Free Translation of the French Language Original

CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS	2
CONSOLIDATED BALANCE SHEETS – ASSETS	2
CONSOLIDATED BALANCE SHEETS – LIABILITIES AND EQUITY	3
CONSOLIDATED INCOME STATEMENTS	4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	6
CONSOLIDATED STATEMENTS OF CASH FLOWS	7
NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2011	8
A. BASIS OF PREPARATION OF THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTING POLICIES	8
B. SIGNIFICANT INFORMATION DURING THE FIRST HALF OF 2011	13
C. EVENTS SUBSEQUENT TO JUNE 30, 2011	42

The condensed half-year consolidated financial statements are unaudited but have been subject to a review

by the statutory auditors in accordance with professional standards applicable in France.

  I – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS – ASSETS

(€ million)	Note	June 30, 2011		December 31, 2010
Property, plant and equipment	B.2.		10,669		8,155
Goodwill	B.3.		35,885		31,932
Other intangible assets	B.3. - B.4.		24,192		12,479
Investments in associates and joint ventures	B.5.		910		924
Non-current financial assets	B.6.		2,124		1,644
Deferred tax assets	B.13.		3,178		3,051
Non-current assets			76,958		58,185
Inventories			6,264		5,020
Accounts receivable			7,709		6,507
Other current assets			1,966		2,000
Current financial assets			115		51
Cash and cash equivalents	B.9.		6,538		6,465
Current assets			22,592		20,043
Assets held for sale or exchange(1)	B.1.2. - B.7.		44		7,036
TOTAL ASSETS			99,594		85,264

⁽¹⁾  The assets of Merial, classified in Assets held for sale or exchange in 2010, have in 2011 been reclassified to the relevant balance sheet line items, in accordance with IFRS 5.26 (see Notes B.1.2. and B.7.).

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

CONSOLIDATED BALANCE SHEETS – LIABILITIES AND EQUITY

(€ million)	Note	June 30, 2011		December 31, 2010
Equity attributable to equity holders of Sanofi			52,456		53,097
Equity attributable to non-controlling interests			143		191
Total equity	B.8.		52,599		53,288
Long-term debt	B.9.		13,289		6,695
Non-current liabilities related to business combinations and to non-controlling interests	B.11.		1,390		388
Provisions and other non-current liabilities	B.12.		9,704		9,326
Deferred tax liabilities	B.13.		6,560		3,808
Non-current liabilities			30,943		20,217
Accounts payable			3,111		2,800
Other current liabilities			5,967		5,624
Current liabilities related to business combinations and to non-controlling interests	B.11.		207		98
Short-term debt and current portion of long-term debt	B.9.		6,753		1,565
Current liabilities			16,038		10,087
Liabilities related to assets held for sale or exchange(1)	B.1.2. - B.7.		14		1,672
TOTAL LIABILITIES & EQUITY			99,594		85,264

⁽¹⁾  The liabilities of Merial, classified in Liabilities related to assets held for sale or exchange in 2010, have in 2011 been reclassified to the relevant balance sheet line items, in accordance with IFRS 5.26 (see Notes B.1.2. and B.7.).

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

CONSOLIDATED INCOME STATEMENTS

(€ million)	Note		6 months to June 30, 2011			6 months to June 30,(1) 2010			12 months to December 31,(1) 2010
Net sales		B.20.		16,128			16,205			32,367
Other revenues				835			807			1,669
Cost of sales				(5,214	)		(4,496	)		(9,398	)
Gross profit				11,749			12,516			24,638
Research and development expenses				(2,297	)		(2,260	)		(4,547	)
Selling and general expenses				(4,201	)		(3,955	)		(8,149	)
Other operating income				191			243			369
Other operating expenses				(168	)		(141	)		(292	)
Amortization of intangibles		B.3.		(1,701	)		(1,802	)		(3,529	)
Impairment of intangibles		B.4.		(69	)		(108	)		(433	)
Fair value remeasurement of contingent consideration liabilities(2)		B.11.		(66	)		—			—
Restructuring costs		B.16.		(467	)		(190	)		(1,384	)
Other gains and losses, and litigation(2)		B.17.		(517	)		—			(138	)
Operating income				2,454			4,303			6,535
Financial expenses		B.18.		(234	)		(214	)		(468	)
Financial income		B.18.		56			74			106
Income before tax and associates and joint ventures				2,276			4,163			6,173
Income tax expense		B.19.		(472	)		(1,071	)		(1,430	)
Share of profit/(loss) of associates				556			476			978
Net income				2,360			3,568			5,721
Net income attributable to non-controlling interests				136			147			254
Net income attributable to equity holders of Sanofi				2,224			3,421			5,467
Average number of shares outstanding (million)		B.8.6.		1,308.6			1,305.8			1,305.3
Average number of shares outstanding after dilution (million)		B.8.6.		1,313.3			1,309.3			1,308.2
– Basic earnings per share (in Euros)				1.70			2.62			4.19
– Diluted earnings per share (in Euros)				1.69			2.61			4.18

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

⁽²⁾  See Note A.1.3.

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(€ million)	6 months to June 30, 2011			6 months to June 30, 2010			12 months to December 31, 2010
Net income		2,360			3,568			5,721
Attributable to equity holders of Sanofi		2,224			3,421			5,467
Attributable to non-controlling interests		136			147			254
Income/(expense) recognized directly in equity:
Ÿ  Actuarial gains/(losses)		95			(628	)		(311	)
Ÿ  Remeasurement of Merial previously held equity interests		—			(5	)		—
Ÿ  Tax effect on above items(1)		(51	)		192			172
Items not to be reclassified to profit or loss		44			(441	)		(139	)
Ÿ  Available-for-sale financial assets		215			23			141
Ÿ  Cash flow hedges		6			(56	)		17
Ÿ  Change in cumulative translation difference		(1,748	)		4,671			2,654
Ÿ  Tax effect on above items(1)		(12	)		16			(20	)
Items that may be reclassified subsequently to profit or loss		(1,539	)		4,654			2,792
Total income/(expense) recognized directly in equity		(1,495	)		4,213			2,653
Total recognized income/(expense) for the period		865			7,781			8,374
Attributable to equity holders of Sanofi		739			7,618			8,109
Attributable to non-controlling interests		126			163			265

⁽¹⁾  See analysis in Note B.8.7.

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(€ million)	Share capital			Additional paid-in capital and retained earnings			Treasury shares			Stock options and other share-based payment			Other items recognized directly in equity			Attributable to equity holders of Sanofi			Attributable to non-controlling interests			Total equity
Balance at January 1, 2010		2,637			48,448			(526	)		1,696			(3,933	)		48,322			258			48,580
Income/(expense) recognized directly in equity(1)		—			(441	)		—			—			4,638			4,197			16			4,213
Net income for the period		—			3,421			—			—			—			3,421			147			3,568
Total recognized income/(expense) for the period		—			2,980			—			—			4,638			7,618			163			7,781
Dividend paid out of 2009 earnings (€2.40 per share)		—			(3,131	)		—			—			—			(3,131	)		—			(3,131	)
Payment of dividends and equivalents to non-controlling interests		—			—			—			—			—			—			(239	)		(239	)
Share repurchase program		—			—			(321	)		—			—			(321	)		—			(321	)
Reduction in share capital		(16	)		(404	)		420			—			—			—			—			—
Share-based payment plans:
Ÿ    Exercise of stock options		1			10			—			—			—			11			—			11
Ÿ    Proceeds from sale of treasury shares on exercise of stock options		—			—			56			—			—			56			—			56
Ÿ    Value of services obtained from employees		—			—			—			58			—			58			—			58
Ÿ    Tax effect of exercise of stock options		—			—			—			(1	)		—			(1	)		—			(1	)
Non-controlling interests generated by acquisitions		—			—			—			—			—			—			—			—
Changes in non-controlling interests without loss of control		—			(61	)		—			—			—			(61	)		(26	)		(87	)
Balance at June 30, 2010		2,622			47,842			(371	)		1,753			705			52,551			156			52,707
Income/(expense) recognized directly in equity(1)		—			302			—			—			(1,857	)		(1,555	)		(5	)		(1,560	)
Net income for the period		—			2,046			—			—			—			2,046			107			2,153
Total recognized income/(expense) for the period		—			2,348			—			—			(1,857	)		491			102			593
Payment of dividends and equivalents to non-controlling interests		—			—			—			—			—			—			(68	)		(68	)
Share-based payment plans:
Ÿ    Exercise of stock options		—			7			—			—			—			7			—			7
Ÿ    Proceeds from sale of treasury shares on exercise of stock options		—			—			—			—			—			—			—			—
Ÿ    Value of services obtained from employees		—			—			—			75			—			75			—			75
Ÿ    Tax effect of exercise of stock options		—			—			—			1			—			1			—			1
Non-controlling interests generated by acquisitions		—			—			—			—			—			—			1			1
Changes in non-controlling interests without loss of control		—			(28	)		—			—			—			(28	)		—			(28	)
Balance at December 31, 2010		2,622			50,169			(371	)		1,829			(1,152	)		53,097			191			53,288
Income/(expense) recognized directly in equity(1)		—			44			—			—			(1,529	)		(1,485	)		(10	)		(1,495	)
Net income for the period		—			2,224			—			—			—			2,224			136			2,360
Total recognized income/(expense) for the period		—			2,268			—			—			(1,529	)		739			126			865
Dividend paid out of 2010 earnings (€2.50 per share)		—			(3,262	)		—			—			—			(3,262	)		—			(3,262	)
Payment of dividends and equivalents to non-controlling interests		—			—			—			—			—			—			(180	)		(180	)
Increase in share capital – dividends paid in shares(2)		76			1,814			—			—			—			1,890			—			1,890
Share repurchase program(3)		—			—			(113	)		—			—			(113	)		—			(113	)
Share-based payment plans:
Ÿ    Exercise of stock options		2			26			—			—			—			28			—			28
Ÿ    Issuance of restricted shares(4)		1			(1	)		—			—			—			—			—			—
Ÿ    Proceeds from sale of treasury shares on exercise of stock options		—			—			1			—			—			1			—			1
Ÿ    Value of services obtained from employees		—			—			—			68			—			68			—			68
Ÿ    Tax effect of exercise of stock options		—			—			—			3			—			3			—			3
Changes in non-controlling interests without loss of control		—			5			—			—			—			5			6			11
Balance at June 30, 2011		2,701			51,019			(483	)		1,900			(2,681	)		52,456			143			52,599

⁽¹⁾  See Note B.8.7.

⁽²⁾  See Note B.8.2.

⁽³⁾  See Note B.8.3.

⁽⁴⁾  See Note B.8.1.

