20-F 1 d246196d20f.htm 20-F 20-F
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

 

(Mark One)

¨   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
Or
¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Or
¨   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                      to                     

Commission File Number: 001-31368

 

 

Sanofi

(Exact name of registrant as specified in its charter)

N/A

(Translation of registrant’s name into English)

France

(Jurisdiction of incorporation or organization)

54, Rue La Boétie, 75008 Paris, France

(Address of principal executive offices)

 

 

Karen Linehan, Executive Vice President Legal Affairs and General Counsel

54, Rue La Boétie, 75008 Paris, France. Fax: 011 + 33 1 53 77 43 03. Tel: 011 + 33 1 53 77 40 00

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

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

 

Title of each class:

  

Name of each exchange on which registered:

American Depositary Shares, each representing one half of one ordinary share, par value 2 per share    New York Stock Exchange
Ordinary shares, par value 2 per share    New York Stock Exchange (for listing purposes only)
Contingent Value Rights    NASDAQ Global Market

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

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2015 was:

Ordinary shares: 1,305,696,759

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  x     NO  ¨.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    YES  ¨    NO  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x                    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ¨                     No  ¨

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

 

Large accelerated filer x   Accelerated filer ¨   Non-accelerated filer ¨

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

 

U.S. GAAP  ¨    International Financial Reporting Standards as issued by
the International Accounting Standards Board x
   Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ¨                     Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨                     No  x.

 

 

 

 


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Presentation of financial and other information

The consolidated financial statements contained in this annual report on Form 20-F have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS as adopted by the European Union, as of December 31, 2015.

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

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

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

 

·   

trademarks used or that may be or have been used under license by Sanofi and/or its affiliates, such as Actonel® a trademark of Actavis; Afrezza® a trademark of Mannkind Corporation; Aldurazyme® a trademark of the Joint Venture Biomarin/Genzyme LLC; Avilomics® a trademark of Avila Therapeutics Inc.; Cialis® OTC a trademark of Eli Lilly; Copaxone® a trademark of Teva Pharmaceuticals Industries; Cortizone-10® a trademark of Johnson & Johnson (except in the United States where it is a trademark of the Group); Fludara® and Leukine® trademarks of Alcafleu; Flutiform® a trademark of Jagotec AG; Gardasil® and Zostavax® trademarks of Merck & Co.; Hexyon® and Repevax® trademarks of Sanofi Pasteur MSD; RetinoStat® and UshStat®, trademarks of Oxford Biomedica; Spedra™ and Stendra® trademarks of Vivus Inc.; Squarekids® a trademark of Kitasato Daiichi Sankyo Vaccine Co., Ltd.; Zaltrap® a trademark of Regeneron in the United States;

 

·   

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

 

·   

other third party trademarks such as Advantage® and Advantix® trademarks of Bayer; Atelvia® trademark of Actavis in the United States; DDAVP® a trademark of Ferring (except in the United States where it is a trademark of the Group); Enbrel® a trademark of Immunex in the United-States and of Wyeth on other geographical areas; GLAAS™ a trademark of Immune

   

Design; Humalog®, Humulin™, Miriopen®, Basaglar® and Kwikpen® trademarks of Eli Lilly; iPhone® and iPod Touch® trademarks of Apple Inc.; Lactacyd® a trademark of Omega Pharma NV in the EU and several other European countries; Rituxan® a trademark of Biogen Idec Inc. in the United States and Canada, and Genentech in Japan; Unisom® a trademark of Johnson & Johnson on certain geographical areas (except in the United States and Israël where it is a trademark of the Group and Canada where it is a trademark of Paladin Labs Inc.); and Yosprala™ a trademark of Pozen Inc.

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

The data relating to market shares and ranking information for pharmaceutical products, in particular as presented in “Item 4. Information on the Company – B. Business Overview – B.6. Markets – B.6.1. Marketing and distribution,” are based on sales data from IMS Health MIDAS (IMS), retail and hospital, in Moving Annual Total September 2015, in constant euros (unless otherwise indicated).

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

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

 

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

 

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

 

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

Data relative to market shares and ranking information presented herein for our Consumer Health Care products, are based on sales data from Nicholas Hall.

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

 

 

 

 


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

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

Cautionary statement regarding forward-looking statements

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

 

·   

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

 

·   

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

·   

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

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

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

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

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

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

 

 

 

 


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ABBREVIATIONS

Abbreviations used in the Form 20-F

 

ADR/ADS   American Depositary Receipt/American Depositary Share
AFEP   Association francaise des entreprises privees´(French association of large companies)
AMF   Autorité des marcheś financiers (the French market regulator)
ANDA   Abbreviated New Drug Application
ECB   European Central Bank
BLA   Biologic License Application
BMS   Bristol-Myers Squibb
CGU   Cash generating unit
CHC   Consumer Health Care
CHMP   Committee for Medicinal Products for Human Use
CNS   Central Nervous System
COSO   Committee of Sponsoring Organizations of the Treadway Commission
COVALIS   Health risk prevention committee
CSR   Corporate Social Responsibility
CVMP   Committee for Medicinal Products for Veterinary Use
CVR   Contingent Value Right
ECHA   European Chemicals Agency
ECOVAL   Internal committee for assessing the environmental risks of our pharmaceutical products
EMA   European Medicines Agency
EMTN   Euro Medium Term Note
EPA   U.S. Environmental Protection Agency
EPS   Earnings per share
EU   European Union
FCPA   U.S. Foreign Corrupt Practices Act
FCPE   Fonds commun de placement d’entreprise (Corporate investment funds)
FDA   U.S. Food and Drug Administration
GAVI   Global Alliance for Vaccines and Immunisation
GLP-1   Glucagon-like peptide-1
GMP   Good Manufacturing Practice
GRI   Global Reporting Initiative
HSE   Health, Safety and Environment
IASB   International Accounting Standards Board
IFRS   International Financial Reporting Standards
ILO   International Labor Organisation
LEED   Leadership in Energy and Environmental Design
LSD   Lysosomal storage disorder
MEDEF   Mouvement des entreprises de France (French business confederation)
NASDAQ   National Association of Securities Dealers Automated Quotations
NDA   New Drug Application
OECD   Organisation for Economic Co-operation and Development
OTC   Over The Counter
PaHO   Pan American Health Organisation
PRAC   Pharmacovigilance Risk Assessment Committee
R&D   Research & Development
REACH   Registration, Evaluation, Authorization and restriction of Chemicals
ROA   Return on assets
SEC   U.S. Securities and Exchange Commission
TRIBIO   Internal biological risk committee
TSR   Total Shareholder Return
TSU   Therapeutic Strategic Unit
UNICEF   United Nations Children’s Fund
USDA   United States Department of Agriculture
WHO   World Health Organization
 

 

 

I


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Table of contents

 

LOGO  
  Item 1.   Identity of Directors, Senior Management and Advisers     1   
  Item 2.   Offer Statistics and Expected Timetable     1   
  Item 3.   Key Information     1   
    A. Selected Financial Data     1   
   

B. Capitalization and Indebtedness

    3   
   

C. Reasons for Offer and Use of Proceeds

    3   
    D. Risk Factors     4   
  Item 4.   Information on the Company     18   
   

A. History and Development of the Company

    19   
    B. Business Overview     20   
    C. Organizational Structure     72   
    D. Property, Plant and Equipment     73   
  Item 4A.   Unresolved Staff Comments  
  Item 5.   Operating and Financial Review and Prospects     78   
  Item 6.   Directors, Senior Management and Employees     132   
   

A. Directors and Senior Management

    132   
    B. Compensation     153   
    C. Board Practices     169   
    D. Employees     174   
    E. Share Ownership     176   
  Item 7.   Major Shareholders and Related Party Transactions     180   
    A. Major Shareholders     180   
    B. Related Party Transactions     181   
    C. Interests of Experts and Counsel     181   
  Item 8.   Financial Information     182   
   

A. Consolidated Financial Statements and Other Financial Information

    182   
    B. Significant Changes     184   
  Item 9.   The Offer and Listing     186   
    A. Offer and Listing Details     186   
    B. Plan of Distribution     187   
    C. Markets     187   
    D. Selling Shareholders     187   
    E. Dilution     187   
    F. Expenses of the Issue     187   
  Item 10.   Additional Information     188   
    A. Share Capital     188   
   

B. Memorandum and Articles of Association

    188   
    C. Material Contracts     200   
    D. Exchange Controls     201   
    E. Taxation     201   
    F. Dividends and Paying Agents     205   
    G. Statement by Experts     205   
    H. Documents on Display     205   
    I. Subsidiary Information     205   
  Item 11.   Quantitative and Qualitative Disclosures about Market Risk     206   
  Item 12.   Description of Securities other than Equity Securities     210   
LOGO     
     
     
  Item 13.   Defaults, Dividend Arrearages and Delinquencies     216   
  Item 14.   Material Modifications to the Rights of Security Holders     216   
  Item 15.   Controls and Procedures     216   
  Item 16.   [Reserved]     216   
  Item 16A.   Audit Committee Financial Expert     216   
  Item 16B.   Code of Ethics     217   
  Item 16C.   Principal Accountants’ Fees and Services     217   
  Item 16D.   Exemptions from the Listing Standards for Audit Committees     217   
  Item 16E.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers     217   
  Item 16F.   Change in Registrant’s Certifying Accountant     218   
  Item 16G.   Corporate Governance     218   
  Item 16H.   Mine Safety Disclosure     219   
     

LOGO  

  

  Item 17.   Financial Statements     220   
  Item 18.   Financial Statements     220   
  Item 19.   Exhibits     220   
 


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Item 1. Identity of Directors, Senior Management and Advisers

 

 

 

PART I

 

Item 1. Identity of Directors, Senior Management and Advisers

N/A

 

Item 2. Offer Statistics and Expected Timetable

N/A

 

Item 3. Key Information

A. Selected Financial Data

SUMMARY OF SELECTED FINANCIAL DATA

 

The tables below set forth selected consolidated financial data for Sanofi. These financial data are derived from the Sanofi consolidated financial statements. The Sanofi consolidated financial statements for the years ended December 31, 2015, 2014 and 2013 are included in Item 18 of this annual report.

The consolidated financial statements of Sanofi for the years ended December 31, 2015, 2014 and 2013 have been

prepared in compliance with IFRS issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union as of December 31, 2015. The term “IFRS” refers collectively to international accounting and financial reporting standards (IAS and IFRS) and to interpretations of the interpretations committees (SIC and IFRIC) mandatorily applicable as of December 31, 2015.

Sanofi reports its financial results in euros.

 

 

 

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Item 2. Offer Statistics and Expected Timetable

 

 

 

SELECTED CONDENSED FINANCIAL INFORMATION

 

    As of and for the year ended December 31,  
(€ million, except per share data)   2015     2014     2013     2012     2011  
IFRS Income statement data(a)                                        

Net sales

    34,542        31,694        30,966        34,947(a)        33,389(a)   

Gross profit

    23,942        21,769        20,989        24,859(a)        24,193(a)   

Operating income

    5,624        6,064        4,982        6,430(a)        5,861(a)   

Net income excluding the held-for-exchange Animal Health business

    4,512        4,392        3,797        -(a)        -(a)   

Net income attributable to equity holders of Sanofi

    4,287        4,390        3,716        4,888        5,646   
Basic earnings per share (€)(b) :                                        

Net income excluding the held-for-exchange Animal Health business

    3.38        3.25        2.75        -(a)        -(a)   

Net income attributable to equity holders of Sanofi

    3.28        3.34        2.81        3.70        4.27   
Diluted earnings per share (€)(c) :                                        

Net income attributable to equity holders of Sanofi

    3.25        3.30        2.77        3.68        4.26   
IFRS Balance sheet data                                        

Goodwill and other intangible assets

    51,583(d)        53,740        52,529        58,265        62,221   

Total assets

    102,321        97,392        96,055        100,399        100,672   

Outstanding share capital

    2,603        2,620        2,641        2,646        2,647   

Equity attributable to equity holders of Sanofi

    58,049        56,120        56,904        57,352        56,193   

Long term debt

    13,118(d)        13,276        10,414        10,719        12,499   

Cash dividend paid per share ()(e)

    2.93(f)        2.85        2.80        2.77        2.65   

Cash dividend paid per share ($)(e)/(g)

    3.19(f)        3.46        3.86        3.65        3.43   

 

(a)   Including the Animal Health business, the net income/loss of which is presented in a separate line item, Net income/(loss) of the held-for-exchange Animal Health business, in the consolidated income statements for 2015, 2014 and 2013 (see Notes D.2.1. and D.36. to our consolidated financial statements included at Item 18 of this annual report). For 2012 and 2011, it is not practicable to provide information excluding the Animal Health business without unreasonable effort or expense.
(b)   Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to 1,306.2 million shares in 2015, 1,315.8 million shares in 2014, 1,323.1 million shares in 2013, 1,319.5 million shares in 2012 and 1,321.7 million shares in 2011.
(c)   Based on the weighted average in each period of the number of shares outstanding plus stock options and restricted shares with a potentially dilutive effect; i.e., 1,320.8 million shares in 2015, 1,331.1 million shares in 2014, 1,339.1 million shares in 2013, 1,329.6 million shares in 2012 and 1,326.7 million shares in 2011.
(d)   Excluding the Animal Health business which is presented in separate line items, Assets held for sale or exchange and Liabilities related to assets held for sale or exchange.
(e)   Each American Depositary Share, or ADS, represents one half of one share.
(f)   Dividends for 2015 will be proposed for approval at the annual general meeting scheduled for May 4, 2016.
(g)   Based on the relevant year-end exchange rate.

 

 

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Item 3. Key Information

 

 

 

SELECTED EXCHANGE RATE INFORMATION

 

The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the euro from 2011 through March 2016 expressed in U.S. dollars per euro. The information concerning the U.S. dollar exchange rate is based on the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”). We provide the

exchange rates below solely for your convenience. We do not represent that euros were, could have been, or could be, converted into U.S. dollars at these rates or at any other rate. For information regarding the effect of currency fluctuations on our results of operations, see “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

 

 

(U.S. dollar per euro)    Period-
end Rate
     Average
Rate(1)
     High      Low  
2011      1.30         1.40         1.49         1.29   
2012      1.32         1.29         1.35         1.21   
2013      1.38         1.33         1.38         1.28   
2014      1.21         1.32         1.39         1.21   
2015      1.09         1.10         1.20         1.05   
Last 6 months                                    
2015                                    

September

     1.12         1.12         1.14         1.11   

October

     1.10         1.12         1.14         1.10   

November

     1.06         1.07         1.10         1.06   

December

     1.09         1.09         1.10         1.06   
2016                                    

January

     1.08         1.09         1.10         1.07   

February

     1.09         1.11         1.14         1.09   

March(2)

     1.09         1.09         1.09         1.09   

 

(1)   

The average of the Noon Buying Rates on the last business day of each month during the relevant period for the full year average, and on each business day of the month for the monthly average. The latest available Noon Buying Rate being February 26, 2016, we have used European Central Bank Rates for the period from February 29, 2016 through March 3, 2016.

 

(2)   

In each case, measured through March 3, 2016.

On March  3, 2016 the European Central Bank Rate was 1.0901 per euro.

B. Capitalization and Indebtedness

N/A

C. Reasons for Offer and Use of Proceeds

N/A

 

 

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Item 3. Key Information

 

 

 

D. Risk Factors

Important factors that could cause actual financial, business, research or operating results to differ materially from expectations are disclosed in this annual report, including without limitation the following risk factors. Investors should carefully consider all the information set forth in the following risk factors before deciding to invest in any of the Company’s securities. In addition to the risks listed below, we may be subject to other material risks that as of the date of this report are not currently known to us or that we deem immaterial at this time.

Risks Relating to Legal and Regulatory Matters

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

Through patent and other proprietary rights such as data exclusivity or supplementary protection certificates in Europe, we hold exclusivity rights for a number of our research-based products. However, the protection that we are able to obtain varies in its duration and scope from product to product and country to country. This protection may not be sufficient to maintain effective product exclusivity because of local differences in the patents, in national laws or applicable legal systems, or developments in law or jurisprudence, which may give rise to inconsistent judgments when we assert or defend our patents.

Moreover, patent and other proprietary rights do not always provide effective protection for our products. Manufacturers of generic products or biosimilars are increasingly seeking to challenge patent validity or coverage before the patent expire, and manufacturers of biosimilars or interchangeable versions of the products are seeking to have their version of the product approved before the exclusivity period ends. Furthermore, in an infringement suit against a third party, we may not prevail and the decision rendered may not consider that our patent or other proprietary rights are valid, enforceable or infringed. Our competitors may also successfully avoid patents, for example, through design innovation, and we may not hold sufficient evidence of infringement to bring suit.

In certain cases, to terminate or avoid patent litigation, we or our partners may be required to obtain licenses from the holders of third-party intellectual property rights that cover aspects of our existing and future products in order to manufacture, use and/or sell them. Any payments under these licenses may reduce our profits from such products and we may not be able to obtain these licenses on favorable terms or at all. Third parties may also request a preliminary injunction in a country from a court of law to prevent us from marketing a product if they consider that we infringe their patent rights in the country. If they obtain a

preliminary or permanent injunction from a court of law or if we fail to obtain a required license for a country where the valid third-party intellectual property right as confirmed by a court of law, exists or are unable to alter the design of our technology to fall outside the scope of third-party intellectual property rights, we may be unable to market some of our products in certain countries, which may limit our profitability.

Also, some countries may consider granting a compulsory license to a third party to use patents protecting an innovator’s product, which limits the protection granted to such products.

We are involved in litigation worldwide to enforce certain of our patent rights against generics, proposed generics and biosimilars of our small molecule and biological pharmaceutical products (see “Item 8. Financial Information – A. Consolidated Financial Statements and Other Financial Information – Information on Legal or Arbitration Proceedings” for additional information). Even in cases where we ultimately prevail in an infringement claim, legal remedies available for harm caused to us by infringing products may be inadequate to make us whole. A competitor may launch a generic or a biosimilar product “at risk” before the initiation or completion of the court proceedings, and the court may decline to grant us a preliminary injunction to halt further “at risk” sales and remove the infringing product from the market. Additionally, while we would be entitled to obtain damages in such a case, the amount that we may ultimately be awarded and able to collect may be insufficient to compensate all harm caused to us. A successful result against a competing product for a given patent or in a specific country is not necessarily predictive of our future success against another competing product or in another country because of local variations in the patents and patent laws.

We have increased the proportion of biological therapeutics in our pipeline relative to traditional small molecule pharmaceutical products. We expect to face increasing competition from biosimilars in the future. With the accelerated regulatory pathways provided in the U.S. and Europe for biosimilar drug approval, biosimilars can be a threat to the exclusivity of any biological therapeutics we sell or may market in the future and can pose the same issues as the small molecule generic threat described hereinabove. Governments may adopt more permissive approval frameworks (for example, shortening the duration of data exclusivity, or narrowing the scope of new products receiving data exclusivity) which could allow competitors to obtain broader marketing approval for biosimilars including as a substitutable product, increasing competition for our products (see also “Changes in the laws or regulations that apply to us could affect the Group’s business, results of operations and financial condition”). If a biosimilar version of one of our products were approved, it could reduce our sales of that product.

However, with our presence as a manufacturer of generics and anticipated entry into biosimilars, we will utilize patent

 

 

 

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challenge strategies against other innovators’ patents, similar to those of long-established generic companies, but there is no assurance that these strategies will be successful.

If our patents and/or proprietary rights to our products were limited or circumvented, our financial results could be materially and adversely affected.

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

Product liability is a significant risk for any pharmaceutical company, and our product liability exposure could increase given that liability claims relating to our businesses may differ with regards to their nature, scope and level, from the types of product liability claims that we have handled in the past. Substantial damage awards and/or settlements have been handed down – notably in the United States and other common law jurisdictions – against pharmaceutical companies based on claims for injuries allegedly caused by the use of their products. Such claims can also be accompanied by consumer fraud claims by customers or third-party payers seeking reimbursement of the cost of the product.

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

Often, the side effect profile of pharmaceutical drugs cannot be fully established based on preapproval clinical studies involving only several hundred to several thousand patients. Routine review and analysis of the continually growing body of post-marketing safety surveillance and clinical trials provide additional information – for example, potential evidence of rare, population-specific or long-term adverse reactions or of drug interactions that were not observed in preapproval clinical studies – and may cause product labeling to evolve, including restrictions of therapeutic indications, new contraindications, warnings or precautions, and occasionally even the suspension or withdrawal of a product marketing authorization. Following a recall or a withdrawal, pharmaceutical companies can face significant product liability claims.

Furthermore, we commercialize several devices (some of which use new technologies) which, if they malfunction, could cause unexpected damage and lead to product liability claims (see “– Breaches of data security, disruptions of information technology systems and cyber threats could result in financial, legal, business or reputational harm.”).

Although we continue to insure a portion of our product liability with third-party carriers, product liability coverage is increasingly difficult and costly to obtain, particularly in the United States. In the future, it is possible that self-insurance may become the sole commercially reasonable means available for managing the product liability financial risk of our pharmaceutical and vaccines businesses (see “Item 4.

Information on the Company – B. Business Overview – B.9. Insurance and Risk Coverage”). In cases where we self-insure, the legal costs that we would bear for handling such claims and potential indemnifications to be paid to claimants could have a negative impact on our financial condition.

Due to insurance conditions, even when the Group has insurance coverage, recoveries from insurers may not be totally successful. Moreover, insolvency of an insurer could affect our ability to recover claims on policies for which we have already paid a premium.

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

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

Obtaining marketing authorization is a long and highly regulated process requiring us to present extensive documentation and data to the regulatory authorities. Regulatory processes differ from one authority to another. Either at the time of the filing of the application for a marketing authorization or later during its review, each regulatory authority may impose its own requirements which can evolve over time, including requiring local clinical studies, and may delay or refuse to grant approval, even though a product has already been approved in another country.

Health authorities are increasingly focusing on product safety and on the risk/benefit profile of pharmaceuticals products. In particular, the FDA and the EMA have increased their requirements, particularly in terms of the volume of data needed to demonstrate a product’s efficacy and safety. Even after regulatory approval, marketed products are subject to continual review, risk evaluations or comparative effectiveness studies including post-marketing studies to which we have committed as a condition of approval. In addition, following the implementation of European pharmacovigilance legislation in 2012, the Company and the European Regulatory Agencies (under the supervision of the PRAC (Pharmacovigilance Risk Assessment Committee)) have reinforced their systematic and intensive safety signal detection systems, which may detect safety issues even with mature products that have been on the market for considerable time. This system may result in additional market authorization suspensions or withdrawals. All of these requirements have increased the costs associated with maintaining regulatory approvals and achieving reimbursement for our products. Post-regulatory approval

 

 

 

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reviews and data analyses can lead to the issuance of recommendations by government agencies, health professional and patient or other specialized organizations regarding the use of products; for example, a recommendation to limit the patient scope of a drug’s indication, impose marketing restrictions, or suspend or withdraw the product can result in a reduction in sales volume, as well as an increased risk of litigation.

Moreover, to monitor our compliance with applicable regulations, the FDA, the EMA and comparable agencies in other jurisdictions routinely conduct inspections of our facilities and may identify potential deficiencies. We have received FDA Warning Letters in the past following the inspection of some of our facilities and may receive such letters in the future. If we fail to adequately respond to warning letters identifying a deficiency following an inspection, or fail to comply with applicable regulatory requirements at all or within the targeted timeline, we could be subject to enforcement, remedial and/or punitive actions by the FDA, the EMA or other regulatory authorities. In addition, in order to comply with our duty to report adverse safety signals to regulatory authorities, we must regularly train our employees and third parties (such as external sales forces and distributor employees) on regulatory matters. If we fail to train these people, or fail to train them appropriately, we may be exposed to the risk that safety events are not reported or not reported in a timely manner in breach of our reporting obligations.

To the extent that new regulations raise the costs of obtaining and maintaining product authorizations, or limit the economic value of a new product to its originator, the growth prospects of our industry and of the Group would be diminished. Approximately 65% of our current development portfolio consists of biological products that may in the future bring new therapeutic responses to current unmet medical needs, but that may also lead to more regulatory and technical constraints and/or costly investments from an industrial standpoint as biological products are complex to produce. These constraints and costs could adversely affect our business, results of operations and financial condition.

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

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

UK Bribery Act, the OECD Anti-Bribery Convention and other anti-bribery laws and regulations).

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

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

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

These risks may encourage us to enter into settlement agreements and those settlements may involve significant monetary payments and/or criminal penalties and may include admissions of wrongdoing. Settlement of healthcare fraud cases in the United States may require companies to enter into a Corporate Integrity Agreement, which is intended to regulate company behavior for a specified period of years. For example in 2015 we entered into such an agreement as part of settlements relating to our Seprafilm® and Hyalgan® products.

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

All aspects of our business, including research and development, manufacturing, marketing, pricing or sales are

 

 

 

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subject to extensive legislation and regulation. Changes in applicable laws, or in their application, could have a material adverse effect on our business.

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

This new competitive environment and potential regulatory changes may further limit the exclusivity enjoyed by innovative products on the market and directly impact pricing and reimbursement levels, which may adversely affect our business and future results. See “Item 4. Information on the Company – B. Business Overview – B.6. Markets – B.6.2. Competition” and “– B.6.3. Regulatory framework”.

