20-F 1 d614161d20f.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
 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018
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   

NASDAQ Global Select Market

Ordinary shares, par value 2 per share   

NASDAQ Global Select Market*

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, 2018 was:

Ordinary shares: 1,245,454,385

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES      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  .

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                      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes                       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” or “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer   Non-accelerated filer   Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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 
   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  .

*Not for trading but only in connection with the registration of American Depositary Shares representing such ordinary shares.

 

 

 

 


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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, 2018.

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 “US” 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; Aldurazyme®, a trademark of the Joint Venture Biomarin/Genzyme LLC; Cialis® OTC, a trademark of Eli Lilly; Leukine®, a trademark of Alcafleu; UshStat®, a trademark of Oxford Biomedica; Vaxelis®, a trademark of MCM Vaccine Co (USA) and MCM Vaccine B.V. (Netherlands); and 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.; Insulia®, a trademark of Voluntis; LibertyLink® Rice 601, LibertyLink® Rice 604 and StarLink®, trademarks of Bayer; and

 

 

other third party trademarks such as Aabasaglar®, Basaglar® and Humalog®, trademarks of Eli Lilly; Eylia®, a trademark of Regeneron; GLAAS®, a trademark of Immune Design ; Kyprolis®, a trademark of Onyx Pharmaceuticals Inc.; Revlimid® trademark of Celgene Corporation; Semglee, a trademark of Mylan Pharmaceuticals Inc.; Velcade®, a trademark of Millenium Pharmaceuticals Inc ; Xyzal® Allergy 24, a trademark of GSK in some countries and UCB Farchim in other countries; and Zantac®, a trademark of Glaxo Group Limited.

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, the 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 mainly on sales data excluding vaccines and in constant euros (unless otherwise indicated) on a September 2018 MAT (Moving

Annual Total) basis. The data are mainly from IQVIA local sales audit, supplemented by country-specific sources.

Data relating to market shares and ranking information presented herein for our Consumer Healthcare products are based on sales data from Nicholas Hall.

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

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

 

 

Cautionary statement regarding forward-looking statements

This Annual Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. 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 Sanofi 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.

 

 


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Risk factors which could affect 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

Principal abbreviations used in the Annual Report on Form 20-F

 

ADR   American Depositary Receipt
ADS   American Depositary Share
AFEP   Association française des entreprises privées (French Association of Large Companies)
AMF   Autorité des marchés financiers (the French market regulator)
ANDA   Abbreviated New Drug Application
BLA   Biologic License Application
BMS   Bristol-Myers Squibb
CEO   Chief Executive Officer
CER   Constant exchange rates
CGU   Cash generating unit
CHC   Consumer Healthcare
CHMP   Committee for Medicinal Products for Human Use
CVR   Contingent value right
ECB   European Central Bank
EFPIA   European Federation of Pharmaceutical Industries and Associations
EMA   European Medicines Agency
EU   European Union
FDA   US Food and Drug Administration
GAVI   Global Alliance for Vaccines and Immunisation
GBU   Global Business Unit
GCP   Good clinical practices
GDP   Good distribution practices
GLP   Good laboratory practices
GLP-1   Glucagon-like peptide-1
GMP   Good manufacturing practices
Hib   Haemophilus influenzae type b
HSE   Health, Safety and Environment
IASB   International Accounting Standards Board
ICH   International Council for Harmonization
IFPMA   International Federation of Pharmaceutical Manufacturers & Associations
IFRS   International Financial Reporting Standards
IPV   Inactivated polio vaccine
ISIN   International Securities Identification Number
J-MHLW   Japanese Ministry of Health, Labor and Welfare
LSD   Lysosomal storage disorder
MEDEF   Mouvement des entreprises de France (French business confederation)
MS   Multiple sclerosis
NASDAQ   National Association of Securities Dealers Automated Quotations
NDA   New Drug Application
NHI   National Health Insurance (Japan)
NYSE   New York Stock Exchange
OECD   Organisation for Economic Co-operation and Development
OPV   Oral polio vaccine
OTC   Over the counter
PhRMA   Pharmaceutical Research and Manufacturers of America
PMDA   Pharmaceuticals and Medical Devices Agency (Japan)
PRV   Priority Review Voucher
PTE   Patent Term Extension
QIV   Quadrivalent influenza vaccine
R&D   Research and development
ROA   Return on assets
SA   Société anonyme (French public limited corporation)
SEC   US Securities and Exchange Commission
SPC   Supplementary Protection Certificate
TSR   Total shareholder return
UNICEF   United Nations Children’s Emergency Fund
US   United States of America
WHO   World Health Organization
 


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TABLE OF CONTENTS

 

 

 

 

1

 

  PART I     1  
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     20  
  A/ History and Development of the Company     21  
  B/ Business Overview     22  
  C/ Organizational Structure     70  
  D/ Property, Plant and Equipment     71  
Item 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS     74  
  A/ Operating results     74  
  B. Liquidity and Capital Resources     123  
  C. Off-Balance Sheet Arrangements / Contractual Obligations and Other Commercial Commitments     128  
Item 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES     130  
  A. Directors and Senior Management     130  
  B. Compensation     160  
  C. Board Practices     180  
  D. Employees     187  
  E. Share Ownership     188  
Item 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     192  
  A. Major Shareholders     192  
  B. Related Party Transactions     193  
  C. Interests of Experts and Counsel     193  
Item 8.   FINANCIAL INFORMATION     194  
  A. Consolidated Financial Statements and Other Financial Information     194  
  B. Significant Changes     198  
Item 9.   THE OFFER AND LISTING     199  
  A. Offer and Listing Details     199  
  B. Plan of Distribution     200  
  C. Markets     200  
  D. Selling Shareholders     200  
  E. Dilution     200  
  F. Expenses of the Issue     200  
Item 10.   ADDITIONAL INFORMATION     217  
  A. Memorandum and Articles of Association     201  
  C. Material Contracts     213  
  D. Exchange Controls     214  
  E. Taxation     214  
  F. Dividends and Paying Agents     218  
  G. Statement by Experts     218  
  H. Documents on Display     218  
  I. Subsidiary Information     218  
Item 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     219  
Item 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES     223  
   

 

2

 

  PART II     229  
Item 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES     229  
Item 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS     229  
Item 15.   CONTROLS AND PROCEDURES     229  
Item 16A.   AUDIT COMMITTEE FINANCIAL EXPERT     230  
Item 16B.   CODE OF ETHICS     230  
Item 16C.   PRINCIPAL ACCOUNTANTS’ FEES AND SERVICES     230  
Item 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES     230  
Item 16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS     231  
Item 16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT     231  
Item 16G.   CORPORATE GOVERNANCE     231  
Item 16H.   MINE SAFETY DISCLOSURE     232  
   

 

3

 

  PART III     233  
Item 17.   FINANCIAL STATEMENTS     233  
Item 18.   FINANCIAL STATEMENTS     233  
Item 19.   EXHIBITS     233  
 


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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, 2018, 2017 and 2016 are included in Item 18 of this annual report.

The consolidated financial statements of Sanofi for the years ended December 31, 2018, 2017 and 2016 have been prepared in compliance with IFRS as issued by the International Accounting Standards Board (IASB) and with IFRS as adopted by the European Union as of December 31, 2018. 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, 2018.

Sanofi reports its financial results in euros.

 

 

SANOFI  /  FORM 20-F 2018   1


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ITEM 3. KEY INFORMATION

 

 

 

Selected condensed financial information

 

    As of and for the year ended December 31,  
(€ million, except per share data)   2018     2017(a)     2016(a)     2015     2014  
IFRS Income statement data(b)                                        

Net sales(c)

    34,463       35,072       33,809       34,060       31,380  

Gross profit

    24,242       24,608       23,995       23,942       21,769  

Operating income

    4,676       5,804       6,531       5,624       6,064  

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

    4,423       3,894       4,486       4,512       4,392  

Net income attributable to equity holders of Sanofi

    4,306       8,416       4,709       4,287       4,390  
Basic earnings per share (€)(d):                                        

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

    3.46       3.00       3.42       3.38       3.25  

Net income attributable to equity holders of Sanofi

    3.45       6.70       3.66       3.28       3.34  
Diluted earnings per share (€)(e):                                        

Net income attributable to equity holders of Sanofi

    3.43       6.64       3.63       3.25       3.30  
IFRS Balance sheet data                                        

Goodwill and other intangible assets

    66,124       53,344 (f)       51,166 (f)       51,583 (f)       53,740  

Total assets

    111,408       99,813       104,679       102,321       97,392  

Outstanding share capital

    2,491       2,508       2,544       2,603       2,620  

Equity attributable to equity holders of Sanofi

    58,876       58,070       57,552       58,049       56,120  

Long term debt

    22,007       14,326 (f)       16,815 (f)       13,118 (f)       13,276  

Cash dividend paid per share ()(g)

    3.07 (h)       3.03       2.96       2.93       2.85  

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

    3.52 (h)       3.63       3.12       3.19       3.46  

 

  (a)

Includes the effects of the first-time application of IFRS 15 on revenue recognition, effective January 1,2018.

 

  (b)

The results of the Animal Health business, and the gain on the divestment of that business, are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations), see Notes D.2. and D.36. to our consolidated financial statements.

 

  (c)

Following a change in accounting presentation in 2016, VaxServe sales of non-Sanofi products are included in Other revenues. The presentation of prior period Net sales and Other revenues has been amended accordingly (see note B.13. to our consolidated financial statements).

 

  (d)

Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to 1,247.1 million shares in 2018, 1,256.9 million shares in 2017, 1,286.6 million shares in 2016, 1,306.2 million shares in 2015, and 1,315.8 million shares in 2014.

 

  (e)

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:1,255.2 million shares in 2018, 1,266.8 million shares in 2017, 1,296.0 million shares in 2016, 1,320.7 million shares in 2015, and 1,331.1 million shares in 2014.

 

  (f)

As reported, excluding the Animal Health business presented in the line items, Assets held for sale or exchange and Liabilities related to assets held for sale or exchange as of December 31, 2015, December 31, 2016 and December 31, 2017.

 

  (g)

Each American Depositary Share, or ADS, represents one half of one share.

 

  (h)

Dividends for 2018 will be proposed for approval at the annual general meeting scheduled for April 30, 2019.

 

  (i)

Based on the relevant year-end exchange rate.

 

2    SANOFI  /  FORM 20-F 2018


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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 2014 through March 2019 expressed in US dollars per euro. The information concerning the US 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 US 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(a)
    High     Low  
2014     1.21       1.32       1.39       1.21  
2015     1.09       1.10       1.20       1.05  
2016     1.06       1.10       1.15       1.04  
2017     1.20       1.14       1.20       1.04  
2018     1.15       1.18       1.25       1.13  
Last 6 months        
2018        

September

    1.16       1.17       1.18       1.16  

October

    1.13       1.15       1.16       1.13  

November

    1.13       1.14       1.15       1.13  

December

    1.15       1.14       1.15       1.13  
2019        

January

    1.15       1.14       1.15       1.13  

February

    1.13       1.14       1.15       1.13  

March(b)

    1.13       1.13       1.14       1.13  

 

  (a)

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 March 1, 2019, we have used European Central Bank Rates for the period from March 4, 2019 through March 7, 2019.

 

  (b)

In each case, measured through March 7, 2019.

On March 7, 2019 the European Central Bank Rate was 1.13 per euro.

B. Capitalization and indebtedness

N/A

C. Reasons for offer and use of proceeds

N/A

 

SANOFI  /  FORM 20-F 2018   3


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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, invalidated 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 by country. This protection may not be sufficient to maintain effective product exclusivity because of local differences in the patents, in national laws, 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 patents 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 conclude 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.

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 order removal of 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.

In addition, if we lose patent protection as a result of an adverse court decision or a settlement, we face the risk that government and private third-party payers and purchasers of pharmaceutical products may claim damages alleging they have over-reimbursed or overpaid for 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 secured against the sale of generic clopidogrel during the course of the litigation.

In certain cases to terminate or avoid patent litigation, we or our collaborators may be required to obtain licenses from the holders of third-party intellectual property rights that already 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 or a permanent 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 that country. For example, Sanofi is currently party to patent infringement proceedings in several countries initiated against us and Regeneron by Amgen relating to Praluent® in which Amgen has requested injunctive relief (see Note D.22.b) to the consolidated financial statements included at Item 18 of this annual report for more information). If third parties obtain a preliminary or permanent injunction or if we fail to obtain a required license for a country where a valid third-party intellectual property rights as confirmed by a court of law exist, or if we 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 value of the patent protection granted to such products.

We have increased the proportion of biological therapeutics in our pipeline relative to traditional small molecule pharmaceutical products. Typically, the development, manufacture, sale and distribution of biological therapeutics is complicated by third-party intellectual property rights (otherwise known as freedom to operate (FTO) issues), to a greater extent than for the development, manufacture, sale and distribution of small molecule therapeutics, because of the types of patents allowed

 

 

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by national patent offices. Further, our ability to successfully challenge third-party patent rights is dependent on the laws of national courts. Certain countries have laws that provide stronger bases for challenging third-party patent rights compared to the laws that are available to challenge patents in other countries. Therefore, we may be able to invalidate a certain third-party patent in one country but not invalidate counterpart patents in other countries. In addition, we expect to face increasing competition from biosimilars in the future. With the accelerated regulatory pathways provided in the US 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 above. 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 our business, results of operations and financial condition” below). If a biosimilar version of one of our products were to be approved, it could reduce our sales and/or profitability of that product.

However, through our presence as a manufacturer of generics and biosimilars, we will also utilize patent challenge strategies against other innovators’ patents similar to those of long-established generic companies, though 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 regard to their nature, scope and level from the types of product liability claims that we have handled in the past. Substantial damages have been awarded and/or settlements agreed – 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 Company will be successful in defending against these claims or will not face additional claims in the future.

Often establishing the full side effect profile of a pharmaceutical drug goes beyond data derived from preapproval clinical studies which may only involve 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 over time following interactions with regulatory authorities, including restrictions of therapeutic indications, new contraindications, warnings or precautions and occasionally even the suspension or withdrawal of a product marketing authorization. Following any of these events, 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 pharmaceuticals 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 we have 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 Company’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

 

 

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from one jurisdiction and regulatory 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 it 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 pharmaceutical 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 at times 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 a considerable time. This system may result in negative risk/benefit assessments and 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 reviews and data analyses can lead to the issuance of recommendations by government agencies, healthcare professional and patient or other specialized organizations regarding the use of products; for example, a recommendation to limit the patient population of a drug’s indication, the imposition of marketing restrictions, or the suspension or withdrawal of 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 notices of deficiencies and FDA Warning Letters in the past following the inspection of some of our facilities and may receive such letters in the future. More generally, if we fail to adequately respond to Regulatory Inspection observations identifying a deficiency during 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 (such as a Warning Letter), the EMA or other regulatory authorities.

In addition, in order to comply with our duty to report adverse events and 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, or they do not comply with contractual requirements, 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 Sanofi would be diminished. At least 50% 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. Regulations applicable to biologics are often more complex and extensive than the regulations applicable to other pharmaceutical products. Biologics are also 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, ethics, competition law, marketing practices, pricing, human rights of workers, data protection and other legal matters could adversely affect our business, results of operations and financial condition.

Our industry is heavily regulated. Our business covers an extremely wide range of activities worldwide and involves numerous partners. We are therefore obligated to comply with the laws of all countries in which we operate. However, legal requirements may vary from country to country and new requirements may be imposed on us from time to time. We have adopted a Code of Ethics (the “Code”) that requires employees to comply with applicable laws and regulations, as well as the specific principles and rules of conduct set forth in the 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 US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, the OECD Anti-Bribery Convention, the French Anti-Corruption measures law (Sapin II) and the French duty of vigilance law and other anti-bribery laws and regulations).

Notwithstanding these efforts, non compliance with laws and regulations may occur and there can be no assurance that we, our officers and/or our directors will not face liability 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, including new regulations, could result in substantial liabilities for the Company and harm the Company’s reputation. Governments and regulatory authorities around the world have been strengthening implementation and enforcement activities in recent years, including in relation to anti-bribery, anti-corruption, ethical requirements with respect to medical and scientific research, respect of human rights of workers and data protection legislation.

With respect to data protection legislation, the General Data Protection Regulation (“GDPR”) has created a range of compliance obligations since it came into force within the European Union in May 2018. Violations of the GDPR carry

 

 

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financial risks due to penalties for data breach or improper processing of personal data (including a possible fine of up to 4% of total worldwide annual turnover for the preceding financial year for the most serious infringements) and may also harm our reputation. Also some uncertainty remains around the legal and regulatory environment for these evolving privacy and data protection laws.

Sanofi and certain of its subsidiaries are under investigation or could become the subject of additional investigations or legal proceedings by various government entities and are defending a number of lawsuits relating to pricing and marketing practices (including, for example, “whistleblower” litigation in the United States). We also face litigation and government investigations or audits, including allegations of 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 may divert management’s attention from our business.

Unfavorable outcomes in any of these matters, or in similar matters that may arise in the future, could preclude the commercialization of our products, harm our reputation, negatively affect the profitability of existing products and subject us to substantial fines (including treble damages and fines based on our sales), punitive damages, penalties and injunctive or administrative remedies, potentially leading to the imposition of additional regulatory controls, monitoring or self-reporting obligations, or exclusion from government reimbursement programs or markets, all of which could have a material adverse effect on our business, results of operations or financial condition.

As such proceedings are unpredictable, we may, after consideration of all relevant factors, decide to enter into settlement agreements to settle certain claims. Such 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.

In September 2018, Sanofi has reached a civil settlement with the US Securities and Exchange Commission (SEC) fully resolving the SEC’s investigation into possible violation of the US Foreign Corrupt Practices Act. Sanofi did not admit any wrongdoing in connection with the settlement but agreed to pay $25 million in penalties and also agreed to a two-year period of self-reporting on the effectiveness of its enhanced internal controls. The DOJ has also completed its related investigation and has declined to pursue any action.

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

All aspects of our business, including research and development, manufacturing, marketing, pricing and sales, are subject to extensive legislation and governmental regulation. Changes in applicable laws and the costs of compliance with such laws and regulations 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 other proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited, invalidated or circumvented, our financial results could be materially and adversely affected” above). Regarding the United States market, on December 11, 2018, in line with the Trump Administration’s stated goal of enhancing competition for biologicals, the FDA released final guidance defining biologics, transitioning biological products approved under an NDA to a deemed biologics license application (BLA), and outlining an abbreviated pathway for biosimilar licensure. As part of the publication of the final guidance, the FDA is allowing for ongoing comments from the public, which may result in further changes or revisions to such guidance. The potential impact of ongoing comments that may result in revisions to the final guidance is unknown and may negatively affect our market exclusivity or impact pricing considerations in the future. As discussed below, however, the overall status of the Biologics Price Competition and Incentives Act (BPCIA) is uncertain, based on a December 14, 2018 federal court decision which declared the Affordable Care Act (ACA), of which the BPCIA is a part, to be unconstitutional. (see “– The pricing and reimbursement of our products is increasingly affected by decisions of governments and other third parties and cost reduction initiatives” below)

This new competitive environment and the potential regulatory changes and agency guidance may further limit the exclusivity available to innovative products on the market and directly impact pricing, access 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”.

Also, in Europe, the implementation of new regulations on Medical Devices and In-Vitro Diagnostics that will apply respectively in May 2020 and May 2022, may cause delays in approvals (for new drug-device combination products and new drug-device combination products and new medical devices/IVDs), product discontinuation (for some legacy medical devices & IVDs), and non-compliance risks (regarding post

 

 

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marketing safety reporting, Unique Device Identification (UDI), European Databank on Medical Devices (EUDAMED)), due to increased requirements in terms of approval process, post-marketing surveillance, traceability and transparency.

In addition to international tax law and regulatory changes such as the OECD Base Erosion and Profit Shifting initiatives and EU directives being implemented (such as EU directive rules against tax avoidance practices or relating to the mandatory automatic exchange of information in relation to reportable cross-border arrangements) changes in tax frameworks, tax reforms and other changes to the way existing tax laws are applied in jurisdictions and major countries where Sanofi and its subsidiaries and affiliates operate could affect our income, our effective tax rate, and consequently our future net income. This particularly applies to French and US tax reforms enacted respectively in December 2018 and December 2017 for which French tax administration and some Internal Revenue Services comments, guidelines and regulations are still expected. Additional tax changes may be enacted in France for instance with respect to the corporate tax rate which could be increased back to 34.4%. These changes may cover matters such as taxation of our operations, intercompany transactions, internal restructuring and more generally taxable income, tax rates, indirect taxation, transfer pricing, R&D tax credits, taxation of intellectual property, dividend taxation, controlled companies or a restriction in certain forms of tax relief. Any of these changes could have a material adverse effect on our business and future results. 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 decreasing sales of products facing patent expiration and termination of regulatory data exclusivity, introduction of lower-priced generics, increasingly aggressive generic commercialization tactics or competition from new products of competitors that are perceived as being superior or equivalent. We must pursue both early stage research and early and late development stages in order to propose a sustainable and well-balanced portfolio of products. In 2018, we spent 5,894 million on research and development, amounting to 17.1% of our 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 fail to invest in the right technology platforms, therapeutic areas, and product classes, or fail to build a robust pipeline and fulfill unmet medical needs in a timely manner. Also when we perform portfolio review we may miscalculate the probabilities of success at each phase of the development. Fields of discovery, particularly 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 of its development may become less attractive if a competitor addressing the same unmet need reaches the market earlier.

The research and development process can generally take 12 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 efficacy, 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 of money and human resources, even in late stage development (Phase III). More and more trials are designed with clinical endpoints of superiority; failure to achieve those endpoints could damage the product’s reputation and our overall program. 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 and profitability.

In 2015 we announced that we had up to 18 new medicines and vaccines on track to arrive on the market between 2014-2020, including six key launches. As of the end of 2018, all of those six products have already been approved and launched: Toujeo®, Praluent®, Dengvaxia®, Soliqua® 100/33 / Suliqua®, Kevzara® and Dupixent®. However, there can be no assurance that all of the products approved or launched will achieve commercial success.

In addition, following (or in some cases contemporaneously with) review of a product for a marketing authorization, 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 studies,

 

 

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including comparative studies, which may effectively delay marketing, change the population which the new product treats, 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, it may take time for us to address these 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;

 

 

increased public attention to the price of drugs and particularly price increases, limiting our ability to set the price, or to manage or increase the price of our products based upon their value;

 

 

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

 

 

partial reimbursement of patient populations within a labelled indication;

 

 

increased difficulty in obtaining and maintaining satisfactory drug reimbursement rates;

 

 

increase in cost containment policies (including budget limitations) related to health expenses;

 

 

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 or manage the price of drugs based on an external benchmark of a product’s price in other countries;

 

 

aggressive pricing strategies by some of our competitors; and

 

 

entry of new consumer healthcare competitors offering online sales.

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 formularies), managing prescribing via various conditions (including prior authorisations

and step edits) or otherwise discouraging physicians from prescribing our products (see also “– The concentration of the US market exposes us to greater pricing pressure” below).

In the United States, the Affordable Care Act (ACA) has increased the government’s role with respect to price, reimbursement, and coverage levels for healthcare services and products. This law also imposed rebates and fees on pharmaceutical companies. In May 2018, the Trump Administration published its American Patients First proposal, which indicates its plans to investigate the ACA’s impact on private market drug prices and potentially alter the ACA taxes and rebates for Medicaid and Medicaid managed care organizations. On December 14, 2018, a federal judge for the Northern District of Texas, Fort Worth Division, issued a ruling declaring the ACA unconstitutional, which sets the stage for another hearing on the law by the Federal Court of Appeals for the Fifth Circuit and possibly the United States Supreme Court thereafter. Included in the many parts of the ACA that could potentially be affected by the continued litigation is the Biologics Price Competition and Incentives Act. In addition to further judicial review of the ACA, the Trump Administration and other United States federal and state officials are continuing to focus on the cost of health coverage, health care and pharmaceuticals although future policy or the timing of any changes remains unclear, creating significant risks for the sector. At the federal level, legislation like the Bipartisan Budget Act of 2018 amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, and also increases in 2019 the percentage by which a drug manufacturer must discount the cost of prescription drugs from 50 percent under current law to 70 percent. Further, from 2017-2018, at least seven states enacted and an additional 22 states proposed legislation which will require price transparency and reporting of certain manufacturer information. This trend is anticipated to continue to 2019, where legislation is expected regarding pricing transparency, marketing, access to drugs and other measures related to pricing.

Government price reporting obligations are complex, and we face risks related to the reporting of pricing data that could affect the reimbursement of and discount provided for our products to US government healthcare programs.

We also encounter 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, and 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 an unfavorable financial environment could have negative consequences for our business”.

In China, the health authorities continue to develop measures around post loss-of-exclusivity (LOE) brands including the selection of the generics validated through bioequivalence. The health authorities are testing new procurement systems targeting

 

 

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post LOE brands with generics demonstrating bioequivalence in four municipalities and seven major cities.

While we are trying to predict the availability or level of reimbursement and related restrictions for our product candidates, external events and unexpected decisions can occur that go against our expectations.

Price negotiations in a country may result in a price that is incompatible with the global price positioning of our products, which may lead us not to launch the product in that country, damaging our image and 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.

The concentration of the US market exposes us to greater pricing pressure.

In the United States, price is increasingly important to managed care organizations (MCOs) and pharmacy benefit managers (PBMs), and as the MCOs/PBMs grow in size following market consolidation, pharmaceutical companies have faced increased pressure in discounting and usage negotiations, and competition among pharmaceutical companies to have their products included in the payers’ formularies is robust. This can lead to price discounts or rebates in connection with the placement of products.

Exclusion of one of our drugs from a formulary can significantly reduce sales in the MCO/PBM patient population (for instance, effective 2017 Lantus®/Toujeo® were excluded from certain template formularies covering millions of people).

Also, some payers in the United States have put in place significant restrictions on the usage of Praluent®, which has resulted in significant out-of-pocket expenditures for patients. As a result in 2018 we reduced the net price of Praluent for US payers that agreed to reduce burdensome access barriers for patients.

Due to these pressures on our prices, our revenues and margins are, and could continue to be, negatively affected.

We may lose market share to competing therapeutic options, 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 meet patient expectations and in certain areas such as diabetes to

deliver a positive patient experience. We need also to educate patients when permissible and promote our products to healthcare providers by providing them with innovative data about the product and its uses including through the use of digital tools. If these education efforts are not effective, we may not be able to increase the sales of our 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. For example, although we do not believe it is possible to state with certainty what level of net sales would have been achieved in the absence of generic competition, a comparison of our consolidated net sales for 2018 and 2017 for products affected by generic and biosimilar competition shows a loss of 1,749 million of net sales on a reported basis. However, other parameters may have contributed to the loss of sales, such as a fall in the average price of certain products (e.g. Lantus®). Also mandatory price regulations apply in certain countries to off-patent products and classes of products, and generics prices are taken into account for international reference pricing and tenders. Substitution is often permitted for generic products that are considered to be interchangeable or clinically identical. Competition, including from non-substitutable biosimilars, would likely result in a decrease in prices, additional rebates, increased promotion efforts 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, France and Germany. 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.

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 and are heavily

 

 

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regulated by governmental health authorities around the world. Whether our products and the related raw materials are manufactured at our own dedicated manufacturing facilities or by third parties, we must ensure that all manufacturing processes comply with current Good Manufacturing Practices (cGMP) and other applicable regulations, as well as with our own quality standards. Third parties supply us with a 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 in line with quality standards or if they 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, Praluent® is administered with an auto-injector manufactured by a third party.

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. We may fail to develop and maintain technology platforms for developing, launching and manufacturing our biological products. We also need to be and remain competitive in the biologic area in terms of manufacturing capabilities. 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. These difficulties may also be encountered during testing, which is a mandatory requirement for the products to be released. For example, in China, we encountered supply constraints of Pentaxim® vaccine in 2018 due to a problem with a supplier of a raw material used in the formulation of Pentaxim® vaccine for China. As a result we had to find an alternative raw material to meet the Chinese requirements. Effective insurance coverage for biological products may also be difficult to obtain in the event of contaminated batches 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 Sanofi’s results of operations and financial results.” below)

Additionally, specific conditions must be respected both by Sanofi and our customers for the storage and distribution of many of our

biological products. For example, cold storage is required for certain vaccines, insulin-based products and some hemophilia products. Failure to adhere to these requirements may result in lost product inventory or products becoming out of specification, which in turn may result in efficacy or safety issues for patients.

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; this 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” above).

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 backup facilities or set up new facilities is more limited because biologics are more complex to manufacture and generally require dedicated facilities. 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 requires significant time and prior approval by health authorities.

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 can have a negative impact on the confidence of patients, customers and professional healthcare providers and the image of Sanofi and may lead to lower product revenues. Government authorities and regulators in the United States, in the European Union and other agencies worldwide are also considering measures to reduce these risks, such as through Supply Risk Management Plans for some products with high medical need, e.g. the French decree of July 2016 concerning the preparation of shortage management plans (“plans de gestion des pénuries”). It cannot be ruled out that these ongoing initiatives may generate additional costs for Sanofi if they result in a requirement to establish backup 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 to test 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.

 

 

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

Our industry is both highly collaborative and competitive, 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 and we need to ensure our attractiveness as a potential partner.

