line itemAcquisitions of investments in consolidated undertakings, net of cash acquired, was a net cash outflow of €13.1 billion.
– BMP Sunstone
On February 24, 2011, Sanofi completed the acquisition of 100% of BMP Sunstone Corporation, a pharmaceutical company previously quoted on the NASDAQ market, which is developing a portfolio of branded pharmaceuticals and healthcare products in China. Through BMP Sunstone, the Group manufactures pediatric and feminine healthcare products, sold in pharmacies across the country.
The purchase consideration was €384 million, excluding acquisition-related costs of €4 million that were recognized mainly in the line itemOther operating expenses in 2011.
The provisionalfinal purchase price allocation for this acquisition was completed in 2012, and was not materially different from the provisional allocation in 2011.
– Topaz Pharmaceuticals, Inc.
In October 2011, Sanofi acquired Topaz Pharmaceuticals Inc., a U.S. pharmaceutical research company which has developed an innovative anti-parasitic treatment for head lice. An upfront payment of BiPar is shown below:
($ million) | Historical cost | Fair value remeasurement | Fair value | |||||
Intangible assets(1) | — | 715 | 715 | |||||
Deferred taxes | 26 | (257 | ) | (231 | ) | |||
Other assets and liabilities | 2 | — | 2 | |||||
Net assets of BiPar as of April 27, 2009 | 28 | 458 | 486 | |||||
Goodwill | — | |||||||
Purchase price | 486 |
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- Medley
On April 27, 2009, sanofi-aventis acquired 100%$35 million was made upon closing of the shares of Medley, Brazil’s third largest pharmaceutical companytransaction. The agreement provides for other potential milestone payments when the product obtains marketing approval and a leading generics company, with net sales of approximately €160 million in 2008. The purchase price, based on a €500 million enterprise value, was €348 million inclusivethe attainment of acquisition-related costs.sales targets. The total amount of these payments, including the upfront payment, could reach $207.5 million.
Since the acquisition date, Medley has generated net sales of €163 million and business operating income (as defined in Note D.35. below) of €58 million. Medley’s contribution to net income attributable to equity holders of the Company was €17 million; this figure takes account of expenses charged during the period in relation to the fair value remeasurement of assets at the acquisition date.
The provisionalfinal purchase price allocation for this acquisition was completed in 2012, and was not materially different from the provisional allocation in 2011.
– Universal Medicare Private Limited
In November 2011, Sanofi acquired the business of Medley is shown below:Universal Medicare Private Limited, one of the leading Indian producers of neutraceuticals and life management products, including vitamins, antioxidants, mineral supplements and anti-arthritics, for a consideration of €83 million.
(€ million) | Historical cost | Fair value remeasurement | Fair value | ||||||
Intangible assets | 2 | 168 | 170 | ||||||
Property, plant and equipment | 35 | 10 | 45 | ||||||
Deferred taxes | 26 | (71 | ) | (45 | ) | ||||
Long-term and short-term debt | (118 | ) | — | (118 | ) | ||||
Other assets and liabilities | (89 | ) | 2 | (87 | ) | ||||
Net assets of Medley as of April 27, 2009 | (144 | ) | 109 | (35 | ) | ||||
Goodwill | 383 | ||||||||
Purchase price | 348 |
The final purchase price allocation for this acquisition was completed in 2012, and was not materially different from the provisional allocation in 2011.
- ZentivaD.1.3. Disposals
On March 11, 2009, sanofi-aventis successfully closedIn 2012, Sanofi sold its offer for Zentiva N.V. (Zentiva). As of December 31, 2009, sanofi-aventis held about 99.1% of Zentiva’s share capital. The purchase price was €1,200 million, including acquisition-related costs. Prior to this acquisition, sanofi-aventis had owned 24.9% of Zentiva, which was accounted for as an associate using the equity method (see Note D.6.). The Zentiva group reported sales of CZK 18,378 million (€735 million)39.1% interest in 2008.Société Financière des Laboratoires de Cosmétologie Yves Rocher.
Since the acquisition date, Zentiva has generated net sales of €457 million andIn 2011, Sanofi sold its Dermik dermatology business operating income (as defined in Note D.35. below) of €60to Valeant Pharmaceuticals International Inc. for €321 million. The contribution made by Zentiva entities to net income attributable to equity holderstransaction includes all Dermik assets, including a portfolio of the Company was a lossseveral leading brands in
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
therapeutic and esthetic dermatology such as Benzaclin®, Carac® and Sculptra®, and a manufacturing site in Canada.
Year ended December 31, 2009 The pre-tax loss arising from this sale was recognized in 2011 in the line itemOther gains and losses, and litigation (see Note D.28.).
The provisional purchase price allocation of Zentiva is shown below:
(€ million) | Historical cost | Fair value remeasurement | Fair value | ||||||||
Intangible assets | 123 | 853 | 976 | ||||||||
Property, plant and equipment | 303 | 59 | 362 | ||||||||
Deferred taxes | (1 | ) | (176 | ) | (177 | ) | |||||
Inventories | 100 | 17 | 117 | ||||||||
Cash and cash equivalents | 81 | — | 81 | ||||||||
Long-term and short-term debt | (633 | ) | — | (633 | ) | ||||||
Other assets and liabilities | 74 | 25 | 99 | ||||||||
Net assets of Zentiva as of March 31, 2009 | a | 47 | 778 | 825 | |||||||
Share attributable to minority interests in the Zentiva sub-group | b | 35 | |||||||||
Equity interest acquired March 31, 2009 (74.2%) | c | 586 | |||||||||
Goodwill (transaction of March 31, 2009) | d | 614 | |||||||||
Purchase price | e=c+d | 1,200 | (1) |
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The value of Zentiva in the consolidated financial statements of sanofi-aventis breaks down as follows:
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The other principal business combinations inThere were no material disposals during the year ended December 31, 20092010.
D.1.4. Business combinations during 2010
The principal acquisitions in 2010 were as follows:
– TargeGen, Inc. (TargeGen)
In July 2010, Sanofi acquired 100% of the capital of TargeGen, Inc., a U.S. biopharmaceutical company developing small molecules 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. The agreement provides for other potential milestone payments at various stages in the development of TG 101 348, TargeGen's principal product candidate. The total amount of payments (including the upfront payment) could reach $560 million. The final purchase price allocation for this acquisition was not materially different from the provisional allocation.
- Chattem, Inc. (Chattem)
On February 9, 2010, Sanofi successfully completed a cash tender offer for Chattem, based in Chattanooga (United States). Chattem has become Sanofi's platform in the United States for consumer health products and over-the-counter products and has managed the Allegra® brand since 2011. The final purchase price allocation for this acquisition was not materially different from the provisional allocation.
The principalother acquisitions during 2008in 2010 were as follows:
On September 25, 2008, sanofi-aventis completedThe acquisition in April 2010 by Sanofi of a controlling interest in the acquisitioncapital of Acambis plc for £285 million. Acambis plc became Sanofi Pasteur Holding Ltd,Bioton Vostok, a wholly-owned subsidiaryRussian insulin manufacturer. Under the terms of Sanofi Pasteur Holding S.A. This company develops novel vaccines that address unmet medical needs or substantially improve current standards of care. Sanofi Pasteur and Acambis plcthe agreement, put options were already developing vaccines in a successful partnership of more than a decade: Acambis plc was conducting three of its major projects under exclusive collaboration agreements with sanofi pasteur, for vaccines against dengue fever, Japanese encephalitis and West Nile virusgranted to non-controlling interests (see Note D.4.D.18.).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009D.2. Merial
- Symbion Consumer
On September 1, 2008, sanofi-aventis completed the acquisition In March 2010, Sanofi exercised its contractual right to combine its Animal Health business (Merial) with that of Merck (Intervet/Schering-Plough) to form a new joint venture owned equally by Merck and Sanofi. Consequently, all of the Australian company Symbion CP Holdings Pty Ltd (Symbion Consumer)assets and liabilities of Merial were reported respectively in the line itemsAssets held for AUD560 million. Symbion Consumer manufactures, marketssale or exchange and distributes nutraceuticals (vitaminsLiabilities related to assets held for sale or exchange, and mineral supplements) and over the counter brands throughout Australia and New Zealand. Symbion Consumer has a portfolionet income of brands including Natures Own, Cenovis, Bio-organics, Golden Glow and Microgenics. In 2007, Symbion Consumer sales amounted to around AUD190 million. Symbion Consumer isMerial was reported in the market leaderline itemNet income from the held-for-exchange Merial business, in Australia,accordance with an estimated 21% market shareIFRS 5 (see Note D.4.).
The principal acquisition during 2007 was as follows:
- Regeneron
In November 2007, sanofi-aventis acquired 12 million newly-issued shares in the biopharmaceutical company Regeneron Pharmaceuticals Inc. (Regeneron) for $312 million, raising its interest in Regeneron from approximately 4% to approximately 19%. These shares are classified as an available-for-sale financial asset, and are included inFinancial assets — non-current (see Note D.7.B.7.).
However, on March 22, 2011, Merck and Sanofi announced the end of the agreement to form a new joint venture in animal health and the decision to maintain two separate entities, Merial and Intervet/Schering-Plough, operating independently. This decision was primarily due to the complexity of implementing the proposed transaction, both in terms of the nature and extent of the anticipated divestitures and the length of time necessary for the worldwide antitrust review process.
As a result, Sanofi's investment in Merial has since January 1, 2011 been presented in the relevant line items of the consolidated balance sheet and income statement. In accordance with IFRS 5 (see Note B.7.), this change in accounting method was treated as follows:
D.2. DivestmentsTable of Contents
No material divestments occurred during 2009, 2008 or 2007.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009D.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, 2007 | 233 | 2,811 | 4,072 | 1,212 | 1,011 | 9,339 | ||||||||||||
Changes in scope of consolidation | (3 | ) | — | 1 | 1 | — | (1 | ) | ||||||||||
Acquisitions and other increases | 3 | 34 | 90 | 86 | 1,122 | 1,335 | ||||||||||||
Disposals and other decreases | (23 | ) | (29 | ) | (7 | ) | (3 | ) | (4 | ) | (66 | ) | ||||||
Translation differences | — | (94 | ) | (67 | ) | (27 | ) | (34 | ) | (222 | ) | |||||||
Transfers | 3 | 272 | 409 | 113 | (804 | ) | (7 | ) | ||||||||||
Gross value at December 31, 2007 | 213 | 2,994 | 4,498 | 1,382 | 1,291 | 10,378 | ||||||||||||
Changes in scope of consolidation | 5 | 13 | 9 | — | 12 | 39 | ||||||||||||
Acquisitions and other increases | — | 30 | 55 | 67 | 1,207 | 1,359 | ||||||||||||
Disposals and other decreases | (4 | ) | (6 | ) | (4 | ) | (58 | ) | (1 | ) | (73 | ) | ||||||
Translation differences | (7 | ) | (46 | ) | (80 | ) | (22 | ) | 13 | (142 | ) | |||||||
Transfers | 8 | 315 | 501 | 176 | (1,010 | ) | (10 | ) | ||||||||||
Gross value at December 31, 2008 | 215 | 3,300 | 4,979 | 1,545 | 1,512 | 11,551 | ||||||||||||
Changes in scope of consolidation | 61 | 245 | 199 | 26 | 13 | 544 | ||||||||||||
Acquisitions and other increases | 1 | 32 | 87 | 63 | 1,170 | 1,353 | ||||||||||||
Disposals and other decreases | (3 | ) | (22 | ) | (23 | ) | (157 | ) | (17 | ) | (222 | ) | ||||||
Translation differences | 6 | 26 | 24 | 5 | 4 | 65 | ||||||||||||
Transfers | (5 | ) | 463 | 581 | 122 | (1,348 | ) | (187 | ) | |||||||||
Gross value at December 31, 2009 | 275 | 4,044 | 5,847 | 1,604 | 1,334 | 13,104 | ||||||||||||
Accumulated depreciation & impairment at January 1, 2007 | (15 | ) | (724 | ) | (1,581 | ) | (779 | ) | (21 | ) | (3,120 | ) | ||||||
Depreciation expense | — | (192 | ) | (469 | ) | (158 | ) | — | (819 | ) | ||||||||
Impairment losses | — | (10 | ) | — | — | (12 | ) | (22 | ) | |||||||||
Disposals | 11 | — | — | — | — | 11 | ||||||||||||
Translation differences | — | 45 | 41 | 16 | — | 102 | ||||||||||||
Transfers | 1 | (7 | ) | 33 | (19 | ) | — | 8 | ||||||||||
Accumulated depreciation & impairment at Dec. 31, 2007 | (3 | ) | (888 | ) | (1,976 | ) | (940 | ) | (33 | ) | (3,840 | ) | ||||||
Depreciation expense | — | (205 | ) | (476 | ) | (161 | ) | — | (842 | ) | ||||||||
Impairment losses | (1 | ) | (17 | ) | (14 | ) | (5 | ) | (4 | ) | (41 | ) | ||||||
Disposals | — | — | — | 50 | — | 50 | ||||||||||||
Translation differences | — | 11 | 46 | 13 | — | 70 | ||||||||||||
Transfers | — | 6 | 20 | (13 | ) | — | 13 | |||||||||||
Accumulated depreciation & impairment at Dec. 31, 2008 | (4 | ) | (1,093 | ) | (2,400 | ) | (1,056 | ) | (37 | ) | (4,590 | ) | ||||||
Depreciation expense | — | (238 | ) | (530 | ) | (161 | ) | — | (929 | ) | ||||||||
Impairment losses | (4 | ) | (73 | ) | (22 | ) | (4 | ) | (5 | ) | (108 | ) | ||||||
Disposals | 2 | 12 | 24 | 148 | 2 | 188 | ||||||||||||
Translation differences | — | (4 | ) | (16 | ) | (3 | ) | — | (23 | ) | ||||||||
Transfers | 3 | 87 | 103 | (5 | ) | — | 188 | |||||||||||
Accumulated depreciation & impairment at Dec. 31, 2009 | (3 | ) | (1,309 | ) | (2,841 | ) | (1,081 | ) | (40 | ) | (5,274 | ) | ||||||
Carrying amount: January 1, 2007 | 218 | 2,087 | 2,491 | 433 | 990 | 6,219 | ||||||||||||
Carrying amount: December 31, 2007 | 210 | 2,106 | 2,522 | 442 | 1,258 | 6,538 | ||||||||||||
Carrying amount: December 31, 2008 | 211 | 2,207 | 2,579 | 489 | 1,475 | 6,961 | ||||||||||||
Carrying amount: December 31, 2009 | 272 | 2,735 | 3,006 | 523 | 1,294 | 7,830 | ||||||||||||
(€ million) | Land | Buildings | Plant & equipment | Fixtures, fittings & other | Property, plant and equipment in process | Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross value at January 1, 2010 | 275 | 4,044 | 5,847 | 1,604 | 1,334 | 13,104 | |||||||||||||
Changes in scope of consolidation | 1 | 29 | 15 | 5 | 7 | 57 | |||||||||||||
Acquisitions and other increases | 1 | 12 | 57 | 71 | 1,058 | 1,199 | |||||||||||||
Disposals and other decreases | (3 | ) | (14 | ) | (12 | ) | (124 | ) | — | (153 | ) | ||||||||
Currency translation differences | 11 | 172 | 134 | 38 | 31 | 386 | |||||||||||||
Transfers(3) | (11 | ) | 312 | 482 | 76 | (1,076 | ) | (217 | ) | ||||||||||
Gross value at December 31, 2010 | 274 | 4,555 | 6,523 | 1,670 | 1,354 | 14,376 | |||||||||||||
Merial (1) | 31 | 384 | 208 | 50 | 84 | 757 | |||||||||||||
Changes in scope of consolidation | 72 | 770 | 396 | 13 | 613 | 1,864 | |||||||||||||
Acquisitions and other increases | 5 | 28 | 111 | 82 | 1,214 | 1,440 | |||||||||||||
Disposals and other decreases | (3 | ) | (32 | ) | (19 | ) | (89 | ) | (1 | ) | (144 | ) | |||||||
Currency translation differences | 4 | 60 | (27 | ) | — | 45 | 82 | ||||||||||||
Transfers(3) | (8 | ) | 171 | 448 | 284 | (1,060 | ) | (165 | ) | ||||||||||
Gross value at December 31, 2011 | 375 | 5,936 | 7,640 | 2,010 | 2,249 | 18,210 | |||||||||||||
Changes in scope of consolidation | — | 5 | 1 | — | — | 6 | |||||||||||||
Acquisitions and other increases | 9 | 70 | 83 | 44 | 1,145 | 1,351 | |||||||||||||
Disposals and other decreases | (5 | ) | (8 | ) | (17 | ) | (161 | ) | (22 | ) | (213 | ) | |||||||
Currency translation differences | (2 | ) | (42 | ) | (23 | ) | (10 | ) | (11 | ) | (88 | ) | |||||||
Transfers(3) | 7 | 320 | 622 | 235 | (1,326 | ) | (142 | ) | |||||||||||
Gross value at December 31, 2012 | 384 | 6,281 | 8,306 | 2,118 | 2,035 | 19,124 | |||||||||||||
Accumulated depreciation & impairment at January 1, 2010 | (3 | ) | (1,309 | ) | (2,841 | ) | (1,081 | ) | (40 | ) | (5,274 | ) | |||||||
Depreciation expense | — | (298 | ) | (623 | ) | (167 | ) | — | (1,088 | ) | |||||||||
Impairment losses | (4 | ) | (29 | ) | 12 | (2 | ) | (6 | ) | (29 | ) | ||||||||
Disposals | — | 10 | 1 | 114 | — | 125 | |||||||||||||
Currency translation differences | — | (66 | ) | (67 | ) | (24 | ) | — | (157 | ) | |||||||||
Transfers(3) | 5 | 140 | 42 | 11 | 4 | 202 | |||||||||||||
Accumulated depreciation & impairment at December 31, 2010 | (2 | ) | (1,552 | ) | (3,476 | ) | (1,149 | ) | (42 | ) | (6,221 | ) | |||||||
Changes in scope of consolidation | — | 24 | 18 | 12 | — | 54 | |||||||||||||
Depreciation expense (2) | — | (362 | ) | (700 | ) | (199 | ) | — | (1,261 | ) | |||||||||
Impairment losses | (28 | ) | (184 | ) | (31 | ) | (29 | ) | (15 | ) | (287 | ) | |||||||
Disposals | — | 23 | 3 | 81 | — | 107 | |||||||||||||
Currency translation differences | (1 | ) | (10 | ) | 26 | 1 | (1 | ) | 15 | ||||||||||
Transfers(3) | 12 | 151 | 54 | (85 | ) | 1 | 133 | ||||||||||||
Accumulated depreciation & impairment at December 31, 2011 | (19 | ) | (1,910 | ) | (4,106 | ) | (1,368 | ) | (57 | ) | (7,460 | ) | |||||||
Depreciation expense | — | (353 | ) | (655 | ) | (193 | ) | — | (1,201 | ) | |||||||||
Impairment losses | 1 | (19 | ) | (23 | ) | — | (111 | ) | (152 | ) | |||||||||
Disposals | 3 | 3 | 5 | 145 | 21 | 177 | |||||||||||||
Currency translation differences | — | 8 | 5 | 6 | — | 19 | |||||||||||||
Transfers (3) | — | 39 | 51 | (21 | ) | 2 | 71 | ||||||||||||
Accumulated depreciation & impairment at December 31, 2012 | (15 | ) | (2,232 | ) | (4,723 | ) | (1,431 | ) | (145 | ) | (8,546 | ) | |||||||
Carrying amount: January 1, 2010 | 272 | 2,735 | 3,006 | 523 | 1,294 | 7,830 | |||||||||||||
Carrying amount: December 31, 2010 | 272 | 3,003 | 3,047 | 521 | 1,312 | 8,155 | |||||||||||||
Carrying amount: December 31, 2011 | 356 | 4,026 | 3,534 | 642 | 2,192 | 10,750 | |||||||||||||
Carrying amount: December 31, 2012 | 369 | 4,049 | 3,583 | 687 | 1,890 | 10,578 | |||||||||||||
The “Transfers”This line includes the Merial property, plant and equipment previously presented asAssets held for sale or exchange, which were reclassified following the year ended December 31,announcement of the decision to maintain two separate entities (Merial and Intervet/Schering-Plough) operating independently.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Acquisitions during 2012 amounted to €1,351 million. The Pharmaceuticals segment made acquisitions totaling €1,061 million, primarily investments in industrial facilities (€533 million excluding Genzyme in 2012, versus €510 million in 2011 and €471 million in 2010) and in construction and fitting-out at research sites (€97 million in 2012, versus €124 million in 2011 and €159 million in 2010). Genzyme accounted for €301 million of Pharmaceuticals segment acquisitions in 2012, compared with €218 million in 2011. Acquisitions by the Vaccines segment reached €207 million (versus €302 million in 2011 and €423 million in 2010). The Animal Health segment accounted for €83 million of acquisitions in 2012, versus €78 million in 2011. Acquisitions of property, plant and equipment included €27 million of capitalized interest costs, against €44 million in 2011 and €27 million in 2010.
Firm orders for property, plant and equipment stood at €323 million as of December 31, 2012 (versus €292 million as of December 31, 2011 and €321 million as of December 31, 2010). Property, plant and equipment pledged as security for liabilities amounted to €15€225 million as of December 31, 2009 (€102012 (versus €239 million as of December 31, 20082011 and €13€26 million as of December 31, 2007)2010).
Following impairmentImpairment tests conducted onof property, plant and equipment conducted using the method described in Note B.6., resulted in the recognition during 2012 of net impairment losses of €152 million. Most of this relates to the reorganization of research and development (see Note D.27.). In 2011, impairment testing led to the recognition of net impairment losses of €287 million, relating mainly to research and development sites and to an industrial facility in Slovakia. In 2010, an impairment loss of €107€53 million was recognized in the year ended December 31, 2009 in respect of sites designated as(mainly on a site held for sale (principally, Alnwick in the United Kingdom and Porcheville in France)sale), see Note D.8.2. In the year ended December 31, 2008,as well as an impairment loss reversal of €41 million was recognized, primarily on industrial sites in France and the United States. In the year ended December 31, 2007, an impairment loss of €22 million was recognized, principally on industrial sites in Europe.€24 million.
Acquisitions made in the Pharmaceuticals segment related primarily to investments in industrial facilities (€496 million in 2009, versus €501 million in 2008 and €536 million in 2007) and in facilities and equipment of research sites (€325 million in 2009, versus €376 million in 2008 and €374 million in 2007). Acquisitions made in the Vaccines segment totaled €446 million in 2009 (versus €382 million in 2008 and €335 million in 2007). Capitalized borrowing costs amounting to €30 million were included in acquisitions of property, plant and equipment in 2009, versus €24 million in 2008 and €21 million in 2007. Firm orders for property, plant and equipment amounted to €351 million at December 31, 2009, compared with €450 million at December 31, 2008 and €379 million at December 31, 2007.
The table below shows amounts for items of property, plant and equipment held under finance leases:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Land | 3 | 7 | 7 | |||||||
Buildings | 86 | 137 | 84 | |||||||
Other property, plant and equipment | 17 | 17 | 15 | |||||||
Total gross value | 106 | 161 | 106 | |||||||
Accumulated depreciation and impairment | (42 | ) | (64 | ) | (78 | ) | ||||
Carrying amount | 64 | 97 | 28 | |||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
Land | 7 | 7 | 7 | ||||||
Buildings | 99 | 99 | 97 | ||||||
Other property, plant and equipment | 6 | 7 | 6 | ||||||
Total gross value | 112 | 113 | 110 | ||||||
Accumulated depreciation and impairment | (81 | ) | (83 | ) | (77 | ) | |||
Carrying amount | 31 | 30 | 33 | ||||||
The payment schedule is as follows:
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 | |||||||||||
Finance lease obligations: | ||||||||||||||||
– principal | 78 | 13 | 27 | 27 | 11 | |||||||||||
– interest | 22 | 7 | 9 | 4 | 2 | |||||||||||
Total | 100 | 20 | 36 | 31 | 13 | |||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.4. IntangibleGoodwill and other intangible assets and goodwill
IntangibleOther intangible assets and goodwill break down as follows:
(€ million) | Acquired Aventis R&D | Other Acquired R&D | Rights to marketed Aventis products | Trademarks, patents, licenses and other rights | Software | Total intangible assets | ||||||||||||
Gross value at January 1, 2007 | 3,054 | 187 | 30,371 | 1,491 | 587 | 35,690 | ||||||||||||
Changes in scope of consolidation | — | — | — | 25 | — | 25 | ||||||||||||
Acquisitions and other increases | — | 176 | — | 136 | 42 | 354 | ||||||||||||
Disposals and other decreases | — | (9 | ) | — | (2 | ) | (16 | ) | (27 | ) | ||||||||
Translation differences | (175 | ) | (17 | ) | (1,595 | ) | (97 | ) | (20 | ) | (1,904 | ) | ||||||
Transfers | (235 | ) | (1 | ) | 235 | 1 | (6 | ) | (6 | ) | ||||||||
Gross value at December 31, 2007 | 2,644 | 336 | 29,011 | 1,554 | 587 | 34,132 | ||||||||||||
Changes in scope of consolidation | — | 198 | — | 139 | 2 | 339 | ||||||||||||
Acquisitions and other increases | — | 85 | — | 18 | 47 | 150 | ||||||||||||
Disposals and other decreases | — | (74 | ) | — | (2 | ) | (53 | ) | (129 | ) | ||||||||
Translation differences | 109 | 15 | 1,008 | 66 | 1 | 1,199 | ||||||||||||
Transfers | (300 | ) | (2 | ) | 300 | (15 | ) | 1 | (16 | ) | ||||||||
Gross value at December 31, 2008 | 2,453 | 558 | 30,319 | 1,760 | 585 | 35,675 | ||||||||||||
Changes in scope of consolidation | — | 789 | — | 1,405 | 12 | 2,206 | ||||||||||||
Acquisitions and other increases | — | 275 | — | 62 | 56 | 393 | ||||||||||||
Disposals and other decreases | — | (70 | ) | — | (1 | ) | (2 | ) | (73 | ) | ||||||||
Translation differences | (45 | ) | (51 | ) | (451 | ) | 47 | 2 | (498 | ) | ||||||||
Transfers | (87 | ) | (9 | ) | 87 | 11 | 2 | 4 | ||||||||||
Gross value at December 31, 2009 | 2,321 | 1,492 | 29,955 | 3,284 | 655 | 37,707 | ||||||||||||
Accumulated amortization & impairment at January 1, 2007 | (299 | ) | (14 | ) | (10,490 | ) | (710 | ) | (439 | ) | (11,952 | ) | ||||||
Amortization expense | — | (7 | ) | (3,486 | ) | (152 | ) | (80 | ) | (3,725 | ) | |||||||
Impairment losses, net of reversals | 11 | — | (69 | ) | — | — | (58 | ) | ||||||||||
Disposals | — | 1 | — | — | 15 | 16 | ||||||||||||
Translation differences | 21 | 1 | 679 | 51 | 15 | 767 | ||||||||||||
Transfers | — | — | 1 | — | 1 | 2 | ||||||||||||
Accumulated amortization & impairment at Dec. 31, 2007 | (267 | ) | (19 | ) | (13,365 | ) | (811 | ) | (488 | ) | (14,950 | ) | ||||||
Amortization expense | — | (29 | ) | (3,277 | ) | (176 | ) | (52 | ) | (3,534 | ) | |||||||
Impairment losses, net of reversals | (1,233 | ) | (69 | ) | (253 | ) | 1 | — | (1,554 | ) | ||||||||
Disposals | — | 71 | — | 2 | 53 | 126 | ||||||||||||
Translation differences | (2 | ) | (1 | ) | (486 | ) | (37 | ) | 1 | (525 | ) | |||||||
Transfers | 18 | — | (18 | ) | 24 | (2 | ) | 22 | ||||||||||
Accumulated amortization & impairment at Dec. 31, 2008 | (1,484 | ) | (47 | ) | (17,399 | ) | (997 | ) | (488 | ) | (20,415 | ) | ||||||
Amortization expense | — | (70 | ) | (3,155 | ) | (303 | ) | (50 | ) | (3,578 | ) | |||||||
Impairment losses, net of reversals | — | (28 | ) | (344 | ) | — | — | (372 | ) | |||||||||
Disposals | — | 69 | — | 2 | — | 71 | ||||||||||||
Translation differences | 28 | 2 | 288 | 19 | (1 | ) | 336 | |||||||||||
Transfers | — | 2 | — | (4 | ) | — | (2 | ) | ||||||||||
Accumulated amortization & impairment at Dec. 31, 2009 | (1,456 | ) | (72 | ) | (20,610 | ) | (1,283 | ) | (539 | ) | (23,960 | ) | ||||||
Carrying amount: January 1, 2007 | 2,755 | 173 | 19,881 | 781 | 148 | 23,738 | ||||||||||||
Carrying amount: December 31, 2007 | 2,377 | 317 | 15,646 | 743 | 99 | 19,182 | ||||||||||||
Carrying amount: December 31, 2008 | 969 | 511 | 12,920 | 763 | 97 | 15,260 | ||||||||||||
Carrying amount: December 31, 2009 | 865 | 1,420 | 9,345 | 2,001 | 116 | 13,747 | ||||||||||||
(€ million) | Acquired Aventis R&D | Other Acquired R&D | Rights to marketed Aventis products | Products, trademarks and other rights | Software | Total other intangible assets | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross value at January 1, 2010 | 2,321 | 1,492 | 29,955 | 3,284 | 655 | 37,707 | |||||||||||||
Changes in scope of consolidation | — | 192 | — | 1,365 | — | 1,557 | |||||||||||||
Acquisitions and other increases | — | 167 | — | 154 | 67 | 388 | |||||||||||||
Disposals and other decreases | — | (7 | ) | — | (3 | ) | (9 | ) | (19 | ) | |||||||||
Currency translation differences | 121 | 61 | 1,669 | 304 | 28 | 2,183 | |||||||||||||
Transfers (3) | (173 | ) | (341 | ) | 173 | 389 | (1 | ) | 47 | ||||||||||
Gross value at December 31, 2010 | 2,269 | 1,564 | 31,797 | 5,493 | 740 | 41,863 | |||||||||||||
Merial (1) | — | 674 | — | 3,235 | 70 | 3,979 | |||||||||||||
Changes in scope of consolidation | (42 | ) | 2,235 | (1,044 | ) | 8,122 | 38 | 9,309 | |||||||||||
Acquisitions and other increases | — | 92 | — | 62 | 107 | 261 | |||||||||||||
Disposals and other decreases | — | (13 | ) | — | (9 | ) | (2 | ) | (24 | ) | |||||||||
Currency translation differences | 43 | 154 | 667 | 580 | 7 | 1,451 | |||||||||||||
Transfers (3) | (167 | ) | (444 | ) | 167 | 450 | 11 | 17 | |||||||||||
Gross value at December 31, 2011 | 2,103 | 4,262 | 31,587 | 17,933 | 971 | 56,856 | |||||||||||||
Changes in scope of consolidation | — | 10 | — | 79 | — | 89 | |||||||||||||
Acquisitions and other increases | — | 87 | — | 123 | 83 | 293 | |||||||||||||
Disposals and other decreases | — | (20 | ) | — | (15 | ) | (30 | ) | (65 | ) | |||||||||
Currency translation differences | (36 | ) | (53 | ) | (553 | ) | (296 | ) | (8 | ) | (946 | ) | |||||||
Transfers (3) | (279 | ) | (178 | ) | 279 | 166 | 12 | — | |||||||||||
Gross value at December 31, 2012 | 1,788 | 4,108 | 31,313 | 17,990 | 1,028 | 56,227 | |||||||||||||
Accumulated amortization & impairment at January 1, 2010 | (1,456 | ) | (72 | ) | (20,610 | ) | (1,283 | ) | (539 | ) | (23,960 | ) | |||||||
Amortization expense | — | — | (3,050 | ) | (479 | ) | (49 | ) | (3,578 | ) | |||||||||
Impairment losses, net of reversals | (10 | ) | (132 | ) | (117 | ) | (174 | ) | — | (433 | ) | ||||||||
Disposals and other decreases | — | 5 | — | 3 | 9 | 17 | |||||||||||||
Currency translation differences | (75 | ) | (3 | ) | (1,178 | ) | (106 | ) | (24 | ) | (1,386 | ) | |||||||
Transfers | 1 | 62 | — | (108 | ) | 1 | (44 | ) | |||||||||||
Accumulated amortization & impairment at Dec. 31, 2010 | (1,540 | ) | (140 | ) | (24,955 | ) | (2,147 | ) | (602 | ) | (29,384 | ) | |||||||
Changes in scope of consolidation | 42 | — | 832 | 1 | 1 | 876 | |||||||||||||
Amortization expense (2) | — | — | (1,754 | ) | (1,972 | ) | (107 | ) | (3,833 | ) | |||||||||
Impairment losses, net of reversals | — | (101 | ) | 34 | (75 | ) | (1 | ) | (143 | ) | |||||||||
Disposals and other decreases | — | 13 | — | 8 | 5 | 26 | |||||||||||||
Currency translation differences | (33 | ) | (6 | ) | (591 | ) | (119 | ) | (2 | ) | (751 | ) | |||||||
Transfers | — | — | — | (4 | ) | (4 | ) | (8 | ) | ||||||||||
Accumulated amortization & impairment at December 31, 2011 | (1,531 | ) | (234 | ) | (26,434 | ) | (4,308 | ) | (710 | ) | (33,217 | ) | |||||||
Amortization expense | — | — | (1,452 | ) | (1,839 | ) | (105 | ) | (3,396 | ) | |||||||||
Impairment losses, net of reversals | 12 | (111 | ) | — | (18 | ) | (3 | ) | (120 | ) | |||||||||
Disposals and other decreases | — | 18 | — | 16 | 25 | 59 | |||||||||||||
Currency translation differences | 30 | 4 | 475 | 96 | 6 | 611 | |||||||||||||
Transfers | — | (1 | ) | — | 3 | 26 | 28 | ||||||||||||
Accumulated amortization & impairment at December 31, 2012 | (1,489 | ) | (324 | ) | (27,411 | ) | (6,050 | ) | (761 | ) | (36,035 | ) | |||||||
Carrying amount: January 1, 2010 | 865 | 1,420 | 9,345 | 2,001 | 116 | 13,747 | |||||||||||||
Carrying amount: December 31, 2010 | 729 | 1,424 | 6,842 | 3,346 | 138 | 12,479 | |||||||||||||
Carrying amount: December 31, 2011 | 572 | 4,028 | 5,153 | 13,625 | 261 | 23,639 | |||||||||||||
Carrying amount: December 31, 2012 | 299 | 3,784 | 3,902 | 11,940 | 267 | 20,192 | |||||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Movements in goodwill for the last three financial periods are shown below:
(€ million) | Gross value | Impairment | Carrying amount | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2010 | 29,758 | (25 | ) | 29,733 | ||||||
Movements for the period (1) | 1,017 | — | 1,017 | |||||||
Currency translation differences | 1,183 | (1 | ) | 1,182 | ||||||
Balance at December 31, 2010 | 31,958 | (26 | ) | 31,932 | ||||||
Merial goodwill (2) | 1,210 | — | 1,210 | |||||||
Genzyme goodwill (3) | 4,575 | — | 4,575 | |||||||
Other movements for the period (1) | 275 | — | 275 | |||||||
Currency translation differences | 588 | 2 | 590 | |||||||
Balance at December 31, 2011 (4) | 38,606 | (24 | ) | 38,582 | ||||||
Acquisitions during the period (1) | 14 | — | 14 | |||||||
Other movements for the period (5) | (144 | ) | — | (144 | ) | |||||
Currency translation differences | (376 | ) | (3 | ) | (379 | ) | ||||
Balance at December 31, 2012 | 38,100 | (27 | ) | 38,073 | ||||||
• Genzyme acquisition (2011)
The Genzyme final purchase price allocation resulted in the recognition of intangible assets totaling €10,059 million as of the acquisition date (see Note D.1.2.). This figure includes €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. It also includes €2,148 million for assets relating to Genzyme's in-process research and development projects, primarily LemtradaTM and eliglustat. The Genzyme brand was valued at €146 million.
• Merial acquisition (2009)
When Sanofi took control of Merial in 2009, intangible assets were recognized for a total of €3,980 million. This figure includes €3,104 million for marketed products (in particular Frontline®), €674 million for in-process research and development projects, and €131 million for the Merial brand.
(€ million) | Gross value | Impairment | Carrying amount | ||||||
Balance at January 1, 2007 | 28,499 | (27 | ) | 28,472 | |||||
Changes in scope of consolidation | 7 | — | 7 | ||||||
Disposals and other decreases (1) | (63 | ) | — | (63 | ) | ||||
Translation differences | (1,217 | ) | — | (1,217 | ) | ||||
Balance at December 31, 2007 | 27,226 | (27 | ) | 27,199 | |||||
Changes in scope of consolidation | 403 | — | 403 | ||||||
Disposals and other decreases (1) | (6 | ) | — | (6 | ) | ||||
Translation differences | 565 | 2 | 567 | ||||||
Balance at December 31, 2008 | 28,188 | (25 | ) | 28,163 | |||||
Changes in scope of consolidation | 1,882 | — | 1,882 | ||||||
Disposals and other decreases (1) | (84 | ) | — | (84 | ) | ||||
Translation differences | (228 | ) | — | (228 | ) | ||||
Balance at December 31, 2009 | 29,758 | (25 | ) | 29,733 | |||||
In 2012, some of the acquired research and development (€15 million) came into commercial use, and began to be amortized from the date of marketing approval. The main item involved was a parasiticide for the bovine market in the United States.
|
In 2011, some of the acquired research and development (€451 million) came into commercial use, and began to be amortized from the date of marketing approval. The main item involved was Certifect® in the United States and the European Union.
• Aventis Acquisitionacquisition (2004)
On August 20, 2004, sanofi-aventisSanofi acquired Aventis, a global pharmaceutical group created in 1999 by the merger between Rhône-Poulenc and Hoechst.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As part of the process of creating the new Group, the two former parent companies — Sanofi-Synthélabo (renamed sanofi-aventis)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 €27,221€28,285 million atas of December 31, 2009, versus €27,6322012 (compared with €28,573 million atas of December 31, 20082011 and €27,034€28,228 million atas of December 31, 2007.2010).
Rights to marketed products and goodwill arising on the Aventis acquisition were allocated on the basis of the split of the Group’sGroup'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. The average period of amortization for marketed products was initially set at 8 years, based on cash flow forecasts which, among other factors, take account of the period of legal protection offered by the related patents.
Rights to marketed Aventis products represent a diversified portfolio of rights relating to many different products. As of December 31, 2009, 83.7%2012, 75% of the carrying amount of these rights related to the Pharmaceuticals segment, and 16.3%25% to the Vaccines segment. The five principal pharmaceutical products in this portfolio by carrying amount (Lantus®/Apidra®: €2,166 million, Lovenox®: €1,019 million; Taxotere®: €756 million; Actonel®: €564 million; Allegra®: €359 million) accounted for approximately 62.2% of the total carrying amount of product rights for the Pharmaceuticals business as of December 31, 2009.
