On July 31, 2017 Sanofi reported financial results for the quarter ended June 30, 2017 (Press release, Sanofi, JUL 31, 2017, View Source [SID1234519977]).

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Q2 2017 sales growth supported by Specialty Care, Vaccines and Emerging Markets
Net sales were €8,663 million, up 6.4% on a reported basis and 5.5%(2) at CER reflecting the change in scope of the CHC and vaccines Global Business Units (GBUs). At CER and CS(3), net sales were up 0.6%.

Sanofi Genzyme GBU grew 14.3% at CER driven primarily by continued strong sales growth in Multiple Sclerosis; strong U.S. launch of Dupixent in atopic dermatitis driven by high unmet medical need and early market access.

Sanofi Pasteur GBU grew 19.2% at CER and CS as a result of strong sales of pediatric combinations and Menactra.

Diabetes and Cardiovascular GBU sales were down 15.0% at CER; Global Diabetes franchise sales decreased 12.2%.

CHC GBU sales were stable at CER and CS mainly due to seasonality in Europe.

Emerging Markets(5) sales increased 6.6% at CER and CS driven by robust contribution from China.

2017 business EPS guidance at CER raised on first-half financial results and disciplined expense management

Q2 2017 business operating income of €2,299 million, up 4.1% at CER and constant structure.

Q2 2017 business EPS(1) grew 1.5% at CER to €1.35 and increased 3.1% on a reported basis.

Sanofi now expects 2017 business EPS(1) to be broadly stable(6) at CER, barring unforeseen major adverse events.

Currency impact on 2017 business EPS is estimated to be approximately +1% at the average June 2017 exchange rates.

Sustaining innovation in R&D

Positive CHMP opinion received for Dupixent in the EU.

Kevzara, an anti IL6 for the treatment of rheumatoid arthritis, approved in the EU in June.

Initiation of Phase 3 ATLAS program for fitusiran in patients with hemophilia.

Phase 2/3 studies started for SAR439684 (anti PD-1) in Non-Small Cell Lung Cancer and Basal Cell Carcinoma.

Sanofi Chief Executive Officer, Olivier Brandicourt, commented:
"Sanofi Genzyme, Sanofi Pasteur and Emerging Markets were once again major contributors to our performance in the quarter. The continued growth of these businesses, together with disciplined expense management, enabled us to more than offset the headwinds in our Diabetes franchise. Consequently, we feel confident in our full-year outlook and raise our 2017 business EPS guidance. We are also encouraged by the strong uptake of Dupixent in the U.S. and the approval of Kevzara. The initiation of Phase 3 studies in additional indications for dupilumab, the Phase 2/3 programs with the anti PD-1 in multiple cancer indications and fitusiran in hemophilia were significant R&D milestones in the second quarter."

(1) In order to facilitate an understanding of operational performance, Sanofi comments on the business net income statement. Business net income is a non-GAAP financial measure (see Appendix 10 for definitions). The consolidated income statement for Q2 2017 and H1 2017 is provided in Appendix 3 and a reconciliation of IFRS net income reported to business net income is set forth in Appendix 4; (2) changes in net sales are expressed at constant exchange rates (CER) unless otherwise indicated (see Appendix 10); (3) CS: constant structure: adjusted for BI CHC business, termination of SPMSD and others; (4) The closing of the disposal of Merial in Mexico is expected in 2017; (5) See definition page 8; (6) 2016 Business EPS was €5.68
Investor Relations: (+) 33 1 53 77 45 45 – E-mail: [email protected]
Media Relations: (+) 33 1 53 77 46 46 – E-mail: [email protected]
Website: www.sanofi.com Mobile app: SANOFI IR available on the App Store and Google Play

2017 second-quarter and first-half Sanofi sales
Unless otherwise indicated, all percentage changes in sales in this press release are stated at CER(7).