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(€ million)	Note	6 months to June 30, 2011			6 months to June 30, 2010(1)			12 months to December 31, 2010(1)
Net income attributable to equity holders of Sanofi			2,224			3,421			5,467
Non-controlling interests other than BMS(2)			12			9			17
Share of undistributed earnings of associates and joint ventures			8			52			52
Depreciation, amortization and impairment of property, plant and equipment and intangible assets			2,925			2,414			5,129
Gains and losses on disposals of non-current assets, net of tax(3)			(35	)		(81	)		(111	)
Net change in deferred taxes			(983	)		(275	)		(1,511	)
Net change in provisions			356			(229	)		461
Cost of employee benefits (stock options and other share-based payments)			68			58			133
Impact of the workdown of acquired inventories remeasured at fair value			264			134			142
Unrealized (gains)/losses recognized in income			(59	)		208	(7)		245	(7)
Operating cash flow before changes in working capital			4,780			5,711			10,024
(Increase)/decrease in inventories			(345	)		(422	)		(386	)
(Increase)/decrease in accounts receivable			(375	)		(463	)		(96	)
Increase/(decrease) in accounts payable			27			3			59
Net change in other current assets, current financial assets and other current liabilities			(182	)		(457	)		272
Net cash provided by/(used in) operating activities(4)			3,905			4,372			9,873
Acquisitions of property, plant and equipment and intangible assets	B.2. – B.3.		(832	)		(786	)		(1,662	)
Acquisitions of investments in consolidated entities, net of cash acquired	B.1.		(13,444	)		(1,357	)		(1,659	)
Acquisitions of available-for-sale financial assets			(23	)		(41	)		(74	)
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax(5)			71			75			136
Net change in loans and other financial assets			361			(29	)		(216	)
Net cash provided by/(used in) investing activities			(13,867	)		(2,138	)		(3,475	)
Issuance of Sanofi shares(6)	B.8.		28			11			18
Dividends paid:
Ÿ to shareholders of Sanofi(6)			(1,372	)		(3,131	)		(3,131	)
Ÿ to non-controlling interests, excluding BMS(2)			(11	)		(5	)		(7	)
Transactions with non-controlling interests, other than dividends			—			(96	)		(97	)
Additional long-term debt contracted	B.9.1.		7,810			527			505
Repayments of long-term debt	B.9.1.		(713	)		(440	)		(1,984	)
Net change in short-term debt			4,309			(316	)		314
Acquisition of treasury shares			(113	)		(321	)		(321	)
Disposals of treasury shares, net of tax			1			57			57
Net cash provided by/(used in) financing activities			9,939			(3,714	)		(4,646	)
Impact of exchange rates on cash and cash equivalents			(50	)		156			55
Impact of the cash and cash equivalents of Merial(1)			146			—			—
Net change in cash and cash equivalents(1)			73			(1,324	)		1,807
Cash and cash equivalents, beginning of period			6,465			4,692			4,692
Cash and cash equivalents, end of period	B.9.		6,538			3,221			6,465
(1)  Further to the announcement that Merial and Intervet/Schering-Plough are to be maintained as separate businesses operating independently, the line items in the statement of cash flows for the comparative periods (2010) include cash flows generated by the operating investing and financing activities of Merial. The cash and cash equivalents of Merial were reported in the balance sheet in Assets held for sale or exchange as of December 31, 2009, December 31, 2010 and June 30, 2010.
– Net change in cash and cash equivalents excluding Merial						(1,471	)		1,773
– Net change in cash and cash equivalents of Merial						147			34
– Net change in cash and cash equivalents including Merial						(1,324	)		1,807
(2)  See Note C.1. to the financial statements for the year ended December 31, 2010.
(3)  Including available-for-sale financial assets. (4)  Including:
– Income taxes paid			(1,460	)		(1,718	)		(3,389	)
– Interest paid			(211	)		(204	)		(475	)
– Interest received			62			28			62
– Dividends received from non-consolidated entities			3			3			3
(5)  Property, plant and equipment, intangible assets, investments in consolidated entities and other non-current financial assets.
(6)  Amounts for issuance of Sanofi shares and dividends paid to equity holders of Sanofi are reported net of dividends taken in the form of shares, which do not generate cash flows.
(7)  Arising primarily on the translation of U.S. dollar surplus cash from American subsidiaries transferred to the parent company (Sanofi).

The accompanying notes on pages 8 to 42 are an integral part of the condensed half-year consolidated financial statements.

NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2011

INTRODUCTION

Sanofi is a diversified global healthcare leader engaged in the research, development and marketing of therapeutic solutions focused on patient needs. Sanofi has fundamental strengths in the healthcare field, operating via six growth platforms: emerging markets, diabetes, human vaccines, consumer health care (CHC), animal health and new products.

At the Annual General Meeting held on May 6, 2011, the shareholders approved a change in our company name from “sanofi-aventis” to “Sanofi”.

Sanofi, the parent company of the Group, is a société anonyme (a form of limited liability company) incorporated under the laws of France. The registered office is at 174, avenue de France, 75013 Paris, France.

Sanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY).

The condensed consolidated financial statements for the half-year ended June 30, 2011 were reviewed by the Sanofi Board of Directors at the Board meeting on July 27, 2011.

A. BASIS OF PREPARATION OF THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTING POLICIES

A.1. Basis of preparation of the half-year consolidated financial statements and accounting policies

The half-year consolidated financial statements have been prepared and presented in condensed format in accordance with IAS 34 (Interim Financial Reporting). The accompanying notes therefore relate to significant events and transactions of the period, and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2010.

The consolidated financial statements as of June 30, 2011 have been prepared in compliance with standards and interpretations adopted by the European Union and with those issued by the IASB. Except for the changes described in Notes A.1.1. and A.1.3., the accounting policies applied as of June 30, 2011 are identical to those described in the notes to the consolidated financial statements for the year ended December 31, 2010.

IFRSs adopted by the European Union as of June 30, 2011 can be accessed under the heading “IAS/IFRS Standards and Interpretations” at:

http://ec.europa.eu/internal_market/accounting/ias/index_en.htm

A.1.1. New standards and amendments applicable in the period

¡ The 2010 “Improvements to IFRSs”, applicable from January 1, 2011, were adopted by the European Union in February 2011. The amendments to IAS 34 (Interim Financial Reporting) specifies that an interim financial report must contain an explanation of significant events and transactions that are necessary to an understanding of changes in financial position and performance since the end of the last annual reporting period. Because the Group’s interim financial statements already satisfy this requirement, the Annual Improvements to IFRSs have no impact on the Group financial statements.

¡ In June 2011, the IASB issued an amendment to IAS 1 (Presentation of Financial Statements). This amendment, which is mandatorily applicable to accounting periods commencing on or after July 1, 2012, has not yet been adopted by the European Union but nonetheless may be applied insofar as it does not contradict existing standards. The amendment requires components of other comprehensive income that can be reclassified to profit or loss to be

reported separately from those that can not. Sanofi has early adopted this amendment in the condensed half-year consolidated financial statements as of June 30, 2011.

¡ The other standards, amendments and interpretations mandatorily applicable from January 1, 2011, as issued in 2010 or previously are described in Note B.28. to the consolidated financial statements for the year ended December 31, 2010, and have no material effect on the consolidated financial information for the six months ended June 30, 2011.

A.1.2. New standards, interpretations and amendments issued in the first half of 2011

In May 2011, the IASB issued five pronouncements designed to improve the principles applied in the preparation of consolidated financial statements and the disclosure requirements for joint arrangements and for any type of entity in which an interest is held:

¡ IFRS 10 (Consolidated Financial Statements) supersedes the parts of IAS 27 (Consolidated and Separate Financial Statements) that dealt with consolidated financial statements, and SIC-12 (Consolidation – Special Purpose Entities). This new standard redefines the concept of control; its impact on the Group, especially as regards the scope of consolidation, is under review.

¡ IFRS 11 (Joint Arrangements) supersedes IAS 31 (Interests in Joint Ventures) and SIC-13, (Jointly Controlled Entities – Non-Monetary Contributions by Venturers). This new standard establishes the principles to be applied in accounting for arrangements that give joint control over a business (a “joint operation”) or over an entity (“joint venture”). Whether an arrangement is classified as a joint operation or a joint venture depends on the rights to the assets, and obligations for the liabilities, of each of the parties under the contractual arrangements that establish joint control. Under IFRS 11, proportionate consolidation is no longer a permitted option; Sanofi did not elect this option. Although the impact of this standard is currently under review, Sanofi does not expect it to materially alter the financial statements.

¡ IFRS 12 (Disclosures of Interests in Other Entities) covers the disclosures to be made in respect of interests in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity, irrespective of the level of control or influence exercised over the entity. Because IFRS 12 relates only to the disclosure requirements for such entities, it will have no impact on the Sanofi consolidated financial statements.

Two existing standards – IAS 27 (Consolidated and Separate Financial Statements), and IAS 28 (Investments in Associates) – were amended, to bring them into line with the changes introduced by the publication of IFRS 10, IFRS 11 and IFRS 12.

¡ The amended IAS 27 (Separate Financial Statements) will now refer solely to the accounting treatment of interests in subsidiaries, jointly controlled entities and associates for reporting entities that prepare separate financial statements in accordance with IFRS.

¡ The amended IAS 28 (Investments in Associates and Joint Ventures) must be applied in accounting for interests in associates and in joint ventures (as defined in IFRS 11).

These new pronouncements are applicable from January 1, 2013. Simultaneous early adoption of all five pronouncements is possible subject to their adoption by the European Union, which to date is still pending.

¡ In May 2011, the IASB and the FASB jointly issued a standard and application guidance, providing a common definition of fair value. This standard, known as IFRS 13 (Fair value Measurement) under IFRS, also specifies the disclosures needed to help users understand how fair value is measured, but does not change the scope of application of fair value accounting. IFRS 13 is mandatorily applicable from January 1, 2013.

¡ In June 2011, the IASB issued an amended version of IAS 19, mandatorily applicable from January 1, 2013. The key changes in the amended version are:

- The option of deferring actuarial gains and losses using the “corridor” method is eliminated. Under the revised standard, all actuarial gains and losses must be recognized directly in equity (other comprehensive income). Sanofi already applies this method.

- The change in the methods used to determine the assumption regarding the long-term return on plan assets, which under the revised IAS 19 will be based on the discount rate used to measure the present value of the obligation. The rate currently used is based on the expected return on plan assets.

- The deferral of past service cost on unvested benefits is no longer permitted: all additional costs arising from past service are instead recognized immediately in profit or loss, including any portion relating to benefits not yet vested.

The impact of the amended IAS 19 on the Sanofi financial statements is under review.

None of the pronouncements issued during the first half of 2011 has to date been adopted by the European Union.

A.1.3. Updating of accounting policies as of June 30, 2011

The Group’s accounting policies, as described in Note B to the consolidated financial statements for the year ended December 31, 2010, have been updated as follows:

¡ Business combinations

- The revised IFRS 3 does not specify the accounting treatment of contingent consideration related to a business combination made by an entity prior to the acquisition of control in that entity and recognized as a liability in its balance sheet. The accounting treatment applied by Sanofi to such a liability is to measure it at fair value as of the acquisition date, and to report it in the line item Liabilities related to business combinations and to non-controlling interests. This treatment is consistent with that applied to contingent consideration in the books of the acquiring entity.

- Changes in the fair value of contingent consideration in the books of the acquired entity or recognized in a business combination and initially recognized as a liability are recognized in profit or loss in accordance with the principles described in Note B.3.1. to the consolidated financial statements for the year ended December 31, 2010. Such adjustments are reported separately in the income statement, in the line item Fair value remeasurement of liabilities related to contingent consideration. This line item also includes the effect of the unwinding of discount, and of exchange rate movements where the liability is expressed in a currency other than the functional currency of the reporting entity.

¡ Assets and liabilities held for sale and discontinued operations

The accounting treatment required under IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations) is described in Note B.7 to the consolidated financial statements for the year ended December 31, 2010. In the event of changes to a plan of sale that require an asset no longer to be classified as held for sale, IFRS 5 specifies the following treatment:

- The assets and liabilities previously classified as held for sale are reclassified to the appropriate balance sheet line items, with no restatement of comparative periods.

- Each asset is measured at the lower of:

(a) its carrying amount before the asset was classified as held for sale, adjusted for any depreciation, amortization or revaluation that would have been recognized if the asset, had not been classified as held for sale; or

(b) its recoverable amount at the date of the reclassification.

The backlog of depreciation, amortization and impairment not recognized while a non-current asset was classified as held for sale must be reported in the same income statement line item as that used to report (i) impairment losses arising on the classification of assets as held for sale and (ii) gains or losses on the sale of such assets. In the Sanofi consolidated income statement, these impacts are reported in the line item Other gains and losses, and litigation.

- The net income of a business that was previously classified as discontinued or held-for-exchange and reported on a separate line in the income statement must be reclassified and included in net income from continuing operations, for all periods reported.

