Sanofi delivers strong 2019 business EPS growth of 6.8% at CER

(1) In order to facilitate an understanding of operational performance, Sanofi comments on the business net income statement. Business net income is a non-GAAP financial measure (see Appendix 11 for definitions). The consolidated income statement for Q4 2019 is provided in Appendix 3 and a reconciliation of reported IFRS net income to business net income is set forth in Appendix 4; (2) Q4 2019 and full-year 2019 included impairment charge of €1,581 million and €3,604 million, respectively, mainly related to Eloctate^®; (3) Changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (see Appendix 11); (4) Constant Structure: Adjusted for divestment of European generics business and sales of Bioverativ products to SOBI; (5) Base for business EPS growth is €5.97, reflecting 2 cents impact from IFRS 16 (see appendix 11).

2019 fourth-quarter and full-year Sanofi sales

In the fourth quarter of 2019, Company sales were €9,608 million, up 6.8% on a reported basis. Exchange rate movements had a positive effect of 2.1 percentage points, mainly driven by the strength of the U.S. dollar and the Japanese yen. At CER, Company sales increased 4.7%. Full-year 2019 Company sales reached €36,126 million, up 4.8% on a reported basis. Exchange rate movements had a favorable effect of 2.0 percentage points. At CER, Company sales were up 2.8%.

Global Business Units

At its Capital Markets Day in December 2019, Sanofi announced plans for a new GBU organization⁽⁷⁾ which will include three core GBUs, Specialty Care, General Medicines and Vaccines together with a standalone Consumer Healthcare business. The General Medicines GBU will be created from two existing GBUs, Primary Care and China & Emerging Markets. Each GBU will include its respective Emerging Markets sales contribution.

Olivier Charmeil has been appointed to lead the General Medicines GBU. Olivier is one of Sanofi’s most seasoned business leaders. He will draw on his recent experience leading the China & Emerging Markets GBU to engage with customers and markets and ensure that our combined Diabetes, Cardiovascular and Established Products business drives growth and delivery for patients around the world.

Alongside the GBU reorganization, Sanofi will implement changes in the configuration of its Executive Committee. This leadership committee will now include, in addition to the four GBU Heads, the global Heads of R&D, Industrial Affairs, Finance, Human Resources, and Legal, together with the Chief Digital Officer. A leaner configuration will foster agility and speed in decision-making, in line with the fourth priority of the company’s new strategy (“Reinvent How We Work”).

The table below presents sales by Global Business Unit (GBU).

(a) Does not include China & Emerging Markets sales – see definition page 9; (b) Includes Emerging Markets sales for Primary Care and Specialty Care; (c) +19.3% at CS -Adjusted for Bioverativ acquisition and sales of Bioverativ products to SOBI – see page 5; (d) -10.9% at CS; (e) +3.6% at CS – Adjusted for Bioverativ and sales of Bioverativ products to SOBI and disposal of European Generics business.

Global Franchises

The tables below present fourth-quarter and full-year 2019 sales by the global franchise, including Emerging Markets sales, to facilitate comparisons. Appendix 1 provides a reconciliation of sales by GBU and franchise.

(6) See Appendix 11 for definitions of financial indicators. (7) subject to consultation with social partners and works councils.

(1) +19.9 % at CS- Adjusted for Bioverativ and sales of products to SOBI – see page 5; (2) +0.8% at CS- see page 5; (3) -0.8% at CS -see page 5; (4) -5.5% at CS;
(5) -10.9% at CS; (6) including Generics; (7) -4.1% at CS; (8) -7.9% at CS; (9) +3.6% at CS- Adjusted for Bioverativ and sales of Bioverativ products to SOBI and disposal of European Generics business;(10) +1.5% at CS – Adjusted for Bioverativ and sales of Bioverativ products to SOBI and disposal of European Generics business.

Pharmaceuticals

Fourth-quarter Pharmaceutical sales were up 2.4% to €6,548 million, mainly driven by Dupixent^® which was partially offset by Diabetes and Established Rx Products. Full-year 2019 sales for Pharmaceuticals increased by 2.2% (up 3.3% at CS) to €25,708 million, reflecting the disposal of the European generics business at the end of the third quarter of 2018.

Specialty Care franchises

Immunology franchise

Dupixent^® (collaboration with Regeneron) generated sales of €679 million in the fourth quarter (up 135%). In the U.S., Dupixent^® sales of €545 million (up 135%) were driven by continued growth in atopic dermatitis which benefited from increased penetration in adult patients and launch in the adolescent age group (12 to 17 years of age) in March, together with rapid uptake in asthma and launch in chronic rhinosinusitis with nasal polyposis (CRSwNP, approved in June). In the U.S., Dupixent^® NBRx and TRx more than doubled in the quarter compared to the fourth quarter of 2018, growing at 108% and 117%, respectively. Fourth-quarter sales of Dupixent^® in Europe rose to €64 million (up 117%) following additional launches while sales in Japan were €46 million (versus €13 million in the fourth quarter of 2018). Full-year 2019 Dupixent^® sales increased 152% to €2,074 million. Dupixent^® is now launched in 34 countries for adult atopic dermatitis; among these, Dupixent^® is also launched in adolescent atopic dermatitis in 10 countries, in asthma in 8 countries and in CRSwNP in 4 countries. Potentially as many as 89 additional country launches are planned across these indications for 2020.