During 2007,2012, some of the acquired Aventis research and development (€235279 million) came into commercial use; it is being amortized from the date of marketing approval. The main items involved are the Lantus®-Apidra® pens,use, and new indications for Taxotere®.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
During 2008, some of the acquired Aventis research and development (€300 million) came into commercial use; it is beingbegan to be amortized from the date of marketing approval. The main products involved are Pentacel® vaccinethe multiple sclerosis treatment Aubagio® (teriflunomide) in the United States, and the “once-a-month” dose of Actonel®second-line prostate cancer drug Jevtana® (cabazitaxel) in the United States.rest of the world.
During 2009,2011, some of the acquired Aventis research and development (€87167 million) came into commercial use; it is beinguse, and began to be amortized from the date of marketing approval. The main item involved was the oncology product Jevtana® (cabazitaxel) in the European Union.
In 2010, some of the acquired Aventis research and development (€173 million) came into commercial use. The main item involved is Sculptra®was the oncology product Jevtana® (cabazitaxel) in the United States.
• Other acquisitions
Acquisitions of intangible assets (excluding software and business combinations) amounted to €210 million in 2012, most of which related to licensing agreements (for a description of the principal agreements, see Note D.21.).
During 2012, €163 million of acquired research and development (other than Aventis and Merial acquired R&D) came into commercial use; the main item involved was €97 million relating to an anti-parasite product acquired in the Topaz Pharmaceuticals Inc. acquisition (see Note D.1.2.).
Intangible assets relating to CO2 emission quotas amounted to €4.1 million at December 31, 2012, compared with €4.2 million at December 31, 2011.
The increase in goodwill and other intangible assets (excluding Genzyme and Merial) in the year ended December 31, 2011 primarily related to the acquisition of BMP Sunstone (see Note D.1.2.).
Acquisitions of intangible assets (excluding software and business combinations) in 2011 amounted to €154 million, mainly related to licensing agreements (for a description of the principal agreements, see Note D.21.).
Increases in goodwill and other intangible assets and goodwill during the year ended December 31, 20092010 were mainly due to business combinations completed during the year. Details of theThe purchase price allocations for the principal acquisitions made during 2009 are provided2010, as described in Note D.1. “Significant acquisitions”. The main effects on intangible assets atD.1.4., generated the acquisition dates are summarized below:following impacts:
The Shantha purchase price allocation led to the
The Medley purchase price allocation led to the
The Zentiva purchase price allocation led to the recognition of intangible assets of €976 million, mainly comprising the value of marketed products and the Zentiva trademark. Goodwill of €894 million was recognized, including the effect of buyouts of minority interests during the period.
In the BiPar purchase price allocation, the principal product under development (BSI-201) was valued at €539 million.
Acquisitions of intangible assets during the year ended December 31, 2009 (other than software and assets recognized in business combinations) totaled €337 million and related primarily to license agreements, including the collaboration agreements signed with Exelixis and Merrimack (see Note D.21.).
The provisional purchase allocations for the principal acquisitions made in 2008 (see Note D.1.) were as follows:
The Symbion Consumer purchase price allocation led to the recognition of intangible assets of €116 million. Goodwill arising on this acquisition amounted to €206 million.
The Acambis purchase price allocation led to the recognition of intangible assets of €223 million (of which €198 million related to research projects). Goodwill arising on this acquisition amounted to €197 million.
There were no material adjustments to these purchase price allocations during the year ended December 31, 2009.
Acquisitions of intangible assets (other than software and assets recognized in business combinations) in 2008 were €103 million, and related mainly to license agreements, including the collaboration agreements signed with Dyax Corp. and Novozymes (see Note D.21.).
Contents
Acquisitions of intangible assets (other than software and assets recognized in business combinations ) in 2007 were €312 million. This amount includes payments made under collaboration agreements, including those signed during the year with Oxford BioMedica (Trovax®) and Regeneron (see Note D.21.). It also includes the buyout of the Japanese rights for Panaldine® (Daiichi) and Myslee® (Astellas).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
In 2010, acquired non-Aventis research brought into commercial use mainly comprised Zentiva generics in Eastern Europe, the Japanese encephalitis vaccine, and the Libertas® formulation of Actonel® in the United States.
• Dermik sale (2011)
The "Change in scope of consolidation" line includes the €212 million carrying amount of the intangible assets (other than goodwill) of the Dermik dermatology business (which was sold to Valeant Pharmaceuticals International, Inc.), and the derecognition of the €77 million goodwill relating to Dermik.
Amortization of intangible assets is recognized in the income statement underin theAmortization of intangiblesintangible assets line item except for amortization of software, which is recognized onin the relevant linecomponent of theoperating income statement according to the purpose for which the software is used:
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||
Cost of sales | 11 | 10 | 18 | |||
Research and development expenses | 14 | 14 | 16 | |||
Selling and general expenses | 24 | 28 | 45 | |||
Other operating expenses | 1 | — | 1 | |||
Total | 50 | 52 | 80 | |||
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 (1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Cost of sales | 27 | 13 | 11 | |||||||
Research and development expenses | 13 | 16 | 11 | |||||||
Selling and general expenses | 61 | 55 | 26 | |||||||
Other gains and losses, and litigation (2) | — | 18 | — | |||||||
Other operating expenses | 4 | 5 | 1 | |||||||
Total | 105 | 107 | 49 | |||||||
D.5. Impairment of intangible assets and property, plant and equipment goodwill and intangibles
• Goodwill
The allocation of goodwill is shown below:
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||
(€ million) | Pharma- ceuticals | Vaccines | Total | Pharma- ceuticals | Vaccines | Total | Pharma- ceuticals | Vaccines | Total | |||||||||
Europe | 13,528 | — | 13,528 | 12,414 | — | 12,414 | 12,428 | — | 12,428 | |||||||||
North America | 10,739 | 680 | 11,419 | 11,057 | 693 | 11,750 | 10,577 | 464 | 11,041 | |||||||||
Other countries | 4,368 | 418 | 4,786 | 3,830 | 169 | 3,999 | 3,561 | 169 | 3,730 | |||||||||
Total carrying amount | 28,635 | 1,098 | 29,733 | 27,301 | 862 | 28,163 | 26,566 | 633 | 27,199 | |||||||||
In 2009, 2008 and 2007, the recoverable amount of the segmental CGUs wascash 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.
The allocation of goodwill as of December 31, 2012 is shown below:
(€ million) | Pharmaceuticals: Europe | Pharmaceuticals: North America | Pharmaceuticals: Other Countries | Vaccines: USA | Vaccines: Other Countries | Animal Health | Group Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Goodwill | 15,025 | 14,010 | 6,717 | 751 | 337 | 1,233 | 38,073 | |||||||||||||||
The goodwill arising on Pluromed, Inc. was allocated to the Pharmaceuticals North America CGU. The goodwill arising on Newport was allocated to the Animal Health CGU.
The goodwill arising on Genzyme was allocated to the relevant CGUs in the Pharmaceuticals segment.
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 in order to take account of its specific economic conditions.
The rates used for impairment testing in 2012 were in a range from 7.0% to 10.5% (principally 8.0% for Pharmaceuticals North America, and 8.5% for Pharmaceuticals Europe); an identical value in use for the Group would be obtained by applying a uniform 9% rate to all 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 in 2009 were:
Pharmaceuticals | Vaccines | |||
Operating margin (as a percentage of net sales) | 29% - 34% | 30% - 36% | ||
Perpetual growth rate | 1% | 1% - 3% | ||
After-tax discount rate | 9.5% | 9.5% | ||
These assumptions are reviewed annually.
The operating margin Apart from the discount rate, the principal assumptions used is the range of values per the strategic plan for each operating segment.in 2012 were as follows:
North America) to 1% for Pharmaceuticals CGUs, and from 1% to 3% for the Vaccines and Animal Health CGUs.
Sanofi-aventisGroup also applies assumptions on the probability of success of its current research and development projects, and more generally on its ability to refreshrenew its product portfolio in the longer term.
No impairment losses have been recognized against goodwillValue in 2009, 2008use (determined as described above) is compared with carrying amount, and 2007.this comparison is then subject to sensitivity analysis with reference to the two principal parameters (discount rate and perpetual growth rate).
Goodwill forOver all the Pharmaceuticals segment relates primarily to Europe and North America. TheCGUs, no reasonable change in the assumptions used to calculate the value in use of these two CGUs comprise2012 would require an after-tax discount rate of 9.5% and a perpetual growth rate of 1%. No impairment would needloss to be recognized unless the discount rate used to calculateagainst goodwill. No impairment loss would be required even if value in use were to exceedbe calculated using:
No impairment losses were recognized against goodwill in the years ended December 31, 2012, 2011, or 2010.
• Other intangible assets
When there is evidence that an asset may have become impaired, its value in use is calculated by applying a post-tax discount rate to the estimated future post-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 not result from amortizing the asset if its value in anyuse were regarded as its depreciable amount for tax purposes. Applying post-tax discount rates to post-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 post-tax discount rates used in 2012 for impairment testing of other intangible assets in the goodwillPharmaceuticals, Vaccines and Animal Health segments were obtained by adjusting the Group's 8% weighted average cost of these CGUs.
In most cases, 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 2012, impairment testing of other intangible assets (excluding software) resulted in the recognition of a €117 million net impairment loss, mainly comprising:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The after-tax discount rates used in 2009 forIn 2011, impairment testing of other intangible assets are shown below:
Pharmaceuticals | Vaccines | |||
After-tax discount rate | ||||
Acquired in-process R&D | 11% | 11% | ||
Rights to marketed products | 10% | 10% | ||
Certain intangible assets for which indications of potential impairment were identified(excluding software) resulted in the years ended December 31, 2009, 2008recognition of a €142 million net impairment loss. This includes:
In 2009,2010, impairment losses of €372€433 million were recognized based on the results of impairment tests.testing of other intangible assets. These losses relatedarose mainly on marketed products (€291 million), including Actonel® (due to proposed amendments to the marketed products Actonel® (€177 million), Benzaclin® (€89 million)terms of the collaboration agreement with Warner Chilcott) and Nasacort® (€70 million),Shan5® (due to revised sales projections following requalification of the vaccine by the World Health Organization). Impairment losses recognized in respect of research projects totaled €142 million, and take accountarose mainly from revisions to the development plan for BSI-201 following announcement of changesthe initial results from the Phase III trial in the competitive environmenttriple-negative metastatic breast cancer and the approval dates of generics.from decisions to halt development on some other projects.
• Property, plant and equipment
In 2008, impairment losses were recognized to take account of:
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In 2007, impairment losses totaling €69 million were recognized based on the results of impairment tests. These losses related to Amaryl® (€46 million) and Ketek® (€23 million). In addition, reversals of impairment losses totaling €11 million were recognized during the year.
Impairment losses taken against property, plant and equipment are disclosed in Note D.3.
D.6. Investments in associates and joint ventures
Associates consistFor definitions of companies over which sanofi-aventis exercises significant influence,the terms "associate" and joint ventures. Sanofi-aventis accounts for joint ventures using the equity method (i.e. as associates)"joint venture", in accordance with the allowed alternative treatment specified in IAS 31 (Financial Reporting of Interests in Joint Ventures).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 | ||||||||||
Since November 2011, Sanofi has no longer been represented on the Board of Directors of Financière des Laboratoires de Cosmétologie Yves Rocher and consequently, as a result of the loss of significant influence, no longer accounts for this interest using the equity method. This interest was recognized as an available-for-sale financial asset as of December 31, 2011, and was sold in August 2012.
(€ million) | % interest | Dec. 31, 2009 | Dec. 31, 2008 | Dec. 31, 2007 | |||||||
Sanofi Pasteur MSD | 50.0 | 407 | 427 | 467 | |||||||
Merial(until September 17, 2009) | 50.0 | — | (3) | 1,203 | 1,151 | ||||||
InfraServ Höchst | 31.2 | 95 | 96 | 97 | |||||||
Entities and companies managed by Bristol-Myers Squibb(1) | 49.9 | 234 | 196 | 178 | |||||||
Zentiva(until March 30, 2009) | 24.9 | — | (4) | 332 | (2) | 346 | (2) | ||||
Financière des Laboratoires de Cosmétologie Yves Rocher | 39.1 | 123 | 119 | 103 | |||||||
Other investments | — | 96 | 86 | 151 | |||||||
Total | 955 | 2,459 | 2,493 | ||||||||
The reduction in the carrying amount of the interests in entities and companies managed by Bristol-Myers Squibb during the year ended December 31, 2012 mainly reflects the loss of exclusivity for Plavix® and Avapro® in the United States during 2012.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The financial statements include arm's length commercial transactions between the Group and certain of its associates:
(€ million) | 2009 | 2008 | 2007 | |||
Sales | 517 | 432 | 404 | |||
Royalties(1) | 1,179 | 1,014 | 945 | |||
Accounts receivable(1) | 419 | 370 | 355 | |||
Purchases | 247 | 254 | 236 | |||
Accounts payable | 32 | 30 | 29 | |||
Other liabilities(1) | 297 | 242 | 365 | |||
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Key financial indicators for associates excluding the effects of purchase price allocations,and joint ventures that are shownregarded as related parties. The principal transactions and balances with related parties are summarized below:
(€ million) | Principal associates(1) 100% impact | Principal joint ventures(2) Share held by sanofi-aventis | ||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||
Non-current assets | 526 | 1,919 | 1,950 | 27 | 354 | 323 | ||||||
Current assets | 1,278 | 2,717 | 2,788 | 224 | 688 | 687 | ||||||
Non-current liabilities | 336 | 913 | 1,190 | 32 | 99 | 104 | ||||||
Current liabilities | 792 | 1,798 | 1,552 | 178 | 404 | 418 | ||||||
Equity attributable to equity holders of the Company | 391 | 1,622 | 1,712 | 41 | 536 | 486 | ||||||
Minority interests | 285 | 303 | 284 | — | 2 | 2 | ||||||
Net sales | 9,325 | 9,770 | 9,165 | 1,203 | 1,537 | 1,431 | ||||||
Cost of sales | 2,397 | 2,555 | 2,371 | 359 | 433 | 394 | ||||||
Operating income | 3,144 | 2,838 | 2,338 | 312 | 372 | 313 | ||||||
Net income | 2,880 | 2,384 | 2,054 | 222 | 225 | 206 | ||||||
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(€ million) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Sales | 320 | 526 | 541 | |||||||
Royalties (1) | 564 | 1,292 | 1,324 | |||||||
Accounts receivable (1) | 79 | 503 | 441 | |||||||
Purchases | 231 | 236 | 227 | |||||||
Accounts payable | 22 | 21 | 22 | |||||||
Other liabilities (1) | 100 | 404 | 350 | |||||||
D.7. FinancialNon-current financial assets — non-current
The main items included inFinancialNon-current financial assets — non-current are:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale financial assets | 2,569 | 1,302 | 816 | |||||||
Pre-funded pension obligations (see Note D.19.1.) | 6 | 6 | 4 | |||||||
Long-term loans and advances | 695 | 573 | 483 | |||||||
Assets recognized under the fair value option | 135 | 124 | 121 | |||||||
Derivative financial instruments (see Note D.20.) | 394 | 394 | 220 | |||||||
Total | 3,799 | 2,399 | 1,644 | |||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Available-for-sale financial assets | 588 | 491 | 676 | |||
Pre-funded pension obligations (see Note D.18.1.) | 3 | 1 | 7 | |||
Long-term loans and advances | 256 | 186 | 219 | |||
Assets recognized under the fair value option | 100 | 72 | 85 | |||
Derivative financial instruments (see Note D.20.) | 51 | 71 | 50 | |||
Total | 998 | 821 | 1,037 | |||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Equity investmentsinterests classified as available-for-sale financial assets include:include the following publicly traded investments:
A 13% interest in ProStrakan, carried at an amount of €25€2,051 million as of December 31, 2009 (€242012 based on the quoted market price of $171.07 as of that date; this compares with a carrying amount of €678 million atas of December 31, 20082011 and €23€389 million atas of December 31, 2007).
Interests2010.
During 2008, the Group divested its equity interestOther comprehensive income recognized in Millennium (carrying amount €46 million), generating a pre-tax gainrespect of €38 million (see Note D.29.).
The cumulativeavailable-for-sale financial assets represents unrealized net after-tax gain recognized directlygains of €1,745 million as of December 31, 2012 (including €1,669 million for the investment in Regeneron), versus €409 million as of December 31, 2011 and €164 million as of December 31, 2010.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A 10% fall in the stock prices of quoted equity oninvestments classified as available-for-sale financial assets atwould have had the following impact as of December 31, 2009 was €38 million. This compares with a cumulative unrealized net after-tax loss of €49 million at December 31, 2008, mainly on the investment in Regeneron (€49 million), and a cumulative unrealized net after-tax gain of €48 million at December 31, 2007 (see Note D.15.7.).2012:
(€ million) | Sensitivity | |||
---|---|---|---|---|
Other comprehensive income before tax | (231 | ) | ||
Income before tax | — | |||
Total | (231 | ) | ||
The impact ofAs regards other available-for-sale financial assets, a 10% fall in stock prices on quoted shares included in available-for-sale assets at December 31, 2009 would have been as follows:
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A 10% fall in stock prices of other available-for-sale financial assets combined with a simultaneous 0.5% rise in the yield curve would have had the following impact atas of December 31, 2009:2012:
(€ million) | Sensitivity | |||||||
---|---|---|---|---|---|---|---|---|
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Other comprehensive income before tax | (18 | ) | ||||||
Income before tax | — | |||||||
Total (1) | (18 | ) | ||||||
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Available-for-sale financial assets also include equity investments not quoted in an active market. These investments had a carrying amount of €31€82 million atas of December 31, 2009, against €342012, €260 million atas of December 31, 20082011, and €36€47 million atas of December 31, 2007.2010. The reduction in 2012 is related to the sale of the investment in Yves Rocher.
Long-term loans and advances are measured at amortized cost, which at the balance sheet date was not materially different from their fair value. The increase in long-term loans and advances betweencarrying amount of Greek government bonds as of December 31, 2008 and December 31, 20092012 was mainly due to the indemnification asset€16 million, of which €8 million are reported in respect of the vendor’s guarantee of liabilities recognized on the acquisition of MedleyCurrent financial assets (see Note D.1.D.12.).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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, 20092012 of assets held for sale or exchange, and of liabilities related to assets held for sale or exchange, is shown below:
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(€ 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 | |||||||||
On September 17, 2009, sanofi-aventis acquired, in addition to its initial 50% interest in Merial, the remaining 50% interest held by Merck. Simultaneously, a contract was signed whereby once the merger between Merck and Schering-Plough has been completed sanofi-aventis will be able to exercise an option to create a single group combining Merial and Intervet/Schering-Plough, to be held 50% by sanofi-aventis and 50% by Merck/Schering-Plough (see Note D.1.)
With effect from September 17, 2009, sanofi-aventis has had exclusive control over Merial by virtue of its 100% interest in the company, and has accounted for Merial by the full consolidation method. Due to the high probability that the option will be exercised, thereby diluting the interest held by sanofi-aventis in Merial and leading to the loss of exclusive control, the entire interest in Merial has to be accounted for in accordance with IFRS 5, the main principles of which are described in Note B.7.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year endedD.8.1. Other assets held for sale
As of December 31, 20092012, 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, 2009,2010, after elimination of intercompany balances between Merial and other Group companies.
(€ million) | December 31, | ||||||
---|---|---|---|---|---|---|---|
Assets | |||||||
| |||||||
• Property, plant and equipment and financial assets | 811 | ||||||
• Goodwill | 1,210 | ||||||
• | 3,961 | ||||||
• Deferred tax assets | 92 | ||||||
• Inventories | 344 | ||||||
• Accounts receivable | 405 | ||||||
• Other current assets | 49 | ||||||
• Cash and cash equivalents | 147 | ||||||
Total assets held for sale or exchange | |||||||
Liabilities | |||||||
| 4 | ||||||
• | 70 | ||||||
| |||||||
• Deferred tax liabilities | 1,132 | ||||||
• Short-term debt | 24 | ||||||
• Accounts payable | 161 | ||||||
• Other current liabilities | 281 | ||||||
Total liabilities related to assets held for sale or exchange | |||||||
The components ofNet income from the held-for-exchange Merial business are shown below:
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||
Net sales (2) | 479 | — | — | ||||
Operating income (2) | 69 | — | — | ||||
Net financial income/(expense) (2) | 2 | — | — | ||||
Income tax expense (2) | (35 | ) | — | — | |||
Share of profit/(loss) of associates (1) | 139 | 120 | 151 | ||||
Net income from the held-for-exchange Merial business | 175 | 120 | 151 | ||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The table below sets forth, as required by IFRS 5, disclosures of how net income attributable to equity holders of the Company, net income attributable to minority interests, basic earnings per share and diluted earnings per share are split between activities other than Merial and the held-for-exchange Merial business:
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||
Net income excluding the held-for-exchange Merial business | 5,516 | 4,172 | 5,531 | |||
Net income from the held-for-exchange Merial business | 175 | 120 | 151 | |||
Net income | 5,691 | 4,292 | 5,682 | |||
- Net income attributable to minority interests: | ||||||
Net income excluding the held-for-exchange Merial business | 426 | 441 | 419 | |||
Net income from the held-for-exchange Merial business | — | — | — | |||
Net income attributable to minority interests | 426 | 441 | 419 | |||
- Net income attributable to equity holders of the Company: | ||||||
Net income excluding the held-for-exchange Merial business | 5,090 | 3,731 | 5,112 | |||
Net income from the held-for-exchange Merial business | 175 | 120 | 151 | |||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | |||
- Basic earnings per share: | ||||||
Excluding the held-for-exchange Merial business (in euros) | 3.90 | 2.85 | 3.80 | |||
Held-for-exchange Merial business (in euros) | 0.13 | 0.09 | 0.11 | |||
Basic earnings per share (in euros) | 4.03 | 2.94 | 3.91 | |||
- Diluted earnings per share: | ||||||
Excluding the held-for-exchange Merial business (in euros) | 3.90 | 2.85 | 3.78 | |||
Held-for-exchange Merial business (in euros) | 0.13 | 0.09 | 0.11 | |||
Diluted earnings per share (in euros) | 4.03 | 2.94 | 3.89 | |||
The table below sets forth the net sales of Merial’s principal products, expressed in millions of U.S. dollars:
($ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||
Frontline® and other fipronil products | 996 | 1,053 | 1,033 | |||
Vaccines | 794 | 790 | 675 | |||
Avermectin | 475 | 512 | 478 | |||
Other | 289 | 288 | 263 | |||
Total | 2,554 | 2,643 | 2,449 | |||
The contractual obligations and other commitments of Merial as of December 31, 2009 are as follows:
(€ million) | Total | Under 1 year | From 1 to 3 years | From 3 to 5 years | Over 5 years | |||||||||
Contractual obligations and other commercial commitments: | ||||||||||||||
• outflows | 148 | 94 | 29 | 16 | 9 | |||||||||
• inflows | (37 | ) | (33 | ) | (3 | ) | — | (1 | ) | |||||
Total contractual obligations and other commercial commitments | 111 | 61 | 26 | 16 | 8 | |||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.8.2. Other assets held for sale
As of December 31, 2009, other assets held for sale relate to the ongoing divestment of the R&D facilities at Alnwick and Porcheville and of an industrial site. An impairment loss of €107 million was charged against these assets (and recognized underRestructuring costs in the income statement) prior to their reclassification as held for sale.
As of December 31, 2008, sanofi-aventis had assets held for sale relating to the ongoing divestment of a plant at Colomiers in the Haute-Garonne region of France. These assets were fully written down as of that date.
There were no assets held for sale as of December 31, 2007.
D.9. Inventories
Inventories break down as follows:
| December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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(€ 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.).
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||
Gross | Impairment | Net | Gross | Impairment | Net | Gross | Impairment | Net | |||||||||||||
Raw materials | 752 | (96 | ) | 656 | 615 | (91 | ) | 524 | 607 | (83 | ) | 524 | |||||||||
Work in process | 2,456 | (241 | ) | 2,215 | 2,028 | (226 | ) | 1,802 | 2,073 | (230 | ) | 1,843 | |||||||||
Finished goods | 1,709 | (136 | ) | 1,573 | 1,449 | (185 | ) | 1,264 | 1,534 | (172 | ) | 1,362 | |||||||||
Total | 4,917 | (473 | ) | 4,444 | 4,092 | (502 | ) | 3,590 | 4,214 | (485 | ) | 3,729 | |||||||||
The impact of changes in provisions for impairment of inventories in 2009 was a net expense of €26€28 million in 2012, compared with a net expense of €30€6 million in 20082011 and a net expense of €39€22 million in 2007.2010.
Impairment taken against inventory at December 31, 2009 relates primarily to the product Ketek®.
Inventories pledged as security for liabilities amountamounted to €10€16 million atas of December 31, 2009 (versus €10 million at December 31, 2008).
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.).
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
Gross value | 6,111 | 5,391 | 5,034 | ||||||
Impairment | (96 | ) | (88 | ) | (130 | ) | |||
Net value | 6,015 | 5,303 | 4,904 | ||||||
The impactImpairment losses (net of changes in provisions for impairment ofreversals) against accounts receivable in 2009 is a net expense of €5 million (against a net reversal of €7(see Note B.8.2.) amounted to €11 million in 2008 and a net expense of €172012, compared with €32 million in 2007).both 2011 and 2010.
The gross value of overdue receivables atas of December 31, 2009 is €8842012 was €1,057 million, (versus €794compared with €1,103 million atas of December 31, 20082011 and €801€887 million atas of December 31, 2007).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 | |||||||||||||
(€ 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, 2009 | 884 | 288 | 172 | 132 | 110 | 182 | ||||||
December 31, 2008 | 794 | 267 | 146 | 121 | 95 | 165 | ||||||
December 31, 2007 | 801 | 218 | 166 | 130 | 115 | 172 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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.
Group policy is to retain receivables until maturity, and hence not to use receivables securitization programs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.11. Other current assets
Other current assets break down as follows:
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Taxes recoverable | 1,019 | 927 | 1,185 | |||
Other receivables(1) | 914 | 781 | 754 | |||
Prepaid expenses | 171 | 173 | 187 | |||
Total | 2,104 | 1,881 | 2,126 | |||
|
(€ 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 | |||||||
D.12. FinancialCurrent financial assets — current
FinancialCurrent financial assets — current break down as follows:
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Interest rate derivatives measured at fair value (see Note D.20.) | 18 | 33 | — | |||
Currency derivatives measured at fair value (see Note D.20.) | 251 | 348 | 67 | |||
Other current financial assets | 8 | 22 | 16 | |||
Total | 277 | 403 | 83 | |||
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Interest rate derivatives measured at fair value (see Note D.20.) | 40 | 90 | 1 | |||||||
Currency derivatives measured at fair value (see Note D.20.) | 82 | 48 | 27 | |||||||
Other current financial assets | 56 | (1) | 35 | (2) | 23 | |||||
Total | 178 | 173 | 51 | |||||||
D.13. Cash and cash equivalents
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Cash | 689 | 502 | 831 | |||
Cash equivalents(1) | 4,003 | 3,724 | 880 | |||
Cash and cash equivalents(2) (3) | 4,692 | 4,226 | 1,711 | |||
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Cash | 904 | 1,029 | 696 | |||||||
Cash equivalents (1) | 5,477 | 3,095 | 5,769 | |||||||
Cash and cash equivalents (2) | 6,381 | 4,124 | 6,465 | |||||||
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.14. Net deferred tax position
The net deferred tax position breaks down as follows:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax on: | ||||||||||
• Consolidation adjustments (intragroup margin in inventory) | 1,156 | 858 | 875 | |||||||
• Provision for pensions and other employee benefits | 1,608 | 1,297 | 1,157 | |||||||
• Remeasurement of other acquired intangible assets (1) | (5,641 | ) | (6,815 | ) | (3,706 | ) | ||||
• Recognition of acquired property, plant and equipment at fair value | (83 | ) | (75 | ) | (76 | ) | ||||
• Equity interests in subsidiaries and investments in foreign affiliates (2) | (1,276 | ) | (1,154 | ) | (399 | ) | ||||
• Tax losses available for carry-forward | 593 | 617 | 152 | |||||||
• Stock options and other share-based payment | 79 | 40 | 12 | |||||||
• Accrued expenses and provisions deductible at the time of payment (3) | 1,923 | 1,946 | 1,349 | |||||||
• Other | 86 | 389 | (121 | ) | ||||||
Net deferred tax liability | (1,555 | ) | (2,897 | ) | (757 | ) | ||||
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 €18.4 billion as of December 31, 2012, compared with €15.7 billion as of December 31, 2011 and €16.2 billion as of December 31, 2010.
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
Deferred tax on: | |||||||||
• Consolidation adjustments (intragroup margin in inventory) | 858 | 845 | 808 | ||||||
• Provision for pensions and other employee benefits | 1,097 | 1,070 | 915 | ||||||
• Remeasurement of acquired intangible assets(1) | (4,144 | ) | (4,805 | ) | (6,123 | ) | |||
• Recognition of Aventis property, plant and equipment at fair value | (99 | ) | (65 | ) | (77 | ) | |||
• Tax cost of distributions made from reserves(2) | (643 | ) | (769 | ) | (693 | ) | |||
• Stock options | 21 | 6 | 48 | ||||||
• Tax losses available for carry-forward (see below) | 70 | 171 | 266 | ||||||
• Other non-deductible provisions and other items | 819 | 799 | 833 | ||||||
Net deferred tax liability | (2,021 | ) | (2,748 | ) | (4,023 | ) | |||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
The table below shows when the tax losses available for carry-forward by the Group are due to expire:
(€ million) | Tax losses available for carry-forward (1) | |||
---|---|---|---|---|
2013 | 24 | |||
2014 | 15 | |||
2015 | 30 | |||
2016 | 16 | |||
2017 | 145 | |||
2018 and later (2) | 2,197 | |||
Total at December 31, 2012 | 2,427 | (3) | ||
Total at December 31, 2011 | 2,699 | (4) | ||
Total at December 31, 2010 | 1,028 | (5) | ||
(€ million) | Tax loss carry- forwards at December 31, 2009 (*) | Tax loss carry- forwards at December 31, 2008 (*) | Tax loss carry- forwards at December 31, 2007 (*) | |||
2008 | — | — | 63 | |||
2009 | — | 30 | 32 | |||
2010 | 8 | 50 | 33 | |||
2011 | 19 | 20 | 23 | |||
2012 | 21 | 74 | 31 | |||
2013 and later | 594 | 671 | 888 | |||
Total | 642 | 845 | 1,070 | |||
|
Use of these tax loss carry-forwards is limited to the entity in which they arose. In jurisdictions where tax consolidations are in place, tax losses can usually be netted against taxable income generated by the 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 their future recovery was not considered probable, amountamounted to €486€413 million at December 31, 2009in 2012, €476 million in 2011, and €451 million in 2010 (including €99 million on asset disposals), compared with €374 million at December 31, 2008 (including €162 million on asset disposals) and €274 million at December 31, 2007 (including €131€35 million on asset disposals).
The recognition of deferred tax assets previously unrecognized when accounting for business combination, therefore requiring a corresponding adjustment to goodwill, amount to €88 million at December 31, 2009, €6 million at December 31, 2008, and €43 million at December 31, 2007.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.15. Consolidated shareholders’shareholders' equity
D.15.1. Share capital
The share capital of €2,636,958,104 comprises 1,318,479,052€2,652,685,918 consists of 1,326,342,959 shares with a par value of €2.
Treasury shares held by the Group are as follows:
| Number of shares in million | % | |||||
---|---|---|---|---|---|---|---|
December 31, 2012 | 3.1 | 0.24% | |||||
December 31, 2011 | 17.2 | 1.28% | |||||
December 31, 2010 | 6.1 | 0.46% | |||||
January 1, 2010 | 9.4 | 0.71% | |||||
Closing | Number of shares | % | ||
December 31, 2009 | 9,422,716 | 0.71% | ||
December 31, 2008 | 10,014,971 | 0.76% | ||
December 31, 2007 | 37,725,706 | 2.76% | ||
January 1, 2007 | 8,940,598 | 0.66% |
Treasury shares are deducted from shareholders’shareholders' equity. Gains and losses on disposals of treasury shares are taken directly to equity and are not recognized in net income for the period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Movements in the share capital of the sanofi-aventisSanofi parent company over the last three years are presented below:
Date | Transaction | Number of shares | Share capital (1) | Additional paid-in capital (1) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
January 1, 2010 | 1,318,479,052 | 2,637 | 6,738 | |||||||||
During 2010 | Capital increase by exercise of stock subscription options | 430,033 | 1 | 17 | ||||||||
Board of Directors meeting of April 28, 2010 | Capital reduction by cancellation of treasury shares | (7,911,300 | ) | (16 | ) | (404 | ) | |||||
December 31, 2010 | 1,310,997,785 | 2,622 | 6,351 | |||||||||
During 2011 | Capital increase by exercise of stock subscription options | 1,593,369 | 4 | 66 | ||||||||
During 2011 | Capital increase by issue of restricted shares | 587,316 | 1 | (1 | ) | |||||||
June 16, 2011 | Capital increase by payment of dividends in shares | 38,139,730 | 76 | 1,814 | ||||||||
Board of Directors meeting of July 27, 2011 | Capital reduction by cancellation of treasury shares | (2,328,936 | ) | (5 | ) | (116 | ) | |||||
Board of Directors meeting of November 2, 2011 | Capital reduction by cancellation of treasury shares | (8,070,453 | ) | (16 | ) | (372 | ) | |||||
December 31, 2011 | 1,340,918,811 | 2,682 | 7,742 | |||||||||
During 2012 | Capital increase by exercise of stock subscription options | 11,945,454 | 24 | 621 | ||||||||
During 2012 | Capital increase by issue of restricted shares | 1,074,063 | 2 | (2 | ) | |||||||
Board of Directors meeting of April 26, 2012 | Capital reduction by cancellation of treasury shares | (21,159,445 | ) | (42 | ) | (1,088 | ) | |||||
Board of Directors meeting of October 24, 2012 | Capital reduction by cancellation of treasury shares | (6,435,924 | ) | (13 | ) | (405 | ) | |||||
December 31, 2012 | 1,326,342,959 | 2,653 | 6,868 | |||||||||
(€ million) | |||||||||||
Date | Transaction | Number of shares | Share capital | Additional paid-in capital | |||||||
January 1, 2007 | 1,359,434,683 | 2,719 | 9,138 | ||||||||
During 2007 | Capital increase by exercise of stock subscription options | 4,950,010 | 10 | 201 | |||||||
Shareholders’ meeting of May 31, 2007 | Capital increase on merger of Rhône Cooper into sanofi-aventis | 1,531,951 | 3 | 71 | |||||||
December 31, 2007 | 1,365,916,644 | 2,732 | 9,410 | ||||||||
During 2008 | Capital increase by exercise of stock subscription options | 1,046,238 | 2 | 37 | |||||||
Board meeting of April 29, 2008 | Capital reduction by cancellation of treasury shares | (51,437,419 | ) | (103 | ) | (2,843 | ) | ||||
December 31, 2008 | 1,315,525,463 | 2,631 | 6,604 | ||||||||
During 2009 | Capital increase by exercise of stock subscription options | 2,953,589 | 6 | 134 | |||||||
December 31, 2009 | 1,318,479,052 | 2,637 | 6,738 | ||||||||
For equity related disclosures about the management of capital as required under IFRS 7, refer to Note B.27.
A total of 11,945,454 shares were issued during 2012 as a result of the exercise of Sanofi stock subscription options.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.15.2. Restricted share planplans
The meeting ofRestricted share plans are accounted for in accordance with the sanofi-aventispolicies described in Note B.24.3.
The plan was measured as of the date of grant. The fair value per share awarded is the quoted market price per share as of that date (€57.62), adjusted for dividends expected during the vesting period.
The fair value of this plan is €192 million. This amount is being recognized in profit or loss over the vesting period, with the matching entry recognized directly in equity; the expense recognized in 2012 was €45 million.
In accordance with IFRS 2 (Share-Based Payment), sanofi-aventis has estimated the fair value of this plan on the basis of the fair value of the equity instruments awarded, as representing the fair value of the employee services received during the period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Fair value was measured at the date of grant. The fair value of eachper share awarded corresponds tois the quoted market price per share as of thatthe date of grant (€41.10)50.28), adjusted for dividends expected during the vesting period.
The fair value of this plan is €125 million.
The fair value of this plan is €67 million.
The fair value of the restricted sharethis plan was measured at €37is €50 million. This amount is being recognized as an expense over the vesting period, with a corresponding increase in equity.
The total expense recognized for this plan during 2009 was €11 million.
As ofall restricted share plans in the year ended December 31, 2009,2012 was €125 million, compared with €84 million in the totalyear ended December 31, 2011 and €36 million in the year ended December 31, 2010.
The number of restricted shares outstandingnot yet vested as of December 31, 2012 was 1,181,049.
10,414,053, comprising 4,584,920 under the 2012 plans, 3,184,240 under the 2011 plans, 1,470,980 under the October 2010 plans, 631,544 under the March 2010 plans, and 542,369 under the March 2009 plans. The number of restricted shares not yet vested was 7,062,324 as of December 31, 2011 and 4,467,968 as of December 31, 2010.
D.15.3. Capital increase for employee share ownership plan
On May 6, 2011, the Annual General Meeting of Sanofi shareholders approved the payment of a dividend of €2.50 per share in respect of the year ended December 31, 2010, with an option for payment in cash or in newly-issued Sanofi shares. This option was exercised by shareholders representing 57.8% of the shares, as a result which 38,139,730 new shares were issued for payment of the dividend in shares. The shares issued represent 2.9% of the share capital, and led to an increase of €76 million in the share capital and €1,814 million in additional paid-in capital (net of issuance costs).
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 either 20092010, 2011 or 2008.2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.15.4. Repurchase of Sanofi shares
At its meeting of October 30, 2007,On May 4, 2012, the Board of Directors used the authorization granted by the Shareholders’ Annual General Meeting of May 31, 2007 to launch an employee share ownership plan by carrying out a share issue reserved for employees. The plan involved the issuance of a maximum of 6.8 million shares, ranking for dividend from January 1, 2007 and priced at €48.55 per share. The subscription period was from November 19, 2007 through November 30, 2007, and a total of 1,531,951 shares were subscribed. An expense of €21 million was recognized in respect of this share issue in the income statement for the year ended December 31, 2007.
D.15.4. Repurchase of sanofi-aventis shares
Sanofi-aventis did not repurchase any of its own shares during 2009.
The Shareholders’ Annual General Meeting of May 14, 2008 authorized a further share repurchase program. Under this new program, sanofi-aventis acquired 810,000 of its own shares during the period from June 6, 2008 through August 21, 2008 for a total of €36 million (including transaction costs).
The Shareholders’ Annual General Meeting of May 31, 2007 authorizedSanofi shareholders approved a share repurchase program for a period of 18 months. Under this program sanofi-aventisand only this program, the Group repurchased 23,052,1696,060,150 shares in 2012 for a total amount of €397 million.
On May 6, 2011, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under this program, the Group repurchased 7,513,493 shares in the first half of 2012 for a total amount of €426 million, and 21,655,140 shares in 2011 for a total amount of €1,074 million.
On May 17, 2010, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. The Group did not repurchase any of its own shares in the period from January 1, 2008 through May 14, 2008 for a total of €1,191 million (including transaction costs). Under the same program, sanofi-aventis had previously acquired 29,366,500 of its own shares during the second half of 2007 for a total of €1,806 million (including transaction costs).
under this program.