- In addition, segment information relating to the income statement and the statement of cash flows (acquisitions of non-current assets), as reported in the notes to the financial statements in accordance with IFRS 8 (Operating Segments), must also be restated for all prior periods reported.

¡ Other gains and losses, and litigation

This line item replaces Gains and losses on disposals, and litigation, as defined in Note B.20.2. to the consolidated financial statements for the year ended December 31, 2010.

It includes the impact of material transactions of an unusual nature or amount, which Sanofi believes it necessary to report separately in the income statement in order to improve the relevance of the financial statements.

The components of the line item Other gains and losses, and litigation are:

- gains and losses on major disposals of property, plant and equipment, of intangible assets, of assets (or groups of assets and liabilities) held for sale, or of a business within the meaning of the revised IFRS 3, to the extent that they are not considered as restructuring costs;

- impairment losses and reversals of impairment losses on assets (or groups of assets and liabilities) held for sale, to the extent that they are not regarded as restructuring costs;

- expenses arising on reclassifying non-current assets previously accounted for as held for sale, where the amounts involved relate to previously-reported periods;

- gains on bargain purchases; and

- costs and provisions relating to major litigation.

A.2. Use of estimates

The preparation of financial statements requires management to make reasonable estimates and assumptions, based on information available at the date of the review of the financial statements that may affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and disclosures of contingent assets and contingent liabilities. Examples of estimates and assumptions include:

¡ amounts deducted from sales for projected sales returns, chargeback incentives, rebates and price reductions;

¡ the amount of provisions for product claims;

¡ impairment of property, plant and equipment, intangible assets, and investments in associates and joint ventures;

¡ the valuation of goodwill, and the valuation and useful life of acquired intangible assets;

¡ the amount of post-employment benefit obligations;

¡ the amount of provisions for restructuring, litigation, tax risks and environmental risks;

¡ the measurement of contingent consideration.

For the purposes of the half-year financial information, and as allowed under IAS 34, Sanofi has determined income tax expense on the basis of an estimate of the effective tax rate for the full financial year. This rate is applied to Income before tax and associates and joint ventures. The estimated effective tax rate is based on the tax rates that will be applicable to projected pre-tax profits or losses arising in the various tax jurisdictions in which Sanofi operates.

Actual results could vary from these estimates.

A.3. Seasonal trends

Sanofi’s activities are not subject to significant seasonal fluctuations.

B. SIGNIFICANT INFORMATION DURING THE FIRST HALF OF 2011

B.1. Impact of changes in the scope of consolidation, and change in treatment of Merial

B.1.1. Main changes in the scope of consolidation

The major changes in the scope of consolidation during the first half of 2011 are as follows:

¡ Genzyme

As of June 30, 2011, Genzyme Corporation (Genzyme) is a wholly-owned subsidiary of Sanofi.

Genzyme, whose shares were previously listed on the NASDAQ market, is a biotechnology group headquartered in Cambridge, Massachusetts (United States). Genzyme’s primary areas of focus are rare diseases, renal endocrinology, oncology and biosurgery. In 2010, Genzyme generated net sales of approximately $4 billion. The group employs nearly 10,000 people and operates in approximately 70 sites.

This acquisition will expand Sanofi’s reach in biotechnologies; Sanofi intends to make Genzyme its global center of excellence in rare diseases.

Sanofi acquired Genzyme on April 4, 2011, the completion date of the public exchange offer for all of the outstanding shares of common stock of Genzyme Corporation at a cash price of $74 per share. As part of the acquisition, Sanofi also issued to Genzyme shareholders one contingent value right (CVR) per Genzyme share held.

Each CVR entitles the holder to additional cash payments if milestones relating to Lemtrada™ (the registered name submitted to health authorities for the investigational agent alemtuzumab) are met over a specified period, or if specified production levels of Cerezyme^® and Fabrazyme^® are met in 2011. Under the terms of the CVR agreement, the CVRs will expire on the earlier of December 31, 2020, or the attainment of the fourth sales milestone of Lemtrada™. Each milestone and payment may occur once only. The milestones and payments per CVR are summarized below:

- $1 if specified production levels of Cerezyme^®/Fabrazyme^® are met during 2011;

- $1 if final approval by the U.S. Food and Drug Administration of Lemtrada™ for the treatment of multiple sclerosis is obtained no later than March 31, 2014;

- $2 if post-launch net sales of Lemtrada™ is $400 million or more over specified periods and in specified territories;

- $3 if such net sales reach at least $1.8 billion worldwide over a period of four consecutive calendar quarters;

- $4 if such net sales reach at least $2.3 billion worldwide over a period of four consecutive calendar quarters;

- $3 if such net sales reach at least $2.8 billion worldwide over a period of four consecutive calendar quarters.

Sanofi issued 291 million CVRs (representing a maximum commitment of $4.1 billon), which are listed on the NASDAQ market under the ticker “GCVRZ” and have been quoted since April 4, 2011. As of that date, the quoted price per CVR was $2.35. This price was used as the basis for determining the overall fair value of the contingent consideration. In accordance with the revised IFRS 3 (see Note B.3.1. to the consolidated financial statements for the year ended December 31, 2010), contingent consideration is measured at fair value on the acquisition date. Consequently, this contingent consideration is included in the price paid to acquire Genzyme for the purposes of determining goodwill, and recognized as a liability in the balance sheet line item Liabilities related to business combinations and to non-controlling interests.

The provisional purchase price allocation is analyzed below:

(€ million)	Fair value at acquisition date
Property, plant and equipment		2,033
Intangible assets		10,521
Non-current financial assets		106
Inventories		927
Accounts receivable		770
Cash and cash equivalents		1,267
Long-term and short-term debt		(836	)
Liability related to Bayer contingent consideration		(582	)
Accounts payable		(298	)
Deferred taxes		(2,502	)
Other assets and liabilities		(148	)
Net assets of Genzyme as of April 4, 2011		11,258
Goodwill		3,556
Purchase price		14,814	(1)

⁽¹⁾  Includes the €481 million valuation of the CVRs as of the acquisition date.

Prior to Sanofi’s acquisition of Genzyme, in May 2009, Genzyme acquired the worldwide development and marketing rights to alemtuzumab (under the brand name Lemtrada^TM), a molecule currently under development for multiple sclerosis, from Bayer Schering Pharma A.G. (Bayer). At the same time, Genzyme also acquired rights to the products Campath^®, Fludara^® and Leukine^®. In exchange, Bayer is entitled to receive the following contingent payments:

- a percentage of sales of alemtuzumab, up to a maximum of $1,250 million or over a maximum period of ten years, whichever is achieved first;

- a percentage of aggregate sales of Campath^®, Fludara^® and Leukine^® up to a maximum of $500 million (of which $230 million was paid as of the acquisition date) or over a maximum period of eight years, whichever is achieved first;

- milestone payments up to $150 million based on the aggregate sales of Campath^®, Fludara^® and Leukine^® for the years 2011 to 2013;

- milestone payments based on specified levels of worldwide sales of alemtuzumab beginning in 2021, provided Genzyme does not exercise its right to buy out these milestone payments by making a one-time payment not exceeding $900 million.

This additional contingent purchase consideration is measured at its fair value as of April 4, 2011, and is recognized as a liability in the balance sheet line item Liabilities related to business combinations and to non-controlling interests. The amount is remeasured at fair value at each reporting date. The impact of the resulting fair value adjustment is recognized in profit or loss in the line item Fair value remeasurement of liabilities related to contingent consideration, similarly to other contingent consideration on business combinations (see Note A.1.3.).

The goodwill arising on the acquisition mainly represents the portfolio of future products in the upstream research and development phase not separately identified at the acquisition date; the capacity to renew the existing product portfolio based on specialized organizational structures and the scientific expertise of Genzyme staff; and a range of beneficial effects of combining Genzyme with Sanofi, such as the advantages gained from creating new growth platforms and expected future synergies. This goodwill does not give rise to any deduction for tax purposes.

The goodwill was determined on the basis of the provisional fair values of the assets and liabilities identified at the time of the acquisition; it will be adjusted, within a period of no more than twelve months from the acquisition date, if these fair values change as a result of circumstances existing at the acquisition date. These fair value adjustments may arise in respect of property, plant and equipment, intangible assets and inventories, on completion of the necessary valuations, and physical verifications of such assets. The amount of provisions may also be adjusted as a result of ongoing procedures to identify and measure liabilities and contingent liabilities, including tax, environmental risks, and litigation. The amount of deferred taxes may also be adjusted during the purchase price allocation period.

Since the acquisition date, Genzyme has generated net sales of €796 million and business operating income of €197 million (see definition in Note B.20., “Segment Information”). Over the same period, Genzyme made a negative contribution of €216 million to consolidated net income (after taking account of expenses during the period associated with the remeasurement of assets at fair value on recognition at the acquisition date). For the six months ended June 30, 2011, Genzyme net sales amounted to €1,518 million.

Acquisition-related costs recognized in the period amounted to €65 million, mostly recorded in the line item Other operating expenses.

The impact of this acquisition as reflected in the statements of cash flows in the line item Acquisitions of investments in consolidated entities, net of cash acquired, is a net cash outflow of €13.1 billion.

¡ BMP Sunstone

On February 24, 2011, Sanofi completed the acquisition of 100% of BMP Sunstone Corporation, a pharmaceutical company previously quoted on the NASDAQ market, which is developing a portfolio of branded pharmaceuticals and healthcare products in China. Through BMP Sunstone, the Group manufactures pediatric and feminine healthcare products, sold in pharmacies across the country.

The provisional purchase price allocation is analyzed below:

(€ million)	Fair value at acquisition date
Property, plant and equipment		17
Intangible assets		199
Inventories		5
Other assets and liabilities		(42	)
Deferred taxes		(129	)
Net assets of BMP Sunstone as of February 24, 2011		50
Goodwill		334
Purchase price		384

Since the acquisition date, the BMP Sunstone entities have generated net sales of €11 million, and negative business net income of €2 million (see definition in Note B.20., “Segment Information”). Over the same period, the BMP Sunstone entities made a negative contribution of €11 million to consolidated net income (after taking account of expenses during the period associated with the remeasurement of assets at fair value at the acquisition date).

The goodwill recognized on this acquisition primarily represents the benefits of creating a new Consumer Health growth platform in China favoring the launch of new product extensions for existing brands, access to certain Chinese markets, and expected future synergies from combining BMP Sunstone with Sanofi. This goodwill does not give rise to any deduction for tax purposes.

Acquisition-related costs recognized in the period amounted to €4 million, mostly recorded in the line item Other operating expenses.

B.1.2. Merial

In March 2010, Sanofi exercised its contractual right to combine its animal health business (Merial) with that of Merck (Intervet/Schering-Plough) to form a new joint venture equally owned by Merck and Sanofi. Consequently, all of the assets and liabilities of Merial were reported respectively in the line items Assets held for sale or exchange and Liabilities related to assets held for sale or exchange, and the net income of Merial was reported in the line item Net income from the held-for-exchange Merial business, in accordance with IFRS 5 (see Notes B.7. and D.8.1. to the consolidated financial statements for the year ended December 31, 2010).

However, on March 22, 2011 Merck and Sanofi announced that they had mutually terminated their agreement to form a new animal health joint venture and had decided to maintain Merial and Intervet/Schering-Plough as two separate entities, operating independently. This decision was mainly due to the increasing complexity of implementing the proposed transaction, both in terms of the nature and extent of the anticipated divestitures and the length of time necessary for the worldwide regulatory review process.

Consequently, the interest of Sanofi in Merial has ceased to be reported separately in the consolidated balance sheet and income statement with effect from January 1, 2011. In accordance with IFRS 5 (see Note A.1.3.), this change in accounting method has been treated as follows:

¡ As of June 30, 2011, the assets and liabilities of Merial are reported in the relevant balance sheet line item, without restating the presentation of the balance sheet as of December 31, 2010.

