UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20092011
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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
Commission File Number: 001-31368
Sanofi-AventisSanofi
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant’s name into English)
France
(Jurisdiction of incorporation or organization)
174, avenue de France, 7501354, Rue La Boétie, 75008 Paris, France
(Address of principal executive offices)
Karen Linehan, Senior Vice President Legal Affairs and General Counsel
174, avenue de France, 7501354, Rue La Boétie, 75008 Paris, France. Fax: 011 + 33 1 53 77 43 0303. Tel: 011 + 33 1 53 77 40 00
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class: | Name of each exchange on which registered: | |
American Depositary Shares, each representing one half of one ordinary share, par value €2 per share | New York Stock Exchange | |
Ordinary shares, par value €2 per share | New York Stock Exchange (for listing purposes only) | |
Contingent Value Rights | NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act:None
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
common stock as of December 31, 20092011 was:
Ordinary shares: 1,318,479,0521,340,918,811
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
YES 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.
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 x No ¨
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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x | 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 ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board x Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ¨ Item 18 ¨
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 ¨ NO x.
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, 2009.2011.
Unless the context requires otherwise, the terms “sanofi-aventis,“Sanofi,” the “Company,” the “Group,” “we,” “our” or “us” refer to sanofi-aventisSanofi and its consolidated subsidiaries.
All references herein to “United States” or “U.S.” are to the United States of America, references to “dollars” or “$” are to the currency of the United States, references to “France” are to the Republic of France, and references to “euro” and “€” are to the currency of the European Union member states (including France) participating in the European Monetary Union.
Brand names appearing in this annual report are trademarks of sanofi-aventisSanofi and/or its affiliates, with the exception of:
trademarks used or that may be or have been used under license by |
trademarks sold by |
other third party trademarks such as |
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® and Aubagio™ trade names have not been approved by the FDA.
The data relative to market shares and ranking information for pharmaceutical products presented in particular in “Item 4. Information on the Company — B. Business Overview — Markets — Marketing and distribution” are based on sales data from IMS Health MIDAS (IMS), retail and hospital, for calendar year 2009,2011, 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 5. Operating and Financial Review and Prospects — Presentation of Net Sales,” IMS data shown in the present document have been adjusted and include:
(i) | sales as published by IMS excluding |
(ii) |
IMS sales of products sold under alliance or license agreements which we recognize in our consolidated net sales but which are not attributed to us in the reports published by IMS; |
adjustments related to the exclusion of IMS sales for products which we do not recognize in our consolidated net sales but which are attributed to us by IMS. |
Data relative to market shares and ranking information presented herein for our vaccines business are based on internal estimates unless stated otherwise.
Product indications described in this annual report are composite summaries of the major indications approved in the product’s principal markets. Not all indications are necessarily available in each of the markets in which the products are approved. The summaries presented herein for the purpose of financial reporting do not substitute for careful consideration of the full labeling approved in each market.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the Securities and Exchange Commission on Form 6-K, in our annual report to shareholders, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Examples of such forward-looking statements include:
projections of operating revenues, net income, business net income, earnings per share, business earnings per share, capital expenditures, cost savings, restructuring costs, positive or negative synergies, dividends, capital structure or other financial items or ratios;
statements of our profit forecasts, trends, plans, objectives or goals, including those relating to products, clinical trials, regulatory approvals and competition; and
statements about our future events and economic performance or that of France, the United States or any other countries in which we operate; andoperate.
statementsThis information is based on data, assumptions and 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” 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. uncertainties associated with the regulatory, economic, financial and competitive environment, and other factors that could cause future results and objectives to differ materially from those expressed or implied in the forward-looking statements. The list below indicates some of the risk factors faced by the Company:
“we rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited or circumvented, our financial results could be materially and adversely affected”;
“product liability claims could adversely affect our business, results of operations and financial condition”;
“changes in the laws or regulations that apply to us could affect the Group’s business, results of operations and financial condition”;
“generic versions of some of our products may be approved for sale in one or more of their major markets”;
“our long-term objectives may not be fully realized”;
“we may fail to adequately renew our product portfolio whether through our own research and development or through acquisitions and strategic alliances”;
“we may lose market share to competing remedies or generic brands if they are perceived to be equivalent or superior products”;
“the diversification of the Group’s business exposes us to additional risks”;
“our products and manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverse consequences to our business if we fail to comply with the regulations or maintain the approvals”;
“we incurred substantial debt in connection with the acquisition of Genzyme which may limit our business flexibility compared to some of our peers”;
“we face uncertainties over the pricing and reimbursement of pharmaceutical products”;
“the ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business”;
“the manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, adversely affect our operating results and financial condition and delay the launch of new products”; and
risks related to financial markets.
We caution you that the foregoing list of risk factors is not exclusive and a number of important factors, discussed under “Item 3. Key Information — D. Risk Factors” below, could affect the future results and cause actual results to differ materially from those contained in any forward-looking statements. Such factors, some of which are discussed under “Item 3. Key Information — D. Risk Factors” below, include but areAdditional 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.
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A. Consolidated Financial Statements and Other Financial Information |
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Item 16D. |
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Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
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Item 16F. |
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Item 16G. |
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Item 16H. | Mine Safety Disclosure | 232 | ||
Item 17. |
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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, 20082011, 2010 and 20072009 are included in Item 18 of this annual report.
The consolidated financial statements of sanofi-aventisSanofi for the years ended December 31, 2009, 20082011, 2010 and 20072009 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, 2011. The term “IFRS” refers collectively to international accounting and financial reporting standards (IAS and IFRS) and to interpretations of the interpretations committees (SIC and IFRIC). mandatorily applicable as of December 31, 2011.
Sanofi-aventisSanofi reports its financial results in euros.
SELECTED CONDENSED FINANCIAL INFORMATION
As of and for the year ended December 31, | As of and for the year ended December 31, | |||||||||||||||||||||||||||||||
(€ million, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||
IFRS Income statement data | ||||||||||||||||||||||||||||||||
Net sales | 29,306 | 27,568 | 28,052 | 28,373 | 27,311 | 33,389 | 32,367 | 29,785 | 27,568 | 28,052 | ||||||||||||||||||||||
Gross profit | 22,869 | 21,480 | 21,636 | 21,902 | 20,947 | 24,156 | 24,638 | 23,125 | 21,480 | 21,636 | ||||||||||||||||||||||
Operating income | 6,366 | 4,394 | 5,911 | 4,828 | 2,888 | 5,731 | 6,535 | 6,435 | 4,394 | 5,911 | ||||||||||||||||||||||
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 | |||||||||||||||||||||||||||
Net income attributable to equity holders of Sanofi | 5,693 | 5,467 | 5,265 | 3,851 | 5,263 | |||||||||||||||||||||||||||
Basic earnings per share (€)(a)/(b) : | ||||||||||||||||||||||||||||||||
Net income attributable to equity holders of Sanofi | 4.31 | 4.19 | 4.03 | 2.94 | 3.91 | |||||||||||||||||||||||||||
Diluted earnings per share (€)(a)/(c) : | ||||||||||||||||||||||||||||||||
Net income attributable to equity holders of Sanofi | 4.29 | 4.18 | 4.03 | 2.94 | 3.89 | |||||||||||||||||||||||||||
IFRS Balance sheet data | ||||||||||||||||||||||||||||||||
Intangible assets and goodwill | 43,480 | 43,423 | 46,381 | 52,210 | 60,463 | |||||||||||||||||||||||||||
Goodwill and other intangible assets | 61,718 | 44,411 | 43,480 | 43,423 | 46,381 | |||||||||||||||||||||||||||
Total assets | 80,049 | 71,987 | 71,914 | 77,763 | 86,945 | 100,165 | 85,264 | 80,251 | 71,987 | 71,914 | ||||||||||||||||||||||
Outstanding share capital | 2,618 | 2,611 | 2,657 | 2,701 | 2,686 | 2,647 | 2,610 | 2,618 | 2,611 | 2,657 | ||||||||||||||||||||||
Equity attributable to equity holders of the Company | 48,188 | 44,866 | 44,542 | 45,600 | 46,128 | |||||||||||||||||||||||||||
Equity attributable to equity holders of Sanofi | 56,219 | 53,097 | 48,322 | 44,866 | 44,542 | |||||||||||||||||||||||||||
Long term debt | 5,961 | 4,173 | 3,734 | 4,499 | 4,750 | 12,499 | 6,695 | 5,961 | 4,173 | 3,734 | ||||||||||||||||||||||
Cash dividend paid per share (€)(d) | 2.40 | (e) | 2.20 | 2.07 | 1.75 | 1.52 | 2.65 | (e) | 2.50 | 2.40 | 2.20 | 2.07 | ||||||||||||||||||||
Cash dividend paid per share ($) (d)(f) | 3.46 | (e) | 3.06 | 3.02 | 2.31 | 1.80 | 3.43 | (e) | 3.34 | 3.46 | 3.06 | 3.02 |
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(b) | Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to 1,321.7 million shares in 2011, 1,305.3 million shares in 2010, 1,305.9 million shares in 2009, 1,309.3 million shares in 2008, and 1,346.9 million shares in |
(c) | Based on the weighted average in each period of the number of shares outstanding plus stock options and restricted shares with a potentially dilutive effect;i.e., 1,326.7 million shares in 2011, 1,308.2 million shares in 2010, 1,307.4 million shares in 2009, 1,310.9 million shares in 2008, and 1,353.9 million shares in |
(d) | Each American Depositary Share, or ADS, represents one half of one share. |
(e) | Dividends for |
(f) | Based on the relevant year-end exchange rate. |
SELECTED EXCHANGE RATE INFORMATION
The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the euro from 20052007 through February 2010March 2012 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 Buying Rate”). We provide the exchange rates below solely for your convenience. We do not represent that euros were, could have been, or could be, converted into U.S. dollars at these rates or at any other rate. For information regarding the effect of currency fluctuations on our results of operations, see “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Period- end Rate | Average Rate(1) | High | Low | Period- end Rate | Average Rate(1) | High | Low | |||||||||||||||||
(U.S. dollar per euro) | (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 | 1.46 | 1.38 | 1.49 | 1.29 | ||||||||||||||||
2008 | 1.39 | 1.47 | 1.60 | 1.24 | 1.39 | 1.47 | 1.60 | 1.24 | ||||||||||||||||
2009 | 1.43 | 1.40 | 1.51 | 1.25 | 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 | ||||||||||||||||||||
Last 6 months | ||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||
2011 | ||||||||||||||||||||||||
September | 1.46 | 1.46 | 1.48 | 1.42 | 1.34 | 1.37 | 1.43 | 1.34 | ||||||||||||||||
October | 1.48 | 1.48 | 1.50 | 1.45 | 1.39 | 1.37 | 1.42 | 1.33 | ||||||||||||||||
November | 1.50 | 1.49 | 1.51 | 1.47 | 1.35 | 1.36 | 1.38 | 1.32 | ||||||||||||||||
December | 1.43 | 1.46 | 1.51 | 1.42 | 1.30 | 1.32 | 1.35 | 1.29 | ||||||||||||||||
2010 | ||||||||||||||||||||||||
2012 | ||||||||||||||||||||||||
January | 1.39 | 1.43 | 1.45 | 1.39 | 1.31 | 1.29 | 1.32 | 1.27 | ||||||||||||||||
February | 1.37 | 1.37 | 1.40 | 1.35 | 1.34 | 1.32 | 1.35 | 1.31 | ||||||||||||||||
March(2) | 1.36 | 1.36 | 1.37 | 1.35 | 1.32 | 1.32 | 1.33 | 1.32 |
(1) | The average of the Noon Buying Rates on the last business day of each month during the relevant period for the full year average, and on each business day of the month for the monthly average. The latest available Noon Buying Rate being |
(2) | In each case, measured through March |
On March 10, 20105, 2012 the European Central Bank Rate was 1.36101.3220 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.”Statements”. 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, may be approved for sale in oneand if such patents and other rights were limited or more of their major markets.
Competitors may file marketing authorization requests for generic versions ofcircumvented, 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,financial 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 conditionmaterially and the value of our assets.adversely affected.
Through patent and other proprietary rights such as supplementary protection certificate 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. 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, or our infringement claim may not result in a decision that our rights are valid, enforceable or infringed. Moreover, a number of countries are increasingly easing the introduction of generic drugs or biosimilar products through accelerated approval procedures.
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 a generic product “at risk” before the initiation or completion of the court proceedings, and the court may decline to grant us a preliminary injunction to halt further “at risk” sales and remove the infringing product from the market. Additionally, while we would be entitled to obtain damages in such a case, the amount that we may ultimately be awarded and able to collect may be insufficient to compensate all harm caused to us.
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 differences in national law or legal systems.patents.
A numberTo 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 order to manufacture, use or sell 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 Group’sdesign of our technology to fall outside the scope 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:limit our profitability.
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Product liability claims could adversely affect our business, results of operations and financial condition.
Product liability is a significant business risk for us, notably inany pharmaceutical company, and the United States where product liability claims can be particularly costly. The Group’s recent acquisitions mayongoing diversification could increase our product liability exposure (see “Thenotably “— The diversification of the Group’s business exposes us to additional risks” below). Substantial damage awards and/or settlements have been made — notably in certainthe United States and 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 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. Also our risk exposure also increased due to the fact that we are now commercializing some devices using new technologies which, in case of malfunction, could cause unexpected damages and trigger 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’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 could adversely affect our business, results of operations and financial condition.
The marketing of our products is heavily regulated, and alleged failures to comply fully with applicable regulations could subject us to substantial fines, penalties and injunctive or administrative remedies, potentially leading to the imposition of additional regulatory controls or exclusion from government reimbursement programs. Sanofi-aventisSanofi 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 faces significant litigation and government investigations or audits, including allegations of securities law violations, claims related to employment matters, patent and intellectual property disputes, consumer law claims and tax audits.
Unfavorable outcomes in these matters, or in similar matters to be faced in the future, could preclude the commercialization of products, negatively affect the profitability of existing products and subject us to substantial fines, penalties and injunctive or administrative remedies, potentially leading to the imposition of additional regulatory controls or exclusion from government reimbursement programs. Any such result could materially and adversely affect our results of operations, financial condition, or business. 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.
Changes in the laws or regulations that apply to us could affect the Group’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 4. Information on the Company — B. Business Overview — Competition” and “—“Item 4. Information on the Company — B. Business Overview — Regulation”.
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” below.
Risks Relating to Our Business
Generic versions of some of our products may be approved for sale in one or more of their major markets.
Many of our products are subject to aggressive generic competition, and additional products of the Group could become subject to generic competition in the future as product patents and/or exclusivities for several of our products have recently expired, or are about to expire. For example pediatric exclusivity for Aprovel® and Plavix® which contribute significantly to our net income will expire in the United States in March 2012 and May 2012, respectively, and the compound patent of Aprovel® will expire in most of the European Union in August 2012. Also, the U.S. market exclusivity of Eloxatin® will expire in August 2012, pursuant to settlement agreements. We expect this generic competition to continue and to implicate drug products with even relatively modest revenues.
The introduction of a generic version of a branded medicine typically results in a significant and rapid reduction in net sales for the branded product because generic manufacturers typically offer their unbranded versions at sharply lower prices. Accordingly, approval and market entry of a generic product often reduces the price that we receive for these products and/or the volume of the product that we would be able to sell and could materially and adversely affect our business, results of operations and financial condition. The extent of sales erosion also depends on the number of generic versions of our products that are actually marketed. For instance in 2011, there was only one generic product of enoxaparin sodium (Lovenox®) marketed in the United States. The introduction of a second generic on the U.S. market in early 2012 is likely to decrease our sales and revenues on this product.
Our long-term objectives may not be fully realized.
We have established a strategy focused on three pillars: increased innovation in R&D, adaptation of our structure for future opportunities and challenges and pursuit of external growth opportunities. 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 implementing a cost savings program across the Group and expect this new initiative, together with expected synergies from our recent acquisition of Genzyme, to generate additional incremental cost savings by 2015. We may fail to realize all the expected cost savings, which could materially and adversely affect our financial results.
We may fail to adequately renew our product portfolio whether through our own research and development or through the making of acquisitions orand strategic alliances.
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 2009,2011, we spent €4,583€4,811 million on research and development, amounting to approximately 15.6%14.4% of our net sales.
Developing a product is a costly, lengthy and uncertain process. Also we may not be investing in the right technology platforms, leading 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 showing the same mechanism of action reaches earlier the market.
The research and development process typically takes from 10 to 15 years from discovery to commercial product launch. This process is conducted in various stages in order to test, along with other features, the effectiveness and safety of a product. There can be no assurance that any of these compounds will be proven safe or effective. See “Item 4. Information on the Company — B. Business Overview — Pharmaceutical Research & Development” and “—“Item 4. Information on the Company — B. Business Overview — Vaccines Research and Development”. 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). 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 eachrevenues which may negatively affect our operating results. Each regulatory authority may also 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, obtaining regulatory marketing approval is not a guarantee that the product will achieve commercial success.
Also our success depends on our ability to educate patients and healthcare providers and provide them with innovative data about our products and their 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.
On the same topic, for the research and development of drugs in rare diseases, we produce relatively small amounts of material at early stages. Even if a product candidate receives all necessary approvals for commercialization, we may not be able to successfully scale-up production of the product material at a reasonable cost or at all and we may not receive additional approvals in sufficient time to meet product demand.
As a complement to itsour portfolio of products, sanofi-aventis pursueswe pursue a strategy of selective acquisitions, in-licensing and partnerships in order to develop new growth opportunities. The implementation of this strategy depends on our ability to identify business development opportunities at a reasonable cost and under acceptable conditions of
financing. Moreover, entering into these in-licensing or partnership agreements generally requires the payment of 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 dependsthe Group continues to depend on the performance of certain flagship productsproducts.
Sanofi-aventis generatesWe generate a substantial share of itsour revenues from the sale of certain key products (see “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year ended December 31, 2011 compared with year ended December 31, 2010 — Net Sales by Product — Pharmaceuticals”), which represented 45.3%37.6% of the Group’s consolidated revenues in 2009.2011. Among these products is Lantus®, which in 2009, becamewas the Group’s leading product with revenues of €3,080€3,916 million in 2011, representing 10.5%11.7% of the Group’s consolidated revenues.revenues for the year. Lantus® is a flagship product of the Diabetes division, one of the Group’s recognized growth platforms. A reduction in
Sales of Cerezyme®, our enzyme-replacement product for patients with Gaucher disease which is also amongst our flagship products, totaled €441 million for the year ended December 31, 2011, below the usual level of sales due to important production disruptions since 2009 (see “— The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, adversely affect our operating results and financial condition and delay the launch of new products.” below). In addition the patient population with Gaucher disease is limited. Furthermore, changes in the methods for treating patients with such disease could limit growth, ofor result in a decline, in Cerezyme® sales.
In general, a reduction in sales of one or more of theseour flagship products (in particular sales of Lantus®)or in their growth could affect theour business, the results of operations and the 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.
For example, Cerezyme® and Fabrazyme® shortages due to manufacturing issues at our facility in Allston, Massachusetts (United-States) (see “— The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, adversely affect our operating results and financial condition and delay the launch of new products.” below) created, and continue to create, opportunities for our competitors and have resulted in a decrease in the number of patients using these products and a loss of our overall market share of Gaucher and Fabry patients, respectively. Even if we are able again to provide a full, sustainable product supply, there is no guarantee these patients will return to using our products.
Additionally, 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.
The diversification of the Group’s business exposes us to additional risks.
We have undertaken to transform our Group byare implementing a strategy that includes pursuing external growth opportunities to meet the challenges that we have identified for the future. The inability to quickly or efficiently integrate newly acquired activities or businesses, such as Genzyme, the loss of key employees or integration costs that are higher than anticipated, could delay our growth objectives and prevent us from achieving expected synergies. For instance, challenges that we may face in our efforts to integrate Genzyme include, among others:
addressing manufacturing problems and supply constraints that have negatively affected Genzyme’s business in recent years;
ensuring continued compliance with a consent decree that Genzyme entered into with the FDA in May 2010 relating to a manufacturing facility in Allston, Massachusetts (United-States) (see “Item 4. Information on the Company — B. Business Overview — Production and Raw Materials.”);
the outcome of ongoing legal and other proceedings to which Genzyme is a party, including shareholder litigation and patent litigation;
preserving and developing Genzyme’s goodwill in the genetic disease community; and
realizing the potential of the research and development pipeline.
If we fail to effectively integrate Genzyme or the integration takes longer than expected, we may not achieve the expected benefits of the transaction.
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. It may take a considerable amount of time and be difficult to implement a risk analysis 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.
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 the animal health business. The contribution of our animal health business to the Group’s income may be adversely affected by a number of risks including some which are specific to this business: i.e., the outbreak of an epidemic or pandemic that could kill large numbers of animals, and the effect of reduced veterinary expenditures during an economic crisis. In some of these sectors example:
• | we have increased exposure to the animal health business. The contribution of our animal health business to the Group’s income may be adversely affected by a number of risks including some which are specific to this business:i.e., the outbreak of an epidemic or pandemic that could kill large numbers of animals, and the effect of reduced veterinary expenditures during an economic crisis (see “— The ongoing slowdown of global economic growth and the global financial crisis could have negative consequences for our business” below). |
the margins of consumer health and generic products are generally lower than inthose of the traditional branded prescription pharmaceutical business. Moreover, the nature, scopeperiodic review of the effectiveness, safety and leveluse of certain over-the-counter drug products by health authorities or lawmakers may result in modifications to the regulations that apply to certain components of such products, which may require them be withdrawn from the market and/or that their formulation be modified.
specialty products (such as those developed by Genzyme) that treat rare, life-threatening diseases that are used by a small number of patients are often expensive to develop compared to the market opportunity, and third-party payers trying to limit health-care expenses may become less willing to support their per-unit cost.
Moreover, losses that may be sustained or caused by these new businesses may differ, with regards to their nature, scope and level, from the 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” above), and thus our current risk management and insurance coverage may not be adapted to such losses. These risks could affect our business, results of operations or financial condition.
The globalization of the Group’s business exposes us to increased risks.
Emerging markets have been identified as one of our growth platforms and are among the pillars of our overall strategy. Any 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 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)), corruption and fraud. Any difficultiesfraud, as we operate in adaptingmany parts of the world where corruption exists to some degree.
Our existing policies and procedures, which are designed to help ensure that we, our employees and our agents 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 taken by our employees, agents and intermediaries 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 opportunities and could affect our business, resultsan approved product from the market, or the imposition of operationscriminal or financial condition.civil sanctions, including substantial monetary penalties.
The regulatory environment is increasingly challenging forOur products and manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverse consequences to our business if we fail to comply with the pharmaceutical industry.regulations or maintain the approvals.
The industry in which we operate faces a changing regulatory environment and heightened public scrutiny worldwide, which simultaneously require greater assurances than ever as to the safety and efficacy of medications and health products on the one hand, and effectively provide reduced incentives for innovative pharmaceutical research on the other hand.
Health authorities, inare increasingly focusing on product safety and on the risk/benefit profile of pharmaceuticals products. In particular, the U.S. Food and Drug Administration (FDA)FDA and the European Medicines Agency (EMA) have imposed increasingly burdensome requirements on pharmaceutical companies, particularly in terms of the volume of data needed to demonstrate a product’s efficacy and safety. 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 unnecessary commercial harm, overly restrictive regulatory actions and erratic share price performance.
ToIn 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. 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.
For example, in May 2010, Genzyme entered into a consent decree with the FDA relating to its Allston facility (see “Item 4. Information on the Company — B. Business Overview — Production and Raw Materials.”). Pursuant to the consent decree, in November 2010, Genzyme paid $175.0 million to the U.S. Federal Governement disgorgement of past profits. The consent decree also requires 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. Remediation of the Allston facility in accordance with that plan is underway and is currently expected to continue for four more years, however, there is no guarantee that this timeframe will be respected.
We incurred substantial debt in connection with the acquisition of Genzyme which may limit our business flexibility compared to some of our peers
Our consolidated debt increased substantially in connection with our acquisition of Genzyme because we incurred debt to finance the acquisition price, and because our consolidated debt includes the debt incurred by Genzyme prior to the acquisition. Although we already achieved a partial deleverage by the end of 2011 (as of December 31, 2011, our debt, net of cash and cash equivalents amounted to €10.9 billion), we 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 the pricing and reimbursement of pharmaceutical products.
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 pricing and reimbursement is strong due to:
price controls imposed by governments in many countries;
removal of a number of drugs from government reimbursement schemes;schemes (for instance products determined to be less cost-effective than alternatives);
increased difficulty in obtaining and maintaining satisfactory drug reimbursement rates; and
the tendency of governments and private health care providers to favor generic pharmaceuticals.
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 hold the majority in Congress and the presidency, have introduced ahealth care reform proposal designed to increaselaw is increasing the government’s role in determining thewith respect to price, reimbursement and the coverage levels for healthcare-related expenses. This proposal includes notably provisions seeking to expandexpenses for the large government health care sector, imposed cost containment measures and increaseimposed drug companies’ rebates to create an independent body to reduce expenditures,the government. Implementation of health care reform has affected and to reinforce the authority of the government agency responsible for regulating 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 4. Information on the Company — B. Business Overview — Markets — Pricing & Reimbursement”). Some states are also considering legislation that would control the prices of and access to drugs and we believe that federal and state legislatures and health agencies will 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 example, in Spain, recent direct price-related measures include price discount to all products launched more than 10 years ago, all genericized products needing to be at a minor (lower) price, and no more gradualism in price reductions of originator post generics introduction. Additionally, measures such as INN prescriptions, have been implemented. Another example, in Turkey Government has accelerated enforcement of drugs costs containment measures which include increased institutional discount applied on reimbursement prices and lower reference prices for reimbursement of Generics and originals with Generics as well as 20-year old drugs without Generics.
Due to the ongoing cost containment policies being pursued in many jurisdiction 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 reduce 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.
Additionally, to the extent the slowing economic environment, as well as ongoing sovereign debt crisis affecting several European countries, may lead to financial difficulties or even the default or failure of major players including wholesalers or public sector buyers financed by insolvent States, the Group could 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 manufacture and supply of a substantial portion of our raw materials, active ingredients and medical devices; supply disruptions and/or quality concerns could adversely affect our operating results and financial condition”, “We rely on third parties for the marketing of some of our products.products” and “ Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition” below.
We marketFurther, 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 may lead some of ourpatients to switch to generic 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®delay treatments, skip doses or use less effective treatments to reduce their costs. Moreover, current economic conditions in the United States and several other countries, with Warner Chilcott forhave resulted in an increase in the osteoporosis treatment Actonel®, with Teva for Copaxone®, and with Merck & Co., Inc. fornumber of patients in the distributionMedicaid program, under which sales 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, wepharmaceuticals are subject to substantial rebates and, in many U.S. states, to formulary restrictions limiting access to brand-name drugs, including ours.
Our animal health business may also be negatively affected by the risk that certain decisions, such ascurrent slowdown in global economic growth (for instance tight credit conditions may limit the establishmentborrowing power of budgets and promotion strategies, are subjectlivestock producers, causing some 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 subjectswitch 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.lower-priced products).
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. 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
1 | Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms’ report on the consolidated financial statements. |
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(see “— Risks Relating to Legal Matters — Product liability claims could adversely affect our business, results of operations and financial condition”condition,” above). The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and the delay of new product launches and can adversely affect our operating results and financial condition.
Like many of our competitors, we have faced, and to a certain extent continue to face, significant manufacturing issues, most notably in our Genzyme subsidiary for the production of Cerezyme® and Fabrazyme®. In June 2009, Genzyme announced it had detected a virus that impairs cell growth in one of the bioreactors used in the Allston, Massachusetts facility to produce Cerezyme®. This contamination has had a material adverse effect on Cerezyme® and Fabrazyme® revenues. We will continue to work with minimal levels of inventory for Cerezyme® and Fabrazyme® until we are able to build inventory. However, there can be no guarantee that we will be able to return to pre-contamination supply levels of such products, nor can there be any 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 manufacture and supply of a substantial portion of our raw materials, active ingredients and medical devices.devices; supply disruptions and/or quality concerns could adversely affect our operating results and financial condition.
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 example, in 2008 we recalled a limited number of batches of Lovenox
® and wrote down significant unused inventory following the discovery of quality issues at a Chinese supplier of raw materials. 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. We may not have redundant manufacturing capacity for certain products particularly biologic products. For instance in summer 2011 a technical incident occurred in the filling line used for Apidra 3mL cartridges at our manufacturing site in Frankfurt and this has caused temporary shortages for Apidra 3mL cartridges. Also 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. Some
Further, some raw materials essential to the manufacture of our products are not widely available from sources we consider reliable; for example, we have approved only a limited number of suppliers of heparins for use in the manufacture of Lovenox®. Heparin purchase prices can also fluctuate. See “Item 4. Information on the Company — B. Business Overview — Production and Raw Materials” for a description of these outsourcing arrangements. Any of these factors could adversely affect our business, operating results or financial condition.
We rely on third parties for the 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®, and with Merck & Co., Inc. for the distribution of vaccines in Europe. See “Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products — Main pharmaceutical products” and “Item 4. Information on the Company — B. Business Overview — Vaccine Products” for more information on our major alliances. 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 during the course of these agreements or at the time of their renewal or renegotiation may affect the marketing of certain of our products and may cause a decline in our revenues and affect our results of operations.
Counterfeit versions of 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 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.(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%62% of our consolidated U.S. pharmaceutical sales wereare accounted for by just three wholesalers. In addition, the Group’s three main customers represent 22%17.4% 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 the beginning of 2010, financial difficulties in some countries of southern Europe have increased especially in Greece and Portugal. Part of our customers in these countries are public or subsidized health systems. The deteriorating economic and credit conditions in these countries has led to longer payment terms. This trend may continue and 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.
1 | Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms’ report on the consolidated financial statements and by Notes D.10. and D.34. to our consolidated financial statements included at Item 18 of this annual report. |
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 “— Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition” below and “— The ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business” above). For example, given the current level of investor confidence in the ability of the Greek State to avoid default, as a result of mark to market accounting standards, we recognized an impairment of €49 million on certain Greek bonds held by us in 2011.
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 some devices using new technologies which, in case of malfunctions could lead to a misuse causing a risk of damages to patients (see “— Product liability claims could adversely affect our business, results of operations and financial condition” above). Our inability or the inability 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 could lead to data deterioration or loss in the event of a system malfunction, or allow data to be 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.
Natural disasters prevalent in certain regions in which we do business could affect our operations
Some of our production sites are located in areas exposed to natural disasters, such as earthquakes (in North Africa, Middle East, Asia, Pacific, Europe, Central and Latin Americas), floods (in Africa, Asia Pacific and Europe) and hurricanes. In the event of a major disaster we could experience severe destruction or interruption of our operations and production capacity. As a result, our operations could suffer serious harm which could have a material adverse effect on our business, financial condition and results of operations.
Environmental Risks of Our Industrial Activities
Risks from the handling of hazardous materials could adversely affect our results of operations.
Manufacturing activities, such as the chemical manufacturing of the active ingredients in our products and the related storage and transportation of raw materials, products and wastes, expose us to various risks, including:
fires and/or explosions from inflammable substances;explosions;
storage tank leaks and ruptures; and
discharges or releases of toxic or hazardous substances.
These operating risks can cause personal injury, property damage and environmental contamination, and may result in:
the shutdown of affected facilities; and
the imposition of civil or criminal penalties.
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:
that we currently own or operate;
that we formerly owned or operated; or
where waste from our operations was disposed.
These environmental remediation obligations could significantly reduce our operating results. Sanofi-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 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 responsible parties” or the equivalent under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (also known as “Superfund”), and similar statutes in France, Germany, Italy, Brazil and elsewhere. As a matter of statutory or contractual obligation, we and/or our subsidiaries may retain responsibility for environmental liabilities at some of the sites of our predecessor companies, or our subsidiaries that we demerged, divested or may divest. We have disputes outstanding 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.
Environmental regulations are evolving (i.e.(i.e., in Europe, REACH, CLP/GHS, SEVESO, IPPC, the Waste Framework Directive, the Emission Trading Scheme Directive, the Water Framework Directive and the Directive on Taxation of Energy Products and Electricity and several other regulations aiming at preventing global warming). Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to our Group and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants, site restoration and compliance costs to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities, thereby adversely affecting our business, results of operations or financial condition. For more detailed information on environmental issues, see “Item 4. Information on the Company — B. Business Overview — Health, Safety and Environment (HSE).”
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%2011, 29.8% 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
1 | Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms’ report on the consolidated financial statements. |
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 alleged or actual disruption in the use of the euro as currency in one or more European Monetary Union countries and the associated fluctuations in currency exchange rates could have a material effect on our financial condition and earnings, the magnitude and consequences of which are unpredictable. For more information concerning our exchange rate exposure, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
In the context of the worldwide financial crisis, our liquidity may be constrained.
As of December 31, 2009,2011, the Group’s net debt amounted approximately to €4.1 billion.€10.9 billion, an amount which increased substantially with the acquisition of Genzyme in 2011. In addition to debt outstanding, the Group has contracted a number of credit lines and put into place commercial paper and medium term note programs with the aim of providing liquidity. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” In the event of a market-wide liquidity crisis, the Group might be faced with reduced access to
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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 offer new shares and they 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.
Our two largest shareholders own a significant percentage of the share capital and voting rights of sanofi-aventis.Sanofi.
As of December 31, 2009, Total and2011, L’Oréal our two largest shareholders,and Total held approximately 7.33%8.82% and 8.97%3.22% of our issued share capital, respectively, accounting for approximately 12.36%15.69% and approximately 15.32%5.52%, respectively, of the voting rights (excluding treasury shares) of sanofi-aventis.Sanofi. See “Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders.” Affiliates of each of these shareholders are currently serving on our Board of Directors. To the extent these shareholders continue to hold a large percentage of our share capital and voting rights, TotalL’Oréal and L’OréalTotal will remain in a position to exert heightened influence in the election of the directors and officers of sanofi-aventisSanofi and in other corporate actions that require shareholders’ approval.
Sales of our shares may cause the market price of our shares or ADSs to decline.
Neither TotalL’Oréal nor L’OréalTotal is, to our knowledge, subject to any contractual restrictions on the sale of the shares each holds in our Company. Both of these shareholders have announced their intent to sell all or part ofthat they do not consider their stakes in our company,Company as strategic to them, and have recently liquidated a significant partTotal makes regular sales of their respective holdings.its holdings on the financial market. 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. 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:
an active public market for the CVRs may not develop or the CVRs may trade at low volumes, both of which could have an adverse effect on the resale price, if any, of the CVRs;
because a public market for the CVRs has a limited history, the market price and trading volume of the CVRs may be volatile;
if the milestones specified in the CVR agreement are not achieved for any reason within the time periods specified therein, and if net sales do not exceed the thresholds set forth in the CVR agreement for any reason within the time periods specified therein, no payment will be made under the CVRs and the CVRs will expire without value;
since the U.S. federal income tax treatment of the CVRs is unclear, any part of any CVR payment could be treated as ordinary income and required to be included in income prior to the receipt of the CVR payment;
any payments in respect of the CVRs are subordinated to the right of payment of certain of our indebtedness;
we are not prohibited from acquiring the CVRs, whether in open market transactions, private transactions or otherwise, and on November 17, 2011, Sanofi publicly disclosed that it has obtained the necessary coporate authorizations to acquire any or all of the outstanding CVRs (for more information see “Item 5. Operating and Financial Review and Prospectus — Liquidity.”);
we may under certain circumstances purchase and cancel all outstanding CVRs; and
while we have agreed to use diligent efforts, until the CVR agreement is terminated, to achieve each of the Lemtrada™-related CVR milestones set forth in the CVR agreement, we are not required to take all possible actions to achieve these goals, and the failure to achieve such goals would have an adverse effect on the value, if any, of the CVRs.
Item 4. Information on the Company
Introduction
We are a global pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. In 2009,2011, our net sales amounted to €29,306€33,389 million. Based on 2009 sales, weWe are the fourthfifth largest pharmaceutical group in the world and the secondthird largest pharmaceutical group in Europe (source: IMS sales 2009)2011). 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.
Our business includes twothree main activities: pharmaceuticals,Pharmaceuticals, Human Vaccines through Sanofi Pasteur and human vaccines through sanofi pasteur. The Group is also present in animal healthAnimal Health products through Merial Limited (“Merial”)(Merial).
In our pharmaceuticalPharmaceuticals activity, which generated net sales of €25,823€27,890 million in 2009, we specialize in the following therapeutic areas:2011, our major product categories are:
• | Diabetes: our main products |
• | Rare Diseases:our principle products are enzyme replacement therapies: Cerezyme®, to treat Gaucher disease; Fabrazyme® to treat Fabry disease and Myozyme®/Lumizyme® to treat Pompe disease. |
• | Oncology: our |
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The global pharmaceutical portfolio of sanofi-aventisSanofi also comprises a wide range of other pharmaceutical products in Consumer Health Care (“CHC”)(CHC) and other prescription drugs including generics.
We are a world leader in the vaccines industry. Our net sales amounted to €3,483€3,469 million in 2009,2011, with leading vaccines in five areas:
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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,influenza vaccines, adult and by the sales growth of Pentaxim® in the international(1) region. Sanofi Pasteur also strengthened its leadership position in both seasonaladolescent booster vaccines, meningitis vaccines, and pandemic influenza.travel and endemics vaccines.
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’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 providing a comprehensive range of products to enhance the health, well-being and performance of a wide range of animals (production and companion animals). Our net sales for 2009 (which are not included in the Group’s 2009 net sales) amounted to $2,554 million. The company’s top-selling products include Frontline®, a topical anti-parasitic flea and tick brand for dogs and cats, Heartgard®, a parasiticide for control of heartworm€2,030 million in companion animals as well as Ivomec®, a parasiticide for the control of internal and external parasites in livestock.2011.
In the description below, the following should be kept in mind:
• | A drug can be referred to either by its international non-proprietary name (INN) |
For our pharmaceutical activity, except where otherwise stated, all market share percentages and rankings are based on full-year 20092011 sales figures from IMS Health MIDAS (retail and hospital);.
For our vaccines activity, market shares and rankings are based on our own estimates. These estimates have been made from assembled public domain information based oncollated from various sources, including statistical data collected by industry associations and information published by competitors; andcompetitors.
• | We present our consolidated net sales for our leading products sold directly and through alliances. As regards the products sold through our alliance with |
A. History and Development of the Company
Sanofi-aventisSanofi 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 operate under the commercial name “sanofi-aventis”“Sanofi” (formerly 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’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 105,000113,719 employees at year end 2009, not including an additional 5,600 employees of Merial.2011. Our legacy companies, Sanofi-Synthélabo (formed by athe 1999 merger betweenof Sanofi and Synthélabo in 1999)into the current holding company) and Aventis (formed by the combination of Rhône-Poulenc and Hoechst also in 1999), bring to the Group more than a century of experience in the pharmaceutical industry.
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.
Synthélabo was founded in 1970 through the merger of two French pharmaceutical laboratories, Laboratoires Dausse (founded in 1834) and Laboratoires Robert & Carrière (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, withto the time of the German industrial revolution and the emergence of the chemical industry. Traditionally active in pharmaceuticals, Hoechst strengthened its position in that industry by taking a controlling interest in Roussel-Uclaf in 1974 and the U.S. pharmaceutical company Marion Merrell in 1995.
Rhône-Poulenc was formed in 1928 from the merger of two French companies: 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, the remaining 49% of shares of Pasteur Mérieux Connaught in the area of vaccinesSerums & Vaccins S.A. 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.
In 1994, Pasteur Mérieux Serums & Vaccins, the Group’s vaccines division, together with the vaccines division of Merck & Co., Inc. formed Sanofi Pasteur MSD, creating the only European firm entirely dedicated to vaccines.
Merial was founded in 1997 as a combination of the animal health activities of Rhône-Poulenc and Merck. Merial was a joint venture in which we and Merck each held 50%. On September 17, 2009, sanofi-aventiswe acquired Merck’s 50%entire interest in Merial. Merial and Merial is now a wholly-owned subsidiary of sanofi-aventis. On March 8, 2010, sanofi-aventis exercised its contractual right to combine the Intervet/Schering-Plough Animal Health business with Merial to form anbecame Sanofi’s dedicated animal health division following the joint venture that would be equally ownedstatement issued by the new Merck and sanofi-aventis. FormationSanofi in March 2011 announcing the end of thetheir agreement to create 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. See Note D.2. to our consolidated financial statements included at Item 18 of this annual report).report.
Starting in 2009, Sanofi made a series of acquisitions to create or strengthen our regional CHC and generics platforms including:
The Prague-based branded generics group Zentiva was acquired by sanofi-aventisSanofi through a tender offer completed on March 11, 2009.2009;
On April 27, 2009, Sanofi acquired a 100% equity interest in Medley, the third largest pharmaceutical company in Brazil and a leading generics company in that country;
On February 9, 2010, Sanofi-aventisSanofi successfully completed its tender offer for all outstanding shares of common stock of Chattem, Inc., (“Chattem”) a leading U.S. consumer healthcare company. Immediately following the tender offer, sanofi-aventisSanofi held approximately 97% of Chattem’s outstanding shares, and acquired the remaining shares in a “short form” merger on March 10, 2010.2010; and
On February 24, 2011, we acquired BMP Sunstone Corporation (a specialty pharmaceutical company with a proprietary portfolio of branded pharmaceutical and healthcare products in China) through a merger between BMP Sunstone and a wholly-owned subsidiary of ours.
On April 4, 2011, we acquired Genzyme Corporation, a leading biotechnology group headquartered in Cambridge, Massachusetts and specialized in the treatment of rare diseases, renal diseases, endocrinology, oncology and biosurgery. Immediately following the tender offer, Sanofi held over 90% of Genzyme’s outstanding shares, and acquired the remaining shares in a “short form” merger on April 8, 2011. The agreement is described at “Item 10. Additional Information — C. Material Contracts”.
As of the May 2011 General Meeting of Shareholders, the Group changed its name to “Sanofi”.
Strategy
Sanofi-aventisSanofi is a diversified, global healthcare leader with a numberoffering solutions across areas of core strengths:historical strength and multiple growth platforms. Like other pharmaceutical companies, we have been facing competition from generics for several of our major products, in an environment subject to cost containment pressures from both third party payers and healthcare authorities. Starting in 2009, we have responded to these major challenges by implementing a strongnew strategy with the objective of repositioning Sanofi for more stable and long-established presencesustainable revenue and earnings growth. During that time we have transformed the Company by decreasing our reliance on existing “blockbuster” medicines (medicines with over $1 billion in emerging markets global sales), optimizing our approach to Research & Development (R&D), increasing our diversification, and investing in 6 growth platforms (Emerging Markets(1), Diabetes Solutions, Human Vaccines, Consumer Health Care, Animal Health, and Innovative Products). Additionally, we became a global leader in rare genetic diseases through our acquisition of Genzyme in 2011.
We regularly review our strategy and are continuing to execute on this strategy along three prongs:
Increasing innovation in Research & Development (R&D)
We have conducted a complete review of our research and development portfolio since 2009, in order to improve the allocation of diabetes drugsour resources. This review has led to a rationalization of our portfolio, focusing on high-value projects and reallocating part of our resources from internal infrastructure to partnerships and collaborations. We also redefined our decision-making processes so that commercial potential and the scope for value creation are better integrated into our development choices. We also redesigned our R&D footprint including the biggest selling insulinincreasing our presence in the world: Lantus®,Boston, MA area with its concentration of universities and innovative biotechnology companies. R&D is now based on an organizational structure focused on patient needs and encouraging entrepreneurship. This network-based organization, open to external opportunities, enables our R&D portfolio to more effectively capitalize on innovation, from a market-leading position in vaccines, a broadwide 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.sources.
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Like most pharmaceutical companies, we are 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. We have decided to respond to these major challenges by developing our platforms for growth.
Throughout 2009, we have been engaged in a wide-ranging transformation program designed to secure sources of sustainable growth. Our strategy focuses on three key themes:
Increasing innovation in Research & Development (“R&D”)
We conducted a complete and objective review of our research portfolio in 2009, in order to reassess the allocation of 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 redefined our decision-making processes so that new commercial potential and the scope for value creation are better integrated into our development choices. The ongoing reorganization of our R&D is intended to help us become more flexible and innovative, with some of our existing resources being reallocated to external collaborations. 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 arein 2011 designed 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 broadenresearch (including diabetes, oncology 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.vaccines). Finally, we have made progress on our objective of offering more products that add value for patients: for example Multaq®, whichpatients, with five New Molecular Entities (NMEs) submitted to regulatory agencies in 2009 was launched in2011, and 18 potential new product launches possible before the United States and approved in the European Union.end of 2015.
Adapting our structures to meet the opportunities and the challenges of the future
DuringSince 2009, we have adapted our operating model, previously toofrom being focused on the most importantbest-selling prescription drugs in our traditionally importanttraditional markets, to reflecta broader set of products and services reflecting the diversity of our activities and our geographical reach. In particular, we tailored our strategy, structure and offering to each region’s needs, so as to deliver the most appropriate solution to each patient. 25%The result is a dramatic shift in business mix from Top 15 products to key growth platforms. In 2008, 61 % of our 2009sales originated from our top 15 products while in 2011, 65 % of our sales originated from Genzyme and our growth platforms. Moreover, 30 % of our 2011 sales were in emerging markets. We strengthenedmarkets where we have enhanced our presenceofferings in vaccineshigh growth market segments such as Generics and expanded our consumer health care operations, so as to address our customers’ needs more thoroughlyConsumer Health Care by completing 17 transactions and take better advantageinvesting a total of growth opportunities. approximately €3.7 billion in acquisitions over the last three years.
We 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 enabledkeeping a tight control on SG&A expenses, this has helped enable us to further improve our operating ratios. In 2009, the initial resultssuccessfully navigate through a period where multiple of our leading products faced the loss of patent exclusivity protection, despite an often 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 intoremains an integral and disciplined pillar of our overall strategy, and translates into disciplinedtargeting acquisitions and alliances that create and/or strengthen platforms for long-term growth and create value for our shareholders. DuringSince January 2009, we conducted an active andhave invested a total of approximately €23 billion in external growth accounting for approximately 20% increase in 2011 consolidated sales. During 2011, we pursued this targeted policy ofactively, announcing 30 new transactions, including three acquisitions and 27 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 playersGenzyme, a global leader in healthrare genetic diseases 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 supplementsemerging leader 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.multiple sclerosis. We also strengthened our animal health interests by acquiringEmerging Markets growth platform with the remaining 50%acquisition of Merial not previously held by usUniversal Medicare, advancing our sustainable growth strategy in India and subsequently exercised on March 8, 2010,facilitating the creation of a Consumer Health Care platform in that country. Our U.S. vaccines operations were reinforced with the acquisition of Topaz Pharmaceuticals, which complements 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).pediatric offering.
OurIn the years to come, we expect our sound financial position should giveto provide us significantthe potential to create value via external growth opportunities and to strengthen our diversification and growth platforms through new acquisitions and partnerships. We will remain financially disciplined with the aim of securingour business development activities to execute strategically important transactions and partnerships that secure 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:categories: diabetes, rare diseases, oncology, thrombosis &and other flagship products in anti-thrombotics, cardiovascular, central nervous systemrenal and internal medicine.biosurgery fields.
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 otherOther 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, 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 sellingbest-selling pharmaceutical products for the year ended December 31, 2009.2011. These products are major contributors to public health.
Therapeutic Area / Product Name | Net Sales (€ million) | Drug Category / Main Areas of Use | ||||
Diabetes | ||||||
Lantus® (insulin glargine) | 3,916 | Long-acting analog of human insulin | ||||
• Type 1 and 2 diabetes mellitus | ||||||
Apidra® (insulin glulisine) | 190 | Rapid-acting analog of human insulin | ||||
• Type 1 and 2 diabetes mellitus | ||||||
Amaryl® (glimepiride) | 436 | Sulfonylurea | ||||
• Type 2 diabetes mellitus | ||||||
Insuman® (insulin) | 132 | Human insulin (rapid and intermediate acting) | ||||
• Type 1 and 2 diabetes mellitus | ||||||
Rare Disease | ||||||
Cerezyme® (imiglucerase for injection) | 441 | (1) | Enzyme replacement therapy | |||
• Gaucher disease | ||||||
Fabrazyme® (agalsidase beta) | 109 | (1) | Enzyme replacement therapy | |||
• Fabry disease | ||||||
Myozyme®/Lumizyme® (alglucidase alpha) | 308 | (1) | Enzyme replacement therapy | |||
• Pompe disease | ||||||
Oncology | ||||||
Taxotere® (docetaxel) | 922 | Cytotoxic agent | ||||
• Breast cancer • Non small cell lung cancer • Prostate cancer • Gastric cancer • Head and | ||||||
Eloxatine® (oxaliplatin) | 1,071 | Cytotoxic agent | ||||
• Colorectal cancer | ||||||
Jevtana® (cabazitaxel) | 188 | Cytotoxic agent | ||||
• Prostate cancer | ||||||
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Lovenox® (enoxaparin sodium) | 2,111 | Low molecular weight heparin | ||||
• Treatment and prevention of deep vein thrombosis • Treatment of acute coronary syndromes | ||||||
Plavix® (clopidogrel bisulfate) | 2,040 | Platelet adenosine disphosphate receptor antagonist | ||||
• Atherothrombosis • Acute coronary syndrome with and without ST segment elevation | ||||||
Aprovel® (irbesartan) / CoAprovel® (irbesartan & hydrochlorothiazide) | 1,291 | Angiotensin II receptor antagonist | ||||
• Hypertension | ||||||
Multaq® (dronedarone) | 261 | Anti-arrhythmic drug | ||||
• Atrial Fibrillation |
Therapeutic Area / Product Name | 2011 Net Sales (€ million) | Drug Category / Main Areas of Use | ||||
Renagel® (sevelamer hydrochloride) / Renvala® (sevelamer carbonate) | 415 | (1) | Oral phosphate binders | |||
• High phosphorus levels in patients with chronic kidney disease, or CKD, on dialysis | ||||||
Synvisc® / Synvisc-One® | 256 | (1) | Viscosupplements | |||
• Pain associated with osteoarthritis of the knee | ||||||
Others | ||||||
Stilnox® /Ambien®/Myslee® (zolpidem tartrate) | 490 | Hypnotic | ||||
• Sleep disorders | ||||||
Allegra® (fexofenadine hydrochloride) | 580 | (2) | Anti-histamine | |||
• Allergic rhinitis • Urticaria | ||||||
Copaxone® (glatiramer acetate) | 436 | Non-interferon immunomodulating agent | ||||
• Multiple sclerosis | ||||||
Tritace® (ramipril) | 375 | Angiotensin Converting Enzyme | ||||
• Hypertension • Congestive heart failure • Nephropathy | ||||||
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Depakine® (sodium valproate) | 388 | Anti-epileptic | ||||
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•
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Xatral® (alfuzosin hydrochloride) | 200 | Uroselective alpha1-blocker | ||||
• Benign prostatic hypertrophy | ||||||
Actonel® (risedronate sodium) | 167 | Biphosphonate | ||||
• Osteoporosis • Paget’s | ||||||
Nasacort® (triamcinolone acetonide) | 106 | Local corticosteroid | ||||
• Allergic rhinitis |
(1) | Since date of acquisition |
(2) | Excluding Allegra® OTC sales. |
Diabetes
The prevalence of diabetes is expected to increase significantly over the next 20 years, as a direct result ofreflecting multiple socio-economic factors including sedentary lifestyle, excessivelifestyles, excess weight and obesity, unhealthy diet and an aging population. Our principal diabetes products are Lantus®, a long-acting analog of human insulin,insulin; Apidra®, a rapid-acting analog of human insulininsulin; Insuman®, a human insulin; and Amaryl®, a sulfonylurea. In 2011, in some European markets, we launched the BGStar® solution range of blood glucose meters for patients with diabetes, whether they are treated with insulin or not.