In addition, changes in the various tax laws of the jurisdictions where affiliates of the Group operate, or changes in their application, with respect to matters such as tax rates, transfer pricing, dividends, controlled companies or a restriction in certain forms of tax relief, could affect our effective tax rate and our future results. For example, both the OECD’s initiative on Base Erosion and Profits Shifting (BEPS) and the European Union’s initiative on the Code of Conduct for Business Taxation could lead to significant changes to tax laws and regulations in the future. Additionally, due to the complexity of the fiscal environment, the ultimate resolution of any tax matters may result in payments greater or lesser than amounts accrued.

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

Risks Relating to Our Business

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

Discovering and developing a new product is a costly, lengthy and uncertain process. To be successful in the highly competitive pharmaceutical industry, we must commit substantial resources each year to research and development in order to develop new products to compensate for the decreasing sales of our products facing expiry of patents and regulatory data exclusivity or

competition from new products of competitors that are perceived as being superior. In 2015, we spent 5,259 million on research and development, amounting to 14.2% of our aggregate net sales.

Our industry is driven by the need for constant innovation, but we may spread ourselves across too many areas of inquiry to be successful and may not be able to improve internal research productivity sufficiently to sustain our pipeline. We may also not invest in the right technology platforms, therapeutic areas, and product classes to build a robust pipeline and fulfill unmet medical needs. Fields of discovery, in particular biotechnology are highly competitive and characterized by significant and rapid technological changes. Numerous companies are working on the same targets and a product considered as promising at the very beginning may become less attractive if a competitor addressing the same unmet need reaches the market earlier.

The research and development process can take up to 15 years from discovery to commercial product launch. This process is conducted in various stages in order to test, along with other features, the effectiveness and safety of a product. There can be no assurance that any of these product candidates will be proven safe or effective. See “Item 4. Information on the Company – B. Business Overview – B.5. Global Research & Development”. Accordingly, there is a substantial risk at each stage of development – including clinical studies – that we will not achieve our goals of safety and/or efficacy and that we will have to abandon a product in which we have invested substantial amounts and human resources, even in late stage development (Phase III). Decisions concerning the studies to be carried out can have a significant impact on the marketing strategy for a given product. Multiple in-depth studies can demonstrate that a product has additional benefits, facilitating the product’s marketing, but such studies are expensive and time consuming and may delay the product’s submission to health authorities for approval. Our ongoing investments in new product launches and research and development for future products could therefore result in increased costs without a proportionate increase in revenues, which would negatively affect our operating results.

We have up to 18 new medicines and vaccines on track to arrive on the market between 2014-2020, including six key launches (Toujeo®, Praluent®, Dengvaxia®, sarilumab, LixiLan and dupilumab). However, there can be no assurance that all of these products will be approved, or with the targeted indications, and/or within the expected timeline, or that, if approved, they will achieve commercial success.

Following each product marketing approval, the medical need served by the product and the corresponding reimbursement are evaluated by governmental agencies and/or third party payers, requiring in some cases additional

 

 

 

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studies, including comparative studies, which may both effectively delay marketing of the new product and add to its development costs.

After marketing approval of our products other companies, or investigators whether independently or with our authorization, may conduct studies or analysis beyond our control that may ultimately report results negatively affecting our sales either permanently or temporarily and it may take time for Sanofi to address the reported findings, leading among other things to a material adverse impact on sales.

The pricing and reimbursement of our products is increasingly affected by decisions of governments and other third parties and cost reduction initiatives.

The commercial success of our existing products and our product candidates depends in part on their pricing and the conditions under which our products are reimbursed. Our products continue to be subject to increasing price and reimbursement pressure due inter alia to:

 

·   

price controls imposed by governments in many countries;

 

·   

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

 

·   

increased difficulty in obtaining and maintaining satisfactory drug reimbursement rates;

 

·   

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

 

·   

governmental and private health care provider policies that favor prescription of generic medicines or substitution of branded products with generic medicines;

 

·   

more demanding evaluation criteria applied by Health Technology Assessment (HTA) agencies when considering whether to cover new drugs at a certain price level;

 

·   

more governments using international reference pricing to set the price of drugs based on international comparisons; and

 

·   

aggressive pricing strategies by some of our competitors.

In addition to the pricing pressures they exert, governmental and private third-party payers and purchasers of pharmaceutical products may reduce volumes of sales by restricting access to formularies (including exclusive formulary) or otherwise discouraging physicians from prescribing our products. In the United States, price is increasingly important to managed care organizations (MCOs) and as the MCOs grow in size following market consolidation, competition among pharmaceutical companies to have their product included in the formulary is aggressive. For example, for Lantus®, since 2014, we have increased the level of rebates granted in order to maintain

favorable formulary positions with key payers in the U.S. Exclusion of one of our drugs from a formulary can significantly reduce sales in the MCO patient population.

Also in the United States, the federal health care reform law is increasing the government’s role with respect to price, reimbursement, and coverage levels for healthcare services and products within the large government healthcare sector. This law also imposed cost containment measures and rebates and fees on pharmaceutical companies and current federal budget proposals would impose further restrictions on pricing and reimbursement. In addition, some U.S. states are considering legislation that would influence the marketing and prices of, and access to, drugs. U.S. federal and state officials will likely continue to focus on healthcare reform implementation in the future.

We encounter similar cost containment issues in countries outside the United States. In certain countries, including countries in the European Union, China and Canada, the coverage of prescription drugs, pricing and levels of reimbursement are subject to governmental control. For example, in Europe various authorities are developing the use of tenders for expensive products and are considering joint procurement mechanisms to negotiate lower prices. See also below “– Global economic conditions and the unfavorable financial environment could have negative consequences for our business”.

In addition, if we lose patent protection in patent litigation, we face the risk that government and private third-party payers and purchasers of pharmaceutical products may claim damages alleging they have over-reimbursed a drug. For example, in Australia, our patent on clopidogrel was ultimately held invalid. Following this decision, the Australian Government is seeking damages for its alleged over-reimbursement of clopidogrel drugs due to the preliminary injunction we had obtained against the sale of generic clopidogrel during the course of the litigation.

As a consequence of the growing number of mergers of retail chains and distributors and resulting consolidation of the distribution channel, distributors have increased their capacity to negotiate price and other terms. Due to these cost containment policies and pressure on our prices, our revenues and margins are, and could continue to be, negatively affected.

We are also unable to predict the availability or amount of reimbursement for our product candidates. Price negotiations in a country may be incompatible with the global positioning of our products, which may lead us not to launch the product in that country, resulting in a decrease in initially anticipated sales.

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

 

 

 

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We may lose market share to competing remedies, biosimilar or generic products.

We are faced with intense competition from generic products, biosimilars and brand-name drugs including from retail chains and distributors.

Doctors or patients may choose competitors’ products over ours or alternative therapeutic options such as surgery if they perceive them to be safer, more reliable, more effective, easier to administer or less expensive, which could cause our revenues to decline and adversely affect our results of operations.

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

We may not be able to anticipate precisely the date of market entry of generics or biosimilars or the potential impact on our sales, both of which depend on numerous parameters. The introduction of a generic version of a branded medicine typically results in a significant and rapid reduction in net sales for the branded product because generic manufacturers typically offer their unbranded versions at significantly lower prices, resulting in adverse price and volume effects for our genericized products. Substitution is often permitted for generic products that are considered to be interchangeable or clinically identical. With respect to biosimilars, in the United States only biosimilars that refer to an innovator drug that was approved under a Biologics License Application may be designated as interchangeable with the original biologic and only in circumstances where specific criteria are met. In many European countries, automatic substitution of biologics is officially prohibited or not recommended. Nevertheless competition even from non-substitutable biosimilars would likely result in a decrease in prices, additional rebates, promotion effort and lower margins.

Approval of a generic or biosimilar that is substitutable for one of our products would increase the risk of accelerated market penetration by that generic or biosimilar to a greater extent than would be the case for a non-substitutable product.

These trends are exacerbated by applicable legislation which encourages the use of generic products to reduce spending on prescription drugs in many countries such as the United States and France. Therefore, the market for our products could also be affected if a competitor’s innovative drug in the same market were to become available as a generic because a certain number of patients can be expected to switch to a lower-cost alternative therapy. We expect this generic competition to continue and to affect more of our products, including those with relatively modest sales.

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

We generate a substantial share of our revenues from the sale of certain key products (see “Item 5. Operating and Financial Review and Prospects – Results of Operations – Year ended December 31, 2015 compared with year ended December 31, 2014 – Net Sales by Product – Pharmaceuticals segment”). Lantus® is particularly important; it was the Group’s leading product with revenues of 6,390 million in 2015, representing 17.2% of the Group’s aggregate net sales for the year. Lantus® is a flagship product of the Diabetes business. Accounting for recent market trends, we announced in October 2015 that we project global diabetes sales over the period from 2015 to 2018 to decline at an average annualized rate of between 4% and 8% at constant exchange rate (CER). Nevertheless our actual sales may differ from these expectations given the numerous underlying assumptions (for example the outlook for insulin glargine sales, and expectations for Lyxumia® and BGM (Blood Glucose Monitoring)). Furthermore, the launch of new medicines and vaccines in other therapeutic areas and the performance of our other businesses may not be sufficient to reduce the relative contribution of Lantus® to our overall performance.

Our flagship products benefit from certain intellectual property protections such as patents and exclusivity periods but patent and proprietary rights, even if they are not challenged, are subject to expiration dates. Expiration of effective intellectual property protections for our products typically results in the entry of one or more lower-priced generic competitors, often leading to a rapid and severe decline in revenues on those products (for information on the expected impact of biosimilar entry on the market see “– We may lose market share to competing remedies, biosimilar or generic products.”)

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

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

Many of our products are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. Third

 

 

 

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parties supply us with a substantial portion of our raw materials, active ingredients and medical devices, which exposes us to the risk of a supply shortage or interruption in the event that these suppliers are unable to manufacture our products to Group quality standards or experience financial difficulties. Further, some raw materials essential to the manufacture of our products are not widely available from sources we consider reliable; for example, we have approved only a limited number of suppliers of heparins for use in the manufacture of Lovenox®. Any of these factors could adversely affect our business, operating results or financial condition. See “Item 4. Information on the Company – B. Business Overview – B.8. Production and Raw Materials” for a description of these outsourcing arrangements.

Our products are also increasingly reliant on the use of product-specific devices for administration which may result in technical issues. For example in October 2015, we voluntary recalled all Auvi-Q® (epinephrine injection, USP) marketed in the U.S. and Canada as the product has been found to potentially have inaccurate dosage delivery, which may include failure to deliver the drug. Sanofi has ultimately decided to return all U.S. and Canadian rights to the developer of Auvi-Q®. One of our newly launched products, Praluent®, is administered with an auto-injector manufactured by a third party. The success of this product will depend partially on the performance of this device.

We must also be able to produce sufficient quantities of our products to satisfy demand. We may have difficulties transforming and adapting our existing plants to manufacture new products, including biologics, and scaling up production of our products currently under development once they are approved. Our biological products in particular, are subject to the risk of manufacturing stoppages or the risk of loss of inventory because of the difficulties inherent in the processing of biological materials and the potential difficulties in accessing adequate amounts of raw materials meeting required standards. Effective insurance coverage for biologics products in the event of contaminated batches may also be difficult to obtain as the cause of the contamination can be difficult to ascertain (for the impact on our financial statements see “– Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group’s results of operations and financial results.”)

For example, in the U.S we encountered production issues which caused delays in the supply of Pentacel® vaccine starting from 2012. While these problems have either been remedied or are in the process of being remedied, we continue to face strong demand for our vaccines that requires us in certain cases to manage the supply allocation. We are working to increase our capacities but cannot reasonably estimate how long it will take to address these constraints. There can be no guarantee that we will not face similar issues in the future or that we will successfully manage such issues when they arise.

Additionally, specific conditions must be respected both by the Group and our customers for the storage and distribution of many of our biological products, for example, cold storage for certain vaccines and insulin-based products is required. Failure to adhere to these requirements may result in lost product inventory.

The complexity of these processes, as well as strict internal and health authority standards for the manufacture of our products, subject us to risks because the investigation and remediation of any identified or suspected problems can cause production delays, substantial expense, product recalls, or lost sales and inventories and delay the launch of new products, which could adversely affect our operating results and financial condition, and cause reputational damage and the risk of product liability (see “– Product liability claims could adversely affect our business, results of operations and financial condition”).

When manufacturing disruptions occur, we may not have alternate manufacturing capacity, particularly for certain biologics. In the event of manufacturing disruptions, our ability to use back up facilities or set up new facilities is more limited because biologics are more complex to manufacture. Even though we aim to have backup sources of supply whenever possible, including by manufacturing backup supplies of our principal active ingredients at additional facilities when practicable, we cannot be certain they will be sufficient if our principal sources become unavailable. Switching sources and manufacturing facilities require significant time.

Supply shortages generate even greater negative reactions when they occur with respect to life saving medicines with limited or no viable therapeutic alternatives. Shortages of products lead to lower product revenues but also can have a negative impact on the confidence of patients, customers and professional healthcare providers and the image of the Group. Government authorities and regulators in the United States and in the European Union are also considering measures to reduce these risks. It cannot be ruled out that these ongoing initiatives may generate additional costs for the Group if they result in a requirement to establish back up supply channels or to increase inventory levels to avoid shortages.

We are sometimes required to use animals to test our products in the development phase and our vaccines before distributing them. Animal testing activities have been the subject of controversy and adverse publicity. Testing on animals can be vital for the development or commercialization of a product. If applicable regulations were to ban this practice, or if, due to pressure from animal welfare groups, we were no longer able to source animals to perform such tests, it would be difficult and in some cases impossible to develop or distribute our products in certain jurisdictions under the applicable marketing authorizations. In addition, negative publicity regarding our use, or the industry’s use, of animal subjects could harm our reputation.

 

 

 

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

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

We conduct a number of significant research and development programs and market some of our products in collaboration with other biotechnology and pharmaceutical companies. For example, we currently have a global strategic collaboration with Regeneron for the discovery, development, commercialization and manufacturing of therapies based on monoclonal antibodies. With Alnylam we have an agreement to develop and commercialize treatments for rare genetic diseases. We also have collaborative arrangements with Merck & Co., Inc. for the distribution of vaccines in Europe (See “Item 4. Information on the Company – B. Business Overview – B.2. Main pharmaceutical products” and “Item 4. Information on the Company – B. Business Overview – B.3. Vaccine Products” for information on our alliances). In addition we may also rely on partners to design and manufacture medical devices, notably for the administration of our products.

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

When we research and market our products through collaboration arrangements, the performance of certain key tasks or functions are the responsibility of our collaboration partners and, therefore we are subject to the risk that they do not perform effectively. We are also subject to the risk that decisions may be under the control of or subject to the approval of our collaboration partners, and we may have differing views. Failures in the development or differing priorities may adversely affect the activities conducted through the collaboration arrangements. Any conflicts that we may have with our partners during the course of these agreements or at the time of their renewal or renegotiation may affect the marketing of certain of our products and may

cause a decline in our revenues and negatively affect our results of operations.

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

We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. This risk is accentuated by recent concentrations among distributors, as well as by current global credit and economic conditions, including the worldwide economic slowdown, in particular in the emerging markets. The United States poses particular customer credit risk issues, because of the concentrated distribution system in which more than half of our consolidated U.S. pharmaceutical sales are accounted for by three wholesalers. We are also exposed to large wholesalers in other markets, particularly in Europe. Worldwide, the Group’s three main customers represent 24.7% of our gross total revenues. An inability of one or more of these wholesalers to honor their debts to us would adversely affect our financial condition (see Note D.34. to our consolidated financial statements included at Item 18 of this annual report).

In some countries, some customers are public or subsidized health systems. The economic and credit conditions in these countries may lead to an increase in the average length of time needed to collect on accounts receivable or the ability to collect 100% of receivables outstanding. Because of this context, we may need to reassess the recoverable amount of our debts in these countries during the coming financial years (see also “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Liquidity.”).

Global economic conditions and the unfavorable financial environment could have negative consequences for our business2.

Over the past several years, growth of the global pharmaceutical market has become increasingly tied to global economic growth. In this context, a substantial and lasting slowdown of the global economy, major national economies or emerging markets could negatively affect growth in the global pharmaceutical market and, as a result, adversely affect our business.

Unfavorable economic conditions have reduced the sources of funding for national social security systems, leading to austerity measures including heightened pressure on drug prices, increased substitution of generic drugs, and the exclusion of certain products from formularies.

 

 

 

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

 

 

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Further, our net sales may be negatively impacted by the continuing challenging global economic environment, as high unemployment, increases in co-pays, and lack of developed third party payer systems in certain regions may lead some patients to switch to generic products, delay treatments, skip doses or use less effective treatments to reduce their costs. In the United States there has been an increase in the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many U.S. states, to formulary restrictions limiting access to brand-name drugs, including ours. Also, as a result of the insurance coverage mandate that came into effect in the United States in 2015, some employers may seek to reduce costs by reducing or eliminating employer group healthcare plans or transferring a greater portion of healthcare costs to their employees.

In emerging markets countries where the economy is highly dependent on oil, a decline in oil prices may impact the ability of those countries to sustain healthcare spending, which could adversely affect our sales in those countries.

Our Consumer Health Care (CHC) and Animal Health businesses could also be adversely impacted as difficult economic conditions may limit the financial resources of people and livestock producers.

If economic conditions worsen, or in the event of default or failure of major players including wholesalers or public sector buyers financed by insolvent states, the financial situation of the Group, its results of operations and the distribution channels of its products may be adversely affected. See also “We are subject to the risk of non-payment by our customers”.

Economic and financial difficulties may have an adverse impact on third parties who are important to our business, including collaboration partners and suppliers, which could cause such third parties to delay or disrupt performance of their obligations to us and could materially adversely affect our business or results of operations. See “– We rely on third parties for the discovery, manufacture and marketing of some of our products” above. For more information see “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Liquidity.”

Counterfeit versions of our products harm our business.

Counterfeiting activities and the presence of counterfeit products in a number of markets and over the Internet continue to be a challenge for maintaining a safe drug supply. Counterfeit products are frequently unsafe or ineffective, and can be life-threatening. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs along with increased levels of counterfeiting could be mistakenly attributed to the authentic product, affect patient confidence in the authentic product and harm the business of companies such as Sanofi. If one

of our products were to be the subject of counterfeits, we could incur substantial reputational and financial harm. See “Item 4. Information on the Company – B. Business Overview – B.6. Markets – B.6.2. Competition.”

Breaches of data security, disruptions of information technology systems and cyber threats could result in financial, legal, business or reputational harm.

Our business depends heavily on the use of information technologies. Certain key areas such as research and development, production and sales are to a large extent dependent on our information systems, including cloud-based computing, or those of third party providers, including for the storage and transfer of critical, confidential or sensitive information. We commercialize a number of devices using new technologies which if they malfunction could lead to a risk of harm to patients (see “– Product liability claims could adversely affect our business, results of operations and financial condition”) including the unavailability of our products.

We and our third-party service providers are implementing secure information technology systems for the protection of data and threat detection. However, there can be no assurance that our efforts or those of our third-party service providers to implement adequate security and control measures would be sufficient to protect against breakdowns, service disruption, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a cyber-attack, security breach, industrial espionage attacks or insider threat attacks which could result in financial, legal, business or reputational harm.

The expansion of social media platforms and mobile technologies present risks and challenges for our business and reputation.

We increasingly rely on social media and new technologies to communicate about our products and diseases or to provide health services. The use of these media requires specific attention, monitoring programs and moderation of comments. For example, patients may use these channels to comment on the effectiveness of a product and to report an alleged adverse event. When such issues arise, the nature of evidence-based health care and restrictions on what pharmaceutical manufacturers may say about their products are not always well suited to rapidly defending the Group or the public’s legitimate interests in the face of the political and market pressures generated by social media and rapid news cycles, and this may result in commercial harm, overly restrictive regulatory actions and erratic share price performance. Negative or inaccurate posts or comments about Sanofi, our business, directors or officers on any social networking website could seriously damage our reputation. In addition, our employees and partners may use social media and mobile technologies inappropriately, which may give rise to liability for the Group, or which could lead to

 

 

 

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breaches of data security, loss of trade secrets or other intellectual property or public disclosure of sensitive information, including information about our employees, clinical trials or customers. Such uses of social media and mobile technologies could have a material adverse effect on our reputation, business, financial condition and results of operations.

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

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

If any of our strategic equity investments decline in value and remain below cost for an extended period, we may be required to write down our investment. We own a significant stake in Regeneron Pharmaceuticals Inc. (22.1% of share capital as of December 31, 2015), which is listed on the NASDAQ and has been accounted for using the equity method since 2014. Any material deterioration in Regeneron’s share price or financial performance would be an indicator that the value of our investment might have become impaired. This would require us to perform an impairment test, which could have a negative impact on our financial statements.

In addition, the inherent variability of biologics manufacturing increases the risk of write-offs of these products. Due to the value of the materials used, the carrying amount of biological products is much higher than that of small-molecule products.

The financial environment and in particular the economic difficulties affecting Russia, Venezuela, Brazil, China and the Middle East could also negatively affect the value of our assets (see “– Global economic conditions and the unfavorable financial environment could have negative consequences for our business” and “– Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition”).

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

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

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

Risks Relating to the Group Structure and Strategy

Our strategic objectives for long-term growth may not be fully realized.

In November 2015, we outlined our strategic roadmap for the period 2015-2020. Our long term strategy rests on four pillars: reshape our portfolio, deliver outstanding launches, sustain innovation in R&D and simplify our organization.

We may not be able to fully realize our strategic objectives and, even if we are able to do so, these strategic objectives may not deliver the expected benefits or within the expected timeline.

We will look to reshape our portfolio through acquisitions and divestitures and may not reach this objective if we are unable to identify opportunities, or enter into agreements in a timely manner or on sufficiently attractive terms. In addition, we may fail to (i) adopt the best strategy for our acquisitions/ divestitures or (ii) compete in an intensively competitive, increasingly focused market environment (see “– We may fail to successfully identify external business opportunities or realize the anticipated benefits from our strategic investments” below and “Our research and development efforts may not succeed in adequately renewing our product portfolio” above). We may also not have the necessary flexibility to appropriately reallocate resources towards our priority businesses.

The successful launch of a new pharmaceutical product involves substantial investment in sales and marketing activities. We have up to 18 new medicines and vaccines on track to arrive on the market between 2014-2020; including six key launches (Toujeo®, Praluent®, Dengvaxia®, sarilumab, LixiLan and dupilumab). However there can be no assurance that all of these products will be approved, or with the targeted indications, and/or within the expected timeline or that, if approved, they will achieve commercial success. The launch strategy we develop (in terms of timing, pricing, market access, marketing efforts and dedicated sales forces)

 

 

 

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may not deliver the benefits that we expect. The competitive environment for a given product may also have changed by at the time of the actual launch, modifying our initial expectations. The need to prioritize the allocation of resources may also cause delays in the expected launch of some of our products (see also “– Our research and development efforts may not succeed in adequately renewing our product portfolio” above).

Sustaining innovation in R&D is inherently risky due to the high rate of failure and we may not be able to allocate our resources to obtain optimal results (see also “– Our research and development efforts may not succeed in adequately renewing our product portfolio” above).

Our ongoing simplification of our global organization through the implementation, starting from January 2016 (pending relevant mandatory labor group consultations) of five global business units (GBU) to meet significant growth objectives requires substantial attention from our management. There is no guarantee that we will be able to fully implement this new organization within the targeted timeline, that it will enable the Group to concentrate its efforts around the businesses most likely to deliver growth or that these GBUs will grow in line with anticipated growth rates or will deliver the expected benefits.

Failure to successfully implement and meet our strategic objectives would have an adverse impact on our business, prospects and results of operations.

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

We pursue a strategy of selective acquisitions, in-licensing and collaborations in order to reinforce our pipeline and portfolio. The implementation of this objective depends on our ability to identify business development opportunities and execute them at reasonable cost and on acceptable financing terms. Moreover, entering into in-licensing or collaboration agreements generally requires the payment of significant “milestones” well before the relevant products reach the market, without any assurance that such investments will ultimately become profitable in the long term (see Note D.21.1. to the consolidated financial statements included at Item 18 of this annual report and also “– We rely on third parties for the discovery, manufacture and marketing of some of our products”).

For newly acquired activities or businesses our growth objectives could be delayed or ultimately not realized, and expected synergies could be adversely impacted if:

 

  ¡  

we are unable to quickly or efficiently integrate those activities or businesses;

 

  ¡  

integration takes longer than expected;

  ¡  

key employees leave; or

 

  ¡  

we have higher than anticipated integration costs.

We may miscalculate the risks associated with business development transactions at the time they are made or not have the resources or ability to access all the relevant information to evaluate them properly, including with regards to the potential of research and development pipelines, manufacturing issues, compliance issues, or the outcome of ongoing legal and other proceedings. It may also take a considerable amount of time and be difficult to implement a risk analysis and risk mitigation plan after the acquisition of an activity or business is completed due to lack of historical data. As a result, risk management and coverage of such risks, particularly through insurance policies, may prove to be insufficient or ill-adapted.