D.15.5. ReductionReductions in share capital
TheOn October 24, 2012, the Board of Directors’ meetingDirectors approved the cancellation of April 29, 2008 decided to cancel 51,437,4196,435,924 treasury shares (€2,946418 million), of which 51,407,169 had been repurchased through April 14, 2008 under the share repurchase program, representing 3.77%0.49% of the share capital as of that date (see Note D.15.4.).date.
On April 26, 2012, the Board of Directors approved the cancellation of 21,159,445 treasury shares (€1,130 million), representing 1.60% of the share capital as of that date.
On November 2, 2011, the Board of Directors approved the cancellation of 8,070,453 treasury shares (€388 million), representing 0.60% of the share capital as of that date.
On July 27, 2011, the Board of Directors approved the cancellation of 2,328,936 treasury shares (€121 million), representing 0.17% of the share capital as of that date.
On April 28, 2010, the Board of Directors approved the cancellation of 7,911,300 treasury shares (€420 million), representing 0.60% of the share capital as of that date.
These cancellations had no effect on consolidated shareholders’shareholders' equity.
D.15.6. CumulativeCurrency translation differences
CumulativeCurrency translation differences break down as follows:
(€ million) | December 31, 2012 | December 31, 2011 (1) | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Attributable to equity holders of Sanofi | (1,918 | ) | (1,390 | ) | (1,318 | ) | ||||
Attributable to non-controlling interests | (24 | ) | (16 | ) | (4 | ) | ||||
Total | (1,942 | ) | (1,406 | ) | (1,322 | ) | ||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
Attributable to equity holders of the Company | (3,965 | ) | (3,669 | ) | (4,631 | ) | |||
Attributable to minority interests | (15 | ) | (16 | ) | (2 | ) | |||
Total | (3,980 | ) | (3,685 | ) | (4,633 | ) | |||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The movement in cumulativecurrency translation differences during the period was mainly due to the effect of changes in the U.S. dollar exchange rate, primarily on goodwill, intangible assets and inventories.
In accordance with the accounting policy described in Note B.8.4., cumulativecurrency translation differences attributable to equity holders of the CompanySanofi include the post-tax effecteffects of currency hedges of net investments in foreign operations, totaling €86operations; these effects (after tax) were €72 million at December 31, 2009; compared with €982012, €66 million as of bothat December 31, 20082011, and €85 million at December 31, 2007.2010.
D.15.7. Other items recognized directly in equity
Movements in other items recognized directly in equity break down as follows:
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Balance, beginning of period | (4,436 | ) | (4,659 | ) | (2,061 | ) | |||
Available-for-sale financial assets: | |||||||||
• Change in fair value | 110 | (1) | (132 | ) | (5 | ) | |||
• Tax effects | (23 | ) | 33 | (10 | ) | ||||
Cash flow hedges: | |||||||||
• Change in fair value | (175 | )(2) | 104 | 8 | |||||
• Tax effects | 61 | (37 | ) | (3 | ) | ||||
Zentiva fair value remeasurement (3) | |||||||||
• Change in fair value | 108 | — | — | ||||||
• Tax effects | (28 | ) | — | — | |||||
Merial fair value remeasurement (3) | |||||||||
• Change in fair value | 1,215 | — | — | ||||||
• Tax effects | (293 | ) | — | — | |||||
Actuarial gains and losses and impact of asset ceiling: | |||||||||
• Asset ceiling | 2 | 2 | (1 | ) | |||||
• Actuarial gains/(losses) excluding associates and joint ventures (see Note D.18.1.) | (169 | ) | (824 | ) | 277 | ||||
• Actuarial gains/(losses) in associates and joint ventures | (2 | ) | (7 | ) | 6 | ||||
• Tax effects | 36 | 136 | (106 | ) | |||||
Change in cumulative translation differences | |||||||||
• Translation differences on foreign subsidiaries | (283 | )(4) | 948 | (2,764 | ) | ||||
• Hedges of net investments in foreign operations | (18 | ) | — | — | |||||
• Tax effects | 6 | — | — | ||||||
Balance, end of period | (3,889 | ) | (4,436 | ) | (4,659 | ) | |||
Attributable to equity holders of the Company | (3,873 | ) | (4,419 | ) | (4,658 | ) | |||
Attributable to minority interests | (16 | ) | (17 | ) | (1 | ) | |||
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009D.15.7. Other comprehensive income
Movements in other comprehensive income are as follows:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 (1) | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, beginning of period | (1,477 | ) | (1,102 | ) | (3,755 | ) | ||||
Attributable to equity holders of Sanofi | (1,460 | ) | (1,097 | ) | (3,739 | ) | ||||
Attributable to non-controlling interests | (17 | ) | (5 | ) | (16 | ) | ||||
Actuarial gains/(losses) | ||||||||||
• Impact of asset ceiling | 1 | — | 1 | |||||||
• Actuarial gains/(losses) excluding associates and joint ventures | (1,549 | ) | (677 | ) | (311 | ) | ||||
• Actuarial gains/(losses) on associates and joint ventures | (7 | ) | — | (1 | ) | |||||
• Tax effects | 492 | 138 | 172 | |||||||
Items not subsequently reclassifiable to profit or loss | (1,063 | ) | (539 | ) | (139 | ) | ||||
Available-for-sale financial assets: | ||||||||||
• Change in fair value (2) | 1,451 | 250 | 141 | |||||||
• Tax effects | (114 | ) | (5 | ) | (15 | ) | ||||
Cash flow hedges: | ||||||||||
• Change in fair value (3) | (4 | ) | 5 | 17 | ||||||
• Tax effects | 1 | (2 | ) | (6 | ) | |||||
Change in currency translation differences: | ||||||||||
• Currency translation differences on foreign subsidiaries (4) | (542 | ) | (65 | ) | 2,656 | |||||
• Hedges of net investments in foreign operations | 10 | (30 | ) | (2 | ) | |||||
• Tax effects | (4 | ) | 11 | 1 | ||||||
Items subsequently reclassifiable to profit or loss | 798 | 164 | 2,792 | |||||||
Balance, end of period | (1,742 | ) | (1,477 | ) | (1,102 | ) | ||||
Attributable to equity holders of Sanofi | (1,718 | ) | (1,460 | ) | (1,097 | ) | ||||
Attributable to non-controlling interests | (24 | ) | (17 | ) | (5 | ) | ||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.15.8. Share-based payment
Stock option plans and share warrants
a) Assumption by sanofi-aventisSanofi of the obligations of Aventis
Stock subscription option plans
With effect from December 31, 2004, sanofi-aventisSanofi substituted for Aventis in all the rights and obligations of the issuer in respect of stock subscription options granted to employees and former corporate officers of Aventis and of related companies (as defined in article L.225-180 of the Commercial Code) and not exercised as of that date.
With effect from December 31, 2004, stock subscription options granted by Aventis and not yet exercised may be exercised in sanofi-aventisSanofi shares on the same terms, subject to the adjustments described below. The number and subscription price of the optioned shares have been adjusted to reflect the share exchange ratio applicable to Aventis shareholders, subject to possible further adjustment in the event of future capital transactions. The new terms for the exercise of options, subject to future financial adjustments, are as follows:
Stock purchase option plans
In the case of stock option plans issued by Aventis Inc. and Hoechst AG entitling the grantees to purchase Aventis shares, the plan regulations have been amended in accordance with the principles described above so as to enable the grantees to purchase sanofi-aventis shares. The other terms of exercise are unchanged.
b) Description of stock option plans
2009 stockStock subscription option plan granted by sanofi-aventisplans
On March 2, 2009,5, 2012, the Board of Directors granted 7,736,480814,050 stock subscription options at an exercise price of €45.09€56.44 per share.
The vesting period is four years, and the plan expires on March 2, 2019.5, 2022.
2007 stock subscription option plan granted by sanofi-aventis
On December 13, 2007,March 9, 2011, the Board of Directors granted 11,988,975874,500 stock subscription options at an exercise price of €62.33€50.48 per share.
The vesting period is four years, and the plan expires on December 13, 2017.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) On March 1, 2010, the Board of Directors granted 8,121,355 stock subscription options at an exercise price of €54.12 per share. The vesting period is four years, and the plan expires on February 28, 2020.
Year ended December 31, 2009Stock purchase option plans
The table shows all sanofi-aventisSanofi stock purchase option plans still outstanding or under which options were exercised in the year ended December 31, 2009.2012.
Origin | Date of grant | Options granted | Start date of exercise period | Expiration date | Exercise price (€) | Options outstanding at December 31, 2012 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Synthélabo | 10/18/1994 | 330,200 | 10/18/1999 | 10/18/2014 | 6.01 | 5,200 | |||||||||||||
Synthélabo | 01/12/1996 | 208,000 | 01/12/2001 | 01/12/2016 | 8.56 | 8,870 | |||||||||||||
Synthélabo | 04/05/1996 | 228,800 | 04/05/2001 | 04/05/2016 | 10.85 | 18,500 | |||||||||||||
Synthélabo | 10/14/1997 | 262,080 | 10/14/2002 | 10/14/2017 | 19.73 | 23,442 | |||||||||||||
Synthélabo | 06/25/1998 | 296,400 | 06/26/2003 | 06/25/2018 | 28.38 | 3,500 | |||||||||||||
Synthélabo | 03/30/1999 | 716,040 | 03/31/2004 | 03/30/2019 | 38.08 | 232,025 | |||||||||||||
Sanofi-Synthélabo | 05/22/2002 | 3,111,850 | 05/23/2006 | 05/22/2012 | 69.94 | — | |||||||||||||
Total | 291,537 | ||||||||||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Origin | Date of grant | Options granted | Start date of exercise period | Expiration date | Exercise price (€) | Options outstanding at December 31, 2009 | ||||||
Synthélabo | 12/15/1993 | 364,000 | 12/15/1998 | 12/15/2013 | 6.36 | 8,000 | ||||||
Synthélabo | 10/18/1994 | 330,200 | 10/18/1999 | 10/18/2014 | 6.01 | 16,600 | ||||||
Synthélabo | 01/12/1996 | 208,000 | 01/12/2001 | 01/12/2016 | 8.56 | 19,270 | ||||||
Synthélabo | 04/05/1996 | 228,800 | 04/05/2001 | 04/05/2016 | 10.85 | 36,970 | ||||||
Synthélabo | 10/14/1997 | 262,080 | 10/14/2002 | 10/14/2017 | 19.73 | 30,974 | ||||||
Synthélabo | 06/25/1998 | 296,400 | 06/26/2003 | 06/25/2018 | 28.38 | 11,870 | ||||||
Synthélabo | 03/30/1999 | 716,040 | 03/31/2004 | 03/30/2019 | 38.08 | 327,755 | ||||||
Aventis (Hoechst AG) | 09/07/1999 | 2,930,799 | 09/08/2002 | 09/07/2009 | 41.25 | — | ||||||
Sanofi-Synthélabo | 05/24/2000 | 4,292,000 | 05/25/2004 | 05/24/2010 | 43.25 | 1,476,014 | ||||||
Sanofi-Synthélabo | 05/10/2001 | 2,936,500 | 05/11/2005 | 05/10/2011 | 64.50 | 2,551,739 | ||||||
Sanofi-Synthélabo | 05/22/2002 | 3,111,850 | 05/23/2006 | 05/22/2012 | 69.94 | 2,901,250 | ||||||
Total | 7,380,442 | |||||||||||
Under IFRS, sanofi-aventisSanofi shares acquired to cover stock purchase optionsoption plans are deducted from shareholders’shareholders' equity. The exercise of all outstanding stock purchase options would increase shareholders’shareholders' equity by €440€10 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-aventisSanofi share equivalents. These options have been granted to certain corporate officers and employees of Group companies.
The table shows all sanofi-aventisSanofi stock subscription option plans still outstanding or under which options were exercised in the year ended December 31, 2009.2012.
Origin | Date of grant | Options granted | Start date of exercise period | Expiration date | Exercise price (€) | Options outstanding at December 31, 2012 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aventis | 03/06/2002 | 1,173,913 | 03/07/2005 | 03/06/2012 | 69.82 | — | |||||||||||||
Aventis | 11/12/2002 | 11,775,414 | 11/13/2005 | 11/12/2012 | 51.34 | — | |||||||||||||
Aventis | 12/02/2003 | 12,012,414 | 12/03/2006 | 12/02/2013 | 40.48 | 1,850,188 | |||||||||||||
Sanofi-Synthélabo | 12/10/2003 | 4,217,700 | 12/11/2007 | 12/10/2013 | 55.74 | 1,359,860 | |||||||||||||
Sanofi-aventis | 05/31/2005 | 15,228,505 | 06/01/2009 | 05/31/2015 | 70.38 | 12,897,536 | |||||||||||||
Sanofi-aventis | 12/14/2006 | 11,772,050 | 12/15/2010 | 12/14/2016 | 66.91 | 9,591,305 | |||||||||||||
Sanofi-aventis | 12/13/2007 | 11,988,975 | 12/14/2011 | 12/13/2017 | 62.33 | 8,632,330 | |||||||||||||
Sanofi-aventis | 03/02/2009 | 7,736,480 | 03/04/2013 | 03/01/2019 | 45.09 | 7,143,460 | |||||||||||||
Sanofi-aventis | 03/01/2010 | 8,121,355 | 03/03/2014 | 02/28/2020 | 54.12 | 7,597,245 | |||||||||||||
Sanofi-aventis | 03/09/2011 | 874,500 | 03/10/2015 | 03/09/2021 | 50.48 | 844,500 | |||||||||||||
Sanofi | 03/05/2012 | 814,050 | 03/06/2016 | 03/05/2022 | 56.44 | 814,050 | |||||||||||||
Total | 50,730,474 | ||||||||||||||||||
Origin | Date of grant | Options granted | Start date of exercise period | Expiration date | Exercise price (€) | Options outstanding at December 31, 2009 | ||||||
Aventis | 12/15/1999 | 5,910,658 | 01/06/2003 | 12/15/2009 | 50.04 | — | ||||||
Aventis | 05/11/2000 | 877,766 | 05/11/2003 | 05/11/2010 | 49.65 | 223,372 | ||||||
Aventis | 11/14/2000 | 13,966,871 | 11/15/2003 | 11/14/2010 | 67.93 | 10,339,911 | ||||||
Aventis | 03/29/2001 | 612,196 | 03/30/2004 | 03/29/2011 | 68.94 | 546,756 | ||||||
Aventis | 11/07/2001 | 13,374,051 | 11/08/2004 | 11/07/2011 | 71.39 | 9,650,791 | ||||||
Aventis | 03/06/2002 | 1,173,913 | 03/07/2005 | 03/06/2012 | 69.82 | 1,173,906 | ||||||
Aventis | 11/12/2002 | 11,775,414 | 11/13/2005 | 11/12/2012 | 51.34 | 5,330,982 | ||||||
Aventis | 12/02/2003 | 12,012,414 | 12/03/2006 | 12/02/2013 | 40.48 | 5,704,986 | ||||||
Sanofi-Synthélabo | 12/10/2003 | 4,217,700 | 12/11/2007 | 12/10/2013 | 55.74 | 3,835,070 | ||||||
Sanofi-aventis | 05/31/2005 | 15,228,505 | 06/01/2009 | 05/31/2015 | 70.38 | 13,531,100 | ||||||
Sanofi-aventis | 12/14/2006 | 11,772,050 | 12/15/2010 | 12/14/2016 | 66.91 | 11,031,620 | ||||||
Sanofi-aventis | 12/13/2007 | 11,988,975 | 12/14/2011 | 12/13/2017 | 62.33 | 11,475,985 | ||||||
Sanofi-aventis | 03/02/2009 | 7,736,480 | 03/03/2013 | 03/02/2019 | 45.09 | 7,645,420 | ||||||
Total | 80,489,899 | |||||||||||
The exercise of all outstanding stock subscription options would increase shareholders’shareholders' equity by approximately €4,991€3,060 million. The exercise of each option results in the issuance of one share.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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:
| | Exercise price | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Number of options | Weighted average per share (€) | Total (€ million) | |||||||
Options outstanding at January 1, 2010 | 87,870,341 | 61.87 | 5,436 | |||||||
Options exercisable | 57,717,316 | 63.04 | 3,638 | |||||||
Options granted | 8,121,355 | 54.12 | 440 | |||||||
Options exercised | (1,756,763 | ) | 42.50 | (75 | ) | |||||
Options cancelled (1) | (1,269,312 | ) | 59.56 | (75 | ) | |||||
Options forfeited | (10,694,693 | ) | 67.21 | (719 | ) | |||||
Options outstanding at December 31, 2010 | 82,270,928 | 60.86 | 5,007 | |||||||
Options exercisable | 55,663,453 | 63.63 | 3,542 | |||||||
Options granted | 874,500 | 50.48 | 44 | |||||||
Options exercised | (1,679,029 | ) | 43.11 | (72 | ) | |||||
Options cancelled (1) | (1,137,052 | ) | 57.64 | (66 | ) | |||||
Options forfeited | (12,597,283 | ) | 69.90 | (880 | ) | |||||
Options outstanding at December 31, 2011 | 67,732,064 | 59.54 | 4,033 | |||||||
Options exercisable | 51,916,769 | 62.51 | 3,245 | |||||||
Options granted | 814,050 | 56.44 | 46 | |||||||
Options exercised | (11,999,244 | ) | 53.87 | (646 | ) | |||||
Options cancelled (1) | (557,554 | ) | 58.40 | (33 | ) | |||||
Options forfeited | (4,967,305 | ) | 66.40 | (330 | ) | |||||
Options outstanding at December 31, 2012 | 51,022,011 | 60.17 | 3,070 | |||||||
Options exercisable | 34,622,756 | 64.93 | 2,248 | |||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Exercise price | ||||||||
Number of options | Weighted average per share (€) | Total (€ million) | ||||||
Options outstanding at January 1, 2007 | 82,599,660 | 61.00 | 5,039 | |||||
Of which exercisable | 50,920,604 | 58.02 | 2,954 | |||||
Options granted | 11,988,975 | 62.33 | 747 | |||||
Options exercised | (5,530,880 | ) | 42.07 | (233 | ) | |||
Options cancelled (1) | (712,658 | ) | 68.05 | (48 | ) | |||
Options forfeited | (69,402 | ) | 29.14 | (2 | ) | |||
Options outstanding at December 31, 2007 | 88,275,695 | 62.34 | 5,503 | |||||
Of which exercisable | 50,643,150 | 59.05 | 2,991 | |||||
Options exercised | (1,141,554 | ) | 36.82 | (42 | ) | |||
Options cancelled (1) | (1,682,800 | ) | 65.51 | (110 | ) | |||
Options forfeited | (146,391 | ) | 34.14 | (5 | ) | |||
Options outstanding at December 31, 2008 | 85,304,950 | 62.66 | 5,345 | |||||
Of which exercisable | 48,713,680 | 59.59 | 2,903 | |||||
Options granted | 7,736,480 | 45.09 | 349 | |||||
Options exercised | (3,545,344 | ) | 46.69 | (165 | ) | |||
Options cancelled (1) | (1,000,535 | ) | 61.72 | (62 | ) | |||
Options forfeited | (625,210 | ) | 48.89 | (31 | ) | |||
Options outstanding at December 31, 2009 | 87,870,341 | 61.87 | 5,436 | |||||
Of which exercisable | 57,717,316 | 63.04 | 3,638 | |||||
|
The table below provides summary information about options outstanding and exercisable as of December 31, 2009:2012:
Outstanding | Exercisable | |||||||||
Range of exercise prices per share | Number of options | Average residual life (in years) | Weighted average exercise price per share (€) | Number of options | Weighted average exercise price per share (€) | |||||
From €1.00 to €10.00 per share | 43,870 | 5.19 | 7.19 | 43,870 | 7.19 | |||||
From €10.00 to €20.00 per share | 67,944 | 6.96 | 14.90 | 67,944 | 14.90 | |||||
From €20.00 to €30.00 per share | 11,870 | 8.49 | 28.38 | 11,870 | 28.38 | |||||
From €30.00 to €40.00 per share | 327,755 | 9.25 | 38.08 | 327,755 | 38.08 | |||||
From €40.00 to €50.00 per share | 15,049,792 | 6.19 | 43.23 | 7,404,372 | 41.31 | |||||
From €50.00 to €60.00 per share | 9,166,052 | 3.32 | 53.18 | 9,166,052 | 53.18 | |||||
From €60.00 to €70.00 per share | 40,021,167 | 4.77 | 66.04 | 17,513,562 | 67.92 | |||||
From €70.00 to €80.00 per share | 23,181,891 | 3.93 | 70.80 | 23,181,891 | 70.80 | |||||
Total | 87,870,341 | 57,717,316 | ||||||||
| Outstanding | Exercisable | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of exercise prices per share | Number of options | Average residual life (in years) | Weighted average exercise price per share (€) | Number of options | Weighted average exercise price per share (€) | |||||||||||
From €1.00 to €10.00 per share | 14,070 | 2.58 | 7.62 | 14,070 | 7.62 | |||||||||||
From €10.00 to €20.00 per share | 41,942 | 4.12 | 15.81 | 41,942 | 15.81 | |||||||||||
From €20.00 to €30.00 per share | 3,500 | 5.48 | 28.38 | 3,500 | 28.38 | |||||||||||
From €30.00 to €40.00 per share | 232,025 | 6.25 | 38.08 | 232,025 | 38.08 | |||||||||||
From €40.00 to €50.00 per share | 8,993,648 | 5.09 | 44.14 | 1,850,188 | 40.48 | |||||||||||
From €50.00 to €60.00 per share | 10,615,655 | 6.60 | 54.22 | 1,359,860 | 55.74 | |||||||||||
From €60.00 to €70.00 per share | 18,223,635 | 4.43 | 64.74 | 18,223,635 | 64.74 | |||||||||||
From €70.00 to €80.00 per share | 12,897,536 | 2.41 | 70.38 | 12,897,536 | 70.38 | |||||||||||
Total | 51,022,011 | 34,622,756 | ||||||||||||||
Measurement of stock option plans
The fair value of the stock subscription option plan awarded in 2012 is €7 million. This amount is recognized as an expense over the vesting period, with the matching entry recognized directly in equity. On this basis, an expense of €1 million was recognized in the year ended December 31, 2012.
The fair value of the plan awarded in 2009 is €34 million, and the fair value of the plan awarded in 2007 is €1432011 was €6 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The following assumptions were used in determining the fair value of these plans:
26.69% for the 2012 plan, 26.93% for the 2011 plan.
The fair value of the options granted in 20092012 and 20072011 is €4.95€8.42 and €11.92€7.88 per option, respectively.
The expense recognized for stock option plans, and the matching entry taken to shareholders’recognized in equity, amounted to €102was €30 million in the year ended December 31, 2009for 2012 (including €12€3 million for the Vaccines segment); €125€59 million in the year ended December 31, 2008for 2011 (including €13€6 million for the Vaccines segment); and €115€97 million in the year ended December 31, 2007for 2010 (including €10 million for the Vaccines segment).
As of December 31, 2009,2012, the total unrecognized cost related to non-vested share-based compensation arrangementsof unvested stock options was €127€31 million, to be recognized over a weighted average period of 1.93two years. The current tax benefit related to share-based compensation arrangementsthe exercise of stock options in 2009 amounted to2012 was €15 million (versus €2 million (2008: €2 million; 2007: €19 million)in 2011 and €1 million in 2010).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 a potentially dilutive effect.
(in millions) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Average number of shares outstanding | 1,319.5 | 1,321.7 | 1,305.3 | |||||||
Adjustment for options with potentially dilutive effect | 4.0 | 1.7 | 1.7 | |||||||
Adjustment for restricted shares with potentially dilutive effect | 6.1 | 3.3 | 1.2 | |||||||
Average number of shares used to compute diluted earnings per share | 1,329.6 | 1,326.7 | 1,308.2 | |||||||
(in millions) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Average number of shares outstanding | 1,305.9 | 1,309.3 | 1,346.9 | |||
Adjustment for options with potentially dilutive effect | 1.1 | 1.6 | 7.0 | |||
Adjustment for restricted shares with potentially dilutive effect | 0.4 | — | — | |||
Average number of shares used to compute diluted earnings per share | 1,307.4 | 1,310.9 | 1,353.9 | |||
In 2009,2012, a total of 80.332 million stock options were not taken into account in the calculation of diluted earnings per share because they did not have a potentially dilutive effect, compared with 76.256 million in 20082011 and 65.469.1 million in 2007.
2010.
D.16. MinorityNon-controlling interests
MinorityNon-controlling interests in consolidated companies break down as follows:
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Minority interests of ordinary shareholders: | ||||||
• BMS(1) | 104 | 111 | 80 | |||
• Zentiva | 32 | — | — | |||
• Aventis Pharma Ltd India | 73 | 60 | 64 | |||
• Maphar | 7 | 6 | 6 | |||
• Sanofi-aventis Pakistan | 5 | 5 | 6 | |||
• Shantha Biotechnics | 12 | — | — | |||
• Other | 25 | 23 | 21 | |||
Total | 258 | 205 | 177 | |||
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-controlling interests of ordinary shareholders: | ||||||||||
• BMS (1) | — | 34 | 41 | |||||||
• Zentiva | 14 | 21 | 28 | |||||||
• Sanofi India Ltd | 63 | 58 | 75 | |||||||
• Maphar | 7 | 7 | 7 | |||||||
• Sanofi-Aventis Korea | — | 7 | 7 | |||||||
• Shantha Biotechnics | 8 | 10 | 9 | |||||||
• Other | 42 | 33 | 24 | |||||||
Total | 134 | 170 | 191 | |||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.17. Debt, cash and cash equivalents
The table below shows changes in the Group’sGroup's financial position over the last three years:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 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 | |||||||
Interest rate and currency derivatives used to hedge debt | (433 | ) | (483 | ) | (218 | ) | ||||
Total debt | 14,098 | 14,956 | 8,042 | |||||||
Cash and cash equivalents | (6,381 | ) | (4,124 | ) | (6,465 | ) | ||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 2 | 27 | — | |||||||
Debt, net of cash and cash equivalents | 7,719 | 10,859 | 1,577 | |||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
Long-term debt, at amortized cost | 5,961 | 4,173 | 3,734 | ||||||
Short-term debt and current portion of long-term debt | 2,866 | 1,833 | 2,207 | ||||||
Total debt | 8,827 | 6,006 | 5,941 | ||||||
Cash and cash equivalents | (4,692 | ) | (4,226 | ) | (1,711 | ) | |||
Debt, net of cash and cash equivalents | 4,135 | 1,780 | 4,230 | ||||||
“Debt,"Debt, net of cash and cash equivalents”equivalents" is a non-GAAP financial indicator used by management and investors to measure the company’scompany's overall net indebtedness.
Trends in the gearing ratio are shown below:
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Debt, net of cash and cash equivalents | 4,135 | 1,780 | 4,230 | |||
Total equity | 48,446 | 45,071 | 44,719 | |||
Gearing ratio | 8.5% | 3.9% | 9.5% | |||
A reconciliation of carrying amount to value on redemption is shown below:
Carrying amount: Dec. 31, 2009 | Amortized cost | Adjustment to debt measured at fair value | Value on redemption | ||||||||||||||
(€ million) | Dec. 31, 2009 | Dec. 31, 2008 | Dec. 31, 2007 | ||||||||||||||
Long-term debt | 5,961 | 17 | (35 | ) | 5,943 | 4,123 | 3,686 | ||||||||||
Short-term debt and current portion of long-term debt | 2,866 | 2 | (15 | ) | 2,853 | 1,815 | 2,187 | ||||||||||
Total debt | 8,827 | 19 | (50 | ) | 8,796 | 5,938 | 5,873 | ||||||||||
Cash and cash equivalents | (4,692 | ) | — | — | (4,692 | ) | (4,226 | ) | (1,711 | ) | |||||||
Debt, net of cash and cash equivalents | 4,135 | 19 | (50 | ) | 4,104 | 1,712 | 4,162 | ||||||||||
| | | | Value on redemption December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Carrying amount: Dec. 31, 2012 | Amortized cost | Adjustment to debt measured at fair value | 2012 | 2011 | 2010 | |||||||||||||
Long-term debt | 10,719 | 45 | (322 | ) | 10,442 | 12,278 | 6,683 | ||||||||||||
Short-term debt and current portion of long-term debt | 3,812 | — | — | 3,812 | 2,937 | 1,565 | |||||||||||||
Interest rate and currency derivatives used to hedge debt | (433 | ) | — | 269 | (164 | ) | (258 | ) | (192 | ) | |||||||||
Total debt | 14,098 | 45 | (53 | ) | 14,090 | 14,957 | 8,056 | ||||||||||||
Cash and cash equivalents | (6,381 | ) | — | — | (6,381 | ) | (4,124 | ) | (6,465 | ) | |||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 2 | — | — | 2 | 24 | — | |||||||||||||
Debt, net of cash and cash equivalents | 7,719 | 45 | (53 | ) | 7,711 | 10,857 | 1,591 | ||||||||||||
a) Principal financing transactions during the year
The following financing transactions that took place during 2009:2012 were as follows:
CHF250 million fixed-rate bond issue bearing annual interest of 3.25%, fungible with the CHF275
Three bond issues were redeemed on maturity:
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Three bond issues wereThe Group also repaid on maturity:
July 2007 bond issue withmaturity a nominal value of ¥19.15 billion (€144 million), which matured July 10, 2009;
July 2007 bond issue with a nominal value of €200 million loan from the European Investment Bank, originally contracted on December 13, 2007.
During 2012, the Group amended the terms of its €7 billion facility as follows:
December 2006 bond issue with a nominal valueOn July 16, 2012, the Group agreed an initial one-year extension of €100 million, which matured December 21, 2009.
A €1its €3 billion syndicated bank loan was repaid in July 2009.
In addition, a €461 million syndicated bank loan, fully drawn down by Zentiva N.V., a company acquired in March 2009 (see Note D.1.), was repaid on July 10, 2009.
credit facility with the fourteen banks.
b) Debt, net of cash and cash equivalents by type, at value on redemption
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-current | Current | Total | Non-current | Current | Total | Non-current | Current | Total | |||||||||||||||||||
Bond issues | 9,886 | 2,509 | 12,395 | 11,662 | 1,324 | 12,986 | 5,879 | 92 | 5,971 | |||||||||||||||||||
Other bank borrowings | 478 | 994 | 1,472 | 522 | 562 | 1,084 | 771 | 402 | 1,173 | |||||||||||||||||||
Commercial paper | — | — | — | — | 695 | 695 | — | 735 | 735 | |||||||||||||||||||
Finance lease obligations | 65 | 13 | 78 | 80 | 12 | 92 | 19 | 6 | 25 | |||||||||||||||||||
Other borrowings | 13 | 42 | 55 | 14 | 62 | 76 | 14 | 57 | 71 | |||||||||||||||||||
Bank credit balances | — | 254 | 254 | — | 282 | 282 | — | 273 | 273 | |||||||||||||||||||
Interest rate and currency derivatives used to hedge debt | (124 | ) | (40 | ) | (164 | ) | (143 | ) | (115 | ) | (258 | ) | (194 | ) | 2 | (192 | ) | |||||||||||
Total debt | 10,318 | 3,772 | 14,090 | 12,135 | 2,822 | 14,957 | 6,489 | 1,567 | 8,056 | |||||||||||||||||||
Cash and cash equivalents | — | (6,381 | ) | (6,381 | ) | — | (4,124 | ) | (4,124 | ) | — | (6,465 | ) | (6,465 | ) | |||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | — | 2 | 2 | — | 24 | 24 | — | — | — | |||||||||||||||||||
Debt, net of cash and cash equivalents | 10,318 | (2,607 | ) | 7,711 | 12,135 | (1,278 | ) | 10,857 | 6,489 | (4,898 | ) | 1,591 | ||||||||||||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||||||||||||||||||||
Non-current | Current | Total | Non-current | Current | Total | Non-current | Current | Total | ||||||||||||||||
Bond issues | 5,236 | 1,982 | 7,218 | 2,418 | 488 | 2,906 | 2,390 | 1,390 | 3,780 | |||||||||||||||
Credit facility drawdowns | — | — | — | 1,000 | 34 | 1,034 | 1,000 | 1 | 1,001 | |||||||||||||||
Other bank borrowings | 678 | 529 | 1,207 | 670 | 262 | 932 | 257 | 266 | 523 | |||||||||||||||
Commercial paper | — | — | — | — | 717 | 717 | — | 102 | 102 | |||||||||||||||
Finance lease obligations | 15 | 9 | 24 | 21 | 4 | 25 | 25 | 4 | 29 | |||||||||||||||
Other borrowings | 14 | 16 | 30 | 14 | 11 | 25 | 14 | 1 | 15 | |||||||||||||||
Bank credit balances | — | 317 | 317 | — | 299 | 299 | — | 423 | 423 | |||||||||||||||
Total debt | 5,943 | 2,853 | 8,796 | 4,123 | 1,815 | 5,938 | 3,686 | 2,187 | 5,873 | |||||||||||||||
Cash and cash equivalents | — | (4,692 | ) | (4,692 | ) | — | (4,226 | ) | (4,226 | ) | — | (1,711 | ) | (1,711 | ) | |||||||||
Debt, net of cash and cash equivalents | 5,943 | (1,839 | ) | 4,104 | 4,123 | (2,411 | ) | 1,712 | 3,686 | 476 | 4,162 | |||||||||||||
Bond issues madecarried out by Sanofi under the EMTN (EuroEuro Medium Term Notes)Notes (EMTN) program comprise:
September 2003 issue [ISIN: XS0176128675] with a nominal value of €1,500 million, maturing September 2010, bearing annual interest at 4.25%;
January 2007 issue [ISIN: XS0282647634] amounting to £200 million (€225 million), maturing January 2010, bearing annual interest at 5.50% and swapped into euros at a floating rate indexed to 3-month Euribor;
Bond issues made outside the EMTN (Euro Medium Term Notes) program comprise:
December 2007 issue [ISIN: CH0035703021] amounting to CHF200 million (€135 million), maturing January 2010, bearing annual interest of 2.75%, and swapped into euros at a floating rate indexed to 6-month Euribor;
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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:
The U.S. dollar issues have been retained in this currency and have not been swapped into euros.
Bond issues carried out by Sanofi outside the EMTN program and the U.S. shelf registration statement program consist of the December 2007 and February 2008 issues [ISIN: CH0035703070] amounting toof CHF400 million (€270331 million), maturing December 2015, bearing annual interest ofat 3.375%, and swapped into euros at a fixed rate of 4.867%;.
December 2008 and January 2009Bond issues made by Genzyme Corp. comprise:
Sanofi-aventis has put in place the following arrangements to manage its liquidity needs:
A syndicated bank facility of €8 billion, of which €0.3 billion expires in March 2011 and €7.7 billion in March 2012. There were no drawdowns under this facility as of December 31, 2009;
A syndicated 364-day bank facility, contracted in 2005 for an initial amount of €5 billion, initially with four 364-day extension options. The final extension option was exercised in early 2009, extending the expiry of the facility from January 2009 to January 2010. During 2009, the facility was renewed early, extending the expiry date from January 2010 to January 2011. With effect from January 2010, the amount of this facility will be €4.0 billion, versus €3.7 billion in 2009. There were no drawdowns under this facility as of December 31, 2009;
A bilateral 364-day bank facility of $0.6 billion (€0.4 billion) expiring January 2010. This facility was renewed in January 2010, and now expires in January 2011;
A bilateral 364-day bank facility of $0.25 billion (€0.2 billion) expiring February 2010.
These short-term bank facilities, which are confirmed but have not been drawn down, are used in particular to back two commercial paper programs, of €6 billion in France and $6 billion in the United States. In 2009, the average drawdown under these programs was €0.4 billion (maximum €0.8 billion). These programs were not mobilized as of December 31, 2009.
The financing in place at December 31, 2009 is not subject to covenants regarding financial ratios, and contains no clauses linking credit spreads or fees to the credit rating of sanofi-aventis.