Kevzara^® (collaboration with Regeneron) sales were €54 million (up 68%) in the fourth quarter, of which €34 million was generated in the U.S. (up 39%). Full-year 2019 Kevzara^® sales increased by 114% to €185 million.

Multiple Sclerosis franchise

Fourth-quarter Multiple Sclerosis (MS) sales decreased by 3.0% to €540 million. Over the period, Aubagio^® sales growth in the U.S. was more than offset by lower Lemtrada^® sales. Full-year 2019 MS sales increased by 1.8% to €2,160 million.

Fourth-quarter Aubagio^® sales increased by 5.4% to €482 million, driven by the U.S. performance (up 7.1% to €343 million). Full-year 2019 Aubagio^® sales increased 10.0% to €1,879 million. As of January 1, Aubagio^® was excluded from the national formulary at ESI, which covers roughly 14% of total commercial lives in the US. Contracted access positions for Aubagio^® remain strong for other national health plans and national PBMs.

In the fourth quarter, Lemtrada^® sales decreased 42% to €58 million due to lower sales in the U.S. (down 29% to €34 million) and in Europe (down 57% to €16 million), reflecting increased global competition and the update to the EU label. Full-year 2019 Lemtrada^® sales decreased by 32% to €281 million.

Oncology franchise

Fourth-quarter Oncology sales increased 11.4% to €441 million driven by the U.S. (up 18.4% to €174 million) and Europe (up 15.7% to €102 million). Full-year 2019 Oncology sales increased by 10.6% to €1,695 million.

Fourth-quarter Jevtana^® sales increased 9.6% to €128 million driven by the U.S. and by the publication of the results of the CARD study in metastatic castration-resistant prostate cancer at ESMO (European Society for Medical Oncology) in September 2019. Full-year 2019 Jevtana^® sales were up 11.1% to €484 million. In the fourth quarter, Thymoglobulin^® sales increased 12.8% to €89 million, driven by the U.S.  2019 sales of Thymoglobulin^® increased 16.5% to €354 million.

Libtayo^® (collaboration with Regeneron) approved 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 had ex-U.S. sales of €12 million and €16 million in the fourth quarter and full-year 2019, respectively. In 2019 Libtayo^® was launched in 7 countries outside the U.S. and there are 13 additional country launches planned by the end of 2020. U.S. Libtayo^® sales are reported by Regeneron.

Rare Disease franchise

In the fourth quarter, Rare Disease sales increased 1.6% to €815 million against a high base for comparison. This performance was driven by Emerging Markets (up 5.3% to €154 million) and the U.S. (up 2.7% to €309 million). In Europe, over the period, sales were flat at €263 million. Full-year 2019 Rare Disease sales increased 6.5% to €3,165 million.

Fourth-quarter Gaucher (Cerezyme^® and Cerdelga^®) sales decreased 1.3% to €232 million, impacted by Cerezyme^® sales phasing effects in Emerging Markets which offset strong Cerdelga^® performance. Fourth-quarter Cerdelga^® sales increased 22.7% to €55 million, with sales up 18.8% in Europe (to €20 million) and up 19.2% in the U.S. (to €31 million). Full-year 2019 Gaucher sales were €914 million, up 7.0%.
Fourth-quarter Pompe (Myozyme^®/Lumizyme^®) sales grew 4.4% to €238 million, driven by the U.S. (up 7.6% to €88 million) and Emerging Markets (up 16.7% to €41 million) and supported by positive trends in naïve patient accrual. Full-year 2019 Myozyme^®/Lumizyme^® sales increased 8.3% to €918 million.

Fourth-quarter Fabry (Fabrazyme^®) sales grew 2.4% to €215 million, driven by Emerging Markets (up 15.4% to €29 million) and Europe (up 6.7% to €48 million). Over the period, U.S. sales decreased 1.0% to €106 million. Full-year 2019 Fabrazyme^® sales were up 5.3% to €813 million.

Rare Blood Disorder franchise

* -11.6% at CS in 2019 – see footnote 8; **+12.4% at CS in 2019  – see footnote 8; *** +0.8% at CS in 2019 – see footnote 8

Bioverativ was consolidated in Sanofi’s Financial Statements from March 9, 2018. Fourth-quarter sales of the Rare Blood Disorder franchise were €301 million, down 0.7%. Fourth-quarter U.S. sales were €210 million, down 13.6%. Non-U.S. sales were €91 million with Japan as the primary contributor. Full-year 2019 sales of the Rare Blood Disorder franchise were €1,152 million, up 0.8% at CS⁽⁸⁾.