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

In December 2015, we announced our intention to acquire Boehringer Ingelheim’s consumer healthcare (CHC) business with an enterprise value of 6.7 billion in exchange for our animal health business (Merial). The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of 4.7 billion. The transaction would allow Sanofi to become a global leader in CHC but there is no certainty that the transaction will be ultimately completed as contemplated, within the expected time frame or at all. We cannot guarantee that Boehringer Ingelheim’s CHC business will be successfully integrated with ours and that we will be able to retain key personnel. The expected benefits of the transaction may never be fully realized or may take longer to realize than expected.

The globalization of our business exposes us to increased risks in specific areas

We continue to focus on Emerging Markets. However, difficulties in operating in Emerging Markets, a significant decline in the anticipated growth rate in these regions or an unfavorable movement of the exchange rates of these countries’ currencies against the euro could impair our ability to take advantage of these growth opportunities and could affect our business, results of operations or financial condition (see also “– Global economic conditions and the unfavorable financial environment could have negative consequences for our business”).

The expansion of our activities in Emerging Markets also exposes us to more volatile economic conditions, political instability, competition from multinational or locally based companies that are already well established in these markets, the inability to adequately respond to the unique characteristics of Emerging Markets (particularly with respect to their underdeveloped judicial systems and regulatory

 

 

 

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frameworks) difficulties in recruiting qualified personnel or maintaining the necessary internal control systems, potential exchange controls, weaker intellectual property protection, higher crime levels (particularly with respect to counterfeit products (see “– Counterfeit versions of our products harm our business”)), and compliance issues including corruption and fraud (see “– Claims and investigations relating to compliance, competition law, marketing practices, pricing and other legal matters, could adversely affect our business, results of operations and financial condition”). We may also face compliance and internal control systems issues in mature markets due to increased competition and more complex and stringent regulations.

As a global healthcare leader, we are exposed to a number of risks inherent in sectors in which we were previously less active such as the generics and consumer healthcare sectors, whose business models and trade channels are different from our traditional pharmaceutical business, in particular regarding promotional efforts and trade terms.

Our success depends in part on our senior management team and other key employees and our ability to attract, integrate and retain key personnel and qualified individuals in the face of intense competition.

We depend on the expertise of our senior management team and other key employees. In addition, we rely heavily on recruiting and retaining talented people to help us meet our strategic objectives. We face intense competition for qualified individuals for senior management positions, or in specific geographic regions or in specialized fields such as clinical development, biosciences and devices. In addition, our ability to hire qualified personnel also depends in part on our ability to reward performance, incentivize our employees and to pay competitive compensation. Laws and regulations on executive compensation may restrict our ability to attract, motivate and retain the required level of talented people. The inability to attract, integrate and/or retain highly skilled personnel, in particular those in leadership positions, may weaken our succession plans, may materially adversely affect the implementation of our strategy and our ability to meet our strategic objectives and could ultimately impact our business or results of operations.

Environmental Risks of Our Industrial Activities

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

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

 

  ¡  

fires and/or explosions;

 

  ¡  

storage tank leaks and ruptures; or

  ¡  

discharges or releases of toxic or pathogen substances.

These operating risks can cause personal injury, property damage and environmental contamination, and may result in the shutdown of affected facilities and/or the imposition of civil, administrative, criminal penalties and/or civil damages.

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

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

Environmental liabilities and costs related to compliance with applicable regulations may have a significant adverse effect on our results of operations.

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

 

  ¡  

that we currently own or operate;

 

  ¡  

that we formerly owned or operated; or

 

  ¡  

where waste from our operations was disposed.

These environmental remediation obligations could significantly reduce our operating results. Sanofi accrues provisions for remediation when our management believes the need is probable and that it is reasonably possible to estimate the cost. See “Item 4. Information on the Company – B. Business Overview – B.10. Health, Safety and Environment (HSE)” for additional information regarding our environmental policies. In particular, our provisions for these obligations may be insufficient if the assumptions underlying these provisions prove incorrect or if we are held responsible for additional, currently undiscovered contamination. These judgments and estimates may later prove inaccurate, and any shortfalls could have a material adverse effect on our results of operations and financial condition.

We are or may become involved in claims, lawsuits and administrative proceedings relating to environmental matters. Some current and former Sanofi subsidiaries have been named as “potentially responsible parties” or the equivalent under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (also known as “Superfund”), and similar statutes in France, Germany, Italy, Brazil and elsewhere. As a matter of statutory or contractual obligation, we and/or our subsidiaries may retain responsibility for environmental liabilities at some of the sites of our predecessor companies,

 

 

 

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or of subsidiaries that we demerged, divested or may divest. We have disputes outstanding regarding certain sites no longer owned by the Group. An adverse outcome in such disputes might have a significant adverse effect on our operating results. See Note D.22.e) to the consolidated financial statements included at Item 18 of this annual report and “Item 8. Financial Information – A. Consolidated Financial Statements and Other Financial Information – Information on Legal or Arbitration Proceedings”.

Environmental regulations are evolving (i.e., in Europe, REACH, CLP/GHS, SEVESO, IPPC/IED, the Waste Framework Directive, the Emission Trading Scheme Directive, the Water Framework Directive and the Directive on Taxation of Energy Products and Electricity and several other regulations aimed at preventing global warming). Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to our Group and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants, site restoration and compliance to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities, thereby adversely affecting our business, results of operations or financial condition. For more detailed information on environmental issues, see “Item 4. Information on the Company – B. Business Overview – B.10. Health, Safety and Environment (HSE).”

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

Some of our production sites are located in areas exposed to natural disasters, such as earthquakes, floods and hurricanes. In the event of a major disaster we could experience severe destruction or interruption of our operations and production capacity. As a result, our operations and our employees could suffer serious harm which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Financial Markets3

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

Because we sell our products in numerous countries, our results of operations and financial condition could be adversely affected by fluctuations in currency exchange rates. We are particularly sensitive to movements in exchange rates between the euro and the U.S. dollar, the Japanese yen, and to currencies in Emerging Markets. In 2015, 36% of our aggregate net sales were realized in the

United States, 32% in Emerging Markets (including countries that are, or may in future become, subject to exchange controls), and 6% in Japan. While we incur expenses in those currencies, the impact of currency exchange rates on these expenses does not fully offset the impact of currency exchange rates on our revenues. As a result, currency exchange rate movements can have a considerable impact on our earnings. When deemed appropriate and when technically feasible, we enter into transactions to hedge our exposure to foreign exchange risks. These efforts, when undertaken, may fail to offset the effect of adverse currency exchange rate fluctuations on our results of operations or financial condition. For more information concerning our exchange rate exposure, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Risks Relating to an Investment in Our Shares or ADSs

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

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

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

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

 

 

 

3 

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

 

 

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

As of December 31, 2015, L’Oréal held approximately 9.05% of our issued share capital, accounting for approximately 16.36% of the voting rights (excluding treasury shares) of Sanofi. See “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders.” Affiliates of L’Oréal currently serve on our Board of Directors. To the extent L’Oréal continues to hold a large percentage of our share capital and voting rights, it will remain in a position to exert greater influence in the appointment of the directors and officers of Sanofi and in other corporate actions that require shareholders’ approval.

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

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

Risks Relating to Our Contingent Value Rights (CVRs)

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

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

CVR holders are subject to additional risks, including:

 

·   

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

 

·   

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

 

·   

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

 

·   

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

 

·   

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

 

·   

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

 

·   

we are not prohibited from acquiring the CVRs, whether in open market transactions, private transactions or otherwise and we have already purchased CVRs on several occasions (for more information see “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Liquidity.”);

 

·   

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

 

·   

while we have agreed to use diligent efforts (as defined in the CVR agreement), until the CVR agreement is terminated, to achieve each of the remaining Lemtrada® related CVR milestones set forth in the CVR agreement, we are not required to take all possible actions to achieve these goals. The two first milestones were not met. On October 29, 2015, Sanofi disclosed that, based upon actual sales trends to date, it does not expect that product sales milestone #1 will be met. There can be no assurance that the other product sales milestones will be achieved. Failure to achieve the sales milestones would have an adverse effect on the value, if any, of the CVRs.

 

 

 

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Item 4. Information on the Company

 

 

 

Item 4. Information on the Company

Introduction

Sanofi is a leading global healthcare company, focused on patient needs and engaged in the research, development, manufacture and marketing of therapeutic solutions.

In 2015, our net sales were 34,542 million. This figure excludes net sales of our Animal Health activity. Our aggregate net sales (including Animal Health, see definition at “Item 5 – Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014” below) were 37,057 million. We are the fifth largest pharmaceutical group in the world and the third largest in Europe in terms of sales (IMS data 2015 Moving Annual Total September 2015).

In the remainder of this section:

 

·   

A product is referred to either by its international non-proprietary name (INN) or its brand name, which is generally exclusive to the company that markets it. In most cases, the brand names of our products, which may vary from country to country, are protected by specific registrations. In this document, products are identified by their brand name used in France, except for Allegra® (sold in France as Telfast®), Tritace® (sold in France as Triatec®), Amaryl® (sold in France as Amarel®) and Ambien® CR (an extended-release formulation of zolpidem tartrate, not sold in France);

 

·   

For the Pharmaceuticals activity, unless otherwise stated, all market share percentages and rankings are calculated based on net sales figures expressed as the Moving Annual Total (MAT) in September 2015 from IMS Health MIDAS (retail and hospital), except Nicholas Hall for Consumer Health Care;

 

·   

For the Human Vaccines (Vaccines) activity, market share percentages and rankings are based on our own estimates. These estimates have been made from information in the public domain collated from various sources, including statistical data collected by industry associations and information published by competitors;

 

·   

For the Animal Health activity, the market share percentages and rankings are calculated based on sales data from Vetnosis.

The Group is organized around three principal activities: pharmaceuticals, vaccines via Sanofi Pasteur, and animal health via Merial(1). These activities are operating segments within the meaning of the IFRS 8 accounting standard (see Note D.35. to our consolidated financial statements included in Item 18 of this annual report).

We invest in the following activities (see “B. Business Overview – B.1. Strategy” below): Diabetes, Cardiovascular, Rare Diseases and Multiple Sclerosis (MS), Consumer Health Care, Oncology, Generics, Established Prescription Products(2), Vaccines, and Animal Health. Unlike the Vaccines and Animal Health activities, which are also operating segments within the meaning of IFRS 8, the Diabetes, Cardiovascular, Rare Diseases and Multiple Sclerosis (MS), Consumer Health Care, Oncology, Generics, and Established Prescription Products activities are units whose performance is monitored primarily on the basis of net sales, and the products each unit sells are included in our Pharmaceuticals operating segment. We are also active in Emerging Markets(3), selling products from all three of our principal activities (pharmaceuticals, vaccines and animal health). The performance of Emerging Markets is monitored primarily on the basis of net sales.

Net sales of our activities for the year 2015 are presented in “Item 5 – Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014”.

Within our pharmaceuticals activity, which generated net sales of 29,799 million in 2015, we specialize in the following therapeutic areas:

 

·   

Diabetes: with Lantus®, a long-acting human insulin analog which is the world-leading brand in the insulin market; Toujeo®, a new formulation of insulin glargine; Amaryl®, an oral once-daily sulfonylurea; Apidra®, a rapid-acting human insulin analog; Insuman®, a range of rapid-acting or intermediate-acting human insulins; Lyxumia®, a once-daily GLP-1 receptor agonist administered once daily before breakfast; and a range of integrated care solutions;

 

·   

Cardiovascular: with Praluent® a cholesterol-lowering drug that inhibits PCSK9, for patients with heterozygous familial hypercholesterolemia or with clinical atherosclerotic cardiovascular disease, and Multaq®(4), an anti-arrhythmic drug in atrial fibrillation (AF);

 

 

 

(1) On December 15, 2015, Sanofi and Boehringer Ingelheim signed an exclusivity agreement to exchange Sanofi’s Animal Health business for Boehringer Ingelheim’s Consumer Health Care business. The transaction would also involve a gross cash payment from Boehringer Ingelheim to Sanofi. The two parties aim to close the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances in the fourth quarter of 2016 (see “– B.1. Strategy” below and Note D.2.1. to our consolidated financial statements included in Item 18 of this annual report).

 

(2)

Established Prescription Products includes mature products including Plavix®, Lovenox®, Aprovel®, Renagel® and Renvela®.

 

(3) All markets excluding the U.S., Canada, Western Europe (France, Germany, U.K., Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Sweden, Portugal, the Netherlands, Austria, Switzerland, Ireland, Finland, Norway, Iceland and Denmark), Japan, South Korea, Australia, and New Zealand.

 

(4) Consolidated in established prescription products until December 31, 2015, see the Net Sales table below.

 

 

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·   

Rare Diseases: with a portfolio of enzyme replacement therapies including Cerezyme® and Cerdelga® for Gaucher disease, Myozyme®/Lumizyme® for Pompe disease, Fabrazyme® for Fabry disease, and Aldurazyme® for mucopolysaccharidosis Type 1 (MPS I);

 

·   

Multiple sclerosis (MS): with Aubagio® a once-daily oral immunomodulator, and Lemtrada® (alemtuzumab), a monoclonal antibody. Both products have been developed to treat patients with relapsing forms of MS;

 

·   

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

 

·   

Established Prescription Products: our main thrombosis medicines include Plavix®, an anti-platelet agent indicated for a number of atherothrombotic conditions and Lovenox®, a low molecular weight heparin indicated for prevention and treatment of deep vein thrombosis and for unstable angina and myocardial infarction. Our Established Prescription Products also include two hypertension treatments: Aprovel® and CoAprovel®. In nephrology, our two main products are Renagel® and Renvela®, oral phosphate binders for the treatment of high phosphorous levels for use in patients undergoing dialysis for chronic kidney disease. In biosurgery, our two main products are medical devices, Synvisc® and Synvisc-One®, viscosupplements used to reduce pain in patients suffering from osteoarthritis of certain joints. Other products include Stilnox®, indicated in the short-term treatment of insomnia, and Allegra®, a long-lasting (12- and 24-hour) non-sedating prescription anti-histamine for the treatment of seasonal allergic rhinitis (hay fever) and uncomplicated hives.

Our pharmaceutical portfolio also includes a wide range of other products: Consumer Health Care products, a category in which we are the fifth largest global player and a wide range of Generics products.

Our Vaccines activity is operated through Sanofi Pasteur. Net sales from vaccines amounted to 4,743 million in 2015, with leading vaccines in five areas: pediatric vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines, and travel and endemic vaccines.

Our Animal Health activity is carried out through Merial, one of the world leaders in this market. Merial is dedicated to the research, development, manufacture and marketing of innovative pharmaceutical products and vaccines used by

veterinarians, farmers and pet owners. It achieved net sales of 2,515 million in 2015 with a wide range of products to improve the health, well-being and performance of a large variety of animals (both livestock and pets).

We obtained regulatory approval for three new products in 2015: Toujeo® in the U.S., the E.U. and Japan; Praluent® in the U.S. and the E.U.; and Dengvaxia® in Brazil, Mexico and the Philippines.

Partnerships are essential to our business and a certain number of our products, either on the market or under development, are in-licensed products relying on third-party rights or technologies.

A. History and Development of the Company

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

Main changes since 2011

In 2011, Merial became our dedicated Animal Health division. Merial was founded in 1997 and was a joint venture between Merck and Co. Inc. and Sanofi until September 17, 2009, when Sanofi acquired the share held by Merck in Merial.

On April 4, 2011, following a tender offer, we acquired control of Genzyme, a biotechnology group headquartered in Cambridge, Massachusetts (U.S.).

In December, 2015, we announced we had opened exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed transaction would consist of an exchange of the Sanofi Animal Health business (Merial) with an enterprise value of 11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of 6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of 4.7 billion. Until final completion of the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal health business (which remains an operating segment) and to report the performance of that business at Group level.

 

 

 

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B. Business overview

B.1. Strategy

The market context for Sanofi

A number of fundamental trends point to a positive outlook for the pharmaceutical industry. The global population is growing and aging. Unmet medical needs remain high. The industry has increased R&D productivity, with once again over 30 annual New Molecular Entities (NME)/ Biologic License Application (BLA) approvals by the U.S. Food and Drug Administration (FDA). Patients around the world, and a rising middle class in emerging markets, are demanding better care, empowered by access to new information and digital technology. It is a particularly exciting time scientifically, with the promise of genomics being realized and immuno-oncology transforming cancer treatments.

At the same time, the industry faces challenges. Economic growth in emerging markets has slowed. Affordability is a key concern globally, with pricing and reimbursement pressure from payers in developed markets, particularly Europe and the U.S.. Biosimilars have entered the U.S. market for the first time. More focused competitors are building leadership positions in their priority therapy areas.

In this dynamic market, we have leading positions in four of our main businesses (see below). We have a number of strong products to be launched across multiple therapeutic areas and a track record in building major brands and franchises that have transformed patient care. We have been successful in sourcing external innovation from key partners including Regeneron and Alnylam. We have strong skills for managing mature businesses. We are also clear about the challenges we face, namely a portfolio with a broad set of businesses, a competitive environment and loss of exclusivity for certain products, pressure on margins as we fund product launches and pipeline expansion, and a complex organization.

New strategic roadmap

To build on these strengths and meet these challenges, Sanofi has developed a new strategic roadmap, announced on November 6, 2015. The Group will continue to be a global healthcare company focused on disease prevention and treatment. The strategic roadmap has four pillars, namely reshape the portfolio, deliver outstanding launches, sustain innovation in R&D, and simplify the organization.

Reshape the portfolio

To reshape the portfolio, we have segmented our businesses focusing on three targets: to sustain leadership, build competitive positions, and explore strategic options.

Below is a brief overview of our strategy in each business.

Sustain leadership

 

·   

Diabetes and Cardiovascular. Sanofi remains committed, for the long term, to fighting the global epidemic of diabetes and to treating cardiovascular disease, the leading cause of death globally. Our three priorities to return the diabetes business to growth beginning in 2019 are to develop the insulin franchise, with Lantus®, Toujeo®, and of lixisenatide/insulin glargine association project; strengthen our pipeline; and lead the market shift to managing diabetes outcomes, in part through the new collaboration with our world-class partner Verily (formerly Google Life Sciences). We have taken concrete steps to strengthen our pipeline already through licensing agreements with Lexicon for sotagliflozin, a SGLT-1/2 inhibitor, and with Hanmi for a weekly GLP-1, a long-acting insulin, and a weekly insulin-GLP-1 combination. In cardiovascular, we have the opportunity to transform the management of hypercholesterolemia through Praluent®, developed jointly with Regeneron.

 

·   

Vaccines. Over the next five years, we expect to outgrow the market in vaccines. Our growth will be driven by Dengvaxia®, and our leading products in flu, pediatric combinations, and boosters. Vaccination rates for these products remain below public health targets. Demand typically exceeds supply, so a key priority for us is to produce more. We are investing to secure and expand flu and pediatric capacity. To secure growth for the longer term, we are working on novel vaccines such as Clostridium difficile.

 

·   

Rare Diseases. We intend to sustain our market share through the patient-centered approach unique to Sanofi Genzyme, product differentiation, and market access. Our objective is to grow the market through screening and manufacturing expansion. We also expect to advance our strong pipeline where four of our assets have received breakthrough or fast-track designation from the FDA.

 

·   

Emerging Markets. Sanofi is the leader in emerging markets and is a major multinational player in the BRIC-M countries (Brazil, Russia, India, China and Mexico). We intend to sustain leadership through greater focus on key countries, prioritizing resource allocation, adapting the industrial footprint, and developing market-specific innovations.

Build competitive positions

 

·   

Multiple Sclerosis. Sanofi already has a competitive position in multiple sclerosis. In the coming years, we

 

 

 

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    intend to complete the global launches of Aubagio® and Lemtrada® and then maximize our support through product life-cycle management. We will also strengthen our portfolio, in high efficacy and in neuroprotection.

 

·   

Oncology. Sanofi is rebuilding its oncology portfolio. We intend to maximize our clinical assets, particularly isatuximab, an anti-CD38 monoclonal antibody for multiple myeloma, and to build a transformative pipeline in immuno-oncology and cancer-cell dependencies.

 

·   

Immunology. With sarilumab in rheumatoid arthritis and dupilumab in atopic dermatitis and asthma as the lead indications, developed in collaboration with Regeneron, we have the cornerstones of an important new franchise in immunology.

 

·   

Consumer Health Care. Our aim is to achieve leadership and we intend to do so by maximizing the value of existing brands, shaping new categories, and building scale through bolt-on acquisitions such as our proposed business swap with Boehringer Ingelheim (see next section).

Explore strategic options

 

·   

Animal Health. The Animal Health business has made a strong return to growth. We are the world leader in medical products for pets and the fourth player overall. On December 15, 2015, we announced exclusive negotiations with Boehringer Ingelheim to swap businesses. The proposed transaction would consist of an exchange of the Sanofi Animal Health business with an enterprise value of 11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of 6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of 4.7 billion. The transaction would allow Sanofi to become the number one ranked player in the Over-the-Counter (OTC) drug market.

 

·   

Generics in Europe. Our European Generics business has approximately 1 billion in sales, including both Western and Eastern Europe. We rank fifth in a consolidating market and have achieved above-average profitability. We are exploring which strategic option will best position the European Generics business for continued success.

Deliver outstanding launches

Our second strategic priority is to deliver outstanding launches of new medicines and vaccines. We are on track to deliver up to 18 new products to the market by 2020. We have focused the organization on six major product launches among the 18, namely Toujeo®, Praluent®, Dengvaxia®, sarilumab, lixisenatide/insulin glargine, and dupilumab.

These products are described in greater detail in “B. Business Overview – B.2. Main Pharmaceutical Products, and “– B.3. Vaccines”.

Sustain innovation in R&D

Our strategy depends on continued innovation in R&D. Sanofi will continue to strengthen its R&D pipeline, increasing the number of high-quality projects in the early-stage pipeline and replenishing the late-development pipeline as products launch. We will align the R&D organization with the new Global Business Unit structure (see below). Sanofi has a number of anchor collaborations in R&D, most notably with Regeneron for monoclonal antibodies, increasingly focused on immuno-oncology, and with Alnylam for RNAi therapeutics in rare genetic diseases. Fostering these collaborations is an important part of our R&D strategy.

Our R&D investments will follow our business priorities, focusing on those businesses where we aim to sustain leadership and build competitive positions. We expect to increase our R&D investments up to 6 billion annually by 2020.

Simplify the organization

Our final strategic priority is to drive focus and simplification within our organization. As we launch new products, it is important that Sanofi works together in an integrated way. That is why, as of January 1, 2016, Sanofi created:

 

·   

Five Global Business Units (GBUs):

 

   

the General Medicines & Emerging Markets GBU consists of Sanofi’s Established Prescription Products, Generics, Consumer Healthcare, and all pharmaceutical businesses in Emerging Markets;

 

   

the Specialty Care GBU, to be called Sanofi Genzyme consists of Sanofi’s medicines in Rare Diseases, Multiple Sclerosis, Oncology and Immunology;

 

   

the Diabetes & Cardiovascular GBU consists of Sanofi’s Diabetes Care medicines as well as Cardiovascular medicines;

 

   

Sanofi Pasteur and Merial are both GBUs and continue to manage their current portfolios of vaccines and animal health products.

 

·   

Centralized global functions, aligned with the GBUs;

 

·   

The aligned R&D organization referred to above.

Our new structure will allow us to be more aligned in our strategy and more effective in our execution across R&D and commercial, and from global to country level. Full implementation of the new organizational structure remains subject to ongoing negotiations with labor unions/employee representatives.

 

 

 

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Reshaping the plant network is a second element in our program of simplification. We will continue to reshape the network to better match our evolving business by implementing a more focused approach in Emerging Markets, improving competitiveness and simplifying product lines. At the same time, we will continue to invest in biologics capacity to support our product launches and growth.

One of the outcomes of simplification will be a reduction in costs. To balance the need for increased resources and to partly offset lower diabetes sales expectations, we expect to generate 1.5 billion in cost savings by 2018. The savings will largely be reinvested in the business. Two-thirds of the cost savings are expected to come from simplification of the organization worldwide and from a more focused portfolio. Of those two-thirds, half is expected to come from improvements in gross margins. The other half is expected to come from Selling, General and Administrative expenses (SG&A). The remaining third of the cost savings is expected to come from investment prioritization.

The third element of the simplification program is to unite the different parts of the Group behind a single vision, a common set of values, and a shared culture.

B.2. Main Pharmaceutical Products

Within the pharmaceuticals business, our most important marketed products can be grouped into the key fields of diabetes, cardiovascular disease, rare diseases, multiple sclerosis and oncology. We have also developed a significant presence in consumer health care and generics.

The sections below provide additional information on the indications and market position of our products. Our intellectual property rights over our pharmaceutical products are material to our operations and are described at “B.7. – Patents, Intellectual Property and Other Rights” below. As disclosed in “Item 8. Financial Information – A. Consolidated Financial Statements and Other Financial Information – Patents” of this annual report, we are involved in significant litigation concerning the patent protection of a number of these products.

 

 

The table below shows the net sales of the main pharmaceutical products for the year ended December 31, 2015.