The line “Other borrowings”"Other borrowings" mainly includes:
Participating
In order to manage its liquidity needs for current operations, the Group now has:
The Group also has two commercial paper programs of €6 billion in France and $10 billion in the United States. In 2012, only the U.S. program was used, with an average drawdown of €2.3 billion and a maximum drawdown of €3.3 billion. Nothing was drawn down under either of these programs as of December 31, 2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The financing in place as of December 31, 2012 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.
c) Debt by maturity, at value on redemption
| | Current | Non-current | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | ||||||||||||||||||||
December 31, 2012 (€ million) | Total | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 and later | |||||||||||||||
Bond issues | 12,395 | 2,509 | 3,094 | 710 | 2,637 | 750 | 2,695 | |||||||||||||||
Other bank borrowings | 1,472 | 994 | 5 | 6 | 7 | 434 | 26 | |||||||||||||||
Commercial paper | — | — | — | — | — | — | — | |||||||||||||||
Finance lease obligations | 78 | 13 | 13 | 14 | 13 | 14 | 11 | |||||||||||||||
Other borrowings | 55 | 42 | — | — | — | — | 13 | |||||||||||||||
Bank credit balances | 254 | 254 | — | — | — | — | — | |||||||||||||||
Interest rate and currency derivatives used to hedge debt | (164 | ) | (40 | ) | — | (87 | ) | — | (3 | ) | (34 | ) | ||||||||||
Total debt | 14,090 | 3,772 | 3,112 | 643 | 2,657 | 1,195 | 2,711 | |||||||||||||||
Cash and cash equivalents | (6,381 | ) | (6,381 | ) | — | — | — | — | — | |||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 2 | 2 | — | — | — | — | — | |||||||||||||||
Debt, net of cash and cash equivalents | 7,711 | (2,607 | ) | 3,112 | 643 | 2,657 | 1,195 | 2,711 | ||||||||||||||
December 31, 2009 | ||||||||||||||||
Non-current | ||||||||||||||||
(€ million) | Total | Current 2010 | 2011 | 2012 | 2013 | 2014 | 2015 and later | |||||||||
Bond issues | 7,218 | 1,982 | — | 354 | 1,613 | 700 | 2,569 | |||||||||
Other bank borrowings | 1,207 | 529 | 11 | 225 | 433 | 7 | 2 | |||||||||
Finance lease obligations | 24 | 9 | 3 | 3 | 3 | 3 | 3 | |||||||||
Other borrowings | 30 | 16 | — | — | — | — | 14 | |||||||||
Bank credit balances | 317 | 317 | — | — | — | — | — | |||||||||
Total debt | 8,796 | 2,853 | 14 | 582 | 2,049 | 710 | 2,588 | |||||||||
Cash and cash equivalents | (4,692 | ) | (4,692 | ) | — | — | — | — | — | |||||||
Debt, net of cash and cash equivalents | 4,104 | (1,839 | ) | 14 | 582 | 2,049 | 710 | 2,588 | ||||||||
| | Current | Non-current | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | ||||||||||||||||||||
December 31, 2011 (€ million) | Total | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 and later | |||||||||||||||
Bond issues | 12,986 | 1,324 | 2,423 | 3,133 | 720 | 2,659 | 2,727 | |||||||||||||||
Other bank borrowings | 1,084 | 562 | 482 | 15 | 8 | 9 | 8 | |||||||||||||||
Commercial paper (1) | 695 | 695 | — | — | — | — | — | |||||||||||||||
Finance lease obligations | 92 | 12 | 14 | 13 | 14 | 14 | 25 | |||||||||||||||
Other borrowings | 76 | 62 | — | — | — | — | 14 | |||||||||||||||
Bank credit balances | 282 | 282 | — | — | — | — | — | |||||||||||||||
Interest rate and currency derivatives used to hedge debt | (258 | ) | (115 | ) | (58 | ) | — | (85 | ) | — | — | |||||||||||
Total debt | 14,957 | 2,822 | 2,861 | 3,161 | 657 | 2,682 | 2,774 | |||||||||||||||
Cash and cash equivalents | (4,124 | ) | (4,124 | ) | — | — | — | — | — | |||||||||||||
Interest rate and currency derivatives used to hedge cash and cash equivalents | 24 | 24 | — | — | — | — | — | |||||||||||||||
Debt, net of cash and cash equivalents | 10,857 | (1,278 | ) | 2,861 | 3,161 | 657 | 2,682 | 2,774 | ||||||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | Current | Non-Current | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | ||||||||||||||||||||
December 31, 2010 (€ million) | Total | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 and later | |||||||||||||||
Bond issues | 5,971 | 92 | 420 | 1,638 | 1,200 | 321 | 2,300 | |||||||||||||||
Other bank borrowings | 1,173 | 402 | 203 | 555 | 6 | 7 | — | |||||||||||||||
Commercial paper (1) | 735 | 735 | — | — | — | — | — | |||||||||||||||
Finance lease obligations | 25 | 6 | 6 | 5 | 3 | 3 | 2 | |||||||||||||||
Other borrowings | 71 | 57 | — | — | — | — | 14 | |||||||||||||||
Bank credit balances | 273 | 273 | — | — | — | — | — | |||||||||||||||
Interest rate and currency derivatives used to hedge debt | (192 | ) | 2 | (73 | ) | (46 | ) | — | (75 | ) | — | |||||||||||
Total debt | 8,056 | 1,567 | 556 | 2,152 | 1,209 | 256 | 2,316 | |||||||||||||||
Cash and cash equivalents | (6,465 | ) | (6,465 | ) | — | — | — | — | — | |||||||||||||
Debt, net of cash and cash equivalents | 1,591 | (4,898 | ) | 556 | 2,152 | 1,209 | 256 | 2,316 | ||||||||||||||
December 31, 2008 | ||||||||||||||||
(€ million) | Total | Current 2009 | Non-current | |||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 and later | ||||||||||||
Bond issues | 2,906 | 488 | 1,845 | — | 185 | 119 | 269 | |||||||||
Credit facility drawdowns (1) | 1,034 | 34 | — | — | 1,000 | — | — | |||||||||
Other bank borrowings | 932 | 262 | 13 | 7 | 208 | 439 | 3 | |||||||||
Commercial paper (2) | 717 | 717 | — | — | — | — | — | |||||||||
Finance lease obligations | 25 | 4 | 3 | 6 | 2 | 3 | 7 | |||||||||
Other borrowings | 25 | 11 | — | — | — | — | 14 | |||||||||
Bank credit balances | 299 | 299 | — | — | — | — | — | |||||||||
Total debt | 5,938 | 1,815 | 1,861 | 13 | 1,395 | 561 | 293 | |||||||||
Cash and cash equivalents | (4,226 | ) | (4,226 | ) | — | — | — | — | — | |||||||
Debt, net of cash and cash equivalents | 1,712 | (2,411 | ) | 1,861 | 13 | 1,395 | 561 | 293 | ||||||||
|
|
December 31, 2007 | ||||||||||||||||
(€ million) | Total | Current 2008 | Non-current | |||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 and later | ||||||||||||
Bond issues (1) | 3,780 | 1,390 | 316 | 1,894 | — | — | 180 | |||||||||
Credit facility drawdowns (2) | 1,001 | 1 | — | — | — | 1,000 | — | |||||||||
Other bank borrowings | 523 | 266 | 15 | 12 | 9 | 216 | 5 | |||||||||
Commercial paper | 102 | 102 | — | — | — | — | — | |||||||||
Finance lease obligations | 29 | 4 | 4 | 3 | 6 | 6 | 6 | |||||||||
Other borrowings | 15 | 1 | — | — | — | — | 14 | |||||||||
Bank credit balances | 423 | 423 | — | — | — | — | — | |||||||||
Total debt | 5,873 | 2,187 | 335 | 1,909 | 15 | 1,222 | 205 | |||||||||
Cash and cash equivalents | (1,711 | ) | (1,711 | ) | — | — | — | — | — | |||||||
Debt, net of cash and cash equivalents | 4,162 | 476 | 335 | 1,909 | 15 | 1,222 | 205 | |||||||||
|
|
The main undrawn confirmed general-purpose credit facilities thatat holding company level were not allocated to outstanding commercial paper drawdowns atas follows:
Year of expiry | Undrawn confirmed credit facilities available (€ million) | |||
---|---|---|---|---|
2013 | 3,000 | |||
2015 | 250 | |||
2017 | 6,750 | |||
Total | 10,000 | |||
As of December 31, 2009 break down as follows:2012, no single counterparty represented more than 7% of undrawn confirmed credit facilities.
Year of expiry | Undrawn confirmed credit facilities available (€ million) | ||
2010 | 590 | ||
2011 | 4,027 | (1) | |
2012 | 7,673 | ||
Total | 12,290 | ||
|
Confirmed credit facilities mainly comprise:
a syndicated credit facility of €8 billion expiring in 2011 (€0.3 billion) and in 2012 (€7.7 billion).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
confirmed short-term bank facilities available for backing commercial paper programs, amounting to €3.7 billion at December 31, 2009 and not being used to back commercial paper programs as of that date (raised to €4.0 billion effective January 13, 2010).
As of December 31, 2009, no single counterparty represented more than 11% of undrawn confirmed credit facilities.
d) Debt by interest rate, type, at value on redemption
The tables below split total debt, net of cash and cash equivalents between fixed and floating rate, and by maturity or contractual repricing date, atas of December 31, 2009.2012. The figures shown are the value on redemption, before the effects of derivative instruments:
| December 31, 2012 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 and later | |||||||||||||||
Fixed-rate debt | 11,506 | 1,884 | 2,526 | 623 | 2,637 | 1,175 | 2,661 | |||||||||||||||
EUR | 6,468 | |||||||||||||||||||||
USD | 4,783 | |||||||||||||||||||||
% fixed-rate | 82% | |||||||||||||||||||||
Floating-rate debt (maturity based on contractual repricing date) | 2,584 | 2,584 | — | — | — | — | — | |||||||||||||||
EUR | 241 | |||||||||||||||||||||
USD | 1,493 | |||||||||||||||||||||
% floating-rate | 18% | |||||||||||||||||||||
Total debt | 14,090 | 4,468 | 2,526 | 623 | 2,637 | 1,175 | 2,661 | |||||||||||||||
Cash and cash equivalents | (6,379 | ) | (6,379 | ) | — | — | — | — | — | |||||||||||||
EUR | (5,050 | ) | ||||||||||||||||||||
USD | (890 | ) | ||||||||||||||||||||
% floating-rate | 100% | |||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,711 | (1,911 | ) | 2,526 | 623 | 2,637 | 1,175 | 2,661 | ||||||||||||||
December 31, 2009 | ||||||||||||||||
(€ million) | Total | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 and later | |||||||||
Fixed-rate | 7,441 | 1,860 | — | 554 | 1,758 | 700 | 2,569 | |||||||||
% fixed-rate | 85% | |||||||||||||||
Floating-rate (maturity based on contractual repricing date) | 1,355 | 1,355 | — | — | — | — | — | |||||||||
% floating-rate | 15% | |||||||||||||||
Debt | 8,796 | 3,215 | — | 554 | 1,758 | 700 | 2,569 | |||||||||
Cash and cash equivalents | (4,692 | ) | (4,692 | ) | — | — | — | — | — | |||||||
% floating-rate | 100% | |||||||||||||||
Debt, net of cash and cash equivalents | 4,104 | (1,477 | ) | — | 554 | 1,758 | 700 | 2,569 | ||||||||
Floating-rate interest onSince the financing of the Genzyme acquisition in 2011, the Group has managed its net debt is usually indexed toin two currencies, the euro zone interbank offered rate (Euribor). Floating-rateand the U.S. dollar. The floating-rate portion of this debt exposes the Group to rises in interest on cash and cash equivalents is usually indexed torates, primarily in the Eonia rate.and Euribor benchmark rates (for the euro) and in the U.S. Libor and Federal Fund Effective rates (for the U.S. dollar).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In order to reduce the amount andand/or volatility of the cost of debt, sanofi-aventisthe Group has contracted derivative instruments (swaps,(interest rate swaps, cross-currency swaps and in some cases caps or combinations of purchases of caps and sales of floors)interest rate options). This hasThese have the effect of altering the fixed/floating split and the maturity based on contractual repricing dates:
| December 31, 2012 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 and later | |||||||||||||||
Fixed-rate debt | 6,819 | 1,842 | 947 | 623 | 1,137 | 375 | 1,895 | |||||||||||||||
EUR | 2,411 | |||||||||||||||||||||
USD | 4,400 | |||||||||||||||||||||
% fixed-rate | 48% | |||||||||||||||||||||
Floating-rate debt | 7,271 | 7,271 | — | — | — | — | — | |||||||||||||||
EUR | 4,639 | |||||||||||||||||||||
USD | 1,876 | |||||||||||||||||||||
% floating-rate | 52% | |||||||||||||||||||||
Total debt | 14,090 | 9,113 | 947 | 623 | 1,137 | 375 | 1,895 | |||||||||||||||
Cash and cash equivalents | (6,379 | ) | (6,379 | ) | — | — | — | — | — | |||||||||||||
EUR | (5,920 | ) | ||||||||||||||||||||
USD | (20 | ) | ||||||||||||||||||||
% floating-rate | 100% | |||||||||||||||||||||
Debt, net of cash and cash equivalents | 7,711 | 2,734 | 947 | 623 | 1,137 | 375 | 1,895 | |||||||||||||||
December 31, 2009 | ||||||||||||||||
(€ million) | Total | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 and later | |||||||||
Fixed-rate | 5,912 | 1,500 | — | 385 | 1,758 | — | 2,269 | |||||||||
% fixed-rate | 67% | |||||||||||||||
Floating-rate(1) | 2,884 | 2,884 | — | — | — | — | — | |||||||||
% floating-rate | 33% | |||||||||||||||
Debt | 8,796 | 4,384 | — | 385 | 1,758 | — | 2,269 | |||||||||
Cash and cash equivalents | (4,692 | ) | (4,692 | ) | — | — | — | — | — | |||||||
% floating-rate | 100% | |||||||||||||||
Debt, net of cash and cash equivalents | 4,104 | (308 | ) | — | 385 | 1,758 | — | 2,269 | ||||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The table below shows the fixed/floating rate split at redemption value after taking account of derivative instruments onas of December 31, 20082011 and 2007:2010:
(€ million) | 2011 | % | 2010 | % | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fixed-rate debt | 6,726 | 45% | 5,350 | 66% | |||||||||
Floating-rate debt | 6,299 | 42% | 2,706 | 34% | |||||||||
Capped-rate debt | 1,932 | 13% | — | — | |||||||||
Total debt | 14,957 | 100% | 8,056 | 100% | |||||||||
Cash and cash equivalents | (4,100 | ) | (6,465 | ) | |||||||||
Debt, net of cash and cash equivalents | 10,857 | 1,591 | |||||||||||
(€ million) | 2008 | % | 2007 | % | ||||||
Fixed-rate | 3,412 | 57% | 2,892 | 49% | ||||||
Floating-rate | 2,526 | 43% | 2,981 | 51% | ||||||
Debt | 5,938 | 100% | 5,873 | 100% | ||||||
Cash and cash equivalents | (4,226 | ) | (1,711 | ) | ||||||
Debt, net of cash and cash equivalents | 1,712 | 4,162 | ||||||||
The weighted average interest rate on debt atas of December 31, 20092012 was 4.09%3.0% before derivative instruments and 3.93%2.4% after derivative instruments. All cash and cash equivalents were invested at an average rate of 0.87% at0.3% as of December 31, 2009.2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Based on the Group’sGroup's level of debt, and taking account of derivative instruments in place atas of December 31, 2009,2012, sensitivity to movements in market interest rates over a full year would be as follows in 2010 is as follows:the year ending December 31, 2013:
Change in 3-month Euribor interest rate assumptions | Impact on pre-tax net income (€ million) | Impact on income/(expense) recognized directly in equity, before tax (€ million) | ||
+ 100 bp | 18 | 18 | ||
+ 25 bp | 4 | 5 | ||
- 25 bp | (4) | (5) | ||
- 100 bp | Not applicable | Not applicable |
Change in 3-month Euribor interest rate assumptions | 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 | |||||
e) Debt, net of cash and cash equivalents by currency, at value on redemption
The table below shows debt, net of cash and cash equivalents by currency at December 31, 2009,2012, before and after taking account of derivative instruments contracted to convert third-party debt into the functional currency of the borrower entity:
| December 31, 2012 | ||||||
---|---|---|---|---|---|---|---|
(€ million) | Before derivative instruments | After derivative instruments | |||||
EUR | 1,659 | 1,129 | |||||
USD | 5,386 | 6,256 | |||||
BRL | 368 | 368 | |||||
CHF | 244 | — | |||||
JPY | 93 | — | |||||
Other currencies | (39 | ) | (42 | ) | |||
Debt, net of cash and cash equivalents | 7,711 | 7,711 | |||||
December 31, 2009 | ||||||
(€ million) | Before derivative instruments | After derivative instruments | ||||
EUR | 3,208 | 4,304 | ||||
CHF | 750 | (8 | ) | |||
GBP | 167 | (58 | ) | |||
JPY | 116 | 3 | ||||
USD | (22 | ) | (22 | ) | ||
Other currencies | (115 | ) | (115 | ) | ||
Debt, net of cash and cash equivalents | 4,104 | 4,104 | ||||
The table below shows debt, net of cash and cash equivalents by currency at December 31, 20082011 and 2007,2010, after taking account of derivative instruments contracted to convert third-party debt into the functional currency of the borrower entity:
(€ million) | 2008 | 2007 | ||||
EUR | 1,603 | 4,192 | ||||
USD | (19 | ) | 78 | |||
GBP | (64 | ) | (81 | ) | ||
Other currencies | 192 | (27 | ) | |||
Debt, net of cash and cash equivalents | 1,712 | 4,162 | ||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
(€ million) | December 31, 2011 | December 31, 2010 | |||||
---|---|---|---|---|---|---|---|
EUR | 3,084 | 1,581 | |||||
USD | 7,717 | 37 | |||||
Other currencies | 56 | (27 | ) | ||||
Debt, net of cash and cash equivalents | 10,857 | 1,591 | |||||
f) Market value of debt, net of cash and cash equivalents
The market value of debt, net of cash and cash equivalents (excluding derivative instruments) atas of December 31, 20092012 was €4,341€8,566 million (December 31, 2008: €1,779 million;(versus €11,596 million as of December 31, 2007: €4,162 million), versus2011 and €1,887 million as of December 31, 2010); this compares with a value on redemption of €4,104€7,711 million (December 31, 2008: €1,712 million;as of December 31, 2007: €4,162 million).
Derivative instruments contracted for debt management purposes had a positive fair value2012 (versus €10,857 million as of €7 million at December 31, 2009, compared with a positive fair value2011 and €1,591 million as of €18 million at December 31, 2008 and €29 million at December 31, 2007 (see Note D.20.)2010).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 as atof December 31, 2009:2012:
| December 31, 2012 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual cash flows by maturity | |||||||||||||||||||||
(€ million) | Total | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 and later | |||||||||||||||
Debt | 15,590 | 4,047 | 3,421 | 882 | 2,855 | 1,314 | 3,071 | |||||||||||||||
– principal | 13,988 | 3,667 | 3,124 | 637 | 2,650 | 1,192 | 2,718 | |||||||||||||||
– interest (1) | 1,602 | 380 | 297 | 245 | 205 | 122 | 353 | |||||||||||||||
Net cash flows related to derivative instruments | (307 | ) | (88 | ) | (84 | ) | (54 | ) | (50 | ) | (13 | ) | (18 | ) | ||||||||
Total | 15,283 | 3,959 | 3,337 | 828 | 2,805 | 1,301 | 3,053 | |||||||||||||||
December 31, 2009 | ||||||||||||||||||
Contractual cash flows by maturity | ||||||||||||||||||
(€ million) | Total | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 and later | |||||||||||
Debt | 10,118 | 3,049 | 231 | 797 | 2,254 | 844 | 2,943 | |||||||||||
– principal | 8,681 | 2,737 | 6 | 570 | 2,052 | 709 | 2,607 | |||||||||||
– interest (1) | 1,437 | 312 | 225 | 227 | 202 | 135 | 336 | |||||||||||
Net cash flows related to derivative instruments | (14 | ) | 51 | 8 | (9 | ) | (24 | ) | 2 | (42 | ) | |||||||
Total | 10,104 | 3,100 | 239 | 788 | 2,230 | 846 | 2,901 | |||||||||||
|
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’sGroup's debt or its hedging policy.
Maturities used for credit facility drawdowns are those of the facility, not the drawdown.
The tabletables below showsshow the amount of future contractual undiscounted cash flows (principal and interest) relating to debt and to derivative instruments designated as hedges of debt as atof December 31, 20082011 and 2007:2010:
| 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 | |||||||||||||||
| 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 | |||||||||||||||
December 31, 2008 | |||||||||||||||||
Contractual cash flows by maturity | |||||||||||||||||
(€ million) | Total | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 and later | ||||||||||
Debt | 6,468 | 1,957 | 2,004 | 88 | 1,470 | 591 | 358 | ||||||||||
– principal | 5,921 | 1,784 | 1,851 | 6 | 1,407 | 562 | 311 | ||||||||||
– interest (1) | 547 | 173 | 153 | 82 | 63 | 29 | 47 | ||||||||||
Net cash flows related to derivative instruments | 16 | 17 | 77 | 7 | (9 | ) | (35 | ) | (41 | ) | |||||||
Total | 6,484 | 1,974 | 2,081 | 95 | 1,461 | 556 | 317 | ||||||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year endedD.18. Liabilities related to business combinations and non-controlling interests
For a description of the nature of 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.
Movements in liabilities related to business combinations and to non-controlling interests were as follows:
| Liabilities related to business combinations | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Liabilities related to non-controlling interests (1) | CVRs issued in connection with the acquisition of Genzyme (2) | Bayer contingent consideration arising from the Genzyme acquisition | Other | Total (6) | |||||||||||
Balance at January 1, 2011 | 134 | — | — | 352 | 486 | |||||||||||
New business combinations | — | 481 | 585 | 75 | 1,141 | |||||||||||
Payments made | — | (2 | ) | (53 | ) | (44 | ) | (99 | ) | |||||||
Fair value remeasurements through profit or loss (including unwinding of discount) | — | (211 | ) | 127 | 69 | (15 | ) | |||||||||
Other movements | (4 | ) | — | — | (5 | ) | (9 | ) | ||||||||
Currency translation differences | 3 | — | 35 | 14 | 52 | |||||||||||
Balance at December 31, 2011 | 133 | 268 | 694 | 461 | 1,556 | |||||||||||
New business combinations | 64 | — | — | 18 | 82 | |||||||||||
Payments made | — | (54 | )(3) | (101 | ) | (33 | ) | (188 | ) | |||||||
Fair value remeasurements through profit or loss (including unwinding of discount) (4) | — | 127 | 44 | 21 | 192 | |||||||||||
Other movements | (5 | ) | — | — | (154 | )(5) | (159 | ) | ||||||||
Currency translation differences | — | (20 | ) | (5 | ) | (8 | ) | (33 | ) | |||||||
Balance at December 31, 2012 | 192 | 321 | 632 | 305 | 1,450 | |||||||||||
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 currently 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:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2007 | |||||||||||||||||||
Contractual cash flows by maturity | |||||||||||||||||||
(€ million) | Total | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 and later | ||||||||||||
Debt | 6,509 | 2,376 | 488 | 2,056 | 80 | 1,252 | 257 | ||||||||||||
– principal | 5,831 | 2,145 | 335 | 1,909 | 15 | 1,222 | 205 | ||||||||||||
– interest (1) | 678 | 231 | 153 | 147 | 65 | 30 | 52 | ||||||||||||
Net cash flows related to derivative instruments | (4 | ) | (5 | ) | (3 | ) | 5 | (11 | ) | (1 | ) | 11 | |||||||
Total | 6,505 | 2,371 | 485 | 2,061 | 69 | 1,251 | 268 | ||||||||||||
The fair value of this liability was measured at €632 million as of December 31, 2012, compared with €694 million as of December 31, 2011.
|
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 | |||||||||||
These commitments amounted to €5,578 million as of December 31, 2011. The reduction in the commitment during 2012 was mainly attributable to the repurchase of 40 million CVRs.
D.18.Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.19. Provisions and other non-current liabilities
Provisions and other non-current liabilities break down as follows:
(€ million) | Provisions for pensions and other long-term benefits (D.18.1.) | Restructuring provisions (D.18.2.) | Other provisions (D.18.3.) | Other non-current liabilities | Total | ||||||||||
January 1, 2007 | 3,839 | 218 | 3,554 | 309 | 7,920 | ||||||||||
Changes in scope of consolidation | — | — | 1 | — | 1 | ||||||||||
Charged during the period | 346 | 64 | 670 | — | 1,080 | ||||||||||
Provisions utilized(4) | (401 | ) | (26 | ) | (171 | ) | (186 | ) | (784 | ) | |||||
Reversals of unutilized provisions | (14 | ) | (12 | ) | (614 | )(3) | — | (640 | ) | ||||||
Transfers(1) | (1 | ) | (54 | ) | (285 | ) | 35 | (305 | ) | ||||||
Unwinding of discount | — | — | 35 | 4 | 39 | ||||||||||
Unrealized gains and losses | — | — | — | (6 | ) | (6 | ) | ||||||||
Translation differences | (94 | ) | (2 | ) | (64 | ) | (11 | ) | (171 | ) | |||||
Actuarial gains/losses on defined-benefit plans(6) | (277 | ) | — | — | — | (277 | ) | ||||||||
December 31, 2007 | 3,398 | 188 | 3,126 | 145 | 6,857 | ||||||||||
Changes in scope of consolidation | — | — | 33 | — | 33 | ||||||||||
Charged during the period | 334 | 290 | 828 | (2) | — | 1,452 | |||||||||
Provisions utilized | (365 | ) | (33 | ) | (223 | ) | (3 | ) | (624 | ) | |||||
Reversals of unutilized provision | (65 | ) | — | (531 | )(3) | — | (596 | ) | |||||||
Transfers(1) | 1 | (84 | ) | (176 | ) | 51 | (208 | ) | |||||||
Unwinding of discount | — | 5 | 31 | 1 | 37 | ||||||||||
Unrealized gains and losses | — | — | — | 14 | (5) | 14 | |||||||||
Translation differences | (59 | ) | — | (4 | ) | 4 | (59 | ) | |||||||
Actuarial gains/losses on defined-benefit plans(6) | 824 | — | — | — | 824 | ||||||||||
December 31, 2008 | 4,068 | 366 | 3,084 | 212 | 7,730 | ||||||||||
Changes in scope of consolidation | 13 | — | 228 | 9 | 250 | ||||||||||
Charged during the period | 683 | 183 | 1,256 | (2) | 66 | 2,188 | |||||||||
Provisions utilized | (603 | ) | (61 | ) | (251 | ) | — | (915 | ) | ||||||
Reversals of unutilized provisions | (130 | ) | (1 | ) | (753 | )(3) | (24 | ) | (908 | ) | |||||
Transfers(1) | 133 | (232 | ) | (104 | ) | (70 | ) | (273 | ) | ||||||
Unwinding of discount | — | 3 | 36 | 2 | 41 | ||||||||||
Unrealized gains and losses | — | — | — | (12 | )(5) | (12 | ) | ||||||||
Translation differences | 9 | (1 | ) | 37 | (4 | ) | 41 | ||||||||
Actuarial gains/losses on defined-benefit plans(6) | 169 | — | — | — | 169 | ||||||||||
December 31, 2009 | 4,342 | 257 | 3,533 | 179 | 8,311 | ||||||||||
|
|
|
|
Other current liabilities are described in Note D.19.4.
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.18.1.D.19.1. Provisions for pensions and other benefits
The Group and its subsidiaries have a significant number of pension plans covering the majority of their employees. The specific features (benefit formulas, funding policies and types of assets held) of the plans vary depending on laws and regulations in the particular country in which the employees work. Several of these plans are defined benefitdefined-benefit plans and cover employees as well as some members of the Board of Directors.Directors as well as employees.
Actuarial valuations of the Group’sGroup's benefit obligations were computed by management with assistance from external appraisersactuaries as of December 31, 2009, 20082012, 2011 and 2007. The2010. These calculations incorporate the following:following elements:
2010.
2010.
Inflation rate | 2009 | 2008 | 2007 | |||
- Euro zone | 2% | 2% | 2% | |||
- United States | 3% | 3% | 3% | |||
- United Kingdom | 3.1% | 3.1% | 2.75% | |||
Inflation rate | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
– Euro zone | 2% | 2% | 2% | |||||||
– United States | 2.75% | 2.75% | 2.75% | |||||||
– United Kingdom | 2.8% | 3% | 3.25% | |||||||
| Pensions and other long-term benefits | Other post-employment benefits | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year ended December 31, | Year ended December 31, | |||||||||||||||||
Discount rate | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||
Weighted average for all regions: | 3.31% | 4.61% | 4.97% | 3.78% | 4.62% | 5.45% | |||||||||||||
– Euro zone | 2.25% or 3% | (1) | 4.25% or 4.75% | 4.25% or 4.75% | 3% | 4.75% | 4.75% | ||||||||||||
– United States | 3.75% | 4.5% | 5.5% | 3.75% | 4.5% | 5.5% | |||||||||||||
– United Kingdom | 4.25% | 5% | 5.5% | 4.25% | 5% | 5.5% | |||||||||||||
Pensions and other long-term benefits | Other post-employment benefits | ||||||||||||
Year ended December 31, | Year ended December 31, | ||||||||||||
Discount rate | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||
Weighted average for all regions: | 5.34% | 5.98% | 5.42% | 5.76% | 6.01% | 5.93% | |||||||
- Euro zone | 4.5% or 5.25% | (1) | 5.75% or 6% | 5% or 5.25% | 5.25% | 6% | 5.25% | ||||||
- United States | 5.75% | 6% | 6% | 5.75% | 6% | 6% | |||||||
- United Kingdom | 5.75% | 6.5% | 5.75% | 5.75% | 6.5% | 5.75% | |||||||
|
The discount rates used are based on market rates for high quality corporate bonds (AA) the term of which approximates that ofwith a duration close to the expected benefit payments of the plans. The principal benchmark indicesbenchmarks used areto determine these discount rates were the Iboxx Corporate € index for the euro zone, the Iboxx Corporate £ index for the United Kingdom,same in 2012, 2011 and the Citigroup Pension Liability Index for the United States.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 20092010.
Sensitivity analysis of pension plans and other post-employment benefits in the principal countries shows that a 0.5% reduction in discount rates would increase the Group’sGroup's obligation by approximately €500€789 million, of which approximately €150€248 million would relate to the United Kingdom, €150€214 million to Germany, €110€168 million to France and €90€159 million to the United States.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| Pensions and other long-term benefits | Other post-employment benefits | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year ended December 31, | Year ended December 31, | |||||||||||||||||
Long-term rate of return on plan assets | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||
Range of rates of return | 1.7% - 12.5% | 1.7% - 14% | 2% - 13.5% | 6.75% | 7.5% | 8% | |||||||||||||
Weighted average for all regions: | 6.24% | 6.48% | 6.86% | 6.75% | 7.5% | 8% | |||||||||||||
– Germany | 6.25% | 6.25% | 6.75% | — | — | — | |||||||||||||
– United States | 6.75% | 7.5% | 8% | 6.75% | 7.5% | 8% | |||||||||||||
– United Kingdom | 6% | 6.25% | 6.5% | — | — | — | |||||||||||||
Pensions and other long-term benefits | Other post-employment benefits | |||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||
Expected long-term rate | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||
Range of rates of return on plan assets: | 2% - 13.5% | 2.5% - 13.5% | 2.5% - 12% | 8% | 8% | 8% | ||||||
Weighted average for all regions | 6.86% | 6.97% | 7.01% | 8% | 8% | 8% | ||||||
- Germany | 6.75% | 6.75% | 7% | — | — | — | ||||||
- United States | 8% | 8% | 8% | 8% | 8% | 8% | ||||||
- United Kingdom | 6.5% | 7% | 6.75% | — | — | — | ||||||
The average long-term raterates of return on plan assets waswere determined on the basis of actual long-term rates of return in the financial markets. These returns vary according to the asset category (equities, bonds, real estate, other). As a general rule, sanofi-aventisSanofi applies the risk premium concept in assessing the return on equities relative to bond yields.
An analysis of the sensitivity of the benefit cost to changes in the expected long-term rate of return on plan assets shows that a 0.5% reduction in the rate of return would increase the benefit cost by approximately €25€34 million.
The weighted average allocation of funds invested in Group pension plans is shown below:
| Funds invested | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Asset category (percentage) | 2012 | 2011 | 2010 | |||||||
Equities | 48% | 47% | 50% | |||||||
Bonds | 44% | 49% | 47% | |||||||
Real estate | 4% | 2% | 2% | |||||||
Cash and other | 4% | 2% | 1% | |||||||
Total | 100% | 100% | 100% | |||||||
Funds invested | ||||||
Asset category (percentage) | 2009 | 2008 | 2007 | |||
Equities | 51% | 46% | 51% | |||
Bonds | 46% | 49% | 47% | |||
Real estate | 1% | 2% | { 2% | |||
Cash | 2% | 3% | ||||
Total | 100% | 100% | 100% | |||
The target allocation of funds invested as of December 31, 20092012 is not materially different from the actual allocation as of December 31, 20082011 and December 31, 2007.2010.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The table below reconciles the net obligation in respect of the Group’sGroup's pension plans and other employee benefits with the amounts recognized in the consolidated financial statements:
(€ million) | Pensions and other long-term benefits | Other post-employment benefits (healthcare cover) | ||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||
Valuation of obligation: | ||||||||||||||||||
Beginning of period | 7,742 | 8,481 | 9,187 | 368 | 339 | 321 | ||||||||||||
Service cost | 218 | 228 | 236 | 16 | 12 | 13 | ||||||||||||
Contributions from plan members | 4 | 4 | 6 | — | — | — | ||||||||||||
Interest cost | 446 | 435 | 414 | 21 | 19 | 18 | ||||||||||||
Actuarial (gain)/loss | 759 | (579 | ) | (437 | ) | 1 | 5 | (12 | ) | |||||||||
Plan amendments | 219 | (2) | 71 | (24 | ) | — | — | 45 | ||||||||||
Translation differences | 64 | (336 | ) | (326 | ) | (6 | ) | 8 | (29 | ) | ||||||||
Plan curtailments/settlements | (131 | ) | (68 | ) | (51 | ) | (4 | ) | — | — | ||||||||
Changes in scope of consolidation, transfers | 145 | (3) | 34 | (5 | ) | — | 2 | — | ||||||||||
Benefits paid | (542 | ) | (528 | ) | (519 | ) | (20 | ) | (17 | ) | (17 | ) | ||||||
Obligation at end of period | 8,924 | 7,742 | 8,481 | 376 | 368 | 339 | ||||||||||||
Fair value of plan assets: | ||||||||||||||||||
Beginning of period | 3,957 | 5,362 | 5,575 | 41 | 51 | 56 | ||||||||||||
Expected return on plan assets | 278 | 362 | 366 | 3 | 4 | 4 | ||||||||||||
Difference between actual and expected return on plan assets | 547 | (1,348 | ) | (161 | ) | 6 | (12 | ) | 1 | |||||||||
Translation differences | 49 | (270 | ) | (257 | ) | (2 | ) | 2 | (6 | ) | ||||||||
Contributions from plan members | 4 | 4 | 6 | — | — | — | ||||||||||||
Employer’s contributions | 405 | 175 | 146 | 1 | — | — | ||||||||||||
Plan settlements | (5 | ) | (2 | ) | (39 | ) | — | — | — | |||||||||
Changes in scope of consolidation, transfers | — | 25 | — | — | — | — | ||||||||||||
Benefits paid | (359 | ) | (351 | ) | (274 | ) | (5 | ) | (4 | ) | (4 | ) | ||||||
Fair value of plan assets at end of period | 4,876 | 3,957 | 5,362 | 44 | 41 | 51 | ||||||||||||
Net amount shown in the balance sheet: | ||||||||||||||||||
Net obligation | 4,048 | 3,785 | 3,119 | 332 | 327 | 288 | ||||||||||||
Unrecognized past service cost | (49 | ) | (55 | ) | (28 | ) | 6 | 6 | 6 | |||||||||
Effect of asset ceiling | 2 | 4 | 6 | — | — | — | ||||||||||||
Net amount shown in the balance sheet | 4,001 | 3,734 | 3,097 | 338 | 333 | 294 | ||||||||||||
Amounts recognized in the balance sheet: | ||||||||||||||||||
Pre-funded obligations (see Note D.7.) | (3 | ) | (1 | ) | (7 | ) | — | — | — | |||||||||
Obligations provided for(1) | 4,004 | 3,735 | 3,104 | 338 | 333 | 294 | ||||||||||||
Net amount recognized | 4,001 | 3,734 | 3,097 | 338 | 333 | 294 | ||||||||||||
Benefit cost for the period: | ||||||||||||||||||
Service cost | 218 | 228 | 236 | 16 | 12 | 13 | ||||||||||||
Interest cost | 446 | 435 | 414 | 21 | 19 | 18 | ||||||||||||
Expected return on plan assets | (278 | ) | (362 | ) | (366 | ) | (3 | ) | (4 | ) | (4 | ) | ||||||
Amortization of past service cost | 224 | (2) | 42 | 9 | — | — | 34 | |||||||||||
Recognition of actuarial (gains)/losses | 38 | (38 | ) | (8 | ) | — | — | — | ||||||||||
Effect of plan settlements | (122 | )(4) | (38 | ) | (9 | ) | (4 | ) | — | — | ||||||||
Effect of plan curtailments | (3 | ) | (27 | ) | (3 | ) | — | — | — | |||||||||
Benefit cost for the period | 523 | 240 | 273 | 30 | 27 | 61 | ||||||||||||
| Pensions and other long-term benefits | Other post-employment benefits (healthcare cover) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | 2012 | 2011 | 2010 (1) | 2012 | 2011 | 2010 (1) | |||||||||||||
Valuation of obligation: | |||||||||||||||||||
Beginning of period | 10,475 | 9,559 | 8,924 | 470 | 429 | 376 | |||||||||||||
Merial | — | 207 | — | — | 1 | — | |||||||||||||
Service cost | 262 | 265 | 240 | 24 | 13 | 14 | |||||||||||||
Contributions from plan members | — | — | 5 | — | — | — | |||||||||||||
Interest cost | 462 | 458 | 454 | 21 | 22 | 22 | |||||||||||||
Actuarial (gain)/loss | 1,911 | 366 | 593 | 53 | 23 | 22 | |||||||||||||
Plan amendments | 6 | — | 15 | 1 | — | — | |||||||||||||
Currency translation differences | (17 | ) | 169 | 259 | (9 | ) | 13 | 27 | |||||||||||
Plan curtailments/settlements | (455 | ) | (80 | ) | (69 | ) | — | (8 | ) | (13 | ) | ||||||||
Changes in scope of consolidation, transfers | (18 | ) | 105 | (283 | )(2) | — | — | 1 | |||||||||||
Benefits paid | (605 | ) | (574 | ) | (579 | ) | (21 | ) | (23 | ) | (20 | ) | |||||||
Obligation at end of period | 12,021 | 10,475 | 9,559 | 539 | 470 | 429 | |||||||||||||
Fair value of plan assets: | |||||||||||||||||||
Beginning of period | 5,995 | 5,661 | 4,876 | 50 | 51 | 44 | |||||||||||||
Merial | — | 144 | — | — | — | — | |||||||||||||
Expected return on plan assets | 378 | 367 | 347 | 3 | 3 | �� | 4 | ||||||||||||
Difference between actual and expected return on plan assets | 357 | (290 | ) | 252 | 3 | (2 | ) | 3 | |||||||||||
Currency translation differences | — | 113 | 185 | (1 | ) | 1 | 4 | ||||||||||||
Contributions from plan members | 5 | 9 | 5 | — | — | — | |||||||||||||
Employer's contributions | 582 | 331 | 400 | — | 3 | 1 | |||||||||||||
Plan settlements | (166 | ) | (4 | ) | (1 | ) | — | — | — | ||||||||||
Changes in scope of consolidation, transfers | (10 | ) | 73 | 5 | — | — | — | ||||||||||||
Benefits paid | (401 | ) | (409 | ) | (408 | ) | (4 | ) | (6 | ) | (5 | ) | |||||||
Fair value of plan assets at end of period | 6,740 | 5,995 | 5,661 | 51 | 50 | 51 | |||||||||||||
Net amount shown in the balance sheet: | |||||||||||||||||||
Net obligation | 5,281 | 4,480 | 3,898 | 488 | 420 | 378 | |||||||||||||
Unrecognized past service cost | (15 | ) | (23 | ) | (45 | ) | 6 | 8 | 7 | ||||||||||
Effect of asset ceiling | — | 1 | 1 | — | — | — | |||||||||||||
Net amount shown in the balance sheet | 5,266 | 4,458 | 3,854 | 494 | 428 | 385 | |||||||||||||
Amounts recognized in the balance sheet: | |||||||||||||||||||
Pre-funded obligations (see Note D.7.) | (6 | ) | (6 | ) | (4 | ) | — | — | — | ||||||||||
Obligations provided for (3) | 5,272 | 4,464 | 3,858 | 494 | 428 | 385 | |||||||||||||
Net amount recognized | 5,266 | 4,458 | 3,854 | 494 | 428 | 385 | |||||||||||||
Benefit cost for the period: | |||||||||||||||||||
Service cost | 257 | 256 | 240 | 24 | 13 | 14 | |||||||||||||
Interest cost | 462 | 458 | 454 | 21 | 22 | 22 | |||||||||||||
Expected return on plan assets | (378 | ) | (367 | ) | (347 | ) | (3 | ) | (3 | ) | (4 | ) | |||||||
Amortization of past service cost | 13 | 21 | 20 | (1 | ) | — | — | ||||||||||||
Recognition of actuarial (gains)/losses | 55 | 4 | 44 | — | — | — | |||||||||||||
Effect of plan curtailments | (229 | ) | (77 | ) | (69 | ) | — | (8 | ) | (13 | ) | ||||||||
Effect of plan settlements | (60 | ) | 1 | — | — | — | — | ||||||||||||
Benefit cost for the period | 120 | 296 | 342 | 41 | 24 | 19 | |||||||||||||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Actuarial gains and losses on pensions, other long-term and other post-employment benefits break down as follows:
(€ million) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actuarial gains/(losses) arising during the period (1) | (1,604 | ) | (681 | ) | (360 | ) | (207 | ) | (786 | ) | ||||||
Comprising: | ||||||||||||||||
• gains/(losses) on experience adjustments | 319 | (266 | ) | 169 | 531 | (1,326 | ) | |||||||||
• gains/(losses) on changes in assumptions (2) | (1,923 | ) | (415 | ) | (529 | ) | (738 | ) | 540 | |||||||
Breakdown of experience adjustments: | ||||||||||||||||
• gains/(losses) on plan assets (3) | 360 | (292 | ) | 255 | 553 | (1,360 | ) | |||||||||
• gains/(losses) on obligations | (41 | ) | 26 | (86 | ) | (22 | ) | 34 | ||||||||
Amount of obligations at the balance sheet date | 12,560 | 10,945 | 9,988 | 9,300 | 8,110 | |||||||||||
Fair value of plan assets at the balance sheet date | 6,791 | 6,045 | 5,712 | 4,920 | 3,998 | |||||||||||
(€ million) | 2009 | 2008 | 2007 | 2006 | ||||||||
Actuarial gain/(loss) arising during the period(1) | (207 | ) | (786 | ) | 289 | 359 | ||||||
Comprising: | ||||||||||||
• gain/(loss) on experience adjustments | 531 | (1,326 | ) | (135 | ) | 126 | ||||||
• gain/(loss) on changes in assumptions(2) | (738 | ) | 540 | 424 | 233 | |||||||
Breakdown of experience adjustments: | ||||||||||||
• gain/(loss) on plan assets(3) | 553 | (1,360 | ) | (160 | ) | 191 | ||||||
• gain/(loss) on obligations | (22 | ) | 34 | 25 | (65 | ) | ||||||
Amount of obligations at the balance sheet date | 9,300 | 8,110 | 8,820 | 9,508 | ||||||||
Fair value of plan assets at the balance sheet date | 4,920 | 3,998 | 5,413 | 5,631 | ||||||||
|
|
|
The net pre-tax actuarial loss recognized directly in equity (excluding associates and Merial)joint ventures) was €1,143€3,693 million as ofat December 31, 2009,2012, versus €974€2,145 million as ofat December 31, 20082011 and €150€1,459 million as ofat December 31, 2007.2010.