Eloctate^® sales were €177 million in the fourth quarter, down 12.8%. In the U.S., sales of the product decreased 25.6% to €123 million, reflecting ongoing competitive pressure. In the Rest of the World region, fourth-quarter Eloctate^® sales increased 35.3% to €47 million. Full-year 2019 Eloctate^® sales were €684 million, down 11.6% at CS⁽⁸⁾.

Alprolix^® sales were €108 million in the fourth quarter, up 9.5%. In the U.S., sales of the product decreased 1.3%  to €77 million, related to shipment timing. In the Rest of the World region, Alprolix^® sales increased 47.4% to €30 million due to growth in product sales to SOBI. Full-year 2019 Alprolix^® sales were €412 million, up 12.4% at CS⁽⁸⁾.

Cablivi^® for the treatment of adults with acquired thrombotic thrombocytopenic purpura (aTTP) generated fourth-quarter sales of €16 million. The number of patients treated with Cablivi increased over 30% compared to the third quarter to approximately 150 patients. Sales were sequentially lower primarily due to price adjustments in Europe and increased assistance program participations in the U.S. In the U.S., where Cablivi^® was launched in April, sales were €10 million. In Europe, the product is commercially available in Germany, Denmark, Austria, Belgium and the Netherlands. Cablivi^® has a temporary license to be sold in France. Full-year 2019 Cablivi^® sales were €56 million.

Primary Care franchises

Cardiovascular franchise

Fourth-quarter Praluent^® (collaboration with Regeneron) sales decreased 11.0% to €75 million, reflecting lower sales in the U.S. (down 26.9% to €39 million) which were impacted by significantly higher rebates. In Europe, Praluent^® sales increased 4.3% to €24 million despite the suspension of sales in Germany in August following the Regional Court of Dusseldorf ruling in the ongoing patent litigation. Full-year 2019 Praluent^® sales decreased 3.8% to €258 million.

In December 2019, Sanofi and Regeneron announced their intent to simplify their antibody collaboration for Kevzara^® and Praluent^® by restructuring into a royalty-based agreement. Under the proposed restructuring, Sanofi is expected to gain sole global rights to Kevzara^® and sole ex-U.S. rights to Praluent^®. Regeneron is expected to gain sole U.S. rights to Praluent^®. Under the proposed terms of the agreement, each party will be solely responsible for funding development and commercialization expenses in their respective territories. These changes are expected to increase efficiency and streamline operations for the products. Completion of the agreement is expected to be finalized in the first quarter of 2020.

(8) Growth comparing 2019 sales versus full 2018 sales at CER. Sales of products to SOBI were initially recorded in “other revenues” in H1 2018 and in sales from H2 2018; the H1 2018 reclassification was reflected in Q3 2018. H1 2018 and Q3 2018 sales were adjusted accordingly for calculation of CS. Unaudited data.
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Diabetes franchise

In the fourth quarter, global Diabetes sales decreased 9.2% to €1,268 million, due to lower glargine (Lantus^® and Toujeo^®) sales in the U.S.  Fourth-quarter U.S. Diabetes sales were down 20.5% to €454 million, reflecting the increased contribution to the coverage gap related to Medicare Part D and a continued decline in average U.S. glargine net prices. Fourth-quarter sales in Emerging Markets increased 7.4% to €407 million. Fourth-quarter sales in Europe decreased 4.4% to €305 million despite Toujeo^® growth. Full-year 2019 global Diabetes sales decreased 8.2% to €5,113 million. Broad U.S. payer coverage for key Diabetes brands is expected to be largely maintained in 2020.

In the fourth quarter, Lantus^® sales were €729 million, down 17.2%. In the U.S., Lantus^® sales decreased 26.9% to €286 million, mainly reflecting lower average net price and the increased contribution to the coverage gap related to Medicare Part D. In Europe, fourth-quarter Lantus^® sales were €146 million, down 13.1% due to biosimilar glargine competition and patients switching to Toujeo^®. In Emerging Markets, fourth-quarter Lantus^® sales were stable at €244 million reflecting lower sales in the Middle-East. Full-year 2019 Lantus^® sales decreased 17.0% to €3,012 million.
On January 28, 2020, Sanofi’s petition for rehearing the Court of Appeals for the Federal Circuit decision affirming the December 2018 PTAB decisions invalidating the Lantus^® formulation patents was denied. Mylan currently does not have FDA approval for either its vial or pen product.

Fourth-quarter Toujeo^® sales increased 8.5% to €234 million. In the U.S., fourth-quarter Toujeo^® sales were €77 million, down 7.4% mainly reflecting lower average net price and the increased contribution to the coverage gap related to Medicare Part D. In Europe and Emerging Markets, fourth-quarter Toujeo^® sales were €87 million (up 14.3%) and €48 million (up 48.4%), respectively. Full-year 2019 Toujeo^® sales increased 3.2% to €883 million.