 

Therapeutic Area / Product Name    2015
Net Sales
(€ million)
     Drug Category / Main Areas of Use
Diabetes Solutions              

Lantus® (insulin glargine)

     6,390      

Long-acting analog of human insulin

· Type 1 and 2 diabetes

Amaryl® (glimepiride)

     393      

Sulfonylurea

· Type 2 diabetes

Apidra® (insulin glulisine)

     376      

Rapid-acting analog of human insulin

· Type 1 and 2 diabetes

Toujeo® (Glargine U300)

     164      

Long-acting analog of human insulin

· Type 1 and 2 diabetes

Insuman® (insulin)

     141      

Human insulin (rapid and intermediate acting)

· Type 1 and 2 diabetes

Lyxumia® (lixisenatide)

     38      

GLP-1 receptor agonist

· Type 2 diabetes

Rare Diseases              

Cerezyme® (imiglucerase for injection)

     757      

Enzyme replacement therapy

· Gaucher disease

Myozyme®/Lumizyme® (alglucosidase alpha)

     650      

Enzyme replacement therapy

· Pompe disease

Fabrazyme® (agalsidase beta)

     592      

Enzyme replacement therapy

· Fabry disease

Aldurazyme® (laronidase)

     195      

Enzyme replacement therapy

· Mucopolysaccharidosis Type 1

Cerdelga® (eliglustat)

     66      

Enzyme replacement therapy

· Gaucher disease Type 1

 

 

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Therapeutic Area / Product Name    2015
Net Sales
(€ million)
     Drug Category / Main Areas of Use
Multiple Sclerosis              

Aubagio® (teriflunomide)

     871      

Immunomodulating agent

· Multiple Sclerosis (MS)

Lemtrada® (alemtuzumab)

     243      

Humanized monoclonal antibody

· Multiple Sclerosis (MS)

Oncology              

Jevtana® (cabazitaxel)

     321      

Cytotoxic agent

· Prostate cancer

Thymoglobulin® (anti-thymocyte globulin)

     256      

Polyclonal anti-human thymocyte antibody preparation

· Acute rejection in organ transplantation

· Aplastic anemia

· Graft-versus-Host Disease

Eloxatin® (oxaliplatin)

     227      

Cytotoxic agent

· Colorectal cancer

Taxotere® (docetaxel)

     222      

Cytotoxic agent

· Breast cancer

· Non small cell lung cancer

· Prostate cancer

· Gastric cancer

· Head and neck cancer

Mozobil® (plerixafor)

     143      

Hematopoietic stem cell mobilizer

· Hematologic maligancies

Zaltrap® (aflibercept)

     77      

Recombinant fusion protein

· Oxaliplatin resistant metastatic colorectal cancer

Established Prescription Products              

Plavix® (clopidogrel bisulfate)

     1,929      

Platelet adenosine disphosphate receptor antagonist

· Atherothrombosis

· Acute coronary syndrome with and without ST segment elevation

Lovenox® (enoxaparin sodium)

     1,719      

Low molecular weight heparin

· Treatment and prevention of deep vein thrombosis

· Treatment of acute coronary syndromes

Renagel® (sevelamer hydrochloride) / Renvela® (sevelamer carbonate)

     935      

Oral phosphate binders

· High phosphorus levels in patients with

chronic kidney disease (CKD) on dialysis

Aprovel® (irbesartan) / CoAprovel® (irbesartan & hydrochlorothiazide)

     762      

Angiotensin II receptor antagonist

· Hypertension

Synvisc® / Synvisc-One® (hylan G-F 20)

     413      

Viscosupplements

· Pain associated with osteoarthritis of the knee

Multaq® (dronedarone)

     341      

Anti-arrhythmic drug

· Atrial Fibrillation (AF)

Stilnox® / Ambien® / Myslee® (zolpidem tartrate)

     306      

Hypnotic

· Sleep disorders

Allegra® (fexofenadine hydrochloride)

     194(1)      

Anti-histamine

· Allergic rhinitis

· Urticaria

 

 

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Therapeutic Area / Product Name    2015
Net Sales
(€ million)
     Drug Category / Main Areas of Use
Praluent® (alirocumab)      9      

Cholesterol-lowering drug that inhibits PCSK9

· Heterozygous familial hypercholesterolemia

· Clinical atherosclerotic cardiovascular disease

Consumer Health Care              

Total

     3,492        
Generics              

Total

     1,917        

 

(1)  

Excluding Allegra® OTC sales.

 

a) Diabetes Solutions

The prevalence of diabetes is expected to increase significantly by 2030, reflecting multiple socio-economic factors including sedentary lifestyles, excess weight and obesity, unhealthy diet and an aging population.

Our principal diabetes products are Lantus®, and Toujeo®, long acting analogs of human insulin; Amaryl®, a sulfonylurea; Apidra®, a rapid acting analog of human insulin; Insuman®, a human insulin; and Lyxumia® (lixisenatide), a once-daily prandial GLP-1 receptor agonist.

Lantus®

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

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

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

 

·   

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

 

·   

AllSTAR™, the first state of the art reusable insulin pen developed specially for people with diabetes in emerging markets, indicated for use with Sanofi’s insulin portfolio. AllSTAR™ is currently available in a dozen countries, mostly in emerging markets.

Lantus® remains the world’s no. 1 selling insulin brand in terms of both sales and units and is available in over 120 countries worldwide. The leading countries for sales of Lantus® in 2015 were the U.S., China, France and Germany.

2015 sales of Lantus® were 6,390 million, down 10.8% (constant exchange rate). In the U.S., sales of Lantus® decreased 20.5% to 4,023 million, mainly reflecting higher discounts as compared to last year, a slowdown of basal insulin market growth and an unfavorable mix effect towards highly-discounted government channels such as Medicaid (which also included Medicaid delayed bills from multiple States). A biosimilar of Lantus® from Eli Lilly and Company (Lilly) was launched in several European markets in the third quarter (including Germany, the U.K., Spain and eight other countries) and in Japan. In Emerging Markets, 2015 sales of Lantus® were up 17.3% to 1,137 million, driven by China.

In the U.S., Sanofi’s pediatric regulatory exclusivity for the Lantus compound expired in February 2015. The Lantus® compound patent expired in August 2014 in the U.S., and in November 2009 in Europe and Japan. A Patent Term Extension in Japan expired in November 2014. The Supplementary Protection Certificate for Lantus® including pediatric extension expired in major European countries in May 2015. Sanofi also has patents protecting the Lantus® formulation and devices which deliver Lantus®.

On September 28, 2015, Sanofi and Lilly announced that they had agreed to dismiss the patent infringement lawsuit in the U.S. and to discontinue similar disputes worldwide. For more information refer to Item 8 – Consolidated Financial Statements and Other Financial Information – Information on Legal or Abitration Proceedings – Lantus® and Lantus SoloSTAR® Patent Litigation (United States, France and Japan).

On December 16, 2015, the FDA granted approval in the U.S. to Lilly and Boehringer Ingelheim for their insulin glargine product for use with KwikPen®, a pre-filled dosing device, under the trade name Basaglar® (NDA 205-692). It is a long-acting human insulin analog to improve glycemic control in adult and pediatric patients with type 1 diabetes and in adults with type 2 diabetes.

Following this settlement in the U.S. Lilly will not sell its insulin glargine product before December 15, 2016.

 

 

 

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Toujeo®

Sanofi’s next generation basal insulin Toujeo (insulin glargine 300 units/mL) has been granted marketing authorization by three major regulatory authorities: the FDA (February 25, 2015), the European Commission (April 28, 2015) and the Japanese Ministry of Health, Labor and Welfare (J-MHLW) where its approved brand name is Lantus® XR (June 30, 2015).

Toujeo® is available in the Toujeo® SoloSTAR®, a disposable prefilled pen which contains 450 units of Toujeo® and requires one third of the injection volume to deliver the same number of insulin units as compared to the Lantus® SoloSTAR®. The maximum single injection dose of 80 IU meets the needs of the vast majority of patients on basal insulin in the U.S., who require 80 IU or less per day.

Toujeo® has now been launched in 20 countries, including the U.S., Germany, the U.K. and Japan. Toujeo® is currently pending marketing authorization with other health authorities around the world and it is expected that an additional 24 countries including France, Italy and Spain will launch Toujeo® in 2016 making this next-generation basal insulin treatment for type 1 and type 2 diabetes widely available.

Apidra®

Apidra® (insulin glulisine) is a rapid-acting analog of human insulin. Apidra® is indicated for the treatment of adults with type 1 or type 2 diabetes for supplementary glycemic control. Apidra® has a more rapid onset and shorter duration of action than fast-acting human insulin and can be used in combination with long-acting insulins such as Lantus® for supplementary glycemic control at mealtimes. Apidra® can be administered subcutaneously using syringes or specific pens including the Apidra® SoloSTAR® disposable pen.

Apidra® is available in over 100 countries worldwide.

Insuman®

Insuman® (human insulin) is a range of insulin solutions and suspensions for injection and is indicated for diabetes patients when treatment with insulin is required. Human insulin is produced by recombinant DNA technology in Escherichia coli strains. Insuman® is supplied in vials, cartridges, and pre-filled disposable pens (OptiSet® and SoloSTAR®). The Insuman® range is comprised of rapid-acting insulin solutions (Insuman® Rapid and Insuman® Infusat) that contain soluble insulin, an intermediate-acting insulin suspension (Insuman® Basal) that contains isophane insulin, and combinations of fast-acting and intermediate-acting insulins in various proportions (Insuman® Comb).

Insuman® is principally sold in Germany and in Emerging Markets. At the end of 2015, limited manufacturing capacity at a Sanofi manufacturing site in Frankfurt, Germany, for

Insuman pre-filled pens and cartridges caused supply difficulties for some Insuman suspension products. A shortage is therefore expected for the first half of 2016 with some limited, and temporary supply disruptions of some products in the E.U.

Lyxumia®

Lyxumia® (lixisenatide) is a once-daily prandial GLP-1 receptor agonist and is indicated for the treatment of adults with type 2 diabetes to achieve glycemic control in combination with oral glucose-lowering medicinal products and/or basal insulin when these, together with diet and exercise, do not provide adequate glycemic control.

In February 2013, the European Commission granted marketing authorization in Europe for Lyxumia®. On completion of pricing and reimbursement discussions, Sanofi initiated a phased launch of Lyxumia® in most E.U. countries. Applications for regulatory approval have also been submitted in several other countries around the world and are being reviewed. Lyxumia® has been approved in over 60 countries and launched in over 35 countries around the world. The countries with the largest sales are Japan, Spain, the U.K. and Belgium. Recent launches include Russia and Korea. Lyxumia® has been withdrawn from the market in Germany.

Lixisenatide was submitted to the FDA on July 27, 2015 after the results of ELIXA demonstrated cardiovascular safety in type 2 diabetes patients with high cardiovascular risk. A launch is anticipated in the third quarter of 2016. Other major launches expected in 2016 include France in the fourth quarter.

Additional Phase IIIb studies are ongoing including research into the safety and efficacy of Lyxumia® in the pediatric setting.

Afrezza®

Afrezza® is a rapid-acting inhaled insulin indicated to improve glycemic control in adult patients with diabetes. The product was launched in the U.S. at the beginning of February 2015. In January 2016, Sanofi exercised its option to terminate the license and collaboration agreement with MannKind Corporation, the developer of Afrezza, and will transfer the rights for Afrezza back to MannKind on April 4, 2016.

Integrated Care Solutions

Sanofi is committed to developing integrated care solutions to improve diabetes health outcomes for people with diabetes. This approach integrates technology, therapeutic innovations, personalized services and support solutions.

Sanofi and Verily (formerly Google Life Sciences) entered into a collaboration to improve diabetes health outcomes.

 

 

 

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We will work together on new digital technology and tools for diabetes. The aim is to use data and miniaturized technology to provide patients with more tools to self-manage their disease, and healthcare professionals with the ability to better support and treat patients. Together they will strive to shift from episodic, event-driven diabetes care to continuous, value-based care.

In the framework of their partnership, Sanofi and AgaMatrix have co-developed MyStar Dose Coach®, a dose helper for Insulin Glargine with an integrated blood glucose meter, which has obtained the CE mark. Sanofi and AgaMatrix have already co-developed intelligent solutions in diabetes care such as blood glucose monitoring solutions BGStar®, iBGStar® and MyStar Extra® which are easy to use, accurate, reliable and fit the lifestyle of people with diabetes today.

 

b) Cardiovascular

Praluent®

Praluent® is a human monoclonal antibody (mAb) that blocks the interaction of PSCK9 with LDL receptors, increasing the recycling of LDL receptors and reducing LDL-C levels.

Praluent® has been extensively studied through the ODYSSEY Phase III program with 16 global trials including more than 23,500 patients in more than 40 countries to evaluate the efficacy and safety of Praluent® across various high cardiovascular risk patients (due to but not limited to diabetes, family hypercholesterolemia or previous events) including patients with Heterozygous Familial Hypercholesterolemia (HeFH), patients with primary hypercholesterolemia uncontrolled on statins and/or other lipid-modifying therapies, post Acute Coronary Syndrome (ACS) patients and as a monotherapy for patients who are unable to tolerate effective dose of statins.

The effect of Praluent® on cardiovascular morbidity and mortality within post ACS patient population is being investigated in the ongoing ODYSSEY OUTCOMES trial. In parallel, the ability of Praluent® to reduce major cardiovascular events is being investigated and results are anticipated in 2017.

Praluent® has been approved by both the FDA in the U.S. and the European Commission. As of March 2016, Praluent® has been launched in the U.S., Germany, the U.K., Austria and Nordic countries.

On August 5, 2015, an application for Praluent® was submitted in Japan and submission in the rest of the world is progressing according to plans.

The main countries contributing to Praluent® sales in 2015 were the U.S. and Germany.

Multaq®

Multaq® (dronedarone) is among the most extensively studied anti-arrhythmic drugs in atrial fibrillation (AF) and has demonstrated a unique cardiovascular outcome benefit in the ATHENA study and effective rhythm control in the EURIDIS and ADONIS studies which was confirmed in real world investigations.

Multaq® is a multichannel blocker with anti-arrhythmic (prevention of AF recurrences) properties and is the first and only anti-arrhythmic drug to have shown a significant reduction in cardiovascular hospitalization and death in patients with paroxysmal and persistent AF.

The main countries contributing to Multaq® sales in 2015 were the U.S., Germany and Italy.

 

c) Rare Diseases

Our Rare Diseases business is focused on products for the treatment of rare genetic diseases and other chronic debilitating diseases, including lysosomal storage disorders, or LSDs, a group of metabolic disorders caused by enzyme deficiencies.

Cerezyme®

Cerezyme® (imiglucerase for injection) is an enzyme replacement therapy used to treat Gaucher disease, an inherited, potentially life-threatening LSD. It is estimated that Gaucher disease occurs in approximately one in 120,000 newborns in the general population and one in 850 in the Ashkenazi Jewish population worldwide, but the incidence and patient severity vary among regions.

Cerezyme® is the only therapy with a 20-year history of reducing, relieving and reversing many of the symptoms and risks of Type 1 and Type 3 (in certain markets) Gaucher disease. Cerezyme® is administered by intravenous infusion over one or two hours.

The principal markets for Cerezyme® are the U.S., Europe and Latin America.

Cerdelga®

Cerdelga® (eliglustat) is the only first-line oral therapy for Gaucher disease Type 1.

A potent, highly specific ceramide analogue inhibitor of GL-1 synthesis with broad tissue distribution, Cerdelga® has demonstrated efficacy in the treatment of naïve Gaucher disease patients and in patients who switch from enzyme replacement therapy (ERT). The Cerdelga® development program is the largest ever in Gaucher disease, with almost 400 patients treated in 29 countries.

The principal market for Cerdelga® currently is the U.S. It received European Medicines Agency (EMA) approval in January 2015 and was approved in Japan in March 2015.

 

 

 

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Myozyme® / Lumizyme®

Myozyme® / Lumizyme® (alglucosidase alfa) are enzyme replacement therapies used to treat Pompe disease, an inherited, progressive and often fatal LSD. Pompe disease occurs in approximately one in 40,000 newborns worldwide, but the incidence and patient severity vary among regions.

Myozyme® has been marketed since 2006 in the U.S. and the E.U. and is approved in 76 countries. Outside the U.S., Myozyme® is marketed for patients with both infantile- and late-onset disease. Lumizyme® has been marketed since June 2010 in the U.S.. Initially designed specifically to treat patients with late-onset Pompe disease and patients over eight years of age without evidence of cardiac hypertrophy, on August 1, 2014 it was approved for infantile-onset Pompe disease.

Myozyme® and Lumizyme® are administered by intravenous infusion. Both products are recombinant forms of the same human enzyme.

Fabrazyme®

Fabrazyme® (agalsidase beta) is an enzyme replacement therapy used to treat Fabry disease, an inherited, progressive and potentially life threatening LSD.

Fabry disease occurs in approximately one in 35,000 newborns worldwide, but the incidence and patient severity vary among regions.

Fabrazyme® has been marketed in the E.U. since 2001 and in the U.S. since 2003. Fabrazyme® is approved in 75 countries.

Fabrazyme® is administered by intravenous infusion.

Aldurazyme®

Aldurazyme® (laronidase) is an enzyme replacement therapy used to treat Mucopolysaccharidosis Type 1 (MPS I). MPS I occurs in approximately one in 85,000 newborns worldwide, but the incidence and patient severity vary among regions.

The principal markets for Aldurazyme® are the U.S., Europe and Latin America.

 

d) Multiple Sclerosis (MS)

Multiple sclerosis (MS) is an autoimmune disease in which a person’s immune system attacks the central nervous system, damaging myelin, the protective sheath that covers nerve fibers. This causes a break in communication between the brain and the rest of the body, ultimately destroying the nerves themselves, and causing irreversible damage. More than two million people suffer from MS worldwide.

Genzyme is focused on the development and commercialization of therapies to treat MS. Genzyme’s MS franchise consists of Aubagio® (teriflunomide), a once-daily,

oral immunomodulator, and Lemtrada® (alemtuzumab), a monoclonal antibody. Both products have been developed to treat patients with relapsing forms of MS. In addition to its marketed therapies Lemtrada® and Aubagio®, Genzyme has an MS R&D pipeline focused on investigational treatments to address unmet needs for relapsing and progressive forms of MS. Genzyme’s R&D programs are pursuing research in selective immunomodulation, neuroprotection and remyelination.

Aubagio®

Aubagio® (teriflunomide) is a small molecule immunomodulatory agent with anti-inflammatory properties, reversibly inhibits dihydroorotate dehydrogenase, a mitochondrial enzyme involved in de novo pyrimidine synthesis. The exact mechanism by which teriflunomide exerts its therapeutic effect in MS is unknown but may involve a reduction in the number of activated lymphocytes in the CNS. Aubagio® has shown significant efficacy across key measures of MS disease activity, including slowing the progression of physical disability, reducing relapses, and reducing the number of brain lesions as detected by MRI. Aubagio® is the first and only oral MS therapy to significantly slow the progression of disability in two Phase III trials (TEMSO and TOWER) and is the only oral therapy shown to prevent or delay a second clinical attack in patients who have experienced initial neurological symptoms suggestive of MS (TOPIC trial).

Ongoing development efforts include the TeriKIDS study to assess the safety and efficacy of teriflunomide in children (10-17 years old), global post-marketing registries for pregnancy, and a post-approval study that will evaluate long-term safety in the marketed population using data from selected national health registries in Europe.

Aubagio® was approved in the U.S. in August 2013 and is now approved in more than 60 countries around the world, including the E.U. and Brazil, with additional marketing applications under review by regulatory authorities globally. To date, more than 48,000 people have been treated with Aubagio® worldwide.

Lemtrada®

Lemtrada® (alemtuzumab) is a humanized monoclonal antibody targeting the CD52 antigen. Alemtuzumab was developed to treat patients with relapsing forms of MS.

In September 2013, Lemtrada® was granted marketing authorization in the E.U. for treatment of adult patients with relapsing forms of MS with active disease defined by clinical or imaging features. Since then, Lemtrada® has been approved by regulatory authorities in several countries in the world including Brazil. In November 2014, the U.S. FDA approved Lemtrada® for the treatment of patients with relapsing forms of multiple sclerosis. Because of its safety profile, the FDA approval limited use of Lemtrada® to

 

 

 

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patients who have had an inadequate response to two or more drugs indicated for the treatment of MS and included a black box warning on potential side effects. Lemtrada® is only available in the U.S. through a restricted program called the LEMTRADA Risk Evaluation and Mitigation Strategy (REMS) Program. Lemtrada® is currently approved in more than 45 countries. Additional marketing applications for Lemtrada® are under review by regulatory agencies around the world.

 

e) Oncology

We have a portfolio of 10 marketed products in Oncology, and diversified our presence beyond chemotherapy (Taxotere®, Jevtana®, Eloxatin®) with Thymoglobulin® and Mozobil® and with an angiogenesis inhibitor, Zaltrap®, launched in 2012 in the United States and in 2013 in the E.U..

Jevtana®

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

Jevtana® was launched in the U.S. in 2010 and this therapy is now covered by Centers for Medicare and Medicaid Services (CMS), and by most of the private insurance companies that pay for oncology care.

In 2011, Jevtana® received marketing authorization from the European Commission. In July 2014, the Japanese Health Authority (Pharmaceuticals and Medical Devices Agency, or PMDA) granted marketing authorization for Jevtana®, which is now approved in over 80 countries.

Sanofi has initiated a broad development program with Jevtana®. Two post-marketing requirement Phase III studies are ongoing in first- and second-line chemotherapy treatment of metastatic castration resistant prostate cancer patients. The clinical program is also evaluating Jevtana® in pediatric patients with brain cancer (phase I/II ongoing).

The main countries contributing to sales of Jevtana® in 2015 were the U.S., France, Germany, Japan, Italy, Spain and the U.K.

Taxotere®

Taxotere® (docetaxel), a taxoid class derivative, inhibits cancer cell division by essentially “freezing” the cell’s internal skeleton, which is comprised of microtubules. Microtubules assemble and disassemble during a cell cycle. Taxotere®

promotes their assembly and blocks their disassembly, thereby preventing many cancer cells from dividing, which ultimately results in destroying many cancer cells.

Taxotere® is available in more than 90 countries as an injectable solution. It has been approved for use in 11 indications in five different tumor types (breast, prostate, gastric, lung, and head and neck).

The top four countries contributing to sales of Taxotere® in 2015 were Japan, China, Taiwan and South Korea. Generics of docetaxel were launched in Europe, in the U.S., and in Japan (see “– B.7. Patents, Intellectual Property and Other Rights” below).

Eloxatin®

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

Eloxatin® is in-licensed from Debiopharm and is marketed in more than 70 countries worldwide.

Following the end of Eloxatin® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have been launched throughout Europe. Market exclusivity in the U.S. was lost in 2012. In the second quarter of 2013, Eloxatin® received regulatory approval for advanced Hepatocellular Carcinoma (HCC) in China. Several generics of oxaliplatin are available globally, including Canada where Eloxatin® lost exclusivity in December 2015.

The main three countries contributing to sales of Eloxatin® in 2015 were Canada, China and South Korea.

Thymoglobulin®

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

The main countries contributing to Thymoglobulin® sales in 2015 were the U.S., China, France, Japan and South Korea.

 

 

 

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Mozobil®

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

The main countries contributing to Mozobil® sales in 2015 were the U.S., the U.K.,Germany and France.

Zaltrap®

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

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

In the E.U., Zaltrap® was approved in February 2013 by the European Commission to treat mCRC that is resistant to or has progressed after an oxaliplatin-containing regimen.

Zaltrap® was approved in a further 18 countries in 2014, and is now approved in over 50 countries worldwide. Marketing authorization applications are under review in several other countries.

The main countries contributing to sales of Zaltrap® in 2015 were the U.S., Germany, France, Spain, Italy and the U.K..

For additional information on the commercialization of this product, see “Item 5 – Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

 

f) Established Prescription Products and Other Products

Plavix® / Iscover®

Plavix® (clopidogrel bisulfate), a platelet adenosine diphosphate (ADP) receptor antagonist with a rapid onset of action that selectively inhibits platelet aggregation induced by ADP, is indicated for the prevention of atherothrombotic events in patients with a history of recent myocardial infarction, recent ischemic stroke or established peripheral arterial disease.

Plavix® is indicated for patients with acute coronary syndrome (ACS):

 

·   

For patients with non-ST-segment elevation ACS, including unstable angina/nonQ-wave myocardial infarction (MI), including patients who are to be managed medically and those who are to be managed with percutaneous coronary intervention (with or without stent) or coronary artery bypass grafting, Plavix has been shown to decrease the rate of a combined endpoint of cardiovascular death, MI, or stroke as well as the rate of a combined endpoint of cardiovascular death, MI, stroke, or refractory ischemia;

 

·   

For patients with ST-segment elevation acute myocardial infarction, Plavix® has been shown to reduce the rate of death from any cause and the rate of a combined endpoint of death, re-infarction or stroke.

Plavix® is also indicated in combination with acetylsalicylic acid (ASA) for the prevention of atherothrombotic and thromboembolic events in Atrial Fibrillation, including stroke.

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

For additional information on the commercialization of these products, see “Item 5 – Financial Presentation of Alliances – Alliance Arrangements with Bristol-Myers Squibb”. A number of generics have been launched in Europe, the U.S. and other markets.