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 on monoclonal antibodies. In immuno-oncology, we have a global collaboration for the joint development and commercialization of cemiplimab, a programmed cell death protein 1 (PD-1) inhibitor antibody. We have also an immuno-oncology discovery and development agreement on the development of two clinical-stage bispecific antibody programs targeting respectively (i) BCMA and CD3 and (ii) MUC16 and CD3. (See “Item 4. Information on the Company – B. Business Overview”). In addition we may also rely on partners to design and manufacture medical devices, notably for the administration of our products.

As regards products recently launched or under development in our R&D portfolio for which we have an alliance arrangement with a partner, the terms of the alliance agreements may require us to share profits and losses arising from commercialization of such products with our partners. This differs from the treatment of revenue and costs generated by other products for which we have no alliance agreement, and such profit sharing may deliver a lower contribution to our financial results.

If disruptions or quality concerns were to arise in the third-party supply of raw materials, active ingredients or medical devices or if our partners 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” above.

When we research and market our products through collaboration agreements, we are also subject to the risk that we may not adequately manage our alliance. For instance, we may not properly manage the decision making process with our partners. Decisions may also be under the control of or subject to the approval of our collaboration partners, who may have views that differ from ours. We are also subject to the risk that our partners may not perform effectively, which could have a detrimental effect when the performance of certain key tasks or functions is the responsibility of our collaboration partners. Failures in the development process or differing priorities may adversely affect the activities conducted through the collaboration arrangements.

Any conflicts or difficulties that we may have with our partners during the course of these agreements or at the time of their renewal or renegotiation, or any disruption in the relationships with our partners, may affect the development, the launch and/or the marketing of certain of our products or product candidates and may cause a decline in our revenues or otherwise negatively affect our results of operations.

A substantial share of the revenue and income of Sanofi 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, 2018 compared with year ended December 31, 2017 – Net Sales – Pharmaceuticals segment”).

Among our flagship products, Lantus®, Lovenox® and Plavix® already face generic competition on the market. Lantus® is particularly important; it was Sanofi’s leading product with revenues of 3,565 million in 2018, representing 10.3% of Sanofi’s net sales for the year. Aubagio®, following a settlement agreement entered into in 2017, is expected to face generic competition starting from August 2023. 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 the products mentioned above to our overall performance. More generally 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 therapeutic options, biosimilar or generic products” above and for information regarding ongoing patent litigation see Note D.22. to the consolidated financial statements included at Item 18 of this annual report).

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, exclusion from formularies or changes in labeling, or if a new, more effective treatment were introduced, or if there were a reduction in sales or a decline in sales growth of one or more of our flagship products, the adverse impact on our business, results of operations and financial condition could be significant.

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 interdependent information technology systems, including Internet-based systems and digital tools. Certain key areas such as research and development, production and sales are to a large extent dependent on our information systems (including cloud-based

 

 

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computing) or those of third-party providers (including for the storage and transfer of critical, confidential, sensitive or personal information regarding our patients, clinical trials, vendors, customers, employees, collaborators and others). We and our third-party service providers use secure information technology systems for the protection of data and threat detection. Like many companies, we may experience certain of these events given that the external cyber-attack threat continues to grow and 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.

Any such event could negatively impact important processes, such as the conduct of scientific research and clinical trials, the submission of the results of such efforts to health authorities in support of requests for product approvals, the functioning of our manufacturing and supply chain processes, our compliance with legal obligations and other key business activities, including our employees’ ability to communicate with one another and with third parties. (see “– Product liability claims could adversely affect our business, results of operations and financial condition” above)

In addition, if we do not allocate and effectively manage the resources necessary to build and maintain our information systems, and require our third-party service providers, suppliers, contract manufacturers, distributors or other third parties to do the same, or if we or they fail to timely identify or appropriately respond to cyberattacks or other incidents, our business could be disrupted, potentially damaging our customers’ health or business and negatively impacting our reputation, business and results of operations.

Although we maintain insurance coverage, this insurance may not be sufficiently available in the future to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. For example, certain types of cyber-attacks could be considered as an Act of War subject to insurance exclusion.

Failure of our business continuity planning in the event of a crisis incident may affect our results of operations and our reputation.

We may not be adequately prepared and/or able to respond effectively to a crisis incident (for instance in the event of a pandemic, natural disaster, a manufacturing, logistics or information technology systems breakdown, or a cyber-attack).

This could result in a delay or interruption of supply, or a threat to our business and assets, as well as to the safety of our employees. If we cannot mitigate the impact of the incident because we cannot react rapidly or because we cannot implement a business continuity plan in line with the magnitude of the incident, we could be prevented from restoring our operations in a timely manner and our operating results may be negatively impacted, as well as our image and reputation.

We are subject to the risk of non-payment by our customers.(1)

We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. This risk is accentuated by recent concentrations among distributors, as well as by uncertainties around global credit and economic conditions, in particular in emerging markets. The United States poses particular customer credit risk issues because of the concentrated distribution system: our three main customers represented respectively 9%, 6% and 4% of our consolidated net sales in 2018. We are also exposed to large wholesalers in other markets, particularly in Europe. Although we assigned receivables to factoring companies or banks, an inability of one or more of these wholesalers to honor their debts to us could adversely affect our financial condition (see Note D.34. to our consolidated financial statements included at Item 18 of this annual report).

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 future financial years (see also “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Liquidity.”).

Global economic conditions and an unfavorable financial environment could have negative consequences for our business.(2)

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,

 

 

 

(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.

 

(2)

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.

 

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increased substitution of generic drugs, and the exclusion of certain products from formularies.

Further, our net sales may be negatively impacted by the continuing challenging global economic environment, as high unemployment, increases in cost-sharing, 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 other treatments to reduce their costs. In the United States there is a consistent increase in the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many US states, to formulary restrictions limiting access to brand-name drugs, including ours. Also, employers may seek to transfer a greater portion of healthcare costs to their employees due to rising costs.

Our Consumer Healthcare business could also be adversely impacted by difficult economic conditions that limit the financial resources of our customers.

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 Company, 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” above.

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.”

The impact of “Brexit” could negatively affect our business

Following the “Brexit” vote in the UK, the EU decided to move the headquarters of the EU’s health authority, the EMA, from the UK to the Netherlands by March 2019. It is expected that a significant percentage of the current employees of the EMA will decide not to make the move to the Netherlands. This raises the possibility that new drug approvals in the EU could be delayed as a result. We are also addressing the impact of Brexit on our supply chain management and quality oversight between the UK and the EU and our internal Brexit Task Force is developing and deploying appropriate contingency plans aiming at avoiding interruption of supply to patients in the event of a ‘hard Brexit’ – see Item 4. Business Overview – B.6.3.8. Other new legislation proposed or pending implementation – Brexit and “– The globalization of our business exposes us to increased risks in specific areas” below).

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.”

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

We increasingly rely on social media, new technologies and digital tools 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 questions 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 Sanofi 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. In addition, unauthorized communications, such as press releases or posts on social media, purported to be issued by Sanofi, may contain information that is false or otherwise damaging and could have an adverse impact on our stock price. 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 Sanofi, or which could lead to 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 or other information. Such uses of social media and mobile technologies could have a material adverse effect on our reputation, business, financial condition and results of operations.

 

 

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Impairment charges or write-downs in our books and changes in accounting standards could have a significant adverse effect on Sanofi’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 written down in value 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. (21.7% of its share capital as of December 31, 2018), which is listed on 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 the economic difficulties affecting some countries could also negatively affect the value of our assets (see “– Global economic conditions and an unfavorable financial environment could have negative consequences for our business” above and “– Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition” below).

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 Sanofi’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 Sanofi’s 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 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 are looking 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 successfully 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 or divestments” 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 toward our priority businesses.

The successful launch of a new pharmaceutical product involves substantial investment in sales and marketing activities. In 2015 we announced that we have up to 18 new medicines and vaccines on track to arrive on the market between 2014-2020 including six key launches. As of the end of 2018, all of those six products have already been approved and launched: Toujeo®, Praluent®, Dengvaxia® and Soliqua® 100/33 / Suliqua®, Kevzara® and Dupixent®. However there can be no assurance that all of these products will achieve commercial success. We may also encounter failures or delays in our launch strategy. For example, Dengvaxia® sales suffer from political changes and economic volatility in Latin America and also from the recommendation to update the label at the end of 2017 following new clinical studies. In addition, in the Philippines, Sanofi received a legal order revoking the Dengvaxia® License in early 2019. In addition, the implementation of utilization management restrictions by payers in the United States and limited market access in Europe hampered our launch strategy on Praluent®. The launch strategy we develop (in terms of timing, pricing, market access, marketing efforts and dedicated sales forces) may not deliver the benefits that we expect. The competitive environment for a given product may also have changed by the time of the actual launch, modifying our initial expectations. The need to prioritize the allocation of resources may also cause delays in or hamper the launch of some of our products.

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 global organization through the implementation from January 2016 of five global business units (GBUs), and their reorganization

 

 

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from 2019 to refocus two GBUs (Primary Care and China and Emerging Markets) to meet significant growth objectives, requires substantial attention from our management. There is no guarantee that this organization will enable Sanofi 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 deliver the expected benefits. Also we need to simplify our organization to gain agility and generate savings. There is no certainty that we will manage to implement these changes within the appropriate time-frames to support our growth strategy.

We have also defined a focused, competitive digital strategy (see Item 4. Information on the Company – B. Business Overview – B.1. Strategy). Our seven priority digital initiatives use digital to create value in two ways: (i) helping us run our business better, faster, and cheaper as we use digital across our value chain to increase productivity, and (ii) introducing new business models (in diabetes). Nevertheless we may fail to capture the benefits of digital at an appropriate cost and/or in a timely manner. Competitors, including new entrants such as tech companies, may outpace us in this fast-moving area.

Failure to support and grow our marketed products, successfully execute the launches of newly approved products, advance our late-stage pipeline, manage the change of our organization or deliver digital transformation 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 or divestments.

We pursue a strategy of selective acquisitions, in-licensing and collaborations in order to reinforce our pipeline and portfolio. We are also proceeding to selective divestments to focus on key business areas. The implementation of this strategy depends on our ability to identify transaction opportunities, mobilize the appropriate resources and execute these transactions 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” above).

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.

For divestments, the financial benefit could be impacted if we face significant financial claims or price adjustment post closing.

In March 2018 and June 2018, we completed the acquisitions of Bioverativ and Ablynx respectively, but the expected benefits of those transactions may never be fully realized or may take longer to realize than expected.

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 regard 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 opportunities, there can be no assurance of our success in completing these transactions when such opportunities are identified.

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 an unfavorable financial environment could have negative consequences for our business” above).

The expansion of our activities in emerging markets also exposes us to more volatile economic conditions, political instability (including a backlash in certain areas against free trade), 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 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” above)), and compliance issues including corruption and fraud (see “– Claims and investigations relating to compliance, ethics, competition law, marketing practices, pricing, human rights of workers, data protection and other legal matters could adversely affect our business, results of operations and financial condition” above).

We may also face compliance and internal control systems issues in mature markets due to increased competition and more complex and stringent regulations.

 

 

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In Europe, there is a risk that barriers to free trade and the free movement of people may rise following the United Kingdom’s “Brexit” vote and the rise of nationalist, separatist and populist sentiment in various countries. Also, international conflicts, barriers to free trade and related restrictions could collectively disturb the international flow of goods and increase the costs and difficulties of international transactions.

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 consumer healthcare. The business models and trade channels in consumer healthcare, in particular regarding promotional efforts and trade terms for example, are different from those in our traditional pharmaceuticals business.

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, or digital and artificial intelligence. 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 adversely 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 waste, 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 Company 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 US Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (also known as “Superfund”), and similar statutes in France, Germany, Italy, Brazil and elsewhere. As a matter of statutory or contractual obligation, we and/or our subsidiaries may retain responsibility for environmental liabilities at some of the sites of our predecessor companies, or of subsidiaries that we demerged, divested or may divest. We have disputes outstanding regarding certain sites no longer owned by the Company. An adverse outcome in such disputes might have a significant adverse effect on our operating results. See Note D.22.d) 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. For example, in Europe, new or evolving regulatory regimes include REACH, CLP/GHS, SEVESO, IPPC/IED, the Waste Framework Directive, the

 

 

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Emission Trading Scheme Directive, the Water Framework Directive, 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 Company 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. Such disasters could be exacerbated in a context of global warming. 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 markets(1)

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

Because we sell our products in numerous countries, our results of operations and financial condition could be adversely affected by fluctuations in currency exchange rates. We are particularly sensitive to movements in exchange rates between the euro and the US dollar, the Japanese yen, the Chinese Yuan and to currencies in emerging markets. In 2018, 33.5% of our net sales were generated in the United States; 22.2% in Emerging Markets other than China (see the definition in “Item 5. Operating and Financial Review and Prospects – A/ Operating results”), including countries that are, or may in future become, subject to exchange controls; 7.1% in China; and 5.0% 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 US dollar value of our ADSs and dividends (if any).

Holders of ADSs face exchange rate risk. Our ADSs trade in US 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 US dollar will affect the US dollar amounts received by owners of ADSs upon conversion by the depositary of cash dividends, if any. Moreover, these fluctuations may affect the US dollar price of the ADSs on the Nasdaq Global Select Market (Nasdaq) whether or not we pay dividends, in addition to any amounts 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 US 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 pro rata portion of the new issuance, the depositary is allowed, at its own discretion, to sell this right to subscribe for new shares for the benefit of the ADS holders instead of making that right available to such holders. In that case, ADS holders could be substantially diluted. Holders of ADSs must also instruct the depositary how to vote their shares. Because of this additional procedural step involving the depositary, the process for exercising voting rights will take longer for holders of ADSs than for holders of shares. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting.

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

As of December 31, 2018, L’Oréal held approximately 9.48% of our issued share capital, accounting for approximately 16.95% 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.

 

 

18    SANOFI  /  FORM 20-F 2018

 

 

(1)

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.


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ITEM 3. KEY INFORMATION

 

 

 

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 US 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. On July 5, 2016 Sanofi disclosed that, based upon actual sales of Lemtrada® in Qualifying Major Markets and in other markets during the respective applicable periods since the Product Launch, Product Sales Milestone #1 has not been met. On February 7, 2018, Sanofi disclosed that, based upon actual sales trends to date, it does not expect that product sales milestones #2, #3 and #4 will be met. Failure to achieve the remaining sales milestones could have an adverse effect on the value of the CVRs (see also Note D.22.c to the consolidated financial statements included at Item 18 of the annual report regarding the ongoing CVR Trustee Claim).

 

 

SANOFI  /  FORM 20-F 2018   19


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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 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 names used in France and/or in the US.

 

 

For our Pharmaceuticals activity, unless otherwise stated, all market share percentages and rankings are calculated based on consolidated national pharmaceutical sales data, excluding vaccines and in constant euros, on a September 2018 MAT (Moving Annual Total) basis. The data are mainly from IQVIA local sales audit supplemented by various other country-specific sources including Knobloch (Mexico), GERS (France) and HMR (Portugal).

 

 

For our 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 our competitors.

Sanofi has three principal activities: Pharmaceuticals, Consumer Healthcare (CHC), and Vaccines via Sanofi Pasteur. These activities are operating segments within the meaning of the IFRS 8 accounting standard (see Note D.35. to our consolidated financial statements, included at Item 18 of this annual report).

We invest in the following activities: Rare Diseases, Multiple Sclerosis, Immunology, Rare Blood Disorder, Oncology, Diabetes, Cardiovascular, Established Prescription Products(1), Generics, Consumer Healthcare, and Vaccines. Unlike our Vaccines and Consumer Healthcare activities, which are operating segments within the meaning of IFRS 8, our Rare Diseases, Multiple Sclerosis, Immunology, Rare Blood Disorder, Oncology, Diabetes, Cardiovascular, Established Prescription Products and Generics activities are franchises whose performance is monitored primarily on the basis of net sales; the

products sold by each of those franchises are included in our Pharmaceuticals operating segment. We are also active in emerging markets selling products from our three activities; the performance of our Emerging Markets(2) operations is monitored primarily on the basis of net sales.

For a presentation of the net sales of our activities for the year ended December 31, 2018, refer to “Item 5 – Results of Operations – Year Ended December 31, 2018 Compared with Year Ended December 31, 2017”.

The most important pharmaceutical products marketed by us are described below.

 

 

Rare Diseases: a portfolio of enzyme replacement therapies including Cerezyme® for Gaucher disease, Myozyme® and Lumizyme® for Pompe disease, and Fabrazyme® for Fabry disease; Cerdelga®, an oral ceramide analog for Gaucher disease; and Aldurazyme® for mucopolysaccharidosis Type 1 (MPS 1).

 

 

Multiple sclerosis: Aubagio®, a once-daily oral immunomodulator; and Lemtrada®, a monoclonal antibody. Both products were developed to treat patients with relapsing forms of multiple sclerosis.

 

 

Immunology: Dupixent®, a monoclonal antibody against the Interleukin-4 receptor alpha, indicated for adults with moderate-to-severe atopic dermatitis and (in the US) for moderate-to-severe asthma; and Kevzara®, a monoclonal antibody against the Interleukin-6 receptor, indicated for adults with moderate to severe rheumatoid arthritis.

 

 

Rare Blood Disorder: Elocate® and Alprolix®, extended half-life clotting-factor therapies for the treatment of adults and children with hemophilia A and B, respectively; and Cablivi®, a bivalent nanobody for the treatment of adults experiencing an episode of acquired thrombotic thrombocytopenic purpura.

 

 

Oncology: Libtayo®, a fully human monoclonal antibody targeting the immune checkpoint receptor PD-1 (programmed cell death protein-1), for the treatment of certain patients with metastatic cutaneous squamous cell carcinoma (CSCC) or locally advanced CSCC; Jevtana®, a taxane, indicated for patients with prostate cancer; Taxotere®, a taxane representing a cornerstone therapy for several cancer types; Eloxatin®, a platinum-based agent used as an adjuvant treatment for certain people with stage III colon cancer; Thymoglobulin®, a broad immuno-suppressive and immuno- modulating agent; Mozobil®, a hematopoietic stem cell mobilizer for patients with hematologic malignancies; and

 

 

20    SANOFI  /  FORM 20-F 2018

 

 

(1)

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

 

(2)

World excluding the US, Canada, Western & Eastern Europe (apart from Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico.


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Zaltrap®, a recombinant fusion protein, indicated for certain patients with metastatic colorectal cancer.

 

 

Diabetes: Lantus® (insulin glargine), a long-acting human insulin analog which is the world-leading brand in the insulin market; Toujeo® (insulin glargine 300 U/mL); 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®/Adlyxin® (lixisenatide), a once-daily GLP-1 receptor agonist; Soliqua® 100/33 / Suliqua®, a once-daily combination of insulin glargine and lixisenatide; and Admelog® / Insulin lispro Sanofi® (insulin lispro), a rapid-acting insulin.

 

 

Cardiovascular diseases: Praluent®, a cholesterol-lowering drug that inhibits PCSK9; and Multaq®, an anti-arrhythmic drug in atrial fibrillation.

 

 

Established Prescription Products: Plavix®, an anti-platelet agent indicated for a number of atherothrombotic conditions; Lovenox®, a low molecular weight heparin for the prophylaxis and treatment of venous thromboembolism and of acute coronary syndrome; Aprovel® and CoAprovel®, anti-hypertensives; Renagel® and Renvela®, oral phosphate binders for use in patients undergoing dialysis; Synvisc® and Synvisc-One®, viscosupplements used to reduce pain in patients suffering from osteoarthritis of certain joints; Stilnox®, for the short-term treatment of insomnia; and Allegra®, a long-lasting (12- and 24-hour) non-sedating anti-histamine for the treatment of seasonal allergic rhinitis (hay fever) and uncomplicated hives.

 

 

Generics: our pharmaceuticals portfolio also includes a wide range of generics. In September 2018, we completed the divestment of our European generics business Zentiva to Advent International, a US global private equity firm.

Our Consumer Healthcare (CHC) activity is focused around four strategic categories: Allergy Cough & Cold, Pain, Digestive and Nutritionals.

Our Vaccines activity is operated through Sanofi Pasteur. We sell vaccines in five areas: pediatric vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines, and travel and endemics vaccines.

In 2018, we obtained regulatory approval for two new products: Cablivi® in the EU and the US and Libtayo® in the US. We also obtained regulatory approval in the US for Dupixent® in an additional indication: moderate-to-severe asthma in certain patients.

Collaborations are essential to our business and a certain number of our products, whether 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, our main telephone number is +33 1 53 77 40 00 and our website is www.sanofi.com. Our principal US subsidiary’s office is located at 55 Corporate Drive, Bridgewater, NJ 08807; telephone: +1 (908) 981 5000.

The SEC maintains an internet site at http://www.sec.gov that contains reports, information statements, and other information regarding issuers that file electronically with the SEC.

Main changes over the last five years

At the end of December 2016, Sanofi Pasteur and MSD ended their vaccines joint venture in Europe and integrated their respective European vaccines businesses into their own operations.

On January 1, 2017, Sanofi and Boehringer Ingelheim (BI) successfully closed in most markets a transaction to swap Sanofi’s Animal Health business for BI’s CHC business.

On March 8, 2018, following a tender offer, we acquired control of Bioverativ Inc., a US biopharmaceutical company headquartered in Waltham, Massachusetts. Bioverativ is engaged in the research, development and commercialization of therapies for people with hemophilia and other rare blood disorders.

On June 19, 2018, Sanofi finalized the acquisition of Ablynx, a Belgian biopharmaceutical company engaged in the development of Nanobodies® – which combine the advantages of conventional antibody drugs with some of the features of small-molecule drugs – in various therapeutic areas.

On September 30, 2018, we completed the divestment of our European generics business Zentiva to Advent International, a US global private equity firm.

 

 

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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, and is launching a high number of innovative medicines. Patients around the world, and a rising middle class in emerging markets, are demanding better care, empowered by access to new information. It is a particularly exciting time scientifically and technologically: the promise of genomics is being realized, immuno-oncology is transforming cancer treatments, and big data is generating new insights into disease. Digital technologies are having a transformative effect across sales, R&D and manufacturing, and acting as enablers for new businesses.

At the same time, increased geopolitical uncertainties, funding challenges, budget tightening and affordability will continue to put the entire healthcare value chain under significant pressure. Although we believe that pharmaceuticals will remain a fundamentally attractive business within that value chain, the bar for innovation will most likely continue to rise. Payers will continue to put scrutiny on prices and reimbursement, and demand demonstration of real life outcomes. This will be coupled with more innovative pricing and contracting practices; pricing pressure is already increasing in the US and China.

There are two other significant trends. Firstly, in the innovation race, good ideas are quickly recognized by competitors who can move fast to implement them. Secondly, biosimilars are now firmly part of the competitive landscape in both the US and Europe.

Implementing the strategic roadmap

To compete and win in this market, we announced our 2020 strategic roadmap in November 2015. We have made significant progress against each of the four pillars of that strategy: reshape the portfolio, deliver outstanding launches, sustain innovation in R&D, and simplify the organization.

Reshape the portfolio

To reshape the portfolio, we focused on three targets: sustaining our leadership, building competitive positions, and exploring strategic options. As a result, we have achieved several important milestones:

Building a leading Rare Blood Disorder franchise

We began the year by creating a new global Rare Blood Disorder franchise, with three strategic deals announced within the space of a month. The first was a reshaping of our alliance with Alnylam, under which we obtained global development and

commercialization rights to fitusiran, an investigational RNAi therapeutic currently in development for the treatment of hemophilia A and B. The second was the acquisition of Bioverativ, a biotechnology company focused on therapies for hemophilia and other rare blood disorders. Completed in early March 2018 at a price of $11.6 billion, this deal brought us a portfolio of products including the flagship hemophilia treatments Eloctate® and Alprolix®. The third was the acquisition of Ablynx, a company engaged in the discovery and development of Nanobodies®. This deal was completed in June 2018 at a price of 3.9 billion; it enhances our portfolio with the addition of Cablivi® (caplacizumab) - the first therapeutic specifically indicated for the treatment of acquired thrombotic thrombocytopenic purpura (aTTP) - which received marketing approval from the European Commission in September 2018 and from the FDA in February 2019.

Rebuilding our competitive position in Oncology

We have entered the Immuno-Oncology (IO) market with the US launch of Libtayo® (cemiplimab), the first anti PD-1 agent to be approved for metastatic cutaneous squamous cell carcinoma (CSCC) and certain locally advanced CSCCs. In January 2018, Sanofi and Regeneron announced that the two companies had more than doubled their investment in cemiplimab, to $1.6 billion. This will fund a broad clinical program in a range of cancers including basal cell carcinoma, cervical and non-small cell lung cancer.

As regards isatuximab, our fully-owned oncology asset, we see significant potential for the CD38 antibody in multiple myeloma and have several Phase III trials underway that address the entire disease continuum. In February 2019, we announced that the isatuximab Phase III trial in combination with standard of care therapies had met its primary endpoint of prolonging progression free survival in patients with relapsed/refractory multiple myeloma. We also believe strongly that isatuximab has potential beyond multiple myeloma.

In January 2019, we announced that we had restructured our IO collaboration with Regeneron. Under the revised agreement, our earlier stage IO efforts with Regeneron will now focus entirely on two bispecific antibodies. This gives us more flexibility to develop our own novel IO programs. Importantly, we will be able to focus on our platform of multi-specific T-cell engagers. This is a key milestone given our significantly enhanced capabilities in multi-specific biologics following the acquisition of Ablynx.

Divesting our European Generics business

In September, 2018, we completed the divestment of our European generics business Zentiva to Advent International, a US global private equity firm, for 1.9 billion (enterprise value).

Bolstering our Consumer Healthcare operations

In January 2017, Sanofi and Boehringer Ingelheim (BI) successfully closed a transaction to swap our Animal Health business for BI’s Consumer Healthcare (CHC) business,

 

 

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enhancing our position in four strategic categories: Allergy Cough & Cold, Pain, Digestive and Nutritionals as well as our geographical footprint.

Sustaining our leadership in Specialty Care, Vaccines and Emerging Markets

In Rare Diseases, we are sustaining our market share leadership in rare genetic diseases through the patient-centered approach unique to Sanofi Genzyme, supported by product differentiation and market access. We continue to grow the market through screening expansion.

In Multiple Sclerosis, investing for the future, we have signed a licensing agreement with Principia to develop their experimental oral treatment (Bruton’s tyrosine kinase inhibitor) that shows promise in multiple sclerosis and, potentially, other central nervous system diseases.

In Vaccines, the influenza vaccine market is highly competitive and to retain our leadership in this category we have built a differentiated product offering. This includes converting our influenza portfolio from trivalent to quadrivalent and offering age-specific products (such as Fluzone® High-Dose for the over-65s), and the recent US launch of Flublok®, the first recombinant protein-based influenza vaccine. Demand typically exceeds supply, so producing more is a key priority for us. We are investing to secure and expand influenza and pediatric vaccines capacity: in April 2018, we announced an investment of 350 million for the construction of a new state-of-the-art vaccine manufacturing facility at the Sanofi Pasteur Canadian headquarters in Toronto, Ontario.

We are the pharmaceutical industry leader in Emerging Markets, and a major multinational player in Brazil, Russia, India, China and Mexico.

Out-licensing our infectious disease research and development portfolio

We have out-licensed most of our infectious disease research and early-stage development portfolio and transferred our infectious disease research unit to Evotec AG, though we continue to be involved in infectious diseases through our vaccine R&D and global health programs.

Deliver outstanding launches

Launching our Immunology franchise

We have the cornerstones of an important new franchise in immunology through Dupixent® (for atopic dermatitis, asthma) and Kevzara® (for rheumatoid arthritis). Both drugs were developed in collaboration with Regeneron and both were launched in 2017.

In 2017 we launched Dupixent®, the first and only biologic medicine for the treatment of adults with moderate-to-severe atopic dermatitis. In October 2018, Dupixent® was approved in

the US as an add-on maintenance therapy in some patients with moderate-to-severe asthma. In November 2018, the FDA accepted for Priority Review a supplemental application in certain adolescent patients with moderate-to-severe atopic dermatitis. Dupilumab is being evaluated in a broad range of clinical development programs for diseases that are driven by Type 2 inflammation. Dupixent® uptake to date is being driven by high patient need, healthcare professional engagement and market access. By the end of 2018, we had launched Dupixent® in the US and 16 other countries, including Japan.

Other new launches

In diabetes, we continued the global launch and ramp-up of Toujeo® and Soliqua® 100/33/ Suliqua®, a lixisenatide and insulin glargine combination treatment for diabetes.

In cardiovascular diseases, we continued the global launch and ramp-up of Praluent® for hypercholesterolemia. The European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) has adopted a positive opinion recommending a new indication for Praluent® to reduce cardiovascular risk by lowering low-density lipoprotein cholesterol (LDL-C) levels as an adjunct to correction of other risk factors in adults with established atherosclerotic cardiovascular disease.

In December 2018, the European Commission granted marketing authorization for Dengvaxia® for use in European endemic areas in individuals aged 9 to 45 years with a documented prior dengue infection.

Sustain innovation in R&D

Our strategy depends on continued innovation in R&D. We continue to strengthen our 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 have aligned the R&D organization with the new Global Business Unit structure, reorganized research into thematic clusters, continued to build capability in translational science, and recruited important new talent. Sanofi has engaged a strong reshaping of its R&D strategy, strengthening the development of innovative products that promise to substantially elevate the standard of care for patients, and prioritizing the therapeutic areas where the patient need is most urgent and where the scientific and medical landscape is richest with opportunity. This shift in priorities translates into an increase in the proportion of R&D projects representing specialty care compared to primary care, while maintaining a strong commitment to Vaccines. In the long-term the aspiration is that roughly 80% of the Sanofi portfolio will consist of molecules with first-in-class or truly differentiated best-in-class potential, with two thirds of biologics compounds and two thirds of the pipeline directly derived from Sanofi internal research.

