Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
A. Selected financial data
B. Capitalization and indebtedness
C. Reasons for offer and use of proceeds
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 and elsewhere in this document 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.
Product liability claims could adversely affect our business, results of operations
and financial condition.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 by some jurisdictions 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 lead to product recalls, withdrawals, or declining sales, and/or be accompanied by consumer fraud claims by customers, or third-party payers seeking reimbursement of the cost of the product.product and/or other claims, including potential civil or criminal governmental actions.
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“Breaches of data security, disruptions of information technology systems and cyber threats could result in financial, legal, business or reputational harm” below).
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 financial risk associated with product liability financial risk ofin 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 damage awardawards 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 due to market-driven insurance market limitations and exclusions. 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.
We have adopted a Code of Ethics 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 officers, employees, agents, intermediaries and other third parties comply with applicable laws and regulations (including but not limited to 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, failure to comply with laws and regulations (including as a result of a business partner’s breach) may occur and could result in liabilities for us and/or our management.
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, 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.
Obtaining a marketing authorization for a product is a long and highly regulated process requiring us to present extensive documentation and data to the relevant regulatory authorities 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. Each regulatory authority may also delay or refuse to grant approval even though a product has already been approved in another country. Regulatory authorities are increasingly strengthening their requirements on product safety and risk/benefit profile. All of these requirements, including post-marketing requirements, have increased the costs associated with maintaining marketing authorizations and achieving reimbursement for our products.authorizations.
In addition, all aspects of our business, including research and development, manufacturing, marketing, reimbursement, 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 an adverse effect on our business.
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. AlsoFurthermore, patents and other proprietary rights do not always provide effective protection for our products.
For example, governmental authorities are increasingly looking to facilitate generic and biosimilar competition tofor existing products through new regulatory proposals intended to achieve, or resulting in, changes to the scope of patent or data exclusivity rights and through the 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.
Moreover, 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,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 our patents. 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. Moreover, 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 seekingsought 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. The Australian Government’s claim was dismissed following a
In certain cases, to terminate or avoid patent litigation we or our collaboration partners may be required to obtain licenses from the holders of third-party intellectual property rights. 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.
Furthermore, 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 by national patent offices. Further, our ability to successfully challenge third-party patent rights is dependent on the lawslegal interpretation and case law of national courts. In addition, we expect to face increasing competition from biosimilars in the future. With the accelerated regulatory pathways provided in the USUnited States 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. If a biosimilar version of one of our products were to be approved, it could reduce our sales and/or profitability of that product.
If our patents and/or proprietary rights to our products were limited or circumvented, our financial results could be adversely affected.
The complexity of these processes, as well as standards required 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“– 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 specific 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.
A substantial share of the revenue and income of Sanofi depends on the performance of certain flagship products.products
We may also encounter failures or delays in our launch strategy (in terms of timing, pricing, market access, marketing efforts and dedicated sales forces) of, such that our products that may not deliver the expected benefits. 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 or expansion of some of our products.
More generally, an expiration of effective intellectual property protections for our products typically results in the market entry of one or more lower-priced generic competitors, often leading to a rapid and significant decline in revenues on those products (for information regarding ongoing patent litigation see Note D.22.b)D.22.b.) to the consolidated financial statements included at Item 1818. 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, product recalls, non-approval by the health authorities of a new indication for a marketed product, pricing pressure and manufacturing or product recalls)supply issues), the adverse impact on our business, results of operations and financial condition could be significant.
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.
As regards products recently launched or under development for which we have a collaboration agreement with partners, the terms of the applicable alliance agreement 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.
We could also be subject to the risk that 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 our collaboration partners are responsible for the performance of certain key tasks or functions, is the responsibility of our collaboration partners. Failuresfor example related to manufacturing. Any such failures in the development process or differing priorities may adversely affect our business including the activities conducted through the collaboration arrangements.arrangements We also cannot guarantee that third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements. Subject to the completion of its initial public offering in the first half of 2022 including obtaining required market authority approvals, EUROAPI will also become a third-party manufacturer and will continue to manufacture a certain number of APIs for Sanofi. We are also subject to the risk that contract research organizations or other vendors (for instance regarding digital activities) retained by us or our collaboration partners may not perform effectively.
We could face conflicts or difficulties with these partners during the course of these agreements or at the time of their renewal or renegotiation. All of these events may affect the development, themanufacturing, 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.
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 and retailers, as well as by uncertainties around global credit and economic conditions, in particular in emerging markets. As a result, we may be affected by fluctuations in the buying patterns of such customers. The United States poses particular customer credit risk issues because of the concentrated distribution system: our three main customers represented respectively 8%10%, 5%7% and 3%6% of our consolidated net sales in 2019.2021. We are also exposed to large wholesalers in other markets, particularly in Europe. Although we assign some of our receivables to factoring companies or banks, anAn 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 1818. 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.”).years.
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. For example, unpredictable political conditions that currently exist in various parts of the world could have a material negative impact on our business. Collectively, such unstable conditions could, among other things, disturb the international flow of goods and increase the costs and difficulties of international transactions.
Unfavorable economic conditions have reduced the sources of funding for national social security systems, leading to austerity measures including heightened pressure on drug prices, increased substitution of generic drugs, and the exclusion of certain products from formularies.formularies among others (see “— The pricing and reimbursement of our products is increasingly affected by cost containment pressures and decisions of governments and other third parties” above).
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 has been a significant increase in the number of beneficiaries 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.costs, which could lead to further downward price pressure and/or lower demand.
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, our financial situation, the profitability and results of our operations and the distribution channels of our products may be adversely affected. See also “We“— We are subject to the risk of non-payment by our customers” above.
The increasing use of social media platforms and new technologies present risks and challenges for our business and reputation.reputation
We increasingly rely on social media, new technologies and digital tools to communicate about our products and about diseases or to provide health services. The use of these media requires specific attention, monitoring programs and moderation of comments. Political and market pressures may be generated by social media because of rapid news cycles. 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 image and reputation and 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. Such uses of social media and mobile technologies could have an adverse effect on our reputation, business, financial condition and results of operations.
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 in order to enter into agreements in a timely manner, and execute these transactions on acceptable economic 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 1818. of this annual report and also - “We“— We rely on third parties for the discovery, manufacture, marketing and marketingdistribution 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:if, for example:
Nevertheless, the difficulties in operating in emerging markets, a significant decline in the anticipated growth rate or an unfavorable movement of the exchange rates of currencies against the euro could impair our ability to take advantage of growth opportunities and could adversely affect our business, results of operations or financial condition. For instance, while it is not possiblecontinues to be impossible as of the date of this report to predict the economic impact and the magnitude of the ongoing coronavirus epidemic which started in China in December 2019,COVID-19 pandemic, if a long-lasting epidemic and prolonged or repeated restrictive measures to control the outbreak were to result in an economic slowdown in any of our targeted markets, such as China, it would reduce our sales due to lower healthcare spending on other diseases and fewer promotional activities, and could significantly impact our business operations. Such epidemics or other public health crises could also pose risks to the health and safety of our employees. Furthermore, it is not possible to predict if or how the current health crisis will impact the Chinese healthcare system, or that of any otherparticular affected jurisdiction, or to what extent (see also “-“— Global economic conditions and an unfavorable financial environment could have
Emerging markets also expose 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), and compliance issues including corruption and fraud (see particularly “-“— Claims and investigations relating to compliance, ethics and business integrity, 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 have undertaken a number of digital initiatives (such as the opening in October 2019 of our Framingham digitally enabled manufacturing facility in the US, and our Darwin our real-world data platform). Our success in these efforts will depend on many factors, including data quality, technology architecture, entering into successful partnerships and alliances with technology companies, a cultural change among our employees, attracting and retaining employees with appropriate skills and mindsets, and successfully innovating across a variety of technology fields. The COVID-19 pandemic has accelerated our digital transformation, including in the ways we engage and interact with our stakeholders. However, there is no guarantee that our efforts toward a digital transformation will succeed. More generally, we may fail to capture the benefits of digitaldigitalization at an appropriate cost and/or in a timely manner, and/or enter into appropriate collaborations.partnerships. Competitors, including new entrants such as tech companies, may outpace us in this fast-moving area. If we fail to adequately integrate digitalization into our organization and business model, we could lose patients and market share. This could have an adverse impact on our business, prospects and results of operations.
As part of our strategy, we announced our intent to improve our operating efficiencies to fund growth and expand our business operating income margin. We have also announced savings initiatives that we expect will generate €2 billion of savings by 2022 to fund investment in our key growth drivers, to accelerate priority pipeline projects and to support the expansion of our BOI margin. Nevertheless, there is no guarantee that we will be able to fully deliver these operating efficiencies within the targeted timeline or generate the expected benefits.
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.competition
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 the risks of industrial accidents that may lead to discharges or releases of toxic or pathogenpathogenic substances or other events that can cause personal injury, property damage and environmental contamination, and may result in additional operational constraints, including the shutdown of affected facilities and/or the imposition of civil, administrative, criminal penalties and/or civil damages.
The occurrence of an industrial accident may significantly reduce the productivity and profitability of a particular manufacturing facility and adversely affect our operating results and reputation. Although we maintain property damage, 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.
The environmental laws of various jurisdictions impose actual and potential obligations on our Company to manage and/or remediate contaminated sites. These obligations may relate to sites:
These environmental remediation obligations could 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)”Environment” 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 an adverse effect on our results of operations and financial condition. For more detailed information on environmental issues, see “Item 4.Information4. Information on the Company -— B. Business Overview -— B.10. Health, Safety and Environment (HSE) and Notes B.12B.12. and D.19.3D.19.3. to the consolidated financial statements”.
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 or obligations in France, Germany, Italy, Brazil and elsewhere. As a matter of statutory or contractual obligation,obligations, 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 or operated by the Company. An adverse outcome in such disputes might have a significantan adverse effect on our operating results. See Note D.22.d) to the consolidated financial statements included at Item 1818. of this annual report and “Item 8. Financial Information -— A. Consolidated Financial Statements and Other Financial Information -— Information on Legal or Arbitration Proceedings”.
Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition.condition
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 NasdaqNASDAQ Global Select Market (Nasdaq)(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.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. US investors may have difficulty in serving process or enforcing a judgment against us or our directors or executive officers.
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.
Our largest shareholder owns a significant percentage of the share capital and voting rights of Sanofi.Sanofi
Item 4. Information on the Company
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 a presentation of the net sales of our activities for the year ended December 31, 2019,2021, refer to “Item 5 –5. — Results of Operations –— Year Ended December 31, 20192021 Compared with Year Ended December 31, 2018”2020”.
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.
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.
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 isMassachusetts, engaged in the research, development and commercialization of therapies for people with hemophilia and other rare blood disorders.
On September 30, 2018, we completed the divestment of our European generics business Zentiva to Advent International, a US global private equity firm.
On January 23, 2020, following a tender offer, we acquired control of Synthorx, a US clinical-stage biotechnology company based in La Jolla, California. Synthorx isCalifornia, focused on prolonging and improving the lives of people suffering from cancer and autoimmune disorders.
B.1. Strategy
A number of fundamental trends continue to point to a positive outlook for the pharmaceutical industry. The global population is growing, and aging. Unmetaging, and unmet medical needs remain high. With the COVID-19 pandemic, health needs have further increased, strengthening the key roles of innovation in R&D activities and cutting-edge manufacturing. The industry has taken steps to increase R&D productivity, with the objective of launching a higher number of innovative medicines.medicines and vaccines. Patients around the world and– including a rising middle class in emerging markets – are demanding better care,healthcare, empowered by access to more and more 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.how to diagnose and treat diseases. Digital technologies and advanced data analytics are having a transformative effect across sales and marketing activities, R&D and manufacturing, and are acting as enablers for new businesses.
We will continue to pursue our focused and disciplined capital allocation policy. Our priorities in deploying the cash generated from our three core GBUs and the future standalone CHC business are, in the following order: (i) organic investment; (ii) business development and merger & acquisition activities, focusing on bolt-on, value-enhancing opportunities to drive scientific and commercial leadership in core therapeutic areas; (iii) growing the annual dividend; and (iv) anti-dilutive share buybacks.
We also have the potential to raise capital through asset disposals, including streamlining “tail” brands in our Established Products business, and by monetizing our stake after the expiry of the lock-up period under the amended and restated investor agreement with Regeneron. See “Item 5. Financial Presentation of Alliances - Alliance Arrangements with Regeneron”.Consumer Healthcare business.
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 “ 8.“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”.
Moderate-to-severe atopic dermatitis, a form of eczema and a chronic inflammatory disease, is characterized by rashes that sometimes coveringcover much of the body and can include intense, persistent itching and skin dryness, cracking, redness, crusting and oozing.
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(1) | Sanofi has committed to complete ongoing studies, and is looking for a partner to take over and commercialize efpeglenatide. |
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ITEMITEM 4. INFORMATION ON THE COMPANYInformation on the company
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On September 28, 2021, we announced results from new analyses in patients as young as 6 years old with moderate-to-severe atopic dermatitis, and results from long-term treatment (up to 3½ years) for adults in the same indication – the longest treatment with a biologic medicine ever administered to patients. The new data built on the existing wealth of evidence supporting the selective way Dupixent® specifically targets the underlying type 2 inflammation via targeting IL4/IL-13 that contributes to diseases like atopic dermatitis, significantly improving itch and skin lesions and other important measures that impact a patient’s quality of life.
The European Commission (EC) approved Dupixent® in September 2017 for use in adults with moderate-to-severe AD who are candidates for systemic therapy,and extended the marketing authorization in August 2019 to include adolescents aged 12 to 17 years. The European Commission is reviewing an application for an extensionOn November 30, 2020, the EC extended the marketing authorization to children aged 6 to 11 years.years with severe AD and on June 28, 2021 the Dupixent® Summary of Product Characteristics (SmPC) was updated with long-term data following a positive opinion issued by the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) reinforcing the product's well-established safety profile in adults with moderate-to-severe atopic dermatitis.
Long term 76-week data were recently publishedOn June 19, 2020, the National Medical Products Administration (NMPA) in China approved Dupixent® for the treatment of moderate-to-severe AD after identifying dupilumab as an overseas medicine regarded as urgently needed in clinical practice, leading to an expedited review and approval process. On December 28, 2020, the National Healthcare Security Administration (NHSA) officially announced the results of the 2020 National Reimbursement Drug List (NRDL) negotiations, with Dupixent® 300 mg included in the Journal of the American Academy of Dermatologyupdated NRDL effective March 1, 2021. Dupixent® was approved in China in September 2021 for adolescents aged 12-17 years with a safety profile that was consistent with previous clinical trials, and sustained improvement was seen in all efficacy outcomes.moderate-to-severe atopic dermatitis.
Asthma
Dupixent® was granted marketing authorization by the FDA 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. In May 2019, the European Commission approved Dupixent® for use as an add-on maintenance treatment in patients with severe asthma patients aged 12 years and older with type 2 inflammation who are inadequately controlled with high dose inhaled corticosteroid plus another medicinal product for maintenance treatment.
In September 2020, new long-term data from a Phase III open-label extension trial showed sustained improvement in lung function and reduction in severe exacerbations in adults and adolescents with moderate-to-severe asthma. On May 17, 2021, detailed results from a Phase III trial showed Dupixent® significantlyreduced severe asthma attacks, and within two weeks rapidly improved lung function in children aged 6 to 11 years with uncontrolled moderate-to-severe asthma with evidence of type 2 inflammation. Moreover, Dupixent®significantly improved overall asthma symptom control and reduced an airway biomarker of type 2 inflammation, called fractional exhaled nitric oxide (FeNO), that plays a major role in asthma. On October 2021, the FDA approved Dupixent® as an add-on maintenance treatment for patients aged 6 to 11 years with moderate-to-severe asthma characterized by an eosinophilic phenotype or with oral corticosteroid-dependent asthma, thereby bringing a new treatment for children who may be suffering from life-threatening asthma attacks and poor lung function affecting their ability to breathe, which could potentially continue into adulthood.
Chronic rhinosinusitis with nasal polyposis (CRSwNP)
CRSwNP is a chronic disease of the upper airway that obstructs the sinuses and nasal passages. It can lead to breathing difficulties, nasal congestion and discharge, reduced or loss of sense of smell and taste, and facial pressure. Many patients with CRSwNP have other type 2 inflammatory diseases like asthma, and these patients often have more severe asthma and are often more difficult to treat.
In June 2019, the FDA approved Dupixent® for use with other medicines to treat CRSwNP in adults whose disease is not controlled. In October 2019, the European Commission approved Dupixent® for use as an add-on therapy with intranasal corticosteroids in adults with severe CRSwNP for whom therapy with systemic corticosteroids and/or surgery do not provide adequate disease control.
DupilumabEosinophilic esophagitis (EoE)
EoE is a chronic and progressive type 2 inflammatory disease that damages the esophagus and prevents it from working properly, leading to difficulties swallowing. There are currently no FDA-approved medicines for EoE. Dupixent® was granted Orphan Drug designation for the potential treatment of EoE in 2017. In May 2020, we announced positive results from Study A of the pivotal Phase III program evaluating Dupixent® in patients aged 12 years and older with EoE. The trial met both of its co-primary endpoints, as well as all key secondary endpoints. In September 2020, the FDA granted Breakthrough Therapy designation to Dupixent® for the treatment of patients aged 12 years and older with EoE. In October 2020, additional positive results were announced from Study A showing significant improvement in disease severity and extent, as well as normalized gene expression associated with type 2 inflammation. On October 25, 2021, Study B of the pivotal Phase III program showed positive results in patients 12 years and older with EoE meeting co-primary endpoints in patients taking Dupixent® 300 mg weekly, and showing significant improvements in clinical (Dysphagia Symptom Questionnaire) and histologic disease measures compared to a placebo. Dupixent® is the first and only biologic to show positive and clinically-meaningful results in this population as part of a Phase III program. The clinical trial program is ongoing, with patients from the first and second trials continuing into a 28-week long-term extension trial (Part C). Full results from this trial will be available in 2022.
Chronic Spontaneous Urticaria (CSU)
CSU is a chronic inflammatory skin disease characterized by the sudden onset of hives on the skin and/or swelling deep under the skin. Despite standard-of-care treatment, people with CSU often experience symptoms including a persistent itch or burning sensation, which can be debilitating and significantly impact quality of life. Swelling often occurs on the face, hands and feet, but can also affect the throat and upper airways. On July 29, 2021 a pivotal Phase III trial evaluating Dupixent® in patients with moderate-to-severe CSU met its primary endpoints and all key secondary endpoints at 24 weeks. Adding Dupixent® to standard-of-care antihistamines significantly reduced itch and hives for biologic-naive patients, compared to those treated with antihistamines alone (placebo) in Study A (the first of two trials) of the LIBERTY CUPID clinical program.
Study B of the clinical trial evaluates Dupixent® in adults and adolescents who remain symptomatic despite standard-of-care treatment and are intolerant or incomplete responders to an anti-IgE therapeutic (omalizumab). Although positive numerical trends in reducing itch and hives were observed, the results from the interim analysis did not demonstrate statistical significance for the primary endpoints. The safety
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data were generally consistent with the known safety profile of Dupixent® in its approved indications. Sanofi and Regeneron remain committed to advancing Dupixent® for patients with CSU uncontrolled on antihistamines and are evaluating next steps.
Prurigo Nodularis (PN)
People with prurigo nodularis experience intense, persistent itch, with thick skin lesions (called nodules) that can cover most of the body. It is often described as painful with burning, stinging and tingling of the skin. There are no approved systemic treatments for prurigo nodularis. On October 22, 2021 a pivotal Phase III trial evaluating Dupixent® in adults with uncontrolled prurigo nodularis met its primary and all key secondary endpoints, showing that Dupixent® significantly reduced itch at 12 weeks and skin lesions at 24 weeks compared to placebo in this investigational setting. The impact of uncontrolled prurigo nodularis on quality of life is one of the highest among inflammatory skin diseases with intense, chronic itch. Prurigo nodularis is the sixth disease in which Dupixent® has entered a Phase III trial, reinforcing its well-established safety profile. Positive top-line data have been announced for the replicate Phase III studies in the LIBERTY-PN clinical program: PRIME2 (in October 2021) and PRIME (in January 2022). Sanofi and Regeneron plan to begin regulatory submissions in 2022.
Dupixent® is currently being evaluated in a broad range of clinical development programs for diseases that are driven by Typetype 2 inflammation, including pediatric atopic dermatitis (age 6 months to 5 years), pediatric asthma, eosinophilic esophagitis,inflammation. These include chronic obstructive pulmonary disease prurigo nodularis,(COPD), bullous pemphigoid (BP), chronic spontaneousinducible cold urticaria (CINDU) chronic rhinosinusitis without nasal polyposis (CRSsNP), and bullous pemphigoid.allergic fungal rhinosinusitis (AFRS). See “-“— B.5. Global Research & Development”.
Dupixent® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc.. For additional information on the collaboration, see “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances -— Alliance Arrangements with Regeneron”.
There are ongoing patent infringementopposition proceedings in several countries Europe related to Dupixent® initiated by Sanofi and Regeneron against Amgen and Immunex relating to Dupixent®.Immunex. See Note D.22.b)D.22.b.) to the consolidated financial statements included at Item 1818. of this annual report.
Kevzara®Neurology & Immunology
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. Kevzara® is available in 20 countries, including the US.
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 developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. In December 2019, Sanofi and Regeneron announced their intent to simplify their antibody collaboration for Kevzara® and Praluent®. For additional information, see “Item 5. Financial Presentation of Alliances - Alliance Arrangements with Regeneron”.
b) Multiple Sclerosis / Neurology
Multiple sclerosis (MS) is an autoimmune neurological 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 80 countries around the world including the US (since September 2012) for the treatment of patients with relapsing forms of MS,MS; the EU (since August 2013) for the treatment of adult patients with relapsing remitting MS,MS; and China (since July 2018). Ongoing development efforts includeIn June 2021, the TeriKIDS studyEuropean Commission (EC) approved Aubagio® for the treatment of pediatric patients aged 10 to assess17 years with relapsing-remitting multiple sclerosis (RRMS). The EC approval of the safety and efficacypediatric indication provides Aubagio® with an additional year of teriflunomidemarketing protection in children (see “B.5. Global research & development”) and global post-marketing registries for pregnancy.the European Union.
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.
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Lemtrada® is approved in more than 70 countries including the EU (since September 2013), and the US (since November 2014). Because of its safety profile, the FDA approved the use of Lemtrada® in patients with relapsing forms of MS 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. In January 2020, the EMA updated the indication for Lemtrada® to include treatment of relapsing-remitting multiple sclerosis if the disease is highly active despite treatment with at least one disease-modifying therapy, or if the disease is worsening rapidly. The EMA also added new contraindicationscontra-indications for patients with certain heart, circulation or bleeding disorders, and those who have autoimmune disorders other than multiple sclerosis. Alemtuzumab is being evaluated in pediatric patients (see “B.5. Global research & development”).MS.
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 1818. of this annual report.
c) OncologyRheumatoid Arthritis
Rheumatoid arthritis (RA) is a chronic inflammatory autoimmune disease causing inflammation, pain, and eventually joint damage and disability.
LibtayoKevzara®
LibtayoKevzara® (cemiplimab-rwlc), an immune therapy drug,(sarilumab) is a fully human monoclonal antibody targetingthat binds to the immune checkpointinterleukin-6 receptor PD-1 (programmed cell death protein-1). This may restore immune function through(IL-6R) and has been shown to inhibit IL-6R mediated signaling. IL-6 is a cytokine in the activation of cytotoxic T cells, thereby avoiding tumor evasion from host immunity.body that, in excess and over time, can contribute to the inflammation associated with rheumatoid arthritis. Kevzara® is available in 20 countries, including the US.
In September 2018,May 2017, the FDA approved LibtayoKevzara® for the treatment of adult patients with metastatic cutaneous squamous cell carcinoma (CSCC)moderately to severely active RA who have had an inadequate response or locally advanced CSCC who are not candidates for curative surgeryintolerance to one or curative radiation and in July 2019,more disease modifying anti-rheumatic drugs (DMARDs), such as methotrexate. In June 2017, the European Commission granted conditional marketing authorization. Libtayoauthorization for Kevzara® isin combination with methotrexate for the only treatment specifically approved and available for advanced CSCC in the US. CSCC is the second most common form of skin cancer. The Libtayo® launch rollout is ongoing.
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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. The product is being investigatedalso in several clinical development programs.in pediatric populations. See “– “— B.5. Global Research & Development”.
LibtayoKevzara® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. Regeneron. For additional information, on the commercialization of this product, see “Item 5.Operating and Financial Review and Prospects — Financial Presentation of Alliances –— Alliance Arrangements with Regeneron”.
Jevtana®
Jevtana® (cabazitaxel), a chemotherapy drug and cytotoxic agent, is a semi-synthetic second-generation taxane which 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. In the US, Thymoglobulin® is indicated 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 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. It has been approved for use in 11 indications in five different tumor types (breast, prostate, gastric, lung, and head and neck). 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. Generics of oxaliplatin have been launched globally. Eloxatin® is in-licensed from Debiopharm.
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. 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 marketed in more than 50 countries. For additional information on the commercialization of Zaltrap®, see “Item 5 – Financial Presentation of Alliances – Alliance Arrangements with Regeneron”.
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d) Rare Diseasesdiseases
Our Rare Diseases business is focused on products for the treatment of rare genetic diseases and other rare chronic debilitating diseases of high unmet medical need, including lysosomal storage disorders (LSDs), a group of metabolic disorders caused by enzyme deficiencies.
Cerezyme®
Cerezyme® (imiglucerase) is an enzyme replacement therapy used to treat Gaucher disease, ana chronic, inherited, progressive and potentially life-threatening LSD. Gaucher disease is caused by deficiency of the enzyme glucocerebrosidase; this causes a fatty substance called glucosylceramide (also called GL-1) to build up in certain areas of the body including the spleen, liver, and bone. Gaucher disease exhibits diverse manifestations, a broad range of age of onset of symptoms, and a wide clinical spectrum of disease severity. 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.
CerdelgaCerezyme® is typically given byintravenous infusions for 1-2 hours every two weeks at an infusion center, a doctor’s office, or at home as medically appropriate. The dose of Cerezyme® is individualized based on the weight of the patient and disease severity. The most common dosing schedule for Cerezyme® is 60 units per kilogram of body weight, every two weeks.
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 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). It is also in development for the treatment of type I Gaucher disease in pediatric patients. See “— B.5. Global Research & Development”.
There are ongoingRegarding patent infringement proceedings in the US. For further information,US, see Item 8 – “Information"Item 8. Information on Legal or Arbitration Proceedings –- Cerdelga® Patent Litigation.Litigation".
Myozyme® and Lumizyme®
Myozyme® (alglucosidase alfa) is an enzyme replacement therapy used to treat both Infantile Onset and Late Onset Pompe disease (IOPD and LOPD),. Pompe disease is an inherited, progressive and often fatal neuromuscular disease.disease, caused by a genetic deficiency or dysfunction of the lysosomal enzyme acid alpha-glucosidase (GAA) that results in the build-up of glycogen in the muscles’ cells. For infantile-onset Pompe disease, symptoms begin within a few months of birth and there is impact to the heart in addition to skeletal muscle weakness. Other symptoms include difficulties breathing, frequent chest infections, problems feeding that result in failure to gain weight as expected, and failure to meet certain developmental milestones. Patients with late-onset Pompe disease typically present symptoms any time after the first year of life to late adulthood and rarely manifest cardiac problems. The hallmark symptom of late-onset Pompe disease is skeletal muscle weakness, which often leads to walking disability and reduced respiratory function. Patients often require wheelchairs to assist with mobility and may require mechanical ventilation to help with breathing. 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.
The recommended dosage regimen of Myozyme® and Lumizyme® is 20 mg per kilogram of body weight administered every two weeks as an intravenous infusion. Myozyme® should be reconstituted, diluted and administered by a healthcare professional.
Nexviazyme®
Nexviazyme® (avalglucosidase alfa-ngpt) is an important new treatment option for Pompe patients. Nexviazyme® is approved in the US to treat late-onset Pompe disease (LOPD) in patients age one year or above, in Canada for the treatment of LOPD patients older than 6 months and in Switzerland (Nexviadyme®)for all patients with LOPD.
In Japan and Australia, Nexviazyme® is approved for the treatment of both LOPD and IOPD Pompe patients. Nexviazyme® has also been approved by the regulatory authorities in Taiwan for use in IOPD and LOPD for patients aged 6 months and older. In 2022, it is anticipated that Nexviazyme® will launch in an additional 12 markets.
In Europe, Sanofi has requested a re-examination of a negative COMP (Committee for Orphan Medicinal Products) decision regarding the orphan drug designation of avalglucosidase alfa to delay the regulatory decision for several months.
Nexviazyme® is administered as a monotherapy enzyme replacement therapy every two weeks. The recommended dose is based on body weight (20 mg/kg for LOPD patients ≥30 kg or 40 mg/kg for LOPD patients <30 kg) and is administered incrementally via intravenous infusion. For IOPD patients in Australia the approval allows for dose escalation up to 40 mg/kg if the response observed at 20 mg/kg is considered insufficient. Nexviazyme® is also being investigated for the treatment of patients aged less than 6 months who are affected by infantile onset Pompe disease.
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Fabrazyme®
Fabrazyme® (agalsidase beta) is an enzyme replacement therapy used to treat Fabry disease. Fabry disease an(FD) is a multisystemic, progressive, X-linked inherited disorder of glycosphingolipid metabolism due to deficient or absent lysosomal α-galactosidase A activity resulting in progressive globotriaosylceramide (GL-3) accumulation in the lysosomes of various tissues. Fabry disease affects both genders. With age, progressive organ damage develops, leading to potentially life-threatening renal, cardiac and/or cerebrovascular complications. Fabry disease is characterized by different symptom severities and potentially life threatening LSD.rates of progression, ranging from classic disease with early symptom onset to late onset disease with cardiac and/or renal complications later in life. 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.
AldurazymeThe recommended dosage of Fabrazyme® is 1 mg per kilogram of body weight, infused intravenously every two weeks at an infusion center, a doctor’s office, or at home as medically appropriate.
Aldurazyme®
Aldurazyme® (laronidase) is the only approved enzyme replacement therapy for mucopolysaccharidosis type 1 (MPS I), an inherited lysosomal storage disorder caused by a deficiency of alpha-L-iduronidase, a lysosomal enzyme normally required for the breakdown of certain complex carbohydrates known as glycosaminoglycans (GAGs). MPS I is multi-systemic, and children with MPS I are described as having either a severe or attenuated form of the disorder based on age of onset, severity of symptoms, rate of disease progression and whether there is early and direct involvement of the brain. 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.
e)The recommended dosage regimen of Aldurazyme® is 0.58 mg per kilogram of body weight, administered once weekly as an intravenous infusion.
Oncology
Sarclisa®
Sarclisa® (isatuximab) is a monoclonal antibody that binds a specific epitope on the human CD38 receptor and has antitumor activity via multiple mechanisms of action. It was approved in March 2020 in the US in combination with pomalidomide and dexamethasone for the treatment of adults with relapsed refractory multiple myeloma (RRMM) who have received at least two prior therapies including lenalidomide and a proteasome inhibitor, and by the European Commission in May 2020 in combination with pomalidomide and dexamethasone, for the treatment of adult patients with relapsed and refractory multiple myeloma who have received at least two prior therapies including lenalidomide and a proteasome inhibitor and have demonstrated disease progression on the last therapy. Sarclisa® is now approved in more than 25 countries.
Sarclisa® was approved for a label extension in combination with carfilzomib and dexamethasone in March 2021 in the US for the treatment of adults with relapsed or refractory multiple myeloma (RRMM) who have received one to three prior lines of therapy, and by the European Commission in April 2021 for the treatment of adult patients with multiple myeloma (MM) who have received at least one prior therapy. The Japanese Ministry of Health, Labor and Welfare (MHLW) granted approval for Sarclisa® in combination with carfilzomib and dexamethasone, in combination with dexamethasone, and as monotherapy for RRMM patients in November 2021. Sarclisa® is also under investigation in several clinical studies for the treatment of hematologic malignancies and other hematologic indications.
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. The European Commission granted conditional marketing authorization in July 2019. Libtayo® is the only treatment specifically approved and available for advanced CSCC in the EU. CSCC is the second most common form of skin cancer.
Libtayo® received approval in the US for the treatment of adult patients with metastatic basal cell carcinoma (mBCC) and for the treatment of adult patients with locally advanced basal cell carcinoma (laBCC) in February 2021. The European Commission granted marketing authorization for Libtayo® for the treatment of adult patients with locally advanced or metastatic basal cell carcinoma (laBCC or mBCC) who have progressed on or are intolerant to a hedgehog pathway inhibitor (HHI) in June 2021. Libtayo® received approval in the US in February 2021 for the treatment of adult patients with non-small lung cancer (NSCLC) whose tumors have high PD-L1 expression (Tumor Proportion Score of at least 50%) and are not candidates for surgical resection or definitive chemoradiation or have metastatic disease. In June 2021, the European Commission granted marketing authorization for the first-line treatment of adult patients with NSCLC expressing PD-L1 (in 50% tumor cells), with no EGFR, ALK or ROS1 aberrations, who have locally advanced NSCLC and who are not candidates for definitive chemoradiation, or who have metastatic NSCLC. Libtayo® is currently approved in 25 countries.
Libtayo® was filed for label extensions with the FDA and the EMA in 2L+ cervical cancer in 2021. On January 27, 2022, Sanofi and Regeneron announced the voluntary withdrawal of the supplemental Biologics License Application. Discussions with regulatory authorities outside of the US are ongoing. Libtayo® is currently under review by the FDA in chemotherapy combination as a first-line treatment for NSCLC. See “— B.5. Global Research & Development”.
Libtayo® is developed and commercialized in collaboration with Regeneron Pharmaceuticals, Inc. For additional information on the collaboration, see “Item 5.Operating and Financial Review and Prospects — Financial Presentation of Alliances — Alliance Arrangements with Regeneron”.
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Jevtana®
Jevtana® (cabazitaxel), a chemotherapy drug and cytotoxic agent, is a semi-synthetic second-generation taxane that 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 metastatic castration resistant 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. In Europe, generic competition started for Jevtana® from the end of March 2021. In the US, the Jevtana® composition of matter patent expired in September 2021. Sanofi has filed patent infringement suits under the US Hatch-Waxman Act against generic manufacturers for cabazitaxel in the US District Court for the District of Delaware asserting three Orange Book listed US patents for Jevtana®. Sanofi has entered settlement agreements with some of the defendants and the suit against the remaining defendants is ongoing; see Note D.22.b. to the consolidated financial statements, included at Item 18. of this annual report.
Fasturtec®/Elitek®
Fasturtec®/Elitek® is used for the management of plasma uric levels in patients with leukemia, lymphoma, and solid tumor malignancies receiving anticancer therapies.
Rare blood disorders
The Rare Blood Disorders
Rare Blood Disorders is a franchise was created in 2018 following theSanofi's acquisition of Bioverativ and Ablynx (see “–(see “— A. History and Development of the Company”).
Eloctate®
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 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.injection.
We market Eloctate® primarily in the US (since 2014), Japan, Canada, Australia, ColombiaSouth Korea and Taiwan.
Eloctate® is developed and commercialized in collaboration with Swedish Orphan Biovitrum AB (publ)(Sobi), whose territories include Europe, Russia, the 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 controlon-demand treatment and preventioncontrol of bleeding episodes, perioperative management of bleeding, 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 toresulting in a prolonged clottingpatient plasma-clotting time. As a consequence, people with hemophilia B bleed for a longer time similar to hemophilia A. Hemophilia B is a less common type of hemophilia than hemophilia A.normal. Alprolix® temporarily replaces the missing coagulation Factor IX and is administered by intravenous injection.
We market Alprolix® primarily in the US (since 2014), Japan, Canada, Australia, New Zealand, South Korea and Colombia.Taiwan.
Alprolix® is developed and commercialized in collaboration with Swedish Orphan Biovitrum AB (publ)(Sobi), whose territories include Europe, Russia, the Middle East, and some countries in North Africa.
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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 aan ultra-rare (3.5-4.5 episodes per million of population), 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 the US, Germany, Denmark, Austria, Belgium, the Netherlands, Italy and Finland, and is available in France under a temporary user license (autorisation temporaire d´utilisation).more than 20 countries including the US, the majority of European countries (14), Brazil, and Greater Gulf region states. Additional commercial launches are ongoing.
Cablivi® was developed by Ablynx, a Sanofi company since mid-2018. See “- A. History and Development of the Company”.
Primary Care franchises
f) 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.
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. In March 2019 in the EU and in April 2019 in the US, Praluent® was approved for use in patients with established cardiovascular disease to reduce the risk of cardiovascular events.
In March 2019, Sanofi and Regeneron launched a reduced list price (60% cheaper) version of Praluent®. This helped reduce out-of-pocket costs for Medicare patients.
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.
g) Diabetes
Lantus®
Lantus® (insulin glargine 100 units/mL) is a long-acting analog of human insulin, indicated for once-daily administration for the treatment of diabetes mellitus in adults, adolescents and children aged 2 years and above. Lantus® relies on more than 15 years of clinical evidence in diabetes treatment and a well established safety profile. Approved in the US and in EU in 2000 and in Japan in 2008, Lantus® is available in over 130 countries worldwide. One biosimilar insulin glargine is available in the US, two in the European markets and two in Japan.
There are ongoing patent infringement proceedings in the US against Mylan. See “Item 8. Financial information - Information on Legal or Arbitration Proceedings.
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. In January 2020, the European Commission approved the expansion of the indication to include the treatment of diabetes in adolescents and children (6 years and older).
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 at mealtime. Apidra® has a more rapid onset and shorter duration of action than fast-acting human insulin. Apidra® is available in over 100 countries worldwide.
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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, Suliqua® (the product’s brand name in Europe) was approved 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. Suliqua® is available in over 20 countries.
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® was launched in the US and several European countries during 2018.
Amaryl®/Amarel®/Solosa®
Amaryl® (glimepiride) is an orally administered once-daily sulfonylurea available in single form or in combination with metformin, indicated as an adjunct to diet and exercise to improve glycemic control in patients with type 2 diabetes. A number of glimepiride generics are available in most markets.
Integrated Care Solutions
Sanofi, in collaboration with Abbott and Biocorp, is building a connected set of tools to support people living with diabetes and taking insulin and to use de-identified data to evaluate additional clinical or quality of life outcomes. Following the successful pilot of the MyDoseCoach® tool, basal titration will be integrated into this system.
h) Established Prescription Products
Plavix® / Iscover ®
Plavix® or Iscover® (clopidogrel bisulfate), a platelet adenosine diphosphate (ADP) receptor antagonist 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) 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.
A number of clopidogrel bisulfate generics have been launched in most markets. Plavix® or Iscover® are available 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”.
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) for use in the prophylaxis and treatment of venous thromboembolism and in the treatment of acute coronary syndrome. Enoxaparin generics are available in the US, and biosimilar enoxaparin products have gradually become available across various European countries since 2016. Lovenox® or Clexane® is marketed in more than 100 countries.
Aprovel® / Avapro® / Karvea®
Aprovel® or Avapro® or Karvea® (irbesartan) is an angiotensin II receptor antagonist indicated as a first-line treatment for hypertension and for the treatment of nephropathy in hypertensive patients with type 2 diabetes. We also market CoAprovel® / Avalide® / Karvezide®, a combination of irbesartan and the diuretic hydrochlorothiazide. A combination with amlodipine (Aprovasc®) has been launched in several emerging market countries.
A number of irbesartan generics have been launched in most markets. Aprovel® and CoAprovel® are marketed in more than 80 countries. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances - Alliance Arrangements with Bristol-Myers Squibb”. In Japan, the product is licensed to Shionogi Co. Ltd and BMS KK. BMS KK has sublicensed the agreement to Dainippon Pharma Co. Ltd.
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.
Generics of sevelamer carbonate are available in the US and in various European countries. A generic of sevelamer hydrochloride was approved in the US in February 2019, and was subsequently launched. 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.
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Synvisc® / Synvisc-One®
Synvisc® and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis. 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 disorder (in some countries this indication is branded differently e.g. Depakote® in France).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.
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
In December 2019, we announced that Consumer Healthcare will be a standalone business unit with integrated R&D and manufacturing functions plus dedicated support functions and information technology. In June 2019, we signed an agreement with Roche for the exclusive over-the-counter (OTC) US rights to Tamiflu® for the prevention and treatment of influenza (flu). We had previously acquired in 2014, from Eli Lilly, the exclusive OTC rights to Cialis® in the US, Europe, Canada and Australia. During 2019, we divested some non-core brands in Europe and Canada.
Our CHC sales are supported by a range of products, including the following brands.
Allergy, Cough & Cold
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▪ | 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.
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▪ | 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.
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Pain
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▪ | 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.
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▪ | 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.
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Digestive
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▪ | 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.
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▪ | 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.
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▪ | 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.
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▪ | Zantac® products are for the prevention and relief of heartburn. Zantac® is sold in the US and Canada. In October 2019, Sanofi initiated a voluntary recall of all Zantac® OTC in the US and in Canada as a precautionary measure, following inconsistencies in preliminary test results on the active ingredient used in the US product. See Note D.22.a) to our consolidated financial statements, included at Item 18 of this annual report.
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Nutritionals
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▪ | 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.
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Other
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▪ | 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.
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ITEM 4. INFORMATION ON THE COMPANY
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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 combination vaccine that provides protection against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. 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) combination vaccine protecting against five diseases (diphtheria, tetanus, pertussis, Hib and hepatitis B). Shan5® is WHO pre-qualified and procured through Unicef to the GAVI countries.
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.
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.
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 world's 73 poorest countries, representing 80% of the total IPV volumes used in those countries. On October 1, 2018, the ShanIPV® 5-dose vial received WHO pre-qualification.
Vaxelis® is a PR5i hexavalent combination vaccine protecting against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. This vaccine (developed and distributed in partnership with Merck) was approved in 2016 by the EMA and is distributed in various EU countries. Vaxelis® was approved by the FDA in December 2018, becoming the first hexavalent vaccine to be approved in the US. Launch is scheduled from 2021 to ensure adequate supply.
b) Influenza vaccines
Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines, offering several distinct influenza vaccines that are sold globally to meet growing demand.
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 6 months and older.
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. It is a trivalent influenza vaccine, including two influenza A strains and one influenza B strain. Fluzone® High-Dose is sold in the US, Canada, Australia and the UK. Sanofi Pasteur will continue to deliver and offer this trivalent formulation through the end of the 2019-2020 influenza season. Fluzone® High-Dose Quadrivalent for adults aged 65 years of age and older was approved by the FDA in November 2019, and will be available in fall 2020. Compared to Fluzone® High-Dose vaccine, it contains an additional influenza B strain and will replace Fluzone® High-Dose (which contains three strains). Fluzone® High-Dose Quadrivalent is currently also being evaluated by the EMA.
Flublok® is a quadrivalent influenza vaccine for adults aged 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 outside the US 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. It is progressively being replaced by Vaxigrip® Tetra.
Vaxigrip® Tetra is the quadrivalent (QIV) version of Vaxigrip®, including two antigens against A strains of influenza viruses and two antigens against B strains. Compared to the trivalent influenza vaccine, it contains an additional influenza B strain. This quadrivalent formulation, VaxigripTetra®, was licensed in 2016 and has been launched in more than 40 countries since 2017. VaxigripTetra® is not licensed in the US where Fluzone® Quadrivalent, which is produced in the US, is sold.
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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 yet immunized, or only partially immunized through maternal immunization. It is available in 40 countries including the US, 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 outside the US, 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. 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 (outside Europe). It is a strong leader in the meningitis quadrivalent market in the US. 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 endemic vaccines
Sanofi Pasteur provides a wide range of travel and endemic 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.
Dengvaxia® is available or can be supplied in 12 countries. The Philippines FDA revoked the Dengvaxia® license in early 2019. Sanofi filed a motion for reconsideration, which was denied; Sanofi has since filed an appeal before the Office of the President. For more information, please see Note D.22.a) to our consolidated financial statements, included at Item 18 of this annual report. In 2018, the European Commission granted marketing authorization for Dengvaxia® to prevent dengue disease in individuals aged 9-45 years with a documented prior dengue infection who are living in endemic areas; and in 2019, the FDA approved Dengvaxia® to prevent dengue disease caused by serotypes 1-4 of the virus in individuals aged 9-16 years living in endemic areas of the US with a laboratory-documented prior infection.
In most countries where Dengvaxia® is approved, the indication is for individuals aged 9 to 45 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 has recommended a label update for Dengvaxia® to target its use at people with prior dengue infection.
The WHO has recognized the public health value of introducing Dengvaxia® in targeted immunization programs, recommending that the vaccine be offered to individuals who have tested positive for prior dengue infection. Current tests detect acute infections and not past infections. We are collaborating with a serotest manufacturer to co-develop an optimized test to be used at the point of care with higher sensitivity (improved ability to detect past infection), while maintaining high specificity (avoid vaccinating truly seronegative persons).
B.5. Global research & development
Since 2018, Sanofi has been engaged in a strong reshaping of its R&D strategy, strengthening the development of innovative products that aim to substantially elevate the standard of care for patients, and prioritizing therapeutic areas where patient need is most urgent: oncology, immunology, rare diseases and multiple sclerosis/neurology. The objective is to develop transformative medicines with the potential to change patients' lives.
R&D is leveraging the investments made a few years ago to establish competency in several therapeutic modalities, and is building robust in-house capability around monoclonal antibodies and antibody-drug conjugate platforms.
The acquisition of Ablynx in 2018 with its specific nanobodies platform, and the recently-announced acquisition of Synthorx with its expanded genetic alphabet platform,have enhanced this position.
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.
Our aspiration is to build a pipeline of first-in-class or truly differentiated best-in-class medicines, with two-thirds of biologic 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 innovation and access, to help patients and communities to achieve better health outcomes, through large-scale preventive care and transformative medicines.
To meet these challenges, Sanofi R&D is fully engaged in a major transformation process, focusing on:
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▪ | prioritizing and strengthening the portfolio profile with new innovative therapies; |
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▪ | leveraging multiple therapeutic modalities; and |
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▪ | executing to secure accelerated development and quicker access to treatment for patients. |
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Sanofi R&D is organized around five major therapeutic areas (TAs) aligned with our new Global Business Unit (GBU) organization for specialty care:
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▪ | Immunology & Inflammation |
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▪ | Multiple Sclerosis and Neurology |
We recently took the decision to discontinue our research activities in diabetes and cardiovascular (DCV) . The few DCV projects remaining in development are under the responsibility of the General Medicines/Established Products GBU.
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 handle 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.
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 2019, the main events related to the pharmaceuticals portfolio were:
Regulatory approvals:
In 2019, Sanofi obtained regulatory approval in the US for Cablivi® in combination with plasma exchange and immunosuppressive therapy for the treatment of acquired thrombotic thrombocytopenic purpura (aPTT) in adults. In the US and Europe, Dupixent® has been approved for the treatment of moderate to severe atopic dermatitis in adolescents, as well as for the treatment of chronic rhinosinusitis with nasal polyps. In Europe, Dupixent® has been approved for the treatment of severe asthma. The European Commission and the US FDA have approved a new indication for Praluent® (alirocumab) to reduce cardiovascular risk in adults with established atherosclerotic cardiovascular disease. In Europe, a marketing authorization has been issued for Libtayo® (cemiplimab) for the treatment of advanced squamous cell carcinoma (SCC). Sarclisa® (isatuximab) was approved on March 2, 2020 by the US Food and Drug Administration (FDA) for the treatment of adults with relapsed refractory multiple myeloma (RRMM) who have received at least two prior therapies.
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Regulatory submissions:
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▪ | Isatuximab (Sarclisa®) was submitted in Europe as a potential treatment for refractory or relapsing multiple myeloma;
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▪ | Insulin aspart rapid-acting (SAR 341402) was submitted in Europe for the treatment of type 1 and type 2 diabetes mellitus; and |
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▪ | Dupixent® was submitted in Europe and US in the treatment of atopic dermatitis in a pediatric population (children aged 6 to 11 years).
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Phase III starts
In 2019, the following products moved into Phase III:
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▪ | venglustat, a GCS inhibitor, for the treatment of autosomal dominant polycystic kidney disease (ADPKD); |
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▪ | BIVV001, a von Willebrand factor- independent factor VIII therapy for people with hemophilia; and |
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▪ | SAR408701, an antibody drug conjugate (ADC) that binds to CEACAM-5, for the treatment of Non-Squamous Non-Small Cell Lung. Cancer (NSCLC) |
Phase II starts
In 2019, the following products moved into Phase II:
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▪ | SAR439859 (ESR degradation) for the second/third line treatment of metastatic breast cancer (BC) and as adjuvant therapy; and |
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▪ | SAR442168 (BTK inhibitor) for the treatment of relapsing multiple sclerosis (RMS). |
Phase I starts
In 2019, the following products entered Phase I:
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▪ | SAR442085, an anti-CD38 mAb, for the treatment of multiple myeloma (MM); |
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▪ | SAR443122, a RIPK1 inhibitor, for the treatment of rheumatoid arthritis (RA); |
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▪ | BIVV020, a complement C1 inhibitor; |
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▪ | SAR441236, a tri-specific neutralizing anti-HIV mAb, for the treatment of HIV; |
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▪ | SAR441169, a ROR gamma T agonist, for the treatment of psoriasis; |
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▪ | SAR441000, a cytokine mRNA, for the treatment of solid tumors; |
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▪ | BIVV003, a zinc finger nuclease (ZFN) gene editing technology for the treatment of sickle cell disease; and |
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▪ | ST400, a zinc finger nuclease (ZFN) gene editing technology in Phase I for the treatment of ß thalassemia. |
The clinical portfolio of new products as of March 5, 2020 is summarized in the table below; where several indications are being developed for one product, each indication is regarded as a separate project and specified individually.
For more information on Dupixent®, Kevzara®, Praluent®, Aubagio® , Cerdelga®, Libtayo® and Lemtrada®, see also“– Item 4. Information on the Company – B. Business Overview – B.2. Main Pharmaceutical Products”.
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| Phase I | Phase II | Phase III/registration |
Diabetes & Cardiovascular | | | SAR341402 (T1 & T2 diabetes) efpeglenatide (T2 diabetes)
Praluent® (LDL-C reduction HoFH(a))
Praluent® (LDL-C reduction, pediatric)
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Oncology | SAR439459 (advanced solid tumors)
SAR441000 (solid tumors)
SAR442720 (solid tumors)
SAR440234 (leukemia)
SAR442085 (multiple myeloma) Thor-707 (solid tumors) SAR439459 + cemiplimab (advanced solid tumors) SAR439859 + palbociclib (metastatic breast cancer) SAR442720 + cobimetinib (relapsed Refractory solid tumors) SAR441000 + PD1 (solid tumors)
| SAR438859 (metastatic breast cancer 2/3L)
cemiplimab (BCC(c))
isatuximab+cemiplimab (RRMM(e))
isatuximab+cemiplimab (lymphoma)
isatuximab+atezolizumab (metastatic Colorectal Cancer
isatuximab+atezolizumab
(solid tumors) isatuximab (1-2L AML/ALL ped(j))
| isatuximab(1-3L RRMM(d) - IKEMA)
isatuximab (1L NDMM(f) Ti - IMROZ)
isatuximab (1L NDMM(f) Te - GMMG)
cemiplimab (2L CC(g))
cemiplimab (1L NSCLC(h))
cemiplimab + chemotherapy (1LNSCLC (h)) cemiplimab (adjuvant in cSCC(i))
SAR408701 (2-3L NSCLC(h))
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Rare Blood Disorders | BIVV003 (Sickle Cell disease)
ST400 (ß thalassemia)
BIVV020
sutimlimab (ITP(k))
| | fitusiran (Hemophilia A&B) fitusiran (Hemophilia A&B pediatric))
sutimlimab BIVV009 (Cold Agglutinin Disease)
BIVV001 (Hemophilia A)
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Immunology &
Inflammation
| SAR443122 ( inflammatory diseases)
SAR441169 (psoriasis)
SAR441236 (HIV)
| Kevzara® (pcJiA(l))
Kevzara® (sJiA(m))
dupilumab (peanut allergy - Pediatric)
dupilumab (grass pollen allergy)
SAR440340 (Asthma)
SAR440340 (COPD(o))
SAR440340 (Atopic Dermatitis)
romilkimab (Systemic Scleroderma)
| Dupixent® (asthma, 6-11 years)
Dupixent® (Atopic Dermatitis 6m-5y)
dupilumab (EE(n))
dupilumab (COPD(o))
dupilumab (Bullous Pemphigoid) dupilumab (Chronic spontaneous Urticaria) dupilumab (Prurigo Nodularis) Kevzara® (Giant Cell Arteritis)
Kevzara® (Polymyalgia Rheumatica)
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Multiple Sclerosis
Neurology
| SAR443060 (ALS et MS(p))
SAR441344 (MS)
| venglustat (GBA-PD(q))
SAR422459 (Stargardt) SAR442168 (Multiple Sclerosis)
| Aubagio® (RMS pediatric.(r))
Lemtrada® (RRMS pediatric.(s))
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Rare diseases | | olipudase alfa (Niemann Pick)
venglustat (Gaucher type3)
venglustat (Fabry)
SAR339375 (Alport syndrome)
| Avalglucosidase alfa (Pompe)
venglustat (ADPKD(t))
Cerdelga® (Gaucher Type I switching from ERT - pediatric)
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(a) | Homozygous Familial Hypercholesterolemia |
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(c) | 1st-3rd Line Relapsing and/or Refractory Multiple Myeloma |
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(d) | Relapsing and/or Refractory Multiple Myeloma |
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(e) | 1st Line Newly Diagnosed Multiple Myeloma |
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(f) | 2nd Line Cervical Cancer |
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(g) | Non-Small Cell Lung Cancer |
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(h) | Cutaneous squamous-cell carcinoma |
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(i) | Acute myelocytic leukemia / Acute lymphocytic leukemia |
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(j) | Idiopathic Thrombocytopenic Purpura |
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(k) | Polyarticular Juvenile Idiopathic Arthritis |
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(l) | Systemic Juvenile Idiopathic Arthritis |
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(m) | Eosinophilic Esophagitis |
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(n) | Chronic Obstructive Pulmonary Disease |
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(o) | Amyotrophic Lateral Sclerosis and Alzheimer’s disease |
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(p) | GBA related Parkinson’s Disease |
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(q) | Relapsing Multiple Sclerosis pediatric |
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(r) | Relapsing Remitting Multiple Sclerosis pediatric |
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(s) | 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.
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a) Oncology
Products in development
Isatuximab (Sarclisa®), 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:
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▪ | antibody-dependent cellular-mediated cytotoxicity (ADCC); |
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▪ | complement-dependent cytotoxicity (CDC); |
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▪ | antibody-dependent cellular phagocytosis (ADCP); and |
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▪ | 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 registration phase for its lead indication (isatuximab in combination with pomalidomide and dexamethasone in patients with relapsed and refractory multiple myeloma [MM]) based on the Phase III ICARIA-MM study data.
In addition to this Phase III ICARIA-MM trial that is still ongoing, multiple studies in multiple myeloma are under way, and include:
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▪ | Three pivotal Phase III trials: |
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– | 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.
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– | 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.
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– | 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).
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▪ | Several early phase studies: |
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– | 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. |
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– | A Phase I/II study in combination with cemiplimab in the treatment of patients suffering from RRMM. |
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– | A Phase Ib study evaluating the pharmacokinetics, safety and efficacy of isatuximab (SC and IV) in combination with pomalidomide and dexamethasone in patients with Relapsed/Refractory MM. |
In addition, early development studies in solid tumors are ongoing:
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▪ | a Phase II study in combination with cemiplimab in the treatment of lymphoma; |
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▪ | a Phase I/II study with isatuximab alone or in combination with atezolizumab in patients with advanced malignancies; and |
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▪ | a Phase II study in combination with atezolizumab in the treatment of solid tumors (metastatic colorectal cancer). |
Libtayo® - cemiplimab (SAR439684), a PD-1 inhibitor derived from our alliance with Regeneron, was approved for the treatment of advanced CSCC by the FDA in September 2018 and in the EU in July 2019.
A Phase II program in the treatment of basal cell carcinoma is ongoing.
Additional Phase III studies are also running in different indications:
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▪ | in the first-line treatment of patients with advanced or metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1, as monotherapy and in combination with Platinum-based Doublet Chemotherapy; and |
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▪ | 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, a selective estrogen receptor degrader (SERD), has begun a Phase I dose expansion study in combination with palbociclib. It has also entered a pivotal Phase II study in second and third line metastatic breast cancer as monotherapy versus physician’s choice of single-agent endocrine therapy. A Phase II 14-day window of opportunity study has been initiated in the prior to surgery/neoadjuvant-like setting to inform further development in the adjuvant setting.
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SAR408701 is an antibody drug conjugate (ADC) that binds to CEACAM-5, a membrane glycoprotein originally identified as a surface marker on adenocarcinomas of the human gastrointestinal tract. The compound is in Phase III in the treatment of Metastatic Non-Squamous Non-Small Cell Lung Cancer (NSCLC) with CEACAM5 positive tumors. In addition, a study is ongoing to evaluate the activity of the drug in the treatment of NSCLC, colorectal cancer and gastric cancer; a Phase I trial in Japan is also ongoing.
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. The antibody anti-TGFß is expected to alleviate the 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.
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 study testing dose-escalation of SAR440234 in patients with acute myeloid leukemia, acute lymphoid leukemia and myelodysplastic syndrome is ongoing.
SAR441000is 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 First In Human study in patients with advanced melanoma, assessing the safety, PK/PD and anti-tumor activity of SAR441000 as monotherapy and in combination with a PD1 inhibitor, is ongoing.
SAR442720is 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. The First in Human study in advanced non-small cell lung cancer with mutations (KRAS or in NF1) is ongoing. A Phase I/II study in solid tumors with specific genomics aberrations in combination with cobimetinib was initiated in 2019.
SAR442085 is an Fc-engineered anti-CD38 mAb mutated on the Fc fragment of IgG1, to enhance its affinity for the activated Fcg receptor (in particular FcgRIIIa), improve ADCC and clinical activity, while keeping a manageable toxicity profile. The Phase I study in the treatment of multiple myeloma was initiated in 2019.
b) 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:
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▪ | atopic dermatitis: the product was approved for adults in 2017 in the US and Europe, in 2018 in Japan, and launched under the trade name Dupixent®. A supplemental filing for the adolescent population was approved in the US and EU in 2019. The dossier in a first pediatric population (6 to 11 years) was submitted in November 2019 in US and in January 2020 in Europe. A Phase III study in a second pediatric population (6 months to 5 years) is ongoing;
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▪ | asthma: the product was approved for adults & adolescents in the the US and Europe. A Phase III study in children (6-11 years) is ongoing;
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▪ | nasal polyposis: the indication was approved by the FDA in June 2019 and in Europe in October 2019;
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▪ | eosinophilic esophagitis: Phase II/III study is ongoing;
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▪ | adjunct to immunotherapy: Proof-of-concept studies to evaluate dupilumab as an adjunct to immunotherapy (peanut and grass allergies) are ongoing;
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▪ | chronic obstructive pulmonary disease: aPhase III study was initiated in 2019.
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▪ | 3 new Phase III studies in the following indications have been initiated: |
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– | chronic spontaneous urticaria; and |
Kevzara®- sarilumab(SAR153191) is a monoclonal antibody against the Interleukin-6 Receptor derived from our alliance with Regeneron, and is 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 for the treatment of polymyalgia rheumatic and giant cell arteritis are ongoing.
Main products in early stage
Romilkimab (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. Orphan drug designation was granted for the product in the US in 2019.
SAR440340 is a human anti-IL33 monoclonal antibody derived from our alliance with Regeneron. Three Phase II studies are ongoing in moderate-to-severe asthma, in atopic dermatitis and in chronic obstructive pulmonary disease.
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SAR443122, (DNL758), a small molecule against the receptor-interacting serine/threonine-protein kinase 1 (RIPK1), developed in collaboration with Denali, entered Phase I in 2019 for the treatment of inflammatory diseases.
SAR441169 (RORC antagonist), developed in collaboration with Lead Pharma, started a Phase I study in 2019 for the treatment of psoriasis.
SAR441236, a tri-specific neutralizing anti-HIV antibody, entered Phase I in 2019 for the treatment of HIV.
c) Multiple Sclerosis and Neurology
SAR442168 (PRN2246), developed in collaboration with Principia Biopharma, is 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 impacting immune cell and brain cell signaling. Positive results of the Phase IIb Proof of Concept/dose-ranging study in relapsing multiple sclerosis patients were published early February 2020.
SAR443060 (DNL747) is a best-in-class orally administered receptor-interacting serine/threonine protein kinases (RIPK1) inhibitor, developed in collaboration with Denali. 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. Two Phase Ib studies in amyotrophic lateral sclerosis and Alzheimer’s disease are ongoing.
Venglustat (GZ402671), an orally administered brain penetrant glucosylceramide synthase (GCS) inhibitor, is currently in Phase IIa for the treatment of Parkinson’s disease with an associated GBA mutation. 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).
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 isa gene therapy product for the treatment of 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, and the identification of an out-licensing partner is ongoing.
SAR441344, an anti-CD40L mAb, developed in collaboration with Immunext, is in Phase I for the treatment of multiple sclerosis.
d) 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 naive 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. Positive results were published at the end of January 2020.
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 has been 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 started in 2019.
SAR339375is an anti-miR21 RNA in Phase II for the treatment of Alport syndrome.
e) 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 trials which are evaluating the efficacy and safety of sutimlimab in adult patients with primary Cold Agglutinin Disease (CAD). Sutimlimab was awarded Breakthrough Therapy Designation by the US Food and Drug Administration in 2018. Sutimlimabis 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.
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BIVV001 (rFVIIIFc-VWF-XTEN), developed in collaboration with Sobi 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. The product entered Phase III in 2019.
Main products in early stage
Sanofi and Sangamo Therapeutics are working in collaboration to research, develop and commercialize treatments for sickle cell disease and beta thalassemia(BIVV003, ST-400), 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 Sanofi’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, Sanofi 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 in Phase I.
BIVV020, a humanized IgG4 mAb that binds to and inhibits the classical pathway (CP) specific serine protease, C1s, thus inhibiting CP activity.Activation of the CP of complement is associated with a variety of immune disorders involving the presence of autoantibodies. Inhibition of autoantibody mediated CP activation on the surface of erythrocytes via C1s binding prevents complement opsonin deposition on RBCs and protects them from phagocytosis and extravascular hemolysis in autoimmune hemolytic anemia such as Cold Agglutinin Disease (CAD).Inhibition of the CP activation via C1s prevents both immune mediated platelet destruction and inhibition of platelet production caused by anti-platelet autoantibodies (ITP). The product entered Phase I in 2019.
f) Diabetes & Cardiovascular
Diabetes
Rapid Acting insulin (SAR31402) was submitted in Europe for the treatment of type 1 and type 2 diabetes mellitus.
Efpeglenatide (SAR439977), a long-acting GLP1 receptor agonist, is derived from our license agreement with Hanmi. Sanofi has committed to completing the ongoing Phase III studies and is looking for a partner to take over and commercialize efpeglenatide.
Cardiovascular
Praluent®(collaboration with Regeneron): Two studies are ongoing: one evaluating Praluent® in children with heterozygous familial hypercholesterolemia (HeFH), and one in the treatment of homozygous familial hypercholesterolemia (HoFH).
Products removed from the portfolio in 2019
Sotagliflozin (SAR 439954): at the end of July 2019, taking into account the results obtained in terms of reduction of blood sugar level or HbA1c level (main evaluation criterion) in the SOTA-CKD3 and SOTA-CKD4 studies, Sanofi notified Lexicon of the termination of the collaboration agreement relating to the development, manufacture and marketing of ZynquistaTM (sotagliflozin), applicable to all of the programs carried out worldwide in type 1 and type 2 diabetes.