Generics were launched in Japan starting in June 2015 (for stroke indication), October 2015 (for MI) and are expected to be launched in the fourth quarter of 2016 for the PAD indication.

Plavix® is the leading anti-platelet in the Chinese market.

The main countries contributing to sales of Plavix® / Iscover® in 2015 were Japan and China.

Lovenox® / Clexane®

Lovenox® (enoxaparin sodium) has been used to treat almost 500 million patients in more than 100 countries since its launch and is registered for a wider range of clinical indications than any other low molecular weight heparin (LMWH). Its comprehensive clinical dossier has demonstrated a favorable risk-benefit ratio, notably in the prophylaxis and treatment of venous thromboembolism and in the treatment of acute coronary syndrome. In the prevention of venous thromboembolism, the use of Lovenox® continues to grow, particularly in the area of prophylaxis of deep vein thrombosis (DVT) in patients hospitalized for an acute medical condition.

 

 

 

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In the U.S., three enoxaparin generics have been approved as well as Sanofi’s own Lovenox® generic. No biosimilar of Lovenox® has been authorized in the E.U. yet.

In 2015, Lovenox® was the leading injectable anti-thrombotic in all European countries.

Aprovel® / Avapro®  / Karvea®

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

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

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

A fixed-dose combination with amlodipine (Aprovasc) has been launched in several emerging markets.

Aprovel® and CoAprovel® are marketed in more than 80 countries. For additional information on the commercialization of this product, see “Item 5 – Financial Presentation of Alliances – Alliance Arrangements with Bristol-Myers Squibb”. In Japan, the product is licensed to Shionogi Co. Ltd and BMS KK. BMS KK has sublicensed the agreement to Dainippon Pharma Co. LTD.

The main countries contributing to sales of Aprovel® / Avapro® / Karvea® in 2015 were China and Japan.

Renagel® and Renvela®

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

In the U.S., there are an estimated 395,000 dialysis patients, approximately 90% of whom receive a phosphate binder.

There are an estimated 350,000 dialysis patients in the E.U. and 65,000 in Brazil. In the E.U., Renvela® is also approved to treat CKD patients not on dialysis.

Renagel® and Renvela® are marketed in more than 85 countries. In Japan and several Pacific Rim countries, Renagel® is marketed by Chugai Pharmaceutical Co., Ltd and its sublicensee, Kyowa Hakko Kirin Co., Ltd.

As of January 31, 2016, there have been no approvals of generics in the U.S.. However, Sanofi expects potential generics approvals in the U.S. in 2016. Generics of the product are currently marketed in some European countries.

In Europe, the product lost its exclusivity in January 2015 and generics are currently marketed in some countries. Sanofi has launched an authorized generic in some markets.

The main countries contributing to sales of Renagel® and Renvela® in 2015 were the U.S., France, Germany, Italy, Brazil and the U.K..

Allegra® / Telfast®

Allegra® (fexofenadine hydrochloride) is a long-lasting (12- and 24-hour) non-sedating prescription anti-histamine for the treatment of seasonal allergic rhinitis (hay fever) and uncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.

We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant for effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion. This combination is marketed in Japan under the Dellegra® brand name.

Generics of most forms of Allegra® / Telfast® have been approved in our major markets.

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

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

Stilnox® / Ambien®  / Myslee®

Stilnox® (zolpidem tartrate) is indicated in the short-term treatment of insomnia. Stilnox® rapidly induces sleep that is qualitatively close to natural sleep and devoid of certain side effects that are characteristic of the benzodiazepine class as a whole. Its action lasts for a minimum of six hours, and it is

 

 

 

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generally well tolerated, allowing the patient to awaken without notably impaired attention, alertness or memory throughout the day.

Stilnox® is marketed in over 100 countries. It is available under the brand name Ambien® / Ambien®CR in the U.S. and Myslee® in Japan, where it is co-promoted jointly with Astellas. Stilnox® and Ambien CR® are subject to generic competition in most markets, including the U.S. and Europe. In Japan, generics of Myslee® entered the market in 2012.

In 2015, the main countries contributing to Stilnox® / Ambien® / Myslee® sales were Japan and the U.S.

Synvisc® / Synvisc-One ®

Synvisc® and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis. Synvisc is indicated for the treatment of pain associated with osteoarthritis (OA) of the knee, hip, ankle, and shoulder joint in countries that have adopted CE marking, and for pain due to knee osteoarthritis in the U.S. Synvisc-One® is approved for use in patients with OA of the knee in U.S. and countries that require CE marking. Currently the main viscosupplementation market is for the treatment of pain associated with osteoarthritis of the knee.

Synvisc® is a triple-injection product and Synvisc-One® a single-injection product. Both are administered directly into the intra-articular space of the joint to temporarily restore synovial fluid. The Phase III trial evaluating Synvisc-One® in hip osteoarthritis did not reach its primary endpoint in 2015.

In 2015, the main countries contributing to Synvisc® and Synvisc-One® sales were the U.S., Mexico, France, Canada, Germany and Brazil.

Auvi-Q® / Allerject ®

On October 30, 2015, Sanofi announced a voluntary recall for Auvi-Q® and Allerject® in the U.S. and Canada.

Sanofi has ultimately decided to return all U.S. and Canadian rights to Auvi-Q® to the developer of Auvi-Q®.

 

g) Consumer Health Care (CHC)

Consumer Health Care is one of the key platforms in Sanofi’s global growth strategy. In 2015, Consumer Health Care sales reached 3,492 million, an increase of 4.6% (or 2.8 % at constant exchange rates). Nearly 48% of these sales were generated in Emerging Markets, 19.1% in Western Europe and 25.8% in the U.S..

Consumer Health Care activities were consolidated within the Global Consumer Health Care Division at the end of 2013. During 2014, this new division became operational and its development continued in 2015, focusing on meeting consumer needs in terms of health and well-being, and

developing the capacity of our Group to meet those needs by mobilizing:

 

·   

Our medical and scientific resources, working in close collaboration with healthcare professionals, physicians and pharmacists;

 

·   

Our regulatory, medical and commercial know-how, in order to launch self-care versions of products previously available only on prescription; and

 

·   

Our international dedicated sites integrated in the industrial network, manufacturing products to the highest pharmaceutical quality standards.

Sanofi is the fifth largest player in the global consumer healthcare market and one of the fastest growing companies in this sector.

The sustained growth of our Consumer Health Care business is based on three complementary development priorities:

 

·   

Maximizing the existing brand portfolio by accelerating our innovation processes and giving priority to the six major global categories (Allergies, Cough & Cold, Digestive Health, Feminine Hygiene, Analgesics, Vitamins, Minerals and Supplements) forming our core business;

 

·   

Enhancing the strategy of launching self-care versions of products previously available only by prescription. In 2015, Sanofi prepared for the marketing of Cialis® OTC, on the basis of a license agreement signed in 2014 with Lilly granting Sanofi exclusive rights to apply for approval of Cialis® as an OTC product in the U.S., Europe, Canada and Australia, and to market it on the same markets following receipt of all necessary regulatory approvals and once certain patents protecting the product have expired;

 

·   

Pursuing the external growth strategy via the targeted acquisition of products or companies enabling us to strengthen our consumer offering. On December 15, 2015, we announced exclusive negotiations with Boehringer Ingelheim to enter into a proposed transaction that would consist of an exchange of the Sanofi Animal Health business with an enterprise value of 11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of 6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of 4.7 billion. The transaction would allow Sanofi to become the leader in the OTC drug market.

 

 

 

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Highlights of our numerous product launches throughout the world in 2015 include extensions of the brands listed below.

 

·   

In the U.S.:

 

   

Allegra® gelcaps, designed to ease the ingestion of the product. This version of the product is the first extension of the brand since its transition to OTC status in 2011;

 

   

The pediatric version of Nasacort® Allergy 24HR, marketed one year after the transition of the brand to OTC status in 2014;

 

   

IcyHot SmartRelief® for shoulders and knees, a new version of the innovative drug-free pain-relief device, based on Transcutaneous Electrical Nerve Stimulation (TENS) technology, blocking pain signals and stimulating the production of endorphins, the body’s naturally produced pain relievers. The IcyHot SmartRelief® brand has been available throughout the U.S. since the fall of 2014;

 

   

Aspercreme®, a lidocain-based cream providing a new, odorless and non-irritant solution for consumers suffering from pain and constantly looking for new means to attenuate it.

 

·   

In France, the launch of a wide range of OTC pain-relief products, including DolipraneOrodoz 500 mg, an oro-dispersible tablet that may be taken with or without water; DolipraneTabs, a coated tablet masking the relatively bitter taste of paracetamol (500 mg and 1000 mg formulations); DolipraneCaps, an easy-to-swallow capsule containing 1000 mg of paracetamol; DolipraneLiquiz, an oral suspension in liquid, single-dose stick-packs for children. These new products fill out the pain-relief offering of Sanofi, in which Doliprane® plays a central role and covers the needs of patients of all ages, mainly on the French market and in various African countries.

Growth in 2015 was also supported by a range of Consumer Health Care products listed below that enable Sanofi to play a major role in the field of digestive health:

 

·   

No Spa® (drotaverine hydrochloride) is an abdominal anti-spasmodic, indicated for intestinal spasms, menstrual pain and bladder spasm. No Spa® is sold mainly in Russia and Eastern Europe where sales volumes have grown steadily;

 

·   

Enterogermina® is a probiotic in the form of a drinkable suspension in 5 ml bottles or capsules containing two billion Bacillus clausii spores. Enterogermina® is indicated for the maintenance and restoration of intestinal flora in the treatment of acute or chronic intestinal disorders (in babies and adults). Enterogermina® is sold primarily in Europe with strong growth in Latin America, India, Ukraine and Belarus;

 

·   

Essentiale® is a plant-based product for the treatment of liver problems. It is composed of essential phospholipids

   

extracted from highly purified soya and contains a high percentage of phosphatidylcholine, a major component of the cell membrane. Essentiale® is used to alleviate symptoms such as loss of appetite, pressure in the right epigastrium, food-related liver lesions and hepatitis. Essentiale® is sold mainly in Russia (no. 1 CHC product in the market), Eastern Europe, various countries in Southeast Asia and China;

 

·   

Maalox® is a well-established brand that contains two antacids, aluminum hydroxide and magnesium hydroxide. It is available in various forms, namely tablets, oral suspension and sachets, thus offering consumers a range of suitable solutions. Maalox® is available in 55 countries in Europe, Latin America and Asia;

 

·   

Magne B6® is a food supplement containing magnesium and vitamin B6. It has a wide range of therapeutic indications, including irritability, anxiety, sleep disorders and women’s health issues (premenstrual syndrome and menopausal problems). Magne B6® is available primarily in Europe and Russia;

 

·   

The Lactacyd® range covers a number of intimate feminine-hygiene products. Lactacyd® is sold mainly in Brazil and in Asia where the range, enhanced with several new products, has continued to show strong growth in sales. In the fall of 2015, it was launched in Japan with the objective of developing the market for intimate feminine-hygiene products;

The above, long-standing products are supplemented by Chattem products in the U.S.. In addition to Allegra® OTC and Nasacort® Allergy 24H, the main products are ACT®, Aspercreme®, Gold Bond®, Icy Hot®, Cortizone-10®, Selsun Blue® and Unisom®;

Sanofi is also actively growing in the Vitamins, Minerals and Supplements (VMS) market with the Omnivit® range in various emerging-market countries and with the Cenovis® and Nature’s Own® brands on the Australian market.

 

h) Generics

The Generics business recorded 2015 net sales of 1,917 million, up 7.6% at constant exchange rates (CER).

In Emerging Markets, the Generics business generated net sales of 1,094 million, an increase of 5.2% CER, driven by Eurasia/Middle East and Venezuela. Net sales in Western Europe increased by 4.1% CER to 569 million, boosted by a good performance in Germany. In the U.S., net sales advanced by 15.4% CER to 171 million, mainly due to increased sales of the authorized generic of Lovenox®. In the Rest of the World region, net sales rose by 90.7% CER to 83 million, due mainly to the performance in Japan of the authorized generic of Allegra® and of the authorized generic of Plavix® launched by Sanofi and our partner Nichi-Iko Pharmaceuticals at the end of the second quarter of 2015.

 

 

 

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Sales in the U.S. grew by 15.4% at constant exchange rates, driven by authorized generics of Lovenox® and Arava®.

B.3. Vaccine Products

Sanofi Pasteur, the vaccines division of Sanofi, offers a broad range of vaccines. In 2015, Sanofi Pasteur provided more than one billion doses of vaccines, making it possible to immunize more than 500 million people across the globe against 20 serious diseases, and generated net sales of 4,743 million. Sales were favorably impacted by record sales of influenza vaccines and a strong performance of the pediatric combinations, boosters and meninge franchises.

Sanofi Pasteur is a world leader in the vaccine industry in terms of sales. In the U.S., Sanofi Pasteur is the leading producer of influenza and meningitis vaccines.

In Europe, Sanofi Pasteur’s vaccine products are developed and marketed by Sanofi Pasteur MSD, a joint venture that serves 19 countries. Created in 1994 and held equally by Sanofi Pasteur and Merck & Co., Inc., Sanofi Pasteur MSD also distributes Merck vaccines, such as Gardasil® and Zostavax®. In 2015, Sanofi Pasteur MSD net sales amounted to 824 million.

Sanofi Pasteur continued to expand in Asia, Latin America, Africa, the Middle East and Eastern Europe. In addition, Sanofi Pasteur is a key supplier to publicly funded international markets such as UNICEF, the Pan American Health Organization (PAHO) and the Global Alliance for Vaccines and Immunization (GAVI).

See “B.5.3 – Vaccines Research and Development” below for a presentation of the Sanofi Pasteur R&D portfolio.

The table below lists net vaccine sales by product range.

 

( million)   2015
Net Sales
 
Polio/Pertussis/Hib Vaccines     1,348   
Influenza Vaccines     1,322   
Meningitis/Pneumonia Vaccines     614   
Adult Booster Vaccines     496   
Travel and Other Endemic Vaccines     375   
Vaxserve     481   
Other Vaccines     107   
Total Vaccines     4,743   

 

a) Pediatric, Combination and Poliomyelitis (Polio) Vaccines

Sanofi Pasteur is one of the key players in pediatric vaccines in both mature and emerging markets with a broad portfolio of standalone and combination vaccines protecting against up to six diseases in a single injection. Due to the diversity of

immunization schedules throughout the world, vaccines vary in composition according to regional specificities.

Pentaxim®, a pediatric combination vaccine protecting against diphtheria, tetanus, pertussis, polio and Haemophilus influenzae type b (Hib), was first marketed in 1997. To date, more than 230 million doses of Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the national immunization programs of more than 25 countries.

Hexaxim® is the only fully liquid, ready to use, 6-in-1 (hexavalent) pediatric vaccine that provides protection against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. In 2013, the EMA approved this hexavalent pediatric vaccine in the E.U., where it is sold under the brand name Hexyon® in Western Europe by Sanofi Pasteur MSD and under the brand name Hexacima® in Eastern Europe by Sanofi Pasteur. The roll-out of this new hexavalent vaccine began in July 2013 in Germany and has ramped up significantly with 27 countries having launched Hexaxim® in their public or private immunization programs. In December 2014, the WHO granted prequalification status to Hexaxim®, in a one-dose vial presentation. Hexaxim® is the only combination vaccine including acellular pertussis (acP) and inactivated polio vaccines (IPV) currently prequalified by the WHO.

Pentacel®, a pediatric combination vaccine protecting against five diseases (diphtheria, tetanus, pertussis, polio and Hib), was launched in the U.S. in 2008. There has been a tight supply of Pentacel® since 2013, which has improved over the past two years, yet requires careful supply management to meet strong market demand. Supply constraints are expected to continue throughout the first half of 2016.

Pediacel® is a fully liquid pentavalent vaccine protecting against diphtheria, tetanus, pertussis, polio and Hib.

Act-HIB®, for the prevention of Hib, is also an important growth driver within the pediatric product line.

Quadracel® is a combination vaccine against diphtheria, tetanus, pertussis and polio. It is used as a booster to be administered as the fifth dose in the primary series of vaccines, allowing children to complete the entire childhood schedule with as few injections as possible. Quadracel® was already licensed in Canada (1997) and Australia (2002) and was licensed in the U.S. in April 2015. The U.S. commercial launch of Quadracel® is planned for 2016.

Shan5™, developed by Shantha, is a fully-liquid 5-in-1 vaccine, protecting against five diseases (diphtheria, tetanus, pertussis, polio and Hepatitis B). Following improvements made to key manufacturing steps in the production of the antigen components of the vaccine, Shan5™ regained its prequalification from the WHO in May 2014 and was launched on the Indian market in the last quarter of 2014. Over 22 million doses were delivered to UNICEF in 2015.

 

 

 

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In Japan, a key milestone was achieved in July 2014 with the licensure of Squarekids®, a quadrivalent pediatric combination vaccine offering protection against diphtheria, tetanus, pertussis and polio. Squarekids® was co-developed with our partner Kitasato Daiichi Sankyo Vaccine. The commercial launch took place in December 2015.

Sanofi Pasteur is the world’s leading developer and manufacturer of polio vaccines, with both Oral Polio Vaccines (OPV) and Injectable Polio Vaccines (IPVs) in its portfolio. Sanofi Pasteur’s polio production capacity and historic commitment have enabled us to serve as an important industrial partner in helping to achieve the goal of worldwide polio eradication. In November 2013, GAVI announced its support for the introduction of IPV in the national immunization programs of the world’s 73 poorest countries. The combined use of OPV and IPV is expected to improve the level of protection in countries threatened by the possible resurgence of polio. GAVI support has paved the way for the implementation of the recommendation made by the WHO expert group on immunization that all countries introduce at least one dose of IPV in their routine immunization schedule by the first half of 2016. The end of February 2014 marked an important milestone in the global fight against polio with the UNICEF decision to award Sanofi Pasteur unprecedented quantities of IPV for use in GAVI countries. IPV routine immunization in GAVI countries began in September 2014 in Nepal. Beyond GAVI countries, the expanded use of Sanofi Pasteur’s Imovax® Polio vaccine began with IPV introduction in the Philippines in October 2014. In 2015 and early 2016 there has been significant progress in the global fight against polio, with to date 120 countries using IPV and more than 70 countries expected to introduce IPV by the first half of 2016, including two countries where polio remains endemic: Afghanistan and Pakistan. In 2015, Sanofi Pasteur delivered 27 million doses of IPV standalone to UNICEF for GAVI countries. In India, ShanIPV manufactured by Shantha, and reserved for the Indian market, received marketing authorization in 2015 and was launched in December 2015.

 

b) Influenza Vaccines

Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines with over 220 million doses delivered in 2015. In recent years, influenza vaccine demand has experienced strong growth in many countries, particularly in the U.S., Brazil and Mexico. Sanofi Pasteur expects the global demand for influenza vaccines to continue to grow within the next decade due to increased disease awareness, growth in emerging markets and expanded recommendations by governmental and advisory bodies to be vaccinated against seasonal influenza.

Sanofi Pasteur has two distinct influenza vaccines that are sold globally, Fluzone and Vaxigrip. Sanofi Pasteur remains focused on meeting the increasing demand for seasonal influenza vaccines through the launch of innovative vaccines. The differentiated product strategy is

strengthening the leadership of Sanofi Pasteur in the influenza market with the following products:

 

·   

Fluzone® High-Dose vaccine, launched in the U.S. in 2010, was specifically designed to generate a more robust immune response against influenza in people aged 65 and older and provide greater protection against influenza. In November 2014, the FDA changed the prescribing information for Fluzone High-Dose vaccine to document the superior clinical benefit for Fluzone® High-Dose vaccine, compared to the standard dose of Fluzone® vaccine (Fluzone® High-Dose vaccine was 24% more effective than Fluzone vaccine in a large-scale efficacy study). In 2015, Fluzone® High-Dose continued to generate strong sales growth;

 

·   

Fluzone® Quadrivalent vaccine is a quadrivalent inactivated influenza vaccine containing two type A antigens and two type B antigens. Compared to the trivalent influenza vaccine, the addition of a second B strain to the vaccine provides increased protection against the most prevalent circulating strains. In June 2013, Sanofi Pasteur obtained FDA authorization for Fluzone® Quadrivalent to be commercialized in the U.S. for children over six months, adolescents and adults. Since 2014, Fluzone® Quadrivalent/ FluQuadri® vaccine has launched in over 20 other countries, including Mexico and Canada;

 

·   

Intradermal (ID) trivalent influenza vaccines (Intanza®/IDflu® launched in 2010 in Australia, Canada, the E.U. and several other countries and Fluzone® ID launched in the U.S. in 2011) also contribute to Sanofi Pasteur’s flu differentiation strategy. The innovative ID vaccines represent new and innovative offer efficiency and provide simplicity of administration. In 2015, Fluzone® ID Quadrivalent was launched in the U.S.;

 

·   

Vaxigrip vaccine is a trivalent vaccine that is licensed in over 150 countries globally for people at least six months old. Sanofi Pasteur is planning to launch a quadrivalent formulation of Vaxigrip in the coming years. The E.U. license for Vaxigrip quadrivalent influenza vaccine (QIV) + 3 years is expected in the second half of 2016 with a launch starting in 2017. With regards to Vaxigrip QIV 6-35 months, a license application in the E.U. is expected to be submitted in the course of 2018.

 

c) Adult and Adolescent Boosters

Many countries now recommend pertussis immunization for adolescents and adults. These recommendations, combined with immunization awareness initiatives, have led to increased pertussis vaccination rates in these populations in recent years.

Adacel®, the first trivalent adolescent and adult booster offering protection against diphtheria, tetanus and pertussis, was licensed and launched in the U.S. in 2005. Since its launch in the U.S. and expansion to over 60 countries, more

 

 

 

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than 140 million doses of Adacel® have been sold. This vaccine plays an important role in efforts to better control pertussis, by preventing the disease in adolescents and adults and reducing exposure to infants who are not immunized or only partially immunized.

Repevax® (also marketed under the trademark Adacel-Polio®) is a combination vaccine that provides the same benefits as Adacel®, but also offers protection against polio. Repevax® is useful in markets that recommend adolescent and/or adult immunizations to protect against both pertussis and polio. This vaccine is licensed in more than 30 countries worldwide.

 

d) Meningitis and Pneumonia Vaccines

Sanofi Pasteur is at the forefront of the development of vaccines to prevent bacterial meningitis. In 2014, Sanofi Pasteur celebrated 40 years of providing vaccines protecting against meningitis. In 2005, Sanofi Pasteur introduced Menactra®, the first quadrivalent conjugate vaccine against meningococcal meningitis, which is considered the deadliest form of meningitis in the world. In 2011, the FDA granted Sanofi Pasteur a license to expand the indication of Menactra® to children as young as nine months of age. Menactra® is now indicated for people aged nine months through 55 years in the U.S., Canada, several Middle Eastern countries such as Saudi Arabia and numerous other countries in all regions of the world. The most recent launches include Russia, South Korea and Japan in 2015.

 

e) Travel and Endemic Vaccines

Sanofi Pasteur provides a wide range of travel and endemic vaccines including hepatitis A, typhoid, cholera, yellow fever, and Japanese encephalitis, as well as rabies vaccines and immunoglobulins. These vaccines and immunoglobulins are used in endemic settings in the developing world and are the foundation for important partnerships with governments and organizations such as UNICEF. They are also used by travelers and military personnel in industrialized countries and in endemic areas. Sanofi Pasteur is the leader in most of the world’s travel and endemic vaccine markets and benefits from long-term expertise in this domain.

In 2009, Shantha launched Shanchol™, the first oral cholera vaccine produced in India for use in children and adults. Shanchol™ received WHO prequalification in 2011.

IMOJEV®, a Japanese encephalitis vaccine, is the most recent addition to our travel and endemic vaccines portfolio and was successfully launched in Australia and Thailand in 2012. In 2014, IMOJEV® obtained an extension of indication for use in children starting from nine months of age and obtained WHO prequalification, which provides access to the products in low-income countries. IMOJEV® is being progressively rolled out in endemic countries throughout Asia.

f) Dengue

Dengue fever constitutes a major public-health and economic burden in the endemic areas of Asia-Pacific and in Latin America. More than 100 countries, representing nearly half of the world’s population, are at risk. Over the last 50 years, the incidence of the disease has increased 30-fold, an alarming rate given there is no specific treatment available. In response to this global threat, which can impact children, adolescents and adults, the WHO has set ambitious objectives to reduce the burden of the disease on society. One of these objectives is to reduce morbidity by 25% and mortality by 50% by 2020. Following 20 years of innovative research and collaboration with local at-risk communities and dengue scientists around the world, Sanofi Pasteur has developed a dengue vaccine candidate and embarked on a global, multinational clinical development program.

In 2014, the results of two large-scale Phase III efficacy studies conducted in 10 countries in Asia and Latin America were published in The Lancet and The New England Journal of Medicine, respectively. These studies involved 31,000 participants aged two to 16 years living in highly endemic countries. The results showed an overall efficacy against symptomatic dengue of 56.5% in Asia and 60.8% in Latin America, with a favorable safety profile during the 25-month active surveillance period. Overall, the results of these studies combined showed efficacy against all four dengue serotypes. Importantly, these studies consistently showed highly significant reductions in severe dengue and hospitalization due to dengue during the 25-month active surveillance periods (80% reduction in severe disease and 67.2% reduction in hospital cases in Asia and 95% protection against severe dengue and 80.3% reduction in risk of hospitalization in Latin America).