As ofAt December 31, 2009,2012, the present value of obligations in respect of pensions and similarother long-term benefits under wholly or partially funded plans was €6,897€9,672 million, and the present value of unfunded obligations was €2,027€2,349 million (compared with, respectively, €5,924(versus €8,913 million and €1,817€1,562 million at December 31, 2008,2011, and €6,557€7,589 million and €1,924€1,969 million at December 31, 2007)2010, respectively).
In Germany, sanofi-aventisSanofi is a member of aPensionskasse multi-employer plan. This is a defined contributiondefined-benefit plan which coversaccounted for as a defined-contribution plan in accordance with the accounting policy described in Note B.23. Plan contributions cover the current level of annuities. However, the obligation arising from future increases in annuity rates is recognized as part of the overall pension obligation; it amounted to €449€655 million at December 31, 2009, €3932012, versus €489 million at December 31, 20082011 and €428€487 million at December 31, 2007.2010.
The table below shows the sensitivity of (i) the benefit cost recognized in the consolidated income statement, and (ii) the obligation in the consolidated balance sheet, to changes in healthcare costs associated with other post-employment benefits.
(€ million) | Sensitivity of assumptions | ||||||
---|---|---|---|---|---|---|---|
1% increase in healthcare costs | |||||||
• Impact on benefit cost for the period | 3 | ||||||
• Impact on obligation in the balance sheet | 38 | ||||||
1% reduction in healthcare costs | |||||||
• Impact on benefit cost for the period | ( | ) | |||||
• Impact on obligation in the balance sheet | |||||||
(47 | ) | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The total cost of pensions and other benefits, for 2009, amountingwhich amounted to €553€161 million in 2012, is split as follows:
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The remaining €13 million relates to actuarial losses on deferred compensation plans funded by assets accounted forrecognized under the fair value option (see Note D.7.),. These actuarial gains and islosses are offset by changes in the fair value of those assets.
The total cost
The timing of estimated future benefit payments on unfunded pension and settlements) for 2008 was €332 million, compared with €346 million in 2007, splitpost-employment plans as of December 31, 2012 is as follows:
(€ million) | Total | Less than 1 year | From 1 to 3 years | From 3 to 5 years | More than 5 years | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Estimated payments | 1,741 | 60 | 115 | 133 | 1,433 | |||||||||||
|
|
|
The table below shows the expected cash outflows on pensions, other long-term benefits and other post-employment benefits over the next ten years:
(€ million) | Pensions and similar benefits | |
Estimated employer’s contribution in 2010 | 410 | |
Estimated benefit payments: | ||
2010 | 643 | |
2011 | 631 | |
2012 | 637 | |
2013 | 648 | |
2014 | 636 | |
2015 through 2019 | 3,272 | |
(€ million) | Pensions and other benefits | |||
---|---|---|---|---|
Estimated employer's contribution in 2013 | 268 | |||
Estimated benefit payments: | ||||
2013 | 651 | |||
2014 | 602 | |||
2015 | 602 | |||
2016 | 624 | |||
2017 | 680 | |||
2018 to 2022 | 3,528 | |||
D.18.2.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.19.2. Restructuring provisions
The table below shows movements in restructuring provisions classified inOther non-current liabilities andOther current liabilities:liabilities:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, beginning of period | 1,930 | 1,611 | 1,018 | |||||||
of which: | ||||||||||
• Classified in non-current liabilities | 1,182 | 1,017 | 257 | |||||||
• Classified in current liabilities | 748 | 594 | 761 | |||||||
Change in provisions recognized in profit or loss for the period | 857 | 861 | 1,073 | |||||||
Provisions utilized | (728 | ) | (592 | ) | (839 | ) | ||||
Transfers | 109 | (2) | 1 | 322 | (1) | |||||
Unwinding of discount | 45 | 38 | 27 | |||||||
Currency translation differences | — | 11 | 10 | |||||||
Balance, end of period | 2,213 | 1,930 | 1,611 | |||||||
of which: | ||||||||||
• Classified in non-current liabilities | 1,461 | 1,182 | 1,017 | |||||||
• Classified in current liabilities | 752 | 748 | 594 | |||||||
Provisions for employee termination benefits at December 31, 2012 amounted to €1,982 million (versus €1,672 million at December 31, 2011), and primarily covered redundancy programs announced as part of the adaptation of sales forces, R&D and industrial operations in France, the United States, and some other European countries. The provision relating to France was €1,515 million at December 31, 2012, versus €933 million at December 31, 2011. Charges to provisions during the period included €646 million for the adaptation of the Group's resources in France (see Note D.27.).
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 "Fillon" levies on those annuities and on outsourced annuities. The average residual period of carry under these plans was 3.5 years as of December 31, 2012 (3.3 years as of December 31, 2011). In 2012, premiums paid in connection with the outsourcing of annuities amounted to €7 million (most of which related to an increase in the period of carry for existing annuities in response to the raising of the statutory retirement age); this compares with €6 million in 2011.
The timing of future termination benefit payments is as follows:
Year ended December 31, 2012 | ||||||||||||||||
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 | 1,515 | 400 | 644 | 382 | 89 | |||||||||||
• Other countries | 467 | 257 | 179 | 24 | 7 | |||||||||||
Total | 1,982 | 657 | 823 | 406 | 96 | |||||||||||
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Balance, beginning of period | 678 | 395 | 496 | ||||||
of which: | |||||||||
• Classified in “Other non-current liabilities” | 366 | 188 | 218 | ||||||
• Classified in “Other current liabilities” | 312 | 207 | 278 | ||||||
Change in provisions recognized in profit or loss for the period | 837 | 510 | 180 | ||||||
Provisions utilized | (388 | ) | (228 | ) | (273 | ) | |||
Transfers | (110 | )(1) | (3 | ) | — | ||||
Unwinding of discount | 3 | 5 | — | ||||||
Translation differences | (2 | ) | (1 | ) | (8 | ) | |||
Balance, end of period | 1,018 | 678 | 395 | ||||||
of which: | |||||||||
• Classified in “Other non-current liabilities” | 257 | 366 | 188 | ||||||
• Classified in “Other current liabilities” | 761 | 312 | 207 | ||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
An analysis of restructuring costs by type is provided in Note D.27.
Year ended December 31, 2011 | ||||||||||||||||
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 | 933 | 189 | 231 | 339 | 174 | |||||||||||
• Other countries | 739 | 465 | 235 | 21 | 18 | |||||||||||
Total | 1,672 | 654 | 466 | 360 | 192 | |||||||||||
The current portion of these provisions mainly relates to gross payments to be incurred in the short term under early retirement plans in France. As of December 31, 2009, the balance reported for these provisions represents payments in lieu of notice and termination benefits payable under these and other plans in France and Europe. The related social security charges and “Fillon” levies are recognized underProvisions for pensions and other long-term employee benefits (see Note D.18.1.).
D.18.3.D.19.3. Other provisions
Other provisions include provisions for risks and litigation relating to environmental, tax, commercial and product liability risks, and for litigation.matters.
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Tax exposures | 2,114 | 2,409 | 2,228 | |||||||
Environmental risks and remediation | 728 | 764 | 781 | |||||||
Product liability risks, litigation and other | 869 | 985 | 951 | |||||||
Total | 3,711 | 4,158 | 3,960 | |||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Tax exposures | 2,009 | 1,770 | 1,645 | |||
Environmental risks and remediation | 695 | 589 | 494 | |||
Product liability risks, litigation and other | 829 | 725 | 987 | |||
Total | 3,533 | 3,084 | 3,126 | |||
Provisions for tax exposures are recorded if 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.
Provisions for “Environmentalenvironmental risks and remediation”remediation mainly relate to contingencies arising from business divestments.divestitures.
Identified environmental risks are covered by provisions estimated on the basis of the costs sanofi-aventisSanofi believes it will be obliged to meet over a period not exceeding (other than in exceptional cases) 30 years. Sanofi-aventisThe Group expects that €137€99 million of these provisions will be utilized in 20102013, and €365€286 million over the period from 20112014 through 2014.2017.
“Product"Product liability risks, litigation and other”other" mainly comprises provisions for risks relating to product liability (including “IBNR”IBNR provisions as described in Note B.12.), government investigations, regulatory or competitionantitrust law claims, or contingencies arising from business divestmentsdivestitures (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’sGroup's legal advisers, and provisions are recorded as required by circumstances in accordance with the principles described in Note B.12.
D.19.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.19.4. Other current liabilities
Other current liabilities break down as follows:
(€ million) | December 31, 2012 | December 31, 2011 | December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Taxes payable | 935 | 1,060 | 785 | |||||||
Employee-related liabilities | 1,909 | 1,957 | 1,411 | |||||||
Restructuring provisions (see Note D.19.2.) | 752 | 748 | 594 | |||||||
Interest rate derivatives (see Note D.20.) | 2 | 27 | 3 | |||||||
Currency derivatives (see Note D.20.) | 40 | 218 | 104 | |||||||
Amounts payable for acquisitions of non-current assets | 222 | 191 | 267 | |||||||
Other liabilities | 2,898 | 3,020 | 2,460 | |||||||
Total | 6,758 | 7,221 | 5,624 | |||||||
(€ million) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||
Taxes payable | 631 | 664 | 797 | |||
Employee-related liabilities | 1,458 | 1,366 | 1,337 | |||
Restructuring provisions (see Note D.18.2.) | 761 | 312 | 207 | |||
Interest rate derivatives (see Note D.20.) | 62 | — | — | |||
Currency derivatives (see Note D.20.) | 119 | 249 | 187 | |||
Amounts payable for acquisitions of non-current assets | 251 | 292 | 429 | |||
Liabilities relating to contingent consideration on buyouts of minority interests | 76 | — | — | |||
Other liabilities | 2,087 | 1,838 | 1,756 | |||
Total | 5,445 | 4,721 | 4,713 | |||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
This item includes the current portion of provisions for litigation, productsales returns and other risks;risks, amounts due to associates and joint ventures (see Note D.6.);, and amounts due to governmental agencies and the 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, 2009:2012:
(€ million) | Non-current assets | Current assets | Total assets | Non-current liabilities | Current liabilities | Total liabilities | Fair value at Dec. 31, 2009 (net) | Fair value at Dec. 31, 2008 (net) | Fair value at Dec. 31, 2007 (net) | ||||||||||||||
Currency derivatives | — | 251 | 251 | — | (119 | ) | (119 | ) | 132 | 99 | (120 | ) | |||||||||||
• operational | — | 34 | 34 | — | (80 | ) | (80 | ) | (46 | ) | 201 | 33 | |||||||||||
• financial | — | 217 | 217 | — | (39 | ) | (39 | ) | 178 | (102 | ) | (153 | ) | ||||||||||
• net investment hedges | — | — | — | — | — | — | — | — | — | ||||||||||||||
Interest rate derivatives | 51 | 18 | 69 | — | (62 | ) | (62 | ) | 7 | 18 | 29 | ||||||||||||
Total | 51 | 269 | 320 | — | (181 | ) | (181 | ) | 139 | 117 | (91 | ) | |||||||||||
(€ million) | Non- current assets | Current assets | Total assets | Non- current liabilities | Current liabilities | Total liabilities | Fair value at Dec. 31, 2012 (net) | Fair value at Dec. 31, 2011 (net) | Fair value at Dec. 31, 2010 (net) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Currency derivatives | 1 | 82 | 83 | — | (40 | ) | (40 | ) | 43 | (169 | ) | (104 | ) | |||||||||||||||
• operational | 1 | 30 | 31 | — | (14 | ) | (14 | ) | 17 | (89 | ) | (27 | ) | |||||||||||||||
• financial | — | 52 | 52 | — | (26 | ) | (26 | ) | 26 | (80 | ) | (77 | ) | |||||||||||||||
Interest rate derivatives | 393 | 40 | 433 | — | (2 | ) | (2 | ) | 431 | 456 | 218 | |||||||||||||||||
Total | 394 | 122 | 516 | — | (42 | ) | (42 | ) | 474 | 287 | 114 | |||||||||||||||||
Objectives of the use of derivative financial instruments
Sanofi-aventisSanofi uses derivative instruments primarily to manage operational 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). Less frequently, sanofi-aventisSanofi uses equity derivatives in connection with the management of its portfolio of equity investments.
Sanofi-aventisSanofi 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. As of December 31, 2009, sanofi-aventisSanofi had no material embedded derivatives.
derivatives as of December 31, 2012, 2011 and 2010.
Counterparty risk
As of December 31, 2009,2012, all currency and interest rate hedges were contracted with leading banks, and no single counterparty accounted for more than 15%13% of the Group’snotional amount of the Group's overall currency orand interest rate positions.
D.20.1. Currency and interest rate derivatives
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
a) Currency derivatives used to manage operational risk exposures
Sanofi-aventisSanofi operates a foreign exchange risk hedging policy to reduce the exposure of operating income to fluctuations in foreign currencies, in particular the U.S. dollar. This policy involves regular assessments of the Group’sGroup's worldwide foreign currency exposure, based on budget estimates of foreign-currency transactions to be carried out by the parent company and its subsidiaries. These transactions mainly comprise sales, purchases, research costs, co-marketing and co-promotion expenses, and royalties. To reduce the exposure of these transactions to exchange rate movements, sanofi-aventisSanofi contracts economic hedges using liquid financialderivative instruments, such asprimarily forward purchases and sales of currency call and put options, and combinations of currency options (collars).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009swaps.
The table below shows operational currency hedging instruments in place as of December 31, 2009,2012, with the notional amount translated into euros at the relevant closing exchange rate.rate:
As of December 31, 2012 | | | 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 | 2,972 | 21 | — | — | — | 2,972 | 21 | |||||||||||||||||||
• of which U.S. dollar | 972 | 6 | — | — | — | 972 | 6 | |||||||||||||||||||
• of which Japanese yen | 485 | 15 | — | — | — | 485 | 15 | |||||||||||||||||||
• of which Russian rouble | 368 | (3 | ) | — | — | — | 368 | (3 | ) | |||||||||||||||||
• of which Singapore dollar | 271 | — | — | — | — | 271 | — | |||||||||||||||||||
• of which Chinese yuan renminbi | 255 | 1 | — | — | — | 255 | 1 | |||||||||||||||||||
Forward currency purchases | 944 | (4 | ) | — | — | — | 944 | (4 | ) | |||||||||||||||||
• of which Singapore dollar | 231 | (4 | ) | — | — | — | 231 | (4 | ) | |||||||||||||||||
• of which Hungarian forint | 166 | (3 | ) | — | — | — | 166 | (3 | ) | |||||||||||||||||
• of which Swiss franc | 110 | — | — | — | — | 110 | — | |||||||||||||||||||
• of which Chinese yuan renminbi | 94 | — | 94 | — | ||||||||||||||||||||||
• of which U.S. dollar | 69 | — | — | — | — | 69 | — | |||||||||||||||||||
Total | 3,916 | 17 | — | — | — | 3,916 | 17 | |||||||||||||||||||
December 31, 2009 | Notional amount | Fair value | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||||
(€ million) | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||||
Forward currency sales | 2,800 | (51 | ) | 583 | (7 | ) | (7 | ) | 2,217 | (44 | ) | |||||||
• of which U.S. dollar | 1,757 | (41 | ) | 367 | (5 | ) | (5 | ) | 1,390 | (36 | ) | |||||||
• of which Japanese yen | 269 | 1 | 150 | (1 | ) | (1 | ) | 119 | 2 | |||||||||
• of which Russian rouble | 132 | (4 | ) | — | — | — | 132 | (4 | ) | |||||||||
• of which Pound sterling | 111 | — | — | — | — | 111 | — | |||||||||||
• of which Hungarian forint | 104 | (1 | ) | — | — | — | 104 | (1 | ) | |||||||||
Forward currency purchases | 377 | 6 | — | — | — | 377 | 6 | |||||||||||
• of which Hungarian forint | 114 | 3 | — | — | — | 114 | 3 | |||||||||||
• of which U.S. dollar | 69 | — | — | — | — | 69 | — | |||||||||||
• of which Pound sterling | 68 | 1 | — | — | — | 68 | 1 | |||||||||||
• of which Canadian dollar | 42 | 1 | — | — | — | 42 | 1 | |||||||||||
• of which Swiss franc | 20 | — | — | — | — | 20 | — | |||||||||||
Put options purchased | 448 | 14 | 20 | 1 | — | 428 | 13 | |||||||||||
• of which U.S. dollar | 278 | 8 | — | — | — | 278 | 8 | |||||||||||
Call options written | 881 | (17 | ) | 20 | (1 | ) | — | 861 | (16 | ) | ||||||||
• of which U.S. dollar | 555 | (10 | ) | — | — | — | 555 | (10 | ) | |||||||||
Put options written | 278 | (8 | ) | — | — | — | 278 | (8 | ) | |||||||||
• of which U.S. dollar | 278 | (8 | ) | — | — | — | 278 | (8 | ) | |||||||||
Call options purchased | 555 | 10 | — | — | — | 555 | 10 | |||||||||||
• of which U.S. dollar | 555 | 10 | — | — | — | 555 | 10 | |||||||||||
Total | 5,339 | (46 | ) | 623 | (7 | ) | (7 | ) | 4,716 | (39 | ) | |||||||
As of December 31, 2009,2012, none of these instruments hashad an expiry date after December 31, 2010.February 28, 2013, with the exception of a forward purchase of GBP 33 million expiring between 2013 and 2015.
These positions hedge:
Allmainly hedge material future foreign-currency cash flows arising after the balance sheet date in relation to transactions carried out during the year ended December 31, 20092012 and recognized in the balance sheet at that date. Gains and losses on these hedging instruments (forward contracts) have been and will continue to beare calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Consequently, we do not expect the commercial foreign exchange gain or loss to be recognized on these items (hedges and hedged instruments) in 2010 is not expected2013 to be material.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Forecast foreign-currency cash flows relating to commercial transactions to be carried out in 2010. These hedges (forward contracts and options) cover from 8% to 40% of the expected net cash flows for 2010 in currencies subject to budgetary hedging. The portfolio of derivatives contracted to cover 2010 U.S. dollar cash flows consists solely of forward contracts, and represents 8% of the forecast net cash flows for 2010. Given the designation of these forward sales as cash flow hedges, the estimated sensitivity of these positions in terms of foreign exchange gains/losses and equity impact for 2010 is as follows:
Assumes a constant €/$ exchange rate over the year ending December 31, 2010 | Foreign exchange gain/(loss) on U.S. dollar hedges (€ million) | Impact on equity at December 31, 2009 (€ million) | ||||
Depreciation of 10% in the U.S. dollar (€1 = $1.5847) | 28 | 33 | ||||
Exchange rate maintained at the December 31, 2009 rate (€1 = $1.4406) | (5 | ) | — | |||
Appreciation of 10% in the U.S. dollar (€1 = $1.2965) | (46 | ) | (41 | ) | ||
The table below shows operational currency hedging instruments in place as of December 31, 2008,2011, with the notional amount translated into euros at the relevant closing exchange rate.rate:
As of December 31, 2011 | | | 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 | 3,446 | (96 | ) | — | — | — | 3,446 | (96 | ) | |||||||||||||||||
• of which U.S. dollar | 1,779 | (59 | ) | — | — | — | 1,779 | (59 | ) | |||||||||||||||||
• of which Japanese yen | 685 | (22 | ) | — | — | — | 685 | (22 | ) | |||||||||||||||||
• of which Russian rouble | 310 | (5 | ) | — | — | — | 310 | (5 | ) | |||||||||||||||||
• of which Singapore dollar | 71 | — | — | — | — | 71 | — | |||||||||||||||||||
• of which Australian dollar | 63 | (2 | ) | — | — | — | 63 | (2 | ) | |||||||||||||||||
Forward currency purchases | 1,077 | 7 | — | — | — | 1,077 | 7 | |||||||||||||||||||
• of which Singapore dollar | 357 | 4 | — | — | — | 357 | 4 | |||||||||||||||||||
• of which Swiss franc | 165 | 2 | — | — | — | 165 | 2 | |||||||||||||||||||
• of which Japanese yen | 124 | 3 | — | — | — | 124 | 3 | |||||||||||||||||||
• of which Hungarian forint | 107 | (4 | ) | — | — | — | 107 | (4 | ) | |||||||||||||||||
• of which U.S. dollar | 69 | — | — | — | — | 69 | — | |||||||||||||||||||
Total | 4,523 | (89 | ) | — | — | — | 4,523 | (89 | ) | |||||||||||||||||
December 31, 2008 | Notional amount | Fair value | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||
(€ million) | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||
Forward currency sales | 3,305 | 219 | 1,562 | 121 | 123 | 1,743 | 98 | |||||||||
• of which U.S. dollar | 2,461 | 182 | 1,358 | 108 | 111 | 1,103 | 74 | |||||||||
• of which Japanese yen | 191 | (5 | ) | 95 | 3 | 2 | 96 | (8 | ) | |||||||
• of which Russian rouble | 134 | 15 | — | — | — | 134 | 15 | |||||||||
• of which Pound sterling | 104 | 6 | — | — | — | 104 | 6 | |||||||||
• of which Saudi Arabian riyal | 58 | 5 | 4 | — | — | 54 | 5 | |||||||||
• of which Polish zloty | 53 | 6 | 33 | 5 | 6 | 20 | 1 | |||||||||
Forward currency purchases | 601 | (11 | ) | — | — | — | 601 | (11 | ) | |||||||
• of which Hungarian forint | 175 | (1 | ) | — | — | — | 175 | (1 | ) | |||||||
• of which U.S. dollar | 140 | 3 | — | — | — | 140 | 3 | |||||||||
• of which Pound sterling | 75 | (6 | ) | — | — | — | 75 | (6 | ) | |||||||
• of which Russian rouble | 72 | (6 | ) | — | — | — | 72 | (6 | ) | |||||||
• of which Canadian dollar | 51 | (1 | ) | — | — | — | 51 | (1 | ) | |||||||
Put options purchased | 24 | — | 2 | — | — | 22 | — | |||||||||
Call options written | 48 | (7 | ) | 2 | — | — | 46 | (7 | ) | |||||||
Total | 3,978 | 201 | 1,566 | 121 | 123 | 2,412 | 80 | |||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The table below shows operational currency hedging instruments in place as of December 31, 2007:2010, with the notional amount translated into euros at the relevant closing exchange rate:
As of December 31, 2010 | | | 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 | 2,444 | (25 | ) | — | — | — | 2,444 | (25 | ) | |||||||||||||||||
• of which U.S. dollar | 1,380 | (12 | ) | — | — | — | 1,380 | (12 | ) | |||||||||||||||||
• of which Russian rouble | 248 | (7 | ) | — | — | — | 248 | (7 | ) | |||||||||||||||||
• of which Japanese yen | 202 | (4 | ) | — | — | — | 202 | (4 | ) | |||||||||||||||||
• of which Pound sterling | 95 | 2 | — | — | — | 95 | 2 | |||||||||||||||||||
• of which Australian dollar | 60 | (1 | ) | — | — | — | 60 | (1 | ) | |||||||||||||||||
Forward currency purchases | 257 | (2 | ) | — | — | — | 257 | (2 | ) | |||||||||||||||||
• of which Hungarian forint | 84 | (1 | ) | — | — | — | 84 | (1 | ) | |||||||||||||||||
• of which U.S. dollar | 51 | (1 | ) | — | — | — | 51 | (1 | ) | |||||||||||||||||
• of which Canadian dollar | 31 | — | — | — | — | 31 | — | |||||||||||||||||||
• of which Russian rouble | 30 | — | — | — | — | 30 | — | |||||||||||||||||||
• of which Japanese yen | 18 | — | — | — | — | 18 | — | |||||||||||||||||||
Total | 2,701 | (27 | ) | — | — | — | 2,701 | (27 | ) | |||||||||||||||||
December 31, 2007 | Notional amount | Fair value | Of which derivatives designated as cash flow hedges | Of which derivatives not eligible for hedge accounting | ||||||||||||||
(€ million) | Notional amount | Fair value | Of which recognized in equity | Notional amount | Fair value | |||||||||||||
Forward currency sales | 2,205 | 30 | 486 | 8 | 8 | 1,719 | 22 | |||||||||||
• of which U.S. dollar | 1,288 | 20 | 239 | 3 | 3 | 1,049 | 17 | |||||||||||
• of which Russian rouble | 224 | — | — | — | — | 224 | — | |||||||||||
• of which Japanese yen | 132 | 4 | 77 | 4 | 3 | 55 | 1 | |||||||||||
• of which Pound sterling | 119 | 3 | — | — | — | 119 | 3 | |||||||||||
• of which Polish zloty | 62 | (2 | ) | 33 | (1 | ) | (1 | ) | 29 | — | ||||||||
• of which Australian dollar | 45 | 2 | 36 | 2 | 2 | 9 | — | |||||||||||
• of which Mexican peso | 43 | 1 | 19 | — | — | 24 | 1 | |||||||||||
• of which Turkish lira | 39 | — | — | — | — | 39 | — | |||||||||||
• of which Korean won | 33 | 1 | — | — | — | 33 | 1 | |||||||||||
• of which Slovakian koruna | 33 | — | 10 | — | — | 23 | — | |||||||||||
Forward currency purchases | 464 | — | — | — | — | 464 | — | |||||||||||
• of which Hungarian forint | 214 | 1 | — | — | — | 214 | 1 | |||||||||||
• of which Swiss franc | 54 | — | — | — | — | 54 | — | |||||||||||
• of which U.S. dollar | 48 | (1 | ) | — | — | — | 48 | (1 | ) | |||||||||
• of which Canadian dollar | 47 | — | — | — | — | 47 | — | |||||||||||
Put options purchased | 409 | 4 | 15 | 1 | 1 | 394 | 3 | |||||||||||
• of which U.S. dollar knock-out options(1) | 326 | 3 | — | — | — | 326 | 3 | |||||||||||
Call options written | 741 | (1 | ) | 15 | — | — | 726 | (1 | ) | |||||||||
• of which U.S. dollar knock-out options(1) | 652 | (2 | ) | — | — | — | 652 | (2 | ) | |||||||||
Put options written | 12 | — | — | — | — | 12 | — | |||||||||||
Total | 3,831 | 33 | 516 | 9 | 9 | 3,315 | 24 | |||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) |
|
b) Currency and interest rate derivatives used to manage financial risk exposures
Cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of the Group’sGroup's financing activities, expose certain entities to financial foreign exchange risk. This is 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. This risk mainly affects the sanofi-aventis parent company in respect of the U.S. dollar, and is hedged by firm financial instruments (currencythe Sanofi parent company using currency swaps or forward contracts).contracts, which are contracted with banks.
The table below shows financial currency hedging instruments used to manage financial risk exposuresin place as of December 31, 2009,2012, with the notional amount translated into euros at the relevant closing exchange rate.rate:
| 2012 | 2011 | 2010 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | |||||||||||||||||||
Forward currency sales | 3,970 | 38 | 4,900 | (104 | ) | 2,728 | (64 | ) | ||||||||||||||||||||
• of which U.S. dollar | 1,897 | 1 | 2013 | 2,964 | (89 | ) | 2012 | 862 | (26 | ) | 2012 | |||||||||||||||||
• of which Japanese yen | 1,272 | 34 | 2013 | 993 | (17 | ) | 2012 | 904 | (24 | ) | 2011 | |||||||||||||||||
• of which Czech koruna | 191 | — | 2013 | 251 | 4 | 2012 | 359 | (7 | ) | 2011 | ||||||||||||||||||
Forward currency purchases | 2,638 | (12 | ) | 2,719 | 24 | 2,086 | (13 | ) | ||||||||||||||||||||
• of which Pound sterling | 549 | (3 | ) | 2013 | 843 | 5 | 2012 | 565 | (11 | ) | 2011 | |||||||||||||||||
• of which U.S. dollar | 521 | 1 | 2013 | 828 | 10 | 2012 | 814 | (8 | ) | 2011 | ||||||||||||||||||
• of which Singapore dollar | 492 | (4 | ) | 2013 | 191 | 5 | 2012 | 20 | — | 2011 | ||||||||||||||||||
Total | 6,608 | 26 | 7,619 | (80 | ) | 4,814 | (77 | ) | ||||||||||||||||||||
2009 | 2008 | 2007 | |||||||||||||||||||
(€ million) | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | Notional amount | Fair value | Expiry | ||||||||||||
Forward currency purchases | 6,760 | 185 | — | 9,210 | (80 | ) | — | 8,261 | (179 | ) | — | ||||||||||
• of which U.S. dollar (1) | 5,634 | 180 | 2010 | 8,256 | (66 | ) | 2009 | 7,348 | (167 | ) | 2008 | ||||||||||
• of which Pound sterling | 433 | �� | 2 | 2010 | 235 | (4 | ) | 2009 | 442 | (11 | ) | 2008 | |||||||||
• of which Swiss franc | 152 | 1 | 2010 | 140 | 5 | 2009 | 173 | 1 | 2008 | ||||||||||||
Forward currency sales | 3,169 | (7 | ) | — | 1,954 | (22 | ) | — | 1,563 | 26 | — | ||||||||||
• of which U.S. dollar | 1,634 | (28 | ) | 2010 | 1,043 | (23 | ) | 2009 | 936 | 20 | 2008 | ||||||||||
• of which Japanese yen | 837 | 18 | 2010 | 665 | (7 | ) | 2009 | 206 | 3 | 2008 | |||||||||||
• of which Czech koruna | 394 | 7 | 2010 | 22 | 1 | 2009 | 28 | — | 2008 | ||||||||||||
Total | 9,929 | 178 | 11,164 | (102 | ) | 9,824 | (153 | ) | |||||||||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
These currency swapsforward 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 liabilitiesborrowings and receivablesloans is offset by the change in the intrinsic value of the hedging instruments. As regards the main currency hedged (the U.S. dollar), the interest rate differential on forward purchase contracts had a negative effect of €24 million on the net financial foreign exchange result in 2009, compared with a negative effect of €51 million in 2008. In addition, the Group may hedge some future foreign-currency cash flows relating to investment or divestment transactions.
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). The Group’sfloating-rate portion of this debt exposes the Group to rises in interest rate exposure arises from (i) fixed-rate debt (primarily bond issues),rates, primarily in the fair value of which moves in line with fluctuations in market interest rates;Eonia and (ii) floating-rate or adjustable-rate debt and cash investments (credit facilities, commercial paper, floating rate notes, funds placed in collective investment schemes), on which interest outflows and inflows are exposed to fluctuations inEuribor benchmark rates (principally Eonia,(for the euro) and in the U.S. Libor and Euribor)Federal Fund Effective rates (for the U.S. dollar). ToIn order to reduce the costamount and/or volatility of its short-term and medium-termthe cost of debt, sanofi-aventisthe Group uses interest rate swaps, cross-currency swaps and in some cases interest rate options (purchases of caps, or combined purchases of caps and sales of floors) that alter the fixed/floating structuresplit of its debt. These derivative instruments are denominated partially in euros and partially in U.S. dollars.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table below shows instruments of this type in place atas of December 31, 2009:2012:
| Notional amounts by expiry date as of December 31, 2012 | | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | ||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | | 2013 | 2014 | 2015 | 2016 | 2017 | 2019 | Total | | Fair value | | Notional amount | Fair value | | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||||
Interest rate swaps | ||||||||||||||||||||||||||||||||||||||||||||||||
– Pay floating/receive 2.73% | — | — | — | 500 | — | — | 500 | 45 | 500 | 45 | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay floating/receive 2.38% | — | 1,200 | — | 1,000 | — | 800 | 3,000 | 251 | 3,000 | 251 | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay floating/receive 0.57% | — | — | — | — | 375 | — | 375 | 2 | 375 | 2 | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay floating/receive 1.15% | — | — | — | — | 428 | — | 428 | 2 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay floating/receive 0.34% | — | 379 | — | — | — | — | 379 | 2 | 379 | 2 | — | — | — | |||||||||||||||||||||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||||||||||||||||||||||||||||||
– Pay € floating/receive JPY floating | 92 | — | — | — | — | — | 92 | 40 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay € 4.87%/receive CHF 3.38% | — | — | 244 | — | — | — | 244 | 91 | — | — | 244 | 91 | 4 | |||||||||||||||||||||||||||||||||||
Currency swaps hedging USD investments | ||||||||||||||||||||||||||||||||||||||||||||||||
– Pay USD/receive € | 872 | — | — | — | — | — | 872 | (2 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Total | 964 | 1,579 | 244 | 1,500 | 803 | 800 | 5,890 | 431 | 4,254 | 300 | 244 | 91 | 4 | |||||||||||||||||||||||||||||||||||
Notional amounts by expiry date as of December 31, 2009 | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | |||||||||||||||||||||||
(€ million) | 2010 | 2012 | 2013 | 2015 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | ||||||||||||||
Interest rate swap, pay € 1.27% / receive € floating(1) | 1,000 | — | — | — | 1,000 | 2 | 1,000 | 2 | — | — | — | ||||||||||||||
Cross currency swaps | |||||||||||||||||||||||||
- pay € floating (2) / receive £ 5.50% | 299 | — | — | — | 299 | (62 | ) | 299 | (62 | ) | — | — | — | ||||||||||||
- pay € floating (2) / receive ¥ floating (3) | — | — | 92 | — | 92 | 21 | — | — | — | — | — | ||||||||||||||
- pay € floating(4) / receive CHF 2.75% | 122 | — | — | — | 122 | 16 | 122 | 16 | — | — | — | ||||||||||||||
- pay € 4.89% / receive CHF 3.26% | — | 180 | — | — | 180 | 3 | — | — | 180 | 3 | (2 | ) | |||||||||||||
- pay € 4.87% / receive CHF 3.38% | — | — | — | 244 | 244 | 23 | — | — | 244 | 23 | (2 | ) | |||||||||||||
- pay € floating (2) / receive CHF 3.26% | — | 167 | — | — | 167 | 4 | 167 | 4 | — | — | — | ||||||||||||||
Total | 1,421 | 347 | 92 | 244 | 2,104 | 7 | 1,588 | (40 | ) | 424 | 26 | (4 | ) | ||||||||||||
|
|
|
|
The table below shows instruments of this type in place atas of December 31, 2008:2011:
| Notional amounts by expiry date as of December 31, 2011 | | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | | 2012 | 2013 | 2014 | 2015 | 2016 | 2019 | 2021 | Total | | Fair value | | Notional amount | Fair value | | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||||||
Caps | |||||||||||||||||||||||||||||||||||||||||||||||||||
– Purchases of caps 0.50% | 1,932 | — | — | — | — | — | — | 1,932 | 1 | — | — | 1,932 | 1 | (1 | ) | ||||||||||||||||||||||||||||||||||||
Interest rate swaps | |||||||||||||||||||||||||||||||||||||||||||||||||||
– Pay floating/receive 2.73% | — | — | — | — | 500 | — | — | 500 | 34 | 500 | 34 | — | — | — | |||||||||||||||||||||||||||||||||||||
– Pay floating/receive 2.38% | — | — | 1,200 | — | 1,000 | 800 | — | 3,000 | 204 | 3,000 | 204 | — | — | — | |||||||||||||||||||||||||||||||||||||
– Pay floating/receive 1.86% | — | — | — | — | — | — | 232 | 232 | (1 | ) | 232 | (1 | ) | — | — | — | |||||||||||||||||||||||||||||||||||
– Pay floating/receive 0.34% | — | — | 386 | — | — | — | — | 386 | 1 | 386 | 1 | — | — | — | |||||||||||||||||||||||||||||||||||||
Cross-currency swaps | |||||||||||||||||||||||||||||||||||||||||||||||||||
– Pay € floating/receive JPY floating | — | 92 | — | — | — | — | — | 92 | 58 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
– Pay € 4.89%/receive CHF 3.26% | 180 | — | — | — | — | — | — | 180 | 48 | — | — | 180 | 48 | 1 | |||||||||||||||||||||||||||||||||||||
– Pay € 4.87%/receive CHF 3.38% | — | — | — | 244 | — | — | — | 244 | 96 | — | — | 244 | 96 | 11 | |||||||||||||||||||||||||||||||||||||
– Pay € floating/receive CHF 3.26% | 167 | — | — | — | — | — | — | 167 | 42 | 167 | 42 | — | — | — | |||||||||||||||||||||||||||||||||||||
Currency swaps hedging USD investments | |||||||||||||||||||||||||||||||||||||||||||||||||||
– Pay USD/receive € | 1,404 | — | — | — | — | — | — | 1,404 | (27 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | 3,683 | 92 | 1,586 | 244 | 1,500 | 800 | 232 | 8,137 | 456 | 4,285 | 280 | 2,356 | 145 | 11 | |||||||||||||||||||||||||||||||||||||
Notional amounts by expiry date as of December 31, 2008 | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | ||||||||||||||||||||||||||
(€ million) | 2009 | 2010 | 2012 | 2013 | 2015 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | ||||||||||||||||
Interest rate swap, pay € 3.69% / receive € floating(1) | — | 1,000 | — | — | — | 1,000 | (12 | ) | — | — | 1,000 | (12 | ) | (14 | ) | |||||||||||||
Cross currency swaps | ||||||||||||||||||||||||||||
- pay €floating (1) /receive £ 5.50% | — | 299 | — | — | — | 299 | (74 | ) | 299 | (74 | ) | — | — | — | ||||||||||||||
- pay €floating (1) /receive ¥ 0.22% | 116 | — | — | — | — | 116 | 33 | 116 | 33 | — | — | — | ||||||||||||||||
- pay €floating (1) /receive ¥ floating (2) | — | — | — | 92 | — | 92 | 27 | — | — | — | — | — | ||||||||||||||||
- pay€ floating(3) / receive CHF 2.75% | — | 122 | — | — | — | 122 | 16 | 122 | 16 | — | — | — | ||||||||||||||||
- pay€ 4.89% / receive CHF 3.26% | — | — | 180 | — | — | 180 | 5 | — | — | 180 | 5 | — | ||||||||||||||||
- pay€ 4.87% / receive CHF 3.38% | — | — | — | — | 244 | 244 | 23 | — | — | 244 | 23 | (1 | ) | |||||||||||||||
Total | 116 | 1,421 | 180 | 92 | 244 | 2,053 | 18 | 537 | (25 | ) | 1,424 | 16 | (15 | ) | ||||||||||||||
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The table below shows the portfolioinstruments of interest rate derivative instruments at December 31, 2007:
Notional amounts by expiry date as of December 31, 2007 | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | |||||||||||||||||||||||||
(€ million) | 2008 | 2009 | 2010 | 2012 | 2015 | Total | Fair value | Notional amount | Fair value | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||
Interest rate swap, pay € 3.11% / receive € floating(1) | — | — | — | 1,000 | — | 1,000 | 50 | — | — | 1,000 | 50 | 50 | |||||||||||||||
Interest rate swap, pay floating(€) Eonia + 0.59% | 250 | — | — | — | — | 250 | — | — | — | — | — | — | |||||||||||||||
Cross currency swaps | |||||||||||||||||||||||||||
- pay €floating (1) / receive £ 5.50% | — | — | 299 | — | — | 299 | (14 | ) | 299 | (14 | ) | — | — | — | |||||||||||||
- pay €floating (1) / receive ¥ 0.22% | — | 116 | — | — | — | 116 | (2 | ) | 116 | (2 | ) | — | — | — | |||||||||||||
- pay€ floating(2) / receive CHF 2.75% | — | — | 122 | — | — | 122 | (2 | ) | 122 | (2 | ) | — | — | — | |||||||||||||
- pay€ 4.87% / receive CHF 3.38% | — | — | — | — | 183 | 183 | (3 | ) | — | — | 183 | (3 | ) | — | |||||||||||||
Total | 250 | 116 | 421 | 1,000 | 183 | 1,970 | 29 | 537 | (18 | ) | 1,183 | 47 | 50 | ||||||||||||||
|
|
The changethis type in the structure of the Group’s debt arising from these financial instruments is described in Note D.17., which also includes an analysis of the Group’s sensitivity to interest rates.