In the second quarter of 2017, Company sales were €8,663 million, up 6.4% on a reported basis. Exchange rate movements had a favorable effect of 0.9 percentage points mainly reflecting the positive evolution of the U.S. dollar, Brazilian Real and Russian Ruble which more than offset the negative impact from the Egyptian Pound, Turkish Lira, British Pound and Chinese Yuan. Company sales benefited from the acquisition of Boehringer Ingelheim’s CHC business and full consolidation of Sanofi’s European vaccines operations leading to an increase of 5.5% at CER. At CER and constant structure, Company sales were up 0.6%.

First-half Company sales reached €17,311 million, up 8.7% on a reported basis. Exchange rate movements had a favorable effect of 1.7 percentage points. At CER and constant structure, Company sales were up 2.0%.

Global Business Units
The table below presents sales by Global Business Unit (GBU) and reflects the organization of Sanofi. This structure drives deeper specialization, simplifies reporting and provides clear focus on growth drivers. Please note that in Emerging Markets, Specialty Care and Diabetes and Cardiovascular sales are included in the General Medicines and Emerging Markets GBU.

Net Sales by GBU
(€ million)
Q2 2017
Change
(CER)
Change
CER/CS*
H1 2017
Change
(CER)
Change
CER/CS*

Sanofi Genzyme (Specialty Care)(a)
1,439
+14.3%
+14.4%
2,818
+14.9%
+14.9%

Diabetes and Cardiovascular(a)
1,386
-15.0%
-15.0%
2,805
-11.4%
-11.4%

General Medicines & Emerging Markets(b)
3,659
-1.2%
-1.3%
7,384
+0.5%
+0.3%

Consumer Healthcare (CHC)
1,163
+42.5%
-0.1%
2,504
+42.6%
+2.4%

Total Pharmaceuticals
7,647
+3.2%
-1.5%
15,511
+5.3%
+0.6%

Sanofi Pasteur (Vaccines)
1,016
+26.2%
+19.2%
1,800
+24.5%
+16.5%

Total net sales
8,663
+5.5%
+0.6%
17,311
+7.0%
+2.0%

(a) Does not include Emerging Markets sales- see definition page 7; (b) Includes Emerging Markets sales for Diabetes & Cardiovascular and Specialty Care
*CS: constant structure

Global Franchises
The tables below present second-quarter and first-half 2017 sales by global franchise, including Emerging Markets sales, to facilitate comparisons. Appendix 1 provides a reconciliation of sales by GBU and franchise.

Net sales by Franchise
(€ million)
Q2 2017
Change
(CER)
Change
at CER/CS*
Developed
Markets
Change
at CER/CS*
Emerging
Markets
Change
at CER/CS*

Specialty Care
1,711
+13.5%
+13.6%
1,439
+14.4%
272
+9.7%

Diabetes and Cardiovascular
1,772
-10.7%
-10.7%
1,386
-15.0%
386
+8.6%

Established Rx Products
2,559
-2.3%
-2.6%
1,592
-6.1%
967
+3.5%

Consumer Healthcare (CHC)
1,163
+42.5%
-0.1%
762
-2.3%
401
+4.6%

Generics
442
-8.0%
-7.6%
253
-6.7%
189
-8.9%

Vaccines
1,016
+26.2%
+19.2%
602
+17.3%
414
+22.2%

Total net sales
8,663
+5.5%
+0.6%
6,034
-1.8%
2,629
+6.6%

*CS: constant structure
(7) See Appendix 10 for definitions of financial indicators.

Net sales by Franchise
(€ million)
H1 2017
Change
(CER)
Change
at CER/CS*
Developed
Markets
Change
at CER/CS*
Emerging
Markets
Change
at CER/CS*

Specialty Care
3,331
+14.5%
+14.6%
2,818
+14.9%
513
+12.7%

Diabetes and Cardiovascular
3,567
-7.5%
-7.5%
2,805
-11.4%
762
+10.4%

Established Rx Products
5,199
-0.9%
-1.2%
3,226
-5.1%
1,973
+5.9%

Consumer Healthcare (CHC)
2,504
+42.6%
+2.4%
1,699
+2.1%
805
+3.0%

Generics
910
-5.0%
-4.7%
521
-5.8%
389
-3.2%

Vaccines
1,800
+24.5%
+16.5%
1,070
+16.1%
730
+17.1%

Total net sales
17,311
+7.0%
+2.0%
12,139
-0.1%
5,172
+7.5%
*CS: constant structure