The established safety and efficacy profile of this dengue vaccine candidate after 25 months in these two large-scale Phase III studies points to the significant public health impact that this vaccine candidate could have in countries where dengue is endemic.

In January 2015, the rolling submission for Dengue vaccine was initiated in several endemic countries in Asia and Latin America, the first licenses for the Dengue vaccine were granted in December 2015 in Mexico, the Philippines and Brazil. The first shipment of doses occurred in the Philippines in February 2016.

 

g) Other Products

Growth in other products is mainly driven by VaxServe, a leading specialty distributor and solutions provider in the U.S. market (sales of 481 million in 2015). VaxServe, a Sanofi Pasteur company, offers a broad portfolio of products from Sanofi Pasteur and other manufacturers and is a strategic asset that enables us to position ourselves closer to our customers and better serve their needs.

 

 

 

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B.4 Animal Health: Merial

Our Animal Health activity is carried out through Merial, one of the world leaders in this market. Merial is dedicated to the research, development, manufacture and marketing of innovative pharmaceutical products and vaccines used by veterinarians, farmers and pet owners. The company offers a complete range of products to improve the health, well-being and performance of a large variety of animals (both livestock and pets).

The range of veterinary products covers four main segments, namely parasiticides, anti-infectious drugs, other pharmaceuticals (such as anti-inflammatory agents, anti-ulcer agents, etc.) and vaccines. Merial’s top-selling products are Frontline®, a topical flea and tick anti-parasitic intended for dogs and cats, the highest selling veterinary product in the world; Heartgard®, a parasiticide for control of heartworm in pets; Nexgard®, an oral anti-parasitic for the treatment and prevention of fleas and ticks in dogs; LongRange® and Ivomec®, two parasiticides for the control of internal and external parasites in livestock; Vaxxitek®, a high-technology vector vaccine, protecting chickens against infectious bursal disease (IBD) and Marek’s disease; Previcox®, a highly selective anti-inflammatory/COX 2 inhibitor for relief of pain and control of inflammation in dogs; Eprinex®, a parasiticide for use in livestock and Circovac®, a porcine circovirus type 2 (PCV2) vaccine. Merial plays an important role in veterinary public-health activities of governments around the world. The company is the world leader in vaccines for foot-and-mouth disease, rabies and catarrhal fever.

Merial’s net sales amounted to 2,515 million in 2015. The performance in 2015 was boosted by the strong sales of Nexgard® which, in the second year following its launch, became one of the ten top-selling animal-health products in the world.

In the Livestock segment, growth at Merial is in line with that of the market as a whole. The Avian sector grew strongly in 2015, particularly in the emerging countries. The Ruminant sector also experienced solid growth, due in large part to the success of LongRange® (eprinomectin, an injectable anti-parasitic against internal and external parasites in cattle) in the U.S.

The Merial range of anti-parasitic products for pets was recently filled out with:

 

·   

The approval in December 2013 in Europe by EMA of Broadline®, a broad-spectrum internal and external anti-parasitic for treatment and prevention in cats, valid throughout the E.U. Broadline® is a combination of four active ingredients and protects cats for one month. The product was launched in Europe in March 2014;

 

·   

The positive opinion of the 27 E.U. Member States in May 2014, followed by the approval of marketing authorizations starting in June 2014 for Frontline Tri Act®/

   

Frontect® for the treatment and prevention of flea and tick infestations when repellent activity is necessary against sand flies, biting flies and/or mosquitoes;

 

·   

The approval by the European Commission of NexGard Spectra™, (afoxolaner and milbemycin oxime) on 19 January 2015. This new chewable tablet, building on the success of NexGard® against fleas and ticks, offers additional protection against heartworm and treats infections caused by intestinal worms in dogs.

Targeted acquisitions have also been made. In the Pet segment, Merial secured the supply of Heartgard® by acquiring the Barceloneta site in Puerto Rico from Merck & Co. Inc. and has since March 2015 made use of the site’s expertise in chewables manufacturing technology. In the Livestock segment, Merial acquired Bayer’s equine portfolio, consisting of Legend®/Hyonate® (hyaluronate sodium) and Marquis® (ponazuril). Legend®/Hyonate® is an injectable solution that treats non-infectious joint dysfunction in horses and Marquis Antiprotozoal Oral Paste is the first FDA-approved treatment for equine protozoal myeloencephalitis (EPM), a disease that affects the central nervous system in horses.

The principal markets for Merial are the U.S., France, Italy, Brazil, China, the U.K., Germany, Australia, Korea and Japan. Mature markets represent 74% of total net sales and the rate of growth exceeds 10% in 2015.

In December 2015, we announced we had opened exclusive negotiations with Boehringer Ingelheim with a view to an asset swap. The proposed transaction would consist of an exchange of the Sanofi Animal Health business (Merial) with an enterprise value of 11.4 billion and the Boehringer Ingelheim Consumer Healthcare business with an enterprise value of 6.7 billion. The Boehringer Ingelheim Consumer Health Care business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of 4.7 billion. Until final completion of the transaction, which is subject to execution of definitive agreements and thereafter to regulatory clearances, expected in the fourth quarter of 2016, we will continue to monitor the performance of the Animal health business (which remains an operating segment) and to report the performance of that business at Group level.

B.5. Global Research & Development

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

To meet these challenges, R&D has evolved towards a global organization integrating all R&D activities across three

 

 

 

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major segments: Pharmaceuticals, Vaccines, and Animal Health. Our therapeutic areas encompass a wide range of diseases that represent a large and growing burden on populations and healthcare systems, in line with global trends and the most pressing health needs, including diabetes, cardiovascular diseases and oncology, as well as immune-mediated, degenerative, infectious, and rare diseases.

To carry out our mission, meet these challenges and maximize our impact, we strive to bring innovation to patients and to build a pipeline of high value projects. Our approach is neutral to the source of innovation, whether it comes from internal research or external innovation.

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

By using a translational medicine approach, ensuring that research hypotheses are validated in humans as early as possible, we can translate basic research findings into medical practice more quickly and efficiently and improve the scientific quality of our projects.

B.5.1. Research & Development Organization

Over recent years, we have moved from a pure pharmaceutical R&D organization to a global and integrated R&D organization where forces are combined to meet a diversity of health needs. Our R&D activities are organized into three major segments:

 

·   

Sanofi Pharma R&D, which is dedicated to the discovery and development of human medicines. This is a project-driven organization, which in 2015 included several units covering different therapeutic areas such as diabetes, cardiovascular, oncology, immune-mediated diseases, rare diseases, multiple sclerosis, neurodegenerative diseases, infectious diseases and ophthalmology. These project-focused units are supported by Scientific Platforms and Enabling Functions, responsible for the operational aspects of R&D, such as Chemistry, Manufacturing and Controls (CMC), toxicology, clinical operations, medical and regulatory affairs, and external innovation;

 

·   

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

 

·   

Merial R&D, which aims to deliver and support effective, innovative, safe and cost-effective animal health products.

   

Although the specifics of animal health are different from human health, some synergies are achieved via support from Scientific Platforms and Enabling Functions.

Our R&D operations are concentrated in four major hubs: North America, Germany, France and Asia. Within these hubs, a regional leadership ensures local resource optimization and effective engagement within the ecosystems.

B.5.2. Pharmaceuticals

Our pharmaceuticals research and development projects are respectively managed by a Research Working Group (RWG) and a Development Working Group (DWG). These working groups are responsible for the oversight of all major aspects of the research and development portfolios respectively. They drive project prioritization and approval of major stage-gate transitions as well as project terminations. The RWG is temporarily chaired by a Research transition group and the DWG is chaired by the Development Deputy. Both groups include senior members of Sanofi Global R&D as well as experts from a variety of fields necessary for informed decision making.

In addition for all major late stage projects, integrated oversight is provided by an Integrated Development Council (IDC) chaired by the CEO. The IDC includes senior representatives from R&D, Global Business Units and Industrial Affairs, and is responsible for reviewing and approving project strategies, major phase transitions (Phase III, filing, major label modifications), and assessing the launch readiness (pricing, reimbursement, marketing, medical plans). The IDC also reviews major deviations from approved strategies and plans, including registration issues and project discontinuation. The Executive Committee endorses decisions made by IDC.

Projects are assessed using two key criteria which allow management to rapidly understand how the portfolio is performing in terms of innovation, unmet medical needs, risk and value:

 

·   

relative medical value: which encompasses the extent of the unmet need, the market dynamics and the likelihood of getting satisfactory market conditions; and

 

·   

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

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

As described at “Item 3. Key Information – D. Risk Factors – Risks Relating to Our Business – Our research and

 

 

 

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development efforts may not succeed in adequately renewing our product portfolio and – Risks Relating to the Group Structure and Strategy – We may fail to successfully identify external business opportunities or realize the anticipated

benefits from our strategic investments” our product development efforts are subject to the risks and uncertainties inherent in any new product development program.

 

 

The clinical portfolio for new products can be summarized as follows as of February 9, 2016.

 

     Phase I   Phase II   Phase III /registration
Diabetes solutions  

SAR425899

SAR438335

SAR438544

SAR440067 (LAPS ins.)

  efpeglenatide (SAR439977)  

Lyxumia® (lixisenatide)

lixisenatide / insulin glargine

SAR342434 (insulin lispro)

sotagliflozin (SAR439954)

Oncology  

SAR408701

SAR428926

SAR439684

SAR566658

  isatuximab (SAR650984)    
Cardiovascular diseases  

SAR407899

SAR439152

       
Immune mediated diseases   SAR113244   SAR156597  

sarilumab (SAR153191)

dupilumab (SAR231893)

Multiple Sclerosis   GZ402668        
Neurodegenerative diseases   SAR228810        
Infectious diseases       ferroquine (combo OZ439) (SSR97193)    
Ophthalmology  

SAR366234

UshStat® (SAR421869)

SAR422459

       
Rare diseases  

GZ402666

SAR339375

fitusiran (SAR439774)

GZ389988

 

olipudase alfa (GZ402665)

GZ402671

sarilumab (uveitis)

 

patisiran (SAR438027)

revusiran (SAR438714)

 

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

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

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

a) Diabetes Solutions

Main compounds currently in Phase III and in the registration Phase

 

·   

Lyxumia® (Lixisenatide) is already registered in the E.U. and many other countries outside the U.S. and is presented in the section “– B.2. Main Pharmaceutical Products” above.

The New Drug Application (NDA) has been submitted in the U.S. in July 2015 and accepted for filing by the FDA.

 

·   

LixiLan: One-daily fixed-ratio combination of insulin glargine 100 Units/mL and lixisenatide. The two Phase III studies, LixiLan®-L and LixiLan®-O, which enrolled more than 1,900 patients worldwide to evaluate the safety and efficacy of the fixed-ratio combination when used in patient populations insufficiently controlled after oral antidiabetic agents and after basal insulin therapy, respectively met their primary endpoints.

 

 

 

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The dossier was submitted to the FDA in December 2015. Sanofi redeemed a priority review voucher (PRV) with the submission to designate the NDA for an expedited 6-month review. The FDA accepted the LixiLan New Drug Application on February 22, 2016. The FDA decision is expected in August 2016.

The LixiLan regulatory submission is planned in the E.U. in March 2016.

 

·   

Insulin lispro biosimilar (SAR342434): The program entered into Phase III in November 2014. The Phase III clinical program will compare SAR342434 to Humalog® (insulin lispro, Lilly) in addition to Lantus® treatment in patients with type 1 diabetes (SORELLA 1) and in patients with type 2 diabetes (SORELLA 2). The entry into Phase III follows the successful completion of the Phase I study, in which SAR342434 rapid-acting solution demonstrated similar activity and exposure compared to Humalog®.

 

·   

Sotagliflozin (SAR439954): investigational new oral dual inhibitor of SGLT1/2 which could be a potential treatment option for people with diabetes. The product was in-licensed from Lexicon in November 2015. The product is in Phase III in the treatment of type 1 diabetes and in Phase II in the treatment of type 2 diabetes.

Main products in early stage

 

·   

Sanofi and Hanmi signed a license agreement to develop a portfolio of long-acting diabetes treatments:

 

  1. Efpeglenatide (SAR439977), a long-acting GLP1 receptor agonist currently in Phase II;

 

  2. a weekly insulin: SAR440067 (LAPS insulin 115) in Phase I; and

 

  3. a fixed-dosed weekly GLP1-R agonist/insulin drug combination.

 

·   

Finally, the dual GLP-1/glucagon receptor (SAR425899) moved into a multiple ascending dose study, a dual GLP-1/GIP receptor agonist (SAR438335) entered Phase I in November 2015, both for the treatment of patients with type 2 diabetes.

SAR438544 (stable glucagon analog) entered in Phase I in December 2015 is intended for the treatment of diabetes patients with severe hypoglycemia.

Sanofi Diabetes maintains a significant network of R&D collaborations with world leading academic institutions and startup companies, including collaborations with Gentofte Hospital (Copenhagen), Gubra (a Danish biotech company specialized in gut hormone R&D), and Selecta. Sanofi and the Juvenile Diabetes Research Foundation (JDRF) continue to jointly fund selected innovation projects in the field of type 1 diabetes research.

Sanofi remains strongly committed to bringing integrated care to people with diabetes, and will continue to establish partnerships with a view to creating new solutions to improve patient outcomes.

Sanofi has entered in a strategic research collaboration with Evotec in 2015 in an effort to develop beta cell-modulating diabetes treatments, which may reduce or even eliminate the need for insulin injections and may be a step towards a cure for type 1 diabetes.

Sanofi and Verily (formerly Google Life Sciences) started a collaboration to improve care and outcomes for people with type 1 and type 2 diabetes. The collaboration will pair Sanofi’s leadership in diabetes treatments and devices with Google’s expertise in analytics, miniaturized electronics and low power chip design. This includes health indicators such as blood glucose and hemoglobin A1c levels, patient-reported information, medication regimens and sensor devices.

 

b) Oncology

Main products in Phase II

 

·   

Isatuximab (SAR650984) is a naked humanized immunoglobulin (IgG1) monoclonal antibody (mAb) that has been in licensed from Immunogen Inc. It selectively binds to CD38, a cell surface antigen widely expressed in multiple myeloma cancer cells, and other hematological malignancies. The program is in Phase II with five ongoing studies in multiple myeloma. One as a single agent, and the others are investigating Isatuximab in combinations with: (i) lenalidomide/dexamethasone, (ii) carfilzomib; (iii) pomalidomide, and (iv) cyclophosphamide/ bortezomib/dexamethasone.

Main products in early stage

 

·   

SAR408701 is an Antibody Drug Conjugate (ADC) that binds to CEACAM-5, a membrane glycoprotein originally identified as a surface marker on adenocarcinomas of the human gastrointestinal tract. The compound entered the Sanofi Phase I pipeline in 2014 with one ongoing study.

 

·   

SAR566658 is an Antibody Drug Conjugate (ADC) loaded with a maytansinoid derivative DM4 (huDS6-SPDB-DM4) targeting CA6. CA6 is a tumor specific epitope highly expressed on some solid tumors. The program is in Phase I with one ongoing study.

 

·   

SAR428926 is Antibody Drug Conjugate (ADC) that binds to Lysosomal Associated Membrane Protein 1 (LAMP1), a protein localized in the lumen of the lysosomes in normal tissue and which is found aberrantly expressed at the cell surface in a number of tumor tissues. SAR428926 is expected to selectively deliver its cytotoxic to LAMP1-expressing tumor cells. The compound entered the Sanofi Phase I pipeline in 2015 with one ongoing study.

 

 

 

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·   

SAR439684 is a PD-1 inhibitor derived from our alliance with Regeneron and is currently in Phase I.

Projects discontinued in 2015

 

·   

Coltuximab ravtansine (SAR3419) is an Antibody Drug Conjugate (ADC) maytansin-loaded anti-CD19 mAb that has been in-licensed from Immunogen Inc and was being developed in Phase II in B-cell malignancies. This program has been discontinued in Phase II and the rights returned to Immunogen.

 

·   

SAR405838 is a potent inhibitor of the HDM2/P53 interaction. The program in Phase I was discontinued in monotherapy as well as in combination with Merck KGaA’s pimasertib.

 

·   

SAR245409 (XL765) was in-licensed from Exelixis, Inc. and developed by Sanofi. This oral agent is dual inhibitor of both (i) phosphoinositide-3-kinase (PI3K), and (ii) the mammalian target of rapamycin (mTOR). The product in Phase II has been discontinued.

 

·   

SAR245408 (XL147) was in-licensed from Exelixis, Inc. and developed by Sanofi. This oral phosphoinositide- 3-kinase (PI3K) inhibitor in a Phase I has been discontinued.

 

·   

SAR125844 is a potent and selective MET tyrosine kinase inhibitor. The development of this product in Phase I has been discontinued and Sanofi decided to explore out-licensing opportunities.

 

c) Cardiovascular diseases

Main products in early stage

 

·   

SAR439152 (MYK-461) – myosin inhibitor derived from our partnership with MyoKardia, entered in Phase I in Obstructive Hypertrophic Cardiomyopathy indication.

 

·   

SAR407899 – Rho-kinase inhibitor has been reactivated in Phase I in the Microvascular Angina (MVA) indication.

Projects discontinued in 2015

 

·   

Fresolimumab (GZ402669) is a TGF-ß antagonist for the treatment of Focal Segmental Glomerulosclerosis (FSGS). The Phase II clinical trial was terminated, with no further development planned.

 

d) Immune Mediated diseases

Main products in Phase III

 

·   

Sarilumab (SAR153191), a monoclonal antibody against the Interleukin-6 Receptor derived from our alliance with Regeneron, is under development for moderate to severe rheumatoid arthritis (RA). The U.S. Biological License Application (BLA) was submitted on October 30, 2015 and

   

accepted for review on January 8, 2016. The clinical program consists of seven trials of which four have been completed. Two pivotal trials in RA, SARIL-RA-MOBILITY in methotrexate inadequate responders assessing signs and symptoms and inhibition of structural damage, and SARIL-RA-TARGET in inadequate responders to anti-TNF treatment assessing signs and symptoms and effect on physical function, met all primary endpoints. One Phase III trial (SARIL-RA-MONARCH) which evaluates sarilumab versus adalimumab as monotherapy is ongoing with data expected in the second quarter to support the filing in Europe planned for the third quarter of 2016.

Additional studies are:

 

  ·   

The SARIL-RA-EXTEND study, an uncontrolled extension study which enrolled patients from MOBILITY and is enrolling participants by invitation from the TARGET and ASCERTAIN (to benchmark safety against tocilizumab) studies, aims to evaluate the long term safety and efficacy of Sarilumab in combination with disease-modifying anti-rheumatic drugs (DMARD) in patients with active RA;

 

  ·   

The SARIL-RA-EASY is a usability study comparing two devices: the auto-injector and the pre-filled syringe.

 

  ·   

Dupilumab (SAR231893) is a monoclonal antibody against the Interleukin-4 alpha Receptor derived from our alliance with Regeneron. Dupilumab modulates signaling of both the IL-4 and IL-13 pathways. It is currently being developed in several indications: atopic dermatitis in Phase III, asthma in Phase III, nasal polyposis with a Positive Phase IIA proof of concept study, and eosinophilic esophagitis in Phase II.

 

  ·   

Atopic Dermatitis, the Phase III program consists of:

 

  ·   

Two identical 16-week monotherapy treatment trials (SOLO 1 & SOLO 2): “Monotherapy Administered to Adult Patients with Moderate- to-Severe Atopic Dermatitis”. These are randomized, double-blind, placebo-controlled, parallel group studies to confirm the efficacy and safety of dupilumab monotherapy in adults with moderate-to-severe atopic dermatitis (AD). Results are expected during the first quarter of 2016.

 

  ·   

A long-term treatment trial in combination with topical corticosteroids: “Study to Assess the Efficacy and Long-term Safety of dupilumab in Adult Patients With Moderate-to-Severe Atopic Dermatitis”. This is a randomized, double-blind, placebo-controlled study to demonstrate the efficacy and long-term safety of dupilumab in adult patients with moderate-to-severe AD. Interim results are expected during the second quarter of 2016.

 

  ·   

An open-label extension study of dupilumab in patients with AD. This is a multicenter study to assess the long-term safety and efficacy of repeat doses of

 

 

 

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    dupilumab in adults with moderate-to-severe AD who have previously participated in controlled studies of dupilumab.

The BLA submission in AD for adult treatment is planned for the third quarter of 2016.

 

  ·   

Asthma, the Phase III program consists of:

 

  ·   

A randomized, double-blind, placebo-controlled, dose-ranging study to evaluate dupilumab in patients with moderate to severe uncontrolled asthma completed in May 2015.

 

  ·   

A 52-week randomized, double-blind, placebo-controlled, parallel group study to evaluate the efficacy and safety of dupilumab in patients with persistent asthma.

 

  ·   

An open-label extension study of dupilumab in patients with asthma who have previously participated in dupilumab asthma clinical studies.

 

  ·   

Nasal Polyposis: an evaluation of dupilumab in patients with bilateral nasal polyposis and chronic symptoms of sinusitis. A randomized, double-blind, Phase II, placebo controlled, two-arm study has been completed and further activities are ongoing in preparation for the next stage of development.

 

  ·   

Eosinophilic Esophagitis: Phase II study of dupilumab in adult patients with active eosinophilic esophagitis (EoE). A randomized, double-blind, parallel, placebo-controlled study to assess the efficacy, safety and tolerability of dupilumab in this population, has been initiated.

Main products in Phase II

 

·   

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

Main products in early stage

 

·   

SAR113244 is an anti-CXCR5, a first-in-class humanized monoclonal antibody in Phase I for the treatment of Systemic Lupus Erythematosus (SLE). A Phase IB multiple ascending dose study in SLE patients is ongoing.

Projects discontinued in 2015

 

·   

SAR391786 (REGN1033) – Sanofi decided to opt out of the anti-GDF8 monoclonal antibody developed in collaboration with Regeneron and evaluated in Sarcopenia.

 

e) Multiple Sclerosis

 

·   

GZ402668 (GLD52), an IgG1 monoclonal antibody binding to CD52 a cell surface antigen present at high

   

level on T ab B lymphocytes, for the treatment of relapsing forms of Multiple Sclerosis (RMS) is in Phase I, the study end being expected for the first quarter of 2016.

Projects discontinued in 2015

 

·   

Vatelizumab (SAR339658), a humanized monoclonal antibody directed at the VLA-2 (Very Late Antigen 2) integrin receptor, in-licensed from Glenmark Pharmaceuticals was developed in the treatment of relapsing-remitting multiple sclerosis (RRMS). A prospectively planned interim analysis (IA) completed in October 2015 did not meet the pre-defined primary efficacy endpoint and treatment has been discontinued. No safety concerns prompted this decision. The compound has been discontinued.

 

f) Age Related Degenerative Diseases

 

·   

SAR228810, an anti-protofibrillar Abeta mAb against Alzheimer’s, completed Phase I in mild to moderate Alzheimer’s patients. Phase I data support moving to next development step.

 

g) Infectious Diseases

 

·   

Ferroquine (OZ439) is a first in class combination for malaria (collaboration with Medicines for Malaria Venture (MMV)). Ferroquine is a new 4 amino quinoline being developed for the treatment of acute uncomplicated malaria, and is active against chloroquine sensitive and chloroquine resistant Plasmodium strains. Due to its long half-life it has the potential to be part of single dose cure regimens for the treatment of both P. vivax and P. falciparum malaria. OZ439 is a synthetic peroxide antimalarial drug candidate from MMV designed to provide a single dose oral cure in humans. A Phase IIB clinical study of the combination of the two products, conducted in adults and children with P. falciparum malaria started in July 2015 in Africa and is expected to start in the second quarter of 2016 in Asia.

 

h) Rare Diseases (Genzyme)

Main products in Phase III

Alnylam collaboration: In October 2012, Genzyme entered into an exclusive license agreement with Alnylam, covering ALN-TTR programs in the Asia-Pacific-Japan region. ALN-TTR01 and ALN-TTR02 Phase I results were published in the New England Journal of Medicine in August 2013. Results showed that RNAi therapeutics targeting transthyretin (TTR) achieved rapid, dose-dependent, durable, and specific knockdown of TTR, the disease-causing protein in TTR-mediated amyloidosis (ATTR). Genzyme’s exclusive territory rights for the ALN-TTR programs were extended to the rest of the world excluding North America and Western Europe on January 14, 2014.

 

 

 

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·   

patisiran (SAR438027) (mRNA inhibition – Alnylam – ALN-TTR02). The Phase III clinical trial is ongoing in the treatment of Familial Amyloid Polyneuropathy. The Japanese Phase I study has been completed and PMDA (Japanese Health Authority) has granted permission for Japan’s inclusion in the APOLLO trial.