Lantus®
Lantus® (insulin glargine) is a long-acting analog of human insulin, offering improved pharmacokinetic and pharmacodynamic profiles compared to other basal insulins. 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 six years and above with type 1 diabetes mellitus.
Lantus® is a well establishedwell-established treatment with 24over 38 million patient-years exposure since 2000. Over 70,000 patients throughout the world have been involved inThe clinical trial experience with Lantus® clinical trials.covers over 100,000 patients.
Lantus® can be administered subcutaneously using syringes or specific pens including the Lantus® SoloSTAR® disposable pen and the new ClikSTAR® reusable pen:including:
• | Lantus® SoloSTAR® is a pre-filled disposable pen available in over 50 countries worldwide. It is the only disposable pen that combines a low injection force, up to 80 units per injection, and |
• | ClikSTAR® is a |
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 JuneSeptember 2009, following four highly publicized but methodologically limited registry analyses, discussingsome of which created concern over 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, oncology and epidemiology to review the findings of the registry analyses. On July 15, 2009, they published a statement concluding that all four manuscripts had significant methodological limitations and shortcomings, and that they provided inconsistent and inconclusive results. This statement followed cautionary statements by the European Medicines Agency (“EMA”), the U.S. FDA as well as patient and scientific organizations such as 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-clinicalpreclinical and clinical programs involving human insulin and insulin glargine andanalogues, including insulin glargine; it is designed to generate more information on whether there is any association between cancer and insulin use, and to assess ifwhether there is any difference in risk between insulin glargine and otherdifferent types of insulins. The plan is structured to yield short-term and longer-term results. Three epidemiological studies are planned (two retrospectivesretrospective cohort studies and one case-control study) have been launched:
• | the Northern European Study will compare the risk of cancer in adults prescribed insulin glargine versus those prescribed human insulin, and other types of insulin, and in all users of insulin combined. The results of the ‘Northern European Database Study of Insulin and Cancer Risk’ are under review by health authorities and will be presented to scientific conferences in 2012. These results confirm Sanofi’s confidence in the safety of Lantus®; |
the U.S. Study will compare the risk of breast, prostate and colon cancer (each considered separately) in glargine users versus human NPH insulin users. Study completion is for the end of the first half of 2012; and
the International Study of Insulin and Cancer, being carried out in the United Kingdom, France and Canada, will assess the association of breast cancer with the use of insulins. The study results are expected by end 2012.
The ADA/ACS (American Diabetes Association / American Cancer Society) Consensus Report published on June 16, 2010 reasserted the inconclusiveness of any link between insulin and cancer.
In January 2011, the FDA updated its ongoing safety review of Lantus®. We expectIn addition to complete the two retrospectives cohort studies and analyze theiranalysis of the four registry analyses published in 2009, the FDA also reviewed results from a five-year diabetic retinopathy clinical trial in patients with type 2 Diabetes. Based on these data, the FDA has not concluded at this time for scientific presentations at medical conferences in 2012. We aim to presentthat Lantus® increases the risk of cancer. FDA review remains ongoing.
In December 2011, results of new meta-analysis were presented at the World Diabetes Congress. This new meta-analysis of all published studies—observational studies derived from databases as well as randomized controlled clinical trials and one case-control studystudy—has demonstrated no increased risk in 2013. We are also conducting pre-clinical studies that for which we expectpeople using Lantus® when compared to have results in 2010 and in 2011.the users of human insulin.
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, theseThese guidelines further established basal insulins such as Lantus®, or a sulfonylurea such as Amaryl®, as two preferred second-line treatment options for people with diabetes who are unable to achieve glycemic control targets with lifestyle intervention and metformin alone. These treatment recommendations reinforce the timely use of basal insulin as a core therapy for type 2 diabetes.
Lantus® is the world number-one soldselling insulin brand in the world interms of both sales and units (source: IMS, 20092011 sales) and is available in over 70 countries worldwide. The three leading countries for sales of Lantus® arein 2011 were the United States, France and Germany.Japan.
Apidra®
Apidra® (insulin glulisine) is a rapid-acting analog of human insulin. Apidra® is indicated for the treatment of adults with type 1 anddiabetes, or in type 2 diabetes for supplementary glycemic control. Apidra® has a more rapid onset and shorter duration of action than fast-acting human insulin and can be associated with long-acting insulins such as Lantus® for supplementary glycemic control at mealtime.
In addition, Apidra® is equally effective in adult diabetics ranging from lean to obese and offers patients greater flexibility of administration, either before or just after mealtime.
Apidra® can be administered subcutaneously using syringes or specific pens including the Apidra® SoloSTAR® disposable pen and the new ClikSTAR® reusable pen:pen.
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Apidra® was launchedis available in Germany in 2004, in other Europeanover 60 countries in 2005, in the United States in 2006, and in Canada and Japan in 2009.worldwide.
Due to a technical incident on a manufacturing line, Apidra® is now available in over 26 countries worldwide. The top three countries contributing to salesfaced a temporary shortage of Apidra® are3mL cartridges (including Apidra® SoloSTAR®) which impacted supplies in some markets. The production of Apidra® 3mL cartridges is expected to return to full capacity in the United States, Germanyfirst half of 2012. Apidra® vials were not impacted.
Insuman®
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 inEscherichia coli 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 mostly sold in Germany.
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® reduces the body’s blood sugar level in two ways: by helping the body to produce more insulin both at mealtime and between meals, and by decreasing insulin resistance. 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® 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®, a fixed-dose combination of 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 leadingbest-selling oral anti-diabetes product by volume (source: IMS 20092011 sales). A number of generics have received marketing authorization and have been launched in Europe and the United States. Generic became available in Japan in November 2010 but the impact on Amaryl® sales compared to the impact of generic sales generally observed in the U.S. or the EU has been more moderate.
BGStar® / iBGStar™
Sanofi and its partner AgaMatrix are co-developing innovative solutions in diabetes care with the aim of simplifying the diabetes management experience for patients and healthcare providers. The blood glucose monitoring solutions will be exclusive to Sanofi and are designed to be synergistic with our Diabetes portfolio, with a positive effect on sales of Lantus® and other products expected.
BGStar® and iBGStar™ are blood glucose meters that feature Dynamic Electrochemistry®, an innovative technology that extracts a spectrum of information from blood that is inaccessible to traditional electrochemical methods and compensates for many interfering factors that often distort blood glucose results.
These monitoring devices are an important step towards our vision of becoming the global leader in diabetes care by integrating innovative monitoring technology, therapeutic innovations, personalized services and support solutions. During 2011, the BGStar® and iBGStar™ were made commercially available in Germany, France, Switzerland, Spain, the Netherlands and Italy.
In December 2011, the FDA approved the iBGStar™ the first blood glucose meter that connects to the iPhone® allowing patients to view and analyze accurate, reliable information in “real time”.
The main compounds currently in Phase II or III clinical development in the DiabetesDiabetes/Other Metabolic Disorders field are:
Lixisenatide (AVE0010 GLP-1: Glucagon-like peptide-1 agonist, |
PN2034 (novel oral insulin sensitizer, type 2 diabetes mellitus; Phase II)IIIb; lixisenatide is in-licensed from Zealand Pharma A/S). As an insulin sensitizer, PN2034 is expected to normalizeThe GETGOAL Phase III studies were finalized and therefore enhance insulin actiondemonstrated that lixisenatide was effective in lowering blood sugar and decreasing body weight with good safety and tolerability. These results were presented at international conferences (e.g. ADA, EASD, IDF). Lixisenatide was submitted in the liver of diabetic patients. The initiation of a Phase IIb study in type 2 diabetes mellitus is projected for the thirdfourth quarter of 2010. PN2034 is licensed-in from Wellstat.2011 to EMA, Switzerland, Mexico, Brazil, Canada, Ukraine, South Africa and Australia. Additional Phase IIIb studies have been initiated.
Phase I studies on combination of lixisenatide and Lantus® have been successfully finalized. A proof-of-concept study to compare insulin glargine/ lixisenatide fixed ratio combination versus insulin glargine on glycemic control over 24 weeks has begun.
Preliminary Phase II results ofSAR236553, co-developed with Regeneron (REGN727: anti-PCSK9 mAb), have been obtained. Treatment with SAR236553 leads to mean relative LDL-Cholesterol reduction of greater than 65% after 8-12 weeks of treatment in patients with high LDL-C at baseline.
The partnership with Metabolex on the GPR119 receptor agonistSAR260093 has been terminated.
Oncology
Sanofi-aventisSanofi is a leaderpresent in the oncology field, primarily in chemotherapy, with twothree major agents:products: Taxotere® and, Eloxatine®., and Jevtana®, which was launched commercially in the United States in 2010 and in the second quarter of 2011 in Europe.
Taxotere®
Taxotere® (docetaxel), a taxoid class derivative, inhibits cancer cell division by essentially “freezing” the cell’s internal skeleton, which is comprised of microtubules. Microtubules assemble and disassemble during a cell cycle. Taxotere® promotes their assembly and blocks their disassembly, thereby preventing many cancer cells from dividing and resulting in death in somemany cancer cells.
Taxotere® is available in more than 100 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 approval for use in eleven indications in five different tumor types (breast, prostate, gastric, lung, and head and neck). Taxotere® is indicated for early stage and metastatic breast cancer, first-line and second-line metastatic Non-Small Cell Lung Cancer (“NSCLC”)(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® in 2009 are2011 were the United States, Japan, France, Germany and Japan.China. Generics of docetaxel were launched at the end of 2010 in Europe and in April 2011 in the U.S. Exclusivity for Taxotere® in Japan will be maintained through November 2013 (see “— Patents, Intellectual Property and Other Rights” below).
EloxatineEloxatin®
EloxatineEloxatin® (oxaliplatin) is a platinum-based cytotoxic agent. EloxatineEloxatin® combined 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, EloxatineEloxatin® is in-licensed from Debiopharm and is marketed in the FOLFOX regimen has been shown to:more than 70 countries worldwide.
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 EloxatineEloxatin® 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 StatesU.S. market, in August and September 2009, a number of oxaliplatin generics received final marketing authorization from the FDA and have since been launched.were marketed until June 30, 2010, when their manufacturers were ordered by the U.S. District Court for the District of New Jersey to cease selling their unauthorized Eloxatin® generic in the United States. Eloxatin U.S. market exclusivity is expected to be maintained through August 9, 2012. See “Item 8. Financial Information — A. Consolidated Financial Statements and other Financial Information — Patents”.
EloxatineJevtana®
Jevtana® (cabazitaxel) is a new 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.
The results of the TROPIC Phase III study demonstrated that cabazitaxel plus prednisone/prednisolone significantly improved overall survival versus the standard regimen of mitoxantrone plus prednisone/prednisolone in patients with metastatic hormone-refractory prostate cancer whose disease progressed following treatment with docetaxel-based chemotherapy. A combination of cabazitaxel and prednisone/prednisolone significantly reduced the risk of death by 28% with an improvement in median overall survival of 15.1 months vs. 12.7 months in the mitoxantrone combination arm.
Jevtana® was launched in the United States in July 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 and was launched during the second quarter of 2011 in Germany and France. Jevtana® is in-licensed from Debiopharm andnow approved in 53 countries.
Sanofi has initiated a broad development program with Jevtana®. The clinical program is marketed in more than 70 countries worldwide. The top countries contributingprojected to the sales of Eloxatineevaluate Jevtana® in 2009first- and second-line treatment of prostate cancer patients, second-line treatment of small-cell lung cancer patients, and patients with advanced gastric cancer.
The top four countries contributing to sales of Jevtana® in 2011 were the United States, Canada, ChinaGermany, Brazil and South Korea.France.
The main compounds currently in Phase II or III clinical development in the Oncology field are:
• | Zaltrap®, also known as aflibercept, is an investigational angiogenesis inhibitor with a unique mechanism of action. This fusion protein binds all forms of Vascular Endothelial Growth Factor-A (VEGF-A), as well as VEGF-B and placental growth factor (PIGF), additional angiogenic growth factors that appear to play a role in tumor angiogenesis and inflammation. Zaltrap has been shown to bind VEGF-A, VEGF-B, and PlGF with higher affinity than their native receptors. Sanofi Oncology and Regeneron are collaborating on a broad oncology development program for Zaltrap. The Phase III clinical program was designed to evaluate Zaltrap in combination with common chemotherapy regimens |
in the treatment of patients with advanced cancers, including cancers where bevacizumab has not demonstrated efficacy. Patients who had previously received bevacizumab were also included in the clinical trials for certain second-line treatment settings. In June 2011, Sanofi announced the positive results from VELOUR, a multinational, randomized, double-blind trial comparing the FOLFIRI (irinotecan-5-fluorouracil-leucovorin) chemotherapy regimen in combination with either Zaltrap or placebo in the treatment of patients with mCRC. The study randomized 1,226 patients with mCRC who previously had been treated with an oxaliplatin-based regimen. About one-third of the participants received bevacizumab as part of their first-line therapy. The primary endpoint was an improvement in overall survival. Secondary endpoints included progression-free survival, response to treatment and safety. Results were first presented at the ESMO World Congress on Gastrointestinal Cancer on June 25, 2011. The abstract (#0-0024) was published in the June 2011 supplement to Annals of Oncology. The current development program also explores Zaltrap for the treatment of metastatic prostate cancer with VENICE: First-line treatment for androgen-independent (hormone-refractory) metastatic prostate cancer in combination with docetaxel and prednisone (Phase III). Final results are anticipated in 2012. The aflibercept dossier was accepted for review by the EMA at the end of 2011. A NDA was filed in February 2012. |
Semuloparin is a novel ultra-low-molecular-weight heparin (ULMWH) characterized by a high anti-Xa and a residual anti-IIa activity. Semuloparin’s binding feature is directly responsible for the prolonged half-life (16-20 hours). In the Phase III placebo-controlled SAVE-ONCO trial, whose results were presented at ASCO 2011, Semuloparin has been investigated for its use in the prophylaxis of venous thromboembolism (VTE) in 3,212 cancer patients receiving chemotherapy for locally advanced or metastatic solid tumors (lung, pancreas, stomach, colon/rectum, bladder or ovary). Overall, Semuloparin 20mg once daily administered subcutaneously over a mean treatment duration of 3.2 months, significantly reduced VTE or VTE related death by 64% and PE by 59% vs placebo. The oncologypipeline includes a broad spectrumtreatment effect was consistent across the components of novel agents with a varietyprimary endpoint, DVT and PE, cancer type, stage and various levels of mechanismsVTE risk. The incidence of actionmajor bleeding was similar in the two groups: 1.2% and 1.1% in the Semuloparin and placebo groups, respectively. Further study analyses by sub-groups have been presented in oral presentations at ESMO and ASH 2011. A new drug application (NDA) has been accepted for treatingreview by the FDA and the EMA end of October 2011. Semuloparin is expected to be the first anti-coagulant approved for the indication of VTE prophylaxis in cancer and/or cancer side-effects, including cytotoxic agents, anti-mitotic agents, anti-angiogenic agents, anti-vascular agents, monoclonal anti-bodies, and supportive care therapies.patients receiving chemotherapy.
BSI-201 (PARP inhibitor, metastatic triple negative breast cancer (TNBC); Phase III). Developed by BiPar Sciences, Inc. (“BiPar”), a privately held U.S. biopharmaceutical company and a leader in the emerging field(iniparib SAR240550) is an agent with novel mechanism of DNA (deoxyribonucleic acid) repairactivity that 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 damage repair; BSI-201 is currently being evaluated for its potential to enhancestudied in advanced squamous non-small cell lung cancer (Phase III) as well as ovarian and breast cancers (Phase II). While the effectinitial dosing regimen was based on the putative PARP inhibitory activity, current efforts are aimed at elucidating the mechanism of chemotherapy–induced DNA damage. It isaction and exploring the furthest advanced compoundmaximal tolerated dose both as a single agent and in clinical developmentcombination with chemotherapy.
Ombrabulin(AVE8062; combretastatin derivative, a new anti-vascular agent in-licensed from Ajinomoto; sarcoma; Phase III). Single agent and combination studies with platinums and taxanes alone or in TNBC.combination have been conducted with ombrabulin. A U.S. Phase III study to confirm Phase II datain soft tissue sarcoma in combination with cisplatin was initiated in July2008 and will terminate enrollment in 2012. Ombrabulin is also investigated in a Phase II trial in Non-Small-Cell Lung Cancer in combination with taxanes and platinum salts, which is over 90% enrolled and will report results in 2012, as well as in an ongoing Phase II trial in ovarian cancer.
SAR302503 (TG101348) was purchased from Targegen in 2009 and is ongoing.being developed exclusively by Sanofi. SAR302503 is a selective oral, small molecule inhibitor of the JAK2 kinase. JAK2 and the JAK/stat pathway have been identified as key regulators of growth and differentiation of normal hematopoeitic cells, and are commonly dysregulated in multiple myeloproliferative disorders, including myelofibrosis (MF), polycythemia vera (PV), and essential thrombocytosis (ET). SAR302503 is now in Phase III, being investigated in the JAKARTA trial, a global Phase III trial of SAR302503 in primary and secondary myelofibrosis. The unique ability of SAR302503 to decrease allele burden will be further explored in the JAKARTA trial. In December 2009,addition, a Phase II study in MF has recently completed accrual. Also ongoing is a Phase II trial in hydroxyurea-resistant PV and ET.
SAR245408 (XL147) was in-licensed from Exelixis, Inc. and is being developed by Sanofi. This phosphoinositide-3-kinase (PI3K) inhibitor is under evaluation in a Phase II study of monotherapy for
the treatment of advanced or recurrent endometrial cancer. Combinations with paclitaxel/carboplatin, letrozole and trastuzumab are also being evaluated. Phase I trials of novel combinations with MSC1936369B (under a collaboration with Merck Serono, a division of Merck KGaA, Darmstadt, Germany) and MM121 (see below) have been initiated. |
SAR245409 (XL765) was also in-licensed from Exelixis, Inc. and is being developed under an alliance by Sanofi. This oral agent is an inhibitor of phosphoinositide-3-kinase (PI3K) and also acts against the FDA granted Fast Track designation (accelerated review)mammalian target of rapamycin (mTOR). A Phase I/II study in combination with letrozole for this indication. In parallel, BSI-201the treatment of metastatic hormone-receptor-positive breast cancer is ongoing and a Phase II trial in mantle cell lymphoma, follicular lymphoma and chronic lymphocytic leukemia has been initiated. Combinations with temozolomide, bendamustine and rituximab are also being evaluated.
SAR256212 (MM-121).Under an exclusive global collaboration and licensing agreement, Merrimack and Sanofi are co-developing SAR256212, a fully human monoclonal antibody targeting ErbB3. ErbB3 has been identified as a key node in tumor growth and survival. SAR256212 blocks Heregulin binding to ErbB3, and formation of pErbB3 and pAKT. Given SAR256212’s mode of action, it has the potential to be used in a wide number of tumors and settings. SAR256212 is in Phase II stage of development (Breast, Lung and Ovarian cancers), while a number of combinations with chemotherapy and targeted agents are being explored in the Phase I program. A companion diagnostic tool is being developed in advanced non-small cell lung cancerparallel with the clinical program.
SAR3419(Antibody Drug Conjugate (ADC) maytansin-loaded anti-CD19 mAb; B-cell malignancies: B-Non Hodgkin’s Lymphomas (NHL), B-Acute Lymphoblastic Leukemias (ALL). License from IMMUNOGEN inc.). The clinical development program is entering Phase II stage in Diffuse Large B Cell Lymphoma (DLBCL, aggressive lymphoma type) with the aim of confirming the clinical benefit observed in patients during Phase I trials. Ongoing/Planned trials in unmet medical need subsets of patients are: one Phase II study as single agent and one study in ovarian cancer (Phase II);combination with Rituximab (rituxan, anti CD20 mAb) in Relapsed/Refractory (R/R) DLBCL patients. A biomarker exploratory sub-study is associated to the clinical NHL program in order to evaluate drivers for anti tumor response. In parallel, preclinical experiments to identify potential synergistic combinations (hypothesis driven combinations and unbiased in vitro screens) are being performed. A second indication is developed in a setting of large medical need, with the start of one exploratory Phase II study in adult patients with R/R ALL.
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Alvocidib(cyclin-dependent kinase inhibitor, chronic lymphocytic leukaemia (CLL); Phase III). Alvocidib is being developed in collaborationIn 2011, we conducted several additional collaborations with Ohio State Universityother companies, universities and the U.S. National Cancer Institute. A pivotal clinical Phase II/III programinstitutes to support accelerated/conditional approval in refractory CLL patients is ongoing in Europe and the United States. Additional studies are expected to explore the potential benefit of alvocidib in other hematological malignancies;
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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 Phase 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. Besides 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 signedCollaborations 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 development of a BiTE® antibody, directed against an antigen present on the surface of tumor cells. BiTE® antibodies are novel therapeutic antibodies that activate T-cells so that they will identify and destroy tumor cells.
Thrombosis and CardiovascularRegeneron
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 blockWe and Regeneron globally collaborate on the blood vessel, preventing blooddevelopment and oxygen from reaching the organ being supplied. Our principal products for the treatment and preventioncommercialization of thrombosis are LovenoxZaltrap®/Clexane. Under the terms of our September 2003 collaboration agreement, as amended, we and Regeneron will share co-promotion rights and profits on sales, if any, of Zaltrap® outside of Japan for disease indications included in our collaboration. In Japan, Sanofi will develop and Plavixcommercialize Zaltrap®/ Iscover, with Regeneron entitled to a royalty payment. Under the terms of the agreement, Sanofi is responsible for funding 100% of the development costs of Zaltrap®. Once Zaltrap® starts to be marketed, Regeneron will repay 50% of the development costs (originally paid by Sanofi) in accordance with a formula based on Regeneron’s share of the profits. Sanofi may also be responsible for making milestone payments upon receipt of specified marketing approvals for Zaltrap® in the United States or the European Union and in Japan.
WithinIn November 2007, Sanofi signed additional agreements with Regeneron to discover, develop and commercialize fully-human therapeutic antibodies. These agreements were broadened, and their term extended, on November 10, 2009. Under the cardiovascular market, hypertension remains the most prevalent disease. Hypertension is defined as blood pressure above the normal level and is oneterms of the main causesdiscovery agreement, Sanofi committed to fund the costs of severe heart, brain, blood vesselRegeneron’s antibody research program until 2017. Sanofi has an option to license for further development those antibodies discovered by Regeneron which advance to IND. Upon exercise of the option, Sanofi is primarily responsible for funding the development and eye complications. co-developing the antibody with Regeneron. Sanofi and Regeneron would also share co-promotion rights and profits on sales. Once a product begins to be marketed, Regeneron will repay out of its profits (provided they are sufficient) 50% of the development costs borne by Sanofi for all antibodies licensed by Sanofi. Sanofi may also be responsible for making milestone payments based upon aggregate sales of antibodies under the collaboration.
Rare Diseases
The acquisition of Genzyme in April 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 principalRare Disease business is focused on products for the treatment of cardiovascularrare genetic diseases and other chronic debilitating diseases, including lysosomal storage disorders, or LSDs, a group of metabolic disorders caused by enzyme deficiencies. Our principle rare disease products are Aprovel®/Avapro®/Karveaenzyme replacement therapies: Cerezyme® and Tritace(imiglucerase for injection) to treat Gaucher disease; Fabrazyme®/Triatec (agalsidase beta) to treat Fabry disease and Myozyme®/Delix Lumizyme®/Altace®. (alglucosidase alfa) to treat Pompe disease.
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 MultaqCerezyme®
Cerezyme® (dronedarone) in the United States. Multaq(imiglucerase for injection) is an enzyme replacement therapy that is 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 a 17-year history of reducing, relieving and reversing many of the symptoms and risks of Type 1 Gaucher disease. Cerezyme® is administered by intravenous infusion over 1-2 hours.
In June 2009, Genzyme interrupted production of Cerezyme® and Fabrazyme® at its Allston facility after identifying a virus in a bioreactor used for Cerezyme® production. Genzyme resumed Cerezyme® shipments in the fourth quarter of 2009. This interruption was followed by a second one in March 2010 resulting from a municipal electrical power failure that compounded issues with the facility’s water system.
Genzyme communicated at the end of 2011 that, given current productivity and progress in the manufacturing recovery, we expect an improving supply outlook as the year progresses. We have begun communicating with the U.S. Gaucher community to inform them that, beginning in February 2012, current patients in the U.S. can be returned to normal dosing. Genzyme will also begin the process of returning additional regions globally back to normal supply. This process will begin in the second quarter of 2012 and continue gradually through the remainder of the year, to ensure that a ramp-up can be sustained. Regions outside of the U.S. will be maintained at their current allocation of Cerezyme®, as Genzyme assesses the timing of the return of additional regions to full supply. No regional allocation will be decreased to accommodate the U.S. ramp-up. We continue to make Cerezyme® available to patients as it is produced. However, since we have minimal inventory, any change to our manufacturing plans can have an immediate impact on our ability to provide product.
The principal markets for Cerezyme® are the United States, Latin America and Europe.
Fabrazyme®
Fabrazyme® (agalsidase beta) is an enzyme replacement therapy that is 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, and has been used in hundreds of patients.
Due to the June 2009 production interruption and low manufacturing productivity upon re-start of production, Fabrazyme® shipments decreased in the fourth quarter of 2009 and Genzyme began shipping Fabrazyme® at a rate equal to 30% of estimated product demand. Throughout 2011, Genzyme has maintained consistent supply of Fabrazyme® to current patients at a reduced dose. To return to normal supply levels of Fabrazyme® for existing and new patients, it will be necessary to utilize the additional capacity from Genzyme’s new manufacturing facility in Framingham, Massachusetts, that was approved in January 2012 by the FDA and the EMA. Genzyme will begin the process of moving the most severely affected patients in Europe to full dose of Fabrazyme® during the first quarter of 2012. Beginning in March 2012 in the U.S., all patients currently on therapy are expected to be able to return to full dosing (1mg/kg). In addition, Genzyme will begin to transition
new patients in the U.S. onto Fabrazyme® at full dosing (1mg/kg) levels. Beginning of March, Genzyme started shipping Fabrazyme® from Framingham. Globally, the return to normal supply levels of Fabrazyme® is expected to begin in the second quarter of 2012 and only anti-arrhythmic drugcontinue throughout the year as planned, as Genzyme works to have shown a significant reductionobtain all global regulatory approvals throughout the year and to build inventory.
The principal markets for Fabrazyme® are the United States and Europe.
Myozyme® / Lumizyme®
Myozyme®/ Lumizyme® (alglucosidase alfa) 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 cardiovascular hospitalization or deaththe 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 with AF/ Atrial flutter (“AFL”).over 8 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.
The main compounds currently in Phase II or III clinical development in the Rare Diseases field are:
Eliglustat tartrate— Substrate reduction therapy targeted for the treatment of Gaucher disease type 1. This product candidate is administered orally in capsule form and has the potential to transform the treatment experience of patients by providing a treatment alternative to bi-weekly infusions. The first three years of data from the Phase II trial of eliglustat tartrate showed clinically significant improvements in hematological, visceral and bone disease parameters in the range expected for enzyme replacement therapy. During 2011, the two pivotal Phase III registration studies completed enrollment and the third Phase III study closed screening. Its recruitment should be completed in 2012.
Other Flagship Products
Lovenox®/Clexane®
Lovenox® (enoxaparin sodium) is the most widely studied and used low molecular weight heparin (“LMWH”)available in the world. Itover 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® 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,VTE management, Lovenox® use continuesis continuing to grow especiallyas a treatment for the prevention of VTE, mainly in hospitalizedacutely ill 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 approval2008, new oral anticoagulants were launched for the prevention of VTE in patients undergoing orthopedic surgery and were approved in 2011 for stroke prevention in patients with atrial fibrillation, with the objective to replace vitamin K antagonists (e.g. warfarin). However, the impact has been limited on Lovenox® usage as prevention of VTE in orthopedic surgery is a small segment of Lovenox® usage and as stroke prevention in atrial fibrillation is not a Lovenox® approved indication.
In VTE prophylaxis in acutely ill medical patients, a major market segment for Lovenox®, two large clinical trials have compared new oral anti-coagulants to Lovenox®: extended prophylaxis using new oral anti-coagulants has not shown added benefit compared to short term prophylaxis using Lovenox®.
Competing generics of enoxaparin were launched respectively in July 2010 and in February 2012 in the lower limbs such as total hip replacement, total knee replacementU.S. An authorized generic is available in the U.S.. See “Item 5. Operating and hip fracture surgery in Japan (January 2008),Financial Review and Prospects — Impacts from generic competition”.
In 2011, Lovenox® was approved for VTE preventionthe leading anti-thrombotic in patients undergoing abdominal surgery in February 2009.
In the cardiovascular area, Lovenox® was approved in 2007 in the United States for the treatment of patients with ST-segment elevation myocardial infarction, and since then has been approved in more than 40 countries worldwide for this indication.
Lovenox® is the leader in anti-thrombotics in the United States, Germany, France, Italy, Spain, and the United Kingdom (source: IMS 20092011 sales).
Plavix®/Iscover®
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® 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 a total of almost 62,000 patients, altogether, 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, a Plavix® is also available in a 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,January 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 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.
A Phase III mortality and shunt-related morbidity study in infants palliated with a systemic to pulmonary artery shunt was completed in 2010. Even though results did not support an indication in such infants, the FDA granted Sanofi an additional six month period of exclusivity to market Plavix® (clopidogrel bisulfate). Exclusivity for Plavix® in the U.S. is now scheduled to expire on May 17, 2012.
To further characterize patient responsiveness to Plavix® and provide the best guidance to healthcare professionals, a clinical program designed in close collaboration with the FDA has been completed by Sanofi and Bristol-Myers Squibb (BMS). Based on this program the label was updated worldwide in 2010, including new results on the pharmacological interaction of omeprazole with Plavix® and recent pharmaco-genomics data which have shown genomic variability of the response to Plavix® treatment (diminished effectiveness in poor metabolizers). This has been highlighted in the U.S. label with a boxed warning.
The extensive clinical development program for Plavix®, including all completed, ongoing and planned studies, is among the largest of its kind, involving more than 130,000 patients overall. Plavix® indications are incorporated into major scientific guidelines in North America, Europe and Japan. Over 115 million patients are estimated to have been treated with Plavix® since its launch in 1998, providing significant evidence of real-life efficacy and safety experience with this product.
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 washas already been launched in several countries (including Australia, in December 2009.Germany, the Netherlands, Ireland, Spain, and Mexico).
The extensive clinical program formarketing of 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/ CoPlavix® 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/ DuoPlavin® is organized through our alliance with BMS (see “—Alliance with BMS” below).
Sales of Plavix® in Japan are consolidated by sanofi-aventisSanofi and are outside the scope of our alliance with BMS. In 2009, Plavix® obtained the highest level recommendation in the Japanese stroke and ACS guidelines.
Plavix® is the leading anti-platelet in the EuropeanU.S., Chinese and U.S.Japanese markets (source: IMS 20092011 sales) even though European markets. In Europe, a number of generics have received marketing authorization and have been affectedlaunched. Plavix® market
share(1) by launches of generic clopidogrel.value was 29.1% in Western Europe and 27.2% in Germany (source: IMS 2011 sales). In Canada, generics were launched in December 2011. Plavix® U.S. market exclusivity is expected to be maintained through May 2012.
Aprovel®/Avapro®/Karvea /Karvea®
Aprovel® (irbesartan) is an anti-hypertensive belonging to the class of angiotensin II receptor antagonists. These highly effective and well tolerated antagonists act by blocking the effect of angiotensin II, the hormone
responsible for blood vessel contraction, thereby enabling blood pressure to return to normal. In addition to Aprovel®/Avapro®/Karvea®, we also market CoAprovel®/Avalide®/Karvezide®, a fixed dose combination of irbesartan and hydrochlorothiazide (“HCTZ”)(HCTZ), a diuretic that increases the excretion of water and sodium by the kidneys and provides an additional blood pressure lowering effect. These products achieve control of blood pressure in over 80% of patients, with a very good safety profile.
Aprovel® and CoAprovel® tablets are available in variousa wide range of dosages to fit the needs of patients with different levels of hypertension severity.
Aprovel® is indicated as a first-line treatment for hypertension and for the treatment of nephropathy in hypertensive patients with type 2 diabetes, in both Europe and the United States.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® and CoAprovel® are marketed in more than 80 countries. The marketing of Aprovel® and CoAprovel® is organized through an alliance with BMS (see “— Alliance with BMS” below).
In Japan, where the product is licensed/sub-licensed to Shionogi Co. Ltd and Dainippon Sumitomo Pharma Co. Ltd, respectively, specific 50 mg and 100 mg dosages developed for the Japaneserespectively. Aprovel® U.S. market were launched in June 2008.
Irbesartan generics in monotherapy are marketed in Spain and Portugal.exclusivity is expected to be maintained through March 2012.
Alliance with BMSBristol-Myers Squibb (BMS)
Plavix® and Aprovel® are marketed through 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 threeThree principal marketing arrangements that are used 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 rights to Plavix® in Japan; sales of Plavix® in Japan are consolidated by sanofi-aventis.Sanofi.
In the territory under our operational management, the marketing arrangements are as follows:
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(1) | Plavix® market = oral platelet aggregants inhibitors. |
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In the territory under BMS operational management, the marketing arrangements are as follows:
Wewe use the co-promotion system in the United States and Canada, where the products are sold through the alliances under the operational management of BMS;
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Wewe 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 suchassociated entities.
The financial impact of our principal alliances on our financial condition orposition and income is significant, and is described under “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances”, and; see also “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — 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) is the most extensively studied anti-arrhythmic drug (AAD) in Atrial Fibrillation (AF) and has demonstrated a unique cardiovascular (CV) outcome benefit in the ATHENA study in addition to effective rhythm control in the EURIDIS and ADONIS studies.
Multaq® is a multichannel blocker with both rhythm (prevention of atrial fibrillation recurrences) and rate (decrease of ventricular rate) controlling properties and additional effects (anti-hypertensive, vasodilatory). It is the first and only anti-arrhythmic drug to have shown a significant reduction in cardiovascular hospitalization orand death in patients with paroxysmal and persistent Atrial Fibrillation (“AF”) / Fibrillation/Atrial flutter (“AFL”). Multaq® has a convenient fixed dose regimen of twice daily 400 mg tablets to be taken with morning and evening meals. Treatment with Multaq® does not require a loading dose and can be initiatedFlutter as seen in an outpatient setting with minimal monitoring. 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 Agency for Therapeutic Products (Swissmedic), by the European Commission, Mexico and Brazil.
In the United States, Multaq® is indicated to reduce the risk of cardiovascular hospitalization in patients with paroxysmal or persistent AF or AFL, with a recent episode of AF/AFL and associated cardiovascular risk factors.
In Canada, Multaq® is indicated for the treatment of patients with a history of or with current AF to reduce their risk of cardiovascular hospitalization 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.ATHENA study.
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, was shown to significantly reducedreduce the risk of first cardiovascular hospitalization or death by 24% (p<0.001) when compared to placebo, meeting the study’s primary end point.endpoint. In a secondary analysis of the ATHENA trial, Multaq® significantly reduced the total number of hospital days versus placebo.
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 now been launchedcollaborated with health authorities agencies to update prescribing information and include liver function monitoring. In Europe, EMA has then coordinated a review of all available data concerning the possible risks of liver injury associated with the use of Multaq® and their impact on its benefit-risk balance. The review was extended to include cardiovascular safety of Multaq® following premature termination of the PALLAS study (Permanent Atrial fibriLLAtion outcome Study) in the United States, Canada, Germany, Denmark and Switzerland. Launch is expected in 2010 in most other European countries and selected Asian and Latin American countries.July 2011.
The main compounds currently in Phase II or III clinical development inPALLAS study, using dronedarone on top of standard therapy, was a randomized, double-blind, parallel-group, placebo-controlled study comparing the Thrombosis and Cardiovascular field are:
Semuloparin (indirect factor Xa/IIa inhibitor, preventionefficacy of VTE; Phase III) is an injectable ultra-low-molecular-weight heparin with a high ratio of anti-factor Xa activitydronedarone 400 mg twice-daily 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 angiogenesisplacebo in patients with peripheral arterial diseasepermanent AF, a population different from the population with non-permanent AF for which Multaq® is currently approved. The study was discontinued in July 2011 following recommendation from the study’s Operations Committee and the Data Monitoring Committee which observed a significant increase in cardiovascular events in the dronedarone arm. The decision to terminate the study was not related to any hepatic adverse event.
The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed in September 2011 that statistically significantly prolonged timethe benefits of Multaq® continue to amputation as comparedoutweigh the risks with a revised indication for the treatment of a limited, newly defined population of paroxysmal and persistent Atrial Fibrillation patients. Multaq® is indicated for the maintenance of sinus rhythm after successful cardioversion in adult clinically stable patients with paroxysmal or persistent atrial fibrillation. Due to placeboits safety profile, Multaq® should only be prescribed after alternative treatment options have been considered and should not be given to patients with left ventricular systolic dysfunction or to patients with current or previous episodes of heart failure.
The FDA approved a label update in a Phase IIb studyDecember 2011 to ensure its use in the appropriate patient population, specifically in patients in sinus rhythm with critical limb ischemia.history of paroxysmal or persistent atrial fibrillation (AF) and reinforcing warnings and precautions for use.
Multaq® has a convenient fixed dose regimen of twice daily 400 mg tablets to be taken with morning and evening meals. Treatment with Multaq® does not require a loading dose and it can be initiated in an outpatient setting.
Multaq® has been launched in 39 countries. The enrollmentthree leading countries for sales of Multaq® in 2011 were the United States, Germany 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.Spain.
Central Nervous SystemRenagel® and Renvela®
We have long-standing expertiseRenagel® (sevelamer hydrochloride) and Renvela® (sevelamer carbonate) are oral phosphate binders used by chronic kidney disease (CKD) patients on dialysis 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 Central Nervous System therapeutic area. OurEU and 65,000 in Brazil. In the EU, Renvela® is also approved to treat CKD patients not on dialysis but who have very high blood phosphorus levels.
The principal markets for Renagel® are the United States, the EU and Brazil. The principal markets for Renvela®, which was first marketed in 2008, are the United States and the EU (launched in 2010). In 2011, new launches took place in Singapore, Malaysia, Thailand, Israel, Columbia, Panama and Switzerland.
We market Renagel® and Renvela® directly to nephrologists through Genzyme’s employee sales force and distribute these products through wholesalers and distributors. In Japan and several Pacific Rim countries, Renagel® is developed and marketed by Chugai Pharmaceutical Co., Ltd and its sublicensee, Kyowa Hakko Kirin Co., Ltd.
The top five countries contributing to the sales of our Renal portfolio in this area are:2011 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 a triple-injection product and Synvisc-One® is our next-generation, single-injection product. The principal viscosupplementation market is treatment of pain associated with osteoarthritis of the knee.
The principal markets for Synvisc® are the U.S., the EU, and Japan (where launch took place in December 2010). The principal markets for Synvisc-One® are the United States and the EU, markets in which Synvisc-One® was first approved in 2009 and 2007, respectively.
We market Synvisc® and Synvisc-One® through Genzyme’s employee sales force directly to physicians, hospitals, and pharmacies. We distribute these products directly and through independent distributors. In Japan, Synvisc® is marketed and distributed by Teijin Pharma Limited.
The top five countries contributing to Synvisc® and Synvisc-One® sales in 2011 were the U.S., Japan, Canada, France, and Germany.
Other pharmaceutical products
Stilnox®/Ambien®/Myslee /Myslee®
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® 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, soldmarketed only 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.CR.
Stilnox® is marketed in over 100 countries. It was launched in Japan 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).2000. Myslee® has been co-promoted jointly with Astellas since 2006. Myslee® is the leading hypnotic in Japan (source: IMS 2011).
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. Ambien® CR generics entered the U.S. market in October 2010. In Japan, competing generics of Myslee® are likely to enter the market in 2012.
Allegra®/Telfast®
Allegra® (fexofenadine hydrochloride) is a long-lasting (12- and 24-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 allergy symptoms without causing drowsiness.
We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant for effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion. Generics of most forms of Allegra®/Tefast® have been approved in our major markets, with the notable exception of Japan.
In March 2011, in the U.S., Allegra® family moved to over-the-counter (OTC) use in adults and children two years of age and older (see “— Consumer Health Care” below).
Allegra®/Telfast® is marketed in approximately 80 countries. The largest market for prescriptions of Allegra® is Japan. In Japan, competing generics of Allegra® may possibly enter the market in the second half of 2012 if the generic manufacturers get marketing approvals. Sanofi appealed at the IP High Court to defend two Allegra® use patents following their invalidation by the patent office (for more information see Item 8 “Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings”).
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”)(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,We have marketed Copaxone® is now available with a new, thinner needle. This new needle may help to ensure adherence by patients to their treatment.
Copaxone® is marketedoutside the United States and Canada through our alliance with Teva. As of February 29, 2012 we no longer market or sell Copaxone®: on a country-by-country basis, we instead receive a payment of 6% on sales from Teva for a period of two years from the date of transfer (see “— Alliance with Teva” below).
Alliance with Teva
We in-licensein-licensed Copaxone® fromTevafrom Teva and marketmarketed it until 2012 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.
Sales and distribution rights were returned to Teva in 2008 for the United States and Canada.
Outside the United States and Canada, there arewere 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, in the United States and Canada. As a result, sanofi-aventis no longer records product sales or shares certain marketing expenses with respect to the United States and Canada and, until March 31, 2010, will receive from Teva a royalty of 25% of sales in these markets.
Under the terms of our agreement, the Copaxone® business in countries other than the U.S. and Canada will behas been transferred to Teva over a period running from the third quarter of 2009 to the first quarter ofFebruary 29, 2012 at the latest, depending on the country. Following the transfer, sanofi-aventisSanofi 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. Key Information — D. Risk Factors — We rely on third partiesIn 2010, the Copaxone® business was transferred to Teva in Poland, in the Czech Republic and in the United Kingdom. In 2011, the Copaxone® business was transferred to Teva in Norway, Germany, Austria, Portugal, and Sweden. In January and February 2012 the Copaxone® business was transferred to Teva in Denmark, the Netherlands, Belgium, France, Greece, Cyprus, Ireland, Italy, Spain, Australia, and New Zealand.
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. Tritace® is the only ACE inhibitor approved for the prevention of stroke, myocardial infarction and death in high-risk patients and has the broadest spectrum of indications among ACE inhibitors for the treatment of cardiovascular diseases.
The combinations with diuretics (ramipril + hydrochlorothiazide) and calcium channel blockers (ramipril + felodipine) are available in Europe.
Tritace® is marketed in over 70 countries. A number of generics have received marketing of some of our products,” for more information relating to risksauthorization and have been launched since December 2001 in connection with our alliance agreements.Europe.
Depakine®
Depakine® (sodium valproate) is a broad-spectrum anti-epileptic that has been prescribed for more than 40 years. Numerous clinical trials and long years of experience have shown that it is effective for all types of epileptic seizures and epileptic syndromes, and is generally well tolerated. Consequently, Depakine® remains a reference treatment for epilepsy worldwide.
Depakine® is also a mood stabilizer, registered in the treatment of manic episodes associated with bipolar disorder and, in numerous countries, in the prevention of mood episodes. Depakine® is recommended as a first-linefirst
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® enabling it to be adapted to most types of patients: syrup, oral solution, injection, enteric-coated tablets, ChronoDepakine® Chrono (a sustained release formulation in tablets) and ChronosphereDepakine® Chronosphere (sustained release formulation of Depakine® packaged in stick packs, facilitating its use by children, the elderly and adults with difficulties swallowing).
Depakine® is marketed in over 100 countries, including the United States, where it is licensed to Abbott.countries.
The top three markets for Depakine®, including both indications, are the United Kingdom, France and Italy.
The main compounds currently in Phase II or III clinical development in the Central Nervous System field are:
Teriflunomide (orally active dihydroorotate dehydrogenase inhibitor, multiple sclerosis; Phase III). An extensive Phase III monotherapy development program in relapsing forms of multiple sclerosis is ongoing, with results of the first pivotal study expected to be released in October 2010. In a Phase II adjunctive therapy study, teriflunomide, when added to background stable therapy with interferon (IFN-beta) showed acceptable tolerance and significant improvements of the disease (measured by magnetic resonance imaging -MRI);
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;
SSR411298 (FAAH inhibitor; Phase II). A dose finding study in Major Depressive Disorders in elderly patients is ongoing;
SAR164877 (anti-NGF (anti-Nerve growth factor) mAb, treatment of moderate to severe pain; Phase II). SAR164877, co-developed with Regeneron Pharmaceuticals, is a fully human anti-NGF monoclonal antibody. An extensive Phase II clinical development program in various types of moderate to severe pain is ongoing, with first results expected before mid-2010; and
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.
Internal Medicine
Our main products in the internal medicine therapeutic area are in the fields of respiratory/allergy, urology and osteoporosis.
AllegraXatral®/TelfastUroxatral®
AllegraXatral® (fexofenadine(alfuzosin hydrochloride) is a long-lasting (12-belongs to the class of alpha1-blockers. Capable of acting selectively on the lower urinary tract, it was the first alpha1-blocker indicated and 24-hour) non-sedating prescription anti-histaminemarketed exclusively for the treatment of seasonal allergic rhinitis (hay fever)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.
Xatral® OD (extended release formulation) is active from the first dose, provides rapid 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.
Generic alfuzosin became available in most European countries in 2009. Generics of the extended release formulation of alfuzosin became available in the U.S. in July 2011.
Actonel®/Optinate® /Acrel®
Actonel® (risedronate sodium) belongs to the bisphosphonate class that helps 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 endpoint (hip, wrist, humerus, clavicle, leg and pelvis).
Actonel® is available in various dosage strengths and combination forms to better suit patient needs. Depending on dosage form, Actonel® is indicated for the treatment of uncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.post-menopausal osteoporosis, osteoporosis in men, or Paget’s disease.
In January 2007, AllegraActonel® Oral Suspension 30 mg/5 ml (6 mg/ml) was commercially launchedis marketed in the United States for the treatment of hay fever symptoms in children aged 2-11 years and the treatment of the uncomplicated hives in children aged 6 months to 11 years. Allegra® Orally Disintegrating Tablets (ODT), 30 mg for treatment of these symptoms in children aged 6-11 years was launched in the United States in February 2008.
We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination productsmore than 75 countries through an alliance with an extended-release decongestant for effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion.
Pursuant to a settlement agreement, sanofi-aventis U.S. granted Barr Laboratories, 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 is currently marketing and distributing an authorized generic version of Allegra® D-12 supplied by sanofi-aventis US under a Teva label. SeeWarner Chilcott “see Note D.22.b)C.2 to our consolidated financial statements included at Item 18 of this annual report.report”.
Winthrop U.S., a divisionThe contribution of sanofi-aventis U.S., also signed an agreementthis alliance on our financial position and income is described under “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances”. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — We rely on third parties for the marketing of some of our products” for more information relating to risk in connection 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.
Allegra®/Telfast® is marketed in approximately 80 countries. The largest market for Allegra® is Japan.our alliance agreements.
Nasacort®
Nasacort®AQ Spray (NAQ) (triamcinolone acetonide) is an unscented, water-based metered-dose pump spray formulation unit containing a microcrystalline suspension of triamcinolone acetonide in an aqueous medium that was launched in 1996.medium. Previously indicated for the treatment of the nasal symptoms of seasonal and perennial allergic rhinitis in adults and children six years of age and older, Nasacort® AQ received an additional approval for the seasonal and annual treatment of pediatric patients between the ages of two and five years from the FDA in September 2008. NAQ is an intranasal corticosteroid, which is recommended in treatment guidelines as first-line treatment for moderate to severe allergic rhinitis patients. NAQ offers significant relief from nasal allergy symptoms to patients, with no scent, alcohol or taste.
The top three countries contributing to Nasacort® AQ Spray sales in 2009 were the United States, France and Turkey. InFollowing a settlement of patent litigation, Barra competing generic triamcinolone acetonide has been granted a license to sell a generic triamcinolone acetonidesold in the United States as early assince June 2011. See Note D.22.b) to our consolidated financial statements included at Item 18 of this annual report.
Xatral®/Uroxatral®
Xatral® (alfuzosin hydrochloride) belongs to 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 extension of the indication in 56 countries worldwide including 16 European countries.
Xatral® OD (extended release formulation) is active from the first dose, provides a rapid 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 mainMain compounds currently in Phase II or III clinical developmentdevelopment:
In the Multiple Sclerosis field:
Teriflunomide — Aubagio™ (orally active dihydroorotate dehydrogenase inhibitor, multiple sclerosis; Phase III). The dossier has been submitted in August 2011 in the Internal Medicine field are:U.S. and in January 2012 in Europe for the treatment of relapsing forms of multiple sclerosis as a monotherapy agent. Results of the first pivotal study, 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 NEJM in October 2011. In addition, a Phase III adjunctive therapy study (TERACLES) has been launched to define the additional efficacy and safety profile of teriflunomide, when added to background stable therapy with interferon (IFN-beta). This study follows on from the successful Phase II study which showed teriflunomide had an acceptable tolerability in adjunct to IFN-beta and demonstrated significant improvements of the disease as measured by magnetic resonance imaging (MRI).