B.5.2. Vaccines
The Vaccines R&D portfolio includes 12 projects in advanced development (including one antibody), as shown in the table below. The portfolio includes five projects for novel targets and seven enhancements of existing vaccines.
In 2019, we obtained regulatory approval in the US for Fluzone® High-Dose Quadrivalent, a higher dose vaccine to prevent influenza in people aged 65 and older. An application for Fluzone® High-Dose Quadrivalent is being reviewed in the European Union. In June, the FDA accepted for review a biologic licence application for MenQuadfiTM, a vaccine candidate to help prevent meningococcal meningitis in people aged 2 and older. In October, MenQuadfiTM was submitted in the European Union for the prevention of invasive meningococcal disease in people aged 12 months and older. In the second quarter, nirsevimab, a monoclonal antibody candidate to prevent RSV infections in all infants, entered Phase III, as did VerorabVax®, our next-generation purified human rabies vaccine candidate. Early in 2020, a next generation live attenuated yellow fever vaccine candidate entered Phase I. In February 2020, the HIV candidate vaccine project (in collaboration with pox-protein public-private partnership - P5) was discontinued based on interim review results.
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Phase I | Phase II | Phase III | Registration |
Pneumo Conjugate Vaccine (PCV)(a) Prevention of pneumococcal pneumonia
| SP0173 TDap(b) booster vaccine
Prevention of TDap infections
US, adults 64y+
| Nirsevimab, mAb(a) Passive prevention of respiratory syncytial virus infections in all infants
| Fluzone® QIV HD Quadrivalent inactivated influenza vaccine - High dose (EU)
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Herpes Simplex Virus (HSV) vaccine(b)
HSV-2 therapeutic vaccine
| | MenQuadfiTM Advanced generation meningococcal ACYW conjugate vaccine
US / EU infants 6w+
| MenQuadfiTM Advanced generation meningococcal ACYW conjugate vaccine US 2y+, EU 1y+
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Respiratory Syncytial Virus (RSV) vaccine
Prevention of RSV infections in infants 4m+
| | Pediatric pentavalent vaccine(a) DTP-Polio-Hib(d) Japan
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Vero Yellow Fever vaccine
| | Shan6 DTP-HepB-Polio-Hib(b) Pediatric hexavalent vaccine
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| | VerorabVax® (VRVg) Purified vero rabies vaccine
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(a) | Partnered and/or in collaboration: Sanofi may have limited or shared rights to some of these products. |
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(b) | D=Diphtheria, T=Tetanus, P=Pertussis, Hib=Hemophilus influenzae b, HepB=Hepatitis B, ap=acellular pertussis. |
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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 (immuno-senescence). 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. In November 2019, the product was approved by the FDA for use in people aged 65 and older, and it will be made available in the US during the 2020-2021 influenza season. Fluzone® QIV HD is also being evaluated by the EMA.
Pediatric pentavalent vaccine for the Japanese market: Sanofi Pasteur is developing this vaccine (primary series and booster vaccine) in partnership with Kitasato and Daiichi Sankyo (KDSV). 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.
MenQuadfiTM: 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. In June 2019, the FDA accepted for review a biologic licence application for MenQuadfiTM, for use in people aged 2 years and older; in October 2019, an application was submitted in the EU for use in people aged 12 months and older. Phase III trials are ongoing to evaluate immunogenicity and safety in infants aged 6 weeks and older.
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.
New vaccine targets
Nirsevimab is a monoclonal antibody which has been engineered to have a long half-life, so that only one dose would be needed for the entire Respiratory Syncytial Virus (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). Sanofi Pasteur has an agreement with MedImmune/AstraZeneca to develop and commercialize nirsevimab. Positive primary analysis of the Phase IIb trial has demonstrated the safety and efficacy of nirsevimab. The Phase III study started in 2019. The product received fast-track designation from the FDA in 2015 and received FDA Breakthrough Therapy designation in February 2019. The EMA granted PRIME eligibility to nirsevimab in February 2019.
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.
Pneumo Conjugate 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.
The Vero Yellow Fever (vYF) vaccine candidate is a next generation freeze-dried live attenuated yellow fever vaccine produced on Vero cell line, for subcutaneous and intra-muscular administrations in populations over 9 months of age. This next generation vaccine aims at replacing both Stamaril and YF-VAX with a single product, securing a sustainable and consistent supply available worldwide. In January 2020, the first Phase I/II trial was initiated in the US.
B.5.3. R&D expenditures for late stage development
Expenditures on research and development amounted to €6,022 million in 2019, comprising €4,622 million in the Pharmaceuticals segment; €148 million in the Consumer Healthcare segment; €653 million in the Vaccines segment; and €599 million allocated to “Other”, representing the R&D support function. Research and development expenditures were the equivalent of about 16.7% of net sales in 2019, compared to about 17.1% in 2018 and about 15.6% in 2017.
The increase in R&D expenditures in 2019 is mainly due to a greater proportion of products being in late stage development. It is also due to the Vaccines segment with an increase of 17.7% in 2019. Preclinical research in the Pharmaceuticals segment amounted to €825 million in 2019, compared to €983 million in 2018 and €1,086 million in 2017. Of the remaining €3,797 million relating to clinical development in the Pharmaceuticals segment (€3,589 million in 2018 and €3,032 million in 2017), the largest portion covers Phase III or post-marketing studies, reflecting the cost of monitoring large scale clinical trials.
B.6. Markets
A breakdown of revenues by business segment and by geographical region for 2019, 2018, and 2017 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 2019 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).
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ITEM 4. INFORMATION ON THE COMPANY
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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. 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, 2019 Compared with Year Ended December 31, 2018.” Sanofi is the eighth largest pharmaceutical company globally by sales. Our main markets in terms of net sales are respectively:
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▪ | Emerging Markets (see definition in “– Information on the Company – Introduction” above): Sanofi is the leading healthcare company in emerging markets, and the seventh largest pharmaceutical company in China. |
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▪ | The US: we rank twelfth with a market share of 3.3%. |
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▪ | Europe: we are the second largest pharmaceutical company in France where our market share is 5.6% and we rank sixth in Germany with a 3.5% market share. |
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▪ | Other countries: our market share in Japan is 1.7%. |
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:
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▪ | competition between pharmaceutical companies to research and develop new patented products or address unmet medical needs; |
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▪ | competition between different patented pharmaceutical products marketed for the same therapeutic indication; |
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▪ | competition between original and generic products or between original biological products and biosimilars, at the end of regulatory exclusivity or patent protection; and |
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▪ | competition between generic or biosimilar products. |
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.
The same types of competition apply in Consumer Healthcare, except that in this business there are two types of generic products: private labels and store brands.
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In Vaccines, there are two types of competition:
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▪ | competition between vaccine companies to research and develop new patented products or address unmet medical needs; and |
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▪ | competition between different patented (or non-patented) vaccine products marketed for the same therapeutic indication; |
Generics and biosimilars are not an issue in vaccines at present, since vaccines are still mostly produced from proprietary viral or bacterial strains. As with pharmaceutical drugs, vaccine manufacturers can face competition through parallel trading. However, the extent of such practices is limited by the need for cold chain distribution of vaccines, and by the fact that vaccines are sold and administered through pharmacies or dispensing physicians.
B.6.3. Regulatory framework
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.
In the EU, there are three main procedures for applying for marketing authorization:
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▪ | 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. |
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▪ | 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. |
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▪ | 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 centralized procedures described above.
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.
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 the US, applications for pharmaceutical approval and biological product licensure 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 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) to a reference 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 that can be referenced as having been approved under the FD&C Act.
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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. Similarly, under the PHS act, there exists an abbreviated licensure pathway for biological products shown to be biosimilar (highly similar with no clinically meaningful differences) or interchangeable with an FDA-licensed reference BLA product
In Japan, the entire process of approval review from review-related inspections and clinical trial consultation to review for the drugs approved by the Ministry of Health, Labour and Welfare (MHLW) is undertaken by the Pharmaceuticals and Medical Devices Agency (PMDA). The PMDA conducts first scientific review of the NDA submitted, assessing particularly the safety, efficacy and quality of the product or medical device proposed. Results of this primary evaluation are then submitted to the PMDA’s external experts. After a second evaluation based on the external experts’ feedback, a report is provided; the Pharmaceutical Affairs and Foods Sanitation Council (PAFCS) - one of the councils organized under the J-MHLW as advisory commission - is consulted, and advises the MHLW on final approvability.
For Japanese registrations, clinical data for Japanese patients are necessary. The regulatory authorities can require local clinical studies, though they also accept multi-regional studies including Japan. In some cases, bridging studies have been conducted to verify extrapolability of foreign clinical data to Japanese patients and to obtain data to determine the appropriateness of the dosages for Japanese patients.
The MHLW may require additional post-approval studies (Phase IV) for some specific cases, to further evaluate safety and/or to gather information on the use of the product under specified conditions. In approval of new drugs, new indications, new dosages or new administrations, reexamination period is determined by the MHLW. Post-marketing information on a drug for the predetermined period after approval is collected to reconfirm its efficacy, safety and quality at the end of the period. In this collection, post-marketing surveillance (PMS) which is non-interventional study and post-marketing clinical trial are involved.
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 PMDA reviews designated products on a priority basis with the aim of reducing their review time from the normal 12 months to six months through rolling review. Based on the National Health Insurance (NHI) price system, the “Premium” classification in term of price 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.
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 biopharmaceutical. Common Technical Document (CTD) submission for generics has been mandatory since March 2017.
The International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH) was created in 1990 and reformed in 2015.
ICH includes today 16 Members and 32 Observers. Harmonization is achieved through the development of ICH Guidelines via a process of scientific consensus with regulatory and industry experts working side-by-side.
In addition to the joint efforts, 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.
B.6.4. Pricing & Reimbursement
Increasingly, efforts to control drug expenditures in most markets in which Sanofi operates influence the pricing and access of pharmaceuticals. The nature of those controls varies from country to country, but some common themes include 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 the political ambition to expand healthcare coverage has become a noticeable feature in many regions and provides opportunities for the industry, it also puts pressure on budgets and brings 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.
US Payer Structure
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.
Private (commercial) health insurance includes:
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▪ | 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. |
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▪ | Pharmacy benefit managers (PBMs) serve as intermediaries between insurance companies, pharmacies and manufacturers to negotiate rebates and discounts on formulary placement for commercial health plans, self-insured employer plans, Medicare Part D plans, and federal and state government employee plans. |
Public health insurance includes:
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▪ | 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 coverage. 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 women and children, individuals receiving supplemental security income, and other eligible persons determined on a state-by-state basis. |
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 and Medicare Part D 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, the adoption of biosimilars (which are now beginning to transform the US biologics landscape), and other methods that generally shift more costs to patients, even when plan costs are flat or declining.
The current Administration continues to focus on lowering the cost of prescription drugs, including policies to address the disparity between drug prices paid by Americans and the rest of the world (the International Pricing Index (IPI) and importation plans). The IPI, as initially proposed, would essentially tether domestic prices for certain Part B drugs to the international markets. It is possible that a revised IPI proposal may include a broader set of Part B drugs as well as Part D drugs. Likewise, the Administration and some states are considering implementing prescription drug importation policies. However, these too are not finalized and several implementation questions remain.
The US Congress also continues to focus on prescription drug pricing, with the US Senate taking a more bipartisan approach. The US House has to date opted for a partisan approach that would likely have a chilling effect on US jobs and innovation from the biopharmaceutical industry. Based on public statements, the House-passed drug pricing legislation (H.R. 3) is unlikely to become law in 2020 given public opposition from Senate Republican leadership.
Until policies are enacted to lower out-of-pocket costs for patients, these issues will continue to receive significant attention and focus from Democrats and Republicans at the state and federal levels.
Significant trends in China:
In 2019, China continued to pursue its objective of reforming its healthcare system, so as to ensure access to high quality drugs and bring innovative medicines to the country. Following major updates to the National Reimbursement Drug List (NRDL) in 2017 and 2018, negotiations during 2019 led to a further 119 drugs being added. Of these, 52 were Western medicines, including Sanofi’s Aubagio® and Lyxumia®. A further 31 medicines were subject to price re-negotiations, 27 of them successfully (including Renvela®), although success came at the cost of substantial price cuts. Until a product is included in the NRDL it can expect only limited access to the Chinese market. Drugs listed on the NRDL are distributed mainly through public health insurance schemes.
Substantial price cuts were also obtained from the national rollout of a centralized procurement scheme, based on the April 2019 pilot ‘4+7’ tender scheme (4 municipalities and 7 major cities participated). The pilot ‘4+7’ scheme had a winner-takes-all format. The new tender allowed up to three suppliers. There have been further announcements that the list of products to come under centralized procurement will be expanded from the 25 originally chosen for the pilot (which included Plavix® and Aprovel®). At the beginning of 2020, a further 33 drugs were added to the list, including Amaryl®, for implementation during 2020.
With the backlog of regulatory approvals essentially cleared, a VAT reduction (to 3%) for selected orphan drugs, and the introduction of a priority review pathway by the National Medical Products Administration among other measures, access to the Chinese market is growing. However, many questions still remain including (significantly) a policy for orphan drugs funding, which is expected in 2020.
Significant trends in other markets:
In Canada, the overhaul of the PMPRB price monitoring rules and procedures is finally expected to be implemented on July 1, 2020. This will include measures such as increasing the number of countries used for price benchmarking. An Advisory Council Report, published in June 2019, recommended a single, universal public system for the administration of prescription drugs. One of the recommendations – the establishment of a Canadian Drug Agency, which would eventually be responsible for the evaluation of drug effectiveness, prescription drug price negotiations and the creation of a national formulary (pilot version expected in 2022) – has been allowed for in the 2019/2020 budget.
In South America, inflation continues to disrupt several economies. Argentina, with over 50% inflation recorded in 2019, is now experiencing shortages and funding difficulties, with many pharmaceutical companies adjusting medicine prices in line with inflation. The newly elected government reached a deal with industry to cut prices by 8% and impose a short-term price freeze as a remedial measure. Long term sustainability will, however, rely on an overhaul of the economic situation
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.
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ITEM 4. INFORMATION ON THE COMPANY
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B.7. Patents, intellectual property and other rights
B.7.1. Patents
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 Member States of the EU. The granted “European Patent” establishes corresponding national patents with uniform patent claims among the Member States. 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. As of the date of this document, 16 countries including France have ratified the agreement, but ratification by 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 to 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 signatory 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.
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 or biosimilar 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. 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. 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 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.
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In Japan, the regulatory exclusivity period varies: four years for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions; 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.
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. 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 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”.
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 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 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.
Orphan drug exclusivity may be granted in the US to drugs intended to treat rare diseases or conditions (those 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.
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.
We summarize below the intellectual property coverage (in some cases through licenses) of our most significant marketed products in terms of sales, in our major markets. In the discussion of patents below, we focus on active ingredient patents (compound patents) and, in the case of 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 its 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 (in the case of 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.
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.
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| United States | European Union | Japan |
Aubagio® (teriflunomide)
| Compound: expired | Compound: expired | Compound: expired |
| Later filed patent: coverage ranging through September 2030 | Later filed patent: coverage ranging through March 2024 |
| Regulatory exclusivity: August 2023 | |
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ITEM 4. INFORMATION ON THE COMPANY
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| United States | European Union | Japan |
Alprolix®(eftrenonacog alfa)
| Use: March 2028 with PTA* and PTE* | Compound: May 2024 May 2029 with SPC* in most EU countries, | 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
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Cerezyme® (imiglucerase)
| patent: expired | patent: expired | patent: expired |
Dupixent® (dupilumab)
| Compound: October 2027 (March 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
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Eloctate® (efmoroctocog alfa)
| Compound: June 2028 with PTA* and PTE* | Use: May 2024 May 2029 with SPC* in most EU countries | 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
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Fabrazyme® (agalsidase beta)
| patent: expired | patent: expired | patent: expired
Generics / biosimilars on the market
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Lantus® (insulin glargine)
| Compound: expired | Compound: expired | Compound: expired |
Later filed patents ranging through March 2033 | 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 |
Lovenox® (enoxaparin sodium)
| Compound: expired | Compound: expired | Compound: expired |
Generics / biosimilars on the market | Generics / biosimilars on the market | |
Lumizyme® / Myozyme® (alglucosidase alfa)
| Compound: expired | Compound: expired | Compound: expired |
Plavix® (clopidogrel bisulfate)
| Compound: expired | Compound: expired | Compound: expired |
Generics on the market | Generics on the market | Generics on the market |
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 |
* 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”.
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ITEM 4. INFORMATION ON THE COMPANY |
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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.
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▪ | Challenges to patented products |
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– | Abbreviated New Drug Applications (ANDAs) |
In the US, generic companies have filed Abbreviated New Drug Applications (ANDAs) containing challenges to patents related to a number of our small molecule 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 (safety and other technical data) as the original approved product. As a result of regulatory protection of our safety and other technical data, ANDA applications are generally four years after FDA approval, and include a challenge to a patent listed in the FDA’s Orange Book. If the patent holder or licensee brings suit in response to the patent challenge within the statutory window, the FDA is barred from granting final approval to an ANDA during the 30 months following the expiry of the 5-year regulatory exclusivity (this bar is referred to in our industry as a “30-month stay”) unless, before the end of the 30 months, the parties reach settlement or a court decision 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.
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 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”.
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– | 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: (a) there is no patent information listed for the reference drug (paragraph I certification); (b) the listed patent has expired for the reference drug (paragraph II certification); (c) 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 (d) 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 our Consumer Healthcare business.
It is our policy to protect our trademarks for products and/or services of interest, in the countries where they are commercialized. 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.
We monitor and defend our trademarks based on this policy in particular to prevent counterfeiting, infringement and/or unfair competition.
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ITEM 4. INFORMATION ON THE COMPANY
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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:
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▪ | 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; |
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▪ | 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 |
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▪ | local sites, which serve their domestic market only. |
Sanofi Pasteur produces vaccines at various sites, with the main locations situated in France, the United States, Canada, Mexico and China. 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:
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▪ | the Biologics facilities in the United States (Allston MA, Framingham MA and Northborough MA), France (Lyon Gerland, Vitry-sur-Seine), Germany (Frankfurt) and Belgium (Geel); |
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▪ | most of the chemical facilities that produce active ingredients, including those located in France (Aramon, Sisteron, Vertolaye, Saint-Aubin-les-Elbeuf), Germany (Frankfurt), Hungary (Ujpest) and Singapore (Jurong); |
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▪ | the Injectables facilities in France (Le Trait), Italy (Anagni), Ireland (Waterford), Germany (Frankfurt) and the United States (Ridgefield NJ); |
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▪ | the Pharmaceuticals facilities in France (Ambarès and Tours); |
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▪ | the Consumer Healthcare facilities in France (Compiègne) and the United States (Chattanooga TN); and |
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▪ | the Vaccines facilities in France (Marcy l’Étoile, Le Trait, Val-de-Reuil and Neuville-sur-Saône), the United States (Swiftwater PA) 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®, and Dupixent®, 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. Starting August 2017, the FDA has been conducting inspections of the facility and delivering favorable conclusions, as a result of which certification has been in place since 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.
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Our Property & Business Interruption program covers all our entities worldwide, wherever it is possible to use a centralized program operated by Carraig. Through risk mutualization between our entities, this approach enables 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 2019 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.
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ITEM 4. INFORMATION ON THE COMPANY
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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, Portland in the United States; Frankfurt in Germany; Brindisi in Italy; Dagenham in the United Kingdom; Ujpest in Hungary; Beaucaire, Valernes, Limay, 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 2019, Sanofi spent €70 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 €737 million as of December 31, 2019 versus €680 million as of December 31, 2018. 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 2019 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 (54 internal audits performed by 81 auditors in 2019). 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 (Comité des Valeurs Limites Internes Sanofi) 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.
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ITEM 4. INFORMATION ON THE COMPANY |
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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).
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 2019, we had reduced CO2 emissions by 12% and water consumption by 19%.
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 2019 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 2019, 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. Since 2017, ten 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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ITEM 4. INFORMATION ON THE COMPANY
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C/ Organizational Structure
C.1. Significant Subsidiaries
Sanofi is the holding company of a consolidated group consisting of over 260 companies. The table below sets forth our significant subsidiaries as of December 31, 2019. 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.
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| | | | | |
Significant subsidiary | Date of
incorporation
| Country of
incorporation
| Principal activity | Financial and
voting interest
|
|
Aventis Inc. | July 1, 1968 | United States | Pharmaceuticals | 100 | % |
Genzyme Corporation | November 21, 1991 | United States | Pharmaceuticals | 100 | % |
Genzyme Europe B.V. | October 24, 1991 | Netherlands | Pharmaceuticals | 100 | % |
Hoechst GmbH | July 8, 1974 | Germany | Pharmaceuticals | 100 | % |
Sanofi-Aventis Deutschland GmbH | June 30, 1997 | Germany | Pharmaceuticals | 100 | % |
Sanofi-Aventis Participations SAS | February 25, 2002 | France | Pharmaceuticals | 100 | % |
Sanofi-Aventis Singapore Pte Ltd | May 14, 1997 | Singapore | Pharmaceuticals | 100 | % |
Sanofi Biotechnology | December 23, 2013 | France | Pharmaceuticals | 100 | % |
Sanofi Foreign Participations B.V. | April 29, 1998 | Netherlands | Pharmaceuticals | 100 | % |
Sanofi Pasteur Inc. | January 18, 1977 | United States | Vaccines | 100 | % |
Sanofi Winthrop Industrie | December 11, 1972 | France | 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, Bioverativ in March 2018 and Ablynx in June 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 for the year ended December 31, 2018, included in our annual report on Form 20-F for that year.
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:
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▪ | 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:
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▪ | in France: Sanofi Pasteur SA, Sanofi Chimie, Sanofi Winthrop Industrie, and Sanofi-Aventis Recherche & Développement; |
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▪ | in the United States: Sanofi Pasteur, Inc., Genzyme Therapeutics Products LP, and Genzyme Corporation; |
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▪ | in Canada: Sanofi Pasteur Limited; |
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▪ | in Germany: Sanofi-Aventis Deutschland GmbH; |
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▪ | in Belgium: Genzyme Flanders BVBA Holding Co; and |
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▪ | in Ireland: Genzyme Ireland Limited. |
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ITEM 4. INFORMATION ON THE COMPANY |
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C.3. Financing and financial relationships between group companies
The Sanofi parent company raises the bulk of the Company’s external financing and uses the funds raised to meet, directly or indirectly, the financing needs of its subsidiaries. The parent company operates a cash pooling arrangement under which any surplus cash held by subsidiaries is managed centrally. There is also a centralized foreign exchange risk management system in place, whereby the parent company contracts hedges to meet the needs of its principal subsidiaries.
Consequently, at December 31, 2019, the Sanofi parent company held 96% of our external financing and 87% of our surplus cash.
Sanofi European Treasury Center SA (SETC), a 100%-owned Sanofi subsidiary incorporated in 2012 under the laws of Belgium, is dedicated to providing financing and various financial services to our subsidiaries.
D/ Property, plant and equipment
D.1. Overview
Our headquarters are located in Paris, France. See “- D.4. Office Space” below.
We operate our business through office premises and research, production and logistics facilities in approximately 100 countries around the world. Our office premises house all of our support functions, plus operational representatives from our subsidiaries and the Company.
A breakdown of our sites by use and by ownership status (owned versus leasehold) is provided below. This breakdown is based on surface area. All surface area figures are unaudited.
|
| | | | | | |
Breakdown of sites by use | | | |
Industrial | 61 | % | | | |
Research | 13 | % | | Breakdown of sites by ownership status |
Offices | 15 | % | | Leasehold | 21 | % |
Logistics | 7 | % | | Owned | 79 | % |
Other | 5 | % | | | |
We own most of our research & development and production facilities, either freehold or under finance leases with a purchase option exercisable on expiration of the lease.
D.2. Description of our sites
Sanofi industrial sites
As part of the process of transforming Sanofi and creating Global Business Units, we are continuing to adapt the organization of the Industrial Affairs department in support of our new business model. The Industrial Affairs department focuses on customer needs and service quality; the sharing of “Sanofi Manufacturing System” good manufacturing practices; the development of a common culture committed to quality; and the pooling of expertise within technology platforms, particularly in biological, injectable and pharmaceutical products.
Since January 2016, the Industrial Affairs department has also been responsible for Sanofi Global HSE and Global Supply Chain.
At the end of 2019, we were carrying out industrial production at 73 sites in 32 countries:
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▪ | 8 sites for our Biologics operations; |
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▪ | 9 sites for our Injectables operations; |
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▪ | 31 sites for our Pharmaceuticals operations; |
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▪ | 14 sites for our Consumer Healthcare operations; and |
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▪ | 11 sites for the industrial operations of Sanofi Pasteur in vaccines. |
The quantity of units sold in 2019, including in-house and outsourced production, was 4,561 million, comprising:
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▪ | Pharmaceuticals: 2,635 million units; |
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▪ | Consumer Healthcare: 1,760 million units; and |
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▪ | Vaccines: 166 million filled containers (syringes, vials and lyophilized products). |
We believe that our production facilities are in compliance with all regulatory requirements, are properly maintained and are generally suitable for future needs. We regularly inspect and evaluate those facilities with regard to environmental, health, safety and security matters, quality compliance and capacity utilization. For more information about our property, plant and equipment, see Note D.3 to our consolidated financial statements, included at Item 18 of this annual report, and section “B.8. Production and Raw Materials” above.
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46 | SANOFI / FORM 20-F 2019
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ITEM 4. INFORMATION ON THE COMPANY
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Our principal production sites by volume are:
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▪ | Frankfurt (Germany), Framingham (United States) and Geel (Belgium) for biologics; |
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▪ | Le Trait (France), Frankfurt (Germany), Csanyikvölgy (Hungary) and Waterford (Ireland) for injectables; |
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▪ | Ambarès (France), Lüleburgaz (Turkey), Campinas (Brazil) and Hangzhou (China) for pharmaceutical products; |
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▪ | Aramon and Sisteron (France), Frankfurt (Germany) and Jurong (Singapore) for active pharmaceutical ingredients; |
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▪ | Compiègne and Lisieux (France), Cologne (Germany), Suzano (Brazil) and Ocoyoacac (Mexico) for Consumer Healthcare products; and |
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▪ | Marcy-l’Étoile and Val-de-Reuil (France), Toronto (Canada) and Swiftwater (United States) for vaccines. |
Research & Development sites
In Pharmaceuticals, research and development activities are conducted at the following sites:
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▪ | four operational sites in France: Chilly-Mazarin/Longjumeau, Montpellier, Strasbourg and Vitry-sur-Seine/Alfortville; |
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▪ | three sites in the rest of Europe (Germany, Belgium and the Netherlands), the largest of which is in Frankfurt (Germany); |
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▪ | four sites in the United States: Bridgewater, Cambridge, Framingham/Waltham and Great Valley; and |
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▪ | in Asia, three sites in China (Beijing, Shanghai and Chengdu) and a clinical research unit in Japan. |
Vaccines research and development sites are:
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▪ | Swiftwater, Cambridge and Orlando (United States); |
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▪ | Marcy-l’Étoile/Lyon (France); and |
D.3. Acquisitions, capital expenditures and divestitures
The carrying amount of our property, plant and equipment at December 31, 2019 was €9,717 million. During 2019, we invested €1,261 million (see Note D.3. to our consolidated financial statements, included at Item 18 of this annual report), mainly in increasing capacity and improving productivity at our various production and R&D sites.
Our principal acquisitions, capital expenditures and divestitures in 2017, 2018 and 2019 are described in Notes D.1. (“Impact of changes in the scope of consolidation”), D.3. (“Property, plant and equipment”) and D.4. (“Goodwill and other intangible assets”) to our consolidated financial statements, included at Item 18 of this annual report.
As of December 31, 2019, our firm commitments in respect of future capital expenditures amounted to €398 million. The principal locations involved were: for the Pharmaceuticals segment, the industrial facilities at Frankfurt (Germany), Le Trait, Maisons-Alfort and Compiègne (France), Cambridge (United States), Csanyikvölgy (Hungary), Origgio et Anagni (Italy); and for the Vaccines segment, the facilities at Toronto (Canada), Marcy-l’Étoile and Val de Reuil (France).
In the medium term and assuming no changes in the scope of consolidation, we expect to invest on average some €1.5 billion a year in property, plant and equipment. We believe that our own cash resources and the undrawn portion of our existing credit facilities will be sufficient to fund these expenditures.
Our principal ongoing capital expenditures are described below.
Biologics
In 2014, a dedicated Biologics platform was launched to develop synergies between Pharmaceuticals, Sanofi Pasteur, Sanofi Genzyme and our Biotherapeutics operations. This platform is helping us extend our footprint in biotechnologies by adopting a multi-disciplinary approach and improving capacity utilization. It also enables us to leverage our expertise in the production of biologics, from active ingredient to integrated manufacturing, including both the medicine itself and associated medical devices.
We have four dedicated biotechnology hubs: Paris/Lyon (France), Frankfurt (Germany), Geel (Belgium) and Boston (United States). The Bioatrium project, a joint venture between Sanofi and Lonza (Switzerland) set up in 2017 to increase bioproduction capacity, is proceeding on schedule. Exploiting the innovative techniques on which biotech relies, including cell and microbiological culture or the development of viral vectors, calls for highly specific knowledge and expertise backed by dedicated production platforms to support global product launches.
Injectables
Our Injectables platform is served by a network whose key sites are Frankfurt (Germany), Le Trait (France) and Waterford (Ireland).
The Waterford and Le Trait sites manufacture pre-filled Dupixent® syringes.
Our pre-filled syringes network delivers Lovenox®/Clexane® from Le Trait and Maisons-Alfort (France) to global markets, Csanyikvölgy (Hungary) mainly to EMA regulated markets and Ridgefield (USA) to the US market.
The Frankfurt facility is our principal site for the manufacture of diabetes treatments.
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SANOFI / FORM 20-F 2019
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ITEM 4. INFORMATION ON THE COMPANY |
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Pharmaceuticals
The development of our General Medicines & Emerging Markets platform is built on a network of over 30 regional and local industrial sites in 21 countries, supporting growth in those markets.
Our Industrial Affairs Department has an ongoing policy of adapting industrial facilities to market needs. As part of this process, during 2019 we divested various facilities, including those at Villa Rica (Colombia) and Dubai (UAE).
Consumer Healthcare
The pharmaceutical industrial operations of our Consumer Healthcare (CHC) business are spread across a dedicated network. Global markets are supplied from our facilities at Compiègne (France) and Cologne (Germany). We have recently invested in projects to bring in-house various manufacturing operations related to our acquisition of Boeringher Ingelheim's CHC business, mainly to our sites at Compiègne (France) and Suzano (Brazil).
Vaccines (Sanofi Pasteur)
Sanofi Pasteur’s industrial operations are in a major investment phase, preparing for the upcoming growth of our influenza and Polio/Pertussis/Hib franchises. Major investments were launched during 2019 in France (including construction of a new influenza vaccine building at Val-de-Reuil), Canada (a new pertussis vaccine building), the US and Mexico.
Innovation and culture of industrial excellence
The ambition of our Industrial Affairs department is to continue to raise quality standards in Sanofi’s production activities, and to remain a world leader and a benchmark in the global pharmaceutical industry. To achieve this goal, all our activities share a common culture of industrial excellence, enshrined in the Sanofi Manufacturing System. This sets out a series of priorities (such as customer service, constant improvement, site network optimization and transverse optimization) that constitute our industrial vision and will be crucial to our mutual success.
Industrial Affairs has its own digital strategy, built on five pillars: Integrated Industrialization, Intelligent Quality, Connected Teams and Operations, Connected Factory, and Real-Time Supply Chain.
D.4. Office space
As part of the transformation of Sanofi, we are undertaking major real estate programs with two core objectives: to bring our teams together on single sites in new workspaces that favor agility, cross-fertilization and communication, and to rationalize office space while achieving a responsible environmental footprint.
Projects completed in 2019 included the rationalization of our sites in Lima (Peru), Dubai (UAE), Bordeaux (France), Zagreb (Croatia), Beijing (China), and Quito (Ecuador), and of other sites in Switzerland, Turkey and the UK. In the UK, we have implemented a masterplan that will see teams previously based in Oxford, Guildford and Maidenhead brought together on a single site to the west of London.
This transformation of workspaces to flexible mode has already reached over 19,000 of our people around the globe, and provides strong support for our various operations to attain their objectives. The rollout will cover all regions worldwide; projects are currently under way in Argentina, Saudi Arabia, Ivory Coast, Singapore, Shanghai and Hong Kong. We continue to divest orphan sites, and in 2019 sold around 20 plots or buildings no longer required for our operations.
Item 4A. Unresolved Staff Comments
N/A
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48 | SANOFI / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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Item 5. Operating and Financial Review and Prospects
You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto included in this annual report at Item 18.
Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union as of December 31, 2019.
The following discussion contains forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this document.
Unless otherwise stated, all financial variations in this item are given on a reported basis.
The discussion of our operating and financial review and prospects for the years ended December 31, 2018 and December 31, 2017 can be found in Part I, Item 5 of our Form 20-F filed on March 8, 2019, including a presentation of our consolidated income statements for the years ended December 31, 2018 and December 31, 2017 in Item 5, “A.2 - Results of operations” of our Form 20-F filed on March 8, 2019.
A. Operating Results
A.1. Significant operating information
A.1.1. 2019 Overview
In a fast-changing industry environment, Sanofi continued its transformation during 2019, as we seek to deliver on our mission as a global healthcare leader at the cutting edge of innovation. The arrival of Paul Hudson as our new CEO in September 2019 was the catalyst for developing a new strategy to boost growth and our potential for innovation, based on four key priorities: (1) focus on growth; (2) lead with innovation; (3) accelerate efficiency; and (4) reinvent how we work. For further information about our new strategy, as announced in December 2019, refer to “- Item 4. - B.1. - Strategy”. Other significant events of the year are described below.
On January 7, 2019, Sanofi and Regeneron announced that they had restructured their 2015 global Immuno-Oncology Discovery and Development Agreement for new cancer treatments. The 2015 agreement was due to end in mid-2020, and this revision provides for ongoing collaborative development of two clinical stage bispecific antibodies. This gives Sanofi increased flexibility to advance its early-stage immuno-oncology pipeline independently, while Regeneron retains all rights to its other immuno-oncology discovery and development programs. On December 10, 2019, Sanofi and Regeneron announced their intention to simplify their antibody collaboration for Kevzara® (sarilumab) and Praluent® (alirocumab) by restructuring it into a royalty-based agreement. Under the proposed restructuring, Sanofi is expected to obtain sole global rights to Kevzara® and sole ex-US rights to Praluent®. Regeneron is expected to obtain sole US 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. The existing collaboration relating to Dupixent® (dupilumab) and to SAR440340 (REGN3500) will remain unchanged.
On April 8, 2019, Sanofi and Alnylam concluded the research and option phase of the companies’ 2014 RNAi therapeutics alliance in rare genetic diseases. The material collaboration terms for patisiran, vutrisiran (ALN-TTRsc02) and fitusiran, as previously announced, continue unchanged. As part of this agreement, Alnylam will advance an additional investigational asset in a rare genetic disease through studies enabling the filing of an Investigational New Drug (IND) application. Sanofi will be responsible for any potential further development or commercialization of the asset.
On June 18, 2019, Sanofi and Google announced that they are establishing a new Innovation Lab with the ambition of transforming how future medicines and health services are delivered by tapping into the power of emerging technologies. The collaboration aims to change how Sanofi develops new treatments and will focus on three key objectives: to better understand patients and diseases, to increase Sanofi’s operational efficiency, and to improve the experience of Sanofi’s patients and customers.
On July 23, 2019, we announced that we had signed an agreement with Roche for the exclusive over-the-counter (OTC) rights to Tamiflu® for the prevention and treatment of influenza (flu) in the US. Under the terms of the agreement, Sanofi will be responsible for leading FDA negotiations for the OTC switch and subsequent exclusive marketing, scientific engagement and distribution of Tamiflu® in the US consumer health care market.
At the end of July 2019, given the primary endpoint results of blood sugar (HbA1c) reduction in the SOTA-CKD3 and SOTA-CKD4 studies, we provided notice to Lexicon that we were terminating our collaboration to develop, manufacture, and commercialize ZynquistaTM in all ongoing global Type 1 and Type 2 diabetes programs.
On September 16, 2019, Sanofi and Abbott announced that they are partnering to integrate glucose sensing and insulin delivery technologies that would help to further simplify how people with diabetes manage their condition. The two companies will take an innovative approach to connected care by developing tools that combine FreeStyle Libre technology with insulin dosing information for future smart pens, insulin titration apps and cloud software.
On October 15, 2019, we inaugurated our new digital manufacturing facility in Framingham, Massachusetts (USA), one of the world’s first digital facilities using intensified, continuous biologics production technology. The new facility features leading-edge technology that connects the production process with research and development, paving the way for improved commercialization of important new medicines for patients.
On December 9, 2019, Sanofi and Synthorx, Inc., a biotechnology company focused on developing treatments to prolong and improve the lives of people suffering from cancer and autoimmune disorders, entered into a definitive agreement under which Sanofi acquired all of the outstanding shares of Synthorx for $68 per share in cash, which represents an aggregate equity value of approximately $2.5 billion (on a fully diluted basis). The acquisition of Synthorx was completed on January 23, 2020.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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In Pharmaceuticals, highlights of our research and development activities in 2019 included the launch of a pivotal Phase II study of SAR439859 (a selective estrogen receptor degrader) in breast cancer, and the entry into Phase III of cemiplimab (Libtayo®), as an adjuvant in the treatment of cutaneous squamous cell carcinoma; venglustat (a GCS inhibitor), in autosomal dominant polycystic kidney disease (ADPKD); BIVV001, a recombinant coagulation factor for patients with hemophilia A; SAR408701, an anti CEACAM-5 antibody drug conjugate as a second and third line treatment for non-small-cell lung cancer; and dupilumab (Dupixent®) in chronic obstructive pulmonary disease. In Vaccines, the hexavalent pediatric vaccine Shan6 (diphtheria, tetanus, pertussis, polio, hepatitis B and hemophilus influenzae B) entered Phase III, along with the monoclonal antibody nirsevimab (collaboration with Medimmune) for the prevention of respiratory syncytial virus (RSV) and the vero-cell rabies vaccine VerorabVax® (VRVg).
Healthcare authorities granted marketing approval for a number of our products in 2019. The Democratic Republic of Congo (DRC) granted marketing approval for fexinidazole for the treatment of human African trypanosomiasis (HAT), more commonly known as sleeping sickness. In the United States, Cablivi®was approved in association with plasma exchange and immuno-suppression for the treatment of acquired thrombotic thrombocytopenic purpura (aTTP) in adults. In the United States and Europe, Dupixent® was approved for the treatment of severe atopic dermatitis in adolescents, and for the treatment of severe nasal polyps. In Europe, Dupixent® was approved as a treatment for severe asthma. The European Commission and the US FDA approved a new indication for Praluent® (alirocumab) to reduce cardiovascular risk in adults with established atherosclerotic cardiovascular disease. In Europe, conditional marketing approval was granted for Libtayo®(cemiplimab) in the treatment of advanced cutaneous squamous cell carcinoma (CSCC).
For further information about the pharmaceutical products and vaccines we sell, and about our research and development portfolio, refer to “- Item 4.B. - Business Overview”.
Our net sales for 2019 amounted to €36,126 million, a year-on-year increase of 4.8%. At constant exchange rates (CER(1)), net sales rose by 2.8%, impacted by (i) the acquisition of Bioverativ’s rare blood disorder products and (ii) the divestment of our European generics business in 2018. At constant exchange rates and on a constant structure basis (CER/CS(1)), the growth rate was 3.6%. Strong performances for Dupixent®, and for Vaccines across all geographies, combined with growth in Emerging Markets sales, more than offset lower sales of Lantus® and Established Prescription Products in mature markets.
Net income attributable to equity holders of Sanofi amounted to €2,806 million in 2019, down 34.8% year-on-year; this was due mainly to impairment losses charged against intangible assets in the period. Earnings per share was €2.24, 35.1% lower than in 2018. Business net income(2) was €7,489 million, up 9.8% on 2018, while business earnings per share (business EPS(2)) was 9.5% higher than in 2018 at €5.99.
As of December 31, 2019, we had reduced our net debt(3) to €15,107 million (versus €17,628 million as of December 31, 2018), due largely to the cash generated by our operations during the year. At the Annual General Meeting on April 28, 2020, we will ask our shareholders to approve a dividend of €3.15 per share for the 2019 financial year, representing a payout of 52.6% of our business net income.
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(1) | Non-GAAP financial measure: see definition in “- A.1.6. Presentation of Net Sales” below. |
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(2) | Non-GAAP financial measure: see definition in “- A.1.5. Segment Information - 3. Business Net Income” below. |
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(3) | Non-GAAP financial measure: see definition in “- B. Liquidity and Capital Resources” below. |
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50 | SANOFI / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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A.1.2. Impacts of Competition from Generics and Biosimilars
Some of our flagship products continued to suffer sales erosion in 2019 due to competition from generics and biosimilars. 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 the years ended December 31, 2019 and 2018 (see “- A.2. Results of Operations - Year Ended December 31, 2019 Compared with Year Ended December 31, 2018” below) for products affected by generic and biosimilar competition shows a loss of €912 million of net sales on a reported basis. Other parameters may have contributed to the loss of sales, such as a fall in the average selling price of certain products (e.g. Lantus®).
The table below sets forth the impact by product.
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| | | | | | | | |
(€ million) | 2019 |
| 2018 |
| Change on a reported basis |
| Change on a reported basis (%) |
|
Aprovel® Europe | 113 |
| 108 |
| 5 |
| +4.6 | % |
Lantus® Europe | 584 |
| 684 |
| (100 | ) | -14.6 | % |
Lovenox® Europe | 709 |
| 870 |
| (161 | ) | -18.5 | % |
Plavix® Europe | 139 |
| 147 |
| (8 | ) | -5.4 | % |
Renagel® / Renvela® Europe | 51 |
| 60 |
| (9 | ) | -15.0 | % |
Ambien® United States | 42 |
| 45 |
| (3 | ) | -6.7 | % |
Lantus® United States | 1,149 |
| 1,614 |
| (465 | ) | -28.8 | % |
Lovenox® United States | 33 |
| 38 |
| (5 | ) | -13.2 | % |
Renagel® / Renvela® United States | 133 |
| 253 |
| (120 | ) | -47.4 | % |
Allegra® Japan | 115 |
| 112 |
| 3 |
| +2.7 | % |
Amaryl® Japan | 15 |
| 18 |
| (3 | ) | -16.7 | % |
Aprovel® Japan | 21 |
| 28 |
| (7 | ) | -25.0 | % |
Lantus® Japan | 25 |
| 29 |
| (4 | ) | -13.8 | % |
Myslee® Japan | 68 |
| 76 |
| (8 | ) | -10.5 | % |
Plavix® Japan | 131 |
| 156 |
| (25 | ) | -16.0 | % |
Taxotere® Japan | 7 |
| 9 |
| (2 | ) | -22.2 | % |
Total | 3,335 |
| 4,247 |
| (912 | ) | -21.5 | % |
We expect the erosion caused by generic competition to continue in 2020, with a negative impact on our net income. The products likely to be impacted include those that already faced generic competition in 2019, but whose sales can reasonably be expected to be subject to further sales erosion in 2020: Aprovel®, Lantus®, Lovenox®, Plavix® and Renagel®/Renvela® in Europe; Ambien®, Lantus®, Lovenox®, Renagel® / Renvela® and Taxotere® in the United States; and Allegra®, Amaryl®, Aprovel®, Lantus®, Myslee®, Plavix® and Taxotere® in Japan.
In 2019, the aggregate consolidated net sales of those products in countries where generic competition currently exists or is expected in 2020 amounted to €3,335 million; this comprised €1,357 million in the United States (including €1,149 million in net sales of Lantus® and €133 million in net sales of Renagel®/Renvela®); €1,596 million in Europe; and €382 million in Japan. The negative impact on our 2020 net sales is likely to represent a substantial portion of those sales, but the actual impact will depend on a number of factors such as the prices at which the products are sold and potential litigation outcomes.
A.1.3. Purchase Accounting Effects
Our results of operations and financial condition for the years ended December 31, 2019, 2018 and 2017 have been significantly affected by our August 2004 acquisition of Aventis, our April 2011 acquisition of Genzyme, our 2018 acquisition of Bioverativ and certain other transactions. See “- A.1.11. Critical accounting and reporting policies - Business combinations” below for an explanation of the impact of business combinations on our results of operations.
The Bioverativ business combination has generated significant amortization of intangible assets (€488 million in 2019, and €430 million in 2018) and impairment of intangible assets (expenses of €2,803 million in 2019). The Genzyme business combination has generated significant amortization of intangible assets (€727 million in 2019, €760 million in 2018, and €857 million in 2017) and impairment of intangible assets (expenses of €163 million in 2019, expenses of €183 million in 2018, and expenses of €16 million in 2017). The Aventis business combination has also generated significant amortization expenses (€197 million in 2019, €256 million in 2018, and €365 million in 2017).
In order to isolate the purchase accounting effects of all acquisitions and certain other items, we use a non-GAAP financial measure that we refer to as “business net income” (see definition in “- A.1.5. Segment Information - 3. Business Net Income” below).
A.1.4. Sources of Revenues and Expenses
Revenues. Revenue arising from the sale of goods is presented in the income statement within Net sales. Net sales comprise revenue from sales of pharmaceutical products, consumer health care products, active ingredients and vaccines, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Returns, discounts, incentives and rebates are recognized in the period in which the underlying sales are recognized, as a reduction of sales revenue. See Note B.13.1. to our consolidated financial statements included at Item 18 of this annual report. We sell pharmaceutical products and vaccines directly, through alliances, and by licensing arrangements throughout the world. When we sell products directly, we record sales revenues as part of our consolidated net sales. When we sell products through alliances, the revenues reflected in our consolidated financial statements are based on the contractual arrangements governing those alliances. For more information about our alliances, see “- A.1.7. Financial Presentation of Alliances” below. When our products are sold by licensing arrangements, we receive royalty income that we record in Other revenues. The sales of non-
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Sanofi products of our US based entity VaxServe are also presented in Other revenues; see Note B.13.2. to the consolidated financial statements included at Item 18 of this annual report.
Cost of Sales. Our cost of sales consists primarily of the cost of purchasing raw materials and active ingredients, labor and other costs relating to our manufacturing activities, packaging materials, payments made under licensing agreements and distribution costs. We have license agreements under which we manufacture, sell and distribute products that are patented by other companies and license agreements under which other companies distribute products that we have patented. When we pay royalties, we record them in Cost of sales.
Operating Income. Our operating income reflects our revenues, our cost of sales and the remainder of our operating expenses, the most significant of which are research and development expenses and selling and general expenses. For our operating segments, we also measure our results of operations through an indicator referred to as “Business Operating Income,” which we describe below under “- A.1.5. Segment Information -2/Business Operating Income.”
A.1.5. Segment information
1/ Operating segments
In accordance with IFRS 8 (Operating Segments), the segment information reported by Sanofi is prepared on the basis of internal management data provided to the Chief Executive Officer, who is the chief operating decision maker. The performance of those segments is monitored individually using internal reports and common indicators. The operating segment disclosures required under IFRS 8 are provided in Notes B.26. and D.35 (“Segment Information”) to our consolidated financial statements, included at Item 18 of this annual report.
Sanofi has three operating segments: Pharmaceuticals, Consumer Healthcare and Vaccines.
The Pharmaceuticals segment comprises the commercial operations of the following global franchises: Specialty Care (Rare Diseases, Multiple Sclerosis, Oncology, Immunology and Rare Blood Disorders), and Primary Care (Diabetes, Cardiovascular, and Established Prescription Products), together with research, development and production activities dedicated to our Pharmaceuticals segment. This segment also includes associates whose activities are related to pharmaceuticals, in particular our share of Regeneron.
The Consumer Healthcare segment comprises, for all geographical territories, the commercial operations for our Consumer Healthcare products, together with research, development and production activities dedicated to those products.
The Vaccines segment comprises, for all geographical territories (including from January 1, 2017 certain territories previously included in the Sanofi Pasteur MSD joint venture) the commercial operations of Sanofi Pasteur, together with research, development and production activities dedicated to vaccines.
Inter-segment transactions are not material.
The costs of our global support functions (Medical Affairs, External Affairs, Finance, Human Resources, Legal Affairs, Information Solutions & Technologies, Sanofi Business Services, etc.) are managed centrally at group-wide level. The costs of those functions are presented within the “Other” category. That category also includes other reconciling items such as retained commitments in respect of divested activities.
2/ Business Operating Income
We report segment results on the basis of “business operating income”. This indicator is used internally by Sanofi’s chief operating decision maker to measure the performance of each operating segment and to allocate resources. For a definition of “business operating income”, and a reconciliation between that indicator and Income before tax and investments accounted for using the equity method, refer to Note D.35. to our consolidated financial statements.
We have applied IFRS 16 (Leases) with effect from January 1, 2019 (see Note A.2.1. to our consolidated financial statements). In 2019, business net income excludes the impact of first-time application of IFRS 16. Consequently, in determining business operating income we have (i) eliminated depreciation charged against right-of-use assets and (ii) added back lease expense, in order to achieve consistency with the prior-year presentation (given that we elected the modified retrospective approach on transition).
Our “business operating income margin” for 2019 was 27.0%, compared with 25.8% in 2018. Business operating income margin is a non-GAAP financial measure, which we define as the ratio of "business operating income" to Net sales.
Because our business operating income and business operating income margin are not standardized measures, they may not be directly comparable with the non-GAAP financial measures of other companies using the same or similar non-GAAP financial measures. Despite the use of non-GAAP measures by management in setting goals and measuring performance, these are non-GAAP measures that have no standardized meaning prescribed by GAAP.
3/ Business net income
We believe that understanding of our operational performance by our management and our investors is enhanced by reporting “business net income”. This non-GAAP financial measure represents business operating income, less net financial expenses and the relevant income tax effects.
Business net income for 2019 was €7,489 million, 9.8% higher than in 2018 (€6,819 million), and represented 20.7% of net sales (compared with 19.8% in 2018)
We also report “business earnings per share” (business EPS), a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding. Business EPS was €5.99 for 2019, 9.5% higher than the 2018 figure of €5.47, based on an average number of shares outstanding of 1,249.9 million for 2019 and 1,247.1 million for 2018.
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52 | SANOFI / FORM 20-F 2019
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The table below reconciles our business operating income to our business net income:
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(€ million) | December 31, 2019 |
| December 31, 2018 |
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Business operating income | 9,758 |
| 8,884 |
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Financial income and expenses | (264 | ) | (271 | ) |
Income tax expense | (2,005 | ) | (1,794 | ) |
Business net income | 7,489 |
| 6,819 |
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We define business net income as Net income attributable to equity holders of Sanofi determined under IFRS, excluding the following items:
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▪ | amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature); |
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▪ | fair value remeasurements of contingent consideration relating to business combinations or divestments; |
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▪ | other impacts associated with acquisitions (including impacts relating to investments accounted for using the equity method); |
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▪ | restructuring costs and similar items (presented within the line item Restructuring costs and similar items);
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▪ | other gains and losses, including gains and losses on major disposals of non-current assets (presented within the line item Other gains and losses, and litigation);
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▪ | the effects of IFRS 16 on lease accounting; |
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▪ | other costs and provisions related to litigation (presented within the line item Other gains and losses, and litigation);
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▪ | the tax effects of the items listed above, and the effects of major tax disputes; and |
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▪ | the portion attributable to non-controlling interests of the items listed above. |
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The table below reconciles our business net income to Net income attributable to equity holders of Sanofi:
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(€ million) | 2019 |
| 2018 |
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Net income attributable to equity holders of Sanofi | 2,806 |
| 4,306 |
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Amortization of intangible assets(a) | 2,146 |
| 2,170 |
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Impairment of intangible assets(b) | 3,604 |
| 718 |
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Fair value remeasurement of contingent consideration | (238 | ) | (117 | ) |
Expenses arising from the impact of acquisitions on inventories | 3 |
| 114 |
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Other expenses related to acquisitions | — |
| 28 |
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Restructuring costs and similar items | 1,062 |
| 1,480 |
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Other gains and losses, and litigation(c) | (327 | ) | (502 | ) |
Impact of IFRS 16 on lease accounting(d) | 37 |
| — |
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Tax effects of the items listed above: | (1,866 | ) | (1,125 | ) |
amortization and impairment of intangible assets | (1,409 | ) | (692 | ) |
fair value remeasurement of contingent consideration | (6 | ) | 38 |
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expenses arising from the impact of acquisitions on inventories | — |
| (27 | ) |
other expenses related to acquisitions | — |
| (6 | ) |
restructuring costs and similar items | (311 | ) | (435 | ) |
other tax effects | (140 | ) | (3 | ) |
Other tax items(e) | — |
| (188 | ) |
Share of items listed above attributable to non-controlling interests | (4 | ) | (2 | ) |
Investments accounted for using the equity method: restructuring costs and expenses arising from the impact of acquisitions | 165 |
| (76 | ) |
Items relating to the Animal Health business(f) | 101 |
| 13 |
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Business net income | 7,489 |
| 6,819 |
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Average number of shares outstanding (million) | 1,249.9 |
| 1,247.1 |
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Basic earnings per share (in euros) | 2.24 |
| 3.45 |
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Reconciling items per share (in euros) | 3.75 |
| 2.02 |
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Business earnings per share (in euros)(g) | 5.99 |
| 5.47 |
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(a) | Includes amortization expense generated by the remeasurement of intangible assets in connection with business combinations: €2,044 million in 2019 and €1,957 million in 2018. |
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(b) | Includes a €2,803 million impairment loss charged against Eloctate® franchise assets, a €352 million impairment loss taken against Zantac®, and €280 million of impairment losses taken against assets associated with internal or collaborative development projects.
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(c) | For 2019, this line consists mainly of a gain arising on settlement of litigation. For 2018, it mainly comprises the gain on the divestment of our European Generics business, net of separation costs and before any tax effects. |
(d) Impacts of the new accounting standard on leases (IFRS 16), applied from January 1, 2019 using the simplified retrospective method without restatement of comparative periods. For comparative purposes, business net income continues to be reported in accordance with the lease accounting policies applicable under the previous standard (IAS 17).
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(e) | For 2018, this line comprises adjustments to our preliminary analysis of the direct and indirect impacts of US tax reform. |
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(f) | This line shows the effects of the divestment of our Animal Health business. |
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(g) | The implementation of the new accounting standard on leases (IFRS 16) on business earnings per share would have been -2 cents in 2019. This impact mainly comes from the amortization of the lease asset recognized on a straight-line basis while the interest expense decreases over the life of the lease. |
The most significant reconciling items between our business net income and Net income attributable to equity holders of Sanofi relate to (i) the purchase accounting effects of our acquisitions and business combinations, particularly the amortization and impairment of intangible assets (other than software and other rights of an industrial or operational nature) and (ii) the impacts resulting from restructuring or major non-recurring transactions. We believe that excluding those impacts enhances an investor’s understanding of our underlying economic performance, because we do consider that the exclusion of these items allows to better reflect the entity’s ongoing operating performance.
The principal purchase accounting effects of acquisitions and business combinations on net income are:
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▪ | amortization and net impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature), net of taxes and non-controlling interests; and |
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▪ | the incremental cost of sales incurred on the workdown of acquired inventories remeasured at fair value, net of taxes. |
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We believe (subject to the limitations described below) that disclosing our business net income enhances the comparability of our operating performance, for the following reasons:
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▪ | the elimination of charges related to the purchase accounting effects of our acquisitions and business combinations (particularly amortization and impairment of finite-lived intangible assets, other than software and other rights of an industrial or operational nature) enhances the comparability of our ongoing operating performance relative to our peers in the pharmaceutical industry that carry those intangible assets (principally patents and trademarks) at low book values either because they are the result of in-house research and development that has already been expensed in prior periods or because they were acquired through business combinations that were accounted for as poolings-of-interest; |
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▪ | the elimination of other effects related to business combination - such as the incremental cost of sales arising from the workdown of acquired inventories remeasured at fair value in business combinations, also improves the understanding of the ongoing operating performance; |
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▪ | the elimination of restructuring costs and similar items enhances comparability because those costs are incurred in connection with reorganization and transformation processes intended to optimize our operations; and |
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▪ | the elimination of impacts resulting from major non-recurring transactions - gains and losses on disposals, and costs and provisions associated with major litigation and any other major non-recurring items - improves comparability from one period to the next. |
We remind investors, however, that business net income should not be considered in isolation from, or as a substitute for, Net income attributable to equity holders of Sanofi reported in accordance with IFRS. In addition, we strongly encourage investors and potential investors not to rely on any single financial measure but to review our financial statements, including the notes thereto, carefully and in their entirety.
We compensate for the material limitations described above by using business net income only to supplement our IFRS financial reporting and by ensuring that our disclosures provide sufficient information for a full understanding of all adjustments included in business net income.
A.1.6. Presentation of Net Sales
In the discussion below, we present our consolidated net sales for 2019, and 2018. We analyze our net sales among various categories, including by segment, business global units, franchise, product and geographical region. In addition to reported net sales, we analyze non-GAAP financial measures designed to isolate the impact on our net sales of currency exchange rates and changes in the structure of our group.
When we refer to changes in our net sales at constant exchange rates (CER), that means that we have excluded the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period.
When we refer to changes in our net sales on a constant structure basis, that means that we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:
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▪ | by including sales generated by entities or product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on sales information we receive from the party from whom we make the acquisition; |
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▪ | similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period; and |
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▪ | for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period. |
A presentation of consolidated net sales for 2018 compared with 2017 is available in our Form 20-F filed on March 8, 2019, Item 5, section "A.2.1. Net Sales". The analysis of the net sales in that section is comparable with the analysis presented in the present report as regards the presentation by segment, product, and geographical region. The presentation by franchise has changed for the Established Prescription Products franchise, which now includes total sales of Generics, previously presented separately. The presentation by Global Business units has also changed, as described in below in section "A.2.1.Net Sales".
A.1.7. Financial Presentation of Alliances
We have entered into a number of alliances for the development, co-promotion and/or co-marketing of our products. We believe that a presentation of our two principal alliances is useful to an understanding of our financial statements.
The financial impact of the alliances on our income statement is described in “- Results of Operations - Year Ended December 31, 2019 Compared with Year Ended December 31, 2018” and “- Year Ended December 31, 2018 Compared with Year Ended December 31, 2017”, in particular in “- Net Sales”, “- Other Revenues”, “- Share of Profit/Loss from Investments Accounted for using the Equity Method” and “- Net Income Attributable to Non-Controlling Interests”.
1/ Alliance arrangements with Regeneron Pharmaceuticals Inc. (Regeneron)
Collaboration agreements on human therapeutic antibodies
In November 2007, Sanofi and Regeneron signed two agreements (amended in November 2009) relating to human therapeutic antibodies: (i) the Discovery and Preclinical Development Agreement, and (ii) the License and Collaboration Agreement, relating to clinical development and commercialization. Sanofi had an option to develop and commercialize antibodies discovered by Regeneron under the collaboration.
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Discovery and development
Under the 2009 amended agreements, Sanofi funded the discovery and pre-clinical development of fully human therapeutic antibodies up to a maximum of $160 million per year through 2017. Because Sanofi decided not to exercise its option to extend the Discovery and Preclinical Development Agreement, that agreement expired on December 31, 2017.
Upon Sanofi’s exercise of an option on an antibody under the Discovery and Preclinical Development Agreement, the antibody became a Licensed Product under the License and Collaboration Agreement, pursuant to which Sanofi and Regeneron co-develop the antibody with Sanofi initially being wholly responsible for funding the development program. On receipt of the first positive Phase III trial results for any antibody being developed under the License and Collaboration Agreement, the subsequent Phase III costs for that antibody are split 80% Sanofi, 20% Regeneron. Amounts received from Regeneron under those arrangements are recognized by Sanofi as a reduction in the line item Research and development expenses. Co-development with Regeneron of the antibodies Praluent®, Dupixent®, Kevzara® and REGN3500 (SAR440340) is ongoing under the License and Collaboration Agreement at this time.
Once a product begins to be commercialized, and provided that the share of quarterly results under the agreement represents a profit, Sanofi is entitled to an additional portion of Regeneron’s profit-share (capped at 10% of Regeneron’s share of quarterly profits) until Regeneron has paid 50% of the cumulative development costs incurred by the parties in the collaboration (see footnote g(ii) to the table provided in Note D.21.1. of our consolidated financial statements, "Off balance sheet commitments relating to operating activities").
On the earlier of (i) 24 months before the scheduled launch date or (ii) the first positive Phase III trial results, Sanofi and Regeneron share the commercial expenses of the antibodies co-developed under the License and Collaboration Agreement.
Commercialization
Sanofi recognizes all sales of the antibodies. Sanofi and Regeneron share co-promotion rights on sales of the co-developed antibodies. Profits and losses arising from commercial operations in the United States are split 50/50. Outside the United States, Sanofi is entitled to between 55% and 65% of profits depending on sales of the antibodies, and bears 55% of any losses. The share of profits and losses due to or from Regeneron under the agreement is recognized within the line items Other operating income or Other operating expenses, which are components of operating income. In addition, Regeneron is entitled to receive payments of up to $250 million contingent on the attainment of specified levels of aggregate sales on all antibodies outside the United States.
Amendments to the collaboration agreements
In January 2018, Sanofi and Regeneron signed a set of amendments to their collaboration agreements, including an amendment that allowed for the funding of additional programs on Dupixent® and REGN3500 (SAR440340) with an intended focus on extending the current range of indications, finding new indications, and improving co-morbidity between multiple pathologies.
On December 10, 2019, Sanofi and Regeneron announced their intention to simplify their antibody collaboration, including a shift to a royalty-based arrangement for Kevzara® (sarilumab) and Praluent® (alirocumab). Under the proposed restructuring, Sanofi is expected to obtain sole global rights to Kevzara® and sole ex-US rights to Praluent®. Regeneron is expected to obtain sole US rights to Praluent®. 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. The existing collaboration relating to Dupixent® (dupilumab) and to SAR440340 (REGN3500) will remain unchanged.
Immuno-oncology (IO) collaboration agreements
On July 1, 2015, Sanofi and Regeneron signed two agreements - the IO Discovery and Development Agreement and the IO License and Commercialization Agreement (IO LCA) - relating to new antibody cancer treatments in the field of immuno-oncology. As part of the agreements, Sanofi made an upfront payment of $640 million to Regeneron.
The two companies agreed to invest approximately $1 billion from discovery through proof of concept (POC) development (usually a Phase IIa study) of monotherapy and novel combinations of immuno-oncology antibody candidates to be funded 25% by Regeneron ($250 million) and 75% by Sanofi ($750 million). The two companies also agreed to reallocate $75 million (spread over three years) to immuno-oncology antibody research and development from Sanofi’s $160 million annual contribution to their existing antibody discovery collaboration.
An Amended IO Discovery Agreement, effective from December 31, 2018, was signed on January 2, 2019.It narrows the scope of the existing discovery and development activities conducted by Regeneron ("IO Development Activities") under the original 2015 IO Discovery and Development Agreement to developing therapeutic bispecific antibodies targeting (i) BCMA and CD3 (the "BCMAxCD3 Program") and (ii) MUC16 and CD3 (the "MUC16xCD3 Program") through clinical proof-of-concept. The Amended IO Discovery Agreement provided for Sanofi's payment of $462 million to Regeneron as consideration for (x) the termination of the 2015 IO Discovery Agreement, (y) the prepayment for certain IO Development Activities regarding the BCMAxCD3 Program and the MUC16xCD3 Program, and (z) the reimbursement of costs incurred by Regeneron under the 2015 IO Discovery Agreement during the fourth quarter of 2018. This gives Sanofi increased flexibility to advance its early-stage immuno-oncology pipeline independently, while Regeneron retains all rights to its other immuno-oncology discovery and development programs.