Fourth-quarter and full-year 2019 Amaryl^® sales were €79 million (stable) and €334 million (down 2.1%), respectively. In China, the second wave of the nationwide VBP (volume-based procurement) program includes glimepiride in 2020 and Sanofi has opted not to bid with Amaryl^®. In China, Amaryl^® sales were €136 million (up 3.1%) in 2019. Sanofi expects sales of Amaryl^® in China to decline significantly in 2020 due to the extended VBP program.

Fourth-quarter Apidra^® sales decreased 2.2% to €88 million. Lower sales in the U.S. (down 47.1% to €10 million) offset growth in Emerging Markets (up 20.7% to €34 million). Full-year 2019 Apidra^® sales were €344 million, down 3.6%.

Admelog^® (insulin lispro injection) generated sales of €56 million (down 1.8%) in the fourth quarter. Admelog^® sales in the U.S. were €52 million, down 7.4% due to the WAC price adjustment of -44% which took effect on July 1, 2019. Full-year 2019 Admelog^® sales were €250 million versus €93 million in 2018. Sanofi expects lower Admelog^® sales in 2020 due to the full-year impact of the U.S. WAC price adjustment.

Fourth-quarter and full-year 2019 Soliqua^® 100/33 (insulin glargine 100 Units/mL & lixisenatide 33 mcg/mL injection) and Suliqua™ sales increased 41% (to €39 million) and 60% (to €122 million), respectively.

Established Rx Products

In the fourth quarter, Established Rx Products sales decreased 6.3% to €2,276 million, primarily reflecting the decline in Plavix^® and Aprovel^® family sales in China due to net price adjustments and inventory reduction in the channel following the nationwide implementation of the VBP program in December. Full-year 2019 Established Rx Products sales decreased 8.3% to €9,559 million (down 4.1% at CS) reflecting divestment of the European generics business at the end of the third quarter of 2018.

Fourth-quarter Lovenox^® sales decreased 4.0% to €335 million, reflecting lower Mature Markets sales (down 14.4% to €197 million) due to biosimilar competition in several countries in Europe. In Emerging Markets, Lovenox^® sales grew 16.2% to €138 million. Full-year 2019 Lovenox^® sales were down 7.4% to €1,359 million.

In the fourth quarter, Plavix^® sales were down 36.9% to €212 million, primarily reflecting the decrease in China (sales down 69.1% to €55 million) due to net price adjustments and inventory reduction in the channel following the nationwide implementation of the VBP program in December. In Japan, Plavix^® sales decreased 21.1% to €32 million due to a price reduction in October 2019. Full-year 2019 Plavix^® sales decreased 8.8% to €1,334 million.

Fourth-quarter Aprovel^®/Avapro^® sales were down 15.2% to €131 million, primarily reflecting the decrease in China (sales down 40.6% to €40 million) due to net price adjustments and inventory reduction in the channel following nationwide implementation of the VBP program in December. Full-year 2019 Aprovel^®/Avapro^® sales increased 2.0% to €674 million.

As previously announced, Sanofi expects sales of Plavix^® and the Aprovel^® family in China to decline by around 50% in 2020 due to implementation of the VBP program.

Fourth-quarter Renvela^®/Renagel^® (sevelamer) sales decreased 15.6% to €82 million, due to generic competition in the U.S. (down 40.4% to €35 million) and despite growth in China. Full-year 2019 Renvela^®/Renagel^® sales decreased 26.5% to €311 million.

In the fourth quarter, Generics sales decreased 0.4% to €271 million, including stable sales in Emerging Markets (at €172 million). Full-year 2019 Generics sales were €1,075 million, down 27.9% (up 3.9% at CS), reflecting the divestment of the European generics business at the end of the third quarter of 2018.

Consumer Healthcare

CHC sales by geography and category are provided in Appendix 1.

In the fourth quarter, Consumer Healthcare (CHC) sales decreased 5.2% to €1,152 million. Over half of the decline was related to the voluntary recall of Zantac^®. In addition, divestments of non-core products and product suspensions due to changing regulatory requirements impacted sales performance. These factors are expected to have a dampening effect on CHC performance through the first half of 2020. Full-year 2019 CHC sales decreased 0.8% to €4,687 million.

In September 2019, the U.S. Food and Drug Administration (FDA) and Health Canada issued public statements alerting that some ranitidine medicines, including Zantac^® OTC, could contain NDMA at low levels and asked manufacturers to conduct testing. Evaluations are ongoing on both drug substance (active ingredient) and finished drug product. Due to inconsistencies in preliminary test results of the active ingredient used in the U.S. and Canadian products, Sanofi decided to conduct the voluntary recall in the U.S. and Canada in October 2019.

In Europe, fourth-quarter CHC sales decreased 11.7% to €325 million, impacted by changing regulatory requirements as well as divestments of non-strategic brands. Full-year 2019 CHC sales in Europe were down 6.4% to €1,311 million.