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A collaboration agreementIn the context of a business combination prior to the Sanofi takeover, Genzyme acquired in May 2009, from Bayer Schering Pharma A.G (Bayer), development rights and an optionworld marketing rights for a license have been signed with Alopexxalemtuzumab. Genzyme also acquired the rights for the developmentproducts Fludara® and Leukine®. Alemtuzumab is already approved in oncology as the product Campath® (also acquired from Bayer). In exchange, Bayer was granted the right to co-promote Lemtrada™ on a global basis, as well as the right to receive contingent payments (for more information See Note D.1.1. to our consolidated financial statements included in this annual report at Item 18). In connection with the acquisition of a first-in-class human monoclonal antibodyGenzyme, Sanofi issued contingent value rights (“CVR”) entitling holders to cash payments upon the achievement of certain milestones, including regulatory approval of alemtuzumab for the preventiontreatment of multiple sclerosis and treatmenton achievements ofS. aureus, S. epidermidis, E. coli, Y. pestis (the bacterium that causes plague) and other serious infections; and certain aggregate sales thresholds (see “Item 10. Additional Information — C. Material contracts — The Contingent Value Rights Agreement.”)
Kyowa Hakko Kirin and sanofi-aventis have signed a collaboration and licensing agreement forIn the development of an anti-LIGHT fully human monoclonal antibody which is expected to be the first-in-class in the treatment of Ulcerative Colitis and Crohn’s disease.
Ophthalmology field:
Sanofi-aventisSanofi acquired the French companyophthalmology specialist Fovea in October 2009. Products in the pipeline include ainclude:
A Phase II eye-drop fixed dose combination of prednisolone acetate and cyclosporine A for the treatment of allergic conjunctivitis.conjunctivitis (FOV1101);
A Phase II eye-drop formulation of a bradykinin B1 receptor antagonist for the treatment of diabetic macular edema (FOV2304);
FOV2302 was halted in December 2011 for toxicity reasons.
Oxford BioMedica has entered into a new collaboration with sanofi-aventisSanofi in April 2009 to develop novel gene-based medicines, utilizing LentiVector® gene delivery technology, for the treatment of ocular disease. The new agreement covers four Lentivector-basedLentiVector®-based product candidates for different ophthalmologic indications such as wet age-related macular degeneration, Stargardt disease, Usher syndrome, and corneal graft rejection.
In the Thrombosis and Cardiovascular field:
Otamixaban (direct factor Xa inhibitor, interventional cardiology; Phase III). Otamixaban is an injectable, selective direct inhibitor of coagulation factor Xa. It is a synthetic small molecule. Otamixaban exhibits a fast on- and off-set of action. A Phase III program to confirm the positive outcome from the SEPIA-ACS Phase II study was initiated in 2010 and is now ongoing; results are expected for 2013.
Celivarone (anti-arrhythmic; Phase IIb): project terminated because of lack of efficacy (prevention of shocks and major clinical outcomes) in the Phase II study in patients fitted with an implantable cardioverter/defibrillator.
In the Internal Medicine field:
Sarilumab (SAR153191), a monoclonal antibody against the Interleukin-6 Receptor (anti IL-6R mAb) derived from our alliance with Regeneron, entered in Phase III in adult patient with moderate to severe rheumatoid arthritis.
SAR231893, a monoclonal antibody against the Interleukin-4 Receptor (anti IL-4R mAb) derived from our alliance with Regeneron, has entered Phase IIa in asthma and continued development in Phase I in atopic dermatitis.
Mipomersen(Genzyme)Antisense oligonucleotide (ASO) that inhibits the synthesis of apoB, a primary protein constituent of atherogenic lipoproteins. In collaboration with Isis Pharmaceuticals Inc. mipomersen is being developed 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. The marketing authorization application (MAA) for mipomersen was submitted in the third quarter of 2011 in Europe.
Consumer Health Care (“CHC”)(CHC)
Consumer Health Care is a core growth platform identified in sanofi-aventis’our broader strategy for achieving sustainable growth. In 2009, the Group2011, we recorded CHC sales of €1,430 million. We make€2,666 million; nearly half of our CHC sales were in emerging markets.markets, 24% in Europe, and 21% in the United States.
Organic growth was supported byIn March 2011, the solid performance of our eight flagship brands (Doliprane®, Essentiale®, NoSpa®, Enterogermina®, Lactacyd®, Maalox®, Magne B6Allegra® family of allergy medication products was commercially launched in the U.S. for over-the-counter (OTC) use in adults and Dorflexchildren two years of age and older. The Allegra®). Our 2009 portfolio focused on over-the-counter (“OTC”) family of OTC products is available in drug, grocery, mass merchandiser, and club stores nationwide. This switch constitutes a key step in our CHC growth strategy in the U.S. The Allegra® family of OTC products is the number one OTC brand for Sanofi globally.
2011 CHC sales were also supported by our legacy CHC brands, that havewhich provides us with a strong presence in gastro-intestinal, analgesicsthe fever & pain and respiratorydigestive health 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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• | Enterogermina® is composed of two billionBacillus clausii spores in a ready-to-drink oral suspension in vials of 5ml and in capsules. Enterogermina® is indicated in the prevention and the treatment of intestinal imbalance during acute or chronic intestinal disorders (from babies to adults). Enterogermina® is sold mainly in Europe and has been enjoying strong growth in Latin America, India and Central Asia. |
• | Essentiale® is a herbal preparation for liver therapy, made of highly purified essential phospholipids extracted from soybeans and containing a high percentage of phosphatidylcholine, a major constituent |
of cellular membrane. Essentiale® is used to treat symptoms such as lack of appetite, sensation of pressure in the right epigastrium, toxico-nutritional liver damage and hepatitis. Essentiale® is sold mainly in Russia, Eastern Europe, and some South East Asian countries. |
• | Maalox® is a well-established brand containing two antacids: aluminium hydroxide and magnesium hydroxide. Maalox® is available in several pharmaceutical forms — tablets, suspension, and stick packs — to provide consumer choice. Maalox® is present in 55 countries: in Europe, Latin America, Russia, Africa, Middle East, and in some Asian countries. |
• | Magne B6® is a product containing magnesium and vitamin B6. MagneB6® has various therapeutic indications from irritability, anxiety and sleep problems to women’s health issues like premenstrual syndrome or menopause discomfort. MagneB6® is present in Europe and Russia. |
• | Lactacyd® is a range of products for feminine hygiene. Lactacyd® is sold mainly in Brazil and Asia. Lactacyd® was launched in China in May 2011. |
Complementary to our legacy CHC business, well-known brands are:
• | Chattem’s products in the United States, other than the Allegra® family of OTC products, are mainly branded consumer healthcare products, toiletries and dietary supplements across niche market |
Oenobiol’s products in France are dietetary supplements for beauty (sun care, weight, hair care, skin care); well-being (digestive comfort, anti-stress) and menopausal problems.
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Minsheng products in China include 21 Super Vita, one of the leading vitamins & mineral supplements.
In August 2011, we entered into a definitive agreement to acquire the Indian domestic branded formulations business of Universal Medicare, one of the leading providers in the country of nutraceuticals and lifestyle management products including vitamins, antioxidants, mineral supplements, and anti-arthritics.
The top three countries contributing to our CHC sales in 2011 were the United States, France, and Russia.
Generics
Sanofi-aventis recorded €1,012In 2011, sales of the generics business grew by 16.2% to €1,746 million of Genericsled by sales in 2009 fueled by organic growthEmerging Markets and acquisitions. 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 largeUnited States. U.S. generic portfolio.
business growth was driven by sales of recent launches of authorized generics of TaxotereWe are already active in the generic drugs market through the Winthrop®, Ambien® brands, which combine theCR and Lovenox®. Authorized 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 PentacelTaxotere® launched in March 2011 has captured more than 10% of docetaxel generics (source: IMS December 2011). Sales in Emerging Markets were supported by the roll out of Medley products in additional countries in Latin America. In 2011, sales following its launchof generic products 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.Emerging Markets exceeded €1 billion. See “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 20092011 Compared with Year Ended December 31, 20082010 — Net Sales by Product — Pharmaceuticals”.
In March 2009 we created our European Generics Platform, covering generics activities across Western and Eastern Europe, Russia and Turkey. In 2010, we decided to rebrand all our European generics businesses under the Zentiva name. This means that the generics businesses of Winthrop and Helvepharm in France, Germany, Italy, Switzerland, Portugal and the United Kingdom now operate under the Zentiva brand. The roll out will continue in 2012 in the EU countries where Zentiva operates.
In Japan in 2011 we established a new joint venture, Sanofi Nichi-Iko K.K., to develop a strong presence in the fast-growing Japanese generics market: we started co-promotion for two molecules (edaravone in August 2011 and donepezil in October 2011). Scope of products to be co-promoted should be expanded in the future.
Vaccine Products
Sanofi Pasteur is a fully integrated vaccines division offering a broad range of vaccines. In 2011, 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 €3,469 million. Sales were favorably impacted by strong growth in markets outside North America and Europe, 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, 2011 Compared with Year Ended December 31, 2010 — Net Sales — Human Vaccines (Vaccines).”
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® in the market leader in Europe overall and particularly in France.joint venture’s geographic scope. In 2009,2011, Sanofi Pasteur MSD net sales, which are accounted for using the equity method, amounted to €1,132€791 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).
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 | |||
Influenza Vaccines * | 826 | |||
Polio/Pertussis/Hib Vaccines | 1,075 | |||
Meningitis/Pneumonia Vaccines | 510 | |||
Adult Booster Vaccines | 465 | |||
Travel and Other | 370 | |||
Other Vaccines | ||||
223 | ||||
Total Human Vaccines | ||||
3,469 |
* | Seasonal and pandemic influenza 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 five diseases in a single injection — is anchored by acellular pertussis components.
Daptacel®, a trivalent vaccine against pertussis, diphtheria and tetanus, was launched in the United States in 2002 and has become a strong sales contributor due to its adaptation to immunization schedules. Daptacel® is now licensed in the United States for the entire immunization series to protect against diphtheria, tetanus, and pertussis, enabling health care professionals to administer the same brand of DTaP vaccines.
Act-HIB®, for the prevention ofHaemophilus influenzaetype b (“Hib”) infections, is also an important growth driver within the pediatric product line. In 2008, Act-HIB® became the first Hib vaccine to be approved in Japan. In the United States, sanofi pasteur successfully improved its market supply to respond to a competitor’s supply shortage.injection.
Pentacel®, a vaccine protecting against five diseases (pertussis, diphtheria, tetanus, polio andHaemophilus influenzaetype b), was launched in the United States in 2008 and has been approved in ten countries.2008.
Pediacel®, anothera fully liquid acellular pertussis-based pentavalent vaccine, was launchedis the standard of care in the United Kingdom since 2004 for protecting against diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b disease. As of December 31, 2011, Pediacel® was approved in 200429 countries across Europe in a new syringe presentation.
Pentaxim®, a combination vaccine protecting against diphtheria, tetanus, pertussis, polio and licensedHaemophilus influenzae type b was first marketed in 1997 and was launched in China in May 2011. To date, more than 100 million doses of Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the Netherlandsnational immunization programs in 23 countries.
Act-HIB®, for the prevention ofHaemophilus influenzaetype b (Hib) infections, is also an important growth driver within the pediatric product line. In 2008, Act-HIB® became the first Hib vaccine to be approved in Japan.
HexaximTM, is a hexavalent pediatric vaccine providing protection against diphtheria, tetanus, pertussis, poliomyelitis (polio),Haemophilus influenzae type b infections and Portugalhepatitis B. The vaccine is currently under the registration process (Article 58) at EMA, with an opinion expected in 2005.2012.
PR5I is a combination vaccine designed to help protect against six potentially serious diseases: diphtheria, tetanus, whooping cough (pertussis), polio (poliovirus type 1, 2 and 3), invasive disease caused byHaemophilus influenzaetype b, and hepatitis B. This product is jointly being developed between Sanofi Pasteur and Merck in the U.S. and Europe. Phase III studies in the U.S. and Europe began in April 2011.
Sanofi Pasteur is one of the world’s leading developers and manufacturers of polio vaccines, 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 developedSeptember of 2011, Sanofi Pasteur donated to the first newWHO a vaccine strain used for polio vaccineeradication. The biological material given by Sanofi Pasteur is the original viral seed used to produce large quantities of OPV against type 3 poliovirus. With this donation from Sanofi Pasteur, the WHO will be in nearly 30 years for use in eradication, the Monovalent Oral Polio Vaccine-type 1. This product is still being used as partfull control of the WHO strategystorage of the vaccine strain and its distribution to end polio transmission in endemic countries. In 2007, Pentaxim®, an acelluar-based pentavalent vaccine containingproducers worldwide.
Sanofi Pasteur is also supporting the introduction of 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 expectregion. With recent progress towards polio eradication, 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
On February 23, 2011, Sanofi Pasteur applied for approval of manufacturing and marketing of standalone inactivated vaccine against polio (acute poliomyelitis) in Russia following the decision by the Russian authorities to choose the inactivated polio vaccine from sanofi pasteur for the primary immunization 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.Japan.
SHAN5™Shantha Biotechnics is currently pursuing requalification of 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® and Vaxigrip®/Mutagrip® have more than tripled since 1995 and annual supply reached more than 180200 million doses in 20092011 to better meet increasing demand. We expectIn recent years, influenza vaccine demand has experienced strong growth in many countries, particularly in the U.S., South Korea, 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 laid 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 facility in Ocoyoacac. Construction began in 2009.innovative vaccines.
On February 26, 2009,In May 2011, Sanofi Pasteur received regulatory approval by the European Commission granted marketing authorizationU.S. FDA for sanofi pasteur’s INTANZAFluzone®/IDflu®, the first intradermal (“ID”) microinjection influenza vaccine. ID in adults from 18 to 64 years of age. 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 Intanzaadministration. Fluzone ID® or IDflu®., Intanza®/IDflu® vaccine is now approved in the United States, European Union, Canada, Australia and other countries for the prevention of seasonal influenza in both adult (agesadults (age 18 and over) and the elderly (ages(age 60 and over) populations..
In December 2009, the FDA approved sanofi pasteur’sSanofi Pasteur’s supplemental Biologics License Application (sBLA) for licensurelicensing of Fluzone® High-Dose (Influenza Virus Vaccine). This new vaccine, for adults 65 years of age and older, will be available to health-care providers for administration during the third quarter of 2010 in preparation for the 2010-2011 influenza season.virus vaccine. The Fluzone® High-Dose vaccine was specifically designed to generate a more robust immune response in people 65 years of age or older. This age group, which typically shows a weaker immune response, has proven to respond better to the Fluzone®High-Dose product.
In September 2009, the FDA approved the company’s supplemental Biologics License Application for licensure of its Influenza A(H1N1) 2009 Monovalent Vaccine, marking an important milestone in the pandemic fight. The U.S. licensedvaccine. This new vaccine is an inactivated influenza virus vaccine indicated for active immunization 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 licensedwas launched in the United States for populations as young as six months of age.
In 2009, sanofi pasteur received A(H1N1) orders from the U.S. Department of Healthin 2010 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.continued strong growth in 2011.
In November 2009, PanenzaFluzone® (our non-adjuvanted vaccine) was registered byQIV 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 theAgence Française de Sécurité Sanitaire des Produits de Santé. prevailing influenza strains for upcoming seasons is an incredibly difficult task. In the recent past, there have been a number of mismatches of the B strain component in the trivalent vaccine 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. The vaccine was made available totargeted population is the French authorities, and vaccination began in France in November 2009. Panenzasame as standard-dose Fluzone® TIV (trivalent vaccine): children 6 months through 17 years, and adults and elderly 18 years and above. A Phase III clinical trial was completed in 2011 for Fluzone QIV IM and regulatory submission is also registered in Spain, Luxemburg, Germany, Brazil, Hong Kong, Slovakia, Thailand, Tunisia and Turkey. Sanofi Pasteur submitted the final registration fileplanned 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 2010.2012. Vaxigrip QIV IM, targeting the European market, entered Phase III clinical trials in October 2011.
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 State of California in the U.S. and other parts of the world in 2010, 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®, the first trivalent adolescent and adult booster against diphtheria, tetanus and pertussis, was licensed and launched in the United States in 2005. Since 2004, 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® 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. A Phase III clinical trial began in April 2011.
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®, the first conjugate quadrivalent vaccine against meningococcal meningitis, arguably 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, the FDA granted sanofi pasteur licensureSanofi Pasteur a license to expand the indication of Menactra® to children two years through 10 years of age. Menactra® is now indicated for people agesaged 2-55 years in the United States and in Canada. Additional submission for infants aged 9-12 months is expectedIn 2011, sales of Menactra® continued to grow in the United States following the CDC’s Advisory Committee on Immunization Practices recommendation that a single dose at 11 or 12 years of age be followed-up with a booster dose several years later for protecting adolescents at the time of their highest risk. An Infant/Toddler (age 9/12 months) biological license application for Menactra® was approved by the U.S. FDA in 2010.March 2011. Sanofi Pasteur has also begun launchinglaunched Menactra® in other countries. Use ofthe Middle East and Latin America in 2010 and in Asia in 2011.
Meningitis A, C, Y, W-135 conj. Second Generation is a project that targets a second generation meningococcal meningitis vaccinesvaccine that uses an alternative conjugation technology. In 2011, interim Phase II clinical trial results were obtained and indicated that the product is expected to grow significantly through anticipated future usesufficiently immunogenic for further development in multiple segments of the population.infants.
For over 30 years, sanofi pasteurSanofi Pasteur has supplied vaccines againstfor meningococcal meningitis serogroups A and C meningococcal meningitis used to combat annual epidemics occurring in Sub-Saharan countries (African meningitis belt).
Travel and EndemicEndemics Vaccines
Sanofi Pasteur’s Travel/Endemic vaccines provide the widestPasteur provides a wide range of travelertravelers and endemic vaccines in the industry, and includewith hepatitis A, typhoid, rabies, yellow fever, cholera measles, mumps, rubella (“MMR”)(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™, a live attenuated vaccine that confers high level protection againstA Japanese encephalitis vaccine is also in just one dose,preparation. Japanese encephalitis is endemic in Southeast Asia. Sanofi Pasteur will offer a new vaccine in the market: IMOJEVTM. The Australian healthcare authorities granted approval of IMOJEVTM on August 16, 2010 for regulatory approvalindividuals aged 12 months and over. On October 29, 2010, the Thai Food and Drug Administration granted licensure in Thailandthe same age indication.
The new generation Vero serum-free vaccine (VRVg) will provide a worldwide, single rabies vaccine as a replacement to our current rabies vaccine offerings. Results from the 2009 Phase I clinical trial demonstrated non-inferiority of VRVg versus Verorab®. AFSSAPS in France approved VRVg as a line extension of VeroRab in January 2011. Clinical development is continuing in China and Australia. Approval is targeted for 2010.India.
In December 2009, Shantha launched ShanCholTM, India’s first oral vaccine to protect against cholera in children and adults. In September 2011, ShancholTM was approved for procurement to United Nations Agencies (i.e. WHO Pre-qualified).
Other vaccinesProducts
ACAM2000In October 2011, Sanofi Pasteur acquired Topaz Pharmaceuticals, Inc., a small privately-held U.S. specialty pharmaceutical company focused on developing and commercializing treatments primarily for pediatric and dermatology markets. Established in June 2005 and based in Horsham PA, Topaz Pharmaceuticals offers a late-stage prescription product for the treatment of head lice. This investigational product, known as Sklice™, Topical Lotion, is a formulation of Ivermectin. It is the sole pipeline product of the company. The regulatory submission for Sklice, topical Lotion, for treatment of head lice in children and adults, was licensed in August 2007 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 intofiled with the U.S. governmentFDA in April 20082011. In February 2012, the FDA approved Sklice® (ivermectin) lotion, 0.5% for the topical treatment of head lice, 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.patients 6 months of age and older.
Animal Health: Merial
Our animal health activity is carried out through Merial, is one of the world’s leading animal healthcare companies (source: Vetnosis), dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers and pet owners (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 animals (production and companion animals). Its net sales for 20092011 amounted to U.S.$2,554€2,030 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’s top-selling products include Frontline®, a topical anti-parasitic flea and tick brand for dogs and cats, as well asthe highest selling veterinary product in the world (source: Vetnosis 2011); Heartgard®, a parasiticide for control of heartworm in companion animals; Ivomec®, a parasiticide for the control of internal and external parasites in livestock, Heartgardlivestock; 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, anddogs; 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 2011).
In 2009, theThe compound patent protecting fipronil, the active ingredient of Frontline®, expired in 2009 in Japan and in some European countries, including France, Germany, Italy, and the United Kingdom. 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® 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.
Regarding companion animals and specially the fipronil franchise, on June 21, 2011 the U.S. District Court for the Middle District of Georgia ruled in favor of Merial holding that sales of PetArmor™ Plus products infringed Merial’s patent, and it barred Cipla and Velcera from making or selling those products in the United States. A court-ordered seizure of the inventory in the United States still in possession of the generic manufacturers went into effect on August 21, 2011. However, the generic products already sold to retailers were not recalled (see “Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information). In July 2011, Merial launched Certifect®, a new fipronil combination parasiticide for tick and flea control for dogs.
Regarding production animals, in the ruminant segment, performance was driven by the launch in the U.S. of the antibiotic Zactran® against bovine respiratory disease.
Merial’s major stand-alone markets are the United States, France, Brazil, Italy, the United Kingdom, Brazil, Australia, Germany, Japan, Germany, Spain, China, and Canada. The group of “Emerging Markets” countries, with double digit sales growth in 2011, accounts now for 25.0% of total Merial sales.
Merial operates through a network of 16 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.
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 part 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.
Pharmaceutical Research & Development (“R&D”)
Since the start of 2009, sanofi-aventisThe pharmaceutical industry as a whole has been engaged in a wide-ranging transformation program designed to overcome thefacing significant challenges facing the pharmaceutical industry. R&D is the first priority of this program. The rapid developments in the scientific environment, which are bringing aboutrecent years.
These include:
Patent cliff for several products considered as blockbusters, putting revenues under pressure and increasing competition of me-too drugs,
Decrease in New Molecular Entities approvals by Health Authorities (a 50% drop when compared to the 1990’s),
Increasing regulatory requirements and payers demands for demonstrated medical and economic value impacting the costs of development
Increased complexity of science leading to a veritable revolution in biopharmaceutical research, especially in biology, have generated profound and continuous changedecrease in the pharmaceutical environment. success rate for research projects.
To anticipateovercome this new situation, Sanofi has revised its overall infrastructure and operations footprint and opened up to external innovation and new fields of opportunity, so as to feed and strengthen its pipeline. We have adopted a network-based organization, open to external opportunities, to enable our R&D to be more creative and make the consequencesmost of these changesboth in-house and external innovation. In December 2011, out of 48 products in clinical development or registration, 34 (or 71%) originate from external R&D. Employee year-end headcount in the research and development functions generally reflects this trend to maintain its innovative capacities, sanofi-aventis intendsgreater externalization, and amounted to set18,823 for 2011 compared to 16,983 for 2010 and 19,132 for 2009 (in each case excluding Merial but including Genzyme in place2011 - 2,006 employees).
We intend to have the most effective R&D organization in the pharmaceutical industry in place by 2013. The new R&D approach aims to foster greater creativity and innovation, while remaining fully focused on patient needs.innovation. 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 focusedDuring the first phase of transformation (2009-2011) we carried out a rigorous and deep re-evaluation of all current development programs. As a result, we have refocused our efforts on addressing patient needs, and not on therapeutic indicationsper se48 clinical programs (see table below).
The new R&D organization is composedIn parallel we undertook a profound transformation of three different types of units:our operating model reinforcing our patient centric approach and setting an “open innovation” strategy.
Entrepreneurial Units: Divisions,Decentralization with the creation of Oncology, Diabetes and Ophthalmology divisions, five Therapeutic Strategic Units (“TSU”) andstrategic units (TSUs), several Distinct Project Units (“DPU”) focused on patient needs(DPUs) 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 platforms.
Five Scientific core platforms provide expert scientific support throughoutA renewed effort at business development to fill the organization and operate as internal state-of-the-art service providerspipeline by acquiring or in-licensing products which has led to the Entrepreneurial Units.a series of acquisitions.
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,the Group’s diversification strategy, acquisition of Genzyme in April 2011 leading to a numberpush in biotechnology and bringing the Group’s goal of building a globally integrated R&D organization a step closer.
With Sanofi Pasteur, Genzyme and Merial, targeted initiatives launched internally to best leverage each other’s knowledge and experience and establish a governance model to foster effective collaboration and innovation between all organizations.
Creation of alliances with premier academic programs in the U.S., Europe and acquisitions were entered into during 2009a major effort in France 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.the Aviesan program.
Portfolio
During 2009,2011, R&D undertook afollowed up the rigorous and comprehensive portfolio review. The projectsreview already initiated in 2009. Projects were assessed using sixseven 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:
Science:science: level of innovation, level of safety, quality and reliability of the scientific data;
Execution:pharmacovigilance: assessment of the benefit/risk ratio for products (i.e., the clinical benefit versus the potential side effects).
execution: likelihood of development and manufacturing success;
Market:market: existence of a market, positioning within this market, and our place of sanofi-aventis;in the market;
Reimbursement:reimbursement: likelihood of achieving the desired price and reimbursement based on Health Authoritiesthe health authorities positioning and sanofi-aventisSanofi competencies;
Regulatory / Legal:regulatory/legal: dealing with the environment around the project, patent status, regulatory guidelines; and
Financials:financial: 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 2009,2011, the current clinical portfolio 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 through acquisition, collaboration or partnership.alliances.
As described at “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — We may fail to adequately renew our product portfolio whether through our own research and 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 | ||||||
| SAR236553 | Lixisenatide | ||||||
Oncology | SAR125844 SAR153192 SAR307746 SAR566658 SAR650984 Genz-644282 GC1008 |
SAR245409 (XL765) SAR256212 (MM-121) SAR3419 |
ombrabulin (AVE8062) SAR240550 (BSI-201) SAR302503 semuloparin (AVE5026) | |||||
Ophthalmology | RetinoStat® StarGen sFLT-01 AAV | FOV1101 FOV2304 | ||||||
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mipomersen eliglustat tartrate | ||||||||
TSU Aging | SAR114137 SAR292833 |
SAR113945 SAR164877 | ||||||
| TSU Fibrosis & Wound Repair |
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SAR97276 SAR279356 | ||||||||
TSU Immuno-Inflammation | SAR339658 | SAR231893 | ||||||
DPUs |
SSR411298 | otamixaban teriflunomide sarilumab (SAR153191) |
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. (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.
The 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 Phase I compounds entries, and lists projects that were terminated in 2011.
Diabetes/Other Metabolic Disorders portfolio
SAR164653, an inhibitor of Cathepsin A, promising candidate entered Phase I development. The product is being developed to prevent heart failure for patients having experienced acute coronary syndromes.
A new formulation of insulin glargine has been tested in Phase I. This new product shows an anti-PCSK9improved pharmacodynamic profile. Phase III investigating the efficacy and safety in a broad patients population has been initiated end of 2011.
Lantus: the Lantus Pediatric Investigational plan was finalized as scheduled and results have been submitted in Europe in time.
The development ofSAR101099, an Urotensin II Receptor Antagonist, has been discontinued.
Oncology portfolio
With the acquisition of Genzyme in April 2011, the following compounds have reinforced Sanofi Phase I pipeline. Thus, in addition to the marketed intravenous formulation of clofarabine, a potent DNA synthesis inhibitor already registered for pediatric ALL, an oral formulation of the same active ingredient is being developed in new hematological malignancies indications. Also, GENZ-644282, a non-camptothecin topo1 inhibitor, and GC 1008, an anti-TGFß monoclonal antibody, SAR 236553 (fromare being developed in solid tumors.
Furthermore, SAR307746 (REGN910), a monoclonal antibody directed against Ang2 issued from the partnership with Regeneron, alliance)entered Phase I in oncology in the first quarter of 2011.
Finally, the global development of SAR103168, a Phase I multikinase inhibitor being developed in AML,was halted due to pharmacokinetic considerations
Genzyme portfolio
rhASM — Enzyme replacement therapy targeting the treatment of hypercholesterolemia and a combination of Lantus with AVE0010 was also evaluated inNiemann-Pick B disease. A Phase I for type 2 diabetes.II study is under preparation.
One lateFresolumimab — TGF-ß antagonist targeting the treatment of Focal Segmental Glomerulosclerosis (FSGS). Preparations for Phase project was halted:II took place in 2011.
AVE5530 in hypercholesterolemia for insufficient benefitAAV-AADC — Gene therapy based on AAV vector targeting the treatment of moderate to severe Parkinson’s disease. The low-dose cohort of the Phase I study is completed and follow-up is ongoing.
Ophthalmology portfolio
A number of compounds for the patienttreatment of eye disease were added to the portfolio via the acquisition of Fovea, the collaboration agreement with Oxford BioMedica and the acquisition of Genzyme (see “— Pharmaceutical Products — Main Pharmaceutical Products — Other Pharmaceutical Products” above).
In gene therapy, three compounds targeting the treatment of Age-related Macular Degeneration (AMD) and Stargardt Disease entered into Phase I in 2011
- | RetinoStat® (AMD) — gene therapy based on Lentivector |
- | sFlt01 (AMD) — gene therapy based on AAV vector |
- | Stargen (Stargardt disease) — gene therapy based on Lentivector |
TSU Aging portfolio
Two compounds have progressed into Phase II clinical development:
The following approvalsSAR110894 (H3 receptor antagonist for the treatment of Alzheimer’s dementia)
SAR113945 (IKK-ß kinase inhibitor for the treatment of osteoarthritis by intra-articular administration)
1 compound has completed a Phase I program and should enter Phase II in 2012
SAR292833 — GCR-15300, licensing agreement with Glenmark Pharmaceutical (TRPV3 antagonist for the oral treatment of chronic pain)
1 compound recently completed a Phase I program — results analysis on-going:
SAR114137 (Cathepsin S/K inhibitor for the oral treatment of chronic pain)
1 compound will enter Phase I clinical development in the first quarter of 2012:
SAR228810 (anti-protofibrillar AB mAb for the treatment of Alzheimer’s dementia)
1 compound has been terminated:
SAR152954 (H3 receptor antagonist)
In 2011, two key research agreements were obtained fromsigned with Audion Therapeutics and Aviesan to develop potential treatments in hearing loss and hearing disorders.
For Discovery/development partnerships:
In-license agreement signed in December 2011 with SCIL Technology GMBH, a German biopharmaceutical company to develop CD-RAP products in osteoarthritis indication.
Opt-in agreement signed with Regeneron in December 2011 to develop an anti-GDF8 mAb in the health authorities:sarcopenia indication
TSU Infectious Diseases portfolio
Ferroquine(4-aminoquinoline; malaria; Phase IIb). Ferroquine is a new 4-amino-quinoline being developed for the treatment of acute uncomplicated malaria. Ferroquine is active against chloroquine sensitive and chloroquine resistant Plasmodium strains, and due to its long half-life has the potential to be part of single dose cure regimens and the unified global treatment of both vivax and falciparum malaria.
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Main changes in Oncology portfolio
Two fast track designations from the FDA have been granted for compounds currently in Phase III development in oncology:
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BSI-201 (PARP inhibitor),SAR97276(in licensed from CNRS)is an antimalarial drug belonging to a new chemical class with an innovative mechanism of action, being developed by BiPar Sciences, Inc. (“BiPar”) infor the treatment of metastatic triple negative breast cancer (TNBC). BiPar, a privately held US biopharmaceutical company, leadersevere malaria. A Phase IIa study started in the emerging fieldthird quarter 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:2011.
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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:
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Main Change in Thrombosis and Cardiovascular portfolio
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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
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Main Change in Central Nervous SystemTSU Immuno-Inflammation portfolio
Teriflunomide (HMR 1726,SAR339658 orally active dihydroorotate dehydrogenase(also known as GBR500), a monoclonal antibody directed at the VLA-2 (Very Late Antigen 2) integrin receptor was in-licensed from Glenmark Pharmaceuticals in May 2011. The primary target indication is inflammatory bowel disease such as ulcerative colitis or Crohn’s disease. The compound successfully completed Phase I in 2010 and is on track to enter Phase II in 2012.
Other Projects portfolio
The Phase I program forSAR126119, an injectable synthetic inhibitor multiple sclerosis,of TAFI (thrombin-activable fibrinolysis inhibitor) has been conducted successfully. The Phase III). An extensiveII study in the treatment of acute ischemic stroke (AIS), is expected to start in 2012.
The development ofSSR411298 — an oral fatty acid amide hydrolase (FAAH) inhibitor — as treatment of chronic pain in cancer patients has been initiated. The results of the on going Proof-of-Concept (POC) study are expected by the end of 2012 and should confirm the potential interest of the molecule in pain indication.
R&D expenditures for late stage development
Expenditures on research and development amounted to €4,811 million in 2011, of which €4,101 million in the pharmaceutical segment, €564 million in Human Vaccines and €146 million in Animal Health. Research and development expenditures were the equivalent of about 14.4% of net sales in 2011, compared to about 14.1% in 2010 and 15.5% in 2009. The discontinuation of a number of projects contributed to the decrease in such expenditure in 2009 and 2010 and going forward the level of expenditure can be expected to continue to vary as a reflection of the number of products in late stage development among other factors. Preclinical research in the pharmaceutical segment amounted to €1,113 million in 2011, compared to €1,037 million in 2010 and €1,047 million in 2009. Of the remaining €2,988 million relating to clinical development in the pharmaceutical sector (€2,848 million in 2010 and €3,043 million in 2009), the largest portion was generated by Phase III monotherapyor post-marketing studies reflecting the cost of monitoring large scale clinical trials.
For each of our current late stage (Phase III) compounds in the Pharmaceutical segment, we set out below the date at which this compound entered into Phase III development, programinformation concerning any compound patent in relapsing formsthe principal markets for innovative pharmaceutical products (the United States, European Union and Japan) as well as comments regarding significant future milestones that are reasonably determinable at this date. Because the timing of multiple
Phase III | Entry into Phase III 1 | Compound Patent Term 2 | Comments | |||||||||||||
(month/year) | U.S. | E.U. | Japan | |||||||||||||
Lyxumia® (lixisenatide)4 | May 20083 | 2020 | 2020 | 2020 | Dossier submitted in Europe in October 2011; to be submitted in the U.S. in 2012. | |||||||||||
Zaltrap® (aflibercept) | July 2006 | 2020 | 2020 | 2020 | 4 | 2nd line colorectal cancer, dossier submitted in Europe in November 2011 and in the U.S. in February 2012.
1st line prostate cancer Phase III (VENICE) results expected in the second quarter 2012 | ||||||||||
ombrabulin (AVE8062) | June 2008 | 2016 | 2016 | 2016 | Sarcoma Phase III results expected in the third quarter 2012 | |||||||||||
iniparib (BSI-201) | June 2009 | 2013 | 2014 | N/A | Phase III program on going in 1st line squamous Non Small Cell Lung Cancer
Phase II program in 2nd line ovarian cancer to be launched in 2012
Complementary Phase II studies in breast cancer on going |
Visamerin®/Mulsevo® (semuloparin)4 otamixaban Aubagio™ (teriflunomide)4 In the monotherapy treatment of multiple sclerosis, dossier submitted in August 2011 in U.S. and in February 2012 in Europe Adjunct therapy treatment of multiple sclerosis, Phase III program on going Treatment of Clinically Isolated Syndrome, Phase III program on going. Dossier submitted in Europe in July 2011 in the treatment of homozygous familial hypercholesterolemia (HoFH) and severe heterozygous familial hypercholesterolemia (HeFH) Phase III program in severe HeFH on going for a U.S. submissionPhase III Entry into Phase III 1 Compound Patent Term 2 Comments (month/year) U.S. E.U. Japan May 2008 2024 2023 2023 Dossier submitted in Europe and U.S. in September 2011 April 2010 2016 2016 2016 Phase III results in Acute Coronay Syndrome (ACS) expected in the fourth quarter 2012 September 2004 2014 expired expired Clolar® / Evoltra® Life Cycle Management expired expired expired Phase III program on going in the 1st line treatment of Acute Myeloid Leukemia SAR302503 (TG101348) January 2012 2026 2026 4 2026 4 Phase III program on going in the treatment of myelofibrosis Lemtrada™ (alemtuzumab) September 2007 (MS) 2015 2014 expired Dossier to be submitted in Europe and U.S. for the treatment of Relapsing forms of Multiple Sclerosis during the 1st semester of 2012 New formulation Insulin glargine December 2011 2015 5 2014 2014 Phase III program on going Kynamro™ (mipomersen)4 August 2007 2025 pending pending
Phase III Entry into Phase III 1 Compound Patent Term 2 Comments (month/year) U.S. E.U. Japan eliglustat tartrate September 2009 2022 pending pending Phase III program on going in the treatment of Gaucher Disease type 1 results expected the 1st quarter of 2013 sarilumab August 2011 2028 2027 2027 Phase III program in the treatment of Rheumatoid Arthritis on going
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2 | Subject to any future supplementary protection certificates and patent term extensions. |
3 | Development of lixisenatide as stand alone entity. A program evaluating the benefit of a combination of lixisenatide / Lantus® is |
4 | Application pending. |
5 | Including a |
Late phase projects which were terminated:With respect to the compound patent information set out above, investors should bear the following additional factors in mind.
Saredutant, Phase III trial didThe listed compound patent expiration dates do not give expected results in combination with escitalopram in depression;
Following the interim analysisreflect possible extensions of the Phase II CONNECT study, development of AVE1625 (CB1 antagonist) for schizophrenia was terminated;
Ataciguat, developed in neuropathic pain was stopped dueup 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 withdrawnfive years available in the United States, the European Union, and in Europe;Japan for pharmaceutical products. See “— Patents, Intellectual Property and Other Rights — Patent Protection” for a description of supplementary protection certificates and patent term extensions.
Two compounds in Phase II were also stopped: SSR180575 (diabetic neuropathy) for lackDepending on the circumstances surrounding any final regulatory approval of efficacythe compound, there may be other listed patents or patent applications pending that could have relevance to the product as finally approved; the relevance of any such application would depend upon the claims that ultimately may be granted and AVE0657 (sleep apnea) for insufficient benefit / risk ratio
Main changes in Internal Medecine portfolio
SAR164877 anti-NGF monoclonal antibody from Regeneron, evaluated in the treatmentnature of pain is recruiting patients suffering from sciatica and osteoarthritis in a Phase II study; andthe final regulatory approval of the product.
An anti-IL4 monoclonal antibody (Regeneron alliance)Regulatory exclusivity tied to the protection of clinical data is complementary to patent protection, and in many cases may provide more efficacious or longer lasting marketing exclusivity than a compound’s patent estate. See “— Patents, Intellectual Property and Other Rights — Regulatory Exclusivity” for additional information. In the treatmentUnited States the data protection generally runs five years from first marketing approval of asthmaa new chemical entity extended to seven years for an orphan drug indication, 12 years from first marketing approval of a biological product (e.g., aflibercept). In the European Union and atopic dermatitis entered in Phase I.Japan the corresponding data protection periods are generally ten years and eight years, respectively.
Approvals from health authorities:
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Ophthalmology portfolio
Several compounds designed for the treatment of eye disease were included in the portfolio through the acquisition of Fovea and collaboration agreement with Oxford BioMedica (see “— Main Pharmaceutical Products — Internal Medicine — Ophthalmology” above)
Other discovery/ development partnerships
The first results of our transformation program are illustrated by the number of research and discovery collaborations/partnerships concluded during 2009.
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 aim is to advance an average of four to five antibodies into clinical development per year.
A strategic research alliance agreement with the California Institute of Technology (Caltech) was signed in December 2009. The goal of the research collaboration is to advance knowledge in the area of human health through basic and applied biology research and promote scientific exchange between Caltech and sanofi-aventis.
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 1813 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 9eight vaccines which are enhancements of existing vaccine products.
Phase I | Phase IIa | Phase IIb | Phase III | Submitted | ||||||||
Streptococcus
Rotavirus (Shantha) Live attenuated Pseudomonas Antibody fragment product Prevention of
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2nd generation
Rabies VRVg Purified vero rabies |
ACAM C. diff*
| Quadracel® DTP(1) IPV vaccine 4- Dengue * Mild-to-severe dengue
Quadrivalent DTP-HepB-Polio- | Hexaxim™
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(1) |
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D=Diphtheria, T=Tetanus, Hib=Haemophilus influenzae b, HepB=Hepatitis B, P=Pertussis. |
* | New targets |
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, 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-Dose 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 Monovalentsystems (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.
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.Products”).
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 meningitidisbacteria 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® 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) that will be used in association with the rabies vaccine for post-exposure prophylaxis. It is beingThe last Phase II clinical trial in India was initiated in November 2011. In 2011, Sanofi Pasteur reviewed the rabies mAb project, developed in collaborationpartnership with Crucell. The Phase II study in adolescentsCrucell, acquired by Johnson & Johnson, will take 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 quadrivalent 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.candidate. Sanofi Pasteur’s dengue vaccine research program includes ongoing clinical studies (adults and children) in several countries in endemic regions: Mexico, Colombia, Honduras, Puerto Rico, Peru, the Philippines, Vietnam, Singapore, and Thailand.
IMOJEV™—regions. The ChimeriVax™ technologyfirst Phase III study was further leveraged to develop a vaccine for protection against infection by the Japanese Encephalitis Virus (“JEV”). Japanese encephalitis is endemicinitiated in Southeast Asia. ReplacementOctober 2010 in Australia. This final stage of clinical development aims at demonstrating that production of the currently available vaccinesvaccine on an industrial scale will meet the consistency criteria required for market authorizations. The study in Australia is the first to use our dengue vaccine doses produced on an industrial scale. Two Phase III studies to evaluate efficacy (Latin America and Asia Pacific) began in June 2011. In February 2011, Sanofi Pasteur announced that it was partnering with the single dose product is anticipatedInternational Vaccine Institute (IVI) to provide a strong competitive advantagesupport the recently launched Dengue Vaccine Initiative (DVI) in collaboration with the Sabin Vaccine Institute, the Johns Hopkins University, and facilitate expansionthe WHO to support development of vaccination programs. In July 2009, marketing authorization applications were filed in Thailand and Australia. Regulatory approval is expected in 2010.
West Nile virus — Although the West Nile virus vaccine was safe and immunogenic in Phase II studies, the decision was made in 2009vaccines to place this project on hold due to the current low incidence of the disease.control dengue fever.
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® adjuvant. The candidate vaccine is made up of recombinant protein units. Enrollment inResults from the 2008 Phase I clinicaltrial 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, with full enrollment completed in 2008 and analysis of the clinical samples is ongoing. Additional clinical trials are planned for 2010.June 2011.
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. Last year, 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 by participating in the first concrete evidence, sincePox-T-cell consortium and the discovery ofIPPOX Foundation in 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.
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 alarming 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 difficilevaccine 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. The ongoing stage 2 of the study is evaluating the dosing schedule.
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 patients recently infected withC. difficile startedmechanically ventilated patients.
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.
Patents, Intellectual Property and Other Rights
Patent Protection
We own a broad portfolio of patents, patent applications and patent licenses worldwide. These patents are of various types and may cover:
active ingredients;
pharmaceutical formulations;
product manufacturing processes;
intermediate chemical compounds;
therapeutic indications/methods of use;
delivery systems; and
enabling technologies, such as assays.
Patent protection for individual products typically extends for 20 years from the patent filing date in countries where we seek patent protection. A substantial part of the 20-year life span of a patent on a new chemical 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’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’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 2009,2011, 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” 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 ingredient 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“Generic versions of some of our products may be approved for sale in one or more of their major markets”; and “We may lose market share to competing remedies or generic brands if they are perceived to be equivalent or superior products”. In some cases, it is possible to continue to obtain commercial benefits from product manufacturing trade secrets or from other types of patents, such as patents on processes, intermediates, structure, formulations, methods of treatment, indications or delivery systems. Certain categories of products, such as traditional vaccines and insulin, have been historically relatively less reliant on patent protection and may in many cases have no patent coverage, although it is increasingly frequent for novel vaccines and insulins to be patent protected. See “— Focus on Biologics” below. Patent protection is also an important factor in our animal health business, but is of comparatively lesser importance to our Consumer Health Care and generics businesses, which rely principally on trademark protection.
One of the main limitations 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.
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” below). In addition to the regulatory exclusivity granted to NCEs, significant line extensions of existing NCEs may qualify for an additional three years of regulatory exclusivity. Also, under certain limited conditions, it is possible to extend unexpired U.S. regulatory and patent-related exclusivities by a pediatric extension. See “— Pediatric Extension”, below)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 twelve years after the date on which the reference product was first licensed.
In the European Union, regulatory exclusivity is available in two forms: data exclusivity and marketing exclusivity. Generic drug applications will not be accepted for review until eight years after the first marketing authorization (data exclusivity). This eight-year period is followed by a two-year period during which generics cannot be marketed (marketing exclusivity). The marketing exclusivity period can be extended to three years if, during the first eight-year period, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which are deemed to provide a significant clinical benefit over existing therapies. This is known as the “8+2+1” rule. 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 (for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions) to six years (for new drugs
containing a medicinal composition, or requiring a new route of administration) to eight years (for drugs containing a new chemical entity) to ten years (for orphan drugs or new drugs requiring pharmaco-epidemiological study).
Emerging Markets
One of the main limitations on our operations in emerging market countries is the lack of effective intellectual property protection or enforcement for our products. The World Trade Organization (WTO) Agreement on Trade-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. 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’s regulatory exclusivities for an additional period of time by providing data regarding pediatric studies.
In the United States, the FDA may ask a company for pediatric studies if it has determined that information related to the use of the drugs in the pediatric population may produce health benefits. The FDA has invited us by written request to provide additional pediatric data on several of our main products. Under the Hatch-Waxman Act, timely provision of data meeting the FDA’s requirements (regardless of whether the data supports a pediatric indication) may result in the FDA extending regulatory exclusivity and patent life by six months, to the extent these protections have not already expired (the so-called “pediatric exclusivity”). TheOur main products havingwhich have received past FDA grants of pediatric exclusivity at some point are Aprovel®, Lantus®, Amaryl®, Allegra®, Eloxatine®, and Ambien®/Ambien® CR. Written requests have also been issued to us with respect toCR, Plavix®, Taxotere®, and LovenoxActonel®.
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.
Orphan Drug Exclusivity
Japanese regulations doOrphan 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 currently offerprotected by orphan exclusivity.
Orphan drug exclusivities also exist in the possibility of similar extensions in exchange for pediatric study results.European Union and Japan.
Product Overview
We summarize below the intellectual property coverage in our major markets of the marketed products described above at “— Pharmaceutical Products — Main Pharmaceutical Products”. Concerning animal health products, Merial’s intellectual property coverage is described above (see “— Animal Health: Merial”). In the discussion of patents below, we focus on active ingredient patents (“compound patents”)(compound patents) and any later filed improvement patents listed, as applicable, in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations (the “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” 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 not reflect six-month pediatric extensions to the FDA’s Orange Book dates for the products concerned (Aprovel®, Lantus®, AmarylPlavix®, Eloxatine®, Stilnox®/Ambien® CR and AllegraActonel®).
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 EU 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.