The ongoing development and commercialization collaboration on Libtayo® (cemiplimab) is unaffected by the amendments to the IO Discovery and Development Agreement.
Upon establishment of POC, or when the allocated funding has been expended, whichever is earlier, Sanofi can exercise its opt-in rights to further develop and commercialize under the IO LCA the two candidates derived from the amended IO Discovery Agreement. If Sanofi exercises its opt-in rights with respect to the BCMAxCD3program, Sanofi will lead the development and global commercialization of BCMAxCD3 candidate antibody and fund the development costs in full; Regeneron will refund 50% of those costs provided that the share of quarterly results under the IO LCA represents a profit, subject to a cap set at 10% of Regeneron’s profit-share. If Sanofi exercises its opt-in rights with respect to the MUC16xCD3 program, Regeneron will lead development worldwide and commercialization in the United States; development costs and global profits, will be shared 50/50 between Sanofi and Regeneron.
On the earlier of (i) 24 months before the scheduled launch date or (ii) the first positive Phase III trial results, Sanofi and Regeneron will share the commercial expenses of the antibodies co-developed under the license agreement.
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Libtayo® (cemiplimab)
Under the 2015 IO LCA as amended in January 2018, Sanofi and Regeneron committed funding of no more than $1,640 million, split on a 50/50 basis ($820 million per company), for the development of REGN2810 (cemiplimab, trademark Libtayo®), a PD-1 inhibitor antibody. Regeneron is responsible for the commercialization of Libtayo® in the United States, and Sanofi in all other territories.
The IO LCA also provided for a one-time milestone payment of $375 million by Sanofi to Regeneron in the event that sales of a PD-1 product and any other collaboration antibody sold for use in combination with a PD-1 product were to exceed, in the aggregate, $2 billion in any consecutive 12-month period.
Under the IO License and Commercialization Agreement (IO LCA) Sanofi and Regeneron share equally in profits and losses in connection with the commercialization of collaboration products, except that Sanofi is entitled to an additional share of profits capped at 10% of the share of Regeneron’s quarterly profits to reimburse Sanofi of up to 50% of the clinical development costs funded by Sanofi under the IO Discovery Agreement, as amended.
On September 21, 2018, the US Food and Drug Administration (FDA) approved Libtayo® (cemiplimab) 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 a fully-human monoclonal antibody targeting the immune checkpoint receptor PD-1 (programmed cell death protein-1) and is the first and only treatment specifically approved and available for advanced CSCC in the US. In July 2019, the European Medicines Agency (EMA) granted marketing authorization for Libtayo® for patients with metastatic or locally advanced CSCC who are not candidates for surgery.
In addition to advanced CSCC, clinical trials are ongoing to investigate cemiplimab in non small cell lung cancer, basal cell carcinoma, cervical cancer, head and neck squamous cell carcinoma, melanoma, colorectal cancer, prostate cancer, multiple myeloma, Hodgkin’s disease and non-Hodgkin lymphoma. Those potential indications are still investigational, and the safety and efficacy of Libtayo® have not been evaluated by any regulatory authority for any of them.
Investor agreement
In January 2014, Sanofi and Regeneron amended the investor agreement that has existed between the two companies since 2007. Under the terms of the amendment, Sanofi accepted various restrictions. Sanofi is bound by certain “standstill” provisions, which contractually prohibit Sanofi from seeking to directly or indirectly exert control of Regeneron or acquiring more than 30% of Regeneron’s capital stock (consisting of the outstanding shares of common stock and the shares of Class A stock). This prohibition will remain in place until the earlier of (i) the later of the fifth anniversaries of the expiration or earlier termination of the Zaltrap® collaboration agreement with Regeneron (related to the development and commercialization of Zaltrap®) or the collaboration agreement with Regeneron on monoclonal antibodies (see “Collaboration agreements on human therapeutic antibodies” above), each as amended and (ii) other specified events.
Sanofi also agreed to vote as recommended by Regeneron’s Board of Directors, except that it may elect to vote proportionally with the votes cast by all of Regeneron’s other shareholders with respect to certain change-of-control transactions, and to vote in its sole discretion with respect to liquidation or dissolution, stock issuances equal to or exceeding 20% of the outstanding shares or voting rights of Regeneron’s Class A Stock and Common Stock (taken together), and new equity compensation plans or amendments if not materially consistent with Regeneron’s historical equity compensation practices. As soon as it had passed the threshold of 20% ownership of the capital stock, Sanofi exercised its right to designate an independent director, who was appointed to the Board of Directors of Regeneron. The interest held by Sanofi in Regeneron has been consolidated by the equity method since April 2014. On the conditions set out in the Amended Investor Agreement of January 2014, Sanofi’s right to designate a Regeneron board member was contingent on Sanofi maintaining its percentage share of Regeneron’s outstanding capital stock (measured on a quarterly basis) at a level no lower than the highest percentage level previously achieved, with the maximum requirement capped at 25%. In addition, Sanofi’s interest in Regeneron was subject to a lock-up clause. Those restrictions were amended by the letter agreement of January 2018 (see below).
At Sanofi’s request, pursuant to the Amended Investor Agreement, Regeneron appointed a new independent director, N. Anthony “Tony” Coles, M.D. to its Board of Directors in January 2017 as a Sanofi designee. The Amended Investor Agreement also gives Sanofi the right to receive certain reasonable information as may be agreed upon by the parties and which will facilitate Sanofi’s ability to account for its investment in Regeneron using the equity method of accounting under IFRS.
In January 2018, Sanofi and Regeneron announced (i) amendments to their collaboration agreements on human therapeutic antibodies; (ii) amendments to the IO LCA on the development of cemiplimab (REGN2810); and (iii) a limited waiver and amendment of the Amended Investor Agreement (the Amended and Restated Investor Agreement) pursuant to a letter agreement (the “2018 Letter Agreement”).
Pursuant to the 2018 Letter Agreement, Regeneron agreed to grant a limited waiver of the lock-up clause and the obligation to maintain the “Highest Percentage Threshold” in the Amended and Restated Investor Agreement between the companies, so that Sanofi may elect to sell a small percentage of the Regeneron common stock it owns to fund a portion of the cemiplimab and dupilumab development expansion. This waiver will allow Sanofi to sell up to an aggregate of 1.4 million shares of Regeneron common stock to Regeneron in private transactions through the end of 2020. If Regeneron decides not to purchase the shares, Sanofi will be allowed to sell those shares on the open market, subject to certain volume and timing limitations. Upon expiration of the limited waiver under the 2018 Letter Agreement, the Amended and Restated Investor Agreement will be amended to define “Highest Percentage Threshold” as the lower of (i) 25% of Regeneron outstanding shares of Class A Stock and Common Stock (taken together) and (ii) the higher of (a) Sanofi’s percentage ownership of Class A Stock and Common Stock (taken together) on such termination date and (b) the highest percentage ownership of Regeneron outstanding shares of Class A Stock and Common Stock (taken together) Sanofi attains following such termination date.
As of December 31, 2019, Sanofi had sold 530,172 shares of Regeneron stock to Regeneron out of the 1.4 million shares covered by the 2018 Letter Agreement.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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In December 2019, Sanofi announced that on expiration of the lock-up term and as defined in the Amended and Restated Investor Agreement as amended by the 2018 Letter Agreement (i.e. in principle after December 20, 2020), Sanofi may dispose of its entire interest in Regeneron or of some of the shares of common stock held, on any single occasion or from time to time, via public offering or market transactions or a private sale, using derivatives or other means, at prices and on other terms acceptable to Sanofi depending on Sanofi’s capital allocation priorities and alternative investment opportunities, market conditions, the price of Regeneron common stock, and any other factors judged relevant by Sanofi with respect to its investment in Regeneron. Those provisions will be implemented in accordance with the Amended and Restated Investor Agreement as amended by the 2018 Letter Agreement, including the restrictions contained in Section 5 of the Amended and Restated Investor Agreement.
2/ Alliance arrangements with Bristol-Myers Squibb (BMS)
Two of Sanofi’s leading products were jointly developed with BMS: the anti-hypertensive agent irbesartan (Aprovel®/Avapro®/Karvea®) and the anti-atherothrombosis treatment clopidogrel bisulfate (Plavix®/Iscover®).
On September 27, 2012, Sanofi and BMS signed an agreement relating to their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets.
Under the terms of this agreement, effective January 1, 2013, BMS returned to Sanofi its rights to Plavix® and Avapro®/Avalide® in all markets worldwide with the exception of Plavix® in the United States and Puerto Rico, giving Sanofi sole control and freedom to operate commercially in respect of those products. In exchange, BMS received royalty payments on Sanofi’s sales of branded and unbranded Plavix® and Avapro®/Avalide® worldwide (except for Plavix® in the United States and Puerto Rico) until 2018, and also received a payment of $200 million from Sanofi in December 2018, part of which is for buying out the non-controlling interests (see Note D.18.). Rights to Plavix® in the United States and Puerto Rico remain unchanged and continued to be governed by the terms of the original agreement until March 2020.
In all of the territories managed by Sanofi (including the United States and Puerto Rico for Avapro®/Avalide®) as defined in the new agreement, Sanofi recognized in its consolidated financial statements the revenue and expenses generated by its own operations. Since January 2019 onwards, there has no longer been any share of profits reverting to BMS subsidiaries (previously presented within Net income attributable to non-controlling interests in the income statement).
In the territory managed by BMS (United States and Puerto Rico for Plavix®), Sanofi recognizes its share of profits and losses within the line item Share of profit/(loss) from investments accounted for using the equity method (see also Item 8. for recent changes).
A.1.8. Impact of Exchange Rates
We report our consolidated financial statements in euros. Because we earn a significant portion of our revenues in countries where the euro is not the local currency, our results of operations can be significantly affected by exchange rate movements between the euro and other currencies, primarily the US dollar and, to a lesser extent, the Japanese yen, and currencies in emerging countries. We experience these effects even though certain of these countries do not account for a large portion of our net sales. In 2019, we earned 35.3% of our net sales in the United States. An increase in the value of the US dollar against the euro has a positive impact on both our revenues and our operating income. A decrease in the value of the US dollar against the euro has a negative impact on our revenues, which is not offset by an equal reduction in our costs and therefore negatively affects our operating income. A variation in the value of the US dollar has a particularly significant impact on our operating income, which is higher in the United States than elsewhere, and on the contribution to net income of our collaborations with Regeneron and BMS in the United States (see “- A.1.7. Financial Presentation of Alliances” above).
For a description of arrangements entered into to manage operating foreign exchange risks as well as our hedging policy, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk”, and “Item 3. Key Information - D. Risk Factors - Risks Related to Financial Markets - Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition”.
A.1.9. Divestments
There were no material divestments in 2019.
On September 30, 2018, Sanofi finalized the divestment of Zentiva, its European Generics business, generating a pre-tax gain of €510 million euros in 2018.
On January 1, 2017, Sanofi and Boehringer Ingelheim (BI) finalized the strategic transaction agreed in June 2016, involving the exchange of our Animal Health business (Merial) for BI’s Consumer Healthcare business. After final enterprise value adjustments, the exchange values of the two businesses effectively transferred during 2017 were determined to be €10,557 million for Sanofi’s Animal Health business and €6,239 million for BI’s Consumer Healthcare business. The divestment of the Animal Health business generated an after-tax gain of €4,643 million in 2017.
For further details about the divestments mentioned above, see Note D.1. and D.2. to our consolidated financial statements included at Item 18 of the annual report for the period in which the divestment occurred.
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A.1.10. Acquisitions
The impacts of the acquisitions carried out in 2019 are not material to the Sanofi consolidated financial statements.
Sanofi acquired Bioverativ Inc. (“Bioverativ”) on March 8, 2018 for $11.6 billion (€9.4 billion). The final purchase price allocation resulted in the recognition of goodwill amounting to €2,676 million. The contributions from Bioverativ to net sales and business operating income of the Pharmaceuticals segment in 2018 amount to €892 million and €389 million, respectively. Over the same period, Bioverativ made a negative contribution of €325 million to net profit, including expenses charged during the period relating to the fair value remeasurement of assets recognized at the acquisition date. During the year ended December 31, 2018, Bioverativ generated net sales of €1,068 million. The net cash outflow on this acquisition amounted to €8,932 million, and is recorded within Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statements of cash flows.
Sanofi acquired Ablynx on May 14, 2018 for €3,897 million. The final purchase price allocation resulted in the recognition of goodwill amounting to €1,360 million. The impacts of this acquisition on Sanofi’s business operating income and consolidated net income for the year ended December 31, 2018 are not material. The net cash outflow on this acquisition amounted to €3,639 million, and is recorded within Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statements of cash flows.
In 2019, Sanofi sold shares in the biopharmaceutical company Regeneron with a carrying amount of €33 million, compared with €24 million in 2018. Sanofi had acquired shares in Regeneron in 2017 (at a cost of €184 million). Our investment in Regeneron had a carrying amount of €3,342 million as of December 31, 2019, compared with €3,055 million as of December 31, 2018, and €2,496 million as of December 31, 2017 (see Note D.1. to our consolidated financial statements). This represents an equity interest of 21.2% as of December 31, 2019, compared with 21.7% as of December 31, 2018, and 22.2% as of December 31, 2017.
In 2017, as part of the strategic transaction between Sanofi and Boehringer Ingelheim (BI), we acquired BI’s Consumer Healthcare business. The goodwill arising on that acquisition represents (i) the capacity to draw on a specialized structure to refresh the existing product portfolio; (ii) the competencies of the staff transferred to Sanofi; (iii) the benefits derived from the creation of new growth platforms; and (iv) the expected future synergies and other benefits from combining the CHC operations of BI and Sanofi. The tax-deductible portion of goodwill amounted to €1,876 million out of total goodwill of €2,222 million. This business generated sales of €1,407 million in the year ended December 31, 2017.
On August 25, 2017, Sanofi acquired 100% of Protein Sciences, a biotechnology company headquartered in Meriden, Connecticut (United States). The principal product of Protein Sciences is Flublok®, the only recombinant protein-based influenza vaccine approved by the FDA in the United States. The acquisition price included two contingent purchase consideration elements of €42 million each. The impacts of this acquisition on Sanofi’s business operating income and consolidated net income for the year ended December 31, 2017 were not material.
For further information about the acquisitions mentioned above, see Notes D.1. and D.2. to our consolidated financial statements included at Item 18 of the annual report for the period in which the acquisition occurred.
A.1.11. Critical accounting and reporting policies
Our consolidated financial statements are affected by the accounting and reporting policies that we use. Certain of our accounting and reporting policies are critical to an understanding of our results of operations and financial condition, and in some cases the application of these critical policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our consolidated financial statements. The accounting and reporting policies that we have identified as fundamental to a full understanding of our results of operations and financial condition are the following:
1/ Revenue recognition
Our policies with respect to revenue recognition are discussed in Note B.13. to our consolidated financial statements included at Item 18 of this annual report. Revenue arising from the sale of goods is presented in the income statement within Net sales. Net sales comprise revenue from sales of pharmaceutical products, consumer healthcare products, active ingredients and vaccines, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. In accordance with IFRS 15 (Revenue from Contracts with Customers), such revenue is recognized when Sanofi transfers control over the product to the customer. Control refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from the products. For the vast majority of contracts, revenue is recognized when the product is physically transferred, in accordance with the delivery and acceptance terms agreed with the customer.
For contracts entered into by Sanofi Pasteur, transfer of control is usually determined by reference to the terms of release (immediate or deferred) and acceptance of batches of vaccine.
As regards contracts with distributors, Sanofi does not recognize revenue when the product is physically transferred to the distributor in case of products sold on consignment, or if the distributor acts as an agent. In such cases, revenue is recognized when control is transferred to the end customer and the distributor’s commission is presented within the line item Selling and general expenses in the income statement.
We offer various types of price reductions on our products. In particular, products sold in the United States are covered by various programs (such as Medicare and Medicaid) under which products are sold at a discount. Rebates are granted to healthcare authorities, and under contractual arrangements with certain customers. Some wholesalers are entitled to chargeback incentives based on the selling price to the end customer, under specific contractual arrangements. Cash discounts may also be granted for prompt payment. The discounts, incentives and rebates described above are estimated on the basis of specific contractual arrangements with our customers or of specific terms of the relevant regulations and/or agreements applicable for transactions with healthcare authorities, and of assumptions about the attainment of sales targets. We also estimate the amount of sales returns, on the basis of contractual sales terms and reliable historical data. Discounts, incentives, rebates and sales returns are recognized in the period in which the underlying sales are recognized within Net Sales, as a reduction of gross sales. For additional details regarding the financial impact of discounts, incentives, rebates and sales returns, see Note D.23. to our consolidated financial statements included at Item 18 of this annual report.
Revenues from non-Sanofi products, mainly comprising royalty income from license arrangements and sales of non-Sanofi products by our US-based entity VaxServe, are presented within Other revenues.
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2/ Business combinations
As discussed in Note B.3. “Business combinations and transactions with non-controlling interests” to our consolidated financial statements included at Item 18 of this annual report, business combinations are accounted for by the acquisition method. The acquiree’s identifiable assets and liabilities that satisfy the recognition criteria of IFRS 3 (Business Combinations) are measured initially at their fair values as at the acquisition date, except for (i) non-current assets classified as held for sale, which are measured at fair value less costs to sell and (ii) assets and liabilities that fall within the scope of IAS 12 (Income Taxes) and IAS 19 (Employee Benefits). Business combinations completed on or after January 1, 2010 are accounted for in accordance with the revised IFRS 3 and the revised IAS 27, (Consolidated and Individual Financial Statements), now superseded by IFRS 10 (Consolidated Financial Statements). In particular, contingent consideration payable to former owners agreed in a business combination, e.g. in the form of payments upon the achievement of certain R&D milestones, is recognized as a liability at fair value as of the acquisition date irrespective of the probability of payment. If the contingent consideration was originally recognized as a liability, subsequent adjustments to the liability are recognized in profit or loss (see Note D.18. “Liabilities related to business combinations and non-controlling interests” to our consolidated financial statements included at Item 18 of this annual report).
3/ Impairment of goodwill and intangible assets
As discussed in Note B.6. “Impairment of property, plant and equipment, intangible assets, and investments accounted for using the equity method” and in Note D.5. “Impairment of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18 of this annual report, we test our intangible assets for impairment periodically or when there is any internal or external indication of impairment, which indicators could include primarily but not exclusively (i) increased market competition resulting from (for example) the introduction of a competitor’s product; (ii) earlier than expected loss of exclusivity; (iii) increased pricing pressure; (iv) restrictions imposed by regulatory authorities on the manufacture or sale of a product; (v) delay in the projected launch of a product; (vi) different from expected clinical trial results; (vii) higher than expected development costs or (viii) lower economic performance than expected.
We test for impairment on the basis of the same objective criteria that were used for the initial valuation. Our initial valuation and ongoing tests are based on the relationship of the value of our projected future cash flows associated with the asset to either the purchase price of the asset (for its initial valuation) or the carrying amount of the asset (for ongoing tests for impairment).
Significant underlying assumptions requiring the exercise of considerable judgement are used in the future cash flow projections so as to determine the recoverability of intangible assets, including primarily but not exclusively (i) therapeutic class market growth drivers; (ii) expected impacts from competing products (including but not exclusively generics and biosimilars); (iii) projected pricing and operating margin levels; (iv) likely changes in the regulatory, legal or tax environment; and (v) management’s estimates of terminal growth or attrition rates.
The recoverable amounts of intangible assets related to research and development projects are determined based on future net cash flows, which reflect the development stage of the project and the associated probability of success of marketization of the compound.
The projected cash flows are discounted to present value using a discount rate which factors in the risks inherent in projected cash flows.
Changes in facts and circumstances, assumptions and/or estimates may lead to future additional impairment losses or reversal of impairment previously recorded.
Key assumptions relating to goodwill impairment are the perpetual growth rate, the probability of success of current research and development projects, and more generally on company’s ability to renew the product portfolio in the longer term and the post-tax discount rate. Any changes in key assumptions could result in an impairment charge. A sensitivity analysis to the key assumptions is disclosed in Note D.5. “Impairment of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18 of this annual report.
4/ Contingent consideration receivable
As described in Note B.8.1 and D.7.2 to our consolidated financial statements included at Item 18 of this annual report, contingent consideration receivable such as earn-outs on disposals, for example in the form of a percentage of future sales of the acquirer, are recognized as an asset at fair value as of the date of divestment. Subsequent remeasurements of the fair value of the asset are recognized in profit or loss.
5/ Pensions and post-retirement benefits
As described in Note B.23. “Employee benefit obligations” to our consolidated financial statements included at Item 18 of this annual report, we recognize our pension and retirement benefit commitments as liabilities on the basis of an actuarial estimate of the rights vested in employees and retirees at the end of the reporting period, net of the fair value of plan assets held to meet these obligations. We prepare this estimate at least on an annual basis taking into account financial assumptions (such as discount rates) and demographic assumptions (such as life expectancy, retirement age, employee turnover, and the rate of salary increases).
We recognize all actuarial gains and losses (including the impact of a change in discount rate) immediately through equity. A sensitivity analysis to the discount rate is set forth in Note D.19.1. “Provisions for pensions and other benefits” to our consolidated financial statements included at Item 18 of this annual report.
Depending on the key assumptions used, the pension and post-retirement benefit expense could vary within a range of outcomes and have a material effect on reported earnings. A sensitivity analysis to these key assumptions is set forth in Note D.19.1. “Provisions for pensions and other benefits” to our consolidated financial statements included at Item 18 of this annual report.
6/ Deferred taxes
As discussed in Note B.22. “Income tax expense” to our consolidated financial statements included at Item 18 of this annual report, we recognize deferred income taxes on tax loss carry-forwards and on temporary differences between the tax base and carrying amount of assets and liabilities. We calculate our deferred tax assets and liabilities using enacted tax rates applicable for the years during which we estimate that the temporary differences are expected to reverse. We do not recognize deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. The recognition of deferred tax assets is determined on the basis of profit forecasts for each tax group, and of the tax consequences of the strategic opportunities available to Sanofi.
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7/ Provisions for risks
Sanofi and its subsidiaries and affiliates may be involved in litigation, arbitration or other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights, compliance and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. As discussed in Note B.12. “Provisions for risks” at Item 18 of this annual report, we record a provision where we have a present obligation, whether legal or constructive, as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the outflow of resources. For additional details regarding the financial impact of provisions for risks see Notes D.19.3. “Other provisions” and D.22. “Legal and Arbitral Proceedings” to our consolidated financial statements included at Item 18 of this annual report.
8/ Provisions for restructuring costs
Provisions for restructuring costs include early retirement benefits, compensation for early termination of contracts, and rationalization costs relating to restructured sites. Refer to Note D.19.2 to our consolidated financial statements included in Item 18 of this annual report.
Provisions are estimated on the basis of events and circumstances related to present obligations at the end of the reporting period and of past experience, and to the best of management’s knowledge at the date of preparation of the financial statements. The assessment of provisions can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Given the inherent uncertainties related to these estimates and assumptions, the actual outflows resulting from the realization of those risks could differ from our estimates.
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A.2. Results of operations - year ended December 31, 2019 compared with year ended December 31, 2018
Consolidated income statements |
| | | | | | | | | |
(€ million) | 2019 |
| as % of net sales |
| 2018 |
| | as % of net sales |
|
Net sales | 36,126 |
| 100.0 | % | 34,463 |
| | 100.0 | % |
Other revenues | 1,505 |
| 4.2 | % | 1,214 |
| | 3.5 | % |
Cost of sales | (11,976 | ) | (33.2 | )% | (11,435 | ) | | (33.2 | )% |
Gross profit | 25,655 |
| 71.0 | % | 24,242 |
| | 70.3 | % |
Research and development expenses | (6,018 | ) | (16.7 | )% | (5,894 | ) | | (17.1 | )% |
Selling and general expenses | (9,883 | ) | (27.4 | )% | (9,859 | ) | | (28.6 | )% |
Other operating income | 825 |
| | 484 |
| | |
Other operating expenses | (1,207 | ) | | (548 | ) | | |
Amortization of intangible assets | (2,146 | ) | | (2,170 | ) | | |
Impairment of intangible assets | (3,604 | ) | | (718 | ) | | |
Fair value remeasurement of contingent consideration | 238 |
| | 117 |
| | |
Restructuring costs and similar items | (1,062 | ) | | (1,480 | ) | | |
Other gains and losses, and litigation | 327 |
| | 502 |
| | |
Operating income | 3,125 |
| 8.7 | % | 4,676 |
| | 13.6 | % |
Financial expenses | (444 | ) | | (435 | ) | | |
Financial income | 141 |
| | 164 |
| | |
Income before tax and investments accounted for using the equity method | 2,822 |
| 7.8 | % | 4,405 |
| | 12.8 | % |
Income tax expense | (139 | ) | | (481 | ) | | |
Share of profit/(loss) from investments accounted for using the equity method | 255 |
| | 499 |
| | |
Net income excluding the exchanged/held- for-exchange Animal Health business | 2,938 |
| 8.1 | % | 4,423 |
| | 12.8 | % |
Net income/(loss) of the exchanged/held-for-exchange Animal Health business(a) | (101 | ) | | (13 | ) | | |
Net income | 2,837 |
| 7.9 | % | 4,410 |
| | 12.8 | % |
Net income attributable to non-controlling interests | 31 |
| | 104 |
| | |
Net income attributable to equity holders of Sanofi | 2,806 |
| 7.8 | % | 4,306 |
| | 12.5 | % |
Average number of shares outstanding (million) | 1,249.9 |
| | 1,247.1 |
| | |
Average number of shares after dilution (million) | 1,257.1 |
| | 1,255.2 |
| | |
▪ Basic earnings per share (in euros) | 2.24 |
| | 3.45 |
| | |
▪ Basic earnings per share (in euros) excluding the exchanged/held-for-exchange Animal Health business | 2.33 |
| | 3.46 |
| | |
▪ Diluted earnings per share (in euros) | 2.23 |
| | 3.43 |
| | |
▪ Diluted earnings per share (in euros) excluding the exchanged/held-for-exchange Animal Health business | 2.31 |
| | 3.44 |
| | |
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(a) | The impacts of the divestment of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note D.2 to our consolidated financial statements. |
A.2.1. Net Sales
Consolidated net sales for the year ended December 31, 2019 amounted to €36,126 million, 4.8% higher than in 2018. Exchange rate fluctuations had a positive effect of 2.0 percentage points overall, due mainly to favorable trends in the euro exchange rate against the US dollar and Japanese yen. The Argentinean peso had an unfavorable effect of €166 million in 2019, including the effects of applying hyperinflation accounting from July 1, 2018 onwards (see Note A.4. to our consolidated financial statements).
At constant exchange rates (CER), net sales rose by 2.8%, impacted by (i) the acquisition of Bioverativ’s rare blood disorder products and (ii) the divestment of our European generics business in 2018. At constant exchange rates and on a constant structure basis (CER/CS), the growth rate was 3.6%. Strong performances for Dupixent®, and for Vaccines across all geographies, combined with growth in Emerging Markets sales, more than offset lower sales of Lantus® and Established Prescription Products in mature markets.
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Reconciliation of net sales to net sales at constant exchange rates and on a constant structure basis
|
| | | | | | |
(€ million) | 2019 |
| 2018 |
| Change |
|
Net sales | 36,126 |
| 34,463 |
| +4.8 | % |
Effect of exchange rates | (688 | ) | | |
Net sales at constant exchange rates | 35,438 |
| 34,463 |
| +2.8 | % |
Impact of changes in structure (Zentiva(a) and Bioverativ(b)) | | (268 | ) | |
Net sales at constant exchange rates and on a constant structure basis | 35,438 |
| 34,195 |
| +3.6 | % |
| |
(a) | Elimination of the €456 million of net sales generated from January 1 through September 30, 2018 by Zentiva, our European generics business, divested September 30, 2018. |
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(b) | Add-back of the €188 million of net sales generated from January 1 through March 7, 2018 by Bioverativ, consolidated from March 8, 2018 onwards. |
When we refer to changes in our net sales at constant exchange rates (CER), that means that we have excluded the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period.
When we refer to changes in our net sales on a constant structure (CS) basis, that means that we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:
| |
▪ | by including sales generated by entities or product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on historical sales information we receive from the party from whom we make the acquisition; |
| |
▪ | similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period; and |
| |
▪ | for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period. |
To facilitate analysis and comparisons with prior periods, some figures are given at constant exchange rates and on a constant structure basis (CER/CS).
1/ Net sales by Operating Segment and Global Business Unit
Our net sales comprise the net sales generated by our Pharmaceuticals, Consumer Healthcare and Vaccines segments.
The table below also presents an analysis of our net sales by Global Business Unit (GBU).
|
| | | | | | | | |
(€ million) | 2019 |
| 2018 |
| Change on a reported basis |
| Change at constant exchange rates |
|
Sanofi Genzyme (Specialty Care) GBU(a)(b) | 9,195 |
| 7,226 |
| +27.2 | % | +22.4 | % |
Primary Care GBU(a) | 9,076 |
| 10,406 |
| -12.8 | % | -14.8 | % |
China & Emerging Markets GBU(c)(d) | 7,437 |
| 7,053 |
| +5.4 | % | +6.4 | % |
Total Pharmaceuticals | 25,708 |
| 24,685 |
| +4.1 | % | +2.2 | % |
Consumer Healthcare GBU | 4,687 |
| 4,660 |
| +0.6 | % | -0.8 | % |
Sanofi Pasteur (Vaccines) GBU | 5,731 |
| 5,118 |
| +12.0 | % | +9.3 | % |
Total net sales | 36,126 |
| 34,463 |
| +4.8 | % | +2.8 | % |
| |
(a) | Does not include Emerging Markets net sales. |
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(b) | Rare Diseases, Multiple Sclerosis, Oncology, Immunology, and Rare Blood Disorders. |
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(c) | Includes net sales in Emerging Markets of Specialty Care and Primary Care products. |
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(d) | Emerging Markets: World excluding United States, Canada, Europe (apart from Eurasia: Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
In 2019, our Primary Care GBU (which combines our Diabetes & Cardiovascular and Established Prescription Products franchises) and our Specialty Care GBU were focused exclusively on mature markets. Sales of Specialty Care and Primary Care products in emerging markets were included within the net sales of our China & Emerging Markets GBU, which during 2019 was focused on the distinctive characteristics and growth potential of emerging markets, especially China.
New Global Business Units
On December 9, 2019, our Chief Executive Officer unveiled his new strategy to boost growth and our potential for innovation. From the first quarter of 2020, Sanofi will be organised into three core Global Business Units to support our strategy (subject to completion of consultation with employee representatives): the Specialty Care GBU (Immunology, Rare Diseases, Rare Blood Disorders, Neurology and Oncology); the Vaccines GBU; and the General Medicines GBU (Diabetes, Cardiovascular and Established Prescription Products). The Consumer Healthcare GBU will become a standalone business unit with integrated manufacturing and R&D functions.
As specified on February 6, 2020, at the occasion of the 2019 fourth-quarter and full-year results presentation, 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
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ensure that our combined Diabetes, Cardiovascular and Established Products business drives growth and delivers 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”).
2/ Net sales by Franchise, Geographical Region and Product
The table below sets forth our 2019 and 2018 net sales by franchise, geographical region and product in order to facilitate direct comparisons with our peers. It also provides a reconciliation of sales by GBU for our Pharmaceuticals segment. Net sales for the Specialty Care GBU are obtained by aggregating sales of Specialty Care products in Europe, the United States and the Rest of the World region. Net sales for the General Medicines GBU are obtained by aggregating sales of General Medicines products in Europe, the United States and the Rest of the World region. Net sales for the China & Emerging Markets GBU are obtained by aggregating sales of all our pharmaceutical products in emerging markets.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Europe(a) | United States | Rest of the world(b) | Emerging markets(c) | Total Franchise |
(€ million) | 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change on a reported basis |
| Change at CER |
|
Aubagio® | 412 |
| 385 |
| +7.0 | % | 1,351 |
| 1,157 |
| +10.8 | % | 61 |
| 57 |
| +3.5 | % | 55 |
| 48 |
| +20.8 | % | 1,879 |
| 1,647 |
| +14.1 | % | +10.0 | % |
Lemtrada® | 94 |
| 167 |
| -43.7 | % | 151 |
| 189 |
| -24.3 | % | 11 |
| 19 |
| -47.4 | % | 25 |
| 27 |
| +3.7 | % | 281 |
| 402 |
| -30.1 | % | -31.6 | % |
Total Multiple Sclerosis | 506 |
| 552 |
| -8.3 | % | 1,502 |
| 1,346 |
| +5.9 | % | 72 |
| 76 |
| -9.2 | % | 80 |
| 75 |
| +14.7 | % | 2,160 |
| 2,049 |
| +5.4 | % | +1.8 | % |
Cerezyme® | 246 |
| 270 |
| -8.9 | % | 184 |
| 174 |
| +0.6 | % | 33 |
| 37 |
| -13.5 | % | 245 |
| 230 |
| +20.4 | % | 708 |
| 711 |
| -0.4 | % | +2.7 | % |
Cerdelga® | 73 |
| 51 |
| +43.1 | % | 118 |
| 98 |
| +14.3 | % | 10 |
| 7 |
| +42.9 | % | 5 |
| 3 |
| +100.0 | % | 206 |
| 159 |
| +29.6 | % | +26.4 | % |
Myozyme® | 382 |
| 374 |
| +1.9 | % | 331 |
| 284 |
| +10.6 | % | 59 |
| 58 |
| — |
| 146 |
| 124 |
| +26.6 | % | 918 |
| 840 |
| +9.3 | % | +8.3 | % |
Fabrazyme® | 184 |
| 175 |
| +5.1 | % | 410 |
| 383 |
| +1.6 | % | 121 |
| 115 |
| +0.9 | % | 98 |
| 82 |
| +29.3 | % | 813 |
| 755 |
| +7.7 | % | +5.3 | % |
Aldurazyme® | 78 |
| 76 |
| +1.3 | % | 51 |
| 44 |
| +11.4 | % | 25 |
| 24 |
| +4.2 | % | 70 |
| 62 |
| +19.4 | % | 224 |
| 206 |
| +8.7 | % | +9.2 | % |
Other | 64 |
| 62 |
| +3.2 | % | 89 |
| 89 |
| -6.7 | % | 93 |
| 95 |
| -5.4 | % | 50 |
| 41 |
| +26.8 | % | 296 |
| 287 |
| +3.1 | % | +0.7 | % |
Total Rare Diseases | 1,027 |
| 1,008 |
| +1.9 | % | 1,183 |
| 1,072 |
| +4.7 | % | 341 |
| 336 |
| -2.1 | % | 614 |
| 542 |
| +24.0 | % | 3,165 |
| 2,958 |
| +7.0 | % | +6.5 | % |
Jevtana® | 168 |
| 158 |
| +7.0 | % | 212 |
| 179 |
| +12.3 | % | 78 |
| 62 |
| +17.7 | % | 26 |
| 23 |
| +13.0 | % | 484 |
| 422 |
| +14.7 | % | +11.1 | % |
Thymoglobulin® | 36 |
| 37 |
| — |
| 198 |
| 162 |
| +16.0 | % | 24 |
| 23 |
| — |
| 96 |
| 75 |
| +30.7 | % | 354 |
| 297 |
| +19.2 | % | +16.5 | % |
Eloxatin® | 2 |
| 2 |
| — |
| (6 | ) | — |
| — |
| 26 |
| 30 |
| -13.3 | % | 181 |
| 150 |
| +19.3 | % | 203 |
| 182 |
| +11.5 | % | +10.4 | % |
Mozobil® | 49 |
| 47 |
| +4.3 | % | 115 |
| 96 |
| +14.6 | % | 20 |
| 18 |
| -5.6 | % | 14 |
| 10 |
| +50.0 | % | 198 |
| 171 |
| +15.8 | % | +11.7 | % |
Taxotere® | 4 |
| 3 |
| +33.3 | % | (1 | ) | 1 |
| -200.0 | % | 26 |
| 28 |
| -3.6 | % | 144 |
| 134 |
| +5.2 | % | 173 |
| 166 |
| +4.2 | % | +3.0 | % |
Other | 115 |
| 104 |
| +9.6 | % | 95 |
| 85 |
| +5.9 | % | 44 |
| 40 |
| +2.5 | % | 29 |
| 27 |
| +11.1 | % | 283 |
| 256 |
| +10.5 | % | +7.4 | % |
Total Oncology | 374 |
| 351 |
| +6.8 | % | 613 |
| 523 |
| +11.3 | % | 218 |
| 201 |
| +3.0 | % | 490 |
| 419 |
| +16.7 | % | 1,695 |
| 1,494 |
| +13.5 | % | +10.6 | % |
Dupixent® | 200 |
| 75 |
| +165.3 | % | 1,669 |
| 660 |
| +140.8 | % | 176 |
| 48 |
| +247.9 | % | 29 |
| 5 |
| +460.0 | % | 2,074 |
| 788 |
| +163.2 | % | +151.6 | % |
Kevzara® | 43 |
| 14 |
| +207.1 | % | 115 |
| 64 |
| +70.3 | % | 25 |
| 5 |
| +380.0 | % | 2 |
| — |
| — |
| 185 |
| 83 |
| +122.9 | % | +114.5 | % |
Total Immunology | 243 |
| 89 |
| +171.9 | % | 1,784 |
| 724 |
| +134.5 | % | 201 |
| 53 |
| +260.4 | % | 31 |
| 5 |
| +500.0 | % | 2,259 |
| 871 |
| +159.4 | % | +148.1 | % |
Eloctate® | — |
| — |
| — |
| 517 |
| 500 |
| -2.0 | % | 147 |
| 106 |
| +31.1 | % | 20 |
| 2 |
| +850.0 | % | 684 |
| 608 |
| +12.5 | % | +6.6 | % |
Alprolix® | — |
| — |
| — |
| 300 |
| 222 |
| +27.9 | % | 111 |
| 63 |
| +68.3 | % | 1 |
| — |
| — |
| 412 |
| 285 |
| +44.6 | % | +37.2 | % |
Cablivi® | 22 |
| 4 |
| +450.0 | % | 34 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 56 |
| 4 |
| — |
| — |
|
Total Rare Blood Disorders | 22 |
| 4 |
| +450.0 | % | 851 |
| 722 |
| +11.8 | % | 258 |
| 169 |
| +45.0 | % | 21 |
| 2 |
| +900.0 | % | 1,152 |
| 897 |
| +28.4 | % | +22.0 | % |
Sanofi Genzyme (Specialty Care) | 2,172 |
| 2,004 |
| +8.4 | % | 5,933 |
| 4,387 |
| +28.4 | % | 1,090 |
| 835 |
| +24.7 | % | 1,236 |
| 1,043 |
| +24.4 | % | 10,431 |
| 8,269 |
| +26.1 | % | +22.7 | % |
Lantus® | 584 |
| 684 |
| -14.6 | % | 1,149 |
| 1,614 |
| -32.5 | % | 218 |
| 290 |
| -26.6 | % | 1,061 |
| 977 |
| +9.7 | % | 3,012 |
| 3,565 |
| -15.5 | % | -17.0 | % |
Toujeo® | 334 |
| 290 |
| +15.5 | % | 289 |
| 344 |
| -20.3 | % | 80 |
| 76 |
| +1.3 | % | 180 |
| 130 |
| +39.2 | % | 883 |
| 840 |
| +5.1 | % | +3.2 | % |
Apidra® | 129 |
| 136 |
| -5.1 | % | 46 |
| 74 |
| -41.9 | % | 39 |
| 38 |
| — |
| 130 |
| 109 |
| +22.9 | % | 344 |
| 357 |
| -3.6 | % | -3.6 | % |
Amaryl® | 15 |
| 17 |
| -11.8 | % | 2 |
| 2 |
| — |
| 24 |
| 28 |
| -17.9 | % | 293 |
| 288 |
| — |
| 334 |
| 335 |
| -0.3 | % | -2.1 | % |
Admelog® | 15 |
| 7 |
| +114.3 | % | 235 |
| 86 |
| +158.1 | % | — |
| — |
| — |
| — |
| — |
| — |
| 250 |
| 93 |
| +168.8 | % | +155.9 | % |
Other | 131 |
| 138 |
| -5.1 | % | 90 |
| 65 |
| +32.3 | % | 32 |
| 29 |
| +3.4 | % | 37 |
| 50 |
| -22,0% |
| 290 |
| 282 |
| +2.8 | % | +1.4 | % |
Total Diabetes | 1,208 |
| 1,272 |
| -5.0 | % | 1,811 |
| 2,185 |
| -21.5 | % | 393 |
| 461 |
| -17.1 | % | 1,701 |
| 1,554 |
| +10.3 | % | 5,113 |
| 5,472 |
| -6.6 | % | -8.2 | % |
Praluent® | 107 |
| 86 |
| +24.4 | % | 112 |
| 154 |
| -30.5 | % | 18 |
| 10 |
| +70.0 | % | 21 |
| 11 |
| +81.8 | % | 258 |
| 261 |
| -1.1 | % | -3.8 | % |
Multaq® | 40 |
| 43 |
| -7.0 | % | 295 |
| 296 |
| -5.4 | % | 4 |
| 4 |
| — |
| 8 |
| 7 |
| +14.3 | % | 347 |
| 350 |
| -0.9 | % | -5.1 | % |
Total Cardiovascular | 147 |
| 129 |
| +14.0 | % | 407 |
| 450 |
| -14.0 | % | 22 |
| 14 |
| +50.0 | % | 29 |
| 18 |
| +55.6 | % | 605 |
| 611 |
| -1.0 | % | -4.6 | % |
Plavix® | 139 |
| 147 |
| -4.8 | % | — |
| — |
| — |
| 199 |
| 218 |
| -12.4 | % | 996 |
| 1,075 |
| -8.6 | % | 1,334 |
| 1,440 |
| -7.4 | % | -8.8 | % |
Lovenox® | 709 |
| 870 |
| -18.4 | % | 33 |
| 38 |
| -18.4 | % | 75 |
| 81 |
| -8.6 | % | 542 |
| 476 |
| +13.7 | % | 1,359 |
| 1,465 |
| -7.2 | % | -7.4 | % |
Aprovel® | 113 |
| 108 |
| +4.6 | % | 26 |
| 10 |
| +150.0 | % | 65 |
| 69 |
| -8.7 | % | 470 |
| 465 |
| -0.2 | % | 674 |
| 652 |
| +3.4 | % | +2.0 | % |
Depakine® | 163 |
| 163 |
| — |
| — |
| — |
| — |
| 13 |
| 14 |
| -7.1 | % | 300 |
| 275 |
| +7.6 | % | 476 |
| 452 |
| +5.3 | % | +4.4 | % |
Synvisc® / Synvisc one® | 25 |
| 25 |
| — |
| 211 |
| 217 |
| -7.8 | % | 12 |
| 13 |
| — |
| 61 |
| 58 |
| +1.7 | % | 309 |
| 313 |
| -1.3 | % | -5.1 | % |
Renagel®/Renvela® | 51 |
| 60 |
| -15.0 | % | 133 |
| 253 |
| -50.2 | % | 32 |
| 31 |
| +3.2 | % | 95 |
| 67 |
| +38.8 | % | 311 |
| 411 |
| -24.3 | % | -26.5 | % |
Tritace® | 141 |
| 142 |
| -0.7 | % | — |
| — |
| — |
| 4 |
| 5 |
| — |
| 73 |
| 74 |
| -1.4 | % | 218 |
| 221 |
| -1.4 | % | -0.9 | % |
|
| |
| |
64 | SANOFI / FORM 20-F 2019
|
|
|
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Europe(a) | United States | Rest of the world(b) | Emerging markets(c) | Total Franchise |
(€ million) | 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change at CER |
| 2019 |
| 2018 |
| Change on a reported basis |
| Change at CER |
|
Stilnox® | 37 |
| 39 |
| -5.1 | % | 42 |
| 45 |
| -11.1 | % | 78 |
| 86 |
| -14.0 | % | 62 |
| 61 |
| +1.6 | % | 219 |
| 231 |
| -5.2 | % | -7.8 | % |
Allegra® | 10 |
| 8 |
| +25.0 | % | — |
| — |
| — |
| 118 |
| 116 |
| -4.3 | % | — |
| — |
| — |
| 128 |
| 124 |
| +3.2 | % | -2.4 | % |
Generics | 130 |
| 568 |
| -77.1 | % | 152 |
| 124 |
| +16.9 | % | 123 |
| 113 |
| +1.8 | % | 670 |
| 685 |
| — |
| 1,075 |
| 1,490 |
| -27.9 | % | -27.9 | % |
Other established prescription products | 1,679 |
| 1,768 |
| -4.9 | % | 189 |
| 188 |
| -4.3 | % | 386 |
| 376 |
| -1.9 | % | 1,202 |
| 1,202 |
| +0.7 | % | 3,456 |
| 3,534 |
| -2.2 | % | -2.7 | % |
Total Established Prescription Products | 3,197 |
| 3,898 |
| -17.9 | % | 786 |
| 875 |
| -14.6 | % | 1,105 |
| 1,122 |
| -5.5 | % | 4,471 |
| 4,438 |
| +0.6 | % | 9,559 |
| 10,333 |
| -7.5 | % | -8.3 | % |
Total General Medicines | 4,552 |
| 5,299 |
| -14.0 | % | 3,004 |
| 3,510 |
| -18.8 | % | 1,520 |
| 1,597 |
| -8.4 | % | 6,201 |
| 6,010 |
| +3.3 | % | 15,277 |
| 16,416 |
| -6.9 | % | -8.2 | % |
Total China and Emerging Markets | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 7,437 |
| 7,053 |
| +6.4 | % | — |
| — |
| — |
| — |
|
Total Pharmaceuticals | 6,724 |
| 7,303 |
| -7.9 | % | 8,937 |
| 7,897 |
| +7.4 | % | 2,610 |
| 2,432 |
| +3.0 | % | 7,437 |
| 7,053 |
| +6.4 | % | 25,708 |
| 24,685 |
| +4.1 | % | +2.2 | % |
Allergy, Cough and Cold | 324 |
| 347 |
| -6.3 | % | 323 |
| 303 |
| +0.7 | % | 160 |
| 135 |
| +13.3 | % | 372 |
| 339 |
| +8.0 | % | 1,179 |
| 1,124 |
| +4.9 | % | +2.2 | % |
Pain | 499 |
| 521 |
| -4.0 | % | 185 |
| 165 |
| +6.1 | % | 134 |
| 119 |
| +7.6 | % | 441 |
| 449 |
| +4.0 | % | 1,259 |
| 1,254 |
| +0.4 | % | +1.3 | % |
Digestive | 307 |
| 314 |
| -1.9 | % | 157 |
| 195 |
| -24.1 | % | 51 |
| 54 |
| -9.3 | % | 489 |
| 423 |
| +13.7 | % | 1,004 |
| 986 |
| +1.8 | % | — |
|
Nutritionals | 121 |
| 125 |
| -2.4 | % | 38 |
| 37 |
| -2.7 | % | 257 |
| 256 |
| -1.6 | % | 241 |
| 257 |
| -7.8 | % | 657 |
| 675 |
| -2.7 | % | -4.1 | % |
Other | 60 |
| 96 |
| -39.6 | % | 383 |
| 366 |
| -0.5 | % | 36 |
| 39 |
| -5.1 | % | 109 |
| 120 |
| -7.5 | % | 588 |
| 621 |
| -5.3 | % | -8.2 | % |
Total Consumer Healthcare | 1,311 |
| 1,403 |
| -6.4 | % | 1,086 |
| 1,066 |
| -3.6 | % | 638 |
| 603 |
| +2.7 | % | 1,652 |
| 1,588 |
| +4.7 | % | 4,687 |
| 4,660 |
| +0.6 | % | -0.8 | % |
Polio / Pertussis / Hib Vaccines | 299 |
| 296 |
| +1.0 | % | 380 |
| 397 |
| -9.6 | % | 159 |
| 156 |
| -3.2 | % | 1,108 |
| 900 |
| +23.4 | % | 1,946 |
| 1,749 |
| +11.3 | % | +9.8 | % |
Travel and Other Endemics Vaccines | 129 |
| 117 |
| +10.3 | % | 143 |
| 134 |
| +1.5 | % | 61 |
| 56 |
| +7.1 | % | 206 |
| 181 |
| +12.7 | % | 539 |
| 488 |
| +10.5 | % | +8.4 | % |
Meningitis/Pneumonia Vaccines | — |
| — |
| — |
| 507 |
| 466 |
| +3.4 | % | 14 |
| 16 |
| -12.5 | % | 161 |
| 127 |
| +29.1 | % | 682 |
| 609 |
| +12.0 | % | +8.4 | % |
Adult Booster Vaccines | 166 |
| 129 |
| +28.7 | % | 320 |
| 273 |
| +11.7 | % | 28 |
| 26 |
| — |
| 49 |
| 42 |
| +16.7 | % | 563 |
| 470 |
| +19.8 | % | +16.2 | % |
Influenza Vaccines | 218 |
| 177 |
| +23.7 | % | 1,289 |
| 1,233 |
| +0.2 | % | 88 |
| 81 |
| +4.9 | % | 296 |
| 217 |
| +35.0 | % | 1,891 |
| 1,708 |
| +10.7 | % | +7.3 | % |
Other | 5 |
| 9 |
| -66.7 | % | 94 |
| 74 |
| +20.3 | % | 6 |
| 7 |
| +71.4 | % | 5 |
| 4 |
| -25.0 | % | 110 |
| 94 |
| +17.0 | % | +13.8 | % |
Total Vaccines | 817 |
| 728 |
| +12.1 | % | 2,733 |
| 2,577 |
| +1.1 | % | 356 |
| 342 |
| +1.8 | % | 1,825 |
| 1,471 |
| +24.0 | % | 5,731 |
| 5,118 |
| +12.0 | % | +9.3 | % |
Total Sanofi | 8,852 |
| 9,434 |
| -6.1 | % | 12,756 |
| 11,540 |
| +5.0 | % | 3,604 |
| 3,377 |
| +2.8 | % | 10,914 |
| 10,112 |
| +8.7 | % | 36,126 |
| 34,463 |
| +4.8 | % | +2.8 | % |
| |
(a) | Europe excluding Eurasia (Russia, Ukraine, Georgia, Belarus, Armenia and Turkey). |
| |
(b) | Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. |
| |
(c) | World excluding United States, Canada, Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
3/ Net sales - Pharmaceuticals Segment
In 2019, net sales for the Pharmaceuticals segment were €25,708 million (+4.1% on a reported basis, +2.2% at constant exchange rates (CER)). At constant exchange rates and on a constant structure basis, Pharmaceuticals segment net sales were 3.3% higher in 2019 than in 2018. The year-on-year increase of €1,023 million on a reported basis reflects (i) favorable exchange rate effects of €486 million; (ii) the negative net effect of €268 million of the acquisition of Bioverativ products and the divestment of our European Generics business; and (iii) the following effects at constant exchange rates and on a constant structure basis:
| |
▪ | positive performances from the Immunology franchise (+€1,290 million), the Rare Diseases franchise (+€192 million), the Oncology franchise (+€159 million), the Multiple Sclerosis franchise (+€37 million) and the Rare Blood Disorders franchise (+€9 million); and |
| |
▪ | negative performances from the Diabetes franchise (-€451 million), the Established Prescription Products franchise, which now includes Generics (-€403 million), and the Cardiovascular franchise (-€28 million). |
Comments on the performances of our major Pharmaceuticals segment products are provided below.
Specialty Care
Rare Diseases franchise
Net sales for the Rare Diseases franchise amounted to €3,165 million in 2019, up 7.0% on a reported basis and 6.5% at constant exchange rates (CER), driven by sales in Emerging Markets (+24.0% CER at €614 million). In the United States, the franchise grew net sales by 4.7% CER in 2019, to €1,183 million, while in Europe net sales rose by 1.9% CER over the same period to €1,027 million.
Net sales of Myozyme® / Lumizyme® in Pompe disease rose by 8.3% CER in 2019 to €918 million, boosted by sales growth in Emerging Markets (+26.6% CER at €146 million) and in the United States (+10.6% CER at €331 million). Sales also grew in Europe (+1.9% CER at €382 million). The year-on-year growth reflects the rising number of patients diagnosed with, and treated for, Pompe disease.
|
| |
| |
SANOFI / FORM 20-F 2019
| 65 |
|
|
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
|
In 2019, net sales for the Gaucher disease franchise(Cerezyme®and Cerdelga®) reached €914 million, up 7.0% CER, on strong sales of Cerezyme® in Emerging Markets (+20.4% CER at €245 million) and growing adoption of Cerdelga® in Europe (+43.1% CER, at €73 million) and the United States (+14.3% CER at €118 million). During 2019, Cerezyme® posted net sales of €708 million (+2.7% CER), while net sales of Cerdelga® reached €206 million (+26.4% CER).
Fabrazyme® recorded net sales growth of 5.3% CER in 2019 to €813 million. Sales advanced in all regions due to the increasing number of patients diagnosed with, and treated for, Fabry disease. Growth was particularly strong in Emerging Markets (+29.3% CER at €98 million), while net sales in the United States rose by 1.6% CER to €410 million.
Immunology franchise
Dupixent® (developed in collaboration with Regeneron) generated net sales of €2,074 million in 2019, up 163.2% on a reported basis and 151.6% at constant exchange rates. In the United States, the product posted net sales of €1,669 million in 2019, driven by continued growth in atopic dermatitis (boosted by the approval in mid-March 2019 of an indication for adolescents aged 12 to 17 years) plus a rapid ramp-up in sales for asthma and the launch of the product as a treatment for nasal polyps following FDA approval in June 2019. In Europe, net sales of Dupixent® in 2019 were €200 million, up 165.3% CER. In the Rest of the World region, Dupixent® posted net sales of €176 million (+247.9% CER), including €131 million in Japan. Dupixent® has now been launched in 34 countries as a treatment for atopic dermatitis in adults, with further indications having been approved for atopic dermatitis in adolescents (in 10 countries); for asthma (in 8 countries); and for nasal polyps (in 4 countries).
In 2019, net sales of Kevzara® (developed in collaboration with Regeneron) amounted to €185 million, up 114.5% CER, fueled by growth in the United States (+70.3% CER at €115 million) and Europe (+207.1% CER at €43 million). Those growth figures reflect the adoption of the product, and the expansion of its therapeutic class in mature markets; see also Note C.1, “Alliance Arrangements with Regeneron Pharmaceuticals, Inc.” to our consolidated financial statements.
Multiple Sclerosis franchise
In 2019, our Multiple Sclerosis franchise generated net sales of €2,160 million, up 5.4% on a reported basis and 1.8% CER, as strong growth in sales of Aubagio® offset lower sales of Lemtrada® in mature markets.
Aubagio® reported net sales of €1,879 million in 2019, up 10.0% CER, with strong sales in the United States (+10.8% CER at €1,351 million) and growth in both Europe (+7.0% CER at €412 million) and Emerging Markets (+20.8% CER at €55 million). As of January 1, 2020, Aubagio® was excluded from the National Formulary of US third-party payer 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 pharmacy benefit managers (PBMs).
Net sales of Lemtrada® in 2019 amounted to €281 million, down 31.6% CER on lower sales in Europe (-43.7% CER at €94 million), the United States (-24.3% CER at €151 million) and the Rest of the World region (-47.4% CER at €11 million). The downtrend in sales is mainly due to tougher competition, and to an update to the Summary of Product Characteristics in the European Union.
Oncology franchise
2019 net sales for the Oncology franchise were €1,695 million, up 13.5% on a reported basis and 10.6% CER, on good performances in both Emerging Markets (+16.7% CER at €490 million) and the United States (+11.3% CER at €613 million).
Jevtana® posted net sales of €484 million in 2019 (+11.1% CER), driven by growth in the United States (+12.3% CER at €212 million), Europe (+7.0% CER at €168 million) and Japan (+14.8% CER at €66 million).
Net sales of Thymoglobulin® increased by 16.5% CER in 2019 to €354 million, largely on good performances in the United States (+16.0% CER at €198 million) and Emerging Markets (+30.7% CER at €96 million), especially China (+23.1% CER at €48 million). Over the same period, net sales of Eloxatin® were 10.4% higher CER at €203 million, with growth mainly concentrated in Emerging Markets (+19.3% CER at €181 million), especially China (+28.0% CER at €152 million).
Libtayo® (cemiplimab, developed in collaboration with Regeneron) was approved in the United States in September 2018 for patients with metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC) who are not candidates for surgery or curative radiotherapy. Sales of this product in the United States are consolidated by Regeneron under the terms of our alliance with Regeneron; see Note C.1, “Alliance Arrangements with Regeneron Pharmaceuticals, Inc.” to our consolidated financial statements. In 2019, Libtayo® was approved in Brazil at the end of March, and in Canada in April. At the end of June 2019, Libtayo® was approved in the European Union for adults with metastatic or locally advanced CSCC who are not candidates for surgery or curative radiotherapy. Outside the United States Libtayo® was launched in 7 countries and its sales reached €16 million in 2019.
Rare Blood Disorders franchise
Our Rare Blood Disorders franchise was created in 2018 following two acquisitions. The first was the acquisition of Bioverativ, which added two products to our portfolio: the flagship hemophilia treatments Eloctate® and Alprolix®. This was followed by the acquisition of Ablynx, enhancing our portfolio with the addition of Cablivi® (caplacizumab), which received marketing approval from the European Commission in 2018 and from the FDA in February 2019 in the United States in the treatment of acquired thrombotic thrombocytopenic purpura (aTTP).
Net sales for the Rare Blood Disorders franchise in 2019 reached €1,152 million, up 28.4% on a reported basis and up 0.8% at constant exchange rates and on a constant structure basis. Higher sales in the Rest of the World region (+17.2% CER/CS at €258 million), and good performances from Cablivi® in the United States and Europe, offset a decrease in sales of Eloctate® in the United States.
Consolidated sales of Eloctate®, indicated in the treatment of hemophilia A, were €684 million in 2019, down 11.6% CER/CS. In the United States, net sales were down 18.6% CER/CS at €517 million, reflecting ongoing competitive pressure. In the Rest of the World region, net sales of Eloctate® were up 7.8% CER/CS in 2019 at €147 million (including €96 million in Japan).
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Net sales of the hemophilia B treatment Alprolix® reached €412 million in 2019, up 12.4% CER/CS. In the United States, the product posted a 6.0% rise in sales CER/CS, to €300 million. In the Rest of the World region, Alprolix® net sales were 32.5% higher CER/CS at €111 million, reflecting sales growth in Japan and increased sales to Swedish Orphan Biovitrum AB (SOBI): Alprolix® is developed and commercialized in collaboration with SOBI, whose sales territories include Europe, Russia, the Middle East and some North African countries.
Cablivi®generated net sales of €56 million in 2019. In the United States, where Cablivi® has been on sale since April 2019, net sales reached €34 million. In Europe, where the product is on sale in Germany, Denmark, Austria, Belgium and the Netherlands, net sales were €22 million. The product is also on sale in France, where the healthcare authorities have granted by a temporary authorization for use.
General Medicines
Sanofi has prioritized core assets with differentiated and/or established profiles that have significant opportunity for growth in key markets. Some of these well-established medicines are the standard-of-care for patients living with diabetes or cardiovascular disease. These core assets include Toujeo®, Soliqua®, Praluent®, Multaq®, Lovenox®, and Plavix®.
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Diabetes franchise
Lantus®
Lantus® (insulin glargine 100 units/mL) is a long-acting analog of human insulin, indicated for once-daily administration for the treatment of diabetes mellitus in adults, adolescents and children aged 2 years and above. Lantus® relies on more than 15 years of clinical evidence in diabetes treatment and a well established safety profile. Approved in the US and the EU in 2000 and in Japan in 2008, Lantus® is available in over 130 countries worldwide. Two insulin glargine biosimilars are available in the US, two in European markets, and two in Japan.
There are ongoing patent infringement proceedings in the US against Mylan. See “Item 8. Financial information — Information on Legal or Arbitration Proceedings”.
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 60 countries, including China since the end of 2020. In January 2020, the European Commission approved an expansion of the indication to include the treatment of diabetes in adolescents and children (aged 6 years and above).
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) and the EU (since 2019), Toujeo® is also available in a disposable prefilled pen which contains 900 units of insulin glargine. In India, Toujeo is also available in a dedicated 450-unit cartridge in combination with a dedicated reusable pen (TouStar®).
Apidra®
Apidra® (insulin glulisine) is a rapid-acting analog of human insulin, indicated to improve glycemic control in adults and children with diabetes mellitus. It is administered around meal time, and is used in a regimen with an intermediate or long-acting insulin (Apidra® has a more rapid onset and shorter duration of action than fast-acting human insulin). Apidra® is available in over 100 countries worldwide.
Soliqua® – 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, Suliqua® (the product’s brand name in Europe) was approved 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 either by metformin alone or by metformin combined with another oral glucose-lowering medicinal product or with basal insulin. In Japan, Soliqua® was approved in May 2020 for type 2 diabetes mellitus, where treatment with insulin is required. Suliqua® is available in over 40 countries.
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 (aged 3 years and above) with type 1 diabetes. Admelog® was launched in the US and several European countries during 2018.
Amaryl®/Amarel®/Solosa®
Amaryl® (glimepiride) is an orally administered once-daily sulfonylurea available in single form or in combination with metformin, indicated as an adjunct to diet and exercise to improve glycemic control in patients with type 2 diabetes. A number of glimepiride generics are available in most markets.
Truvelog™/Insulin aspart Sanofi®
Truvelog™ (also known as TruRapi™ or Insulin aspart Sanofi®) is a rapid-acting insulin similar to Novorapid®/Novolog®, another insulin aspart 100 Units/mL. It was granted marketing authorization as a biosimilar (under the proprietary name Insulin aspart Sanofi®) by the European Commission in June 2020. It is used to improve blood sugar control in adults with type 2 diabetes, and in adults and children (aged 1 year and above) with type 1 diabetes. Insulin aspart Sanofi® was launched in several European countries during 2020.
Integrated Digital Care Solutions
Sanofi, in collaboration with Abbott and Biocorp, Health2Sync and Roche, is building a connected set of digital tools and features to support people living with diabetes and taking insulin. Sanofi intends to use aggregated de-identified data to generate insights to inform patients and providers, and to evaluate additional clinical or quality-of-life outcomes. Successful launches in several countries demonstrate the value of the integration of digital tools into a fully connected ecosystem.
Cardiovascular diseases and established prescription products
Praluent®
Praluent® (alirocumab) is a human monoclonal antibody (mAb) for self-administered injection every two weeks or once-monthly. It 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.
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), Canada and Switzerland, as
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well as in the European Union (in 2015). In 2018, the FDA approved a Praluent® label update for some patients currently requiring LDL apheresis therapy. In March 2019 in the EU and in April 2019 in the US, Praluent® was approved for use in patients with established cardiovascular disease to reduce the risk of cardiovascular events.
In December 2019, Praluent® was approved in China, where it started to be commercialized in May 2020.
Since April 2020, Praluent® has no longer been commercialized in collaboration with Regeneron. Regeneron is responsible for commercialization in the US, and Sanofi for all other markets outside the US. For additional information on the commercialization of this product, see “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances — Alliance Arrangements with Regeneron”.
In October 2020, the European Patent Office Technical Boards of Appeal ruled in Sanofi/Regeneron’s favor, invalidating claims of Amgen’s European Patent No. 2215124 relevant to Praluent® for lack of inventive step. This means that Praluent® will continue to be marketed and sold in the EU.
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.
Plavix®/Iscover®
Plavix® or Iscover® (clopidogrel bisulfate) is a platelet adenosine diphosphate (ADP) receptor antagonist. It 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), 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.
A number of clopidogrel bisulfate generics have been launched in most markets. Plavix® or Iscover® are available in more than 80 countries. For additional information on the commercialization of these products, see “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances — Alliance Arrangements with Bristol-Myers Squibb”.
Sanofi is involved in two Plavix® product lawsuits. See Note D.22.c) 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) indicated for use in the prophylaxis and treatment of venous thromboembolism and in the treatment of acute coronary syndrome. Enoxaparin generics are available in the US, and biosimilar enoxaparin products have gradually become available across various European countries and in a growing number of international markets. Lovenox® or Clexane® is marketed in more than 100 countries.