Implementing rigorous portfolio prioritization processes

To prioritize the most promising molecules in the pipeline, we undertook a rigorous portfolio review in 2018. This exercise

 

 

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resulted in termination of 13 development stage molecules. In addition, we discontinued 25 research projects. This illustrates Sanofi’s commitment to managing a more focused portfolio to accelerate development of the most promising molecules in the pipeline.

Developing technology platforms and an in-house Nanobody® platform

R&D is leveraging the investments made a few years ago to establish competency in several therapeutic modalities, going beyond small molecules and conventional monoclonal antibodies, to produce differentiated molecules that tackle targets in novel and innovative ways. Besides the expansions of complex antibodies such as bi or tri specifics and the addition of nanobodies with the integration of the Ablynx platform, Sanofi has made important steps forward in genomic medicines. This includes enhancements to our internal capabilities in gene therapy based on the AAV platform, as well as new collaborations in virus based gene therapy, zinc finger based genome editing and mRNA therapeutics.

Simplify the organization

We are creating a more agile organization through:

 

 

A new Global Business Unit (GBU) structure, implemented in 2016, integrating global franchises and country-level commercial and medical organizations for each of our major businesses (Sanofi Genzyme; Diabetes and Cardiovascular; General Medicines and Emerging Markets; Sanofi Pasteur and Consumer Healthcare) and also saw the creation of Global Functions (Finance, Human Resources, Information Technology and Solutions, etc).

 

 

The refocusing of two of our GBUs, changing their organizational structure to provide greater focus on our operations in mature markets and across emerging markets. We have created a new Primary Care GBU, focused exclusively on mature markets, that combines the product portfolios of our previous Diabetes & Cardiovascular GBU and the Established Prescription Products franchise. Alongside this, we have created a second new GBU: China & Emerging Markets. The two new GBUs launched at the start of 2019.

 

 

In order to accelerate Sanofi’s transformation, in 2018 we decided to combine all of our efforts into one new department: Business Transformation. This new department has been created to simplify our operating models, bring innovative practices to our organization, and create lasting, positive changes.

 

 

Dissolving our vaccines joint venture with MSD: at the end of 2016, Sanofi Pasteur and MSD ended their vaccines joint venture in Europe and integrated their respective European vaccines businesses into their own operations.

We have also defined a focused, competitive digital strategy with seven key initiatives to create value in two ways: help us run our

business better, faster, and cheaper; and pursue new business models.

For example, digital technologies offer the promise of speeding up our trials and getting our drugs to market faster; our plants will be connected with data flowing automatically from equipment sensors; and advanced analytics on supply chain data will enable real-time optimization. We are engaging physicians through a variety of channels, building precision marketing capabilities globally in CHC; and pursuing new business models to integrate drugs, devices, data, and service, and bring innovative solutions to people living with diabetes. Finally, digital transformation opens up the potential for Sanofi to become a much more data-driven organization.

B.2. Main pharmaceutical products

The sections below provide additional information on our main 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. For more information on sales performance, see “Item 5. Operating and Financial Review and Prospects – Results of Operations”.

a) Rare Diseases

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

Cerezyme®

Cerezyme® (imiglucerase, intravenous infusion) is an enzyme replacement therapy used to treat Gaucher disease, an inherited and 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® has been marketed in the US since 1994, in the EU since 1997, in Japan since 1998 and in China since 2008, and is approved to treat Type 1 Gaucher disease in more than 85 countries. It has also been approved to treat the systemic symptoms of Type 3 Gaucher disease in most non-US markets, including the EU and Japan.

Cerdelga®

Cerdelga® (eliglustat) is the first and only first-line oral therapy for Gaucher disease Type 1 adult patients. A potent, highly specific ceramide analog inhibitor of GL-1 synthesis with broad tissue distribution, Cerdelga® has demonstrated efficacy in the treatment of naive Gaucher disease patients and in patients who

 

 

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switch from enzyme replacement therapy. Cerdelga® has been approved to treat Type 1 Gaucher disease in the US (2014), and in the EU and Japan (2015). Regulatory submissions are ongoing in other countries.

There are ongoing patent infringement proceedings in the US. For further information, see Item 8 – “Information on Legal or Arbitration Proceedings – Cerdelga® Patent Litigation.

Myozyme® and Lumizyme®

Myozyme® and Lumizyme® (alglucosidase alfa, intravenous infusion) are recombinant forms of the same human enzyme and are enzyme replacement therapies used to treat Infantile- and Late Onset Pompe disease (IOPD and LOPD), an inherited, progressive and often fatal neuromuscular disease. Pompe disease occurs in approximately one in 40,000 newborns worldwide, but incidence and patient severity vary among regions.

Myozyme® was first approved in 2006 in the EU and has since been approved in more than 70 countries. In the US, alglucosidase alfa has been marketed as Lumizyme® since 2010.

Fabrazyme®

Fabrazyme® (agalsidase beta, intravenous infusion) 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 incidence and patient severity vary among regions. Fabrazyme® has been marketed in the EU since 2001 and in the US since 2003, and is approved in more than 70 countries.

Aldurazyme®

Aldurazyme® (laronidase, intravenous infusion) is the first and only approved treatment for mucopolysaccharidosis type 1 (MPS I). MPS I occurs in approximately one per 100,000 live births worldwide, but incidence and patient severity vary among regions. Aldurazyme® has been marketed in the EU and the US since 2003, and is approved in more than 75 countries.

b) Multiple Sclerosis

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 2.5 million people suffer from MS worldwide.

Our MS franchise consists of Aubagio® (teriflunomide), a once-daily, oral immunomodulator, and Lemtrada® (alemtuzumab), a monoclonal antibody. Both products treat patients with relapsing forms of MS.

Aubagio®

Aubagio® (teriflunomide), a small molecule immunomodulatory agent with anti-inflammatory properties, is a once-daily oral therapy.

Aubagio® is approved in more than 70 countries around the world including the US (since September 2012) for the treatment of patients with relapsing forms of MS, the EU (since August 2013) for the treatment of adult patients with relapsing remitting MS), and China (since July 2018). Ongoing development efforts include the TeriKIDS study to assess the safety and efficacy of teriflunomide in children (see “B.5. Global research & development”) and global post-marketing registries for pregnancy.

In 2017, Sanofi reached settlement with all 20 generic Aubagio® ANDA first filers, granting each a royalty-free license to enter the US market on March 12, 2023.

Lemtrada®

Lemtrada® (alemtuzumab) is a humanized monoclonal antibody targeting the CD52 antigen. Lemtrada® is administered by intravenous infusion as two short courses 12 months apart; for the majority of patients no further treatment is necessary, making Lemtrada® the only disease-modifying therapy (DMT) that can provide long term durable efficacy in the absence of continuous dosing.

Lemtrada® is approved in more than 60 countries including the EU (since September 2013) for the treatment of adult patients with relapsing forms of MS with active disease defined by clinical or imaging features, and the US (since November 2014) for the treatment of patients with relapsing forms of MS. Because of its safety profile, the FDA approval limited use of Lemtrada® to 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. In the US, Lemtrada® is only available through a restricted distribution program called the Lemtrada® Risk Evaluation and Mitigation Strategy (REMS) Program.

Alemtuzumab is being evaluated in a Phase III study in pediatric patients (see “B.5. Global research & development”).

Bayer Healthcare receives contingent payments based on alemtuzumab global sales revenue. For additional information, see Note D.18. to our consolidated financial statements, included at Item 18 of this annual report.

c) Immunology

Our Immunology franchise consists of Dupixent® (dupilumab) for the treatment of adults with moderate-to-severe atopic dermatitis (AD) and as add-on maintenance therapy for some patients with moderate to severe asthma, and Kevzara® (sarilumab) for the treatment of adult patients with moderately to severely active rheumatoid arthritis (RA).

 

 

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Dupixent®

Dupixent® (dupilumab), a human monoclonal antibody, binds to the interleukin-4 receptor (IL-4R) and has been shown to specifically inhibit overactive signaling of two key proteins (IL-4 and IL-13), which are believed to be major drivers of the persistent underlying inflammation in atopic dermatitis, and in certain other allergic or atopic diseases or that may underlie moderate-to-severe asthma. Dupixent® comes in a pre-filled syringe and can be self-administered as a subcutaneous injection.

Moderate-to-severe atopic dermatitis, a form of eczema and a chronic inflammatory disease, is characterized by rashes sometimes covering much of the body and can include intense, persistent itching and skin dryness, cracking, redness, crusting and oozing.

Dupixent® was granted marketing authorization by the FDA in March 2017 for the treatment of adults with moderate-to-severe atopic dermatitis (AD) whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable, and in October 2018 as an add-on maintenance therapy in patients with moderate-to-severe asthma aged 12 years and older with an eosinophilic phenotype or with oral corticosteroid-dependent asthma. The European Commission approved Dupixent® in September 2017 for use in adults with moderate-to-severe AD who are candidates for systemic therapy, and is reviewing an application for authorization as an add-on maintenance therapy for moderate-to-severe asthma: the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion in March 2019. Dupixent® is also approved for use in certain adult patients with moderate-to-severe atopic dermatitis in other countries including Canada and Japan.

Dupixent® is available in 17 countries including the US (since April 2017), several European Union countries (the first launch was in Germany in December 2017) and Japan (since April 2018). Applications for regulatory approval in certain patients with moderate to severe AD and in certain patients with moderate-to-severe asthma are being reviewed in several other countries. In November 2018, the FDA accepted for Priority Review a supplemental application in certain adolescent patients with moderate-to-severe atopic dermatitis.

Dupilumab is currently being evaluated in a broad range of clinical development programs for diseases that are driven by Type 2 inflammation, including pediatric atopic dermatitis, pediatric asthma, nasal polyps and eosinophilic esophagitis. See “– B.5. Global Research & Development”.

Dupixent® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

There are ongoing patent infringement proceedings in several countries initiated by Sanofi and Regeneron against Amgen and

Immunex relating to Dupixent®. See Note D.22.b) to the consolidated financial statements included at Item 18 of this annual report.

Kevzara®

Kevzara® (sarilumab) is a human monoclonal antibody that binds to the interleukin-6 receptor (IL-6R) and has been shown to inhibit IL-6R mediated signaling. IL-6 is a cytokine in the body that, in excess and over time, can contribute to the inflammation associated with rheumatoid arthritis.

Rheumatoid arthritis (RA) is a chronic inflammatory autoimmune disease causing inflammation, pain, and eventually joint damage and disability.

In May 2017, the FDA approved Kevzara® for the treatment of adult patients with moderately to severely active RA who have had an inadequate response or intolerance to one or more disease modifying anti-rheumatic drugs (DMARDs), such as methotrexate. In June 2017, the European Commission granted marketing authorization for Kevzara® in combination with methotrexate for the treatment of moderately to severely active RA in adult patients who have responded inadequately to – or who are intolerant to – one or more DMARDs, such as methotrexate. Kevzara® is approved for use in certain adult patients with moderately to severely active RA in other countries including Canada, Russia, Taiwan, Israel, Hong Kong and Argentina. Additionally, Kevzara® is indicated in Japan for patients with inadequate response to conventional treatments irrespective of disease severity.

Kevzara® is available in 20 countries, including the US.

Sarilumab is being evaluated in children and adolescents with polyarticular-course juvenile idiopathic arthritis (JIA) or with systemic juvenile arthritis, and in adults with giant cell arteritis or with Polymyalgia Rheumatica. See “– B.5. Global Research & Development”.

Kevzara® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

d) Rare Blood Disorder

Rare Blood Disorder is a new franchise created in 2018 following the acquisition of Bioverativ. Bioverativ, including its two marketed products Eloctate® and Alprolix®, is being consolidated in our financial statements with effect from March 8, 2018 (see “– A. History and Development of the Company”).

Eloctate®

Eloctate® (antihemophilic factor (recombinant), Fc fusion protein), is an extended half-life clotting-factor therapy to control and prevent bleeding episodes in adults and children with hemophilia A. In the US, it is indicated for use in adults and children with hemophilia A for on-demand treatment and control of bleeding

 

 

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episodes, perioperative management of bleeding, and routine prophylaxis to reduce the frequency of bleeding episodes.

Hemophilia A is a rare, x-linked genetic bleeding disorder characterized by a deficiency of functional coagulation Factor VIII, resulting in a prolonged patient plasma-clotting time. As a consequence, people with hemophilia A bleed for a longer time than normal. Eloctate® temporarily replaces the missing coagulation Factor VIII by intravenous use.

We market Eloctate® primarily in the United States (since 2014), Japan, Canada, Australia, Colombia and Taiwan.

Eloctate® is developed and commercialized in collaboration with Swedish Orphan Biovitrum AB (publ), whose territories include Europe, Russia, Middle East and some countries in North Africa.

Alprolix®

Alprolix® (coagulation Factor IX (recombinant), Fc fusion protein) is an extended half-life clotting-factor therapy to control and prevent bleeding episodes in adults and children with hemophilia B. In the US, it is indicated for use in adults and children with hemophilia B for control and prevention of bleeding episodes, perioperative management, and routine prophylaxis to reduce the frequency of bleeding episodes.

Hemophilia B is a rare, x-linked genetic bleeding disorder characterized by a deficiency of functional coagulation Factor IX, which leads to a prolonged clotting time similar to hemophilia A. Hemophilia B is a less common type of hemophilia than hemophilia A. Alprolix® temporarily replaces the missing coagulation Factor IX, and is administered by intravenous injection.

We market Alprolix® primarily in the United States (since 2014), Japan, Canada, Australia and Colombia.

Alprolix® is developed and commercialized in collaboration with Swedish Orphan Biovitrum AB (publ), whose territories include Europe, Russia, Middle East and some countries in North Africa.

Cablivi®

Cablivi® (caplacizumab) is a bivalent anti-von Willebrand Factor (vWF) Nanobody® for the treatment of adults experiencing an episode of acquired thrombotic thrombocytopenic purpura (aTTP). Cablivi® is the first therapeutic specifically indicated for the treatment of aTTP.

Acquired thrombotic thrombocytopenic purpura is a life-threatening, autoimmune-based blood clotting disorder characterized by extensive clot formation in small blood vessels throughout the body, leading to severe thrombocytopenia (very low platelet count), microangiopathic hemolytic anemia (loss of red blood cells through destruction), ischemia (restricted blood supply to parts of the body) and widespread organ damage especially in the brain and heart. Cablivi® has an immediate effect on platelet adhesion and the ensuing formation and accumulation of the micro-clots.

Cablivi® was granted marketing authorization by the European Commission in September 2018 and by the FDA in February 2019.

Cablivi® is marketed in Germany and available in France under a temporary user license (autorisation temporaire d´utilisation).

Cablivi® was developed by Ablynx, a Sanofi company since mid 2018. See “– A. History and Development of the Company”.

e) Oncology

Libtayo®

Libtayo® (cemiplimab-rwlc), an immune therapy drug, is a fully human monoclonal antibody targeting the immune checkpoint receptor PD-1 (programmed cell death protein-1). This may restore immune function through the activation of cytotoxic T cells, thereby avoiding tumor evasion from host immunity.

In September 2018, the FDA approved Libtayo® for the treatment of patients with metastatic cutaneous squamous cell carcinoma (CSCC) or locally advanced CSCC who are not candidates for curative surgery or curative radiation. Libtayo® is the only treatment specifically approved and available for advanced CSCC in the US. CSCC is the second most common form of skin cancer. Libtayo® is under regulatory review by the EMA and a number of other countries.

Cemiplimab is being investigated in several clinical development programs. See “– B.5. Global Research & Development”.

Libtayo® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

Jevtana®

Jevtana® (cabazitaxel), a chemotherapy drug and cytotoxic agent, is a semi-synthetic second-generation taxane promoting tubulin assembly and stabilizing microtubules; this prevents many cancer cells from dividing, which ultimately results in destroying many such cells. It is approved in combination with prednisone for the treatment of patients with castration resistant metastatic prostate cancer previously treated with a docetaxel-containing treatment regimen.

Jevtana® was granted marketing authorization by the FDA in June 2010, by the European Commission in March 2011, and in Japan in July 2014. The product is marketed in over 75 countries.

Thymoglobulin®

Thymoglobulin® (anti-thymocyte Globulin) is a polyclonal anti-human thymocyte antibody preparation that acts as a broad immunosuppressive and immunomodulating agent. The product’s primary mechanism of action is T-cell depletion, which is complemented by a host of other immunomodulating effects. In the US, Thymoglobulin® is indicated for for the prophylaxis and treatment of acute rejection in patients receiving a kidney transplant. Thymoglobulin® is to be used in conjunction with concomitant immunosuppression. Outside the US, depending on the country, Thymoglobulin® is indicated for the treatment and/or

 

 

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prevention of acute rejection in organ transplantation; immunosuppressive therapy in aplastic anemia; and the treatment and/or prevention of Graft-versus-Host Disease (GvHD) after allogeneic hematopoietic stem cell transplantation.

Thymoglobulin® is currently marketed in over 65 countries.

Taxotere®

Taxotere® (docetaxel), a chemotherapy drug and cytotoxic agent, is a semi-synthetic taxane promoting tubulin assembly and stabilizing microtubules. It has been approved for use in 11 indications in five different tumor types (breast, prostate, gastric, lung, and head and neck).

Taxotere® is available in more than 90 countries. Generics of docetaxel have been launched globally.

Sanofi is involved in Taxotere® product litigation in the US. See Note D.22.a) to our consolidated financial statements, included at Item 18 of this annual report.

Eloxatin®

Eloxatin® (oxaliplatin), a chemotherapy drug, is a platinum-based cytotoxic agent. In combination with the infusional administration of two other chemotherapy drugs (5-fluorouracil/leucovorin, in the FOLFOX regimen), Eloxatin® is approved by the FDA for adjuvant treatment of people with stage III colon cancer who have had their primary tumors surgically removed.

Eloxatin® is in-licensed from Debiopharm and is marketed in more than 70 countries worldwide. Generics of oxaliplatin have been launched globally.

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). Mozobil® is marketed in over 50 countries.

Zaltrap®

Zaltrap® (aflibercept/ziv-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 VEGFs from binding to their native receptors. VEGF-A is one of the mediators contributing to tumor angiogenesis that helps provide the blood flow tumors need to grow. VEGF-B and PlGF may also contribute to tumor angiogenesis.

The FDA approved Zaltrap® in August 2012 for use in combination with FOLFIRI (a chemotherapy regimen made up of 5-fluorouracil/leucovorin/irinotecan), in patients with metastatic colorectal cancer (mCRC) that is resistant to or has progressed

following an oxaliplatin-containing regimen. To avoid confusion with Eylea®, the FDA assigned a new name, ziv-aflibercept, to the active ingredient. The European Commission approved Zaltrap® (aflibercept) in February 2013 to treat mCRC that is resistant to or has progressed after an oxaliplatin-containing regimen.

Zaltrap® is now approved in more than 70 countries worldwide. For additional information on the commercialization of Zaltrap®, see “Item 5 – Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

f) Diabetes

Lantus®

Lantus® (insulin glargine 100 units/mL) is a long-acting analog of human insulin, indicated for the treatment of diabetes mellitus in adults, adolescents and children aged 2 years and above. Approved in the US and in EU in 2000 and in Japan in 2008, Lantus® is available in over 130 countries worldwide.

A biosimilar of Lantus® from Eli Lilly and Company (Lilly) was launched in most European markets under the name Abasaglar® in 2015, and as Basaglar® in the US in December 2016. It has also been launched in Japan and in several other countries worldwide. In 2018, the FDA issued a complete response letter to Mylan for its biosimilar insulin glargine, which has been approved in Europe under the trade name of SemgleeTM and is available in several European countries. In 2018, Merck & Co and Samsung Bioepis announced that they had abandoned global plans to commercialize Lusduna®, their biosimilar of Lantus®.

There are ongoing patent infringement proceedings in the US against Mylan. See “Item 8. Financial Information – B. Significant changes of this annual report for more information.

Toujeo®

Toujeo® (insulin glargine 300 units/mL) is a long-acting analog of human insulin, indicated for the treatment of diabetes mellitus in adults.

Toujeo® has been granted marketing authorization by the FDA (February 2015); the European Commission (April 2015); and the Ministry of Health, Labor and Welfare (J-MHLW) in Japan, where its approved brand name is Lantus® XR (June 2015). Toujeo® has now been launched in more than 40 countries.

Toujeo® is available in Toujeo® SoloSTAR®, a disposable prefilled pen which contains 450 units of insulin glargine and requires one third of the injection volume to deliver the same number of insulin units as Lantus® SoloSTAR®. In the US, since 2018, Toujeo® is also available in a disposable prefilled pen which contains 900 units of insulin glargine.

Apidra®

Apidra® (insulin glulisine) is a rapid-acting analog of human insulin, indicated for the treatment of diabetes mellitus in adults, for supplementary glycemic control. Apidra® has a more rapid

 

 

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onset and shorter duration of action than fast-acting human insulin and can be used in combination with long-acting insulins such as Toujeo® 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.

Adlyxin®/Lyxumia®

Adlyxin® or Lyxumia® (lixisenatide) is a once-daily injectable 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.

Lixisenatide was approved in the EU and in Japan in 2013 under the brand name of Lyxumia® and in the US in 2016 under the brand name of Adlyxin® . Lixisenatide is now marketed under the proprietary name Lyxumia® in more than 40 countries. Lixisenatide was in-licensed from Zealand Pharma A/S.

Soliqua® 100/33 / Suliqua®

Soliqua® 100/33 or Suliqua® is a once-daily fixed-ratio combination of insulin glargine 100 Units/mL, a long-acting analog of human insulin, and lixisenatide, a GLP-1 receptor agonist.

The FDA approved Soliqua® 100/33 in November 2016 for the treatment of adults with type 2 diabetes inadequately controlled on basal insulin (less than 60 units daily) or lixisenatide; and in February 2019, for patients uncontrolled on oral antidiabetic medicines. In January 2017, the European Commission granted marketing authorization in Europe for Suliqua® (the product’s brand name in Europe) for use in combination with metformin for the treatment of adults with type 2 diabetes to improve glycemic control when this has not been provided by metformin alone or metformin combined with another oral glucose-lowering medicinal product or with basal insulin. In Europe, Suliqua® is available in two pens providing different dosing options. Suliqua® is approved in more than 30 countries and currently marketed in over 20.

Admelog® / Insulin lispro Sanofi®

Admelog® or Insulin lispro Sanofi® is a rapid-acting insulin similar to Humalog®, another insulin lispro 100 Units/mL. Admelog® was approved by the FDA in December 2017, and was also granted marketing authorization as a biosimilar (under the proprietary name Insulin lispro Sanofi®) by the European Commission in July 2017. It is used to improve blood sugar control in adults with Type 2 diabetes and adults and children (3 years and older) with Type 1 diabetes.

Admelog® comes in both vials and the SoloSTAR® pen, and was launched in the US and several European countries during 2018.

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 (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 emerging markets.

Integrated Care Solutions

Sanofi and Verily Life Sciences LLC (formerly Google Life Sciences), an Alphabet company, announced in September 2016 the launch of Onduo, a joint venture created through Sanofi and Verily’s diabetes-focused collaboration. Based in Cambridge, Massachusetts (United States), Onduo is a virtual care program with diabetes tools, coaching and clinical support. In 2018 Onduo started commercial pilots in several states in the US.

Sanofi, Sensile Medical and Verily Life Sciences LLC announced in June 2018 a joint development of an “all-in-one” pre-filled insulin patch pump, primarily to serve people living with type 2 diabetes. The alliance leverages Sanofi’s expertise in patient-centered diabetes solutions and insulins, Sensile Medical’s leadership in developing micro-pump technologies for medical use, and Verily’s experience in micro-electronic integration and digital healthcare technology.

In France, Sanofi commercializes digital insulin titration solutions (under the names of Diabeo® and Insulia®), developed with Voluntis, a French company. Sanofi’s digital titration solutions, embedded in a blood glucose meter (MyStarDoseCoach®) and a smartphone app (MyDoseCoach®), plus collaborations with Voluntis (including the Insulia® smartphone app), are being used by people with diabetes in ten pilot programs and some active commercial launches around the world. These tools use patients’ daily blood sugar measurements to recommend a dose that is aligned with a blood sugar target agreed with their physician.

g) Cardiovascular Diseases

Praluent®

Praluent® (alirocumab) is a human monoclonal antibody (mAb) for self-administered injection every two weeks that blocks the interaction of proprotein convertase subtilisin/kexin type 9 (PCSK9) with low-density lipoprotein (LDL) receptors, increasing the recycling of LDL receptors and reducing LDL cholesterol levels.

 

 

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Praluent® is indicated as an adjunct to diet and maximally tolerated statin therapy in certain adult patients with uncontrolled LDL cholesterol.

Praluent® has been approved in more than 60 countries worldwide, including the US (in 2015), Japan (in 2016), Canada, Switzerland, Mexico and Brazil, as well as the European Union (in 2015).

In 2018, the FDA approved a Praluent® label update for some patients currently requiring LDL apheresis therapy. The FDA has also accepted a supplemental Biologics License Application (sBLA) which outlines a proposed update to the Prescribing Information to include the effect of Praluent® in reducing the overall risk of major adverse cardiovascular events with a target action date of April 28, 2019. The sBLA is supported by data from the ODYSSEY OUTCOMES trial that assessed the effect of Praluent® on cardiovascular morbidity and mortality within a post-acute coronary syndrome (ACS) patient population. In early February 2019, the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for Praluent® recommending a new indication to reduce cardiovascular risk in adults with established atherosclerotic cardiovascular disease.

On February 11, 2019, Sanofi and Regeneron announced that Praluent® will be made available at a new reduced US list price beginning in early March 2019. The new lower-priced Praluent® is expected to result in lower patient out-of-pocket costs and represents another step in Sanofi’s efforts to help improve patient affordability and access.

Praluent® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.

There are ongoing patent infringement proceedings in several countries initiated against us and Regeneron Pharmaceuticals, Inc. by Amgen relating to Praluent® in which Amgen has requested injunctive reliefs. See Note D.22.b) to the consolidated financial statements included at Item 18 of this annual report.

Multaq®

Multaq® (dronedarone) is an oral multichannel blocker with anti-arrhythmic properties for prevention of atrial fibrillation recurrences in certain patients with a history of paroxysmal or persistent atrial fibrillation. Multaq® was approved in the US and in the EU in 2009. Multaq® is available in about 35 countries.

h) Established Prescription Products

Plavix® / Iscover ®

Plavix® or Iscover® (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 (MI), recent ischemic stroke or established peripheral arterial disease (PAD)m and for patients with acute coronary syndrome (ACS).

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.

Plavix® or Iscover® are marketed in more than 80 countries. 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 US, Japan and other markets.

Sanofi is involved in Plavix® product litigation in the US. See Note D.22.a) to our consolidated financial statements, included at Item 18 of this annual report.

Lovenox® /  Clexane®

Lovenox® or Clexane® (enoxaparin sodium) is a 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.

Lovenox® or Clexane® is marketed in more than 100 countries. Enoxaparin generics are available in the US, and biosimilar enoxaparin products have gradually become available across various European countries since 2016: Poland, Germany, UK, Italy, Spain, France and Austria.

Aprovel® /  Avapro® / Karvea®

Aprovel® or Avapro ® or Karvea® (irbesartan) is an angiotensin II receptor antagonist. We also market CoAprovel® / Avalide® / Karvezide®, a fixed-dose combination of irbesartan and the diuretic hydrochlorothiazide.

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 for 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 market countries.

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.

 

 

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A number of generics have been launched in Europe, the US and other markets.

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 hyperphosphatemia, or elevated phosphorus levels, which is associated with heart and bone disease. Renvela® is a second-generation buffered phosphate binder.

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.

In the US, several sevelamer carbonate tablets generics and two sevelamer carbonate powder generics have been approved. Sanofi has launched authorized generics of Renvela® in the US market, in both tablet form (October 2017) and powder form (in January 2018). Generics of sevelamer carbonate are currently marketed in various European countries. As of December 31, 2018, there are no generics of sevelamer hydrochloride approved in either Europe or in the US. We anticipate the first approvals of generics of sevelamer hydrochloride in the US in 2019.

Allegra® / Telfast®

Allegra® or Telfast® (fexofenadine hydrochloride) is a long-lasting (12- and 24-hour) non-sedating anti-histamine for the treatment of seasonal allergic rhinitis (hay fever) and uncomplicated hives. We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant. This combination is marketed in Japan under the Dellegra® brand name.

Allegra® / Telfast® is marketed in approximately 80 countries. Generics of most forms of Allegra® / Telfast® have been approved in most markets.

The Allegra® family is also available for over-the-counter (OTC) use. See “B.3. Consumer Healthcare” below.

Stilnox® /  Ambien® / Myslee®

Stilnox® (zolpidem tartrate) is indicated for the short-term treatment of insomnia. Stilnox® is marketed in over 100 countries. It is available under the brand name Ambien® / Ambien®CR in the US 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 US, Europe and Japan.