Lantus® (insulin glargine) | ||||
U.S. | E.U. | Japan | ||
Compound: August 2014, protection extended to February 2015 by Pediatric extension | Compound: November 2014 in most of
| Compound: November 2014 |
Regulatory exclusivity: October 2011
Apidra® (insulin glulisine) | ||||
U.S. | E.U. | Japan | ||
Compound: June 2018
| Compound: September 2019 in most of the EU | Compound: May 2022 | ||
Later filed improvement patent: ranging through January 2023 | Later filed improvement patent: March 2022
Regulatory exclusivity: September 2014 |
Later filed improvement patent:
Regulatory exclusivity: April 2017 |
Taxotere® (docetaxel) | ||||
| E.U. | Japan | ||
Compound: expired | Compound: expired in most of the EU | Compound: June 2012 | ||
Generics on the market | Generics on the market | Later filed improvement patents: coverage ranging through November 2013 |
Eloxatin® (oxaliplatin)1 | ||||
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | |||
Later filed improvement patents: coverage ranging through August 20162 | Generics on the market |
1 |
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2 | Generics removed from the market by court order. Return anticipated in August 2012. See “Item 8 - A. Consolidated Financial Statements and Other Financial Information — Patents — Eloxatin® (oxaliplatin) Patent Litigation”. |
3 | No rights to compound in Japan. |
Jevtana® (cabazitaxel) | ||||
U.S. | E.U. | Japan | ||
Compound: | Compound: | Compound: | ||
Later filed improvement patents: | Later filed improvement patents: | Later filed improvement patents: | ||
Regulatory exclusivity: June 2015 | Regulatory exclusivity: March 2021 | Regulatory exclusivity to | ||
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U.S. | E.U. | Japan | ||
Compound: Generics on the market | Compound: expired | |||
Compound: expired
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U.S. | E.U. | Japan | ||
Compound: Extended to May 2012, by Pediatric exclusivity | Generics on the market | Compound: | ||
| Regulatory exclusivity: | |||
| ||||
U.S. | E.U. | Japan | ||
Compound: Extended to March 2012 by Pediatric exclusivity | Compound: | Compound: | ||
Later filed improvement patents: coverage ranging through December 2015 with Pediatric exclusivity | Later filed improvement patents: coverage ranging through June 2016 Generics on the market in some EU countries | Later filed improvement patent: coverage ranging through June 2016 (June 2021 if PTE granted) Regulatory exclusivity: April 2016 |
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U.S. | E.U. | Japan | ||||||
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Compound: expired | Compound: expired | |||||||
1 No rights to compound in the U.S. | ||||||||
Multaq® (dronedarone hydrochloride) | ||||||||
U.S. | E.U. | Japan | ||||||
Compound: July
Later filed improvement patent: formulation
Regulatory exclusivity: July 2014 | Compound:
Later filed improvement patent: formulation
Regulatory exclusivity: November 2019 | Compound: |
expired | ||||||
Stilnox® (zolpidem tartrate) | ||||||
U.S. | E.U. | Japan | ||||
Compound patent: expired Generics on the market | Compound patent: expired Generics on the market | Compound patent: expired | ||||
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Copaxone® (glatiramer acetate)1 | ||||
U.S. | E.U. | Japan | ||
Compound: May 2015 | N/A2 |
1 | As of February 29, 2012 Sanofi no longer markets or sells Copaxone®.See “Item 4 — B. Business Overview — Other Pharmaceutical Products — Alliance with Teva”. |
2 | No rights to compounds in the U.S. and Japan. |
Depakine® (sodium valproate) | ||||
U.S. | E.U. | Japan | ||
N/A3 | Compound: expired | Compound: expired | ||
Later filed improvement patent: formulation (October 2017) | Later filed improvement patent: Depakine® Chronosphere formulation |
3 | No rights to compounds in the U.S. |
Allegra® (fexofenadine hydrochloride) | ||||||||
U.S. | E.U. | Japan4 | ||||||
Compound: expired Generics on the market | Compound: expired | Compound: expired | ||||||
Converted to Over-the-Counter | Generics on the market | Later filed improvement patents: coverage ranging through |
4 | In December 2011, the Japan patent office found two patents covering Allegra®to be invalid.This decision in under appeal by Sanofi (see “Item 8 — A. Consolidated Financial Statements and Other Financial Information — Patents –– Allegra® Patent Litigation” of this annual report for further information). |
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U.S. | E.U. | Japan | ||||||
Compound: expired | Compound: expired | Compound: expired | ||||||
Later filed improvement patents: formulation and method of use July 2016 | Later filed improvement patent: formulation July 2017 | |||||||
Generics on the market |
5 | A license was granted to Barr Laboratories, Inc. in settlement of patent litigation. |
Xatral® (alfuzosin hydrochloride) | ||||
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
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market | ||||
Actonel® (risedronate sodium) | ||||
U.S. | E.U. | Japan | ||
Compound: December 2013, Extended to June 2014 by Pediatric extension | Compound: |
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Actonel® (risedronate sodium)6 | ||||
Later filed improvement patents: coverage ranging through June 2018 | Later filed improvement patents: coverage ranging through June 2018 |
6 | On October 30, 2009, Procter & Gamble Pharmaceuticals (P&G) sold its pharmaceutical business to Warner Chilcott (WCRX) which became the successor to P&G in rights and interests for the Actonel® alliance and now holds the NDA and the patents for this product in the United States. We commercialize Actonel® with WCRX. See “Item 5 — Financial Presentation of Alliances”. |
Amaryl® (glimepiride) | ||||
U.S. | E.U. | Japan | ||
Compound: expired | Compound: expired | Compound: expired | ||
Insuman® (human insulin) | ||||
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Fabrazyme® (agalsidase beta) | ||||
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed improvement patents: coverage ranging through September 2015 Biologics Regulatory Exclusivity: April 2015 | Later filed improvement patents: November 2013 Orphan regulatory exclusivity: January 2014 | |||
Cerezyme® (imiglucerase) | ||||
U.S. | E.U. | Japan | ||
Compound: August 2013 | Compound: N/A | Compound: N/A | ||
Later filed improvement patents: coverage ranging through September 2019 | ||||
Lumizyme® / Myozyme® (alglucosidase alfa) | ||||
U.S. | E.U. | Japan | ||
Compound: August 2018 Later filed improvement patents: coverage ranging through February 2023 | Compound: July 2021 Later filed improvement patents: coverage ranging through February 2023 | Compound: N/A Orphan Regulatory Exclusivity: April 2017 | ||
Orphan Drug Exclusivity: April 2013 Biologics Regulatory Exclusivity: April 2018 | Orphan Regulatory Exclusivity: March 2016 Biologics Regulatory Exclusivity: March 2016 |
Renagel® (sevelamer hydrochloride) | ||||
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed improvement patent: coverage ranging through August 2013 and September 2014 | Later filed improvement patent: August 2014 | Later filed improvement patent: August 2014 | ||
SPC coverage to January 2015 in certain EU countries | PTE protection to December 2016 | |||
Renvela® (sevelamer carbonate) | ||||
U.S. | E.U. | Japan | ||
Compound: N/A | Compound: N/A | Compound: N/A | ||
Later filed improvement patent: coverage ranging through August 2013 and September 2014 | Later filed improvement patent: August 2014 | Later filed improvement patent: August 2014 | ||
New dosage form regulatory exclusivity: August 2012 | ||||
Synvisc® (hyaline G-F 20) | ||||
U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: N/A | ||
Later filed improvement patent: March 2012 | ||||
Synvisc One® (hyaline G-F 20) | ||||
U.S. | E.U. | Japan | ||
Compound: expired | Compound: N/A | Compound: N/A | ||
Later filed improvement patent: January 2028 |
Patents held or licensed by the Group do not in all cases provide effective protection against a competitor’s generic version of our products. For example, notwithstanding the presence of unexpired patents, listed above competitors have launched generic versions of EloxatineEloxatin® in Europe, and in the United States, Allegra® in the United States (prior to the product being switched to over-the-counter status) 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.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 sale in one or more of their major markets.materially and adversely affected.”
As disclosed in Item 8 of this annual report, we are involved in significant litigation concerning the patent protection of a number of our products.
Challenges to Patented Products
In the United States, companies have filed Abbreviated New Drug Applications (ANDAs), containing challenges to patents related to a number of our products. An ANDA is an application by a drug manufacturer to receive authority to market a generic version of another company’s approved product, by demonstrating that the purportedly generic version has the same properties as the original approved product. ANDAs may not be filed with respect to drugs licensed as a biological. See “— Focus on Biologics” below. An ANDA relies on the safety and other technical data of the original approved product, and does not generally require the generic manufacturer to conduct clinical trials (thus the name “abbreviated” new drug application), presenting a significant benefit in terms of time and cost. As a result of regulatory protection of our safety and other technical data, the ANDA may generally be filed only five years following the initial U.S. marketing authorization of the original product. See “— Regulatory Exclusivity” above. This period iscan be reduced to four years if the ANDA includes a challenge to a patent listed in the FDA’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”), 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’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” and “— Regulation” below. We seek to defend our patent rights vigorously in these cases. Success or failure in the assertion of a given patent against 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.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
The process and defended based on this policy and in order to prevent infringement and/ or unfair competition.
The 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 integrate the manufacture of our products in order to have better control of quality and distribution. Our principal manufacturing processes consistprocess 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 the active ingredients that we use in our products. We have a general policy of producing theour main active ingredients for ourand principal products at our own plants in order to minimize our dependence on external manufacturers and ensure the strict and precise control of the product throughout the production cycle. In some cases however, we rely on third parties for the manufacture and supply of some active ingredients and medical devices. We also have outsourced certain production elements, especiallyparticularly as part of supply framework agreements entered into within the frameworkcontext of plant divestitures. As a result,divestitures, or in order to adapt locally to market growth in emerging markets. In particular, we outsource a portionpart of the production of the active ingredients used in Stilnox® and 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.section “3.D. Risk Factorsfactors — 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 partnership with BMS, a multi-sourcing organizationmulti-vendor supply and securitysafety stock arehave been put in place for Plavix® / clopidogrel bisulfate(clopidogrel bisulfate) and Aprovel® / irbesartan.(irbesartan).
We purchaseOur pharmaceutical production sites are divided into three categories:
global sites, which serve all the raw materials usedmarkets. Situated principally in Europe, these are plants dedicated to produce Lovenox® fromthe manufacture of our active ingredients, injectables and a number of sources.
Our main European pharmaceutical production facilities are locatedour principal products in France, Germany, Italy, Spain,solid form;
regional sites, which serve the United Kingdommarkets at a continent level, in Europe and Hungary. In North America, we run two facilitiesparticularly the BRIC-M countries (Brazil, Russia, India, China and Mexico), marking our strong industrial presence in the United States (Kansas City and Saint Louis) and one in Canada (Laval). We have one plant in Japan (Kawagoe) and additional facilities located in many other parts ofemerging markets;
local sites, which wholly serve the world. To carry out the production ofdomestic market.
Sanofi Pasteur produces vaccines sanofi pasteur uses a wide industrial operations network, withat sites located in North America, France, China, Thailand, Argentina and India. Le Trait (France) and Anagni (Italy) pharmaceutical sites form part of Sanofi Pasteur’s industrial operations and carry out aseptic filling and freeze-drying activities. A new antigen production unit in Mexico for seasonal and pandemic influenza vaccines is scheduled to commence commercial production in 2012, once the necessary production and marketing approvals have been obtained from the Mexican authorities.
In 2011, our industrial operations diversified into rare diseases with the acquisition of Genzyme and the integration of Merial, Sanofi’s dedicated animal health division.
Genzyme’s activities throughout the world cover all biomedicine development stages, from initial research to clinical trials, regulatory matters, manufacture and marketing.
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 industrial operations dedicated to animal health cover all activities, from the purchase of raw materials through to the delivery of the finished products, ensuring its customers’ needs can be met through a reliable and flexible offer that meets quality expectations. There are sixteen production sites spread across nine countries.
All of our pharmaceutical and vaccine facilities are Good Manufacturing Practices (“GMP”)(GMP) compliant in accordance with international guidelines. Our main facilitiesprincipal sites are also FDA approved includingby the U.S. Food & Drug Administration (FDA): this includes our pharmaceutical facilities in Ambarès, Tours, Le Trait, Maisons-Alfort and Compiègne in France, Dagenham and Holmes Chapel in the United Kingdom, Frankfurt in Germany, Veresegyhaz in Hungary and Saint Louis in the United States, and Lavalas well as our vaccine facilities in Canada and our vaccines facilities of Marcy l’Etoile and the Val de Reuil (our worldwide distribution centersite) in France, Swiftwater in the United States and Toronto in Canada. The Genzyme facilities in the United States (Allston, Framingham, Ridgefield, Cambridge) and in Europe (Geel, Lyon, Haverhill and Waterford) are all FDA approved. Our animal health facilities in Athens, Gainesville, Berlin and Raleigh in the United States are managed by the U.S. Department of Agriculture (USDA). Wherever possible, we seek to have multiple plants approved for the production of key active ingredients and our strategic finished products as inproducts. This is the case of Lovenox®, for example.
In February 2011, we had received an FDA warning letter concerning our Frankfurt facility following a routine FDA inspection in September 2010. The warning letter cited GMP compliance issues in certain manufacturing processes, without referring to specific products. While believing that the points raised in the letter did not compromise the quality of our marketed products, we acted on this warning and worked towards satisfying the recommendations through a “compliance first” improvement action plan. In October 2011, we notified the FDA of the end of this program. We expect the FDA inspection to take place during the second quarter of 2012.
On May 24, 2010, Genzyme entered into a consent decree with the FDA relating to the Allston facility following FDA inspections at the Allston facility that resulted in 483 observations and a warning letter raising 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 paid an upfront disgorgement of past profits of $175.0 million. Conditioned upon Genzyme’s compliance with the terms of the consent decree, Genzyme is permitted to continue manufacturing at the site during the remediation process.
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 previously reported to Genzyme or identified as part of a comprehensive inspection that was completed by a third-party expert in February 2011. This third party expert has been retained by Genzyme and will monitor and oversee the implementation of the remediation workplan. The required comprehensive remediation workplan was submitted to the FDA in April 2011 and accepted by the FDA in January 2012. The workplan is expected to take approximately four more years to complete. The workplan includes a timetable of specified remediation compliance 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.
Genzyme will be meeting with the FDA to propose modifications to the workplan as a result of planned changes in manufacturing operations regarding Cerezyme® and Fabrazyme® for the Allston Landing Facility.
The new Genzyme Framingham (U.S.) facility was approved by the FDA and the EMA in January 2012 for the production of Fabrazyme® (agalsidase beta).
The Merial animal health facilities are regulated by different authorities depending on the product and the country (EPA, FDA, USDA, EU GMP, local authorities).
More details about our manufacturing sites are set forthfound below at “ — D.“— Property, Plant and 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€105 million in 2009.2011.
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’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’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-aventis2011, Sanofi spent €38€41 million on rehabilitating sites previously contaminated by groundsoil or groundwater pollution. During the year ended December 31, 2009,2011, 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€763 million as at December 31, 2009.
Because ofDue to changes in environmental regulations governing site remediation, the Group’s provisions for remediation obligations may not be adequate due to the multiple factors involved, such as the complexity of operational or previously operational sites, the nature of claims received, the rehabilitation techniques considered, the planned timetable for rehabilitation, and the outcome of discussions with national regulatory authorities or other potentially responsible parties, as in the case of multiparty sites. Given the long industrial history of some of our sites and the legacy obligations of Aventis arising from its past involvement in the chemical and agrochemical industries, it is impossible to quantify the future impact of these laws and regulations with precision. See “Item 3.D. Risk Factors — Environmental Risks of Our Industrial 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
(24 in 2009)2011) 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. Additionally 17 specialized audits covering contractors or biosafety were done by our teams. Moreover, 89172 loss prevention technical visits were carried out in 2009.2011.
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’s COVALIS committee classifies all chemical and pharmaceutical products handled within the Group and establishes workplace exposure limits for each of them. The Group’s TRIBIO Committee is responsible for classifying all biological agents according to their degree of pathogenicity, and applies rules for their containment and the preventive measures to be respected throughout the Group. See “Item 3.D.3. Key Information — D. Risk Factors — Environmental Risks of Our Industrial Activities — Risks from the handling of hazardous materials could adversely affect our results of operations”.
Appropriate Industrial 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 the risk assessments.
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, 55 sites are currently ISO 14001 certified. We believe that this strategy clearly expresses the commitment of both management and individuals to health, safety and the environment. In 2008 and 2009, six2011, 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.
TheOur 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 2011, we have reduced carbon dioxide emissions caused by our sales representation car fleet by 14%, our direct carbon dioxide emissions by 11 % and our indirect emissions by 16%10% versus 2010, due to the policy of using energy efficient cars as well as a reduction in the number of cars. Since 2005, in terms of our activity level per unit produced.produced, our direct and indirect carbon dioxide emissions have decreased by 9.5% and 15.6% respectively(1).
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, 20082009, 2010 and 20092011 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 of Financial and Other Information” at the beginning of this document.
Genzyme’s sales are included from date of acquisition.
(1) | The CO2 emissions variations per produced unit are calculated for each business and added proportionally to their respective contribution to the total direct and indirect CO2 emissions. Each business defines a specific indicator of its activity (e.g., hours worked for vaccines, number of boxes produced for pharmaceuticals, etc.). |
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 “B. Business Overview — Strategy”, above) represent 30.3% of our net sales, the largest contribution to net sales of any region. We are the leading healthcare company in emerging markets. In 2011, sales in emerging markets grew by 10.1% at constant exchange rates. This performance was due to robust organic growth (10.4% excluding Genzyme and A/H1N1 vaccines sales). Brazil sales were up 16.9% (excluding Genzyme and A/H1N1 vaccines sales), China sales were up 38.5% (excluding Genzyme), and Russia sales were up 7.4% (excluding Genzyme). In 2011, Asia and Latin America continued to deliver strong double digit sales growth of 15.7% and 18.1% respectively (excluding Genzyme and A/H1N1 vaccines sales). Sales in Eastern Europe and Turkey were slightly down (-0.4% excluding Genzyme and A/H1N1 vaccines sales), which were particularly impacted by price cuts and generic competition for Taxotere® in Turkey. |
The United States represent 29.8% of our net sales; we rank thirteenth with a market share of 3.1% (3.1% in 2010). Sales in the U.S. were up 6.8% at constant exchange rates in 2011 (down 5.7% excluding Genzyme and A/H1N1 vaccines sales) reflecting the impact of generics of Lovenox®, Taxotere®, Ambien® CR, Allegra® and Xyzal®; partially off-set by Lantus® growth, Eloxatin® return to market exclusivity and the launch of Allegra® OTC. |
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Europe:Western Europe represents 41%27.3% of the Group’sour net sales; we are the leading pharmaceutical company in France where our market share is 11.5%9.9% (10.1% in 2009 (13.1% in 2008)2010), and we rank secondfifth in Germany with a 5.6% (5.7% in 2008) market share. Key events in 2009 affecting European4.6% market share include:(after Copaxone® transfer and without taking into account parallel trade). In 2011, sales in Western Europe were down 4.0% at constant exchange rate (down 10.5% excluding Genzyme and A/H1N1 vaccines sales) due to the impact of generic competition for Plavix® and Taxotere® as well as the impact of austerity measures.
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Emerging markets (see definition in “B. Business Overview — Strategy”, above) represent 25%Japan represents 8.6% of the Group’sour net sales; we are the leading healthcare companyour market share is 3.4% (3.1% in emerging markets with a 5.7% market share.2010). Full-year 2011 sales in Japan were up 20.2% at constant exchange rate, or up 12.0% excluding Genzyme and were supported by Plavix® (up 22.9%), Allegra® (up 22.2%) and Hib vaccine sales.
A breakdown of our sales by geographic market is presented in “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 20092011 Compared with Year Ended December 31, 2008.2010.”
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. With regard to rare disease, renal, and biosurgery products, we sell these products directly to physicians as well. With the exception of CHCConsumer Health Care products, these drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor’s prescription.
We use a selection of channels to disseminate information about and promote our products among healthcare professionals and patients, ensuring that the channels not only cover our latest therapeutic advances but also our mature products, as they provide the foundation for satisfying major therapeutic needs.
We regularly advertise in medical journals and exhibit at major medical congresses. In some countries, products are also marketed directly to patients by way of television, radio, newspapers and magazines, and we sometimes use new media channels (such as the internet) to market our products. National education and prevention campaigns can be used to improve patients’ knowledge of conditions.Our medical 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, 2009,2011, 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 “— Pharmaceutical Products — Main pharmaceutical products” above. 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 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 the countries legislation for veterinary products. Merial takes into account each country’s specific characteristics and sells either to veterinaries, chemists, or via wholesalers. In 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:
Competitioncompetition between pharmaceutical companies to research and develop new patented products or new therapeutic indications;
Competitioncompetition between different patented pharmaceutical products marketed for the same therapeutic indication;
Competitioncompetition between original and generic products or between original biological products and biosimilars, at the end of regulatory exclusivity or patent protection; and
Competitioncompetition between generic or biosimilar products.
We compete with other pharmaceutical companies in all major markets to develop innovative new products. We may develop new technologies and new patented products wholly in-house, but we also enter into collaborative R&D agreements in order to access new technologies. See Note D.21. to our consolidated financial statements included at Item 18 of this annual report.
Our prescription drugs compete in all major markets against patented drugs from major pharmaceutical companies like Abbott in benign prostatic hyperplasia;like; AstraZeneca in cardiovascular disease, hypertension and oncology; BayerBayer-Schering in thrombosis;thrombosis prevention; Boehringer-Ingelheim in atherothrombosis and benign prostatic hyperplasia;atherothrombosis; 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; Novo Nordisk in diabetes; Pfizer in oncology, thrombosis and allergies,allergies; Shire plc in rare diseases and in renal; Fresenius Medical Care in renal and Roche in oncology and osteoporosis, and Bayer in thrombosis.osteoporosis.
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 also 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; with Virbac, Ceva and Vetoquinol, French companies with global presence, for pharmaceuticals and vaccines except for Vetoquinol operating only in the pharmaceutical segment .
We also face competition from generic drugs that enter the market when our patent protection or regulatory exclusivity expires, or when we lose a patent infringement lawsuit (see “— Patents, Intellectual Property and
Other Rights” above). Similarly, when a competing patented drug from another pharmaceutical company faces generic competition, these generic products can also affect the competitive environment of our own patented product. See “Item 3. Key Information — D. Risk factors — Risks related to our business”.
Competition from producers of generics has increased sharply in response to healthcare cost containment measures and to the increased number of products for which patents or regulatory exclusivity have expired.
Generics manufacturers who have received all necessary regulatory approvals for a product may decide to launch a generic version before the patent expiry date. Such launch may occur notwithstanding the fact that the owner of the original product may already have commenced patent infringement litigation against the generics manufacturer. Such launches are said to be “at risk” for the promoter of the generic product because it may be required to pay damages to the owner of the original product in the context of patent infringement litigation; however, these launches may also significantly impair the profitability of the pharmaceutical company whose product is challenged.
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 of counterfeit drugs: their development has intensified in 2009.drugs sold on illegal websites have been found to be counterfeit.
A medical productcounterfeit medicine 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 related to its distribution channels). Sanofi-aventisgeneric 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 is committed to being part of any efforts made to overcome drug counterfeiting and has implemented the following actions:
Intensification of close collaboration with international organizations and with customs and police to reinforce regulatory frameworks and to investigate suspected counterfeiters; and
Development of technologies to make drugs more difficult to copy through packaging protection programs and to ensure no direct traceability.
Regulation
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. Interestingly, emergent countries are starting to participate in ICH standardization discussions, and could be more involved in the near future.
Pharmaceutical manufacturers have committedInternational collaboration between regulatory authorities continues to publishing protocolsdevelop with implementation of confidentiality arrangements between ICH regulatory authorities, and results of clinical studies performed with their compounds in publicly accessible registries (Clinical Trials Registrynon-ICH regulatory authorities. Examples include work-sharing on Good Manufacturing Practices (GMP) and Good Clinical Trial Results Registry). In addition, regulatory frameworks inPractices (GCP) inspections and regular interactions identified as “clusters” (i.e. pediatrics, oncology, advanced therapy medicinal products, vaccines, pharmacogenomics, orphans, biosimilars, blood products) between the various ICH countriesUnited States and non-ICH countries tend to impose mandatory disclosure of clinical trials information (protocol-related informationthe European Union, as well as results-related information).creating permanent representatives from the FDA and Japanese Pharmaceutical and Medical Devices Agency (PMDA) now based 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 substantiallymeaningfully extend the time for market entry to long afterbeyond the initial marketing approval is granted.approval. While marketing authorizations for new pharmaceutical products in the European Union have been substantially 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 centralized procedure is mandatory for certain types of medicinal products and optional for others. Anproducts. When an application is typically submitted to the EMA. TheEMA, the scientific evaluation of the application is carried out by the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA,(CHMP) and a scientific opinion is prepared. TheThis opinion is sent to the European Commission which adopts the final decision and grants a CommunityEU marketing authorization. Such a marketing authorization is valid throughout the CommunityEU and the drug may be marketed within all European Union member states.
If a company is seeking a national marketing authorization in more than one Member State,member state, the mutual recognition or decentraliseddecentralized procedure is available to facilitate the granting of harmonized national authorizations across Member States.member states. Both the decentraliseddecentralized and the mutual recognition procedures are based on the recognition by national competent authorities of a first assessment performed by the authoritiesregulatory authority of one member state.
National authorizations are still possible, but are only for products intended for commercialization in a single EU member state or for line extensions to existing national product licenses.
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.approved reference product in the European Union. Generic applications are abridged: generic manufacturers only need to submit quality data and demonstrate that the generic drug is “bioequivalent” to the originator product —i.e. that it(i.e., works in essentially the same way in the patient’s body,body), but there is nodo not need to submit safety or efficacy data assince regulatory authorities can refer to the originatorreference 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 from the date of approval of the originator product has elapsed.
Another relevant aspect in the EU regulatory framework is the “sunset clause”: a provision leading to the cessation of the validity of any marketing authorization which is not followed by marketing within three years or not remaining on the market for a consecutive three year period.
Post-authorization safety monitoring of pharmaceutical products is carefully regulated in Europe. The EMAEU 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. The responsibilities for pharmacovigilance rest with the regulatory authorities of all the EU member states in which the marketing authorizations are held. In accordance with applicable legislation, each EU 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 authorisation 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 assume their obligations and responsibilities.
In 2010 new legislation aimed at improvingstrengthening and rationalizing the opennessEU Pharmacovigilance System was approved, which will be enforced in July 2012. Changes include a strengthened legal basis for regulators to require post-authorization safety and efficacy studies throughout the transparencylife cycle of its activities, suchthe medicinal product. An additional scientific committee called the Pharmacovigilance Risk Assessment Committee, with a key role in pharmacovigilance assessments (scope: all marketed drugs in the EU), is being established at the level of the EMA. This committee, which includes a patient representative, can hold public hearings. As a result, the Periodic Safety Update Report work-sharing procedure, as well as the publicationnew Urgent Union procedure should improve the harmonization of regulatory outcomes of safety evaluation for nationally authorized products.
Implementation of this pharmacovigilance legislation will be a particular priority in light of the highly-publicized Mediator affair in France. Given AFSSAPS’ stature as a leading regulatory agency, as well as the way 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 proposedregulatory network is organized, (with national agencies that are closely entwined with regard to the disclosure of a minimum amount of information on applications that have been submitted for marketing authorization. Also the EMA has become more proactive on the disclosurethrough their experts’ membership of documents/information throughout the product lifecycle, more specifically in the safety area. In addition patients and consumers are increasingly involved in the work EMA’s scientific committees and groups), it is possible the affair will have EU repercussions. Indeed member states may bring additional tighter national requirements. For example, the recently French law of December 29, 2011 that aims at reinforcing the Agency.oversight of safety of medical products allows the French regulator to ask for clinical trials to be conducted against both an active comparator and placebo for marketing authorisation purposes.
A new regulation in pediatric development came into force in January 2007. It is aimed at promotingIn addition the development of drugs well adapted to children and ensuring safe use in the pediatric population. Incentives are proposed such as extension of SPC (Supplementary Protection Certificate) or data protection for PUMA (Pediatric Use Marketing Authorization).
A newEU regulatory framework has been implemented specifically covering Advanced Therapy Medicinal Products (“ATMPs”). This new legislation provides specific requirements for the approval, supervision,medical devices will undergo to an in-depth revision in 2012, that will aim to improve coordination, evaluation and pharmacovigilancecertification 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,medical devices, as well as a permanent representativereinforcing efficient vigilance and post-market surveillance systems with greater harmonization of EMA at the FDA.EU member states’ market surveillance activities.
In the United States, applications for drug and biological approval are submitted to the FDA for review by the U.S. FDA. The FDAwhich has broad regulatory powers over all pharmaceutical products that are intended for U.S. sale and marketing in the United States.marketing. 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’s use outweigh its risks, whether the drug’s labeling is adequate, and if the manufacturing of the drug and the controls used for maintaining quality are adequate to preserve the drug’s identity, strength, quality and purity. Based upon this review, the FDA can require post-approval commitments.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.
InThe FD&C Act provides another abbreviated option for NDA approved products, called the United States,505(b)(2) pathway. This pre-market application may rely on the FDA finding that the reference product has been found to be safe and effective by the FDA based upon the innovator’s preclinical and clinical data.
Sponsors wishing to market a generic drug manufacturers maycan file an Abbreviated NDA (“ANDA”).(ANDA) under 505(j) of the FD&C Act. These applications are “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.product). Consequently, the length of time and cost required for development of such productgenerics can be considerably less than for the originator’s drug. See “— Patents, Intellectual Property and Other Rights” aboveAn application for additional information.a generic drug product does not currently require a user fee payment; however this will likely change under GDUFA (Generic Drug User Fee Act) which is expected to be introduced as an Omnibus Bill in 2012. 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 productscopies of drugs approved under an NDA. See “— Focus on Biologics” below.the FD&C Act and not for BLA approved biological products under the PHS Act.
In Japan the, regulatory authorities can require local development studies; theystudies. 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 United States. In order to solve this drug-lag problem, the MHLW (Ministry of Health, Labour 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 is compensated by a “Premium” for a maximum of 15 years. “Premium” are 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 6 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 animal healthgeneric products, see “—Animal Health: Merial” above.
Focus on Biologics
Products are usuallycan be referred to as “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” 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 guideline on pre-clinicalpreclinical and clinical development of biosimilars of low molecular weight heparins. This means thatheparins (LMWH). Currently in Europe a potential product candidate claiming to be biologically similar to Lovenox® must show therapeutic equivalence in terms of efficacy and safety in at least one adequately powered, randomized, double-blind, parallel group clinical trial. However in 2011, the EMA initiated the revision of several of the existing biosimilar guidelines (general guidelines, as well as product-related guidelines for recombinant insulins and LMWH).
While the EMA has adopted so far a balanced approach for all biosimilars, which allows evaluation on a case-by-case, in accordance with relevant biosimilar guidelines, it seems that there is some willingness to simplify the pathway in very specific circumstances. For a very simple biological fully characterized on the quality level, a biosimilar could be authorized based on a bioequivalence study only combined with an extensive quality package. With respect to vaccines, the CHMP has taken the position is that, currentlyat present, it is 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. Different from the CHMP guidelines, the main scope of the guideline 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 registeredseveral complex protein-based drugs have been approved as a biologicalNDAs under the Public Health Service Act, but accelerated generic approval procedures for large-molecule biologicals have been proposed that would require the law to be revised.
However, in the United States for historical reasons a few biologicals have been registered under theFederal Food Drug &and Cosmetic Act (“FDCA”) following the NDA scheme used for traditional well characterized small molecules.(FD&C Act). It is currently still technically possible to filesubmit an ANDAabbreviated application (ANDA) with respect to those particular products (among the Group’s products(e.g., Lovenox® is one example), Lantus®). BecauseSince an ANDA provides for no is not required to contain
clinical trialstrial data other than from bioequivalence studies, the appropriateness of an ANDA with respect to these NDA-registered biologicalsNDA approved biological products raises significant policyscientific issues for the FDA. Lovenox® (enoxaparin) was approved as a drug by the FDA on March 29, 1993 under Section 505(b)(1) of the FD&C Act and not as a biologic under Section 351 of the Public Health Service Act; therefore it was not possible to submit a biosimilar of the product. An abbreviated NDA (ANDA/generic) application was submitted to FDA August 2005 by Momenta/Sandoz under section 505(j) of the FD&C Act. This application was approved in July 2010; the generic product was approved as therapeutically equivalent to Lovenox®. The FDA approved a second enoxaparin ANDA on September 19, 2011. The sponsor, Amphastar, had submitted the application in 2003. A third ANDA from TEVA, also submitted in 2003, is still pending.
The FDCAU.S. law now provides for another abbreviated registrationa pathway for some“biosimilar” versions of a reference product licensed as a biological under the PHS Act. Healthcare reform legislation entitled the “Patient Protection and Affordable Care Act,” was signed into law by the President on March 2010. Title VII, Subtitle A “Biologics Price Competition and Innovation”, allows for the creation of a regulatory approval pathway for biosimilars and a litigation procedure for patent infringement lawsuits brought against biosimilar products;applicants.
Under the so-called “505(b)(2)” route. This pathwaynew law, the definition of “biological product” in section 351(i) is revised to include proteins, except any chemically synthesized polypeptide. In addition, the law describes how a “biosimilar” product may in particular be used for recombinant proteins. The registration file may partially refer“highly similar” to the existing datareference product “notwithstanding minor differences in clinically inactive components”, and for which there are “no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency of the product”.
This law also stated that approval of an application under section 351(k) may not be made effective until 12 years after the date on which the reference product was first licensed under section 351(a). The date on which the reference product was first licensed does not include the date of approval of: (1) a supplement for the biological product that is the reference product; (2) a subsequent application by the reference product sponsor or manufacturer for a change (other than a structural modification) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength for the previously licensed reference product; or (3) a subsequent application by the reference product sponsor or manufacturer for a modification to the structure of the reference product that does not result in a change in safety, purity, or potency.
Other provisions of this new U.S. law state that ten years after enactment, certain “biological products” approved under section 505 of the FD&C Act will be deemed licensed under section 351 of the PHS Act. Prior to that time, the current legal interpretation is that they cannot be “reference products” for applications submitted under section 351(k) of the PHS Act. The new law also describes how a biological product that is shown to meet the new interchangeability standards, “may be substituted for the reference product but mustwithout the intervention of the healthcare provider who prescribed the reference product”.
On February 15, 2012, the FDA published for consultation three draft guidances 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. The Agency has stated at publicly attended meetings that they are conducting “resource-intensive” pre-IND meetings with sponsors on a range of biosimilar products.
Focus on transparency and public access to documents
Over the last two to three years the pharmaceutical industry is subject to growing pressure for greater transparency about clinical trials (conduct and results). Regulatory authorities are also being pushed for more openness and transparency to make more comprehensive the rationale and basis of regulatory decisions on medicinal products, for enhanced credibility of the regulatory process. This is a meaningful 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.
EU pharmaceutical legislation for medicinal products requires national regulatory authorities and the EMA to actively publish information concerning authorisation 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 EU pharmacovigilance legislation, there will be completedan increased level of transparency especially with dataregard 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 a considerably wider access to documents originated by pharmaceutical companies and submitted to the biosimilar version,regulatory authorities for scientific evaluation, after a regulatory decision is taken. Whilst it is anticipated that these documents should be redacted before disclosure in particular with preclinicalorder to protect information contained therein that cannot be disclosed (commercial confidential information or personal data), the identification of commercially confidential information (CCI) and protection of personal data (PPD) within the structure of the marketing-authorization dossier has been restricted according to the draft document released in June 2011 for public consultation by the EMA and the Head of Medicines Agencies (HMA). Therefore, the scope of the information accessible to the public is considerably widened (e.g., clinical data. Howeverstudy reports in a marketing authorization dossier, but also major parts of non-clinical test data).
In the highly competitive field of medicinal products, there is the need to reinforce the principle that non-innovators cannot obtain marketing authorization solely based on the originator’s data released in the EU and while the data protection period runs.
In the U.S., the FDA indicatedhas initiated a transparency initiative 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); 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 this pathway should remain limitedthe Agency has in its possession, may require revisions 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.U.S. federal regulations.
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:
In the United States, the U.S. government does not currently control pharmaceutical costs directly except in the case2011 was marked by continued implementation of prescriptions purchased or reimbursed by government entities such as Medicaid, Veterans Affairs, and the Department of Defense. These entities provide health insurance coverageand market reforms that are expected to less than 20%lead to a large number of uninsured being covered by 2014, either through
state aid or mandatory coverage, with a system of fines for non-compliance. These reforms are the subject of litigation. These reforms will also lead to the establishment of health insurance exchanges which is expected to expand health care coverage. |
In Europe, emergency cost containment measures and reforms introduced since 2010 in several countries (including, Germany, Greece, Spain, Portugal, and Ireland) are being implemented. These will significantly affect the size of the U.S. population. The U.S. governmentpharmaceutical market. A number of Central Eastern European countries are also authorizes some qualifying private market entitiesimplementing cost containment measures (Hungary, Slovakia, Poland). In parallel, the full effect of the new German laws (end to purchase pharmaceuticals at government controlled prices through the 340B Drug Pricing Program. Third-party payers administer private plans that coverfree-price-setting system) has only just begun to see negative dividends for industry. France has implemented, in 2011, numerous changes to pharmaceutical access. In addition, health economic assessment is now officially part of the U.S. population, as well as the Medicare prescription benefit for the elderly, which the federal government funds and regulates. While the U.S. government does not directly control pricesprice determination in the private and Medicare prescription drug markets, third-party payers seek to decrease drug costs through reimbursement restrictionscountries such as patient co-pays, step therapy protocols (protocols under whichFrance and Spain. Details of the UK value-based pricing of drugs scheme is still to be finalized and it is not clear how or if the emphasis of the Incremental Cost Effectiveness Ratio (ICER) used by the National Institute for Clinical Excellence (NICE) will be diminished.
In Asia, while the Chinese market continues to grow, the National Development and Reform Commission continues to bring controls on drug prices through severe price cuts. As with China, in India, there is a brand product may be prescribedstrong move towards a universal minimum health coverage, with the National Pharmaceutical Pricing Authority also pushing for price control of an essential drug list (EDL).
In Russia, healthcare provision guarantees were signed into law with as yet undefined treatment standards to control usage. However, the 2012 EDL has been established but prices have not been changed considerably.
In Japan, with the usual biennial price cuts (April 2012), the extension of price premiums for drug development and reimbursed only if therapy has already failed using at least one low-cost generic drug, also known as “fail first”), and prior authorization (requirements that a prescriber obtain third-party payer authorization priormeasures to prescribing certain medications), in additionencourage the access to rebate contracting with manufacturers. For pharmaceuticals and biologics administered to Medicare and patients in a medical setting, the U.S. government does not directly control prices, but doesnew medications have the authority to make coverage determinations and has initiated various reimbursement policies, both of which than can reduce access. The Democratic leadership in both the presidency and Congress has put forward proposals to increase the scope of direct government involvement in drugbeen announced. In South Korea, after many announcements on pricing and reimbursement with an aim to reign in future healthcare expenditures which are otherwise expected to increase significantly. For example,revisions the current federal legislative activity on health care reform contains provisions to: extend and increase Medicaid rebates; apply Medicaid rebates to Medicare Part D dual-eligibles; repeal the existing non-interference provision in Part D; create an independent body whose purposegovernment is reduce expenditures; and grant more authority to the current agency responsiblelooking into premium measures for regulating and funding Medicare and Medicaid to experiment with various payment schemes, among other things.innovative products.
Outside the United States, governments frequently directly control pricing of drugs. The level of evidence requested to access 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 needs of the population. In 2009, measures taken in France included the decentralization of the healthcare system via the creation of regional health agencies (Agences Régionales de Santé, ARS) similar to those existing in other EU countries (e.g., Italy, Spain, UK). In Germany, allocation of contributions to the healthcare funds dramatically changed from 2008 to 2009 with the introduction of a common financial collection mechanism within the GKV based on a health fund (Gesundheitsfonds) from January 1, 2009. The new scheme provides for unitary health insurance at a contribution rate set by law. Health funds are responsible for their budget and the needs of their population. Although the scheme is regulated at the federal level, the provision and financing of care is determined at regional level, with the regional associations of each type of health insurance fund and the regional physicians’ associations playing key roles. In Eastern Europe, Poland, the Czech Republic, and Hungary are examples of countries which are moving towards more stringent measures to control pricing and reimbursement of drugs, with certain countries calling for exceptional measures in face of the economic crisis (e.g., Greece, Romania).
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:
We actively engage with our key stakeholders on the value of our products as it specifically pertains to their needs.them. These stakeholders —– including physicians, patient groups, pharmacists, government authorities and third-party payers —– can have a significant impact on the market accessibility of our products;products.
We continue to add flexibility and adaptability to our operations so as to better prepare, diagnose, and address issues in individual markets. For instance, in several countries, account management and sales functions have been reorganized and empowered to make decisions based on regional markets;
Keeping in mind the importance of recognizing the value of our products and the high cost of research and development, we continue to analyze innovative pricing and access strategies that balance patient accessibility with appropriate rewardrewards for innovation.
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 Liability, Stock and Transit, and Directors & Officers Liability.
Our captive insurance company, Carraig, participates in our coverage for various lines of insurance including, but not only, excess property, stock and transit and 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’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 kind 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 workingdeveloped a prevention program with our insurers, to develop a prevention program, 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 emerging from healthcare products which are not subject to market 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 of 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 history from the company or from the market of claims made and settlements, 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’s exposure to unasserted claims for those risks. The actuaries perform an actuarial valuation of the IBNR loss and ALAE (allocated loss adjustment expense) liabilities of the Company as of year end. Two ultimate loss projections (based upon reported losses and paid losses respectively) using the Bornhuetter-Ferguson method are computed each year. Provisions are recorded on that basis.
The Directors & Officers Liability program protects all our legal entities and their directors and officers. Our captive insurance company is not involved in this program.
These 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. This is now also the case for Genzyme and Merial which are integrated in the Group cover at each inception date. By centralizing our major programs, not only do we reduce costs, but we also provide world-class coverage for the entire Group.
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, 2009.2011. For a complete list of our main consolidated subsidiaries, see Note F. to our consolidated financial statements, included in this annual report at Item 18.
Significant Subsidiary or Affiliate | Country of Organization | Ownership and Voting Interest | ||||
Aventis Inc. | United States | |||||
Aventis Pharma S.A. | France | |||||
Genzyme Corporation | United States | 100% | ||||
Hoechst GmbH | Germany | |||||
Merial Ltd | United Kingdom | |||||
| France | |||||
| France | 100% | ||||
Sanofi-Aventis Deutschland GmbH | Germany | |||||
| France | |||||
| France | |||||
| Japan | 100% | ||||
Sanofi-Aventis Participations S.A.S. | France | |||||
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Sanofi-Synthelabo UK Ltd | United Kingdom | 100% | ||||
Sanofi | France | |||||
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Sanofi-aventisSanofi and its subsidiaries form a group, organized around twothree activities: pharmaceuticalPharmaceutical products, Human 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-aventisSanofi parent company, Aventis Pharma S.A. (France), Hoechst GmbH (Germany) and sanofi-aventis, Sanofi-Aventis Deutschland GmbH (Germany) and Genzyme Corporation (United States). The main patents and trademarks of the Human Vaccines and Animal Health activities are owned by Sanofi Pasteur S.A. and Merial Ltd, respectively.
Within the Group, the holding company oversees research and development activities by defining strategic priorities, coordinating work, and taking out the industrial property rights under its own name and at its own expense. In order to fulfill this role, sanofi-aventisSanofi subcontracts research and development to its specialized French and foreign subsidiaries, in many cases licensing its patents, manufacturing know-how and trademarks. In these cases, the licensee subsidiaries manufacture and distribute the Group’s products, either directly or via local distribution entities.
In certain countries, sanofi-aventisSanofi 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 (seeand Actonel® is marketed through an alliance with Warner Chilcott. See “— Pharmaceutical Products — Main Pharmaceutical Products,” above).Products” above.
For most Group subsidiaries, sanofi-aventisSanofi 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
Our headquarters are located in Paris, France. See “— Office Space” below.
We operate our business through offices and research, production and logistics facilities in approximately 110100 countries. All our support functions operate out of our office premises.
A breakdown of these sites by natureuse and by ownership/leasehold status 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 leased
Leased | ||||
Owned |
We believe thatown most of our production plantsresearch and research facilities are in full compliance with regulatory requirements, well maintained,development and generally adequate to meet our needs for the foreseeable future. However, we review our production facilities, oneither freehold or under finance leases with a regular basis with regard to environmental, health, safety and security issues, 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. to our consolidated financial statements includedpurchase option exercisable at Item 18 of this annual report.
Research and Development Sites for the Pharmaceutical ActivitySites: Pharmaceuticals segment
Research and Development activities are housed at 2521 sites:
• |
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• |
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In Japan, Research & Development is representedseven sites in Tokyo;the United States, the largest being in Cambridge and Framingham;
Inone site in China, the main Research and Development operations are located in Shanghai, with a Clinical Research Unit in Beijing.
Sanofi’s Industrial Sites
The Group has 116 production sites for pharmaceuticals (including rare diseases), vaccines and animal health located in 40 countries.
Sanofi believes its production plants and research centers are in compliance with all regulatory requirements, are properly maintained and are generally suitable for future needs. Nonetheless, the Pharmaceutical ActivityGroup regularly inspects and evaluates its production facilities with regard to environmental, health, safety and security matters, quality compliance and capacity utilization. For more information about the Group’s property, plant and equipment, see Note D.3 to the consolidated financial statements.
Industrial Sites: Pharmaceuticals Segment
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 the major sanofi-aventisSanofi drugs, active ingredients, specialties and medical devices are manufactured are:
• | France: Ambarès (Aprovel®, Depakine®, Multaq®), Le Trait (Lovenox®), |
• | Germany: Frankfurt (insulins, ramipril, Lantus®, Tritace®, pens, Apidra®); |
• | Italy: Scoppito (Tritace®, Amaryl®) and Anagni (Depakine®, Fasturtec® and Rifa antibiotic family); |
• | United Kingdom: Dagenham (Taxotere®, Elaxotine®), specialties currently being transferred to Frankfurt, Fawdon (Plavix®, Aprovel®); Holmes Chapel (Nasacort®); |
• | Hungary: Ujpest (irbesartan), Csanyikvölgy (Lovenox®); |
• | Japan: Kawagoe (Plavix®); |
• | United States: Kansas City (Allegra®), speciality currently being transferred to Tours and Compiègne, and Chattanooga (Consumer Health Care products). |
In the field of rare diseases, Genzyme became a Sanofi subsidiary in April 2011. This acquisition expands the Group’s presence in biotechnologies, especially rare diseases. Genzyme manages 11 production sites and collaborates with over 20 subcontractors to manufacture 22 commercial products over an entire range of technological platforms
Genzyme sites are as follows:
• | United States, Massachusetts: Allston (Cerezyme®), Framingham (Fabrazyme®, Myozyme®, Thyrogen®, Seprafilm®, Hyaluronic Acid); Cambridge (Carticel®, Epicel®, MACI® (Matrix-induced Autologous Chondrocyte Implantation)) ; |
• | United States, New Jersey: Ridgefield (Synvisc®, Hectorol®, Mozobil®, Jonexa®, Prevelle®); |
• | Ireland: Waterford (Myozyme®, Lumizyme®, Cholestagel®, Thymoglobuline®, Renagel®, Renvela®, Cerezyme®); |
• | United Kingdom, Suffolk: Haverhill (sevelamer hydrochloride API (Renagel®), sevelamer carbonate API (Renvela®), Cerezyme®, Fabrazyme®, Thyrogen®, Myozyme®, etc). |
• | Belgium: Geel (alglucosidase alfa: Myozyme®/Lumizyme®); |
• | France: Lyon (Thymoglobuline®, Celsior® (Immunosuppression in transplantation: preventing and treating graft rejection)); |
• | Denmark: Copenhagen (MACI®); |
• | Australia: Perth (MACI®); |
Sanofi Pasteur Industrial Sites
The headquarters of ourthe Group’s Vaccines division, sanofi pasteur,Sanofi Pasteur, are located in Lyon, France. Sanofi Pasteur’s production and/or Research and Development sites are located in Swiftwater, Cambridge,*, Rockville* Canton and Canton* (United States),Orlando, United States, Toronto, (Canada),Canada, Marcy l’Etoile, Neuville and Val de Reuil, (France),France, Shenzhen, (China),China, Pilar, (Argentina),Argentina, Chachoengsao, (Thailand),Thailand, Hyderabad, India, and Hyderabad (India).Ocoyoacac, Mexico.
In May 2009, sanofi pasteur continued with its policySanofi launched the construction of reinforcing its presencea new vaccine manufacturing center in emerging marketsNeuville-sur-Saône, France. This €300 million site investment is the largest ever made by acquiringSanofi. The objective is to progressively transition the vaccinesexisting chemical activity of Shanthato vaccine production beginning in India.2013.
We own mostIn 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, reduced time to market and increased probability of sanofi pasteur’ssuccess rates in pre-clinical and clinical stages.
Sanofi Pasteur owns its Research and Development and production sites, either freehold or under finance leases with a purchase option exercisable at expiration.
Acquisitions, Capital Expenditures and DivestituresAnimal Health Industrial Sites (Merial)
The Real Estate Department was largely involvedSince the announcement of Merck and Sanofi in March 2011 that they will maintain separate activities 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 objectivefield 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 we intend to contribute Merial to a joint venture and consequently lose our exclusive control (see Note D.8.1 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.animal health, Merial has approximately 15become a dedicated Sanofi division. Merial has 16 industrial sites, 9distributed throughout nine countries; nine research and development sites and numerous administrative offices with its principal headquarters located at Lyon, (France)France.
Merial industrial sites are as follows:
Brazil: Paulinia (avermectin-based pharmaceutical products and Duluth (Georgia)vaccines to prevent foot-and-mouth disease and rabies);
China: Nanchang (live avian vaccines) and Nanjing (inactivated avian vaccines);
• | France: Toulouse (Frontline® and clostridial vaccines), St-Priest LPA (vaccines), Lyon Gerland, Saint-Herblon (Coophavet), Lentilly (packaging); |
Italy: Noventa (inactivated avian vaccines);
Netherlands: Lelystad (antigen and vaccine against foot-and-mouth disease);
Uruguay: Montevideo (primarily anti-clostridium antigens);
United Kingdom: Pirbright (antigens and vaccines against foot-and-mouth disease);
United States: Berlin, Maryland, Gainesville, Georgia, and Raleigh, North Carolina, three Merial sites dedicated to Merial’s avian business; and Athens, Georgia dedicated to viral and bacterial vaccines for mammals;
New Zealand: Auckland, Ankara (pharmaceutical products mainly for ruminants).
Acquisitions, Capital Expenditures and Divestitures
The net book valuecarrying amount of our property, plant and equipment at December 31, 20092011 was €7,830€10,750 million. During 2009,In 2011, we invested €1,353€1,440 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’s principal capital expenditures and divestments for, the years 2007, 20082009, 2010, and 20092011 are set out in this annual report at “Item 5. Operating and Financial Review and Prospects — Divestments”, “— Acquisitions” and “— Liquidity and Capital Resources” and in the notes to the consolidated financial statements (NoteNote D.1., Note D.2., Note D.3. and Note D.4. to our consolidated financial statements included at Item 18 of this annual report).report.
Our principal investments in progress are described below:
Pharmaceuticals Segment
• | In Europe, we continued to optimize our industrial facilities, in particular by investing in two new Lantus® production lines at the Frankfurt site and acquiring the Diabel manufacturing site from Pfizer to strengthen our insulin production capacity. |
We have also startedbegun the conversion ofBiolaunch project, designed to convert our chemical sitesfacilities to biotechnologies, with a project to create a monoclonal antibody production facility at theour Vitry-sur-Seine site in France from 2012.2012, plus investments in the creation of a new innovative biosynthetic process at the Saint-Aubin-Lès-Elbeuf and Vertolaye industrial sites, in order to improve our corticosteroid production competitiveness at a global level.
• | In |
• | Genzyme’s industrial investments include the expansion of Myozyme® production capacity in Geel (Belgium), Fabrazyme® in Framingham (United States), Thymoglobulin® in Lyon (France) and for filling operations in Waterford (Ireland). Also, in the United States, a new laboratory and office spaces have been built in Framingham and the distribution center in Northborough has been expanded. |
The
Vaccines activitySegment (Sanofi Pasteur)
Our Vaccines business has invested significantly in recent years, with the construction of a state-of-the artstate-of-the-art research facility in Toronto (Canada); the creation of a new vaccines campus in Neuville (France):; the construction of formulationbulk and filling facilities in Val de Reuil (France), of and a bacteriological bulk facility in Marcy l’Étoile (France), and; the creation of bulk flutwo new influenza vaccine facilities in Shenzhen (China) and Ocoyoacac (Mexico); and the completion of bulk and filling facilities in Swiftwater (United States), mainly dedicated to influenza and meningitis vaccines.