Aprovel®/Avapro®/Karvea®
Aprovel®, also known as Avapro® or Karvea® (irbesartan), is an angiotensin II receptor antagonist indicated as a first-line treatment for hypertension and for the treatment of nephropathy in hypertensive patients with type 2 diabetes. We also market CoAprovel®/Avalide®/Karvezide®, a combination of irbesartan and the diuretic hydrochlorothiazide. A combination with amlodipine (Aprovasc®) has been launched in several emerging market countries.
A number of irbesartan generics have been launched in most markets. Aprovel® and CoAprovel® are marketed in more than 80 countries. For additional information on the commercialization of this product, see “Item 5. Financial Presentation of Alliances — Alliance Arrangements with Bristol-Myers Squibb”. In Japan, the product is licensed to Shionogi Co. Ltd and BMS KK. BMS KK has sublicensed the agreement to Dainippon Pharma Co. Ltd.
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.
Generics of sevelamer carbonate are available in the US and in various European countries. A generic of sevelamer hydrochloride was approved in the US in February 2019, and was subsequently launched. 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.
Synvisc®/Synvisc-One®
Synvisc® and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis. 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 50 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 disorder (in some countries this indication is branded differently, for example as Depakote® in France).We hold no rights to Depakine® in the US, and sodium valproate generics are available in most markets.
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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.
Legacy oncology and transplant
Thymoglobulin®
Thymoglobulin® (anti-thymocyte Globulin) is a polyclonal anti-human thymocyte antibody preparation that acts as a broad immunosuppressive and immunomodulating agent. In the US, Thymoglobulin® is indicated for the prophylaxis and treatment of acute rejection in patients receiving a kidney transplant, used in conjunction with concomitant immunosuppression. Outside the US, depending on the country, Thymoglobulin® is indicated for the treatment and/or prevention of acute rejection in organ transplantation; immunosuppressive therapy in aplastic anemia; and 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. It has been approved for use in 11 indications in five different tumor types (breast, prostate, gastric, lung, and head and neck). 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. It is also approved for the treatment of advanced colorectal cancer and in some countries for the treatment of early-stage gastric cancer. Generics of oxaliplatin have been launched globally. Eloxatin® is in-licensed from Debiopharm.
Mozobil®
Mozobil® (plerixafor injection) is a hematopoietic stem cell mobilizer. It is 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 65 countries.
Rezurock™
Rezurock™ (belumosudil) is a selective ROCK2 (rho-associated coiled-coil–containing protein kinase-2) inhibitor. It was approved in July 2021 by the FDA for the treatment of adult and pediatric patients aged 12 years and older with chronic graft-versus-host disease (chronic GVHD) after failure of at least two prior lines of systemic therapy. Activities are ongoing to ensure registration in other territories.
Zaltrap®
Zaltrap® (aflibercept/ziv-aflibercept) is a recombinant fusion protein. 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 marketed in 50 countries. For additional information on the commercialization of Zaltrap®, see “Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances — Alliance Arrangements with Regeneron”.
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. 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 for publicly funded international stakeholders 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, Asian and Middle Eastern markets, Pentaxim® is being gradually replaced by Hexaxim®.
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Hexaxim®/Hexyon®/Hexacima® is a fully liquid, ready-to-use 6-in-1 (hexavalent) pediatric combination vaccine that provides protection against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. 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 more than 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.
Quadracel ® is a vaccine indicated for active immunization against diphtheria, tetanus, pertussis and poliomyelitis, used in children aged 4 through 6 years as a fifth dose in the diphtheria, tetanus, pertussis vaccination (DTaP) series, and as a fourth or fifth dose in the inactivated poliovirus vaccination (IPV) series.
Shan5® is a 5-in-1 (whole-cell pertussis based) combination vaccine protecting against five diseases (diphtheria, tetanus, pertussis, Hib and hepatitis B). Shan5® is WHO pre-qualified and procured through Unicef to the GAVI countries.
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.
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.
Since 2014, when the WHO recommended that every child should receive at least one dose of IPV, Sanofi Pasteur has provided 395 million doses to support the WHO “Polio End Game” strategy for the world's 73 poorest countries, representing 80% of the total IPV volumes used in those countries.
Vaxelis® is a hexavalent combination vaccine protecting against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. This vaccine (developed and distributed in partnership with Merck) was approved in 2016 by the EMA and is distributed in various EU countries. Vaxelis® was approved by the FDA in December 2018, becoming the first hexavalent vaccine to be approved in the US, and launched in the US in June 2021.
b) Influenza vaccines
Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines, offering several distinct influenza vaccines that are sold globally to meet growing demand.
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 13 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 6 months and older.
Fluzone® High-Dose Quadrivalent, designed specifically to provide greater protection against influenza for people aged 65 years and older, was approved by the FDA in November 2019. It has now fully replaced Fluzone® High-Dose Trivalent, and contains two influenza A and two influenza B strains at 60µg/strain. Fluzone® High-Dose Quadrivalent was approved in the EU in the second quarter of 2020, under the name Efluelda®, indicated for adults aged 60 years or older. Both Fluzone® High-Dose Quadrivalent and Efluelda® have been available since the 2020/21 influenza season.
Flublok® is a quadrivalent influenza vaccine for adults aged 18 and older. It is the only recombinant protein-based influenza vaccine approved by the FDA. Flublok® is currently sold in the US, the United Kingdom, Hong Kong and Taiwan, with continued global expansion planned over the next several years. Flublok® was approved in the EU under the name Supemtek® in November 2020.
Vaxigrip® is a trivalent influenza vaccine, containing two antigens against type A influenza viruses and one antigen against type B influenza viruses. It has now been replaced by VaxigripTetra® in most countries.
VaxigripTetra® is the quadrivalent (QIV) version of Vaxigrip®, including two antigens against A strains of influenza viruses and two antigens against B strains. Compared to the trivalent influenza vaccine, it contains an additional influenza B strain; it was licensed in 2016 and has been launched in more than 90 countries since 2017. VaxigripTetra® is not licensed in the US where Fluzone® Quadrivalent, which is produced in the US, is distributed.
c) Booster vaccines
Adacel® is the first trivalent booster vaccine offering protection against diphtheria, tetanus and pertussis. The vaccine can be used from 4 years of age following primary immunization and is the first Tdap vaccine indicated for use during pregnancy for protection against pertussis in newborns. It is available in 55 countries including the US, and otherwise mostly in Europe, Asia and Latin America.
Repevax®/Adacel®-Polio is a combination vaccine that provides protection against diphtheria, tetanus, pertussis and polio. It is the first Tdap-IPV vaccine indicated for use during pregnancy for protection against pertussis in newborns. It is currently marketed in 26 countries outside the US, with a strong focus on European markets (such as France and Germany).
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. 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 (outside Europe). It is a strong leader in the meningitis quadrivalent market in the US and globally. 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.
MenQuadfi® is a novel fully-liquid meningococcal quadrivalent conjugate vaccine formulation. It is expected to have a broad age indication from infants (6 weeks) to the elderly, with flexible dosing schedules. It is also expected to be available worldwide, allowing Sanofi Pasteur to enter the European meningococcal market where it was not previously present. MenQuadfi® is the first and only quadrivalent ACWY vaccine to demonstrate superior immune response against serogroup C in toddlers compared to a monovalent serogroup C vaccine
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(standard-of-care in multiple markets in Europe and internationally). MenQuadfi® was approved in the US in April 2020 for people aged two years and older. Itwas approved in Australia, Canada, the EU and other European Economic Area countries in October and November 2020, and subsequently in Argentina, Brazil and Chile, for people aged 12 months and older. Marketing approval is pending in numerous other countries. Extension of the age indication in these markets down to six weeks will follow submission of additional Phase III data. MenQuadfi® was launched in the US in March 2021 and in Europe in August 2021.
e) Travel and endemic vaccines
Sanofi Pasteur provides a wide range of travel and endemic 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.
B.4. Consumer Healthcare
In 2021, our Consumer Healthcare operations became a standalone business unit with integrated R&D and manufacturing functions plus dedicated support functions and information technology. Implementation progressed as planned in 2021, with more than half of the legal entities created. In addition, we announced the divestment and discontinuation of 111 non-core brands in Europe, the US and Latin America. This program aims to simplify the portfolio and reduce the number of brands from 250 to about 100 by 2022. We will also optimize the Go-To-Market model by tailoring it more closely to the actual needs of our markets.
Our CHC sales are supported by a range of products, including the following brands:
Allergy, cough & cold
•Allegra® comprises 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. The Allegra® brand family is sold in more than 80 countries across the world.
•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, Latin America 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.
•We also have local pain brands such as Eve® in Japan; Dorflex® and Novalgina® in Brazil; and Icy Hot® and Aspercreme® in the US.
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 or sodium picosulfate, 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 360°TM products are for the prevention and relief of heartburn, with a new formula launched in 2021 in North America.
Nutritional
•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); Magne B6® in Europe; and a range of sleep brands, including Novanuit® in Europe, Unisom® in USA and Drewell® in Japan.
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.
Starting from 2021 we are taking a more granular approach and focus on attractive sub-categories in key geographies, based on consumer trends, portfolio strengths and opportunities. These sub-categories include Allergy, Pain, Liver Care, Physical and Mental Wellness, and Probiotics. These sub-categories in our key geographies account for about one-third of our total CHC business today.
B.5. Global research & development
Over recent years, Sanofi has reshaped its R&D strategy, strengthening the development of innovative products that aim to substantially elevate the standard of care for patients, and prioritizing therapeutic areas where patient need is most urgent: oncology, immunology, rare
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ITEM 4. Information on the company |
blood disorders and neurology. The objective is to develop transformative medicines with the potential to change patients' lives. However, discovering and developing a new product is a costly, lengthy and uncertain process and our continuous investments in research and development for future products and for the launches of newly registered molecules could result in increased costs without a proportionate increase in revenues. See “Item 3.D. Risk Factors” for further information.
In development, sustained efforts are being made to accelerate the pace of delivery for patients, adopting streamlined governance and seeking to push decision-making downward with strong team empowerment.
Our aspiration is to build a pipeline of first-in-class or truly differentiated best-in-class medicines, with two-thirds of biologic compounds and two-thirds of the pipeline directly derived from Sanofi internal research.
As part of our strategic framework, seven potentially transformative therapies in areas of high unmet patient need were prioritized: Dupixent® (multiple indications in Immunology & Inflammation), fitusiran and efanesoctocog alfa (hemophilia); amcenestrant (breast cancer); amlitelimab (Immunology & Inflammation); nirsevimab (respiratory syncytial virus); and tolebrutinib (multiple sclerosis).
Efforts to strengthen our pipeline with innovative assets in oncology and immune diseases, which included the acquisition of Principia Biopharma and Synthox in 2020, continued in 2021 when we completed the acquisition of Kiadis (a clinical-stage biopharmaceutical company developing next generation, “off-the-shelf”, NK cell-therapies) and of Kymab Group Ltd. (adding to our portfolio a fully human monoclonal antibody targeting the key immune system regulator OX40L). In our efforts to accelerate the development of transformative vaccines and therapies using mRNA technology, we acquired Translate Bio and Tidal Therapeutics, adding mRNA-based research platforms with applications in vaccines, oncology, immunology, and other disease areas. Sanofi also acquired Kadmon Holdings, Inc. to further strengthen growth and expansion for our General Medicines portfolio. In December 2021, we announced that we had entered into an agreement to acquire immuno-oncology company Amunix Pharmaceuticals, with the intention of accelerating and expanding our contributions to innovative medicines for oncology patients.
B.5.1. Pharmaceuticals
B.5.1.1. Products in development
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ITEM 4. Information on the company |
For 2021, the main pipeline events related to the pharmaceuticals portfolio were:
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Project | Potential Indication | Change | Reason |
amlitelimab (SAR445229) – Anti-OX40L mAb (KY1005) | Atopic dermatitis | Added | Acquired from Kymab |
alomfilimab (SAR445256) – Anti-ICOS mAb (KY1004) | Triple negative breast cancer | Added | Acquired from Kymab |
SAR445419 – NK cell-based immunotherapy (KDS1001) | Acute myeloid leukemia | Added | Acquired from Kiadis |
SAR445710 – Anti PD-L1/IL-15 fusion protein (KD033) | Solid tumors | Added | Acquired from Kadmon |
SAR441566 – TNFa inhibitor | Inflammatory indications | Added | Entered confirmatory development |
SAR444656 – IRAK4 degrader | Atopic dermatitis | Added | Entered confirmatory development |
SAR443216 - Anti-CD3/CD28/HER2 trispecific mAb | Gastric cancer | Added | Entered confirmatory development |
SAR443809 – Anti-Factor Bb antibody | Rare renal diseases | Added | Entered confirmatory development |
SAR442970 – Anti-TNFa/OX40L NANOBODY® | Inflammatory indications | Added | Entered confirmatory development |
SAR443726 – Anti-IL13/OX40L NANOBODY® | Atopic dermatitis | Added | Entered confirmatory development |
SAR444336 – Pegylated-IL2 | Inflammatory indications | Added | Entered confirmatory development |
SAR443765 – Anti-IL13/TSLP NANOBODY® | Inflammatory indications | Added | Entered confirmatory development |
SAR442999 – Anti-TNFa/IL23A NANOBODY® | Inflammatory indications | Added | Entered confirmatory development |
SAR443579 - Anti-NKp46/CD123 mAb | Acute myeloid leukemia | Added | Entered confirmatory development |
Nexviazyme®(GZ402666) | Pompe disease | | Commercialized |
ST400 – Ex Vivo ZFN Gene-Edited Cell Therapy | Beta-thalassemia | Removed | Development discontinued |
SAR445136 – Ex Vivo ZFN Gene-Edited Cell Therapy | Sickle cell disease | Removed | Development discontinued |
rilzabrutinib (SAR444671) – BTK inhibitor | Pemphigus Vulgaris | Removed | Development discontinued* |
venglustat (GZ402671) - Oral GCS inhibitor | Autosomal dominant polycystic kidney disease | Removed | Development discontinued** |
SAR440234 – Bispecific (CD123/CD3) T cell engager | Leukemia | Removed | Development discontinued |
SAR441236 – Trispecific Neutralizing mAb | HIV | Removed | Development discontinued |
REGN4018 – Anti-MUC16xCD3 bispecific mAb | Ovarian cancer | Removed | Development discontinued*** |
REGN5458 – Anti-BCMAxCD3 bispecific mAb | Relapsed refractory multiple myeloma | Removed | Development discontinued*** |
REGN5459 – Anti-BCMAxCD3 bispecific mAb | Relapsed refractory multiple myeloma | Removed | Development discontinued*** |
SAR439459 – TGFb inhibitor | Advanced solid tumors | Removed | Development discontinued |
SAR442085 – Anti-CD38 mAb Fc engineered | Multiple myeloma | Removed | Development discontinued |
mAb: monoclonal antibody
* The development of rilzabrutinib was discontinued in this indication in September 2021.
** The development of venglustat was discontinued in this indication in June 2021
*** Opt-in rights were not exercised for these products from Regeneron.
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ITEM 4. Information on the company |
The clinical portfolio of new products as of December 31, 2021 is summarized in the table below; where several indications are being developed for one product, each indication is regarded as a separate project and specified individually.
For more information on Dupixent®, Kevzara®, Aubagio®, Cerdelga®, Libtayo®, Sarclisa® and Nexviazyme® see also “— Item 4. Information on the Company — B. Business Overview — B.2. Main Pharmaceutical Products”.
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| Phase I | Phase II | Phase III/registration |
Oncology | SAR442720 + pembrolizumab (non-small cell lung cancer 1st line) SAR444245 mono & combo (solid tumors) SAR441000 mono & with PD1 (solid tumors) SAR442257 (multiple myeloma/non Hodgkins lymphoma) SAR444881 (solid tumors) SAR445419 (acute myeloid leukemia) SAR443216 (gastric cancer) SAR443579 (acute myeloid leukemia) SAR445710 (solid tumors) | amcenestrant (metastatic breast cancer 2nd/3rd line) * amcenestrant (breast cancer adjuvant) tusamitamab ravtansine + ramucirumab (non-small cell lung cancer 2nd/3rd line) tusamitamab ravtansine + pembrolizumab (non-small cell lung cancer 1st line) tusamitamab ravtansine (exploratory solid tumors) tusamitamab ravtansine (gastric cancer) alomfilimab (triple negative breast cancer) SAR444245 (advanced skin cancers) SAR444245 (head & neck cancers) SAR444245 (non-small cell lung cancer/mesothelioma) SAR444245 (lymphoma) SAR442720 + KRAS inhibitor (non-small cell lung cancer) | tusamitamab ravtansine (non-small cell lung cancer 2nd/3rd line) amcenestrant + palbociclib (metastatic breast cancer) |
Rare Blood Disorders |
| SAR445088 (cold agglutinin disease) | fitusiran (hemophilia A&B) fitusiran (hemophilia A&B pediatric) sutimlimab (cold agglutinin disease) efanesoctocog alfa(hemophilia A) rilzabrutinib (immune thrombocytopenia) |
Immunology & Inflammation | SAR441566 (inflammatory indications) SAR444656 (atopic dermatitis) SAR443726 (atopic dermatitis) SAR442970 ((inflammatory indications) SAR443765 ((inflammatory indications) SAR444336 ((inflammatory indications) SAR442999 ((inflammatory indications) | rilzabrutinib (IgG4 related disease) rilzabrutinib (atopic dermatitis) SAR443122 (cutaneous lupus erythematosus) SAR444727 (atopic dermatitis) SAR441344 (Sjogren’s syndrome) SAR441344 (systemic lupus erythematosus) amlitelimab (atopic dermatitis) | itepekimab (chronic obstructive pulmonary disease) |
Neurology | SAR443820 (amyotrophic lateral sclerosis) | SAR441344 (multiple sclerosis) SAR445088 (chronic inflammatory demyelinating polyneuropathy) | tolebrutinib (primary progressive multiple sclerosis) tolebrutinib (secondary progressive multiple sclerosis) tolebrutinib (multiple sclerosis) tolebrutinib (myasthenia gravis) |
Rare Diseases | SAR442501 (achondroplasia) SAR443809 (rare renal diseases) | venglustat (Gaucher disease type 3) venglustat (Fabry disease) SAR339375 (Alport syndrome) | olipudase alfa (Niemann-Pick disease type B) Nexviazyme® (Pompe disease – Infantile onset) venglustat (GM2 gangliosidosis) |
* Registrational study.
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) Oncology
Products in development
Amcenestrant (SAR439859), a selective estrogen receptor degrader (SERD), is being assessed in a pivotal Phase II study (AMEERA-3) in second- and third-line metastatic breast cancer as monotherapy versus physician’s choice of single-agent endocrine therapy. A Phase II 14-day window of opportunity study (AMEERA-4) is ongoing in the prior to surgery/neoadjuvant-like setting to inform further development in the adjuvant setting. The evaluation of amcenestrant in combination with palbociclib for the first-line treatment of metastatic breast cancer is also ongoing in a Phase III efficacy study (AMEERA-5). In the prior to surgery/neoadjuvant-like setting, recruitment to the Phase II study (AMEERA-4) was completed in 2021; results will guide further development in the adjuvant setting of breast cancer.
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ITEM 4. Information on the company |
Recruitment of the first patients to the pivotal Phase III study (AMEERA-6) investigating amcenestrant versus tamoxifene in high-risk patients with metastatic breast cancer (adjuvant setting) is expected early 2022.
Tusamitamab ravtansine (SAR408701) is an antibody drug conjugate (ADC) that binds to CEACAM-5, a membrane glycoprotein originally identified as a surface marker on adenocarcinomas of the human gastrointestinal tract. The compound is in Phase III (CARMEN-LC03) for the second- and third-line treatment of metastatic non-squamous non-small cell lung cancer (NSQ NSCLC) with CEACAM-5 positive tumors. In addition, two Phase II studies are ongoing to evaluate the activity of the drug in combination with ramucirumab (CARMEN-LC04) or with pembrolizumab (CARMEN-LC05) in patients with metastatic NSQ NSCLC. In 2021, two Phase II studies were initiated to evaluate tusamitamab ravtansine in patients with CEACAM-5 positive advanced solid tumors (CARMEN-BT01) and in patients with gastric cancer (CARMEN-GC01).
Alomfilimab (SAR445256; formerly Kymab’s KY1004) is a fully human IgG1 anti-ICOS antibody with a dual mode-of-action – depleting ICOS high intra-tumoral T regulatory cells and stimulating ICOS low T effector cells – that entered development in 2021 for the treatment of solid tumors in combination with anti-PDL1 treatments (atezolizumab). SAR445256 is currently being investigated in Phase II for triple negative breast cancer (TNBC).
SAR444245(formerly THOR707)is a non-alpha durably pegylated interleukin-2 (IL-2) acquired from Synthorx in 2020, currently being developed for the treatment of various tumors in monotherapy and combination settings. In 2021, four Phase II trials were initiated for the treatment of advanced skin cancers, head & neck cancers, non-small cell lung cancer/mesothelioma and lymphoma, respectively.
SAR441000is 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. A First In Human study in patients with advanced melanoma, assessing the safety, PK/PD and anti-tumor activity of SAR441000 as monotherapy and in combination with a PD-1 inhibitor, is ongoing.
SAR442720is 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. In 2021, the clinical development strategy was modified to focus on combination with KRAS inhibitors (Phase II study initiated in December 2021) and combination with anti-PD-1 pembrolizumab (Phase I ongoing) in lung cancer.
SAR442257,an anti-CD3/CD28/CD38 trispecific monoclonal antibody, is currently being evaluated in Phase I for the treatment of multiple myeloma/non-Hodgkin lymphoma.
SAR444881, a monoclonal antibody targeting the Ig-like transcript 2 (ILT2) receptor currently being developed with Biond Biologics, entered Phase I in 2021 for the treatment of solid tumors.
SAR445419 (formerly Kiadis’ KDS1001) is an off-the-shelf natural-killer (NK) cell therapy with potent killing activity across a broad range of hematologic and solid tumor cell lines in vitro and showing efficacy in various preclinical models alone or in combination with PD-L1 or ADCC potentiating agents. SAR445419 is currently being evaluated in a Phase I study for the treatment of acute myeloid leukemia.
SAR443216 is a trispecific antibody consisting of three distinct target recognition sites, conferring monovalent binding to HER2 (on tumor cells), CD3 (on T cells) and CD28 (a co-receptor for T cell activation), respectively. SAR443216 entered Phase I in 2021 for the treatment of gastric cancer.
SAR443579, an antibody designed to bring a novel mechanism of action by engaging and boosting NK immune cells against Acute Myeloid Leukemia (AML) blasts, is developed with Innate Pharma. SAR443579 entered Phase I in 2021 for the treatment of AML.
SAR445710 (formerly Kadmon's KD033) is an anti PD-L1/IL-15 fusion protein that entered the Sanofi portfolio following the acquisition of Kadmon in December 2021; the product is currently being evaluated in Phase I in patients with solid tumors.
b) Immunology & Inflammation
Itepekimab (SAR440340), a human anti-IL33 monoclonal antibody derived from our alliance with Regeneron, is in Phase III for the treatment of chronic obstructive pulmonary disease in former smokers.
SAR443122, a small molecule against the receptor-interacting serine/threonine-protein kinase 1 (RIPK1), developed in collaboration with Denali, began a Phase II study in 2021 for the treatment of cutaneous lupus erythematosus.
SAR444727, an inhibitor of Bruton’s tyrosine kinase that joined the Sanofi portfolio following the acquisition of Principia, is currently in Phase II for the treatment of atopic dermatitis.
Rilzabrutinib (SAR444671) is an inhibitor of Bruton’s tyrosine kinase that joined the Sanofi portfolio following the acquisition of Principia in 2020. The development of rilzabrutinib for the treatment of Pemphigus Vulgaris was discontinued in September 2021 based on the Phase III PEGASUS trial results; though the study did not meet its primary or key secondary endpoints, rilzabrutinib’s safety profile remained consistent with previous results and no new safety signals were identified. The development of rilzabrutinib is being pursued in other immunological diseases, with two Phase II trials currently ongoing for the treatment of IgG4-related diseases and atopic dermatitis, respectively. Rilzabrutinib is also being evaluated for the treatment of immune thrombocytopenia (see details below in section e) Rare Blood Disorders).
Amlitelimab (SAR445229; formerly Kymab’s KY1005), an anti-OX40L monoclonal antibody, entered Phase II evaluation in 2021 for the treatment of atopic dermatitis.
SAR441344,an anti-CD40L monoclonal antibody developed in collaboration with Immunext, is being investigated in two Phase II trials for the treatment of Sjogren’s syndrome and Systemic lupus erythematosus, respectively. SAR441344 is also being evaluated in multiple sclerosis (see section c) Neurology).
SAR441566, the first oral small molecule TNFa inhibitor for the treatment of inflammatory indications, entered Phase I in 2021.
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ITEM 4. Information on the company |
In 2021, four new molecular entities designed with the NANOBODY® technology acquired from Ablynx in 2018 entered Phase I clinical trials for the treatment of immunological diseases:
•SAR443726 is a bispecific nanobody blocking IL-13 and OX40L, which are key drivers in type 2 inflammatory diseases such as atopic dermatitis;
•SAR442970 is a bispecific nanobody that combines blockade of TNFa and the immune co-stimulatory regulator OX40L;
•SAR443765 is a bispecific nanobody targeting TSLP and IL-13;
•SAR442999 is a bispecific nanobody targeting TNFa and IL-23A, key effector cytokines in inflammatory diseases.
SAR444656 is an IRAK4 degrader, with potential therapeutic application across multiple indications, including atopic dermatitis. SAR444656 is developed in collaboration with Kymera Therapeutics and entered Phase I in 2021.
SAR444336 (formerly known as THOR-809), a pegylated IL-2 designed to selectively engage CD4+ regulatory T cells (and not on effector T or NK cells) which was acquired from Synthorx, entered Phase I in October 2021.
c) Neurology
Tolebrutinib (SAR442168) is 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 impacting immune cell and brain cell signaling. Tolebrutinib is currently being investigated in Phase III studies in relapsing multiple sclerosis, primary progressive multiple sclerosis and non-relapsing secondary progressive multiple sclerosis, respectively. In addition, a Phase III study was initiated in December 2021 for the treatment of Myasthenia Gravis.
SAR441344,an anti-CD40L monoclonal antibody (see section b) Immunology & Inflammation), began a Phase II trial in 2021 for the treatment of multiple sclerosis.
A Phase II study evaluating SAR445088, a complement C1s inhibitor (see details below in section e) Rare Blood Disorders), was initiated in 2021 in patients with chronic inflammatory demyelinating polyneuropathy (CIDP).
SAR443820, a RIPK1 inhibitor developed in collaboration with Denali (formerly known as DNL788) for the treatment of amyotrophic lateral sclerosis, is being investigated in Phase I.
d) Rare Diseases
Nexviazyme®(avalglucosidase alfa) was approved in the USA and in Japan in 2021 for the treatment of patients aged one year and older with late-onset Pompe disease, a rare disease caused by a deficiency of the enzyme acid alpha-glucosidase (GAA). Nexviazyme® is a long-term enzyme replacement therapy targeting the mannose-6-phosphate receptor, the key pathway for cellular uptake of enzyme replacement therapy, to effectively clear glycogen build-up in muscle cells. This approval was based on the Phase III COMET study, which showed clinically meaningful improvements in respiratory function and movement endurance measures. Nexviazyme® is also being investigated in a Phase III study (Baby-COMET) for the treatment of patients aged 6 months or younger who are affected by infantile onset Pompe disease.
On July 27, 2021, the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for avalglucosidase alfa for the treatment of people with Pompe disease while considered that avalglucosidase alfa does not qualify as a New Active Substance (NAS). Upon Sanofi’s appeal, the CHMP reaffirmed this opinion on November 12, 2021. Sanofi does not agree with the CHMP’s conclusion on NAS status and is evaluating potential options for avalglucosidase alfa in the European Union. The CHMP opinion does not constitute a final regulatory decision. The European Commission has 67 days to evaluate the CHMP opinion and render a formal decision. In December 2021, the EMA Committee for Orphan Medicinal Products (COMP) recommended not to maintain the orphan drug designation for avalglucosidase alfa. Sanofi strongly disagrees with the COMP recommendation as it fails to appropriately recognize scientific innovation and does not take into account the totality of the data. An appeal was filed with EMA requesting a re-examination of the COMP Opinion, which can be expected to delay the regulatory decision for avalglucosidase alfa in Europe by several months.
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. In 2021, based on the positive results obtained in two separate clinical trials for the treatment of ASMD respectively in the adult (Phase II/III trial ASCEND) and pediatric (Phase I/II trial ASCEND-Peds) populations, olipudase alfa was submitted to regulatory authorities in the USA, Europe, and Japan.
Venglustat (GZ402671) is an orally administered brain penetrant glucosylceramide synthase (GCS) inhibitor that blocks the conversion of ceramide to glucosylceramide (GL-1). Venglustat is currently in development for the treatment of late-onset GM2 gangliosidosis (Tay-Sachs disease and Sandhoff disease), Fabry disease, and Gaucher disease type 3. The clinical program in autosomal dominant polycystic kidney disease (ADPKD) was halted in June 2021 based on the pivotal Phase II/III study (STAGED-PKD), which was declared futile; no safety issue was reported, and significant reduction of GL-1 was observed, confirming the intended mechanism of action of venglustat in lysosomal storage diseases (Fabry disease, Gaucher disease type 3 and GM2 gangliosidosis). Completion of recruitment to the Phase III study in late-onset GM2 gangliosidosis (AMETHIST) is expected early 2022. Positive feedback was received from the FDA at end October 2021 for the initiation of a Phase III trial in patients with Fabry disease. A Phase II study in Gaucher disease type 3 (LEAP) is ongoing.
SAR339375is a 22-mer non-coding RNA molecule that negatively regulates genes/networks associated with renal epithelial injury and fibrotic diseases, including Alport syndrome for which a Phase II trial (HERA) is ongoing.
SAR442501, an anti-FGFR3 (fibroblast growth factor receptor 3) antibody (Fab format) that directly targets overactive FGFR3 in achondroplasia, is being investigated in a Phase I study.
SAR443809, a humanized monoclonal antibody that selectively inhibits the activated fragment of Factor B (termed Bb) in the alternative pathway of the complement system, entered development (Phase I) in 2021 for the treatment of rare renal diseases.
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ITEM 4. Information on the company |
e) Rare Blood Disorders
Enjaymo™ (sutimlimab; formerly known as BIVV009) is a monoclonal antibody targeting the classical complement pathway (CP) specific serine protease (C1s), thereby inhibiting CP activity which is associated with a variety of immune disorders involving the presence of autoantibodies. Sutimlimab is being developed for the treatment of hemolysis in adult patients with primary cold agglutinin disease (CAD) and has previously received Breakthrough Therapy Designation (BTD) and Orphan Drug Designations (ODD) from the FDA. In October 2021, the FDA accepted the resubmission of the Biologics License Application (BLA) for sutimlimab in CAD. After priority review, the product was approved in February 2022 as the first treatment to decrease the need for red blood cell transfusion due to hemolysis in adults with CAD.
Fitusiran (SAR439774) is a program in collaboration with Alnylam for the development of a siRNA therapeutic agent to treat hemophilia A and B (adults & adolescents, as well as pediatric programs). It uses a novel approach targeting antithrombin (AT), with AT knockdown leading to increase in thrombin generation. Following the revised dose and dosing regimen introduced in the clinical program (ATLAS) in 2021, Sanofi expects that global regulatory submission timelines for the adult and adolescent studies will be delayed by up to approximately 18 months, to 2024, subject to alignment with health authorities.
Efanesoctocog alfa (BIVV001), developed in collaboration with Sobi, isan 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. Efanesoctogog alfa received Fast Track Designation from the FDA in February 2021 and is currently being investigated in the pivotal Phase III study (EXTEND-1) in patients with severe hemophilia A older than 12 years of age. A Phase III study (EXTEND-Kids) evaluating efanesoctocog alfa in pediatric patients younger than 12 years of age was initiated in March 2021.
Rilzabrutinib (SAR444671) is being investigated in a Phase III trial (LUNA 3; initiated in April 2021) for the treatment of immune thrombocytopenia (ITP) in adults and adolescents, for which the FDA has granted Fast Track Designation.
SAR445088 is a humanized IgG4 monoclonal antibody that binds to and inhibits C1s, thereby inhibiting classical pathway (CP) of complement activity. Activation of the CP of complement is associated with a variety of immune disorders involving the presence of autoantibodies. Inhibition of autoantibody-mediated CP activation on the surface of erythrocytes via C1s binding prevents complement opsonin deposition on red blood cells and protects them from phagocytosis and extravascular hemolysis in autoimmune hemolytic anemia such as cold agglutinin disease (CAD); SAR445088 is currently under evaluation in a Phase II study in this indication. The development of the product for the treatment of immune thrombocytopenic purpura was discontinued in 2021.
f) Line extensions
Libtayo® (cemiplimab), a monoclonal antibody targeting the immune checkpoint receptor PD-1 (programmed cell death protein-1), was approved in 2021 for the treatment of metastatic or locally advanced basal cell carcinoma (BCC) and for the first-line treatment of patients with advanced non-small cell lung cancer (NSCLC) whose tumors have high PD-L1 expression. Libtayo® is being jointly developed by Regeneron and Sanofi under a global collaboration agreement.
Libtayo® was filed for label extensions with the FDA and he EMA for second-line treatment of cervical cancer. On January 27, 2022, Sanofi and Regeneron announced the voluntary withdrawal of the supplemental Biologics License Application.
A supplemental Biologics License Application (sBLA) was submitted to the FDA in November 2021 for Libtayo® in chemotherapy combination in first-line NSCLC. Libtayo® was submitted to the EMA in the same indication in December 2021.
Sarclisa® (isatuximab), a monoclonal antibody designed to selectively bind to CD38, a cell surface antigen expressed in multiple myeloma (MM) cancer cells and other hematological malignancies, is marketed in combination with pomalidomide and dexamethasone for the treatment of adults with relapsed refractory multiple myeloma (RRMM) who have received at least two prior therapies including lenalidomide and a proteasome inhibitor.
In March 2021, the FDA approved Sarclisa® in combination with carfilzomib and dexamethasone for the treatment of adult patients with RRMM who have received one to three prior lines of therapy. Sarclisa® was approved by the European Commission in April 2021 for the treatment of adult patients with multiple myeloma (MM) who have received at least one prior therapy. These approvals were based on the results of the IKEMA Phase III clinical trial.
Sarclisa® continues to be evaluated in combination with current standard and novel treatments across the MM treatment continuum:
•the Phase III IMROZ trial is a randomized, open-label, multicenter study assessing the clinical benefit of Sarclisa® in combination with bortezomib (Velcade®), lenalidomide (Revlimid®) and dexamethasone versus bortezomib, lenalidomide and dexamethasone in patients with newly diagnosed MM not eligible for transplant;
•the Phase III GMMG HD7 trial is a randomized, open-label, multicenter study assessing the clinical benefit of Sarclisa® in combination with lenalidomide, bortezomib, and dexamethasone for induction and with lenalidomide for maintenance in patients with newly diagnosed MM. This study is being conducted in collaboration with the German-speaking Myeloma Multicenter Group (GMMG);
•the Phase III ITHACA trial is a randomized, open-label, multicenter study assessing Sarclisa® in combination with lenalidomide and dexamethasone versus lenalidomide and dexamethasone in patients with high-risk smoldering MM; and
•Phase I studies are ongoing to evaluate Sarclisa® in new combinations with emerging novel mechanisms of action in patients with RRMM or in newly diagnosed MM patients.
Sarclisa® is also under investigation in several early phase studies for the treatment of hematologic malignancies and other hematologic indications:
•a registrational Phase II study assessing the antitumor activity, safety, and pharmacokinetics of isatuximab in combination with chemotherapy in pediatric patients with relapsed/refractory B or T acute lymphoblastic leukemia or acute myeloid leukemia in first or second relapse; and
•a Phase II study evaluating the safety, pharmacokinetics, and efficacy of subcutaneous isatuximab in adults with warm autoimmune hemolytic anemia (wAiHA).
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ITEM 4. Information on the company |
Dupixent®(dupilumab), 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. Dupixent® is being jointly developed with Regeneron in several indications:
•atopic dermatitis: the product was approved in China in September 2021 for adolescents aged 12-17 years with moderate-to-severe atopic dermatitis. Further to the positive results of the pivotal trial evaluating Dupixent® for the treatment of children aged 6 months to 5 years with moderate-to-severe atopic dermatitis, the product was submitted in the USA in December 2021;
•asthma: Dupixent® was approved in the US in October 2021 for the pediatric population aged 6 to 11 years;
•eosinophilic esophagitis: the results of the Phase III clinical program will be available in 2022; see B.2. Main pharmaceutical products. We intend to submit this product to the FDA for this indication in the first quarter of 2022;
•adjunct to immunotherapy: a proof-of-concept study to evaluate Dupixent® as an adjunct to immunotherapy (peanut allergy) is ongoing;
•multiple Phase III studies in the following indications were ongoing in 2021:
–chronic obstructive pulmonary disease,
–chronic spontaneous urticaria,
–prurigo nodularis,
–chronic rhinosinusitis without nasal polyps,
–bullous pemphigoid,
–chronic inducible cold urticaria, and
–allergic fungal rhinosinusitis.
Kevzara® (sarilumab) is a monoclonal antibody against the Interleukin-6 Receptor derived from our alliance with Regeneron, and is already marketed in the treatment of moderate to severe rheumatoid arthritis. The product is currently being evaluated in a pivotal Phase IIb study in pediatric populations for two indications: polyarticular juvenile idiopathic arthritis and systemic juvenile idiopathic arthritis.
Aubagio®(teriflunomide), an immunomodulatory agent with anti-inflammatory properties that selectively and reversibly inhibits the mitochondrial enzyme dihydroorotate dehydrogenase (DHO-DH) already marketed for the treatment of relapsing forms of multiple sclerosis and relapsing remitting multiple sclerosis, was approved in the European Union in 2021 for treatment of the pediatric population (aged 10 to 17 years).
Cerdelga® (eliglustat), a potent, highly specific ceramide analog inhibitor of GL-1 synthesis already marketed for Gaucher disease type 1 in adult patients, is currently in Phase III for the treatment of Gaucher disease type I in pediatric patients; see B.2. Main pharmaceutical products.
B.5.2. Vaccines
The Vaccines R&D portfolio includes 10 projects in advanced development (including one monoclonal antibody candidate), as shown in the table below. The portfolio includes four projects for novel targets and six enhancements of existing vaccines. Updates to the programs in 2021 are described below.
For strategic reasons, Sanofi Pasteur has decided to terminate the development of a COVID-19 mRNA vaccine candidate.
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Phase I | Phase II | Phase III | Registration |
| | Nirsevimab, mAb(a) Passive prevention of respiratory syncytial virus infections in all infants | Shan6 DTwP-HepB-Polio-Hib(b) Pediatric hexavalent vaccine |
| 21-valent Pneumo Conjugate Vaccine (PCV21)(a) Prevention of pneumococcal disease | MenQuadfi® Advanced generation meningococcal ACYW conjugate vaccine US / EU infants aged 6 weeks & older | |
| Respiratory Syncytial Virus (RSV) vaccine (PhI/II) Prevention of RSV infections in toddlers aged 6 months & older
| VRVg Purified vero rabies vaccine | |
| Vero Yellow Fever vaccine (vYF) | COVID-19 recombinant adjuvanted(a) vaccine (Phase I/II) Prevention of novel Coronavirus | |
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| Fluzone® QIV HD Quadrivalent inactivated influenza vaccine – High dose for pediatric use | |
| Meningococcal B Vaccine Prevention of invasive disease caused N. Meningitidis Serogroup B | | |
(a) Partnered and/or in collaboration: Sanofi may have limited or shared rights to some of these products.
(b) Hib = Hemophilus influenzae type b.
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Enhancements of existing vaccines
Fluzone®: QIV HD is a higher dose quadrivalent influenza vaccine licensed in the US and in Europe for the elderly population, who do not respond as well to standard-dose influenza vaccines due to aging of the immune system (immuno-senescence). A Phase III trial is ongoing to evaluate safety and efficacy in the pediatric population.
Shan6TM is a cost-effective, all-in-one liquid hexavalent combination vaccine being developed for low and middle income countries (WHO pre-qualification). It comprises detoxified whole-cell pertussis 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. In May 2021, Sanofi Pasteur obtained Indian regulatory approval for Shan6TM, and also submitted the file for WHO pre-qualification.
MenQuadfi®: Sanofi Pasteur’s Men ACYW-TT vaccine is our latest advance in meningococcal quadrivalent conjugate vaccination, designed to help protect an expanded patient group including infants and adolescents through older adults. MenQuadfi® is already licensed in the US (for people aged 2 years and over), and in Europe and several other countries (for people aged 12 months and over). Additional Phase III trials are ongoing to evaluate immunogenicity and safety in infants aged 6 weeks and older. In May 2021, a request was submitted to the WHO for pre-qualification of MenQuadfi® for people aged 12 months and older. In September 2021, the MenQuadfi® dossier was submitted in Japan. Marketing approval is pending in numerous other countries.
Meningococcal Group B (Men B):This vaccine candidate is intended to provide active immunization against invasive meningococcal disease caused by Neisseria meningitidis serogroup B (Men B) for all age groups, targeting increased breadth of protection and enhanced tolerability compared to currently marketed Men B products. A Phase I/II study was initiated In March 2021. Early-stage development studies are under way to combine the four meningococcal serogroups represented in MenQuadfi® with Men B to advance a pentavalent meningococcal vaccine candidate.
Rabies Vaccine: A next-generation purified human rabies vaccine (VRVg) is 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 and will be free of animal or human material. VRVg is currently in Phase III trials in order to support pre and post exposure indications.
Vero Yellow Fever (vYF) vaccine candidate is a next generation freeze-dried live-attenuated yellow fever vaccine produced on a Vero cell line, for subcutaneous and intra-muscular administration in people aged nine months and older. This vaccine aims to replace Stamaril® and YF-VAX® with a single product. In January 2020, the first Phase I/II trial was initiated in the US. In July 2021, we started Phase II trials of this yellow fever vaccine candidate.
Novel targets
Nirsevimab is a monoclonal antibody engineered to have a long half-life, so that only one dose would be needed for the entire respiratory syncytial virus (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). Sanofi Pasteur has an agreement with AstraZeneca to develop and commercialize nirsevimab. Positive primary analysis of the Phase IIb trial, published in the New England Journal of Medicine in July 2020, demonstrated the safety and efficacy of nirsevimab. The Phase III MELODY study, initiated in 2019, achieved its primary endpoint of protection against medically attended RSV lower respiratory tract infection in healthy full-term and late pre-term infants. The MEDLEY Phase II/III study, conducted in preterm infants and infants with chronic lung disease or congenital heart disease, showed positive safety and pharmacokinetics when compared to standard of care. Regulatory submissions are expected to begin in 2022. Nirsevimab received fast-track designation from the FDA in 2015, and FDA Breakthrough Therapy designation in February 2019, and was granted PRIME eligibility by the EMA in February 2019. It has been selected by the Japanese Agency for Medical Research and Development as a priority medicine, and received breakthrough therapy designation in China in January 2021. We initiated a Phase III study in China in November 2021.
RSV toddler vaccine: Sanofi Pasteur has a Cooperative Research and Development Agreement (CRADA) with the US National Institute of Health (NIH) to develop a live attenuated RSV vaccine for immunization of infants aged 6 months and older. We initiated the Phase I/II study in the US in September 2020. This trial is evaluating the safety and effectiveness of two doses of an intranasal delivery device in infants, the goal being to extend the immunity offered by nirsevimab to additional RSV seasons.
Pneumococcal Conjugate Vaccine (PCV): Sanofi Pasteur is collaborating with SK Chemicals (South Korea) to develop a 21-valent pneumococcal conjugate vaccine that will provide expanded protection against pneumococcal disease globally in at risk populations and in different age groups. This vaccine entered Phase II in May 2020. Phase II studies in adult, toddler and infant populations are ongoing.
Recombinant adjuvanted COVID-19 vaccine candidate: this vaccine candidate is produced in the baculovirus expression system in SF9 cells, and is intended for use in active immunization for the prevention of COVID-19 (SARS-CoV-2) in a pandemic setting. This candidate is being developed in partnership with GlaxoSmithKline (GSK), as it uses GSK's adjuvant. The Coronavirus (COVID-19) vaccine program entered the Sanofi Pasteur portfolio in March 2020 and entered Phase I/II in September 2020. A new Phase II study was initiated with an improved antigen formulation in February 2021, with support from the US Biomedical Advanced Research and Development Authority (BARDA). A Phase III trial started in the second quarter of 2021 to demonstrate vaccine efficacy using both monovalent and bivalent vaccine formulations. The continued emergence of new variants of concern and waning immunity mean there will be an important worldwide need for booster vaccinations; in parallel with the Phase III efficacy study, Sanofi Pasteur launched a comprehensive study to evaluate the vaccine as a heterologous booster for people initially vaccinated with Emergency Use Authorization (EUA) vaccines. In mid-December 2021, positive preliminary booster data were communicated, showing that neutralizing antibodies increased across all primary vaccines received (mRNA or adenovirus) with a good safety and immunogenicity profile. We will file booster data with the regulatory authorities after the Phase III results.
B.5.3. R&D Expenditures for late stage development
Expenditures on research and development amounted to €5,692 million in 2021 (€5,530 million in 2020), comprising €4,330 million in the Pharmaceuticals segment; €153 million in the Consumer Healthcare segment; €712 million in the Vaccines segment; and €497 million
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allocated to “Other”, representing the R&D support function. Research and development expenditures represented approximately 15.1% of our net sales in 2021, compared with approximately 15.3% in 2020.
The increase in R&D expenditures in 2021 was mainly due to additional investments in Immunology and Oncology, while cost control efforts continue. Preclinical research expenditures in the Pharmaceuticals segment amounted to €718 million in 2021, compared with €775 million in 2020. This reduction mainly relates to the termination of the immuno-oncology discovery agreement with Regeneron. Clinical development expenditure in the Pharmaceuticals segment amounted to €3,612 million in 2021; the majority of this covered Phase III and post-marketing studies, reflecting the cost of monitoring large-scale clinical trials.
B.6. Markets
A breakdown of revenues by business segment and by geographical region for 2021, 2020, and 2019 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 2021 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).
B.6.1. Marketing and distribution
We have business operations in approximately 90 countries and our products are available in more than 170 countries. 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, 2021 Compared with Year Ended December 31, 2020.” Sanofi is the eighth largest pharmaceutical company globally by sales. Our main markets in terms of net sales are respectively:
•United States: we rank twelfth with a market share of 3.6%;
•Europe: we are the fourth largest pharmaceutical company in France where our market share is 5.8%, and we rank seventh in Germany with a 3.3% market share; and
•other countries: we are ranked nineteenth in Japan with a market share of 1.8%, and twelfth in China with a market share of 1.6%.
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 diseases 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.
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.
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Drug manufacturers also face competition through parallel trading, also known as reimportation. This takes place when drugs sold abroad under the same brand name as in a domestic market are imported into that domestic market by parallel traders, who may repackage or resize the original product or sell it through alternative channels such as mail order or the internet. This situation is of particular relevance to the 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.
The same types of competition apply in Consumer Healthcare, except that in this business there are two types of generic products: private labels and store brands.
In Vaccines, there are two types of competition:
•competition between vaccine companies to research and develop new patented products or address unmet medical needs; and
•competition between different patented (or non-patented) vaccine products marketed for the same therapeutic indication.
Generics and biosimilars are not an issue in vaccines at present, since vaccines are still mostly produced from proprietary viral or bacterial strains. As with pharmaceutical drugs, vaccine manufacturers can face competition through parallel trading. However, the extent of such practices is limited by the need for cold chain distribution of vaccines, and by the fact that vaccines are sold and administered through pharmacies or dispensing physicians.
B.6.3. Regulatory framework
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 requirements and commitments.
The submission of an application to a regulatory authority does not guarantee that a license to market will be granted or that a product will be approved. Furthermore, each regulatory authority may impose its own requirements during product development or during the application review. It may refuse to grant approval or 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.
Product review and approval can vary from six months or less to several years from the date of application submission depending upon the country and regulatory jurisdiction. Factors such as the quality of data and evidence, the review procedures, the nature of the product and the condition to be treated, play a major role in the length of time a product is under review.
In 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 for human use 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 centralized procedures described above.
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.
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 the US, applications for pharmaceutical approval and biological product licensure are submitted for review to the FDA, which has broad regulatory jurisdiction 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 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 product outweigh its risks; whether the product labeling is adequate; and if the manufacturing of the product and the controls used for maintaining quality are adequate to preserve the product's identity, strength, quality and purity. Based upon this review, the FDA can stipulate post-approval
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ITEM 4. Information on the company |
commitments and requirements. Changes to an approved product, including but not limited to a new indication, require 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 efficacy but need to demonstrate that their product is bioequivalent (i.e., performs in humans in the same manner as the originator’s product) to a reference 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 that can be referenced as having been approved under the FD&C Act.
The FD&C Act provides another option for NDA product approval via the 505(b)(2) pathway. This 505(b)(2) application contains full reports of investigations of safety and effectiveness but at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. For example, under the 505(b)(2) pathway an applicant may seek to rely on literature or earlier FDA findings of safety and effectiveness for approved drugs. Similarly, under the PHS Act, there is an abbreviated licensure pathway for biological products shown to be biosimilar (highly similar with no clinically meaningful differences) or interchangeable with an FDA-licensed reference BLA product.
In Japan, the entire process of approval review from review-related inspections and clinical trial consultation to review for the drugs approved by the Ministry of Health, Labour and Welfare (MHLW) is undertaken by the Pharmaceuticals and Medical Devices Agency (PMDA). The PMDA conducts first scientific review of the NDA submitted, assessing particularly the safety, efficacy and quality of the product or medical device proposed. Results of this primary evaluation are then submitted to the PMDA’s external experts. After a second evaluation based on the external experts’ feedback, a report is provided; the Pharmaceutical Affairs and Foods Sanitation Council (PAFCS) – one of the councils organized under the J-MHLW as advisory commission – is consulted, and advises the MHLW on final approvability.
For Japanese registrations, clinical data for Japanese patients are necessary. The regulatory authorities can require local clinical studies, though they also accept multi-regional studies including Japan. In some cases, bridging studies have been conducted to verify extrapolability of foreign clinical data to Japanese patients and to obtain data to determine the appropriateness of the dosages for Japanese patients.
The MHLW may require additional post-approval studies (Phase IV) for some specific cases, to further evaluate safety and/or to gather information on the use of the product under specified conditions. In approval of new drugs, new indications, new dosages or new administrations, the re-examination period is determined by the MHLW. Post-marketing information on a drug for the predetermined period after approval is collected to reconfirm its efficacy, safety and quality at the end of the period. This collection process involves both post-marketing surveillance (PMS), which is a non-interventional study, and post-marketing clinical trials.
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 biopharmaceutical. Common Technical Document (CTD) submission for generics has been mandatory since March 2017.
The International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH) was created in 1990 and reformed in 2015.
The ICH currently includes 18 Members and 33 Observers. Harmonization is achieved through the development of ICH Guidelines via a process of scientific consensus with regulatory and industry experts working side-by-side.
In addition to the joint efforts, 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.
B.6.4. Pricing & reimbursement
We are operating in an increasingly complex and rapidly evolving market access environment, with continued downward price pressure and facing unprecedented challenges due to the global COVID-19 pandemic.
At a time of intense scrutiny on drug pricing across major markets, governments and payers are using increasingly restrictive price control policies. The mechanisms used vary from country to country, and include price referencing for imported drugs, increased patient co-payments, restrictive formularies, prescribing guidelines, tendering procedures, generic and biosimilar substitution, and medico-economic evaluations of healthcare products.
In addition, pharmaceutical companies are expected to continuously demonstrate value throughout the product life cycle (such as through comparative efficacy studies, real-world patient data, and budget modelling). This requires vast amounts of data and scientific evidence, raising the bar for market entry, with significant variations from country to country.
In response to strong budgetary pressures, there has been a growing payer interest in new payment models based on risk-sharing and outcomes, with a view to balance drug costs and patient access to innovation. Despite implementation challenges, new performance-based and outcome-based deals are gaining traction in a growing number of markets.
We expect these trends will continue in 2022 and beyond, potentially accelerated or exacerbated by the COVID-19 crisis.
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United States
Overview of the US health insurance system:
Commercial 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.
Commercial insurance includes:
•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 negotiate rebates and discounts on formulary placement for commercial health plans, self-insured employer plans, Medicare Part D plans, and federal and state government employee plans.
Government insurance includes:
•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 coverage. Almost two-thirds of all Medicare beneficiaries have enrolled in Part D plans;
•Medicaid, which provides health insurance for low-income families, certain qualified pregnant women and children, individuals receiving supplemental security income, and other eligible persons determined on a state-by-state basis.
In the US there is still uncertainty about the evolution and impact of the COVID-19 pandemic as well as the pace of implementation of drug pricing reforms. The federal government is poised to exert greater price controls in the mid to longer term, which would likely have a significant negative impact on US biopharma that are as yet difficult to estimate.
The Biden Administration also seeks to encourage enforcement of price transparency in healthcare at the federal and state level. New public disclosure requirements for hospitals, insurers and health plans are contained in the Transparency in Coverage Rule issued by the Centers for Medicare and Medicaid Services (CMS) in October 2020. In addition, more than half of US states have passed or are pursuing laws to bring greater transparency and prevent price gouging – an issue that has led to intense debate on insulin costs in recent years.
Despite slow uptake to date, biosimilar adoption is likely to accelerate with first interchangeable biosimilars recently approved by the US FDA for Lantus® (insulin glargine) and Humira® (adalimumab). Savings are projected to potentially exceed $100 billion over the next five years, according to IQVIA. However, the impact of interchangeability on biosimilar uptake and pricing remains to be seen in the long term.
Moreover, the continued consolidation in the commercial health insurance market is expected to exert greater pricing pressure. With the three largest Group Purchasing Organizations (GPOs) OptumRx (Emisar), CVS/Caremark (Zinc), and Express Scripts (Ascent) – now covering over 85% of US prescription claims, consolidation has led to more aggressive formulary management of specialty medicines and larger rebates in return for access. The rise of drug formulary exclusions, in favor of lower-cost therapeutic alternatives, may result in a significant reduction in sales.
China
China has embarked on a vast program of reforms over the past decade towards the Healthy China 2030 vision. Healthcare is one of the growth priorities under the country’s 14th Five-Year Plan (2021-2025), with policies aimed at addressing a large and increasing burden of disease (especially cancer, diabetes and cardiovascular diseases), while balancing costs and innovation.
We plan to launch 25 innovative vaccines and medicines in the Chinese market by 2025 under existing accelerated approval pathways (for treatments with urgent clinical needs). For example, Dupixent® received approval for the treatment of adults with moderate-to-severe atopic dermatitis in June 2020, within 6 months of filing through an expedited review process.
However, pricing and access challenges are expected to intensify in the years to come as the country faces slower growth and rising healthcare costs. A growing number of our products have a chance to undertake national reimbursement drug list (NRDL) negotiations where the lowest price prevails in order to compete with domestic companies, as in the case of national volume-based procurement (VBP) tenders.
Since 2017, annual updates of the National Reimbursement Drug List (NRDL) have improved access and affordability for innovative therapies in exchange for steep price cuts. According to the Chinese National Healthcare Security Administration (NHSA), 67 new medicines were added to the NRDL through negotiation in December 2021, including Praluent® and a number of drugs for rare diseases, with an average price reduction of 62%, higher than in previous years (54% in 2020, 61% in 2019). Importantly, for the second consecutive year, imported PD-1 inhibitors remain excluded in favor of domestically developed treatments – signaling the growing footprint of Chinese biotechs in NDRL listing, particularly in the crowded and highly competitive PD-1/PD-L1 – inhibitor market.
The volume-based procurement (VBP) policy has also expanded rapidly, placing downward price pressure on our established products portfolio. Sanofi actively participated in the three national procurement rounds implemented in 2021, and won successive tenders for schizophrenic treatment amisulpride (February) and oxiloplatin 50 mg (June), as well as for our insulins Toujeo® and Lantus® (November) during the first national biologic VBP. Meanwhile, as in previous rounds, Chinese pharmaceutical companies won the majority of the bids due to their ability to drastically reduce production costs.
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ITEM 4. Information on the company |
Europe
The economic and financial crisis triggered by the COVID-19 pandemic has had, and continues to have, a major (though varying) negative impact on many European healthcare systems. Governments have responded with a wide range of interventions to tackle increased budgetary pressures and other constraints.
At a time of great financial instability, the crisis has exacerbated the effect of existing cost-containment mechanisms, which are already widely established across Europe. These include price referencing, deeper discounting in tenders and renegotiating contracts, and further substitution of generics and biosimilars.
The pandemic has also created an impetus for centralized procurement approaches to vaccines and medicines at EU level. Various cross-border alliances have already emerged in recent years such as the Valletta Declaration Group, the BeNeLuxA initiative, the Nordic Council and the Visegrad Group, with the potential to exert greater bargaining power in pricing and access negotiations.
The European Commission (EC) has committed to enhanced pan-European cooperation on health technology assessment (HTA). After years of joint work between Member States, the new EU HTA regulation was adopted on December 13, 2021 and will be implemented in a staged process by 2025. Under the new rules, Member States will be cooperating on conducting future joint clinical assessments and joint scientific consultations.
The adoption of the EU HTA Regulation will contribute to the objectives of the new Pharmaceutical Strategy for Europe towards improving patient access to innovative and affordable medicines. However, the potential future directions of that strategy – and in the near term, changes to regulations on pediatric and orphan drugs – are a growing cause of concern, since they could be detrimental to existing incentive mechanisms that favor innovation.
Similar pressures are being felt in other regions and countries around the globe.
To address the multiple challenges mentioned above, we are continuously adapting our pricing and market access strategies to country-specific requirements, as well as piloting and developing new innovative contracting models with payers and new digital solutions.
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; technology platforms; delivery systems; digital applications; 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 (PTE).
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, applications for new patents may be submitted to the European Patent Office (EPO). A European Patent (EP) application may cover the 38 European Patent Convention Member States, including all Member States of the EU. The granted EP establishes corresponding national patents with uniform patent claims among the Member States.
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 fully ratified by Germany. As of the date of this document, 16 countries including France have ratified the agreement.
We monitor our competitors and vigorously seek to challenge patent infringers when such infringement 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. 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 also to be patent protected.
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 or biosimilar competitor may not rely on our clinical trial and safety data in its drug application. 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. Significant line extensions of existing NCEs may qualify for an additional three years of regulatory exclusivity if certain conditions are met. In the US, a
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different regulatory exclusivity period applies to biological drugs. The BPCIA (Biologics Price Competition and Innovation Act) provides that FDA may not approve a biosimilar application until 12 years after the date on which the reference product was first licensed.
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: four years for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions; 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, which 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 poses difficulties in certain countries. Additionally, in recent years and especially during the pandemic, a number of countries 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, under certain conditions of the Hatch-Waxman Act, it 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 supplementary patent protection 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.
Orphan drug exclusivity
Under certain conditions, orphan drug exclusivity may be granted in the US to drugs intended to treat rare diseases or conditions. Orphan drug exclusivities also exist in the EU and Japan.
Product overview
We summarize below the intellectual property coverage (in some cases through licenses) of our most significant marketed products in terms of sales, in our major markets. In the discussion of patents below, we focus on active ingredient patents (compound patents) and, in the case of 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 its 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 (in the case of NCEs for example, 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.
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.
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| United States | European Union | Japan |
Aubagio® (teriflunomide) | Compound: expired | Compound: expired | Compound: expired |
| Later filed patent: coverage ranging through September 2030 | Later filed patent: coverage ranging through March 2024 |
| Regulatory exclusivity: August 2024 | |
Alprolix® (eftrenonacog alfa) | Use: March 2028 with PTA* and PTE* | Compound: May 2024 (May 2029 with SPC* in most EU countries) | 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) |
Regulatory exclusivity: March 2026 | Regulatory exclusivity: May 2028 | Regulatory exclusivity: July 2022 |
Cerezyme® (imiglucerase) | Patent: expired | Patent: expired | Patent: expired |
Dupixent® (dupilumab) | Compound: October 2027 (March 2031 with PTE*) | Compound: October 2029 (September 2032 with SPC*) | Compound: October 2029 (May 2034 with PTE*) |
Later filed patents: coverage ranging through August 2040 (pending) | Later filed patents: coverage ranging through May 2039 (pending) | Later filed patents: coverage ranging through May 2039 (pending) |
Regulatory exclusivity: March 2029 | Regulatory exclusivity: September 2027 | Regulatory exclusivity: January 2026 |
Eloctate® (efmoroctocog alfa) | Compound: June 2028 with PTA* and PTE* | Use: May 2024 (November 2029 with SPC* in most EU countries) | 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) |
Regulatory exclusivity: June 2026 | Regulatory exclusivity: November 2025 | Regulatory exclusivity: December 2022 |
Fabrazyme® (agalsidase beta) | Patent: expired | Patent: expired | Patent: expired Generics/biosimilars on the market |
Regulatory exclusivity: March 2028 pediatric indication (ages 2-8 with confirmed Fabry disease) | | |
Jevtana® (cabazitaxel) | Compound:
Expired later filed patents: coverage ranging through October 2030
NCE Regulatory exclusivity: December 2023 | Compound: expired
Later filed patents: coverage ranging through May 2036 (pending)
Regulatory exclusivity: expired | Compound: expired
Later filed patents: coverage ranging through November 2030
Regulatory exclusivity: July 2022 |
Lantus® (insulin glargine) | Compound: expired | Compound: expired | Compound: expired |
Later filed patents ranging through April 2033 | 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 |
Lovenox® (enoxaparin sodium) | Compound: expired | Compound: expired | Compound: expired |
Generics/biosimilars on the market | Generics/biosimilars on the market | |
Lumizyme®/Myozyme® (alglucosidase alfa) | Compound: expired | Compound: expired | Compound: expired |
Plavix® (clopidogrel bisulfate) | Compound: expired | Compound: expired | Compound: expired |
Generics on the market | Generics on the market | Generics on the market |
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 | Later filed patents: coverage ranging through July 2033 with PTE* |
* 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.
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Challenges to patented products
— Abbreviated New Drug Applications (ANDAs)
In the US, generic companies have filed Abbreviated New Drug Applications (ANDAs) containing challenges to patents related to a number of our small molecule 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 (safety and other technical data) as the original approved product. As a result of regulatory protection of our safety and other technical data, ANDA applications are generally four years after FDA approval, and include a challenge to a patent listed in the FDA’s Orange Book. If the patent holder or licensee brings suit in response to the patent challenge within the statutory window, the FDA is barred from granting final approval to an ANDA during the 30 months following the expiry of the 5-year regulatory exclusivity (this bar is referred to in our industry as a “30-month stay”) unless, before the end of the 30 months, the parties reach settlement or a court decision 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.
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 given patent against a competing product is not necessarily predictive of the future success or failure in the assertion of the same 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”.
— 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 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.
Similarly, entities wishing to market a generic biologic can utilize an abbreviated approval pathway established in the PHS Act. This §351(k) pathway enables an applicant to rely on a reference product sponsor’s data when seeking approval of a biological product shown to be biosimilar (highly similar with no clinically meaningful differences) or interchangeable with an FDA-licensed reference BLA product.
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 – Domain names – Copyright
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. We generate new assets (trademarks, domain names, service marks) when creating global brands for new, innovative products. We support the development of the product, from the branding of biotech platforms to the protection of service marks for patient support programs.
Trademarks are particularly important to the commercial success of our products and services in a competitive marketplace, providing a strong visibility and assuring patients of the origin of the products.
Domain names are essential to inform a range of communities about what we do. We also pay close attention to ensuring that no damage is done to our reputation online.