In the U.S., fourth-quarter CHC sales decreased 12.8% to €246 million, reflecting the impact of the Zantac^® recall. In the fourth quarter, Zantac^® sales were -€3m compared to €31 million in the fourth quarter of 2018, reflecting the recall as well as additional provisions for returns. Full-year 2019 CHC sales in the U.S. were down 3.6% to €1,086 million.

In Emerging Markets, fourth-quarter CHC sales increased 3.0% to €425 million, driven by performance in Asia. Full-year 2019 CHC sales in Emerging Markets increased 4.7% to €1,652 million.

In the Rest of the World, fourth-quarter CHC sales increased 2.7% to €156 million, driven by the strong performance of Allegra^® in Japan.

Vaccines

Fourth-quarter Vaccines sales increased 22.0% to €1,908 million as the majority of U.S. influenza vaccines shipments occurred in the quarter, reflecting the delay in strain selection by the WHO at the beginning of the year. As a consequence, U.S. fourth-quarter Vaccines sales were up 33.1% to €1,002 million. In Europe and Emerging Markets, fourth-quarter Vaccines sales were up 15.1% (to €275 million) and up 14.2% (to €552 million), respectively, also driven by influenza vaccines performance. Full-year 2019 Vaccines sales were up 9.3% to €5,731 million.

In the fourth quarter, Polio/Pertussis/Hib (PPH) vaccines sales decreased 13.7% to €443 million, reflecting unfavorable delivery phasing of Hexaxim^® in Emerging Markets. Fourth-quarter Emerging Markets PPH vaccines sales were down 16.4% to €243 million. In the U.S., PPH vaccines sales were up 3.9% to €110 million in the fourth quarter driven by Pentacel^®. In Europe, over the period, PPH vaccines sales were down 9.6% to €75 million due to unfavorable delivery phasing on pediatric vaccines. Full-year 2019 PPH vaccines sales were up 9.8% to €1,946 million.

Influenza vaccine sales increased 69.1% to €1,039 million in the fourth quarter, as the majority of U.S. influenza vaccine shipments occurred in the quarter (up 65.7% to €705 million). U.S. performance also benefited from a successful influenza differentiation strategy. Over the period, influenza vaccines sales in Europe (up 40.9% to €130 million) and in Emerging Markets (up 139% to €163 million) benefited from further quadrivalent vaccines penetration as well as an increase in vaccination coverage rates. Full-year 2019 influenza vaccines sales increased 7.3% to €1,891 million. U.S. influenza vaccines sales were stable (up 0.2%) in 2019 as a result of reserves for estimated higher returns, reflecting the later timing of supply compared with the previous year.

Fourth-quarter Menactra^® sales decreased 5.4% to €124 million, reflecting order phasing in the U.S. and continued expansion in Emerging markets. Full-year 2019 Menactra^® sales increased 8.6% to €682 million.

Fourth-quarter Travel and other endemic vaccines sales were €123 million, down 7.7%, reflecting lower rabies vaccines sales. Full-year 2019 Travel and other endemic vaccines sales were up 8.4% to €539 million.

Fourth-quarter Adult Booster vaccines sales were up 6.7% to €147 million, driven by performance in Europe (up 18.2% to €39 million) and Emerging Markets (up 50.0% to €27 million). In the US., over the period, Adult Booster vaccines were down 5.3% to €74 million, reflecting delivery phasing for Adacel^®. Full-year 2019 Adult Booster vaccines sales increased 16.2% to €563 million.

Company sales by geographic region

1. World excluding U.S., Canada, Western & Eastern Europe (except Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico
2. Russia, Ukraine, Georgia, Belarus, Armenia and Turkey
3. Western Europe + Eastern Europe except Eurasia
4. Japan, South Korea, Canada, Australia, New Zealand, Puerto Rico

Fourth-quarter sales in the U.S. increased 11.8% to €3,684 million, reflecting strong Dupixent^® performance and quarterly phasing of influenza vaccines shipments. Full-year 2019 U.S. sales increased 5.0% to €12,756 million.

Fourth-quarter sales in Emerging Markets rose 1.8% to €2,675 million as growth in Vaccines (up 14.2%) and Diabetes (up 7.4%) was largely offset by lower sales of Established Rx Products (down 9.3%). In Asia, fourth-quarter sales were down 9.0% to €883 million, due to lower sales in China (down 21.0% to €453 million), mainly reflecting the impact of the VBP program. In Latin America, fourth-quarter sales increased 7.5% to €744 million driven by Mexico performance. Fourth-quarter sales in Brazil were up 2.4% to €249 million. In Africa and the Middle East region, fourth-quarter sales were up 3.2% to €634 million, mainly reflecting order phasing. Fourth-quarter sales in the Eurasia region increased 19.8% to €360 million, supported by strong growth in Turkey. Fourth-quarter sales in Russia were €168 million, up 1.3%. In Emerging Markets, full-year 2019 sales increased 8.7% to €10,914 million. In 2019, sales in China, Brazil and Russia were €2,704 million (up 8.8%), €1,013 million (up 1.6%) and €673 million (up 9.1%), respectively.