Other investments related mainly to Research & Development sites.
Animal Health Segment (Merial)
A significant proportion of the investment in Europe over the last several years has been allocated to transferring Lyon Gerland’s vaccine production operations to the new Saint Priest site. In Toulouse, Merial adapted its production capacity to the arrival of new products. Merial invested in a packaging line for Certifect® production (managed according to the Good Manufacturing Practices applicable in the European Union, and approved by the Environmental Protection Agency in the United States) and an injectible facility for Zactran® production. In 2009, Merial acquired a site to produce vaccines against foot-and-mouth disease in Lelystad, Netherlands, which thereby granted Merial two foot-and-mouth vaccine production licenses of the three in existence in Europe.
In the United States, Merial has invested significantly in Athens, Georgia in a pharmaceutical form unit in an effort to increase its capacity to meet the growing number of products.
In Emerging Markets, Merial invested in China to transfer an existing site to a new production site located in Nanchang’s high-tech development zone, in order to support future growth of avian and other species vaccines. In addition, Merial invested in a R&D laboratory in Shanghai in order to facilitate local vaccine development in China.
As of December 31, 2011, our firm orders related to future capital expenditure amounted to €292 million. They were mainly related to the following industrial sites: Frankfurt (Germany) and Elbeuf (France) for the Pharmaceuticals segment, Swiftwater (United States) and Neuville (France) for the Vaccines segment, and the La Boétie site (the Group’s corporate headquarters in France).
In the medium term and on a constant structure basis, we expect our yearly average capital expenditure to be in the range of €1.7 billion. We believe that our existing cash resources and unused credit facilities will be sufficient to finance these investments. No individual capital expenditure or divestiture
Office Space
As part of the rationalization of our office sites in the Paris region of France, we have since mid-2009 been reviewing our medium-term office space master plan for the Greater Paris area.
This review is expected to result in all our Group support functions and operating divisions being housed on a smaller number of sites (five in 2012, when phase 1 is implemented). All of these sites will meet environmental certification standards, and offer cost-effective space solutions.
Closing of the property located in Gentilly, Val de Bièvre marked the 2011 step in this Master Plan.
Preparing our new global corporate headquarters in first quarter 2012 on the Rue La Boétie, in the 8tharrondissement of Paris, at the heart of the city’s business district will bring all our Group support functions together within a single site, symbolizing the transformation of the Group.
Finally, our former corporate headquarters at 174 avenue de France in the 13tharrondissement of Paris will be closed in 2012, along with the adjacent site at 182 avenue de France.
The second phase of the Greater Paris office space master plan is currently under consideration, the aim being to reduce the overall area in use and the overall cost of operation.
A second Master Plan was initiated in late 2011 to outline the Group’s medium-term office space needs for the greater Lyon area.
A project is consideredwas launched to be material tointegrate office sites from the Group asproperty portfolio of Genzyme and Merial, and represents a whole.presence in 50 countries and 540,000 m2.
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, 2009.2011.
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” at the beginning of this document.
20092011 Overview
SinceIn 2011, the startGroup, which changed its name to “Sanofi” following the May 2011 General Meeting of 2009, we have been engaged in a wide-ranging transformation program designedShareholders, continued to meet the challenges facing the pharmaceutical industry to make ourselves a global, diversified healthcare leader,implement its transforming and deliver sustainable growth strategy through the year. Sanofi acquired Genzyme Corporation (Genzyme), a leading American biotechnology company specializing in rare diseases with operations in the areas of renal diseases, endocrinology, oncology, biosurgery, and multiple sclerosis. Despite competition from generics and their impact on the sales of some of our flagship products, as well as the absence of sales of pandemic Influenza A/H1N1 vaccines in 2011, our continuing efforts to our business.establish growth platforms have helped the Group to improve its position in Emerging Markets, Diabetes, Vaccines, Consumer Health Care, and Animal Health. Sanofi has shown resilience in terms of net sales and profitability.
In 2009, we once again delivered solid performances in a world market experiencing profound change. OurThe Group’s net sales for the year were €29,306totaled €33,389 million, up 5.3%3.2% compared to 2010 (5.3% at constant exchange rates (1) relative to 2008 and up 6.3% on a reported basis, with strong performances from our(see definition at “— Presentation of Net Sales” below), buoyed by the solid performance of its growth platforms, Emerging Markets, Diabetes, Human Vaccines, and Consumer Health Care, and Animal Health, as well as the consolidation of Genzyme (€2,395 million in net sales from early April 2011), and this is despite significant competition from generics, which based on 2010 sales at constant exchange rates represented a €2.2 billion loss in net sales (see “— Impacts from generic competition” below). In terms of organic growth platforms more than offsettingdevelopments, 2011 was especially marked by the impactlaunch of genericization of Eloxatinethe cancer drug Jevtana® in the United States and PlavixEuropean Union, the approval of Allegra® for over-the-counter use in Europe. Other highlightsthe United States, FDA approval of 2009 included the launch of Multaqinfluenza vaccine Fluzone® ID in the United States, and its approvallaunch of Certifect® for animal health in the European Union.United States.
The ongoing adaptation of our structuresBy continuing to adapt its resources, the Group has managed to reduce its R&D costs and resources was reflected in a further improvement in our operating ratios. The ratio of research and development expenses to net sales improved from 16.6% in 2008 to 15.6% in 2009, while the ratio ofits 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-taxby 2.4% and pre-inflation cost savings in 2013 relative to 2008.
2.6%, respectively (at constant exchange rates, excluding Genzyme). Business net income totaled €8,629€8,795 million, in 2009 (18.0% higher than in 2008) duedown 4.6% compared to growth in our sales2010 on a reported basis, caused by the competition from generics and control over operating costs, plus favorable trends in the U.S. dollar exchange rate over the period.absence of pandemic influenza A/H1N1 vaccine sales. Business earnings per share were €6.61, 18.2% up on the 2008 figure.was €6.65, down 5.8% compared with 2010. 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 totaled €5,693 million, 4.1% higher than in 2010. Basic earnings per share for 2009 was €5,265 million, up 36.7% from the 2008 figure.2011 were €4.31, 2.9% higher than in 2010; diluted earnings per share for 2011 were €4.29 (2.6% higher).
During 2009, we deployed ourSanofi continued to pursue its 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 research and development (“R&D”) alliances during 2009.
&D partnerships. The acquisition of Genzyme in April 2011 has been described above. In Pharmaceuticals, weConsumer Health Care, the Group successfully completed our offer for Zentiva N.V., a branded generics group with products tailored toits acquisition of BMP Sunstone in China. In Animal Health, Merial became Sanofi’s dedicated animal health division following the Easternjoint statement issued by Merck and Central European markets. A number of other companies were acquired, including Laboratorios Kendrick, one of the leading manufacturers of genericsSanofi 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. AtMarch 2011 announcing the end of the year, we finalized antheir agreement to acquire Chattem, 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.
We have significantly reinforced our presence in Animal Health by acquiring 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 venture that would be equally owned by the new Merck and sanofi-aventis. In addition to execution of final agreements, formation of thecreate a new animal health joint venture remains subjectby combining their respective animal health activities. In addition, partnership and licensing agreements have enabled the Group to approval by the relevant competition authoritiesexpand 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 18further develop its existing areas of this annual report).research.
We have also signed a numberIn September 2011, the Group announced new objectives for the 2012-2015 period based on three initiatives: improvement of alliancegrowth platforms, maintenance of tight cost-control, 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 technologies or to strengthen our existing research fields. We also signed agreements with Regeneron Pharmaceuticals, Inc. to broaden and extend the duration of our existing collaboration,advances in transforming R&D. While we remain focused on the research, development and commercialization of fully human therapeutic monoclonal antibodies.these objectives, we expect erosion from generic competition to continue, with a negative impact on net income in 2012 (see “— Impacts from generic competition” below).
Our operations generate significant cash flow. We recorded €8,515€9,319 million of net cash provided by operating activities in 20092011 compared to €8,523€9,859 million in 2008.2010. During the course of 2009,2011, we paid out €2.9€1.4 billion in dividends and funded partcontracted new debt of $18.0 billion to finance the cost ofGenzyme acquisition. With respect to our acquisitions by contracting new debt. In terms of financial position, we ended 20092011 with our debt, net of cash and cash equivalents (meaning the sum of short-term debt and long-term debt lessplus related interest rate and currency derivatives, minus cash and cash equivalents) at €4.1 billion (2008: €1.8 billion)€10,859 million (2010: €1,577 million). Debt, net of cash and cash equivalents, is a non-GAAP financial indicatormeasure that is used by management and investors to measure the Company’s overall net indebtedness and to assess the Company’s financing risk as measured by its gearing ratio (debt, net of cash and cash equivalents, to total equity). TheOur gearing ratio stood at 8.5%was 19.3% at the end of 20092011 versus 3.9%3.0% at the end of 2008.2010. See “— Liquidity and Capital Resources — Consolidated Balance Sheet and Debt” below.below and Note D.17. to our consolidated financial statements included at Item 18 of this annual report.
Impacts from generic competition
Our flagship products experienced sales erosion in 2011 due to generic competition. While it is not possible to state with certainty what sales levels would have been achieved in the absence of generic competition, it is possible to estimate the sales impact of generic competition for each product.
By comparing 2011 and 2010 net sales figures included at “— Results of Operations — Year Ended December 31, 2011 Compared with Year Ended December 31, 2010”, competition from generics represented a €2.2 billion loss in net sales in 2011 (at constant exchange rates), or €2.3 billion on a reported basis. The table below presents the detailed impact by product.
(€ million) Product | 2011 Reported | 2010 Reported | Change on a reported basis | Change on a reported basis (%) | ||||||||||||
Plavix® Western Europe | 414 | 641 | (227 | ) | -35.4 | % | ||||||||||
Aprovel® Western Europe | 753 | 825 | (72 | ) | -8.7 | % | ||||||||||
Taxotere® Western Europe | 189 | 709 | (520 | ) | -73.3 | % | ||||||||||
Allegra® U.S. | 3 | 147 | (144 | ) | -98.0 | % | ||||||||||
Eloxatin® U.S. | 806 | 172 | +634 | +368.6 | % | |||||||||||
Lovenox® U.S. | 633 | 1,439 | (806 | ) | -56.0 | % | ||||||||||
Xyzal® U.S. | 13 | 127 | (114 | ) | -89.8 | % | ||||||||||
Ambien® U.S. | 82 | 443 | (361 | ) | -81.5 | % | ||||||||||
Xatral® U.S. | 75 | 155 | (80 | ) | -51.6 | % | ||||||||||
Nasacort® U.S. | 54 | 130 | (76 | ) | -58.5 | % | ||||||||||
Taxotere® U.S. | 243 | 786 | (543 | ) | -69.1 | % | ||||||||||
Total | 3,265 | 5,574 | (2,309 | ) | -41.4 | % |
We expect erosion from generic competition to continue in 2012, with a negative impact on net income. The following products are expected to be impacted by generics in 2012:
• | products for which new generic competition can reasonably be expected in 2012 based on the expiration dates or patent or other regulatory exclusivity: Plavix® and Avapro® in the U.S (sales not consolidated by Sanofi), Myslee® in Japan, and possibly Allegra® in Japan in the second half of the year provided that the generic manufacturers get marketing approval; |
• | products for which generics competition started during 2011, and for which generic competition should continue in 2012: Taxotere®, Xatral® and Nasacort® in the U.S.; and Aprovel® in Western Europe; |
• | products which already faced generic competition as of January 1, 2011, but for which 2012 sales can reasonably be expected to be further eroded: Plavix®, Eloxatin® and Taxotere® in Europe; and Lovenox®, Ambien®, Xyzal® and Eloxatin® in the U.S; |
A special case is Eloxatin® in the U.S., which was subject to generic competition for part of 2010 until a court ruling prevented further sales of unauthorized generics from June 2010 till August 9, 2012. Wholesalers worked down their inventories of generic products in the second half of 2010 and in the first half of 2011.
Aggregate 2011 consolidated net sales generated by all the products in the specific countries where generic competition exists or is expected in 2012, excluding Plavix® and Avapro® in the U.S., totaled €4,014 million, including €1,909 million in the U.S., €1,356 million in Europe and €749 million (Allegra® and Myslee®) in Japan. The negative impact on our 2012 net sales could be estimated to potentially represent a substantial part of these sales but will depend on a number of factors, such as actual launch dates of generics products in 2012, selling prices of such products, and potential litigation outcomes.
In addition, the loss of Plavix® and Avapro® exclusivity in the U.S. in 2012 is anticipated to impact our 2012 net income by around €1.4 billion compared to 2011. Net sales for Plavix® and Avapro® in the U.S. are not consolidated by Sanofi, however they impact Sanofi’s net income (see “— Financial Presentation of Alliances — Alliance Arrangements with Bristol-Myers Squibb” below).
Purchase Accounting Effects (primarily the acquisition of Aventis in 2004)
Our results of operations and financial condition for the years ended December 31, 2009,2011, December 31, 20082010 and December 31, 20072009 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 (€3,1751,788 million in 2009, €3,2982011, €3,070 million in 20082010, and €3,511€3,175 million in 2007)2009) and impairmentsimpairment of intangible assets (€344(reversal of €34 million in 2009, €1,4862011 and charges of €127 million in 20082010 and €58€344 million in 2007)2009). The Genzyme acquisition has given rise to new amortization of intangible assets in 2011 (€709 million).
In order to isolate the impact of these and certain other items, we use as an evaluation tool a non-GAAP financial measure that we refer to as “business net income”. For a further discussion and definition of “business net income”, see “— Business Net Income” below. 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, 20082011, 2010 and 20072009 is presented in “— Business Net Income” below.
Sources of Revenues and Expenses
Revenue. Revenue arising from the sale of goods is presented in the income statement under “Net sales.” Net sales comprise revenue from sales of pharmaceutical products, human vaccines, animal health products and active ingredients, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Returns, discounts, incentives and rebates described above are recognized in the period in which the underlying sales are recognized, as a reduction of sales revenue. See Note B.14. to our consolidated financial statements included at Item 18 of this annual report. We sell pharmaceutical products 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” below. When we sell products through licensees, we receive royalty income that we record in “Other revenues.” See Note C. to the consolidated financial statements included at Item 18 of this annual report.
Cost of Sales. Our cost of sales consists primarily of the cost of purchasing 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” as discussed above.
Operating Income. Our operating income reflects our revenues, our cost of sales and the remainder of our operating expenses, the most significant of which are research and development expenses and selling and general expenses. 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 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” and, “Human Vaccines” (Vaccines) and “Animal Health”. Our other identified segments are categorized as “Other”.
The Pharmaceuticals segment includes ourcovers research, development, production and salesmarketing activities relating to pharmaceutical products, including activities acquired with Genzyme. Sanofi’s pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health care and generic products. This segment also includes equity affiliatesall associates and joint ventures with pharmaceutical business activities, including 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 includes 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)consolidated financial statements included at Item 18 of this annual report), and 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 Operating Income,” a performance measure that weIncome”. This indicator, adopted in accordance 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 Operating Income” is equal toderived from “Operating income before restructuring, impairment of property, plant and equipment and intangibles, gains and losses on disposals, and litigation,” modifiedincome”, adjusted as follows:
the amounts reported in the line items “Restructuring costs”, “Fair value remeasurement of contingent consideration liabilities” and “Other gains and losses, and litigation” are eliminated;
amortization ofand impairment losses charged against intangible assets is(other than software) are eliminated;
the share of profitsprofits/losses from associates and losses of associatesjoint ventures is added and net incomeadded;
the share attributable to minoritynon-controlling interests is deducted; and
other impacts associated with acquisitionsacquisition-related effects (primarily, the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of purchase accountingacquisitions on associates)investments in associates and joint ventures) are eliminated; and
restructuring costs relating to associates and joint ventures are eliminated.
The following tables presenttable presents our business operating incomeBusiness Operating Income for the yearsyear ended December 31, 2009 and 2008.2011.
2009 | ||||||||||||||||||||||||||||||||
(€ million) | Pharmaceuticals | Vaccines | Other | Total | Pharmaceuticals | Vaccines | Animal Health | Other | Total | |||||||||||||||||||||||
Net sales | 25,823 | 3,483 | — | 29,306 | 27,890 | 3,469 | 2,030 | — | 33,389 | |||||||||||||||||||||||
Other revenues | 1,412 | 31 | — | 1,443 | 1,622 | 25 | 22 | — | 1,669 | |||||||||||||||||||||||
Cost of sales | (6,527 | ) | (1,326 | ) | — | (7,853 | ) | (8,368 | ) | (1,404 | ) | (654 | ) | — | (10,426 | ) | ||||||||||||||||
Research and development expenses | (4,091 | ) | (491 | ) | (1 | ) | (4,583 | ) | (4,101 | ) | (564 | ) | (146 | ) | — | (4,811 | ) | |||||||||||||||
Selling and general expenses | (6,762 | ) | (561 | ) | (2 | ) | (7,325 | ) | (7,376 | ) | (542 | ) | (617 | ) | 1 | (8,536 | ) | |||||||||||||||
Other operating income and expenses | 387 | (3 | ) | 1 | 385 | (13 | ) | — | (7 | ) | 24 | 4 | ||||||||||||||||||||
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 | ) | |||||||||||||||||||||||||
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 | 10,608 | 1,173 | 247 | 12,028 | 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 (1) | 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 |
(1) |
|
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 | ||||||||
The following table presents our Business Operating Income for the year ended December 31, 2009.
(€ million) | Pharmaceuticals | Vaccines | Animal Health (1) | Other | Total | |||||||||||||||
Net sales | 25,823 | 3,483 | 479 | — | 29,785 | |||||||||||||||
Other revenues | 1,412 | 31 | 4 | — | 1,447 | |||||||||||||||
Cost of sales | (6,527 | ) | (1,326 | ) | (176 | ) | — | (8,029 | ) | |||||||||||
Research and development expenses | (4,091 | ) | (491 | ) | (46 | ) | — | (4,628 | ) | |||||||||||
Selling and general expenses | (6,762 | ) | (561 | ) | (146 | ) | (2 | ) | (7,471 | ) | ||||||||||
Other operating income and expenses | 387 | (3 | ) | (5 | ) | 1 | 380 | |||||||||||||
Share of profit/(loss) of associates and joint ventures | 792 | 41 | 178 | (2) | 8 | 1,019 | ||||||||||||||
Net income attributable to non-controlling interests | (426 | ) | (1 | ) | — | — | (427 | ) | ||||||||||||
Business operating income | 10,608 | 1,173 | 288 | 7 | 12,076 |
(1) |
|
(2) | Including Merial until September 17, 2009. |
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’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. We believe that this non-GAAP financial measure allows investors to understand the performance of our Group because it segregates the results of operations of our current business activities, as opposed to reflecting the impact of past transactions such as acquisitions.
Our management uses business net income to manage and to evaluate our performance, and we believe it is appropriate to disclose this non-GAAP financial measure, as a supplement to our IFRS reporting, in order to assist investors in analyzing the factors and trends affecting our business performance. Our management also intends to use business net income as the basis for proposing the dividend policy for the Group. Accordingly, management believes that an investor’s understanding of trends in our dividend policy is enhanced by disclosing business net income.
We have also decided to report “Business Earnings“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 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 in 2010 and starting September 18, 2009 (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) the 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)(iii), (v) and (vi) correspond to those reported in the income statement line items “Restructuring costs”, “Fair value remeasurement of contingent consideration liabilities”, and “Gains“Other gains and losses, on disposals, and 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, 20082011, 2010 and 2007:2009:
(€ 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. |
| ||||||||
(2) Other items comprise: |
| ||||||||
- 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. |
| ||||||||
(5) Expenses arising from the impacts of acquisitions on associates: workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill. |
|
(€ million) | 2011 | 2010 (1) | 2009 (1) | |||||||||||
Business net income | 8,795 | 9,215 | 8,629 | |||||||||||
(i) | Amortization of intangible assets | (3,314 | ) | (3,529 | ) | (3,528 | ) | |||||||
(ii) | Impairment of intangible assets | (142 | ) | (433 | ) | (372 | ) | |||||||
(iii) | Fair value remeasurement of contingent consideration liabilities | 15 | — | — | ||||||||||
(iv) | Expenses arising from the impact of acquisitions on inventories (2) | (476 | ) | (142 | ) | (90 | ) | |||||||
(v) | Restructuring costs | (1,314 | ) | (1,384 | ) | (1,080 | ) | |||||||
(vi) | Other gains and losses, and litigation (3) | (327 | ) | (138 | ) | — | ||||||||
(vii) | Impact of the non-depreciation of the property, plant and equipment of Merial (IFRS 5) | — | 77 | 21 | ||||||||||
(viii) | Tax effects on the items listed above, comprising: | 1,905 | 1,856 | 1,644 | ||||||||||
– amortization of intangible assets | 1,178 | 1,183 | 1,130 | |||||||||||
– impairment of intangible assets | 37 | 143 | 136 | |||||||||||
– fair value remeasurement of contingent consideration liabilities | 34 | — | — | |||||||||||
– expenses arising from the impact of acquisitions on inventories | 143 | 44 | 24 | |||||||||||
– restructuring costs | 399 | 466 | 360 | |||||||||||
– other gains and losses, and litigation | 114 | 46 | — | |||||||||||
– non-depreciation of property, plant and equipment of Merial (IFRS 5) | — | (26 | ) | (6 | ) | |||||||||
(iv)/(ix) | Other tax items (4) | 577 | — | 106 | ||||||||||
(x) | Share of items listed above attributable to non-controlling interests | 6 | 3 | 1 | ||||||||||
(iv)/(v) | Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures (5) | (32 | ) | (58 | ) | (66 | ) | |||||||
Net income attributable to equity holders of Sanofi | 5,693 | 5,467 | 5,265 |
(1) | The results of operations of Merial, previously reported as a business held for exchange, have been reclassified and included in net results of continuing operations in accordance with paragraph 36 of IFRS 5, following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes D.2. and D.8.1. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | This line comprises the workdown of inventories remeasured at fair value at the acquisition date. |
(3) | See Note D.28. to our consolidated financial statements included at Item 18 of this annual report. |
(4) | In 2011, related to Advance Pricing Agreement impact for €349 million and €228 million reflecting a decrease in deferred tax liabilities related to the remeasurement of intangible assets following changes in tax laws. In 2009: reversal of deferred taxes following ratification of the Franco-American Treaty. |
(5) | This line shows the portion of major restructuring costs incurred by associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill). |
The 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’s understanding of our underlying economic performance because we do not consider that the excluded charges reflect the combined entity’s ongoing operating performance. Rather, we believe that each of the excluded charges reflects the decision to acquire the businesses concerned.
The purchase-accounting effects on net income primarily relate to:
charges to cost of sales resulting from the workdown of acquired inventoryinventories that was written up to fair value, net of tax;
charges related to the impairment of the goodwill; and
charges related to the amortization and impairment of intangible assets, net of tax and minoritynon-controlling interests.
We believe (subject to the limitations described below) that disclosing business net income enhances the comparability of our operating performance, for the following reasons:
the elimination of charges related to the purchase accounting effect of our acquisitions (particularly amortization and impairment of definite-livedfinite-lived intangible assets) enhances the comparability of our ongoing operating performance relative to our peers in the pharmaceutical industry that carry these intangible assets (principally patents and trademarks) at low book values either because they are the result of in-house research and development that has already been expensed in prior periods or because they were acquired through business combinations that were accounted for as poolings-of-interest;
the elimination of selected items, such as the increase in cost of sales arising from the workdown of inventories remeasured at fair value, gains and losses on disposals of non-current assets and costs and provisions associated with major litigation, improves comparability from one period to the next; and
the elimination of integration and restructuring costs relating to our acquisitions and to the implementation of our transformation strategy enhances comparability because these costs are directly, and only, incurred in connection with the relevant acquisitions or transformation processes such as the rationalization of our research and development structures.
We remind investors, however, that business net income should not be considered in isolation from, or as a substitute for, net income attributable to equity holders of 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:
The results presented by business net income cannot be achieved without incurring the following costs that the measure excludes:
• | Amortization of intangible assets. Business net income excludes the amortization charges related to intangible assets. Most of these amortization charges relate to intangible assets that we have acquired. Although amortization is a non-cash charge, it is important for investors to consider it because it represents an allocation in each reporting period of a portion of the purchase price that we paid for certain intangible assets that we have acquired through acquisitions. For example, in connection with our acquisition of Aventis in 2004, we paid an aggregate of €31,279 million for these amortizable intangible assets (which, in general, |
• |
|
In addition, the results presented by business net income are intended to represent the Group’s underlying performance, but items such as gains and losses on disposals and provisions associated with major litigation may recur in future years.
We compensate for 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, 20082011, 2010 and 2007.2009. 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” 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 constant exchange 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 structure 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:
by including sales from an entity or with respect to product rights acquired in the current period for a portion of the previous period (i.e., 2008) equal to the portion of the current period during which we owned them, based on sales information we receive from the party from whom we makemade the acquisition;
similarly, by excluding sales for a portion of the previous period (i.e., 2008) when we have sold an entity or rights to a product in the current period; and
for a change in consolidation method, by recalculating the previous period (i.e., 2008) on the basis of the method used for the current period.
A reconciliation of our reported net sales to our net sales at constant exchange rates and on a constant structure basis is provided at “— Results of Operations — Year Ended December 31, 20092011 Compared with Year Ended December 31, 20082010 — Net Sales” below.
Years ended December 31, 2008 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, 20082010 Compared with Year Ended December 31, 20072009 — Net Sales” below.
Financial Presentation of Alliances
We have entered into a number of alliances for the development, co-promotion and/or co-marketing of our products. We believe that a presentation of our two principal alliances is useful to an understanding of our financial statements.
The financial impact of the alliances on the Company’s income statement is described in “— Results of Operations”Operations — Year Ended December 31, 2011 Compared with Year Ended December 31, 2010” and “— Year Ended December 31, 2010 Compared with Year Ended December 31, 2009”, in particular in “— Net sales”, “— Other Revenues”, “— Share of Profit/Loss of Associates”Associates and Joint Ventures” and “— Net Income Attributable to MinorityNon-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.
There are three principal marketing arrangements that are used:
• | Co-marketing. Under the co-marketing system, each company markets the products independently under its own brand names. We record our own sales and related costs in our consolidated financial statements. |
• | Exclusive Marketing. Under the exclusive marketing system, one company has the exclusive right to market the products. We record our own sales and related costs in our consolidated financial statements. |
• | Co-promotion. Under the co-promotion system, the products are marketed through the alliance arrangements (either by contractual arrangements or by separate entities) under a single brand name. The accounting treatment of the co-promotion |
The alliance arrangements include two royalty streams that are applied on a worldwide basis (excluding Japan and other opt out countries), regardless of the marketing system and regardless of which company has majority ownership and operational management:
• | Discovery Royalty. As inventor of the two molecules, we earn an adjustable discovery royalty on |
• | Development Royalty. In addition to the discovery royalty, we and BMS are each entitled to a development royalty related to certain know-how and other intellectual property in connection with sales of Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover®. |
We record development royalties paid to BMS in our consolidated income statement as an increase to our cost of sales in countries where we consolidate sales of the products. We record development royalties that we receive as “other revenues” in countries where BMS consolidates sales of the products.
Under the 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. Our alliance with BMS does not cover distribution rights to Plavix® in Japan, which is marketed by sanofi-aventis.Sanofi.
Territory under our operational management. In the territory under our operational management, the marketing arrangements and recognition of operations by the Group are as follows:
• | we use the co-promotion system for most of the countries in Western Europe for Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® and for certain Asian countries for Plavix®/Iscover®. We record 100% of all alliance revenues and expenses in our consolidated financial statements. We also record, as selling and general expenses, payments to BMS for the cost of BMS’s personnel involved in the promotion of the products. BMS’s share of the operating income of the alliances is recorded as |
• | we use the co-marketing system in Germany, Spain and Greece for both Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® and in Italy for Aprovel®/Avapro®/Karvea®/Karvezide®; and |
• | we have the exclusive right to market Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® in Eastern Europe, Africa, |
Territory under BMS operational management. In the territory under BMS operational management, the marketing arrangements and recognition of operations by the Group are as follows:
• | we use the co-promotion system in the United States, Canada and |
• | we use the co-marketing system in Brazil, Mexico, Argentina and Australia for Plavix®/Iscover® and Aprovel®/Avapro®/Karvea®/Karvezide® and in Colombia for Plavix®/Iscover®; and |
we have the exclusive right to market the products in certain other countries of Latin America.
In countries where the products are marketed by BMS on a co-marketing basis, or through alliances under the operational management of BMS, we also earn revenues from the sale of the active ingredients for the products to BMS or such entities, which we record as “Net sales” in our consolidated income statement.
Alliance arrangements with Warner Chilcott (previously with Procter & Gamble Pharmaceuticals)
Our agreement with Warner Chilcott (“the Alliance Partner”) covers the worldwide development and marketing arrangements of Actonel®, except Japan for which we hold no rights. Until October 30, 2009, this agreement was between sanofi-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® has been marketed in collaboration with Warner Chilcott. The local marketing arrangements may take various forms.
• | Co-promotion,whereby sales resources are pooled but only one of the two parties to the alliance agreement |
• | Co-marketing, which applies in Italy whereby each party to the alliance agreement sells the product in the country under its own brand name, and recognizes all revenues and expenses from its own operations in its respective income statement. Each company also markets the product independently under its own brand name in Spain, although Spain is not included in the co-marketing |
• | Warner Chilcott only territories: the product has been marketed by the Alliance Partner independently in Germany, Belgium and Luxembourg since January 1, 2008, in the Netherlands since April 1, 2008 and in the United Kingdom since January 1, 2009. We recognize our share of revenues under the alliance agreement in “Other operating income”; and |
• | S |
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 2009,2011, we earned 32.2%29.8% of our net sales in the United States. A decrease in the value of the U.S. dollar against the euro has a negative impact on our revenues, which is not offset by an equal reduction in our costs and therefore negatively affects our operating income. A decrease in the value of the U.S. dollar has a particularly significant impact on our operating income, which is higher in the United States than elsewhere, and on the contribution to net income of our alliance with BMS in the United States, which is under the operational management of BMS, as described at “— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb” above.
For a description of positions entered into to manage operational foreign exchange rate risks as well as our hedging policy, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk”, and “Item 3.D.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
On December 19, 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, 2008in 2010 or 2007.2009.
Acquisitions
The principal acquisitions during 2011 are described below:
In February 2011, Sanofi completed the acquisition of 100% of the share capital of BMP Sunstone Corporation (BMP Sunstone), a pharmaceutical company that develops a portfolio of branded pharmaceutical and healthcare products in China. See Note D.1.2. to our consolidated financial statements included at Item 18 of this annual report.
In April 2011, Sanofi acquired Genzyme Corporation (Genzyme), a major biotechnology company headquartered in Cambridge, Massachussets (United States), with primary areas of focus in rare diseases, renal endocrinology, oncology and biosurgery. In 2011, Genzyme generated full-year net sales of €3.1 billion, out of which €2.4 billion were consolidated by Sanofi as from the acquisition date. The transaction was completed in accordance with the terms of the public exchange offer at a price of $74 in cash plus the issuance to Genzyme shareholders of one contingent value right (CVR) per share. Total purchase price amounted to €14.8 billion. The provisional purchase price allocation is disclosed in Note D.1.1. to our consolidated financial statements included at Item 18 of this annual report.
In October 2011, Sanofi acquired Topaz Pharmaceuticals Inc. (Topaz), a U.S. pharmaceutical research company that developed an innovative anti-parasitic product for treating head lice. An upfront payment of $35 million was made on completion of the transaction. According to the agreement, future milestone payments may be made upon market approval and depending on the achievement of sales targets. See Note D.1.2. 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 neutraceuticals 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. Under the terms of the agreement, Sanofi and TRV / Greylock will invest in Warp Drive Bio at parity. Total program funding over the first five years could amount to up to $125 million, including an equity investment of up to $75 million.
The principal acquisitions during 2010 are described below:
In February 2010, Sanofi acquired the U.S.-based company Chattem, Inc. (Chattem) by successfully completing a cash tender offer leading to the acquisition of 100% of the share capital. Chattem is a major consumer health player in the United States, producing and distributing branded consumer health products, toiletries and dietary supplements across various market segments. Chattem manages the Allegra® brand, and acts as the platform for Sanofi over-the-counter and consumer healthcare products in the United States. See Note D.1. to our consolidated financial statements included at Item 18 of this annual report.
In April 2010, Sanofi acquired a controlling interest in the capital of Bioton Vostok, a Russian insulin manufacturer. Under the terms of the agreement, put options were granted to non-controlling interests. See Note D.18. to our consolidated financial statements included at Item 18 of this annual report.
In May 2010, Sanofi formed a new joint venture with Nichi-Iko Pharmaceuticals Co., Ltd (Nichi-Iko), a leading generics company in Japan, to expand generics activities in the country. In addition to forming this joint venture, Sanofi took a 4.66% equity interest in the capital of Nichi-Iko.
In June 2010, Sanofi acquired 100% of the share capital of Canderm Pharma Inc. (Canderm), a privately-held leading Canadian skincare company distributing cosmeceuticals and dermatological products. Canderm generated net sales of 24 million Canadian dollars in 2009.
In July 2010, Sanofi acquired 100% of the share capital of TargeGen, Inc. (TargeGen), a U.S. biopharmaceutical company developing small molecule kinase inhibitors for the treatment of certain forms of leukemia, lymphoma and other hematological malignancies and blood disorders. An upfront payment of $75 million was made on completion of the transaction. Future milestone payments may be made at various stages in the development of TG 101348, TargeGen’s principal product candidate. The total amount of payments (including the upfront payment) could reach $560 million. See Note D.1. and Note D.18. to our consolidated financial statements included at Item 18 of this annual report.
In August 2010, Sanofi acquired 100% of the share capital of Nepentes S.A. (Nepentes), a Polish manufacturer of pharmaceuticals and dermocosmetics, for a consideration of PLN 425 million (€106 million).
In October 2010, Sanofi Pasteur acquired 100% of the share capital of VaxDesign Corporation (VaxDesign), a privately-held U.S. biotechnology company which has developed a technology reproducing in vitro models of the human immune system, that can be used to select the best candidate vaccines at the pre-clinical stage. Under the terms of the agreement, an upfront payment of $55 million was made upon closing of the transaction, and a further $5 million will be payable upon completion of a specified development milestone.
In October 2010, Sanofi acquired a 60% equity interest in the Chinese consumer healthcare company Hangzhou Sanofi Minsheng Consumer Healthcare Co. Ltd, in partnership with Minsheng Pharmaceutical Co., Ltd (“Minsheng”). Minsheng was also granted a put option over the remaining shares not held by Sanofi. See Note D.18. to our consolidated financial statements included at Item 18 of this annual report.
The principal acquisitions during 2009 are described below:
On September 17, 2009, and further to the agreement signed on July 29, 2009, sanofi-aventisSanofi completed the acquisition of the interest held by Merck & Co., Inc. (“Merck”)(Merck) in Merial Limited (“Merial”)(Merial) for 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.Sanofi. Merial is one of the world’s leading animal health companies, with annual sales of $2.6 billion in 2009.2009 and 2010. With effect from September 17, 2009, sanofi-aventisSanofi has held 100% of the shares of Merial and has exercised exclusive control over the company. In accordance with IAS 27, Merial is accounted for by the full consolidation method in the consolidated financial statements of sanofi-aventis.
In connection with the agreement signed on July 29, 2009, sanofi-aventisSanofi had also signed an option contract giving it the possibility, once the Merck/Schering-Plough merger iswould be complete, to combine the Merck-owned Intervet/Schering-Plough Animal Health business 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.
Sanofi. Because of the high probability of the option being exercised as of year endyear-end 2009 and 2010, Merial was treated as an asset held for sale or exchange pursuant to IFRS 5 as of December 31, 2009.2009 and December 31, 2010. 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 additionHowever, on March 22, 2011, Merck and Sanofi announced that they had mutually terminated their agreement to execution of final agreements, formation of theform a new animal health joint venture remains subjectand decided to approval bymaintain Merial and Intervet/Schering-Plough as two separate entities, operating independently. This decision was mainly due to the relevant competition authoritiesincreasing complexity of implementing the proposed transaction. Starting from January 1, 2011, Merial is no longer accounted for separately on the consolidated balance sheet and other closing conditions (for more information see “Item 8 — B. Significant Changes — Merial”).income statements of Sanofi. Detailed information about the impact of Merial on the consolidated financial statements of sanofi-aventisSanofi as of December 31, 2011 is provided in “Note D.8. — Assets held for sale or exchange”Note D.2. and Note D.8.1. to our consolidated financial statements included at Item 18 of this annual report.
OnIn March 11, 2009, sanofi-aventisSanofi successfully concludedclosed its offer for Zentiva N.V. (“Zentiva”)(Zentiva). As of December 31, 2009, sanofi-aventisSanofi held approximatelyabout 99.1% of Zentiva’s share capital. Following the buyout of the remaining non-controlling interests, Sanofi held 100% of Zentiva’s share capital as of December 31, 2010. The purchase price was €1,200 million, including acquisitionacquisition-related costs. The Zentiva Group reported net sales of €735 million in 2008 and has generated net sales of €457 million since the acquisition date. See Note D.1. to our consolidated financial statements included at Item 18 of this annual report.
OnIn March 31, 2009, sanofi-aventisSanofi acquired Laboratorios Kendrick, one of Mexico’s leading manufacturers of generics, with sales of approximately €26 million in 2008.
OnIn April 27, 2009, sanofi-aventisSanofi acquired a 100% ofequity interest in Medley, the shares of Medley, Brazil’s third largest pharmaceutical company in Brazil and 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.that country. The purchase price based on a €500 million enterprise value, was €348 million inclusive of acquisition-related costs.
OnIn April 27, 2009 sanofi-aventisSanofi acquired 100% of BiPar Sciences, Inc. (“BiPar”)(BiPar), a U.S. biopharmaceutical company developing novel tumor-selective approaches 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 iswas in large part contingent on the achievement (regarded as probable) of milestones related to the development of BSI-201, and could reach $500 million. See Notes D.1. and D.21.Note D.18. to our consolidated financial statements included at Item 18 of this annual report.
OnIn July 2009, Sanofi completed the acquisition of 100% of the share capital of Helvepharm, a Swiss generics company.
In August 31, 2009, sanofi-aventisSanofi took control of Shantha Biotechnics (Shantha), a biotechnologyvaccines company based in Hyderabad (India), which develops, manufactures and markets several important vaccines 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-aventis2010, Sanofi held approximately 95%96.4% of Shantha. The purchase price allocation led to the recognition of intangible assets (excluding goodwill) worth €374 million. This amount includes the acquisitions-date value of the Shan5® pentavalent vaccine, which was partially written down in 2010 (see Note D.5. to our consolidated financial statements included at Item 18 of this annual report).
In October 2009, Sanofi acquired 100% of the share capital of Fovea Pharmaceuticals SA, a privately-held French biopharmaceutical research and development company specializing in ophthalmology. The purchase consideration included contingent milestone payments of up to €280 million linked to the development of three products. See NoteNotes D.1. and D.18. to our consolidated financial statements included at Item 18 of this annual report.
On October 30,In November 2009, sanofi-aventis tookSanofi completed the acquisition of 100% control of Fovea Pharmaceuticals SA. (Fovea), a privately-owned French biopharmaceutical company specializing in ophthalmology. Created in 2005 in Paris, Fovea has a portfolio of three clinical compounds, a unique technology platform 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 immediate upfront payment of €90 million and subsequent milestone payments related to the three clinical compounds.
On November 30, 2009, sanofi-aventis completed the acquisitionshare capital 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 AUD190 million. See Note D.1. 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 representing a financial interest of 36.7% in Carderm Capital LP for $250 million.
In November 2007, sanofi-aventis acquired 12 million newly-issued shares in the biopharmaceutical company Regeneron Pharmaceuticals 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 in “Financial assets — non-current” (see Note D.7. to our consolidated financial statements included at Item 18).
Results of Operations
Year Ended December 31, 20092011 Compared with Year Ended December 31, 20082010
The consolidated income statements for the years ended December 31, 20092011 and December 31, 20082010 break down as follows:
(under IFRS) | 2009 | 2008 | ||||||||||||||||||||||||||
(€ million) | as % of net sales | as % of net sales | ||||||||||||||||||||||||||
(under IFRS) (€ million) | 2011 | as % of net sales | 2010 (1) | as % of net sales | ||||||||||||||||||||||||
Net sales | 29,306 | 100.0% | 27,568 | 100.0% | 33,389 | 100.0% | 32,367 | 100.0% | ||||||||||||||||||||
Other revenues | 1,443 | 4.9% | 1,249 | 4.5% | 1,669 | 5.0% | 1,669 | 5.2% | ||||||||||||||||||||
Cost of sales | (7,880 | ) | (26.9% | ) | (7,337 | ) | (26.6% | ) | (10,902 | ) | (32.7%) | (9,398 | ) | (29.0%) | ||||||||||||||
Gross profit | 22,869 | 78.0% | 21,480 | 77.9% | 24,156 | 72.3% | 24,638 | 76.1% | ||||||||||||||||||||
Research & development expenses | (4,583 | ) | (15.6% | ) | (4,575 | ) | (16.6% | ) | (4,811 | ) | (14.4%) | (4,547 | ) | (14.0%) | ||||||||||||||
Selling & general expenses | (7,325 | ) | (25.0% | ) | (7,168 | ) | (26.0% | ) | (8,536 | ) | (25.6%) | (8,149 | ) | (25.2%) | ||||||||||||||
Other operating income | 866 | 556 | 319 | 369 | ||||||||||||||||||||||||
Other operating expenses | (481 | ) | (353 | ) | (315 | ) | (292 | ) | ||||||||||||||||||||
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% | ||||||||||||||||||||||||
Amortization of intangible assets | (3,314 | ) | (3,529 | ) | ||||||||||||||||||||||||
Impairment of intangible assets | (142 | ) | (433 | ) | ||||||||||||||||||||||||
Fair value remeasurement of contingent consideration liabilities | 15 | — | ||||||||||||||||||||||||||
Restructuring costs | (1,080 | ) | (585 | ) | (1,314 | ) | (1,384 | ) | ||||||||||||||||||||
Impairment of property, plant & equipment and intangibles | (372 | ) | (1,554 | ) | ||||||||||||||||||||||||
Gains and losses on disposals, and litigation | — | 76 | ||||||||||||||||||||||||||
Other gains and losses, and litigation (2) | (327 | ) | (138 | ) | ||||||||||||||||||||||||
Operating income | 6,366 | 21.7% | 4,394 | 15.9% | 5,731 | 17.2% | 6,535 | 20.2% | ||||||||||||||||||||
Financial expenses | (324 | ) | (335 | ) | (552 | ) | (468 | ) | ||||||||||||||||||||
Financial income | 24 | 103 | 140 | 106 | ||||||||||||||||||||||||
Income before tax and associates | 6,066 | 20.7% | 4,162 | 15.1% | ||||||||||||||||||||||||
Income before tax and associates and joint ventures | 5,319 | 15.9% | 6,173 | 19.1% | ||||||||||||||||||||||||
Income tax expense | (1,364 | ) | (682 | ) | (455 | ) | (1,430 | ) | ||||||||||||||||||||
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 | ||||||||||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 1 070 | 978 | ||||||||||||||||||||||||||
Net income | 5,691 | 19.4% | 4,292 | 15.6% | 5,934 | 17.8% | 5,721 | 17.7% | ||||||||||||||||||||
- attributable to minority interests | 426 | 441 | ||||||||||||||||||||||||||
- attributable to equity holders of the Company | 5,265 | 18.0% | 3,851 | 14.0% | ||||||||||||||||||||||||
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) | 1,305.9 | 1,309.3 | 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) | 4.03 | 2.94 | 4.31 | 4.19 | ||||||||||||||||||||||||
Diluted earnings per share (in euros) | 4.29 | 4.18 |
|
(2) | See Note B.20.2. to our consolidated financial statements included at Item 18 of this annual report. |
Net Sales
Net sales for the year ended December 31, 2009 amounted to €29,3062011 totaled €33,389 million, an increaseup 3.2% on 2010. The unfavorable currency fluctuation of 6.3% versus 2008. Exchange rate movements had a favorable effect2.1 points was primarily the result of 1.0 point, mainly reflecting the appreciation in the U.S. dollardollar’s depreciation against the euro. 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 bywere up 5.3%. year-on-year.
Excluding changesGenzyme, the Group’s net sales were down 2.6% in structure and2011 at constant exchange rates, organica reflection of the loss in sales associated with competition from generics and the impacts of austerity measures in the European Union. Excluding both Genzyme and sales of A/H1N1 vaccines, the Group’s net sales growth was 4.0%.
The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 20092011 and December 31, 20082010 to our net sales at constant exchange rates and net sales on a constant structure basis.rates:
(€ 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% | ||||
(€ million) | 2011 | 2010(1) | 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% |
(1) | Net sales of Merial are included. See Note D.2. to our consolidated financial statements included at Item 18 of this annual report. |
Our net sales arecomprise the net sales generated by our two business segments: Pharmaceuticals, and Human Vaccines (Vaccines). and Animal Health businesses.
The following table breaks down our 20092011 and 20082010 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 (%) | 2011 Reported | 2010 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | |||||||||||||||||
Pharmaceuticals | 25,823 | 24,707 | +4.5% | +3.7% | +2.3% | 27,890 | 26,576 | +4.9% | +6.7% | |||||||||||||||||
Vaccines | 3,483 | 2,861 | +21.7% | +19.2% | +18.9% | 3,469 | 3,808 | -8.9% | -5.5% | |||||||||||||||||
Animal Health | 2,030 | 1,983 | +2.4% | +4.3% | ||||||||||||||||||||||
Total | 29,306 | 27,568 | +6.3% | +5.3% | +4.0% | 33,389 | 32,367 | +3.2% | +5.3% | |||||||||||||||||
Net Sales by Product — Pharmaceuticals
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 from the Genzyme consolidation, the negative impact from the competition of generics on sales of Lovenox®, Ambien® CR and Taxotere® in the United States, Plavix® and Taxotere® in the European Union, as well as the effects of healthcare reform in the U.S. and austerity measures in Europe. Excluding Genzyme, our Pharmaceuticals segment posted net sales of €25,495 million, a drop of 4.1% on a reported basis and 2.7% at constant exchange rates.
Flagship Products
Our flagship products (Lantus® and other products in the Diabetes business, Lovenox®, Plavix®, Taxotere®, Aprovel®/CoAprovel®, Eloxatin®, Multaq® and Jevtana®) are discussed below. Sales of Plavix® and Aprovel® are discussed further below under “— Worldwide Presence of Plavix® and Aprovel®”.
Net sales in 2009the Diabetes business were €25,823€4,684 million, an increase of 3.7%up 12.0% at constant exchange rates, bolstered by the growth of Lantus®.
Lantus®, the world’s leading diabetes brand (source: IMS 2011 sales), posted a 15.0% increase in net sales at constant exchange rates in 2011 to €3,916 million. This change is a result of the sharp growth in Emerging Markets (26.0% at constant exchange rates), especially in China (61.7%) and of 4.5% on a reported basis.Brazil (29%), as well as solid performance in the United States (14.6%) and Japan (19.5%). In Western Europe, growth was more moderate (6.4%), which reflected the pricing pressures specifically in Germany.
Net sales of our flagship products (see table below) the rapid-acting insulin analogApidra®advanced by 4.6%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.
Lovenox® saw net sales decrease by 23.4% at constant exchange rates in 2011 to €2,111 million, 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, to €13,278€1,478 million representing 51.4%(representing 70.0% of Pharmaceuticalsworldwide 2011 sales of Lovenox®), posting good performances in Western Europe (up 6.4%) and Emerging Markets (up 14.0%).
Taxotere® reported net sales versus 50.5% in 2008.of €922 million, down 57.0% at constant exchange rates. This growth rate was adversely affected byproduct has 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%).
Eloxatin® net sales rebounded sharply in 2011 by 160.9% at constant exchange rates to €1,071 million, which reflects recovering sales in the United States (€806 million in 2011, versus €172 million in 2010), following a court ruling barring manufacturers of Eloxatinegenerics in the U.S. from selling their unapproved generic versions of oxaliplatin from June 30, 2010.
Multaq® posted a 56.4% growth in net sales to €261 million at constant exchange rates, achieved primarily in the United States (€184 million) and Western Europe (€66 million).
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 €188 million in sales in 2011, €131 million of which was in the United Sates.
Our other major products are described below.
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) to €580 million. In Japan, which represents 80.2% of Allegra®’s worldwide sales, net sales totaled €465 million (up 22.1% at constant exchange rates) with the sharp increase in seasonal allergies. A generic has been approved but not yet distributed in Japan. The drop in prescription sales in the United States (98.6% at constant exchange rates) is related to the approval of Allegra® as an over-the-counter (OTC) product starting in March 2011 on the U.S. market. Following this approval, we account for U.S. sales of Allegra® under CHC and not prescription sales.
Copaxone® net sales, achieved primarily in Western Europe, fell by 15.4% at constant exchange rates to €436 million, a reflection of the end of the co-promotion agreement with Teva for certain countries, specifically since the end of 2010 in the UK and the end of 2011 in Germany.
TheConsumer Health Carebusiness 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, generating €211 million in net sales for the year (out of a worldwide total of €245 million), and by the performance of Emerging Markets in which net sales have increased by 20.8% at constant exchange rates to €1,225 million. These figures consolidated the consumer health products of Chattem in the United States as of February 2010, and of BMP Sunstone in China as of February 2011.
TheGenericsbusiness 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 the United States (up 79.4% at constant exchange rates) where Sanofi launched its own approved generics of Ambien® CR, Taxotere® and Lovenox®.
Net sales ofGenzyme products in 2011 (since the acquisition date beginning of April) were up 7.7% on a constant structure basis and at constant exchange rates, to €2,395 million. Net sales are recognized as from the 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) to €441 million, which reflects the higher production in 2011 following a reduction in availability of the product in 2010 due to manufacturing issues.Myozyme®/Lumizyme® posted sharp growth (27.4% on a constant structure basis and at constant exchange rates, to €308 million), bolstered mainly by the performance of Lumizyme® in the United States and Europe; without this effect,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 on-going 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.”