¡ The net income of Merial, reported in the line item Net income from the held-for-exchange Merial business in the previously-published financial statements, has been reclassified and included in net income from continuing operations for all of the periods reported.

¡ With effect from January 1, 2011, the assets of Merial have been measured at the carrying amount at which they were reported before being classified as held for sale, adjusted for any depreciation, amortization or impairment that would have been recognized if the asset had never been classified as held for sale.

¡ The backlog of depreciation and amortization and impairment not recognized during the period from September 18, 2009, through December 31, 2010, amounts to €517 million, and is reported in the income statement line item Other gains and losses, and litigation.

¡ Depreciation and amortization arising from January 1, 2011, onwards are reported in the appropriate income statement line item for the type and use of the asset, in accordance with the accounting policies applicable to continuing operations.

¡ This decision also extinguished Sanofi’s obligation to pay Merck $250 million to establish parity in the joint venture, or to pay the additional consideration of $750 million stipulated in the agreement signed on July 29, 2009.

The table below shows the effect of reclassifying Merial’s net income (€198 million for the six months ended June 30, 2010, €386 million for the year ended December 31, 2010) to the relevant income statement line items in net income from continuing operations, in line with IFRS 5.36:

(€ million)	6 months to June 30, 2010			12 months to December 31, 2010
Net sales		1,037			1,983
Other revenues		9			18
Cost of sales		(391	)		(681	)
Gross profit		655			1,320
Research and development expenses		(70	)		(146	)
Selling and general expenses		(296	)		(582	)
Other operating income		7			10
Other operating expenses		(1	)		(16	)
Restructuring costs		—			(12	)
Operating income		295			574
Financial expenses		—			(1	)
Financial income		—			1
Income before tax and associates and joint ventures		295			574
Income tax expense		(97	)		(188	)
Net income		198			386

B.2. Property, plant and equipment

Acquisitions of property, plant and equipment amounted to €588 million in the first half of 2011, and reflect investments in the Pharmaceuticals segment of €425 million, mainly in industrial facilities (€199 million) and in the construction and fitting-out of research sites (€57 million). This amount also includes acquisitions made by Genzyme since the acquisition date, totaling €89 million. The Vaccines segment accounted for €137 million of acquisitions of property, plant and equipment during the period, and the Animal Health segment for €26 million.

The effect of changes in the scope of consolidation during the first half of 2011 was €2,052 million, mainly arising from the first-time consolidation of Genzyme, effective April 4, 2011.

Merial had property, plant and equipment of €632 million as of June 30, 2011.

Firm orders for property, plant and equipment as of June 30, 2011 amounted to €530 million.

B.3. Goodwill and Intangible assets

Movements in intangible assets during the first half of 2011 are as follows:

(€ million)	Acquired Aventis R&D			Other acquired R&D			Rights to marketed Aventis products			Products, trademarks and other rights			Software			Total other intangible assets
Gross value at January 1, 2011		2,269			1,564			31,797			5,493			740			41,863
Merial(1)		—			674			—			3,235			70			3,979
Changes in scope of consolidation		—			2,168			—			8,480			56			10,704
Acquisitions and other increases		—			49			—			14			28			91
Disposals and other decreases		—			—			—			(2	)		—			(2	)
Translation differences		(87	)		(145	)		(1,375	)		(486	)		(22	)		(2,115	)
Transfers		(167	)		(351	)		167			351			2			2
Gross value at June 30, 2011		2,015			3,959			30,589			17,085			874			54,522
Accumulated amortization and impairment at January 1, 2011		(1,540	)		(140	)		(24,955	)		(2,147	)		(602	)		(29,384	)
Amortization expense(2)		—			—			(1,044	)		(1,069	)		(55	)		(2,168	)
Impairment losses, net of reversals		—			(27	)		(21	)		(21	)		—			(69	)
Translation differences		61			9			1,111			94			18			1,293
Transfers		—			—			—			—			(2	)		(2	)
Accumulated amortization and impairment at June 30, 2011		(1,479	)		(158	)		(24,909	)		(3,143	)		(641	)		(30,330	)
Carrying amount at January 1, 2011		729			1,424			6,842			3,346			138			12,479
Carrying amount at June 30, 2011		536			3,801			5,680			13,942			233			24,192

⁽¹⁾  This line includes the other intangible assets of Merial, previously reported in Assets held for sale or exchange, which were reclassified following the announcement of the decision to maintain Merial and Intervet/Schering-Plough as two separate businesses operating independently.

⁽²⁾  Includes the expense arising from the backlog of amortization charges for 2009 and 2010 on the intangible assets of Merial previously classified in Assets held for sale or exchange, reported in the income statement line item Other gains and losses, and litigation.

The Genzyme provisional purchase price allocation resulted in the initial recognition of intangible assets totaling €10,521 million at the acquisition date (see Note B.1.1.). This figure includes €8,149 million for marketed products in the fields of rare diseases (primarily Cerezyme^®,, Fabrazyme^® and Myozyme^®), renal endocrinology (primarily Renagel^®), biosurgery (primarily SynVisc^®), and oncology. It also includes €2,168 million for assets relating to Genzyme’s in-process research and development projects. The Genzyme brand was valued at €147 million.

Acquisitions of intangible assets (other than software) in the first half of 2011 totaled €63 million.

Some of the acquired research and development came into commercial use during the period, and is being amortized from the date of marketing approval, primarily Jevtana^® (cabazitaxel) in European Union and Certifect^TM (Merial) in the United States and in the European Union.

Movements in goodwill during the period are shown below:

(€ million)	Gross value			Accumulated amortization and impairment			Carrying amount
Balances at January 1, 2011		31,958			(26	)		31,932
Goodwill of Merial(1)		1,210			—			1,210
Goodwill of Genzyme (preliminary)		3,556			—			3,556
Other changes in scope of consolidation		346			—			346
Translation differences		(1,159	)		—			(1,159	)
Balances at June 30, 2011		35,911			(26	)		35,885

⁽¹⁾  Previously reported in Assets held for sale or exchange, and reclassified following the announcement of the decision to maintain Merial and Intervet/Schering-Plough as two separate businesses operating independently.

The line “Other changes in the scope of consolidation” mainly comprises the goodwill arising on the acquisition of BMP Sunstone.

B.4. Impairment of intangible assets

The results of impairment tests conducted in accordance with IAS 36 (Impairment of Assets) as of June 30, 2011 led to the recognition of a charge of €69 million, mainly related to the Metabolex agreement (€20 million).

B.5. Investments in associates and joint ventures

For definitions of the terms “associate” and “joint venture”, refer to Note B.1. to the consolidated financial statements for the year ended December 31, 2010.

Investments in associates and joint ventures are as follows:

(€ million)	% interest		June 30, 2011		December 31, 2010
Sanofi Pasteur MSD		50.0		332		343
InfraServ Höchst		31.2		88		92
Entities and companies managed by Bristol-Myers Squibb(1)		49.9		257		265
Financière des Laboratoires de Cosmétologie Yves Rocher		39.1		140		128
Other investments		—		93		96
Total				910		924

⁽¹⁾  Under the terms of the agreements with Bristol-Myers Squibb (BMS) (see Note C.1. to the consolidated financial statements for the year ended December 31, 2010), the Group’s share of the net assets of entities majority-owned by BMS is recorded in Investments in associates and Joint ventures.

Genzyme’s investments in associates and joint ventures are not material.

The financial statements include commercial transactions between the Group and certain of its associates and joint ventures, which are regarded as related parties. The principal transactions of this nature are summarized below:

(€ million)	6 months to June 30, 2011		6 months to June 30, 2010		12 months to December 31, 2010
Sales		289		273		541
Royalties(1)		664		640		1,324
Accounts receivable(1)		452		507		441
Purchases		118		114		227
Accounts payable		30		15		22
Other liabilities(1)		485		371		350

⁽¹⁾  These items mainly relate to entities and companies managed by BMS.

B.6. Non-current financial assets

Non-current financial assets mainly comprise:

(€ million)	June 30, 2011		December 31, 2010
Available-for-sale financial assets(1)		1,174		816
Pre-funded pension obligations		8		4
Long-term loans and advances		554		483
Assets recognized under the fair value option		115		121
Derivative financial instruments		273		220
Total		2,124		1,644

⁽¹⁾  Includes 15.8 million shares in Regeneron Pharmaceuticals, valued at €621 million on the basis of the quoted stock market price at June 30, 2011 (versus €389 million at December 31, 2010).

B.7. Assets held for sale or exchange and related liabilities

Assets held for sale or exchange and related liabilities, are as follows:

(€ million)	June 30, 2011		December 31, 2010
Merial		—		7,019
Other		44		17
Total assets held for sale or exchange		44		7,036
Merial		—		1,672
Other		14		—
Total liabilities related to assets held for sale or exchange		14		1,672

As explained in Note A.1.3., the assets and liabilities of Merial are no longer reported as held for sale or exchange, but instead are reported in the relevant balance sheet line item.

B.8. Equity

B.8.1. Share capital

The share capital of €2,700,755,372 consists of 1,350,377,686 shares with a par value of €2.

Treasury shares held by the Sanofi Group are as follows:

	Number of shares (million)		%
June 30, 2011		8.2		0.61	%
December 31, 2010		6.1		0.46	%
June 30, 2010		6.1		0.46	%
January 1, 2010		9.4		0.71	%

A total of 653,685 new shares were issued during the first half of 2011 as a result of the exercise of options under Sanofi stock subscription option plans.

Under the 2009 France restricted share plan, a total of 585,782 restricted shares vested and were issued in March 2011.

B.8.2. Share issue

On May 6, 2011, the Annual General Meeting of Sanofi Shareholders approved the payment of a dividend of €2.50 per share for the 2010 financial year, with an option to take the dividend either in cash or in newly-issued Sanofi shares. Shareholders representing 57.8% of the capital opted to take their dividend in shares, as a result of which 38,139,730 new shares were issued. These newly-issued shares represent 2.9% of the share capital, and an increase of €76 million in the share capital plus €1,814 million of additional paid-in capital (net of transaction costs on dividends taken in the form of shares).

B.8.3. Repurchase of Sanofi shares

The Sanofi Shareholders’ Annual General Meeting of May 6, 2011, has authorized a Sanofi share repurchase program for a period of 18 months. Under this program (and this program only), Sanofi repurchased 2,125,000 shares in June 2011 for a total amount of €112 million.

B.8.4. Restricted share plan

The Board meeting of March 9, 2011 decided to award a restricted share plan of 3,330,650 shares, of which 1,938,510 will vest after a four-year service period and 1,392,140 will vest after a two-year service period but will be non-transferable for a further two-year lock-up period.

The plan was measured as of the date of grant. The fair value of each share awarded is equal to the quoted market price of the share as of that date (€50.28), adjusted for dividends expected during the vesting period.

The fair value of the restricted share plan is €125 million. This amount is being recognized as an expense over the vesting period, with the matching entry recorded directly in equity. The expense recognized for this plan during the first half of 2011 was €14 million.

The total expense recognized in the first half of 2011 for all restricted share plans was €38 million, compared with €13 million in the first half of 2010. A total of 7,132,281 shares were in process of vesting as of June 30, 2011 (3,300,940 under the 2011 plans, 3,270,337 under the 2010 plans, and 561,004 under the 2009 plans).

B.8.5. Stock option plan

On March 9, 2011, the Board of Directors awarded a stock subscription option plan consisting of 874,500 options at an exercise price of €50.48. The vesting period is four years, and the plan expires on March 9, 2021.

The following assumptions were used in determining the fair value of this plan:

¡ dividend yield: 5.12%;

¡ life of the plan: 6 years;

¡ volatility of Sanofi shares, computed on a historical basis: 26.93%;

¡ interest rate: 3.05%.