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 of the knee, hip, ankle, and shoulder joint in countries that have adopted CE marking, and for pain due to knee osteoarthritis in the US. Synvisc-One® is approved for use in patients with osteoarthritis of the knee in the US and countries that require CE marking.

Synvisc® and Synvisc-One® are administered directly into the intra-articular space of the joint to temporarily restore synovial fluid. Synvisc® and Synvisc-One® are marketed in over 60 countries.

Depakine®

Depakine® (sodium valproate) is a broad-spectrum anti-epileptic that has been prescribed for more than 40 years and remains a reference treatment for epilepsy worldwide. Depakine® is also a mood stabilizer, registered in the treatment of manic episodes associated with bipolar disorder3.

Depakine® is marketed in over 100 countries. We hold no rights to Depakine® in the US, and sodium valproate generics are available in most markets.

Sanofi is involved in product litigation related to Depakine®. See Note D.22.a) to the consolidated financial statements included at Item 18 of this annual report.

i) Generics

On September 30, 2018, we completed the divestment of our European generics business Zentiva to Advent International, a US global private equity firm. We have retained our presence in Generics in Emerging Markets, especially in Latin America with two top-of-mind brands – Medley (Brazil) and Genfar (Colombia, Peru, Ecuador and Central America) – and also in Russia, South Africa and Turkey.

B.3. Consumer healthcare

Our CHC sales are supported by a range of products including the following brands:

Allergy, Cough & Cold

 

 

Allegra® is a range of fexofenadine HCl–based products. Fexofenadine is an anti-histamine for relief from allergy symptoms including sneezing, runny nose, itchy nose or throat, and itchy, watery eyes. Allegra® OTC is sold in more than 80 countries across the world.

 

 

SANOFI  /  FORM 20-F 2018   31

 

 

(3)

In some countries this indication is branded differently (e.g. Depakote® in France).


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ITEM 4. INFORMATION ON THE COMPANY

 

 

 

 

Mucosolvan® is a cough brand with many different formulations. It contains the mucoactive agent ambroxol; this stimulates synthesis and release of surfactant. It is sold in various countries in Europe and Asia and in Russia.

Pain

 

 

Doliprane® offers a range of paracetamol/acetaminophen-based products for pain and fever with a wide range of dosage options and pharmaceutical forms, and is sold mainly in France and various African countries.

 

 

The Buscopan® range (hyoscine butylbromide) has an antispasmodic action that specifically targets the source of abdominal pain and discomfort. It is sold across the globe.

Digestive

 

 

Dulcolax® products offer a range of constipation solutions from predictable overnight relief to comfortable natural-feeling relief. The products are sold in over 80 countries. Dulcolax® tablets contain the active ingredient bisacodyl, which works directly on the colon to produce a bowel movement.

 

 

Enterogermina® is a probiotic indicated for the maintenance and restoration of intestinal flora in the treatment of acute or chronic intestinal disorders. Enterogermina® is sold primarily in Europe and in Latin America and parts of Asia.

 

 

Essentiale® is a natural soybean remedy to improve liver health. 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 in fatty liver disease and is sold mainly in Russia, Eastern Europe, various countries in Southeast Asia, and China.

 

 

Zantac® products are for the prevention and relief of heartburn. Zantac® is sold in the US and Canada.

Nutritionals

 

 

Nutritionals include a range of products to maintain general health, provide immune system support, or supplement vitamin deficiencies. These products help manage energy, stress, sleep and anxiety, and include a number of brands across the globe including Nature’s Own® in Australia to improve and maintain health, Pharmaton® (mainly in Europe and Latin America), and Magne B6® in Europe.

Other

 

 

Gold Bond® offers a broad range of products including daily body lotions, anti-itch products, moisturizing and soothing lotions, body and foot creams and powders for eczema. Gold Bond® is only sold in the US.

B.4. Vaccine products

Sanofi Pasteur, the Vaccines division of Sanofi, is a world leader in the vaccine industry and a key supplier of life-saving vaccines all over the world and in publicly funded international markets such as UNICEF, the Pan American Health Organization (PAHO) and the Global Alliance for Vaccines and Immunization (GAVI).

The Sanofi Pasteur portfolio includes the following vaccines:

a) Poliomyelitis, Pertussis and Hib pediatric vaccines

Sanofi Pasteur is one of the key players in pediatric vaccines in both developed 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.

Tetraxim®, a pediatric combination vaccine protecting against diphtheria, tetanus, pertussis and poliomyelitis (polio), was first marketed in 1998. To date, the vaccine has been launched in close to 90 countries outside the US.

Pentaxim®, a pediatric combination vaccine protecting against diphtheria, tetanus, pertussis, polio and Hemophilus influenzae type b (Hib), was first marketed in 1997. To date, the vaccine has been launched in more than 100 countries outside the US. In most European, Latin American and Middle Eastern markets, Pentaxim® is being gradually replaced by Hexaxim®.

Hexaxim® / Hexyon® / Hexacima® is a fully liquid, ready-to-use 6-in-1 (hexavalent) pediatric vaccine that provides protection against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. 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. Hexaxim® is now available in 100 countries outside the US.

Pentacel®, a pediatric combination vaccine protecting against diphtheria, tetanus, pertussis, polio and Hib, was launched in the US in 2008.

Shan5® is a 5-in-1 (whole-cell pertussis based) vaccine protecting against five diseases (diphtheria, tetanus, pertussis, polio and hepatitis B). It regained WHO pre-qualification (which provides access to the product in low-income countries) in May 2014, and was launched in the Indian market in the last quarter of 2014. Shan5® has been retained for the GAVI/UNICEF tender for the 2017-2019 period and in Thailand through local tender.

Act’Hib® is a standalone vaccine protecting against Hib, and is mainly distributed in the US, Japan and China in conjunction with pertussis combination vaccines that do not contain the Hib valence.

Polio vaccines: Sanofi Pasteur is a leading provider of polio vaccines and has been a partner of the Global Polio Eradication Initiative (GPEI) for over 30 years, with more than 13 billion doses of oral polio vaccines (OPV) delivered during that time.

 

 

32    SANOFI  /  FORM 20-F 2018


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Over the 2014-2017 period, Sanofi Pasteur provided 130 million doses of inactivated polio vaccine (IPV) to support the WHO “Polio End Game” strategy for the 73 world poorest countries, representing 80% of the total IPV volumes used in those countries. On October 1, 2018, the ShanIPVTM 5-dose vial received WHO pre-qualification.

Vaxelis®: In 2017, Sanofi Pasteur (in partnership with Merck) made its PR5i hexavalent combination vaccine protecting against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B available on the market under the trademark Vaxelis®. This vaccine is approved and distributed in various EU countries and was approved by the FDA in December 2018. Sanofi and Merck are working to maximize production to allow for a sustainable supply to meet anticipated US demand. Commercial supply will not be available in the US prior to 2020.

b) Influenza vaccines

Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines.

Sanofi Pasteur has several distinct vaccines that are sold globally to meet growing demand for influenza vaccines and innovative solutions in the market.

Fluzone® Quadrivalent is a quadrivalent inactivated influenza vaccine, produced in the US, containing two type A antigens and two type B antigens in order to provide increased protection against more circulating strains of influenza viruses. Fluzone® Quadrivalent/FluQuadri® is available in 27 countries (including the US) for children aged over six months, adolescents and adults. Fluzone® 0.5ml QIV is the currently-licensed standard dose (15 µg/strain) quadrivalent influenza vaccine for ages 3 years and older. A half dose (0.25mL or 7.5 µg) is licensed for children aged 6-35 months.In January 2019, the FDA has approved the use of the 0.5 mL dose to include children age 6 through 35 months.

Fluzone® High-Dose vaccine, launched in the US in 2010, was specifically designed to provide greater protection against influenza in people aged 65 and older. Fluzone® High-Dose is sold in the US, Canada and Australia.

Flublok® is a quadrivalent influenza vaccine for adults age 18 and older. It is the only recombinant protein-based influenza vaccine approved by the FDA. Flublok® is currently sold in the US, with global expansion planned over the next several years.

Vaxigrip® is licensed in over 150 countries globally for people aged six months and older. It is a trivalent influenza vaccine, containing two antigens against type A influenza viruses and one antigen against type B influenza viruses.

Vaxigrip® Tetra is the quadrivalent (QIV) version of Vaxigrip®, including 2 antigens against A strains of influenza viruses and 2 antigens against B strains. Compared to the trivalent influenza vaccine, the addition of a second B strain to the vaccine provides increased protection against more influenza virus circulating strains. This quadrivalent formulation, VaxigripTetra®, was licensed in 2016 and has been launched in more than 40 countries since 2017.

c) Adult booster vaccines

Adacel® is the first trivalent adolescent and adult booster offering protection against diphtheria, tetanus and pertussis. It also reduces exposure for infants who are not immunized or only partially immunized. It is available in 40 countries (including the United States, and otherwise mostly in Europe and Latin America).

Repevax® / Adacel®-Polio is a combination vaccine that provides protection against diphtheria, tetanus, pertussis and polio. It is currently marketed in 20 countries, with a strong focus on European markets (France, Germany, UK).

d) Meningitis vaccines

Menactra® is the first quadrivalent conjugate vaccine against meningococcal meningitis (serogroups: A, C, Y, and W-135), one of the deadliest forms of meningitis in the world. Menactra® is indicated for people aged 9 months through 55 years in the US, Canada, several Middle Eastern countries including Saudi Arabia, and numerous other countries in all regions of the world. It is a strong leader in the meningitis quadrivalent market in the US, and is licensed in 70 countries worldwide. More than 100 million doses of Menactra® have been distributed since launch. It is the only fully liquid (no reconstitution needed) meningitis quadrivalent conjugated vaccine available in the market.

e) Travel and endemics vaccines

Sanofi Pasteur provides a wide range of travel and endemics vaccines including hepatitis A, typhoid, cholera, yellow fever, Japanese encephalitis and dengue, as well as rabies vaccines and immunoglobulins. These products 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.

Focus on Dengue:

Dengvaxia® is licensed in 19 countries. The Philippines FDA revoked the Dengvaxia® license in early 2019 and Sanofi has filed a motion for reconsideration which has been denied. For more information, please see “Item 8. Financial information – Information on legal or arbitration proceedings”. In 2018, the European Commission granted marketing authorization for Dengvaxia® to prevent dengue disease in individuals 9-45 years of age with a documented prior dengue infection who are living in endemic areas, and the FDA granted Dengvaxia® a priority review.

In most countries where Dengvaxia® is approved, the indication is for individuals aged 9 years or older living in a dengue-endemic area. Based on new results from a supplemental analysis of the long term clinical data on the vaccine reported in November 2017, Sanofi Pasteur is recommending a label update

for Dengvaxia® to target its use at people with prior dengue infection: the review process is ongoing in three countries, is expected to start soon in another country and revised label content has been agreed in all other relevant countries.

 

 

SANOFI  /  FORM 20-F 2018   33


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ITEM 4. INFORMATION ON THE COMPANY

 

 

 

The WHO has recognized the public health value of introducing Dengvaxia® in public immunization programs. In September 2018, the WHO issued a recommendation indicating a preference for a pre-vaccination screening strategy to target those at risk of re-infection for protection, and increase the potential of such programs to reduce the overall burden of dengue and severe dengue. As part of our long-standing commitment to ensure access to vaccination in the global effort to reduce the dengue burden, we are pursuing potential collaborations with experienced dengue test manufacturers in order to develop a new, rapid point-of-care dengue test. The aim of the new test is to broaden access to vaccination for those with prior infection who could benefit from the prevention of secondary infections with dengue, which carry a higher risk of being severe.

B.5. GLOBAL RESEARCH & DEVELOPMENT

In 2018 Sanofi engaged in a strong reshaping of its R&D strategy, strengthening the development of innovative products that promise to substantially elevate the standard of care for patients, and prioritizing the therapeutic areas where the patient need is most urgent and where the scientific and medical landscape is richest with opportunity.

R&D is leveraging the investments made a few years ago to establish competency in several therapeutic modalities, going beyond small molecules and conventional monoclonal antibodies, to produce differentiated molecules that tackle targets in novel and innovative ways. Besides the expansions of complex antibodies such as bi or tri specifics and the addition of nanobodies with the integration of the Ablynx platform, Sanofi has made important steps forward in genomic medicines. This includes enhancements to our internal capabilities in gene therapy based on the AAV (adeno-associated vectors) platform, as well as, new collaborations in virus based gene therapy, zinc finger based genome editing and mRNA therapeutics.

In development, sustained efforts are being made to accelerate the pace of delivery for patients, adopting a quick win, fast-fail approach that is underpinned by streamlined governance and pushing decision-making downward with strong team empowerment.

In the long term the aspiration is that roughly 80% of the Sanofi portfolio will consist of molecules with first-in-class or truly differentiated best-in-class potential, with two thirds of biologics compounds and two thirds of the pipeline directly derived from Sanofi internal research.

B.5.1. Pharmaceuticals

B.5.1.1. Organization

Our Global R&D organization is committed to responding to the real needs of patients by providing them with safe, cost-effective and appropriate therapeutic solutions, improving their access to treatment and delivering better health outcomes. In offering new solutions to patients, it is vital to understand the complexity of

human diseases, to sustain innovation and to foster scientific excellence without losing sight of the need for operational efficiency.

To meet these challenges, Sanofi R&D has evolved towards an integrated organization encompassing a wide range of therapeutic areas aligned with the Global Business Units (GBUs), which are dedicated to supporting our commercial operations and reflect our strengths and expertise as well as the most pressing health issues.

For Pharmaceuticals, six therapeutic areas (TAs) have been rolled out:

 

 

Diabetes and Cardiovascular

 

 

Oncology

 

 

Immunology & Inflammation

 

 

Multiple Sclerosis and Neurology

 

 

Rare Blood Disorders

 

 

Rare Diseases

These TAs drive a portfolio of R&D projects, ensuring a strategically coherent approach and flawless implementation.

Each TA has its own experts who are responsible for analyzing medical needs, defining project strategy and development plans, and leading the Global Project Teams.

Our R&D Operations department handles all operational activities and delivers effective development through integrated, collaborative project teams. Those teams harness high caliber functional expertise and the most appropriate technologies across chemical, biological and pharmaceuticals operations, translational medicine and early development, and clinical sciences.

In Research, a dedicated, integrated platform working across multiple disease areas and methods drives collaboration with internal and external partners to translate human biology research and state-of-the art technologies and processes into novel drug targets and world-class safe and effective drugs.

Sanofi’s R&D operations are concentrated in three major hubs: North America, Germany and France. These hubs help build our scientific intelligence network and facilitate connections and knowledge-sharing between in-house scientists, and with external partners and scientific communities, in order to accelerate our research activities.

B.5.1.2. Governance

Global Project Teams (GPTs) are responsible for developing project strategy and driving the execution of projects through functional sub-teams. GPTs are led by a Global Project Head (GPH) who works in collaboration with a Project Manager (PM), and are built around core functional team members representing each department collaborating in the development project.

Various committees assess product and project development across the R&D value chain, carry out in-depth scientific review, make go and no-go decisions and determine portfolio priorities.

 

 

34    SANOFI  /  FORM 20-F 2018


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The Research Working Group (RWG) tracks progress on research programs, and endorses entry into preclinical and the path to the First in Human phase (Phase I).

The Benefit-Risk Assessment Committee (BRAC) reviews the preclinical and clinical data before dossier submission.

The Development Working Group (DWG) endorses the path to Proof of Concept (POC), generally before Phase I, and tracks the development of products all along the value chain. This group is also responsible for the portfolio prioritization exercise.

The Integrated Development and Commercialization Council (IDCC) gives prior input to proof of clinical and commercial concept criteria, and endorses go to late development (Phase III start) and go to file.

The clinical portfolio is the result of decisions taken by these committees during their 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 – research and development efforts may not succeed in adequately renewing the 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.

B.5.1.3. Products

For 2018, the main events related to the pharmaceuticals portfolio were:

Regulatory Approvals:

In 2018, Sanofi obtained regulatory approval for caplacizumab (Cablivi®) in Europe and the US for the treatment of acquired thrombotic thrombocytopenic purpura and cemiplimab (Libtayo®) in the US for the treatment of cutaneous squamous cell carcinoma. Dupilumab (Dupixent®) was also approved in the US for asthma in adults and adolescents (12 to 17 years old), and for atopic dermatitis (adults) in Japan.

Regulatory Submissions:

 

 

sotaglifozin (Zinquista™) was submitted for type I diabetes in Europe and the US;

 

 

cemiplimab (Libtayo®) was submitted for the treatment of cutaneous squamous cell carcinoma in Europe and the US (now approved in the US);

 

 

dupilumab (Dupixent®) was submitted in the US for the treatment of chronic rhinosinusitis with nasal polyposis. It was also submitted for the treatment of atopic dermatitis (adolescents 12 to 17 years old) in Europe and the US;

 

 

Praluent® was submitted in Europe and the US in the reduction of cardiovascular events after acute coronary syndrome.

 

Phase III starts

In 2018, the following products moved into Phase III:

 

 

fitusiran, indicated for the treatment of:

 

   

hemophilia A/B in adults;

 

 

dupilumab (Dupixent®) for the treatment of:

 

   

eosinophilic esophagitis;

 

 

sarilumab (Kevzara®) for the treatment of:

 

   

giant cell arteritis;

 

   

polymyalgia rheumatica;

 

 

isatuximab:

 

   

in combination with lenalidomide, bortezomib, and dexamethasone (VRd) for induction treatment in patients with newly diagnosed multiple myeloma who are eligible for transplant;

 

 

sotaglifozin (Zinquista™) for the treatment of:

 

   

worsening heart failure.

Phase II starts

In 2018, the following products moved into Phase II:

 

 

SAR440340, an anti-IL33 monoclonal antibody for the treatment of :

 

   

asthma;

 

   

chronic obstructive pulmonary disease (COPD);

 

   

atopic dermatitis;

 

 

dupilumab (Dupixent®) as an adjunct therapy for:

 

   

peanut allergy;

 

   

grass allergy;

 

 

sarilumab (Kevzara®) for the treatment of:

 

   

systemic juvenile idiopathic arthritis (sJiA);

 

 

isatuximab,

 

   

in combination with cemiplimab for the treatment of relapsed refractory multiple myeloma (RRMM) and solid tumors;

 

   

In combination with atezolizumab for the treatment of solid tumors and advanced malignancies.

Phase I Starts

In 2018, the following products entered Phase I:

 

 

SAR441344, an anti-CD40L mAb indicated for the treatment of multiple sclerosis;

 

 

SANOFI  /  FORM 20-F 2018   35


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ITEM 4. INFORMATION ON THE COMPANY

 

 

 

 

SAR440234, a T-Cell engaging bispecific (CD3/CD123) antibody for the treatment of acute myeloid leukemia;

 

 

SAR442720, an SHP2 inhibitor for the treatment of advanced non-small cell lung cancer;

 

 

SAR 441000, a cytokine mRNA for the treatment of melanoma.

Entries to the Portfolio

In 2018, the following products entered the R&D Portfolio:

 

 

From our deal with Bioverativ:

 

   

Sutimlimab (BIVV009), an anti-complement C1s mAb in Phase III for the treatment of cold agglutin disease and Phase I for the treatment of idiopathic thrombocytopenic purpura;

   

BIVV001, an investigational von Willebrand factor (VWF)-independent factor VIII therapy in Phase I for the treatment of hemophilia A;

 

   

ST400, a zinc finger nuclease (ZFN) gene editing technology in Phase I for the treatment of ß thalassemia;

 

   

BIVV003, a zinc finger nuclease (ZFN) gene editing technology for the treatment of sickle cell disease.

 

 

From our collaboration with Regulus: SAR339375, an anti-miR21 RNA in Phase II for the treatment of Alport syndrome.

 

 

From our deal with Denali: SAR443060 (DNL747), an RIPK1 inhibitor in Phase I for the treatment of amyotrophic lateral sclerosis and Alzheimer’s disease.

 

 

36    SANOFI  /  FORM 20-F 2018


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ITEM 4. INFORMATION ON THE COMPANY

 

 

 

The clinical portfolio for new products as of March 8, 2019 can be summarized as follows; where several indications are being developed for one product, each indication is regarded as a separate project and specified individually in the table below.

For more information on Dupixent®, Kevzara®, Praluent®, Aubagio® , Cerdelga® and Lemtrada®, see also“– Item 4. Information on the Company – B. Business Overview – B.2. Main Pharmaceutical Products”.

 

 

  

Phase I

  

Phase II

  

Phase III/registration

Diabetes & Cardiovascular             

SAR341402 (T1 & T2 diabetes)

sotagliflozin (T1 & T2 diabetes)

sotagliflozin (WHF(a) in diabetes)

efpeglenatide (T2 diabetes)

Praluent® (LDL-C reduction HoFH(b))

Praluent® (LDL-C reduction pediatric)

Praluent® (CV events after ACS(c))

Oncology   

SAR439459

SAR438859

SAR441000

SAR442720

SAR440234

SAR408701

  

cemiplimab (BCC(d))

isatuximab+cemiplimab (RRMM(f))

isatuximab+cemiplimab (advanced malignancies))

isatuximab+cemiplimab (lymphoma)

isatuximab+atezolizumab (advanced malignancies

isatuximab+atezolizumab

(solid tumours))

  

isatuximab (3L RRMM(e) – ICARIA)

isatuximab (1-3L RRMM(g) – IKEMA)

isatuximab (1L NDMM(h) Ti – IMROZ)

isatuximab (1L NDMM(h) Te – GMMG)

cemiplimab (2L CC(i))

cemiplimab (1L NSCLC(j))

cemiplimab + chemotherapy (1LNSCLC (j))

Rare Blood Disorders   

BIVV003 (Sickle Cell disease)

ST400 (ß thalassemia)

sutimlimab (ITP(k))

BIVV001 (Hemophilia A)

       

fitusiran (Hemophilia A&B)

sutimlimab BIVV009 (Cold Agglutinin Disease )

Immunology &

Inflammation

   SAR441344 (Multiple Sclerosis)   

Kevzara® (pcJiA(l))

Kevzara® (sJiA(m))

dupilumab (peanut allergy – Pediatric)

dupilumab (grass immunotherapy)

SAR440340 (Asthma)

SAR440340 (COPD(o))

SAR440340 (Atopic Dermatitis)

SAR156597 (Systemic Scleroderma)

  

Dupixent® (asthma, 6-11 years)

Dupixent® (Atopic Dermatitis adolescent & pediatric)

dupilumab (EE(n))

dupilumab (Nasal Polyposis)

Kevzara® (Giant Cell Arteritis)

Kevzara® (Polymyalgia Rheumatica)

Multiple Sclerosis

Neurology

  

SAR443060 (ALS and AD(p))

SAR442168 (Multiple Sclerosis)

  

venglustat (GPD(q))

SAR422459 (Stargardt)

  

Aubagio® (RMS pediatric.(r))

Lemtrada® (RRMS pediatric.(s))

Rare diseases        

olipudase alfa (Niemann Pick)

venglustat (Gaucher type3)

venglustat (Fabry)

SAR339375 (Alport syndrome)

  

Avalglocosidase alfa (Pompe)

venglustat (ADPKD(t))

Cerdelga® (Gaucher Type I switching from ERT – pediatric)

 

  (a)

Worsening Heart Failure

 

  (b)

Homozygous Familial Hypercholesterolemia

 

  (c)

Acute Coronary Syndrome

 

  (d)

Basal Cell Carcinoma

 

  (e)

3rd Line Relapsing and/or Refractory Multiple Myeloma

 

  (f)

Relapsing and/or Refractory Multiple Myeloma

 

  (g)

1st-3rd Line Relapsing and/or Refractory Multiple Myeloma

 

  (h)

1st Line Newly Diagnosed Multiple Myeloma

 

  (i)

2nd Line Cervical Cancer

 

  (j)

1st Line Non-Small Cell Lung Cancer

 

  (k)

Idiopathic Thrombocytopenic Purpura

 

  (l)

Polyarticular Juvenile Idiopathic Arthritis

 

  (m)

Systemic Juvenile Idiopathic Arthritis

 

 

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ITEM 4. INFORMATION ON THE COMPANY

 

 

 

  (n)

Eosinophilic Esophagitis

 

  (o)

Chronic Obstructive Pulmonary Disease

 

  (p)

Amyotrophic Lateral Sclerosis and Alzheimer’s disease

 

  (q)

Gaucher related Parkinson’s Disease

 

  (r)

Relapsing Multiple Sclerosis pediatric

 

  (s)

Relapsing Remitting Multiple Sclerosis pediatric

 

  (t)

Autosomal Dominant Polycystic Kidney Disease

 

Phase I studies are the first studies performed in humans, who are mainly healthy volunteers, except for studies in oncology, where Phase I studies are performed in patients. 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 & Cardiovascular

Diabetes

Sotagliflozin (SAR439954), an oral dual inhibitor of SGLT1/2, is in-licensed from Lexicon. Results of the Phase III program in type 1 diabetes were released in 2017. An NDA for sotagliflozin was filed in the US and EU in type 1 diabetes in March 2018. The European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion in March 2019. A large Phase III program including a Cardiovascular Outcome Trial is currently ongoing to investigate the use of sotagliflozin for the treatment of type 2 diabetes. A Phase III study in patients with worsening heart failure was initiated in the second quarter of 2018.

Efpeglenatide (SAR439977) is a long-acting GLP1 receptor agonist derived from our license agreement with Hanmi Pharmaceuticals. A Phase III development program in type 2 diabetes is ongoing. A cardiovascular outcome study, AMPLITUDE-O, evaluating efpeglenatide was initiated in the second quarter of 2018.

Rapid Acting Insulin (SAR341402) is in Phase III for the treatment of type 1 and type 2 diabetes.

Admelog® (a rapid acting insulin – SAR342434) was approved in the US in October 2018.

Products removed from the portfolio in 2018

SAR425899, a dual GLP-1/glucagon receptors was terminated in November 2018

SAR438335, a dual GLP-1/GIP receptor agonists was terminated in November 2018

Cardiovascular 

Praluent® (collaboration with Regeneron): The results of the ODYSSEY OUTCOMES study, which showed Praluent® significantly reduced the risk of major adverse cardiovascular events in patients who had suffered a recent acute coronary syndrome, were submitted to the FDA and EMA in the second quarter of 2018. A Praluent® treatment regimen (administration every 4 weeks) was approved in Japan in Nov 2018. A study evaluating Praluent® in children with heterozygous familial hypercholesterolemia (HeFH) was initiated.

Products removed from the portfolio in 2018

SAR407899, a novel Rho-kinase inhibitor, was discontinued in Nov 2018

SAR247799, a S1P1 agonist, was discontinued in Nov 2018.

Further to the termination in January 2019 of the agreement with MyoKardia to jointly develop small-molecule therapeutics targeting genetic mutations associated with certain heart diseases, the following two projects were removed from the portfolio:

 

 

SAR439152 (Mavacamten), a myosin inhibitor;

 

 

SAR440181, an allosteric activator of cardiac myosin ATPase .

b) Oncology

Products in development

Isatuximab (SAR650984), in-licensed from ImmunoGen, is a monoclonal antibody which selectively binds to CD38, a cell surface antigen expressed in multiple myeloma cancer cells, and other hematological malignancies. Isatuximab kills tumor cells via multiple biological mechanisms including:

 

 

antibody-dependent cellular-mediated cytotoxicity (ADCC);

 

 

complement-dependent cytotoxicity (CDC);

 

 

antibody-dependent cellular phagocytosis (ADCP); and

 

 

direct induction of apoptosis (pro-apoptosis) without cross-linking.

Isatuximab also inhibits CD38 ectoenzymatic activity and the expansion of immune-suppressive regulatory T cells and myeloid derived suppressor cells.

The program is currently in Phase III clinical development, with multiple studies ongoing in multiple myeloma (MM), including four pivotal Phase III trials.

The Phase III ICARIA-MM trial is a randomized, open label, multicenter study comparing isatuximab in combination with

 

 

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pomalidomide and dexamethasone against pomalidomide and dexamethasone in patients with relapsed and refractory multiple myeloma.

The Phase III IKEMA trial is a randomized, open label, multicenter study assessing the clinical benefit of isatuximab combined with carfilzomib (Kyprolis®) and dexamethasone versus carfilzomib with dexamethasone in patients with relapsed and/or refractory multiple myeloma previously treated with one to three prior lines.

The Phase III IMROZ trial is a randomized, open-label, multicenter study assessing the clinical benefit of isatuximab in combination with bortezomib (Velcade®), lenalidomide (Revlimid®) and dexamethasone versus bortezomib, lenalidomide and dexamethasone in patients with newly diagnosed multiple myeloma not eligible for transplant.

The Phase III GMMG HD7 trial is a randomized, open-label, multicenter study assessing the clinical benefit of isatuximab in combination with lenalidomide, bortezomib, and dexamethasone (RVd) for induction and with lenalidomide for maintenance in patients with newly diagnosed multiple myeloma. This study is conducted in collaboration with the German-speaking Myeloma Multicenter Group (GMMG) and was initiated in the last quarter of 2018.

A Phase I study in combination with cyclophosphamide, bortezomib and dexamethasone is ongoing in the treatment of adult patients newly diagnosed with multiple myeloma not eligible for transplant.

A Phase I/II study in combination with cemiplimab in the treatment of patients suffering from RRMM (relapsing and/or refractory multiple myeloma) was initiated in 2018.

In addition, early development studies in solid tumors are ongoing.