We aim to ensure that the product trademarks we submit to healthcare authorities to obtain marketing authorizations are available, and are protected. 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 to secure our rights.
Ongoing digitization emphasizes the importance of securing copyright protection for software and web layouts.
We monitor and defend our trademarks based on a specific policy designed to prevent counterfeiting, trademark infringement and/or unfair competition.
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 the final packaging.
Our general policy is to produce our key active ingredients and main 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 specific 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 Sanofi plant divestitures, or to
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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’’.
We also obtain active ingredients from third parties under collaboration agreements. This applies in particular to the monoclonal antibodies developed with Regeneron.
Our 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, giving us a strong industrial presence in emerging markets; and
•local sites, which serve their domestic market only.
Sanofi Pasteur produces vaccines at various sites, with the main locations situated in France, the United States, Canada, India, Mexico and China. The pharmaceutical site at Le Trait (France) also contributes to Sanofi Pasteur’s industrial operations by making its sterile filling facilities available for vaccine manufacturing.
All of our production facilities are good manufacturing practice (GMP) compliant, in line with international regulations.
Our main sites are approved by the US FDA:
•the Specialty Care facilities in the United States (Framingham MA and Northborough MA), France (Lyon Gerland, Vitry-sur-Seine, Le Trait), Germany (Frankfurt), Ireland (Waterford) and Belgium (Geel);
•the General Medicines facilities in Germany (Frankfurt), France (Aramon, Sisteron, Ambarès and Tours), Italy (Anagni and Scoppito), Singapore (Jurong) and the United States (Ridgefield NJ);
•the chemical facilities producing active ingredients for third parties, including those located in France (Vertolaye, Saint-Aubin-les-Elbeuf), Germany (Frankfurt) and Hungary (Ujpest);
•the Consumer Healthcare facilities in France (Compiègne) and the United States (Chattanooga TN); and
•the Vaccines facilities in France (Marcy l’Étoile, Le Trait, Val-de-Reuil and Neuville-sur-Saône), the United States (Swiftwater PA) 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® and Dupixent®, for example).
In May 2010, Genzyme’s Allston facility in the United States entered into a consent decree with the US government. In March 2021, the Allston facility was divested; based on contractual obligations, the purchaser has assumed responsibility for fulfilling Genzyme's obligations under the consent decree.
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 five main 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 five key programs cover Property & Business Interruption; General & Product Liability; Stock & Transit; loss and liability arising from cyber and digital risks; and Directors & Officers Liability.
Carraig participates in our coverage for various lines of insurance including Property, Stock & Transit, Cyber/Digital, and General & Product Liability. Carraig is run under the supervision of the Irish and European regulatory authorities, is wholly owned by Sanofi, and has sufficient resources to meet those portions of our risks that it has agreed to cover.
Carraig 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, in all territories where it is possible to use a centralized program operated by Carraig. By sharing risk between our entities, this approach enables us to set deductibles and cover appropriate to the needs of local entities before the market attachment point. 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 & 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 Cyber/Digital insurance program protects our operations against loss originating from various sources, and against liability in respect of data security. Centralized through Carraig, the program enables us to set deductibles and cover appropriate to the needs of local entities before the market attachment point.
Our General & Product Liability program was renewed in 2021 for all our subsidiaries worldwide in all territories where it was possible to do so, despite reluctance in the insurance and reinsurance market to cover product liability risks for large pharma-biotech 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.
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The principal risk exposure for our pharmaceutical products is covered with low deductibles at country level, with a greater proportion 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 discrepancies in risk exposure between European countries and the United States; and for specific issues arising in certain jurisdictions, such as generics or biosimilar coverage in the United States. Coverage is adjusted every year to take account of the relative weight of new product liability risks such as those arising out of biotechnologies and new technology platforms.
Our cover for risks that are not specific to the pharma-biotech 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 limiting the premium increase in a global market with severe upward price pressure over the last three years.
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, Portland in the United States; Frankfurt in Germany; Brindisi in Italy; Dagenham in the United Kingdom; Ujpest in Hungary; Beaucaire, Valernes, Limay, 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 2021, Sanofi spent €49 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 €650 million as of December 31, 2021 versus €713 million as of December 31, 2020. 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 2021 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
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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 in 2021). Moreover, more than 100 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.However, despite these efforts, Sanofi may be unsuccessful in the implementation of its policy to reduce and mitigate the harmful effects of its activities on the health and safety of its employees, customers or the general public and on the environment more generally. See “Item 3.B. Risk Factors” for further information.
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 (Comité des Valeurs Limites Internes Sanofi) 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).
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. We use these data to enhance the relevance of our risk assessments.
We believe that the safety management systems implemented at each site, the hazard studies carried out and the risk management methods implemented, as well as our third-party property insurance policies covering any third-party physical damage, are consistent with legal requirements and the best practices in the industry, although no guarantee can be given that they will prevent accidents of various kinds.
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 2030, the program sets more ambitious targets for reducing
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ITEM 4. Information on the company |
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 2019 figures, we are undertaking to reduce our carbon emissions by 55% by the end of 2030 and reach carbon-neutral status by 2030 on our scope 1, 2 & 3 (direct and indirect emissions for all activities). 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 2021, we had reduced CO2 emissions by 25% (scope 1 and 2) and water consumption by 11%.
Overall waste recycling at sites is already above 73% and is expected to be more than 90% by the end of 2025. The discharge rate had dropped to 7% at the end of 2021 and we have committed to move towards a maximum of 1% by 2025. Biodiversity management at our 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 2021, all priority production sites have a life cycle management plan.
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” and “Item 3.D. Risk Factors”.
C. Organizational Structure
C.1. Significant Subsidiaries
Sanofi is the holding company of a consolidated group consisting of almost 290 companies. The table below sets forth our significant subsidiaries as of December 31, 2021. 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.
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Significant subsidiary | Date of incorporation | Country of incorporation | Principal activity | Financial and voting interest |
Aventis Inc. | July 1, 1968 | United States | Pharmaceuticals | 100 | % |
Genzyme Corporation | November 21, 1991 | United States | Pharmaceuticals | 100 | % |
Genzyme Europe B.V. | October 24, 1991 | Netherlands | Pharmaceuticals | 100 | % |
Hoechst GmbH | July 8, 1974 | Germany | Pharmaceuticals | 100 | % |
Sanofi-Aventis Deutschland GmbH | June 30, 1997 | Germany | Pharmaceuticals | 100 | % |
Sanofi-Aventis Participations SAS | February 25, 2002 | France | Pharmaceuticals | 100 | % |
Sanofi-Aventis Singapore Pte Ltd | May 14, 1997 | Singapore | Pharmaceuticals | 100 | % |
Sanofi Biotechnology | December 23, 2013 | France | Pharmaceuticals | 100 | % |
Sanofi Foreign Participations B.V. | April 29, 1998 | Netherlands | Pharmaceuticals | 100 | % |
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Sanofi Winthrop Industrie | December 11, 1972 | France | Pharmaceuticals | 100 | % |
Sanofi Pasteur Inc. | January 18, 1977 | 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, Boehringer Ingelheim (BI) Consumer Healthcare in January 2017, Bioverativ in March 2018, Ablynx in June 2018, Synthorx in January 2020, Principia in September 2020, Translate Bio in September 2021 and Kymab in April 2021. 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. 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 for the year ended December 31, 2018, included in our annual report on Form 20-F for that year. The financial effects in 2020 of the Synthorx and Principia acquisitions, and the financial effects in 2021 of the Kymab, Kiadis, Tidal, Translate Bio, Kadmon and Origimm acquisitions, are presented in Notes D.1 and D.2. to our consolidated financial statements for the year ended December 31, 2021, included in the annual report on Form 20-F for that year.
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 with Regeneron relating to Zaltrap®, Praluent®, Dupixent®, Kevzara® and Libtayo®. For further information, refer to Note C. “Principal Alliances” to our consolidated financial statements.
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PART I |
ITEM 4. Information on the company |
C.2. Internal organization of activities
Sanofi and its subsidiaries collectively form a group organized around three activities: Pharmaceuticals (General Medicines and Specialty Care), Vaccines, and Consumer Healthcare.
Within Sanofi, responsibility for research and development (R&D) in their respective fields rests with Sanofi 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 and Sanofi Biotechnology SAS (France), Sanofi-Aventis Deutschland GmbH (Germany), Ablynx (Belgium), Genzyme Corporation, Bioverativ Inc. ;
•vaccines: Sanofi Pasteur (France), Sanofi Pasteur, Inc. (US) and Translate Bio (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;
•in the United States: Sanofi Pasteur, Inc., Genzyme Therapeutics Products LP, Genzyme Corporation and Translate Bio;
•in Germany: Sanofi-Aventis Deutschland GmbH;
•in Canada: Sanofi Pasteur Limited;
•in Belgium: Genzyme Flanders BVBA; and
•in Ireland: Genzyme Ireland Limited.
C.3. Financing and financial relationships between group companies
The Sanofi parent company raises the bulk of the Company’s external financing and uses the funds raised to meet, directly or indirectly, the financing needs of its subsidiaries. The parent company operates a cash pooling arrangement under which any surplus cash held by subsidiaries is managed centrally. There is also a centralized foreign exchange risk management system in place, whereby the parent company contracts hedges to meet the needs of its principal subsidiaries.
Consequently, at December 31, 2021, the Sanofi parent company held 98% of our external financing and 88% of our surplus cash.
Sanofi European Treasury Center SA (SETC), a 100%-owned Sanofi subsidiary incorporated in 2012 under the laws of Belgium, is dedicated to providing financing and various financial services to our subsidiaries.
D. Property, plant and equipment
D.1. Overview
Our headquarters are located in Paris, France. See “— D.4. Office Space” below.
We operate our business through office premises and research, production and logistics facilities in approximately 90 countries around the world. Our office premises house all of our support functions, plus operational representatives from our subsidiaries and the Company.
A breakdown of our sites by use and by ownership status (owned versus leasehold) is provided below. This breakdown is based on surface area. All surface area figures are unaudited.
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Breakdown of sites by use | | Breakdown of sites by ownership status | |
Industrial | 61 | % | | Leasehold | 25 | % |
Research | 12 | % | | Owned | 75 | % |
Offices | 14 | % | | | |
Logistics | 9 | % | | | |
Other | 4 | % | | | |
D.2. Description of our sites
Sanofi industrial sites
As part of the process of transforming Sanofi and creating Global Business Units, we are continuing to adapt the organization of the Industrial Affairs department in support of our new business model.
The Industrial Affairs department focuses on customer needs and service quality; the sharing of “Sanofi Manufacturing System” good manufacturing practices; and the development of a common culture committed to quality.
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PART I |
ITEM 4. Information on the company |
In 2020, Industrial Affairs modified its organization to align on the new Global Business Units structure comprising Specialty Care, General Medicines, Vaccines and Consumer Health Care.
In February 2020, we announced a plan to create a major leading European company dedicated to the production and marketing of active pharmaceutical ingredients (API) to third parties as well as to Sanofi. This involves creating a standalone company combining our API commercial and development activities with six of our European API production sites: Brindisi (Italy), Frankfurt Chemistry (Germany), Haverhill (UK), Saint-Aubin-les-Elbeuf (France), Újpest (Hungary), and Vertolaye (France). This plan is proceeding as announced, with the carve-out to EUROAPI (a Sanofi subsidiary) of the relevent activities having been completed by the end of December 2021. An IPO on Euronext Paris is envisaged in the first half of 2022, subject to market conditions and obtaining required market authority approvals.
The Industrial Affairs department is also responsible for Sanofi Global HSE and Global Supply Chain.
At the end of 2021, we were carrying out industrial production at 67 sites in 31 countries:
•8 sites for our Specialty Care operations;
•30 sites for our General Medicines operations;
•6 sites for our Third-Party API operations;
•12 sites for our Consumer Healthcare operations; and
•11 sites for the industrial operations of Sanofi Pasteur in vaccines.
The quantity of units sold in 2021, including in-house and outsourced production, was 4.8 billion, comprising:
•Pharmaceuticals: 2.8 billion units;
•Consumer Healthcare: 1.8 billion units; and
•Vaccines: 180 million boxes.
We believe that our production facilities are in compliance with all material regulatory requirements, are properly maintained and are generally suitable for future needs. We regularly inspect and evaluate those facilities with regard to environmental, health, safety and security matters, quality compliance and capacity utilization. For more information about our property, plant and equipment, see Note D.3. to our consolidated financial statements, included at Item 18. of this annual report, and section “B.8. Production and Raw Materials” above.
Our main production sites by volume are:
•Le Trait (France), Frankfurt (Germany), Waterford (Ireland), Geel (Belgium) and Framingham (United States) for Specialty Care;
•Aramon, Sisteron and Ambarès (France), Frankfurt (Germany), Csanyikvölgy (Hungary), Lüleburgaz (Turkey), Campinas (Brazil), Jurong (Singapore) and Hangzhou (China) for General Medicines products;
•Compiègne and Lisieux (France), Cologne (Germany), Origgio (Italy), Chattanooga (United States) and Ocoyoacac (Mexico) for Consumer Healthcare products; and
•Marcy-l’Étoile and Val-de-Reuil (France), Toronto (Canada), Swiftwater (United States) and Hyderabad (India) for vaccines.
Research & Development sites
In Pharmaceuticals, research and development activities are conducted at the following sites:
•four operational sites in France: Chilly-Mazarin/Longjumeau, Montpellier, Strasbourg and Vitry-sur-Seine/Alfortville;
•three sites in the rest of Europe (Germany, Belgium and the Netherlands), the largest of which is in Frankfurt (Germany);
•six sites in the United States: Bridgewater, Cambridge, Framingham/Waltham, Great Valley, San Francisco and San Diego; and
•in Asia, three sites in China (Beijing, Shanghai and Chengdu).
Vaccines research and development sites are:
•Swiftwater, Cambridge and Orlando (United States);
•Marcy-l’Étoile/Lyon (France); and
•Toronto (Canada).
D.3. Acquisitions, capital expenditures and divestitures
The carrying amount of our property, plant and equipment at December 31, 2021 was €10,028 million. During 2021, we invested €1,504 million (see Note D.3. to our consolidated financial statements, included at Item 18. of this annual report), mainly in increasing capacity and improving productivity at our various production and R&D sites.
Our principal acquisitions, capital expenditures and divestitures in 2019, 2020 and 2021 are described in Notes D.1. & D.2. (“Changes in the scope of consolidation”), D.3. (“Property, plant and equipment”) and D.4. (“Goodwill and other intangible assets”) to our consolidated financial statements, included at Item 18. of this annual report.
As of December 31, 2021, our firm commitments in respect of future capital expenditures amounted to €769 million. The principal locations involved were: for the Pharmaceuticals segment, the industrial facilities at Frankfurt (Germany); Le Trait, Maisons-Alfort, Compiègne, and Ambares (France); Cambridge (United States); Geel (Belgium); Origgio, Anagni, Brindisi, and Scoppito (Italy); and for the Vaccines segment, the facilities at Swiftwater (United States), Toronto (Canada), Marcy-l’Étoile, Neuville-sur-Saône and Val-de-Reuil (France), and Singapore.
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PART I |
ITEM 4. Information on the company |
In the medium term and assuming no changes in the scope of consolidation, we expect to invest on average some €1.4 billion a year in property, plant and equipment. We believe that our own cash resources and the undrawn portion of our existing credit facilities will be sufficient to fund these expenditures.
Our principal ongoing capital expenditures are described below.
Speciality care
Our Specialty Care industrial operations are organized around two end-to-end clusters. We have four dedicated biotechnology hubs: Paris/Lyon (France), Frankfurt (Germany), Geel (Belgium) and Boston Area (United States). The Bioatrium project, a joint venture between Sanofi and Lonza (Switzerland) set up in 2017 to increase bioproduction capacity, is proceeding on schedule. Exploiting the innovative techniques on which biotech relies, including cell and microbiological culture and the development of viral vectors, calls for highly specific knowledge and expertise backed by dedicated production platforms to support global product launches.
The Waterford and Le Trait sites manufacture pre-filled Dupixent® syringes.
General medicines
Our General Medicines industrial operations are organized through end-to-end clusters, with chemistry, pharmaceutical and injectable sites organized through a network of over 31 regional and local industrial sites in 20 countries, supporting growth in those markets.
This new organization encompasses a dedicated Launch Sites cluster from API manufacturing to finished goods packaging (Sisteron, Aramon, Ambarès, Scoppito).
The Frankfurt facility is our principal site for the manufacture of diabetes treatments.
Consumer healthcare
The pharmaceutical industrial operations of our Consumer Healthcare (CHC) business are spread across a dedicated network. Global markets are supplied from our facilities at Compiègne (France) and Cologne (Germany). We have recently invested in projects to bring various manufacturing operations related to our acquisition of Boehringer Ingelheim's CHC business in-house, mainly to our sites at Compiègne (France) and Suzano (Brazil).
Vaccines (Sanofi Pasteur)
Sanofi Pasteur’s industrial operations are in a major investment phase, preparing for the upcoming growth of our influenza and Polio/Pertussis/Hib franchises, plus the mid-term growth linked to our New Vaccines pipeline. Major investments were announced in 2020 and 2021 with a new Evolutive Facility in France (Neuville-Sur-Saone) and a new facility in Singapore for our New Vaccines pipeline. Other major investments are under way in France (including construction of a new influenza vaccine building at Val-de-Reuil), Canada (a new pertussis vaccine building), the US and Mexico.
Innovation and culture of industrial excellence
The ambition of our Industrial Affairs department is to continue to raise quality standards in Sanofi’s production activities, and to remain a world leader and a benchmark in the global pharmaceutical industry. To achieve this goal, all our activities share a common culture of industrial excellence, enshrined in the Sanofi Manufacturing System. This sets out a series of priorities (such as customer service, constant improvement, site network optimization and transverse optimization) that constitute our industrial vision and will be crucial to our mutual success.
In terms of operational excellence, we continue to build on our Top Decile performance program, focused on core sites and fully leveraging digital opportunities.
D.4. Office space
As part of the transformation of Sanofi, we are undertaking major real estate programs with two core objectives: to bring our teams together on single sites in new workspaces that favor agility, cross-fertilization and communication, and to rationalize office space while achieving a responsible environmental footprint.
This transformation of workspaces to flexible mode has already reached over 21,000 of our people around the globe, and provides strong support for our various operations to attain their objectives. The rollout covers all regions worldwide, and a number of projects are currently under way. These include projects in the Greater Paris region (relocation of our headquarters to avenue de la Grande-Armée in the seventeenth arrondissement of Paris, and closure of the Croix-de-Berny site at Antony), and further projects in Spain, Hungary and the United States. In 2021, we reviewed our use of office space throughout the world to increase efficiency in all markets, building on hybrid workspace initiatives and the impact of new workplace paradigm shifts arising out of the the COVID-19 pandemic. Finally, we continue to divest sites that are not core to our ongoing business model.
Item 4A. Unresolved Staff Comments
N/A
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PART I |
ITEM 5. Operating and financial review and prospects |
Item 5. Operating and Financial Review and Prospects
You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto included in this annual report at Item 18.
Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS endorsed by the European Union as of December 31, 2021.
The following discussion contains forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this document.
Unless otherwise stated, all financial variations in this item are given on a reported basis.
The discussion of our operating and financial review and prospects for the years ended December 31, 2020 and December 31, 2019, can be found in Part I, Item 5. of our Form 20-F filed on March 4, 2021, including a presentation of our consolidated income statements for the years ended December 31, 2020 and December 31, 2019 in “Item 5. — A.2. Results of operations” of our Form 20-F filed on March 4, 2021.
A. Operating results
A.1. Significant operating information
A.1.1. 2021 Overview
During 2021, Sanofi continued to implement its “Play to Win” strategy, involving major decisions and positive actions that will support and rebuild the competitive margins necessary for Sanofi to continue to deliver on its mission. The strategy is based on four major priorities: focus on growth, lead with innovation, accelerate efficiency, and reinvent how we work. For further information about our strategy, refer to “— Item 4. — B.1. Strategy”. Other significant events of the year are described below.
On January 11, 2021, Sanofi and Kymab, a clinical-stage biopharmaceutical company developing fully human monoclonal antibodies with a focus on immune-mediated diseases and immuno-oncology therapeutics, announced that they had entered into an agreement under which Sanofi would acquire Kymab for an upfront payment of approximately $1.1 billion and up to $350 million contingent upon attainment of certain development milestones. On April 9, 2021, Sanofi announced that it had successfully completed this acquisition, thereby retaining full global rights to KY1005, a fully human monoclonal antibody that targets the key immune system regulator OX40L and has the potential to treat a wide variety of immune-mediated diseases and inflammatory disorders.
On January 12, 2021, Sanofi unveiled EUROAPI as the name of the future industry-leading European company dedicated to the development, production and marketing of active pharmaceutical ingredients (API). Sanofi also announced the appointment of Karl Rotthier as the Chief Executive Officer of EUROAPI effective January 18, 2021. An IPO on Euronext Paris is envisaged in the first half of 2022, subject to market conditions and obtaining required market authority approvals.
On February 12, 2021, Sanofi announced an all-cash offer to all holders of Kiadis shares, to acquire their shares at an offer price of €5.45 (cum dividend). Completion of the acquisition was announced on April 16, 2021. Kiadis is a clinical-stage biopharmaceutical company developing natural killer (NK) cell therapies for patients with potentially life-threatening diseases. NK cells seek and identify malignant cancer cells and have broad application across various tumor types. Kiadis’s NK cell-based medicines will be developed alone and in combination with Sanofi’s existing pipeline and platforms.
On March 31, 2021, Sanofi announced an investment of over €600 million to construct a new vaccine manufacturing facility at its existing site in Toronto, Canada. The new facility will provide additional antigen and filling capacity for Sanofi’s Fluzone® High-Dose quadrivalent influenza vaccine, helping to increase supply availability in Canada, the United States and Europe. Sanofi expects this new facility to be operational in 2026, following design, construction, testing and qualification of the facility and equipment. Fluzone® High-Dose quadrivalent influenza vaccine is currently manufactured exclusively by Sanofi Pasteur, Sanofi’s vaccines global business unit, at its Swiftwater, Pennsylvania site in the United States. Sanofi Pasteur has an ongoing investment program expanding its manufacturing capabilities for influenza vaccines. Two new facilities, in Swiftwater and in Val-de-Reuil (France), will start to operate in the coming years.
On April 7, 2021, Sanofi’s Chief Executive Officer Paul Hudson outlined several key projects that the company will implement to increase the impact of its Corporate Social Responsibility (CSR) strategy. Embedded in Sanofi's long-term strategy, the company’s commitment is based on four pillars in which Sanofi is well positioned to make a difference: access to medicines, support for vulnerable communities, preservation of the environment, and inclusion and diversity of its employees. See “Item 4.B. Information on the Company — Business Overview — Strategy”.
On April 9, 2021, Sanofi acquired Tidal Therapeutics, a privately owned, pre-clinical stage biotech company with a novel mRNA-based approach for in vivo reprogramming of immune cells. The new technology platform will expand Sanofi’s research capabilities in immuno-oncology and inflammatory diseases, and may have applicability to other disease areas as well. Sanofi acquired Tidal Therapeutics for an upfront payment of $160 million and up to $310 million contingent upon attainment of certain development milestones.
On April 12, 2021, Sanofi announced a €400 million investment over five years to create a one-of-a-kind vaccine production center in Singapore, pushing the boundaries of operations through cutting edge digital manufacturing technologies. In partnership with the Singapore Economic Development Board (EDB), the new site will mainly supply the Asian region and complement existing Sanofi manufacturing capacities in Europe and North America.
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PART I |
ITEM 5. Operating and financial review and prospects |
On May 6, 2021, Sanofi entered into a three-year research collaboration with Stanford University School of Medicine. Together, we will work to advance the understanding of immunology and inflammation through open scientific exchange. Additionally, Sanofi will provide funding and scientific inputs into projects of mutual interest, crossing multiple therapeutic areas including autoimmune diseases and inflammatory conditions.
On June 29, 2021, Sanofi announced that it will invest approximately €400 million annually in a first-of-its-kind mRNA vaccines Center of Excellence. The Center will work to accelerate the development and delivery of next-generation vaccines by bringing together approximately 400 dedicated employees and integrating end-to-end mRNA vaccine capabilities with dedicated R&D, digital, and Chemistry, Manufacturing and Controls (CMC) teams across sites at Cambridge, MA (US) and Marcy-l’Étoile, Lyon (France).
On July 13, 2021, Sanofi announced becoming a Premium Partner of Paris 2024 for the Olympic and Paralympic Games being held in Paris in 2024. For Sanofi, whose headquarters are based in Paris, this commitment to Paris 2024 is a unique opportunity to engage its 100,000 employees in one of the largest sporting events in the world. Sanofi’s commitment to Paris 2024 also highlights the company’s societal impact strategy and affirms its support of the values of inclusion, diversity and openness to the world. The company welcomes the objectives of Paris 2024 to foster the values of the Olympic and Paralympic Games to increase their accessibility to the public and make them more sustainable and Sanofi intends to contribute by highlighting the benefits of physical activity on health.
On August 3, 2021, as part of Sanofi’s endeavor to accelerate the application of messenger RNA (mRNA) to develop therapeutics and vaccines, the company entered into a definitive agreement with Translate Bio, a clinical-stage mRNA therapeutics company, under which Sanofi will acquire all outstanding shares of Translate Bio for $38.00 per share in cash, which represents a total equity value of approximately $3.2 billion (on a fully diluted basis). The acquisition was finalized on September 14, 2021.
On September 8, 2021, Sanofi entered into a definitive merger agreement with Kadmon Holdings, Inc. a biopharmaceutical company that discovers, develops, and markets transformative therapies for disease areas of significant unmet medical needs. The acquisition supports Sanofi’s strategy of continuing to grow its General Medicines core assets, and will immediately add Rezurock™ (belumosudil) to its transplant portfolio. Rezurock™ is a recently FDA-approved, first-in-class treatment for chronic graft-versus-host disease (cGVHD) for adult and pediatric patients 12 years and older who have failed at least two prior lines of systemic therapy. Shareholders of Kadmon common stock will receive $9.50 per share in cash, which represents a total equity value of approximately $1.9 billion (on a fully diluted basis). The acquisition of Kadmon by Sanofi was completed on November 9, 2021.
On September 28, 2021, Sanofi announced that despite positive interim results from Phase I/II trials of its mRNA COVID-19 vaccine candidate, the company had decided not to pursue development of that candidate. Sanofi will instead focus on completing the final development steps of its COVID-19 recombinant vaccine, developed in partnership with GSK.
On November 18, 2021, Sanofi announced an equity investment of €155 million in Owkin, along with a new strategic collaboration around discovery and development programs in four types of cancer involving an exclusivity fee up to €90 million spread over three years plus additional milestone-based payments. Owkin, an artificial intelligence (AI) and precision medicine company, builds best-in-class predictive biomedical AI models and robust data sets. With the ambition to optimize clinical trial design and detect predictive biomarkers for diseases and treatment outcomes, this collaboration will support Sanofi’s growing oncology portfolio in three core areas: lung cancer, breast cancer and multiple myeloma. To intensify medical research with AI in a privacy-preserving way, Owkin has assembled a global research network powered by federated learning, which allows data scientists to securely connect to decentralized, multi-party data sets and train AI models without having to pool data. This approach will complement Sanofi’s emerging strengths in oncology, as the company’s scientists apply cutting-edge technology platforms to develop potentially life-transforming medicines for cancer patients worldwide.
On December 1, 2021, Sanofi entered into an agreement to acquire Origimm Biotechnology GmbH, a privately owned Austrian biotechnology company specializing in the discovery of virulent skin microbiome components and antigens from bacteria that cause skin disease, such as acne. This acquisition is a further step in executing Sanofi's global "Play to Win" strategy, seeking out growth opportunities, and building an industry-leading vaccines pipeline. The deal will add ORI-001 to Sanofi’s early-stage pipeline. ORI-001 is a therapeutic acne vaccine candidate based on recombinant proteins, and entered preliminary clinical studies in the third quarter of 2021. In parallel, Sanofi is working to develop additional antigen versions and expects to leverage its next-generation mRNA platform in a Phase I/II trial to start in 2023. The acquisition closed in December 2021.
On December 21, 2021, Sanofi announced that it had entered into an agreement to acquire Amunix Pharmaceuticals, Inc., an immuno-oncology company leveraging its proprietary, clinically validated XTEN® and its innovative universal protease-releasable masking technology platform (Pro-XTENTM), to discover and develop transformative T-cell engagers (TCE) and cytokine therapies for patients with cancer. Amunix’s pipeline, which includes lead candidate AMX-818, a masked HER2-directed TCE, offers a strong strategic fit with Sanofi’s focus on developing potentially transformative cancer therapies in immuno-oncology. Under the terms of the agreement, Sanofi will acquire Amunix for an upfront payment of approximately $1 billion and up to $225 million upon achievement of certain future development milestones. The acquisition was completed on February 8, 2022.
Highlights of Sanofi’s research and development efforts in 2021 in the Pharmaceuticals segment included the launch of a Phase III trial (XTEND-Kids) evaluating efanesoctocog alfa (BIVV001) in pediatric hemophilia A patients, and of a second pivotal trial (AERIFY-2) evaluating itepekimab in chronic obstructive pulmonary disease (COPD). In the Vaccines segment, Sanofi and GSK announced the launch of their Phase III clinical study to assess the safety, efficacy, and immunogenicity of their adjuvanted recombinant-protein COVID-19 vaccine candidate. Positive booster data show that neutralizing antibodies increased across all primary vaccines received (mRNA or adenovirus) in a 9- to 43-fold range and for all age groups tested, with a good safety and tolerability profile. The Phase III trial is ongoing in order to generate the increased number of events needed for analysis, given that populations around the world are increasingly exposed to COVID-19 variants. On December 8, 2021, the New England Journal of Medicine (NEJM) published positive results from a pivotal clinical trial of Dupixent® (dupilumab) in children aged 6 to 11 years with uncontrolled moderate-to-severe asthma. Regulatory reviews are ongoing in the European Union. On December 13, 2021, Sanofi announced positive Phase III results showing that adding Dupixent® (dupilumab) to standard-of-care topical corticosteroids (TCS) significantly improved skin clearance and reduced overall disease severity and itch in infants and children aged 6 months to 5 years with uncontrolled moderate-to-severe atopic dermatitis. Data from two Phase III studies demonstrating that fitusiran significantly reduced bleeds in people with hemophilia A or B, with or without inhibitors, were presented at the American Society of Hematology (ASH) congress.
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PART I |
ITEM 5. Operating and financial review and prospects |
In 2021, Sanofi obtained regulatory marketing approval for a number of products. In the United States, the PD-1 inhibitor Libtayo® (cemiplimab-rwlc) received full approval for locally advanced basal cell carcinoma (BCC) and accelerated approval in metastatic BCC, following a priority review by the US Food and Drug Administration (FDA). Libtayo® is now approved for the two most common advanced skin cancers in the United States. The European Commission also approved Libtayo® for the treatment of metastatic or locally advanced BCC in adults. The FDA and the European Commission approved Libtayo®for the first-line treatment of patients with advanced non-small cell lung cancer (NSCLC) whose tumors have high PD-L1 expression. The FDA and the European Commission approved Sarclisa® (isatuximab-irfc), in combination with carfilzomib and dexamethasone, for adult patients with relapsed and refractory multiple myeloma who have received one to three prior therapies. The European Commission approved Aubagio® (teriflunomide) for the treatment of pediatric patients aged 10 to 17 years with relapsing-remitting multiple sclerosis (MS). The approval confirms Aubagio® as the first oral therapy for first-line treatment of children and adolescents with MS in the European Union. The FDA approved Nexviazyme® (avalglucosidase alfa-ngpt) for the treatment of patients one year of age and older with late-onset Pompe disease, a progressive and debilitating muscle disorder that impairs a person’s ability to move and breathe. The FDA also approved Dupixent® (dupilumab) as an add-on maintenance treatment of patients aged 6 to 11 years with moderate-to-severe asthma characterized by an eosinophilic phenotype or with oral corticosteroid-dependent asthma. In China, Dupixent® was approved for the treatment of atopic dermatitis in adolescents aged 12 to 17 years.
For further information about the pharmaceutical products and vaccines we sell, and about our research and development portfolio, refer to “— Item 4.B. — Business Overview”.
Our net sales for 2021 amounted to €37,761 million, an increase of 4.8% from 2020. At constant exchange rates (CER(9)), net sales rose by 7.1%, due mainly to growth in sales for our Specialty Care global business unit (driven by a solid performance from Dupixent®), our Vaccines business, and our Consumer Healthcare global business unit. Those positive effects more than offset a decrease in sales for our General Medicines global business unit, in line with the streamlining of our non-core product portfolio and lower sales of Lantus® and Aprovel®.
Net income attributable to equity holders of Sanofi amounted to €6,223 million for 2021, compared with €12,294 million in 2020. This €6,071 million decrease mainly reflected the €7,382 million gain recognized in 2020 on the divestment of Regeneron shares following the transaction of May 29, 2020. Earnings per share was €4.97 in 2021, compared with €9.81 in 2020. Business net income(10) was €8,213 million, up 11.8% on 2020, while business earnings per share (business EPS(2)) was 11.9% higher than in 2020 at €6.56.
Our net debt(11) increased from €8,790 million as of December 31, 2020 to €9,983 million as of December 31, 2021, due in particular to cash outflows related to investing activities during the year, and more specifically to our acquisitions of Kadmon, Translate Bio and Kymab. At the Annual General Meeting on May 3, 2022, we will ask our shareholders to approve a dividend of €3.33 per share for the 2021 financial year, representing a payout of 50.8% of our Business net income.
A.1.2. Impacts of competition from generics and biosimilars
Some of our flagship products continued to suffer sales erosion in 2021 under the impact of competition from generics and biosimilars. 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 the Diabetes franchiseyears ended December 31, 2021 and 2020 (see “— A.2. Results of Operations — Year Ended December 31, 2021 Compared with Year Ended December 31, 2020” below) for the main products affected by generic and biosimilar competition shows a loss of €231 million of net sales on a reported basis. Other parameters may have contributed to the loss of sales, such as a fall in the average selling price of certain products.
The table below sets forth the impact by product.
| | | | | | | | | | | | | | | |
(€ million) | 2021 | 2020 | | Change on a reported basis | Change on a reported basis (%) |
Aprovel® Europe | 87 | | 100 | | | (13) | | -13.0 | % |
Lantus® Europe | 474 | | 537 | | | (63) | | -11.7 | % |
Lovenox® Europe | 703 | | 656 | | | 47 | | +7.2 | % |
Plavix® Europe | 115 | | 126 | | | (11) | | -8.7 | % |
Jevtana® Europe | 112 | | 187 | | | (75) | | -40.1 | % |
Lantus® United States | 861 | | 929 | | | (68) | | -7.3 | % |
Lovenox® United States | 29 | | 30 | | | (1) | | -3.3 | % |
Aprovel® Japan | 15 | | 27 | | | (12) | | -44.4 | % |
Lantus® Japan | 16 | | 21 | | | (5) | | -23.8 | % |
Plavix® Japan | 75 | | 105 | | | (30) | | -28.6 | % |
Total | 2,487 | | 2,718 | | | (231) | | -8.5 | % |
We expect the erosion caused by generic competition to continue in 2022, with a negative impact on our net income. The products likely to be impacted in 2022 include those that already faced generic competition in 2021, but whose sales can reasonably be expected to be subject to further sales erosion in 2022 (see products listed in the table above). In 2022, we may be facing generic competition in some EU countries for Mozobil® following expiry of orphan exclusivity in August 2021 (although a secondary patent and supplementary protection certificate remain in force in the EU).
In 2021, the aggregate consolidated net sales of those products in Europe, the United States and Japan were €5,113€2,487 million; this comprised €890 million in the United States (including €861 million in net sales of Lantus®); €1,491 million in Europe; and €106 million in Japan. The negative impact on our 2022 net sales is likely to represent a substantial portion of those sales, but the actual impact will
(9) Non-GAAP financial measure: see definition in “— A.1.6. Presentation of Net Sales” below.
(10) Non-GAAP financial measure: see definition in “— A.1.5. Segment Information — 3. Business Net Income” below.
(11) Non-GAAP financial measure: see definition in “— B. Liquidity and Capital Resources” below.
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depend on a number of factors such as the number of generics available, the prices at which the products are sold, and overall market trends, and potential litigation outcomes.
In China, the authorities have implemented a range of healthcare cost containment measures, including a Volume Based Procurement (VBP) program for insulins (see also “Item 4. — B.6.4. Pricing & Reimbursement”). A large number of molecules were selected to submit tenders under successive waves of the VBP program, with the successful bidders being awarded a high level of market share in return for offering lower prices. In 2021, Sanofi successfully tendered for amisulpride and oxaliplatin 50mg, as well as for our insulins Toujeo® and Lantus. As a consequence, Sanofi expects that its glargine sales (Toujeo®/Lantus®) to decrease by around 30% in 2022 in China. Toujeo®/Lantus® net sales in China in 2021 were €459 million.
A.1.3. Purchase accounting effects
Our results of operations and financial condition for the years ended December 31, 2021, and 2020 have been significantly affected by our past acquisitions (acquisition of Aventis in August 2004, acquisition of Genzyme in April 2011, exchange of our Animal Health business (Merial) for Boehringer Ingelheim’s Consumer Healthcare business in January 2017, acquisition of Bioverativ in 2018, and certain other transactions). See “— A.1.11. Critical accounting and reporting policies — Business combinations” below for an explanation of the impact of business combinations on our results of operations.
The Bioverativ business combination has generated significant amortization of intangible assets (€320 million in 2021, and €331 million in 2020). The Genzyme business combination has generated significant amortization of intangible assets (€509 million in 2021, and €549 million in 2020). The exchange of Merial for Boehringer Ingelheim’s Consumer Healthcare business has generated amortization of intangible assets (€195 million in 2021, and €202 million in 2020).
In order to isolate the purchase accounting effects of all acquisitions and certain other items, we use a non-GAAP financial measure that we refer to as “business net income” (see definition in “— A.1.5. Segment Information — 3. Business Net Income” below).
A.1.4. Sources of revenues and expenses
Revenues. Revenue arising from the sale of goods is presented in the income statement within Net sales. Net sales comprise revenue from sales of pharmaceutical products, consumer health care products, active ingredients and vaccines, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Returns, discounts, incentives and rebates are recognized in the period in which the underlying sales are recognized, as a reduction of sales revenue. See Note B.13.1. to our consolidated financial statements included at Item 18. of this annual report. We sell pharmaceutical products and vaccines directly, through alliances, and by licensing arrangements throughout the world. When we sell products directly, we record sales revenues as part of our consolidated net sales. When we sell products through alliances, the revenues reflected in our consolidated financial statements are based on the contractual arrangements governing those alliances. For more information about our alliances, see “— A.1.7. Financial Presentation of Alliances” below. When our products are sold by licensing arrangements, we receive royalty income that we record in Other revenues. Revenues from non-Sanofi products, mainly comprising royalty income from license arrangements and sales of non-Sanofi products by our US-based entity VaxServe, are presented within Other revenues. This line item also includes revenues arising from the distribution of Eloctate® and Alprolix®) under Sanofi’s agreements with Swedish Orphan Biovitrum AB (Sobi) and revenue received under agreements for Sanofi to provide manufacturing services to third parties. See Note B.13.2. to the consolidated financial statements included at Item 18. of this Annual Report on Form 20-F.
Cost of Sales. Our cost of sales consists primarily of the cost of purchasing raw materials and active ingredients, labor and other costs relating to our manufacturing activities, packaging materials, payments made under licensing agreements and distribution costs. We have license agreements under which we manufacture, sell and distribute products that are patented by other companies. When we pay royalties, we record them in Cost of sales.
Operating Income. Our operating income reflects our revenues, our cost of sales and the remainder of our operating expenses, the most significant of which are research and development expenses and selling and general expenses. For our operating segments, we also measure our results of operations through an indicator referred to as “Business Operating Income,” which we describe below under “A.1.5. Segment Information — 2/Business Operating Income”.
A.1.5. Segment information and Business net income
1/ Operating segments
In accordance with IFRS 8 (Operating Segments), the segment information reported by Sanofi is prepared on the basis of internal management data provided to the Chief Executive Officer, who is the chief operating decision maker. The performance of those segments is monitored individually using internal reports and common indicators. The operating segment disclosures required under IFRS 8 are provided in Notes B.26. and D.35. (“Segment Information”) to our consolidated financial statements, included at Item 18. of this annual report.
Sanofi has three operating segments: Pharmaceuticals, Vaccines, and Consumer Healthcare.
The Pharmaceuticals segment comprises, for all geographical territories, the commercial operations of the following global franchises: Specialty Care (Dupixent®, Neurology & Immunology, Rare Diseases, Oncology, and Rare Blood Disorders) and General Medicines (Diabetes, Cardiovascular and Established Prescription Products), together with research, development and production activities dedicated to the Pharmaceuticals segment. This segment also includes associates whose activities are related to pharmaceuticals. Following the transaction of May 29, 2020, Regeneron is no longer an associate of Sanofi (see Note D.1. to our consolidated financial statements for the year ended December 31, 2020). Consequently, the Pharmaceuticals segment no longer includes Sanofi’s equity-accounted share of Regeneron’s profits for all the periods presented in this Annual Report on Form 20-F.
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The Vaccines segment comprises, for all geographical territories, the commercial operations of Sanofi Pasteur, together with research, development and production activities dedicated to vaccines.
The Consumer Healthcare segment comprises, for all geographical territories, the commercial operations for Sanofi’s Consumer Healthcare products, together with research, development and production activities dedicated to those products.
Inter-segment transactions are not material.
The costs of Sanofi’s global support functions (External Affairs, Finance, Human Resources, Legal Affairs, Information Solutions & Technologies, Sanofi Business Services, etc.) are mainly managed centrally at group-wide level. The costs of those functions are presented within the “Other” category. That category also includes other reconciling items such as retained commitments in respect of divested activities.
Following the Capital Markets Day held in February 2021, Sanofi changed the presentation of net sales for certain products in the Pharmaceuticals segment (within the General Medicines GBU) and the Consumer Healthcare segment, and also reallocated certain expenses. In particular, IT costs relating to our new digital organization – previously allocated to the Pharmaceutical, Vaccines, and Consumer Healthcare segments – are now included within the “Other” segment. The 2020 segmental results presented below have been amended for comparative purposes in order to reflect those adjustments.
In accordance with IAS 8, Sanofi has treated the first-time application of the IFRIC agenda decisions on (i) the calculation of provisions for pensions and other post-employment benefits under IAS 19 and (ii) accounting for costs of configuring or customising a supplier’s application software in a Software as a Service (SaaS) arrangement as retrospective changes in accounting policy. The impacts of those IFRIC agenda decisions are presented in Note A.2.1. of our consolidated financial statements, included at Item 18. of this annual financial report.
2/ Business operating income
We report segment results on the basis of “Business operating income”. This indicator is used internally by Sanofi’s chief operating decision maker to measure the performance of each operating segment and to allocate resources. For a definition of “Business operating income”, and a reconciliation between that indicator and Income before tax and investments accounted for using the equity method, refer to Note D.35. to our consolidated financial statements.
Our “Business operating income” for 2021 amounted to €10,714 million, versus €9,759 million in 2020, while our “Business operating income margin” was 28.4%, versus 27.1% in 2020. “Business operating income margin” is a non-GAAP financial measure, which we define as the ratio of our “Business operating income” to Net sales.
Our Income before tax and investments accounted for using the equity method for 2021 amounted to €7,798 million, versus €13,778 million in 2020.
Because our “Business operating income” and “Business operating income margin” are not standardized measures, they may not be directly comparable with the non-GAAP financial measures of other companies using the same or similar non-GAAP financial measures. Although management uses those non-GAAP measures to set goals and measure performance, they have no standardized meaning prescribed by IFRS. These non-GAAP measures are presented solely to permit investors to more fully understand how Sanofi's management assesses underlying performance. These non-GAAP measures are not, and should not be viewed as, a substitute for IFRS measures, and should be viewed in conjunction with our IFRS financials and performance measures. As a result, such measures have limits in their usefulness to investors.
3/ Business net income
We believe that understanding of our operational performance by our management and our investors is enhanced by reporting “Business net income”. This non-GAAP financial measure represents “Business operating income”, less net financial expenses and the relevant income tax effects.
“Business net income” for 2021 was €8,213 million, 11.8% up on 2020 (€7,346 million), and represented 21.7% of net sales (compared with 20.4% in 2020).
We also report “Business earnings per share” (“Business EPS”), a non-GAAP financial measure we define as “Business net income” divided by the weighted average number of shares outstanding. “Business EPS” was €6.56 for 2021, 11.9% higher than the 2020 figure of €5.86, based on an average number of shares outstanding of 1,252.5 million for 2021 and 1,253.6 million for 2020.
Our Net income attributable to equity holders of Sanofi amounted to €6,223 million for 2021, compared with €12,294 million in 2020.
The table below reconciles our “Business operating income” to our “Business net income”:
| | | | | | | | | | | |
(€ million) | December 31, 2021 | December 31, 2020 | (a) |
Business operating income | 10,714 | | 9,759 | | |
Financial income and expenses | (328) | | (335) | | |
Income tax expense | (2,173) | | (2,078) | | |
Business net income | 8,213 | | 7,346 | | |
(a)Includes the impacts of the IFRIC final agenda decision of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
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We define “Business net income” as Net income attributable to equity holders of Sanofi determined under IFRS, excluding the following items:
•amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature);
•fair value remeasurements of contingent consideration relating to business combinations or divestments or acquisition of intangible assets;
•other impacts associated with acquisitions (including impacts relating to investments accounted for using the equity method);
•restructuring costs and similar items (presented within the line item Restructuring costs and similar items);
•other gains and losses, including gains and losses on major disposals of non-current assets (presented within the line item Other gains and losses, and litigation);
•for 2020, the gain on the divestment of Regeneron shares on May 29, 2020 (see Note D.2. to our consolidated financial statements for the year ended December 31, 2020);
•other costs and provisions related to litigation (presented within the line item Other gains and losses, and litigation);
•the tax effects of the items listed above, and the effects of major tax disputes;
•for 2020, the effects of the discontinuation of accounting by the equity method for the investment in Regeneron (see Note D.2. to our consolidated financial statements for the year ended December 31, 2020); and
•the portion attributable to non-controlling interests of the items listed above.
The table below reconciles our “Business net income” to Net income attributable to equity holders of Sanofi:
| | | | | | | | | | | |
(€ million) | 2021 | 2020 | (a) |
Net income attributable to equity holders of Sanofi | 6,223 | | 12,294 | | |
Amortization of intangible assets(b) | 1,580 | | 1,681 | | |
Impairment of intangible assets(c) | 192 | | 330 | | |
Fair value remeasurement of contingent consideration | 4 | | (124) | | |
Expenses arising from the impact of acquisitions on inventories | 4 | | 53 | | |
| | | |
Restructuring costs and similar items | 820 | | 1,089 | | |
Other gains and losses, and litigation(d) | 5 | | (136) | | |
Gain on divestment of Regeneron shares on May 29, 2020(e) | — | | (7,225) | | |
Tax effects of the items listed above: | (614) | | (270) | | |
•amortization and impairment of intangible assets | (415) | | (541) | | |
•fair value remeasurement of contingent consideration | (2) | | 39 | | |
•expenses arising from the impact of acquisitions on inventories | — | | (8) | | |
| | | |
•restructuring costs and similar items | (200) | | (299) | | |
•gain on divestment of Regeneron shares on May 29, 2020 | — | | 477 | | |
•other tax effects | 3 | | 62 | | |
| | | |
Share of items listed above attributable to non-controlling interests | (1) | | (3) | | |
Investments accounted for using the equity method: restructuring costs and expenses arising from the impact of acquisitions | — | | (30) | | |
Effect of discontinuation of equity method for investment in Regeneron(f) | — | | (313) | | |
Business net income | 8,213 | | 7,346 | | |
Average number of shares outstanding (million) | 1,252.5 | | 1,253.6 | | |
Basic earnings per share (€) | 4.97 | | 9.81 | | |
Reconciling items per share (€) | 1.59 | | (3.95) | | |
Business earnings per share (€) | 6.56 | | 5.86 | | |
(a)Includes the impacts of the IFRIC final agenda decisions of March 2021 on the costs of configuring or customising application software used in a Software as a Service (SaaS) arrangement and of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
(b)Includes amortization expense related to accounting for business combinations: €1,463 million in 2021 and €1,592 million in 2020.
(c)For 2021, this line relates to the discontinuation of the development of sutimlimab in the treatment of Immune Thrombocytopenic Purpura (ITP), and to the termination of various research projects in Vaccines. For 2020, this line mainly comprises impairment losses taken against R&D programs within the Specialty Care GBU, and the discontinuation of certain R&D programs and collaboration agreements in Diabetes.
(d)For 2020, this line mainly comprises the gain on the sale of the Seprafilm® activity to Baxter.
(e)This line includes, for 2020, the gain on the sale of (i) 13 million shares of Regeneron common stock in the registered public offering and (ii) the 9.8 million shares repurchased by Regeneron, but does not include the gain arising from the remeasurement of the 400,000 retained shares at market value as of May 29, 2020.
(f)“Business net income” no longer includes Sanofi’s share of profits from its equity investment in Regeneron (see Note D.1. to our consolidated financial statements for the year ended December 31, 2020).
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The most significant reconciling items between “Business net income” and Net income attributable to equity holders of Sanofi relate to (i) the purchase accounting effects of our acquisitions and business combinations, particularly the amortization and impairment of intangible assets (other than software and other rights of an industrial or operational nature) and (ii) the impacts of restructurings or transactions regarded as non-recurring, where the amounts involved are particularly significant. We believe that excluding those impacts enhances an investor’s understanding of our underlying economic performance, because it gives a better representation of our recurring operating performance.
We believe that eliminating charges related to the purchase accounting effect of our acquisitions and business combinations (particularly amortization and impairment of some intangible assets) enhances comparability of our ongoing operating performance relative to our peers. Those intangible assets (principally rights relating to research, development and commercialization of products) are accounted for in accordance with IFRS 3 (Business Combinations) and hence may be subject to remeasurement. Such remeasurements are not made other than in a business combination.
We also believe that eliminating the other effects of business combinations (such as the incremental cost of sales arising from the workdown of acquired inventories remeasured at fair value in business combinations) gives a better understanding of our recurring operating performance.
Eliminating restructuring costs and similar items enhances comparability with our peers because those costs are incurred in connection with reorganization and transformation processes intended to optimize our operations.
Finally, we believe that eliminating the effects of transactions that we regard as non-recurring and that involve particularly significant amounts (such as major gains and losses on disposals, and costs and provisions associated with major litigation and other major non-recurring items) improves comparability from one period to the next.
We remind investors, however, that “Business net income” should not be considered in isolation from, or as a substitute for, Net income attributable to equity holders of Sanofi reported in accordance with IFRS. In addition, we strongly encourage investors and potential investors not to rely on any single financial measure but to review our financial statements, including the notes thereto, carefully and in their entirety.
We compensate for the material limitations described above by using “Business net income” only to supplement our IFRS financial reporting and by ensuring that our disclosures provide sufficient information for a full understanding of all adjustments included in “Business net income”.
Because our “Business net income” and “Business EPS” are not standardized measures, they may not be directly comparable with the non-GAAP financial measures of other companies using the same or similar non-GAAP financial measures.
A.1.6. Presentation of net sales
In the discussion below, we present our consolidated net sales for 2021, and 2020. We analyze our net sales by various categories including segment, Global Business Units, franchise, product, and geographical region. In addition to reported net sales, we analyze non-GAAP financial measures designed to isolate the impact on our net sales of currency exchange rates and changes in the structure of our group.
When we refer to changes in our net sales at constant exchange rates (CER), that means that we have excluded the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period.
When we refer to changes in our net sales on a constant structure basis, that means that we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:
•by including sales generated by entities or product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on sales information we receive from the party from whom we make the acquisition;
•similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period; and
•for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period.
A presentation of consolidated net sales for 2020 compared with 2019 down 6.6%is available in our Form 20-F filed on March 4, 2021, Item 5., section “A.2.1. Net Sales”.
Following our February 2021 Capital Markets Day, we have changed how we present our sales within the General Medicines and Consumer Healthcare GBUs. We have introduced a separate line for “Industrial sales”, which essentially comprises sales of active ingredients and semi-finished products to third parties. Such sales were previously reported within the Diabetes and Cardiovascular & Established Prescription Products franchises on the line for the relevant product, and on the “Generics” line. For the Consumer Healthcare GBU, we have adopted a more granular presentation by introducing new sub-categories that reflect consumer trends and the strengths and opportunities of our portfolio.
A.1.7. Financial presentation of alliances
We have entered into a number of alliances for the development, co-promotion and/or co-marketing of our products. We believe that a presentation of our two principal alliances is useful to an understanding of our financial statements.
The financial impact of the alliances on our income statement is described in “— Results of Operations — Year Ended December 31, 2021 Compared with Year Ended December 31, 2020”, in particular in “— Net Sales”, “— Other Revenues”, “— Share of Profit/Loss from Investments Accounted for using the Equity Method” and “— Net Income Attributable to Non-Controlling Interests”.
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1/ Alliance arrangements with Regeneron Pharmaceuticals Inc. (Regeneron)
Collaboration agreements on human therapeutic antibodies
In November 2007, Sanofi and Regeneron signed two agreements (amended in November 2009) relating to human therapeutic antibodies: (i) the Discovery and Preclinical Development Agreement, and (ii) the License and Collaboration Agreement, relating to clinical development and commercialization. Under the License and Collaboration Agreement, Sanofi had an option to develop and commercialize antibodies discovered by Regeneron under the Discovery and Preclinical Development Agreement.
Discovery and development
Because Sanofi decided not to exercise its option to extend the Discovery and Preclinical Development Agreement, that agreement expired on December 31, 2017.
As a result of Sanofi’s exercise of an option with respect to an antibody under the Discovery and Preclinical Development Agreement, such antibody became a "Licensed Product" under the License and Collaboration Agreement, pursuant to which Sanofi and Regeneron co-develop the antibody with Sanofi initially being wholly responsible for funding the development program. On receipt of the first positive Phase III trial results for any antibody being developed under the License and Collaboration Agreement, the subsequent development costs for that antibody are split 80% Sanofi, 20% Regeneron. Amounts received from Regeneron under the License and Collaboration Agreement are recognized by Sanofi as a reduction in the line item Research and development expenses. Co-development with Regeneron of the antibodies Dupixent®, Kevzara® and REGN3500 (SAR440340 - itepekimab) is ongoing under the License and Collaboration Agreement as of December 31, 2021.
Once a product begins to be commercialized, and provided that the share of quarterly results under the agreement represents a profit, Sanofi is entitled to an additional portion of Regeneron’s profit-share (capped at 10% of Regeneron’s share of quarterly profits) until Regeneron has paid 50% of the cumulative development costs incurred by the parties in the collaboration (see footnote g(ii) to the table provided in Note D.21.1., “Off balance sheet commitments relating to operating activities”).
On the later of (i) 24 months before the scheduled launch date or (ii) the first positive Phase III trial results, Sanofi and Regeneron share the commercial expenses of the antibodies co-developed under the License and Collaboration Agreement.
Commercialization
Sanofi is the lead party with respect to the commercialization of all co-developed antibodies, and Regeneron has certain option rights to co-promote the antibodies. Regeneron has exercised its co-promotion rights in the United States and in certain other countries. Sanofi recognizes all sales of the antibodies. Profits and losses arising from commercial operations in the United States are split 50/50. Outside the United States, Sanofi is entitled to between 55% and 65% of profits depending on sales of the antibodies, and bears 55% of any losses. The share of profits and losses due to or from Regeneron under the agreement is recognized within the line items Other operating income or Other operating expenses, which are components of Operating income.
In addition, Regeneron is entitled to receive payments contingent on the attainment of specified levels of aggregate sales on all antibodies outside the United States, on a rolling twelve-month basis.
A liability for those payments is recognized in the balance sheet when it is highly probable that the specified level of aggregate sales will be met. The opposite entry for that liability is capitalized within Other intangible assets in the balance sheet. A payment was made in 2021 following the attainment of $1.5 billion of sales of all antibodies outside the United States on a rolling twelve-month basis.
Amendments to the collaboration agreements
In January 2018, Sanofi and Regeneron signed a set of amendments to their collaboration agreements, including an amendment that allowed for the funding of additional programs on Dupixent® and REGN3500 (SAR440340 – itepekimab) with an intended focus on extending the current range of indications, finding new indications, and improving co-morbidity between multiple pathologies.
Effective April 1, 2020, Sanofi and Regeneron signed a Cross License and Commercialization Agreement for Praluent®, whereby Sanofi obtained sole ex-US rights to Praluent®, and Regeneron obtained sole US rights to Praluent® along with a right to 5% royalties on Sanofi’s sales of Praluent® outside the United States. Each party is solely responsible for the development, manufacturing and commercialization of Praluent® in their respective territories. Although each company has responsibility for supplying Praluent® in its respective territory, the companies have entered into agreements to support manufacturing needs for each other.
Effective September 30, 2021, Sanofi and Regeneron signed an amendment to their collaboration agreement in order to specify allocations of responsibilities and associated resources between the two parties in connection with the co-promotion of Dupixent® in certain countries. The terms of the collaboration relating to REGN3500 (SAR440340 �� itepekimab) are unchanged.
Immuno-oncology (IO) collaboration agreements
On July 1, 2015, Sanofi and Regeneron signed two agreements – the IO Discovery and Development Agreement and the IO License and Collaboration Agreement (IO LCA) – relating to new antibody cancer treatments in the field of immuno-oncology.
The Amended IO Discovery Agreement, effective from December 31, 2018, was terminated through a Letter Amendment dated March 16, 2021 in which Sanofi formalized its opt-out from the BCMAxCD3 and MUC16xCD3 programs.
Libtayo® (cemiplimab)
Under the 2015 IO LCA as amended in January 2018, Sanofi and Regeneron committed funding of no more than $1,640 million, split on a 50/ 50 basis ($820 million per company), for the development of REGN2810 (cemiplimab, trademark Libtayo®), a PD-1 inhibitor antibody. The funding was raised to $1,840 million by way of amendment effective on September 30, 2021. Regeneron is responsible for the commercialization of Libtayo® in the United States, and Sanofi in all other territories. Sanofi has exercised its option to co-promote Libtayo® in the United States. In 2021, Regeneron exercised its option to co-promote Libtayo® in certain other countries.
The IO LCA also provided for a one-time milestone payment of $375 million by Sanofi to Regeneron in the event that sales of a PD-1 product were to exceed, in the aggregate, $2 billion in any consecutive 12-month period.
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ITEM 5. Operating and financial review and prospects |
Under the IO LCA Sanofi and Regeneron share equally in profits and losses in connection with the commercialization of collaboration products, except that Sanofi is entitled to an additional portion of Regeneron’s profit-share (capped at 10% of Regeneron’s share of quarterly profits) until Regeneron has paid 50% of the cumulative development costs incurred by the parties under the IO Discovery Agreement, as amended.
In September 2018, the US Food and Drug Administration (FDA) approved Libtayo® (cemiplimab) 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 first and only product specifically approved and available in the United States for advanced stage CSCC. In July 2019, the European Medicines Agency (EMA) granted marketing authorization for Libtayo® for patients with metastatic or locally advanced CSCC who are not candidates for surgery.
In February 2021, the FDA approved Libtayo® for patients with locally advanced basal cell carcinoma (BCC), granted accelerated approval for patients with metastatic BCC, and approved Libtayo® for first-line monotherapy for patients with advanced non-small cell lung cancer (NSCLC) with PD-L1 expression of at least 50%. In June 2021, the EMA approved Libtayo® as a first-line treatment for patients with advanced NSCLC with PD-L1 expression of at least 50% and for advanced basal cell carcinoma. The extensive clinical program for Libtayo® is focused on difficult-to-treat cancers. In skin cancer, this includes trials in adjuvant and neoadjuvant CSCC. Libtayo® is also being investigated in pivotal trials in NSCLC (in combination with chemotherapy) and cervical cancer, as well as in combination with either conventional or novel therapeutic approaches for other solid tumors and blood cancers. These potential uses are investigational, and their safety and efficacy have not been evaluated by any regulatory authority.
Investor agreement
In January 2014, Sanofi and Regeneron amended the investor agreement entered into by the two companies in 2007. Under the terms of the amendment, Sanofi accepted various restrictions, including “standstill” provisions that contractually prohibit Sanofi from seeking to directly or indirectly exert control of Regeneron or acquiring more than 30% of Regeneron’s capital stock (consisting of the outstanding shares of common stock and the shares of Class A stock). This prohibition remains in place until the earlier of (i) the later of the fifth anniversaries of the expiration or earlier termination of the Zaltrap® collaboration agreement with Regeneron (related to the development and commercialization of Zaltrap®) or the collaboration agreement with Regeneron on monoclonal antibodies (see “Collaboration agreements on human therapeutic antibodies” above), each as amended and (ii) other specified events.
Sanofi also agreed to vote as recommended by Regeneron’s Board of Directors, except that it could elect to vote proportionally with the votes cast by all of Regeneron’s other shareholders with respect to certain change-of-control transactions, and to vote in its sole discretion with respect to liquidation or dissolution, stock issuances equal to or exceeding 20% of the outstanding shares or voting rights of Regeneron’s Class A Stock and Common Stock (taken together), and new equity compensation plans or amendments if not materially consistent with Regeneron’s historical equity compensation practices. Sanofi began to account for its interest in Regeneron using the equity method in April 2014. Starting in 2018 Sanofi began to sell a small amount of shares of Regeneron stock pursuant to a Letter Agreement entered into with Regeneron.
On May 29, 2020, Sanofi announced the closing of its sale of 13 million shares of Regeneron common stock in a registered offering and a private sale to Regeneron (see Note D.2.).
At the same date an amendment to the Investor Agreement became effective, which stipulates inter alia that (i) the “standstill” provisions in the Investor Agreement, which contractually prohibit Sanofi from seeking to directly or indirectly exert control of Regeneron, will continue to apply; (ii) the voting commitments contained in the Investor Agreement will continue to apply to shares held by Sanofi; (iii) Sanofi will no longer have the right to designate an independent board member on the Regeneron Board of Directors.
Pursuant to subsequent sales, as of December 31, 2021 Sanofi held 279,766 shares of Regeneron stock.
2/ Alliance arrangements with Bristol-Myers Squibb (BMS)
Two of Sanofi’s leading products were jointly developed with BMS: the anti-hypertensive agent irbesartan (Aprovel®/Avapro®/Karvea®) and the anti-atherothrombosis treatment clopidogrel bisulfate (Plavix®/Iscover®).
On September 27, 2012, Sanofi and BMS signed an agreement relating to their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets.
Under the terms of this agreement, effective January 1, 2013, BMS returned to Sanofi its rights to Plavix® and Avapro®/Avalide® in all markets worldwide with the exception of Plavix® in the United States and Puerto Rico (“Territory B”), giving Sanofi sole control and freedom to operate commercially in respect of those products. In exchange, BMS received royalty payments on Sanofi’s sales of branded and unbranded Plavix® and Avapro®/Avalide® worldwide (except for Plavix® in Territory B) until 2018, and also received a payment of $200 million from Sanofi in December 2018, part of which is for buying out the non-controlling interests. Rights to Plavix® in Territory B remained unchanged and continued to be governed by the terms of the original agreement until February 28, 2020.
In all of the territories managed by Sanofi (including the United States and Puerto Rico for Avapro®/Avalide®) as defined in the new agreement, Sanofi recognized in its consolidated financial statements the revenue and expenses generated by its own operations. Since January 2019 onwards, there has no longer been any share of profits reverting to BMS (previously presented within Net income attributable to non-controlling interests in the income statement).
In Territory B for Plavix®, which was managed by BMS, the Plavix® business was conducted through the Territory B partnerships, which were jointly owned by BMS and Sanofi. Sanofi recognized its share of profits and losses within the line item Share of profit/(loss) from investments accounted for using the equity method.