On this basis, the fair value of one option is €7.88, and the fair value of the 2011 plan is €6 million. This amount is being recognized as an expense over the vesting period, with the matching entry recorded directly in equity. The expense recognized for this plan during the first half of 2011 was €0.5 million.

The total expense recognized for stock option plans in the first half of 2011 was €30 million, compared with €45 million in the first half of 2010.

The table below gives information about options outstanding and exercisable as of June 30, 2011:

	Outstanding						Exercisable
Range of exercise prices per share	Number of options		Average residual life (years)		Weighted average exercise price per share (€)		Number of options		Weighted average exercise price per share (€)
From €1.00 to €10.00 per share		20,770		4.10		7.75		20,770		7.75
From €10.00 to €20.00 per share		58,712		5.53		15.27		58,712		15.27
From €20.00 to €30.00 per share		9,670		6.99		28.38		9,670		28.38
From €30.00 to €40.00 per share		297,597		7.75		38.08		297,597		38.08
From €40.00 to €50.00 per share		12,051,223		5.63		43.29		4,696,648		40.48
From €50.00 to €60.00 per share		17,633,439		5.27		53.49		8,908,424		53.22
From €60.00 to €70.00 per share		25,990,646		5.17		65.41		14,841,666		67.73
From €70.00 to €80.00 per share		22,739,319		2.44		70.80		22,739,319		70.80
Total		78,801,376						51,572,806
of which stock purchase options		3,262,699
of which stock subscription options		75,538,677

B.8.6. Number of shares used to compute diluted earnings per share

Diluted earnings per share is computed using the number of shares outstanding plus stock options and restricted shares with a potentially dilutive effect.

(€ million)	June 30, 2011		June 30, 2010		December 31, 2010
Average number of shares outstanding		1,308.6		1,305.8		1,305.3
Adjustment for options with potentially dilutive effect		1.8		2.5		1.7
Adjustment for restricted shares with potentially dilutive effect		2.9		1.0		1.2
Average number of shares used to compute diluted earnings per share		1,313.3		1,309.3		1,308.2

As of June 30, 2011, 61.3 million stock options were excluded from the calculation of diluted earnings per share because they did not have a potentially dilutive effect, compared with 69.1 million as of December 31, 2010 and 74.8 million as of June 30, 2010.

B.8.7. Income and expenses recognized directly in equity

Movements in income and expenses recognized directly in equity are as follows:

(€ million)	6 months to June 30, 2011			6 months to June 30, 2010			12 months to December 31, 2010
Balance, beginning of period		(1,102	)		(3,755	)		(3,755	)
Net income attributable to equity holders of Sanofi		(1,097	)		(3,739	)		(3,739	)
Net income attributable to non-controlling interests		(5	)		(16	)		(16	)
Merial fair value remeasurement(1) :
Ÿ Change in fair value		—			(5	)		—
Ÿ Tax effect		—			2			—
Actuarial gains and losses:
Ÿ Impact of asset ceiling		—			—			1
Ÿ Actuarial gains/(losses) excluding associates and joint ventures		95			(629	)		(311	)
Ÿ Actuarial gains/(losses) on associates and joint ventures		—			1			(1	)
Ÿ Tax effect		(51	)		190			172
Items not to be reclassified to profit or loss		44			(441	)		(139	)
Available-for-sale financial assets:
Ÿ Change in fair value(2)		215			23			141
Ÿ Tax effect		(10	)		(3	)		(15	)
Cash flow hedges:
Ÿ Change in fair value(3)		6			(56	)		17
Ÿ Tax effect		(2	)		19			(6	)
Change in cumulative translation differences:
Ÿ Translation differences on foreign subsidiaries		(1,748	)		4,671			2,656
Ÿ Hedges of net investments in foreign operations		—			—			(2	)
Ÿ Tax effect		—			—			1
Items that may be reclassified subsequently to profit or loss		(1,539	)		4,654			2,792
Balance, end of period		(2,597	)		458			(1,102	)
Net income attributable to equity holders of Sanofi		(2,582	)		458			(1,097	)
Net income attributable to non-controlling interests		(15	)		—			(5	)

⁽¹⁾  Fair value remeasurement of previously-held equity interests as of the date of acquisition of control, corresponding to 50% for Merial (see Note D.1. to the consolidated financial statements for the year ended December 31, 2010).

⁽²⁾  Includes reclassifications to profit or loss: (€0.4) million for the six months to June 30, 2010 and the year ended December 31, 2010.

⁽³⁾  Includes reclassifications to profit or loss: €7 million for the six months to June 30, 2010 and the year ended December 31, 2010 in operating income, and €1 million for the six months ended June 30, 2011 in net financial expense (versus €2 million for the six months ended June 30, 2010 and €5 million for the year ended December 31, 2010)

B.9. Debt, cash and cash equivalents

Changes in the Group’s financial position during the period are as follows:

(€ million)	June 30, 2011			December 31, 2010
Long-term debt		13,289			6,695
Short-term debt and current portion of long-term debt		6,753			1,565
Interest rate and currency derivatives used to hedge debt		(249	)		(218	)
Total debt		19,793			8,042
Cash and cash equivalents		(6,538	)		(6,465	)
Interest rate and currency derivatives used to hedge cash and cash equivalents		(24	)		—
Debt, net of cash and cash equivalents		13,231			1,577

Trends in the gearing ratio are shown below:

(€ million)	June 30, 2011			December 31, 2010
Debt, net of cash and cash equivalents		13,231			1,577
Total equity		52,599			53,288
Gearing ratio		25.2	%		3.0	%

B.9.1. Debt at value on redemption

A reconciliation of the carrying amount of debt to value on redemption as of June 30, 2011 is shown below:

(€ million)	Carrying amount at June 30, 2011			Amortized cost		Adjustment to debt measured at fair value			Value on redemption at June 30, 2011			Value on redemption at December 31, 2010
Long-term debt		13,289			59		(79	)		13,269			6,683
Short-term debt and current portion of long-term debt		6,753			1		—			6,754			1,565
Interest rate and currency derivatives used to hedge debt		(249	)				17			(232	)		(192	)
Total debt		19,793			60		(62	)		19,791			8,056
Cash and cash equivalents		(6,538	)		—		—			(6,538	)		(6,465	)
Interest rate and currency derivatives used to hedge cash and cash equivalents		(24	)		—		—			(24	)		—
Debt, net of cash and cash equivalents		13,231			60		(62	)		13,229			1,591

Debt, net of cash and cash equivalents by type at value on redemption are as follows:

	June 30, 2011									December 31, 2010
(€ million)	non- current			current			Total			non- current			current			Total
Bond issues		10,739			794			11,533			5,879			92			5,971
Credit facility drawdowns		1,660			415			2,075			—			—			—
Other bank borrowings		776			338			1,114			771			402			1,173
Commercial paper		—			4,837			4,837			—			735			735
Finance lease obligations		80			12			92			19			6			25
Other borrowings		14			55			69			14			57			71
Bank credit balances		—			303			303			—			273			273
Interest rate and currency derivatives used to hedge debt		(232	)		—			(232	)		(194	)		2			(192	)
Total debt		13,037			6,754			19,791			6,489			1,567			8,056
Cash and cash equivalents		—			(6,538	)		(6,538	)		—			(6,465	)		(6,465	)
Interest rate and currency derivatives used to hedge cash and cash equivalents		—			(24	)		(24	)		—			—			—
Debt, net of cash and cash equivalents		13,037			192			13,229			6,489			(4,898	)		1,591

Principal financing and debt reduction transactions during the period

The financing transactions that took place in the first half of 2011 were associated with funding the acquisition of Genzyme for $20.4 billion. This acquisition was funded as follows:

¡ $7 billion from a bond issue in the United States;

¡ $7 billion from a U.S. commercial paper issue;

¡ $4 billion from a drawdown on a bridge facility and;

¡ $2.4 billion from available cash.

In March 2011, Sanofi completed a $7 billion bond issue in six tranches:

- $1 billion of bonds maturing March 2012, bearing interest at 3-month USD Libor +0.05%;

- $1 billion of bonds maturing March 2013, bearing interest at 3-month USD Libor +0.20%;

- $750 million of bonds maturing March 2014, bearing interest at 3-month USD Libor +0.31%;

- $750 million of bonds maturing March 2014, bearing interest at 1.625% per annum;

- $1.5 billion of bonds maturing March 2016, bearing interest at 2.625% per annum;

- $2 billion of bonds maturing March 2021, bearing interest at 4% per annum.

This bond issue was carried out pursuant to a shelf registration statement filed with the United States Securities and Exchange Commission (SEC).

In addition, as a consequence of Genzyme’s acquisition, the following bonds previously issued by Genzyme in two tranches are from now included in the Group’s liabilities:

¡ $500 million of bonds maturing June 2015, bearing interest at 3.625% per annum;

¡ $500 million of bonds maturing June 2020, bearing interest at 5% per annum.

Further to a consent solicitation procedure, these two bonds are now guaranteed by the parent company.

No bond issue has come to maturity during the first half of 2011.

In connection with the launch of its public tender offer for Genzyme, on October 2, 2010 the Group contracted two bridge facilities available for drawdown in U.S. dollars through July 2, 2011, amounting to a total of $15 billion:

¡ Facility A is a $10 billion facility expiring April 2, 2012, with an optional six-month extension;

¡ Facility B is a $5 billion amortizable facility expiring April 2, 2014.

These facilities are not subject to any financial covenants. The margin of Facility B will depend on the long-term credit rating of Sanofi subsequent to the acquisition.

On March 29, 2011, Facility A was reduced by the proceeds of the U.S. bond issue (approximately $7 billion). The remainder of this facility was cancelled on April 1, 2011.

On April 5, 2011, Sanofi drew down $4 billion under Facility B, and cancelled the remaining balance of $1 billion.

On June 21, 2011, Sanofi made an early repayment of $1 billion on the Facility B drawdown. As a result, the remaining drawdown under Facility B as of June 30, 2011 was $3 billion.

In addition, the Group has the following arrangements in place as of June 30, 2011 to manage its liquidity in connection with current operations:

¡ a €5.8 billion syndicated credit facility expiring March 31, 2012, available for drawdown in Euros or U.S. dollars;

¡ a €7 billion syndicated credit facility expiring July 6, 2015, also available for drawdown in Euros or U.S. dollars.

These undrawn confirmed bank credit facilities are used in particular to back commercial paper programs in France (€6 billion) and in the United States ($10 billion). As of June 30, 2011, a total of €4.8 billion was drawn down under these facilities. Consequently, the amount of undrawn general purpose confirmed credit facilities not allocated to backing French and U.S. commercial paper programs as of June 30, 2011 was €8 billion, compared with €12.2 billion as of December 31, 2010.

The financing arrangements in place as of June 30, 2011 at the level of the Sanofi parent company (which centrally manages the bulk of the Group’s financing needs) are not subject to covenants regarding financial ratios, and contain no clauses linking credit spreads or fees to Sanofi’s credit rating.

B.9.2. Market value of debt

The market value of debt, net of cash and cash equivalents was €13,571 million as of June 30, 2011 (versus €1,887 million as of December 31, 2010), as compared with a value on redemption of €13,229 million (versus €1,591 million as of December 31, 2010).