 

 

A Phase I/II study with isatuximab in combination with cemiplimab in patients with advanced malignancies (prostate and non-small cell lung cancer),

 

 

A Phase II study in combination with cemiplimab in the treatment of lymphoma,

 

 

A Phase I/II study with isatuximab alone or in combination with atezolizumab in patients with advanced malignancies (hepatocellular carcinoma, squamous cell carcinoma of the head and neck, epithelial ovarian cancer or glioblastoma multiform),

 

 

A Phase II study in combination with atezolizumab in the treatment of solid tumors.

Libtayo® – cemiplimab (SAR439684), a PD-1 inhibitor derived from our alliance with Regeneron, was approved by the FDA for the treatment of advanced CSCC (Sept 2018) and is anticipated to be approved in EU by the second quarter of 2019.

A Phase II program in the treatment of basal cell carcinoma was initiated in July 2017 and is ongoing.

Additional Phase III studies are also running in different indications:

 

 

in the first-line treatment of patients with advanced or metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1, versus Platinum Based Chemotherapy; and

 

 

in the treatment of patients with recurrent or metastatic platinum-refractory cervical cancer. In this study, cemiplimab is assessed versus investigator’s choice chemotherapy.

SAR439859 is a potent, orally bioavailable, and selective estrogen receptor (ER) inhibitor that belongs to the SERD class of compounds. SAR439859 antagonizes the binding of estradiol to ER but also promotes the transition of ER to an inactive conformation that leads to receptor degradation (98%) at sub-nanomolar concentrations in tumor cells harboring either wild type or mutant ER. The compound is in Phase I in the treatment of metastatic breast cancer, in monotherapy and in combination with palbociclib.

SAR439459 is a monoclonal antibody which inhibits the activity of transforming growth factor beta (TGFß). TGFß regulates several biological processes (including wound healing, embryonic development, and malignant transformation) by controlling many key cellular functions including proliferation, differentiation, survival, migration, and epithelial mesenchyme transition. TGFß is expected to alleviate the suppressive tumor microenvironment and allow checkpoint modulators, such as anti-programmed cell death 1 (PD-1), to better induce immune responses and thus increase the proportion of patients benefitting from anti-PD-1 treatment. The compound is in Phase I in the treatment of advanced solid tumors in monotherapy and in combination with cemiplimab.

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. A study is ongoing to evaluate the activity of the drug in the treatment of non-small-cell lung cancer, colorectal cancer and gastric cancer. In addition, there is an active Phase I trial in Japan.

SAR440234: is a novel bispecific T-cell engager (TCE) that has been engineered incorporating the proprietary Cross-Over-Dual-Variable-Domain (CODV) format, a fully humanized Fc-silenced IgG1 backbone, and variable domains from two antibodies, targeting CD3 (T-cell co-receptor) and CD123, respectively with the goal of developing a therapeutic molecule active against leukemic stem cells and blasts. The First in Human testing of dose-escalation of SAR440234 in patients with acute myeloid leukemia, acute lymphoid leukemia and myelodysplastic syndrome was initiated in 2018.

SAR441000: is an immunostimulatory mRNA mixture designed to stimulate both innate and adaptive arms of the immune system to maximize anti-tumor activity. It is developed in collaboration with BioNTech. The set-up phase of the First in Human study in patients with advanced melanoma is ongoing.

 

 

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SAR442720 is an inhibitor of SHP2 designed to reduce cell growth signaling that is overactive in patients with non-small cell lung cancer and other types of cancers having specific types of genetic mutations. This compound is developed jointly by Sanofi and Revolution Medicines and the First in Human study in advanced non-small cell lung cancer with mutations (KRAS or in NF1) was initiated in 2018.

Products removed from the portfolio in 2018

SAR566658 is an antibody drug conjugate (ADC) loaded with a maytansinoid derivative DM4 (huDS6-SPDB-DM4) targeting CA6. It was discontinued in April 2018. The product was in Phase II in the treatment of triple-negative breast cancer.

c) Immunology & Inflammation

Main products in Phase III and in the registration phase

Dupixent® – dupilumab (SAR231893), an interleukin-4 receptor alpha antagonist, is a human monoclonal antibody of the IgG4 subclass that binds to the IL-4Ra subunit and inhibits IL-4 and IL-13 signaling. Dupilumab is jointly developed with Regeneron in several indications:

 

 

atopic dermatitis: the product was approved for adults by the FDA in March 2017, by the European Commission in September 2017, and by the Japanese PMDA in January 2018, and launched under the trade name Dupixent®. A supplemental filing for the adolescent population has been accepted for priority review by the FDA, with a target action date of March 11, 2019. Several Phase III pediatric studies (6 months to 5 years and 6 to 11 years) are currently ongoing;

 

 

asthma: the product was approved for adults & adolescents by the FDA in October 2018, and the CHMP adopted a positive opinion in March 2019. A Phase III study in children (6-11 years) is ongoing;

 

 

nasal polyposis: positive Phase III results were announced in October 2018;

 

 

eosinophilic esophagitis: Phase II/III study started screening in September 2018;

 

 

adjunct to immunotherapy: Proof-of-concept studies were initiated in 2018 to evaluate dupilumab as an adjunct to immunotherapy (peanut and grass allergies);

 

 

chronic obstructive pulmonary disease: a Phase III study is on track to start early 2019.

Kevzara® – sarilumab (SAR153191), a monoclonal antibody against the Interleukin-6 Receptor derived from our alliance with Regeneron, already marketed in the treatment of moderate to severe rheumatoid arthritis.

The product is in Phase IIb in pediatric populations for two indications: polyarticular juvenile idiopathic arthritis and systemic juvenile idiopathic arthritis.

Two Phase III studies were initiated in 2018 for the treatment of polymyalgia rheumatic and giant cell arteritis.

Main products in early stage

SAR441344, an anti-CD40L mAb, is in Phase I for the treatment of multiple sclerosis.

SAR156597 a humanized bi-specific monoclonal antibody targeting the cytokines IL-4 and IL-13, is in Phase IIa for the treatment of diffuse systemic sclerosis.

SAR440340, a human anti-IL33 monoclonal antibody derived from our alliance with Regeneron, has completed Phase I. Three Phase II studies started in 2018, in moderate-to-severe asthma, in atopic dermatitis and in chronic obstructive pulmonary disease.

Products removed from the portfolio in 2018

SAR439794, a TLR4 agonist, was discontinued in October 2018.

GZ389988 (TrKA), a small molecule which inhibits binding of nerve growth factor (NGF), was terminated in November 2018.

Ferroquine (OZ439) is a first in class combination for malaria, developed in collaboration with the Medicines for Malaria Venture (MMV). In December 2018, Sanofi and MMV agreed to transfer operational responsibility to MMV such that MMV assumes leadership while Sanofi remains the sponsor of the studies and also retains responsibility for fulfilling drug supply, regulatory and legal obligations.

d) Multiple Sclerosis and Neurology

SAR442168 (PRN2246), an orally administered Bruton’s tyrosine kinase (BTK) inhibitor which was designed to access the brain and spinal cord by crossing the blood-brain barrier and impact immune cell and brain cell signaling. The Phase I studies were completed in the second half of 2018. The investigational new drug (IND) application was submitted December 2018, and a Phase IIb Proof of Concept/dose-ranging study in relapsing multiple sclerosis patients is planned to be initiated in early 2019.

SAR443060 (DNL747) is a best-in-class orally administered receptor-interacting serine/threonine protein kinases (RIPK1) inhibitor. It was designed to be brain penetrant and inhibit two major components of neurodegenerative diseases (inflammation and necroptosis), and is being developed for multiple sclerosis and neurodegenerative diseases. A Phase I study was completed in 2018 and two Phase Ib studies in amyotrophic lateral sclerosis and Alzheimer’s disease were started in late 2018.

Venglustat (GZ402671), an orally administered brain penetrant glucosylceramide synthase (GCS) inhibitor, has completed Part 1 (dose escalation phase) of a Phase II study in patients with early-stage Parkinson’s disease carrying a ß-glucocerebrosidase (GBA) gene mutation (GBA-PD) or other prespecified variant. Part 2 (treatment phase) of the study was started in early 2018. The product is also being developed in other rare disease indications (Gaucher disease type 3, Fabry disease and autosomal dominant polycystic kidney disease – see Rare Diseases section).

 

 

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Aubagio® (teriflunomide) is currently marketed for the treatment of relapsing forms of multiple sclerosis and relapsing remitting multiple sclerosis. Teriflunomide is being evaluated in a Phase III study to assess safety and efficacy in pediatric patients with relapsing forms of multiple sclerosis.

Lemtrada® (alemtuzumab) is currently marketed for the treatment of relapsing forms of multiple sclerosis. Alemtuzumab is being evaluated in a Phase III study to assess safety and efficacy in pediatric patients with the relapsing remitting form of multiple sclerosis.

SAR422459 is a gene therapy product which uses a lentivector gene delivery technology to introduce a functional ABCR gene into 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 IIa.

Products removed from the portfolio in 2018

SAR228810, an anti-protofibrillar Abeta monoclonal antibody, completed a Phase I study in mild cognitive impairment due to Alzheimer’s Disease (AD) and in mild AD. The project has been discontinued.

UshStat® (SAR421869), a gene therapy product which uses a lentivector gene delivery technology to introduce a functional MYO7A gene into 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. The product, in Phase I/IIa, will be discontinued contingent upon identification of out-licensing partner.

e) Rare Diseases

Main products in Phase III and in the registration phase

Avalglucosidase alfa (GZ402666 Neo GAA) is a second generation enzyme replacement therapy targeting the treatment of Pompe disease. The Phase III program was launched in November 2016, with the COMET study targeting treatment naïve late onset Pompe disease patients. The Phase IIb/III mini-COMET study started in 2017, targeting treatment experienced infantile onset Pompe disease patients.

GZ402665 (rhASM) olipudase alfa is an enzyme replacement therapy targeting the treatment of non-neurological manifestations of acid sphingomyelinase deficiency (ASMD), also known as Niemann-Pick B disease. Both the open label pivotal Phase I/II trial in the pediatric population and the Phase II/III trial in the adult population have successfully completed enrollment for the target number of patients. Data from the pediatric and adult patients will be assessed one year after enrollment to support registration.

Cerdelga® (eliglustat) is already marketed as a first line oral therapy for Gaucher disease Type 1. It is also currently in Phase III for the treatment of Gaucher disease Type I in pediatric patients.

Main products in early stage

Venglustat (GZ402671 GCS inhibitor) is in development in Fabry disease, Gaucher disease type 3 (GD3) and Autosomal Dominant Polycystic Kidney Disease (ADPKD). The extension study of the Phase II trial for the treatment of Fabry disease to understand the long term effects of venglustat therapy in Fabry patients is completed. A Phase II study in Gaucher disease type 3 (LEAP) is ongoing; the first enrolled patient is about to reach two-year treatment and preliminary results have shown pharmacokinetic evidence that venglustat crosses the blood–CSF barrier. A Phase III pivotal study (STAGED-PKD) in rapidly progressive Autosomal Dominant Polycystic Kidney Disease (ADPKD) patients was initiated in 2018.

SAR339375, an anti-miR21 RNA is being developed in collaboration with Regulus. It is in Phase II for the treatment of Alport syndrome.

f) Rare Blood Disorders

Main products in Phase III and in the registration phase

Sutimlimab (formerly BIVV009/TNT009) is a monoclonal antibody targeting C1. It is a product candidate intended to selectively inhibit the classical complement pathway of the immune system. The Phase III program includes two parallel Phase III trials which are evaluating the efficacy and safety of Sutimlimab in adult patients with primary Cold Agglutinin Disease (CAD/CAgD). Sutimlimab was awarded Breakthrough Therapy Designation by the US Food and Drug Administration in 2018. Sutimlimab is also currently enrolling an open-label Phase Ib trial to evaluate the safety and tolerability of multi-dose in adult patients with Idiopathic Thrombocytopenic Purpura (ITP).

Fitusiran (SAR439774 ALN-AT3) is a program in collaboration with Alnylam for the development of a siRNA therapeutic agent to treat hemophilia (A and B). It uses a novel approach targeting antithrombin (AT), with AT knockdown leading to increase in thrombin generation. The Phase III program (ATLAS) started in 2018.

Main products in early stage

BIVV001 (rFVIIIFc-VWF-XTEN) is an investigational von Willebrand factor (VWF)-independent factor VIII therapy for people with hemophilia A designed to potentially extend protection from bleeds with prophylactic dosing of once weekly or longer. Bioverativ recently dosed the last patient in EXTEN-A, a Phase I/IIa study to evaluate the safety and pharmacokinetic (PK) of BIVV001 in both a 25 IU/kg dose and 65 IU/kg dose cohort of subjects aged 18-65 years with severe hemophilia A. A Phase I repeat dose study to inform the selection of the Phase III dose and regimen started in October 2018.

 

 

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Sangamo Collaboration (BIVV003, ST-400) Bioverativ and Sangamo Therapeutics are working in collaboration to research, develop and commercialize treatments for sickle cell disease and beta thalassemia, two inherited blood disorders that result from the abnormal structure or underproduction of hemoglobin. The collaboration combines the extensive expertise of Sangamo in developing their genome editing technology with Bioverativ’s deep understanding of hematology. The collaboration is focused on the goal of providing a single, lasting treatment for both sickle cell disease and beta thalassemia. Currently, Bioverativ is responsible for execution of the sickle cell disease Phase I/II program, BIVV003, while Sangamo is responsible for the beta thalassemia Phase I/II program, ST-400. Both programs are entering the recruiting phase of these first-in-human trials.

B.5.2. Vaccines

The Vaccines R&D portfolio includes 11 vaccines and antibodies currently in advanced development, as shown in the table below. The portfolio is well balanced, with five vaccine products for novel targets and six vaccines which are enhancements of existing vaccine products.

In 2018, we obtained regulatory approval in the US for Vaxelis®, a pediatric hexavalent combination vaccine protecting against diphtheria, tetanus, pertussis, polio, Hemophilus influenza b and hepatitis B. In the EU, Vaxigrip Tetra® has been extended to childen aged 6 to 35 months. The Pneumoconjugate vaccine entered our Phase I portfolio in late 2018 and we announced in July 2018 that we had decided to discontinue clinical development of our experimental tuberculosis vaccine.

 

 

Phase I

  

Phase II

  

Phase III

  

Registration

Respiratory Syncytial Virus (RSV) vaccine

Prevention of RSV infections in infants aged 4 months and older

  

Human Immunodeficiency Virus (HIV) vaccine(a)

Prevention of HIV infections in at-risk adults

  

Fluzone® QIV HD

Quadrivalent inactivated
influenza vaccine – High dose

    

Herpes Simplex Virus (HSV) vaccine(a)

HSV-2 therapeutic vaccine

  

SP0232 mAb(a)

Passive prevention of respiratory syncytial virus infections for all infants

  

MenQuadTT (ACYW)

Advanced generation
meningococcal ACYW
conjugate vaccine

    

Pneumoconjugate Vaccine (PCV)(a)

Prophylactic vaccine against pneumococcal pneumonia

  

VerorabVax® (VRVg)

Purified vero rabies vaccine

  

Pediatric pentavalent
vaccine(a)

DTP-Polio-Hib(b)

Japan

    
    

SP0173

Tdap(b) booster vaccine

US, for persons aged over 64

  

Shan6

DTP-HepB-Polio-Hib(b) Pediatric hexavalent vaccine

    

 

  (a)

Partnered and/or in collaboration: Sanofi may have limited or shared rights to some of these products.

 

  (b)

D=Diphtheria, T=Tetanus, P=Pertussis, Hib=Hemophilus influenzae b, HepB=Hepatitis B, ap=acellular pertussis.

 

Enhancements of existing vaccines

Fluzone® QIV HD is a higher dose quadrivalent influenza vaccine for the elderly (aged 65 years and older), who do not respond as well to standard dose influenza vaccines due to aging of the immune system (immunosenescence). A Phase III study has demonstrated non-inferior immunogenicity and comparable safety to the licensed trivalent Fluzone® High-Dose vaccine, which has shown greater protection versus standard dose.

Pediatric pentavalent vaccine for the Japanese market: Sanofi Pasteur, in partnership with Kitasato and Daiichi Sankyo (KDSV), is developing a pediatric pentavalent vaccine (primary series and booster vaccine) for the Japanese market. The vaccine includes diphtheria, tetanus and acellular pertussis (DTaP) from KDSV, and inactivated polio (IPV) and Hib from Sanofi Pasteur.

Shan6 is a cost-effective, all-in-one liquid hexavalent combination vaccine being developed for the Indian market and other low and middle income countries (WHO pre-qualification). It comprises a detoxified whole-cell pertussis component as well as diphtheria toxoid, tetanus toxoid, Hemophilus influenza type b PRP-T,

inactivated poliovirus types 1, 2, and 3 and hepatitis B virus components.

SP0173: The current Adacel® (Tdap booster vaccine containing tetanus toxoid, diphtheria toxoid, and 5-component acellular pertussis) is not indicated in the US for persons aged over 64. This development is specifically designed to bridge this indication gap.

MenQuadTT: Sanofi Pasteur’s Men ACYW-TT vaccine candidate is our latest advance in meningococcal quadrivalent conjugate vaccination, designed to help protect an expanded patient group including infants and adolescents through older adults. Phase II and initial Phase III trials have been performed in the US and the EU. Additional Phase III trials are ongoing in the EU, Asia and Latin America. The safety and immunogenicity profiles of the vaccine candidate are encouraging.

VerorabVax® (VRVg) is a next-generation purified human rabies vaccine under development, aimed at replacing both of Sanofi Pasteur’s currently commercialized rabies vaccines (Imovax® Rabies and Verorab®). It will be cultured on Vero cells without animal or human material.

 

 

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New vaccine targets

SP0232 mAb: In March 2017 Sanofi Pasteur announced an agreement with MedImmune/AstraZeneca to develop and commercialize a monoclonal antibody (SP0232, also known as MEDI8897) which has been engineered to have a long half-life, so that only one dose would be needed for the entire RSV season to provide passive immunity and prevent RSV infection in all infants for their first RSV season (and in high-risk infants for their first and second RSV seasons). Positive primary analysis of the Phase IIb trial has demonstrated the safety and efficacy of SP0232. The product received fast-track designation from the FDA in 2015 and is currently under review for EMA PRIME priority medicines designation and for FDA Breakthrough Therapy designation.

Respiratory Syncytial Virus (RSV) infant vaccine: Sanofi Pasteur has a Cooperative Research and Development Agreement (CRADA) with the US National Institutes of Health (NIH) to develop a live attenuated RSV vaccine for immunization in infants aged 4 months and older. The lead candidate(s) are currently under Phase I evaluation in healthy infants without previous RSV exposure.

Pneumoconjugate Vaccine (PCV): Sanofi Pasteur is developing with SK chemicals (South Korea) a pneumococcal conjugate vaccine with broader coverage. This vaccine entered Phase I in December 2018.

Herpes Simplex Virus (HSV) type 2 is a member of the herpes virus family and as such establishes life-long infections – mainly genital herpes – with latent virus established in neural ganglia. Although antivirals currently exist to treat these infections, no vaccine exists. Our vaccine candidate is a live attenuated virus and is being assessed as a therapeutic vaccine to reduce recurrence and transmission. It is currently in Phase I. In 2014, Sanofi Pasteur signed a contract with Immune Design Corp. to

collaborate on the development of this therapeutic herpes simplex virus vaccine candidate by exploring the potential of various combinations of agents.

Human Immunodeficiency Virus (HIV): Sanofi Pasteur is working in a “pox-protein public-private partnership” (P5) to document efficacy of a pox-protein based HIV prophylactic vaccine regimen in South Africa. Specifically, following the modest success of RV144 (the first trial to show supporting evidence that a vaccine could lower the risk of HIV acquisition, the P5 partnership adopted a pox-protein based vaccine regimen to potentially provide greater protection. This is currently being tested in a Phase IIb study in South Africa.

B.5.3. R&D expenditures for late stage development

Expenditures on research and development amounted to 5,894 million in 2018, comprising 4,572 million in the Pharmaceuticals segment; 143 million in the Consumer Healthcare segment; 555 million in the Vaccines segment; and 624 million allocated to “Other”, representing the R&D support function. Research and development expenditures were the equivalent of about 17,1% of net sales in 2018, compared to about 15.6% in 2017 and about 15.3% in 2016. The increase in R&D expenditures as a percentage of sales in 2018 is mainly due to a greater proportion of products being in late stage development. It is also due to the integration of Ablynx and Bioverativ in 2018. Preclinical research in the Pharmaceuticals segment amounted to 983 million in 2018, compared to 1,086 million in 2017 and 1,077 million in 2016. Of the remaining 3,589 million relating to clinical development in the Pharmaceuticals segment (2,969 million in 2017 and 3,124 million in 2016), the largest portion was generated by Phase III or post-marketing studies, reflecting the cost of monitoring large scale clinical trials.

 

 

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Compound   Entry into Phase III(a)   Compound Patent Term(b)   Comments
     (month/year)   US   EU   Japan     

SAR341402

insulin aspart

  August 2017   N/A   N/A   N/A  

Phase III program ongoing in type 1 and 2 diabetes.

sotagliflozin (SAR439954)   November 2015   2028   2027   2027  

NDA filed in Type 1 diabetes. Phase III program ongoing in Type 2 diabetes and in worsening heart failure.

efpeglenatide (SAR439977)   December 2017   2028   2028   2028  

Phase III program ongoing in Type 2 diabetes.

dupilumab Dupixent® (SAR231893)   October 2014   2027   2029   2029  

Dossier approved in atopic dermatitis (AD) in adults, and in asthma for adults and children over 12 years old. Dossier filed in AD in adolescents (12-17 years old). Phase III program ongoing in AD (children: 6 months-11 years old) and in asthma (children: 6–11 years old). Phase III program ongoing in nasal polyposis and eosinophilic esophagitis. Phase II program ongoing in grass immunotherapy and peanut allergy.

sarilumab Kevzara® (SAR153191)   August 2011   2028(c)   2027   2027  

Dossier approved in rheumatoid arthritis. Phase III program ongoing in giant cell arteritis and polymyalgia rheumatica. Phase II program ongoing in systemic juvenile arthritis and polyarticular juvenile idiopathic arthritis.

avalglucosidase alfa (GZ402666)   November 2016   2030   2028   2028  

Phase III program ongoing in Pompe disease.

Venglustat (GZ402671)   February 2019   2032   2032   2032  

Phase III study in autosomal dominant polycystic kidney disease (ADPKD) initiated. Phase II program ongoing in Fabry disease, Gaucher disease Type 3 and Gaucher related Parkinson’s disease.

fitusiran (SAR439774)   March 2018   2033   2033   2033  

Phase III program ongoing for the treatment of hemophilia A&B.

sutimlimab (BIVV009)   March 2018   2033   2033   2033  

Phase III program ongoing in Cold Agglutinin Disease.

isatuximab (SAR650984)   December 2016   2028   2027   2027  

Phase Ill program ongoing in relapsing refractory multiple myeloma (RRMM) and in newly diagnosed multiple myeloma. Phase II program ongoing in combination with atezolizumab in advanced malignancies and solid tumors and in combination with cemiplimab in RRMM, advanced malignancies and lymphoma.

cemiplimab (SAR439684)   May 2017   2035   2035   2035  

Dossier approved for the treatment of advanced cutaneous squamous cell carcinoma. Phase III program ongoing in 1L non-small cell lung cancer (monotherapy and combination) and 2L cervical cancer. Registration Phase II study ongoing in advanced basal cell carcinoma.

 

  (a)

First patient included in Phase III in any indication.

 

  (b)

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

 

  (c)

With Patent Term Adjustment.

 

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 US, the EU, 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 may provide more

 

 

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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 EU 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 2018, 2017, and 2016 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 are based on consolidated national pharmaceutical sales data (excluding vaccines), in constant euros, on a September 2018 MAT (Moving Annual Total) basis. The data are mainly from IQVIA local sales audit supplemented by various other country-specific sources including Knobloch (Mexico), GERS (France) and HMR (Portugal). For more information on market shares and rankings see “Presentation of Financial and Other Information” at the beginning of this Annual Report on Form 20-F.

B.6.1. Marketing and distribution

We have a commercial presence in approximately 100 countries, and our products are available in more than 170 countries. Sanofi is the sixth largest pharmaceutical company globally by sales. Our main markets in terms of net sales are respectively:

 

 

Emerging Markets (see definition in “– Information on the Company – Introduction” above): Sanofi is the leading healthcare company in emerging markets, and the fifth largest pharmaceutical company in China.

 

 

The US: we rank twelfth with a market share of 3.4%.

 

 

Europe: we are the third largest pharmaceutical company in France where our market share is 6.4% and we rank third in Germany with a 4.5% market share.

 

 

Other countries: our market share in Japan is 1.7%.

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, 2018 Compared with Year Ended December 31, 2017.”

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. Our Consumer Healthcare products are

also sold and distributed through e-commerce, which is a growing trend in consumer behavior. 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.

We use a range of channels from in-person to digital to disseminate information about and promote our products among healthcare professionals, ensuring that the channels not only cover our latest therapeutic advances but also our established prescription products, which satisfy patient needs in some therapy areas. We regularly 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.

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.

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.”

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 at Item 18 of this annual report.

 

 

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

In our Consumer Healthcare business, key competitors include Johnson & Johnson, Pfizer, GlaxoSmithKline, Bayer and Reckitt Benckiser as well as local players, especially in emerging markets.

Our generics business competes with multinational corporations such as Teva, Sandoz (a division of Novartis), Mylan and local players, especially in emerging markets.

In our Vaccines business we are one of the top four players, competing primarily with large multinational players including Merck, GlaxoSmithKline, and Pfizer.

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, those 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, even in cases where the owner of the original product has already 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, such launches may also significantly impair the profitability of the pharmaceutical company whose product is challenged.

Drug manufacturers also face competition through parallel trading, also known as reimportation. This takes place when drugs sold abroad under the same brand name as in a domestic market are imported into that domestic market by parallel traders, who may repackage or resize the original product or sell it through alternative channels such as mail order or the internet.

This situation is of particular relevance to the EU, where such 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 falsified drugs. The WHO estimates that falsified products account for 10% of the market worldwide, rising to 30% in some countries. All therapeutic areas are affected, also including vaccines. However, in markets where powerful regulatory controls are in place, falsified 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 and product withdrawals, and to impose 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.

The International Council for Harmonization (ICH) continues to implement its reform mandate.

The aims are to reinforce the foundations of the ICH; expand harmonization globally beyond the traditional ICH members, i.e. the three founding members (EU, Japan, US) plus Canada and Switzerland as standing members; and facilitate the involvement of additional regulators and industry associations around the world. Since the reform started much progress has been made. There are now 10 regulatory agencies (Brazil, China, Chinese Taipei, Singapore and South Korea in addition to the three

 

 

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founding members and the two standing members) and 28 ICH organizations (including 13 regulatory authorities from around the world) with observer status.

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, as well as regular interactions between the US and the EU in the form of “clusters” (pediatrics, oncology, advanced therapy medicinal products, vaccines, pharmacogenomics, orphan drugs, biosimilars, and blood products). In 2017 the United States and the EU completed an exchange of letters to amend the Pharmaceutical Annex to the 1998 US-EU Mutual Recognition Agreement. Under this agreement, US and EU regulators will be able to utilize each other’s good manufacturing practice for inspections of pharmaceutical manufacturing facilities.

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 requirements of many countries (including Japan and several EU Member States) to negotiate selling prices or reimbursement rates for pharmaceutical products with government regulators significantly extend the time to market entry beyond the initial marketing approval. While marketing authorizations for new pharmaceutical products in the EU have been largely centralized within the European Commission in collaboration with the EMA, pricing and reimbursement remain a matter of national competence.

In the EU, there are three main procedures for applying 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 EU marketing authorization. Such a marketing authorization is valid throughout the EU and the drug may be marketed within all EU Member States.

 

 

If a company is seeking a national marketing authorization in more than one Member State, two procedures are available to facilitate the granting of harmonized national authorizations across member states: the mutual recognition procedure or the decentralized procedure. Both 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 EU Member State or for line extensions to existing national product licenses.

In the EU, vaccines are treated as pharmaceutical products, and therefore have to obtain marketing authorization under the same procedures and conditions for registration described above.

On April 26, 2018, the European Commission published its Proposal for a Council Recommendation on “strengthened cooperation against vaccine-preventable diseases in Europe” and a Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Recommendation was adopted by the EU Council on December 7, 2018. The text sets recommendations for action by national governments and the EU to address major vaccination challenges such as vaccination hesitancy, low vaccine uptake and supply issues. Suggested actions include the setting up of a coalition of healthcare professionals for vaccination, an EU vaccination information portal and an EU vaccination card.

The European Trade Association, Vaccines Europe and Sanofi have been working for the past year in support of the adoption of this recommendation as it will be a key lever to increase vaccination coverage rates across Europe.

In parallel, the European Parliament adopted the “Resolution on vaccine hesitancy and the drop in vaccination rates in Europe” on April 19, 2018; and the European Joint Action on vaccination, co-funded by the Health Programme, was launched on September 4, 2018. It will address vaccine hesitancy and seek to increase vaccination coverage in the EU. It is coordinated by INSERM (France) and involves 23 countries (including 20 EU countries). It will also work towards strengthening cooperation of national immunization advisory groups (NITAGs) with a view to increasing transparency and trust in the decision-making process regarding the introduction of new vaccines, and on finding options to better anticipate vaccine demand and secure sustainability of vaccine supply across Europe.