Renagel®/Renvela® posted net sales of €415 million, up 10.2% on a constant structure basis and at constant exchange rates, associated with growth in Pharmaceuticals netthe market share in the U.S.
Net sales would have been 2.2 points higher in 2009 (atofSynvisc® totaled €256 million (up 14.7% on a constant structure basis and at constant exchange rates)., supported by the solid performance ofSynvisc One® in the U.S. and Japan.
Net sales of the other products in ourthe portfolio fell by 6.0%were down 3.4% at constant exchange rates, to €6,078 million, compared with €6,484 million in 2008. At constant exchange rates, net sales of these products were down 9.7% in Europe, at €3,283 million; up 1.2% in the United States, at €610 million; and down 1.5% in the Other Countries region, at €2,185€5,773 million.
For a description of our other pharmaceutical products, see “Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products.”
Our Consumer Health Care business achieved net sales growth of 26.8% in 2009 at constant exchange rates, to €1,430 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. On a constant structure basis and at constant exchange rates, the growth rate was 8.1%.
In 2009, net sales for our Generics business increased almost threefold (by 198% 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 a constant structure basis and at constant exchange rates, the growth rate was 8.7%.
The following table breaks down our 2011 and 2010 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% | ||||||||
(€ 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 products | Diabetes | 10 | — | — | — | |||||||||||||
Sub-total: Diabetes | 4,684 | 4,298 | +9.0% | +12.0% | ||||||||||||||
Lovenox® | Thrombosis | 2,111 | 2,806 | -24.8% | -23.4% | |||||||||||||
Plavix® | Atherothrombosis | 2,040 | 2,083 | -2.1% | -2.9% | |||||||||||||
Taxotere® | Breast, lung, prostate, stomach, and head & neck cancer | 922 | 2,122 | -56.6% | -57.0% | |||||||||||||
Aprovel®/CoAprovel® | Hypertension | 1,291 | 1,327 | -2.7% | -2.4% | |||||||||||||
Eloxatin® | Colorectal cancer | 1,071 | 427 | +150.8% | +160.9% | |||||||||||||
Multaq® | Atrial fibrillation | 261 | 172 | +51.7% | +56.4% | |||||||||||||
Jevtana® | Prostate cancer | 188 | 82 | +129.3% | +135.4% | |||||||||||||
Stilnox®/Ambien® / Myslee® | Sleep disorders | 490 | 819 | -40.2% | -41.4% | |||||||||||||
Allegra® | Allergic rhinitis, urticaria | 580 | 607 | -4.4% | -8.6% | |||||||||||||
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% | |||||||||||||
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% | |||||||||||||
Other products | 5,773 | 6,064 | -4.8% | -3.4% | ||||||||||||||
Consumer Health Care | 2,666 | 2,217 | +20.3% | +22.8% | ||||||||||||||
Generics | 1,746 | 1,534 | +13.8% | +16.2% | ||||||||||||||
Genzyme | 2,395 | — | — | — | ||||||||||||||
Total pharmaceuticals | 27,890 | 26,576 | +4.9% | +6.7% |
The following table below breaks down our 2011 and 2010 net sales for the products acquired with Genzyme:
(€ million) Product | Indication | 2011 Reported | 2010 Reported | Change on a constant structure basis and at constant | ||||||||||
Cerezyme® | Gaucher disease | 441 | — | +11.1% | ||||||||||
Myozyme®/Lumizyme® | Pompe disease | 308 | — | +27.4% | ||||||||||
Fabrazyme® | Fabry disease | 109 | — | +9.4% | ||||||||||
Renagel®/Renvela® | Hyperphosphatembosis | 415 | — | +10.2% | ||||||||||
Synvisc® | Atherothrombosis | 256 | — | +14.7% | ||||||||||
Other Genzyme products | 866 | — | -2.2% | |||||||||||
Total Genzyme | 2,395 | — | +7.7% |
The following table breaks down net sales of our mainPharmaceutical business products by geographicgeographical region in 2009:2011:
(€ 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% at constant exchange rates, at €890 million) and in the Other Countries region (up 14.8% at constant exchange rates, at €331 million). In the United States, net sales increased by 5.3% to €1,822 million.
Taxotere® posted growth of 6.1% in 2009 at constant exchange rates to €2,177 million, driven by its use 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, with net sales rising 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% at constant exchange rates, to €497 million. In Japan, net sales of Myslee®, the leading hypnotic on the market (source: IMS 2009 sales), totaled €194 million, an increase of 15.2% at constant exchange rates.
(€ 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 products | 10 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Sub-total: Diabetes | 943 | +4.3% | 2,405 | +14.4% | 911 | +20.1% | 425 | +0.5% | ||||||||||||||||||||||||
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% | ||||||||||||||||||||||||
Taxotere® | 189 | -73.6% | 243 | -69.2% | 294 | -24.6% | 196 | -20.2 | ||||||||||||||||||||||||
Aprovel®/CoAprovel® | 753 | -9.1% | 49* | +25.6% | 363 | +6.7% | 126 | +8.6% | ||||||||||||||||||||||||
Eloxatin® | 38 | -19.6% | 806 | +393.0% | 162 | +9.3% | 65 | +10.2% | ||||||||||||||||||||||||
Multaq® | 66 | +66.7% | 184 | +50.8% | 7 | +250.0% | 4 | +33.3% | ||||||||||||||||||||||||
Jevtana® | 44 | — | 131 | +65.9% | 13 | — | — | — | ||||||||||||||||||||||||
Stilnox®/Ambien® /Myslee® | 53 | -3.6% | 82 | -80.6% | 65 | -1.5% | 290 | +8.3% | ||||||||||||||||||||||||
Allegra® | 13 | -18.8% | 3 | -98.6% | 99 | +19.3% | 465 | +22.2% | ||||||||||||||||||||||||
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% | ||||||||||||||||||||||||
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% | ||||||||||||||||||||||||
Other products | 2,417 | -8.9% | 497 | -19.9% | 2,106 | +7.4% | 753 | +1.4% | ||||||||||||||||||||||||
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% | ||||||||||||||||||||||||
Genzyme | 621 | — | 1,180 | — | 347 | — | 247 | — | ||||||||||||||||||||||||
Total pharmaceuticals | 8,345 | -3.9% | 7,264 | +8.5% | 8,513 | +15.0% | 3,768 | +14.0% |
(1) | France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Canada, Australia and New Zealand. |
* | Sales of |
Allegra® saw net sales fall by 2.6% at constant exchange rates in 2009 to €731 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% (at constant exchange rates) in the U.S. and Europe. The product recorded further growth in Japan, with sales up 15.2% at constant exchange rates, at €334 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 sales of this product in 2009 (at constant exchange rates), to €467 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, our2011, the Vaccines business generated consolidatedsegment reported net sales of €3,483€3,469 million, up 19.2%an 8.9% drop 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, and 21.7% on a reported basis. driven primarily by Emerging Markets (up 10.7%).
The main growth drivers were Pentacel® and A(H1N1) influenza vaccines. Growthdrop in vaccines sales in 2011 in Western Europe (down 18.4% at constant exchange ratesrates) and in Emerging Markets (down 18.1% at constant exchange rates) was robust across all three geographic regions, at 19.1% inprimarily due to the United States (to €2,098 million), 15.9% in Europe (to €448 million) and 20.8%lack of sales of pandemic influenza vaccines. Strong growth in the Other Countries region (to €937 million). Excluding the impact of(up 24.2% at constant exchange rates) was driven by sales of pandemic influenza Polio/Pertussis/Hib Vaccines in Japan.
Polio/Pertussis/Hibvaccines (A(H1N1) and H5N1), net sales growth was 7.1%were up 12.0% (at constant exchange rates).
Polio/Pertussis/Hib vaccines achieved growth to €1,075 million, based on the solid performance of 22.8%Pentaxim® (up 30.2% at constant exchange rates to €968 million, reflecting the success€238 million) related to product launches in Russia, India and China, and ofPentacel® (the first 5-in-1 pediatric combination vaccine against diphtheria, tetanus, pertussis, polio andhaemophilusHaemophilus influenzae type b licensed(Hib) vaccines (up 20.7% at €178 million) primarily in the United States in June 2008), which posted net sales of €343 million in 2009 versus €84 million in 2008.Emerging Markets and Japan.
Net sales ofinfluenza vaccines rose by 46.7%in 2011 were down 33.2% at constant exchange rates to €1,062€826 million, mainly duetied to the shipment during 20092011 lack of batchessales of vaccines against the A(H1N1)pandemic influenza virus for a total amount of €440 million, including €301 million in the United States.
Meningitis/pneumonia vaccines achieved net salesin 2010 primarily in Latin America and Western Europe. Sales of €538 million,seasonal influenza vaccines were up 6.1%2.5% at constant exchange rates, largely as a resultsupported by the performance of good growth inLatin America.
Meningitis/Pneumoniavaccines generated net sales of vaccines against pneumococcal infections. Net sales of€510 million, up 2.3% at constant exchange rates. The increase was limited by the temporary reduction in catch-up immunization programs for the Menactra® (quadrivalent quadrivalent vaccine against meningococcal meningitis vaccine) increasedin the United States during the first half of 2011, however supported by 1.1%booster vaccinations at constant exchange rates to €445 million.the end of the year.
Net sales of adultAdult boostervaccines 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 3.0%1.6% at constant exchange rates to €406€370 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 20092011 and 2010 sales of our Vaccines activitybusiness 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% | ||||
(€ 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 following table presents the 20092011 sales of our Vaccines business by range of products and by region:
(€ 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% | |||||||
(€ 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% |
France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Canada, Australia and New Zealand. |
(4) | Seasonal and pandemic influenza vaccines. |
In 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 €791 million a fall of 11.0%in 2011, down 13.8% 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 decrease in 2011 reflects the drop in sales of Gardasil®, a vaccine that prevents papillomavirus infections known to cause cervical cancer (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 millions), primarily of seasonal influenza vaccines.
Net Sales — Animal Health
The Animal Health business is carried out 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 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. Merial is no longer presented separately on the consolidated balance sheet and the income statement since January 1, 2011 and net income from Merial has been reclassified and included in the income from continuing operations for all periods reported. Detailed information about the impact of Merial on the consolidated financial statements of Sanofi as of December 31, 2011 is provided in Note D.2. and Note D.8.1. 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.
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 presents the 2011 and 2010 sales of our Animal Health business by range of products:
(€ million) | 2011 Reported | 2010 Reported | Change on a reported basis | Change at exchange | ||||||||||||
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% |
The following table breaks down net sales of our Animal Health business products by geographical region in 2011:
(€ million) Product | Western Europe (1) | Change at constant exchange rates | United States | Change at constant exchange rates | Emerging Markets (2) | Change at constant exchange rates | Other countries (3) | Change at constant exchange rates | ||||||||||||||||||||||||
Frontline® and other fipronil-based products | 206 | +4.5% | 411 | -2.1% | 86 | +8.8% | 61 | 0.0% | ||||||||||||||||||||||||
Vaccines | 195 | +2.6% | 126 | +2.3% | 325 | +14.2% | 16 | -21.1% | ||||||||||||||||||||||||
Avermectin | 64 | +8.5% | 177 | +2.8% | 60 | +8.9% | 71 | +13.6% | ||||||||||||||||||||||||
Other products | 89 | -6.4% | 87 | +24.3% | 36 | +11.8% | 20 | -24.0% | ||||||||||||||||||||||||
Total Animal Health | 554 | +2.4% | 801 | +2.1% | 507 | +12.4% | 168 | -1.2% |
(1) | France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Canada, Australia and New Zealand. |
* | Sales of active ingredient to the entity majority-owned by BMS in the United States. |
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 20092011 and 20082010 net sales by region:
(€ 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 (%) | 2011 Reported | 2010 Reported | Change on a reported basis | Change at exchange | |||||||||||||||||
Europe | 12,059 | 12,096 | -0.3% | +3.2% | +0.3% | |||||||||||||||||||||
Western Europe (1) | 9,130 | 9,539 | -4.3 | % | -4.0% | |||||||||||||||||||||
United States | 9,426 | 8,609 | +9.5% | +2.8% | +5.4% | 9,957 | 9,790 | +1.7 | % | +6.8% | ||||||||||||||||
Other countries | 7,821 | 6,863 | +14.0% | +12.1% | +9.1% | |||||||||||||||||||||
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 | 29,306 | 27,568 | +6.3% | +5.3% | +4.0% | 33,389 | 32,366 | +3.2 | % | +5.3% | ||||||||||||||||
(1) | France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Australia and New Zealand. |
(4) | Japan, Canada, Australia and New Zealand. |
In 2009,Western Europe posted a 4% decrease in net sales in Europe grew by 0.3% on a constant structure basis and at constant exchange rates reflectingto €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), the effecttransfer of the ongoing genericizationCopaxone® business to Teva in certain countries, as well as the impact of Eloxatineausterity 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 excluding A/H1N1 vaccines and Genzyme, showed a 5.7% decline. Sales were affected by competition from generic versions of Lovenox®, Taxotere® and PlavixAmbien®. At constant exchange rates, growth in CR, which were partially offset by the region reached 3.2%, drivenperformance of Lantus® and Eloxatin® as well as by Eastern Europe (34.9% growth at constant exchange rates) where Zentiva’s sales have been consolidated since April 1, 2009.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. Growth at constant exchange rates reached 10.4% excluding sales of A/H1N1 vaccines posted in 2010 (€361 million, primarily in Latin America) and Genzyme. In Brazil, net sales hit €1,522 million, up 4.9% at constant exchange rates, or 21.9% if we exclude A/H1N1 vaccines, thereby reflecting the United States, the endsolid performance of commercialization of Copaxone® by sanofi-aventis effective April 1, 2008generics and the genericization of Eloxatine® during the second half of 2009 slowed the pace ofcontribution made by Genzyme. In China, net sales growth to 2.8% (attotaled €981 million (up 40.4% at constant exchange rates). Lantus, supported by the performance of Plavix® and LovenoxLantus®, with net sales. In Eastern Europe and Turkey, growth of 23.6% and 5.3% respectively (at(3.7% at constant exchange rates) were the principal growth driverssuffered from lower prices and competition from Taxotere® generics in Pharmaceuticals. Growth for the Vaccines business was boosted byTurkey; Russia posted sales of pandemic influenza vaccines (A(H1N1) and H5N1).€732 million, a growth of 11.2% at constant exchange rates.
In the Other Countries region, net sales rose by 12.1%totaled €4,169 million, up 13.8% at constant exchange rates, due largely to the performancerates. Excluding A/H1N1 vaccines and Genzyme, net sales increased by 6.2%. Japan recorded net sales of the Vaccines business€2,865 million (up 20.8% at constant exchange rates) and to the dynamism of Latin America (up 15.7%20.2% at constant exchange rates), the Middle East (up 16.4% at constant exchange rates), China
(up 28.8% at constant exchange rates), Russia (up 59.8% at constant exchange rates) and Japan. Net sales in Japan reached €1,844 million (up 10.7% at constant exchange rates), drivenbuoyed by the performancessolid performance of Plavix® (up 22.9% to €671 million), MysleeAllegra® (up 22.2% to 465 million) and Allegra®. Net sales in Latin America (€1,913 million) were underpinned by good organic growth and byHib vaccines, as well as the acquisition of Medley in the second quarter of 2009.contribution from Genzyme.
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.
Worldwide Presence of Plavix® and Aprovel®
Two of our leading products — Plavix® and Aprovel® — were discovered by sanofi-aventisSanofi and jointly developed with Bristol-Myers Squibb (“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 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.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’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’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 itemslines “Other revenues”, where we bookrecord royalties received on those sales (see “— Other Revenues”); “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 profit/loss of entities included in the BMS Alliance and under BMS operational management; and “Net income attributable to minoritynon-controlling interests” (see “— Net Income Attributable to MinorityNon-Controlling Interests”), where we bookrecord 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 20092011 and 2008,2010, by geographic region:
(€ million) | 2009 | 2008 | Change (%) | 2011 | 2010 | Change on a reported | Change at constant exchange rates | |||||||||||||||||||||||||||||||||||||||
sanofi- aventis (2) | BMS (3) | Total | sanofi- aventis (2) | BMS (3) | Total | Sanofi (2) | BMS (3) | Total | Sanofi (2) | BMS (3) | Total | |||||||||||||||||||||||||||||||||||
Plavix®/Iscover®(1) | ||||||||||||||||||||||||||||||||||||||||||||||
Europe | 1,443 | 161 | 1,604 | 1,622 | 211 | 1,833 | -12.5% | 530 | 44 | 574 | 724 | 98 | 822 | -30.2% | -29.8% | |||||||||||||||||||||||||||||||
United States | — | 4,026 | 4,026 | — | 3,351 | 3,351 | +20.1% | — | 4,759 | 4,759 | — | 4,626 | 4,626 | +2.9% | +7.8% | |||||||||||||||||||||||||||||||
Other countries | 897 | 255 | 1,152 | 711 | 248 | 959 | +20.1% | 1,370 | 286 | 1,656 | 1,165 | 282 | 1,447 | +14.4% | +13.8% | |||||||||||||||||||||||||||||||
Total | 2,340 | 4,442 | 6,782 | 2,333 | 3,810 | 6,143 | +10.4% | 1,900 | 5,089 | 6,989 | 1,889 | 5,006 | 6,895 | +1.4% | +4.5% | |||||||||||||||||||||||||||||||
(€ million) | 2009 | 2008 | Change (%) | |||||||||||||||||||||||||||||||||||||||||||
sanofi- aventis (5) | BMS (3) | Total | sanofi- aventis (5) | BMS (3) | Total | |||||||||||||||||||||||||||||||||||||||||
Aprovel®/Avapro®/Karvea®(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Aprovel®/Avapro® /Karvea®/Avalide®(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Europe | 810 | 172 | 982 | 816 | 176 | 992 | -1.0% | 694 | 130 | 824 | 789 | 158 | 947 | -13.0% | -13.0% | |||||||||||||||||||||||||||||||
United States | — | 524 | 524 | — | 499 | 499 | +5.0% | — | 374 | 374 | — | 482 | 482 | -22.4% | -18.8% | |||||||||||||||||||||||||||||||
Other countries | 314 | 192 | 506 | 291 | 184 | 475 | +6.5% | 451 | 156 | 607 | 411 | 216 | 627 | -3.2% | -2.1% | |||||||||||||||||||||||||||||||
Total | 1,124 | 888 | 2,012 | 1,107 | 859 | 1,966 | +2.3% | 1,145 | 660 | 1,805 | 1,200 | 856 | 2,056 | -12.2% | -11.0% | |||||||||||||||||||||||||||||||
(1) | Plavix® is marketed under the trademarks Plavix® and Iscover®. |
(2) | Net sales of Plavix® consolidated by |
(3) | Translated into euros by |
(4) | Aprovel® is marketed under the trademarks Aprovel®, Avapro® |
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Trends in worldwide sales of Plavix® and Aprovel® 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,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) reported strong growth of 12.8% at constant exchange rates in 2009, reaching €4,026 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%a sustained 7.8% at constant exchange rates, to €339€4,759 million. In Japan and China, Plavix® realized continued success with sales of €671 million (+22.9% at constant exchange rates) and €277 million (+27.7% at constant exchange rates) respectively. These results sharply offset the decline of Plavix® in Europe caused by competition from generics (down 29.8% at constant exchange rates, to €574 million).
In a competitive environment, 2009 worldwideWorldwide sales of Aprovel®/Avapro®/Karvea® were €2,012/Avalide® totaled €1,805 million an increase of 1.7%in 2011, down 11.0% at constant exchange rates. In Europe,rates, with the product is facing competition from generics inimpact of increasing penetration of generic losartan on the monotherapy segment in Spain and Portugal, and recorded sales growth of 0.8% at constant exchange rates.market for anti-hypertensives.
Other Revenues
Other revenues, which mainly comprisemade up primarily of royalty income under licensing agreements contracted in connection with ongoing operations, amounted to €1,443remained stable at €1,669 million in 2009 compared with €1,249 million in 2008.2011 and 2010.
Licensing revenuesRevenues from licensing under the worldwide alliance with BMS on Plavix® and Aprovel® totaled €1,155represented €1,275 million in 2009, compared with €9852011 versus €1,303 million in 2008 (up 17.3%2010 (down 2.1% on a reported basis), boosted by strong growth. These licensing revenues suffered the effect of the U.S. dollar depreciation against the euro, despite the increase in sales of Plavix® sales in the United States and the favorable impact of trends in the(up 7.8% at constant exchange rate of the U.S. dollar against the euro.rates).
Gross Profit
Gross profit for 2009 was €22,869the year ended December 31, 2011 came to €24,156 million (78.0%(72.3% of net sales), versus €21,4802.0% down on the 2010 figure of €24,638 million in 2008 (77.9%(76.1% of net sales), and a decline of 3.8 points in the gross profit reported under sales.
The gross margin ratio of the Pharmaceuticals segment was down 2.8 points to 75.8%, reflecting both the decrease in royalty income (-0.3 point) and the unfavorable trend in the cost of sales to net sales ratio (-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 forof the PharmaceuticalsVaccines segment improved by 0.5 of a point, reflecting the rise in royalty income (impact: +0.6 of a point) and an unfavorable trend in the ratio of cost of saleswas down 4.5 points to net sales (impact: -0.1 of a point)60.2%. This trendchange was principally due to the net result of:absence of 2011 profits from pandemic influenza vaccines, which had trended favorably in 2010.
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The gross margin ratio forof the VaccinesAnimal Health segment was unchanged, with the effect of lower royalty income (impact: -0.5 of a point) offset by an improvement in the ratio of cost of salesdown 1.0 point to net sales (impact: +0.5 of a point) that was largely due to the appreciation of various currencies against the euro.68.9%.
ConsolidatedThe Group’s consolidated gross profit was also impacted in 2011 by thea €476 million expense (or 1.4 points) arising from the workdown during 2009 of inventories remeasured at fair value on completionin connection with acquisitions, principally Genzyme (€473 million). In 2010, this expense represented €142 million (0.4 point) and for the most part affected the workdown of acquisitions (mainly Zentiva, impact €27 million or 0.1 of a point).Merial’s inventories.
Research and Development Expenses
Research and development (R&D) expenses were €4,583 million (versus €4,575totaled €4,811 million in 2008), representing 15.6%2011 (14.4% of net sales (versus 16.6% in 2008); they were down 1.4% year-on-yearsales), 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 or an increase of 5.6%. Excluding Genzyme, R&D expenses decreased by 4.3% at constant exchange rates but up 0.2% onas a reported basis.
Cost savings were achievedresult of reorganizations initiated in 2009, and of the Pharmaceuticals segment due to tight cost control and a reduction in clinical trial costs, reflectingstreamlining of the discontinuation of some projects following the portfolio review.project portfolio.
In the Vaccines segment, research and developmentR&D expenses increasedrose by €66€47 million up 15.5%year-on-year (to €564 million) or an increase of 9.1%, in particular due mainly to the consolidation of Acambis from October 1, 2008 and to clinical trials related to influenzaof vaccines inagainst dengue fever and Clostridium difficile.
In the lightAnimal Health segment, R&D expenses declined by €9 million year-on-year or a decrease of the pandemic.5.8%.
Selling and General Expenses
Selling and general expenses totaled €7,325amounted to €8,536 million compared with €7,168 million in the previous year,(25.6% of net sales), an increase of 2.2% (or 1.1% at constant exchange rates)4.7% on the prior-year figure of €8,149 million (25.2% of net sales).
The ratioPharmaceuticals segment generated a €414 million increase, or 5.9%, primarily from the consolidation of Genzyme. Excluding Genzyme, selling and general expenses dropped by 2.9% at constant exchange rates, due both to net sales improved from 26.0%reduced costs for genericized products in 2008 to 25.0%, mainly becauseEurope and the United States and tight control of savings in marketinggeneral expenses.
In the Vaccines segment, selling and general expenses (in particular,were down €61 million or 10.1% due to the transfer of commercialization of Copaxone® to Tevadecline in North America in April 2008) and cost savings in Europe. The 2009 figure includes theselling expenses of companies consolidated for the first time during the year.pandemic influenza vaccines.
SellingIn the Animal Health business, selling and general expenses forwere up €13 million (+2.2%), in line with the Vaccines segment rose by 7.9%. This increase was due primarily to the influenza pandemic, and to the consolidation of Acambis with effect from October 1, 2008.in net sales.
Other Operating Income and Expenses
Other operating income for 2009 came to €866 million (versus €556totaled €319 million in 2008)2011 (versus €369 million in 2010), and other operating expenses amounted to €481accounted for €315 million (versus €353(compared with €292 million in 2008)2010).
The balance of other operating income and expenses represented a net incomeprofit of €385€4 million for 2009,in 2011, compared with net income€77 million in 2010. The year-on-year decrease of €203€73 million for 2008. The €182 million increase was mainlyessentially due to the transferdiscontinuation of commercialization of Copaxone® toroyalty payments from Teva in North America effective April 1, 2008. We are entitled to receive a 25% royalty ofon North American sales of Copaxone® over a two-year period from that date, and recognize this royalty income in “Other operating income”.the second quarter of 2010.
WeThis line item also recognized gains on disposals relating to our ordinary operationsincludes expenses for the 2011 acquisition of €56 million (compared with €24 million in 2008)Genzyme (€65 million), andas well as a net operating foreign exchange gain of €40 million (compared with a netoperational foreign exchange loss of €94€5 million compared to €138 million in 2008).2010: the latter occurred in the middle of a highly volatile exchange environment.
Amortization of IntangiblesIntangible Assets
Amortization charged against intangible assets in 2009the year ended December 31, 2011 amounted to €3,528€3,314 million, versus €3,483compared with €3,529 million in the previous year. The increasedecline of €215 million was mainly due mainly to trendsa drop in the exchange rate of the U.S. dollaramortization charged against the euro andintangible assets recognized on the acquisition of Zentiva.Aventis (€1,788 million in 2011, versus €3,070 million in 2010, as products have reached the end of their life cycles and faced competition from generics), that was partly compensated 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 consolidation of Merial in the first quarter of 2011 (€709 million and €353 million, respectively).
These chargesImpairment 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 relateassociated with (i) discontinuing a Genzyme research project, (ii) Zentiva generics for which the sales outlook was adjusted downward, and (iii) discontinuing a project developed jointly with Metabolex in the field of diabetes. It also includes an impairment reversal in connection with Actonel®, pursuant to confirmation of the terms of the collaboration agreement with Warner Chilcott (see Note C.2. to the amortizationconsolidated financial statements included at Item 18 of intangible assets remeasured at fair value atthis annual report).
In 2010, impairments were primarily related to (i) Actonel® due to planned changes to the timeterms of the Aventis acquisition (€3,175 millioncollaboration agreement with Warner Chilcott; (ii) the pentavalent vaccine Shan5®, for which sales projections had been revised to factor in 2009, versus €3,298 millionthe need for another WHO pre-qualification following a flocculation problem encountered in 2008).
Operating Income before Restructuring, ImpairmentFair Value Remeasurement of Property, Plant & Equipment and Intangibles, Gains and Losses on Disposals, and LitigationContingent Consideration Liabilities
This line item camerecords fair value remeasurements of liabilities related to €7,818business combinations accounted for in accordance with IFRS 3R. Such remeasurements generated a new profit of €15 million in 2009, compared with €6,457 million in 2008.2011, and were mainly related to a contingent purchase consideration on the acquisition of TargeGen, the contingent value rights (CVRs) issued as part of the Genzyme acquisition, and the contingent consideration to be paid 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 €1,080accounted for a €1,314 million expense in 2011, compared with €1,384 million in 2009, compared with €585 million2010.
In 2011, these were mainly employee-related expenses incurred under plans to adjust headcount in 2008. support functions and sales forces in Europe, and in Research & Development in Europe and the United States, and measures to adapt the Group’s manufacturing facilities in Europe.
In 2009, our restructuring2010, these costs related primarilymainly to measures taken to improve innovation by transforming our Research & Development 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 to adapt our industrial facilities in Europe and to adjust our sales forces.
The restructuring costs recognized in 2008 related primarily to the adaptation of industrial facilitiesoperations in France, and to measures takenour sales and R&D functions in response to the changing economic environment in variousUnited States and some European countries, principally France and Spain.countries.
Impairment of Property, Plant & Equipment and Intangibles
Net impairment losses charged against property, plant and equipment and intangible assets amounted to €372 million in 2009, and related primarily to 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 termination 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.
Other Gains and Losses, on Disposals, and Litigation
Sanofi-aventis did not make any major disposals in either 2009 or 2008.
In 2008, thisThis line item included €76a net expense of €327 million, which mainly represented (i) a backlog of reversaldepreciation and amortization expense against Merial’s tangible and intangible assets in the amount of litigation provisions.€519 million, that had not been recognized from September 18, 2009 through December 31, 2010 because these assets had been classified as held for sale or exchange in accordance with IFRS 5 (see Note D.8.1. to the 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 disposal of the Dermik dermatology business (see Note D.28. to the consolidated financial statements).
In 2010, this line item reported a €138 million expense for adjustment of warranty provisions associated with prior disposals of operations.
Operating Income
Operating income totaled €5,731 million for 2009 was €6,3662011, versus €6,535 million 44.9% higher thanfor 2010, down 12.3% mainly as a result of the 2008 figurecompetition from generics and the absence of €4,394 million.A/H1N1 pandemic influenza vaccine sales in 2011.
Financial Income and Expenses
Net financial expense for 2009 was €300 million, comparedexpenses came to €232€412 million in 2008,2011 versus €362 million in 2010, an increase of €68€50 million.
Interest expenseFinancial expenses directly related to our net debt (short-term(defined as short-term and long-term debt, net ofplus related interest rate and currency derivatives, minus cash and cash equivalents) amounted to €222 million, versus €183were €325 million in 2008. Although2011 versus €324 million in 2010. This stabilization was a result of:
a drop in the average interest rate due to the sharply lower rate on the debt to fund the acquisition of Genzyme in the first quarter of 2011, which, despite the spike in average debt, generated a slight increase in the interest expense;
a rise in the Group’s financial income due to the increase in average level of net debt was lowercash the Group held during the year and a higher average rate of return.
Provisions against securities and receivables totaled €58 million in 2009 than2011 (versus €6 million in 2008, sanofi-aventis was adversely affected by lower interest rates on its cash deposits (which averaged €5.0 billion2010); in 2009, compared with €2.4 billion in 2008).
In 2008, we tendered our shares in Millennium Pharmaceuticals, Inc (Millennium)2011, these provisions were primarily related to the public tender offer for Millennium by Takeda Pharmaceuticals Company Ltd. This transaction generated a €38 million gain.impairment of Greek bonds.
NetGains on disposals of non-current financial assets came to €25 million versus €61 million in 2010. These were essentially related to the 2011 change in the consolidation method for Yves Rocher securities associated with the loss of significant influence (see Note D.6. to the consolidated financial statements), and the Group’s 2010 sale of its equity interest in Novexel.
Lastly, net financial foreign exchange losses for the year were €67 million, compared with €74gains totaled €10 million in 2008.2011 (versus a net loss of €20 million in 2010).
Net Income before Tax and Associates and Joint Ventures
Net incomeIncome before tax and associates for 2009and joint ventures was €6,066€5,319 million 45.7% higher than the 2008 figurein 2011, versus €6,173 million in 2010, a decrease of €4,162 million.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 the change in deferred taxes following changes in both the rate and the laws (mainly in the UK), and the effect of the Franco-American Advance Pricing Agreements (APA) for the 2006-2011 period (see Note D.30. to the 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 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%27.0% in 2009, compared to 29.0%2011, versus 27.8% 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.
2010. The difference betweenrelative to the effective tax rate and the standard corporate income tax rate applicable in France for 2009 (34%(34.4%) was mainly due to the impact of the reduced rate of income taxlower taxes on patent royalties in France.
In 2008, this line item included a gain through the consolidated income statement of €221 million on reversals of tax provisions related to the settlement of tax audits.
Share of Profit/Loss of Associates and Joint Ventures
Our share of the profits ofand losses from associates was €814and joint ventures totaled €1,070 million in 2009, versus €6922011, compared with €978 million in 2008.2010. This itemline mainly comprisesincludes our share of after-tax profits from thegenerated in territories managed by BMS under the Plavix® and Avapro® alliance, which increasedadvanced by 26.0% year-on-year from €6239.2% to €1,070 million compared with €980 million in 20082010. The increase in 2011 in this share was partly related to €785 million in 2009. This increase was a direct result of the growth in sales of Plavix® sales in the United States (up 12.8% at constant exchange rates) and of the appreciation of the U.S. dollar against the euro (up 7.0%2.9%).
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 €5,691for the year was €5,934 million in 2009,2011, compared with €4,292€5,721 million in 2008.
Net Income Attributable to MinorityNon-Controlling Interests
Net income attributable to minoritynon-controlling interests for the year ended December 31, 2009 was €426amounted to €241 million against €441in 2011, compared with €254 million for the previous year.in 2010. This itemline mainly includes the share of pre-tax incomeprofits paid over to BMS fromgenerated in territories managed by sanofi-aventisSanofi (€405225 million, versus €238 million in 2009, versus €422 million2010); this decline is directly related to increased competition from clopidogrel (Plavix®) generics 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 totaled €5,693 million in 2009, versus €3,8512011, against €5,467 million in 2008. Earnings per share (EPS) for 2009 were €4.03, up 37.1% on the 20082010.
Basic earnings per share for 2011 was €4.31, 2.9% higher than the 2010 figure of €2.94,€4.19, based on an average number of shares outstanding of 1,305.91,321.7 million in 2009 and 1,309.32011 compared with 1,305.3 million in 2008.
On a diluted basis,2010. Diluted earnings per share for 2009 were €4.03, up 37.1% on the 2008 earnings per share figure of €2.94,was €4.29 in 2011 compared with €4.18 in 2010, based on an average number of shares outstanding after dilution of 1,307.41,326.7 million in 20092011 and 1,310.91,308.2 million in 2008.2010.
Business Operating Income
Business operating income for 20092011 was €12,028€12,144 million, compared to €10,391€12,863 million in 2008.2010. The table below shows trends in business operating income by business segment for 20092011 and 2008:2010:
(€ million) | 2009 | 2008 | 2011 | 2010 | ||||||||
Pharmaceuticals | 10,608 | 9,399 | 10,496 | 10,965 | ||||||||
Vaccines | 1,173 | 882 | 985 | 1,379 | ||||||||
Animal Health | 627 | 621 | ||||||||||
Other | 247 | 110 | 36 | (102 | ) | |||||||
Business operating income | 12,028 | 10,391 | 12,144 | 12,863 | ||||||||
Business Net Income
Business net income is a non-GAAP financial measure that we use to evaluate our Group’s performance (see “Item 5. Operating and Financial Review and Prospects — Business Net Income” above).
Business net income for 2009 was €8,629 million, versus €7,314totaled €8,795 million in 2008, representing growth2011 versus €9,215 million in 2010, a drop of 18.0%4.6%.
(€ 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 €8,629 million, an increase of 18.0% on the 2008 figure of €7,314 million, and It represented 29.4%26.3% of net sales compared with 26.5%28.5% in 2008. The increase was mainly due to our good operating performance, reflected in the increase in gross profit (€22,869 million in 2009 versus €21,480 million in 2008).2010.
(€ million) | 2011 | 2010 (1) | ||||||||
Business net income | 8,795 | 9,215 | ||||||||
(i) | Amortization of intangible assets | (3,314 | ) | (3,529 | ) | |||||
(ii) | Impairment of intangible assets | (142 | ) | (433 | ) | |||||
(iii) | Fair value remeasurement of contingent consideration liabilities | 15 | — | |||||||
(iv) | Expenses arising from the impact of acquisitions on inventories (2) | (476 | ) | (142 | ) | |||||
(v) | Restructuring costs | (1,314 | ) | (1,384 | ) | |||||
(vi) | Other gains and losses, and litigation (3) | (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: | 1,905 | 1,856 | |||||||
– amortization of intangible assets | 1,178 | 1,183 | ||||||||
– impairment of intangible assets | 37 | 143 | ||||||||
– fair value remeasurement of contingent consideration liabilities | 34 | — | ||||||||
– expenses arising from the impact of acquisitions on inventories | 143 | 44 | ||||||||
– restructuring costs | 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 (4) | 577 | — | |||||||
(x) | Share of items listed above attributable to non-controlling interests | 6 | 3 | |||||||
(iv)/(v) | Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures (5) | (32 | ) | (58 | ) | |||||
Net income attributable to equity holders of Sanofi | 5,693 | 5,467 |
(1) | The results of operations of Merial, which was previously reported as a business held for exchange, have been reclassified and included in net results of continuing operations in accordance with paragraph 36 of IFRS 5, following the announcement that Merial and Intervet/Schering-Plough will be maintained as two separate businesses operating independently (see Notes D.2. and D.8.1. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | This line comprises the workdown of inventories remeasured at fair value at the acquisition date. |
(3) | See Note D.28. to our consolidated financial statements included at Item 18 of this annual report. |
(4) | In 2011, related to Advance Pricing Agreement impact for €349 million and €228 million reflecting a decrease in deferred tax liabilities related to the remeasurement of intangible assets following changes in tax laws. |
(5) | This line shows the portion of major restructuring costs incurred by associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill). |
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 20092011 were €6.61, up 18.2%€6.65 versus €7.06 in 2010, down 5.8% based on the 2008 business earnings per share figure of €5.59. Thea weighted average number of shares outstanding was 1,305.9of 1,321.7 million in 2009 and 1,309.32011 compared with 1,305.3 million in 2008.2010. Diluted business earnings per share for 20092011 were €6.60, up 18.3%€6.63 versus €7.04 in 2010, down 5.8% based on the 2008 diluted business earnings per share figure of €5.58. 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 2007.2010.
Year Ended December 31, 20082010 Compared with Year Ended December 31, 20072009
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, 20082010 and December 31, 20072009 break down as follows:
(under IFRS) | 2008 | 2007 | ||||||||||||||||||||||||||
(€ million) | as % of net sales | as % of net sales | ||||||||||||||||||||||||||
(under IFRS) (€ million) | 2010 (1) | as % of net sales | 2009 | as % of net sales | ||||||||||||||||||||||||
Net sales | 27,568 | 100.0% | 28,052 | 100.0% | 32,367 | 100.0% | 29,785 | 100.0% | ||||||||||||||||||||
Other revenues | 1,249 | 4.5% | 1,155 | 4.1% | 1,669 | 5.2% | 1,447 | 4.9% | ||||||||||||||||||||
Cost of sales | (7,337 | ) | (26.6% | ) | (7,571 | ) | (27.0% | ) | (9,398 | ) | (29.0%) | (8,107 | ) | (27.2%) | ||||||||||||||
Gross profit | 21,480 | 77.9% | 21,636 | 77.1% | 24,638 | 76.1% | 23,125 | 77.6% | ||||||||||||||||||||
Research & development expenses | (4,575 | ) | (16.6% | ) | (4,537 | ) | (16.2% | ) | (4,547 | ) | (14.0%) | (4,626 | ) | (15.5%) | ||||||||||||||
Selling & general expenses | (7,168 | ) | (26.0% | ) | (7,554 | ) | (26.9% | ) | (8,149 | ) | (25.2%) | (7,464 | ) | (25.1%) | ||||||||||||||
Other operating income | 556 | 522 | 369 | 861 | ||||||||||||||||||||||||
Other operating expenses | (353 | ) | (307 | ) | (292 | ) | (481 | ) | ||||||||||||||||||||
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% | ||||||||||||||||||||||||
Amortization of intangible assets | (3,529 | ) | (3,528 | ) | ||||||||||||||||||||||||
Impairment of intangible assets | (433 | ) | (372 | ) | ||||||||||||||||||||||||
Fair value remeasurement of contingent consideration liabilities | — | |||||||||||||||||||||||||||
Restructuring costs | (585 | ) | (137 | ) | (1,384 | ) | (1,080 | ) | ||||||||||||||||||||
Impairment of property, plant & equipment and intangibles | (1,554 | ) | (58 | ) | ||||||||||||||||||||||||
Gains and losses on disposals, and litigation | 76 | — | ||||||||||||||||||||||||||
Other gains and losses, and litigation (2) | (138 | ) | — | |||||||||||||||||||||||||
Operating income | 4,394 | 15.9% | 5,911 | 21.1% | 6,535 | 20.2% | 6,435 | 21.6% | ||||||||||||||||||||
Financial expenses | (335 | ) | (329 | ) | (468 | ) | (325 | ) | ||||||||||||||||||||
Financial income | 103 | 190 | 106 | 27 | ||||||||||||||||||||||||
Income before tax and associates | 4,162 | 15.1% | 5,772 | 20.6% | ||||||||||||||||||||||||
Income before tax and associates and joint ventures | 6,173 | 19.1% | 6,137 | 20.6% | ||||||||||||||||||||||||
Income tax expense | (682 | ) | (687 | ) | (1,430 | ) | (1,399 | ) | ||||||||||||||||||||
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 | ||||||||||||||||||||||||||
Share of profit/(loss) of associates and joint ventures | 978 | 953 | ||||||||||||||||||||||||||
Net income | 4,292 | 15.6% | 5,682 | 20.3% | 5,721 | 17.7% | 5,691 | 19.1% | ||||||||||||||||||||
- attributable to minority interests | 441 | 419 | ||||||||||||||||||||||||||
- attributable to equity holders of the Company | 3,851 | 14.0% | 5,263 | 18.8% | ||||||||||||||||||||||||
Net income attributable to non-controlling interests | 254 | 426 | ||||||||||||||||||||||||||
Net income attributable to equity holders of Sanofi | 5,467 | 16.9% | 5,265 | 17.7% | ||||||||||||||||||||||||
Average number of shares outstanding (million) | 1,309.3 | 1,346.9 | 1,305.3 | 1,305.9 | ||||||||||||||||||||||||
Average number of shares outstanding after dilution (million) | 1,308.2 | 1,307.4 | ||||||||||||||||||||||||||
Basic earnings per share (in euros) | 2.94 | 3.91 | 4.19 | 4.03 | ||||||||||||||||||||||||
Diluted earnings per share (in euros) | 4.18 | 4.03 |
(1) |
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(2) | See Note B.20.2. to our consolidated financial statements included at Item 18 of this annual report. |
Net Sales
Net sales for the year ended December 31, 20082010 were €27,568€32,367 million, up 8.7% on 2009. Growth was sustained by 3.7% on a comparable basis versus 2007. Exchange rate movements had a negative effectboth the appreciation of 3.9 points, nearly 75% of which was related to the U.S. dollar. Changesdollar and the yen against the euro, and changes in Group structure had a negative effect(mainly the consolidation 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 reconciliationZentiva from the second quarter of our reported net sales for2009, of Merial from September 18, 2009, and of Chattem from the year ended December 31, 2007 to our comparable net sales for that year based on 2008 exchange rates and Group structure:first quarter of 2010).
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Our net sales arecomprise the net sales generated by our two business segments: Pharmaceuticals, and Human Vaccines (Vaccines). and Animal Health businesses.
The following table breaks down our 20082010 and 20072009 net sales by business segment:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis change (%) | Comparable basis change (%) | 2010 Reported | 2009 Reported | Change on a reported basis (%) | ||||||||||||||
Pharmaceuticals | 24,707 | 25,274 | 23,965 | -2.2% | +3.1% | 26,576 | 25,823 | +2.9% | ||||||||||||||
Vaccines | 2,861 | 2,778 | 2,611 | +3.0% | +9.6% | 3,808 | 3,483 | +9.3% | ||||||||||||||
Animal Health | 1,983 | 479 | +314.0% | |||||||||||||||||||
Total | 27,568 | 28,052 | 26,576 | -1.7% | +3.7% | 32,367 | 29,785 | +8.7% | ||||||||||||||
Net Sales by Product — Pharmaceuticals
Our pharmaceutical businessNet sales generated net sales of €24,707by our Pharmaceuticals segment were €26,576 million in 2008,2010, up by 3.1% on a comparable basis and down by 2.2%2.9% on a reported basis.basis but down 1.6% at constant exchange rates.
Flagship Products
Our flagship products (Lantus® and other Diabetes business products, Lovenox®, Plavix®, Taxotere®, Aprovel®/CoAprovel®, Eloxatin®, Multaq® and Jevtana®) are discussed below. Sales of Plavix® and Aprovel® are discussed further below under “— Worldwide Presence of Plavix® and Aprovel®”.
Net sales for the Diabetes business came to €4,298 million, up 9.2% at constant exchange rates, driven by growth for Lantus®, Apidra® and Amaryl®.
Lantus®, the world’s leading diabetes brand (source: IMS 2011 sales), posted a 9.1% rise in net sales at constant exchange rates in 2010 to €3,510 million. Growth was strong in Emerging Markets (18.2% at constant exchange rates), but slowed in the United States (7.4% at constant exchange rates) due to healthcare reforms, despite higher sales of the SoloSTAR® injection pen. Lantus® achieved particularly strong growth at constant exchange rates in Japan (32.3%), Russia (25.9%), and Brazil (30.6%).
Net sales of our top 15 products the rapid-acting insulin analogApidra®advanced by 5.2% on24.1% at constant exchange rates in 2010 to €177 million, buoyed by solid performances in Western Europe (21.8% growth) and Emerging Markets (37.5% growth).
Lovenox® saw net sales decrease by 10.5% at constant exchange rates in 2010 to €2,806 million. In the United States, sales fell by 22.7% to €1,439 million following the introduction of a comparable basisgeneric version of enoxaparin at the end of July 2010. Excluding the United States, net sales were up 7.8% at constant exchange rates at €1,367 million (representing 48.7% of worldwide 2010 sales of Lovenox®), with good performances in Western Europe (up 7.3%) and Eastern Europe (up 14.0%).
Taxotere® reported net sales of €2,122 million, down 6.4% at constant exchange rates. The drop in sales came in the United States and Western Europe, where the patents expired in November 2010. Generic docetaxel became available throughout Western Europe by November 2010. In the United States, distributors commenced a work down of Taxotere® inventories in late 2010 in anticipation of the expected arrival of generic docetaxel in 2011. However, the product saw modest growth in Emerging Markets and in the Other Countries region (1.4% and 2.5% respectively).
Net sales ofEloxatin® fell by 58.8% at constant exchange rates in 2010 to €16,657€427 million, hit by competition from generics. Following a court ruling, generics manufacturers have been under order to stop selling their unauthorized Eloxatin® generics in the U.S. market since June 30, 2010. The workdown of existing inventories of generics impaired our Eloxatin® sales performance in the second half of 2010.
Multaq®, which began to be marketed at the end of 2009, reported net sales of €172 million, mainly in the United States. The product is now available in over 20 countries, and further launches are ongoing.
Jevtana®, which has been available in the U.S. market since July 2010, registered net sales of €82 million in 2008, representing 67.4%2010.
Our other major products are described below.
Net sales of pharmaceuticalthe hypnoticStilnox®/Ambien®/Myslee® fell by 10.9% at constant exchange rates to €819 million. In the United States, net sales versus 66.0% in 2007 (onwere €443 million (including €375 million for Ambien® CR), down 21.6% at constant exchange rates, following FDA approval of a comparable basis). The introduction of genericsgeneric version of Ambien® IRCR in October 2010; we responded by launching our own generic version in the United States and of EloxatineStates. In Japan, Myslee® in Europe (i.e. excludingagain performed well, with net sales up 14.5% at constant exchange rates at €247 million.
Allegra® reported a 22.4% drop in net sales (at constant exchange rates) to €607 million, due to the effect of generics of Allegra® D-12, which have been available on the U.S. market since the end of 2009. Sales in Japan were down 2.0% at constant exchange rates, at €356 million.
Net sales ofCopaxone®, generated mainly in Western Europe, grew by 8.4% at constant exchange rates to €513 million.
TheConsumer Health Carebusiness posted year-on-year growth of 45.7% at constant exchange rates to €2,217 million, driven by Emerging Markets where net sales rose by 44.4% at constant exchange rates to €1,050 million. These figures consolidate the consumer health products of Zentiva from April 2009, Oenobiol from December 2009, Chattem from February 2010, and Nepentes from August 2010.
TheGenericsbusiness reported 2010 net sales of €1,534 million, up 41.5% at constant exchange rates. Growth was driven by Emerging Markets, due to the acquisition and consolidation of Zentiva and Kendrick (from April 2009) and Medley (from May 2009), and by the United States, following the launch of our generic version 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).CR.