B.10. Derivative financial instruments

B.10.1. Currency derivatives used to manage operational risk exposures

The table below shows operational currency hedging instruments in place as of June 30, 2011, with the notional amount translated into Euros at the relevant closing exchange rate:

June 30, 2011						Of which derivatives designated as cash flow hedges						Of which derivatives not eligible for  hedge accounting
(€ million)	Notional amount		Fair value			Notional amount		Fair value		Of which recognized in equity		Notional amount		Fair value
Forward currency sales		2,300		6			38		—		—		2,262		6
Ÿ  of which U.S. dollar		1,137		4			—		—		—		1,137		4
Ÿ  of which Japanese yen		305		(2	)		—		—		—		305		(2	)
Ÿ  of which Russian rouble		243		2			21		—		—		222		2
Ÿ  of which Australian dollar		61		—			3		—		—		58		—
Ÿ  of which Singapore dollar		61		—			—		—		—		61		—
Forward currency purchases		541		(1	)		—		—		—		541		(1	)
Ÿ  of which Hungarian forint		115		—			—		—		—		115		—
Ÿ  of which Singapore dollar		84		1			—		—		—		84		1
Ÿ  of which U.S. dollar		82		(1	)		—		—		—		82		(1	)
Ÿ  of which Japanese yen		78		(2	)		—		—		—		78		(2	)
Ÿ  of which Pound sterling		57		(2	)		—		—		—		57		(2	)
Total		2,841		5			38		—		—		2,803		5

As of June 30, 2011, none of these instruments had an expiry date later than September 2011 (except for a forward purchase position of GBP 46 million maturing between 2011 and 2015).

These positions primarily hedge material foreign-currency cash flows arising after the balance sheet date in relation to transactions carried out during the six months to June 30, 2011 and recognized in the consolidated balance sheet as of that date. Gains and losses on these hedging instruments (forward contracts) have been and will continue to be calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Consequently, the commercial foreign exchange gain or loss to be recognized on these items (hedges and hedged instruments) in the second half of 2011 is not expected to be material.

B.10.2. Currency and interest rate derivatives used to manage financial risk exposures

Cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of the Group’s financing activities expose certain entities (especially the Sanofi parent company) to financial foreign exchange risk. This is the risk of changes in the value of loans and borrowings denominated in a currency other than the functional currency of the lender or borrower.

The net foreign exchange exposure for each currency and entity is hedged by firm financial instruments (usually currency swaps or forward contracts), a summary of which as of June 30, 2011 is provided below:

June 30, 2011 (€ million)	Notional Amount		Fair Value			Expiry
Forward currency sales		2,399		(20	)
Ÿ  of which U.S. dollar		1,070		(11	)		2011
Ÿ  of which Pound sterling		618		(11	)		2011
Ÿ  of which Japanese yen		226		(1	)		2011
Ÿ  of which Australian dollar		105		1			2011
Ÿ  of which Swiss franc		103		2			2011
Forward currency purchases		2,825		9
Ÿ  of which Japanese yen		1,038		(4	)		2011
Ÿ  of which U.S. dollar		823		26			2012
Ÿ  of which Czech koruna		311		(14	)		2011
Ÿ  of which Australian dollar		149		(2	)		2011
Ÿ  of which Pound sterling		112		3			2011
Total		5,224		(11	)

To limit risk and optimize the cost of its short-term and medium-term net debt, Sanofi uses derivative instruments that alter the interest rate and currency structure of its debt and cash. The table below shows instruments of this type in place as of June 30, 2011:

	Notional amounts by expiry date as of June 30, 2011																		Of which derivatives designated as fair value hedges				Of which derivatives designated as cash flow hedges
(€ million)	2011		2012		2013		2014		2015		2016		2019		Total		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Of which recognized in equity
Caps
Purchases of Caps 0.50%		1,211		1,730		—		—		—		—		—		2,941		2		—		—		2,941		2		(1	)
Interest rate swaps
Interest rate swap, pay floating(1) / receive 2.73 %		—		—		—		—		—		500		—		500		—		500		—		—		—		—
Interest rate swap, pay floating(2) / receive 2.38 %		—		—		—		1,200		—		1,000		800		3,000		14		3,000		14		—		—		—
Cross Currency Swaps
- pay € floating(3) / receive JPY floating(4)		—		—		92		—		—		—		—		92		37		—		—		—		—		—
- pay € 4.89% / receive CHF 3.26%		—		180		—		—		—		—		—		180		50		—		—		180		50		3
- pay € 4.87% / receive CHF 3.38%		—		—		—		—		244		—		—		244		98		—		—		244		98		11
- pay € floating(3) / receive CHF 3.26%		—		167		—		—		—		—		—		167		48		167		48		—		—		—
Currency Swaps on USD bonds
- pay USD / receive €		2,099		—		—		—		—		—		—		2,099		24		—		—		—		—		—
Total		3,310		2,077		92		1,200		244		1,500		800		9,223		273		3,667		62		3,365		150		13

⁽¹⁾  Floating: Benchmark rate = 1-month Euribor

⁽²⁾  Floating: Benchmark rate = Eonia

⁽³⁾  Floating: Benchmark rate = 3-month Euribor

⁽⁴⁾  Floating: Benchmark rate = 3-month Libor JPY

B.11. Liabilities related to business combinations and non-controlling interests

A description of the nature of the liabilities included in the line item, Liabilities related to business combinations and to non-controlling interests, is provided in Note B.8.5. to the consolidated financial statements for the year ended December 31, 2010. The principal changes in the scope of consolidation during the first half of 2011 are described in Note B.1.1. above.

Commitments related to business combinations essentially comprise contingent consideration related to research and other ongoing projects of the acquired entity. The accounting treatment of contingent consideration is described in Note B.3.1. to the consolidated financial statements for the year ended December 31, 2010.

The table below shows movements in liabilities related to business combinations and to non-controlling interests:

(€ million)	6 months to June 30, 2011			6 months to June 30, 2010			12 months to December 31, 2010
Balance, beginning of period		486			151			151
Split as follows:
Ÿ non-current		388			75			75
Ÿ current		98			76			76
New business combinations		1,099			86			219
Payments made		(19	)		(45	)		(52	)
Fair value remeasurement (including unwinding of discount)		54			2			5
Other movements		—			155			155
Translation differences		(23	)		14			8
Balance, end of period		1,597			363			486
Split as follows:
Ÿ non-current		1,390			285			388
Ÿ current		207			78			98

New business combinations in the period mainly comprise:

- €481 million representing the fair value as of April 4, 2011 of the CVRs issued by Sanofi in connection with the acquisition of Genzyme (see Note B.1.1.) and;

- €582 million representing the estimated fair value as of April 4, 2011 of contingent consideration relating to a business combination that occurred prior to Sanofi’s acquisition of Genzyme (transaction with Bayer in May 2009, see Note B.1.1.).

Fair value remeasurements during the first half of 2011 are as follows:

(€ million)	6 months to June 30, 2011
Fair value remeasurements recognized in income statement (1)		66
comprising:
¡   CVRs issued in connection with the acquisition of Genzyme		5
¡   Bayer contingent consideration arising from the acquisition of Genzyme		14
¡   Other (2)		47
Other fair value remeasurements (3)		(12	)
Total fair value remeasurements for the first half of 2011		54

⁽¹⁾  Amounts reported in the income statement line item Fair value remeasurement of liabilities related to contingent consideration.

⁽²⁾  Contingent consideration in connection with the acquisition of TargeGen.

⁽³⁾  Mainly comprises changes in the fair value of liabilities related to put options granted to non-controlling interests.

The amount recorded in the balance sheet for liabilities related to business combinations and non-controlling interests are comprised of the following:

(€ million)	June 30, 2011		December 31, 2010
Liabilities related to non-controlling interests (1)		120		134
Liabilities related to business combinations		1,477		352
comprising:
¡  CVRs issued in connection with the acquisition of Genzyme		486		—
¡  Bayer contingent consideration arising from the acquisition of Genzyme		589		—
¡  Other (2)		402		352
Balance, end of period		1,597		486

⁽¹⁾  Primarily put options granted to non-controlling interests.

⁽²⁾  Includes €156 million for Fovea as of June 30, 2011.

B.12. Provisions and other non-current liabilities

(€ million)	Provisions for pensions and other long-term benefits			Restructuring provisions			Other provisions			Other non-current liabilities			Total
Balance at January 1, 2011		4,243			1,017			3,960			106			9,326
Merial(1)		64			—			27			4			95
Changes in scope of consolidation		74			—			158			17			249
Increases in provisions and other liabilities		194			255			343			8			800
Reversals of utilized provisions		(183	)		(4	)		(90	)		—			(277	)
Reversals of unutilized provisions		(2	)		(9	)		(88	)		—			(99	)
Transfers(2)		(3	)		(88	)		(18	)		(2	)		(111	)
Unwinding of discounting		1			18			20			—			39
Unrealized (gains)/losses		—			—			(4	)		(26	)		(30	)
Translation differences		(89	)		(5	)		(94	)		(5	)		(193	)
Actuarial (gains)/losses on defined-benefit plans		(95	)		—			—			—			(95	)
Balance at June 30, 2011		4,204			1,184			4,214			102			9,704

⁽¹⁾  This line includes provisions and other non-current liabilities previously reported in Liabilities related to assets held for sale or exchange, which were reclassified following the announcement of the decision to maintain Merial and Intervet/Schering-Plough as two separate businesses operating independently (see Notes B.1.2. and B.7.).

⁽²⁾  Includes transfers between current and non-current.

B.12.1. Provisions for pensions and other long-term benefits

Sanofi applies the option allowed by the amendment to IAS 19, under which all actuarial gains and losses under defined-benefit plans are recognized in the balance sheet with the matching entry recorded as a component of equity. Under this method, Sanofi reviews the relevant assumptions (in particular discount rates and the fair value of plan assets) at each balance sheet date.

For disclosures about the sensitivity of pension and other long-term employee benefit obligations, and the assumptions used as of December 31, 2010, see Note D.19.1. to the consolidated financial statements for the year ended December 31, 2010.

The principal assumptions used for the euro zone, the United States and the United Kingdom were reviewed as of June 30, 2011 to take into account changes during the six-month period.

Actuarial gains and losses on pensions and other post-employment benefits recognized with a matching entry in equity are as follows (amounts reported net of taxes):

(€ million)	6 months to June 30, 2011			6 months to June 30, 2010			12 months to December 31, 2010
Actuarial gains/(losses) on plan assets		(33	)		(126	)		255
Actuarial gains/(losses) on benefit obligations		128			(501	)		(571	)
Decrease/(increase) in provisions		95			(627	)		(316	)

B.13. Net deferred tax position

The net deferred tax position are as follows:

(€ million)	June 30, 2011			December 31, 2010
Deferred tax (excluding Genzyme) on:
•  Consolidation adjustments (intragroup margin in inventory)		828			875
•  Provision for pensions and other employee benefits		1,123			1,157
•  Remeasurement of acquired intangible assets(1)		(3,984	)		(3,706	)
•  Recognition of acquired property, plant and equipment at fair value		(91	)		(76	)
•  Tax cost of distributions made from reserves(2)		(503	)		(399	)
•  Tax losses available for carry-forward		371			152
•  Stock options		28			12
•  Accruals and provisions deductible when paid		1,353			1,349
•  Other items		(180	)		(121	)
Net deferred tax position due to Genzyme(3)		(2,327	)		—
Net deferred tax liability		(3,382	)		(757	)

⁽¹⁾  Including deferred tax liabilities as of June 30, 2011 arising on the remeasurement of the intangible assets of Aventis (€2,123 million) and of Merial (€749 million).

⁽²⁾  In some countries, the Group is liable to withholding taxes and other tax charges when dividends are distributed. Consequently, the Group recognizes a deferred tax liability on those reserves which it regards as likely to be distributed in the foreseeable future.

⁽³⁾  Mainly comprises the impact of the fair value remeasurement of intangible assets as part of the provisional purchase price allocation (see Note B.1.1.).

B.14. Off balance sheet commitments

Research and development license agreements

This item mainly relates to commitments to third parties under collaboration agreements. In pursuance of its strategy, Sanofi acquires technologies and rights to products. Such acquisitions may be made in various contractual forms: acquisitions of shares, loans, license agreements, joint development and co-marketing. These contracts usually involve upfront payments on signature of the agreement, and development milestone payments. Some of these complex agreements include undertakings to finance research programs in future years, and payments contingent upon completion of development milestones, or upon the granting of approvals or licenses, or upon the attainment of sales targets once a product is on the market.