Vaccines industry representatives, via Vaccines Europe (including Sanofi), are involved in Work Packages in areas where industry can contribute such as Research, Development and supply. The European Commission is reinforcing its support for national vaccination efforts to increase coverage, including through the recent publication of three reports: “State of vaccine confidence in the EU 2018”, “Organisation and delivery of vaccination services in the European Union” and “Vaccination programmes and health systems in the EU”.

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 EU. 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

 

 

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applications can be filed and approved in the EU only after the originator product’s 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. In the case of orphan drugs, generic product applications may not be filed before the expiry of a 10- or 12-year period from the date of approval of the originator product.

Another relevant aspect in the EU regulatory framework is the “sunset clause” under which any marketing authorization ceases to be valid if it is not followed by marketing within three years, or if marketing is interrupted for a period of three consecutive years.

In 2018, the EMA recommended 84 medicines for marketing authorization (versus 92 in 2017), including 42 new active substances (versus 35 in 2017).

Among the 84 medicines recommended, 21 (25%) had an orphan designation (versus 19 in 2017 and 17 in 2016), providing medicines for patients with rare diseases. Four medicines were evaluated under accelerated assessment in 2018 (versus seven in both 2016 and 2017); this mechanism is reserved for medicines that have the potential to address unmet medical needs. One medicine was recommended for a conditional marketing authorization; this is one of the EMA’s early access routes to patients, and is intended for medicines that address an unmet medical need and that target seriously debilitating, life-threatening or 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. EU pharmaceutical legislation for medicinal products describes the respective obligations of the marketing authorization holder (MAH) 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 EU Member States in which the marketing authorizations are held. In accordance with applicable legislation, each EU 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 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.

Pharmacovigilance legislation in Europe was amended to strengthen the protection of patient health by promoting prompt and appropriate regulatory action on European medicines.

The measures included the creation of the Pharmacovigilance Risk Assessment Committee (PRAC), a scientific advisory committee at EMA level with a key role in the assessment of all

aspects of risk management relating to the use of medicinal products for human use approved in the European Economic Area (EEA). The PRAC performs reviews of marketed products (by class or on ad hoc basis) through various procedures. For Sanofi, 209 products underwent PRAC review through signal and referral procedures from July 2012 to December 2018, generating 136 safety labeling variations (24 new variations in 2018) and 7 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 EU market.

On November 22, 2017, as part of the ongoing implementation of EU legislation, the EMA launched a new and improved version of EudraVigilance (the system for managing and analyzing information on suspected adverse reactions to medicines which have been authorized or are being studied in clinical trials within the EEA), with enhanced functionalities to support the fulfilment of pharmacovigilance obligations. Alongside the launch, it became mandatory for national Competent Authorities and MAHs to use simplified electronic reporting to notify EudraVigilance of suspected adverse reactions related to medicines. The EMA and the European Commission have agreed transitional arrangements to streamline the monitoring of EudraVigilance by MAHs. A pilot period started on February 22, 2018 in which MAHs of the active substances included in a dedicated list have to monitor them in EudraVigilance and inform EMA and national competent authorities of validated signals with their medicines. The pilot was initially planned for one year but has been extended until further notice. The EMA will finalize a report at the end of 2019 on the experience of signal monitoring in EudraVigilance since February 2018.

The European database of medicinal products aims to deliver structured and quality assured information on medicinal products authorized in the EU that incorporates the terminology adopted in the EU for products, substances, and organizations underpinning pharmacovigilance and regulatory systems. Since January 1, 2015, MAHs have been required to notify the EMA of any new marketing authorizations and any change in the terms of a marketing authorization. Since July 2018, the EMA has made this list publicly available.

Public hearings are a new tool allowing the EMA to engage with EU citizens in the supervision of medicines and listen to their views and experiences. Public hearings are expected to give EU citizens a voice in the evaluation of the safety of medicines and empower them to express their views on issues related to the safety of certain medicines and the management of risks. Public hearings were held on valproate and related substances in 2017 (with Sanofi participation), and on quinolone and fluoroquinolone antibiotics in 2018.

In the US, 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 US. To commercialize a product in the US, a new drug application (NDA) under the Food, Drug and Cosmetic (FD&C) Act, or a Biological License Application (BLA) under the Public Health Service (PHS) Act, must be submitted to

 

 

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the FDA 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 stipulate post-approval commitments and requirements. Approval for a new indication of a previously approved product requires submission of a supplemental NDA (sNDA) for a drug or a supplemental BLA (sBLA) for a biological product.

Sponsors wishing to market a generic drug can file an Abbreviated NDA (ANDA) under 505(j) of the FD&C Act. These applications are “abbreviated” because they are generally not required to include data to establish safety and effectiveness, but need only demonstrate that their product is bioequivalent (i.e. performs in humans in the same manner as the originator’s product). Consequently, the length of time and cost required for development of generics can be considerably less than for the innovator’s drug. The ANDA pathway in the US can only be used for generics of drugs approved under the FD&C Act.

The FD&C Act provides another abbreviated option for NDA approved products, which is a hybrid between an NDA and ANDA called the 505(b)(2) pathway. This 505(b)(2) pathway enables a sponsor to rely on the FDA’s findings that the reference product is safe and effective, based on the innovator’s preclinical and clinical data.

The FDA Center for Drug Evaluation and Research (CDER) approved 59 novel drugs in 2018 (versus 46 in 2017, 22 in 2016, 45 in 2015, 41 in 2014, and 27 in 2013). Designations and pathways to expedite drug development and review include Fast Track (24/59 = 41%), Breakthrough Therapy (14/59 = 24%), Accelerated approval (4/59 = 7%), and Priority Review (43/59 = 73%). Of the 59 novel drugs approved in 2018, 73% were designated in one or more expedited categories. No new vaccines were approved by the FDA in 2018, although three products (Gardasil 9, Afluira, and Fluarix Quadravalent) had their licenses expanded.

CDER identified 19 of the 59 novel drugs approved in 2018 as First-in-Class (32%) (as compared to 33% in 2017), one indicator of the innovative nature of a drug. Approximately 58% of the novel drugs approved in 2018 were approved to treat rare or “orphan” diseases that affect 200,000 or fewer Americans.

In Japan, the 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 obtain data to determine the appropriateness of the dosages for Japanese patients. The Japanese Ministry of Health, Labor and Welfare (J-MHLW) has introduced a new National Health Insurance (NHI) pricing system. 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. Once an official request for development of an unapproved drug or off-label indication has been made, pharmaceutical companies must file literature-based reports within six months or submit a clinical trial notification for registration within one year after the official development request. For unapproved drugs with high medical needs, clinical trials in Japanese patients are generally required.

To promote the development of innovative drugs and bring them into early practical use in Japan ahead of the world, the Sakigake (a Japanese term meaning “forerunner”) review designation program was introduced in April 2015. The Pharmaceuticals and Medical Devices Agency (PMDA) reviews designated products on a priority basis with the aim of reducing their review time from the normal 12 months to six months. Based on the NHI price system, the “Premium” classification is restricted to new products from companies which conduct R&D on “pharmaceuticals truly conducive to the improvement of healthcare quality,” i.e. (i) pediatric/orphan drugs and (ii) drugs to treat diseases that cannot be adequately controlled with existing drugs. From 2021, all prescription product prices will be reviewed annually instead of once every two years, but price cuts will actually be conducted only for a limited number of products with big gaps between their official reimbursement prices and market prices (e.g. generic drugs and long-listed original products). On the other hand, prices of products that are rapidly adopted after approvals for new indications may from 2017 be reviewed four times a year.

The PMDA has set a target for 80% (as opposed to the current 50%) of all applications to be reviewed in 12 months for products with standard review status, and in nine months for products with priority review status, by the end of 2018.

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

The Pharmaceuticals and Medical Devices Act (PMDA) 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 Medicinal Products” (ATMPs) in the EU. The law allows for 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.

 

 

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For new drugs and biosimilar products with approval applications submitted in or after April 2013, Japan has implemented an RMP (Risk Management Plan), similar to the EU Pharmacogivilance system.

For generic products, the data necessary for filing are similar to EU and US requirements. Companies only need to submit quality data, and data demonstrating bioequivalence to the originator product, unless the drug is administered intravenously. Clinical Trial Data (CTD) submission for generics has been mandatory since March 2017.

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 (such as 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. Consequently 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 EU, the 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 Low Molecular Weight Heparin (LMWH) and of insulins. Starting in 2011 and continuing through 2018, the CHMP has been engaged in revising most of the existing biosimilar guidelines (general overarching guidelines, quality, and non-clinical and clinical product-specific guidelines).

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, it has also indicated that in specific circumstances, a confirmatory clinical trial may not be necessary. This applies if 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 currently takes the view that it is at present unlikely that these products can be characterized at the molecular level, and that each vaccine product must be evaluated on a case-by-case basis.

In February 2017, the EMA launched a tailored scientific advice pilot project to support step-by-step development of new biosimilars, based on a review of the quality, analytical and functional data already available. This pilot will encompass six scientific advice requests. The EMA will analyze the outcome after completing the pilot.

In 2017, the EMA and the European Commission published an information guide for healthcare professionals to provide them with reference information on the science and regulation underpinning the use of biosimilar medicines.

In 2018, the EMA gave positive opinions to 19 biosimilars.

In the US, the Patient Protection and Affordable Care Act (Affordable Care Act), signed into law in March 2010, amended 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.

In 2018, the FDA finalized the biosimilar guidance Labeling for Biosimilar Products (first issued in draft in 2016), issued the draft guidance Formal Meetings Between the FDA and Sponsors or Applicants of BsUFA Products and withdrew the 2017 draft guidance Statistical Approaches to Evaluate Analytical Similarity. Another draft guidance published in 2017, Considerations in Demonstrating Interchangeability with a Reference Product, still remains in draft. In December 2018, the FDA also finalized the guidance Questions and Answers on Biosimilar Development and the BPCi Act Guidance for Industry and released the draft guidance New and Revised Draft Q&As on Biosimilar Development and the BPCi Act (Revision2).

The FDA also published a Biosimilars Action Plan: Balancing Innovation and Competition in July 2018, and held a hearing on the Plan in September. The 11-part Action Plan is intended to spur uptake and acceptance of biosimilars in the marketplace by streamlining regulatory review and attempting to address anticompetitive business practices around biosimilar sales. As of the date of this annual report 17 biosimilar products have been approved by the FDA, seven of which were approved in 2018. To date no biosimilar products have been deemed interchangeable.

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, clinical and 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 Regenerative medicine

The US Center for Biologics Evaluation and Research (CBER) released a suite of 6 draft gene therapy guidances in 2018, addressing three general topics (Chemistry Manufacturing and Controls, Long Term Follow-Up After Administration of Human Gene Therapy Products, Testing of Retroviral Vector-Based Human Gene Therapies) and three more disease-specific topics

 

 

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(Human Gene Therapy for Hemophilia, Human Gene Therapy for Rare Diseases, Human Gene Therapy for Retinal Disorders). These guidance documents compliment an existing comprehensive policy framework to address how the agency plans to support and expedite the development of regenerative medicine products, including human cells, tissues, and cellular and tissue-based products (HCT/Ps), which already included guidance on determining whether HCT/Ps are subject to the FDA’s premarket review requirements (Regulatory Considerations for Human Cell, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use) and whether an establishment may qualify for an exception from the requirements under Part 1271 of the Code of Federal Regulations (CFR) Title 21 by meeting the exception in 21 CFR 1271.15(b) (Same Surgical Procedure Exception: Questions and Answers Regarding the Scope of the Exception).

The FDA has continued to move forward with the Regenerative Medicine Advanced Therapy (RMAT) designation program, first established in section 3033 of the 21st Century Cures Act. This program aims to facilitate an efficient development program, expedite review of innovative regenerative medicine therapies, and provide more timely access to potentially life-saving products. Products granted the RMAT designation are eligible for increased early interactions with the FDA, including all the benefits available to breakthrough therapies. As of December 28, 2018, the FDA had granted 24 RMAT designations, as compared with 10 in 2017. Two guidances issued in late 2017 related to the RMAT pathway were finalized in February 2019: Expedited programs for Regenerative Medicine Therapies for Serious Conditions and Evaluation of Devices Used with Regenerative Medicine Advanced Therapies.

Novel regenerative medicine therapies approved by the CBER in 2017 included the first three gene therapies: Novartis AG’s chimeric antigen receptor T-cell (CAR-T) therapy Kymriah (tisagenlecleucel) followed by Kite Pharma Inc.’s CAR-T therapy Yescarta (axicabtagene ciloleucel), both for oncology indications, and Spark Therapeutics Inc.’s Luxturna (voretigene neparvovec-rzyl) for inherited vision loss.

B.6.3.4. Generics

In the EU only 11 positive opinions were issued under the centralized procedure for generics in 2017 (versus 20 in 2017 and 16 in 2016). Most of the generics applications for chemical entities use the mutual recognition and decentralized procedures. Pricing systems for generics remain at national level in the EU.

In the US, to help the FDA ensure that participants in the US generic drug system comply with US 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. The FDA has made review and approval of generics a priority for the Agency, releasing 23 (mostly product-specific) guidance documents between November 1, 2018 and December 28, 2018, and promising to release an umbrella guidance to help address common challenging regulatory and

scientific issues encountered while developing generic drugs. In the period October 1, 2017 through September 30, 2018 (the FDA’s fiscal year), the FDA planned to review and act on 90% of original ANDA submissions within 10 months from the date of submission. During that period, a record number of 781 ANDAs were approved (as compared to 763 in 2017), 190 received tentative approval (174 in 2017), and 2,648 complete responses were issued (1,603 in 2017).

In Japan, the 2018 reforms to the NHI price system included a new special price reduction rule for long-listed drugs. Prices for long-listed drugs (10 years after generic entry) will be gradually brought closer to the generic price (starting at 2.5x generic price 10 years after generic entry). Prices will be reduced based on the generic substitution rate. Reductions are 2.0% if the substitution rate is less than 40%, 1.75% if the rate is 40% or higher but less than 60%, and 1.5% if it is 60% or higher but less than 80%.

NHI prices of first generics (previously set at 60%) were set at 50% of the price of the originator product. A 40% rule is applied to oral first generics once more than ten products with the same ingredients have obtained listing.

In addition, Sakigake premium of 10% was 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.6.3.5. Medical devices

In the EU, there is no pre-market authorization by a regulatory authority. Instead there is a Conformity Assessment Procedure (for medium and high risk devices), possibly involving an independent third party “Notified Body” (NB) depending on the classification of the device. Once certified, medical devices have to bear the CE-mark, allowing them to circulate freely in the EU/EFTA (European Free Trade Association) countries and Turkey.

To align legal requirements across the EU Member States and to strengthen the protection of public health, two new Regulations came into force in 2017 replacing older EU Directives.

 

 

Regulation (EU) 2017/745 of the European Parliament and of the Council of April 5, 2017 on medical devices came into force on May 26, 2017 with a transition period of three years.

 

 

Regulation (EU) 2017/746 of the European Parliament and of the Council of April 5, 2017 on in vitro diagnostic medical devices came into force on May 26, 2017 with a transition period of five years.

In the US, the FDA Center for Devices and Radiological Health (CDRH) is responsible for regulating firms that manufacture, repackage, relabel and/or import medical devices sold in the US. The CDRH also 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 based on their risks and the regulatory controls necessary to provide reasonable assurance of safety and effectiveness. Regulatory control increases from Class I to Class III. The device classification regulation defines the regulatory requirements for a

 

 

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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. Low and moderate risk devices (Classes I and II) can also be classified through the de novo pathway if certain conditions are met.

The basic regulatory requirements that manufacturers of medical devices distributed in the US 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. In 2017 the FDA initiated a Software Precertification Program and Pilot. The purpose of the pilot is to test the initial program and model, and for the FDA to learn how companies of varying sizes develop software. As part of the process the FDA hosted a public workshop in January 2018 to gather feedback. The Precertification Program consists of four components: Excellence Appraisal; Review Determination; Streamlined Review; and Real World Performance.

B.6.3.6. OTC drugs

In the EU, four European centralized prescription to OTC (Rx-to-OTC) switches have occurred since 2009. For nationally authorized products, switches follow national rules for OTC classification. In 2017, a European platform for non-prescription medicines was launched to harmonize non-prescription status and to facilitate the switching environment.

In the US, the FDA approved no prescription to OTC switches in 2018 and only one in 2017: Sanofi Consumer Healthcare’s Xyzal® Allergy 24HR (levocetirizine dihydrochloride).

In Japan, the J-MHLW drug safety committee set new rules 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 an initial three-year safety evaluation period. During this three-year evaluation period, drugs that moved from prescription to OTC are categorized as products that require pharmacist consultations when purchased. Under the new rules, the J-MHLW requires marketing authorization holders to submit interim reports upon completion of their post marketing surveillance (PMS).

The PMS needs to cover 3,000 patients for oral drugs and 1,000 patients for topical drugs. Based on these interim reports and other reports on adverse events, the J-MHLW performs the first evaluation on whether there are any safety concerns three years after the launch. If no safety concerns are identified during this three-year safety evaluation period, the classification of these Rx-to-OTC switches will be downgraded to Category 1 OTC drugs, i.e. drugs which do not require pharmacist consultation and can be sold online. The J-MHLW performs the second safety evaluation one year after the transfer to Category 1 OTC drugs. If

no safety concerns are identified, the classification of the Category 1 OTC drugs will be downgraded to Category 2 OTC drugs, i.e. drugs that can be handled by pharmacists but also by registered salespersons.

Generic OTC drugs can be filed after completion of the three-year PMS period and will be approved in seven months.

The J-MHLW launched a new panel in April 2016 to pick up Rx-to-OTC switch candidates. Under the new scheme, the MHLW accepts requests for Rx-to-OTC switch candidates from various stakeholders such as medical societies, consumers, and pharmaceutical companies, and then these requests are publicly reviewed by the new panel in order to minimize pressures from medical societies. Based on its deliberations, the panel refers shortlisted requests to the Pharmaceutical Affairs and Food Sanitation Council (PAFSC) committee on nonprescription drugs, which effectively makes decisions on marketing approval for OTCs.

B.6.3.7. Transparency and public access to documents

Transparency regarding regulatory information, clinical trials and associated regulatory decision-making

Over the last several years the pharmaceutical industry has been subject to growing pressure for greater transparency about clinical trials (conduct and results). Regulatory authorities are also being pressed for more openness and transparency, for example by making more comprehensive disclosures about the rationale and basis for 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, study information and results of clinical studies conducted 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 and Sanofi has processes in place to address these initiatives.

EU 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. EU 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.

 

 

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The EMA has committed to continuously extend 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 an EU-wide marketing authorization is complete.

In 2014, the EMA adopted Policy 70 for publication of clinical trial 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; to post-authorization procedures for existing centrally authorized medicinal products; and to article 58 applications (medicines that are intended exclusively for markets outside the EU).

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

The policy is being implemented in two phases:

 

 

The first phase came into force on January 1, 2015; it applies solely to the publication of clinical reports, the data from which are accessible on the EMA website.

 

 

In the 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. The EMA will implement this phase at a later stage.

In 2016, the EMA Policy 70 process was fully transitioned to the business operational teams within Sanofi.

As of August 1, 2018 the EMA suspended all new activities related to clinical data publication. This is a result of the implementation of the third phase of the EMA’s business continuity plan ahead of its relocation to the Netherlands in response to Brexit (see – “B.6.3.8. Other new legislation proposed or pending implementation – Brexit” below). The EMA is continuing to publish clinical data submitted on or before July 31, 2018, but no new data packages will be processed until further notice.

In the US, the FDA launched a Transparency Initiative in June 2009, with the aim of making the FDA more transparent and open to the American public by providing the public with useful, user-friendly information about agency activities and decision making.

The FDA Transparency Initiative has three phases: Phase I – Improving the understanding of 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 have been 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 US federal regulations.

In September 2016, the US Department of Health and Human Services, National Institute of Health (NIH) published Final

Rule under Section 801 of the Food and Drug Administration Amendments Act of 2007 (FDAAA) on the Dissemination of Clinical Trial Information. The Final Rule requires registration and results submission for applicable clinical trials (ACTs); clarifies and expands registration data elements; expands the scope of results reporting requirements to include trials of unapproved products; clarifies and expands elements of results data; and revises the Quality Control (QC) and posting process. This information is published on a government-run database of clinical trial information (ClinicalTrials.gov) intended to increase the transparency of ongoing clinical trials in humans. In September 2018, the FDA published a draft guidance, Civil Money Penalties Relating to the ClinicalTrials.gov Data Bank, delineating consequences for sponsors that fail to comply with the requirements on clinical trial registration, results posting, and certification.

Separately, in January 2018, the FDA launched a new pilot program to evaluate whether disclosing certain information included within clinical study reports (CSRs) of approved drugs is beneficial to the public. CSRs are scientific reports prepared by the sponsor to summarily address a drug’s efficacy and safety, and include information related to the methods and results of clinical trials supporting the drug. Traditionally, this information has only been released following submission of a Freedom of Information Act (FOIA) request. Under the pilot program, the Agency will continue to protect trade secrets and confidential commercial information from disclosure, as required by law.

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

Other transparency initiatives also exist in some other countries.

Transparency regarding Health Care Professionals

In the EU, there is no harmonized approach regarding transparency for Health Care Professionals (HCPs). 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 in some countries (such as the UK, Denmark, France and Portugal).

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

The 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.

 

 

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In the US, the Physician Payments Sunshine Act, or “Sunshine Act”, was passed as part of the Affordable Care Act. The law is designed to bring transparency to financial relationships between physicians, teaching hospitals, and the pharmaceutical industry. Manufacturers and group purchasing organizations (GPOs) must report certain payments or transfers of value – including payments for research, publication support, 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 or members of their immediate family 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 of 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: R&D, academic research support, manuscript/writing fees, provision of information, and other expenses.

B.6.3.8. Other new legislation proposed or pending implementation

In the US, in August 2017 the Food and Drug Reauthorization Act (FDARA) was signed into law. The law reauthorized user fee collection for the next five years for drugs (PDUFA VI), devices (MDUFA IV), generics (GDUFA II) and biosimilars (BsUFA II) and reflects a move to a more stable funded program. In addition to user fees, FDARA focuses on modifications and improvements of the regulation of drugs, devices and generics.

In China, since the initial programmatic regulatory reform initiative started in 2015, most of the country’s regulatory processes have been adapted to bring them into line with other major regulatory agencies. These include establishing predictable pathways and timelines (including conditional approvals); a Marketing Application Holder system (pilot); risk-based inspections; and clinical trial processes (including 60 working days IND approval) that allow companies developing innovative drugs to conduct clinical trials simultaneously with other countries (International Multicenter Clinical Trials). The National Medical Products Administration (NMPA), formerly the China Food and Drug Administration (CFDA), also has plans to establish a system for intellectual property protection. China became an ICH management committee member in June 2018, and this is driving the need for full ICH implementation in China. The Changchun Changsheng vaccine incident in August caused the Chinese government to focus attention on the quality of vaccines and forced the NMPA to pivot to regulatory enforcement-related reforms, as well as inviting comments on the draft amendment to the Drug Administration Law (DAL) and a new draft Vaccine Administration Law. Vaccines in China are registered in accordance with the relevant provisions for

Preventive Biological Products in the Drug Registration Regulations. The release of vaccines is managed in phase with batch releases by the National Institute; there is a system for compulsory inspection and audit of each batch of products. Any products that fail the test cannot be approved or imported. Under NMPA reforms implemented to encourage approval of innovative drugs, imported vaccines also benefited from accelerated registration.

Clinical trial regulation in the EU

The Clinical Trial Regulation ((EU) 536/2014) of the European Parliament and of the Council of April 16, 2014 on clinical trials on medicinal products for human use, and repealing Directive 2001/20/EC, was published in the Official Journal of the EU on May 28, 2014.

As a result, 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 streamlines the rules on clinical trials across Europe, facilitating cross-border cooperation to enable larger and more reliable trials, as well as trials of 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 trial regulation was to simplify the clinical trial approval process. The new legislation was drafted in the more stringent form of a regulation rather than as a directive, so as to achieve better harmonization between countries without interfering with Member States’ competencies in terms of ethical issues.

The major points are:

 

 

The timeline for approving a clinical trial proposal is set at 60 days without questions (and a maximum of 99 with questions and clock stops). 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. Selection of reference Member State by the sponsor was maintained.

 

 

As regards transparency requirements for clinical trial data submitted through a single EU 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). Although the Regulation was adopted and entered into force in 2014, the timing of its application depends on confirmation of full functionality of the EU portal and database through an

 

 

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independent audit. The Regulation becomes applicable six months after the European Commission publishes notice of this confirmation.

 

 

In October 2018, the EMA Management Board heard that the development of the auditable release of the portal and database is complete. The release is now in an intensive phase of pre-testing before formal user acceptance testing can start in early 2019.

 

 

Taking into account the rate of progress with testing and bug fixing, and the EMA’s relocation to Amsterdam, the audit field work will take place once the Agency has settled in Amsterdam, after March 2019. Dependent on successful completion of the audit and review by the Management Board around the end of 2019, the system could be ready to go live later in 2020.

Other transparency initiatives also exist in some other countries.

Falsified medicines

The EU has reformed the rules for importing active substances for medicinal products for human use into the EU (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 EU for active substances are those specified in Q7 as issued by the International Council for Harmonization (ICH). 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 EU.

Several implementing measures for the Falsified Medicines Directive have been adopted. A common EU logo for online pharmacies was adopted in June 2014, giving Member States until July 2015 to prepare for its application. 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 will have to be serialized by February 2019. Within the scope of this directive, a European system is in place to ensure that the product delivered to the patient is genuine by reading the unique serialized number per medicinal box unit at the point of dispensation (pharmacist or hospital).

In the USA, the Drug Supply Chain Security Act was implemented since November 2018 for some prescription products; it will also help guarantee the traceability of drug products and to address falsified medicines.

Nagoya Protocol

The Nagoya Protocol came into force in October 2014 and was intended to create greater legal certainty and transparency for both providers and users of genetic resources by:

 

 

establishing more predictable conditions for access to genetic resources; and

 

 

helping to ensure benefit-sharing when genetic resources leave the contracting party providing the genetic resources.

In the EU, the European Commission published the implementation Act in 2015 (Regulation 2015/1866).

It states that the pharmaceutical industry has to implement compliance procedures for non-human biological materials used in the discovery, development, manufacturing and packaging of medicinal products.

The Sanofi Nagoya Ready Project was launched in 2015 to ensure compliance with international treaties on the sustainable use of biodiversity. The Nagoya Ready Project Team has ensured that Sanofi is prepared for compliance with the Nagoya Protocol and ready for full implementation. A Nagoya Expert Group reporting to the Bioethics Committee will continue to monitor the international implementation of the protocol and provide appropriate support and advice to the relevant Sanofi teams.

In Japan, the government submitted the instrument of ratification on May 22, 2017; it became effective on August 20, 2017. Currently the discussion on “benefit-sharing” of genetic resources is ongoing.

NDA electronic clinical trial data submission (eCTD)

In the EU, electronic submission for marketing authorization and variation applications has already been in place for many years.

To allow secure submission over the Internet for all types of eCTD applications for human medicines, the EMA launched the eSubmission Gateway, which is now mandatory for all eCTD submissions through the centralized procedure, in order to improve efficiency and decrease costs for applicants.

As of July 1, 2015, companies are obliged to use electronic application forms provided by the EMA for all centralized marketing authorization applications for human and veterinary medicines. From January 2016, the use of electronic application forms became mandatory for all other EU marketing authorization procedures (i.e. mutual recognition and decentralized procedures, and national submissions).

In Japan, electronic submission of CDISC-based clinical data will become mandatory after the transition period that runs from October 2016 to March 2020, allowing the authority to efficiently store and analyze the data to improve its efficacy and safety predictions.

Such mandatory electronic submissions are expected to be limited to clinical trial data for new drugs newly filed for regulatory approval. The necessity for electronic submission for Phase I trial data will likely be decided on a case-by-case basis, while pharmaceutical companies will be required to file non-clinical toxicity study data in one of the Standard for the Exchange of Non-clinical Data (SEND) formats in due course.

Brexit

The decision by the UK to withdraw from the EU (Brexit) has triggered a need to adapt regulatory activities in the region. Early in 2017, the EMA established a working group to explore options to redistribute across the remaining network the workload related to human and veterinary medicines and inspections currently managed by the UK.

 

 

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The redistribution takes account of the diverse expertise in the network and the workload associated with the regulation of medicines. In April 2018, the remaining Member States (EU27) and the EMA completed the distribution of the UK’s portfolio of over 370 centrally authorized products in preparation for Brexit. The new rapporteurs and co-rapporteurs in the EU27, Iceland and Norway will take full responsibility for these products as of March 30, 2019.

To safeguard continuity of operations and secure the timely execution of its core tasks, the EMA has launched a Business Continuity Plan (BCP). The BCP defines priority levels for EMA activities according to their impact on public health and the ability of the EMA to manage its tasks in light of the resources available. The plan entered its third phase on October 1, 2018, with the temporary suspension or reduction of activities; guideline development and revision were scaled back, and non-product-related working parties temporarily put on hold. These changes are currently scheduled to last until June 30, 2019, but will be subject to a review in April 2019 once the EMA has moved to its temporary premises in Amsterdam.

Following the 2017 procedure, the EU has published a regulation officially naming Amsterdam as the new seat of the EMA.