Net sales of the other pharmaceutical products fell by 1.1% on a comparable basis to €8,050 million in 2008. Sales of these productsthe portfolio were down by 4.8% on a comparable basis in Europe1.9% (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 €2,617constant exchange rates) year-on-year at €6,064 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 2010 and 2009 net sales for the Pharmaceuticals business by product:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis change (%) | Comparable basis change (%) | |||||||||||||||||||||||||||
Product | Indication | |||||||||||||||||||||||||||||||
(€ million) Product | Indication | 2010 Reported | 2009 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | |||||||||||||||||||||||||||
Lantus® | Diabetes | 3,510 | 3,080 | +14.0% | +9.1% | |||||||||||||||||||||||||||
Apidra® | Diabetes | 177 | 137 | +29.2% | +24.1% | |||||||||||||||||||||||||||
Amaryl® | Diabetes | 478 | 416 | +14.9% | +7.7% | |||||||||||||||||||||||||||
Insuman® | Diabetes | 133 | 131 | +1.5% | +1.5% | |||||||||||||||||||||||||||
Sub-total: Diabetes | 4,298 | 3,764 | +14.2% | +9.2% | ||||||||||||||||||||||||||||
Lovenox® | Thrombosis | 2,738 | 2,612 | 2,475 | +4.8% | +10.6% | Thrombosis | 2,806 | 3,043 | -7.8% | -10.5% | |||||||||||||||||||||
Plavix® | Atherothrombosis | 2,616 | 2,424 | 2,368 | +7.9% | +10.5% | Atherothrombosis | 2,083 | 2,623 | -20.6% | -24.6% | |||||||||||||||||||||
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% | | Breast, lung, prostate, stomach, and head & neck cancer | | 2,122 | 2,177 | -2.5% | -6.4% | |||||||||||||||||||
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% | Hypertension | 1,327 | 1,236 | +7.4% | +4.2% | |||||||||||||||||||||
Stilnox®/Ambien®/Myslee® | Sleep disorders | 829 | 1,250 | 1,258 | -33.7% | -34.1% | ||||||||||||||||||||||||||
Eloxatin® | Colorectal cancer | 427 | 957 | -55.4% | -58.8% | |||||||||||||||||||||||||||
Multaq® | Atrial fibrillation | 172 | 25 | +588.0% | +560.0% | |||||||||||||||||||||||||||
Jevtana® | Prostate cancer | 82 | — | — | — | |||||||||||||||||||||||||||
Stilnox® / Ambien®/Myslee® | Sleep disorders | 819 | 873 | -6.2% | -10.9% | |||||||||||||||||||||||||||
Allegra® | Allergic rhinitis, Urticaria | 688 | 706 | 674 | -2.5% | +2.1% | | Allergic rhinitis, urticarial | | 607 | 731 | -17.0% | -22.4% | |||||||||||||||||||
Copaxone® | Multiple sclerosis | 622 | 1,177 | 520 | -47.2% | +19.6% | Multiple sclerosis | 513 | 467 | +9.9% | +8.4% | |||||||||||||||||||||
Tritace® | Hypertension, Congestive heart failure, Nephropathy | 513 | 741 | 734 | -30.8% | -30.1% | Hypertension | 410 | 429 | -4.4% | -7.2% | |||||||||||||||||||||
Amaryl® | Diabetes | 387 | 392 | 392 | -1.3% | -1.3% | ||||||||||||||||||||||||||
Depakine® | Epilepsy | 372 | 329 | +13.1% | +7.6% | |||||||||||||||||||||||||||
Xatral® | Benign prostatic hypertrophy | 331 | 333 | 320 | -0.6% | +3.4% | | Benign prostatic hypertrophy | | 296 | 296 | 0.0% | -3.4% | |||||||||||||||||||
Actonel® | Osteoporosis, Paget’s disease | 330 | 320 | 309 | +3.1% | +6.8% | | Osteoporosis, Paget’s disease | | 238 | 264 | -9.8% | -16.3% | |||||||||||||||||||
Depakine® | Epilepsy | 329 | 316 | 306 | +4.1% | +7.5% | ||||||||||||||||||||||||||
Nasacort® | Allergic rhinitis | 241 | 294 | 274 | -18.0% | -12.0% | Allergic rhinitis | 189 | 220 | -14.1% | -16.8% | |||||||||||||||||||||
Sub-total Top 15 products | 16,657 | 17,071 | 15,827 | -2.4% | +5.2% | |||||||||||||||||||||||||||
Other products | Other products | 8,050 | 8,203 | 8,138 | -1.9% | -1.1% | 6,064 | 5,947 | +2.0% | -1.9% | ||||||||||||||||||||||
Total Pharmaceuticals | 24,707 | 25,274 | 23,965 | -2.2% | +3.1% | |||||||||||||||||||||||||||
Consumer Health Care | 2,217 | 1,430 | +55.0% | +45.7% | ||||||||||||||||||||||||||||
Generics | 1,534 | 1,012 | +51.6% | +41.5% | ||||||||||||||||||||||||||||
Total pharmaceuticals | 26,576 | 25,823 | +2.9% | -1.6% |
The following table below breaks down net sales of our top 15Pharmaceutical business products by geographicgeographical region in 2008:2010:
(€ 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% | ||||||
�� |
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
(€ 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® | 684 | +5.3% | 2,134 | +7.4% | 508 | +18.2% | 184 | +25.2% | ||||||||||||||||||||||||
Apidra® | 68 | +21.8% | 62 | +11.1% | 35 | +37.5% | 12 | +150.0% | ||||||||||||||||||||||||
Amaryl® | 42 | -17.6% | 6 | -33.3% | 222 | +21.7% | 208 | +3.3% | ||||||||||||||||||||||||
Insuman® | 108 | -0.9% | — | — | 25 | +19.0% | — | -100.0% | ||||||||||||||||||||||||
Sub-total: Diabetes | 902 | +4.2% | 2,202 | +7.4% | 790 | +20.0% | 404 | +13.7% | ||||||||||||||||||||||||
Lovenox® | 782 | +7.3% | 1,439 | -22.7% | 499 | +6.9% | 86 | +19.4% | ||||||||||||||||||||||||
Plavix® | 641 | -53.9% | 213 | * | -4.1% | 648 | +0.7% | 581 | +25.4% | |||||||||||||||||||||||
Taxotere® | 709 | -10.6% | 786 | -8.0% | 394 | +1.4% | 233 | +2.5% | ||||||||||||||||||||||||
Aprovel®/CoAprovel® | 825 | -5.0% | 39 | * | +457.1% | 358 | +8.3% | 105 | +67.3% | |||||||||||||||||||||||
Eloxatin® | 46 | -42.9% | 172 | -76.4% | 150 | -9.8% | 59 | +4.0% | ||||||||||||||||||||||||
Multaq® | 39 | — | 128 | — | 2 | — | 3 | — | ||||||||||||||||||||||||
Jevtana® | — | — | 82 | — | — | — | — | — | ||||||||||||||||||||||||
Stilnox®/Ambien® /Myslee® | 55 | -8.3% | 443 | -21.6% | 68 | +5.0% | 253 | +13.6% | ||||||||||||||||||||||||
Allegra® | 16 | -5.9% | 147 | -53.6% | 88 | +17.4% | 356 | -3.2% | ||||||||||||||||||||||||
Copaxone® | 482 | +9.1% | — | — | 13 | -13.3% | 18 | +7.7% | ||||||||||||||||||||||||
Tritace® | 189 | -4.1% | — | — | 191 | -2.6% | 30 | -41.9% | ||||||||||||||||||||||||
Depakine® | 148 | +2.1% | — | — | 209 | +12.0% | 15 | +9.1% | ||||||||||||||||||||||||
Xatral® | 66 | -14.3% | 155 | +2.7% | 70 | +0.0% | 5 | -50.0% | ||||||||||||||||||||||||
Actonel® | 104 | -23.5% | — | — | 93 | -12.4% | 41 | +3.2% | ||||||||||||||||||||||||
Nasacort® | 28 | -3.4% | 130 | -20.3% | 26 | -10.7% | 5 | -20.0% | ||||||||||||||||||||||||
Other products | 2,649 | -2.3% | 652 | +3,3% | 2,052 | +0.4% | 711 | -10.9% | ||||||||||||||||||||||||
Consumer Health Care | 630 | +1.1% | 320 | — | 1,050 | +44.4% | 217 | +31.3% | ||||||||||||||||||||||||
Generics | 404 | +11.1% | 102 | — | 988 | +42.8% | 40 | +61.9% | ||||||||||||||||||||||||
Total pharmaceuticals | 8,715 | -8.5% | 7,010 | -7,5% | 7,689 | +11.9% | 3,162 | +6.9% |
(1) |
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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.
World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. Japan, Canada, Australia and New Zealand. Sales of active ingredient to the entity majority-owned by BMS in the United States. Net Sales — Human Vaccines (Vaccines) Although the Vaccines segment saw net sales decrease in Western Europe and the United States (by 15.6% and 11.5% at constant exchange rates, respectively), the effect was amply offset by strong growth in Emerging Markets and in the Other Countries region (of 46.2% and 23.0% at constant exchange rates, respectively).Net sales ofAcomplia®, which was withdrawn from the market in the fourth quarter of 2008, totaled €72 million in 2008.(2) (3) * OurIn 2010, the Vaccines businesssegment reported net sales of €3,808 million, up 4.8% at constant exchange rates and 9.3% on a reported basis. Growth was driven by sales of seasonal influenza vaccines (€845 million, versus €597 million in 2009). Sales of pandemic influenza vaccines (mainly against the A/H1N1 virus) were flat; excluding their impact, growth for the Vaccines segment reached 5.5% at constant exchange rates.
Net sales ofinfluenza vaccines rose by 18.7% at constant exchange rates to €1,297 million in 2010, boosted by the performance of the Fluzone® seasonal influenza vaccine in the U.S. market. Excluding pandemic influenza vaccines (net sales of €452 million, flat year-on-year), growth reached 33.3% at constant exchange rates.
Polio/Pertussis/Hibvaccines net sales fell by 2.9% (at constant exchange rates) to €984 million, reflecting a decline in sales of Pentacel® (down 11.4% at €317 million at constant exchange rates) but also the performance of Pentaxim® (up 43.9% at €190 million at constant exchange rates).
Meningitis/Pneumoniavaccines generated net sales of €2,861€527 million, down 6.7% at constant exchange rates, mainly due to a reduction in 2008, an increase of 9.6% on a comparable basis (3.0% on a reported basis), including €1,683 million in 2008catch-up vaccination programs with the Menactra® quadrivalent meningococcal meningitis vaccine 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.States.
Net sales ofMenactraAdult boostervaccines reached €449 million (up 4.7% at constant exchange rates), driven by Adacel® (quadrivalent meningococcal meningitis vaccine) were (€301 million, up 7.9% on a comparable basis6.1% at €404 million in 2008.constant exchange rates).
Net sales ofAdacel®Travel and other endemics (adult and adolescent tetanus-diphtheria-pertussis booster) continuedVaccines rose by 15.7% at constant exchange rates to perform very well€382 million, mainly due to growth 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.anti-rabies vaccines.
The following table presents the 20082010 and 2009 sales of our Vaccines activitybusiness 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% | |||||
(€ million) | 2010 Reported | 2009 Reported | Change on a reported basis (%) | Change at constant exchange rates (%) | ||||||||||||
Influenza Vaccines (including Vaxigrip® and Fluzone®) | 1,297 | 1,062 | +22.1% | +18.7% | ||||||||||||
– of which seasonal influenza vaccines | 845 | 597 | +41.5% | +33.3% | ||||||||||||
– of which pandemic influenza vaccines | 452 | 465 | -2.8% | 0.0% | ||||||||||||
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®) | 984 | 968 | +1.7% | -2.9% | ||||||||||||
Meningitis/Pneumonia Vaccines (including Menactra®) | 527 | 538 | -2.0% | -6.7% | ||||||||||||
Adult Booster Vaccines (including Adacel®) | 449 | 406 | +10.6% | +4.7% | ||||||||||||
Travel and Other Endemics Vaccines | 382 | 313 | +22.0% | +15.7% | ||||||||||||
Other Vaccines | 169 | 196 | +13.8% | -18.4% | ||||||||||||
Total Vaccines | 3,808 | 3,483 | +9.3% | +4.8% |
The following table presents the 20082010 sales of our Vaccines activitybusiness 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% | ||||||
(€ 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 | ||||||||||||||||||||||||
Influenza Vaccines (4) (inc. Vaxigrip® and Fluzone®) | 128 | -7.9% | 528 | -20.2% | 618 | +116.4% | 23 | +5.6% | ||||||||||||||||||||||||
Polio/Pertussis.Hib Vaccines (inc.Pentacel® and Pentaxim®) | 61 | -16.2% | 470 | -14.6% | 384 | +11.4% | 69 | +56.4% | ||||||||||||||||||||||||
Meningitis/Pneumonia Vaccines (inc. Menactra®) | 5 | -54.5% | 407 | -11.4% | 101 | +25.6% | 14 | 0.0% | ||||||||||||||||||||||||
Adult Booster Vaccines (inc. Adacel®) | 54 | -3.6% | 345 | +5.2% | 33 | +32.0% | 17 | -20.0% | ||||||||||||||||||||||||
Travel and Other Endemics Vaccines | 18 | +20.0% | 80 | +11.6% | 235 | +15.8% | 49 | +21.2% | ||||||||||||||||||||||||
Other Vaccines | 16 | -63.2% | 128 | -10.4% | 15 | +0.0% | 10 | +22.2% | ||||||||||||||||||||||||
Total Vaccines | 282 | -15.6% | 1,958 | -11.5% | 1,386 | +46.2% | 182 | +23.0% |
France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Canada, Australia and New Zealand. |
(4) | Seasonal and pandemic influenza vaccines. |
In addition to the Vaccines activity reflected in our consolidated net sales, sales ofat Sanofi Pasteur MSD, theour joint venture with Merck & Co., Inc. in Western Europe, reached €1,272amounted to €918 million, in 2008, an increase of 21.8%down 18.9% 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. Sales of Gardasil®, a vaccine that prevents papillomavirus infections (a cause of cervical cancer), totaled €263 million in 2010, compared with €395 million in 2009. This decrease of 33.5% was mainly due to a reduction in catch-up vaccination programs.
Net Sales — Animal Health
The Animal Health business is carried out by Merial, which has been a wholly-owned subsidiary of Sanofi since September 18, 2009. Following the mutual termination by Sanofi and Merck of their agreement to create a new animal health joint venture, Merial’s results have since been included in the results from continuing operations for all periods reported (see note D.2. to our consolidated financial statements included at Item 18 of this annual report).
Merial generated net sales of €1,983 million in 2010, up 314.0% on a reported basis. 2009 net sales were consolidated from September 18, 2009. The following table presents the 2010 and 2009 sales of our Animal Health business by range of products:
(€ million) | 2010 Reported | 2009 Reported | Change on a Reported basis | |||||||||
Frontline® and other fipronil-based products | 774 | 195 | +296.9% | |||||||||
Vaccines | 627 | 131 | +378.6% | |||||||||
Avermectin | 355 | 90 | +294.4% | |||||||||
Other products | 227 | 63 | +260.3% | |||||||||
Total Animal Health | 1,983 | 479 | +314.0% |
The following table breaks down net sales of our Animal Health business products by geographical region in 2010:
(€ million) Product | 2010 Net sales | Western Europe (1) | United States | Emerging Markets (2) | Other countries (3) | |||||||||||||||
Frontline® and other fipronil-based products | 774 | 198 | 438 | 80 | 58 | |||||||||||||||
Vaccines | 627 | 191 | 129 | 288 | 19 | |||||||||||||||
Avermectin | 355 | 59 | 181 | 56 | 59 | |||||||||||||||
Other products | 227 | 94 | 74 | 34 | 25 | |||||||||||||||
Total Animal Health | 1,983 | 542 | 822 | 458 | 161 |
(1) | France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Canada, Australia and New Zealand. |
Net Sales by 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 20082010 and 20072009 net sales by region:
(€ million) | 2008 | 2007 Reported | 2007 Comparable | Reported basis growth (%) | Comparable basis growth (%) | 2010 Reported | 2009 Reported | Change on a Reported basis | ||||||||||||||
Europe | 12,096 | 12,184 | 12,173 | -0.7% | -0.6% | |||||||||||||||||
Western Europe (1) | 9,539 | 9,938 | -4.0% | |||||||||||||||||||
United States | 8,609 | 9,474 | 8,169 | -9.1% | +5.4% | 9,790 | 9,573 | +2.3% | ||||||||||||||
Other countries | 6,863 | 6,394 | 6,234 | +7.3% | +10.1% | |||||||||||||||||
Emerging Markets (2) | 9,533 | 7,493 | +27.2% | |||||||||||||||||||
Of which Eastern Europe and Turkey | 2,659 | 2,279 | +16.7% | |||||||||||||||||||
Of which Asia (excl. Pacific region (3)) | 2,095 | 1,638 | +27.9% | |||||||||||||||||||
Of which Latin America | 2,963 | 1,991 | +48.8% | |||||||||||||||||||
Of which Africa | 880 | 782 | +12.5% | |||||||||||||||||||
Of which Middle East | 825 | 658 | +25.4% | |||||||||||||||||||
Other Countries (4) | 3,505 | 2,781 | +26.0% | |||||||||||||||||||
Of which Japan | 2,275 | 1,871 | +21.6% | |||||||||||||||||||
Total | 27,568 | 28,052 | 26,576 | -1.7% | +3.7% | 32,367 | 29,785 | +8.7% | ||||||||||||||
(1) | France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. |
(2) | World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. |
(3) | Japan, Australia and New Zealand. |
(4) | Japan, Canada, Australia and New Zealand. |
During 2008, sales in France and Germany hamperedWestern Europe saw net sales decrease by 4.0% 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, sales2010 to €9,539 million, hit by competition from generics of Plavix® in Germany have been affectedand Taxotere®, and by competitionprice pressure from several clopidogrel besylates in certain indications.the healthcare authorities.
In the United States, net sales growth resumedgrew by 2.3% at a healthier pace in€9,790 million, despite the last two quartersarrival of 2008 after having been hampered bygeneric competition from generics offor Lovenox® and Ambien® IR, due to particularly excellent performances from
LantusCR, the workdown of inventories of generic versions of Eloxatin® during the second half of 2010 and Taxotere®. Genericsthe effects of Ambien® IR (i.e. excludinghealthcare reform. These figures include net sales of Ambien® IR in the United States in the first quarter of 2007generated by Chattem from February 2010 and the first quarter of 2008) cost 4.6 points of sales growth over 2008 as a whole (on a comparable basis).by Merial from September 18, 2009.
NetEmerging Markets net sales were €9,533 million, representing robust growth of 27.2%. This performance reflected solid organic growth and the impact of acquisitions (primarily Merial, Zentiva in Eastern Europe and Medley in Brazil). Emerging Markets accounted for 29.5% of total consolidated net sales in 2010. The main growth drivers were Latin America, Russia and China. In Latin America (primarily Brazil and Mexico), growth was fueled by sales of influenza vaccines, which virtually trebled (189% growth).
In the Other Countries region, during 2008 were liftednet sales rose by a particularly strong performance26.0% to €3,505 million. Net sales in Japan (up 18.5% on a comparable basis at €1,408 million)reached €2,275 million, up 21.6%, driven bythanks largely to the success of Plavix® (net sales reached €182 million in 2008 versus. €66 million in 2007), the performance of the Vaccines business and Myslee® (net sales reached €142 million in 2008, up 14.9% on a comparable basis).the integration of Merial.
Worldwide Presence of Plavix® and Aprovel®
Two of our leading products — Plavix® and Aprovel® — were discovered by sanofi-aventisSanofi and jointly developed with Bristol-Myers Squibb (“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 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.above.
The worldwideWorldwide sales of these two products are an important indicator of the global market presence of sanofi-aventis products, and we believe this information facilitatesbecause 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 facilitatesfacilitate 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 investorusers to have a clearer understanding of trends in different line itemslines of our income statement, in particular the line itemslines “Other revenues”, where we record royalties received on those sales are booked (see “— Other Revenues”); “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 profit/loss of entities included in the BMS Alliance and under BMS operational management is recorded;management; and “Net income attributable to minoritynon-controlling interests” (see “— Net Income Attributable to MinorityNon-Controlling Interests”), where we record the BMS share of profit/loss of entities included in the BMS Alliance and under our operational management is recorded.management.
The table below sets forth the worldwide sales of Plavix® and Aprovel® in 20082010 and 2007,2009, by geographic region:
(€ million) | 2008 | 2007 | Change (%) | 2010 | 2009 | Change on a reported basis | Change at constant exchange rates | |||||||||||||||||||||||||||||||||||||||
sanofi- aventis (2) | BMS (3) | Total | sanofi- aventis (2) | BMS (3) | Total | |||||||||||||||||||||||||||||||||||||||||
(€ million) | Sanofi (2) | BMS (3) | Total | Sanofi (2) | BMS (3) | Total | Change on a reported basis | Change at constant exchange rates | ||||||||||||||||||||||||||||||||||||||
Europe | 1,622 | 211 | 1,833 | 1,583 | 225 | 1,808 | +1.4% | 724 | 98 | 822 | 1,443 | 161 | 1,604 | -48.8% | -49.2% | |||||||||||||||||||||||||||||||
United States | — | 3,351 | 3,351 | — | 2,988 | 2,988 | +12.1% | — | 4,626 | 4,626 | — | 4,026 | 4,026 | +14.9% | +10.8% | |||||||||||||||||||||||||||||||
Other countries | 711 | 248 | 959 | 553 | 273 | 826 | +16.1% | 1,165 | 282 | 1,447 | 897 | 255 | 1,152 | +25.6% | +13.7% | |||||||||||||||||||||||||||||||
Total | 2,333 | 3,810 | 6,143 | 2,136 | 3,486 | 5,622 | +9.3% | 1,889 | 5,006 | 6,895 | 2,340 | 4,442 | 6,782 | +1.7% | -2.9% | |||||||||||||||||||||||||||||||
(€ million) | 2008 | 2007 | Change (%) | |||||||||||||||||||||||||||||||||||||||||||
sanofi- aventis (5) | BMS (3) | Total | sanofi- aventis (5) | BMS (3) | Total | |||||||||||||||||||||||||||||||||||||||||
Aprovel®/Avapro®/Karvea®(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Aprovel®/Avapro® /Karvea®/Avalide®(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Europe | 816 | 176 | 992 | 750 | 172 | 922 | +7.6% | 789 | 158 | 947 | 810 | 172 | 982 | -3.6% | -4.4% | |||||||||||||||||||||||||||||||
United States | — | 499 | 499 | — | 507 | 507 | -1.6% | — | 482 | 482 | — | 524 | 524 | -8.0% | -10.4% | |||||||||||||||||||||||||||||||
Other countries | 291 | 184 | 475 | 243 | 179 | 422 | +12.6% | 411 | 216 | 627 | 314 | 192 | 506 | +23.9% | +13.5% | |||||||||||||||||||||||||||||||
Total | 1,107 | 859 | 1,966 | 993 | 858 | 1,851 | +6.2% | 1,200 | 856 | 2,056 | 1,124 | 888 | 2,012 | +2.2% | -1.5% | |||||||||||||||||||||||||||||||
(1) | Plavix® is marketed under the trademarks Plavix® and Iscover®. |
(2) | Net sales of Plavix® consolidated by |
(3) | Translated into euros by |
(4) | Aprovel® is marketed under the trademarks Aprovel®, Avapro® |
|
Comparable-basis trends in worldwideIn the United States, sales of Plavix® and Aprovel/Iscover® 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 thangrew by a robust 10.8% 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 for2010 to €4,626 million. Plavix® benefited from its successcontinued to perform well in Japan and China, where net sales reached €182 million over 2008 as a whole (versus €66 milliongrew respectively by 37.1% (to €520 million) and by 36.6% (to €216 million) at constant exchange rates. These performances to some extent cushioned the effect of the decline in 2007).European sales of Plavix® (down 49.2% at constant exchange rates) caused by competition from generics.
Despite a very competitive environment, worldwideWorldwide sales of Aprovel® achieved double-digit growth/Avapro®/Karvea®/Avalide® were €2,056 million in 2008 (10.8% on2010, down 1.5% at constant exchange rates. The performance in the Other Countries region, lifted by sales of active ingredient to our alliance partners in Japan, partially offset the drop in sales in the United States and Europe, where net sales fell by 10.4% and 4.4% respectively at constant exchange rates. At the end of 2010, sales were impacted by a comparable basis)voluntary recall of certain lots of Avalide® (irbesartan-hydrochlorothiazide) by Bristol-Myers Squibb and Sanofi from the U.S., to €1,966 million.Puerto Rican, Canadian, Mexican and Argentinean markets.
Other Revenues
Other revenues, which mainly comprise royalty income under licensing agreements contracted in connection with ongoing operations, amounted to €1,249totaled €1,669 million in 2008 compared with €1,155 million in 2007.2010, 15.3% higher than the 2009 figure of €1,447 million.
LicenseThis increase was mainly due to license revenues under the worldwide alliance with BMS on Plavix® and Aprovel® amounted to €985, which totaled €1,303 million in 2008, compared with €8972010 versus €1,155 million in 2007.2009 (a 12.8% rise on a reported basis). These revenues were boosted by the strong rise in U.S.stronger sales of Plavix® (up 21.1% on a comparable basis in 2008), but were adversely affected by the unfavorable trend in the United States (up 10.8% at constant exchange rates), and by favorable trends in the exchange rate of the U.S. dollar/euro exchange rate.dollar against the euro.
Gross Profit
Gross profit for 2008 was €21,480the year ended December 31, 2010 came to €24,638 million against €21,636(76.1% of net sales), 6.5% up on the 2009 figure of €23,125 million in 2007. (77.6% of net sales).
The gross margin ratio was 77.9% in 2008, compared with 77.1% in 2007.
The 0.8-point increase inof the gross margin ratio reflected a 0.4-point increase inPharmaceuticals segment fell by 1.6 points, reflecting the net effect of increased royalty income (+0.6 of a point) and a 0.4-point improvementerosion in the ratio of cost of sales to net sales.sales (-2.2 points). This erosion was mainly due to genericization (primarily Plavix® in Europe and Lovenox® in the United States) and higher raw material prices for heparins. Nevertheless, the 2010 gross margin ratio for the Pharmaceuticals segment remained healthy at 78.6%.
The main reasons forgross margin ratio of the Vaccines segment rose by 1.9 points to 64.7%, driven by a 2.1-point improvement in the ratio of cost of sales to net sales, werethanks mainly to cost efficiencies in the production of pandemic influenza vaccines.
The Animal Health segment recorded 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 thanratio of €1 386 million in 2010, up 5.8 points to 69.9% due to product mix.
Consolidated gross profit was also dented by a €142 million charge in 2010 (0.4 of a point) arising from the average for the portfolio. These effects were partly offset by the introductionworkdown during 2010 of genericsinventories remeasured at fair value in connection with acquisitions (principally Merial and Chattem), against €90 million in 2009 (0.3 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%amounted to €4,547 million in 2008 to €4,575 million (2007: €4,537 million), and represented 16.6%2010 (14.0% of net sales (assales), compared to 16.2%with €4,626 million in 2007)2009 (15.5% of net sales). ExcludingThis represents a year-on-year reduction of 1.7% on a reported basis.
The Pharmaceuticals segment generated savings of 5.1% as a result of the effectreorganization initiated in 2009, which has helped reorient some in-house resources towards third-party collaborations. These savings also reflect a rationalization of exchange rates (i.e. at 2007 actual exchange rates), researchR&D projects following a full, objective review of the portfolio. Research and development expenses in the Vaccines segment rose by 3.2%€26 million year-on-year, an increase of 5.3%. Phase III programs were launchedResearch and development expenses in 2008the Animal Health segment amounted to €155 million 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 from2010, compared to €46 million in 2009 (for the discontinuation of programs (primarily Acomplia®)period starting September 18, 2009).
Selling and General Expenses
Selling and general expenses totaled €7,168amounted to €8,149 million in 2008 (26.0%(25.2% of net sales), compared with €7,554an increase of 9.2% on the prior-year figure of €7,464 million in 2007 (26.9%(25.1% 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 first-time consolidation of companies acquired in 2010 (primarily Chattem) and 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 CopaxoneJevtana® on April 1, 2008,and Multaq® launches. Excluding these impacts, selling and general expenses show a decrease, which reflects the transformation program initiated in 2009, and was mainly driven by savings in marketing costs in the United States and Canada. As from this date, sanofi-aventis stopped sharing some commercialization costsEurope, and in these countries.general expenses.
Other Operating Income and Expenses
In 2008, we recorded otherOther operating income of €556 million (as comparedamounted to €522€369 million in 2007)2010 (2009: €861 million), and other operating expenses of €353totaled €292 million (as compared to €307 million in 2007)(2009: €481 million). This represents a netOverall, other operating income figureand expenses represented net income of €203€77 million in 2010, compared with €215€380 million in 2007. Net other operating income generated with pharmaceutical partners (€2942009. The year-on-year decrease of €303 million in 2008 compared with €212 million in 2007) includeswas mainly due to the discontinuation of royalty payments from April 1, 2008 onwards the shareTeva on North American sales of profit on Copaxone® followingfrom the takeover by Tevasecond quarter of commercialization of this product in the United States and Canada. We also2010.
In addition, Sanofi recorded gains on disposals on current operations (€24 million in 2008 against €60 million in 2007) and a net operatingoperational foreign exchange loss (€94of €141 million against €33due to highly volatile currency markets; this compares with a net gain of €40 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.2009.
Amortization of IntangiblesIntangible Assets
Amortization charged against intangible assets totaled €3,483 million in the year ended December 31, 2008,2010 amounted to €3,529 million, compared with €3,654€3,528 million in the year ended December 31, 2007. The reduction was mainly dueprevious year. An increase in amortization expense in North America, related to the weakening oftrends in the U.S. dollardollar/euro exchange rate and the Chattem acquisition, was offset by a reduction in Europe as some intangible assets reached the end of their useful lives.
This line item mainly comprises amortization charged against the euro.
These charges mainly relate to the amortization of intangible assets remeasured at fair value aton the timeacquisitions of the Aventis acquisition (€3,2983,070 million in 2008 as compared with €3,5112010, versus €3,175 million in 2007)2009) and of Zentiva (€130 million in 2010, versus €98 million in 2009).
Operating Income before Restructuring, Impairment of Property, Plant & Equipment and Intangibles, Gains and Losses on Disposals, and LitigationIntangible Assets
This line item came to €6,457recorded impairment losses of €433 million in 2008,2010, compared with €6,106€372 million in 2007.2009. The losses booked in 2010 related mainly to (i) Actonel®, due to contemplated amendments to the terms of the collaboration agreement with Warner Chilcott; (ii) the pentavalent vaccine Shan5®, for which sales projections were revised to take account of the need to file a new application for WHO pre-qualification following a flocculation problem in some batches; (iii) the BSI-201 project, for which the development plan was revised following the announcement of the initial results from a Phase III trial in triple-negative metastatic breast cancer; and (iv) some of Zentiva’s generics and consumer health products, whose sales projections in Eastern Europe were adjusted downwards.
The net impairment loss of €372 million recognized in 2009 related mainly to Actonel®, Benzaclin® and Nasacort®, and reflected the changing competitive environment and the approval dates of generics.
Restructuring Costs
Restructuring costs amounted to €585€1,384 million in 2008,2010, compared with €137€1,080 million in 2007. The 2008 figure relates2009.
In 2010, these costs mainly related to costs incurred on the adaptation ofmeasures taken to adapt our industrial facilitiesoperations 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 BarrR&D functions in the United States (€114 million).and some European countries.
In 2007, net impairment losses charged against property, plant2009, restructuring costs mainly related to measures aimed at transforming R&D operations to encourage innovation, and equipmentadapting central support functions to streamline the organizational structure. They mainly comprised employee-related expenses, in the form of early retirement benefits and intangible assets were €58 million. This chargetermination benefits under voluntary redundancy plans. To a lesser extent, they reflected the results of impairment tests, which identified impairment lossesongoing measures to adapt our industrial facilities in respect of intangible assets recognized as part of the allocation of the purchase price of Aventis.Europe and adjust our sales forces.
Other Gains and Losses, on Disposals, and Litigation
In 2008,2010, this line item comprised €76reported an expense of €138 million, of reversals ofrelating to an adjustment to vendor’s guarantee provisions for litigation.in connection with past divestments.
The Group did not make any significant disposals during 2008 and 2007.We made no material divestments in 2010 or 2009.
Operating Income
Operating income for 20082010 was €4,394€6,535 million, compared with €5,911versus €6,435 million for 2007.2009, an increase of 1.6%.
Financial Income and Expenses
Net financial expense amounted to €232expenses were €362 million in 2008,2010, compared with €139€298 million in 2007,2009, an increase of €93 million.21.5%.
Interest expenseFinancial expenses directly related to ournet debt net of cash(defined as short-term and cash equivalents (short-termlong-term debt, plus long-term debt,related interest rate and currency derivatives, minus cash and cash equivalents) totaled €183were €325 million in 2008, against €2092010, versus €230 million in 2007.2009. This situation reflects two contrasting trends: year-on-year rise reflected the following factors:
an increase in the average interest rate (due to a longer average maturity), charged on a higher level of average consolidated debt;
a reduction in the amountinterest income, reflecting a lower average rate of our debt during the periodreturn; and the unfavorable interest rate trends.
Sanofi-aventis tendered its sharesthe €34 million of financial expenses incurred on the acquisition credit facilities contracted in Millennium Pharmaceuticals, Inc. (Millennium) toOctober 2010 in connection with the launch of the public tender offer for Millennium by Takeda Pharmaceuticals Company Ltd. This transaction generated a gainGenzyme (see “Item 8.B. Significant changes”).
Gains on disposals amounted to €61 million, mainly on the sale of €38 million, recognizedthe equity interest in the first half of 2008.Novexel.
We recorded a netNet foreign exchange loss for 2008 of €74 million, compared to a net gain of €87losses on financial items totaled €20 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 2007.2010 (2009: €67 million).
Income before Tax and Associates and Joint Ventures
Income before tax and associates for 2008and joint ventures was €4,162€6,173 million compared with €5,772in 2010, versus €6,137 million for 2007.in 2009, an increase of 0.6%.
Income Tax Expense
Income tax expense totaled €1,430 million in 2010, compared with €1,399 million in 2009.
The reportedeffective tax rate for 2008 was 16.4%, compared with 11.9% for 2007.
In 2008, this reducedis calculated on the basis of business operating income minus net financial expenses and before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests. The effective tax rate was a result of a gain of €221 million on reversals of tax provisions, related27.8% in 2010, versus 28.2% in 2009. The difference relative to the settlementstandard income tax rate applicable in France in 2010 and 2009 (34.4%) was mainly due to royalty income being taxed at a reduced rate in France.
This line item also includes tax effects of tax audits. In 2007, this item comprised a net gainamortization 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 (€1,183 million in 2010, €1,130 million in 2009) and of Aventis.restructuring costs (€466 million in 2010, €360 million in 2009).
Share of Profit/Loss of Associates and Joint Ventures
Our share of the net profits ofand losses from associates and joint ventures was €692€978 million in 2008,2010, compared with €446€953 million in 2007.2009. This itemline mainly comprisesincludes our share of after-tax profits from the territories managed by BMS under the Plavix® and Avapro® alliance, (€623which rose by 24.8% from €785 million in 2008, compared2009 to €526€980 million in 2007). The2010. This year-on-year increase in our profit share was a direct resultmainly related to stronger sales of the increase in Plavix® sales during the period, despite the unfavorable trends in the euro/United States (up 10.8% at constant exchange rates) and to the appreciation of the 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 lossagainst the euro (positive impact of €102 million on the equity-accounted investment in Zentiva.
Net income from the Held-for-Exchange Merial Business3.7%).
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 €4,292for the year was €5,721 million in 2008,2010, compared with €5,682€5,691 million in 2007.2009.
Net Income Attributable to MinorityNon-Controlling Interests
Net income attributable to minoritynon-controlling interests totaled €441amounted to €254 million in 2008,2010, compared to €419with €426 million in 2007.2009. This item includesline mainly comprises the share of pre-tax incomeprofits paid over to BMS from territories managed by sanofi-aventisSanofi (€422238 million, versus €405 million in 2008, compared2009). The decrease in net income attributable to €403 millionnon-controlling interests in 2007).2010 was directly related to increased competition from generics of clopidogrel (Plavix®) in Europe.
Net Income Attributable to Equity Holders of the CompanySanofi
Net income attributable to equity holders of the Company for 2008 was €3,851Sanofi totaled €5,467 million in 2010, against €5,263€5,265 million for 2007. Earningsin 2009.
Basic earnings per share (EPS) were €2.94, compared with €3.91 for 2007,2010 was €4.19, 4.0% higher than the 2009 figure of €4.03, based on an average number of shares outstanding of 1,309.31,305.3 million in 2008 (2007: 1,346.9 million).2010 and 1,305.9 million in 2009. Diluted earnings per share was €4.18 in 2010 compared with €4.03 in 2009, based on an average number of shares outstanding after dilution of 1,308.2 million in 2010 and 1,307.4 million in 2009.
Business Operating Income
Business operating income for 2010 was €10,391€12,863 million, compared to €12,076 million in 2008, against €10,162 million in 2007.
2009. The table below shows trends in business operating income by business segment for 20082010 and 2007:2009:
(€ million) | 2008 | 2007 | 2010 | 2009 | ||||||||
Pharmaceuticals | 9,399 | 9,084 | 10,965 | 10,608 | ||||||||
Vaccines | 882 | 869 | 1,379 | 1,173 | ||||||||
Animal Health | 621 | 288 | ||||||||||
Other | 110 | 209 | (102 | ) | 7 | |||||||
Business operating income | 10,391 | 10,162 | 12,863 | 12,076 | ||||||||
Business Net Income
Business net income is a non-GAAP financial measure that we use to evaluate our Group’s performance (see “Item 5. Operating and Financial Review and Prospects — Business Net Income” above).
Business net income for 2010 was €9,215 million, an improvement of 6.8% on the 2009 figure of €8,629 million, and represented 28.5% of net sales compared with 29.0% in 2009. The increase was mainly due to our good operating performance, reflected in the increase in gross profit (€24,638 million in 2010 versus €23,125 million in 2009).
(€ million) | 2010 (1) | 2009 (1) | ||||||
Business net income | 9,215 | 8,629 | ||||||
(i) Amortization of intangible assets | (3,529 | ) | (3,528 | ) | ||||
(ii) Impairment of intangible assets | (433 | ) | (372 | ) | ||||
(iii) Fair value remeasurement of contingent consideration liabilities | — | — | ||||||
(iv) Expenses arising from the impact of acquisitions on inventories (2) | (142 | ) | (90 | ) | ||||
(v) Restructuring costs | (1,384 | ) | (1,080 | ) | ||||
(vi) Other gains and losses, and litigation (3) | (138 | ) | — | |||||
(vii) Impact of the non-depreciation of the property, plant & equipment of Merial (IFRS 5) | 77 | 21 | ||||||
(viii) Tax effects on the items listed above, comprising: | 1,856 | 1,644 | ||||||
- amortization of intangible assets | 1,183 | 1,130 | ||||||
- impairment of intangible assets | 143 | 136 | ||||||
- expenses arising from the impact of acquisitions on inventories | 44 | 24 | ||||||
- restructuring costs | 466 | 360 | ||||||
- other gains and losses, and litigation | 46 | — | ||||||
- non-depreciation of property, plant and equipment of Merial (IFRS 5) | (26 | ) | (6 | ) | ||||
(iv)/(ix) Other tax items (4) | — | 106 | ||||||
(x) Share of items listed above attributable to non-controlling interests | 3 | 1 | ||||||
(iv)/(v) Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures (5) | (58 | ) | (66 | ) | ||||
Net income attributable to equity holders of Sanofi | 5,467 | 5,265 |
(1) | The results of operations of Merial, which was previously reported as a business held for exchange, have been reclassified and included in net results of continuing operations in accordance with paragraph 36 of IFRS 5, following the announcement that Merial and Intervet/Schering-Plough will be maintained as two separate businesses operating independently (see note D.2. to our consolidated financial statements included at Item 18 of this annual report). |
(2) | This line comprises the workdown of inventories remeasured at fair value at the acquisition date. |
(3) | See note D.28. to our consolidated financial statements included at Item 18 of this annual report. |
(4) | In 2009: reversal of deferred taxes following ratification of the Franco-American Treaty. |
(5) | This line shows the portion of major restructuring costs incurred by associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill). |
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 2010 were €7.06, up 6.8% on the 2009 business earnings per share figure of €6.61. The weighted average number of shares outstanding was 1,305.3 million in 2010 and 1,305.9 million in 2009. Diluted business earnings per share for 2010 were €7.04, up 6.7% on the 2009 diluted business earnings per share figure of €6.60. On a diluted basis, the weighted average number of shares outstanding was 1,308.2 million in 2010 and 1,307.4 million in 2009.
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, partDuring the course of 2011, our debt significantly increased to finance the costacquisition of our acquisitions was also funded
by taking on debt.Genzyme. As of December 31, 2009,2011, our debt, net of cash and cash equivalents, stood at €4,135€10,859 million (8.5%(19.3% of our net equity) versus €1,780€1,577 million as of December 31, 2008 (3.9%2010 (3.0% of our net equity) and €4,128 million as of December 31, 2009 (8.5% of our net equity). See Note D.17. “Debt, cash and cash equivalents” to our consolidated financial statements included at Item 18 of this annual report.
Consolidated Statement of Cash Flows
The table below shows our summarized cash flows for the years ended December 31, 2009, 20082011, 2010 and 2007:2009:
(€ million) | 2009 | 2008 | 2007 | 2011 | 2010 | 2009 | |||||||||||||||
Net cash provided by / (used in) operating activities | 8,515 | 8,523 | 7,106 | 9,319 | 9,859 | 8,602 | |||||||||||||||
Net cash provided by / (used in) investing activities | (7,287 | ) | (2,154 | ) | (1,716 | ) | (14,701 | ) | (3,475 | ) | (7,327 | ) | |||||||||
Net cash provided by / (used in) financing activities | (787 | ) | (3,809 | ) | (4,820 | ) | 2,893 | (4,646 | ) | (788 | ) | ||||||||||
Impact of exchange rates on cash and cash equivalents | 25 | (45 | ) | (12 | ) | 1 | 55 | 27 | |||||||||||||
Impact of the cash and cash equivalents of Merial (1) | 147 | — | — | ||||||||||||||||||
Net change in cash and cash equivalents — (decrease) / increase | 466 | 2,515 | 558 | (2,341 | ) | 1,793 | 514 | ||||||||||||||
(1) | See Note D.8.1. to our consolidated financial statements included at Item 18 of this annual report. |
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, 2011 Compared with Year Ended December 31, 2010
Net cash provided by operating activities totaled €8,515€9,319 million in 2009,2011, compared with €8,523€9,859 million in 2008.2010. 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” and “Results of Operations — Year Ended December 31, 2010 Compared with Year Ended December 31, 2009”. 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 an €165 million increase in 2010. The 2011 increase was related to increased inventories (€232 million) and trade receivables (€257 million), following the 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. These mainly corresponded to investments in industrial and research facilities (1,394 million compared with €1,261 million in 2010) as well as contractual payments for intangible rights under licensing or collaboration agreements (€182 million versus €312 million in 2010).
Financial investments for 2011 totaled €13,616 million, net of cash from acquired companies. Including assumed liabilities and commitments, these were valued at €14,079 million and regarded mainly the acquisition of Genzyme (€13,602 million) and BMP Sunstone (€374 million). In 2010, financial investments were €1,733 million net of acquired cash; they were valued, after including assumed liabilities and commitments, at €2,130 million, primarily covering the acquisition of equity interests in Chattem (€1,640 million) and Nepentes (€104 million).
After-tax proceeds from disposals amounted to €359 million, coming mainly from the sale of the Dermik dermatology business (€321 million). In 2010, proceeds from disposals accounted for €136 million net of taxes, mainly from the sale divestment of the equity interest in Novexel (€48 million) and on the disposal of various tangible assets (€55 million).
Net cash used in financing activities yielded a positive balance in 2011 of €2,893 million, compared with a negative balance in 2010 of €4,646 million. In 2011, these specifically included €5,283 million in outside funding (net change in short-term and long-term debt) compared with €1,165 million in debt repayments in 2010, our 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 the impact 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.
Year Ended December 31, 2010 Compared with Year Ended December 31, 2009
Net cash provided by operating activities amounted to €9,859 million in 2010, compared with €8,602 million in 2009. Operating cash flow before changes in working capital was €9,362€10,024 million, (versus €8,524versus €9,384 million in 2008),2009, reflecting our good operating performance.
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”income”, which is discussed in detail above under “Results of Operations — Year Ended December 31, 20092010 Compared with Year Ended December 31, 2008”2009” and “Results of Operations — Year Ended December 31, 20082009 Compared with Year Ended December 31, 2007”2008”. 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€165 million in 2009, having been stable2010, compared with an €782 million increase in 2008. This increase2009. The main factor in 2010 was due toa €386 million rise in inventories, partly offset by the growth in our operations during 2009, reflected in higher levelsdiscontinuation of inventories (up €489royalty payments from Teva on North American sales of Copaxone® (impact: €126 million) and trade receivables (up €429 million).the integration of Merial’s net current liabilities.
Net cash used in investing activities was €7,287totaled €3,475 million in 2009,2010, versus €2,154€7,327 million in 2008.2009.
Acquisitions of property, plant and equipment and intangible assets totaled €1,785amounted to €1,662 million (compared with €1,606(2009: €1,826 million), comprising €1,350 million in 2008), and mainly comprisedof investments in industrial and research facilities and research sites, plus€312 million of contractual payments for intangible rights under licensing or collaboration agreements.
Financial investments during 2010 totaled €1,733 million, net of acquired cash; after including assumed liabilities and commitments, these acquisitions were valued at €2,130 million. Our main investment during 2010 was the equity interest in Chattem (€3251,640 million). In 2009, acquisitions of investments were €5,568 million, net of acquired cash; after including assumed liabilities and commitments, these acquisitions were valued at €6,334 million. Our main investments in 2009 mainly related to licensing agreements).
Financial investments, net of cash acquired, totaled €5,568 million. These investments, valued at a total of €6,334 million inclusive of assumed debt, mainly comprised acquisitions of shareswere the equity interests 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 comprising the acquisitions of the entire share capital of the U.K. company Acambis Plc (€332 million) and of the Australian company Symbion CP Holdings Pty Ltd, now sanofi-aventis Healthcare Holdings Pty Limited (€329 million).BiPar.
After-tax proceeds from disposals amounted to €136 million, arising mainly on the divestment of the equity interest in Novexel (€8548 million) relatedand on the disposal of various items of property, plant and equipment (€55 million). In 2009, after-tax proceeds from disposals were €87 million, mainly toon disposals of intangible assets, some of which were required as conditions for clearance of our acquisition of Zentiva. In 2008, after-tax proceeds from disposals were €123 million, mostly arising from the May 2008 disposal of our shares in Millennium.
Net cash used in financing activities amounted to €787 million, against €3,809€4,646 million in 2008. 2010, versus €788 million in 2009.
The 20092010 figure includes aour dividend payout of €3,131 million (2009: €2,872 million (versus €2,702 million in 2008)million), and additional external financingplus net repayments of debt (net increasechange in short-term and long-term debt) of €1,923€1,165 million (versus €69a net €1,922 million of new debt contracted in 2008)2009). During 2009, we placed five bond issues for a total amountIt also includes the acquisition of €4.7 billion (refer to Note D.17. “Debt, cash and cash equivalents” to our consolidated financial statements). In 2008, we acquired 23.95.9 million of our own shares at a cost of €1,227 million under our share repurchase programs.for €321 million.
After the impact of exchange rates and the impact of the cash and cash equivalents of Merial, the net change in cash and cash equivalents during 20092010 was an increase of €466€1,793 million, compared with an increase of €2,515€514 million in 2008.2009.
Consolidated Balance Sheet and Debt
Total assets stood at €80,049€100,165 million as of December 31, 2009,2011, compared with €71,987€85,264 million as of December 31, 2008,2010, an increase of €8,062€14,901 million.
Ourdebt, net of cash and cash equivalents was €10,859 million as of December 31, 2009 was €4.1 billion, compared with €1.8 billion2011, versus €1,577 million as of December 31, 2008.2010. We define “debt, net of cash and cash equivalents” as short-term and long-term debt, plus related interest rate and currency derivatives, minus cash and cash equivalents. Debt, net of cash and cash equivalents, is a non-GAAP financial measure that is used by management and investors to measure the Company’s overall net indebtedness and to assess the Company’s financing risk as short-term debt plus long-term debt, minus cash and cash equivalents.
The table below shows changes in the Group’s financial position over the last three years:
(€ 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 | ||||||
Themeasured by its gearing ratio (debt, net of cash and cash equivalents, to total equity) rose from 3.9% at the end of 2008 to 8.5% at the end of 2009 (see “—Liquidity and Capital Resources” above). For an analysis of our debt at December 31, 2009 and 2008 by type, maturity, interest rate and currency, seeSee Note D.17. to our consolidated financial statements included at Item 18 of this annual report.
The financing in place at December 31, 2009 at the level of the sanofi-aventis holding company is not subject to covenants regarding financial ratios, and contains no clause linking credit spreads or fees to our credit rating.
Other key movements in balance sheet items for the period under review are summarized below.
Total equitystood at €48,446 million as of December 31, 2009, against €45,071 million a year earlier. The principal factors underlying this net increase in equity were:
reductions: the dividend of €2,872 million distributed to our shareholders out of our 2008 earnings, and the net movement in the cumulative translation adjustment arising from the appreciation of the euro against various currencies (€295 million, relating primarily to the U.S. dollar); and
increases: net income attributable to equity holders of the Company for the year ended December 31, 2009 (€5,265 million); the remeasurement of our existing equity interests in Zentiva (€80 million) and in Merial (€922 million), net of taxes; and changes in our share capital relating to share-based payment plans (exercise of stock options, and proceeds from the sale of treasury shares on exercise of stock options: total impact €166 million).
At December 31, 2009, we held 9.4 million of our shares as treasury shares representing 0.71% of our share capital and recorded as a deduction from shareholders’ equity.
Goodwillandintangible 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 of the acquisitions made in 2009 (€1,882 million of goodwill and €2,206 million of intangible assets); and
reductions: amortization and impairment losses charged during the period (€3,950 million).
Provisions and other non-current liabilities (€8,311 million as of December 31, 2009) increased by €581 million year-on-year, due mainly to a €274 million net rise in provisions for pensions and other long-term employee benefits and a €239 million net increase in tax exposures. The impact of the first-time consolidation of companies acquired during 2009 (principally Zentiva and Medley) on the total net increase amounted to €250 million. Refer to Note D.18. to our consolidated financial statements for further information.
Net deferred tax liabilities (€2,021 million as of December 31, 2009) were €727 million lower than at the previous year-end, largely as a result of the reversal of deferred tax liabilities relating to the remeasurement of acquired intangible assets (€661 million). An additional factor was a €126 million reduction in deferred tax liabilities relating to the tax cost of distributions made from reserves, mainly as a direct result of the entry into force 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.
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.
NetThe table below shows our financial position for the years ended December 31, 2011, 2010 and 2009:
(€ million) | 2011 | 2010 | 2009 | |||||||||
Long-term debt | 12,499 | 6,695 | 5,961 | |||||||||
Short-term debt and current portion of long-term debt | 2,940 | 1,565 | 2,866 | |||||||||
Cash and cash equivalents | (4,124 | ) | (6,465 | ) | (4,692 | ) | ||||||
Related interest rate and currency derivatives | (456 | ) | (218 | ) | (7 | ) | ||||||
Debt, net of cash and cash equivalents | 10,859 | 1,577 | 4,128 |
The gearing ratio (debt, net of cash and cash equivalents as a proportion of total equity) rose from 3.0% on December 31, 2010 to 19.3% on December 31, 2011; this change was due to financing arrangement for the Genzyme acquisition in the first half of 2011. For an analysis of our debt by type, maturity, interest rate and currency as of December 31, 2011 and December 31, 2010, refer to Note D.17. to our consolidated financial statements.
The financing arrangements in place as of December 31, 2011 at the Sanofi parent company level are not subject to covenants regarding financial ratios and do not contain any clauses linking credit spreads or fees to our credit rating. Under the Bridge Facility, the margin above Libor and mandatory costs may vary under Facility B as a function of our credit rating (see Item 10.C. hereof for further information).