The main collaboration agreements entered into by the Pharmaceuticals segment during the first half of 2011 are described below.

¡ On May 16, 2011, Sanofi announced the signature of a license agreement with Glenmark Pharmaceuticals SA, a wholly-owned subsidiary of Glenmark Pharmaceuticals Limited India (GPL), for the development and commercialization of GBR500, a novel monoclonal antibody for the treatment of Crohn’s Disease and other chronic autoimmune disorders. The closing of the transaction is subject to customary conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

¡ On June 28, 2011, Sanofi announced the signature of an exclusive worldwide research collaboration agreement and option for license with Rib-X Pharmaceuticals, Inc. for novel classes of antibiotics resulting from Rib-X’s RX-04 program for the treatment of resistant Gram-positive and resistant Gram-negative pathogens.

B.15. Legal and Arbitral Proceedings

Sanofi and its affiliates are involved in litigation, arbitration and other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights (particularly claims against generic companies seeking to limit the patent protection of Sanofi products), competition law and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures.

The matters discussed below constitute the most significant developments since publication of the disclosures concerning legal proceedings in the Company’s financial statements for the year ended December 31, 2010.

a) Patents

¡ Allegra^® Patent Litigation

United States. In June and July 2011, several suits against generic manufacturers were dismissed without prejudice following an agreement amicably resolving the disputes between the parties.

On June 30, 2011, upon the parties representation to the Court that the litigation had been settled, the District Court entered an Order of Dismissal without prejudice, in the Allegra^® oral suspension case against Actavis, with the right, upon good cause shown, to reopen the action if the settlement is not consummated. Sanofi-aventis U.S. continues to be involved in ongoing U.S. patent litigation against Dr Reddy’s in relation to the Allegra^® single entity formulation, Allegra-D^® 12 Hour, as well as Allegra-D^® 24 Hour.

¡ Taxotere^® Patent Litigation

United States. On May 17, 2011, based on the decision of the U.S. District Court for the District of Delaware in the consolidated Hospira/Apotex action, judgment was also entered against Sanofi in the Accord Pharmaceuticals action. In addition to the appeal of the Hospira/Apotex, Sun and Sandoz judgments, Sanofi has appealed the Accord judgment to the United States Court of Appeals for the Federal Circuit. All four appeals are pending. The Accord, Sun and Sandoz appeals have been stayed pending the outcome of the Hospira/Apotex appeal.

¡ Eloxatine^® (oxaliplatin) Patent Litigation

United States. In February 2011, the U.S. District Court for the District of New Jersey granted Sanofi’s request for a preliminary injunction prohibiting Sun Pharmaceuticals from launching an unauthorized generic product. Following a remand from the U.S. Court of Appeals for the Federal Circuit, on April 7, 2011, the District Court held a trial to consider additional factual evidence pertaining to Sun’s obligations, if any, to cease selling its “at risk” generic product, pursuant to the April 2010 settlement agreement. A decision is expected by the fourth quarter of 2011.

In a related matter, on June 17, 2011, Sanofi filed suit against Sun Pharmaceuticals in the U.S. District Court for the District of New Jersey in response to Sun’s application filed with the FDA seeking marketing approval for a new formulation of an Eloxatine^® (oxaliplatin) solution product.

¡ Ambien^® CR Patent Litigation

In July 2011, Sanofi and Sandoz entered into an agreement amicably resolving the dispute between the parties concerning U.S. Patent No. 6,514,531 (the “ ‘531 Patent”). Consequently, the U.S. District Court for the District of New Jersey will issue an order dismissing the patent infringement claim against Sandoz.

b) Government Investigations, Competition Law and Regulatory Claims

¡ Civil Suits — Pricing and Marketing Practices

§ 340B Suit. On March 29, 2011, the U.S. Supreme Court issued an opinion concluding that plaintiffs do not have a private right of action, ruling in favor of Aventis Pharmaceuticals and fourteen other defendants, and restoring an order of dismissal that previously had been entered by the U.S. District Court for the Northern District of California.

¡ Cipro^® Antitrust Litigation

On March 7, 2011, the U.S. Supreme Court denied the direct purchaser plaintiffs’ petition for a writ of certiorari, thus ending the federal litigation relating to Cipro^®.

¡ Plavix^® Antitrust Claim

Following Orders entered by the U.S. District Court for the Southern District of Ohio in October 2009, and in January 2011, dismissing the claims of the direct purchasers and indirect purchasers respectively, plaintiffs have not appealed, thus ending these matters.

c) Other litigation and arbitration

¡ Apotex Settlement Claim

On April 8, 2011, the New Jersey state court granted Sanofi and Bristol-Myers Squibb’s motion for summary judgment. Apotex filed an appeal to the Superior Court of New Jersey, Appellate Division. Oral argument has not yet been scheduled.

¡ Zimulti^®/Acomplia^® (rimonabant) Class Action

Order dated March 31, 2011, the U.S. District Court for the Southern District of New York dismissed a number of individual defendants, however, denied the request of Sanofi to dismiss the Company, as well as one of its current directors and one of its former officers. The proceedings are ongoing.

¡ Actonel^® Alliance Agreement Arbitration (Warner Chilcott)

In April 1997, Aventis Pharmaceuticals Inc., a subsidiary of Sanofi, entered into a global collaboration agreement with Procter & Gamble Company and Procter & Gamble Pharmaceuticals (together P&G) for the co-development and marketing of Actonel^® (the Alliance). On October 30, 2009, P&G sold its pharmaceutical business to Warner Chilcott, who succeeded to P&G’s rights and obligations in the Alliance. Further to the termination of an ancillary supply agreement, Warner Chilcott attempted to prematurely terminate the Alliance on May 20, 2012, instead of January 1, 2015. Both Sanofi and Warner Chilcott initiated arbitration proceedings, on March 2, 2011, concerning the duration of the Alliance. On July 14, 2011, an arbitral panel decided that the termination by Warner Chilcott of an ancillary agreement has not resulted in the cross-termination of the Actonel^® Alliance. The Alliance thus remains in effect until January 1, 2015.

B.16. Restructuring costs

Restructuring costs recognized for the first half of 2011 relate mainly to measures announced by Sanofi in connection with the large-scale transformation project launched in 2009 to adapt the Group’s structures to the challenges of the future. These costs essentially comprise employee-related expenses incurred under plans to adjust headcount in support functions, sales forces and R&D in Europe, along with industrial site rehabilitation costs and accelerated depreciation of property, plant and equipment. They also include ongoing measures to migrate the Group’s businesses towards biotechnologies and vaccine production, and to anticipate the decline in sales associated with the patent expiries of a number of major products.

(€ million)	6 months to June 30, 2011		6 months to June 30, 2010		12 months to December 31, 2010
Employee-related costs		351		112		817
Expenses related to property, plant and equipment		82		16		184
Indemnities on contracts termination excluding employee-related costs		24		2		35
Environmental expenses		—		59		105
Other restructuring costs		10		1		243
Total		467		190		1,384

B.17. Other gains and losses, and litigation

Other gains and losses recognized in the first half of 2011 include €517 million mainly representing the backlog of depreciation and amortization charged against the property, plant and equipment and intangible assets of Merial for the period, September 18, 2009 through December 31, 2010 (see Note B.1.2.).

B.18. Financial income and expenses

Financial income and expenses are as follows:

(€ million)	6 months to June 30, 2011			6 months to June 30, 2010(1)			12 months to December 31, 2010(1)
Cost of debt(2)		(198	)		(193	)		(385	)
Interest income		62			28			61
Cost of debt, net of cash and cash equivalents		(136	)		(165	)		(324	)
Non-operating foreign exchange gains/(losses)		(10	)		(9	)		(20	)
Unwinding of discount of provisions(3)		(40	)		(31	)		(68	)
Gains/(losses) on disposals of financial assets		1			51			61
Impairment losses on financial assets, net of reversals		—			(4	)		(6	)
Other items		7			18			(5	)
Net financial income/(expenses)		(178	)		(140	)		(362	)
comprising :    Financial expenses		(234	)		(214	)		(468	)
Financial income(4)		56			74			106

⁽¹⁾  The result of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net result of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently.

⁽²⁾  Including gain/(loss) on interest and currency derivatives used to hedge debt: €5 million for the six months ended June 30, 2011, €4 million for the six months ended June 30, 2010, and €7 million for the year ended December 31, 2010.

⁽³⁾  Mainly provisions for environmental risks.

⁽⁴⁾  Including net foreign currency gains and losses.

B.19. Income tax expense

The difference between the effective tax rate and the standard corporate income tax rate applicable in France is explained as follows:

(as a percentage)	6 months to June 30, 2011(1)			6 months to June 30, 2010(1)			12 months to December 31, 2010
Standard tax rate applied in France		34			34			34
Impact of reduced-rate income tax on royalties in France		(13	)		(7	)		(10	)
Impact of change in net deferred tax liability due to changes in tax rates		1			—			—
Impact of tax borne by BMS for the territory managed by Sanofi		(2	)		(1	)		(2	)
Other		1			—			1
Effective tax rate		21			26			23

⁽¹⁾  Rate calculated on the basis of the estimated full-year effective tax rate (see Note A.2.).

B.20. Segment information

Sanofi has three operating segments: Pharmaceuticals, Human Vaccines (Vaccines), and Animal Health.

In March 2011, Sanofi and Merck announced the mutual termination of their agreement to create a new animal health joint venture. Following this announcement, the Animal Health business was identified as an operating segment, on the basis of information that is now used internally by management to measure operational performance and to allocate resources.

The Pharmaceuticals segment covers research, development, production and marketing of medicines, including activities acquired with Genzyme (see Note B.1.1.). Sanofi’s pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health products. This segment also includes all associates and joint ventures whose activities are related to pharmaceuticals, in particular the entities majority owned by BMS.

The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes the Sanofi Pasteur MSD joint venture.

The Animal Health segment comprises the research, development, production and marketing activities of Merial, which offers a complete range of medicines and vaccines for a wide variety of animal species.

The Other segment includes all activities that do not qualify as reportable segments under IFRS 8 (Operating Segments). In particular, this segment includes Sanofi’s interest in the Yves Rocher Group, and the effects of retained commitments in respect of divested businesses.

Inter-segment transactions are not material.

Segment results

Sanofi reports segment results on the basis of “Business operating income”. This indicator, adopted in order to comply with IFRS 8, is used internally to measure operational performance and allocate resources.

Business operating income is derived from Operating income, adjusted as follows:

¡ the amounts reported in the line items Restructuring costs, Fair value remeasurement of liabilities related to contingent consideration and Other gains and losses, and litigation are eliminated;

¡ amortization and impairment losses charged against intangible assets (other than software) are eliminated;

¡ the share of profits/losses from associates and joint ventures is added;

¡ the share attributable to non-controlling interests is deducted;

¡ other acquisition-related effects (primarily the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments in associates and joint ventures) are eliminated;

¡ restructuring costs relating to associates and joint ventures are eliminated.