 

·   

revusiran (SAR438714) (mRNA inhibition – Alnylam – ALN- TTRsc). Revusiran represents a second generation formulation for Alnylam’s RNAi platform. Unlike the lipid nanoparticle formulation utilized by patisiran, the revusiran formulation utilizes a GalNAc (N-acetylgalactosamine) conjugation. This allows for the subcutaneous delivery of the product, as opposed to the intravenous administration of patisiran. Revusiran has shown equivalent knockdown of TTR in studies in both normal healthy volunteers as well as in patients. The Phase III program in the treatment of Familial Amyloidotic Cardiomyopathy is ongoing.

Main products in Phase II

 

·   

GZ402665 (rhASM) olipudase alfa is an enzyme replacement therapy targeting the treatment of non-neurological manifestations of acid sphingomyelinase deficiency (ASMD), Niemann-Pick B disease. A Phase I/II study in the pediatric population has dosed four patients to-date. These four patients complete the enrollment of the adolescent cohort (ages 12 years old to less than 18 years old). The child cohort (ages six years old to less than 12 years old) will begin enrollment in the second quarter of 2016. The Phase II/III adult trial started at the end of 2015.

 

·   

GZ402671 (CGS inhibitor) in Phase II for the treatment of Fabry disease. The Phase II trial in Gaucher disease type 3 is planned for the third quarter of 2016.

Main products in early stage

 

·   

GZ402666 (Neo GAA) is a second generation enzyme replacement therapy targeting the treatment of Pompe disease. The program is currently in Phase I with a start planned in the second quarter of 2016 for the pivotal trial in the Late Onset population.

 

·   

SAR339375 is an anti-miR targeting microRNA-21 for the treatment of Alport syndrome, a life-threatening kidney disease with no approved therapy. The program is currently in Phase I. This program is partnered and led by Regulus Therapeutics.

·   

GZ389988 (TrKA) is a small molecule which inhibits binding of nerve growth factor (NGF) to its primary TrkA receptor, and is being developed as a treatment for pain resulting from osteoarthritis. The molecule is currently in Phase I with enrollment completed in October 2015.

 

·   

fitusiran (SAR439774 – Alnylam – ALN-AT3), siRNA targeting anti-thrombin and derived from our license agreement with Alnylam is in Phase I in the treatment of hemophilia A/B. One pivotal study is expected to start in the third quarter of 2016.

 

i) Ophthalmology

Main products in Phase II

 

·   

A proof-of-concept study is being conducted for SAR153191 – sarilumab (Phase II) in an ophthalmology indication: this anti-IL-6-receptor monoclonal antibody could be a safe and efficient option for treating non-infectious uveitis affecting the posterior segment of the eye at risk of vision loss. Early analysis results are under assessment.

Main products in early stage

 

·   

UshStat® (SAR421869): a gene therapy product which uses a lentivector gene delivery technology to introduce a functional MYO7A gene to the photoreceptors and Retinal Pigment Epithelium (RPE) cells in patients with Usher 1B syndrome, an orphan inherited condition that leads to progressive visual field constriction and vision loss from childhood. A Phase I/IIA clinical study is on-going.

 

·   

SAR422459: a gene therapy product which uses a lentivector gene delivery technology to introduce a functional ABCR gene to photoreceptors in patients with autosomal recessive Stargardt’s disease, an orphan inherited condition that leads to progressive vision loss from childhood. The product is currently in Phase I/IIA.

 

·   

SAR366234 administered as eye drops, is via its active metabolite, an agonist of EP2 receptor of the prostaglandin E2 which activation induces an increase of the aqueous humor outflow and the reduction of intra ocular pressure (IOP). Elevated IOP is a well-established risk factor for glaucoma characterized by progressive optic nerve degeneration resulting in vision loss. The product is currently assessed in Phase I.

 

 

 

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B.5.3 Vaccines

Our Human Vaccines R&D is focused on improving existing vaccines and on developing new prophylactic vaccines.

Portfolio

The Sanofi Pasteur R&D portfolio includes 12 vaccines currently in advanced development as shown in the table below. The portfolio is well balanced, with five vaccine products for novel targets and seven vaccines which are enhancements of existing vaccine products.

 

Phase I    Phase II    Phase III    Submitted
Streptococcus pneumonia*    Men Quad TT    C. difficile toxoid vaccine*    Dengvaxia*
Pneumonia and meningitis vaccine    2nd generation meningococcal ACYW conjugate vaccine    Toxoid vaccine against clostridium difficile    Mild-to-severe dengue fever vaccine

Herpes Simplex virus Type 2*

 

HSV-2 vaccine

  

Rabies VRVg

 

Purified vero rabies vaccine

  

Vaxigrip® QIV IM

 

Quadrivalent inactivated influenza vaccine (6-35 months) (E.U.)

  

PR5i, DTP-HepB-Polio-Hib(1)

 

Pediatric hexavalent vaccine (U.S.)

   Fluzone® QIV HD    Japan Penta    Vaxigrip® QIV IM
   High-dose quadrivalent inactivated influenza vaccine   

DTP- Polio-Hib

 

Pediatric pentavalent vaccine

   Quadrivalent inactivated influenza vaccine (+3 years) (E.U.)
   Tuberculosis*      
     Recombinant subunit vaccine          

 

(1)   

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

 

*   New targets

 

Project highlights

Influenza Vaccine

To sustain our global leadership in the development of influenza vaccines, our R&D efforts are focused on innovative approaches. Following up on the development of quadrivalent flu vaccines (see “B.3. Vaccine Products”), Sanofi Pasteur will continue to assess new formulations and alternative delivery systems, as well as “universal” vaccine approaches, in order to address specific patient needs and to continue to offer innovative solutions in the future.

Meningitis Vaccine

Neisseria meningitidis bacteria are a leading cause of meningococcal disease in the U.S., Europe, the African meningitis belt and other endemic regions such as Brazil and Australia.

Sanofi Pasteur is developing a second-generation quadrivalent conjugated meningococcal vaccine. This vaccine uses an alternative conjugation technology. Phase II clinical trial results have demonstrated its safety and immunogenicity. Sanofi Pasteur is continuing the development of this vaccine to suit a wider range of age groups and a flexible range of vaccination schedules.

Rabies Vaccine

A new generation serum-free Vero cell human rabies vaccine (VerorabVax®) is under development to allow both of our currently available human rabies vaccines, Verorab and Imovax Ravies, to be replaced by a single vaccine. The results of a Phase II clinical trial, demonstrated the non-inferiority of VRVg versus Verorab® in pre-exposure prophylaxis. VRVg was approved in France as a line extension of Verorab® in 2011. More recent Phase II data, conducted to license VerorabVax® in countries where Verorab was not previously licensed, has provided data indicating a requirement to adjust the formulation.

 

 

 

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Pediatric Vaccine

Sanofi Pasteur, in partnership with Kitasato (KDSV) and Daiichi Sankyo (DS), is developing a pediatric pentavalent vaccine for the Japanese market. The vaccine includes diphtheria, tetanus, acP (DTaP) from KDSV, and inactivated polio IPV & Hib from Sanofi Pasteur. It is anticipated that this product, to be distributed by DS, will be the first pentavalent pediatric combination vaccine in the Japanese market. It would serve as a primary series and booster vaccine for Japanese children up to two years old. The project is currently in Phase III.

PR5i (hexavalent vaccine)

Sanofi Pasteur is co-developing, with Merck & Co., Inc., a hexavalent combination vaccine (6-in-1 vaccine PR5i) designed to protect against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. An application for licensure of this vaccine was submitted to the European Medicines Agency in Europe by Sanofi Pasteur MSD in January 2015. On December 17, 2015 the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending the marketing authorization for the product which will be commercialized as Vaxelis in the E.U.. On February 19, 2016, Sanofi Pasteur MSD was granted the marketing authorization for Vaxelis. Likewise, a Biologics License Application was submitted to the U.S. FDA in August 2014, and on November 2, 2015 the FDA issued a Complete Response Letter (CRL) for PR5I, which will be commercialized through a partnership of Merck & Co., Inc. and Sanofi Pasteur. Both Sanofi Pasteur and Merck & Co., Inc. are currently reviewing the CRL and plan to further communicate with the FDA. PR5I is expected to be the first hexavalent vaccine in the U.S. market.

New Vaccine Targets

C.diff Toxoid Clostridium difficile is a major public-health concern in North America and Europe. In hospitals, it is the leading cause of infectious diarrhea in adults, particularly the elderly. The epidemiology of Clostridium difficile associated disease has been increasing at a worrying rate since 2003, driven primarily by the emergence of a treatment-resistant, highly virulent strain: CD027. There is currently no vaccine available and our C.diff vaccine is the only candidate in Phase III. C.diff is a toxoid-based vaccine. Sanofi Pasteur received a positive response from the FDA Center for Biologics Evaluation & Research (CBER) on the Fast Track Development Program submission in 2010. A multinational, large scale, Phase III study, named Cdiffense™, began in August 2013. This trial is focused on evaluating the vaccine’s efficacy in preventing the first episode of Clostridium difficile infection in at-risk individuals, including adults with imminent hospitalization or current or impending residence in a long-term care or rehabilitation facility. Phase II results were communicated in May 2014 showing

the C.diff vaccine candidate to be generally well tolerated and immunogenic in the target population.

Tuberculosis – Statens Serum Institute (SSI) of Denmark has granted Sanofi Pasteur a license to its technology with regard to the use of certain fusion proteins in the development of a tuberculosis vaccine. The candidate vaccine is made up of recombinant protein units. Results from the 2008 Phase I trial found that the candidate vaccine was safe when administered to healthy adults living in a region of high endemic tuberculosis. A phase I/II study was initiated in July, 2013, in South Africa in infants. A Phase II proof-of-concept study was initiated in young adolescents in South Africa in March 2014.

Herpes Simplex Virus – Herpes simplex virus type 2 is a member of the herpes virus family and, as such, establishes life-long infections, with latent virus established in neural ganglia. Although antivirals currently exist to treat infections, no vaccine exists, greatly limiting options in disease management. The vaccine candidate is a live, attenuated virus and is being assessed as a therapeutic and, possibly, prophylactic vaccine to reduce recurrence and transmission. A NIH-sponsored Phase I trial was initiated in October 2013 to evaluate the vaccine. In October 2014, Sanofi Pasteur signed a contract with Immune Design Corp. to collaborate on the development of a Herpes simplex virus vaccine.

Pneumococcal VaccineStreptococcus pneumoniae bacteria are the leading etiological agent causing severe infections (over three million deaths per year worldwide, including one million children). Diseases caused by Streptococcus pneumoniae (pneumococcus), such as pneumonia, meningitis and febrile bacteraemia, constitute a major, global public-health problem; additionally otitis media, sinusitis and bronchitis are more common but less serious manifestations of infection. The WHO recommends the use of pneumococcal conjugate vaccines (PCV) in all countries. The anti-microbial resistance in Streptococcus pneumoniae has complicated the treatment of pneumococcal disease and further emphasized the need for vaccination to prevent large-scale morbidity and mortality.

Sanofi Pasteur has entered into a long-term strategic collaboration with SK Chemical Co. to co-develop an innovative PCV. The collaboration agreement includes research & development, production, and commercialization of a preventative pneumococcal disease vaccine.

Rotavirus – The results of the Phase III evaluating the vaccine against rotavirus lead us not to consider submitting an application for license.

B.5.4. R&D expenditures for late stage development

Aggregate research and development expenditures (including Animal Health) amounted to 5,259 million in 2015, comprising 4,530 million in the Pharmaceuticals

 

 

 

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segment, 552 million in Human Vaccines and 177 million in Animal Health. Research and development expenditures were the equivalent of about 14.2% of net sales in 2015, compared to about 14.3% in 2014 and 14.5% in 2013. The stability in R&D expenditure as a percentage of sales over the past three years is attributable to active management of the portfolio and close cost control, and has been achieved despite a greater proportion of products being in late stage development. Preclinical research in the pharmaceutical segment amounted to 1,072 million in 2015 compared to 986 million in 2014 and 951 million in 2013. Of the remaining 3,458 million relating to clinical development in the Pharmaceuticals segment (3,188 million in 2014 and 3,136 million in 2013), the largest portion was generated by Phase III or post-marketing studies, reflecting the cost of monitoring large scale clinical trials.

For each of our current late stage (Phase III in 2015) compounds in the Pharmaceuticals segment, we set out below the date at which this compound entered into Phase III development, information concerning any compound patent in the principal markets for innovative pharmaceutical products (the U.S., the E.U. and Japan) as well as comments regarding significant future milestones that are reasonably determinable at this date. Because the timing of such milestones typically depends on a number of factors outside of our control (such as the time to validate study protocols and recruit subjects, the speed with which endpoints are realized, as well as the substantial time taken by regulatory review) it is frequently not possible to provide such estimates, and any such estimates as are given should be understood to be indicative only. See also “Item 3. Key Information – D. Risk Factors – Risks Relating to Our Business”.

 

 

Phase III    Entry into Phase  III(1)    Compound Patent Term(2)      Comments
      (month/year)    U.S.      E.U.      Japan        

Lyxumia®

(lixisenatide)(3)(4)

(AVE0010)

   May 2008(5)      2020         2020         2020      

Dossier approved in Europe in February 2013; dossier submitted and withdrawn in the U.S. in December 2013. Re-submitted with complementary Phase III study in July 2015, and accepted for review in September 2015

Expected approval in the third quarter of 2016.

LixiLan    January 2014      2020         2020         2020      

Phase III program ongoing.

Submission in Type 2 diabetes in U.S. done in December 2015, and accepted for review in February 2016

Submission in Type 2 diabetes in E.U. expected in the first quarter of 2016.

SAR342434

Insulin Lispro

   November 2014      NA         NA         NA      

Phase III program ongoing in Type 1 & 2 diabetes.

Phase III results expected in the second quarter of 2016.

sotagliflozin

(SAR439954)

   November 2015      2028         2027         2027       Phase III program ongoing in Type 1 diabetes.

sarilumab

(SAR153191)

   August 2011      2028         2027         2027      

Phase III program in the treatment of Rheumatoid Arthritis ongoing.

Submitted in U.S. in October 2015, and accepted for review in January 2016

Submission expected in the third quarter of 2016 for E.U.

dupilumab

(SAR231893)

   October 2014      2027         2029         2029      

Phase III program in the treatment of Atopic Dermatitis & Asthma ongoing.

Submission in AD expected in the third quarter of 2016 for U.S.

patisiran

(SAR438027)

   December 2013      2029         2029         2029       Phase III program ongoing in Familial Amyloid Polyneuropathy.

revusiran

(SAR438714)

   December 2014      2032         2032         2032       Phase III program ongoing in Familial Amyloid Cardiomyopathy.

 

(1)   First entry into Phase III in any indication.

 

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

 

(3)   Application pending in some countries.

 

(4)   See also table in section “– B.7. Patents, Intellectual Property and Other Rights” for more information.

 

(5)  

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

 

 

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

 

·   

The listed compound patent expiration dates do not reflect possible extensions of up to five years available in the U.S., the E.U., and Japan for pharmaceutical products. See “– B.7. Patents, Intellectual Property and Other Rights – Patent Protection” for a description of supplementary protection certificates and patent term extensions;

 

·   

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

 

·   

Regulatory exclusivity tied to the protection of clinical data is complementary to patent protection, and in many cases may provide more efficacious or longer lasting marketing exclusivity than a compound’s patent estate. See “– B.7. Patents, Intellectual Property and Other Rights – Regulatory Exclusivity” for additional information. In the United States the data protection generally runs five years from first marketing approval of a new chemical entity extended to seven years for an orphan drug indication and twelve years from first marketing approval of a biological product. In the E.U. and Japan the corresponding data protection periods are generally ten years and eight years, respectively.

B.6. Markets

A breakdown of revenues by business segment and by geographical region for 2015, 2014 and 2013 can be found at Note D.35. to our consolidated financial statements included at Item 18 of this annual report.

The following market shares and ranking information is based on sales data from IMS Health MIDAS, retail and hospital at MAT September 2015, in constant euros (unless otherwise indicated). For more information on market shares and ranking, see “Presentation of Financial and Other Information” at the beginning of this document.

B.6.1. Marketing and Distribution

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

 

·   

Emerging Markets (see definition in “Item 4. Information on the Company – Introduction” above) represent 32.4%

   

of our 2015 aggregate net sales (including Animal Health). Sanofi is the leading healthcare company in emerging markets. In 2015, our sales in emerging markets grew by 7.8% at constant exchange rates. Latin America grew by 4% in 2015. Full-year aggregate net sales, as defined in Item 5, in China, Russia and Brazil were up 19.5%, down 2.8% and down 6.2% respectively. In Africa and the Middle East, aggregate net sales were up 6.8% million sustained by the performance in Middle East;

 

·   

The U.S. represents 36.2% of our aggregate net sales; we rank twelfth with a market share of 3.7% (3.5% in 2014). Sales in the U.S. were down 1% at constant exchange rates in 2015;

 

·   

Western Europe represents 21.7% of our aggregate net sales; we are the leading pharmaceutical company in France where our market share is 7.9% (8.3% in 2014), and we rank third in Germany with a 4.5% market share. In 2015, sales in Western Europe were up 0.9% at constant exchange rates;

 

·   

Other countries represent 9.7% of our aggregate net sales; our market share in Japan is 2.9% (3.2% in 2014). Full-year 2015 aggregate net sales in Japan were down 6.6% at constant exchange rates.

A breakdown of our aggregate net sales by geographical region is presented in “Item 5. Operating and Financial Review and Prospects – Results of Operations – Year Ended December 31, 2015 Compared with Year Ended December 31, 2014.”

Although specific distribution patterns vary by country, we sell prescription drugs primarily to wholesale drug distributors, independent and chain retail drug outlets, hospitals, clinics, managed-care organizations and government institutions. Rare disease products are also sold directly to physicians. With the exception of Consumer Healthcare products, our drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor’s prescription.

We use a range of channels from in-person to digital to disseminate information about and promote our products among healthcare professionals and patients, ensuring that the channels not only cover our latest therapeutic advances but also our established prescription products. Established prescription products also satisfy patient needs in some therapy areas. We regularly advertise in medical journals and exhibit at major medical congresses. In some countries, products are also marketed directly to patients by way of television, radio, newspapers and magazines, and digital channels (such as the internet). National education and prevention campaigns can be used to improve patients’ knowledge of their conditions.

 

 

 

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Our sales representatives, who work closely with healthcare professionals, use their expertise to promote and provide information on our drugs. They represent our values on a day-to-day basis and are required to adhere to a code of ethics and to internal policies in which they receive training. As of December 31, 2015, we had a global sales force of 34,172 people.

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

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

Animal Health products are sold and/or distributed by various channels depending on national legislation applicable to veterinary products. Merial takes into account characteristics specific to each country and thus markets its products to veterinarians, pharmacies or wholesalers. In the event of an epidemic, Merial delivers directly to governments.

B.6.2. Competition

The pharmaceutical industry continues to experience significant changes in its competitive environment.

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

 

·   

competition between pharmaceutical companies to research and develop new patented products or address unmet medical needs;

 

·   

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

 

·   

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

 

·   

competition between generic or biosimilar products.

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

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

Sanofi is the fifth-largest player in the global CHC market and competes with multinational corporations such as Bayer, GSK-Novartis, Johnson & Johnson, Pfizer, as well as local players, especially in emerging markets.

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

In our Human Vaccines business, Sanofi is one of the top four players, competing primarily with large multinational players, Merck (outside Europe), GlaxoSmithKline, and Pfizer.

In the Animal Health field in 2015, Sanofi is in competition mainly with major international groups such as Zoetis, Merck and Elanco, Boehringer Ingelheim and Bayer; and with Virbac, Ceva and Vetoquinol, French companies with a global presence.

We also face competition from generic drugs that enter the market when our patent protection or regulatory exclusivity expires, or when we lose a patent infringement lawsuit (see “– B.7. Patents, Intellectual Property and Other Rights” below). Similarly, when a competing patented drug from another pharmaceutical company faces generic competition, these generic products can also affect the competitive environment of our own patented product. See “Item 3. Key Information – D. Risk factors – Risks relating to our business”.

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

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

 

 

 

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

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

B.6.3. Regulatory Framework

B.6.3.1 Overview

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

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

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

In 2015, the International Council for Harmonization (ICH), formerly the International Conference on Harmonization

(ICH), launched its reforms building on a 25-year track record of successful delivery of harmonized guidelines for the development and regulation of the pharmaceutical industry.

The aim is to reinforce the foundations of ICH, expand harmonization globally beyond the current ICH Members (the three founding members: E.U., Japan, U.S., plus Canada and Switzerland as observers) and will facilitate the involvement of additional regulators and industry associations around the world. Countries and regional harmonization initiatives can now “automatically” join ICH either as observers or via ICH’s global cooperation group.

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

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

The Trans-Pacific Partnership, under discussion since 2008, was concluded on October 5, 2015. This free trade agreement, which was negotiated between Australia, New Zealand, the U.S., Peru, Chile, Mexico, Canada, Singapore, Brunei, Malaysia, Vietnam and Japan, affects 40% of the global economy. Provisions which affect the BioPharma industry include patent exclusivity term for biologics.

The Transatlantic Trade and Investment Partnership (TTIP) is still being negotiated. The proposed free trade agreement, between the E.U. and the U.S., aims to promote multilateral economic growth. Specifically with respect to the biopharma industry, the agreement aims to enable regulators to work together more closely to ensure medicines are safe and effective.

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

 

 

 

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In the E.U., there are three main procedures by which to apply for marketing authorization:

 

·   

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

 

·   

If a company is seeking a national marketing authorization in more than one Member State, the mutual recognition or decentralized procedure is available to facilitate the granting of harmonized national authorizations across Member States. Both the decentralized and the mutual recognition procedures are based on the recognition by national competent authorities of a first assessment performed by the regulatory authority of one Member State.

 

·   

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

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

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

In 2015, the EMA recommended 93 medicines for marketing authorization (versus 82 in 2014), including 39 new active substances.

Among the 93 medicines recommended, 18 (19.3%) had an orphan designation (versus 17 in 2014 and 11 in 2013), providing medicines for patients with rare diseases. Five medicines were evaluated under accelerated assessment in 2015 (versus 7 in 2014 and only one in 2013), this mechanism is reserved for medicines that have the potential to address unmet medical needs. Three medicines received a recommendation for a conditional marketing authorization, one of the EMA’s early access routes to patients, intended for medicines that address an unmet medical need and that target seriously debilitating or life-threatening diseases, rare diseases or are intended for use in emergency situations in response to a public health threat.

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

It is possible for the regulatory authorities to withdraw products from the market for safety reasons. Responsibilities for pharmacovigilance rest with the regulatory authorities of all the E.U. Member States in which the marketing authorizations are held. In accordance with applicable legislation, each E.U. Member State has a pharmacovigilance system for the collection and evaluation of information relevant to the risk-benefit balance of medicinal products. The regulatory authority regularly monitors the safety profile of the products available in its territory, takes appropriate action where necessary, and monitors the compliance of marketing authorization holders (MAHs) with their pharmacovigilance obligations. All relevant information is shared between the regulatory authorities and the MAH, in order to allow all parties involved in pharmacovigilance activities to fulfill their obligations and responsibilities.

In July 2012, pharmacovigilance legislation came into force, with significant impacts on the regulatory environment. Changes include the creation of a new scientific advisory committee, the Pharmacovigilance Risk Assessment Committee (PRAC) at EMA level, with a key role in the assessment of all aspects of the risk management of the use of medicinal products for human use approved in the European Economic Area (EEA). This includes measures relating to the detection, assessment, minimization and communication of the risk of adverse reactions, having due regard to the therapeutic effect of the medicinal product. This committee is also responsible for the design and evaluation of post-authorization safety studies (PASS) and pharmacovigilance audits.

In Europe, the PRAC has performed reviews of marketed products (by class or on ad hoc basis) through various

 

 

 

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procedures. 120 Sanofi products underwent PRAC review through signal and referral procedures from July 2012 to December 2015, generating 73 labeling variations (17 new variations in 2015) and five additional risk minimization measures. In only two cases for Sanofi (Myolastan® and Methadone oral solutions containing povidone) did the review lead to the product being withdrawn from the E.U. market.

The pharmacovigilance legislation was amended in 2012. The amendments aim to further strengthen the protection of patient health by promoting prompt and appropriate regulatory action on European medicines. In particular, the amendments include major changes to notification requirements: MAHs of human medicines have to notify E.U. regulators of any action to withdraw a product from the market, together with the reason for this action.

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

The pharmacovigilance legislation also introduced a periodic safety report to be prepared by pharmaceutical companies (Periodic Safety Update Report – PSUR). This is not limited to safety data, but instead presents a critical analysis of the risk-benefit balance of the medicinal product, taking into account new or emerging information in the context of cumulative information on risks and benefits.

There is a legal requirement for an enhanced adverse reaction collection and management system (EudraVigilance) that delivers better health protection through simplified reporting, better quality data and better searching, analysis and tracking functionalities. It is associated with a legal requirement for MAHs to monitor the EudraVigilance data to the extent to which they have access. Following an EudraVigilance functionalities audit scheduled in 2016, the move to EMA centralized reporting is planned for mid 2017.