On November 25, 2018, the EU officially endorsed the terms of the UK’s withdrawal, bringing to an end negotiations which began in March 2017. The EU leaders have approved the final text of the draft EU Withdrawal Agreement. The Withdrawal Agreement includes provisions for a transition, or “implementation”, period lasting until December 31, 2020, during which EU law will continue to apply in the UK. During this time, the UK Medicines and Healthcare Regulatory Authority (MHRA) will continue to operate under the jurisdiction of the EMA. However, the MHRA will no longer be able to participate in EMA activities unless expressly invited to do so.

The UK Parliament voted against the Withdrawal Agreement on January 15, 2019 by a large majority. Since then there have been two votes in the UK Parliament on various amendments, and the UK Prime Minister has been tasked to go back to Brussels to ask for change to the Withdrawal agreement. There will be a further vote not later than 27 February 2019, and the UK Parliament will be asked to vote in favour of the Withdrawal deal or on further options. If the agreement is not approved by Parliament then this will be a “no deal” or “hard Brexit” scenario in which EU law will cease to apply in the UK as of 11 pm on March 29, 2019. However much could still happen before this date, including a general election, a second referendum or even rescinding Article 50.

Sanofi has set up an internal Brexit Task Force to proactively address issues triggered by Brexit. A Brexit readiness analysis was conducted by a third party. The primary objectives were to provide an external perspective on the level of comprehensiveness and rigor of Sanofi’s Brexit planning activities, surface any potential concerns or risks, and suggest targeted mitigation measures where applicable. The stress test concluded that Sanofi is well prepared for Brexit across most

impact categories, with implementation of strategies generally on track. A plan was put into place to address remaining gaps with the goal of achieving full readiness before 29 March 2019. Sanofi has set up contingency plans, such as stockpiling certain medicines or shifting operations from the UK to the EU in the event of a ”hard Brexit”, as there are no guarantees for effective transitional solutions being in place by March 30, 2019 and because the model for the future UK-EU relationship is still unclear.

B.6.4. Pricing & Reimbursement

Increasingly, efforts to control drug expenditures in most markets in which Sanofi operates result in pricing and market-access controls for pharmaceuticals. The nature and impact of these controls vary from country to country, but some common themes are: reference pricing, systematic price reductions, formularies, volume limitations, patient co-pay requirements, and generic substitution. In addition, governments and third-party payers are increasingly demanding comparative and/or relative effectiveness data and budget impact modelling to support their decision-making process. They are also increasing their use of emerging healthcare information technologies such as electronic prescribing and health records to increase oversight on efficacy and safety and to improve compliance with prescribing guidelines. As a result, the environment in which pharmaceutical companies must operate in order to make their products available to patients and providers who need them becomes more complex each year.

While a drive to expand healthcare coverage has become a noticeable feature in many regions, providing opportunities for the industry, it has also put pressure on these new budgets, bringing with it a wave of price and volume control measures. Many countries and regions have increased pressure on pricing through joint procurement and negotiation. National production, whether through a policy of industrialization, technology transfer agreements or preferential conditions for local production, is also a growing issue.

Significant trends in the US:

Private health insurance is offered widely as part of employee benefit packages, and is the main source of access to subsidized healthcare provision. Some individuals purchase private health plans directly, while publicly-subsidized programs provide cover for retirees, the poor, the disabled, uninsured children, and serving or retired military personnel. Double-coverage can occur. Public health insurances include:

 

 

Medicare, which provides health insurance for retirees and for people with permanent disabilities. The basic Medicare scheme (Part A) provides hospital insurance only and the vast majority of retirees purchase additional cover through some or all of three other plans named Part B, Part C and Part D. Part D enables Medicare beneficiaries to obtain outpatient drug subsidies. Almost two-thirds of all Medicare beneficiaries have enrolled in Part D plans.

 

 

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Medicaid, which provides health insurance for low-income families, certain qualified pregnant woman and children, individuals receiving supplemental security income, and other eligible persons determined on a state-by-state basis.

Managed Care Organizations (MCOs) combine the functions of health insurance, delivery of care, and administration. MCOs use

specific provider networks and specific services and products. There are three types of managed care plans: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans.

Pharmacy benefit managers (PBMs) serve as intermediaries between insurance companies, pharmacies and manufacturers to secure lower drug costs for commercial health plans, self-insured employer plans, Medicare Part D plans, and federal and state government employee plans.

The US market has seen increased consolidation of key payer organizations. Most notably, the CVS-Aetna and Cigna-ESI mergers point to a strong role for integrated payers and PBMs in terms of product access and affordability. This trend may also impact market pricing for pharmaceuticals going forward. With the largest three PBMs now covering over 75% of the market, consolidation has led to significant negotiating power for commercial plans. Commercial payers continue to employ tools designed to lower plan-level net costs; these include formulary management tools and exclusions, benefit design changes and generic conversions, and the adoption of biosimilars (which are now beginning to transform the US biologics landscape).

The current Administration has increasingly focused on the cost of prescription drugs in order to align policy with the President’s campaign promise to address the disparity between drug prices paid by Americans and the rest of the world (referred to as the “American Patients First” plan). Since the publication of the American Patients First Blueprint in 2018, there has been proposed legislation, rulemaking, and guidance that indicates the Administration’s priorities are to cut list prices, increase competition for Medicare part B drugs, and reduce out of pocket costs for patients. These proposals include action like a proposed International Price Index Model to tether domestic prices to the international markets, and suggested reforms to the rebate system to eliminate incentives that lead to higher list prices. These proposals are not settled and there is ongoing uncertainty regarding if, when, and how the costs of federally funded programs would be lowered. Other major changes at the federal level in line with these trends include (i) the early closure of the Medicare Part D “donut hole” gap in coverage, which saw manufacturer’s share of costs increase from 50% to 70%; and (ii) the increasing use of co-pay accumulator adjustment programs. Additionally, these trends are not limited to the federal level as states are also increasingly concerned with prescription drug prices and are continuing to consider legislation that may further impact the regulatory landscape.

Through all of these changes, we remain committed to responsible business practices. In February 2019, we updated our public commitment to the pricing principles we first published

in 2017, impacting our practices both in the US and in other markets (for more information, see https://www.sanofi.com/en/our-responsibility/documents-center/).

Significant trends in China:

China has a quarter of the cancer deaths in the world, a diabetes prevalence of 10.9% and ongoing supply problems for basic medicines. Compounded with public pressure over a range of scandals (such as fake vaccines and the quality of generics) and the affordability of oncology products, there has been continuing pressure on the Chinese government to modernize the national pharmaceutical landscape. Several policy reforms over the past few years are finally beginning to have their effect. There is now a considerable acceleration in updates of the National Reimbursement Drug List (NRDL) and Essential Drugs List, especially for oncology products. The first major update of the NRDL in February 2017 has been followed by further additions, including 17 oncology products that were added in October 2018. However, there is still no clarity on pricing methods. National negotiations and a recent collective negotiation on 47 oncology products run jointly by 14 provinces show a tendency to push for lower prices to reflect these increased volumes. This is not limited to oncology: following the introduction in 2015 of the Generic Quality Consistency Evaluation, a measure designed to ensure bioequivalency of Chinese generics, it was announced in September 2018 that generics demonstrating bioequivalence would be allowed to participate in a pilot tender involving 4 municipalities and 7 major cities. The tender took place in December 2018, and resulted in significant price decreases. In many other pilots, formal and informal international price referencing has again played a part. It remains to be seen how the Chinese authorities will implement health technology assessment (HTA) following the creation of a new HTA body, or how their orphan drug policy will lead to real market access. While access to the market is increasingly being facilitated, especially following the waiver for local clinical trial data, it remains to be seen how the cost of this potentially massive increase in volume will be managed.

Significant trends in other markets:

In Canada, the international price benchmarking basket is set to grow, a change which will be accompanied by a string of cost-cutting measures applied according to the cost-effectiveness level of a drug’s indications. In Japan, negotiations are still ongoing for the long-awaited implementation of HTA, which is expected in 2019. Already, 2018 saw a number of new measures implemented: cost-containment mechanisms for market expansion and high sales, new international reference pricing rules, and changes to the price maintenance premium system.

In Europe, the UK’s imminent exit from the EU is still uncertain with several possible implications for the pharmaceutical industry. Much remains to be decided on how the two parties, the EC and the UK government, will align and accept the regulations of each other. In the short term, Sanofi has mitigated risk by planning for a no-deal Brexit, stockpiling medicines and vaccines where global supply allows and establishing new supply routes into the

 

 

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UK. For the most part, prices of medicines and vaccines to the NHS are fixed in sterling, which gives some risk of sterling-to-euro fluctuations in the event of a no-deal. In the longer term, small increased costs could occur with the application of border checks if customs arrangements have not been resolved at the time of the UK’s exit, and as a result of the UK’s exit from the EMA and subsequent need to file submissions with the UK Medicines and Healthcare Products Regulatory Agency (MHRA).

We believe that third-party payers will continue to act to curb the cost of pharmaceutical products. While the impact of those measures cannot be predicted with certainty, we are taking the necessary steps to defend the accessibility and price of our products in order to reflect the value of our innovative product offerings, and we continue to develop and pilot innovative contracting platforms with commercial payers to better align our price and value across multiple therapeutic areas including diabetes, rheumatoid arthritis, multiple sclerosis and asthma.

B.7. Patents, intellectual property and other rights

B.7.1. Patents

Patent protection

We own a broad portfolio of patents, patent applications and patent licenses worldwide. These patents are of various types and may cover:

 

 

active ingredients;

 

 

pharmaceutical formulations;

 

 

product manufacturing processes;

 

 

intermediate chemical compounds;

 

 

therapeutic indications/methods of use;

 

 

delivery systems; and

 

 

enabling technologies, such as assays.

Patent protection for individual products typically extends for 20 years from the patent filing date in countries where we seek patent protection. A substantial part of the 20-year life span of a patent on a new molecule (small molecule or biologic) has generally already passed by the time the related product obtains marketing authorization. As a result, the effective period of patent protection for an approved product’s active ingredient is significantly shorter than 20 years. In some cases, the period of effective protection may be extended by procedures established to compensate regulatory delay in Europe (via Supplementary Protection Certificate or SPC), in the US (via Patent Term Extension or PTE) and in Japan (also via PTE).

Additionally, the product may benefit from the protection of patents obtained during development or after the product’s initial marketing authorization. The protection a patent provides to the related product depends upon the type of patent and its scope of coverage, and may also vary from country to country. In Europe for instance, applications for new patents may be submitted to

the European Patent Office (EPO), an intergovernmental organization which centralizes filing and prosecution. As of December 2017, an EPO patent application may cover the 38 European Patent Convention Member States, including all 28 Member States of the EU. The granted “European Patent” establishes corresponding national patents with uniform patent claims among the Member States. However, some older patents were not approved through this centralized process, resulting in patents having claim terms for the same invention that differ between the countries. Additionally, a number of patents prosecuted through the EPO may pre-date the European Patent Convention accession of some current European Patent Convention Member States, resulting in different treatment in those countries.

In 2013, EU legislation was adopted to create a European Unitary Patent and a Unified Patent Court. However, it will only enter into force once the agreement on the Unified Patent Court is ratified by at least 13 Member States including France, Germany, and the United Kingdom. As of the date of this document, 14 countries including France have ratified the agreement, but ratification by the United Kingdom and Germany is still outstanding, and the process is impacted by Brexit.

The Unitary Patent will provide unitary protection within the participating states of the EU (when ratified by the Member States with the exception of Croatia, Spain, and Poland, not currently signatories of the agreement). The Unified Patent Court will be a specialized patent court with exclusive jurisdiction for litigation relating to European patents and Unitary Patents. The Court will be composed of a central division (headquartered in Paris) and several local and regional divisions in the contracting Member States to the agreement. The Court of Appeal will be located in Luxembourg.

We monitor our competitors and vigorously seek to challenge patent infringements when such infringements would negatively impact our business objectives. See “Item 8 – A. Consolidated Financial Statements and Other Financial Information – Information on Legal or Arbitration Proceedings – Patents” of this annual report.

The expiration or loss of a patent covering a new molecule, typically referred to as a compound patent, may result in significant competition from generic products and can result in a dramatic reduction in sales of the original branded product (see “Item 3. Key Information – D. Risk Factors”). In some cases, it is possible to continue to benefit from a commercial advantage through product manufacturing trade secrets or other types of patents, such as patents on processes, intermediates, compound structure, formulations, methods of treatment, indications or delivery systems. Certain categories of products, such as traditional vaccines and insulin, were historically relatively less reliant on patent protection and may in many cases have no patent coverage. It is nowadays increasingly frequent for novel vaccines and insulins also to be patent protected. Finally, patent protection is of comparatively lesser importance to our Consumer Healthcare and generics businesses, which rely principally on trademark protection.

 

 

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Regulatory exclusivity

In some markets, including the EU and the US, many of our pharmaceutical products may also benefit from multi-year regulatory exclusivity periods, during which a generic competitor may not rely on our clinical trial and safety data in its drug application. Exclusivity is meant to encourage investment in research and development by providing innovators with exclusive use, for a limited time, of the innovation represented by a newly approved drug product. This exclusivity operates independently of patent protection and may protect the product from generic competition even if there is no patent covering the product.

In the US, the FDA will not grant final marketing authorization to a generic competitor for a New Chemical Entity (NCE) until the expiration of the regulatory exclusivity period (five years) that commences upon the first marketing authorization of the reference product. The FDA will accept the filing of an Abbreviated New Drug Application (ANDA) containing a patent challenge one year before the end of this regulatory exclusivity period (see the descriptions of ANDAs in “– Product Overview – Challenges to Patented Products” below). In addition to the regulatory exclusivity granted to NCEs, significant line extensions of existing NCEs may qualify for an additional three years of regulatory exclusivity if certain conditions are met. Also, under certain limited conditions, it is possible to extend unexpired US regulatory and patent-related exclusivities by a pediatric extension. See “– Pediatric Extension”, below.

In the US, a different regulatory exclusivity period applies to biological drugs. The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) was enacted on March 23, 2010 as part of the Affordable Care Act. The BPCIA introduced an approval pathway for biosimilar products. A biosimilar product is a biologic product that is highly similar to the reference (or innovator) product, and which has no clinically meaningful differences from the reference product in terms of the safety, purity, and potency of the product. The BPCIA provides that an application for a biosimilar product that relies on a reference product may not be submitted to the FDA until four years after the date on which the reference product was first licensed, and that the FDA may not approve a biosimilar application until 12 years after the date on which the reference product was first licensed. US Federal and state officials, including the current Administration, are continuing to focus on the cost of health coverage and health care although the future policy, including the nature and timing of any changes to the Affordable Care Act, remains unclear.

In the EU, regulatory exclusivity is available in two forms: data exclusivity and marketing exclusivity. Generic drug applications will not be accepted for review until eight years after the first marketing authorization (data exclusivity). This eight-year period is followed by a two-year period during which generics cannot be marketed (marketing exclusivity). The marketing exclusivity period can be extended to three years if, during the first eight-year period, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which are deemed to provide a significant clinical benefit over existing therapies. This is known as the “8+2+1” rule.

In Japan, the regulatory exclusivity period varies from four years for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions, to six years for new drugs containing a medicinal composition or requiring a new route of administration; eight years for drugs containing a new chemical entity; and ten years for orphan drugs or new drugs requiring pharmaco-epidemiological study.

Emerging markets

One of the main limitations on our operations in emerging market countries is the lack of effective intellectual property protection or enforcement for our products. The World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIP) required developing countries to amend their intellectual property laws to provide patent protection for pharmaceutical products since January 1, 2005. However, it also provided a limited number of developing countries with an extended period in which to achieve compliance with TRIP. Additionally, these same countries frequently do not provide non-patent exclusivity for innovative products. While the situation has gradually improved, the lack of protection for intellectual property rights or the lack of robust enforcement of intellectual property rights poses difficulties in certain countries. Additionally, in recent years a number of countries facing health crises have waived or threatened to waive intellectual property protection for specific products, for example through compulsory licensing of generics. See “Item 3. Key Information – D. Risk Factors – Risks Relating to Sanofi’s Structure and Strategy – The globalization of our business exposes us to increased risks in specific areas”.

Pediatric extension

In the US and the EU, under certain conditions, it is possible to extend a product’s regulatory exclusivity for an additional period of time by providing data on pediatric studies.

In the US, the FDA may ask a company for pediatric studies if it has determined that information related to the use of the drugs in the pediatric population may produce health benefits. The FDA has invited us by written request to provide additional pediatric data on several of our main products. Under the Hatch-Waxman Act, timely provision of data meeting the FDA’s requirements (regardless of whether the data supports a pediatric indication) may result in the FDA extending regulatory exclusivity and patent life by six months, to the extent these protections have not already expired (the so-called “pediatric exclusivity”).

In Europe, a regulation on pediatric medicines provides for pediatric research obligations with potential associated rewards including extension of patent protection (for patented medicinal products) and six month regulatory exclusivity for pediatric marketing authorization (for off-patent medicinal products).

In Japan, there is no pediatric research extension of patent protection (for patented medicinal products). However, regulatory exclusivity may be extended from eight to ten years.

 

 

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Orphan drug exclusivity

Orphan drug exclusivity may be granted in the US to drugs intended to treat rare diseases or conditions (affecting fewer than 200,000 patients in the US, or in some cases more than 200,000 with no expectation of recovering costs).

Obtaining orphan drug exclusivity is a two step process. An applicant must first seek and obtain orphan drug designation from the FDA for its drug for one or more indications. If the FDA approves a drug for the designated indication, the drug will generally receive orphan drug exclusivity for such designated indication.

Orphan drug exclusivity runs from the time of approval and bars approval of another application (ANDA, 505(b)(2), New Drug Application (NDA) or Biologic License Application (BLA)) from a different sponsor for the same drug in the same indication for a seven year period. Whether a subsequent application is for the “same” drug depends upon the chemical and clinical characteristics. The FDA may approve applications for the “same” drug for indications not protected by orphan exclusivity.

Orphan drug exclusivities also exist in the EU and Japan.

Product overview

We summarize below the intellectual property coverage (in some cases through licences) in our major markets of the marketed products described above at “– B.2. Main Pharmaceutical Products”. In the discussion of patents below, we focus on active

ingredient patents (compound patents) and for NCEs on any later filed patents listed, as applicable, in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”) or in their foreign equivalents. For Biologics the Orange Book listing does not apply. These patents or their foreign equivalents tend to be the most relevant in the event of an application by a competitor to produce a generic or a biosimilar version of one of our products (see “– Challenges to Patented Products” below). In some cases, products may also benefit from pending patent applications or from patents not eligible for Orange Book listing (for NCEs) (e.g. patents claiming industrial processes). In each case below, we specify whether the active ingredient is claimed by an unexpired patent. Where patent terms have been extended to compensate for US Patent and Trademark Office (USPTO) delays in patent prosecution (Patent Term Adjustment – PTA) or for other regulatory delays, the extended dates are indicated below. The US patent expirations presented below reflect USPTO dates, and also reflect six month pediatric extensions when applicable. Where patent terms have expired we indicate such information and mention whether generics are on the market.

We do not provide later filed patent information relating to formulations already available as an unlicensed generic. References below to patent protection in Europe indicate the existence of relevant patents in most major markets in the EU. Specific situations may vary by country, most notably with respect to older patents and to countries that have only recently joined the EU.

 

 

We additionally set out any regulatory exclusivity from which these products continue to benefit in the US, EU or Japan. Regulatory exclusivities presented below incorporate any pediatric extensions obtained. While EU regulatory exclusivity is intended to be applied throughout the EU, in some cases Member States have taken positions prejudicial to our exclusivity rights.

 

 

 

United States

 

European Union

 

Japan

Aldurazyme® (laronidase)   Compound: November 2019   Compound: November 2020 in some EU countries only   Compound: November 2020
    Later filed patents: ranging through July 2020 with PTA**   Later filed patent: November 2020 in some EU countries only    
Allegra®/Telfast® (fexofenadine hydrochloride)   Compound: expired   Compound: expired   Compound: expired
  Generics on the market   Generics on the market   Generics on the market
    Converted to over-the-counter   Converted to over-the-counter   Converted to over-the counter
Alprolix®(eftrenonacog alfa)   Compound: March 2028 with PTA** and PTE**   Compound: May 2024 (May 2029 with SPC** in most EU countries, if granted)   Compound: February 2026 with PTE**
  Later filed patents: coverage ranging through December 2037 (pending)   Later filed patents: coverage ranging through December 2037 (pending)   Later filed patents: coverage ranging through December 2037 (pending)
    Biologics regulatory exclusivity: March 2026   Regulatory exclusivity: May 2026  

Regulatory exclusivity:

July 2022

Amaryl®/Amarel® (glimepiride)  

Compound: expired

 

Generics on the market

 

Compound: expired

 

Generics on the market

 

Compound: expired

 

Generics on the market

 

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United States

 

European Union

 

Japan

Apidra® (insulin glulisine)   Compound: expired   Compound: September 2019 with SPC** in most of the EU countries  

Compound: May 2022 with

PTE**

    Later filed patents: ranging through September 2027   Later filed patent: March 2022   Later filed patent: July 2022
Aprovel®/Avapro® (irbesartan)   Compound: expired   Compound: expired   Compound: expired
      Later filed patent: June 2021 with PTE**
    Generics on the market   Generics on the market   Generics on the market
Aubagio® (teriflunomide)*   Compound: expired   Compound: expired   Compound: expired
  Later filed patents: coverage ranging through February 2034   Later filed patent: coverage ranging through September 2030   Later filed patent: coverage ranging through March 2024
        Regulatory exclusivity: August 2023    
Cablivi® (caplacizumabt)   Compound: August, 2027 (January 2032 with PTE** if granted)   Compound: May 2026
(May 2031 with SPC** if granted)
  Compound: May 2026
(with PTE** if granted)
  Later filed patents: coverage ranging through June 2035 (pending)   Later filed patents: coverage ranging through June 2035   Later filed patents: coverage ranging through June 2035
    Biologics regulatory exclusivity: August 2031 (with PED)   Regulatory exclusivity: August 31, 2030 (with orphan PED)   Regulatory exclusivity: to be determined
Cerdelga® (eliglustat)   Compound: 2026 with PTE**   Compound: July 2022 (July 2027 with SPC** if granted)   Compound: March 2025 with PTE**
  Later filed patent: November 2030 (pending)   Later filed patent: November 2030   Later filed patent: November 2030 (pending)
  Regulatory exclusivity:
August 2019
  Orphan drug exclusivity: January 2025   Regulatory exclusivity:
March 2023
    Orphan drug exclusivity: August 2021        
Cerezyme® (imiglucerase)*   Compound: expired   Compound: N/A   Compound: N/A
Depakine® (sodium valproate)   Compound: N/A(1)   Compound: N/A   Compound: N/A
        Later filed patent: Expired   Later filed patent: Expired
Dupixent® (dupilumab)*   Compound: October 2027 (Mar 2031 with PTE** if granted)   Compound: October 2029 (September 2032 with SPC** if granted)   Compound: October 2029 (June 2034 with PTE** if granted)
  Later filed patents: coverage ranging through January 2036 with PTA**   Later filed patents: coverage ranging through November 2035 (pending)   Later filed patents: coverage ranging through November 2035 (pending)
    Regulatory exclusivity: March 2029   Regulatory exclusivity: September 2027   Regulatory exclusivity: January 2026

 

 

(1)

No rights to compounds in the US, EU and Japan.

 

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United States

 

European Union

 

Japan

Eloctate® (efmoroctocog alfa)   Compound: June 2028 with PTA** and PTE**   Compound: May 2024 (May 2029 with SPC** in most EU countries, if granted)   Compound: August 2026 with PTE**
  Later filed patents: coverage ranging through December 2037 (pending)   Later filed patents: coverage ranging through December 2037 (pending)   Later filed patents: coverage ranging through December 2037 (pending)
    Biologics regulatory exclusivity: June 2026   Regulatory exclusivity: November 2025   Regulatory exclusivity: December 2022
Fabrazyme® (agalsidase beta)*   Compound: N/A   Compound: N/A   Compound: N/A
    Later filed patents: expired   Later filed patents: expired   Later filed patents: expired
Insuman® (human insulin)   Compound: N/A   Compound: N/A   Compound: N/A
        Later filed patents: expired    
Jevtana® (cabazitaxel)   Compound: September 2021 with PTE** and pediatric exclusivity   Compound: expired   Compound: March 2021 with PTE**
  Later filed patents: coverage ranging through April 2031 with pediatric exclusivity   Later filed patents: coverage ranging through October 2030 (pending)   Later filed patents: coverage ranging through November 2030 with PTE**
        Regulatory exclusivity: March 2021   Regulatory exclusivity: July 2022
Kevzara® (sarilumab)   Compound: January 2028 with PTA**   Compound: June 2027   Compound: June 2027
 

Later filed patents: coverage ranging through March 2037

(pending)

  Later filed patents: coverage ranging through March 2037 (pending)   Later filed patents: coverage ranging through March 2037 (pending)
    Regulatory exclusivity: May 2029   Regulatory exclusivity:
June 2027
  Regulatory exclusivity: September 2025
Lantus® (insulin glargine)*   Compound: expired   Compound: Expired   Compound: expired
  Later filed patents ranging through March 2028   Later filed patent: June 2023   Later filed patent: June 2023
    Generics / biosimilars on the market   Generics / biosimilars on the market   Generics / biosimilars on the market
Lemtrada® (alemtuzumab)   Compound: expired   Compound: expired   Compound: expired
    Later filed patent: August 2029 with PTA**   Later filed patent: September 2027(1)   Later filed patent: September 2027
Lovenox® (enoxaparin sodium)*   Compound: N/A   Compound: expired   Compound: expired
    Generics / biosimilars on the market   Generics / biosimilars on the market    
Lumizyme® / Myozyme® (alglucosidase alpha)*   Compound: N/A   Compound: N/A   Compound: N/A
    Later filed patents: coverage ranging through February 2023 with PTA**   Later filed patents: coverage ranging through July 2021   Later filed patents: coverage ranging through July 2021

 

 

(1)

Patent revoked, appeal pending.

 

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United States

 

European Union

 

Japan

Lyxumia®/Adlyxin® (lixisenatide)   Compound: July 2020
(July 2025 with PTE** if granted)
  Compound: July 2020 (2025 with SPC** in most EU countries if granted)   Compound: July 2024 with PTE**
  Later filed patents: coverage ranging through August 2032   Later filed patents: November 2030 (pending)   Later filed patents: November 2030
    Regulatory exclusivity: July 2021   Regulatory exclusivity: February 2023   Regulatory exclusivity: June 2021
Mozobil® (plerixafor)   Compound: N/A   Compound: N/A   Compound: N/A
  Later filed patents: coverage ranging through July 2023   Later filed patent: July 2022 (2024 with SPC** in some EU countries)   Later filed patent: August 2026 with PTE**
        Orphan drug exclusivity: August 2019   Orphan drug exclusivity: December 2026
Multaq® (dronedarone hydrochloride)   Compound: expired   Compound: expired   Compound: expired
  Later filed patents: coverage ranging through June 2031   Later filed patent: June 2023 with SPC**  
        Regulatory exclusivity: December 2019    
Plavix® (clopidogrel bisulfate)*   Compound: expired   Compound: expired   Compound: expired
    Generics on the market   Generics on the market   Generics on the market
Praluent® (alirocumab)  

Compound: December 2029

 

Later filed patents: coverage ranging through September 2032 (pending)

  Compound: December 2029 (September 2030 if SPC** granted)   Compound: November 2032 with PTE**
  Biologics regulatory exclusivity: July 2027   Later filed patents: coverage ranging through September 2032 (pending)   Later filed patents: coverage ranging through September 2032
        Regulatory exclusivity: September 2025   Regulatory exclusivity: July 2024
Renagel® (sevelamer hydrochloride)   Compound: N/A   Compound: N/A   Compound: N/A
    Later filed patent: October 2020   Later filed patent: October 2020   Later filed patent: October 2020
Renvela® (sevelamer carbonate)   Compound: N/A   Compound: N/A   Compound: N/A
  Later filed patents: October 2025 (tablet) and December 2030 (sachet)   Later filed patent: November 2025 (tablet) and September 2026 (sachet)   Later filed patents: November 2025 (tablet) and September 2026 (sachet)
    Generics on the market   Generics on the market    
Soliqua®100/33 / Suliqua® (lixisenatide + insulin glargine)   Compound: July 2020 (July 2025 with PTE** if granted)   Compound: July 2020 (July 2025 with SPC** in most EU countries if granted)   Compound: July 2024 with PTE**
  Later filed patents: coverage ranging through November 2035   Later filed patents: coverage ranging through January 2032 with SPC**   Later filed patents: coverage ranging through November 2030
    Regulatory exclusivity: July 2021   Regulatory exclusivity: January 2027   Regulatory exclusivity: to be determined
Stilnox®/Ambien® (zolpidem tartrate)   Compound: expired   Compound: expired   Compound: expired
    Generics on the market   Generics on the market  

Generics on the market

 

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United States

 

European Union

 

Japan

Synvisc® (Hylan G-F 20)   Compound: expired   Compound: N/A   Compound: expired
Synvisc-One® (Hylan G-F 20)   Compound: expired   Compound: N/A   Compound: expired
        Later filed patent: December 2025   Later filed patent: December 2025
Toujeo® (insulin glargine)*   Compound: expired   Compound: expired   Compound: expired
  Later filed patents: coverage ranging through May 2031   Later filed patents: coverage ranging through May 2031 (pending)   Later filed patents: coverage ranging through July 2033 with PTE**
            Regulatory exclusivity: July 2019
Zaltrap® (aflibercept)   Compound: May 2020 (July 2022 with PTE** if granted)   Compound: May 2020 (May 2025 with SPC** in most EU countries, if granted)   Compound: May 2020 (May 2025 with PTE** if granted)
  Later filed patents: coverage ranging through April 2032 (pending)   Later filed patents: coverage ranging through April 2032   Later filed patents: coverage ranging through April 2032
    Biologics regulatory exclusivity: November 2023   Regulatory exclusivity: February 2023  

Regulatory exclusivity:

March 2023

 

  *

The products shown in bold are the most significant in terms of sales (2% or more of Sanofi’s sales in 2018).