On February 28, 2020, Sanofi purchased all BMS’s interests (50.1%) in each of the Territory B partnerships for a cumulative purchase price of $12 million. Following a transition period, Sanofi has been commercializing Plavix® under its own label since July 1, 2020.
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ITEM 5. Operating and financial review and prospects |
A.1.8. Impact of exchange rates
We report our consolidated financial statements in euros. Because we earn a significant portion of our revenues in countries where the euro is not the local currency, our results of operations can be significantly affected by exchange rate movements between the euro and other currencies, primarily the US dollar and, to a lesser extent, the Japanese yen, and currencies in emerging countries. We experience these effects even though certain of these countries do not account for a large portion of our net sales. In 2021, we earned 38.1% of our net sales in the United States. An increase in the value of the US dollar against the euro has a positive impact on both our revenues and our operating income. A decrease in the value of the US dollar against the euro has a negative impact on our revenues, which is not offset by an equal reduction in our costs and therefore negatively affects our operating income. A variation in the value of the US dollar has a particularly significant impact on our operating income, which is higher in the United States than elsewhere.
For a description of arrangements entered into to manage operating foreign exchange risks as well as our hedging policy, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk”, and “Item 3. Key Information — D. Risk Factors — Risks Related to Financial Markets — Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition”.
A.1.9. Divestments
There were no material divestments in 2021.
On May 29, 2020, Sanofi announced the closing of its sale of 13 million shares of Regeneron common stock through a registered offering at a price of $515 per share. This included a previously-announced overallotment option, which was fully exercised by the underwriters. In addition, Sanofi announced the completion of Regeneron's repurchase of 9.8 million shares or approximately $5,000 million in common stock directly from Sanofi. As a result of the offering, Sanofi has sold its entire equity investment in Regeneron (except for 400,000 Regeneron shares retained by Sanofi to support its ongoing collaboration with Regeneron) for total sale proceeds (before transaction-related costs) of €10,575 million. Consequently, Sanofi’s equity interest in Regeneron ceased to be accounted for by the equity method.
On November 26, 2019, Sanofi entered into a definitive agreement to sell Seprafilm® to Baxter. The sale was completed on February 14, 2020. Sanofi recognized a pre-tax gain of €129 million.
For further details about the divestments mentioned above, see Note D.1. to our consolidated financial statements included at Item 18. of this annual report.
A.1.10. Acquisitions
On April 8, 2021, Sanofi acquired the entire share capital of Kymab for an upfront payment of $1.1 billion (€973 million) and up to $350 million (€295 million) contingent upon reaching certain development milestones. The preliminary purchase price allocation resulted in the recognition of €965 million of other intangible assets. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows is a net cash outflow of €932 million.
On April 16, 2021, Sanofi completed the public offering for Kiadis. As of the end of the post-closing acceptance period on April 29, 2021, Sanofi held 97.39% of the share capital of Kiadis, and launched a statutory public buy-out procedure in order to obtain 100% of the share capital. The preliminary purchase price allocation resulted in the recognition of €341 million of other intangible assets. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows is a net cash outflow of €326 million.
On April 9, 2021, Sanofi acquired Tidal Therapeutics for an upfront payment of $160 million (€136 million), and up to $310 million (€261 million) contingent upon reaching certain development milestones. The preliminary purchase price allocation resulted in the recognition of €130 million of other intangible assets. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows is a net cash outflow of €135 million.
On September 14, 2021, Sanofi completed the acquisition of Translate Bio for a purchase price of €2.6 billion. The provisional purchase price allocation resulted in the recognition of goodwill amounting to €2,179 million. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows is a net cash outflow of €2,333 million.
On November 9, 2021, Sanofi completed the acquisition of Kadmon in a transaction valued at $1.9 billion (€1.6 billion) on a fully-diluted basis. The preliminary purchase price allocation resulted in the recognition of €1,739 million of other intangible assets. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows is a net cash outflow of €1,575 million.
On December 3, 2021, Sanofi completed the acquisition of Origimm Biotechnology GmbH, for an initial payment of €55 million, and up to €95 million contingent upon reaching certain development phases. The preliminary purchase price allocation resulted in the recognition of €55 million of other intangible assets. The impact of this acquisition as reflected within the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method in the consolidated statement of cash flows for the year ended December 31, 2021 is a net cash outflow of €50 million.
On January 23, 2020, Sanofi acquired Synthorx Inc. (“Synthorx”), for $2.5 billion (€2.2 billion). The final purchase price allocation, resulted in the recognition of goodwill amounting to €930 million. Synthorx has no commercial operations, and made a negative contribution of €106 million to Sanofi’s consolidated net income in 2020. The cash outflow on this acquisition amounted to €2,245 million, and was recorded in the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method within the consolidated statement of cash flows.
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ITEM 5. Operating and financial review and prospects |
Sanofi acquired Principia Biopharma Inc. (“Principia”) on September 28, 2020, for $3.68 billion (€3.2 billion). The final purchase price allocation resulted in the recognition of goodwill amounting to €912 million. Principia has no commercial operations, and made a negative contribution of €45 million to Sanofi’s consolidated net income in 2020. The cash outflow on this acquisition amounted to €2,972 million, and was recorded in the line item Acquisitions of consolidated undertakings and investments accounted for using the equity method within the consolidated statement of cash flows.
For further information about the acquisitions mentioned above, see Notes D.1. and D.2. to our consolidated financial statements included at Item 18. of this Annual Report on Form 20-F.
A.1.11. Critical accounting and reporting policies
Our consolidated financial statements are affected by the accounting and reporting policies that we use. Certain of our accounting and reporting policies are critical to an understanding of our results of operations and financial condition, and in some cases the application of these critical policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our consolidated financial statements. The accounting and reporting policies that we have identified as fundamental to a full understanding of our results of operations and financial condition are the following:
1/ Revenue recognition
Our policies with respect to revenue recognition are discussed in Note B.13. to our consolidated financial statements included at Item 18. of this annual report. Revenue arising from the sale of goods is presented in the income statement within Net sales. Net sales comprise revenue from sales of pharmaceutical products, consumer healthcare products, active ingredients and vaccines, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. In accordance with IFRS 15 (Revenue from Contracts with Customers), such revenue is recognized when Sanofi transfers control over the product to the customer. Control refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the products. For the vast majority of contracts, revenue is recognized when the product is physically transferred, in accordance with the delivery and acceptance terms agreed with the customer.
For contracts entered into by Sanofi Pasteur, transfer of control is usually determined by reference to the terms of release (immediate or deferred) and acceptance of batches of vaccine.
As regards contracts with distributors, Sanofi does not recognize revenue when the product is physically transferred to the distributor in case of products sold on consignment, or if the distributor acts as an agent. In such cases, revenue is recognized when control is transferred to the end customer, and the distributor’s commission is presented within the line item Selling and general expenses in the income statement.
We offer various types of price reductions on our products. In particular, products sold in the United States are covered by various programs (such as Medicare and Medicaid) under which products are sold at a discount. Rebates are granted to healthcare authorities, and under contractual arrangements with certain customers. Some wholesalers are entitled to chargeback incentives based on the selling price to the end customer, under specific contractual arrangements. Cash discounts may also be granted for prompt payment. The discounts, incentives and rebates described above are estimated on the basis of specific contractual arrangements with our customers or of specific terms of the relevant regulations and/or agreements applicable for transactions with healthcare authorities, and of assumptions about the attainment of sales targets. We also estimate the amount of sales returns, on the basis of contractual sales terms and reliable historical data. Discounts, incentives, rebates and sales returns are recognized in the period in which the underlying sales are recognized within Net Sales, as a reduction of gross sales. For additional details regarding the financial impact of discounts, incentives, rebates and sales returns, see Note D.23. to our consolidated financial statements included at Item 18. of this annual report.
Revenues from non-Sanofi products, mainly comprising royalty income from license arrangements and sales of non-Sanofi products by our US-based entity VaxServe, are presented within Other revenues. This line item also includes revenues arising from the distribution of Eloctate® and Alprolix® under Sanofi’s agreements with Swedish Orphan Biovitrum AB (Sobi) and revenue received under agreements for Sanofi to provide manufacturing services to third parties.
2/ Business combinations
As discussed in Note B.3. “Business combinations and transactions with non-controlling interests” to our consolidated financial statements included at Item 18. of this annual report, business combinations are accounted for by the acquisition method. The acquiree’s identifiable assets and liabilities that satisfy the recognition criteria of IFRS 3 (Business Combinations) are measured initially at their fair values as at the acquisition date, except for (i) non-current assets classified as held for sale, which are measured at fair value less costs to sell and (ii) assets and liabilities that fall within the scope of IAS 12 (Income Taxes) and IAS 19 (Employee Benefits). Business combinations completed on or after January 1, 2010 are accounted for in accordance with the revised IFRS 3 and IFRS 10 (Consolidated Financial Statements). In particular, contingent consideration payable to former owners agreed in a business combination, e.g. in the form of payments upon the achievement of certain R&D milestones, is recognized as a liability at fair value as of the acquisition date irrespective of the probability of payment. If the contingent consideration was originally recognized as a liability, subsequent adjustments to the liability are recognized in profit or loss (see Note D.18. “Liabilities related to business combinations and non-controlling interests” to our consolidated financial statements included at Item 18. of this annual report).
3/ Impairment of goodwill and intangible assets
As discussed in Note B.6. “Impairment of property, plant and equipment, intangible assets, and investments accounted for using the equity method” and in Note D.5. “Impairment of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18. of this annual report, we test our intangible assets for impairment periodically or when there is any internal or external indication of impairment. Such indicators could include primarily but not exclusively (i) increased market competition resulting from (for example) the introduction of a competitor’s product; (ii) earlier than expected loss of exclusivity; (iii) increased pricing pressure; (iv) restrictions imposed by regulatory authorities on the manufacture or sale of a product; (v) delay in the projected launch of a
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ITEM 5. Operating and financial review and prospects |
product; (vi) different from expected clinical trial results; (vii) higher than expected development costs or (viii) lower than expected economic performance.
We test for impairment on the basis of the same objective criteria that were used for the initial valuation. Our initial valuation and ongoing tests are based on the relationship of the value of our projected future cash flows associated with the asset to either the purchase price of the asset (for its initial valuation) or the carrying amount of the asset (for ongoing tests for impairment).
Significant underlying assumptions requiring the exercise of considerable judgement are applied in the future cash flow projections used to determine the recoverability of intangible assets, including primarily but not exclusively (i) therapeutic class market growth drivers; (ii) expected impacts from competing products (including but not exclusively generics and biosimilars); (iii) projected pricing and operating margin levels; (iv) likely changes in the regulatory, legal or tax environment; and (v) management’s estimates of terminal growth or attrition rates.
The recoverable amounts of intangible assets related to research and development projects are determined based on future net cash flows, which reflect the development stage of the project and the associated probability of success of marketization of the compound.
The projected cash flows are discounted to present value using a discount rate which factors in the risks inherent in cash flow projections.
Changes in facts and circumstances, assumptions and/or estimates may lead to future additional impairment losses or reversal of impairment previously recorded.
Key assumptions relating to goodwill impairment are the perpetual growth rate and the post-tax discount rate. A sensitivity analysis to the key assumptions is disclosed in Note D.5. “Impairment of intangible assets and property, plant and equipment” to our consolidated financial statements included at Item 18. of this annual report.
4/ Contingent consideration receivable
As described in Note B.8.1. and D.7.3. to our consolidated financial statements included at Item 18. of this annual report, contingent consideration receivable such as earn-outs on divestments, for example in the form of a percentage of future sales of the acquirer, are recognized as an asset at fair value as of the date of divestment. Subsequent remeasurements of the fair value of the asset are recognized in profit or loss.
5/ Pensions and post-retirement benefits
As described in Note B.23. “Employee benefit obligations” to our consolidated financial statements included at Item 18. of this annual report, we recognize our pension and retirement benefit commitments as liabilities on the basis of an actuarial estimate of the rights vested in employees and retirees at the end of the reporting period, net of the fair value of plan assets held to meet those obligations. We prepare this estimate at least on an annual basis taking into account financial assumptions (such as discount rates) and demographic assumptions (such as life expectancy, retirement age, employee turnover, and the rate of salary increases).
We recognize all actuarial gains and losses (including the impact of a change in discount rate) immediately through equity.
Depending on the key assumptions used, the pension and post-retirement benefit expense could vary within a range of outcomes and have a material effect on reported earnings. A sensitivity analysis to these key assumptions is set forth in Note D.19.1. “Provisions for pensions and other benefits” to our consolidated financial statements included at Item 18. of this annual report.
6/ Taxes
As discussed in Note B.22. “Income tax expense” to our consolidated financial statements included at Item 18. of this annual report, we recognize deferred income taxes on tax loss carry-forwards and on temporary differences between the tax base and carrying amount of assets and liabilities. We calculate our deferred tax assets and liabilities using enacted tax rates applicable for the years during which we estimate that the temporary differences are expected to reverse. We do not recognize deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. The recognition of deferred tax assets is determined on the basis of profit forecasts for each tax group, and of the tax consequences of the strategic opportunities available to Sanofi.
The positions adopted by Sanofi in tax matters are based on its interpretation of tax laws and regulations. Some of those positions may be subject to uncertainty. In such cases, Sanofi assesses the amount of the tax liability on the basis of the following assumptions: that its position will be examined by one or more tax authorities on the basis of all relevant information; that a technical assessment is carried out with reference to legislation, case law, regulations, and established practice; and that each position is assessed individually (or collectively where appropriate), with no offset or aggregation between positions. Those assumptions are assessed on the basis of facts and circumstances existing at the end of the reporting period. When an uncertain tax liability is regarded as probable, it is measured on the basis of Sanofi’s best estimate and recognized as a liability; uncertain tax assets are not recognized.
7/ Provisions for risks
Sanofi and its subsidiaries and affiliates may be involved in litigation, arbitration or other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights, compliance and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures. As discussed in Note B.12. “Provisions for risks” to our consolidated financial statements included at Item 18. of this annual report, we record a provision where we have a present obligation, whether legal or constructive, as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the outflow of resources. We also disclose a contingent liability in circumstances where we are unable to make a reasonable estimate of the expected financial effect that will result from the ultimate resolution of the proceeding, or a cash outflow is not probable.
For additional details regarding the financial impact of provisions for risks see Notes D.19.3. “Other provisions” and D.22. “Legal and Arbitral Proceedings” to our consolidated financial statements included at Item 18. of this annual report.
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ITEM 5. Operating and financial review and prospects |
8/ Provisions for restructuring costs
Provisions for restructuring costs include collective redundancy or early retirement benefits, compensation for early termination of contracts, and rationalization costs relating to restructured sites. Refer to Note D.19.2. to our consolidated financial statements included at Item 18. of this annual report.
Provisions are estimated on the basis of events and circumstances related to present obligations at the end of the reporting period and of past experience, and to the best of management’s knowledge at the date of preparation of the financial statements. The assessment of provisions can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Given the inherent uncertainties related to these estimates and assumptions, the actual outflows resulting from the realization of those risks could differ from our estimates.
A.2. Results of operations – Year ended December 31, 2021 compared with year ended December 31, 2020
Consolidated income statements
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(€ million) | 2021 | as % of net sales | 2020 | (a) | as % of net sales |
Net sales | 37,761 | | 100.0 | % | 36,041 | | | 100.0 | % |
Other revenues | 1,414 | | 3.7 | % | 1,328 | | | 3.7 | % |
Cost of sales | (12,255) | | (32.5 | %) | (12,159) | | | (33.7 | %) |
Gross profit | 26,920 | | 71.3 | % | 25,210 | | | 69.9 | % |
Research and development expenses | (5,692) | | (15.1 | %) | (5,530) | | | (15.3 | %) |
Selling and general expenses | (9,555) | | (25.3 | %) | (9,391) | | | (26.1 | %) |
Other operating income | 859 | | | 697 | | | |
Other operating expenses | (1,805) | | | (1,415) | | | |
Amortization of intangible assets | (1,580) | | | (1,681) | | | |
Impairment of intangible assets | (192) | | | (330) | | | |
Fair value remeasurement of contingent consideration | (4) | | | 124 | | | |
Restructuring costs and similar items | (820) | | | (1,089) | | | |
Other gains and losses, and litigation | (5) | | | 136 | | | |
Gain on Regeneron investment arising from transaction of May 29, 2020 | — | | | 7,382 | | | |
Operating income | 8,126 | | 21.5 | % | 14,113 | | | 39.2 | % |
Financial expenses | (368) | | | (388) | | | |
Financial income | 40 | | | 53 | | | |
Income before tax and investments accounted for using the equity method | 7,798 | | 20.7 | % | 13,778 | | | 38.2 | % |
Income tax expense | (1,558) | | | (1,807) | | | |
Share of profit/(loss) from investments accounted for using the equity method | 39 | | | 359 | | | |
Net income | 6,279 | | 16.6 | % | 12,330 | | | 34.2 | % |
Net income attributable to non-controlling interests | 56 | | | 36 | | | |
Net income attributable to equity holders of Sanofi | 6,223 | | 16.5 | % | 12,294 | | | 34.1 | % |
Average number of shares outstanding (million) | 1,252.5 | | | 1,253.6 | | | |
Average number of shares after dilution (million) | 1,257.9 | | | 1,260.1 | | | |
•Basic earnings per share (€) | 4.97 | | | 9.81 | | | |
•Diluted earnings per share (€) | 4.95 | | | 9.76 | | | |
(a)Includes the impacts of the IFRIC final agenda decisions of March 2021 on the costs of configuring or customising application software used in a Software as a Service (SaaS) arrangement and of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
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PART I |
ITEM 5. Operating and financial review and prospects |
A.2.1. Net sales
Consolidated net sales for the year ended December 31, 2021 amounted to €37,761 million, 4.8% higher than in 2020. Exchange rate fluctuations had a negative effect of 2.3 percentage points overall, due mainly to adverse trends in the euro exchange rate against the US dollar, Japanese yen, Turkish lira, Brazilian real and Argentinean peso. At constant exchange rates (CER, see definition below), net sales rose by 7.1%, mainly reflecting strong growth for our Specialty Care global business unit (driven by a solid performance from Dupixent®), and increased sales for our Vaccines business and our Consumer Healthcare global business unit. Those positive effects more than offset a decrease in sales for our General Medicines global business unit, in line with the streamlining of our non-core product portfolio and lower sales of Lantus® and Aprovel®.
Reconciliation of net sales to net sales at constant exchange rates
| | | | | | | | | | | |
(€ million) | 2021 | 2020 | Change |
Net sales | 37,761 | | 36,041 | | +4.8 | % |
Effect of exchange rates | 850 | | | |
Net sales at constant exchange rates | 38,611 | | 36,041 | | +7.1 | % |
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When we refer to changes in our net sales at constant exchange rates (CER), that means that we have excluded the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period.
When we refer to changes in our net sales on a constant structure (CS) basis, that means that we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:
•by including sales generated by entities or product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on historical sales information we receive from the party from whom we make the acquisition;
•similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period; and
•for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period.
To facilitate analysis and comparisons with prior periods, some figures are given at constant exchange rates and on a constant structure basis (CER/CS).
1/ Net sales by operating segment and global business unit
Our net sales comprise the net sales generated by our Pharmaceuticals, Vaccines and Consumer Healthcare segments.
The table below also presents an analysis of our net sales by Global Business Unit (GBU).
| | | | | | | | | | | | | | |
(€ million) | 2021 | 2020 | Change on a reported basis | Change at constant exchange rates |
Specialty Care GBU | 12,752 | | 10,954 | | +16.4 | % | +19.7 | % |
General Medicines GBU | 14,218 | | 14,720 | | -3.4 | % | -1.4 | % |
Pharmaceuticals segment | 26,970 | | 25,674 | | +5.0 | % | +7.6 | % |
Vaccines GBU/segment | 6,323 | | 5,973 | | +5.9 | % | +6.8 | % |
Consumer Healthcare GBU/segment | 4,468 | | 4,394 | | +1.7 | % | +4.6 | % |
Total net sales | 37,761 | | 36,041 | | +4.8 | % | +7.1 | % |
2/ Net sales by franchise, geographical region and product
Following our February 2021 Capital Markets Day, we have changed how we present our sales within the General Medicines and Consumer Healthcare GBUs. We have introduced a separate line for “Industrial sales”, which essentially comprises sales of active ingredients and semi-finished products to third parties. Such sales were previously reported within the Diabetes and Cardiovascular & Established Prescription Products franchises on the line for the relevant product, and on the “Generics” line. For the Consumer Healthcare GBU, we have adopted a more granular presentation by introducing new sub-categories that reflect consumer trends and the strengths and opportunities of our portfolio.
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PART I |
ITEM 5. Operating and financial review and prospects |
For comparative purposes, the 2020 figures used to compute the year-on-year movements presented below have been adjusted to reflect those changes.
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(€ million) | Net sales | Change (CER) | Change (reported) | United States | Change (CER) | Europe | Change (CER) | Rest of the world | Change (CER) |
Dupixent® | 5,249 | | +52.7 | % | +48.5 | % | 3,971 | | +46.2 | % | 649 | | +67.4 | % | 629 | | +90.0 | % |
Aubagio® | 1,955 | | -1.8 | % | -4.4 | % | 1,312 | | -5.7 | % | 512 | | +8.0 | % | 131 | | +6.5 | % |
Lemtrada® | 82 | | -24.8 | % | -27.4 | % | 35 | | -38.3 | % | 24 | | -20.0 | % | 23 | | +4.3 | % |
Kevzara® | 287 | | +23.7 | % | +21.6 | % | 135 | | +12.2 | % | 102 | | +34.7 | % | 50 | | +39.5 | % |
Total Neurology & Immunology | 2,324 | | -0.3 | % | -2.9 | % | 1,482 | | -5.5 | % | 638 | | +10.0 | % | 204 | | +13.0 | % |
Cerezyme® | 683 | | +3.9 | % | -1.0 | % | 173 | | +1.1 | % | 244 | | -2.0 | % | 266 | | +11.4 | % |
Cerdelga® | 254 | | +11.1 | % | +8.5 | % | 132 | | +7.0 | % | 105 | | +14.1 | % | 17 | | +28.6 | % |
Myozyme®/Lumizyme® | 1,003 | | +7.7 | % | +5.8 | % | 373 | | +8.1 | % | 410 | | +5.1 | % | 220 | | +12.0 | % |
Fabrazyme® | 844 | | +6.5 | % | +3.3 | % | 395 | | +1.0 | % | 223 | | +11.0 | % | 226 | | +12.8 | % |
Aldurazyme® | 243 | | +7.3 | % | +3.8 | % | 54 | | +5.8 | % | 84 | | +5.0 | % | 105 | | +9.8 | % |
Total Rare Diseases | 3,126 | | +7.0 | % | +3.8 | % | 1,142 | | +5.4 | % | 1,069 | | +5.6 | % | 915 | | +10.5 | % |
Jevtana® | 455 | | -12.3 | % | -15.1 | % | 253 | | +6.5 | % | 112 | | -40.6 | % | 90 | | -5.8 | % |
Fasturtec® | 152 | | +2.0 | % | — | % | 90 | | -3.1 | % | 46 | | +9.5 | % | 16 | | +14.3 | % |
Libtayo® | 129 | | +91.0 | % | +92.5 | % | — | | — | | 105 | | +72.1 | % | 24 | | +283.3 | % |
Sarclisa® | 176 | | +318.6 | % | +309.3 | % | 67 | | +165.4 | % | 64 | | +600.0 | % | 45 | | +500.0 | % |
Total Oncology | 912 | | +16.9 | % | +14.3 | % | 410 | | +15.2 | % | 327 | | +8.7 | % | 175 | | +40.5 | % |
Alprolix® | 414 | | -7.9 | % | -11.2 | % | 332 | | +7.5 | % | — | | — | | 82 | | -41.8 | % |
Eloctate® | 563 | | -8.5 | % | -11.8 | % | 429 | | +0.4 | % | — | | — | | 134 | | -29.0 | % |
Cablivi® | 164 | | +47.8 | % | +45.1 | % | 81 | | +16.7 | % | 81 | | +95.1 | % | 2 | | — | |
Total Rare Blood Disorders | 1,141 | | -3.0 | % | -6.2 | % | 842 | | +4.5 | % | 81 | | +95.1 | % | 218 | | -33.6 | % |
Specialty Care GBU | 12,752 | | +19.7 | % | +16.4 | % | 7,847 | | +20.1 | % | 2,764 | | +19.0 | % | 2,141 | | +19.3 | % |
Lantus® | 2,494 | | -3.8 | % | -6.3 | % | 861 | | -3.8 | % | 474 | | -11.9 | % | 1,159 | | -0.3 | % |
Toujeo® | 969 | | +6.4 | % | +3.9 | % | 259 | | +0.4 | % | 394 | | +5.1 | % | 316 | | +13.7 | % |
Soliqua®/Suliqua® | 195 | | +24.2 | % | +21.1 | % | 115 | | +19.0 | % | 29 | | +20.8 | % | 51 | | +40.5 | % |
Other Diabetes | 877 | | -3.7 | % | -6.3 | % | 183 | | -6.0 | % | 257 | | -3.7 | % | 437 | | -2.8 | % |
Total Diabetes | 4,535 | | -0.8 | % | -3.3 | % | 1,418 | | -1.8 | % | 1,154 | | -4.2 | % | 1,963 | | +2.0 | % |
Lovenox® | 1,486 | | +12.0 | % | +10.0 | % | 29 | | +3.3 | | 703 | | +7.5 | % | 754 | | +16.8 | % |
Plavix® | 929 | | +2.4 | % | +1.8 | % | 9 | | — | | 115 | | -8.7 | % | 805 | | +4.2 | % |
Multaq® | 329 | | +8.3 | % | +5.4 | % | 292 | | +9.9 | % | 22 | | -8.3 | % | 15 | | +7.1 | % |
Praluent® | 218 | | -15.8 | % | -15.8 | % | 5 | | -94.3 | % | 161 | | +34.5 | % | 52 | | +52.9 | % |
Aprovel® | 419 | | -24.5 | % | -24.4 | % | 10 | | -54.5 | % | 87 | | -13.0 | % | 322 | | -25.7 | % |
Mozobil® | 233 | | +10.7 | % | +8.9 | % | 129 | | +8.1 | % | 60 | | +9.1 | % | 44 | | +22.2 | % |
Thymoglobulin® | 350 | | +13.3 | % | +10.8 | % | 207 | | +12.6 | % | 34 | | +17.2 | % | 109 | | +13.5 | % |
Generics | 699 | | -7.7 | % | -13.5 | % | 117 | | -23.6 | % | 7 | | -20.0 | % | 575 | | -3.5 | % |
Other Established Prescription Products | 4,212 | | -4.5 | % | -6.2 | % | 380 | | +0.3 | % | 1,371 | | -10.3 | % | 2,461 | | -1.8 | % |
Total Cardiovascular & Established Prescription Products | 8,875 | | -1.8 | % | -3.7 | % | 1,178 | | -6.7 | % | 2,560 | | -3.2 | % | 5,137 | | +0.1 | % |
Industrial Sales | 808 | | +0.5 | % | -0.6 | % | 41 | | -35.8 | % | 723 | | +10.8 | % | 44 | | -48.9 | % |
General Medicines GBU | 14,218 | | -1.4 | % | -3.4 | % | 2,637 | | -4.8 | % | 4,437 | | -1.4 | % | 7,144 | | — | % |
Total Pharmaceuticals | 26,970 | | +7.6 | % | +5.0 | % | 10,484 | | +12.7 | % | 7,201 | | +5.5 | % | 9,285 | | +3.9 | % |
Polio/Pertussis/Hib Vaccines | 2,159 | | +4.2 | % | +2.5 | % | 470 | | +18.4 | % | 306 | | -7.6 | % | 1,383 | | +2.7 | % |
Adult Booster Vaccines | 488 | | +6.0 | % | +4.5 | % | 279 | | +16.2 | % | 146 | | -3.3 | % | 63 | | -10.0 | % |
Meningitis/Pneumonia Vaccines | 658 | | +21.1 | % | +17.7 | % | 487 | | +28.8 | % | 1 | | — | % | 170 | | +3.0 | % |
Influenza Vaccines | 2,628 | | +5.9 | % | +6.3 | % | 1,366 | | -13.6 | % | 729 | | +64.4 | % | 533 | | +16.4 | % |
Travel & Other Endemics Vaccines | 306 | | +3.3 | % | +1.7 | % | 86 | | +20.5 | % | 42 | | -10.6 | % | 178 | | — | % |
Total Vaccines | 6,323 | | +6.8 | % | +5.9 | % | 2,762 | | +1.6 | % | 1,225 | | +25.6 | % | 2,336 | | +5.0 | % |
Allergy | 612 | | +2.9 | % | -0.8 | % | 371 | | +7.5 | % | 49 | | -3.9 | % | 192 | | -3.4 | % |
Cough, Cold and Flu | 320 | | -15.2 | % | -16.0 | % | — | | — | % | 156 | | -22.0 | % | 164 | | -7.7 | % |
Pain | 1,093 | | +7.2 | % | +4.0 | % | 196 | | +12.2 | % | 515 | | +7.5 | % | 382 | | +4.6 | % |
Digestive Wellness | 1,131 | | +17.6 | % | +14.5 | % | 124 | | +51.8 | % | 389 | | +4.9 | % | 618 | | +21.1 | % |
Physical Wellness | 323 | | -5.2 | % | -6.4 | % | — | | — | % | 29 | | +7.4 | % | 294 | | -6.3 | % |
Mental Wellness | 211 | | +12.5 | % | +9.9 | % | 46 | | +9.3 | % | 100 | | +12.2 | % | 65 | | +15.3 | % |
Personal Care | 519 | | +3.5 | % | -0.2 | % | 394 | | +5.1 | % | 4 | | +33.3 | % | 121 | | -2.3 | % |
Other | 259 | | -11.0 | % | -13.7 | % | 8 | | -33.3 | % | 91 | | -33.8 | % | 160 | | +11.2 | % |
Total Consumer Healthcare | 4,468 | | +4.6 | % | +1.7 | % | 1,139 | | +10.6 | % | 1,333 | | -1.8 | % | 1,996 | | +5.7 | % |
Total Sanofi | 37,761 | | +7.1 | % | +4.8 | % | 14,385 | | +10.3 | % | 9,759 | | +6.6 | % | 13,617 | | +4.4 | % |
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PART I |
ITEM 5. Operating and financial review and prospects |
3/ Net sales – Pharmaceuticals segment
In 2021, net sales for the Pharmaceuticals segment amounted to €26,970 million, up 5.0% on a reported basis and 8.2%7.6% at constant exchange rates (CER). The year-on-year reported-basis increase of €1,296 million reflects adverse exchange rate effects of €666 million, and the following principal effects at constant exchange rates:
•solid performances from Dupixent® (+€1,862 million), the Oncology (+€135 million) and Rare Diseases (+€210 million) franchises, and industrial sales (+€4 million); and
•lower sales for the Cardiovascular & Established Prescription Products (-€166 million), Diabetes (-€38 million), Rare Blood Disorders (-€37 million) and Neurology & Immunology (-€8 million) franchises.
Comments on the performances of our major Pharmaceuticals segment products are provided below.
Specialty Care GBU
Dupixent®
Dupixent® (developed in collaboration with Regeneron) generated net sales of €5,249 million in 2021, up 48.5% on a reported basis and 52.7% at constant exchange rates. In the United States, sales of Dupixent® reached €3,971 million in 2021, boosted by continuing strong demand in the treatment of atopic dermatitis in adults, adolescents and children aged 6 to 11 years (approved in May 2020), plus ongoing adoption of the product for the treatment of asthma and nasal polyps. In Europe, the product posted 2021 net sales of €649 million, up67.4% CER, driven by continuing growth in atopic dermatitis in key markets and by new launches in asthma. In the Rest of the Worldregion, Dupixent® posted net sales of €629 million (+90.0% CER), including €291 million in Japan (+61.5% CER). In China, where Dupixent® was approved in June 2020 for moderate to severe atopic dermatitis in adults and was added to the NRDL (National Reimbursement Drug List) in March 2021, the product generated net sales of €74 million (+483.3% CER).
Neurology and immunology
In 2021, the Neurology and Immunology franchise generated net sales of €2,324 million, down 2.9% on a reported basis and 0.3% CER, with growth in sales of Kevzara® more than offset by lower sales of Lemtrada® and Aubagio®.
Aubagio® posted net sales of €1,955 million in 2021, down 1.8% CER, on lower sales in the United States (-5.7% CER at €1,312 million) reflecting increased competition, which was partly offset by growth in Europe (+8.0% CER at €512 million) and the Rest of the World region (+6.5% CER at €131 million).
In 2021, net sales of Lemtrada® amounted to €82 million, down 24.8% CER, on a decline in sales in the United States (-38.3% CER at €35 million) and Europe (-20.0% CER at €24 million).
Net sales of Kevzara® (developed in collaboration with Regeneron) in 2021 reached €287 million, up 23.7% CER, driven by sales of the product in Europe (+34.7% CER at €102 million), the Rest of the World region (+39.5% CER at €50 million), and the United States (+12.2% CER at €135 million). The growth trend mainly reflects rising demand for IL-6 receptor inhibitors, and temporary shortages of tocilizumab.
Rare diseases
In 2021, net sales for the Rare Diseases franchise totaled €3,126 million, up 3.8% on a reported basis and 7.0% at constant exchange rates (CER). In Europe, net sales for the franchise rose by 5.6% CER to €1,069 million. In the United States, net sales advanced by 5.4% CER to €1,142 million. In the Rest of the World region, net sales were up 10.5% CER at €915 million.
Net sales of the Pompe disease franchise (Myozyme®/Lumizyme® and Nexviazyme®) were up 9.5% CER in 2021 at €1,020 million, driven (i) in the United States by Lumizyme® sales growth (+8.1% CER at €373 million) and the launch of Nexviazyme® (€15 million), and (ii) by the increases in Europe (5.7% CER, at €412 million) and in the Rest of the World region (+12.5% CER at €220 million). Growth in all three geographies was due to a rise in the number of patients diagnosed with and treated for Pompe disease.
In 2021, net sales for the Gaucher disease franchise (Cerezyme®and Cerdelga®) reached €937 million, a rise of 5.7% CER. Cerezyme® sales were up 3.9% CER at €683 million, helped by a solid performance in the Rest of the World region (+11.4% CER at €266 million). Sales of Cerdelga® rose by 11.1% CER to €254 million, driven by Europe (+14.1% CER at €105 million), the United States (+7.0% CER at €132 million) and the Rest of the World region (28.6% CER at €17 million) as new patients adopted the product or switched treatment.
Net sales of the Fabry disease treatment Fabrazyme® in 2021 were €844 million (+6.5% CER), propelled by Europe (+11.0% CER at €223 million) and the Rest of the World region (+12.8% CER at €226 million), and to a lesser extent by the United States (+1.0% CER at €395 million), due to more patients adopting the product and better observance of the treatment.
Oncology
In 2021, net sales for the Oncology franchise amounted to €912 million, up 14.3% on a reported basis and 16.9% CER, driven by the launches of Sarclisa® and Libtayo®, which more than offset the impact of generics of Jevtana® in Europe.
Jevtana® posted net sales of €455 million in 2021, down 12.3% CER, as sales decreased in Europe (-40.6% CER at €112 million) following the entry of generic competition in some European markets at end March 2021. In the US, where the Jevtana® composition of matter patent expired in September 2021, sales were up 6.5% CER at €253 million. However, Sanofi has filed patent infringement suits against generic filers on Jevtana® under Hatch-Waxman in the U.S. District Court for the District of Delaware asserting three method of use patents, two of which (US 10,583,110 and US 10,716,777) expire in October 2030 and the other one of which (US 8,927,592) expires in April 2031 including 6-month pediatric exclusivities. Sanofi has reached settlement agreements with some of the defendants and the suit against the remaining defendants is ongoing. No trial dates have been scheduled and the remaining defendants have agreed not to launch any generic cabazitaxel product until the earlier of a district court decision in favor of the defendants or four months after the completion of the post-trial briefing. Separately, Jevtana® has been granted a data exclusivity on the CARD clinical study results which expires in December 2023.
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PART I |
ITEM 5. Operating and financial review and prospects |
Libtayo® (developed in collaboration with Regeneron) reported net sales of €129 million in 2021, up91.0% CER, driven by rising demand in cutaneous squamous cell carcinoma (CSCC) and by launches in new countries. In the United States, Libtayo® sales are consolidated by Regeneron under the terms of the alliance between Sanofi and Regeneron (see Note C.1. “Alliance arrangements with Regeneron Pharmaceuticals, Inc. (Regeneron)” to our consolidated financial statements, included at Item 18. of this Annual Report on Form 20-F).
In 2021, net sales of Sarclisa® reached €176 million, up 318.6% CER, driven by new launches in European countries and a good performance in Japan; sales for the year were €67 million in the United States, €64 million in Europe, and €45 million in the Rest of the World region.
Rare blood disorders
In 2021, the Rare Blood Disorders franchise generated net sales of €1,141 million, down 6.2% on a reported basis and 3.0% at constant exchange rates, mainly as a result of lower industrial sales to Sobi following amendments to the supply agreement in 2020. When excluding that effect, net sales rose by 8.0% CER.
Eloctate®, indicated in the treatment of hemophilia A, generated net sales of €563 million in 2021, down 8.5% CER, reflecting lower sales in the Rest of the World region (-29.0% CER) due to a decrease in industrial sales to Sobi (which are recorded in that region). Excluding industrial sales to Sobi, net sales of Eloctate® increased by 0.4% in 2021.
In 2021, net sales of Alprolix®, indicated in the treatment of hemophilia B, amounted to €414 million, down 7.9% CER. In the United States, sales of the product reached €332 million, up 7.5% CER, reflecting patient switching to prophylactic treatments. In the Rest of the World region, net sales of Alprolix® were down 41.8% CER at €82 million, due to a decrease in industrial sales to Sobi (which are recorded in that region). Excluding industrial sales to Sobi, net sales of Alprolix® increased by 7.8% in 2021.
Cablivi®, which treats acquired thrombotic thrombocytopenic purpura (aTTP) in adults, posted net sales of €164 million in 2021, up 47.8% CER, reflecting increased awareness of the condition and of the treatment along with new guidelines on aTTP from the International Society on Thrombosis and Haemostasis (ISTH). Sales reached €81 million in the United States (+16.7% CER), while in Europe net sales were up 95.1% CER at €81 million, mainly as a result of launches in new countries.
General Medicines GBU
In 2021, General Medicines GBU net sales were down slightly year-on-year by 1.4% at€14,218 million. Following the February 2021 Capital Markets Day, Sanofi decided to prioritize core products within its General Medicines portfolio that have differentiated or established profiles and significant opportunity for growth in key markets; these include Toujeo®, Soliqua®, Praluent®, Multaq®, Lovenox®, Plavix®. and Thymoglobulin®. Sales of core products in 2021 were up 5.6% CER at €5,768 million, fueled by good performances from Lovenox®, Mozobil®, Thymoglobulin® and Toujeo®. Non-core products posted sales of €7,642 million, down 6.2% CER, reflecting a streamlining of the portfolio and lower sales of Lantus® and Aprovel®/Avapro®. In 2021 industrial sales, mainly comprising sales of active ingredients and semi-finished products to third parties, rose by 0.5% CER to €808 million.
Diabetes
In 2021, net sales for the Diabetes franchise were €4,535 million, down 3.3% on a reported basis and 0.8% at constant exchange rates. This mainly reflects a declinedecrease in sales for the franchise in the United States (-21.5%(-1.8% CER at €1,811€1,418 million), especially of insulin glargines (Lantus and Europe ® and Toujeo®) as a result of changes to Medicare Part D welfare program cover and the ongoing decline in average net prices for insulin glargines in the United States. However, we expect that reimbursement of our principal Diabetes products by US payers will be largely maintained in 2020. Elsewhere in the world, net sales for the Diabetes franchise rose in Emerging Markets (+10.3%(-4.2% CER at €1,701€1,154 million) but fell in the Rest of the World region (-17.1% CER at €393 million) and in Europe (-5.0% CER at €1,208 million), as good performances from Toujeo® only partially offseton lower sales of Lantus®.
Over 2019 as, and a whole, netdecrease in sales of our Amarylinsulin glargines® (Lantus® and Toujeo®) were down 11.6% on a reported basis and 13.2% CER at €3,895 million.in China.
Net sales ofLantus® in 20192021 were down 17.0%3.8% CER at €3,012€2,494 million. In the United States, the product saw net sales decreaseddecrease by 32.5%3.8% CER to €1,149 million for the reasons explained above. Net sales in Europe were 14.6% lower CER at €584€861 million, due largely to the launch of a biosimilar of Lantus® and the switching of patients to Toujeo®. In Emerging Markets, sales of Lantus® advanced by 9.7% CER to €1,061 million.
In 2019, Toujeo® posted net sales of €883 million (+3.2% CER), driven by strong performances in Emerging Markets (+39.2% CER at €180 million) and Europe (+15.5% CER at €334 million).Sales decreased by 20.3% CER in the United States to €289 million), mainly as a result of a decreasedrop in the average net selling price.
Net sales of Apidra® in 2019 were down 3.6% CER at €344 million. Lower sales in the United States (-41.9% CER at €46 million) were partially offset by sales growth in Emerging Markets (+22.9% CER at €130 million).
Amaryl® posted In Europe, net sales of €334Lantus® were €474 million in 2019, down 2.1% CER on 2018. 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 (+3.1%(-11.9% CER) in 2019. Sanofi expects sales of Amaryl® in China to decline significantly in 2020 due to the extended VBP program.
Admelog® (injectable insulin lispro), launched in 2018 in the United States and also as a biosimilar in some European countries under the name Insulin lispro Sanofi®, generated net sales of €250 million in 2019, including €235 million in the United States as a result of its being accepted onto the Managed Medicaid program. However, we expect a contraction in net sales of Admelog® in 2020 following a downward adjustment of 44% to the wholesale price in the United States.
Soliqua® 100/33 and Suliqua® (insulin glargine 100 units/ml and lixisenatide 33 mcg/ml injectable) posted a 60.3% rise in net sales at CER in 2019, to €122 million. Sales grew in all geographies, and reached €87 million in the United States.
Cardiovascular franchise
Net sales for the Cardiovascular franchise in 2019 were €605 million, down 1.0% on a reported basis and 4.6% at constant exchange rates.
Net sales of Praluent® (developed in collaboration with Regeneron) decreased by 3.8% CER to €258 million, on lower sales in the United States (-30.5% CER at €112 million), impacted by a significant price reduction. The effect was partly offset by sales growth in Europe (+24.4% CER at €107 million), achieved despite German sales of Praluent® being suspended in August 2019 following a ruling by the Düsseldorf Regional Court in the ongoing patent litigation. Under the terms of the restructuring of the collaboration agreement between Regeneron and Sanofi proposed in December 2019, Regeneron is expected to obtain sole US rights to Praluent®; see Note C.1, “Alliance Arrangements with Regeneron Pharmaceuticals, Inc.” to our consolidated financial statements.
Net sales of Multaq® amounted to €347 million in 2019, a decrease of 5.1% CER compared with 2018. The majority of the product's net sales are generated in the United States (€295 million, down 5.4% CER) and Europe (€40 million, down 7.0% CER).
Established Prescription Products
Net sales of Established Prescription Products in 2019 amounted to €9,559 million, down 7.5% on a reported basis and 8.3% CER, mainly reflecting the divestment of Zentiva, our European Generics business, at the end of the third quarter of 2018. At constant exchange rates and on a constant structure basis, net sales for our Established Prescription Products franchise were down 4.1%, reflecting competition from genericsbiosimilars of Renvelainsulin glargine and patients switching to Toujeo®/Renagel® in the United States, lower sales of Lovenox® in Europe, and of Plavix® in China.
Net sales of Lovenox® were €1,359 million, down 7.4% CER, mainly as a result of lower sales in Europe (-18.4% CER at €709 million) due to competition from biosimilars in several countries. This decrease was not wholly offset by sales growth in Emerging Markets (+13.7% CER at €542 million).
In China, Plavix® and CoAprovel® won a nationwide tender in the Volume Based Procurement (VBP) program in September 2019. In the fourth quarter of 2019, sales of Plavix® and of the Aprovel®/Avapro® family decreased substantially in China due to net price adjustments and inventory reduction in the channel following the nationwide implementation of the VBP program in December. In 2020, we expect net sales of Plavix® and the Aprovel®/Avapro® family to be around 50% lower in China due to the price reductions offered to secure the tender.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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In 2019, Plavix® posted net sales of €1,334 million, down 8.8% CER, mainly on lower sales in China (-11.6% CER at €728 million, following the implementation of the VBP program as described above) and Japan (-21.1% CER at €131 million, due to generic competition). Sales of Plavix® in the United States and Puerto Rico are handled by BMS under the terms of the Sanofi-BMS alliance; see Note C.2., “Alliance Arrangements with Bristol-Myers Squibb (BMS)”, to our consolidated financial statements.
Net sales of Aprovel®/Avapro®in 2019 reached €674 million (+2.0% CER). Sales of the product in China began to decrease (-3.0% CER at €290 million) for the reasons described above, while sales in Japan continued to erode under pressure from generics (-28.6% CER at €21 million). However, the impact was more than offset by higher sales of Aprovel®/Avapro® in the United States (+150.0% CER at €26 million) and Europe (+4.6% CER at €113 million).
In 2019, net sales of Renvela®/Renagel® amounted to €311 million, down 26.5% CER, mainly on generic competition in the United States (-50.2% CER at €133 million). The effect was only partially offset by stronger sales in Emerging Markets (+38.8% CER at €95 million).
Net sales of Generics in 2019 were €1,075 million, down 27.9% CER, mainly as a result of the divestment of Zentiva, our European Generics business, in September 2018. At constant exchange rates and on a constant structure basis, Generics net sales rose by 3.9%, driven by the performance in mature markets (+11.4% CER/CS at €405 million). Emerging Markets sales were stable at €670 million.
4/ Net sales - Consumer Healthcare Segment
In 2019, net sales of Consumer Healthcare products were €4,687 million, up 0.6% on a reported basis but down 0.8% at constant exchange rates. Lower sales of Nutritionals (-4.1% CER at €657 million) were partially offset by sales growth in Allergy, Cough & Cold (+2.2% CER at €1,179 million) and Pain (+1.3% CER at €1,259 million), and more generally by the performance in Emerging Markets. Tighter regulation (especially in Europe), coupled with the ongoing effects of divesting non-strategic brands, impacted growth in our Consumer Healthcare operations during 2019; we expect those factors will continue to have an impact in the first half of 2020.
In September 2019, the FDA and the Canadian healthcare authorities announced publicly that ranitidine-based medicines, including Zantac®, might contain low levels of N-nitrosodimethylamine (NDMA), and that manufacturers had been asked to conduct tests. Inconsistencies in the results of preliminary tests on the active ingredient used in the products we sell in the United States and Canada led Sanofi to voluntarily recall Zantac® in October 2019. As a result of the recall, net sales of Zantac® decreased by 42.5% CER to €78 million in 2019.
Consumer Healthcare net sales in Emerging Markets in 2019 were €1,652 million, up 4.7% CER. The main drivers were Digestive (+13.7% CER at €489 million), especially Essentiale® in China (+25.9% CER at €68 million), and Allergy, Cough & Cold (+8.0% CER at €372 million).
In Europe, Consumer Healthcare net sales were 6.4% lower in 2019 at €1,311 million, reflecting the divestment of non-strategic brands and tighter regulation.
Consumer Healthcare net sales in the United States were €1,086 million in 2019, down 3.6% CER. Most of the year-on-year decrease was attributable to Digestive (-24.1% CER at €157 million), reflecting the voluntary recall of Zantac® as described above.
In the Rest of the World region, net sales of Lantus® held relatively steady in 2021 at €1,159 million.
In 2021, Toujeo®posted net sales of €969 million, up 6.4% CER, driven by the Rest of the World region (+13.7% CER at €316 million, due mainly to the product's launch in China in the fourth quarter of 2020) and by Europe (+5.1% CER at €394 million, reflecting patient switches from Lantus® and a favorable comparative base. During 2021, Sanofi successfully tendered for our Consumer Healthcare operations reached €638Toujeo® and Lantus® under China's national volume-based procurement (VBP) program, thereby securing significant sales volumes but at lower prices. As a consequence Sanofi expects a decrease in sales of insulin glargines (Toujeo® and Lantus®) in China by around 30% in 2022. Toujeo®/Lantus® net sales in China in 2021 were €459 million. In the United States, net sales of Toujeo® were relatively stable year-on-year (+0.4% at €259 million), as volume growth offset the effect of lower average selling prices.
Net sales of Soliqua®rose by 24.2% CER in 2021 to €195 million. Sales increased in all geographies, especially the Rest of the World region (+40.5% CER at €51 million, reflecting a number of product launches) and the United States (+19.0% CER at €115 million).
Cardiovascular & Established Prescription Products
In 2021, net sales for the Cardiovascular & Established Prescription Products amounted to €8,875 million, down 3.7% on a reported basis and 1.8% at constant exchange rates. A positive performance from core products such as Lovenox®, Plavix®, Thymoglobulin® and Mozobil® was more than offset by lower sales of Praluent®, Aprovel®/Avapro® and generics, and by the impact of divestments of non-core products.
Net sales of Lovenox® were €1,486 million in 2019, a rise of 2.7%2021, up 12.0% CER, driven by sales growth in the Rest of the World region (+16.8% CER at €754 million), as the effect of recent WHO recommendations on the use of low molecular weight heparins in hospitalized COVID-19 patients more than offset the impact of competition from biosimilars.
Net sales of Plavix® were €929 millionin 2021, up 2.4% CER, as sales growth in the Rest of the World region (+4.2%, driven by China where sales were up 11.1% CER at €389 million) more than offset reduced sales in Japan (+6.6%and Europe.
Net sales of Aprovel®/Avapro® were €419 million, down 24.5% CER, mainly due to lower sales in China (-20.0% CER at €344€157 million). as a result of temporary supply constraints.
In 2021, net sales of Praluent® (developed in collaboration with Regeneron) decreased by 15.8% CER to €218 million, reflecting lower sales in the United States (-94.3% CER at €5 million). Since April 1, 2020, as a result of the restructuring of Sanofi's collaboration
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ITEM 5. Operating and financial review and prospects |
agreements with Regeneron (see Note C.1. “Alliance arrangements with Regeneron Pharmaceuticals Inc. (Regeneron)” to our consolidated financial statements, included at Item 18. of this Annual Report on Form 20-F), Sanofi has had sole responsibility for Praluent® outside the United States, while Regeneron has had sole responsibility for Praluent® in the United States. The two companies entered into agreements to meet short-term manufacturing imperatives. Since then, sales of Praluent® in the United States recognized by Sanofi correspond to industrial sales made to Regeneron. The reduction in sales in the United States was partly offset by sales growth in Europe (+34.5% CER at €161 million) and the Rest of the World region (+52.9% CER at €52 million), following the launch of the product in China in the second quarter of 2020. Praluent® was added to the Chinese National Reimbursement Drug List (NRDL) in January 2022.
Net sales -of Multaq® totaled €329 million in 2021, up 8.3% CER, as growth in US sales stimulated by increased medical consultations and prescriptions for antiarrhythmic drugs with the recovery from the COVID-19 pandemic more than offset lower sales in Europe.
4/ Net sales – Vaccines Segmentsegment/GBU
In 2019,2021, the Vaccines segment posted net sales of €5,731€6,323 million, up 12.0%5.9% on a reported basis and 9.3% CER. The6.8% CER, reflecting growth across all franchises; the main growth drivers were influenza vaccines (+5.9% CER at €2,628 million), Polio/Pertussis/Hib vaccines in Emerging Markets (+23.4%4.2% CER at €1,108€2,159 million), and a recovery of sales of meningitis vaccines (+21.1% CER at €658 million).
Sales of influenza vaccines rose by 5.9% CER in 2021 to €2,628 million. This reflected strong demand in Europe, boosted by increased sales of differentiated vaccines (especially in Germany, supported by the performanceadoption of Influenza vaccinesa recommendation of Efluelda® as the vaccine of choice for people aged over 60 years), and also in the Rest of the World region (+7.3%16.4% CER at €1,891€533 million), especially in Emerging Markets and Europe. In the United States, vaccines sales rose by 1.1% CER to €2,733 million, with stronger sales of Adult Booster vaccines and Meningitis/Pneumonia vaccines offsetting lower sales of Polio/Pertussis/Hib vaccines. In Emerging Markets and Europe, Vaccines net sales rose by 24.0% CER (to €1,825 million) and 12.1% CER (to €817 million) respectively.
2019 net sales of Polio/Pertussis/Hib vaccines reached €1,946 million, up 9.8% CER, mainly on a good performance in Emerging Markets (+23.4% CER at €1,108 million), especially from Pentaxim® (+71.4% CER at €516 million) and in China (+64.1% CER at €317 million). Those positive; those effects were partly offset by lower sales both in the United States (-9.6%(-13.6% at €1,366 million).
In 2021, Polio/Pertussis/Hib (PPH) vaccines generated net sales of €2,159 million, up 4.2% CER, reflectring growth in the United States (+18.4% CER at €380€470 million), due to fluctuationsa favorable ordering sequence for Pentacel® and a soft comparative from 2020. Sales in inventories heldthe Rest of the World region rose by our principal customers) and2.7% CER to €1,383 million, boosted by Pentaxim® in Japan (-3.5%China. In Europe, net sales of PPH vaccines were down 7.6% CER at €118 million). In Europe,€306 million.
VaxelisTM, a vaccine co-developed in an alliance between Sanofi and Merck, has been available in the United States since June 2021. VaxelisTM is the first and only hexavalent combined vaccine approved in the United States to protect infants and children against six diseases: diphtheria, tetanus, pertussis, polio, hepatitis B, and invasive diseases caused by Hemophilus Influenzae type b. Finished product sales of VaxelisTM are consolidated by the franchise were relatively stable (+1.0% CER) at €299 million, of which €209 million was generated by Hexaxim® (+8.2% CER).MSP Vaccine Company joint venture.
Net sales of InfluenzaMeningitis/Pneumonia vaccines rosefor 2021 were €658 million, up 21.1% CER, driven by 7.3% CER to €1,891 million, driven largely by Emerging Markets (+35.0% CER at €296 million) and Europe (+23.7% CER at €218 million), where quadrivalent vaccines performed well and vaccine take-up rates improved. In the United States sales(+28.8% CER at €487 million) due to the resumption of influenza vaccines held steady at €1,289 million:meningitis vaccinations and the shipment backlog experienced atlaunch of MedQuadfi® in March 2021. Sales in the startRest of the year (due to a delay while the WHO selected the strains) was recovered in the fourth quarter.World region were 3.0% higher CER at €170 million.
In 2019,2021, sales of Meningitis/Pneumoniaadult booster vaccines posted net sales of €682advanced by 6.0% to €488 million, up 8.4% CER. Net sales of Menactramainly due to a recovery in Adacel® increasedvaccinations in both the United States and Emerging Markets, by 3.4% CER (to €507 million) and 29.1% CER (to €161 million) respectively.States.
Net sales of Adult Boostertravel and other endemics vaccines in 2019 reached €5632021 were €306 million, up 16.2%a rise of 3.3% CER, driven by strong performancesreflecting a low comparable base in Europe (+28.7% at €166 million) especially from Repevax®,and in2020 due to the United States (+11.7% CER at €320 million) especially from Adacel®/Covaxis®.COVID-19 pandemic.
5/ Net sales of Travel and Other Endemics vaccines in 2019 were up 8.4% CER at €539 million, on increased demand for yellow fever vaccine.– Consumer Healthcare segment/GBU
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68 | SANOFI / FORM 20-F 2019
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6/ Net sales by Geographical Region
The table below sets forth ourIn 2021, net sales for 2019the Consumer Healthcare (CHC) segment increased by 1.7% on a reported basis and 2018 by geographical region:
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(€ million) | 2019 |
| 2018 |
| Change on a reported basis |
| Change at constant exchange rates |
|
United States | 12,756 |
| 11,540 |
| +10.5 | % | +5.0 | % |
Emerging Markets(a) | 10,914 |
| 10,112 |
| +7.9 | % | +8.7 | % |
of which Asia | 4,393 |
| 3,962 |
| +10.9 | % | +8.5 | % |
of which Latin America | 2,734 |
| 2,612 |
| +4.7 | % | +11.2 | % |
of which Africa and Middle East | 2,307 |
| 2,232 |
| +3.4 | % | +1.7 | % |
of which Eurasia(b) | 1,312 |
| 1,152 |
| +13.9 | % | +17.2 | % |
Europe(c) | 8,852 |
| 9,434 |
| -6.2 | % | -6.1 | % |
Rest of the World(d) | 3,604 |
| 3,377 |
| +6.7 | % | +2.8 | % |
of which Japan | 1,908 |
| 1,710 |
| +11.6 | % | +4.6 | % |
of which South Korea | 449 |
| 432 |
| +3.9 | % | +4.2 | % |
Total net sales | 36,126 |
| 34,463 |
| +4.8 | % | +2.8 | % |
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(a) | World excluding United States, Canada, Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. |
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(b) | Russia, Ukraine, Georgia, Belarus, Armenia and Turkey. |
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(c) | Europe excluding Eurasia. |
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(d) | Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. |
4.6% at constant exchange rates to €4,468 million. Stronger sales in the Digestive Wellness, Pain, and Mental Wellness categories more than offset the effects of low incidence of coughs and colds during the winter season and of divestments of non-core products.
In 2019, net sales in the United States reached €12,756, CHC net sales amounted to €1,139 million in 2021, up 10.5% on a reported basis10.6% CER, boosted by strong growth in the Digestive Wellness, Pain, Mental Wellness, Personal Care and 5.0% at constant exchange rates, due in part to the acquisition of Bioverativ's products in 2018. At constant exchange rates and on a constant structure basis, US sales reflect solid performances from Dupixent® (+140.8% CER at €1,669 million), Admelog® (+158.1% CER at €235 million) and Aubagio® (+10.8% CER at €1,351 million), which more than offset a decrease in sales of Lantus® (-32.5% CER at €1,149 million) and Renvela®/Renagel® (-50.2% CER at €133 million).Allergy categories.
In Emerging MarketsEurope, net sales amounted to €10,914 million, up 7.9% on a reported basis and 8.7% CER. All our Pharmaceuticals franchises posted net sales growth in Emerging Markets, as did Vaccines and Consumer Healthcare. The biggest contributors to sales growth in Emerging Markets were Polio/Pertussis/Hib vaccines (+23.4% CER at €1,108 million), the Diabetes franchise (+10.3% CER at €1,701 million), and the Rare Diseases franchise (+24.0% CER at €614 million). In Asia,CHC net sales were €4,393 million (+8.5% CER), reflecting a solid performance in China (+8.8% CER at €2,704 million) driven by Vaccines and Pharmaceuticals. In Latin America, net sales amounted to €2,734 million, up 4.7% on a reported basis and 11.2% CER. Net sales in Brazil during 2019 were up 1.6% CER at €1,013 million on growth in Vaccines. In the Africa and Middle East region, net sales were €2,307 million, up 1.7% CER: good performances from Established Prescription Products (+3.9% CER at €1,017 million) and from the Rare Diseases and Immunology franchises offset lower sales for the Vaccines segment in the region. In Eurasia, net sales reached €1,312 million (+17.2% CER) on strong growth in Turkey (+30.5% CER at €495 million) and Russia (+9.1% CER at €673 million).
Net sales in Europe decreased by 6.1%down 1.8% CER in 2019 to €8,852 million, due largely to the divestment of our European Generics business in 2018. At constant exchange rates and on a constant structure basis, net sales in Europe were down 1.3% year-on-year: a decrease in sales of Lovenox®, Lantus® and Lemtrada® and2021 at €1,333 million; this reflects lower sales in Consumer Healthcare were not wholly offset by good performances from Dupixent®the Cough & Cold categories, due to social distancing and Vaccines.divestments of non-core strategic brands.
In the Rest of the World region, CHC net sales rosewere up 5.7% CER at €1,996 million in 2021. The main factor was growth in the Digestive Wellness category, driven by 2.8% CER to €3,604 million. In Japan,Enterogermina®, Buscopan® and Essentiale®, plus higher sales in the Pain and Mental Wellness categories.
6/ Net sales by geographical region
The table below sets forth our net sales for 2021 and 2020 by geographical region:
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(€ million) | 2021 | 2020 | Change on a reported basis | Change at constant exchange rates |
United States | 14,385 | | 13,465 | | +6.8 | % | +10.3 | % |
Europe | 9,759 | | 9,151 | | +6.6 | % | +6.6 | % |
Rest of the World | 13,617 | | 13,425 | | +1.4 | % | +4.4 | % |
of which China | 2,720 | | 2,454 | | +10.8 | % | +7.9 | % |
of which Japan | 1,657 | | 1,735 | | -4.5 | % | +1.7 | % |
of which Brazil | 815 | | 836 | | -2.5 | % | +7.3 | % |
of which Russia | 575 | | 641 | | -10.3 | % | -4.8 | % |
Total net sales | 37,761 | | 36,041 | | +4.8 | % | +7.1 | % |
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ITEM 5. Operating and financial review and prospects |
In 2021, net sales in the United Statesreached €1,908€14,385 million, (+4.6% CER), boosted by sales ofup 6.8% on a reported basis and 10.3% at constant exchange rates. Strong performances from Dupixent®, which (+46.2% CER at €3,971 million) and meningitis vaccines (+28.8% CER at €487 million) more than offset lower sales of influenza vaccines (-13.6% CER at €1,366 million), of Praluent® (-94.3% CER at €5 million, following the restructuring of Sanofi's collaboration agreements with Regeneron; see Note C.1. “Alliance arrangements with Regeneron Pharmaceuticals Inc. (Regeneron)” to our consolidated financial statements, included at Item 18. of this Annual Report on Form 20-F), and from our Neurology & Immunology franchise (-5.5% CER at €1,482 million.
In Europe, net sales advanced by 6.6% on a decreasereported basis and 6.6% at constant exchange rates in 2021 to €9,759 million. A substantial rise in sales of Plavixinfluenza vaccines (+64.4% CER at €729 million), plus strong performances by Dupixent®(+67.4% CER at €649 million), Libtayo® (+72.1% CER at €105 million) and Sarclisa® (+600.0% CER at €64 million), more than offset lower sales for the Diabetes franchise (-4.2% CER at €1,154 million) and the Cardiovascular & Established Prescription Products franchise (-3.2% CER at €2,560 million).
In the Rest of the World region, net sales for 2021 increased by 1.4% on a reported basis and 4.4% at constant exchange rates, to €13,617 million. Under-performances by the Rare Blood Disorders franchise (mainly due to lower industrial sales to Sobi further to the amendments to the supply agreement in 2020) and by Aprovel® were outweighed by good performances from Dupixent®, AprovelLovenox®, influenza vaccines and Mysleethe Rare Diseases franchise. China led the way in terms of growth, with net sales up ®7.9% CER at €2,720 million, driven by an acceleration in sales for the Cardiovascular & Established Prescription Products franchise and Dupixent due to generic competition.®.
A.2.2. Other income statement items
In accordance with IAS 8, Sanofi has treated the first-time application of the IFRIC agenda decisions on (i) the calculation of provisions for pensions and other post-employment benefits under IAS 19 and (ii) accounting for costs of configuring or customising a supplier’s application software in a Software as a Service (SaaS) arrangement as retrospective changes in accounting policy. The impacts of those IFRIC agenda decisions are presented in Note A.2.1. to our consolidated financial statements, included at Item 18. of this annual financial report.