Fourth-quarter sales in Europe were stable at €2,344 million. Over the period, Dupixent^® and Vaccines performance were offset by lower Lovenox^®, Lemtrada^®, Lantus^®, and CHC sales. In Europe, full-year 2019 sales decreased 6.1% (-1.3% at CS) to €8,852 million, reflecting divestment of the European generics business at the end of the third quarter of 2018.

Sales in Japan increased 0.5% to €455 million in the fourth quarter, driven by Dupixent^® which offset lower sales of Plavix^® and Vaccines. In Japan, full-year 2019 sales increased 4.6% to €1,908 million.

R&D update

Regulatory update

Regulatory updates since October 31, 2019 include the following:

• In November, Dupixent^® (collaboration with Regeneron) was submitted to the FDA in children 6 to 11 years with moderate-to-severe atopic dermatitis.The FDA has granted a priority review and set a PDUFA date of May 26, 2020. Dupixent^® was also submitted for the same indication in the European Union in January.
• In November, the FDA approved a supplemental NDA expanding the indication for Toujeo^® in the United States to include the treatment of pediatric patients 6 years and older with diabetes.
• In November, the FDA approved a supplemental Biologics License Application for Fluzone^® High-Dose Quadrivalent (influenza vaccine) for use in adults 65 years of age and older.
• In December, the China National Medical Products Administration (NMPA) approved Praluent^® for the treatment of adult patients with primary hypercholesterolemia or mixed dyslipidemia and for the treatment of adult patients with established atherosclerotic cardiovascular disease to reduce myocardial infarction, stroke or unstable angina requiring hospitalization.
• In December, the China National Medical Products Administration (NMPA) approved Fabrazyme^® as a long term enzyme replacement therapy in patients with a confirmed diagnosis of Fabry disease.
• In January, the European Commission approved the expansion of the indication for Toujeo^® in the European Union to include the treatment of diabetes in adolescents and children (6 years and older).

At the beginning of February 2020, the R&D pipeline contained 91 projects, including 38 new molecular entities in clinical development (or that have been submitted to the regulatory authorities). 39 projects are in phase 3 or have been submitted to the regulatory authorities for approval.

Portfolio update

Phase 3:

• Three-year data from the OLE (Open Label Extension) study of Dupixent^® supporting the long term efficacy and safety profile were presented at the Maui Dermatology Conference in January.
• Positive results of a pivotal phase 3 open-label, single-arm trial evaluating the safety and efficacy of sutimlimab in people with primary cold agglutinin disease (CAD) were presented at the Late Breaking Abstracts Session of the Annual Meeting of the American Society of Hematology. This study met its primary and secondary endpoints.
• Positive results from the EDITION JUNIOR phase 3 trial, evaluating Toujeo^® in children and adolescents with type 1 diabetes, were presented at the International Society for Pediatric and Adolescent Diabetes Annual Conference.
• SAR408701, an anti-CEACAM5 antibody-drug conjugate, entered into phase 3 in second and third line non-small cell lung cancer (NSCLC).
• Dupixent^® entered into phase 3 in bullous pemphigoid, chronic spontaneous urticaria and prurigo nodularis.
• BIVV001 (recombinant coagulation factor VIII Fc) entered into phase 3 in hemophilia A.

Phase 2

• BTK inhibitor, SAR442168, met the primary endpoint in a proof of concept trial in relapsing multiple sclerosis, with detailed results expected to be presented at an upcoming medical meeting in Q2 2020.
• Olipudase alfa, a recombinant human acid sphingomyelinase, demonstrated positive results in two separate clinical trials evaluating olipudase alfa for the treatment of acid sphingomyelinase deficiency (ASMD) in adult and pediatric patients. Olipudase alfa is the first and only investigational enzyme replacement therapy in late-stage development for the treatment of ASMD. No treatments are currently approved for ASMD.
• SAR439859, a selective estrogen receptor degrader (SERD), has entered into a pivotal phase 2 study in second and third line metastatic breast cancer as a monotherapy, a phase 2 study to enable examination in the adjuvant setting, and a phase 1 combination with palbociclib.

 Phase 1

•  A candidate vaccine for Yellow Fever entered into phase 1.
• THOR-707, an engineered “not-alpha” IL-2, entered into phase 1 for the treatment of solid tumors, with the acquisition of Synthorx.
• SAR441000, an mRNA-based intratumoral immunotherapy, entered into phase1 in combination with PD-1.

Synthorx

• On January 23, Sanofi announced the completion of its acquisition of Synthorx, enhancing Sanofi’s position as an emerging leader in the area of oncology and immunology. Through the acquisition Sanofi gained access to THOR-707 and an innovative platform that complements the company’s oncology and immunology research.