 

  **

PTE: Patent Term Extension. – SPC: Supplementary Protection Certificate. – PTA: Patent Term Adjustment.

 

Patents held or licensed by Sanofi do not in all cases provide effective protection against a competitor’s generic version of our products. For example, notwithstanding the presence of unexpired patents, competitors launched generic versions of Allegra® in the US (prior to the product being switched to over-the-counter status) and Plavix® in the EU.

We caution the reader that there can be no assurance that we will prevail when we assert a patent in litigation and that there may be instances in which Sanofi determines that it does not have a sufficient basis to assert one or more of the patents mentioned in this report, for example in cases where a competitor proposes a formulation not appearing to fall within the claims of our formulation patent, a salt or crystalline form not claimed by our composition of matter patent, or an indication not covered by our method of use patent. See “Item 3. Key Information – D. Risk Factors – 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”.

As disclosed in Item 8 of this annual report, we are involved in significant litigation concerning the patent protection of a number of our products.

Challenges to patented products

 

 

Abbreviated New Drug Applications (ANDAs)

In the US, companies have filed Abbreviated New Drug Applications (ANDAs), containing challenges to patents related to a number of our products. An ANDA is an application by a drug manufacturer to receive authority to market a generic version of another company’s approved product, by demonstrating that the

purportedly generic version has the same properties as the original approved product. ANDAs may not be filed with respect to drugs licensed as a biological. See “– B.6.3. Regulatory Framework – B.6.3.2. Biosimilars” above. An ANDA relies on the safety and other technical data of the original approved product, and does not generally require the generic manufacturer to conduct clinical trials (thus the name “abbreviated” new drug application), presenting a significant benefit in terms of time and cost. As a result of regulatory protection of our safety and other technical data, the ANDA may generally be filed only five years after the initial US original product marketing authorization. See “– Regulatory Exclusivity” above. This period can be reduced to four years if the ANDA includes a challenge to a patent listed in the FDA’s Orange Book. However, in such a case if the patent holder or licensee brings suit in response to the patent challenge within the statutory window, then the FDA is barred from granting final approval to an ANDA during the 30 months following the patent challenge (this bar is referred to in our industry as a “30-month stay”), unless, before the end of the 30 months, a court decision or settlement has determined either that the ANDA does not infringe the listed patent or that the listed patent is invalid and/or unenforceable.

FDA approval of an ANDA after this 30-month period does not resolve outstanding patent disputes, but it does remove the regulatory impediments to a product launch by a generic manufacturer willing to take the risk of later being ordered to pay damages to the patent holder.

The accelerated ANDA-type procedures are potentially applicable to many, but not all, of the products we manufacture. See “– B.6.3. Regulatory Framework – 6.3.2. Biosimilars” and “– Regulation” above. We seek to defend our patent rights vigorously in these cases. Success or failure in the assertion of a

 

 

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given patent against a competing product is not necessarily predictive of the future success or failure in the assertion of the same patent – or a fortiori the corresponding foreign patent – against another competing product due to factors such as possible differences in the formulations of the competing products, intervening developments in law or jurisprudence, local variations in the patents and differences in national patent law and legal systems. See “Item 3. Key Information – D. Risk Factors – Risks Relating to Legal and Regulatory Matters – We rely on our patents and 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”.

Section 505(b)(2) New Drug Applications in the US

Our products and patents are also subject to challenge by competitors via another abbreviated approval pathway, under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. This provision expressly permits an applicant to rely, at least in part, on the FDA’s prior findings of safety and effectiveness of a drug that has obtained FDA approval. The FDA may still require applicants to provide additional preclinical or clinical data to ensure that differences from the reference drug do not compromise safety and effectiveness. This pathway allows for approval for a wide range of products, especially for those products that represent only a limited change from an existing approved drug. The 505(b)(2) pathway is distinct from the ANDA pathway, which allows for approval of a generic product based on a showing that it is equivalent to a previously approved product.

A 505(b)(2) applicant is required to identify the reference drug on which it relies, as well as to certify to the FDA concerning any patents listed for the referenced product in the Orange Book. Specifically, the applicant must certify in the application that, for each patent that claims the drug or a use of the drug for which the applicant is seeking approval:

 

 

there is no patent information listed for the reference drug (paragraph I certification);

 

 

the listed patent has expired for the reference drug (paragraph II certification);

 

 

the listed patent for the reference drug has not expired, but will expire on a particular date and approval is sought after patent expiration (paragraph III certification); or

 

 

the listed patent for the reference drug is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the product for which the 505(b)(2) NDA is submitted (paragraph IV certification).

A paragraph III certification may delay the approval of an application until the expiration of the patent. A paragraph IV certification generally requires notification of the patent owner and the holder of the NDA for the referenced product. If the patent owner or NDA holder brings patent litigation against the applicant within the statutory window, a 30-month stay is entered on the FDA’s ability to grant final approval to the 505(b)(2) applicant

unless, before the end of the stay, a court decision or settlement determines the listed patent is invalid, not enforceable, and/or not infringed. A 505(b)(2) application may also be subject to non-patent exclusivity, and the FDA may be prohibited from giving final approval to a 505(b)(2) application until the expiration of all applicable non-patent exclusivity periods.

In the EU, a generic drug manufacturer may only reference the data of the regulatory file for the original approved product after data exclusivity has expired. However, there is no patent listing system in Europe comparable to the Orange Book, which would allow the patent holder to prevent the competent authorities from granting marketing authorization by bringing patent infringement litigation prior to approval. As a result, generic products may be approved for marketing following the expiration of marketing exclusivity without regard to the patent holder’s rights. Nevertheless, in most of these jurisdictions once the competing product is launched, and in some jurisdictions even prior to launch (once launch is imminent), the patent holder may seek an injunction against such marketing if it believes its patents are infringed. See Item 8 of this annual report.

B.7.2. Trademarks

Our products are sold around the world under trademarks that we consider to be of material importance in the aggregate. Our trademarks help to identify our products and to protect the sustainability of our growth. Trademarks are particularly important to the commercial success of CHC and generics.

It is our policy to protect and register our trademarks with a strategy adapted to each product or service depending on the countries where they are commercialized: on a worldwide basis for worldwide products or services, or on a regional or local basis for regional or local products or services.

The process and degree of trademark protection vary country by country, as each country applies its own trademark laws and regulations. In most countries, trademark rights may only be obtained through formal trademark application and registration. In some countries, trademark protection can be based primarily on use. Registrations are granted for a fixed term (in most cases ten years) and are renewable indefinitely, except in some countries where maintenance of the trademarks is subject to their effective use.

When trademark protection is based on use, it covers the products and services for which the trademark is used. When trademark protection is based on registration, it covers only the products and services designated in the registration certificate. Additionally, in certain cases, we may enter into a coexistence agreement with a third party that owns potentially conflicting rights in order to avoid any risk of confusion and better protect and defend our trademarks.

Our trademarks are monitored and defended based on this policy and in order to prevent counterfeit, infringement and/or unfair competition.

 

 

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B.8. Production and raw materials

We have opted to manufacture the majority of our products in-house. There are three principal stages in our production process: the manufacture of active ingredients, the transformation of those ingredients into drug products or vaccines, and packaging those products.

Our general policy is to produce the majority of our active ingredients and principal drug products at our own plants in order to reduce our dependence on external suppliers. We also rely on third parties for the manufacture and supply of certain active ingredients, drug products and medical devices. Active ingredients are manufactured using raw materials sourced from suppliers who have been subject to rigorous selection and approval procedures, in accordance with international standards and our own internal directives. We have outsourced some of our production under supply contracts associated with acquisitions of products or businesses or with plant divestitures, or to establish a local presence to capitalize on growth in emerging markets. Our pharmaceutical subcontractors follow our general quality and logistics policies, as well as meeting other criteria. See ‘‘Item 3. Key Information – D. Risk Factors – Risks Relating to Our Business’’.

At the start of 2017 we launched our “Global External Manufacturing” team, to enhance the way we manage relations with our third-party suppliers of finished products.

We also obtain active ingredients from third parties under collaboration agreements. This applies in particular to the monoclonal antibodies developed with Regeneron.

Our pharmaceutical production sites are divided into three categories:

 

 

global sites, which serve all markets: located mainly in Europe, these facilities are dedicated to the manufacture of our active ingredients, injectable products, and a number of our main solid-form products;

 

 

regional sites, which serve markets at regional level, in Europe and particularly the BRIC-M countries (Brazil, Russia, India, China and Mexico), giving us a strong industrial presence in emerging markets; and

 

 

local sites, which serve their domestic market only.

Sanofi Pasteur produces vaccines at sites located in the United States, Canada, France, Mexico, China and India. The pharmaceutical site at Le Trait (France) also contributes to Sanofi Pasteur’s industrial operations by making available its sterile filling facilities.

All of our production facilities are good manufacturing practice (GMP) compliant, in line with international regulations.

Our principal sites approved by the FDA are:

 

 

the Biologics facilities in the United States (Allston, Framingham and Northborough), France (Lyon Gerland, Vitry-sur-Seine), Germany (Frankfurt) and Belgium (Geel);

 

the Injectables facilities in France (Le Trait), Italy (Anagni), Ireland (Waterford), Germany (Frankfurt) and the United States (Ridgefield);

 

 

the Pharmaceuticals facilities in France (Ambarès and Tours) and the United Kingdom (Haverhill);

 

 

the Consumer Healthcare facilities in France (Compiègne) and the United States (Chattanooga); and

 

 

the Vaccines facilities in France (Marcy l’Étoile and Le Trait, which handle filling and packaging of Fluzone® ID for the US market), the United States (Swiftwater) and Canada (Toronto).

Wherever possible, we seek to have multiple plants approved for the production of key active ingredients and our strategic finished products (this is the case with Lovenox®, for example).

In May 2010, Genzyme’s Allston facility in the United States entered into a consent decree with the US government following FDA inspections at the facility that resulted in observations and a warning letter raising Current Good Manufacturing Practices (CGMP) deficiencies.

The workplan was completed on March 31, 2016. The next step was a third-party certification process. In August 2017, the FDA conducted an inspection of the facility and delivered a favorable conclusion, following which certification was received on October 4, 2017.

The Allston facility is required to engage a third-party expert to audit its manufacturing operations for an additional period of at least five years.

More details about our manufacturing sites are given below at section ‘‘D. Property, Plant and Equipment’’.

B.9. Insurance and risk coverage

We are protected by four key insurance programs, relying not only on the traditional corporate insurance and reinsurance market but also on our direct insurance company, Carraig Insurance DAC (Carraig).

These four key programs cover Property & Business Interruption, General & Product Liability, Stock and Transit, and Directors & Officers Liability.

Carraig participates in our coverage for various lines of insurance including Property & Business Interruption, Stock and Transit, and General & Product Liability. Carraig is run under the supervision of the Irish regulatory authorities, is wholly owned by Sanofi, and has sufficient resources to meet those portions of our risks that it has agreed to cover.

It sets premiums for our entities at market rates. Claims are assessed using the traditional models applied by insurance and reinsurance companies, and the company’s reserves are regularly verified and confirmed by independent actuaries.

Our Property & Business Interruption program covers all our entities worldwide, wherever it is possible to use a centralized

 

 

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program operated by Carraig. Through risk mutualization between our entities, this approach enabling us to set tailored deductibles and covers to match local entities’ needs before market intervention. It also incorporates a prevention program, including a comprehensive site visit schedule covering our production, storage, research and distribution facilities and standardized repair and maintenance procedures across all sites.

The Stock and Transit program protects all goods owned by Sanofi while they are in transit nationally or internationally whatever the means of transport, and all our inventories wherever they are located. Sharing risk between our entities through Carraig means that we can set deductibles at appropriate levels, for instance differentiating between goods that require temperature controlled distribution and those that do not. We have developed a prevention program with assistance from experts, implementing best practices in this area at our distribution sites.

Our General & Product Liability program was renewed in 2018 for all our subsidiaries worldwide wherever it was possible to do so, despite reluctance in the insurance and reinsurance market to cover product liability risks for large pharmaceutical groups. For several years, insurers have been reducing product liability cover because of the difficulty of transferring risk for some products that have been subject to numerous claims. This applies to a few of our products and has led us to increase, year by year, the extent to which we self-insure.

The principal risk exposure for our pharmaceutical products is covered with low deductibles at country level, the greatest level of risk being retained. The level of risk self-insured by Sanofi (including via Carraig) before the market attachment point, enables us to retain control over the management and prevention of risk. Our negotiations with third-party insurers and reinsurers are tailored to our specific risks. In particular, they allow for differential treatment of products in the development phase, for the discrepancies in risk exposure between European countries and the United States, and for specific issues arising in certain jurisdictions such as generics coverage in the United States. Coverage is adjusted every year in order to take into account the relative weight of new product liability risks, such as those relating to rare diseases or to healthcare products which do not require marketing approval.

Our cover for risks that are not specific to the pharmaceutical industry (general liability) is designed to address the potential impacts of our operations.

For all the insurance programs handled by Carraig, outstanding claims are covered by provisions for the estimated cost of settling all claims incurred but not paid at the balance sheet date, whether reported or not, together with all related claims handling expenses. Where there is sufficient data history from Sanofi or from the market for claims made and settled, management – with assistance from independent actuaries – prepares an actuarial estimate of our exposure to unreported claims for the risks covered. The actuaries perform an actuarial valuation of the

company’s IBNR (Incurred But Not Reported) and ALAE (Allocated Loss Adjustment Expense) liabilities at year end. Two ultimate loss projections (based upon reported losses and paid losses, respectively) are computed each year using various actuarial methods including the Bornhuetter-Ferguson method; those projections form the basis for the provisions set.

The Directors & Officers Liability program protects all legal entities under our control, and their directors and officers. Carraig is not involved in this program.

We also operate other insurance programs, but these are of much lesser importance than those described above.

All our insurance programs are backed by best in class insurers and reinsurers and are designed in such a way that we can integrate most newly acquired businesses without interruption of cover. Our cover has been designed to reflect our risk profile and the capacity available in the insurance market. By centralizing our major programs, we are able to provide world-class protection while reducing costs.

B.10. Health, Safety and Environment

Our manufacturing and research operations are subject to increasingly stringent health, safety and environmental (HSE) laws and regulations. These laws and regulations are complex and rapidly changing, and Sanofi invests the necessary sums in order to comply with them. This investment, which aims to respect health, safety and the environment, varies from year to year.

Applicable environmental laws and regulations may require us to eliminate or reduce the effects of chemical substance discharge at our various sites. The sites in question may belong to Sanofi, and may be currently operational, or may have been owned or operational in the past. In this regard, Sanofi may be held liable for the costs of removal or remediation of hazardous substances on, under or in the sites concerned, or on sites where waste from activities has been stored, without regard to whether the owner or operator knew of or under certain circumstances caused the presence of the contaminants, or at the time site operations occurred the discharge of those substances was authorized.

As is the case for a number of companies in the pharmaceutical, chemical and intense agrochemical industries, soil and groundwater contamination has occurred at some of our sites in the past, and may still occur or be discovered at others. In Sanofi’s case, such sites are mainly located in the United States, Germany, France, Hungary, Italy and the United Kingdom. As part of a program of environmental surveys conducted over the last few years, detailed assessments of the risk of soil and groundwater contamination have been carried out at current and former Sanofi sites. In cooperation with national and local authorities, Sanofi regularly assesses the rehabilitation work required and carries out such work when appropriate. Long-term rehabilitation work is in progress or planned in Mount Pleasant, East Palo Alto and Portland in the United States; Barceloneta in

 

 

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Puerto Rico; Frankfurt in Germany; Brindisi in Italy; Dagenham in the United Kingdom; Ujpest in Hungary; Beaucaire, Valernes, Limay, Romainville, Neuville and Vitry in France; and on a number of sites divested to third parties and covered by contractual environmental guarantees granted by Sanofi.

We may also have potential liability for investigation and cleanup at several other sites. We have established provisions for the sites already identified and to cover contractual guarantees for environmental liabilities for sites that have been divested. In France specifically, we have provided the financial guarantees for environmental protection required under French regulations.

Potential environmental contingencies arising from certain business divestitures are described in Note D.22.d to the consolidated financial statements. In 2018, Sanofi spent 62 million on rehabilitating sites previously contaminated by soil or groundwater pollution.

Due to changes in environmental regulations governing site remediation, our provisions for remediation obligations may not be adequate due to the multiple factors involved, such as the complexity of operational or previously operational sites, the nature of claims received, the rehabilitation techniques involved, the planned timetable for rehabilitation, and the outcome of discussions with national regulatory authorities or other potentially responsible parties, as in the case of multiparty sites. Given the long industrial history of some of our sites and the legacy obligations arising from the past involvement of Aventis in the chemical and agrochemical industries, it is impossible to quantify the future impact of these laws and regulations with precision. See “Item 3.D. Risk Factors – Environmental Risks of Our Industrial Activities”.

We have established, in accordance with our current knowledge and projections, provisions for cases already identified and to cover contractual guarantees for environmental liabilities relating to sites that have been divested. In accordance with Sanofi standards, a comprehensive review is carried out once a year on the legacy of environmental pollution. In light of data collected during this review, we adjusted our provisions to approximately 680 million as of December 31, 2018 versus 685 million as of December 31, 2017. The terms of certain business divestitures, and the environmental obligations and retained environmental liabilities relating thereto are described in Note D.22. to our consolidated financial statements.

To our knowledge, Sanofi did not incur any liability in 2018 for non-compliance with current HSE laws and regulations that could be expected to significantly jeopardize its activities, financial situation or operating income. We also believe that we are in substantial compliance with current HSE laws and regulations and that all the environmental permits required to operate our facilities have been obtained.

Regular HSE audits are carried out by Sanofi in order to assess compliance with standards (which implies compliance with regulations) and to initiate corrective measures (50 internal audits

performed by 87 auditors in 2018). Moreover, around 200 specific visits were performed jointly with experts representing our insurers.

Sanofi has implemented a worldwide master policy on health, safety and environment to promote the health and well-being of the employees and contractors working on its sites and respect for the environment. We consider this master policy to be an integral part of our commitment to social responsibility. In order to implement this master policy, Sanofi key requirements have been drawn up in the key fields of HSE management, HSE leadership, safety in the workplace, process safety, occupational hygiene, health in the workplace and protection of the environment.

Health

From the development of compounds to the commercial launch of new drugs, Sanofi research scientists continuously assess the effect of products on human health. This expertise is made available to employees through two committees responsible for chemical and biological risk assessment. Sanofi’s COVALIS Committee is responsible for the hazard determination and classification of all active pharmaceutical ingredients and synthesis intermediates handled at Sanofi facilities. This covers all active ingredients handled in production at company sites or in processes sub-contracted for manufacture. Any important issues involving raw materials or other substances that lack established occupational exposure limits may also be reviewed. The COVALIS Committee determines the occupational exposure limits required within Sanofi. Our TRIBIO Committee is responsible for classifying all biological agents according to their degree of pathogenicity, and applies rules for their containment and the preventive measures to be respected throughout Sanofi. See “Item 3. Key Information – D. Risk Factors – Environmental Risks of Our Industrial Activities – Risks from the handling of hazardous materials could adversely affect our results of operations”.

Appropriate occupational hygiene practices and programs are defined and implemented in each site. These practices consist essentially of containment measures for collective and individual protection against exposure in all workplaces where chemical substances or biological agents are handled. All personnel are monitored with an appropriate medical surveillance program, based on the results of professional risk evaluations linked to their duties.

In addition, dedicated resources have been created to implement the EU Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH). To fully comply with the new European Regulation on Classification, Labeling and Packaging of chemicals, Sanofi has registered the relevant hazardous chemical substances with the European Chemicals Agency (ECHA).

 

 

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Safety

Sanofi has rigorous policies to identify and evaluate safety risks and to develop preventive safety measures, and methods for checking their efficacy. Additionally, Sanofi invests in training that is designed to instill in all employees a sense of concern for safety, regardless of their duties. These policies are implemented on a worldwide scale to ensure the safety of all employees and to protect their health. Each project, whether in research, development or manufacturing, is subject to evaluation procedures, incorporating the chemical substance and process data communicated by the COVALIS and TRIBIO Committees described above. The preventive measures are designed primarily to reduce the number and seriousness of work accidents and to minimize exposures involving permanent and temporary Sanofi employees as well as our sub-contractors.

The French chemical manufacturing sites in Aramon, Sisteron and Vertolaye, as well as the plants located in the Hoechst Industry Park in Frankfurt, Germany, and the chemical production site in Budapest, Hungary, are listed Seveso III (from the name of the European directive that deals with potentially dangerous sites through a list of activities and substances associated with classification thresholds). In accordance with French law on technological risk prevention, the French sites are also subject to heightened security inspections due to the toxic or flammable materials stored on the sites and used in the operating processes.

Risk assessments of processes and installations are drawn up according to standards and internal guidelines incorporating the best state of the art benchmarks for the industry. These assessments are used to fulfill regulatory requirements and are regularly updated. Particular attention is paid to any risk-generating changes such as process or installation changes, as well as changes in production scale and transfers between industrial or research units.

We have specialized process safety-testing laboratories that are fully integrated into our chemical development activities, apply methods to obtain the physico-chemical parameters of manufactured chemical substances (intermediate chemical compounds and active ingredients) and apply models to measure the effect of potentially leachable substances in the event of a major accident. In these laboratories the parameters for qualifying hazardous reactions are also determined, in order to define scale-up process conditions while transferring from development stage to industrial scale. All these data ensure that our risk assessments are relevant.

We believe that the safety management systems implemented at each site, the hazard studies carried out and the risk management methods implemented, as well as our third-party property insurance policies covering any third-party physical damage, are consistent with legal requirements and the best practices in the industry.

 

Environment

We have committed to an ambitious policy aimed at limiting the direct and indirect impacts of our activities on the environment, throughout the life cycle of our products. We have identified five major environmental challenges relating to our businesses: greenhouse gas emissions and climate disruption; water; pharmaceuticals in the environment; waste; and biodiversity.

The initiatives already implemented since 2010 are continuing, and we have been keen to give them fresh impetus through the Planet Mobilization program. Reflecting our environment strategy out to 2025, the program sets more ambitious targets for reducing environmental impacts across the entire value chain. Planet Mobilization is a global project that involves all of the Company’s resources in defining objectives and engaging with external partners.

Compared with 2015 figures, we are undertaking to halve our carbon emissions by the end of 2025 and reach carbon-neutral status by 2050 on our scope 1 & 2 (industrial, R&D and tertiary sites, including the medical rep fleet). We have also set ourselves the target of achieving sustainable water resource management, especially at sites which are under hydric stress. On this new scope, by the end of 2018, we had reduced CO2 emissions by 9% and water consumption by 14%.

Overall waste recycling at sites is already above 72% and is expected to be more than 90% by the end of 2025. The discharge rate had dropped to 8% at the end of 2017 and we have committed to move towards a maximum of 1% by 2025. Biodiversity management at sites is also a priority, with the aim of making all employees aware of this challenge and implementing risk assessment and management plans at priority sites.

Finally, we are pursuing the policy we began in 2010 of managing pharmaceutical products in the environment throughout their life cycles. At the end of 2018, all priority chemical sites had been evaluated and were shown to present no risk to the environment. The assessment program was extended to other sites, starting with the pharmaceutical production sites. In 2018, eight sites implemented the program.

In line with this approach, we have committed to the “Roadmap AMR 2020” initiative, which aims to combat microbial resistance to antibiotics. The initiative brings together thirteen of the major players in the pharmaceutical industry, and will involve co-producing reference guides and methodologies for sustainable management of antibiotics in the pharmaceutical sector. The initiative includes a specific commitment with respect to antibiotic production sites that are operated by signatories or their suppliers, involving firstly the definition and deployment of a shared framework for managing potential waste, and secondly the establishment of environmental thresholds. (See “Cautionary statement regarding forward-looking statements”).

 

 

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C/ Organizational Structure

C.1. Significant Subsidiaries

Sanofi is the holding company of a consolidated group consisting of over 300 companies. The table below sets forth our significant

subsidiaries as of December 31, 2018. For a fuller list of the principal companies in our consolidated group, see Note F. to our consolidated financial statements, included in this annual report at Item 18.

 

 

Significant subsidiary

  

Date of
incorporation

 

Country of
incorporation

 

Principal activity

   Financial
and voting
interest
 
Aventis Inc.    07/01/1968   United States   Pharmaceuticals      100%  
Aventis Pharma SA    09/24/1974   France   Pharmaceuticals      100%  
Genzyme Corporation    11/21/1991   United States   Pharmaceuticals      100%  
Hoechst GmbH    07/08/1974   Germany   Pharmaceuticals      100%  
Sanofi-Aventis Deutschland GmbH    06/30/1997   Germany   Pharmaceuticals      100%  
Sanofi-Aventis US LLC    06/28/2000   United States   Pharmaceuticals      100%  
Sanofi-Aventis Participations SAS    02/25/2002   France   Pharmaceuticals      100%  
Sanofi Pasteur SA    02/08/1989   France   Vaccines      100%  
Sanofi Pasteur Inc.    01/18/1977   United States   Vaccines      100%  
Sanofi Winthrop Industrie    12/11/1972   France   Pharmaceuticals      100%  
Chattem, Inc.    11/11/1909   United States   Pharmaceuticals      100%  

 

Since 2009, we have transformed Sanofi through numerous acquisitions (see “A. History and Development of the Company” above), in particular those of Genzyme in April 2011, Merial in September 2009 and Bioverativ and Ablynx in January 2018. The financial effects of the Genzyme acquisition are presented in Note D.1.3. to our consolidated financial statements for the year ended December 31, 2013, included in our annual report on Form 20-F for that year. The financial effects of the Merial acquisition are presented in Note D.1.3. to our consolidated financial statements for the year ended December 31, 2010, included in our annual report on Form 20-F for that year. At the end of December 2016, Sanofi Pasteur and MSD (known as Merck in the United States and Canada) ended their Sanofi Pasteur MSD joint venture. The financial effects of the resulting divestment/acquisition are presented in Note D.1.2. to our consolidated financial statements for the year ended December 31, 2016, included in our annual report on Form 20-F for that year. On January 1, 2017, Sanofi and Boehringer Ingelheim (BI) finalized the strategic transaction agreed in June 2016, involving the exchange of Sanofi’s Animal Health business (Merial) for BI’s Consumer Healthcare business. The financial effects of this transaction are presented in Note D.1. to our consolidated financial statements for the year ended December 31, 2017, included in our annual report on Form 20-F for that year. The financial effects of the Bioverativ and Ablynx acquisitions are presented in Note D.1.1. to our consolidated financial statements, included at Item 18 of this annual report on Form 20 F.

In certain countries, we carry on some of our business operations through joint ventures with local partners. In addition, we have entered into worldwide collaboration agreements (i) with

Regeneron, relating to Zaltrap®, human therapeutic antibodies such as Praluent® and antibodies in immunology such as Dupixent® and Kevzara®; and (ii) with BMS, relating to Plavix®. For further information, refer to Note C. “Principal Alliances” to our consolidated financial statements.

C.2. Internal organization of activities

Sanofi and its subsidiaries collectively form a group organized around three activities: Pharmaceuticals, Consumer Healthcare and Vaccines.

Within Sanofi, responsibility for research and development (R&D) in their respective fields rests with Sanofi SA and Genzyme Corporation in Pharmaceuticals, and with Sanofi Pasteur and Sanofi Pasteur, Inc. in Vaccines. However, within our integrated R&D organization, strategic priorities are set and R&D efforts coordinated on a worldwide scale. In fulfilling their role in R&D, the aforementioned companies subcontract R&D to those of their subsidiaries that have the necessary resources. They also license patents, manufacturing know-how and trademarks to certain of their French and foreign subsidiaries. Those licensee subsidiaries manufacture, commercialize and distribute the majority of our products, either directly or via local distribution entities.

Our industrial property rights, patents and trademarks are mainly held by the following companies:

 

 

Pharmaceuticals: Sanofi, Sanofi Mature IP, Sanofi Biotechnology SAS (France), Sanofi-Aventis Deutschland GmbH (Germany), Ablynx (Belgium), and Genzyme Corporation and Bioverativ Inc. (US);

 

 

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Vaccines: Sanofi Pasteur (France) and Sanofi Pasteur, Inc. (US).

For a description of our principal items of property, plant and equipment, see “– D. Property, Plant and Equipment” below. Our property, plant and equipment is held mainly by the following companies:

 

 

in France: Sanofi Pasteur SA, Sanofi Chimie, Sanofi Winthrop Industrie, and Sanofi-Aventis Recherche & Développement;