Segment results are shown in the tables below:

	6 months ended June 30, 2011
(€ million)	Pharmaceuticals			Vaccines			Animal Health			Other			Total
Net sales		13,730			1,308			1,090			—			16,128
Other revenues		816			10			9			—			835
Cost of sales		(4,073	)		(550	)		(327	)		—			(4,950	)
Research and development expenses		(1,963	)		(264	)		(70	)		—			(2,297	)
Selling and general expenses		(3,614	)		(264	)		(322	)		(1	)		(4,201	)
Other operating income and expenses		42			(1	)		(7	)		(11	)		23
Share of profit/(loss) of associates(1)		559			(2	)		—			13			570
Net income attributable to non-controlling interests		(136	)		—			—			—			(136	)
Business operating income		5,361			237			373			1			5,972
Financial income and expenses														(178	)
Income tax expense														(1,474	)
Business net income														4,320

⁽¹⁾  Net of taxes

	6 months ended June 30, 2010(1)
(€ million)	Pharmaceuticals			Vaccines			Animal Health			Other			Total
Net sales		13,476			1,692			1,037			—			16,205
Other revenues		786			12			9			—			807
Cost of sales		(3,531	)		(552	)		(303	)		—			(4,386	)
Research and development expenses		(1,943	)		(247	)		(75	)		—			(2,265	)
Selling and general expenses		(3 373	)		(284	)		(306	)		(2	)		(3,965	)
Other operating income and expenses		168			(2	)		6			(70	)		102
Share of profit/(loss) of associates(2)		491			(8	)		—			8			491
Net income attributable to non-controlling interests		(150	)		1			1			—			(148	)
Business operating income		5,924			612			369			(64	)		6,841
Financial income and expenses														(140	)
Income tax expense														(1,796	)
Business net income														4,905

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

⁽²⁾  Net of taxes

	12 months ended December 31, 2010(1)
(€ million)	Pharmaceuticals			Vaccines			Animal Health			Other			Total
Net sales		26,576			3,808			1,983			—			32,367
Other revenues		1,623			28			18			—			1,669
Cost of sales		(7,316	)		(1,371	)		(615	)		—			(9,302	)
Research and development expenses		(3,884	)		(517	)		(155	)		—			(4,556	)
Selling and general expenses		(6,962	)		(603	)		(604	)		(2	)		(8,171	)
Other operating income and expenses		177			14			(6	)		(108	)		77
Share of profit/(loss) of associates(2)		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
Financial income and expenses														(362	)
Income tax expense														(3,286	)
Business net income														9,215

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

⁽²⁾  Net of taxes

“Business net income” is determined by taking “Business operating income” and adding financial income and deducting financial expenses, including the related income tax effects.

“Business net income” is defined as Net income attributable to equity holders of Sanofi excluding (i) amortization of intangible assets; (ii) impairment of intangible assets; (iii) fair value remeasurement of liabilities related to contingent consideration; (iv) other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); (v) restructuring costs (including restructuring costs relating to associates and joint ventures), (vi) other gains and losses, and litigation; (vii) the impact of the non-depreciation of the property, plant and equipment of Merial in 2010 (in accordance with IFRS 5); (viii) the tax effect related to the items listed above as well as (ix) the effects of major tax disputes and (x) the share of non-controlling interests in items (i) through (ix). Items (iii), (v) and (vi) correspond to those reported in the income statement line items Fair value remeasurement of liabilities related to contingent consideration, Restructuring costs, and Other gains and losses, and litigation.

The table below reconciles “Business net income” to Net income attributable to equity holders of Sanofi:

(€ million)		6 months to June 30, 2011			6 months to June 30, 2010(1)			12 months to December 31, 2010(1)
Business net income			4,320			4,905			9,215
(i)	Amortization of intangible assets		(1,701	)		(1,802	)		(3,529	)
(ii)	Impairment of intangible assets		(69	)		(108	)		(433	)
(iii)	Fair value remeasurement of liabilities related to contingent consideration		(66	)		—			—
(iv)	Expenses arising from the impact of acquisitions on inventories(2)		(264	)		(134	)		(142	)
(v)	Restructuring costs		(467	)		(190	)		(1,384	)
(vi)	Other gains and losses, and litigation		(517	)		—			(138	)
(vii)	Impact of the non-depreciation of the property, plant and equipment of Merial in 2010 (in accordance with IFRS 5)		—			39			77
(viii)	Tax effects of:		1,002			726			1,854
	- amortization of intangible assets		559			600			1,181
	- impairment of intangible assets		20			33			143
	- fair value remeasurement of liabilities related to contingent consideration		5			—			—
	- expenses arising from the impact of acquisitions on inventories		78			43			44
	- restructuring costs		150			63			466
	- other gains and losses, and litigation		190			—			46
	- non-depreciation of the property, plant and equipment of Merial in 2010 (IFRS 5)		—			(13	)		(26	)
(iv) / (ix)	Other tax items		—			(1	)		2
(x)	Share of items listed above attributable to non-controlling interests		—			1			3
(iv) / (v)	Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures(3)		(14	)		(15	)		(58	)
Net income attributable to equity holders of Sanofi			2,224			3,421			5,467

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with of IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

⁽²⁾  This line corresponds to the workdown of inventories remeasured at fair value at the acquisition date.

⁽³⁾  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).

Other segment information

The tables below show the split by operating segment of (i) the carrying amount of investments in associates and joint ventures, (ii) acquisitions of property, plant and equipment, and (iii) acquisitions of intangible assets.

The principal associates and joint ventures allocated to each segment are for Pharmaceuticals, the entities majority owned by BMS (see Note C.1. to the consolidated financial statements for the year ended December 31, 2010), Handok, and Infraserv Höchst; for Vaccines, Sanofi Pasteur MSD; and for the Other segment, Yves Rocher.

Acquisitions of intangible assets and property, plant and equipment correspond to acquisitions paid for during the period.

	June 30, 2011
(€ million)	Pharmaceuticals		Vaccines		Animal Health		Other		Total
Investments in associates and joint ventures		432		338		—		140		910
Acquisitions of property, plant and equipment		540		162		38		—		740
Acquisitions of intangible assets		83		5		4		—		92
	June 30, 2010
(€ million)	Pharmaceuticals		Vaccines		Animal Health		Other		Total
Investments in associates and joint ventures		459		363		—		128		950
Acquisitions of property, plant and equipment		358		208		43		—		609
Acquisitions of intangible assets		149		27		1		—		177
	December 31, 2010
(€ million)	Pharmaceuticals		Vaccines		Animal Health		Other		Total
Investments in associates and joint ventures		446		350		—		128		924
Acquisitions of property, plant and equipment		779		416		88		—		1,283
Acquisitions of intangible assets		335		43		1		—		379

Information by geographical region

The geographical information on net sales provided below is based on the geographical location of the customer.

In accordance with IFRS 8, the non-current assets reported below exclude financial instruments, deferred tax assets, and pre-funded pension obligations.

			6 months to June 30, 2011
(€ million)	Total		Europe		of which France		North America		Of which United States		Other Countries
Net sales		16,128		5,981		1,591		4,843		4,580		5,304
Non-current assets:
– Property, plant and equipment		10,669		7,032		4,049		2,585		2,187		1,052
– Intangible assets(1)		21,078		5,458				12,901				2,719
– Goodwill(1)		34,767		14,651				14,885				5,231

⁽¹⁾  Excluding Merial, which has intangible assets of €4,232 million, including goodwill of €1,118 million.

			6 months to June 30, 2010
(€ million)	Total		Europe		of which France		North America		Of which United States		Other Countries
Net sales(1)		16,205		6,298		1,578		5,066		4,819		4,841
Non-current assets:
– Property, plant and equipment		8,234		5,763		3,502		1,630		1,208		841
– Intangible assets		14,503		4,183				7,304				3,016
– Goodwill		33,050		13,673				14,388				4,989

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with of IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

			12 months to December 31, 2010
(€ million)	Total		Europe		of which France		North America		Of which United States		Other Countries
Net sales(1)		32,367		12,198		3,092		10,333		9,790		9,836
Non-current assets:
– Property, plant and equipment		8,155		5,764		3,603		1,510		1,091		881
– Intangible assets		12,479		3,773				5,835				2,871
– Goodwill		31,932		13,718				13,264				4,950

⁽¹⁾  The results of operations of Merial, previously reported as held-for-exchange, have been reclassified and included in net results of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/Schering-Plough are to be maintained as two separate businesses operating independently (see Notes B.1.2. and B.7.).

As stated in Note D.5. to the consolidated financial statements for the year ended December 31, 2010, France is not a cash generating unit (CGU). Consequently, information about goodwill is provided for Europe.

Net sales

Sanofi’s net sales comprise the net sales generated by the Pharmaceuticals, Vaccines and Animal Health segments.

The table below shows net sales of flagship products and of the other major products of the Pharmaceuticals segment:

(€ million)	6 months to June 30, 2011		6 months to June 30, 2010		12 months to December 31, 2010
Lantus®		1,894		1,716		3,510
Apidra®		102		83		177
Amaryl®		217		234		478
Insuman®		64		67		133
Other Diabetes Products		4		—		—
Sub-total: Diabetes		2,281		2,100		4,298
Lovenox®		1,119		1,635		2,806
Taxotere®		586		1,129		2,122
Plavix®		994		1,073		2,083
Aprovel®		663		665		1,327
Eloxatin®		436		160		427
Multaq®		131		63		172
Jevtana®		96		—		82
Stilnox®/ Ambien®/ Ambien CR®/ Myslee®		232		441		819
Allegra®		335		319		607
Copaxone®		233		262		513
Tritace®		194		211		410
Depakine®		196		184		372
Xatral®		129		153		296
Actonel®		91		124		238
Nasacort®		74		104		189
Other Products		2,940		3,060		6,064
Consumer Health Care		1,356		1,069		2,217
Generics		848		724		1,534
Cerezyme®		166		—		—
Myozyme® / Lumizyme®		99		—		—
Fabrazyme®		30		—		—
Renagel® / Renvela®		137		—		—
SynVisc®		89		—		—
Other Genzyme Products		275		—		—
Sub-total: Genzyme(1)		796		—		—
Total Pharmaceuticals		13,730		13,476		26,576

⁽¹⁾  Since acquisition date (April 4, 2011).

The table below shows net sales of the principal vaccine types sold by the Vaccines segment:

(€ million)	6 months to June 30, 2011		6 months to June 30, 2010		12 months to December 31, 2010
Influenza Vaccines		158		532		1,297
of which seasonal vaccines		158		113		845
Of which pandemic vaccines		—		419		452
Pediatric Combination and Poliomyelitis Vaccines		494		483		984
Meningitis/Pneumonia Vaccines		183		224		527
Adult Booster Vaccines		206		186		449
Travel and Endemics Vaccines		171		193		382
Other Vaccines		96		74		169
Total Vaccines		1,308		1,692		3,808

The table below shows net sales of the principal products sold by the Animal Health segments:

(€ million)	6 months to June 30, 2011		6 months to June 30, 2010 (1)		12 months to December 31, 2010 (1)
Frontline® and other fipronil- based products		459		446		774
Vaccines		325		299		627
Avermectin		198		188		355
Other Animal Health Products		108		104		227
Total Animal Health		1,090		1,037		1,983

⁽¹⁾  See Note B.1.2.

Split of sales

The three largest customers accounted for 6.5%, 5.2% and 4.9% of the Group’s gross sales in the first half of 2011.

C. EVENTS SUBSEQUENT TO JUNE 30, 2011

¡ On July 11, 2011, Sanofi announced the strategic divestiture of its dermatology business Dermik to Valeant Pharmaceuticals International Inc. (NYSE/TSX: VRX), (“Valeant”) for a total cash consideration of US $425 million. This transaction enables Sanofi to concentrate its efforts on its growth platforms in North America. The transaction includes all of the assets of Dermik, comprising a portfolio including leading therapeutic and aesthetic dermatology brands such as BenzaClin^®, Carac^® and Sculptra^®, plus a manufacturing site in Canada. The sales related to this business amounted to US $206 million in 2010. Closing of the transaction is contingent on the clearance from the relevant regulatory authorities and the other customary closing conditions.

¡ End of July 2011, Sanofi updated on the supply of Genzyme’s products Cerezyme^® and Fabrazyme^®. Based upon actual production trends to date and lead times to release products to the market, Sanofi does not expect that the 2011 Contingent Value Right (CVR) Production Milestone will be met.