D.20.2. Equity derivatives
The Group did not hold any equity derivativesplace as of December 31, 2009,2010:
| Notional amounts by expiry date as of December 31, 2010 | | Of which derivatives designated as fair value hedges | Of which derivatives designated as cash flow hedges | |||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | | 2011 | 2012 | 2013 | 2015 | 2016 | Total | | Fair value | | Notional amount | Fair value | | Notional amount | Fair value | Of which recognized in equity | |||||||||||||||||||||||||||||
Interest rate swaps | |||||||||||||||||||||||||||||||||||||||||||||
– Pay floating/receive 2.73% | — | — | — | — | 500 | 500 | 12 | 500 | 12 | — | — | — | |||||||||||||||||||||||||||||||||
Cross-currency swaps | |||||||||||||||||||||||||||||||||||||||||||||
– Pay € floating/receive JPY floating | — | — | 92 | — | — | 92 | 47 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
– Pay € 4.89%/receive CHF 3.26% | — | 180 | — | — | — | 180 | 41 | — | — | 180 | 41 | 1 | |||||||||||||||||||||||||||||||||
– Pay € 4.87%/receive CHF 3.38% | — | — | — | 244 | — | 244 | 82 | — | — | 244 | 82 | 6 | |||||||||||||||||||||||||||||||||
– Pay € floating/receive CHF 3.26% | — | 167 | — | — | — | 167 | 38 | 167 | 38 | — | — | — | |||||||||||||||||||||||||||||||||
Currency swaps | |||||||||||||||||||||||||||||||||||||||||||||
– pay €/receive USD | 489 | — | — | — | — | 489 | (2 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Total | 489 | 347 | 92 | 244 | 500 | 1,672 | 218 | 667 | 50 | 424 | 123 | 7 | |||||||||||||||||||||||||||||||||
D.21. Off balance sheet commitments
The off balance sheet commitments presented below are shown at their nominal value.
D.21.1. Off balance sheet commitments relating to operating activities
The Group's off balance sheet commitments break down as follows:
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 | |||||||||||
• Operating lease obligations | 1,296 | 250 | 367 | 220 | 459 | |||||||||||
• Irrevocable purchase commitments (1) | ||||||||||||||||
– given | 2,913 | 1,513 | 651 | 368 | 381 | |||||||||||
– received | (209 | ) | (106 | ) | (67 | ) | (14 | ) | (22 | ) | ||||||
• Research and development license agreements | ||||||||||||||||
– future service commitments (2) | 767 | 181 | 286 | 276 | 24 | |||||||||||
– potential milestone payments (3) | 2,201 | 149 | 267 | 295 | 1,490 | |||||||||||
Firm commitment under the agreement with BMS (4) | 82 | — | — | — | 82 | |||||||||||
Total | 7,050 | 1,987 | 1,504 | 1,145 | 2,414 | |||||||||||
D.21. Contractual obligations and other commercial commitmentsTable of Contents
The Group’s contractual obligations and other commercial commitments (excluding Merial, see Note D.8.1.) comprise:
December 31, 2009 | Payments due by period | ||||||||||||||
(€ million) | Total | Under 1 year | From 1 to 3 years | From 3 to 5 years | Over 5 years | ||||||||||
• Debt(1): | |||||||||||||||
- principal | 8,681 | 2,737 | 576 | 2,761 | 2,607 | ||||||||||
- interest | 1,437 | 312 | 452 | 337 | 336 | ||||||||||
- net cash flows related to derivative instruments | (14 | ) | 51 | (1 | ) | (22 | ) | (42 | ) | ||||||
• Operating lease obligations | 1,197 | 278 | 350 | 201 | 368 | ||||||||||
• Irrevocable purchase commitments (2): | |||||||||||||||
- given | 2,628 | 1,484 | 550 | 197 | 397 | ||||||||||
- received | (297 | ) | (203 | ) | (33 | ) | (13 | ) | (48 | ) | |||||
• Commercial commitments | 5,781 | 235 | 546 | 542 | 4,458 | ||||||||||
• Commitments relating to business combinations | 439 | 76 | 268 | 95 | — | ||||||||||
• Commitment related to the tender offer for Chattem | 1,319 | 1,319 | — | — | — | ||||||||||
• Commitment related to the combination of Intervet/Schering-Plough Animal Health and Merial(3) | 694 | 694 | — | — | — | ||||||||||
Total contractual obligations and other commitments | 21,865 | 6,983 | 2,708 | 4,098 | 8,076 | ||||||||||
Undrawn credit facilities(4) | 12,290 | 590 | 11,700 | — | — | ||||||||||
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Leases Operating leases
Finance leases
Future minimum lease payments due under finance leases at December 31, 2009 are €27 million (€31 million at December 31, 2008 and €35 million at December 31, 2007), including interest of €3 million (€5 million at December 31, 2008 and €6 million at December 31, 2007). The payment schedule is as follows:
December 31, 2009 | Payments due by period | |||||||||
(€ million) | Total | Under 1 year | From 1 to 3 years | From 3 to 5 years | Over 5 years | |||||
Finance lease obligations: | ||||||||||
- principal | 24 | 9 | 6 | 6 | 3 | |||||
- interest | 3 | 1 | 1 | 1 | — | |||||
Total | 27 | 10 | 7 | 7 | 3 | |||||
Operating leases
Sanofi-aventisGroup leases certain of its properties and equipment used in the ordinary course of business under operating leases. Future minimum lease payments due under non-cancelable operating leases at December 31, 2009 amounted to €1,1972012 were €1,296 million (€1,192(versus €1,456 million at December 31, 2008, €1,2832011 and €1,291 million at December 31, 2007)2010).
Total rental expense recognized in the year ended December 31, 20092012 was €273€294 million (€282(versus €324 million in the year ended December 31, 2008, €2922011 and €281 million in the year ended December 31, 2007)2010).
GuaranteesResearch and development license agreements
Guarantees given and received (mainly surety bonds) are as follows:
(€ million) | 2009 | 2008 | 2007 | ||||||
Guarantees given | 2,358 | 1,524 | 1,895 | ||||||
Guarantees received | (171 | ) | (218 | ) | (195 | ) | |||
Commercial commitments
This includes commitments to third parties under collaboration agreements. In pursuance of its strategy, sanofi-aventis acquiresthe 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 contracts usually involve upfront payments on signature of the agreement, and development milestone payments.payments, and royalties. Some of these complex agreements include undertakings to finance research programs in future years and payments contingent upon completion ofspecified development milestones, or upon the granting of approvals or licenses, or upon the attainment of sales targets once a product is on the market.
The "Research and development license agreements" line comprises future service commitments to finance 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). This item excludes commitments relating to projects in the research phase (€5 billion in 2012, €4.2 billion in 2011) and payments contingent upon the attainment of sales targets once a product is on the market (€4.7 billion in 2012, €4.4 billion in 2011).
The main Potential milestone payments relating to Pharmaceuticals segment development projects amount to €2 billion, of which €1.4 billion relates to the principal collaboration agreements described below.
vanilloid receptor (TRPV3) antagonist molecules, including ERC 15300, a first-in-class clinical compound.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
|
In October 2009, sanofi-aventis and Wellstat Therapeutics Corporation (Wellstat) signed a worldwide license agreement for PN2034, a novel first-in-class oral insulin sensitizer for the treatment of Type II diabetes. As a sensitizer, PN2034 is expected to normalize and therefore enhance insulin action in the livers of diabetic patients. The compound is currently in Phase II clinical testing. Total milestone payments could reach $310 million. Wellstat will also receive royalties on worldwide product sales, and additional milestone payments linked to sales performance.
At end September 2009, sanofi-aventisSanofi and Merrimack Pharmaceuticals Inc. (Merrimack) signed an exclusive worldwideglobal licensing and collaboration and licensing agreement forcovering the MM-121 molecule for the management of solid malignancies. MM-121 is a first-in-class fully human monoclonal antibody designed to block signalingtumors.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
end this collaboration agreement.
In February 2008, sanofi-aventis and Dyax Corp. entered into agreements that granted sanofi-aventis an exclusive worldwide license for the development and commercialization of Dyax’s fully human monoclonal antibody DX-2240, as well as a worldwide non-exclusive license to Dyax’s proprietary Phage Display technology (phage expression and antibody banks). Under the terms of the two agreements, Dyax could receive up to $270 million in license fees and milestone payments. Dyax will also receive royalties on sales of antibody candidates.
Sanofi amounted to €0.6 billion.
Sanofi has also entered into the following major agreements, currently in a less advanced research phase:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009 In June 2012, Sanofi decided to discontinue the BiTE® antibody project and terminate its collaboration with Micromet.
Sanofi-aventis has signed other collaboration agreements with laboratories and universities, under which total contingent payments over the next five years could reach around €129 million.
The main collaboration agreements in the Vaccines segment are described below:
Sanofi Pasteur has entered into a number of collaboration agreements. Milestone payments relating to development projects under those agreements with partners including Crucell, Intercell, Vactech, Maxigen, SSI and Syntiron, under which sanofi pasteur may be requiredamounted to make total contingent payments of around €99 million over the next five years.€0.2 billion in 2012.
In JuneDecember 2009, sanofi-aventis announced its intention to donateSanofi 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 vaccinestrain with pandemic potential, up to a maximum of 100 million doses to help developing countries deal with the influenza pandemic. This donationdoses. Since this agreement was a responseput in place, Sanofi Pasteur has already donated to the 2009 influenza pandemic causedWHO some of the doses covered by the emergencecommitment.
D.21.2. Off balance sheet commitments related to the financing of the new A(H1N1) influenza strain, and replaced a previous commitment made in 2008 in the context of the H5N1 pandemic threat. However, the 100 million dose donation will be based on A(H1N1) or H5N1 strains, or any other strain that could potentially create an influenza epidemic.
Group
Commitments relating to business combinations Credit facilities
Undrawn credit facilities break down as follows:
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 | |||||||||||
General-purpose credit facilities | 10,021 | 3,020 | 250 | 6,750 | 1 | |||||||||||
As of December 31, 2012, total credit facilities amounted to €10,021 million (versus €10,046 million as of December 31, 2011 and €23,464 million as of December 31, 2010 including Genzyme acquisition facilities).
Guarantees given and received (mainly surety bonds) are as follows:
(€ million) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Guarantees given | 4,311 | 3,296 | 2,558 | |||||||
Guarantees received | (185 | ) | (224 | ) | (185 | ) | ||||
D.21.3. Off balance sheet commitments relating to the scope of consolidation
The maximum amount of contingent consideration related to business combinations relate mainly to contingent consideration in the form of milestone payments linked to the development of projects conducted by the acquired entity. Contingent consideration is recognized as a financial liability if payment is regarded as possible and the amount involved can be measured reliably; refer to Note B.3.1. for a description of the accounting policy applied.
These commitments relate to:
BiPar Sciences
For a description of BiPar’s activities and the purchase price allocation, see Note D.1.
The additional purchase consideration is contingent on future milestone payments, which could reach $157 million.
Fovea
On October 30, 2009, sanofi-aventis acquired Fovea Pharmaceuticals SA (Fovea), a privately-owned French biopharmaceutical company specializing in ophthalmology. Fovea has three products in clinical development: FOV 1101, currently in Phase II for persistent allergic conjunctivitis; FOV 2302, currently in Phase I, an intravitreal injection for the treatment of retinal vein occlusion induced macular edema; and FOV 2304, which entered Phase I at the end of 2009, for the treatment of diabetic macular edema. Milestone payments could reach €280 million.
Financial commitment relating to the tender offer for Chattem Inc
On December 21, 2009, sanofi-aventis announced that it had entered into a definitive agreement to acquire 100% of the outstanding shares of Chattem Inc (Chattem) in a cash tender offer for approximately $1.9 billion. Sanofi-aventis also announced its intention to convert its antihistamine brand Allegra® (fexofenadine) from a prescription medicine to an over-the-counter product in the United States. After the conversion, Chattem will assume responsibility for managing the Allegra® brand, and become the platform for sanofi-aventis over-the-counter and consumer health products in the United States. Under the terms of the agreement, sanofi-aventis launched on January 11, 2010 a tender offer for all the outstanding shares of Chattem for a cash price of $93.50 per share, representing a premium of 44% to the average closing price of Chattem shares during the six months preceding the announcement of the transaction. The offer was contingent on a majority of the outstanding ordinary shares of Chattem being tendered into the offer, clearance from the relevant regulatory authorities, and the other customary closing conditions. On February 9, 2010, sanofi-aventis acquired 89.8% of Chattem’s shares on a fully diluted basis, by accepting all validly tendered shares.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Financial commitment relating to Merial
This commitment relates to the option contract describedpresented in Note D.1.
D.18.
D.22. Legal and Arbitral Proceedings
Sanofi-aventisSanofi 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-aventisSanofi 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. Consequently,Contingent liabilities are cases for a majority of these claims,which either we are unable to make a reasonable estimate of the expected financial effect that will result from ultimate resolution of the proceeding.proceeding, or a cash outflow is not probable. In those cases, we have not accruedeither case, a reserve for the potential outcome, but disclose information with respect tobrief description of the nature of the contingency.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 a case-by-case basis or by class would seriously prejudice the Company’sCompany'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 other than provisions for pensions and other long-term benefits and restructuring provisions are disclosed in Note D.18.3.D.19.3.
When a legal claim involves a challenge to the patent protection of a pharmaceutical product, the principal risk to sanofi-aventis is that the sales of the product might decline following the introduction of a competing generic product in the relevant market. In cases where the product rights have been capitalized as an asset on the balance sheet (i.e., assets acquired through a separate acquisition or through a business combination — see Note B.4.), such a decline in sales could negatively affect the value of the intangible asset. In those cases, the Company performs impairment tests in accordance with the principles disclosed in Note B.6.1., based upon the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
best available information and, where appropriate, records an impairment loss to reduce the carrying amount of the related intangible asset to its estimated fair value. The amounts of such impairments are disclosed in Note D.5.
The principal ongoing legal and arbitral proceedings are described below:
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 SA and/or Sanofi Pasteur MSD twoS.N.C., the former a French subsidiariessubsidiary of sanofi-aventis, in whichSanofi, 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 syndrome orand Guillain-Barré syndrome as a result of receiving the hepatitis B vaccine. Numerous judgments have rejected claims alleging such causal link. Nevertheless, it is difficult to provide an opinion on the evolution and final outcome of these cases. In its most recent decisions concerning sanofi-aventis, the The French Supreme Court (Cour de Cassation (the French Supreme Court)), onin July 9, 2009, upheld a decision of the Court of AppealAppeals of Lyon ordering Sanofi Pasteur MSD SNCS.N.C. to pay damages of €120,000 to a claimant whose multiple sclerosis syndrome appeared shortly after her vaccination against the hepatitis B virus (HBV), butvirus; however, in Septemberseveral cases before and after the July 2009 itdecision, theCour de Cassation upheld a decisionseveral decisions of various Courts of Appeals (including the Court of AppealAppeals of MetzParis), rejecting claims against Sanofi Pasteur MSD.alleging such causal link.
SinceIn January 31, 2008, both the legal entity Sanofi Pasteur MSD S.N.C., and a corporate officer areof 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 Inc. Thimerosal Litigation
Since early 2001,and the former chief executive officer of Sanofi Pasteur Inc. has been a defendant in lawsuits filed in several federal and state courts in the United States alleging that serious personal injuries resulted from the presence of mercury in the preservative thimerosal, trace amounts of which are contained in vaccines manufactured by Sanofi Pasteur Inc.
Currently, there are 282 such cases pending. Several of the cases seek certification to proceed as class actions.
Sanofi Pasteur Inc. believes that under U.S. law, all of these claims must first be filed in the U.S. Court of Federal Claims to determine whether the claim qualifies for compensation by the National Vaccine Injury Compensation Program (VICP) before the claimants may bring direct actions against the company. The U.S. Court of Federal Claims (Claims Court) has established a process designed to facilitate the handling of the almost 5000 thimerosal claims within the VICP. The process involves a committee of petitioners’ representatives and representatives of the U.S. Department of Justice, who represent the government in the VICP. As originally planned, the process called for petitioners’ representatives to designate three “test cases” in each of the three different theories of general causation advanced by the petitioners. Hearings on two of the theories were completed in 2007 and 2008 and the petitioners decided that there was no need to proceed with the last theory.
On February 12, 2009, the U.S. Court of Federal Claims announced decisions in the first three test cases which were the subject of hearings completed in 2007. In each decision it was held that the petitioners failed to establish that their claimed injuries were caused in any way by thimerosal-containing vaccines and the MMR vaccine, and no compensation was awarded to any of them under the VICP. The claimants asked for review of the decisions by the Claims Court which ultimately upheld the prior rulings. The petitioners may now seek appellate review in the U.S. Court of Appeals for the Federal Circuit. Decisions in the second set of test cases are expected in 2010.
Currently, all of the 282 cases are either in the preliminary response stage, in the discovery process, have been stayed pending adjudication by the Claims Court, or have pending plaintiffs’ requests for reconsiderationplaced under an "advised witness" status.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
• Blood Products Litigation
On June 2, 2003 a purported worldwide class action was filed against current and former Group affiliates Armour Pharmaceutical Company, Aventis Behring, Aventis Inc. and against three other U.S. plasma fractionators, on behalf of a purported class of foreign and domestic plaintiffs alleging infection with HIV and/or hepatitis C from 1978-1990. A settlement is under negotiation and sanofi-aventis hopes the settlement may be concluded in 2010. Even if the settlement is concluded, some opt out litigation could still persist. The amount to be paid to the plaintiffs by the Group under the conditional settlement is fully covered by the existing reserves.
• Agreal®Plavix® Product Litigation
The Group faces civil, criminal or administrative claims chiefly in Spain from women alleging that the menopause treatment Agreal® (veralipride) has caused a range of neurological and psychological harm. In 2007 and 2008, decisions in suitsAround 444 lawsuits, involving several hundredapproximately 2,857 claimants were handed down by civil tribunals in Spain. In the majority of cases to date, the decisions have been favorable to sanofi-aventis, generally on the basis of a finding that causation was not proven by the claimants and/or that the leaflet gave adequate notice of potential side effects. A small number of the civil cases have been decided adversely to sanofi-aventis and sanofi-aventis has appealed each of these. On November 27, 2007 and February 20, 2008 the Appeal Court of Barcelona confirmed a decision holding that the product is defective due to insufficient information in the leaflet on side effect. Sanofi-aventis has appealedfiled against these decisions before the Supreme Court. The first administrative Court decisions (approximately 40 resolutions) issued between October 2009 and January 2010 have dismissed all these administrative claims. All the criminal actions submitted have been dismissed to date. Any amounts awarded to date have not been material to the Group on a consolidated basis. A substantial number of claims remain to be adjudicated and there can be no assurance that cases decided to date will be representative of future decisions and that additional claims will not be filed in Spain or other countries. In France approximately 60 claimants have filed a motion (référé) in order to appoint one or more expert(s) to conduct certain studies, in particular, concerning the alleged injury and causal link with the ingestion of the medication concerned.
• Plavix® Product Litigation
Affiliatesaffiliates of the Group and Bristol-Myers Squibb are named in a number of individual actions seeking recovery under state law for personal injuries allegedly sustained in connection with the use of Plavix®Plavix®. The actions are primarily venued in several jurisdictions, including the U.S. District Court for the Districtfederal and/or state courts of New Jersey, which had administratively stayedNew York, California, Pennsylvania, and Illinois. The defendants have exercised their right to terminate the proceedings pending a U.S. Supreme Court decision in the Levine case (which presented issues of federal preemption relevant to state law claims). Following the March 2009 decision rendered by the U.S. Supreme Court in this case, 23 of these cases were reactivated, while a tolling agreement (agreement which tolls or suspends the running of the statute of limitations) remains in effect for, 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 plaintiffs.
financial impact on the Company.
b) Patents
• Plavix®Ramipril Canada Patent Litigation
United States.On March 21, 2002, sanofi-aventis, Sanofi-Synthélabo Inc. and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership (or “BMS Sanofi Holding”, our partnership with Bristol-Myers Squibb) filed suit in the U.S. District Court for the Southern District of New York against Apotex Inc. and Apotex Corp. (hereinafter “Apotex”) for the infringement of U.S. patent rights relating to Plavix® as a result of an ANDA filed by Apotex including a Paragraph IV challenge to U.S. Patent No. 4,847,265 (the “‘265 patent”), expiring in 2011, which discloses and claimsinter alia the clopidogrel bisulfate compound, the active ingredient in Plavix®. Apotex asserted antitrust counterclaims.
On January 24, 2006, sanofi-aventis learned that the FDA had granted final approval to the Apotex ANDA.
On March 21, 2006, sanofi-aventis and BMS announced that they had reached an agreement subject to certain conditions with Apotex to settle the patent infringement lawsuit pending among the parties. That agreement was withdrawn and subsequently a new agreement was reached in May 2006.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Ultimately the agreement failed to receive the required antitrust clearance. On August 8, 2006, Apotex announced the launch “at risk” of its generic product in the United States. On August 31, 2006, the District Court granted sanofi-aventis’ motion for a preliminary injunction ordering Apotex to halt its sales of a generic version of clopidogrel bisulfate product that competes with Plavix® until the pending patent infringement lawsuit was resolved.
On June 19, 2007, following a trial, the U.S. District Court issued a decision upholding the validity and enforceability of the principal Plavix® patent, and permanently enjoined Apotex from further sale of generic clopidogrel bisulfate. On December 12, 2008, the U.S. Court of Appeals for the Federal Circuit upheld this decision. In November 2009, the U.S. Supreme Court declined to hear the petition by Apotex in the Plavix patent litigation.
Sanofi-aventis and Bristol-Myers Squibb are seeking damages from Apotex, in reparation of harm caused by that company’s marketing and sale of an infringing generic version of Plavix® in 2006. The proceeding is ongoing in this matter before the Federal District Court.
In August 2009, the USPTO granted Apotex’s request for a reexamination of the Plavix enantiomer patent (‘265). In December 2009,involved in a non-final office action,number of legal proceedings involving companies which is an intermediary stagemarket 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 proceeding, the USPTO examiner rejected several claims covering Plavix that were previously upheld by the Federal District Court and Federal Circuit Court of Appeals after extensive litigation. Sanofi-aventis intends to respond to the office action in February 2010. In January 2010, Apotex filed a motion seeking a stay of the damages action pending the outcome of the reexamination of the Plavix patent. That motion, which sanofi-aventis and BMS oppose, remains pending.
The same plaintiffs filed suit against other ANDA filers, namely Dr. Reddy’s Laboratories, Teva and Cobalt, in the U.S. District Court for the Southern District of New York for infringementmarketing of these same patent rights.
Dr Reddy’s, Teva and Cobalt agreed to be bound by the injunction against Apotex, ending these litigations.
Certain more significant Plavix®-related patent suits outside of the United States are described below.
Korea. A number of companies have received marketing authorizations in Korea for generic forms of clopidogrel bisulfate and other salts of clopidogrel. Sanofi-aventis had asserted the Korean patent for Plavix® (Korean Patent No. 103094) inproducts, Sanofi filed patent infringement actions against all those companies. In a numberpatent infringement action, the Federal Court of companies. OnCanada ruled on June 28, 2006,29, 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 nullity action filed by several companiesgeneric ramipril during the time taken to resolve the proceedings against Koreanthe 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 No. 103094, the Korean Intellectual Property Tribunal issued a decision holding that this patent’s claims were not patentable under Korean law. This Intellectual Property Tribunal decision was upheld on appealLitigation in 2008 and before the Supreme Court in October 2009. The case is now ended.Australia
Australia. OnIn August, 17, 2007, GenRX a(a subsidiary of ApotexApotex) obtained registration of a generic clopidogrel bisulfate product on the Australian Register of Therapeutic Goods and sent notice to sanofi-aventis that it had in parallel applied toGoods. At the same time, GenRX filed a patent invalidation action with the Federal Court of Australia, for an order revoking theseeking revocation of Sanofi's Australian enantiomer patent claiming clopidogrel salts. Onsalts (a "nullity action"). In September 21, 2007, sanofi-aventisSanofi 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 introducedfiled a nullity action against theSanofi's Australian enantiomer patent. The Spirit Proceedingproceeding was consolidated with the Apotex proceeding.
OnIn August, 12, 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 infringed. Claims covering the hydrochloride, hydrobromide and taurocholate salts also were found valid. However claim 1 of the patent directed to clopidogrel and its pharmaceutical salts was found to be invalid. All parties appealed. In September 2009,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 patent covering clopidogrel$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 invalid. Sanofi-aventis filed an appealentitled to money damages from Sanofi related to the Apotex preliminary injunction. The Department has not yet taken any formal legal action associated with the Supreme Court in November 2009.this claim.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
• Allegra® Patent Litigation
United States.Sanofi-aventis has been engaged in patent infringement actions concerning Allegra® since the first ANDA referring to this product was submitted to the FDA in 2001. In 2005, Barr Laboratories Inc. and Teva launched a generic version of Allegra® “at risk”, despite the patent infringement litigation pending against them and other ANDA filers. In November 2008, sanofi-aventis U.S. entered into agreements to settle the U.S. patent infringement suits related to Barr and Teva’s generic version of Allegra® (fexofenadine hydrochloride), as well as the U.S. patent infringement suit related to Barr’s proposed generic version of Allegra-D® 12 Hour (fexofenadine hydrochloride; pseudoephedrine hydrochloride). The respective settlements each took effect on January 2, 2009.
Under the settlement agreements, the U.S. patent suits, including any damage claims, against Barr and Teva relating to sanofi-aventis’ U.S. Allegra® patent and against Barr relating to its U.S. Allegra-D® 12 Hour patent, were dismissed without prejudice. The Barr/Teva generic version of Allegra® product remains on the market under a non-exclusive license and Barr has been granted a non-exclusive license starting in November 2009 for the commercialization of Allegra-D® 12 Hour in the United States, in each case with royalties paid to sanofi-aventis.
Sanofi-aventis U.S. continues to be involved in ongoing U.S. patent litigation against other parties in relation to the Allegra® single entity formulation (Mylan, Dr. Reddy’s, Sandoz and Sun), Allegra-D® 12 Hour (Impax, Mylan, Dr. Reddy’s, Sandoz and Sun) as well as Allegra-D® 24 Hour (Dr. Reddy’s). These other suits were not settled by the agreements described above.
• Actonel® Patent Litigation
Actonel® was originally marketed by the Alliance for Better Bone Health, an alliance between Procter & Gamble Company and P&G Pharmaceuticals (together “P&G”) and Aventis Pharmaceuticals Inc. (“API”). On October 30, 2009, P&G sold its pharmaceutical business to Warner Chilcott, succeeding to P&G’s rights and obligations in the alliance. P&G had filed a patent infringement suit in 2004 against Teva Pharmaceuticals USA in the U.S. District Court for the District of Delaware in response to Teva’s application to market a generic version of Actonel® (risedronate sodium) tablets in the United States. Sanofi-aventis is not a party to this action. On February 28, 2008, the U.S. District Court for the District of Delaware held P&G’s U.S. Patent No. 5,538,122 (the “ ‘122 patent”) claiming the active ingredient of Actonel® to be valid and enforceable.
P&G filed additional patent infringement actions against Teva in 2008 in response to Teva’s applications to market a generic version of Actonel® 75mg tablets and Actonel® plus Calcium. In May 2008, the District Court judge entered an order of final judgment in favor of P&G, in both cases, and Teva appealed all three final judgments. The three appeals were consolidated by the Federal Circuit and a hearing was held December 2, 2008. In May 2009, the U.S. Court of Appeals ruled in favor of P&G and confirmed the validity of the ‘122 patent.
In September 2008, and in January and March 2009, P&G and Roche brought suit in the U.S. District Court of Delaware in response to respectively Teva’s, Sun Pharma Global’s, and Apotex’s applications to market a generic version of the 150mg Actonel® tablets.
• Lovenox® Patent Litigation(enoxaparin sodium)
United States. In June 2003, Aventis Pharmaceuticals Inc. (“API”) received notice that both Amphastar Pharmaceuticals and Teva Pharmaceuticals were seeking approval from the FDA for purportedly generic versions of Lovenox® (pre-filled syringes) and were challenging U.S. Patent No. 5,389,618 (the “‘618 patent”) listed in the Orange Book for Lovenox®. API brought a patent infringement suit against both Amphastar and Teva in U.S. District Court for the Central District of California on the ‘618 patent.
On February 8, 2007, the U.S. District Court for the Central District of California issued a decision in sanofi-aventis’ Lovenox® patent infringement suit against Amphastar and Teva holding the ‘618 patent
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
unenforceable. On May 14, 2008, the Federal Circuit Court of Appeals denied sanofi-aventis’ appeal of the District Court’s decision and subsequently refused sanofi-aventis’ petition to rehear the appeal en banc. On April 27, 2009, the U.S. Supreme Court denied sanofi-aventis’ petition for a writ of certiorari. In the first semester 2009, the U.S. District Court for the Central District of California dismissed Amphastar’s antitrust counterclaims in the Lovenox® patent litigation.
Further to the Federal Circuit Amphastar decision of May 14, 2008, the U.S. District Court for the Central District of California entered judgment against sanofi-aventis in two patent infringement suits brought against Sandoz and Hospira as a result of these companies’ respective ANDAs relating to pre-filled syringe and multidose presentations of Lovenox®.
Italy. The company Opocrin has filed suit in Italy before the Tribunale di Milano (civil section) seeking a declaratory judgment of invalidity and of non-infringement with respect to the Italian patent covering Clexane® (enoxaparin sodium) which is the Italian counterpart to the U.S. Patent No. 5,389,618. The suit remains pending. Biofer and Chemi had also filed a similar suit in 2001. A judgment against these companies upholding the validity of the patent, within certain limitations, is under appeal.
Germany. The companies Hexal, Ratiopharm, Chemi and Opocrin filed opposition proceedings with the German Federal Patent Court, requesting the revocation of the German patent DE 41 21 115 which claims the active ingredient of Clexane® (enoxaparin sodium) and is the German counterpart to the U.S. Patent No. 5,389,618. On April 2, 2009, the German Federal Patent Court revoked the German Patent (DE 41 21 115) on the active ingredient covering Clexane®. Sanofi-aventis is not aware of any enoxaparin biosimilars having been submitted for the German market.
• Ramipril Canada Patent Litigation
Sanofi-aventis is involved in a number of legal proceedings involving companies which market generic Altace® (ramipril) in Canada. Notwithstanding proceedings initiated by sanofi-aventis, the following eight manufacturers: Apotex (in 2006), Novopharm, Sandoz and Cobalt (in 2007), Riva, Genpharm, Ranbaxy, and Pro Doc (in 2008), have now obtained marketing authorizations from the Canadian Minister of Health for generic versions of ramipril in Canada. Following the marketing of these products, sanofi-aventis filed patent infringement actions against all eight companies. In the patent infringement actions against Apotex and Novopharm, the Federal Court of Canada ruled on June 29, 2009 that the asserted patent was invalid. Each of Novopharm and Riva have initiated damages claims against sanofi-aventis, 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. Sanofi-aventis has filed appeals of the Federal Court of Canada decisions on the patent invalidity before the Federal Court of Appeal. Neither appeal suspends the advancement of the existing damages claims.
• Taxotere® Patent Litigation
United States.Sanofi-aventis received notifications from Hospira, Apotex and Sun in 2007 and 2008 who have filed 505 (b) (2) applications, and from Sandoz in 2009 who filed an ANDA with the U.S. Food and Drug Administration (“FDA”) seeking to market generic versions of Taxotere®. In response to these notifications, sanofi-aventis has filed patent infringement lawsuits against Hospira and Apotex (2007), Sun (2008), and Sandoz (2009). The lawsuits are pending in the U.S. District Court for the District of Delaware. None of the applications contested U.S. Patent No. 4,814,470 claiming the active ingredient, which expires in May 2010. The cases against Hospira and Apotex were consolidated for a trial held between October 26, 2009 and November 2, 2009 but the court has not issued a decision yet. Presently, no trial dates have been scheduled for the Sun and Sandoz actions.
Canada. In October 2007, sanofi-aventis learned that Hospira Healthcare Corporation had filed an application with Canadian authorities for a marketing authorization for a proposed docetaxel product which is the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
active ingredient of Taxotere®, alleging that Aventis Pharma SA’s Canadian Patent Nos. 2,102,777 and 2,102,778 for docetaxel were invalid and not infringed. On November 29, 2007, sanofi-aventis’ Canadian subsidiary and Aventis Pharma SA commenced an application for judicial review in the Federal Court of Canada. In Canada, the compound patent relating to this product has expired.
Europe. In several European countries, in particular Germany and France, the generic manufacturers have requested the revocation of some formulation and combination patents either before the patent office or courts. The proceedings are ongoing. In Hungary, a preliminary injunction against Pharmacenter, based on a formulation patent, has been granted to Aventis Pharma SA. Pharmacenter appealed the decision. In Germany, a decision on one of the formulation patents is expected in June 2010.
• Eloxatin® (oxaliplatin) Patent Litigation,
United States. Starting in February 2007, over a dozen ANDA certifications relating to Eloxatine® (oxaliplatin) solution and/or lyophilized products were filed contesting part or all of the Orange Book patents under Paragraph IV. Each of the generic manufacturers has been sued for infringement of one or more of the Orange-Book listed patents before the U.S. District Court for the District of New Jersey. U.S. regulatory data exclusivity expired in February 2008.
In June 2009, the U.S. District Court for the District of New Jersey granted a summary judgment motion in favor of certain generic manufacturers. The District Court held that the generic oxaliplatin products that would be introduced by these generic challengers would not infringe the ‘874 patent. While sanofi-aventis obtained appellate reversal of the District Court’s judgment, a number of generic oxaliplatin products were launched “at risk” in the United States over the second half of 2009. Presently, sanofi-aventis has been unsuccessful in obtaining injunctive relief. On December 2, 2009, the court asked all the parties to consider settlement.
• Ambien® CR Patent Litigation
Starting in 2007, sanofi-aventis filed suits for infringement of U.S. Patent No. 6,514,531 (the “ ‘531 patent”) in the U.S. District Court for the District of New Jersey based on ANDAs for a generic version of Ambien® CR filed by Watson, Barr, Mutual and Sandoz. Watson subsequently converted to a Paragraph III certification, and Barr and Mutual have withdrawn their ANDAs, leaving suit in New Jersey ongoing only against Sandoz.
In 2007, sanofi-aventis also filed suit for infringement of the ‘531 patent in the U.S. District Court for the Middle District of North Carolina based on an ANDA for a generic version of Ambien® CR filed by Synthon. That case was transferred to the Eastern District of North Carolina, and subsequently was stayed pending a USPTO reexamination of the ‘531 patent. On December 22, 2009, Synthon provided sanofi-aventis with 120 days notice of its intention to launch its generic version of Ambien® CR.
Sanofi-aventis did not bring suit against Anchen, which was the first to notify sanofi-aventis of its Paragraph IV ANDA on the 12.5mg strength, or against Abrika (now Actavis), which was the first to notify sanofi-aventis on its Paragraph IV ANDA on the 6.25mg strength. Sanofi-aventis also did not bring suit against three other subsequent Paragraph IV filers: Lupin, Andrx and PTS Consulting. Marketing exclusivities in the United States for Ambien® CR expired in March 2009.
• Nasacort® AQ Patent Litigation
In March 2006, sanofi-aventis was notified that Barr Laboratories had submitted an ANDA to the FDA containing a Paragraph IV patent certification relating to triamcinolone acetonide 55 microgram nasal spray (Nasacort® AQ). Further to this notification, sanofi-aventis filed a patent infringement lawsuit in the U.S. District Court of Delaware against Barr Laboratories, Inc. regarding two Nasacort® AQ patents (U.S. Patents Nos. 5,976,573 and 6,143,329). In November 2008, sanofi-aventis U.S. and Barr entered into an agreement to settle the U.S. patent infringement suits related to Barr’s proposed generic version of Nasacort® (triamcinolone acetonide) AQ. This settlement took effect on January 2, 2009.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Under the settlement agreement, the U.S. patent suit has been dismissed without prejudice and Barr has been granted a license authorizing production and marketing of a generic of this product for the United States market no earlier than June 2011 and at the latest December 2013; this date may be accelerated under certain conditions.
• SoloSTAR® Patent Litigation
On July 10, 2007, Novo Nordisk filed complaints in the Courts of Düsseldorf and Mannheim in Germany, and in the U.S. District Court for the District of New Jersey, alleging the Group’s new Lantus® SoloSTAR® disposable insulin pen infringes various Novo Nordisk patent and intellectual property rights. For the New Jersey action Novo Nordisk also served a motion for a preliminary injunction for the court to enjoin the selling of the SoloSTAR® device in the United States. On February 19, 2008, the U.S. District Court for the District of New Jersey denied Novo Nordisk’s request for a preliminary injunction against sanofi-aventis. On July 30, 2008, this ruling was confirmed on appeal. In September 2008, Novo Nordisk filed a motion for summary judgment for alleged infringement of its patent rights.