Sustainable performance update

Sanofi’s leadership in water management was recently recognized by CDP in its rating upgrade to A- from B. CDP is a global non-profit organization that drives companies and governments to reduce greenhouse gas emissions, safeguard water resources.

Sanofi considers water as a sustainable renewable resource and believes that shortages of water could become a major obstacle to public health involving diseases associated with lack of access to safe drinking water, inadequate sanitation and poor hygiene. Consequently, the company has implemented a dedicated program to reduce water consumption and promote its reuse. Sanofi has already exceeded its 2020 target to reduce water consumption.

2019 fourth-quarter and full-year 2019 financial results⁽⁹⁾

Business Net Income⁽⁹⁾

In the fourth quarter of 2019, Sanofi generated net sales of €9,608 million, an increase of 6.8% (up 4.7% at CER). Full-year 2019 sales were €36,126 million, up 4.8% on a reported basis (up 2.8% at CER).

Fourth-quarter other revenues increased 24.3% (up 20.4% at CER) to €409 million, reflecting the VaxServe sales contribution of non-Sanofi products (€358 million, up 32.4% at CER). Full-year 2019 other revenues increased 24.0% (up 18.0% at CER) to €1,505 million, driven by the VaxServe sales contribution of non-Sanofi products (€1,273 million, up 26.3% at CER) and the consolidation of collaboration revenues from Swedish Orphan Biovitrum AB (SOBI).

Fourth-quarter Gross Profit increased 6.0% to €6,562 million (up 3.8% at CER). The gross margin ratio decreased 0.5 percentage points to 68.3% (68.2% at CER) versus the fourth quarter of 2018. The negative impact from net price adjustments of inventory in the channel in China, products and geographical mix in CHC, U.S. Diabetes net price evolution, and Vaccines more than offset the favorable impact from Dupixent^® growth. In the fourth quarter of 2019, the gross margin ratio of segments was 72.8% for Pharmaceuticals (up 0.7 percentage points), 64.5% for CHC (down 1.5 percentage points) and 60.1% for Vaccines (down 0.3 percentage points). Full-year 2019 Gross Profit increased 5.3% to €25,657 million (up 3.1% at CER). In 2019, the gross margin ratio increased 0.3 percentage points to 71.0% (70.8% at CER) versus 2018.

Research and Development (R&D) expenses increased 0.5% to €1,687 million in the fourth quarter of 2019. At CER, R&D expenses decreased 0.7% reflecting smart spending initiatives as well as portfolio prioritization. In the fourth quarter, the ratio of R&D to sales decreased 1.1 percentage points to 17.6% compared to the fourth quarter of 2018. In 2019, R&D expenses increased 2.2% to €6,022 million (up 0.2% at CER). In 2019, the ratio of R&D to sales was 0.4 percentage points lower at 16.7% compared to 2018.

Fourth-quarter selling general and administrative expenses (SG&A) increased 0.1% to €2,724 million. At CER, SG&A expenses were down 1.4%, reflecting a decrease in general expenses which more than offset increased investments in Specialty Care and Vaccines. In the fourth quarter, the ratio of SG&A to sales decreased 1.8 percentage points to 28.4% compared to the fourth quarter of 2018. In 2019, SG&A expenses increased 0.5% to €9,880 million (down 1.4% at CER). In 2019, the ratio of SG&A to sales was 1.2 percentage points lower at 27.3% compared to 2018.

Fourth-quarter operating expenses were €4,411 million, an increase of 0.3% and a decrease of 1.2% at CER. Full-year 2019 operating expenses were €15,902 million, an increase of 1.1% and down 0.8% at CER.

Fourth-quarter other current operating income net of expenses was -€70 million versus -€148 million in the fourth quarter of 2018. In the fourth quarter of 2019, this line included an expense of €241 million (versus an expense of €65 million in the fourth quarter of 2018) corresponding to the share of profit to Regeneron of the monoclonal antibodies Alliance, reimbursement of development costs by Regeneron and the reimbursement of commercialization-related expenses incurred by Regeneron. In the fourth quarter of 2019, this line also included a one-time income due to a legislation change related to supplementary pension plans in France. In the fourth quarter of 2018, the “other current operating income net of expenses” line also included charges related to a legal contingency provision as well as a capital gain on an associate company and other accruals, which in aggregate represented a net charge of €72 million. In 2019, other current operating income net of expenses was -€382 million versus -€64 million in 2018. The full-year 2019 expense associated with the monoclonal antibodies Alliance with Regeneron was €681 million, which compared with an expense of €211 million in 2018 (see appendix 7 for further details).

The share of profit from associates was €119 million in the fourth quarter versus €121 million in 2018, mainly reflecting the share of profit in Regeneron. In 2019, the share of profit from associates was broadly stable at €420 million versus €423 million in 2018.