1/ Other revenues
Other revenues increased by 24.0%6.5% to €1,505€1,414 million in 20192021 (versus €1,214€1,328 million in 2018)2020). This line item mainly comprises VaxServe sales of non-Sanofi products (€1,273 million, versus €9591,078 million in 2018,2021 versus €1,136 million in 2020, recorded within the Vaccines segment), and revenues. It also includes, among other items, royalties associated with the distribution of Eloctate® and Alprolix® (primarily in Europe) under our agreements with Swedish Orphan Biovitrum AB.AB (Sobi) and revenue received under agreements for Sanofi to provide manufacturing services to third parties.
2/ Gross profit
Gross profit for 20192021 amounted to €25,655€26,920 million compared with €24,242€25,210 million in 2018,2020, an increase of 5.8%6.8%. As a percentage of net sales, that represents an improvement on 2018 (71.0% of net sales in 2019, versus 70.3% on 2018). The year-on-year change includes the impacts of the remeasurement of inventories acquired in the acquisition of Bioverativ (€114 million in 2018).
Gross margin for the Pharmaceuticals segment (the ratio of gross profit to net sales) increasedalso rose, reaching 71.3% in 2019 to 74.7% (versus 73.7%2021, versus 69.9% in 2018). Positive factors for2020. The year-on-year increase in gross margin reflects a stronger gross margin for the Pharmaceuticals segment, which reached 75.2% in 2021, versus 73.3% in 2020, driven largely by productivity gains in Industrial Affairs and the favorable effect of the increased weighting of Specialty Care in the year includedsales mix. This increase was partly offset by lower gross margin for (i) the performance of Dupixent®; (ii) the ending of royalty paymentsVaccines segment, at 63.1% in 2021 (versus 63.7% in 2020), due in particular to Bristol-Myers Squibb on sales of Plavix® (outside the United States and Puerto Rico) and Avapro®; and (iii) the impact of the divestmentdestruction of our European Generics business. Those factors outweighedtime-expired vaccine inventories as a result of the unfavorable effects of lower average net selling prices for insulin glargines in the United StatesCOVID-19 pandemic, and a decrease in sales of Established Prescription Products in mature markets.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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Gross margin for(ii) the Consumer Healthcare segment, decreasedat 65.3% in 2019 to 66.3%2021 (versus 67.0%66.6% in 2018), in line with lower sales in the United States, due to the voluntary recall of Zantac®2020).
Gross margin for the Vaccines segment improved in 2019 to 63.3% (versus 63.0% in 2018), reflecting favorable trends in the product mix.
3/ Research and development expenses
Research and development (R&D) expenses amounted to €6,018€5,692 million in 2019, compared with €5,8942021, versus €5,530 million in 2018), representing 16.7%2020, a rise of 2.9%. The increase in R&D expenditures in 2021 was mainly due to additional investments in Immunology and Oncology, while cost control effort continues. R&D expenses represented 15.1% of net sales (versus 17.1% in 2018). At constant exchange rates, R&D expenses were stable year-on-year: increased expenditure arising from our acquisitions of Bioverativ and Ablynx, and higher R&D spend2021, versus 15.3% in Vaccines, were offset by a reduction in research costs following the restructuring our immuno-oncology agreement with Regeneron.2020.
4/ Selling and general expenses
Selling and general expenses amounted to €9,883€9,555 million (27.4%in 2021 (25.3% of net sales), compared with €9,859€9,391 million in 2018 (28.6%2020 (26.1% of net sales). The year-on-year, representing a slight increase of 0.2% was attributable mainly to1.7% in line with increased promotional spend in Specialty Care. The reduction in the effectratio of exchange rates. At constant exchange rates, selling and general expenses were lower year-on-year, reflecting costto net sales was due to close control measures in our Pharmaceuticals segment (especially in Primary Care, in mature marketsover general expenses, and in support functions) and the divestment of our European Generics business. Those positive factors more than offset an increase in spending in Specialty Care and Vaccines.operational excellence.
5/ Other operating income and expenses
Other operating income amounted to €825€859 million in 20192021 (versus €484€697 million in 2018)2020), and other operating expenses to €1,207€1,805 million, (versus €548versus €1,415 million in 2018).2020.
Overall, this represented a net expense of €382€946 million in 2019,2021, compared with a net expense of €64€718 million in 2018.2020.
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(€ million) | 2021 | 2020 | (a) | Change |
Other operating income | 859 | | 697 | | | +162 | |
Other operating expenses | (1,805) | | (1,415) | | | -390 | |
Other operating income/(expenses), net | (946) | | (718) | | | -228 | |
(a)Includes the impacts of the IFRIC final agenda decision of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
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| | | | | | |
(€ million) | 2019 |
| 2018 |
| Change |
|
Other operating income | 825 |
| 484 |
| +341 |
|
Other operating expenses | (1,207 | ) | (548 | ) | (659 | ) |
Other operating income/(expenses), net | (382 | ) | (64 | ) | (318 | ) |
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The overall negative change of €228 million was due mainly to higher net negative movement of €318 million is largely due to (i) an increase in the net expenseexpenses relating to our pharmaceutical alliance partners, (€640 millionand in 2019, versus €243 million in 2018); the main factor wasparticular an increase in the share of profits/losses generated by ourthe alliance with Regeneron under our collaboration agreement (see Note C.1. to our consolidated financial statements)statements, included at Item 18. of this Annual Report on Form 20-F), due primarilymainly to higher sales of Dupixent®.
The contribution of our alliance with Regeneron to this line item is as follows:
| | | | | | | | |
(€ million) | 2021 | 2020 |
Income & expense related to (profit)/loss sharing under the Monoclonal Antibody Alliance | (1,253) | | (727) | |
Additional share of profit paid by Regeneron towards development costs | 127 | | 75 | |
Reimbursement to Regeneron of selling expenses incurred | (303) | | (349) | |
Total: Monoclonal Antibody Alliance | (1,429) | | (1,001) | |
Immuno-Oncology Alliance | 68 | | 89 | |
Other (mainly Zaltrap®) | (12) | | (14) | |
Other operating income/(expenses), net related to the Regeneron Alliance | (1,373) | | (926) | |
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| | | | |
(€ million) | 2019 |
| 2018 |
|
Income & Expense related to profit/loss sharing of the Antibodies Alliance | (253 | ) | 177 |
|
Additional share of profit paid by Regeneron related to development costs | 21 |
| — |
|
Regeneron commercial operating expenses reimbursement | (449 | ) | (388 | ) |
Total: Antibody Alliance | (681 | ) | (211 | ) |
Immuno-Oncology Alliance | 62 |
| 4 |
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Other (mainly Zaltrap®) | (14 | ) | (14 | ) |
Other operating income/(expenses), net, related to Regeneron Alliance | (633 | ) | (221 | ) |
This line item also“Other operating income/expenses, net” includes the favorable impact of top-up pension plan amendments following the application of the Pacte law in France, but also a reduced level of gains on disposalsasset divestments (€296418 million in 2019, versus €3262021, €307 million in 2018).2020), and in 2021 a payment of €119 million received from Daiichi Sankyo relating to the ending of a vaccines collaboration agreement in Japan.
6/ Amortization of intangible assets
Amortization charged against intangible assets amounted to €2,146€1,580 million in 2019,2021, compared with €2,170€1,681 million in 2018.2020.
This €24€101 million decrease was mainly due to a reduction in amortization expense generated by intangible assets recognized in connection with the acquisition of various licenses and products (€102 million in 2019, versus €213 million in 2018) and with the acquisitions of Aventis (€197 million in 2019, versus €256 million in 2018) and Genzyme (€727 million in 2019, versus €760 million in 2018) as some products reachedreaching the end of their life cycles. Those effects were partly offset by an increase in the amortization charged against intangible assets recognized on the acquisitions of Ablynx (€157 million) and Bioverativ (€488 million).periods.
7/ Impairment of intangible assets
In 2019,For 2021, this line item shows net impairment losses of €3,604€192 million taken against intangible assets, (compared withmainly related to the discontinuation of the development of sutimlimab (Immune Thrombocytopenic Purpura (ITP)), and the termination of various research projects in Vaccines.
For 2020, this line item shows net impairment losses of €718 million in 2018). The main factor was an impairment loss of €2,803 million against Eloctate® franchise assets, reflecting ongoing competitive pressure in the market for hemophilia treatments. It also includes impairment losses of €352€330 million taken against rights to Zantac® followingintangible assets, mainly on R&D projects in Specialty Care and the voluntary recalltermination of this productvarious R&D projects and collaboration agreements in Diabetes, in line with the United States and Canada, and €280 million of impairment losses taken against assets associated with internal or collaborative development projects. It does not include the portion of the Eloctate® franchise impairment loss allocated to the BIVV001 research project (see above),strategic roadmap unveiled in accordance with paragraph 104 of IAS 36.December 2019.
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In 2018, this line item included impairment losses of (i) €183 million, taken against rights to Lemtrada® and (ii) €454 million, taken against assets associated with internal or collaborative development projects (including €92 million relating to the agreement with MyoKardia, and €129 million relating to certain projects arising from the acquisition of Ablynx).
8/ Fair value remeasurement of contingent consideration
Fair value remeasurements of contingent consideration relating torecognized in acquisitions represented a net gain of €238€4 million in 2019,2021, versus a net gain of €117€124 million in 2018. These relate2020.
The net gain for 2020 mainly related to a remeasurement ofthe contingent consideration payablereceivable further to Bayer as a result of an acquisition made by Genzyme prior to the latter’s acquisition by Sanofi (gain of €214 million in 2019, versus a gain of €109 million in 2018) and to remeasurements arising from the dissolution of the Sanofi Pasteur MSD joint venture (net gain of €154 million in 2019, versus a (net gain of €30 million in 2018)€89 million).
9/ Restructuring costs and similar items
Restructuring costs and similar items amounted torepresented a total charge of €1,062€820 million in 2019,2021, versus a charge of €1,480€1,089 million in 2018. In 2019, restructuring costs mainly comprised termination benefit payments2020.
The amount charged in 2021 includes employee-related expenses of €791€193 million primarily in Europe, the United States and Asia. This line item also includes €106 million ofnet expenses, gains and losses on assets (including asset write-downs and accelerated depreciation.depreciation and amortization) of €110 million. In addition, those restructuring costs and similar items relate to transformational projects, primarily those associated with the creation of the new standalone Consumer Healthcare entity and of EUROAPI (the future European market leader in active pharmaceutical ingredients), and with the implementation of Sanofi’s new digital strategy.
Restructuring costs and similar items represented a total charge of €1,089 million in 2020. That amount includes (i) employee-related expenses of €697 million, comprising separation costs (primarily in Europe) further to the announcement of plans to adapt Sanofi’s organization in line with the new “Play to Win” strategy and (ii) net expenses, gains and losses on assets (including asset write-downs and accelerated deprecation and amortization) of €149 million.
10/ Other gains and losses, and litigation
For 2021, this line item shows a net loss of €5 million.
Other gains and losses, and litigation showedFor 2020, this line item shows a net gain of €327€136 million, in 2019 (versus a gain of €502 million in 2018), mainly comprisingdue to a gain on settlementthe sale of litigation.operations related to the Seprafilm® activity.
11/ Operating income
Operating income amounted to €3,125€8,126 million in 2019, compared with €4,6762021, versus €14,113 million in 2018, a2020. The reduction was mainly due to the recognition in 2020 of the €7,382 million gain on the divestment of Sanofi’s equity investment in Regeneron following the transaction of May 29, 2020. Without this effect, operating income would have increased year-on-year, decrease of 33.2%, due mainly to impairment losses taken against intangible assets duringreflecting the period.improvement in gross profit and lower restructuring costs.
12/ Financial income and expenses
Net financial expenses were €303€328 million in 2019,2021, versus €271€335 million in 2018, an increase2020, a slight decrease of €32€7 million.
The cost of our net debt (see the definition in “B. Liquidity and Capital Resources” below) decreasedincreased to €172€259 million in 2019,2021, compared with €273€225 million in 2018. However, this decrease was offset by factors that increased our2020, largely due to a reduction in net financial expenses:gains on interest rate and currency derivatives used to hedge debt to €51 million in 2021, compared with €66 million in 2020.
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▪70 | the non-recurrence of gains on disposals of non-current financial assets (zero in 2019, versus €63 million in 2018); andSANOFI FORM 20-F2021 |
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▪PART I |
interest expense on lease liabilities (€39 million in 2019), reflecting the first-time application of IFRS 16 from January 1, 2019.ITEM 5. Operating and financial review and prospects |
Other movements in net financial expenses included:
•the net change in “Other financial income and expenses” (income of €16 million in 2021, versus expense of €4 million in 2020); and
•a reduction in the net interest cost of pension plans, mainly in France and Germany (€44 million, versus €57 million in 2020).
13/ Income before tax and investments accounted for using the equity method
Income before tax and investments accounted for using the equity method amounted to €2,822reached €7,798 million in 2019,2021, versus €4,405€13,778 million in 2018, a decrease of 35.9%.2020.
14/ Income tax expense
Income tax expense represented €139€1,558 million in 2019,2021, versus €481€1,807 million in 2018,2020, giving an effective tax rate based on consolidated net income of 4.9%20.0% in 2019,2021, compared with 10.9%13.1% in 2018. Changes2020. The reduction in the level of income tax expense are also significantly impacted bywas mainly due to the tax effects of the amortization and impairment of intangible assets (€1,409 milliontransaction involving Regeneron shares in 2019, versus €692 million in 2018) and of restructuring costs (€311 million in 2019, versus €435 million in 2018) as well as the positive tax effects relating to past acquisitions and divestitures.2020.
The effective tax rate on our business net income is a non-GAAP financial measure (see definition under “A.1.5. Segment information -— 3. Business Net Income” above). It is calculated on the basis of business operating income, minus net financial expenses and before (i) the share of profit/loss from investments accounted for using the equity method and (ii) net income attributable to non-controlling interests. We believe the presentation of this measure, used by our management, is also useful for investors as it provides a means to analyze the effective tax cost of our current business activities. It should not be seen as a substitute for the effective tax rate based on consolidated net income.
When calculated on business net income, our effective tax rate was 20.9% in 2021, compared with 22.0% in 2019, compared with 21.6% in 2018. The main impacts on this tax rate are the geographical mix of the profits of Sanofi entities.2020.
The table below reconciles our effective tax rate based on consolidated net income to our effective tax rate based on business net income:
| | | | | | | | | | | |
(as a percentage) | 2021 | 2020 | (a) |
Effective tax rate based on consolidated net income | 20 | % | 13.1 | % | |
Tax effects: | | | |
Amortization and impairment of intangible assets | 0.5 | | 1.3 | | |
Restructuring costs and similar items | 0.4 | | 1.1 | | |
Gain on sale of Regeneron shares on May 29, 2020 | — | | 6.9 | | |
Other tax effects | — | | (0.4) | | |
Effective tax rate based on business net income | 20.9 | % | 22.0 | % | |
(a)Includes the impacts of the IFRIC final agenda decisions of March 2021 on the costs of configuring or customising application software used in a Software as a Service (SaaS) arrangement and of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
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| | | | |
(as a percentage) | 2019 |
| 2018 |
|
Effective tax rate based on consolidated net income | 4.9 | % | 10.9 | % |
Tax effects: | | |
Amortization and impairment of intangible assets | 4.3 |
| 1.3 |
|
Restructuring costs and similar items | 5.3 |
| 3.4 |
|
Other tax effects(a) | 7.5 |
| 6.0 |
|
Effective tax rate based on business net income | 22.0 | % | 21.6 | % |
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(a) | In 2019, this line includes the impact of past acquisitions and divestitures; in 2018, it includes the direct and indirect effects of the US tax reform (positive impact of €188 million). |
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15/ Share of profit/(loss) from investments accounted for using the equity method
Investments accounted for using the equity method contributed net income of €255€39 million in 2019,2021, versus €499€359 million in 2018. This2020. For 2020, this line item mainly comprisescomprised our share of profits from Regeneron (€245343 million in 2019, versus €484 million2020). On May 29, 2020, Sanofi sold its entire equity investment in 2018);Regeneron (except for 400,000 Regeneron shares retained by Sanofi to support its ongoing collaboration with Regeneron), which then ceased to be accounted for by the decrease was attributable mainly to lower corporate profits at Regeneron after adjustment to align on our accounting policies.
16/ Net income excludingequity method. The amount for 2020 therefore reflects the exchanged/held-for-exchange Animal Health business
Net income excluding the exchanged/held-for-exchange Animal Health business amounted to €2,938 million in 2019, versus €4,423 million in 2018.
17/ Net income/(loss)use of the exchanged/held-for-exchange Animal Health businessequity method until that date.
In accordance with IFRS 5, the line item Net income/(loss) of the exchanged/held-for-exchange Animal Health business shows an expense of €101 million in 2019 (€13 million in 2018) relating to the final settlement signed in September 2019 with Boehringer Ingelheim.
18/16/ Net income
Net income amounted to €2,837€6,279 million in 2019,2021, compared with €4,410€12,330 million in 2018.2020.
19/17/ Net income attributable to non-controlling interests
Net income attributable to non-controlling interests was €31€56 million in 2019,2021, versus €104€36 million in 2018. The reduction was mainly due to the ending (effective December 31, 2018) of payments of the share of pre-tax profits due to BMS on sales of Plavix® (outside the United States and Puerto Rico) and Avapro®/Aprovel® under our alliance agreement with BMS (see Note C.2. to our consolidated financial statements).2020.
20/18/ Net income attributable to equity holders of Sanofi
Net income attributable to equity holders of Sanofi amounted to €2,806€6,223 million in 2019,2021, compared with €4,306€12,294 million in 2018.2020.
Basic earnings per share for 20192021 was €2.24,€4.97 versus €3.45€9.81 for 2018,2020, based on an average number of shares outstanding of 1,249.91,252.5 million in 20192021 and 1,247.11,253.6 million in 2018.2020. Diluted earnings per share for 20192021 was €2.23, 35.0% lower than the 2018 figure of €3.43,€4.95 versus €9.76 for 2020, based on an average number of shares after dilution of 1,257.11,257.9 million in 20192021 and 1,255.21,260.1 million in 2018.2020.
A.2.3. Segment results
Our business operating income, as defined in Note D.35D.35. (“Segment information”) to our consolidated financial statements, amounted to €9,758€10,714 million in 2019,2021, compared with €8,884€9,759 million in 2018,2020, an increase of 9.8%. That represents 27.0%28.4% of our net sales, compared with 25.8%27.1% in 2017.
As indicated in Notes B.26. and D.35. (“Segment information”) to our consolidated financial statements, Sanofi has three operating segments: Pharmaceuticals, Consumer Healthcare and Vaccines.
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PART I |
ITEM 5. Operating and financial review and prospects |
The table below sets forth our business operating income for the years ended December 31, 20192021 and 2018:2020:
| | | | | | | | | | | | | | |
(€ million) | December 31, 2021 | December 31, 2020 | (a) | Change |
Pharmaceuticals | 9,409 | | 9,207 | | | +2.2 | % |
As percentage of sales | 34.9 | % | +35.9 | % | | |
Vaccines | 2,609 | | 2,336 | | | +11.7 | % |
As percentage of sales | 41.3 | % | +39.1 | % | | |
Consumer Healthcare | 1,493 | | 1,410 | | | +5.9 | % |
As percentage of sales | 33.4 | % | +32.1 | % | | |
Other | (2,797) | | (3,194) | | | -12.4 | % |
Business operating income | 10,714 | | 9,759 | | | +9.8 | % |
|
| | | | | | |
(€ million) | December 31, 2019 |
| December 31, 2018 |
| Change |
|
Pharmaceuticals | 8,969 |
| 8,488 |
| +5.7 | % |
Consumer Healthcare | 1,556 |
| 1,536 |
| +1.3 | % |
Vaccines | 2,195 |
| 1,954 |
| +12.3 | % |
Other | (2,962 | ) | (3,094 | ) | -4.3 | % |
Business operating income | 9,758 |
| 8,884 |
| +9.8 | % |
(a)2020 figures have been adjusted to take account of the reallocation of certain expenses (in particular IT costs related to Sanofi’s new digital organization) from the Pharmaceuticals, Vaccines and Consumer Healthcare operating segments to the “Other” segment.
(b)Includes the impacts of the IFRIC final agenda decision of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
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72 | SANOFI / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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B. Liquidity and Capital Resourcescapital resources
Our operations generate significant positive cash flows. We fund our day-to-day investments (with the exception of significant acquisitions) primarily with operating cash flow, and pay regular dividends on our shares.
“Net debt” is a non-GAAP financial indicator which is reviewed by our management, and which we believe provides useful information to measure our overall liquidity and capital resources. We define “net debt” as (i) the sum total of short term debt, long term debt, and interest rate derivatives and currency derivatives used to manage debt, minus (ii) the sum total of cash and cash equivalents and interest rate derivatives and currency derivatives used to manage cash and cash equivalents. Following the first-time application of IFRS 16 effective from January 1, 2019,Lease liabilities are not included in net debt does not includes lease liabilities.debt.
As of December 31, 20192021 our net debt was €15,107€9,983 million, compared with €17,628€8,790 million as of December 31, 2018,2020. The increase was due mainlylargely to cash outflows of €5,594 million on acquisitions of consolidated entities and to the cash generated by our operating activities. See Note D.17.1.€4,008 million dividend payout to our consolidated financial statements.shareholders, partly offset by the €8,096 million of free cash flow generated in the year.
In order to assess our financing risk, we also use the “gearing ratio”, a non-GAAP financial measure (see table in section “B.2. Consolidated Balance Sheet and Debt” below). We define the gearing ratio as the ratio of net debt to total equity. As of December 31, 2019,2021, our gearing ratio was 25.6%14.5%, compared with 29.9%13.9% as of December 31, 2018.2020.
Because our net debt and gearing ratio are not standardized measures, they may not be directly comparable with the non-GAAP financial measures of other companies using the same or similar non-GAAP financial measures. Despite the use of non-GAAP measures by management in setting goals and measuring performance, these are non-GAAP measures that have no standardized meaning prescribed by GAAP.
B.1. Consolidated statement of cash flows
Generally, factors that affect our earnings -– for example, pricing, volume, costs and exchange rates -– flow through to cash from operations. The most significant source of cash from operations is sales of our branded pharmaceutical products and vaccines. Receipts of royalty payments also contribute to cash from operations.
Summarized consolidated statements of cash flows
| | | | | | | | | | | |
(€ million) | 2021 | 2020 | (a) |
Net cash provided by/(used in) operating activities | 10,522 | | 7,418 | | |
Net cash provided by/(used in) investing activities | (7,298) | | 3,619 | | |
Net cash provided by/(used in) financing activities | (7,056) | | (6,485) | | |
Impact of exchange rates on cash and cash equivalents | 15 | | (64) | | |
Net change in cash and cash equivalents | (3,817) | | 4,488 | | |
|
| | | | |
(€ million) | 2019 |
| 2018 |
|
Net cash provided by/(used in) operating activities | 7,744 |
| 5,547 |
|
Net cash provided by/(used in) investing activities | (1,212 | ) | (12,866 | ) |
Net cash inflow from the exchange of the Animal Health business for BI’s Consumer Healthcare business | 154 |
| (6 | ) |
Net cash provided by/(used in) financing activities | (4,193 | ) | 3,934 |
|
Impact of exchange rates on cash and cash equivalents | 9 |
| 1 |
|
Net change in cash and cash equivalents | 2,502 |
| (3,390 | ) |
(a)Includes the impacts of the IFRIC final agenda decisions of March 2021 on the costs of configuring or customising application software used in a Software as a Service (SaaS) arrangement and of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.Net cash provided byby/used in operating activities represented a net cash inflow ofamounted to €7,744€10,522 million in 2019, against €5,5472021, compared with €7,418 million in 2018.
Operating2020. This increase mainly resulted from an improvement in operating cash flow before changes in working capital for 2019(which amounted to €8,163 million, compared with €6,827€9,113 million in 2018. Working capital requirements increased by €4192021, versus €7,743 million in 2019, compared with an2020) and a net reduction of €1,409 million in the working capital requirement in 2021, versus a net increase of €1,280€325 million in 2018. The main factors in 2019 were an increase of €462 million in accounts receivable, and a €547 million rise in inventories associated with new products (especially Dupixent2020.®).
We run the risk of delayed payments or even non-payment by our customers, who consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies (see “Item 3.D - Risk Factors - 2. Risks Relating to Our Business - We are subject to the risk of non payment by our customers”). Over our business as a whole, the amount of trade receivables overdue by more than 12 months - which primarily consists of amounts due from public sector bodies - increased from €61 million as of December 31, 2018 to €105 million as of December 31, 2019 (see Note D.10. to our consolidated financial statements), due mainly to changes in the level of accounts receivable in the Middle East region.
Net cash provided by/used in investing activities totaled €1,212represented a net cash outflow of €7,298 million in 2019,2021, compared with €12,866a net inflow of €3,619 million in 2018.2020. The net cash outflow in 2021 was attributable mainly to the acquisitions of Translate Bio (€2,333 million), Kadmon (€1,575 million), Kymab (€932 million), Kiadis (326 million), Tidal (€135 million) and Origimm (€50 million).The net cash inflow in 2020 was mainly due to the sale of Renegeron shares on May 29, 2020 for cash proceeds of €10,370 million, partly offset by cash outflows related to the acquisitions of Synthorx (€2,245 million) and Principia (€2,972 million).
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PART I |
ITEM 5. Operating and financial review and prospects |
Acquisitions of property, plant and equipment and intangible assets amounted to €1,816€2,043 million, versus €1,977€2,083 million in 2018.2020. There were €1,323€1,479 million of acquisitions of property, plant and equipment (versus €1,415€1,254 million in 2018)2020), mostlymost of which (€8511,024 million) inrelated to the Pharmaceuticals segment, primarily in industrial facilities. The Vaccines segment accounted for €462€382 million of acquisitions of property, plant and equipment during 2019.2021. Acquisitions of intangible assets (€493564 million, versus €562€829 million in 2018)2020) mainly comprised contractual payments for intangible rights under license and collaboration agreements.
Acquisitions of equity interests in other entities, during 2019, totaled €526 million, net of the cash of acquired entities and after including assumed liabilities and commitments. This compares with €12,994 million in 2018, when the main acquisitions were Bioverativ (€8,932 million) and Ablynx (€3,639 million).
After-tax proceeds from disposals were €1,224amounted to €718 million in 2019,2021, and arose mainly from salesincluded the divestments of (i) two activities related to some of our equity interest in Alnylam (€706 million)established prescription products for a selling price before taxes of €187 million and in MyoKardia (€118 million).(ii) some of our Consumer Healthcare products for a selling price before taxes of €109 million. In 2018,2020, after-tax proceeds from disposals amounted to €2,163€918 million, mainly arising onthe main items being (i) the sale to Baxter of the Seprafilm® activity for a selling price before taxes of €311 million; (ii) the divestment of some of our European Generics business (€1,598 million), the saleestablished prescription products for €97 million before taxes; and (iii) €167 million before taxes of some Consumer Healthcare products to Cooper-Vemedia (€158 million), and the divestment of equity interestscontingent consideration received in Impact Therapeutics (€99 million).
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SANOFIconnection with a past divestment. / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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Net cash provided by/used in financing activities represented a net cash outflow of €4,193€7,056 million in 2019,2021, compared with a net inflowcash outflow of €3,934€6,485 million in 2018.2020. The 20192021 figure includes a net outflow of €2,804 million for debt repayments (including lease liabilities), primarily (i) the redemption at maturity on March 29, 2021 of €491the $2 billion bond issue from March 2011 and (ii) the early redemption on June 22, 2021 of the €500 million (versusbond issue from September 2015; that compares with a net externaloutflow of €1,885 million for debt finance raised of €8,722 millionrepayments in 2018);2020). It also includes the dividend payout to our shareholders of €3,834€4,008 million (versus €3,773€3,937 million in 2018);2020), and the effect of changes in our share capital (repurchases of our own shares, net of capital increases), representing a net inflowcash outflow of €153€196 million in 20192021 and a net outflowcash inflow of €924€619 million in 2018.2020.
The net change in cash and cash equivalents during 2019in 2021 was an increase of €2,502€3,817 million, versus a decreasean increase of €3,390€4,488 million in 2018.2020.
"“Free cash flowflow”" for the year ended December 31, 20192021 was €6,026 million. This represents€8,096 million, an increase on the 20182020 figure of €4,054 million, mainly as a result€6,982 million. This reflects our operational performance (including the effect of a rise in our business net income; a reduction in cash outflows on pensionscost containment measures), and other employee-related benefits; and a lower level of investment in property, plant and equipment.asset divestments made during the period.
“Free Cash Flowcash flow” is a non-GAAP financial indicator which is reviewed by our management, and which we believe provides useful information to measure the net cash generated from the Company’sour operations that is available for strategic investments(1)(12) (net of divestments(1)), for debt repayment, and for payments to shareholders. Free Cash Flow“Free cash flow” is determined from Business Net Incomeour “Business net income”(2)(13) adjusted forafter adding back (in the case of expenses and losses) or deducting (in the case of income and gains) the following items: depreciation, amortization and impairment, share of undistributed earnings from investments accounted for using the equity method, gains & losses on disposals, net change in provisions including pensions and other post-employment benefits, deferred taxes, share-based payment expense and other non-cash items. It also includes net changes in working capital, capital expenditures and other asset acquisitions(3)(14) net of disposal proceeds(3), and payments related to restructuring and similar items. Free Cash Flow“Free cash flow” is not defined by IFRS, and is not a substitute for Net cash provided by operating activities as reported under IFRS. Management recognizes that the term “Free Cash Flow”cash flow” may be interpreted differently by other companies and under different circumstances.
The table below sets forth a reconciliation between Net cash provided by operating activities and Free Cash Flow:“Free cash flow”:
| | | | | | | | | | | |
(€ million) | 2021 | 2020 | (a) |
Net cash provided by operating activities | 10,522 | | 7,418 | | |
Acquisitions of property, plant and equipment and software | (1,400) | | (1,329) | | |
Acquisitions of intangible assets, equity interests and other non-current financial assets(b) | (1,488) | | (562) | | |
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax(b) | 667 | | 930 | | |
Repayments of lease liabilities(c) | (149) | | (234) | | |
Other items(d) | (56) | | 759 | | |
Free cash flow | 8,096 | | 6,982 | | |
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(€ million) | 2019 |
| 2018 |
|
Net cash provided by operating activities | 7,744 |
| 5,547 |
|
Acquisitions of property, plant and equipment and software | (1,405 | ) | (1,674 | ) |
Acquisitions of intangible assets, equity interests and other non-current financial assets(a) | (576 | ) | (635 | ) |
Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax(a) | 490 |
| 522 |
|
Repayments of lease liabilities(b) | (267 | ) | — |
|
Other items | 40 |
| 294 |
|
Free cash flow | 6,026 |
| 4,054 |
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(a) | Free cash flow includes investments and divestments not exceeding a cap of €500 million per transaction. |
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(b) | Following first-time application of IFRS 16, cash outflows representing repayments of lease liabilities are included in the free cash flow calculation. |
(a)Includes the impacts of the IFRIC final agenda decision of April 2021 on the attribution of benefits to periods of service, as described in Note A.2.1. to the consolidated financial statements presented at Item 18. of this annual financial report.
(b)Free cash flow includes investments and divestments not exceeding a cap of €500 million per transaction.
(c)Cash outflows relating to repayments of the principal portion of lease liabilities (IFRS 16) are included in free cash flow.
(d)This line mainly comprises in 2020 the reclassification of net foreign exchange gains and losses arising on financial monetary items, and on the related hedging instruments, to Net cash provided by/(used in) financing activities.
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(1) | Amount of the transaction above a cap of €500 million per transaction. |
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(2) | Non-GAAP financial measure, as defined in "- A.1.5 - Segment Information - 3. Business Net income" above. |
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(3) | Not exceeding a cap of €500 million per transaction. |
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74 | SANOFI / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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B.2. Consolidated balance sheet and debt
In accordance with IAS 8, Sanofi has treated the first-time application of the IFRIC agenda decisions on (i) the calculation of provisions for pensions and other post-employment benefits under IAS 19 and (ii) accounting for costs of configuring or customising a supplier’s application software in a Software as a Service (SaaS) arrangement as retrospective changes in accounting policy. The impacts of those IFRIC agenda decisions are presented in Note A.2.1. of our consolidated financial statements, included at Item 18. of this annual financial report.
Total assets were €112,736€120,242 million as of December 31, 2019,2021, compared with €111,408€114,413 million as of December 31, 2018,2020, an increase of €1,328€5,829 million.
Net debt was €15,107€9,983 million as of December 31, 2019, compared with €17,6282021, versus €8,790 million as of December 31, 2018,2020. The increase was due mainlylargely to cash outflows of €5,594 million on acquisitions of consolidated entities and to the €4,008 million dividend payout to our shareholders, partly offset by the €8,096 million of free cash flow generated by our operating activities. “Netin the year.
(12) Above a cap of €500 million per transaction.
(13) Non-GAAP financial measure, as defined in "— A.1.5. — Segment Information — 3. Business Net income" above.
(14) Not exceeding a cap of €500 million per transaction.
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PART I |
ITEM 5. Operating and financial review and prospects |
“Net debt” is a non-GAAP financial measure which is reviewed by our management, and which we believe provides useful information to measure our overall liquidity and capital resources. We define “net debt” as (i) the sum total of short term debt, long term debt, and interest rate derivatives and currency derivatives used to manage debt, minus (ii) the sum total of cash and cash equivalents and interest rate derivatives and currency derivatives used to manage cash and cash equivalents.
| | | | | | | | |
(€ million) | 2020 | 2019 |
Long-term debt | 17,123 | | 19,745 | |
Short-term debt and current portion of long-term debt | 3,183 | | 2,767 | |
Interest rate and currency derivatives used to manage debt | (56) | | 119 | |
Total debt | 20,250 | | 22,631 | |
Cash and cash equivalents | (10,098) | | (13,915) | |
Interest rate and currency derivatives used to manage cash and cash equivalents | (169) | | 74 | |
Net debt(a) | 9,983 | | 8,790 | |
Total equity | 69,031 | | 63,252 | |
Gearing ratio | 14.5 | % | 13.9 | % |
(a)Net debt does not include lease liabilities, which amounted to €2,108 million as of December 31, 2021 and €1,163 million as of December 31, 2020.
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(€ million) | 2019 |
| 2018 |
|
Long-term debt | 20,131 |
| 22,007 |
|
Short-term debt and current portion of long-term debt | 4,554 |
| 2,633 |
|
Interest rate and currency derivatives used to manage debt | (117 | ) | (54 | ) |
Total debt | 24,568 |
| 24,586 |
|
Cash and cash equivalents | (9,427 | ) | (6,925 | ) |
Interest rate and currency derivatives used to manage cash and cash equivalents | (34 | ) | (33 | ) |
Net debt(a) | 15,107 |
| 17,628 |
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Total equity | 59,108 |
| 59,035 |
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Gearing ratio | 25.6 | % | 29.9 | % |
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(a) | WIth effect from January 1, 2019, the first-time application of IFRS 16 means that lease liabilities are not included in net debt (see Note A.2.1. to our consolidated financial statements). |
To assess our financing risk, we use the “gearing ratio”, a non-GAAP financial measure. This ratio (which we define as the ratio of net debt to total equity) reducedincreased from 29.9%13.9% as of December 31, 20182020 to 25.6%14.5% as of December 31, 2019.2021. Analyses of debt as of December 31, 20192021 and December 31, 2018,2020, by type, maturity, interest rate and currency, are provided in Note D.17.1. to our consolidated financial statements.
We expect that the future cash flows generated by our operating activities will be sufficient to repay our debt. The financing arrangements in place as of December 31, 20192021 at the Sanofi parent company level are not subject to covenants regarding financial ratios and do not contain any clauses linking credit spreads or fees to Sanofi’s credit rating.
We have applied IFRS 16 (Leases) with effect from January 1, 2019 (see Note A.2.1. to our consolidated financial statements). As a result, we have recognised in our balance sheet as of December 31, 2019 (i) a right-of-use asset of €1,300 million; (ii) a non-current lease liability of €987 million; and (iii) a current lease liability of €261 million.
Other key movements in the balance sheet are described below.
Total equity was €59,108€69,031 million as of December 31, 2019,2021, versus €59,035€63,252 million as of December 31, 2018.2020. The year-on-year change reflects the following principal factors:
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▪ | increases: our net income for 2019 (€2,837 million) and movements in currency translation differences (€751 million, mainly on the US dollar); and |
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▪ | decreases: the dividend payout to our shareholders in respect of the 2018 financial year (€3,834 million), and repurchases of our own shares (€12 million). |
•increases: our net income for 2021 (€6,279 million); and positive currency translation differences (€2,459 million); and
•decreases: the dividend paid to our shareholders in respect of the 2020 financial year (€4,008 million), and repurchases of our own shares (€382 million).
As of December 31, 20192021, we held 0.0211.02 million of our own shares, recorded as a deduction from equity and representing 0.002%0.872% of our share capital.
Goodwill and Other intangible assets (€61,09169,463 million in total) decreasedincreased by €5,033€6,758 million year-on-year, the main factors being:
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▪ | decreases: amortization and impairment charged during the period (€5,928 million, including the impairment loss taken against Eloctate® franchise•increases: movements associated with the acquisitions of Translate Bio (€2,179 million of provisional goodwill, €396 million of other intangible assets), Kymab (€965 million of other intangible assets), and Kadmon (€1,739 million of other intangible assets), and currency translation differences (€2,398 million); and •decreases: amortization and impairment charged in the period (€1,932 million). |
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▪ | increases: currency translation differences (€826 million).
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Investments accounted for using the equity method (€3,591250 million) increased by €189€49 million mainly due to the recognitionremeasurement of our share ofinterest in the profits of Regeneron.MSP Vaccine Company joint venture.
Other non-current assets were €304amounted to €3,127 million, lower at €2,667a year-on-year increase of €393 million. The main movement duringThis mainly reflects the year was$180 million equity investment in Owkin, and the divestmentrecognition as of our equity interestDecember 31, 2021 of overfundings of defined-benefit pension schemes (especially in Alnylam and MyoKardia.the United Kingdom).
Net deferred tax assets amounted to €3,140€2,981 million as of December 31, 2019,2021, versus €1,199€2,406 million as of December 31, 2018,2020, a year-on-year rise of €575 million. This mainly reflects deferred taxes arising on consolidation adjustments for intragroup margin in inventory, and an increase of €1,941 million. This was largely due to the reversal of deferredin tax liabilities relating to amortization and impairment of intangible assets, and the recognition of deferred tax assets on (i) restructuring provisions and (ii) provisions for pensions and other post-employment benefits (after taking account of actuarial losses).loss carry-forwards.
Non-current provisions and other non-current liabilities (€9,3216,721 million) rose by €708showed a decrease of €594 million, mainly duerelated to an increaseactuarial losses on defined-benefit plans (recognized in provisions for pensions and other post-employment benefits.Other comprehensive income).
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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Liabilities related to business combinations and to non-controlling interests (€800714 million) were €504€109 million lowerhigher year-on-year. The main movements in this line item are fair value remeasurementsduring 2021 were the recognition of $382 million of contingent consideration payable to BayerShire Human Genetic Therapies Inc. (Shire) as a result of an acquisition made by Genzyme prior to the latter’s acquisition by Sanofi. The year-on-year decrease also reflects the signature of an agreement to settle the ongoing litigation related to the contingent value rights (CVRs) issued in connection with our acquisition of Genzyme (see Note D.22.Translate Bio in September 2021, partly offset by the settlement during the first half of 2021 of the contingent consideration liability due to True North Therapeutics as a result of our consolidated financial statements).acquisition of Bioverativ.
B.3. Liquidity
We expect that our existing cash resources and cash from operations will be sufficient to finance our foreseeable working capital requirements.requirements, in both the short term (i.e. the 12 months following the year ended December 31, 2021) and the long term (i.e. beyond such additional 12-month period). At year-end 2019,2021, we held cash and cash equivalents amounting to €9,427€10,098 million, substantially all of which were held in euros (see Note D.13. to our consolidated financial statements included at Item 1818. of this annual report). As at December 31, 2019, €4562021, €427 million of our cash and cash equivalents were held by captive insurance and reinsurance companies in accordance with insurance regulations.
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PART I |
ITEM 5. Operating and financial review and prospects |
We run the risk of delayed payments or even non-payment by our customers, who consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies (see “Item 3.D. Risk Factors -— 2. Risks Relating to Our Business -— We are subject to the risk of non-payment by our customers”). Deteriorating credit and economic conditions and other factors in some countries have resulted in, and may continue to result in an increase in the average length of time taken to collect our accounts receivable in these countries. Should these factors continue, it may require us to re-evaluate the collectability of these receivables in future periods. We carefully monitor sovereign debt issues and economic conditions and evaluate accounts receivable in these countries for potential collection risks. We have been conducting an active recovery policy, adapted to each country and including intense communication with customers, negotiations of payment plans, charging of interest for late payments, and legal action. Over our business as a whole, the amount of trade receivables overdue by more than 12 months (which primarily consists of amounts due from public sector bodies) increaseddecreased from €61€95 million as of December 31, 20182020 to €105€56 million as of December 31, 20192021 (see Note D.10. to our consolidated financial statements), due mainly to changes in the level of accounts receivable in the Middle East region.
In November 2011, Sanofi obtained the necessary corporate authorizations to purchase any or all of the outstanding Contingent Value Rights (“CVR”) and subsequently purchased CVRs in 2011. In 2012 following a tender offer initiated in September 2012 on the basis of the same corporate authorization, Sanofi purchased an additional 40,025,805 CVRs (for a total consideration of approximately $70 million), followed by a further 10,928,075 CVRs (for approximately $9 million) in 2013, 1,879,774 CVRs (for approximately $1 million) in 2014, and none in 2015, 2016, 2017, 2018 and 2019. As of December 31, 2019, a total of 236,457,284 CVRs were outstanding out of the 291,313,510 issued at the time of the Genzyme acquisition..
At year-end 2019,2021, we had no commitments for capital expenditures that we consider to be material to our consolidated financial position. Undrawn confirmed credit facilities amounted to a total of €8,000 million at December 31, 2019.2021. For a discussion of our treasury policies, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
We expect that cash from our operations will be sufficient to repay our debt. For a discussion of our liquidity risks, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
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76 | SANOFI / FORM 20-F 2019
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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C. Off balance Sheet Arrangements / sheet arrangements/Contractual Obligationsobligations and Other Commercial Commitmentsother commercial commitments
We have various contractual obligations and other commercial commitments arising from our operations. Our contractual obligations and our other commercial commitments as of December 31, 20192021 are shown in Notes D.3., D.17., D.18., and D.21. to our consolidated financial statements included at Item 1818. of this annual report. Note D.21. to our consolidated financial statements discloses details of commitments under our principal research and development collaboration agreements. For a description of the principal contingencies arising from certain business divestitures, refer to Note D.22.d)D.22.d.) to our 20192021 consolidated financial statements.
Sanofi’s contractual obligations and other commercial commitments are set forth in the table below:below | | | | | | | | | | | | | | | | | |
December 31, 2021 | | Payments due by period |
(€ million) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years |
Future contractual cash flows relating to debt and debt hedging instruments(a) | 21,677 | | 3,271 | | 4,618 | | 5,117 | | 8,671 | |
Principal payments related to lease liabilities(b) | 2,336 | | 314 | | 476 | | 362 | | 1,184 | |
Other lease obligations (with a term of less than 12 months, low value asset leases and lease contracts committed but not yet commenced)(c) | 109 | | 39 | | 16 | | 18 | | 36 | |
Irrevocable purchase commitments(d) | | | | | |
•given | 8,901 | | 5,343 | | 1,784 | | 685 | | 1,089 | |
•received | (1,124) | | (366) | | (442) | | (166) | | (150) | |
Research & development license agreements | | | | | |
•Commitments related to R&D and other commitments | 536 | | 254 | | 169 | | 77 | | 36 | |
•Potential milestone payments(e) | 2,892 | | 237 | | 1,139 | | 451 | | 1,065 | |
Obligations relating to business combinations(f) | 689 | | 108 | | 181 | | 78 | | 322 | |
Estimated benefit payments on unfunded pensions and post employment benefits(g) | 1,106 | | 60 | | 105 | | 106 | | 835 | |
Total contractual obligations and other commitments | 37,122 | | 9,260 | | 8,046 | | 6,728 | | 13,088 | |
Undrawn general-purpose credit facilities | 8,000 | | 4,000 | | — | | 4,000 | | — | |
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(a) See Note D.17.1. to our consolidated financial statements, included at Item 18. of this annual report. |
| | | | | | | | | | |
December 31, 2019 | | Payments due by period |
(€ million) | Total |
| Less than 1 year |
| 1 to 3 years |
| 3 to 5 years |
| More than 5 years |
|
Future contractual cash flows relating to debt and debt hedging instruments(a) | 26,591 |
| 4,678 |
| 5,520 |
| 4,633 |
| 11,760 |
|
Principal payments related to lease liabilities(b) | 1,466 |
| 272 |
| 422 |
| 232 |
| 540 |
|
Other lease obligations (with a term of less than 12 months, low value asset leases and lease contracts committed but not yet commenced)(c) | 1,067 |
| 31 |
| 91 |
| 122 |
| 823 |
|
Irrevocable purchase commitments(d) | 2,577 |
| 2,943 |
| 3,862 |
| 771 |
| |
| 6,726 |
| 3,478 |
| 1,465 |
| 646 |
| 1,137 |
|
| (648 | ) | (188 | ) | (115 | ) | (95 | ) | (250 | ) |
Research & development license agreements | | | | | |
▪ Commitments related to R&D and other commitments | 784 |
| 500 |
| 264 |
| 9 |
| 11 |
|
▪ Potential milestone payments(e) | 3,040 |
| 203 |
| 936 |
| 876 |
| 1,025 |
|
▪ Obligations related to R&D license agreements reflected in the balance sheet | 224 |
| 69 |
| 53 |
| 19 |
| 83 |
|
Obligations relating to business combinations(f) | 3,503 |
| 2,580 |
| 390 |
| 284 |
| 249 |
|
Estimated benefit payments on unfunded pensions and post employment benefits(g) | 1,265 |
| 68 |
| 117 |
| 121 |
| 959 |
|
Total contractual obligations and other commitments | 44,018 |
| 11,691 |
| 9,143 |
| 6,847 |
| 16,337 |
|
Undrawn general-purpose credit facilities | 8,000 |
| 4,000 |
| 4,000 |
| — |
| — |
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(b) See Note D.17.2. to our consolidated financial statements, included at Item 18. of this annual report. | |
(a) | See Note D.17.1 to our consolidated financial statements included at Item 18 of this annual report. |
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(b) | See Note D.17.2. to our consolidated financial statements included at Item 18 of this annual report. |
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(c) | See Note D.21.1. to our consolidated financial statements included at the Item 18 of this annual report. |
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(d) | These comprise irrevocable commitments to suppliers of (i) property, plant and equipment, net of down payments (see Note D.3. to our consolidated financial statements included at Item 18 of this annual report) and (ii) goods and services. |
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(e) | This line includes all potential milestone payments on projects regarded as reasonably possible, i.e., on projects in the development phase. |
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(f) | See Note D.18. to our consolidated financial statements included at Item 18 of this annual report. |
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(g) | See Note D.19.1. to our consolidated financial statements included at Item 18 of this annual report. The table above does not include the ongoing annual employer’s contributions to plan assets, estimated at €46 million in 2019. |
(c) See Note D.21.1. to our consolidated financial statements, included at Item 18. of this annual report.
(d) These comprise irrevocable commitments to suppliers of (i) property, plant and equipment, net of down payments (see Note D.3. to our consolidated financial statements, included at Item 18. of this annual report) and (ii) goods and services.
(e) This line includes all potential milestone payments on projects regarded as reasonably possible, i.e. on projects in the development phase.
(f) See Note D.18. to our consolidated financial statements, included at Item 18. of this annual report.
(g) See Note D.19.1. to our consolidated financial statements, included at Item 18. of this annual report. The table above does not include ongoing annual employer’s contributions to plan assets, estimated at €49 million for 2022.
We may have payments due to our current or former research and development partners under collaboration agreements. These agreements typically cover multiple products, and give us the option to participate in development on a product-by-product basis. When we exercise our option with respect to a product, we pay our collaboration partner a fee and receive intellectual property rights to the product in exchange. We are also generally required to fund some or all of the development costs for the products that we select, and to make payments to our partners when those products reach development milestones.
We have entered into collaboration agreements under which we have rights to acquire products or technology from third parties through the acquisition of shares, loans, license agreements, joint development, co-marketing and other contractual arrangements. In addition to
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PART I |
ITEM 5. Operating and financial review and prospects |
upfront payments on signature of the agreement, our contracts frequently require us to make payments contingent upon the completion of development milestones by our alliance partner or upon the granting of approvals or licenses.
Because of the uncertain nature of development work, it is impossible to predict (i) whether Sanofi will exercise further options for products, or (ii) whether the expected milestones will be achieved, or (iii) the number of compounds that will reach the relevant milestones. It is therefore impossible to estimate the maximum aggregate amount that Sanofi will actually pay in the future under existing collaboration agreements.
Given the nature of its business, it is highly unlikely that Sanofi will exercise all options for all products or that all milestones will be achieved.
The main collaboration agreements relating to development projects are described in Note D.21.1. to our consolidated financial statements, included at Item 1818. of this annual report. Milestone payments relating to development projects under these agreements included in the table above exclude projects still in the research phase (€6.7 billion in 2019, €6.82021, and €6.7 billion in 2018 and €7.2 billion in 2017)2020) and payments contingent upon the attainment of sales targets once a product is on the market (€10.68.1 billion in 2019, €9.92021, and €8.1 billion in 2018, €10.1 billion in 2017)2020).
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76 | |
SANOFIFORM 20-F / FORM 20-F 20192021 | 77 |
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PART I |
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Directors, senior management and employees |
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
Since January 1, 2007, Sanofi has separated the offices of Chairman and Chief Executive Officer. Annual evaluations conducted since that date have indicated that this governance structure is appropriate to Sanofi’s current configuration. This arrangement was maintained with the appointment of Serge Weinberg to the office of Chairman firstly on May 17, 2010, then on May 6, 2011, again on May 4, 2015, and finally on April 30, 2019. The Board of Directors regardsbelieves this governance structure asis still appropriate to the current context in which Sanofi operates and its share ownership structure, and as protecting the rights of all of its stakeholders.
The Chairman organizes and directs the work of the Board, and is responsible for ensuring the proper functioning of the corporate decision-making bodies in compliance with good governance principles. The Chairman coordinates the work of the Board of Directors with that of its Committees. He ensures that the Company’s management bodies function properly, and in particular that the directors are able to fulfil their duties. The Chairman is accountable to the Shareholders’ General Meeting, which he chairs.
In addition to these roles conferred by law, the Chairman:
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▪ | in coordination with the Chief Executive Officer, liaises between the Board of Directors and the shareholders of the Company; |
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▪ | is kept regularly informed by the Chief Executive Officer of significant events and situations affecting the affairs of the Company, and may request from the Chief Executive Officer any information useful to the Board of Directors; |
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▪ | may, in close collaboration with the Chief Executive Officer, represent the Company in high-level dealings with governmental bodies and with key partners of the Company and/or of its subsidiaries, both nationally and internationally; |
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▪ | seeks to prevent any conflict of interest and manages any situation that might give rise to a conflict of interest. He also gives rulings, in the name of the Board, on requests to take up external directorships of which he may become aware or that may be submitted to him by a director; |
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▪ | may interview the statutory auditors in preparation for the work of the Board of Directors and the Audit Committee; and |
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▪ | strives to promote in all circumstances the values and image of the Company. |
•in coordination with the Chief Executive Officer, liaises between the Board of Directors and the shareholders of the Company;
•is kept regularly informed by the Chief Executive Officer of significant events and situations affecting the affairs of the Company, and may request from the Chief Executive Officer any information useful to the Board of Directors;
•may, in close collaboration with the Chief Executive Officer, represent the Company in high-level dealings with governmental bodies and with key partners of the Company and/or of its subsidiaries, both nationally and internationally;
•seeks to prevent any conflict of interest and manages any situation that might give rise to a conflict of interest. He also gives rulings, in the name of the Board, on requests to take up external directorships of which he may become aware or that may be submitted to him by a director;
•may interview the statutory auditors in preparation for the work of the Board of Directors and the Audit Committee; and
•strives to promote in all circumstances the values and image of the Company.
The Chairman is also required to develop and maintain a proper relationship of trust between the Board and the Chief Executive Officer, so as to ensure that the latter consistently and continuously implements the orientations determined by the Board.
In fulfilling his remit, the Chairman may meet with any individual, including senior executives of the Company, while avoiding any involvement in directing the Company or managing its operations, which are exclusively the responsibility of the Chief Executive Officer.
Finally, the Chairman reports to the Board on the fulfilment of his remit.
The Chairman carries out his duties during the entire period of his term of office, subject to the caveat that a director who is a natural person may not be appointed or reappointed once that director has reached the age of 70.
The Chief Executive Officer manages the Company, and represents it in dealings with third parties within the limit of the corporate purpose. The Chief Executive Officer has the broadest powers to act in all circumstances in the name of the Company, subject to the powers that are attributed by law to the Board of Directors and to the Shareholders’ General Meeting and within the limits set by the Board of Directors.
The Chief Executive Officer must be less than 65 years old.
Limitations on the powers of the Chief Executive Officer set by the Board
With effect from March 6, 2018, the limitations on the powers of the Chief Executive Officer are specified in the Board Charter. Without prejudice to legal provisions regarding authorizations that must be granted by the Board (regulated agreements, guarantees, divestments of equity holdings or real estate, etc.), prior approval from the Board of Directors is required for transactions or decisions resulting in an investment or divestment, or an expenditure or guarantee commitment, made by the Company and its subsidiaries, in excess of:
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▪ | a cap of €500 million (per transaction) for transactions, decisions or commitments pertaining to a previously approved strategy; and |
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▪ | a cap of €150 million (per transaction) for transactions, decisions or commitments not pertaining to a previously approved strategy. |
•a cap of €500 million (per transaction) for transactions, decisions or commitments pertaining to a previously approved strategy; and
•a cap of €150 million (per transaction) for transactions, decisions or commitments not pertaining to a previously approved strategy.
When such transactions, decisions or commitments give rise to installment payments to the contracting third party (or parties) that are contingent upon future results or objectives, such as the registration of one or more products, attainment of the caps is calculated by aggregating the various payments due from signature of the contract until (and including) filing of the first application for marketing authorization in the United States or in Europe.
Attainment of the above caps is also assessed after taking into account all commitments to make payments on exercise of a firm or conditional option with immediate or deferred effect, and all guarantees or collateral to be provided to third parties over the duration of such commitments.
The prior approval procedure does not apply to transactions and decisions that result in the signature of agreements that solely involve subsidiaries and the Company itself.
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78 | SANOFIFORM 20-F / FORM 20-F 20192021 | 77 |
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PART I |
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Directors, senior management and employees |
Board of Directors
The Board of Directors establishes the orientation of the Company's activities and ensures that they are implemented, paying due consideration to social and environmental issues. Subject to those powers expressly attributed to Shareholders’ General Meetings and within the limits set by the corporate purpose, it addresses any issue of relevance to the proper conduct of the Company’s affairs and, through its deliberations, settles matters concerning the Company.
Each year, the Board of Directors conducts a review to ensure that there is an appropriate balance in its composition and in the composition of its Committees. In particular, the Board seeks to ensure gender balance and a broad diversity of competencies, experiences, nationalities and ages, reflecting our status as a diversified global business. The Board investigates and evaluates not only potential candidates, but also whether existing directors should seek reappointment. Above all, the Board seeks directors who show independence of mind and are competent, dedicated and committed, with compatible and complementary personalities.
As of December 31, 2019 the2021 our Board of Directors had 1615 members, including two directors representing employees. 43%54% of the directors (excluding directors representing employees) were women, and 43%53% of the directors (including directors representing employees) were non-French nationals.
The Board worksActing on proposals from the Chief Executive Officer and in liaison with the Compensation Committee and the Appointments, Governance and CSR Committee, to ensurethe Board sets objectives for gender balance on Sanofi’s executive bodies, and more generally ensures that the Executive Committee operates an inclusion (non-discrimination) and diversity policy especially as regards gender balance.is applied within the Company. As of December 31, 2019, 21%2021, 27% of the 1411 Executive Committee members were women, and 71%73% were non-French nationals. Following the changes announced on July 29, 2021 and implemented on October 1, 2021 and February 1, 2022, as of the date of publication of this Annual Report on Form 20-F, 18% of our Executive Committee members were 18% women and 73% were non-French nationals. For more details on these changes, see the section entitled “Executive Committee” below.
The Board of Directors is also kept informed, in particular on the occasion of its annual discussion on professionalequal opportunity and equal pay equality policy, on how theSanofi's inclusion and diversity policy is cascaded down to “Senior Leaders” and “Executives” (the positions in the CompanySanofi with the highest level of responsibility). In 2019, there were 2,066 “Senior Leaders” within Sanofi,
Finally, the Board monitors progress on our CSR strategy, as recalibrated in 2021, paying particularly close attention to tracking delivery on our CSR program including Executive Committee members and other executives; of that total, 37.2% were women.
Subject to the powers expressly attributed to the Shareholders’ General Meeting and within the scopeour climate commitments. Since 2020, 15% of the Company’s corporate purpose, the Boardvariable compensation package of Directors’ remit covers all issues relatingour CEO has been linked to the proper management of the Company, and through its decisions the Board determines matters falling within its authority.CSR criteria, including an objective to cut our greenhouse gas emissions.
The rules and operating procedures of our Board of Directors are defined by law, by our Articles of Association, and by our Board charterCharter (an English language version of which is reproduced in full as Exhibit 1.2 to this Annual Report on Form 20-F).
Term of Office
The term of office of directors is four years. Directors are required to seek reappointment by rotation, such that members of the Board are required to seek reappointment on a regular basis in the most equal proportions possible. Exceptionally, the Shareholders’ Ordinary General Meeting may appoint a director to serve for a term of one, two or three years, in order to ensure adequate rotation of Board members. Each director standing down is eligible for reappointment. Should one or more directorships fall vacant as a result of death or resignation, the Board of Directors may make provisional appointments in the period between two Shareholders’ General Meetings, in accordance with applicable laws.
Directors may be removed from office at any time by a Shareholders’ General Meeting.
A natural person cannot be appointed or reappointed as a director once he or she reaches the age of 70. As soon as the number of directors aged over 70 represents more than one-third of the directors in office, the oldest director shall be deemed to have resigned; his or her term of office shall end at the date of the next shareholders’Shareholders’ Ordinary General Meeting.
Selection Process for Board Members
The Appointments, Governance and CSR Committee has a remit to organize a procedure for selecting future independent directors. Once the desired profile and skillset for a new director has been defined, a search for potential candidates is conducted by external consultants.
Once a shortlist has been established, the Committee interviews two or three candidates. After completing the interviews, the Committee makes a recommendation to the Board on the candidate with the best fit for the profile, supporting that recommendation with an explanation of how the interviews were conducted and giving reasons why a candidate was selected.
Independence of Board Members
Under the terms of the AFEP-MEDEF corporate governance code (the AFEP-MEDEF Code), a director is independent when he or she has no relationship of any kind whatsoever with the Company, its group or its senior management that may color his or her judgment. More specifically, a director can only be regarded as independent if he or she:
•is not (and has not been during the past five years):
–an employee or executive officer of the Company,
–an employee, executive officer or director of an entity consolidated by the Company, or
–an employee, executive officer or director of the Company’s parent, or of an entity consolidated by that parent (criterion 1);
•is not an executive officer of an entity in which (i) the Company directly or indirectly holds a directorship or (ii) an employee of the Company is designated as a director or (iii) an executive officer of the Company (currently, or who has held office within the past five years) holds a directorship (criterion 2);
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▪78 | is not (and has not been during the past five years):SANOFI FORM 20-F2021 |
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– | an employee or executive officer of the Company; |
| PART I |
– | an employee, executive officer or director of an entity consolidated by the Company; orITEM 6. Directors, senior management and employees |
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– | an employee, executive officer or director of the Company’s parent, or of an entity consolidated by that parent (criterion 1); |
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▪ | is not an executive officer of an entity in which (i) the Company directly or indirectly holds a directorship or (ii) an employee of the Company is designated as a director or (iii) an executive officer of the Company (currently, or who has held office within the past five years) holds a directorship (criterion 2); |
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▪ | is not a customer, supplier, investment banker or corporate banker that is material to the Company or its group, or for whom the Company or its group represents a significant proportion of its business (criterion 3); |
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▪ | has no close family ties with a corporate officer of the Company (criterion 4); |
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▪ | has not acted as auditor for the Company over the course of the past five years (criterion 5); |
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▪ | has not been a director of the Company for more than twelve years (criterion 6); |
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▪ | does not receive variable compensation in cash or in the form of shares or any compensation linked to the performance of the Company or its group (criterion 7); or |
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▪ | does not represent a shareholder that has a significant or controlling interest in the Company (criterion 8). |
•is not a customer, supplier, investment banker or corporate banker that is material to the Company or its group, or for whom the Company or its group represents a significant proportion of its business (criterion 3);
•has no close family ties with a corporate officer of the Company (criterion 4);
•has not acted as auditor for the Company over the course of the past five years (criterion 5);
•has not been a director of the Company for more than twelve years (criterion 6);
•does not receive variable compensation in cash or in the form of shares or any compensation linked to the performance of the Company or its group (criterion 7); or
•does not represent a shareholder that has a significant or controlling interest in the Company (criterion 8).
The influence of other factors such as the ability to understand challenges and risks, and the courage to express ideas and form a judgment, is also evaluated before it is decided whether a director can be regarded as independent.
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SANOFI / FORM 20-F 2019
| 79 |
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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In compliance with our Board Charter and pursuant to the AFEP-MEDEF Code, the Board of Directors’ meeting of March 4, 2020February 22, 2022 discussed the independence of the current directors. Of the sixteenfifteen directors presentin office on thisthat date, elevennine were deemed to be independent directors by reference to the independence criteria used by the Board of Directors pursuant to the AFEP-MEDEF Code: Serge Weinberg, Emmanuel Babeau, Bernard Charlès, Claudie Haigneré,Rachel Duan, Lise Kingo, Patrick Kron, Fabienne Lecorvaisier, Melanie Lee, Suet-Fern Lee, Carole Piwnica, Gilles Schnepp, Diane Souza and Thomas C. Südhof.
In accordance with the rules described above, Paul Hudson (who is an executive director of Sanofi) and Barbara Lavernos and Christophe Babule (who were appointed on the recommendation of L'Oréal, a major shareholder of Sanofi), are not deemed independent.
Serge Weinberg is no longer deemed independent, pursuant to the AFEP-MEDEF Code, because with effect from December 2021 he has served as a director of Sanofi for more than twelve years.
Consequently, the proportion of independent directors is 79%69%. This compares with the AFEP-MEDEF recommendation of 50% in companies with dispersed ownership and no controlling shareholder (which is the case for Sanofi). In accordance with the recommendations of the AFEP-MEDEF Code, directors representing employees are excluded when calculating the proportion of independent directors.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Serge
Weinberg Rachel Duan | Emmanuel
Babeau Lise Kingo | Bernard
Charlès Patrick Kron | Claudie
Haigneré Fabienne Lecorvaisier | Patrick
Kron Melanie Lee | Fabienne
Lecorvaisier Carole Piwnica | Melanie
Lee Gilles Schnepp | Suet-Fern
Lee Diane Souza | Carole
Piwnica
| Diane
Souza
| Thomas C. Südhof |
Criterion 1: not an employee/executive officer in past 5 years | NoYes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 2: nNoo cross-directorships | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 3: no significant business relationship(2) | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 4: no close family ties | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 5: not an auditor | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 6: not held office for >12 years | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 7: no variable or performance-linked compensation | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Criterion 8: not a significant shareholder | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Deemed independent | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
1/ Serge Weinberg
Failure to fulfil one of the criteria does not automatically disqualify a director from being independent.
The Board’s conclusions onIn assessing the situation of Serge Weinberg and on thecriterion related to significant business relationships review are set out below.