Other key movements in balance sheet items are described below.
Total equity stood at €56,389 million as of December 31, 2011, compared with €53,288 million a year earlier. The main factors underlying this net increase were as follows:
increases: net income for the year ended December 31, 2011 (€5,693 million), and the impact of capital increases to pay share dividends, net of share buybacks (€816 million); and
reductions: dividend payments to our shareholders (payment of dividends for fiscal year 2010 of €3,262 million).
As of December 31, 2011, Sanofi held 17.2 million of its own shares, recorded as a deduction from equity and representing 1.3% of the share capital.
Goodwill and other intangible assets (€61,718 million) increased by €17,307 million compared to a year earlier, mainly as a result of the following factors:
increases: the impact of company acquisitions (€4,361 million of goodwill, and €10,446 million of other intangible assets), mainly Genzyme, the reclassification of Merial’s assets previously reported as held for sale or exchange (€1,210 million of goodwill and €3,979 million of other intangible assets), and the euro revaluation of assets denominated in other currencies (€1,276 million, primarily on the U.S. dollar);
reductions: amortization and impairment losses for the period (€3,976 million).
Provisions and other non-current liabilities (€10,346 million) were €1,020 million higher than at the previous year-end, mainly due to the increase in actuarial gains and losses associated with provisions and other benefits (€677 million), the impact of the recent consolidation of new companies (Genzyme and BMP Sunstone) and the reclassification of Merial’s provisions previously reported as assets held for sale or exchangeexchange.
Net deferred tax liabilities (€4,9092,378 million) were up €1,621 million in 2011; they increased on the one hand due to the consolidation of new companies, mainly compriseGenzyme and Merial, and decreased on the netother hand from the reversal of deferred tax liabilities associated with the amortization and impairment of acquired intangible assets (€1,529 million).
Liabilities related to business combinations and to non-controlling interests, both current and non-current, (€1,556 million) increased by €1,070 million due to the 2011 recognition of Merial, whose operations have been accounted for bya price consideration to Bayer and contingent value rights (CVR) resulting from the full consolidation method with effect from September 18, 2009 and presented in accordance with IFRS 5 (refer toacquisition of Genzyme (see Note D.8. “Assets held for sale or exchange”D.18. to our consolidated financial statements).
The change in net assets held for sale or exchange (€47 million versus €5,364 million as of December 31, 2010) was related to the reclassification of Merial’s net assets (€5,347 million) to each line item on the balance sheet based on its type (see Note D.8.1. 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 2011, we held cash and cash equivalents amounting to €4,692€4,124 million, substantially all of which waswere held in euros (see Note D.13. to our consolidated financial statements). As at December 31, 2009, €4302011, €460 million of our cash and cash equivalents waswere held by our captive insurance and reinsurance companies in accordance with insurance regulations. As
Since the beginning of year end 2009,2010, certain Southern European countries have encountered increasing financial difficulties, particularly Greece and Portugal, where part of our customers are government-owned or supported healthcare facilities. 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 these accounts receivable 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. Risks 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”.
At year-end 2011, 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, 2009.2011. For a discussion of our treasury policies, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
In November 2011, Sanofi obtained the necessary corporate authorizations to purchase any or all of the outstanding Contingent Value Rights (“CVR”). As of December 31, 2011, Sanofi had purchased 2,120,897 CVRs (for a total consideration of $2.6 million) out of 291,313,510 issued at the time of the Genzyme acquisition.
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, 20092011 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 2011 consolidated financial statements describes our principal contractual commitments in respect of divestments.
The Group’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, 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 | — | — | ||||||||||
December 31, 2011 | 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) | 16,495 | 3,121 | 6,496 | 3,680 | 3,198 | |||||||||||||||
• Operating lease obligations | 1,456 | 284 | 406 | 245 | 521 | |||||||||||||||
• Finance lease obligations (2) | 123 | 19 | 40 | 35 | 29 | |||||||||||||||
• Irrevocable purchase commitments (3) | ||||||||||||||||||||
- given | 3,041 | 1,672 | 608 | 325 | 436 | |||||||||||||||
- received | (247 | ) | (105 | ) | (76 | ) | (42 | ) | (24 | ) | ||||||||||
• Research & development license agreements | ||||||||||||||||||||
- Future service commitments (4) | 944 | 196 | 307 | 416 | 25 | |||||||||||||||
- Potential milestone payments (5) | 2,822 | 175 | 297 | 444 | 1,906 | |||||||||||||||
• Obligations relating to business combinations(6) | 5,578 | 496 | 1,144 | 718 | 3,220 | |||||||||||||||
Ÿ Estimated benefit payments on unfunded pensions and post employment benefits(7) | 1,453 | 64 | 121 | 140 | 1,128 | |||||||||||||||
Total contractual obligations and other commitments | 31,665 | 5,922 | 9,343 | 5,961 | 10,439 | |||||||||||||||
Undrawn general-purpose credit facilities | 10,046 | 3,046 | — | 7,000 | — |
(1) |
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(2) | See Note D.3. to our consolidated financial statements included at Item 18 of this annual report. |
(3) | These comprise irrevocable commitments to suppliers of (i) property, plant and equipment, net of down payments (see Note D.3. |
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(6) | See Note D.18. to our consolidated financial statements included at Item 18 of this annual report. |
(7) | See Note D.19.1. to our consolidated financial statements included at Item 18 of this annual report. The table above does not include the ongoing annual employer’s contributions to plan assets, estimated at €353 million in 2012. |
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 €2.1 billion in 2011. These exclude projects in the research phase (€4.2 billion in 2011) and payments contingent upon the attainment of sales targets once a product is on the market ( €4.4 billion in 2011).
Following the Genzyme acquisition in April 2011, Sanofi took over a commitment towards Isis Pharmaceuticals Inc. This collaboration agreement was signed in January 2008 and enabled to obtain an exclusive license to develop and commercialize Mipomersen, a treatment in advanced development phase used in severe familial hypercholesterolemia.
In May 2011, Sanofi signed a license agreement with Glenmark Pharmaceuticals S.A. (Glenmark), a wholly-owned subsidiary of Glenmark Pharmaceuticals Limited India, to develop and commercialize GBR500, a novel monoclonal antibody for the treatment of Crohn’s disease and other chronic auto-immune diseases.
In June 2010 Sanofi signed an exclusive global collaboration and license agreement with Ascenta Therapeutics, a U.S. biopharmaceutical company, on a number of molecules that could restore apoptosis (cell death) in tumor cells.
At the end of April 2010, Sanofi signed a license agreement with Glenmark for the development and commercialization of novel agents to treat chronic pain. Those agents are vanilloid receptor (TRPV3) antagonist molecules, including a first-in-class clinical compound, GRC 15300, which is currently in Phase I clinical development.
In April 2010, Sanofi signed a global license agreement with CureDM Group Holdings, LLC for Pancreate™, a novel human peptide which could restore a patient’s ability to produce insulin and other pancreatic hormones in both type 1 and 2 diabetes.
In December 2009, sanofi-aventisSanofi and the AmericanU.S. biotechnology company Alopexx Pharmaceuticals LLC (Alopexx)simultaneously signed (i) a collaboration agreement, and (ii) an option for a license on a first-in-class human monoclonalan antibody for the prevention and treatment of infections originating in the bacterium that causes plague and other serious infections. This new antibody is currently in preclinical development. We will finance part of the Phase I clinical trials and we have made an upfront payment to Alopexx. In addition, we will make milestone payments which could reach $210 million, plus royalties on sales of commercialized products and additional milestone payments linked to sales performance.
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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-aventisSanofi signed a global license agreement in oncology with the biotechnology company Exelixis, Inc. (Exelixis) for the XL147 and XL765 molecules, andXL765. Simultaneously Sanofi signed an exclusive research collaboration agreement for the discovery of inhibitors of phosphoinositide-3 kinasePhosphoinositide-3 Kinase (PI3K) for the management of malignant tumors. We have made an upfront cash payment to Exelixis,tumors, that was terminated on December 22, 2011.
May 2009: collaboration and could make milestone payments that could reach over $1 billion in aggregate. In addition, Exelixis will be entitled to receive royalties on sales of commercialized products, and milestone payments linked to the sales performance of those products.
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’s disease. Kyowa Hakko Kirin will receive milestone payments which could reach $305 million. Kyowa Hakko Kirin will also be entitled to receive royalties and milestone payments linked to sales performance.
In February 2008, sanofi-aventis and Dyax Corp. entered into agreements that granted sanofi-aventis an exclusive worldwide license forSeptember 2003, Sanofi signed a collaboration agreement in oncology with Regeneron Pharmaceuticals Inc. (Regeneron) to develop 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.
In November 2007, sanofi-aventisSanofi signed a furtheranother collaboration agreement with Regeneron to discover, develop and commercialize fully-human therapeutic antibodies. This agreement was broadened, and extendedits term extended; on November 10, 2009. From 2010 until 2017, we will increase our yearly financial commitmentUnder the terms of the development agreement, Sanofi committed to fund 100% of the development costs of Regeneron’s antibody research program until 2017. Once a product begins to $160 million.be marketed, Regeneron will repay out of its profits (provided they are sufficient) half of the development costs borne by Sanofi.
Sanofi has also entered into the following major agreements, which are currently in a less advanced research phase:
In June 2011, Sanofi signed an exclusive worldwide research collaboration agreement and option for license with Rib-X Pharmaceuticals, Inc. (Rib-X) for novel classes of antibiotics resulting from the Rib-X’s RX-04 program for the treatment of resistant Gram-positive and resistant Gram-negative pathogens.
In September 2003, sanofi-aventis signedDecember 2010: a global licensing and patent transfer agreement with Ascendis Pharma (Ascendis) on the proprietary Transcon Linker and Hydrogel Carrier technology developed by Ascendis for precise, time-controlled release of therapeutic active ingredients into the body. The agreement will enable Sanofi to develop, manufacture and commercialize products combining this technology with active molecules for the treatment of diabetes and related disorders.
• | December 2010: alliance with Avila Therapeutics Inc. (Avila) to discover target covalent drugs for the treatment of cancers, directed towards six signaling proteins that are critical in tumor cells. Under the terms of the agreement, Sanofi will have access to Avila’s proprietary AvilomicsTM platform offering “protein silencing” for these pathogenic proteins. |
December 2010: an exclusive global licensing option with Oxford BioTherapeutics for three existing antibodies, plus a research and collaboration agreement to discover and validate new targets in oncology.
September 2010: alliance with Regeneronthe Belfer Institute of Applied Cancer Science at the Dana-Farber Cancer Institute (DFCI) to identify novel targets in oncology to developfor the Vascular Endothelial Growth Factor (VEGF) Trap program.development of new therapeutic agents directed towards these targets and their associated biomarkers. Under the terms of the agreement, development milestone paymentsSanofi will have access to the Belfer Institute’s anticancer target identification and royalties on VEGF Trap sales are payablevalidation platform and to Regeneron. Total milestone payments could reach $350 million.its translational medicine resources. Sanofi also has an option over an exclusive license to develop, manufacture and commercialize novel molecules directed towards the targets identified and validated under this research collaboration.
Sanofi-aventis has signedJune 2010: alliance with Regulus Therapeutics Inc. to discover, develop and commercialize novel micro-RNA therapeutics, initially in fibrosis. Sanofi also received an option, which if exercised, would provide access to the technology to develop and commercialize other collaboration agreements with laboratories or universities, under which total contingent payments overmicro-RNA based therapeutics, beyond the next five years could reach around €129 million.first four targets.
• | October 2009: agreement with Micromet, Inc. to develop a BiTE® antibody against a tumor antigen present at the surface of carcinoma cells. |
The main collaborative agreements in
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.€0.3 billion in 2011.
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:
Revenue recognition. Our policies with respect to revenue recognition are discussed in Note B.14. to our consolidated financial statements included at Item 18 of this annual report. Revenue arising from the sale of goods is presented in the income statement under “Net sales”. Net sales comprise revenue from sales of pharmaceutical products, vaccines, and active ingredients, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Revenue is recognized when all of the following conditions have been met: the risks and rewards of ownership have been transferred to the customer; the Group no longer has effective control over the goods sold; the amount of revenue and costs associated with the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction will flow to the Group.
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 chargebackcharge back 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 of 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”.
Business combinations. As discussed in Note B.3. “Business combinations and transactions with non-controlling interests” to our consolidated financial statements included at Item 18 of this annual report, business combinations are accounted for by the acquisition method. The acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria of IFRS 3 “Business combinations” are measured initially at their fair values as at the acquisition date, except for non-current assets classified as held for sale, which are measured at fair value less costs to sell. Business combinations completed on or after January 1, 2010 are accounted for in accordance with the revised IFRS 3 and the revised IAS 27, “Consolidated and individual financial statements”. In particular, contingent consideration to former owners agreed in a business combination, e.g. in the form of milestone payments upon the achievement of certain R&D milestones, is recognized as a liability at fair value as of the acquisition date. Any subsequent changes in amounts recorded as a liability are recognized in the consolidated income statement.
Goodwill impairment and intangible assets. As discussed in Note B.6. “Impairment of property, plant and equipment, goodwill, intangible assets, and investments in associates”associates and joint ventures” and in Note D.5. “Impairment of property, plant and equipment, goodwill and intangibles” to our consolidated financial statements included at Item 18 of this annual report, we test our intangible assets periodically for impairment. The most significant intangible assets that we test for impairment are those resulting from the business combination of Sanofi-Synthélabo and Aventis in 2004. We test for impairment on the basis of the same objective criteria that were used for the initial valuation. Our initial valuation and ongoing tests are based on the relationship of the value of our projected future cash flows associated with the asset to either the purchase price of the asset (for its initial valuation) or the carrying amount of the asset (for ongoing tests). The determination of the underlying assumptions related to the recoverability of intangible assets is subjective and requires the exercise of considerable judgment. Key assumptions related to goodwill impairment and intangible assets are the perpetual growth rate and the after tax discount rate. Any changes in key assumptions could result in an impairment charge. A
“Impairment of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18 of this annual report, we test our intangible assets periodically for impairment. We test for impairment on the basis of the same objective criteria that were used for the initial valuation. Our initial valuation and ongoing tests are based on the relationship of the value of our projected future cash flows associated with the asset to either the purchase price of the asset (for its initial valuation) or the carrying amount of the asset (for ongoing tests). The determination of the underlying assumptions relating to the recoverability of intangible assets is subjective and requires the exercise of considerable judgment. Key assumptions relating to goodwill impairment and intangible assets are the perpetual growth rate and the post-tax discount rate. Any changes in key assumptions could result in an impairment charge. A sensitivity analysis to the key assumptions is performed and disclosed in Note D.5. “Impairment of intangible assets and property, plant and |
Pensions and post-retirement benefits. As described in Note B.23. “Employee benefit obligations” to our consolidated financial statements included at Item 18 of this annual report, we recognize our pension and retirement benefit commitments as liabilities on the basis of an actuarial estimate of the potential rights vested in employees and retirees as of the balance sheet date, net of the valuation of funds to meet these obligations. We prepare this estimate at least on an annual basis, taking into account actuarial assumptions, including life expectancy, staff turnover, salary growth, long-term return on plan assets, retirement and discounting of amounts payable. Pensions and post-retirement benefits key assumptions are the discount rate and the expected long term rate of return on plan assets.
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 performed in Note D.18.1.D.19.1. “Provisions for pensions and other 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 performed in Note D.18.1.D.19.1. “Provisions for pensions and other benefits” to our consolidated financial statements included at Item 18 of this annual report.
Deferred taxes. As discussed in Note B.22. “Income tax expense” to our consolidated financial statements included at Item 18 of this annual report, we account for deferred taxes using the liability method, whereby deferred income taxes are recognized on tax loss carry-forwards, and on the difference between the tax base and carrying amount of assets and liabilities. We calculate our deferred tax assets and liabilities using enacted tax rates applicable for the years during which we estimate that the temporary differences are expected to reverse. We do not recognize deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. The estimates of recognized deferred tax assets are based on our assumptions regarding future profits and the timing of reversal of temporary differences. These assumptions are regularly reviewed; however, final deferred income tax could differ from those estimates.
Provisions for risks. Sanofi-aventisSanofi and its subsidiaries and affiliates may be involved in litigation, arbitration or other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights, compliance and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. As discussed in Note B.12. “Provisions for risks” at Item 18 of this annual report, we record a provision where we have a present obligation, whether legal or constructive, as a result of a past event; when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and when a reliable estimate can be made of the amount of the outflow of resources. For additional details regarding the financial impact of provisions for risks see Notes D.18.3.D.19.3. “Other provisions” and D.22. “Legal and Arbitral Proceedings” to our consolidated financial statements included at Item 18 of this annual report.
Provisions are estimated on the basis of events and circumstances related to present obligations at the balance sheet date, of past experience, and to the best of management’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. While this decision was initially adopted out of a desire to ensure an orderly succession in light of the scheduled departure of Jean-François Dehecq, who was nearing the mandatory age limit set in the Company’s Articles of Association, the annual evaluations conducted since have indicated that this governance structure is suitable to the Group’s current configuration. This arrangement was thus 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. HeThe Chairman organizes and directs the work of the Board and is accountableresponsible for thisensuring the proper functioning of the corporate decision-making bodies in compliance with good governance practices. The Chairman coordinates the work of the Board of Directors with its Committees. The Chairman is accountable to the Shareholders’ General Meeting. He is also responsible for ensuring that the corporate decision-making bodies chaired by him (Board of Directors and Shareholders’ General Meeting) operate properly.Meeting, which he presides.
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 such role has been broadly assumed by Serge Weinberg. No element other than his chairmanship is of a nature which puts into question his independence, in particular given that prior to joining the Board Serge Weinberg did not have any ties 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 onLimitations to 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:
a €500 million cap for each undertaking pertaining to a previously approved strategy; and
a €150 million cap for each undertaking not pertaining to a non-previouslypreviously approved strategy.
When the consideration payable to the contracting parties for such undertakings includeincludes potential installment payments which are subject to the achievement of future results or objectives, such as the registration of one or severalmore products, the caps are calculated by adding 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.
Board of Directors
Sanofi-aventisThe Company is administered by a Board of Directors with sixteencomprised currently of fifteen members.
Since May 14, 2008, the terms of office of thesethe directors have been staggered, suchin order to ensure that the directors are progressively re-elected between 2010 and 2012.
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, diversity of background and country of origin, since the business of the Group is both diversified and global. The Board also investigates and evaluates the potential candidates as well as each year from 2010time individual directors are up for election. Above all, the Board seeks talented directors, who show independence of mind and who are competent, present and involved.
Under the terms of the AFEP-MEDEF corporate governance code, a director is deemed to 2012 one-thirdbe 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:
- | not to be an employee, nor a corporate officer of the Company, nor a corporate officer of a related company, |
- | not to be a customer, supplier nor a banker with respect to the business or financing of the Company, |
- | not to have close family ties with any corporate officer of the Company, |
- | not to have acted as auditor for the Company over the course of the last five years, |
- | not to have been a director of Sanofi for more than 12 years, |
- | not to be representative of a significant shareholder or control person of the Company. |
In conformity with the Board Charter and pursuant to the AFEP-MEDEF corporate governance code, a discussion as to the independence of the current directors took place during the meeting of the Board willof Directors of December 13, 2011. Of the fifteen directors, eight were deemed to be requiredindependent directors having regard to seek re-election each year.
During its meeting on March 1, 2010, the Board discussedindependence criteria set forth in the issue of director independence. Out of the sixteen directors, seven were regarded as independent:AFEP-MEDEF corporate governance code: Uwe Bicker, Jean-Marc Bruel, Lord Douro, Jean-René Fourtou, Claudie Haigneré, Suet-Fern Lee, Carole Piwnica, Klaus Pohle, and Gérard Van Kemmel.
In 2009, halfits examination of the membersindependence of each Director, the Board of Directors took into account the various relationships that could exist between Directors and the Group and concluded that no such relationships were of a nature that could put into question 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 with, and/or purchased products and received services from, companies in which certain of the Company’s directors who are classified as independent Directors untilor members of their close family were senior managers or employees during the resignation on November 24, 2009financial year 2011. Each time, the amounts paid or received from such companies over the past three years were determined in accordance with normal course of Gunter Thielen, an independent Director. Since his replacement by Serge Weinberg,business and did not represent amounts that the Board considered to be of such nature as to bring into question the independence of the directors in question. In the same manner, the Board of Directors has had 7 independent Directors outdid not find the office of 16. This is a temporary situation,trustee held by Uwe Bicker and Klaus Pohle with the proportionAventis Foundation (Germany) was of independent Directors will be revised in 2010 so that at least halfsuch nature as to bring into question their independence with respect to the Sanofi Board of the Directors are independent.Directors.
A director is regarded as independent if he or she has no relationship of any kind with the Company, the Group or its management that is liable to impair his or her judgment. It is the responsibility of the 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 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 determines all matters concerning the Board.falling within its authority.
Composition of the Board of Directors as of December 31, 20092011
Positions held in listed companies are flagged by an asterisk.
Chairman of the Board
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Nationality First elected Last reappointment Term |
French
May
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1,566 shares |
Other current directorships and appointments
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•
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• Chairman of Weinberg Capital Partners, Financière Piasa and Piasa Holding |
• Director of |
• Manager of Alret and |
• Member of the Supervisory Board of Financière BFSA |
• Vice Chairman and Director of |
• Member of the Supervisory Board of Schneider Electric* |
• Weinberg Capital Partners’ representative on the Board of Alliance Industrie and Sasa Industrie |
Education and business experience
• | Degree from theInstitut d’Etudes Politiques |
• | Studies at theENA (Ecole Nationale |
•
1976-1982 | Sous-Préfetand then Chief of Staff of the French Budget Minister (1981) |
1982-1987 | Deputy General Manager of FR3 (the French Television Channel) and then Chief Executive Officer of Havas Tourisme |
1987-1990 | Chief Executive Officer of Pallas Finance |
1990-2005 | Various positions at PPR* group including Chairman of the Management Board | |
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Past directorships held since 2007
Christopher Viehbacher Chief Executive Officer Director |
Nationalities First elected Last reappointment Term as director expires |
German and Canadian December 2008 May 2010 2014 |
95,442 shares | |||
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Other current directorships and appointments
Education and business experience
1988-2008 | Various positions at the GSK group, including President Pharmaceutical Operations for North America |
Past directorships held since 2007
Uwe Bicker Independent Director |
Nationality First elected Term expires |
German May 2008 2012 |
600 shares
Other current directorships and appointments
Education and business experience
1975-1994 | ||
| ||
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| Various positions at Boehringer Mannheim GmbH (later Roche AG) |
1994-2004 | Various positions at Hoechst group |
Since 1983 | Professor at the Medical Faculty of Heidelberg |
Since 2011 | ||||
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Past directorships held since 2007
Robert Castaigne Director |
Nationality First elected Last reappointment Term expires |
French February 2000 May
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517 shares
Other current directorships and appointments Member of the Audit Committee of Sanofi* Director of Vinci*and Société Générale* Member of the Audit, Internal control and Risk Committee of Société Générale* Member of the Audit Committee of Vinci* Education and business experience
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• | ||
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| 1972-2008 | Various positions at the |
Past directorships held since 2007
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Thierry Desmarest Director |
Nationality First elected Last reappointment Term expires |
French February 2000 May
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517 shares
Other current directorships and appointments Member of the Compensation Committee, the Appointments and Governance Committee and the Strategy Committee of Sanofi* Director and Honorary President of Total S.A.* Chairman of the Nominating and Governance Committee of Total S.A.* Member of the Compensation Committee and the Strategy Committee of Total S.A.*
Director of L’Air Liquide*, Renault SA*, Renault SAS Member of the Appointments and Governance Committee and the Compensation Committee of L’Air Liquide* Chairman of the International Strategy Committee, member of the Remuneration Committee and member of the Industrial Strategy Committee of Renault SA* Director, member of the Appointments and Governance Committee, member of the Human Resources and Compensation Committee of Bombardier Inc. (Canada) Member of the Board of Directors of l’Ecole Polytechnique Chairman of Fondation de l’Ecole Polytechnique (Foundation) Director of Musée du Louvre Education and business experience
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• | ||
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Since 1981 | Various positions at the |
Past directorships held since 2007
Lord Douro Independent Director |
Nationality First elected Last reappointment Term expires |
British May 2002 May
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2,000 shares
Other current directorships and appointments
• | ||
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Education and business experience
•Degree from Oxford University
| 1979-1989 | Member of the European Parliament |
1995-2000 | Chairman of Sun Life & Provincial Holdings |
1993-2005 | Chairman of Framlington Group Ltd (United Kingdom) |
Past directorships held since 2007
Jean-René Fourtou Independent Director |
Nationality First elected Last reappointment Term expires |
French August 2004 May 2008 2012 |
4,457 shares
Other current directorships and appointments Member of the Compensation Committee, the Appointments and Governance Committee and the Strategy Committee of Sanofi* Chairman of the Supervisory Board of Vivendi* Member of the Supervisory Board of Maroc Telecom* (Morocco) Director and member of the Compensation Committee of Nestlé* (Switzerland) Education and business experience
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• |
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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, Vice Chairman of the Supervisory Board and member of the Strategy Committee of |
| 2002-2005 | Chairman and Chief Executive Officer of |
Past directorships held since 2007
Claudie Haigneré Independent Director |
Nationality First elected Term expires |
French May 2008 2012 |
500 shares
Other current directorships and appointments
• | ||
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• | ||
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• | Member of
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Education and business experience
1984-1992 | Rheumatologist, Cochin Hospital (Paris) |
| 1996 | Scientific space mission to the MIR space station (Cassiopée Franco-Russian mission) |
| 2001 | Technical and scientific space mission to the International Space Station (Andromède mission) |
| 2002-2004 | Deputy Minister for Research and New Technologies in French government |
2004-2005 | Deputy Minister for European Affairs |
Past directorships held since 2007
Igor Landau Director |
Nationality First elected Last reappointment Term expires |
French August 2004 May
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12,116 shares
Other current directorships and appointments Chairman of the Supervisory Board of Adidas-Salomon* (Germany) Director of HSBC France and INSEAD Member of the Supervisory Board and the Audit Committee of Allianz AG* (Germany) Education and business experience
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• | ||
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| 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* (now called Technicolor*) |
2003-2006 | Member of the Supervisory Board of Dresdner Bank (Germany) |
Past directorships held since 2007
N/A
Suet-Fern Lee Director | Date of birth Nationality First elected Term expires | May 16, 1958 Singaporean May 2011 2015 |
500 shares
Other current directorships and appointments
Education and business experience
Since 2008 | President of the Inter-Pacific Bar Association (Singapore) | |
Since 2006 | Member of the Board of trustees of Nanyang Technological University (Singapore) | |
Since 2006 | Member of the Accountant Advisory Board of the National University of Singapore Business School (Singapour) | |
Since 2007 | Member of the Advisory Committee of the Singapore Management University School of Law (Singapour) |
Past directorships held since 2007
Christian Mulliez Director |
Nationality First elected Last reappointment Term expires |
French June 2004 May
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1,391 shares
Other current directorships and appointments Vice President, General Manager Administration and Finance of L’Oréal* Chairman of the Board of Directors of Regefi Director of DG 17 Invest, L’Oréal USA Inc., The Body Shop International (United Kingdom) and Galderma Pharma (Switzerland) Education and business experience
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1984-2002 | Various positions at Synthélabo and then at Sanofi-Synthélabo, including Vice President Finance | |
Since 2003 | Executive Vice President Administration and Finance at L’Oré |
Past directorships held since 2007
N/A
Lindsay Owen-Jones Director |
Nationality First elected Last reappointment Term expires |
British May 1999 May 2008 2012 |
15,000 shares Other current directorships and appointments Member of the Compensation Committee, of the Appointments and Governance Committee and of the Strategy Committee of Sanofi* Chairman of the Board of Directors of Fondation d’Entreprise L’Oréal (Foundation) Chairman of Alba Plus Director of L’Oréal* (France) and Ferrari S.p.A. (Italy) Education and business experience Bachelor of Arts (Hons) from Oxford University and degree from INSEAD
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Since 1969 | Various positions at the L’Oré | |
1989-2005 | Director of BNP Paribas* | |
1988-2006 | Chief Executive of L’Oréal* | |
2001-2006 | Vice-President and member of the Supervisory Board of L’Air Liquide* | |
until 2006 | Director of Galderma Pharma |
Past directorships held since 2007
Vice-Chairman of the Board of Directors of L’Air Liquide* (2006-2009)
Chairman of the Board of Directors and Chairman of the Strategy and Implementation Committee of L’Oréal* (France, until 2011)
Chairman & Director of L’Oréal USA Inc. (United States, until 2011) and L’Oréal UK Ltd (United Kingdom, until 2011)
Carole Piwnica Independent Director | Date of birth Nationality First elected Term expires | February 12, 1958 Belgian December 2010 2012 |
500 shares
Other current directorships and appointments
Director of Naxos UK Ltd (United Kingdom)
Director and Chairman of the Committee of Governance, Compensation and Appointment of Eutelsat Communications*
Director of Louis Delhaize* (Belgium), Big Red (United States), Elevance (United States) and Amyris Inc.* (United States)
Education and business experience
Degree in law, Université Libre de Bruxelles
Masters in law, New York University
Admitted to Paris and New York Bars
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 | |
1996-2000 | Director of Tate & Lyle Plc (United Kingdom) | |
1998-2004 | Director of Spadel (Belgium) | |
2000-2006 | Director and Vice-Chairman for Governmental Affairs | |
1996-2006 | Chairman of the Liaison Committee and director of the CIAA (Confederation of the Food and Drink Industries of the European Union) | |
2000- 2006 | Chairman of the Export Commission and director of the Association Nationale des Industries Alimentaires |
Past directorships held since 2007
Klaus Pohle Independent Director 2,500 shares |
Nationality First elected Last reappointment Term expires |
German August 2004 May 2008 2012 |
Other current directorships and appointments Chairman of the Audit Committee of Sanofi* Trustee of Fondation Aventis (not-for-profit, Germany) Education and business experience Doctorate in law from Frankfurt University (Germany) Doctorate in economics from Berlin University (Germany) Masters in law from Harvard University Professor of Business Administration at the Berlin Institute of Technology (Germany)
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1966-1980 | Various positions at the BASF group | |
1981-2003 | Deputy Chief Executive Officer and Chief Financial Officer of Schering AG | |
2003-2005 | Chairman of the German Accounting Standards Board |
Past directorships held since 2007
Gérard Van Kemmel Independent Director |
Nationality First elected Last reappointment Term expires |
French May 2003 May
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1000 shares | |||||
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Other current directorships and appointments
Education and business experience
•Director of Groupe Eurotunnel, Europacorp and Eurotunnel NRS Holders Company Limited (United Kingdom)
•Chairman of the Compensation Committee of sanofi-aventis
•Member of the Audit Committee and the Appointments and Governance Committee of sanofi-aventis
•Member of the Audit Committee of Europacorp
• | ||||
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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 (Chief Operating Officer) and at |
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Gunter Thielen was an independent Director and member of the Compensation Committee of sanofi-aventis until November 24, 2009.Past directorships held since 2007
During 2009, the Board
The Board of Directors’ meeting held on March 1, 2010 discussedSeveral changes in the reappointment of five memberscomposition of the Board of Directors whose termsoccurred in 2011. The co-optation of office expireCarole Piwnica on December 15, 2010, was ratified at the end of theShareholders’ 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 Mulliez 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 Research at the CNRS (the French national center for scientific research); the French Ambassador at large for science, technology and innovation; President6, 2011. Likewise, Suet-Fern Lee was appointed director of the French High Commission on Biotechnology; and President ofCompany during 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):
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.6, 2011.
Executive Committee
The Executive Committee is chaired by the Chief Executive Officer.
The Committee meets twiceonce a month, and has the following permanent members:
Christopher Viehbacher, Chief Executive Officer;
Marc Cluzel,Olivier Charmeil, ExecutiveSenior Vice President Research & Development;Vaccines;
Jérôme Contamine,, Executive Vice President Chief Financial Officer;
Laurence DebrouxDavid-Alexandre Gros,, Senior Vice President Chief StrategicStrategy Officer;
Karen Linehan,, Senior Vice President Legal Affairs and General Counsel;
Philippe Luscan,, Senior Vice President Industrial Affairs;
Wayne Pisano, Senior Vice President Vaccines;
Roberto Pucci,, Senior Vice President Human Resources;
Hanspeter Spek,President Global Operations; and
Hanspeter SpekElias Zerhouni,, President, Global Operations.Research and Development.
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
Age: 49Date of birth: March 26, 1960
Christopher Viehbacher was appointed as Chief Executive Officer on December 1, 2008, and is a member of the Strategy Committee.
For additional information regarding his professional education and business experience see “Composition of the Board of Directors as of December 31, 2011” in “A. Directors and Senior Management” on this Item 6.
Christopher Viehbacher is both a graduate in Commercecitizen of the Queens University (Ontario — Canada) and a certified public accountant. After beginning his career at Price Waterhouse, he spent the major part of his professional life (1988-2008) in the GlaxoSmithKline (GSK) company where he acquired broad international experience in different positions across Europe, in the United StatesGermany and Canada. In his last position, he was President Pharmaceutical Operations North America, Co-Chairman of the Portfolio Management Board and a member of the Board of Directors of GSK plc. He was appointed to his present position effective December 1, 2008.
Jean-François Brin
Member of the Management Committee
Senior Vice President Pharmaceutical Customer Solutionssince October 2009
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 & JapanVaccines since January 1, 2011
Age: 47Date of birth: February 19, 1963
Olivier Charmeil is a graduate of HEC (Ecole des Hautes Etudes Commerciales) and of theInstitut d’Etudes Politiques in Paris. From 1989 to 1994, he worked in the Mergers & Acquisitions department of Banque de l’Union européEuropéenne. 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, 2009
Age: 52Date of birth: November 23, 1957
Jérôme Contamine is a Graduate ofEcoleÉcole Polytechnique(X), andENSAE, the national statistics and economics engineering school, affiliated with the Ministry of Finance.Finance (1982). He also graduated from the ENA—ENA(Ecole Nationale d’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 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 Officersince September 2011
Date of the Management Committee and the Executive Committee
Senior Vice President Chief Strategic Officer since February 11, 2009
Age: 40
Laurence Debroux is a graduate of HEC (Ecole des Hautes Etudes Commercialesbirth: July 23, 1972). 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 Controllera key advisor to pharmaceutical, biotechnology and diagnostic companies as a Principal and founding member of the Healthcare Investment Banking practice. David-Alexandre Gros joined Sanofi as Chief Strategy Officer 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.September 2011.
Marie-Hélène Laimay
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 years 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 Financial 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.
Christopher Viehbacher Karen LinehanMember of the Management Committee and theChief Executive CommitteeOfficerSenior Vice President Legal Affairs and General CounselAge: 51Director
Date of birth
Nationalities
First elected
Last reappointment
Term as director expires
Karen Linehan graduated from GeorgetownMarch 26, 1960
German and Canadian
December 2008
May 2010
2014
Other current directorships and appointments
Education and business experience
1988-2008 | Various positions at the GSK group, including President Pharmaceutical Operations for North America |
Past directorships held since 2007
Uwe Bicker Independent Director | Date of birth Nationality First elected Term expires | June 14, 1945 German May 2008 2012 |
600 shares
Other current directorships and appointments
Education and business experience
1975-1994 | Various positions at Boehringer Mannheim GmbH (later Roche AG) |
1994-2004 | Various positions at Hoechst group |
Since 1983 | Professor at the Medical Faculty of Heidelberg |
Since 2011 | Dean at the Medical Faculty, Heidelberg University |
Managing Director at the University Clinic of |
Past directorships held since 2007
Robert Castaigne Director | Date of Nationality First elected Last reappointment Term expires | April 27, 1946 French February 2000 May 2010 2014 |
517 shares
Other current directorships and appointments
Education and business experience
• |
|
Antoine Ortoli
Member of
1972-2008 | Various positions at the
|
Past directorships held since 2007
| Date of Nationality First elected Last reappointment Term expires | December 18, 1945
February 2000
2015 |
517 shares
Other current directorships and appointments
• | Chairman of
|
Education and business experience
• | Degree from
|
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
Since 1981 | Various positions at
|
Past directorships held since 2007
Lord Douro Independent Director | Date of birth Nationality First elected Last reappointment Term expires | August 19, 1945 British May 2002 May 2010 2014 |
2,000 shares
Other current directorships and appointments
• | Member of the International Advisory Board of Abengoa SA* (Spain, since |
Education and business experience
1979-1989 | Member of the European Parliament |
1995-2000 | Chairman of Sun Life & Provincial Holdings Plc* |
1993-2005 | Chairman of Framlington Group Ltd (United Kingdom) |
Past directorships held since 2007
Jean-René Fourtou Independent Director | Date of birth Nationality First elected Last reappointment Term expires | June 20, 1939 French August 2004 May 2008 2012 |
4,457 shares
Other current directorships and appointments
Education and business experience
• | Degree from theEcole Polytechnique |
1963-1986 | Various positions at the Bossard group, including Chairman and Chief Executive Officer (1977-1986) |
1986-1999 | Chairman and Chief Executive Officer of Rhône-Poulenc* |
1999-2004 | Vice Chairman of the Management Board, Vice Chairman of the Supervisory Board and member of the Strategy Committee |
2002-2005 | Chairman and |
Past directorships held since 2007
Claudie Haigneré Independent Director | Date of birth Nationality First elected Term expires | May 13, 1957 French May 2008 2012 |
500 shares
Other current directorships and appointments
• | Chairman of Universcience (Cité des Sciences et de l’Industrie and Palais de la Découverte) |
• | Director of France Telecom*, ofFondation de France, ofFondation CGénial, ofFondation d’Entreprise L’Oréal and ofFondation Lacoste (Foundations) |
• | Member ofAcadémie des Technologies,Académie des Sports andAcadémie Nationale de l’Air et de l’Espace |
Education and business experience
1984-1992 | Rheumatologist, Cochin Hospital (Paris) |
1996 | Scientific space mission to the MIR space station (Cassiopée Franco-Russian mission) |
2001 | Technical and scientific space mission to the International Space Station (Andromède mission) |
2002-2004 | Deputy Minister for Research and New Technologies in French government |
2004-2005 | Deputy Minister for European Affairs |
Past directorships held since 2007
Igor Landau Director | Date of birth Nationality First elected Last reappointment Term expires | July 13, 1944 French August 2004 May 2011 2015 |
12,116 shares
Other current directorships and appointments
Education and business experience
• | Degree from theEcole des Hautes Etudes Commerciales(HEC) and from INSEAD (Master of Business Administration) |
1968-1970 | Chief Executive Officer of the |
1971-1975 | Management consultant at McKinsey (France) |
1975-2004 | Various positions at the Rhône-Poulenc group, including member of the Management Board of Aventis (1999-2002) and Chairman of the |
2001-2005 | Director of Essilor* |
2002-2005 | Director of Thomson* (now called Technicolor*) |
2003-2006 | Member of the |
Past directorships held since 2007
N/A
Director | Date of birth Nationality First elected Term expires | May 16, 1958 Singaporean May 2011 2015 |
500 shares
Other current directorships and appointments
Education and business experience
Since 2008 | President of the
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Since 2006 | Member of the Board of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Since 2006 | Member of the | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Since 2007 | Member of the Advisory Committee of the Singapore Management University School of Law (Singapour) |
Past directorships held since 2007
Christian Mulliez Director | Date of birth Nationality First elected Last reappointment Term expires | November 10, 1960 French June 2004 May 2010 2014 |
1,391 shares
Other current directorships and appointments
Education and business experience
• | Degree from theEcole Supérieure des Sciences Economiques et Commerciales (ESSEC) |
| Various positions at Synthélabo and | |
Since 2003 | Executive Vice President Administration and Finance at L’Oréal* |
Past directorships held since 2007
N/A
Director | Date of birth Nationality First elected Last reappointment Term expires | March 17, 1946 British May 1999 May 2008 2012 |
15,000 shares
Other current directorships and appointments
Member of the Compensation Committee, of the Appointments and Governance Committee and of the Strategy Committee of Sanofi*
Chairman of the Board of Directors of Fondation d’Entreprise L’Oréal (Foundation)
Chairman of Alba Plus
Director of L’Oréal* (France) and Ferrari S.p.A. (Italy)
Education and business experience
Bachelor of Arts (Hons) from Oxford University and degree from INSEAD
Since 1969 | Various positions at the | |
1989-2005 | Director of BNP Paribas* | |
1988-2006 | Chief Executive of L’Oréal* | |
2001-2006 | Vice-President and member of the Supervisory Board of | |
until 2006 | Director of |
Past directorships held since 2007
Vice-Chairman of the Board of Directors of L’Air Liquide* (2006-2009)
Chairman of the Board of Directors and Chairman of the Strategy and Implementation Committee of L’Oréal* (France, until 2011)
Chairman & Director of L’Oréal USA Inc. (United States, until 2011) and L’Oréal UK Ltd (United Kingdom, until 2011)
Carole Piwnica Independent Director | Date of birth Nationality First elected Term expires | February 12, 1958 Belgian December 2010 2012 |
500 shares
Other current directorships and appointments
Director of Naxos UK Ltd (United Kingdom)
Director and Chairman of the Committee of Governance, Compensation and Appointment of Eutelsat Communications*
Director of Louis Delhaize* (Belgium), Big Red (United States), Elevance (United States) and Amyris Inc.* (United States)
Education and business experience
Degree in law, Université Libre de Bruxelles
Masters in law, New York University
Admitted to Paris and New York Bars
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 | |
1996-2000 | Director of Tate & Lyle Plc (United Kingdom) | |
1998-2004 | Director of Spadel (Belgium) | |
2000-2006 | Director and Vice-Chairman for | |
1996-2006 | Chairman of the | |
2000- 2006 | Chairman of the Export Commission and director of the Association Nationale des Industries Alimentaires |
Past directorships held since 2007
Klaus Pohle Independent Director
2,500 shares | Date of birth Nationality First elected Last reappointment Term expires | November 3, 1937 German August 2004 May 2008 2012 |
Other current directorships and appointments
Education and business experience
1966-1980 | Various positions at the BASF group | |
1981-2003 | Deputy Chief Executive Officer and Chief Financial Officer of Schering AG | |
2003-2005 | Chairman of the German Accounting Standards Board |
Past directorships held since 2007
Gérard Van Kemmel Independent Director
| Date of birth Nationality First elected Last reappointment Term expires | August 8, 1939 French May 2003 May 2011 2015 | ||
1000 shares |
Other current directorships and appointments
Education and business experience
• |
1966-1995 | Various positions including President of Arthur Andersen and
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1996-1997 | Senior advisor to French Finance Minister | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1997-2006 | Various positions at Cambridge Technology Partners (Chief Operating Officer) and at Novell* (President EMEA) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2004-2006 | Europe Chairman of
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Past directorships held since 2007
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.
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.
Several changes in the composition of the Board of Directors occurred in 2011. The co-optation of Carole Piwnica on December 15, 2010, was ratified at the Shareholders’ General Meeting held on May 6, 2011. Likewise, Suet-Fern Lee was appointed director of the Company during the Shareholders’ General Meeting held on May 6, 2011.
Executive Committee
The Executive Committee is chaired by the Chief Executive Officer.
The Committee meets once a month, and has the following permanent members:
Christopher Viehbacher, Chief Executive Officer;
Olivier Charmeil,Senior Vice President Vaccines;
Jérôme Contamine,Executive Vice President Chief Financial Officer;
David-Alexandre Gros,Vice President Chief Strategy Officer;
Karen Linehan,Senior Vice President Legal Affairs and General Counsel;
Philippe Luscan,Senior Vice President Industrial Affairs;
Roberto Pucci,Senior Vice President Human Resources;
Hanspeter Spek,President Global Operations; and
Elias Zerhouni,President, Global Research and Development.
The name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each of the executive officers of Sanofi are set forth below. The business address and phone number of each such executive officer is c/o Sanofi, 54 rue La Boétie, 75008 Paris, France, +33 1 53 77 40 00. Unless otherwise indicated, each executive officer is a citizen of France.
Christopher Viehbacher
Chief Executive Officer
Chairman of the Executive Committee
Date of birth: March 26, 1960
Christopher Viehbacher was appointed as Chief Executive Officer on December 1, 2008, and is a member of the Strategy Committee.
For additional information regarding his professional education and business experience see “Composition of the Board of Directors as of December 31, 2011” in “A. Directors and Senior Management” on this Item 6.
Christopher Viehbacher is a citizen of Germany and Canada.
Olivier Charmeil
Senior Vice President Vaccines since January 1, 2011
Date of birth: February 19, 1963
Olivier Charmeil is a graduate of HEC (Ecole des Hautes Etudes Commerciales) and of theInstitut d’Etudes Politiques in Paris. From 1989 to 1994, he worked in the Mergers & Acquisitions department of Banque de l’Union Européenne. He joined Sanofi Pharma in 1994 as head of Business Development. Subsequently, he held various posts within the Group, including Chief Financial Officer (Asia) for Sanofi-Synthélabo in 1999 andAttaché to the Chairman, Jean-François Dehecq, in 2000, before being appointed as Vice President, Development within the Sanofi-Synthélabo International Operations Directorate, where he was responsible for China and support functions. In 2003, Olivier Charmeil was appointed Chairman and Chief Executive Officer of Sanofi-Synthélabo France, before taking the post of Senior Vice President, Business Management and Support within the Pharmaceutical Operations Directorate. In this role, he piloted the operational integration of Sanofi-Synthélabo and Aventis. He was appointed Senior Vice President Asia/Pacific, Pharmaceutical Operations in February 2006 and since January 1, 2008, Operations Japan have reported to him as well as Asia/Pacific and Japan Vaccines since February 2009. Since January 1, 2011, Olivier Charmeil has served as Senior Vice President Vaccines and a member of the Executive Committee.
Jérôme Contamine
Executive Vice President Chief Financial Officer
Date of birth: November 23, 1957
Jérôme Contamine is a Graduate ofÉcole Polytechnique(X), andENSAE, the national statistics and economics engineering school, affiliated with the Ministry of Finance (1982). He also graduated from theENA(Ecole Nationale d’Administration). After four years at the“Cour des Comptes”, as a Senior State General Auditor, he joined Elf Aquitaine in 1988, as advisor to the Chief Financial Officer, and became Group Finance 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 in 2000 became Vice President Europe and Central Asia, Upstream Division of Total. The same year, he joined Veolia Environnement as CFO and Deputy General Manager. In 2003, he was appointed Vice-President Senior Executive, Deputy Chief Executive Officer, Financial Director of Veolia Environnement. Jérôme Contamine joined Sanofi as Executive Vice President, Chief Financial Officer (CFO) of Sanofi in March 2009.
David-Alexandre Gros
Chief Strategy Officersince September 2011
Date of birth: July 23, 1972
David-Alexandre Gros has a B.A. from Darmouth College (1995), an M.D. from Johns Hopkins University School of Medicine (1999), and an M.B.A. from Harvard Business School (2002). He began his career in clinical research at the Department of Urology of the Johns Hopkins Hospital, from 1996 to 1999, and acquiring clinical experience as a Resident Physician at the University of Pennsylvania Health System from 1999 to 2000. He started his advisory career in 2002 at McKinsey & Company as an Associate, was promoted to Engagement Manager in 2004 and to Associate Principal in 2006. In late 2006, he was appointed Vice President at Merrill Lynch, serving healthcare clients on a wide range of strategic, corporate finance and merger & acquisition issues. In 2009, he joined Centerview Partners, in San Franciso, California, as a key advisor to pharmaceutical, biotechnology and diagnostic companies as a Principal and founding member of the Healthcare Investment Banking practice. David-Alexandre Gros joined Sanofi as Chief Strategy Officer in September 2011.
Christopher Viehbacher Chief Executive OfficerChristopher Viehbacher took officeDirector
Date of birth
Nationalities
First elected
Last reappointment
Term as director expires
March 26, 1960
German and Canadian
December 2008
May 2010
2014
Other current directorships and appointments
Education and business experience
1988-2008 | Various positions at the GSK group, including President Pharmaceutical Operations for North America |
Past directorships held since 2007
Uwe Bicker Independent Director | Date of birth Nationality First elected Term expires | June 14, 1945 German May 2008 2012 |
600 shares
Other current directorships and appointments
Education and business experience
1975-1994 | Various positions at Boehringer Mannheim GmbH (later Roche AG) |
1994-2004 | Various positions at Hoechst group |
Since 1983 | Professor at the Medical Faculty of Heidelberg |
Since 2011 | Dean at the Medical Faculty, Heidelberg University |
Managing Director at the University Clinic of Mannheim |
Past directorships held since 2007
Robert Castaigne Director | Date of birth Nationality First elected Last reappointment Term expires | April 27, 1946 French February 2000 May 2010 2014 |
517 shares
Other current directorships and appointments
Education and business experience
• | Degree from theEcole Centrale de Lille and theEcole Nationale Supérieure du Pétrole et des Moteurs |
1972-2008 | Various positions at the Total* group, including Chief Financial Officer and member of the Executive Committee (June 1994 — May 2008) |
Past directorships held since 2007
Thierry Desmarest Director | Date of birth Nationality First elected Last reappointment Term expires | December 18, 1945 French February 2000 May 2011 2015 |
517 shares
Other current directorships and appointments
• | Chairman ofFondation Total (Foundation) |
Education and business experience
• | Degree fromEcole Polytechnique andEcole Nationale Supérieure des Mines de Paris |
Since 1981 | Various positions at the Total* group including Chairman and Chief Executive Officer |
Past directorships held since 2007
Lord Douro Independent Director | Date of birth Nationality First elected Last reappointment Term expires | August 19, 1945 British May 2002 May 2010 2014 |
2,000 shares
Other current directorships and appointments
• | Member of the International Advisory Board of Abengoa SA* (Spain, since April 1 |
Education and business experience
1979-1989 | Member of the European Parliament |
1995-2000 | Chairman of Sun Life & Provincial Holdings Plc* |
1993-2005 | Chairman of Framlington Group Ltd (United Kingdom) |
Past directorships held since 2007
Independent Director | Date of birth Nationality First elected Last reappointment Term expires | June 20, 1939 French August 2004 May 2008 2012 |
4,457 shares
Other current directorships and appointments
Education and business experience
(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 | ||