The database of medicinal products aims to deliver structured and quality assured information on medicinal products authorized in the E.U. that can support E.U. terminologies of products, substances, and organizations

used to power pharmacovigilance and regulatory systems. Since January 1, 2015, Marketing Authorization Holders (MAH) need to notify the EMA of any new marketing authorizations within 15 calendar days from the date of authorization and notify the EMA of any variation to the terms of the Marketing Authorization as soon as possible and no later than 30 calendar days from the date of which the changes have been authorized.

The EMA’s medical literature monitoring (MLM) service was launched on September 1, 2015 to monitor selected medical literature for reports of suspected adverse drug reactions containing certain active substances and to enter reports into EudraVigilance database.

There is a legal requirement for EMA to set up a repository for Periodic Safety Update Reports (PSURs) and their assessment reports, to allow centralized PSUR reporting and to enhance access to data and information, thereby supporting benefit risk assessments of medicines. In June 2015, the PSUR Repository has achieved its full functionality and its use in the E.U. will become mandatory on June 13, 2016.

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

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

Sponsors wishing to market a generic drug can file an Abbreviated NDA (ANDA) under 505(j) of the FD&C Act. These applications are “abbreviated” because they are generally not required to include data to establish safety and effectiveness, but need only demonstrate that their product is bioequivalent (i.e., performs in humans in the same manner as the originator’s product). Consequently, the

 

 

 

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length of time and cost required for development of generics can be considerably less than for the originator’s drug. The ANDA pathway in the U.S. can only be used for generics of drugs approved under the FD&C Act.

The FDA Center for Drug Evaluation and Research approved 45 novel drugs in 2015 (versus 41 in 2014, 27 in 2013 and 39 in 2012). A breakdown of designations and pathways to expedite drug development and review includes Fast Track (14=31%), Breakthrough Therapy (10=22%), Accelerated Approval (6=13%), and Priority Review (24=53%). Of the 2015 novel drugs, 27 (60%) were designated in one or more expedited categories.

CDER identified 16 of the 45 novel drugs approved in 2015 (36%) as First-in-Class, one indicator of the innovative nature of a drug. Approximately 47% of the novel drugs approved in 2015 (21 of 45) were approved to treat rare or “orphan” diseases that affect 200,000 or fewer Americans.

Congress encouraged development of new human drugs and biological products for prevention and treatment of certain tropical diseases (FDAAA 2007) and rare pediatric diseases (FDASIA 2012) by offering additional incentives for obtaining FDA approval of such products. To date three tropical disease priority review vouchers (PRVs) and six pediatric rare disease PRVs have been granted. Regeneron purchased in 2014 a pediatric rare disease PRV from BioMarin which was redeemed for the priority review of their PCSK9 product Praluent®, thus cutting short the review time by 4 months. Sanofi purchased a second pediatric rare disease PRV from Retrophin in the summer of 2015, which was redeemed in December 2015 for the priority review of their fixed combination product – Lixisenatide/insulin glargine – Lixilan. On December 18, 2015, Congress extended the rare pediatric disease priority review voucher program to September 30, 2016. The extension was granted as part of the Congressional budget deal. Bills in both the House and Senate have been introduced which could extend the program beyond the September 2016 date.

In Japan, regulatory authorities can require local clinical studies, though they also accept multi-national studies. In some cases, bridging studies have been conducted to verify that foreign clinical data are applicable to Japanese patients and require data to determine the appropriateness of the dosages for Japanese patients. These additional procedures have created a significant delay in the registration of some innovative products in Japan compared to the E.U. and the U.S.. In order to solve this drug-lag problem, the Japanese Ministry of Health, Labor and Welfare (J-MHLW) introduced the new National Health Insurance (NHI) pricing system on a trial basis in April 2010. Reductions in NHI prices of new drugs every two years are compensated by a “Premium” for a maximum of 15 years. A “Premium” is granted in exchange for the development of unapproved drugs or off-label

indications with high medical needs. The pharmaceutical companies concerned are required to file literature-based submission within six months or to submit a clinical trial notification for registration within one year after the official development request of unapproved drugs or the off label indications. For unapproved drugs with high medical needs, clinical trials in Japanese patients are generally required. Otherwise, a fine equivalent to 105% (with 5% representing interest) of sales based on the premium would be paid back to the government.

In order to promote the development of innovative drugs in Japan for putting them into early practical use in Japan ahead of the world, SAKIGAKE (which is a Japanese term meaning forerunner) review designation program was implemented from April 2015 on a trial basis. The Pharmaceuticals and Medical Devices Agency (PMDA) will review designated products on a priority basis with the aim of reducing their review time from the normal 12 months to 6 months.

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

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

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

The Pharmaceuticals and Medical Devices Act was implemented on November 25, 2014. There are three major objectives. The first objective is to strengthen safety measures for drugs and medical devices. In particular, MAHs must prepare a package insert based on the latest knowledge and notify the J-MHLW before placing products on the market or when revisions are made. The second objective is to accelerate the development of medical devices. The third-party accreditation system will be expanded to specially controlled generic medical devices (i.e. Class III devices). Consequently, the PMDA can accelerate the review of innovative medical devices. The third objective is accelerated commercialization of regenerative medicinal products.

The term “Regenerative Medicinal Products” used in the law includes cellular and tissue-based products and gene therapies. This concept is similar to “Advanced Therapy

 

 

 

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Medicinal Products (ATMPs)” in the E.U. This law enables conditional regulatory approval based on confirmation of probable efficacy and safety in small-scale clinical trials, followed up by comprehensive studies to confirm safety and efficacy in a wider population that would then lead to a regular (full) approval.

For new drugs and biosimilar products with approval applications submitted on or after April 2013, Japan will begin implementing an RMP, similar to the E.U. Pharmacogivilance system.

For generic products, the data necessary for filing are similar to E.U. and U.S. requirements. Pharmaceutical companies only need to submit quality data, and data demonstrating bioequivalence to the originator product, unless the drug is administered intravenously.

B.6.3.2 Biosimilars

Products can be referred to as “biologics” when they are derived from natural sources, including blood products or products manufactured within living cells (e.g., antibodies). Most biologics are complex molecules or mixtures of molecules which are difficult to characterize and require physico-chemical-biological testing, and an understanding of and control over the manufacturing process.

The concept of “generics” is not scientifically appropriate for biologics due to their high level of complexity and therefore the concept of “biosimilar” products is more appropriate. A full comparison of the purity, safety and efficacy of the biosimilar product against the reference biological product should be undertaken, including assessment of physical-chemical-biological, non-clinical and clinical similarity.

In the E.U., a regulatory framework for developing and evaluating biosimilar products has been in place since 2005. The CHMP has issued several product/disease specific guidelines for biosimilar products including guidance on preclinical and clinical development of biosimilars of LMWH and of insulins. Starting in 2011 and continuing in 2015, the CHMP initiated a revision of the majority of the existing biosimilar guidelines (general overarching guidelines, quality, non-clinical and clinical product specific guidelines).

End of 2014, the CHMP published its revised overarching guideline on biosimilars. The main change introduced by this new guidance is the possibility for biosimilar developers to use a comparator authorized outside the EEA in certain clinical studies and in vivo non-clinical studies. This concept is expected to facilitate the global development of biosimilars and to avoid unnecessary repetition of clinical trials. This revised guideline came into force as of April 30, 2015.

While the CHMP has adopted a balanced approach for all biosimilars, allowing evaluation on a case-by-case basis in accordance with relevant biosimilar guidelines, the CHMP has expressed that in specific circumstances, a confirmatory clinical trial may not be necessary. This would require that similar efficacy and safety can clearly be deduced from the similarity of physicochemical characteristics, biological activity/potency, and pharmacokinetic and/or pharmacodynamic profiles of the biosimilar and the reference product. With respect to vaccines, the CHMP position is that it is at present unlikely that these products may be characterized at the molecular level, and that each vaccine product must be evaluated on a case-by-case basis.

In the U.S., the Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, 2010, amends the Public Health Service Act to create an abbreviated licensure pathway (351k) for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biological product.

To date, the FDA has published for consultation seven draft guidance documents concerned with biosimilar development and approval. Four of those seven guidance documents have been finalized. Guidance on labeling and interchangeability has not yet been published.

In Japan, guidelines defining the regulatory approval pathway for follow-on biologics were finalized in March 2009. These guidelines set out the requirements on preclinical and clinical Chemistry, Manufacturing and Control (CMC) data to be considered for the development of the new application category of biosimilars. Unlike the CHMP guidelines, the main scope of the Japanese guidelines includes recombinant proteins and polypeptides, but not polysaccharides such as LMWH.

Many regulatory authorities worldwide have in place, or are in the process of developing, a regulatory framework for biosimilar development and approval. It should be noted that although many emerging markets are basing their regulations and guidance on WHO or EMA documentation, some markets have approved biosimilars under an existing regulatory framework that is not specific to biosimilars.

B.6.3.3 Generics

In the E.U. the number of positive opinions by centralized procedure for generics has increased from last year (16 in 2013, eight in 2014, 21 in 2015). Most of the generics applications for chemical entities use mutual recognition and decentralized procedures, with about 8% of the procedures relating to nonprescription products. Pricing systems for generics remain at national level in the E.U.

 

 

 

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In the U.S., to help the FDA ensure that participants in the U.S. generic drug system comply with U.S. quality standards and to increase the likelihood that American consumers get timely access to low cost, high quality generic drugs, the FDA and the industry have jointly agreed to a comprehensive program (Generic Drug User Fee Amendments) to supplement traditional appropriated funding, focused on safety, access, and transparency. ANDA review performance goals for 2015 state that FDA will review and act on 60 percent of original ANDA submissions within 15 months from the date of submission.

In December 2013 the FDA and EMA announced the launch of a joint initiative to share information on inspections of bioequivalence studies submitted in support of generic drug approvals. This collaborative effort provides a mechanism to conduct joint facility inspections for generic drug applications submitted to both agencies. Taking part in this initiative are the EMA and the E.U. Member States France, Germany, Italy, the Netherlands and the U.K..

In Japan, the NHI price system was reformed in 2014, including a new special price reduction rule for long-listed drugs. The new rule will reduce the NHI prices of long-listed drugs whose generic replacement rates are less than 20% five years after their first generics join the NHI price list. Reductions are 2.0% in the first NHI price revision, 1.75% if the substitution rate is 20% or higher but less than 40%, and 1.5% if the rate is 40% or higher but less than 60%. The rule was introduced in April 2014.

Under the new price system, NHI prices of first generics (currently set at 70%) will be set at 60% of the price of the originator product. A 50% rule will be applied to oral first generics once more than ten products with the same ingredients have obtained listing.

In addition, a max 20% “Sakigake premium” will be introduced in April 2016 for Sakigake-designated products, which have new mechanisms of action and obtain approval in Japan ahead of the rest of the world.

B.6.3.4 Medical Devices

In the E.U., there is no pre-market authorization by a regulatory authority. Instead there is a Conformity Assessment Procedure (for medium and high risk devices), involving an independent third party “Notified Body” (NB). Once certified, medical devices bear the CE-mark allowing them to circulate freely in the EU/EFTA (European Free Trade Association) countries and Turkey. Medical Devices are currently regulated by three core Directives.

In September, 2012 the European Commission adopted proposals to introduce two Regulations that will overhaul and tighten the current E.U. rules governing medical devices (EU Medical Device Directive 93/42/EC amended in 2007, 2007/47/EC).

The European Parliament endorsed in 2013 essential measures that will strengthen patient safety and which are supported by the industry, such as improving the competence and control of Notified Bodies, introducing unannounced site visits by Notified Bodies, increasing the transparency and traceability of medical devices, introducing a stricter post-market follow-up, and improved stakeholder engagement. A “scrutiny procedure” would be used at least for high-risk Class III devices (novel technologies or specific public health threats).

The revised framework also formally introduces the concept of “companion diagnostic”, which is expected to deliver a more accurate definition of the patient population that will benefit from a given product. Sanofi has several “companion diagnostics” in development.

The E.U. Trilogue Negotiations on Medical Device (MD) and In Vitro Diagnostic (IVD) Regulations started in 2015 but will not be fully in force until 2019.

In the U.S., the FDA Center for Devices and Radiological Health (CDRH) is responsible for regulating firms who manufacture, repackage, relabel and/or import medical devices sold in the U.S. In addition, CDRH regulates radiation-emitting electronic products (medical and non-medical) such as lasers, x-ray systems, ultrasound equipment, microwave ovens and color televisions.

Medical devices are classified into Class I, II, and III. Regulatory control increases from Class I to Class III. The device classification regulation defines the regulatory requirements for a general device type. Most Class I devices are exempt from Premarket Notification 510(k); most Class II devices require Premarket Notification 510(k); and most Class III devices require Premarket Approval.

The basic regulatory requirements that manufacturers of medical devices distributed in the U.S. must comply with are: Establishment Registration; Medical Device Listing; Premarket Notification 510(k) unless exempt or Premarket Approval; Investigational Device Exemption; Quality System Regulation; Labeling Requirements and Medical Device Reporting.

B.6.3.5 OTC drugs

In the E.U., EllaOne, an emergency contraceptive, become the fourth European Centralized Rx-to-OTC switch in January, 2015. GlaxoSmithKline Consumer Healthcare’s Alli (orlistat) weight-loss medicine was the first in January, 2009, followed by Nycomed’s 20mg pantoprazole tablets in June, 2009, and AstraZeneca’s Nexium Control (esomeprazole) in 2013.

In the U.S., FDA approved one prescription-to-OTC switch in 2015 for Rhinocort Allergy Spray (budesonide).

 

 

 

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In Japan, the J-MHLW drug safety committee decided in 2013 on the details of safety evaluations for drugs newly switched from prescription to OTC, following the passage of a bill to revise the Pharmaceutical Affairs Law (PAL). The J-MHLW gives the green light for online sales of such OTC drugs if no safety concerns arise during their three-year safety evaluation period (the safety evaluation period is currently four years). During the three-year evaluation period, drugs that moved from prescription to OTC are categorized as products that require pharmacist consultations when purchasing.

Under the new plan, the J-MHLW requires marketing authorization holders to submit interim reports upon the completion of their postmarketing surveillance (PMS). Based on these interim reports and other reports on adverse events, the J-MHLW will evaluate serious adverse events two years after the launch of OTC drugs or later.

In 2016, the J-MHLW will set up a new panel that would pick prescription products candidates that should be switched to nonprescription status, with its first meeting scheduled as early as this summer. Under its plan, the J-MHLW would constantly accept requests for prescription-to-OTC changes from medical societies and other organizations as well as consumers, and then these requests would be publicly reviewed by the new panel. Based on its deliberations, the panel would refer the shortlisted requests to the Pharmaceutical Affairs and Food Sanitation Council’s (PAFSC) committee on nonprescription drugs, which effectively makes decisions on marketing approval for OTCs. The ministry is also planning to seek public comments.

B.6.3.6 Transparency and public access to documents

 

·   

Transparency regarding clinical trials

Over recent years the pharmaceutical industry has been subject to growing pressure for greater transparency about clinical trials (conduct and results). Regulatory authorities are also being pushed for more openness and transparency, for example by making more comprehensive disclosures about the rationale and basis of regulatory decisions on medicinal products, so as to enhance the credibility of the regulatory process. This is a significant driver of the transparency initiatives undertaken in several countries.

Pharmaceutical manufacturers have committed to publishing protocols and results of clinical studies performed with their products in publicly accessible registries. In addition, both ICH and non-ICH countries often impose mandatory disclosure of clinical trials information.

From a regulatory perspective, ambitious initiatives have been undertaken by the major regulatory authorities.

E.U. pharmaceutical legislation for medicinal products requires national regulatory authorities and the EMA to actively publish information concerning authorization and supervision of medicinal products. The EMA has introduced a series of initiatives aimed at improving the transparency of its activities, such as improving the format of the European Public Assessment Report and web-published product approvals, withdrawals and rejections. In addition, there is an increased focus on comparative efficacy and effectiveness. The new E.U. pharmacovigilance legislation aims at giving greater transparency, especially with regard to communication of safety issues (e.g. public hearings, specific European web portals with information on medicinal products). Finally, patients and consumers are increasingly involved in the work of the EMA’s scientific committees.

The EMA has committed to continuously extending its approach to transparency. A key goal in this process is the proactive publication of clinical trial data for medicines once the decision-making process on an application for a E.U.-wide marketing authorization is complete.

At the start of October 2014, the EMA adopted the Policy 0070 for publication of clinical trials reports. The policy came into force on January 1, 2015. It applies to clinical reports contained in any new marketing authorization applications for centralized marketing authorizations and article 58 applications (medicines that are intended exclusively for markets outside the E.U.) submitted after that date.

For post-authorization procedures for existing centrally authorized medicinal products, the effective date will be July 1, 2015 for extension of indication and line extension applications submitted as of that date.

There is a two-step approach for the implementation of the policy:

 

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The first phase concerns the publication of clinical reports only, whereby the data that will be accessible on the EMA website.

 

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In a second phase, the EMA will endeavor to find the most appropriate way to make Individual Patient Data (IPD) available, in compliance with privacy and data protection laws.

In order to operationalize the EMA Policy 70, a Sanofi internal project has been launched to define, develop, implement and control a sustainable process, associated tools and documents as well as resourcing, training and communication plans to manage clinical documents and data redaction in compliance with Policy 70.

In the U.S., the FDA launched a Transparency Initiative in June 2009. The objective of the initiative was to render the FDA much more transparent and open to the American public by providing the public with useful, user-friendly information about agency activities and decision making.

 

 

 

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The FDA Transparency Initiative has three phases: Phase I – Improving the understanding of the FDA basics (completed with ongoing updates); Phase II – Improving the FDA’s disclosure of information to the public (ongoing); and Phase III – Improving the FDA’s transparency to regulated industry (ongoing). Proposals to improve transparency and access to information were released for consultation for both Phase II and Phase III. Some of the less controversial proposals have been implemented; others, such as proactive release of information that the Agency has in its possession, may require revisions to U.S. federal regulations.

In Japan, the J-MHLW/PMDA actively publishes information concerning approvals of medicinal products (ethical drugs, nonprescription drugs, and quasi-drugs) and medical devices. For ethical drugs discussed at the J-MHLW’s Pharmaceutical Affairs and Food Sanitation Council, the redacted clinical trials data module 1&2 (except for commercial confidential information and personal data) have been made publicly available on the PMDA website.

 

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Transparency regarding Health Care Professionals

In the E.U., there is no harmonized approach regarding transparency for Health Care Professionals (HCP). There is no common harmonized approach. For transparency purposes, there is increased external scrutiny of interactions between pharmaceutical companies and HCPs at national level, with legal provisions or healthcare industry voluntary undertakings (Pharma Code) in some countries (such as the U.K., Denmark, France, or Portugal).

The European Federation of Pharmaceutical Industries Association (EFPIA) released in mid-2013 a new Code on Disclosure of Transfers of Value from Pharmaceutical Companies to HCPs and Healthcare Organizations (HCOs), the “EFPIA HCP/HCO Disclosure Code”. EFPIA members were required to comply with this new code and transpose it into their national codes in full by December 13, 2013.

This new Code includes stricter rules on hospitality and gifts, with the requirement for member associations to include a threshold on hospitality and the prohibition of gifts in their national codes.

In the U.S., the Physician Payments Sunshine Act, or “Sunshine Act”, was passed as part of the Patient Protection and Affordable Care Act in 2010. The law is designed to bring transparency to financial relationships between physicians, teaching hospitals, and the pharmaceutical industry. Manufacturers and group purchasing organizations must report all payments or transfers of value – including payments for research, travel, honoraria and speaking fees, meals, educational items like textbooks and journal

reprints – whether made directly to a physician or teaching hospital or indirectly through a third party. The law also requires manufacturers and GPOs to report physicians who have an ownership interest in the company. Reports are made to the Centers for Medicare and Medicaid Services, a government agency.

In Japan, the Japan Pharmaceutical Manufacturers Association (JPMA) member companies started releasing information on their funding to healthcare professionals in 2013 and patient groups in 2014 under the trade group’s voluntary guidelines to boost financial transparency. Under the JPMA’s transparency guidelines for the relations between companies and medical institutions, its members currently report their payments in five categories: 1) R&D, 2) academic research support, 3) manuscript/writing fees, 4) information provisioning, and 5) other expenses.

B.6.3.7 Other new legislation proposed or pending implementation

In the U.S., the 21st Century Cares Act (HR 6) Help and Hope for Patients through Biomedical Innovation passed the House by a vote of 344-77 on July 10, 2015. A companion Senate bill has not yet been introduced.

 

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Clinical trials regulation in E.U.

The new Clinical Trials Regulation ((EU) No 536/2014) of the European Parliament and of the Council of 16 April 2014 on clinical trials on medicinal products for human use, and repealing Directive 2001/20/EC was published in the Official Journal of the E.U. on May 28, 2014.

Pharmaceutical companies and academic researchers will be required to post the results of all their European clinical trials in a publicly-accessible database.

The legislation will streamline the rules on clinical trials across Europe, facilitating cross-border cooperation to enable larger, more reliable trials, as well as trials on products for rare diseases. It simplifies reporting procedures, and gives the European Commission the authority to perform audits. Once a clinical trial sponsor has submitted an application dossier to a Member State, the Member State will have to respond to it within fixed deadlines.

One of the main objectives of the European Commission in introducing the clinical trials regulation was the impact on the competitiveness of the European life sciences industry caused by changes to the conditions of the clinical trial approval process. The new legislation was drafted as a more stringent form of regulation instead of a directive in order to reach better harmonization between countries, without interfering with Member States’ competences in terms of ethical aspects.

 

 

 

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The major points are:

 

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The timeline for approving a clinical trial proposal is set at 60 days without questions (and a maximum of 99 with questions and clock stops). This can be seen as a setback for the industry, as the Commission’s proposal was based on 41 days without questions and a maximum of 74 days including all possible delays. In the case of advanced therapy medicinal products, the timeline can be extended by another 50 days, making 110 days in total.

 

·   

To make both the reference state and the relevant Member States comply with the timelines, the legislation includes the concept of tacit approval. The fact that this feature was accepted by all parties can be seen as a positive outcome for the industry.

 

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As regards transparency requirements for clinical trial data submitted through a single E.U. submission portal and stored in a Union-level database, the new clinical trial regulation allows for protection of personal data of patients and commercially confidential information, which is in line with the industry data sharing laid out in Policy 70 (see previous section).

 

·   

Selection of reference Member State by the sponsor was maintained.

During the three-year transition period, both sets of rules will apply in parallel.

 

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Adaptive pathways (AP) and Priority medicines (PRIME) scheme

The adaptive pathways approach is part of the EMA efforts to improve timely access for patients to new medicines. Adaptive pathway is a scientific concept for medicine development and data generation which allows for early and progressive patient access to a medicine. The approach makes use of the existing E.U. regulatory framework for medicines.

EMA AP Pilot project is a new approach to licensing medicines in the form of a “soft” regulatory pathway. Starting in March 2014, this pilot project is to be tested over a limited period of time to collect objective elements for potential new legislation. It is a prospectively planned process, starting with earlier authorization of a medicine in a restricted, well characterized patient population, based on limited clinical development. This will be followed by iterative phases of evidence gathering and adaptations of the marketing authorization to expand access to the medicine to broader patient populations.

AP builds on existing legislative/regulatory tools (scientific advice (SA), parallel SA with HTA bodies, centralized compassionate use, conditional approval, patients’ registries and enhanced pharmacovigilance activities).

Another initiative launched in 2015 is a new scheme for PRIME, to optimize the development and facilitate the accelerated assessment of new priority medicines of major public health interest to benefit patients as early as possible. The scheme is based on enhanced interaction and early dialogue with medicine developers. EMA expects to launch PRIME in the first quarter of 2016.

PRIME will provide enhanced scientific and regulatory support to companies developing medicines that may offer new therapeutic options to patients who currently have no treatment options, or a major therapeutic advantage over existing treatments.

PRIME reinforces early dialogue and builds on regulatory processes already in place within the E.U. legal framework, including scientific advice to optimize the generation of robust data and the accelerated assessment procedure to improve timely access for patients to priority medicines.

 

·   

Falsified medicines

The E.U. has reformed the rules for importing active substances for medicinal products for human use into the E.U. Directive 2011/62/EU. Since January 2013, all imported active substances must have been manufactured in compliance with GMP standards or standards at least equivalent to GMP. The manufacturing standards in the E.U. for active substances are those of the ICH Q7. With effect from July 2, 2013, such compliance must be confirmed in writing by the competent authority of the exporting country, except for countries with waivers. Written confirmation must also confirm that the plant where the active substance was manufactured is subject to control and enforcement of GMP at least equivalent to that in the E.U.

Several implementing measures for the Falsified Medicines Directive were adopted: the establishment of a common E.U. logo for online pharmacies was adopted in June 2014, giving Member States until July 2015 to prepare for its application. The detailed rules for the safety features appearing on the outer packaging of medicinal products for human use have been adopted, meaning that all prescription drugs or reimbursed drugs commercialized on the European market (CEE) will have to be serialized for December 2018 or February 2019.

 

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Nagoya Protocol

The Nagoya Protocol to the Convention on Biological Diversity on “Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from Their Utilization” was adopted in Nagoya at the tenth Conference of the Parties of the Convention on Biological Diversity (CBD) on October 29, 2010. The Nagoya Protocol has been ratified by 68 countries and the E.U.; the protocol applies in

 

 

 

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