In the fourth quarter, non-controlling interests were -€8 million versus -€22 million in prior period, reflecting the end of non-controlling interests related to the Alliance with Bristol-Myers Squibb on Plavix^® and Avapro^®. In 2019, non-controlling interests were -€35 million versus -€106 million for 2018.

(9) See Appendix 3 for 2019 fourth-quarter consolidated income statement; see Appendix 11 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.

Fourth-quarter business operating income increased 26.0% to €2,192 million. At CER, business operating income increased 20.9%. The ratio of business operating income to net sales increased 3.5 percentage points to 22.8% versus the fourth quarter of 2018. Over the period, the business operating income ratio of segments were 28.7% for Pharmaceuticals (up 1.6 percentage points), 27.3% for CHC (down 1.7 percentage points) and 37.6% for Vaccines (up 1.5 percentage points). In 2019, business operating income was €9,758 million, up 9.8% (up 7.1% at CER). In 2019, the ratio of business operating income to net sales increased 1.2 percentage points to 27.0%.

Net financial expenses were -€63 million in the fourth quarter versus -€60 million in the same period of 2018, reflecting the lower cost of net debt. The fourth quarter of 2018 included a gain of €22 million in the market value of financial investment.  Full-year 2019 net financial expenses were -€264 million versus -€271 million in 2018.

Fourth-quarter and full-year 2019 effective tax rates were 22.1% and 22.0%, respectively. Sanofi expects its effective tax rate to be around 22% in 2020.

Fourth-quarter business net income⁽⁹⁾ increased 23.5% to €1,684 million and increased 18.4% at CER. The ratio of business net income to net sales increased 2.3 percentage points to 17.5% versus the fourth quarter of 2018. In 2019, business net income⁽⁹⁾ increased 9.8% to €7,489 million and increased 7.0% at CER. The ratio of business net income to net sales increased 0.9 percentage points to 20.7% versus 2018.

Reconciliation of IFRS net income reported to business net income (see Appendix 4)

In 2019, the IFRS net income was €2,806 million. The main items excluded from the business net income were:

• An amortization charge of €2,146 million related to fair value remeasurement on intangible assets of acquired companies (primarily Genzyme: €727 million, Bioverativ: €488 million, Boehringer Ingelheim CHC business: €240 million, Aventis: €197 million) and to acquired intangible assets (licenses/products: €102 million). An amortization charge of €510 million related to fair value remeasurement on intangible assets of acquired companies (primarily Genzyme: €177 million, Bioverativ: €108 million, Boehringer Ingelheim CHC business: €56 million, Aventis: €44 million) and to acquired intangible assets (licenses/products: €22 million) was recorded in the fourth quarter. These items have no cash impact on the Company.

• An impairment of intangible assets of €3,604 million mainly related to Eloctate^® (€2,803 million due to revision of sales projections), Zantac^® (€352 million), sotagliflozin and Lemtrada^®. The fourth quarter included an impairment of intangible assets of €1,581 million of which €1,194 million related to Eloctate^® and €169 million to Zantac^®.

• Restructuring costs and similar items of €1,062 million (of which €158 million in the fourth quarter) mainly related to streamlining initiatives in Japan, Europe and the U.S.

• An income of €238 million mainly reflecting a decrease of Bayer contingent considerations linked to Lemtrada^® (an income of €214 million of which €74 million in the fourth quarter), a contingent price adjustment on the disposal of SP MSD (€192 million) and a fair value remeasurement on the CVR price (a charge of €49 million of which €32 million in the fourth quarter).

• A net income of €327 million (of which a charge of €67 million in the fourth quarter) mainly related to litigation.

• A €1,866 million tax effect arising from the items listed above, mainly comprising €1,409 million of deferred taxes generated by amortization and impairments of intangible assets and €311 million associated with restructuring costs and similar items. The fourth quarter tax effect was €587 million, including €503 million of deferred taxes generated by amortization and impairments of intangible assets and €64 million associated with restructuring costs and similar items (see Appendix 4).

(9) See Appendix 3 for 2019 fourth-quarter consolidated income statement; see Appendix 11 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.

• An expense of €165 million net of tax (of which €71 million In the fourth quarter) related to restructuring costs of associates and joint ventures and expenses arising from the impact of acquisitions on associates and joint ventures.

Capital Allocation

In 2019, Free Cash Flow (see definition on Appendix 11) increased 48.6% to €6,026 million, after net changes in working capital (-€580 million), capital expenditures (-€1,405 million) and other asset acquisitions¹ (-€576 million) net of disposal proceeds¹ (€490 million), and payments related to restructuring and similar items (-€1,142 million). Over the period, the dividend paid by Sanofi was €3,834 million and proceeds from disposals² were €672 million. As a consequence, net debt decreased from €17,628 million at December 31, 2018, to €15,107 million at December 31, 2019 (amount net of €9,427 million cash and cash equivalents).
¹Not exceeding €500 million per transaction.
 ²Amount of the transaction above €500 million per transaction.