On May 20, 2008, the Court of Mannheim dismissed Novo Nordisk’s suit based on infringement of its German Utility Model by the Lantus® SoloSTAR® disposable insulin pen. On August 8, 2008, the Court of Düsseldorf dismissed Novo Nordisk’s suit based on infringement of its German patent by the Lantus®SoloSTAR® insulin pen. Novo Nordisk has appealed in each case. On February 11, 2009, the German Patent and Trademark Office cancelled, at the request of sanofi-aventis, Novo Nordisk’s German Utility Model DE 200 23 819.
On December 22, 2009, Sanofi-Aventis and Novo Nordisk concluded a settlement agreement ending all intellectual property disputes regarding SoloSTAR®, NovoPen® 4 and NovoFine® Autocover® in the USA, Germany and Denmark.
• Xatral® Patent Litigation
Starting in August 2007, sanofi-aventis has received several ANDA certifications relating to Xatral® in the United States under Paragraph IV. Each of the generic manufacturers has been sued for infringement of one or both of the Orange Book listed patents before the U.S. District Court for the District of Delaware. Trial against Mylan (who is the only remaining defendant) has been scheduled for March 2010.
• Xyzal® Tablets ANDA
Sanofi-aventis has a co-commercialization agreement with UCB Inc. with respect to Xyzal® in the United States. Sanofi-aventis is aware that UCB has received four Paragraph IV certifications since February 2008 from Synthon Pharma Inc., Sun Pharmaceuticals, Sandoz Inc., and Barr Laboratories. All the generic manufacturers have been sued by UCB for patent infringement in cases pending before the U.S. District Court of North Carolina.
Glossary of Patent Terminology
A number of technical terms used above in Note D.22.(b) are defined below for the convenience of the reader.
ANDA or Abbreviated New Drug Application (United States): An application by a drug manufacturer to receive authority from the U.S. FDA to market a generic version of another company’s approved product, by demonstrating that the purportedly generic version has the same properties (bioequivalence) as the original approved product. As a result of data exclusivity, the ANDA may be filed only several years after the initial market authorization of the original product.
Paragraph III and Paragraph IV Certifications: ANDAs relating to approved products for which a patent has been listed in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the “Orange Book”, must specify whether final FDA approval of the ANDA is sought onlyafter
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
expiration of the listed patent(s) (this is known as a Paragraph III certification under the Hatch-Waxman Act) or whether final FDA approval is soughtprior to expiration of one or more listed patents (a Paragraph IV certification). ANDAs including a Paragraph IV certification may be subject to the 30-Month Stay defined below.
Section 505(b)(2) application: A section 505(b)(2) application may be used to seek FDA approval for, among other things, combination products, different salts of listed drugs, products that do not demonstrate bioequivalence to a listed drug and over-the-counter versions of prescription drugs.
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.
30-Month Stay (United States): If patent claims cover a product listed in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the “Orange Book”, and are owned by or licensed to the manufacturer of the original version, the FDA is barred from granting a final approval to an ANDA during the 30 months following the patent challenge, unless, before the end of the 30 months, a court decision or settlement has determined either that the ANDA does not infringe the listed patent or that the listed patent is invalid and/or unenforceable. FDA approval of an ANDA after this 30-month period does not resolve outstanding patent disputes, which may continue to be litigated in the courts.
c) Government Investigations, Competition Law and Regulatory Claims
• Government Investigations — Pricing and Marketing Practices
Private Labels. In May 2009, sanofi-aventis U.S. entered into a civil settlement with the U.S. Department of Justice and the U.S. Attorney’s Office for the District of Massachusetts to resolve a Medicaid “best price” investigation involving one of its predecessor companies, Aventis Pharmaceuticals Inc. (“API”). The settlement ended an investigation into whether sales by API of certain products to a managed care organization for resale under that organization’s private label should have been included in the “best price” calculations used to compute Medicaid rebates for API products. The settlement called for payment of $95.5 million (plus interest) which includes payment of approximately $55.5 million to resolve all federal claims and the establishment of an “opt-in” fund of approximately $40 million for states desiring to resolve Medicaid rebate claims relating to the same conduct. The total amount of the settlement was fully covered by existing reserves.
Lovenox® Marketing. The U.S. Attorney’s Office in Chicago, Illinois conducted a civil and criminal investigation with regard to Lovenox® sales and marketing practices for a period starting January 1, 1999. Without prejudice to its right to pursue any further investigation in the future, the U.S. government has declined to intervene in a Federal False Claims Act case related to the facts under investigation brought by two former employees, and the matter is proceeding against the Company as civil litigation in Illinois Federal Court.
Ambien® and Ambien® CR Marketing.On August 11, 2008, sanofi-aventis U.S. received a subpoena issued by the U.S. Department of Health & Human Services Office of Inspector General and the U.S. Attorney’s Office in San Francisco, California. The subpoena requested information regarding Ambien® and Ambien® CR in connection with an investigation of possible false or otherwise improper claims for payment under Medicare and Medicaid. Sanofi-aventis U.S. has provided documents in response to this subpoena.
• Civil Suits — Pricing and Marketing Practices
Average Wholesale Prices (AWP). Class Actions. Aventis Pharmaceuticals Inc. (“API”) is a defendant in several U.S. lawsuits seeking damages on behalf of multiple putative classes of individuals and entities that allegedly overpaid for certain pharmaceuticals as a result of the AWP pricing which were used to set Medicare and Medicaid reimbursement levels. Aventis Behring and Sanofi-Synthelabo Inc. were also defendants in some of these cases. These suits allege violations of various statutes, including state unfair trade, unfair competition, consumer protection and false claim statutes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
A group of eleven defendants, including sanofi-aventis defendants, reached a tentative global settlement of the claims of the insurers and consumers, for a total of $125 million. This settlement was granted preliminary approval by the U.S. District Court in Boston in early July 2008. Subject to the final approval hearing which is expected in 2010, all the class actions suits against API before the U.S District Court in Boston will be ended consistent with the settlement. Sanofi-aventis share of the global settlement is fully covered by existing reserves. One additional purported class action remains in New Jersey and is in discovery phase.
AWP Public Entity Suits. U.S. subsidiaries of the Group together with several dozen other pharmaceutical companies are defendants in lawsuits brought starting in 2002 notably by the states of Alabama, Alaska, Hawaii, Idaho, Iowa, Illinois, Kansas, Kentucky, Mississippi, Pennsylvania, Utah, and Wisconsin for AWP pricing issues described above. These suits alleged violations of state unfair trade, consumer protection and false claims statutes, breach of contract, and Medicaid fraud. The Iowa and Utah cases are pending before the Federal District Court in Boston. All of the other state suits are pending before other federal courts or in the state courts in which they were filed.
In May 2009, sanofi-aventis U.S. entered into a group settlement (with six other pharmaceutical companies) to resolve claims brought by the State of Alabama, against Aventis Pharmaceuticals Inc. and Sanofi-Synthelabo Inc., sanofi-aventis predecessor companies. The settlement covers all AWP-based claims against sanofi-aventis and all of its predecessors, subsidiaries and other corporate affiliates involving the State’s Medicaid program. The settlement involves confidential contributions by the companies, including sanofi-aventis, to a group settlement totaling $89 million. Sanofi-aventis’ share of the settlement was fully covered by existing reserves.
§ 340B Suit.On August 18, 2005, the County of Santa Clara, California filed a suit against Aventis Pharmaceuticals Inc. and fourteen other pharmaceutical companies in the Superior Court of the State of California, County of Alameda, alleging that the defendants had overcharged Public Health Service entities for their pharmaceutical products in breach of pharmaceutical pricing agreements between the defendants and the Secretary of Health and Human Services. In May 2009, the Court denied the plaintiffs’ motion for class certification without prejudice. Discovery is ongoing.
• Pharmaceutical IndustryCipro® Antitrust Litigation
Approximately 135 cases remain pending of the numerous complaints that were filed in the mid-1990’s by retail pharmacies in both federal and state court. These complaints shared the same basic allegations: that the defendant pharmaceutical manufacturers and wholesalers, including sanofi-aventis predecessor companies, violated the Sherman Act, the Robinson Patman Act, and various state antitrust and unfair competition laws by conspiring to deny all pharmacies, including chains and buying groups, discounts off the list prices of brand-name drugs. Shortly before a November 2004 trial in the U.S. District Court for the Eastern District of New York, sanofi-aventis and the remaining manufacturer defendants settled the Sherman Act claims of the majority of the remaining plaintiffs. These settlements did not dispose of the remaining plaintiffs’ Robinson Patman Act claims.
• European Commission Fines
Following the appeal filed by Hoechst GmbH regarding the MCAA market fine of €74 million assessed against it by the European Commission, the fine was reduced in September 2009 to €66.6 million (not including interests). As neither Hoechst nor the Commission has appealed, the fine is subject to payment early 2010.
• European Commission Sector Inquiry
In January 2008, the European Commission’s Directorate General for Competition opened a sector inquiry into the functioning of the market to investigate what it considered to be a low level of competition in the pharmaceuticals industry in the European Union. The inquiry commenced with unannounced information-gathering inspections at a number of companies including sanofi-aventis. According to the Commission, the sector inquiry ultimately involved information gathering from 43 originator companies and 27 generic companies. The final report was released on July 8, 2009. The Commission announced that the pharmaceutical industry remained under scrutiny and that it intends to intensify its investigations regarding anti-competitive conduct.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
• European Commission generics investigation
On October 6, 2009, the European Commission conducted surprise inspections in the offices of several pharmaceutical companies, including sanofi-aventis, under suspicion of infringing antitrust rules of the European Union with respect to their activities concerning so-called “generic products”.
• Cipro® Antitrust Litigation
Since August 2000, Aventis Pharmaceuticals Inc. (“API”)(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®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-aventis’Sanofi's summary judgment motions, and issued a judgment in favor of API and the other defendants in this litigation. By orderOrder entered October 15, 2008, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’sCourt's ruling in the appeal by indirect purchaser plaintiffs; the direct purchaser plaintiffs’plaintiffs' appeal was heard by the U.S. Court of Appeals for the Second Circuit in April 2009. No opinion has yet been issued.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 in
In re. K-Dur Antitrust Litigation.
• DDAVP®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®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's alleged scheme to monopolize the market for DDAVP®DDAVP® tablets in violation of the Sherman Act and the antitrust and deceptive trade practices statutes of several states. On November 6, 2006,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 District Court dismissed these claims. Oral argument on plaintiffs’ appeal of the decision to dismiss was heard by theindirect purchasers for U.S. Court of Appeals for the Second circuit in 2008. By order dated October 16, 2009, the appellate court reversed and remanded the case back to the District Court. Petitions for rehearing and rehearing en banc were denied.
$800 000.
• Plavix® Antitrust Claim
On March 23, 2006, the U.S. retailer The Kroger Co. filed an antitrust complaint in the District Court for the Southern District of Ohio against sanofi-aventis, Bristol-Myers Squibb Co. and Apotex Corp. alleging antitrust violations by the defendants in relation to their tentative agreement to settle the U.S. Plavix® patent litigation (see “Plavix® Patent Litigation — United States,” above, for a description of the transaction). 17 other complaints have since been filed by direct and indirect purchasers of Plavix® on the same or similar grounds. Plaintiffs seek relief including injunctive relief and monetary damages. Defendants have moved to dismiss the consolidated direct and indirect purchasers’ complaints. Oral argument on this motion was heard in September 2008; no decision has yet been issued.
• Arava®Lovenox® Antitrust Litigation
Sanofi-aventis and certain U.S. subsidiaries of the Group were defendants in a lawsuit brought in the U.S District Court for the Southern District of New York in August 2007 by Louisiana Wholesale Drug Co. on behalf of itself and a proposed class of all direct purchasers of Arava®. Under the federal antitrust laws plaintiffs alleged that the Group had misused the Citizen Petition process in an attempt to delay approval of generic leflunomide by the U.S Food and Drug Administration, thereby injuring the class. On November 20, 2008, a jury rejected plaintiffs’ allegations that sanofi-aventis had inappropriately filed the Citizen Petition. The plaintiffs requested the judge to reconsider the jury’s verdict. The plaintiff’s motion requesting the Court to reconsider the jury’s verdict and grant a new trial was denied on August 28, 2009. Following this decision the parties agreed that plaintiff would forego its appeal in return for sanofi-aventis withdrawing its motion for costs. The matter is now concluded.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
• Lovenox® Antitrust Litigation
In August 2008, Eisai Inc. (“Eisai”)(Eisai) brought suit against sanofi-aventisSanofi U.S. LLC and sanofi-aventisSanofi U.S. Inc. in the U.S. District Court for the District of New Jersey alleging that certain contracting practices for Lovenox®Lovenox® violate federal and state antitrust laws. In October 2008,The proceedings are in the defendantsdiscovery 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 motionseparate 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 dismiss Eisai’s complaint, which was deniedEisai in June 2009. In November 2009,breach of their employment agreements with Sanofi, and that such confidential information has been utilized by them and by Eisai to the defendants filed a second motion to dismiss, which remains pending.
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-aventis’Sanofi's German subsidiary Hoechst AG (now Hoechst GmbH) approved a resolution transferring the shares held by minority shareholders to sanofi-aventisSanofi 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-aventisSanofi 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 localDistrict Court of Frankfurt court,(Landgericht Frankfurt am MainFrankfurt-am-Main,) contesting the amount of the cash compensation paid in the squeeze out. TheIn its decision dated January 27, 2012, the District Court of Frankfurt ruled in favor of Sanofi, confirming the amount sought has not been specified. The proceedings are ongoing.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.
• Apotex Settlement Claim
On November 13, 2008, Apotex filed a complaint before a state court in New Jersey against sanofi-aventis and BMS claiming the payment of a $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 (see “Patents — Plavix® Patent Litigation — United States”). The proceedings are ongoing.
• Zimulti® /Acomplia®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-aventisSanofi shares. The complaint charged sanofi-aventisSanofi and certain of its current and former officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleged that defendants’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 rimonabant’s propensity to causecertain alleged secondary effects of rimonabant, in particular, suicidality in patients suffering from depression. In September 2009, the motion was dismissed with prejudice. The plaintiffs have filed a motion for reconsideration.
• U.S. Gender Discrimination
Certain female U.S. pharmaceutical sales representatives of sanofi-aventis brought a putative class action lawsuit against sanofi-aventis U.S. LLC in On July 27, 2010, the U.S. District Court for the Southern District of New York alleging gender discrimination. The parties have entered intogranted 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 settlement in December 2009 whichnumber 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 fully covered byon-going. A reliable measure of potential liabilities arising from this purported class action is not possible at this stage of the existing reserves.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
litigation.
• Merial Heartgard® Advertisement Claim
On August 31, 2009, a purportedputative 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®Heartgard® and Heartgard®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 case is at an early stageproceedings 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-aventisSanofi 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-aventisSanofi as seller to CSL Limited as purchaser. Sanofi-aventisSanofi 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:example, indemnification obligations relating to the due organization, capital stock and ownership of Aventis Behring Companies runs through March 31, 2014, environmental indemnification through March 31, 2009, 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, sanofi-aventisthe 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-aventisSanofi is generally obligated to indemnify CSL Limited, only to the extent indemnifiable, losses exceeding $10U.S.$10 million and up to a maximum aggregate amount of $300U.S.$300 million. For environmental claims, the indemnification due by sanofi-aventisSanofi equals 90% of the indemnifiable losses. Product liability claims are generally treated separately, and the aggregate indemnification is capped at $500U.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 predecessorlegacy companies of sanofi-aventis)Sanofi) of their aggregate 76% participation in Aventis CropScience Holding (“ACS”)(ACS) to Bayer and Bayer CropScience AG (“BCS”)(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 notably third-party site claims (i) such as the natural resources damages (“NRD”) claim filed by the state of New Jersey against BCS in 2007 in relation to the Factory Lane site and (ii) a remediation and NRD project underway in Portland, Oregon)liabilities); taxes; certain legal proceedings; claims related to StarLink®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 Bayer CropScienceBCS 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 Bayer CropScience AG,BCS, including the termination of arbitration proceedings initiated in August 2003 for an alleged breach of a financial statement-related
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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. LitigationLitigation:: Bayer CropScience BCS has sent sanofi-aventisSanofi notice of potential claims for indemnification under various provisions of the stock purchase agreement. These potential claims relate to several class actions andhundred 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”"CropScience Companies") which were part of the Aventis CropScienceACS group prior to Bayer’sBayer'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®"Liberty Link® Rice 601”601" (also known as “LLRICE601”"LLRICE601") or “Liberty Link®"Liberty Link® Rice 604”604" (also known as “LLRICE604”"LLRICE604") in samples of commercial long-grain rice. LLRICE601 and LLRICE604, each a variety of long grain rice genetically altered to resist Liberty®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 first bellwether trial concludedU.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 December 4, 2009, thepunitive 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 rendered a verdict awardingawarded Riceland Foods U.S.$11.8 million in compensatory damages and U.S.$125 million in punitive damages. In June 2011 (prior to the amountabove-mentioned Arkansas Supreme Court decision) punitive damages were reduced to U.S.$1 million in application of $1,955,387the statutory cap. Both BCS and Riceland appealed the decision, and in favour of one plaintiff, and $53,336 in favour of another plaintiff.January 2013, reached a settlement resolving Riceland's claims. Non-grower trials are scheduled for 2013.
Sanofi-aventisSanofi denies direct or indirect liability for these cases, and has so notified Bayer CropScience.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”)(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 Bayer CropScience.
BCS.
• Aventis Animal Nutrition Retained Liabilities
Aventis Animal Nutrition SAS.A. and Aventis (both predecessorlegacy companies of sanofi-aventis)Sanofi) signed an agreement for the sale to Drakkar Holdings SAS.A. of the Aventis Animal Nutrition business effective in April 2002. The sale agreement contained customary representations and warranties. Sanofi-aventis’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) have been transferred to Celanese in full, Hoechst splits with Celanese any such cost incurred under these obligations applying a 2:1 ratio. The liability for indemnification of Hoechst under the demerger agreement is with Celanese and an affiliate.
To the extent Hoechst is liable to purchasers of certain of its divested businesses (as listed in the demerger agreement), Celanese mustand an affiliate are liable to indemnify Hoechst, as far as environmental damages are concerned, for aggregate
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
liabilities up to €250 million, liabilities exceeding such amount will be borne by Hoechst alone up to €750 million, and amounts exceeding €750 million will be borne 2/3 by Hoechst and 1/3 by Celanese without any further caps.
Compensation paid to third parties by Celanese under the aforementioned clause, through December 31, 2009,2012, 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-aventisSanofi 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. Nothwithstanding
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 sanofi-aventis’ favor of Sanofi, with the court holding that the settlement precluded the indemnification claims. The decision in Brazil is currentlywas 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.
On April 13, 2005, Rhodia initiated anad hoc arbitration procedure seeking indemnification from sanofi-aventisSanofi 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’sRhodia's accounts.
The arbitral tribunal determined that it has no jurisdiction to rule on pension claims and that Rhodia’sRhodia'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-aventis.
Sanofi.
On July 10, 2007, sanofi-aventisSanofi was served with a civil suit brought by Rhodia before the Commercial Court of Paris ((Tribunal de Commerce de Paris)Paris) seeking indemnification on the same grounds as described above. The relief sought inallegations before the Commercial Court of Paris is identicalare comparable to the relief claimedthose asserted in Rhodia’sRhodia's arbitration demand. The procedure is still pending.On February 10, 2010, Rhodia submitted its pleadings brief (conclusions récapitulatives) in which it has 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 has claimed indemnification in the amount of €1.3 billion for retirement commitments and approximately €311 million for environmental liabilities. On December 14, 2011, the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Commercial Court of Paris ruled in favor of Sanofi, rejecting all of Rhodia's allegations and claims. Rhodia has appealed this decision.
• 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-aventisSanofi 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’sRhodia'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 the Company (a derivative action), as well as personal claims of €4.3 million and €125.4 million for their own alleged individual losses. Sanofi-aventisSanofi contests both the substance and the admissibility of these claims.
Sanofi-aventis 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 theAutorité des marchéMarchés financiersFinanciers regarding Rhodia’sRhodia's financial communications. In 2006, the Commercial Court of Paris accepted sanofi-aventisSanofi and the other defendants’defendants' motion to stay the civil litigation pending the conclusion of the criminal proceedings. The plaintiffs’plaintiffs' appeals against this decision, first before the Court of Appeals, and then before the French Supreme Court (Cour de cassationCassation (the French Supreme Court)), were both rejected.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
• Clariant Retained Liabilities — Specialty Chemicals Business
Hoechst conveyed its specialty chemicals business to Clariant AG (Clariant) pursuant to a 1997 agreement. While Clariant has undertaken to indemnify Hoechst for all costs incurred for environmental matters relating to purchased sites, certain ongoing indemnification obligations of Hoechst for environmental matters in favor of Clariant can be summarized as follows:
• InfraServInfraserv 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 HöchstInfraserv GmbH & Co. Höchst KG. InfraServInfraserv 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 InfraServInfraserv Höchst approximately €57 million to fund reserves. In 1997, Hoechst also agreed it would reimburse current and future InfraServInfraserv 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.23. Provisions for discounts, rebates and sales returns
The adjustmentsAdjustments 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 and State programs(1) | Managed Care and GPO programs(2) | Charge- back incentives | Rebates and discounts | Sales returns | Other deductions | Total | ||||||||||||||
January 1, 2007 | 318 | 136 | 61 | 144 | 190 | 47 | 896 | ||||||||||||||
Current provision related to current period sales | 453 | 329 | 692 | 1,195 | 201 | 174 | 3,044 | ||||||||||||||
Net change in provision related to prior period sales | (6 | ) | 5 | (7 | ) | 12 | 5 | 3 | 12 | ||||||||||||
Payments made | (502 | ) | (319 | ) | (679 | ) | (906 | ) | (182 | ) | (153 | ) | (2,741 | ) | |||||||
Translation differences | (21 | ) | (15 | ) | (7 | ) | (8 | ) | (18 | ) | (2 | ) | (71 | ) | |||||||
December 31, 2007 | 242 | 136 | 60 | 437 | 196 | 69 | 1,140 | ||||||||||||||
Current provision related to current period sales | 466 | 366 | 751 | 1,516 | 173 | 135 | 3,407 | ||||||||||||||
Net change in provision related to prior period sales | 10 | (3 | ) | (8 | ) | 5 | 4 | (3 | ) | 5 | |||||||||||
Payments made | (442 | ) | (324 | ) | (725 | ) | (1,678 | ) | (193 | ) | (146 | ) | (3,508 | ) | |||||||
Translation differences | 10 | 10 | 4 | (19 | ) | 3 | (3 | ) | 5 | ||||||||||||
December 31, 2008 | 286 | 185 | 82 | 261 | 183 | 52 | 1,049 | ||||||||||||||
Current provision related to current period sales | 566 | 433 | 904 | 2,036 | 204 | 128 | 4,271 | ||||||||||||||
Net change in provision related to prior period sales | 19 | 7 | — | 12 | (7 | ) | — | 31 | |||||||||||||
Payments made | (477 | ) | (431 | ) | (903 | ) | (1,893 | ) | (175 | ) | (136 | ) | (4,015 | ) | |||||||
Translation differences | (8 | ) | (7 | ) | (3 | ) | 9 | (3 | ) | 2 | (10 | ) | |||||||||
December 31, 2009 | 386 | 187 | 80 | 425 | 202 | 46 | 1,326 | ||||||||||||||
(€ million) | Government and State programs (2) | Managed Care and GPO programs (3) | Charge- back incentives | Rebates and discounts | Sales returns | Other deductions | Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
January 1, 2010 | 386 | 187 | 80 | 415 | 190 | 46 | 1,304 | |||||||||||||||
Current provision related to current period sales | 937 | 410 | 1,246 | 3,058 | 357 | 127 | 6,135 | |||||||||||||||
Net change in provision related to prior period sales | (4 | ) | (11 | ) | 8 | 14 | 12 | (4 | ) | 15 | ||||||||||||
Payments made | (670 | ) | (400 | ) | (1,225 | ) | (2,804 | ) | (261 | ) | (126 | ) | (5,486 | ) | ||||||||
Currency translation differences | 17 | 15 | 6 | 36 | 19 | 5 | 98 | |||||||||||||||
December 31, 2010 | 666 | 201 | 115 | 719 | 317 | 48 | 2,066 | |||||||||||||||
Merial (1) | — | — | 1 | 69 | 1 | 8 | 79 | |||||||||||||||
Genzyme | 7 | — | 4 | 132 | 39 | 12 | 194 | |||||||||||||||
Current provision related to current period sales | 1,224 | 496 | 1,569 | 4,159 | 349 | 152 | 7,949 | |||||||||||||||
Net change in provision related to prior period sales | (5 | ) | (35 | ) | 13 | 22 | (5 | ) | (2 | ) | (12 | ) | ||||||||||
Payments made | (1,132 | ) | (466 | ) | (1,548 | ) | (4,135 | ) | (322 | ) | (125 | ) | (7,728 | ) | ||||||||
Currency translation differences | 20 | 7 | 6 | 9 | 11 | 3 | 56 | |||||||||||||||
December 31, 2011 | 780 | 203 | 160 | 975 | 390 | 96 | 2,604 | |||||||||||||||
Current provision related to current period sales | 1,713 | 522 | 2,368 | 4,574 | 432 | 261 | 9,870 | |||||||||||||||
Net change in provision related to prior period sales | (56 | ) | (34 | ) | (22 | ) | 9 | (23 | ) | 1 | (125 | ) | ||||||||||
Payments made | (1,422 | ) | (517 | ) | (2,345 | ) | (4,807 | ) | (347 | ) | (260 | ) | (9,698 | ) | ||||||||
Currency translation differences | (15 | ) | (3 | ) | (3 | ) | 3 | (10 | ) | (3 | ) | (31 | ) | |||||||||
Balance at December 31, 2012 | 1,000 | 171 | 158 | 754 | 442 | 95 | 2,620 | |||||||||||||||
|
|
|
D.24. Personnel costs
Total personnel costs break down as follows:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 (1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Salaries | 6,151 | 5,940 | 5,121 | |||||||
Social security charges (including defined-contribution pension plans) | 1,883 | 1,716 | 1,555 | |||||||
Stock options and other share-based payment expense | 155 | 143 | 133 | |||||||
Defined-benefit pension plans | 212 | 358 | 340 | |||||||
Other employee benefits | 267 | 262 | 238 | |||||||
Total | 8,668 | 8,419 | 7,387 | |||||||
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Salaries | (5,019 | ) | (4,774 | ) | (4,891 | ) | |||
Social security charges (including defined-contribution pension plans) | (1,510 | ) | (1,451 | ) | (1,462 | ) | |||
Share-based payment | (114 | ) | (125 | ) | (115 | ) | |||
Employee share ownership plan | — | — | (21 | ) | |||||
Defined-benefit pension plans | (404 | ) | (305 | ) | (346 | ) | |||
Other employee benefits | (233 | ) | (259 | ) | (197 | ) | |||
Total | (7,280 | ) | (6,914 | ) | (7,032 | ) | |||
The total number of employees at December 31, 20092012 was 104,867,111,974, compared with 98,213113,719 at December 31, 20082011 and 99,495101,575 at December 31, 20072010 (these employee numbers are unaudited).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Employee numbers by function (excluding Merial) as of December 31 are shown below (unaudited):
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||
Production | 36,849 | 31,903 | 31,292 | |||
Research and development | 19,132 | 18,976 | 19,310 | |||
Sales force | 34,292 | 33,507 | 35,115 | |||
Marketing and support functions | 14,594 | 13,827 | 13,778 | |||
Total | 104,867 | 98,213 | 99,495 | |||
Merial had a total of 5,601 employees (unaudited) as of December 31, 2009.
| 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 | |||||||
D.25. Other operating income
Other operating income amounted to €866totaled €562 million in 2009,2012, compared with €556€319 million in 20082011 and €522€369 million in 2007.2010.
This line includes income arising under alliance agreements in the Pharmaceuticals segment (€646258 million in 2009, compared with €4722012, versus €202 million in 20082011 and €323€315 million in 2007)2010), in particular the agreement on the worldwide development and marketing of Actonel®Actonel® (see Note C.2.C.3.) and the Group’sGroup's share of profits on Copaxone® from April 1, 2008,Copaxone®.
In 2012, it also included the dateimpact of the favorable outcome of litigation relating to a license.
Other items recorded on which commercialization of this product in the United States and Canada reverted to Teva Pharmaceutical Industries.
It also includes operatingline include net foreign exchange gains and losses representing a(representing net gainlosses of €40€41 million in 2009 versus a net loss of €942012, €5 million in 20082011 and a net loss of €33€141 million in 2007,2010) and proceeds from disposals related to ongoing operations which amounted to(€59 million in 2012, versus €56 million in 2009, €242011 and €54 million in 2008, and €60 million in 2007.
2010).
D.26. Other operating expenses
Other operating expenses amounted to €481€454 million in 2009, against €3532012, €315 million in 20082011 and €307€292 million in 2007.2010. This item includes shares of profits due to alliance partners (other than BMS and the Alliance Partner under the Actonel®Actonel® agreement) under product marketing agreements, primarily in Europe, Japan, the United States and Canada (€18666 million in 2009,2012, versus €178€121 million in 20082011 and €136€169 million in 2007)2010).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In 2012, Sanofi paid $109 million in an out-of-court settlement with the office of the Massachusetts District Attorney, the U.S. Department of Justice and various other U.S. states to resolve all claims arising from the investigation into the distribution of samples of Hyalgan®, a former Sanofi product.
In 2009, Also included on this itemline is an additional provision of €116 million (before taxes) relating to litigation in Canada in respect of ramipril, recognized in 2012.
Finally, this line includes an expense of €69 million (versus €113€40 million in 2008) arising from changes to estimates of future expenditure on environmental risks at sites formerly operated by sanofi-aventis or sold to third parties (see note D.22. (e) “Contingencies arising from certain Business Divestitures”). Reversals of these provisions are classified2012 (versus €43 million inOther operating income(see Note D.25.).
This item also includes, for 2009, an expense of €59 million 2011) relating to pensions and other benefits for Group retirees.
In 2007, this item included an expense of €61 million, recognized following the signature of agreements on welfare and healthcare obligations in France for retirees and their beneficiaries.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
D.27. Restructuring costs
Restructuring costs recognized in 2009 amountamounted to €1,080 million (€585€1,141 million in 2008 and €1372012, versus €1,314 million in 2007),2011 and €1,384 million in 2010, and break down as follows:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Employee-related expenses | 860 | 840 | 817 | |||||||
Expenses related to property, plant and equipment | 221 | 422 | 184 | |||||||
Compensation for early termination of contracts (other than contracts of employment) | 7 | 27 | 35 | |||||||
Decontamination costs | 2 | 22 | 105 | |||||||
Other restructuring costs | 51 | 3 | 243 | |||||||
Total | 1,141 | 1,314 | 1,384 | |||||||
These restructuring costs reflect measures announced by the Group as part of the major transformation project initiated in 2009 to adapt the Group's structures to meet future challenges.
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||
Employee-related expenses | 869 | 498 | 137 | |||
Expenses related to property, plant and equipment | 146 | — | — | |||
Compensation for early termination of contracts (other than contracts of employment) | 19 | — | — | |||
Decontamination costs | 30 | 50 | — | |||
Other restructuring costs | 16 | 37 | — | |||
�� | ||||||
Total | 1,080 | 585 | 137 | |||
In 2012, these costs include provisions of €646 million recognized in the year ended December 31, 2012 following the announcement of a realignment of the Group's resources in France. These measures cover changes in the scope of activities of the Group's Research and Development sites during the next three years, the reorganization of industrial facilities in the Vaccines segment, and the streamlining of the Group's support functions. The restructuring costs recognized during the year also reflect the ongoing transformation of industrial facilities in Europe, adjustments to sales forces worldwide, and the integration of Genzyme. In addition, an impairment loss of €107 million was recognized against property, plant and equipment in France in connection with the reorganization of Research and Development operations.
The restructuring costs recognized in 2011 primarily reflected the transformation and reorganization of Research and Development operations, measures taken to adapt the Group's industrial facilities in Europe, adjustments to the sales forces in the United States and Europe, the implementation of multi country organizations (MCOs) in Europe, and the integration of Genzyme entities worldwide.
In 2009,2010, restructuring costs related primarily to measures announced by sanofi-aventis in June 2009 aimed at transformingthe Group to continue transformation of its Research and Development operations, in France in orderupgrade its chemical manufacturing sites to stimulate innovationbiotech and at adapting central support functions in order to streamline the organizational structure. These costs mainly comprise employee-related expenses, in the form of early retirement benefitsvaccine production, and of termination benefits under voluntary redundancy plans. In France, these plans affected approximately 1,000 jobs in Research and Development and 450 jobs in central support functions.
Restructuring costs for the period also included amounts relating to transformation plans announced in other countries. The Research and Development transformation plan is a global project, which also affects the United States, the United Kingdom and Japan.
To a lesser extent, restructuring costs for the period reflect ongoing measures taken by sanofi-aventis to adapt its industrial facilities in Europe and adjustreorganize its sales forces.
In 2008, restructuring costs related primarily to adaptation of industrial facilities in France and to measures taken by sanofi-aventis to adjust its sales force to reflect changing pharmaceutical market conditions in various European countries — mainly France, Italy, Spain and Portugal — and in the United States.
In 2007, restructuring costs related to the cost of measures taken by sanofi-aventis in response to changes in the economic and regulatory environment in France and Germany.
D.28. Gains and losses on disposals, and litigation
Sanofi-aventis made no major divestments during the years ended December 31, 2009, 2008 or 2007.
In 2008, this item included €76 million of reversals of provisions in respect of litigationforces in the United States and Europe. These costs also included the impact of pension reforms on pricing and market practices (see Note D.22.(c) “Government Investigations, Competition Law and Regulatory Claims”).existing early retirement plans in France.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YearD.28. Other gains and losses, and litigation
Other gains and losses for the year ended December 31, 2011 included:
In 2010, this line showed an expense of €138 million, relating to an adjustment to vendor's guarantee provisions in connection with past divestitures.
The Group made no major divestitures in either 2012 or 2010.
D.29. Financial income and expenses
Financial income and expenses break down as follows:
(€ million) | Year ended December 31, 2012 | Year ended December 31, 2011 | Year ended December 31, 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Cost of debt (1) | (417 | ) | (425 | ) | (385 | ) | ||||
Interest income | 68 | 100 | 61 | |||||||
Cost of debt, net of cash and cash equivalents | (349 | ) | (325 | ) | (324 | ) | ||||
Non-operating foreign exchange gains/(losses) | (17 | ) | 10 | (20 | ) | |||||
Unwinding of discount on provisions (2) | (87 | ) | (83 | ) | (68 | ) | ||||
Gains/(losses) on disposals of financial assets | 37 | 25 | 61 | |||||||
Impairment losses on financial assets, net of reversals (3) | (30 | ) | (58 | ) | (6 | ) | ||||
Other items | (14 | ) | 19 | (5 | ) | |||||
Net financial income/(expenses) | (460 | ) | (412 | ) | (362 | ) | ||||
comprising: Financial expenses | (553 | ) | (552 | ) | (468 | ) | ||||
Financial income | 93 | 140 | 106 | |||||||
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Cost of debt(1) | (310 | ) | (315 | ) | (297 | ) | |||
Interest income | 88 | 132 | 88 | ||||||
Cost of debt, net of cash and cash equivalents | (222 | ) | (183 | ) | (209 | ) | |||
Foreign exchange gains (non-operating) | (67 | ) | (74 | ) | 87 | ||||
Fair value gains/(losses) on other derivatives | — | — | 4 | ||||||
Unwinding of discounting of provisions(2) | (42 | ) | (37 | ) | (38 | ) | |||
Net gains/(losses) on disposals of financial assets(3) | 1 | 41 | 7 | ||||||
Impairment losses on financial assets, net of reversals(4) | (2 | ) | (8 | ) | (14 | ) | |||
Other items | 32 | 29 | 24 | ||||||
Net financial income/(expenses) | (300 | ) | (232 | ) | (139 | ) | |||
comprising: Financial expenses | (324 | ) | (335 | ) | (329 | ) | |||
Financial income | 24 | 103 | 190 | ||||||
|
|
|
|
The impact of the ineffective portion of hedging relationships was not material in 2009, 2008 or 2007.material.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.30. Income tax expense
The Group has opted for tax consolidations in a number of countries, principally France, Germany, the United Kingdom and the United States.
The table below shows the split of income tax expense between current and deferred taxes:
(€ 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 | ) | ||||
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Current taxes | (2,531 | ) | (2,140 | ) | (2,162 | ) | |||
Deferred taxes | 1,167 | 1,458 | 1,475 | ||||||
Total | (1,364 | ) | (682 | ) | (687 | ) | |||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
The difference between the effective tax rate and the standard corporate income tax rate applicable in France is explained as follows:
(as a percentage) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Standard tax rate applicable in France | 34 | 34 | 34 | ||||||
Impact of reduced-rate income tax on royalties in France | (9 | ) | (12 | ) | (8 | ) | |||
Impact of change in net deferred tax liabilities as a result of changes in tax rates(1) | 1 | — | (9 | ) | |||||
Impact of the ratification of the Franco-American treaty on net deferred tax liabilities relating to tax cost of distributions made from reserves | (2 | ) | — | — | |||||
Impact of tax borne by BMS for the territory managed by sanofi-aventis (see Note D.32.) | (3 | ) | (4 | ) | (3 | ) | |||
Other | 1 | (2 | ) | (2 | ) | ||||
Effective tax rate | 22 | 16 | 12 | ||||||
|
Because 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.
A new protocol to the 1994 U.S.-France income tax treaty took effect on December 23, 2009. The new protocol eliminates source-country taxation of certain direct dividends (subject to conditions) and source-country taxation of cross-border royalty payments. The protocol applies retroactively to January 1, 2009 with respect to taxes that have been withheld at the former rate of 5% for both dividends and royalties. Consequently, the withholding taxes deducted at source in 2009 will be reimbursed and the deferred tax liability on tax cost of distributions made from reserves is reduced by 106 M€.
The French Business Tax reform was enacted on December 31, 2009 and is applicable as from January 1, 2010. The Finance Bill repealed the Local Business Tax (taxe professionnelle). The new tax CET (Contribution Economique Territoriale) has two components, the CFE (Cotisation Fonciere des Entreprises), and the CVAE (Cotisation sur la Valeur AjouteeAjoutée des Entreprises). The second component is determined by applying a rate to tax in France effective January 1, 2010, and (ii) the reassessment of some of the Group's tax risks.
For the periods presented, the amount of value added generateddeferred tax assets recognized in profit or loss that were initially subject to impairment losses on a business combination is immaterial.
Article 6 of the French Amending Finance Bill for 2012, enacted August 16, 2012, introduced an additional corporate income tax contribution of 3% on amounts distributed by French or foreign companies and entities that are subject to corporate income tax in France. This contribution, the trigger point for which is the decision by the business duringshareholders' general meeting to make the year.
Given that part ofdistribution, has not been taken into account in measuring the CVAE component is calculated as the amount by which certain revenues exceed certain expenses, and given that 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), sanofi-aventis regards the CVAE component as meeting the definition of income taxes specified in IAS 12, paragraph 2 (“taxes which are based on taxable profits”). Consequently, aGroup's deferred tax liability has been recognized, generating an expenseassets and liabilities. It will apply to future distributions of €59 million, relating primarily to depreciable assets in the balance sheet asdividends by Sanofi.