When the offices of Chairman of the Board and Chief Executive Officer were temporarily combined on October 29, 2014, the Board of Directors determined that Serge Weinberg - given his role as Chief Executive Officer - could no longer be regarded as independent. When the two offices were separated again in April 2015, the Board of Directors determined that Serge Weinberg could be regarded as independent and could therefore resume the chairmanship of the Appointments and Governance Committee (renamed the Appointments, Governance and CSR Committee in March 2019).
Under Article 8.6 of the AFEP-MEDEF Code, a non-executive officer cannot be regarded as independent if he or she receives variable compensation in cash or shares or any compensation linked to the performance of the Company or group. Serge Weinberg complies with this criterion, in that he receives fixed compensation only, with no entitlement to variable compensation in either cash or shares.
2/ Business Relationships Review
In its examination of the independence of each director,(criterion 3), the Board of Directors took into account the various relationships between directors and Sanofi and concluded that no relationships were of a kind that might undermine their independence. The Board of Directors noted that the Company and its subsidiaries had, in the normal course of business, over the past three years, sold products and provided services to, and/or purchased products and received services from, companies in which certain of the Company’s directors who are classified as independent (or their close family members) were senior executives or employees during 2019.2021. In each case, the amounts paid to or received from such companies over the past three years were determined on an arm’s length basis and did not represent amounts that the Board regarded as undermining the independence of the directors in question.
Board Evaluationevaluation
Under the terms of the Board Charter, a discussion of the operating procedures of the Board and its committees must be included on the agenda of one Board meeting every year. The Charter also requires a formal evaluation to be performed at least every three years under the direction of the Appointments, Governance and CSR Committee, with assistance from an independent consultant if deemed necessary.
In 2018, a formal evaluation of the Board was conducted under the direction of the Appointments and Governance Committee (renamed the Appointments, Governance and CSR Committee in March 2019), with assistance from the same specialist consultancy firm as retained for the previous formal evaluation.
The results of the 2018 evaluation showed a positive assessment of the way in which the Board and its Committees operate.
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80 | SANOFI / FORM 20-F 2019
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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In 2019, in response to the areas for progress and vigilance identified in the 2018 evaluation, steps were taken to enhance the quality of the Board’s work, in terms of deeper long-term strategic thinking and detailed review of R&D priorities.consultant.
The 2019 evaluation wasand 2020 evaluations were conducted internally, using a detailed questionnaire sent to directors by the Secretary to the Board. Each director was allowed a few weeks to complete the questionnaire using a secure digital platform. At the end of that period, the responses were analyzed by the Secretary to the Board, and supplemented by one-on-one interviews. The results were then presented to, and discussed by, the Appointments, Governance and CSR Committee. A detailed report approved at that meeting was presented at the Board meeting of March 4, 2020.
The results of the 2019 evaluation highlighted the following points: | | | | | |
▪SANOFI FORM 20-F2021 | the selection process for the new Chief Executive Officer had been conducted satisfactorily;79 |
| | |
▪ | the directors have observed increased transparency and dialogue since Paul Hudson’s appointment as Chief Executive Officer, which was reflected in the quality of interactions; |
| PART I |
▪ | the composition of the Board was regarded as balanced, although more expertise in China, CSRITEM 6. Directors, senior management and the pharmaceutical industry would be welcome;employees |
| |
▪ | Following the 2020 evaluation (conducted in 2021), the following actions were taken to address the contribution of the committees to the Board’s decision-making process was regarded as satisfactory; and |
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▪ | a majority of the directors would welcome more concise presentations that allow more time for debate, and better prioritization of agenda items at Board meetings. |
The areas for progress and vigilance identified (see our 2020 Annual Report on Form 20-F):
•our Human Resources policy was reviewed and tightened up under the leadership of Sanofi's new Chief People Officer;
•the process of formalizing the succession plan for the Chairman of the Board was agreed; and
•the risk profile and risk management plan was reviewed (with particular reference to the public health crisis triggered by COVID-19), and the Audit Committee reviewed cybersecurity risks in light of stress test results and an analysis of emerging risks (especially in the geopolitical arena).
The remit of the Strategy Committee remained unchanged, with the Appointments, Governance and CSR Committee taking the view that it was consistent with usual practice and served the need of the Board.
In 2021, a formal evaluation was conducted under the direction of the Appointments, Governance and CSR Committee, with the assistance of a specialist consulting firm.
This evaluation took place over several weeks, according to the following procedure:
–issuance of a questionnaire to all directors (the main topics covered by this questionnaire are: alignment of the composition of the Board with Sanofi's needs, quality of support and interventions, working methods, appropriateness of the resources made available to the Board and the Committees, compliance of the company's governance with best practices, quality of debates and freedom of expression, composition and remits of the Committees, relations between the Board and the Executive Committee/shareholders/stakeholders, expectations of the Directors, personal contributions (competencies, and effective participation in deliberations),
–review of the answers provided by the directors,
–update on the evaluation process at the meeting of the Appointments, Governance and CSR Committee on February 15, 2022,
–individual interviews conducted by a consultant;
The Appointments, Governance and CSR Committee meeting of February 15, 2022 reviewed the results and agreed a summary report including the areas for progress and vigilance identified, which was then presented to the Board were:on February 22, 2022.
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▪ | increased amount of time should be allocated to long-term strategic thinking; |
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▪ | greater attention should be paid to issues relating to CSR and human resources policy; |
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▪ | the induction program for new directors should be enhanced; and |
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▪ | work should progress on preparing succession plans for the Chairman of the Board and members of the Executive Committee. |
The results of the 2021 evaluation show an improvement in the functioning of the Board since the previous evaluation, the directors having particularly underlined the effectiveness of the Chairman's action and the quality of the dialogue with the Chief Executive Officer.
The following areas for progress have nevertheless been identified;
–the preparation of the Chairman's succession must be continued and accelerated, under the leadership of an independent director;
–the implementation of the CSR strategy will have to be subject to tighter monitoring, which will involve the review by the Appointments, Governance and CSR Committee of the four pillars of the policy from 2022;
–strategic seminars should be more devoted to discussing strategy rather than reviewing activities;
–the duration of the two executive sessions should be extended to allow for more in-depth discussion;
–the integration program for new Directors, made difficult due to the health crisis linked to COVID-19, will have to be reinforced.
Board members stated that COVID had not harmed the working of the Board but they expressed a desire for a rapid return to physical meetings as well as normal social activities.
The Chairman will provide feedback on each Board member's individual performance over the course of the year.
Succession Planningplanning
The remit of the Appointments, Governance and CSR Committee includes preparing for the future of the Company’s executive bodies, in particular through the establishment of a succession plan for executive officers. The Committee has retained a specialist consultancy firm to evaluate and implement the plan.
The plan, which is reviewed at meetings of the Appointments, Governance and CSR Committee, addresses various scenarios:
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▪ | unplanned vacancy due to prohibition, resignation or death; |
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▪ | forced vacancy due to poor performance, mismanagement or misconduct; and |
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▪ | planned vacancy due to retirement or expiration of term of office. |
•unplanned vacancy due to prohibition, resignation or death;
•forced vacancy due to poor performance, mismanagement or misconduct; and
•planned vacancy due to retirement or expiration of term of office.
Through its work and discussions, the Committee seeks to devise a succession plan that is adaptable to situations arising in the short, medium or long term, but which also builds in diversity -– in all its facets -– as a key factor.
To fulfill its remit, the Appointments, Governance and CSR Committee:
| |
▪ | provides the Board with progress reports, in particular at executive sessions; |
| |
▪ | co-ordinates with the Compensation Committee. In that regard, having directors that sit on both Committees is a great advantage; |
| |
▪ | works closely with the Chief Executive Officer to (i) ensure the plan is consistent with the Company’s own practices and market practices, (ii) ensure high-potential internal prospects receive appropriate support and training, and (iii) check there is adequate monitoring of key posts likely to fall vacant; |
| |
▪ | meets with key executives as needed; and |
| |
▪ | involves the Chairman and the Chief Executive Officer insofar as each has a key role in planning for his own successor, though without them directing the process. |
•provides the Board with progress reports, in particular at executive sessions;
•co-ordinates with the Compensation Committee. In that regard, having a director that sits on both Committees is a great advantage;
•works closely with the Chief Executive Officer to (i) ensure the plan is consistent with the Company’s own practices and market practices, (ii) ensure high-potential internal prospects receive appropriate support and training, and (iii) check there is adequate monitoring of key posts likely to fall vacant;
•meets with key executives as needed; and
•involves the Chairman and the Chief Executive Officer insofar as each has a key role in planning for his own successor, though without them directing the process.
In fulfilling their remit, Committee members are acutely conscious of confidentiality issues.
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PART I |
ITEM 6. Directors, senior management and employees |
Although aware that separating the offices of Chairman and Chief Executive Officer provides continuity of power, the Committee nonetheless assesses the situation of the Chairman as well as that of the executive team.
In 2019, succession planning for the Chairman of the Board was examined in detail due to the expiry of Serge Weinberg'sWeinberg’s current term of office which was renewedexpires at the end of the Annual General Meeting on April 30, 2019.
With Olivier Brandicourt approachingof Sanofi shareholders called to approve the financial statements for the year ended December 31, 2022, and cannot be renewed as he will have reached the age limit of 65 for serving as Chief Executive Officer as stipulated in the Articles of Association (an English language version of which is reproduced in full as Exhibit 1.2 to this Annual Report on Form 20-F). At the Committee identified various potential candidates, both internalinstigation of Serge Weinberg and external. The short-listed candidates were presented to the Board members at an executive session on April 25, 2019. Olivier Brandicourt's decision to take retirement led the Committee to accelerate the process of finding a candidate with the right profile to succeed, with assistance from external consultants. Thea consultancy firm, the Appointments, Governance and CSR Committee has begun preparatory succession planning work, involving consideration of the profile required for the new Chair(woman) and discussions with Board members. That work is being continued and formalized by the Committee during 2022. Gilles Schnepp, who is an independent director and was appointed as Chair of the Committee on December 15, 2021 (following Serge Weinberg's decision to appoint Paul Hudson was taken at a step down as Chair, as mentioned above) will use his governance expertise to support the Committee in this process.
Succession planning for the Chief Executive Officer is subject to regular review by the Appointments, Governance and CSR Committee.
Board meetingCharter
Our Board Charter describes the rights and obligations of Board members; the composition, role and operating procedures of the Board of Directors and Board Committees; and the roles and powers of the Chairman and the Chief Executive Officer. It is prepared in accordance with the French Commercial Code and our Articles of Association.
An English-language version of our Board Charter is reproduced in full as Exhibit 1.2 to this Annual Report on June 6, 2019.Form 20-F.
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SANOFI / FORM 20-F 2019
| 81 |
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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Composition of the Board of Directors as of December 31, 20192021
As of December 31, 2019,2021, our Board of Directors comprised:
| | Director | Age |
| Gender | Nationality | Number of shares |
| Number of directorships in listed companies(a) |
| Independent | First appointed | Term expires | Years of Board service |
| AC | AGC | CC | SC | SciC | Director | Age | Gender | Nationality | Number of shares | Number of directorships in listed companies(a) | Independent | First appointed | Term expires | Years of Board service | AC | AGC | CC | SC | SciC |
Serge Weinberg, Chairman of the Board | 69 |
| M | French | 1,636 |
| 1 |
| Yes | 2009 | 2023 AGM | 10 |
| | C | | C | M | Serge Weinberg, Chairman of the Board | 71 | | M | French | 1,636 | 1 | No | 2009 | 2023 AGM | 12 | | | M | | C | M |
Paul Hudson, Chief Executive Officer | 52 |
| M | British | 5,600 |
| | No | 2019 | 2022 AGM | | | M | | Paul Hudson, Chief Executive Officer | 54 | | M | British | 5,600 | | 1 | No | 2019 | 2022 AGM | 2 | | M | |
Laurent Attal | 62 |
| M | French | 1,000 |
| 1 |
| No | 2012 | 2020 AGM | 7 |
| | M | |
Emmanuel Babeau | 53 |
| M | French | 500 |
| 3 |
| Yes | 2018 | 2022 AGM | 2 |
| M | | |
Christophe Babule | 54 |
| M | French | 1,000 |
| 2 |
| No | 2019 | 2022 AGM | 1 |
| | Christophe Babule | 56 | | M | French | 1,000 | | 1 | | No | 2019 | 2022 AGM | 2 | | M | |
Bernard Charlès | 62 |
| M | French | 1,000 |
| 2 |
| Yes | 2017 | 2021 AGM | 3 |
| | |
Claudie Haigneré | 62 |
| F | French | 1,000 |
| 1 |
| Yes | 2008 | 2020 AGM | 11 |
| | M | | |
Rachel Duan | | Rachel Duan | 51 | | F | Chinese | 1,000 | 4 | Yes | 2020 | 2024 AGM | 1 | | M | |
Lise Kingo | | Lise Kingo | 60 | | F | Danish | 1,000 | 3 | Yes | 2020 | 2024 AGM | 1 | | M | |
Patrick Kron | 66 |
| M | French | 1,000 |
| 4 |
| Yes | 2014 | 2022 AGM | 5 |
| | M | C | M | | Patrick Kron | 68 | | M | French | 1,000 | 4 | Yes | 2014 | 2022 AGM | 7 | | M | C | M | |
Wolfgang Laux(b) | | Wolfgang Laux(b) | 54 | | M | German | 3,190 | | 1 | No | 2021 | 2025 AGM | 0 | |
Barbara Lavernos | | Barbara Lavernos | 53 | | F | French/German | 500 | 1 | No | 2021 | 2025 AGM | 0 | |
Fabienne Lecorvaisier | 57 |
| F | French | 1,000 |
| 2 |
| Yes | 2013 | 2021 AGM | 6 |
| C | | Fabienne Lecorvaisier | 59 | | F | French | 1,000 | 3 | Yes | 2013 | 2025 AGM | 8 | C | |
Melanie Lee | 61 |
| F | British | 1,000 |
| 1 |
| Yes | 2017 | 2021 AGM | 3 |
| | M | | M | Melanie Lee | 63 | | F | British | 1,000 | 1 | Yes | 2017 | 2025 AGM | 4 | | M | | M |
Suet-Fern Lee | 62 |
| F | Singaporean | 1,000 |
| 2 |
| Yes | 2011 | 2023 AGM | 8 |
| | |
Marion Palme(b) | 37 |
| F | German | 109 |
| 1 |
| No | 2017 | 2021 AGM | 3 |
| | |
Carole Piwnica | 61 |
| F | Belgian | 1,000 |
| 4 |
| Yes | 2010 | 2020 AGM | 9 |
| | M | | Carole Piwnica | 64 | | F | Belgian | 1,000 | 2 | Yes | 2010 | 2024 AGM | 11 | | M | |
Christian Senectaire(b) | 55 |
| M | French | 279 |
| 1 |
| No | 2017 | 2021 AGM | 3 |
| | |
Gilles Schnepp | | Gilles Schnepp | 63 | | M | French | 1,000 | 4 | Yes | 2020 | 2022 AGM | 1 | | C | | M | |
Diane Souza | 67 |
| F | American | 1,104 |
| 1 |
| Yes | 2016 | 2020 AGM | 4 |
| M | | M | | Diane Souza | 69 | | F | American | 1,137 | 1 | Yes | 2016 | 2024 AGM | 5 | M | | M | |
Thomas Südhof | 64 |
| M | American/ German | 1,136 |
| 1 |
| Yes | 2016 | 2020 AGM | 4 |
| | C | Thomas Südhof | 66 | | M | American/ German | 1,170 | | 1 | Yes | 2016 | 2024 AGM | 5 | | | C |
Independent directors | Female directors | Non-French directors | | |
79% | 43% | 43% | | |
Yann Tran(b) | | Yann Tran(b) | 56 | | M | French | 1,066 | | 1 | No | 2021 | 2025 AGM | — | | |
Independent directors (c) | | Independent directors (c) | Female directors (c) | Non-French directors | |
69% | | 69% | 54% | 53% | |
AC: Audit CommitteeCommittee.
AGC: Appointments, Governance and CSR CommitteeCommittee.
CC: Compensation CommitteeCommittee.
SC: Strategy CommitteeCommittee.
SciC: Scientific CommitteeCommittee.
C: Chairman/ChairwomanChairwoman.
M: MemberMember.
(a) Includes all non-executive and executive (and equivalent) directorships held in listed companies. The office held within Sanofi is included in the calculation of this rate.
(b) Director representing employees.
(c) Directors representing employees are not taken into consideration for the calculation of these percentages.
| | | | | |
(a)SANOFI FORM 20-F2021 | Includes all non-executive and executive (and equivalent) directorships held in listed companies.81 |
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(b)PART I |
Director representing employees.ITEM 6. Directors, senior management and employees |
Competencies of Board members
The Board of Directors, in liaison with the Appointments, Governance and CSR Committee, must ensure that the composition of the Board is balanced, diverse and fit for purpose.
In assessing its composition, the Board takes account of the corporate strategy and of the new challenges facing Sanofi and the Company,corporate strategy, and determines whether the qualities of serving directors are sufficient for the Board to deliver on its remit.
Over the past several years, the Board has adapted its composition in line with its roadmap by:
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▪ | bringing additional pharmaceutical industry and healthcare sector expertise onto the Board; |
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▪ | further raising the proportion of non-French directors; |
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▪ | increasing the proportion of women on the Board; |
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▪ | developing its competencies in digital; and |
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▪ | maintaining the level of core competencies, especially in accounting and finance. |
•bringing additional pharmaceutical industry and healthcare sector expertise onto the Board;
•further raising the proportion of non-French directors, especially those with experience of the Chinese market; |
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82 | SANOFI•developing its knowledge of CSR issues; and / FORM 20-F 2019
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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•maintaining the level of core competencies, especially in accounting and finance.
The Board has completed an overview of the competencies currently represented. The matrix below(a) shows a comprehensive, balanced spread of the types of competencies required, both in general terms and by reference to our strategic ambitions (the matrix shows the number of directors possessing each of those competencies)(1)(b):
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Scientific training | | | | | | | | | | 4 |
3(c) |
| | | | | | | | | | |
Healthcare/pharmaceutical industry experience | | | | | | | | | | 4 |
5(d) |
| | | | | | | | | | |
Senior executive role in international group(2)(e) | | | | | | | | | | 8 |
9(f) |
| | | | | | | | | | |
Board membership in international group | | | | | | | | | | 8 |
7(g) |
| | | | | | | | | | |
International experience(3)(h) | | | | | | | | | | 8 |
9(i) |
| | | | | | | | | | |
Mergers & acquisitions | | | | | | | | | | 9 |
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| | | | | | | | | | |
Finance/Accounting | | | | | | | | | | 5 |
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| | | | | | | | | | |
Regulatory | | | | | | | | | | 5 |
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| | | | | | | | | | |
Digital | | | | | | | | | | 2 |
|
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(1)Mergers & acquisitions | The information shown excludes directors representing employees. | | | | | | | | | 8(j) |
| | | | | | | | | | |
(2)Finance/Accounting | Executive Committee member within an international group. | | | | | | | | | 5(k) |
| | | | | | | | | | |
(a) Based on the composition of the Board as of February 22, 2022.
(b) The information shown excludes directors representing employees.
(c) Barbara Lavernos, Melanie Lee and Thomas Südhof.
(d) Paul Hudson, Rachel Duan, Lise Kingo, Melanie Lee and Diane Souza.
(e) Executive Committee member within an international group.
(f) Serge Weinberg, Paul Hudson, Christophe Babule, Rachel Duan, Lise KIngo, Patrick Kron, Barbara Lavernos, Fabienne Lecorvaisier and Gilles Schnepp.
(g) Serge Weinberg, Rachel Duan, Lise Kingo, Patrick Kron, Fabienne Lecorvaisier, Carole Piwnica and Gilles Schnepp.
(h) Operational role within an international group.
(i) Serge Weinberg, Paul Hudson, Christophe Babule, Rachel Duan, Lise Kingo, Patrick Kron, Fabienne Lecorvaisier, Gilles Schnepp and Diane Souza.
(j) Serge Weinberg, Paul Hudson, Christophe Babule, Patrick Kron, Fabienne Lecorvaisier, Carole Piwnica, Gilles Schnepp and Diane Souza.
(k) Christophe Babule, Fabienne Lecorvaisier, Carole Piwnica, Gilles Schnepp and Diane Souza.
All members of our Board or Directors are engaged with corporate social responsibility issues, for example (non-exhaustive list):
•Serge Weinberg founded Weinberg Capital Partners, a responsible investment fund that takes sustainability criteria into account in its investment decisions and measures the impact of its investments on society and the environment, in 2005;
•Christophe Babule, as CFO of L'Oréal, is in charge of financing the group's sustainable transition. He is also a director of the L'Oréal for Women endowment fund;
•Lise Kingo holds a Master degree in Responsibility & Business Practice from the University of Bath in the United Kingdom. She was Professor of Sustainability and Innovation at the Vrije Universiteit Amsterdam (The Netherlands) from 2006 to 2015, and in parallel held various CSR-related positions including Director of Environmental Affairs at Novozymes and Executive Vice President, Corporate Relations at Novo Nordisk, before becoming CEO & Executive Director of the United Nations Global Compact from 2015 to 2020;
•Patrick Kron, in his capacity as a director of Holcim, is a member of the Health, Safety & Sustainability Committee, a specialist committee of the Holcim board;
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(3)82 | Operational role within an international group.SANOFI FORM 20-F2021 |
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PART I |
ITEM 6. Directors, senior management and employees |
•Fabienne Lecorvaisier has experience as Executive Vice President of Air Liquide with responsibiliy for sustainable development, public and international affairs and societal programs, including the Air Liquide Foundation and Inclusive Business;
•Gilles Schnepp led Legrand's CSR policy as Chairman and CEO from 2006 to 2018, and since March 2021 has been Chairman of the Board of Directors of Danone, a société à mission (social purpose company). He has also chaired the Ecological and Economic Transition Commission of the MEDEF (the French employer's federation) since 2018.
The Annualterms of office of Paul Hudson, Christophe Babule, Patrick Kron and Gilles Schnepp will expire at the General Meeting to be held on May 3, 2022. In addition, Melanie Lee and Carole Piwnica will leave the Board of Directors ahead of the General Meeting. The General Meeting of April 28, 2020Sanofi shareholders of May 3, 2022 will be asked to renewapprove:
•the renewal of the terms of office of Laurent Attal, Carole Piwnica, Diane Souzaof:
–Paul Hudson, who has served as our Chief Executive Officer since September 1, 2019 and Thomas Südhof.
The four directors put forward for reappointment to the Board have the following competencies:
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▪ | Laurent Attal: scientific training, pharmaceutical industry experience, senior executive role in international group and international experience; |
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▪ | Carole Piwnica: Board membership in international group, mergers & acquisitions and finance/accounting; |
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▪ | Diane Souza: health insurance experience, mergers & acquisitions, finance/accounting and regulatory; and |
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▪ | Thomas Südhof: scientific training. |
The Annual General Meeting will also be asked to ratify the decision taken at the Board meeting of October 30, 2019 to co-opt Paul Hudsonwas appointed as a director following the resignation ofin October 2019, succeeding Olivier Brandicourt from his officewho had served as a director further to his decision to take retirement on September 1.
TheChief Executive Officer until August 31, 2019. Renewing Paul Hudson's term of office will enable to play a full part in the work of Claudie Haigneré, which also expires at the next Annual General Meeting, will not be renewed because byBoard, and to contribute his in-depth knowledge of the time of that meeting she will have served for 12 yearspharmacetical industry,
–Christophe Babule (refer to his career résumé on page 86, and his competencies as shown in the Sanofitable above),
–Patrick Kron (refer to his career résumé on page 89, and his competencies as shown in the table above),
–Gilles Schnepp (refer to his career résumé on page 95, and his competencies as shown in the table above); and
•the appointment as a new director of:
– Carole Ferrand: Finance/accounting, Board of Directors. Moreover, Suet-Fern Lee has let known her intention to retire and resign from her director's remit before the next annual shareholder's meeting.membership in international groups;
The candidates put forward to replace them are:– Emile Voest: Scientific training;
| |
▪ | Rachel Duan, who would bring to the Board acknowledged healthcare sector expertise and a good knowledge of international markets, especially China, |
| |
▪ | Lise Kingo, who has a great knowledge of the pharmaceutical industry and sustainable development matters and would bring her expertise in these areas to the Board. |
Rachel Duan and Lise Kingo would be qualified as independent directors.– Antoine Yver: Scientific training, International experience, Healthcare / Pharmaceutical industry experience.
The following pages provide key information about each director individually:
| |
▪ | directorships and appointments held during 2019 (directorships in listed companies are indicated by an asterisk, and each director’s principal position is indicated in bold); |
| |
▪ | other directorships held during the last five years; and |
•directorships and appointments held during 2021 (directorships in listed companies are indicated by an asterisk, and each director’s principal position is indicated in bold);
•other directorships held during the last five years;
•training and professional experience; and
•competencies.
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SANOFIFORM 20-F / FORM 20-F 20192021 | 83 |
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
|
| |
▪ | education and professional experience. |
|
| | |
Serge Weinberg | | PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Serge Weinberg |
| Date of birth: | February 10, 1951 (aged 69)71) |
Nationality: | French |
First elected: | appointed: December 2009 |
Last reappointment: | April 2019 |
Term expires: | 2023 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
Number of shares held: 1,636 shares |
Directorships and appointments of Serge Weinberg |
| Within the Sanofi Group | Outside the Sanofi Group |
| | | | | |
Current directorships and appointments |
In French companiesWITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
▪
Independent directorDirector and Chairman of the Board of Directors of Sanofi*, | | In French companies |
• – Chairman of the Strategy Committee of Sanofi– •ChairmanMember of the Appointments and Governance Committee of Sanofi (renamed the Appointments, Governance and CSR Committee effective March 8, 2019)– •Member of the Scientific Committee of Sanofi | | ▪ Chairman of Weinberg Capital PartnersPartners:
|
| | In foreign companies |
| None | •None |
| | |
Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
•None | | In French companies |
None | | ▪ •Permanent representative of Weinberg Capital Partners on the Board of Directors of ADIT (ended October 4, 2019)▪ •Director of Madrigall (ended June 19, 2019)▪ •Chairman of the Supervisory Boards of Financière Climater SAS (ended October 31, 2018) and Financière Tess SAS (ended October 4, 2019)▪ •Chairman of Financière Piasa and Piasa Holding (ended October 5, 2018) |
| | In foreign companies |
| None | ▪ •Chairman of Corum (Switzerland) |
| | | | | | | | |
Education and professional experience |
▪ •Graduate in law, degree from the Institut d’Etudesd’Études Politiques |
▪ •Graduate of ENA (EcoleÉcole Nationale d’Administration) |
Since 2005 | Chairman of Weinberg Capital Partners |
2005-2010 | Vice Chairman of the Supervisory Board of Schneider Electric* |
2006-2009 | Chairman of the Board of Accor* |
1990-2005 | Various positions at PPR* group including Chairman of the Management Board for 10 years |
1987-1990 | Chief Executive Officer of Pallas Finance |
1982-1987 | Deputy General Manager of FR3 (French television channel) and then Chief Executive Officer of Havas Tourisme |
1976-1982 | Sous-préfet and then Chief of Staff of the French Budget Minister (1981) |
1982-1987 | Deputy General Manager of FR3 (French television channel) and then Chief Executive Officer of Havas Tourisme | | | | | | | | | | | | | |
1987-1990 | Chief Executive Officer of Pallas FinanceCompetencies |
1990-2005 | Various positions at PPR*Senior executive in international group, including Chairman of the Management Board for 10 years |
2006-2009 | Chairman of the Board of Accor* |
2005-2010 | Vice Chairman of the Supervisory Board of Schneider Electric* |
|
Number of shares held | |
1,636 shares | | membership in international group, International experience, Mergers & acquisitions |
|
| |
| | |
84 | SANOFIFORM 20-F / FORM 20-F 20192021 |
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|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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|
| | |
Paul Hudson | | PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Paul Hudson |
| Date of birth: | October 14, 1967 (aged 52)54) |
Nationality: | British |
First elected: | appointed: September 2019 |
Last reappointment: | Term expires: 2022 |
Term expires: | 2022 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
Number of shares held: 5,600 shares |
Directorships and appointments of Paul Hudson | |
| Within the Sanofi Group | Outside the Sanofi Group |
| | | | |
Current directorships and appointments |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
Chief Executive Officer | | In French companies |
▪
Chief Executive Officer of Sanofi*•– Chairman of the Executive Committee of Sanofi– •Member of the Strategy Committee of Sanofi | | •None |
| In foreign companies |
| •None | None |
| | |
Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
•None | | In French companies |
None | | •None |
| | In foreign companies |
None | | •None |
| | | | | | | | |
|
Education and professional experience |
▪ •Degree in economics from Manchester Metropolitan University, UK |
▪ •Diploma in marketing from the Chartered Institute of Marketing, UK |
▪ •Honorary Doctorate in Business Administration, Manchester Metropolitan University, UK |
From September 1, 2019 | Chief Executive Officer of Sanofi* |
2016-2019 | CEO of Novartis Pharmaceuticals, member of Executive Committee
|
2006-2016 | Various operational and managerial positions at AstraZeneca (including President, AstraZeneca US; Executive Vice President, North America; and Representative Director & President, AstraZeneca KK, Japan,Japan; President of AstraZeneca Spain,Spain; and Vice-President and head of Primary Care United-Kingdom); United Kingdom) |
Before 2006 | Various operational and managerial positions at Schering-Plough, including Head of Global Marketing for biologicals. |
Before 2016 | Various sales and marketing positions at GlaxoSmithKline UK and Sanofi-Synthélabo UK |
|
Number of shares held |
5,600 shares | |
|
| |
| |
SANOFI / FORM 20-F 2019
| 85 |
|
|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
|
|
| | |
Laurent Attal | | |
| | |
| Date of birth: | February 11, 1958 (aged 62) |
Nationality: | French |
First appointed: | May 2012 |
Last reappointment: | May 2016 |
Term expires: | 2020 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
|
Directorships and appointments of Laurent Attal |
| Within the Sanofi Group | Outside the Sanofi Group |
|
Current directorships and appointments | In French companies |
–
Member of the Strategy Committee of Sanofi–
Member of the Scientific Committee of Sanofi | ▪
Director of Fondation d’Entreprise L’Oréal |
| In foreign companies |
| None | None |
|
Past directorships
expiring within the
last five years
| In French companies |
None | None |
In foreign companies |
None | None |
|
Education and professional experience |
▪
Doctor of medicine, dermatologist |
▪
MBA from INSEAD (Institut Européen d’Administration des Affaires) |
| |
Since 2010 | Executive Vice-President, Research and Innovation at L’Oréal* |
Since 1986 | Various positions within the L’Oréal* Group, including posts within the Active Cosmetics Division and as President and Chief Executive Officer of L’Oréal USA (United States) |
Since 2002 | Member of the Executive Committee of L’Oréal* |
|
Number of shares held |
1,000 shares | | |
|
| |
| |
86 | SANOFI / FORM 20-F 2019
|
|
|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
|
|
| | |
Emmanuel Babeau | | |
| | |
| Date of birth: | February 13, 1967 (aged 53) |
Nationality: | French |
First elected: | May 2018 |
Term expires: | 2022 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
| | |
Directorships and appointments of Emmanuel Babeau |
| Within the Sanofi Group | Outside the Sanofi Group |
|
Current directorships and appointments | In French companies |
▪
Independent director of Sanofi*–
Member of the Audit Committee of Sanofi | ▪
Schneider Electric Group (of which Schneider Electric SE* is the parent company)–
Director of Schneider Electric Industries SAS–
Member of the Supervisory Board of Schneider Electric Energy Access (representing Schneider Electric Industries SAS)–
Chairman of the Audit Committee of Sodexo▪
Managing Partner of SCI GETIJ |
| In foreign companies |
| None | ▪
Schneider Electric Group (of which Schneider Electric SE* is the parent company)–
Vice-chairman and non-executive director of Aveva Group PLC*–
Director of AO Schneider Electric, Schneider Electric (China) Co. Ltd., Samos Acquisition Company Ltd., Schneider Electric USA Inc., Schneider Electric Holdings Inc., Carros Sensors Topco Ltd. (formerly InnoVista Sensors Topco Ltd.) |
|
Past directorships expiring within the last five years | In French companies |
None | ▪
Schneider Electric Group (of which Schneider Electric SE* is the parent company)–
Member of the Management Board of Schneider Electric SA*–
Director of Telvent GIT SA–
Member of the Strategy Committee of Aster Capital Partners–
Member of the Supervisory Board of Innovista Sensors SAS–
Member of the Supervisory Board of Aster Capital Partners SAS |
| In foreign companies |
| None | ▪
Schneider Electric Group (of which Schneider Electric SE* is the parent company)–
Director of Invensys Ltd. (United States) |
|
Education and professional experience |
▪
Graduate of ESCP (École Supérieure de Commerce de Paris), 1989▪
Post-graduate diploma in accounting and finance |
Since 2013 | Deputy Chief Executive Officer in charge of Finance and Legal Affairs of Schneider Electric SE* |
1990-1993 | Arthur Andersen |
1996-2009 | Various functions within the Pernod Ricard* Group, including Chief Development Officer and Chief Financial Officer |
2009-2013 | Various functions within Schneider Electric SE*, including Deputy Chief Executive Officer in charge of Finance and Legal Affairs |
|
Number of shares held |
500 shares(1)
|
| Competencies |
(1) | Under the Board Charter, each director must be a shareholderHealthcare/pharmaceutical industry experience, Senior executive role in a personal capacity and hold at least 1,000 Sanofi shares in their own name. However, directors are allowed a period of two years in which to acquire these shares.international group, International experience, Mergers & acquisitions |
|
| | | | |
| |
SANOFIFORM 20-F / FORM 20-F 20192021 | 87 |
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|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
85 |
|
| | |
Christophe Babule | | PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Christophe Babule |
| Date of birth: | September 20, 1965 (aged 54)56) |
Nationality: | French |
First appointed: | February 2019 |
Term expires: | 2022 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris, France |
Number of shares held: 1,000 shares |
Directorships and appointments of Christophe Babule: |
| Within the Sanofi group | Outside the Sanofi group |
| | | | | |
Current directorships and appointments |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
Director | | In French companies |
•Member of the Audit Committee | | Director of Sanofi*the “L'Oréal Fund for Women” charitable endowment fund | None |
| | In foreign companies |
| None | •None |
Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
▪•None
| | In French companies |
| | •None |
| | In foreign companies |
| | L'Oréal* GroupGroup: |
| | - •Director of L'Oréal USA Inc. (United States)States)
|
| | | | | | | | |
Past directorships expiring within the last five year | In French companies |
None | None |
In foreign companies |
None | None |
|
Education and professional experience |
▪ •Graduate of HEC Paris: Master of Business Administration (MBA) in FinanceEducation and professional experience |
Since February 2019 | Executive Vice President, Chief Financial Officer at L'Oréal* |
SInceSince 1988 | Various positions within the L’Oréal* Group, including as Director of Administration & Finance for China, then Mexico,Mexico; Director of Internal AuditAudit; and Administration & Financial Director for the Asia Pacific Zone |
| | |
Number of shares held |
1,000 shares |
| | | | | | | | | | | | | | |
Competencies |
Senior executive role in international group, International experience, Mergers & acquisitions, Finance/Accounting |
|
| | | | |
| |
8886 | SANOFIFORM 20-F / FORM 20-F 20192021 |
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|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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|
| | |
Bernard Charlès | | PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Rachel Duan |
| Date of birth: | March 30, 1957 July 25, 1970 (aged 62)51) |
Nationality: | French Chinese |
First elected: | May 2017appointed: April 2020 |
Term expires: | 2021 2024 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
Number of shares held: 1,000 shares |
Directorships and appointments of Bernard Charlès |
| Within the Sanofi Group | Outside the Sanofi Group |
| | | | | |
Current directorships and appointments |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
Independent director | | In French companies |
▪•Member of the Compensation Committee
| | Independent director of Sanofi*AXA* | ▪
Vice-Chairman of the Board of Directors and Chief Executive Officer of Dassault Systèmes* |
| | In foreign companies |
| None | ▪
Dassault Systèmes Group:–
ChairmanIndependent director of the Board of Directors of Dassault Systemes Corp., Dassault Systemes SolidWorks Corp., Dassault Systemes Simulia Corp., and Centric Software Inc. (United States)–
Chairman of the Advisory Board (statutory body) of Dassault Systemes 3DExcite GmbH (Germany) HSBC* |
| | Independent director of Adecco Group* |
| | |
Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
•None | | In French companies |
None | | •None |
| | In foreign companies |
None | | ▪
Dassault Systèmes •GroupNone |
| | | | | | | | |
Education and professional experience |
•:MBA, University of Wisconsin-Madison (United States) |
–
Chairman•Bachelor’s degree in Economics and International Trade, Shanghai International Studies University (China) |
1996-2020 | Senior Vice President of the Board of Directors of Dassault Systemes Biovia Corp.General Electric* (United States) and President & CEO of Dassault Systemes Canada Software Inc. (Canada)GE Global Markets (China) |
| Various leadership positions within the GE group, including President & CEO of GE Advanced Materials China and then Asia Pacific, President & CEO of GE Healthcare China, and President & CEO of GE China. |
| | | | | | | | | | | | | | |
Education and professional experienceCompetencies |
▪
Graduate of Healthcare/pharmaceutical industry experience, Senior executive role in international groupÉcole Normale Supérieure, engineering school, Cachan (France)Board membership in international group, International experience |
▪
Agrégé and Ph.D. in mechanic, majoring in automation engineering and information science |
Since 2016 | Vice-Chairman of the Board of Directors and Chief Executive Officer of Dassault Systèmes* (France) |
1983-1984 | National Service as Scientific Advisor in the Ministry of Defense (France) |
1986-1988 | Founder of the New Technology, Research and Strategy division at Dassault Systèmes* (France) |
1988-1994 | Head of Strategy, Research and Development at Dassault Systèmes* (France) |
Since 1995 | Chief Executive Officer of Dassault Systèmes* (France) |
2005 | Knight of the Légion d’honneur (France)
|
2009 | Member of the Académie des Technologies (France)
|
2012 | Officer of the Légion d’honneur (France)
|
2017 | Member of the National Academy of Engineering (United States) |
| | |
Number of shares held |
1,000 shares |
|
| |
| |
SANOFI / FORM 20-F 2019
| 89 |
|
|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
|
|
| | | |
SANOFI FORM 20-F2021 | Claudie Haigneré87 |
| | |
| | | PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Lise Kingo |
| Date of birth: | May 13, 1957 August 3, 1961 (aged 62)60) |
| Nationality: | French Danish |
| First appointed: | May 2008 April 2020 |
| Last reappointment: | May 2016Term expires: 2024 |
| Term expires: | 2020 |
| Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
Number of shares held: 1,000 shares |
| | | | | | | | |
| DirectorshipsCurrent directorships and appointments of Claudie Haigneré |
WITHIN THE SANOFI GROUP | | Within the Sanofi Group | Outside the Sanofi GroupOUTSIDE THE SANOFI GROUP |
Independent director | |
| Current directorships
and appointments
| In French companies |
| ▪
Independent director of Sanofi*•– Member of the Appointments, and Governance Committee of Sanofi (renamed the Appointments, Governance and& CSR Committee effective March 8, 2019)–
Member of the Compensation Committee of Sanofi | | ▪
Director of• Fondation de l’Université de Lyon, Fondation C-Génial, Fondation d’Entreprise L’Oréal,Fondation Airbus and Ecole de l'Air▪
Member of Académie des Technologies, Académie des Sports, Académie Nationale de l’Air et de l’Espace and Académie des Sciences de l’Outre-Mer▪
Director of IRIS (French Institute for International and Strategic Affairs)None |
|
|
|
| | In foreign companies |
| | None | None•Independent director of Covestro AG* (Germany) |
| | •Independent director of Aker Horizons ASA* (Norway) |
| Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
•None | | In French companies |
| None | ▪
Director and member of the Innovation and Technology Committee of Orange*▪
Chairwoman of Universcience (•Cité des Sciences et de l’Industrie et Palais de la Découverte)▪
Director of Fondation de France, École Normale Supérieure, Campus Condorcet, Pôle de Recherche et d’Enseignement Supérieur Hautes-Études-Sorbonne-Arts-et-Métiers and Fondation Lacoste▪
Chairwoman of the Board of Directors of La GéodeNone |
| | In foreign companies |
| | •None |
| None | | | | | | | | | | |
| |
| Education and professional experience |
| ▪ •Rheumatologist, doctorateBachelor’s degree in sciences majoring in neurosciencesReligions and Ancient Greek Art, University of Aarhus (Denmark) |
| ▪ •SelectedBachelor’s degree in 1985 by the CNES (French National Space Center) as an astronaut candidateMarketing and Economics, Copenhagen Business School (Denmark) |
| | |
| 1984-1992 | Rheumatologist, Cochin Hospital (Paris) |
| 1996 | Scientific space mission to the MIR space station (Cassiopée, Franco-Russian mission) |
| 2001 | Scientific and technical space mission to the International Space Station (Andromède mission) |
| 2002-2004 | Deputy Minister for Research and New Technologies•Master’s degree in the French government |
| 2004-2005 | Deputy Minister for European Affairs in the French government |
| 2005-2009 | Adviser to the Director GeneralResponsibility & Business, University of the European Space Agency |
| 2007-2011 | Vice-Chairwoman (Finance) of the IAA (International Academy of Astronautics) |
| 2010-2011 | Director of Aéro Club de FranceBath (United Kingdom)
|
| 2010-2015 | Chairwoman of Universcience (French public-sector body)•Director Certification, INSEAD (France) |
2021 | 2015Independent Director, Covestro AG* (Germany) |
2021 | Special Adviser to theIndependent Director, GeneralAker Horizons ASA* (Norway) |
2020 | Member of the European Space AgencyAdvisory Panel for Humanitarian and Development Coordination, Novo Nordisk Foundation (Denmark) |
2020 | Chair of Blueprint for Denmark Initiative (Denmark) |
2015-2020 | NumberDirector of shares heldPrinciples for Responsible Investment, UN PRI (UK) |
2015-2020 | 1,000 sharesCEO & Executive Director of United Nations Global Compact (USA) |
2014-2015 | Deputy chair of the Danish Foundation for Nature Preservation (Denmark) |
2013-2015 | Member of the “Scale for Good” Advisory Panel, Tesco Plc, (United Kingdom) |
2012-2015 | Chair of the Danish Council for Corporate Social Responsibility (Denmark) |
2012-2015 | Independent Director of Grieg Star Shipping (Norway) |
2010-2014 | Chair, Steno Diabetes Center (Denmark) |
2006-2015 | Professor of Sustainable Development and Innovation at Vrije Universiteit Amsterdam (Netherlands) |
2005-2009 | Independent Director and Deputy Chairwoman, GN Store Nord (Denmark) |
2002-2014 | Executive Vice President Corporate Relations & Chief of Staff at Novo Nordisk A/S (Denmark) |
1999-2002 | Senior Vice President, Stakeholder Relations at Novo Holding (Denmark) |
1995-2006 | Member of the HRH Prince of Wales Cambridge University Faculty for Sustainability Leadership (United Kingdom) |
1988-1999 | Various positions at the Bioindustrial Novo Industry group, now Novozymes (Denmark), including Promotion Coordinator and Director, Corporate Environmental Affairs. |
| | | | | | | | | | | | | | |
Competencies |
Healthcare/pharmaceutical industry experience, Senior executive role in international group, Board membership in international group, International experience |
|
| | | | |
| |
9088 | SANOFIFORM 20-F / FORM 20-F 20192021 |
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|
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
|
| | |
PART I |
ITEM 6. Directors, senior management and employees |
| | | | | |
Patrick Kron | | |
| | |
| Date of birth: | September 26, 1953 (aged 66)68) |
Nationality: | French |
First appointed: | May 2014 |
Last reappointment: | May 2018 |
Term expires: | 2022 |
Business address: | Sanofi - 54, rue La Boétie - 75008 Paris - France |
Number of shares held: 1,000 shares |
Directorships and appointments of Patrick Kron |
| Within the Sanofi Group | Outside the Sanofi Group |
| | | | | |
Current directorships and appointments |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
Independent director | | In French companies |
▪
Independent director of Sanofi*•– Chairman of the Compensation Committee of Sanofi– •Member of the Appointments and Governance Committee of Sanofi (renamed the Appointments, Governance and CSR Committee effective March 8, 2019)– •Member of the Strategy Committee of Sanofi | | ▪ Chairman of Truffle Capital SAS▪ Chairman of PKC&I SASSAS:– •Permanent representative of PKC&I on the Supervisory Board of Segula Technologies
|
| In foreign companies |
| None | ▪
Director of Lafarge-Holcim* (Switzerland) |
| | In foreign companies |
| | Director of Holcim* (Switzerland) |
| | Director of Viohalco* (Belgium) |
| | |
Past directorships expiring within the last five years |
WITHIN THE SANOFI GROUP | | OUTSIDE THE SANOFI GROUP |
•None | | In French companies |
None | | ▪ Interim Chief executive Officer of Imerys*– Chairman and Chief Executive Officer
– Chairman of Alstom Resources Management
|
| | In foreign companies |
| None | ElvalHalcor* (Greece) |
| | | | | | | | |
|
Education and professional experience |
▪ •Degree from École Polytechnique and École Nationale Supérieure des Mines de Paris |
Since 2019 | Chairman of Imerys* (and(and Interim Chief Executive Officer from October 2019 to February 2020) |
Since 2016 | Chairman of Truffle Capital SAS |
Since 2016 | Chairman of PKC&I SAS |
2003-2016 | Chief Executive Officer, then Chairman and Chief Executive Officer, of Alstom* |
1998-2002 | Chairman of the Managing Board of Imerys |
1995-1997 | Manager of the Food and Health Care Packaging Sector at Pechiney, and Chief Operating Officer of American National Can Company in Chicago (United States) |
1993-1997 | Chairman and Chief Executive Officer of Carbone Lorraine |
1993 | Member of the Executive Committee of the Pechiney Group |
1988-1993 | Various senior operational and financial positions within the Pechiney Group |
1984-1988 | Operational responsibilities in one of the Pechiney Group’s biggest factories in Greece, then manager of the Greek subsidiary of Pechiney |
1979-1984 | Various positions at the French Ministry of Industry, including as project officer at the Direction régionale de l’Industrie, de la Recherche et de l’Environnement (DRIRE) and in the Ministry’s general directorate |
The table below shows changes in the composition of the Board of Directors during 20182020 and 2019,2021, and the changes that will be submitted for approval by our shareholders at the Annual General Meeting of May 3, 2022:
Under current French legislation, and given that employees own less than 3% of our share capital, the Board does not include a director representing employee shareholders.
The Executive Committee is chaired by the Chief Executive Officer. The Committee meets at least twice a month.
Paul Hudson joined Sanofi as Chief Executive Officer on September 1, 2019.
Previously CEO of Novartis Pharmaceuticals (2016-2019), where he was a member of the Executive Committee, Paul has had an extensive international career in healthcare that spans the US, Japan and Europe.
Prior to Novartis, he worked for AstraZeneca, where he held several increasingly senior positions and most recently carried out the roles of President, AstraZeneca United States and Executive Vice President, North America.
He began his career in sales and marketing roles at GlaxoSmithKline UK and Sanofi-Synthélabo UK.
Paul holds a degree in economics from Manchester Metropolitan University in the UK and last year his alma mater awarded him an honorary Doctor of Business Administration for his achievements in industry. He also holds a diploma in marketing from the Chartered Institute of Marketing, also in the UK.
In May 2015, Olivier Charmeil and André Syrota were appointed as Co-Leaders of “Medicine of the Future”, an initiative developed by the French Minister for Economy, Industry and Digital Affairs, the French Minister for Social Affairs, Health and Women’s Rights and the French Minister for National and Higher Education and Research. They have been tasked with assembling a group of industrialists and academics, with the objective of imagining how French industry can accelerate the launch and export of innovative industrial products, with an emphasis on new biotechnologies.
From June 2016 to December 2018, Olivier Charmeil served as Executive Vice President of our General Medicines and Emerging Markets Global Business Unit.
Olivier Charmeil is a citizen of France.
Jean-Baptiste Chasseloup de Chatillon holds a Masters from Paris Dauphine University and studied Finance in the United Kingdom at Lancaster University.
Jean-Baptiste Chasseloup de Chatillon is a citizen of France.
John Reed holds a B.A. in chemistry from the University of Virginia, Charlottesville and an M.D. and Ph.D. (Immunology) from the University of Pennsylvania School of Medicine.
He began his academic career as a member of the faculty at the University of Pennsylvania in 1988, following a post-doctoral fellowship in Molecular Biology at the Wistar Institute and a residency in Pathology & Laboratory Medicine at the Hospital of the University of Pennsylvania. John Reed subsequently held faculty appointments at several universities including the University of California, the University of Florida and ETH-Zurich.
In 1992, he joined the Sanford-Burnham Medical Research Institute in La Jolla, California, one of the largest independent non-profit biomedical research institutes in the United States. From 2002 to 2013, he served as CEO of the Institute. During his tenure, John Reed ran a highly productive laboratory that generated more than 900 research publications and over 130 patents, was awarded more than 100 research grants, and trained over 100 post-doctoral fellows. He is a Fellow of the American Association for the Advancement of Science (AAAS) and the recipient of numerous honors and awards for his accomplishments in biomedical research.
John Reed has served on multiple editorial boards of research journals, and was scientific founder or co-founder of four biotechnology companies. He has served on the Board of Directors for five publicly traded biopharmaceutical and biotechnology companies and on the governing boards for various non-profit biomedical research organizations.
From 2013 to 2018, John Reed was Global Head of Roche Pharmaceutical Research & Early Development, based at company headquarters in Basel, Switzerland. He was responsible for research through Phase IIb development for all therapeutic areas, overseeing R&D activities across 7seven global sites.
He assumed his current position as Executive Vice President, Global Head of Research & Development for Sanofi in July 2018.
John Reed is a citizen of the United States of America.
Bill Sibold has headed up Sanofi Genzyme, our specialty care global business unit, since July 1, 2017. He has also servesserved as sponsorPresident for North America since February 2020.
Bill Sibold is a citizen of Canada and of the United States of America.
This section describes the compensation policy for corporate officers of Sanofi, as established pursuant to Article L. 225-37-222-10-8 of the French Commercial Code. That policy describes all the components of compensation awarded to corporate officers of Sanofi as consideration for holding office, and explains the process by which it is determined, divided, reviewed and implemented.
Our compensation policy for corporate officers has three distinct elements: (i) the compensation policy for directors; (ii) the compensation policy for the Chairman of the Board; and (iii) the compensation policy for the Chief Executive Officer.
Each of those policies is submitted for approval by our shareholders at the Annual General Meeting, in accordance with Article L. 225-37-222-10-8 II of the French Commercial Code. The compensation policy approved in any given year applies to any person holding corporate office in that year. Moreover, when a corporate officer is appointed between two Annual General Meetings, their compensation is defined applying the terms of the compensation policy approved by the most recent Annual General Meeting.Meeting of shareholders.
The compensation policy for corporate officers is established by the Board of Directors, acting on the recommendation of the Compensation Committee. The Board of Directors applies the AFEP-MEDEF Code when determining the compensation and benefits awarded to our executive and non-executive and executivecorporate officers.
After consulting the Compensation Committee and as the case may be the other Board Committees, the Board of Directors may, under the second paragraph of item III of Article L. 225-37-2 of the French Commercial Code, temporarily derogate from the approved compensation policy for the Chief Executive Officer in exceptional circumstances and to the extent that the changes are aligned on the corporate interest and necessary to safeguard the continuity or viability of Sanofi. The components of compensation where it is possible to derogateDerogations from the approved policy are (i) fixedpossible in respect of the performance conditions applied to the Chief Executive Officer’s compensation, and (ii) annual variable compensation, and the change may beresult in either an increase or a decrease in compensation. The circumstances in which it is possible to apply such a derogation could apply might include (non-exhaustive list) an exceptional acquisition orare (i) a major change in strategy.the structure of the Sanofi group or (ii) major events affecting the markets. Such derogation may only be temporary and must be properly substantiated. Moreover, it will remain subject to approval by the next General Meeting of Sanofi shareholders.
The Compensation Committee must ensure that trends in the compensation of corporate officers over the medium term are not uncorrelated with trends in the compensation of all our employees. In terms of annual variable compensation and equity-based compensation, the Compensation Committee aims to achieve convergence between the performance criteria applied to our Senior Leaders and those applied to the Chief Executive Officer.
Our equity-based compensation policy, which aims to align employee and shareholder interests and reinforce loyalty to Sanofi, is a critical tool for our worldwide attractiveness as an employer.
The Board of Directors makes any grant of performance shares contingent on multiple, exacting multi-year performance criteria in order to ensure that our equity-based compensation plans incentivize overall performance. Failure to achieve those criteria over the entire performance measurement period results in a reduction or loss of the initial grant.
In order to align equity-based compensation with our long-term performance, performance is measured over three financial years (the “vesting period”). Awards of performance shares are also contingent on continued employment in the Sanofi group during the vesting period, followed by further stringent lock-up obligations in the case of the Chief Executive Officer.Officer (see below).
The terms of prior awards cannot be reset subsequently, for instance with less exacting performance conditions.
Directors hold office for a four-year term, as specified in our Articles of Association.
The maximum annual amount of overall compensation that can be allocated to the directors washas been set by the Annual General Meeting of our shareholders on May 10, 2017 at €1,750,000 (the previous amount of €1,500,000 had been changed due to the entry of two directors representing employees to the Board). Given the increasing number of non-French directors on the Board of Directors and in order to allow a revaluation of the variable portion of the compensation, the forthcoming Annual General Meeting will be asked to approve an increase in the maximum annual amount of overall compensation that can be allocated to the directors to €2,000,000 with effect from the 2020 financial year.since 2020.
The arrangements for allocating the overall annual amount set by the Annual General Meeting between the Directorsdirectors are determined by the Board of Directors, acting on a recommendation from the Compensation Committee. Directors’ compensation includescomprises (i) a fixedan annual fixed amount of €30,000, apportioned on a time basis for directors who assumed or left office during the year, and (ii) a variable amount, allocated by the Board according to actual attendance at Board and Committee meetings. As required by the AFEP-MEDEF Code, directors’ compensation is allocated predominantly on a variable basis.
As an exception, in certain cases two meetings held on the same day give entitlement only to a single payment:
The introduction of a separate compensation scale depending on whether or not the director is a European resident is intended to take into account the significantly longer travel time required to attend meetings in person.
Directors do not receive any exceptional compensation or equity-based compensation and have no entitlement to a top-up pension plan.
Neither the Chairman of the Board nor the Chief Executive Officer receives any compensation for serving as a director.
The term of office of the Chairman of the Board is the same as that of the other directors (four years), and the Chairman’s term is aligned with his term of office as a director.
The compensation policy for the Chairman of the Board is discussed by the Compensation Committee, which then makes a recommendation to the Board of Directors. The Chairman of the Board is not a member of the Committee, and does not attend meetings where his compensation is discussed.
The compensation of the Chairman of the Board of Directors (where the office of Chairman is separate from that of Chief Executive Officer, as is currently the case) consists solely of fixed compensation and benefits in kind and excludes any variable or exceptional compensation, any awards of stock options or performance shares, and any directors’ attendance fees.compensation for serving as a director. The Board meeting of February 22, 2022 set the annual fixed compensation awarded to the Chairman of the Board at €800,000 gross, unchanged from 2021.
Where the office of Chairman is separate from that of Chief Executive Officer, the Chairman of the Board is not entitled to the Sanofi top-up defined-contribution pension plan.
Nor is he entitled to a termination benefit or a non-compete indemnity.
Our Chief Executive Officer is not appointed for a fixed term of office.
The compensation policy for the Chief Executive Officer is established by the Board of Directors, acting on the recommendation of the Compensation Committee. The compensation structure is not subject to annual review and is applicable for as long as it remains unchanged. The arrangements for implementing the policy may vary from year to year; a table showing the changes made to those arrangements in 20192022 and 20182021 is provided at the end of the present section.
When the Chief Executive Officer is an outside appointment, the Board of Directors may decide, acting on a recommendation from the Compensation Committee, to compensate the appointee for some or all of the benefits he may have forfeited on leaving his previous employer. In such a case, the terms on which the Chief Executive Officer is hired aim to replicate the diversity of what was forfeited, with a comparable level of risk (variable portion, medium-term equity-based or cash compensation).
Our policy aims at achieving and maintaining a balance in the compensation structure between fixed compensation, benefits in kind, short-term variable cash compensation, and medium-term variable equity-based compensation.
The compensation policy for the Chief Executive Officer is designed to motivate and reward performance by ensuring that a significant portion of compensation is contingent on the attainment of financial, operational and extra-financial criteria that reflect Sanofi’s objectives, and are aligned with the corporate interest and with the creation of shareholder value. Variable cash compensation and equity-based compensation are the two principal levers for action, and are intended to align the interests of the Chief Executive Officer with those of our shareholders and stakeholders.
During the meeting that follows the Board meeting held to close off the financial statements for the previous year, the Compensation Committee examines the levels of attainment of variable compensation for that year. In advance of that meeting, the Chief Executive Officer presents the Committee with a report containing narrative and quantitative information necessary to measure attainment of the objectives. The members of the Compensation Committee then discuss the information provided and report to the Board on those discussions, giving an evaluation of the Chief Executive Officer’s performance against each of the criteria.criteria (determining the level of attainment for quantitative objectives, and evaluating the level of attainment for qualitative objectives).
The amount of fixed compensation is not subject to annual review. It may however be changed, provided that such changes are not material:
The percentage of variable compensation linked to the attainment of quantitative criteria may be scaled down regardless of actual performance, in order to give greater weight to the attainment of qualitative criteria. This flexibility can only operate to reduce the amount of variable compensation, and cannot compensate for underperformance on quantitative criteria.
The policy does not allow for the possibility of clawing back any annual variable compensation.
The Chief Executive Officer’s equity-based compensation, which since June 2019 can only be in the form of performance shares, may not exceed 250% of his target short-term compensation (fixed plus variable).
The Chief Executive Officer’s equity-based compensation is contingent upon attainment of exacting performance conditions measured over a three-year-period. Such awards are contingent upon both:
Each award to our Chief Executive Officer takes into account previous awards and his overall compensation.
In any event, the maximum number of shares to be delivered may not be more than the number of performance shares initially awarded.
The Chief Executive Officer is bound by the same obligations regarding share ownership specified in our Articles of Association and Board Charter as our other corporate officers.
In addition, until he ceases to hold office the Chief Executive Officer is required to retain a quantity of Sanofi shares equivalent to 50% of any gain (net of taxes and social contributions) arising on the vesting of performance shares, calculated as of the date on which those shares vest. Those shares must be retained in registered form until he ceases to hold office.
In compliance with the AFEP-MEDEF Code and our Board Charter, the Chief Executive Officer must undertake to refrain from entering into speculative or hedging transactions.
The Chief Executive Officer does not receive multi-year variable compensation.
Executive officers of Sanofi do not receive any compensation for serving as directors. Consequently, the Chief Executive Officer does not receive compensation in his capacity as a director or as a member of the Strategy Committee.
No exceptional compensation can be awarded to the Chief Executive Officer.
The Chief Executive Officer is entitled to a top-up defined-contribution pension plan, a termination benefit, and a non-compete indemnity.
Such arrangements are part of the overall compensation package generally awarded to executive officers; in line with recommendations of the AFEP-MEDEF code, there are very strict rules about how they are implemented. The termination benefit and non-compete indemnity are intended to compensate for the fact that the Chief Executive Officer may be dismissed at any time.
Each of those benefits is taken into account by the Board of Directors when fixing the overall compensation of the Chief Executive Officer.
The Chief Executive Officer is entitled to benefits under the top-up defined-contribution pension plan introduced within Sanofi on January 1, 2020. This is a collective plan falling within the scope of Article 82 of the French General Tax Code. It is also offered to members of our Executive Committee and all senior executives whose position is classified within the Sanofi grade scale as “Executive Level 1 or 2”. The Chief Executive Officer's entitlement under this plan may be withdrawn by a decision of the Board of Directors, but not retroactively.
Under the terms of the plan, the Chief Executive Officer receives an annual contribution the amount of which (subject to attainment of a performance condition) may be up to 25% of his reference compensation (annual fixed and variable cash-based compensation only; all other compensation is excluded). The rights accruing under the plan are those that are generated by the capitalization contract taken out with the insurer, and vest even if the Chief Executive Officer does not remain with Sanofi until retirement. The Chief Executive Officer may elect for the rights to be transferable as a survivor's pension.
Because this performance condition is linked to the attainment of the performance criteria for annual variable compensation (which itself is determined with reference to the strategic objectives of Sanofi), it ensures that no pension contributions could be made in the event that the Chief Executive Officer fails to deliver.
The plan is wholly funded by Sanofi, which pays the full amount of the gross contributions. Because it is treated as equivalent to compensation, the contribution is subject to payroll taxes and employer’s social security charges, and to income tax in the hands of the Chief Executive Officer; all of the above are charged on the basis of the bands, rates and other conditions applicable to compensation, paid and declared on his payslips for the contribution period.
Subject to (i) formal confirmation by the Board of Directors that the performance condition for the previous year has been met and (ii) approval of the Chief Executive Officer's compensation package for that year by the Annual General Meeting of our shareholders, the annual gross contribution will beis paid as follows:
The pension entitlement is not cumulative with (i) any termination benefit paid in the event of forced departure or (ii) any non-compete indemnity.
The termination benefit only becomes payable if the departure of the Chief Executive Officer is forced, i.e. in the event of removal from office or resignation linked to a change in strategy or control of the Company. Compensation for non-renewal of the term of office is irrelevant in the case of the Chief Executive Officer, because this office is held for an indefinite term.
In addition, no termination benefit is payable and the arrangement is deemed to have been rescinded in the following circumstances:
Payment of the termination benefit is contingent upon fulfillment of a performance condition, which is deemed to have been met if the attainment rate for the individual variable compensation objectives exceeded 90% of the target; that condition is assessed over the three financial years preceding the Chief Executive Officer leaving office.
The amount of the termination benefit is capped at 24 months of the Chief Executive Officer’s most recent total compensation on the basis of (i) the fixed compensation effective on the date of leaving office and (ii) the last variable compensation received prior to that date subject to fulfilment of the performance condition.
The amount of the termination benefit is reduced by any amount received as consideration for the non-compete undertaking, such that the aggregate amount of those two benefits may never exceed two years of total fixed and variable compensation.
In the event of his departure from the Company, the Chief Executive Officer undertakes, during the 12 month12-month period following his departure, not to join a competitor of Sanofi as an employee or corporate officer, or to provide services to or cooperate with such a competitor.
In return for this undertaking, he receives an indemnity corresponding to one year’s total compensation, based on his fixed compensation effective on the day he leaves office and on the last individual variable compensation he received prior to that date. This indemnity is payable in 12 monthly installments.
However, the Board of Directors reserves the right to release the Chief Executive Officer from that undertaking for some or all of that 12-month period. In such cases, the non-compete indemnity would not be due for the period of time waived by the Company.
If the Chief Executive Officer leaves Sanofi for reasons other than resignation or removal from office for gross or serious misconduct (in which case any award of equity-based compensation is forfeited in full), the overall allocation percentage is prorated to reflect the amount of time the Chief Executive Officer remained with Sanofi during the vesting period.
If at any time prior to the expiration of the vesting period of his performance shares the Chief Executive Officer joins a competitor of Sanofi as an employee or corporate officer, or provides services to or cooperates with such a competitor, he irrevocably loses those performance shares regardless of any full or partial discharge by the Board of Directors of the non-compete undertaking relating to his office as Chief Executive Officer.
The table below presents a summary of the benefits (as described above) that could be claimed by the Chief Executive Officer on leaving office, depending on the terms of his departure. The information provided in this summary is without prejudice to any decisions that may be made by the Board of Directors.