The “Other” line includes (i) the difference between the tax rate applicable in France and tax rates applicable in other countries, (ii) the impact of reassessing certain of the Group’s tax exposures and (iii) the impact on the effective tax rate of amortization and impairment charged against intangibles.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.31. Share of profit/loss of associates and joint ventures
This item mainly comprises the share of co-promotion profits attributable to sanofi-aventisSanofi for territories covered by entities majority-owned by BMS (see Note C.1.). The impact of the BMS alliance in 20092012 was €1,229€643 million, before deducting the tax effect of €444€223 million (2008: €984(versus €1,671 million with a tax effect €361 million; 2007: €816of €601 million in 2011, and €1,551 million with a tax effect €290 million)of €571 million in 2010).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
It also includes the share of profits or losses from other associates (€29 million profitand joint ventures, the amount of which was immaterial in 2009, €69 million profit in 20082012, 2011 and €80 million loss in 2007). These figures include the effect of the Aventis acquisition (workdown of acquired inventories, amortization and impairment of intangible assets). The 2007 figure included an impairment loss of €102 million on the equity-accounted investment in Zentiva (see Note D.6.).
In accordance with IFRS 5 the share of profits from Merial for 2008 and 2007 has been retrospectively reclassified to the lineNet income from the held-for-exchange Merial business (see Note D.8.).
2010.
D.32. Net income attributable to minoritynon-controlling interests
This line includes the share of co-promotion profits attributable to BMS for territories covered by entities majority-owned by sanofi-aventisSanofi (see Note C.1.). The amount involved was €405€149 million in 2009, €4222012, €226 million in 20082011, and €403€237 million in 2007.2010. There is no tax effect, because BMS receives its share before tax.
It also includes the share of net income attributable to the other minority shareholdersnon-controlling interests (€2120 million in 2009, €192012, €15 million in 20082011, and €16€17 million in 2007)2010).
D.33. Related party transactions
The principal related parties of sanofi-aventisSanofi 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’sGroup's principal shareholders, in particular the Total group (until September 2012), fall within the ordinary course of business and were immaterial as ofin the years ended December 31, 2009,2012, December 31, 20082011 and December 31, 2007.2010.
DetailsA list of transactions with relatedthe principal companies the Group controls is presented in Note F.1. These companies are disclosedfully consolidated (as described in Note B.1.). Transactions between these 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 2012 and 2011, and three directors during 2009 and four directors during 2008 and 2007in 2010, who were covered by supplementary pension plans, see Item 6.B.) and the members of the ManagementExecutive Committee (23(9 members during 2009, 22 during 20082012, 2011 and 21 during 2007)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 | |||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | |||
Short-term benefits(1) | 34 | 37 | 30 | |||
Post-employment benefits(2) | 14 | 16 | 14 | |||
Share-based payment(3) | 9 | 11 | 12 | |||
Total recognized in the income statement | 57 | 64 | 56 | |||
|
|
|
The aggregate amount of supplementary pension obligations to certain corporate officers and to members of the Executive Committee was €162 million at December 31, 2012, compared with €121 million at December 31, 2011 and €130 million at December 31, 2010 (the increase is mainly due to a fall in discount rates during 2012). The aggregate amount of retirement benefits payable to certain corporate officers and key management personnel was €191€5 million at December 31, 2009, versus €183 million at December 31, 20082012, 2011 and €163 million at December 31, 2007. The aggregate amount of lump-sum retirement benefits payable to corporate officers and key management personnel was €14 million at December 31, 2009, versus €10 million at December 31, 2008 and €12 million December 31, 2007.
2010.
D.34. Split of net sales
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 pre-vetting customers in order to set
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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’sGroup's sales with its largest customers, in particular certain wholesalers in the United States. The Group’sGroup's three largest customers respectively accounted respectively for 8.1%approximately 6.5%, 7.5%5.3% and 6.8%5.2% of gross salesrevenues in 2009.2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net sales
NetThe net sales of sanofi-aventisSanofi comprise net sales generated by the Pharmaceuticals segment, and net sales generated by the Vaccines segment and the Animal Health segment. The table below shows sales of flagship products and other major pharmaceutical products:
| Year ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(€ million) | 2012 | 2011 | 2010 | |||||||
Lantus® | 4,960 | 3,916 | 3,510 | |||||||
Apidra® | 230 | 190 | 177 | |||||||
Amaryl® | 421 | 436 | 478 | |||||||
Insuman® | 135 | 132 | 133 | |||||||
Other diabetes products | 36 | 10 | — | |||||||
Total: Diabetes | 5,782 | 4,684 | 4,298 | |||||||
Taxotere® | 563 | 922 | 2,122 | |||||||
Eloxatine® | 956 | 1,071 | 427 | |||||||
Jevtana® | 235 | 188 | 82 | |||||||
Zaltrap® | 25 | — | — | |||||||
Mozobil® | 96 | 59 | — | |||||||
Other Oncology products (1) | 519 | 389 | 59 | |||||||
Total: Oncology | 2,394 | 2,629 | 2,690 | |||||||
Lovenox® | 1,893 | 2,111 | 2,806 | |||||||
Plavix® | 2,066 | 2,040 | 2,083 | |||||||
Aprovel®/CoAprovel® | 1,151 | 1,291 | 1,327 | |||||||
Allegra® | 553 | 580 | 607 | |||||||
Stilnox®/Ambien®/Ambien® CR/Myslee® | 497 | 490 | 819 | |||||||
Copaxone® | 24 | 436 | 513 | |||||||
Depakine® | 410 | 388 | 372 | |||||||
Tritace® | 345 | 375 | 410 | |||||||
Multaq® | 255 | 261 | 172 | |||||||
Xatral® | 130 | 200 | 296 | |||||||
Actonel® | 134 | 167 | 238 | |||||||
Nasacort® | 71 | 106 | 189 | |||||||
Renagel®/Renvela® (1) | 653 | 415 | — | |||||||
Synvisc®/Synvisc-One® (1) | 363 | 256 | — | |||||||
Aubagio® | 7 | — | — | |||||||
Total: Multiple Sclerosis | 7 | — | — | |||||||
Cerezyme® (1) | 633 | 441 | — | |||||||
Myozyme®/Lumizyme® (1) | 462 | 308 | — | |||||||
Fabrazyme® (1) | 292 | 109 | — | |||||||
Other Rare Diseases products (1) | 391 | 264 | — | |||||||
Total: Rare Diseases (1) | 1,778 | 1,122 | — | |||||||
Total: New Genzyme (1) | 1,785 | 1,122 | — | |||||||
Other Products | 5,513 | 5,927 | 6,005 | |||||||
Consumer Health Care | 3,008 | 2,666 | 2,217 | |||||||
Generics | 1,844 | 1,746 | 1,534 | |||||||
Total: Pharmaceuticals | 28,871 | 27,890 | 26,576 | |||||||
Table of the other major products of the Pharmaceuticals segment:Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, | ||||||
(€ million) | 2009 | 2008 | 2007 | |||
Lantus® | 3,080 | 2,450 | 2,031 | |||
Lovenox® | 3,043 | 2,738 | 2,612 | |||
Plavix® | 2,623 | 2,609 | 2,424 | |||
Taxotere® | 2,177 | 2,033 | 1,874 | |||
Aprovel®/CoAprovel® | 1,236 | 1,202 | 1,080 | |||
Eloxatine® | 957 | 1,345 | 1,521 | |||
Apidra® | 137 | 98 | — | |||
Multaq® | 25 | — | — | |||
Flagship products | 13,278 | 12,475 | 11,542 | |||
Stilnox®/Ambien®/Myslee® | 873 | 822 | 1,250 | |||
Allegra® | 731 | 666 | 706 | |||
Copaxone® | 467 | 622 | 1,177 | |||
Tritace® | 429 | 491 | 741 | |||
Amaryl® | 416 | 379 | 392 | |||
Depakine® | 329 | 322 | 316 | |||
Xatral® | 296 | 319 | 333 | |||
Actonel® | 264 | 330 | 320 | |||
Nasacort® | 220 | 240 | 294 | |||
Other Products | 6,078 | 6,484 | 8,203 | |||
Consumer Health Care | 1,430 | 1,203 | — | |||
Generics | 1,012 | 354 | — | |||
Total Pharmaceuticals | 25,823 | 24,707 | 25,274 | |||
Net sales of the principal product ranges of the Vaccines segment are shown below:
| Year ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(€ million) | 2012 | 2011 | 2010 | |||||||
Polio/Pertussis/Hib Vaccines | 1,184 | 1,075 | 984 | |||||||
Influenza Vaccines | 884 | 826 | 1,297 | |||||||
Meningitis/Pneumonia Vaccines | 650 | 510 | 527 | |||||||
Adult Booster Vaccines | 496 | 465 | 449 | |||||||
Travel and Endemics Vaccines | 364 | 370 | 382 | |||||||
Other Vaccines | 319 | 223 | 169 | |||||||
Total: Vaccines | 3,897 | 3,469 | 3,808 | |||||||
Net sales of the principal product ranges of the Animal Health segment are shown below:
Year ended December 31, | ||||||
(€ million) | 2009 | 2008 | 2007 | |||
Influenza Vaccines (1) | 1,062 | 736 | 766 | |||
Pediatric Combination and Poliomyelitis Vaccines | 968 | 768 | 660 | |||
Meningitis/Pneumonia Vaccines | 538 | 472 | 482 | |||
Adult and Adolescent Booster Vaccines | 406 | 399 | 402 | |||
Travel and Endemic Vaccines | 313 | 309 | 327 | |||
Other Vaccines | 196 | 177 | 141 | |||
Total Vaccines | 3,483 | 2,861 | 2,778 | |||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
(€ million) | 2012 | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Frontline® and other fipronil-based products | 775 | 764 | 774 | |||||||
Vaccines | 730 | 662 | 627 | |||||||
Avermectin | 423 | 372 | 355 | |||||||
Other Animal Health products | 251 | 232 | 227 | |||||||
Total: Animal Health | 2,179 | 2,030 | 1,983 | |||||||
D.35. Segment information
As indicated in Note B.26., sanofi-aventisSanofi has twothe following operating segments: the Pharmaceuticals, segment and the Human Vaccines (Vaccines) segment.and Animal Health. All other activities are combined in a separate segment, Other.
In March 2011, Sanofi and Merck announced the mutual termination of their agreement to create a new Animal Health joint venture. Following this announcement, the Animal Health business was identified as an operating segment on the basis of information now used internally by management to measure operational performance and to allocate resources.
The Pharmaceuticals segment covers research, development, production and marketing of medicines.medicines, including those originating from Genzyme (see D.1.2.). The sanofi-aventisSanofi pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health care products. This segment also includes all associates whose activities are related to pharmaceuticals, in particular the entities majority owned by BMS.
The Human 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 segmentsactivities that aredo not qualify as reportable segments within the meaning ofunder IFRS 8. This segment includes the Group’sSanofi's interest in the Yves Rocher group until the Animal Health business (Merial)date of loss of significant influence (see Note D.6.), and the impacteffects 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-aventisSanofi reports segment results on the basis of “Business"Business operating income”income". This indicator adopted in order to comply(compliant with IFRS 8,8) is used internally to measure operational performance and allocate resources.
“Business operating income” equates to “Operating income before restructuring, impairmentis derived fromOperating income, adjusted as follows:
litigation are eliminated;
Segment results are shown in the tables below:
2009 | ||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||||||
Net sales | 25,823 | 3,483 | — | 29,306 | ||||||||
Other revenues | 1,412 | 31 | — | 1,443 | ||||||||
Cost of sales | (6,527 | ) | (1,326 | ) | — | (7,853 | ) | |||||
Research and development expenses | (4,091 | ) | (491 | ) | (1 | ) | (4,583 | ) | ||||
Selling and general expenses | (6,762 | ) | (561 | ) | (2 | ) | (7,325 | ) | ||||
Other operating income and expenses | 387 | (3 | ) | 1 | 385 | |||||||
Share of profit/(loss) of associates excluding Merial (1) | 792 | 41 | 8 | 841 | ||||||||
Share of profit/loss of Merial (1) | — | — | 241 | 241 | ||||||||
Net income attributable to minority interests | (426 | ) | (1 | ) | — | (427 | ) | |||||
Business operating income | 10,608 | 1,173 | 247 | 12,028 | ||||||||
Financial income and expenses | (300 | ) | ||||||||||
Income tax expense | (3,099 | ) | ||||||||||
Business net income | 8,629 | |||||||||||
| 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 | |||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 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 | ||||||||||
Year ended December 31, 2009 The table below shows the reconciliation between "Business net income" andIncome before tax and associates and joint ventures:
2008 | ||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||||||
Net sales | 24,707 | 2,861 | — | 27,568 | ||||||||
Other revenues | 1,208 | 41 | — | 1,249 | ||||||||
Cost of sales | (6,231 | ) | (1,104 | ) | — | (7,335 | ) | |||||
Research and development expenses | (4,150 | ) | (425 | ) | — | (4,575 | ) | |||||
Selling and general expenses | (6,662 | ) | (520 | ) | 14 | (7,168 | ) | |||||
Other operating income and expenses | 297 | 1 | (95 | ) | 203 | |||||||
Share of profit/(loss) of associates excluding Merial (1) | 671 | 28 | 21 | 720 | ||||||||
Share of profit/loss of Merial (1) | — | — | 170 | 170 | ||||||||
Net income attributable to minority interests | (441 | ) | — | — | (441 | ) | ||||||
Business operating income | 9,399 | 882 | 110 | 10,391 | ||||||||
Financial income and expenses | (270 | ) | ||||||||||
Income tax expense | (2,807 | ) | ||||||||||
Business net income | 7,314 | |||||||||||
|
2007 | ||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||||||
Net sales | 25,274 | 2,778 | — | 28,052 | ||||||||
Other revenues | 1,085 | 70 | — | 1,155 | ||||||||
Cost of sales | (6,549 | ) | (1,022 | ) | — | (7,571 | ) | |||||
Research and development expenses | (4,103 | ) | (429 | ) | (5 | ) | (4,537 | ) | ||||
Selling and general expenses | (7,059 | ) | (522 | ) | 27 | (7,554 | ) | |||||
Other operating income and expenses | 292 | (7 | ) | (9 | ) | 276 | ||||||
Share of profit/(loss) of associates excluding Merial (1) | 563 | 1 | 15 | 579 | ||||||||
Share of profit/loss of Merial (1) | — | — | 181 | 181 | ||||||||
Net income attributable to minority interests | (419 | ) | — | — | (419 | ) | ||||||
Business operating income | 9,084 | 869 | 209 | 10,162 | ||||||||
Financial income and expenses | (139 | ) | ||||||||||
Income tax expense | (2,963 | ) | ||||||||||
Business net income | 7,060 | |||||||||||
|
“Business net income” is determined by taking “business operating income”
(€ 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 | |||||||
“Business net income” is defined asNet income attributable to equity holders of the Company, determined under IFRS, excluding (i) amortization of intangible assets; (ii) impairment of intangible assets, (iii) other impacts associated with acquisitions (including impactsimpact of acquisitions on associates); (iv) restructuring costs; gainsassociates and losses on disposals of non-current assets; costs or provisions associated with litigation; (v) the tax effect related to the items listed in (i) through (iv) as well as (vi) effects of major tax disputes, and (vii)joint ventures.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
A reconciliation of “Business net income” toNet income attributable to equity holders of the Company is set forth below:
(€ million) | Year ended December 31, 2009 | Year ended December 31, 2008 | Year ended December 31, 2007 | ||||||
Business net income | 8,629 | 7,314 | 7,060 | ||||||
(i) amortization of intangible assets | (3,528 | ) | (3,483 | ) | (3,654 | ) | |||
(ii) impairment of intangible assets | (372 | ) | (1,554 | ) | (58 | ) | |||
(iii) expenses arising on the workdown of acquired inventories (1) | (27 | ) | (2 | ) | — | ||||
(iv) restructuring costs | (1,080 | ) | (585 | ) | (137 | ) | |||
(iii)/(iv) other items(2) | — | 114 | (61 | ) | |||||
(v) tax effect on the items listed above | 1,629 | 1,904 | 1,939 | ||||||
(iii)/(vi) other tax items(3) | 106 | 221 | 337 | ||||||
(vii) share of minority interests on the items listed above | 1 | — | — | ||||||
(iii) expenses arising from the impact of the Merial acquisition (4) | (66 | ) | (50 | ) | (30 | ) | |||
(iii) expenses arising from the impact of acquisitions on associates (5) | (27 | ) | (28 | ) | (133 | ) | |||
Net income attributable to equity holders of the Company | 5,265 | 3,851 | 5,263 | ||||||
|
|
| |||||||
| |||||||
|
|
Net charge to/(reversal of) provisions for tax exposures | 221 | 337 | ||||
Reversal of deferred taxes following ratification of the Franco-American Treaty (see Note D.30.) | 106 |
|
|
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, accounted for by the equity method, (ii) acquisitions of property, plant and equipment, and (iii) acquisitions of intangible assets.
The principal associates and joint ventures accounted for by the equity method are: for the Pharmaceuticals segment, the entities managedmajority owned by BMS (see Note C.1. to the consolidated financial statements for the year ended December 31, 2009)), Handok (divested October 30, 2012), Infraserv GmbH & Co. Höchst KG, and (for the year ended December 31, 2008) Zentiva; for the Vaccines segment, Sanofi Pasteur MSD; and for theMSD. The Other segment Merial andincludes the associate Yves Rocher, in 2007 and 2008, and Yves Rocher in 2009.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009which ceased to be accounted for by the equity method effective November 2011 (see note D.6.).
Acquisitions of intangible assets and property, plant and equipment correspond to acquisitions paid formade during the period.
2009 | ||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||
Investments in associates and joint ventures accounted for by the equity method | 420 | 412 | 123 | 955 | ||||
Acquisitions of property, plant and equipment | 940 | 465 | — | 1,405 | ||||
Acquisitions of intangible assets | 364 | 16 | — | 380 | ||||
| 2012 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
Investments in associates and joint ventures | 192 | 292 | 3 | — | 487 | |||||||||||
Acquisitions of property, plant and equipment | 1,024 | 216 | 79 | — | 1,319 | |||||||||||
Acquisitions of intangible assets | 276 | 9 | 8 | — | 293 | |||||||||||
2008 | ||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||
Investments in associates and joint ventures accounted for by the equity method | 706 | 431 | 1,322 | 2,459 | ||||
Acquisitions of property, plant and equipment | 967 | 375 | — | 1,342 | ||||
Acquisitions of intangible assets | 225 | 39 | — | 264 | ||||
2007 | ||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | ||||
Investments in associates and joint ventures accounted for by the equity method | 768 | 471 | 1,254 | 2,493 | ||||
Acquisitions of property, plant and equipment | 977 | 359 | — | 1,336 | ||||
Acquisitions of intangible assets | 237 | 37 | — | 274 | ||||
| 2011 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
Investments in associates and joint ventures | 488 | 319 | — | — | 807 | |||||||||||
Acquisitions of property, plant and equipment | 1,136 | 323 | 77 | — | 1,536 | |||||||||||
Acquisitions of intangible assets | 223 | 8 | 15 | — | 246 | |||||||||||
| 2010 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||
Investments in associates and joint ventures | 446 | 350 | — | 128 | 924 | |||||||||||
Acquisitions of property, plant and equipment | 779 | 416 | 88 | — | 1,283 | |||||||||||
Acquisitions of intangible assets | 335 | 43 | 1 | — | 379 | |||||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
D.35.3. Information by geographical region: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- fundedpre-funded pension obligations.
| 2012 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | |||||||||||||
Net sales | 34,947 | 11,056 | 2,846 | 11,440 | 10,873 | 12,451 | |||||||||||||
Non-current assets: | |||||||||||||||||||
• property, plant and equipment | 10,578 | 6,707 | 4,073 | 2,696 | 2,285 | 1,175 | |||||||||||||
• intangible assets | 20,192 | 4,417 | 11,400 | 4,375 | |||||||||||||||
• goodwill | 38,073 | 15,025 | 15,994 | 7,054 | |||||||||||||||
2009 | ||||||||||||
(€ million) | Total | Europe | Of which France | North America | Of which United States | Other countries | ||||||
Net sales | 29,306 | 12,059 | 3,206 | 9,870 | 9,426 | 7,377 | ||||||
Non-current assets: | ||||||||||||
• property, plant and equipment | 7,830 | 5,734 | 3,436 | 1,375 | 1,018 | 721 | ||||||
• intangible assets | 13,747 | 4,636 | 5,930 | 3,181 | ||||||||
• goodwill | 29,733 | 13,528 | 11,419 | 4,786 | ||||||||
| 2011 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | |||||||||||||
Net sales | 33,389 | 11,796 | 3,106 | 10,511 | 9,957 | 11,082 | |||||||||||||
Non-current assets: | |||||||||||||||||||
• property, plant and equipment | 10,750 | 6,857 | 4,128 | 2,768 | 2,374 | 1,125 | |||||||||||||
• intangible assets | 23,639 | 5,537 | 15,422 | 2,680 | |||||||||||||||
• goodwill (1) | 38,582 | 15,238 | 16,365 | 6,979 | |||||||||||||||
| 2010 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(€ million) | Total | Europe | of which France | North America | of which United States | Other countries | |||||||||||||
Net sales | 32,367 | 12,198 | 3,092 | 10,333 | 9,790 | 9,836 | |||||||||||||
Non-current assets: | |||||||||||||||||||
• property, plant and equipment | 8,155 | 5,764 | 3,603 | 1,510 | 1,091 | 881 | |||||||||||||
• intangible assets | 12,479 | 3,773 | 5,835 | 2,871 | |||||||||||||||
• goodwill | 31,932 | 13,718 | 13,264 | 4,950 | |||||||||||||||
2008 | ||||||||||||
(€ million) | Total | Europe | Of which France | North America | Of which United States | Other countries | ||||||
Net sales | 27,568 | 12,096 | 3,447 | 9,042 | 8,609 | 6,430 | ||||||
Non-current assets: | ||||||||||||
• property, plant and equipment | 6,961 | 5,174 | 3,181 | 1,320 | 1,042 | 467 | ||||||
• intangible assets | 15,260 | 4,573 | 7,429 | 3,258 | ||||||||
• goodwill | 28,163 | 12,414 | 11,750 | 3,999 | ||||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
2007 | ||||||||||||
(€ million) | Total | Europe | Of which France | North America | Of which United States | Other countries | ||||||
Net sales | 28,052 | 12,184 | 3,610 | 9,989 | 9,474 | 5,879 | ||||||
Non-current assets: | ||||||||||||
• property, plant and equipment | 6,538 | 4,958 | 2,884 | 1,157 | 843 | 423 | ||||||
• intangible assets | 19,182 | 6,327 | 9,081 | 3,774 | ||||||||
• goodwill | 27,199 | 12,428 | 11,041 | 3,730 | ||||||||
As described in NoteIn accordance with Notes B.6.1. and D.5. to the consolidated financial statements, France is not a cash-generating unit. Consequently, information about goodwill is provided for Europe.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
E. PRINCIPAL ACCOUNTANTS’ACCOUNTANTS' FEES AND SERVICES
PricewaterhouseCoopers Audit and Ernst & Young Auditet Autres served as independent auditors of sanofi-aventis,Sanofi for the year ended December 31, 20092012 and for all other reporting periods covered by this annual report on Form 20-F. The table below shows fees paid tocharged by these firms and member firms of their networks by sanofi-aventisto Sanofi and other consolidated companiessubsidiaries in the years ended December 31, 20092012 and 2008:2011.
(€ million) | Ernst & Young | PricewaterhouseCoopers | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | ||||||||||||||
Audit | |||||||||||||||||||||
Audit opinion, review of statutory and consolidated financial statements(1) | 13.1 | 93 | % | 11.7 | 94 | % | 14.1 | 95 | % | 12.2 | 99 | % | |||||||||
- of which sanofi-aventis SA | 4.1 | 4.1 | 4.0 | 4.1 | |||||||||||||||||
- of which consolidated subsidiaries | 9.0 | 7.6 | 10.1 | (3) | 8.1 | ||||||||||||||||
Other audit-related services(2) | 1.0 | 7 | % | 0.7 | 6 | % | 0.8 | 5 | % | 0.1 | 1 | % | |||||||||
- of which sanofi-aventis SA | 0.1 | — | 0.1 | — | |||||||||||||||||
- of which consolidated subsidiaries | 0.9 | 0.7 | 0.7 | 0.1 | |||||||||||||||||
Sub-total | 14.1 | 100 | % | 12.4 | 100 | % | 14.9 | 100 | % | 12.3 | 100 | % | |||||||||
Non-audit services | |||||||||||||||||||||
Tax | — | — | — | — | |||||||||||||||||
Other | — | — | — | — | |||||||||||||||||
Sub-total | — | — | — | — | |||||||||||||||||
TOTAL | 14.1 | 100 | % | 12.4 | 100 | % | 14.9 | 100 | % | 12.3 | 100 | % | |||||||||
|
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|
| Ernst & Young | PricewaterhouseCoopers | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
(€ million) | Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||
Audit: | |||||||||||||||||||||||||
Audit opinion, review of statutory and consolidated financial statements (1) | 15.4 | 96% | 13.6 | 92% | 15.6 | 92% | 17.9 | 91% | |||||||||||||||||
– Sanofi S.A. | 3.9 | 3.5 | 4.0 | 4.1 | |||||||||||||||||||||
– fully consolidated | 11.5 | 10.1 | 11.6 | 13.8 | |||||||||||||||||||||
Other audit-related services (2) | 0.5 | 3% | 1.0 | 7% | 1.2 | 7% | 1.3 | 7% | |||||||||||||||||
– Sanofi S.A. | — | 0.3 | 0.3 | 0.9 | |||||||||||||||||||||
– fully consolidated | 0.5 | 0.7 | 0.9 | 0.4 | |||||||||||||||||||||
Sub-total (3) | 15.9 | 99% | 14.6 | 99% | 16.8 | 99% | 19.2 | 98% | |||||||||||||||||
Non-audit services: | |||||||||||||||||||||||||
Tax | 0.1 | 0.1 | 0.1 | 0.4 | |||||||||||||||||||||
Other | — | — | — | — | |||||||||||||||||||||
Sub-total | 0.1 | 1% | 0.1 | 1% | 0.1 | 1% | 0.4 | 2% | |||||||||||||||||
TOTAL | 16.0 | 100% | 14.7 | 100% | 16.9 | 100% | 19.6 | 100% | |||||||||||||||||
Audit Committee Pre-approval and Procedures
The Group Audit Committee has adopted a policy and established certain procedures for the pre-approvalapproval 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 2009,2012, the Audit Committee established a budget breaking down 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—(Continued)
F. LIST OF PRINCIPAL COMPANIES INCLUDED IN THE CONSOLIDATION FOR THE YEAR ENDED DECEMBER 31, 20092012
F.1. Principal fully-consolidatedfully consolidated companies
The principal companies in the Group’sGroup's areas of operations and business segments are:
Europe | Financial interest % | |||||||
---|---|---|---|---|---|---|---|---|
| Germany | 100 | ||||||
| Germany | 100 | ||||||
| Germany | 100 | ||||||
Winthrop Arzneimittel GmbH | Germany | 100 | ||||||
Zentiva Inhalationsprodukte GmbH | Germany | 100 | ||||||
Merial GmbH | Germany | 100 | ||||||
Genzyme GmbH | Germany | 100 | ||||||
Sanofi-Aventis | Austria | 50.1 | ||||||
Sanofi-Aventis GmbH | Austria | 100 | ||||||
Sanofi-Aventis Belgium S.A.N.V. | Belgium | 100 | ||||||
Sanofi European Treasury Center | Belgium | 100 | ||||||
Genzyme Flanders BVBA | Belgium | 100 | ||||||
Merial Norden A/S | Denmark | 100 | ||||||
Sanofi-Aventis Denmark A/S | Denmark | 100 | ||||||
Sanofi Winthrop BMS partnership (JV DK) (1) | Denmark | 50.1 | ||||||
Merial Laboratorios S.A. | Spain | 100 | ||||||
Sanofi-Aventis SA | Spain | 100 | ||||||
Sanofi-aventis Bms Ay (1) | Finland | 50.1 | ||||||
Sanofi-Aventis OY | Finland | 100 | ||||||
Sanofi-Aventis Europe | France | 100 | ||||||
Sanofi-Aventis Participations | France | 100 | ||||||
Sanofi Pasteur Participations | France | 100 | ||||||
Sanofi-Aventis Amérique du Nord | France | 100 | ||||||
Sanofi Pasteur Holding | France | 100 | ||||||
Aventis Pharma S.A. | France | 100 | ||||||
Sanofi Pasteur | France | 100 | ||||||
Aventis Agriculture | France | 100 | ||||||
Fovea Pharmaceuticals | France | 100 | ||||||
Francopia | France | 100 | ||||||
Winthrop Médicaments | France | 100 | ||||||
Sanofi Chimie | France | 100 | ||||||
Sanofi Participations | France | 100 | ||||||
Sanofi Pharma Bristol-Myers Squibb (1) | France | 50.1 | ||||||
Sanofi | France | 100 | ||||||
Sanofi-Aventis France | France | 100 | ||||||
Sanofi-Aventis Groupe | France | 100 | ||||||
Sanofi-Aventis Recherche et Développement | France | 100 | ||||||
Sanofi Winthrop Industrie | France | 100 | ||||||
Merial SAS | France | 100 | ||||||
Genzyme SAS | France | 100 | ||||||
Genzyme Polyclonals | France | 100 | ||||||
Chattem Greece S.A. | Greece | 100 | ||||||
sanofi-aventis A.E.B.E. | Greece | 100 | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Europe | Financial interest % | |||||
---|---|---|---|---|---|---|
Chinoin Private Co. Ltd | Hungary | 99.6 | ||||
SANOFI-AVENTIS Private Co. Ltd | Hungary | 99.6 | ||||
Chattem Global Consumer Products Limited | Ireland | 100 | ||||
Carraig Insurance Ltd | Ireland | 100 | ||||
Sanofi-Aventis Ireland Limited | Ireland | 100 | ||||
Genzyme Ireland Limited | Ireland | 100 | ||||
Merial Italia S.p.A. | Italy | 100 | ||||
sanofi-aventis SpA | Italy | 100 | ||||
Sanofi-aventis Norge AS | Norway | 100 | ||||
Sanofi Winthrop BMS partnership Ans (NO) (1) | Norway | 50.1 | ||||
sanofi-aventis Netherlands B.V. | Netherlands | 100 | ||||
Sanofi Winthrop Bms Vof (Netherlands) (1) | Netherlands | 50.1 | ||||
Genzyme Europe BV | Netherlands | 100 | ||||
Sanofi-Aventis Sp z.o.o. | Poland | 100 | ||||
Winthrop Farmaceutica Portugal, Lda | Portugal | 100 | ||||
Sanofi — Produtos Pharmaceuticos Lda | Portugal | 100 | ||||
Sanofi Winthrop BMS — AEIE (Portugal) (1) | Portugal | 50.1 | ||||
Sanofi-Aventis, s.r.o. | Czech Republic | 100 | ||||
Zentiva | Czech Republic | 100 | ||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
| 100 | |||||
| ||||||
Sanofi-Aventis Romania SRL | Romania | 100 | ||||
Aventis Pharma | ||||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
| United Kingdom | 100 | ||||
May and Baker Limited | United Kingdom | 100 | ||||
Genzyme Limited | United Kingdom | 100 | ||||
Merial Limited | United Kingdom | 100 | ||||
Merial Animal Health Ltd | United Kingdom | 100 | ||||
ZAO Aventis Pharma | Russia | 100 | ||||
Sanofi-aventis Vostok | Russia | 51 | ||||
Zentiva Pharma o.o.o. | Russia | 100 | ||||
sanofi-aventis Pharma Slovakia s.r.o. | Slovakia | 100 | ||||
Zentiva a.s., Hlohovec | Slovakia | 98.8 | ||||
Sanofi-Aventis AB | Sweden | 100 | ||||
Sanofi | Switzerland | 100 | ||||
Sanofi-Aventis (Suisse) SA | Switzerland | 100 | ||||
| ||||||
Sanofi-Aventis Ilaclari | Turkey | 100 | ||||
Winthrop Ilac Anonim Sirketi | Turkey | 100 | ||||
| Turkey | 100 | ||||
| Turkey | 100 | ||||
Limited Liability Company Sanofi-aventis Ukraine | Ukraine | 100 | ||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
United States | Financial interest % | |||||||
---|---|---|---|---|---|---|---|---|
Armour | United States | 100 | ||||||
Aventis Inc. (US) | United States | 100 | ||||||
Aventisub Inc. (US) | United States | 100 | ||||||
Aventis Holdings Inc. (US) | United States | 100 | ||||||
Aventis Pharmaceuticals Inc. (US) | United States | 100 | ||||||
| United States | 100 | ||||||
Carderm Capital L.P. (US) | United States | 100 | ||||||
| United States | 100 | ||||||
| United States | 100 | ||||||
| United States | 100 | ||||||
Sanofi | United States | 100 | ||||||
| United States | 100 | ||||||
| United States | 100 | ||||||
Sanofi Pasteur Inc. (US) | United States | 100 | ||||||
Sanofi-Synthelabo Inc. | United States | 100 | ||||||
Sundex, LLC | United States | 100 | ||||||
TargeGen Inc. | United States | 100 | ||||||
Sanofi Pasteur VaxDesign Corporation | United States | 100 | ||||||
BMP Sunstone Corporation (US) | United States | 100 | ||||||
Genzyme Corporation | United States | 100 | ||||||
Sanofi-Topaz Inc. | United States | 100 | ||||||
VaxServe, Inc. (US) | United States | 100 | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other | Financial interest % | |||||||
---|---|---|---|---|---|---|---|---|
Sanofi-Aventis South Africa (Pty) Ltd | South Africa | 100 | ||||||
Winthrop Pharmaceuticals (Pty) | South Africa | 100 | ||||||
Winthrop Pharma Saïdal S.P.A. | Algeria | 70 | ||||||
Sanofi-Aventis Algérie | Algeria | 100 | ||||||
| Argentina | 100 | ||||||
| Argentina | 100 | ||||||
Quimica Medical Argentina Sociedad Anonima Comercial E Industrial | Argentina | 100 | ||||||
Sanofi-Aventis Australia Pty Limited | Australia | 100 | ||||||
Sanofi-aventis Healthcare Holdings Pty Ltd | Australia | 100 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
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Sanofi-aventis Healthcare Pty Ltd | Australia | 100 | |||||||
| Australia | 100 | |||||||
| Australia | 100 | |||||||
| Australia | 100 | |||||||
MCP Direct Pty Ltd | Australia | 100 | |||||||
Carlson Health Pty Ltd | Australia | 100 | |||||||
| Australia | 100 | |||||||
MERIAL SAUDE ANIMAL LTDA | Brazil | 100 | |||||||
Sanofi-Aventis | Brazil | 100 | |||||||
| Brazil | 100 | |||||||
Medley | Brazil | 100 | |||||||
| Brazil | 100 | |||||||
Merial Canada, Inc. | Canada | 100 | |||||||
| Canada | 100 | |||||||
Sanofi-Aventis | Canada | 100 | |||||||
Sanofi Consumer Health Inc./Sanofi Santé Grand Public Inc. | Canada | 100 | |||||||
Sanofi-Aventis de | Chile | 100 | |||||||
| China | 100 | |||||||
| China | 100 | |||||||
| China | 100 | |||||||
Shenzhen Sanofi Pasteur Biological Products Co. Ltd | China | 100 | |||||||
Hangzhou Sanofi Minsheng Consumer Healthcare Co., Ltd | China | 60 | |||||||
MERIAL ANIMAL HEALTH CO. LTD | China | 99 | |||||||
Sunstone Fulai (Tangshan) Pharmaceutical Co., Ltd. | China | 100 | |||||||
Winthrop Pharmaceuticals de | Colombia | 100 | |||||||
Sanofi-Aventis de Colombia | Colombia | 100 | |||||||
| Korea | 100 | |||||||
| United Arab Emirates | 100 | |||||||
| Egypt | 99.8 | |||||||
Sanofi-Aventis del Ecuador | Ecuador | 100 | |||||||
| Guatemala | 100 | |||||||
| Hong Kong | 100 | |||||||
| Hong Kong | 100 | |||||||
Sanofi-Synthelabo (India) Ltd | India | 100 | |||||||
| India | 60.4 | |||||||
Shantha Biotechnics | India | 97 | |||||||
PT | Indonesia | 100 | |||||||
PT Aventis Pharma | Indonesia | 75 | |||||||
| Japan | 100 | |||||||
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Year ended December 31, 2009
Other countries | Financial interest % | |||||
---|---|---|---|---|---|---|
| ||||||
Sanofi-Aventis Meiji Pharmaceuticals Co., Ltd | Japan | 51 | ||||
Sanofi Pasteur Kabushiki Kaisha | Japan | 100 | ||||
Merial JAPAN LTD | Japan | 80 | ||||
Genzyme JP KK | Japan | 100 | ||||
Winthrop Pharmaceuticals (Malaysia) SDN-BHD | Malaysia | 100 | ||||
Sanofi-Aventis (Malaysia) Sdn Bhd | Malaysia | 100 | ||||
Maphar | Morocco | 80.6 | ||||
Sanofi-Aventis Maroc | Morocco | 100 | ||||
Merial de Mexico S.A. de C.V. | Mexico | 100 | ||||
Sanofi Pasteur SA de CV (Mexico) | Mexico | 100 | ||||
Sanofi-Aventis de Mexico S.A de CV | Mexico | 100 | ||||
Sanofi-Aventis Winthrop SA de CV | Mexico | 100 | ||||
Laboratorios Kendrick S.A. | Mexico | 100 | ||||
Sanofi Aventis Pakistan | Pakistan | 52.9 | ||||
Sanofi-Aventis de Panama S.A. | Panama | 100 | ||||
Sanofi-Aventis Latin America SA | Panama | 100 | ||||
sanofi-aventis del Peru SA | Peru | 100 | ||||
Chattem Peru S.R.L. | Peru | 100 | ||||
Sanofi-Aventis Philippines Inc | Philippines | 100 | ||||
Sanofi-Aventis de la Republica Dominicana S.A. | Dominican Rep. | 100 | ||||
Aventis Pharma (Manufacturing) Pte. Ltd | Singapore | 100 | ||||
Sanofi-Aventis Singapore Pte Ltd | Singapore | 100 | ||||
Sanofi Taiwan Co Ltd | Taiwan | 100 | ||||
Sanofi-Synthélabo (Thailand) Ltd | Thailand | 100 | ||||
| Thailand | 100 | ||||
| Tunisia | 100 | ||||
Winthrop Pharma Tunisie | Tunisia | 100 | ||||
Sanofi-Aventis de Venezuela SA | Venezuela | 100 | ||||
Sanofi-Synthélabo Vietnam Pharmaceutical Shareholding Company | 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
Financial interest % | |||||||||
---|---|---|---|---|---|---|---|---|---|
| Germany | 31.2 | |||||||
Bristol-Myers | Canada | 49.9 | |||||||
Bristol-Myers | United States | 49.9 | |||||||
Bristol-Myers | United States | 49.9 | |||||||
Bristol-Myers | United States | 49.9 | |||||||
Bristol-Myers | United States | 49.9 | |||||||
Bristol-Myers | United States | 49.9 | |||||||
Sanofi Pasteur MSD | France | 50 | |||||||
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F-121