Pharmaceuticals
Second-quarter Pharmaceuticals sales were up 3.2% to €7,647 million. At constant structure, Pharmaceuticals sales were down 1.5% primarily due to Diabetes and Established products. First-half sales for Pharmaceuticals increased 5.3% (+0.6% at constant structure) to €15,511 million.

Rare Disease franchise
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Myozyme / Lumizyme
203
+10.4%
393
+11.5%

Cerezyme
193
-2.0%
369
-3.4%

Fabrazyme
190
+12.0%
367
+13.6%

Aldurazyme
57
+12.0%
109
+10.2%

Cerdelga
31
+19.2%
62
+24.5%

Others
78
-4.8%
164
-0.6%

Total Rare Diseases
752
+5.9%
1,464
+6.7%

In the second quarter, Rare Disease sales increased 5.9% to €752 million driven by the accrual of patients worldwide. Rare Disease sales grew 6.8% in the U.S., 10.2% in Emerging Markets and 3.4% in Europe. First-half Rare Disease sales increased 6.7% to €1,464 million.

Gaucher (Cerezyme and Cerdelga) sales were slightly up (0.4%) at €224 million in the second quarter. Cerezyme sales were down 2.0% to €193 million reflecting a strong base for comparison. Cerdelga sales increased 19.2% to €31 million of which €23 million were generated in the U.S. (up 15.0%). First half Gaucher sales were €431 million (down 0.2%).

Second-quarter Fabrazyme sales were up 12.0% to €190 million, reflecting a continued accrual of new patients. First-half Fabrazyme sales were up 13.6% to €367 million.

Myozyme/Lumizyme sales grew 10.4% to €203 million in the second quarter, mainly due to new patient accruals and increased worldwide diagnosis of Pompe disease. First-half Myozyme/Lumizyme sales increased 11.5% to €393 million.

Multiple Sclerosis franchise
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Aubagio
425
+32.7%
796
+31.3%

Lemtrada
124
+13.9%
249
+26.0%

Total Multiple Sclerosis
549
+27.9%
1,045
+30.0%

Second-quarter Multiple Sclerosis (MS) sales grew 27.9% to €549 million, reflecting strong Aubagio growth. First-half MS sales increased 30.0% to €1,045 million.

Second-quarter Aubagio sales increased 32.7% to €425 million driven by the U.S. (up 28.7% to €285 million) and Europe (up 42.5% to €114 million). In the U.S., Aubagio achieved a market share of 9.3% (source IMS TRX-Q2 2017). First-half Aubagio sales increased 31.3% to €796 million.

In the second quarter Lemtrada sales increased 13.9% to €124 million, including €63 million in the U.S. (up 10.7%) and €47 million in Europe (up 22.5%). First-half Lemtrada sales increased 26.0% to €249 million.

Immunology franchise
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Dupixent
26
–
26
–

Kevzara
1
–
1
–

Total Immunology
27
–
27
–

Dupixent which was launched in the U.S. in March for the treatment of moderate to severe adult atopic dermatitis generated sales of €26 million in the second quarter. Since the launch, over 5,100 physicians in the U.S. have prescribed Dupixent (as of July 26, 2017) and cumulatively over 13,000 patients have been prescribed Dupixent since launch (as of July 26, 2017). In Europe, Dupixent received a positive recommendation from the CHMP on July 21st 2017.

Kevzara, an anti IL6 treatment for rheumatoid arthritis, was launched in June in the U.S. and approved in EU.
Oncology franchise
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Jevtana
100
+12.5%
197
+9.0%

Thymoglobulin
76
+8.7%
148
+8.2%

Taxotere
44
-6.5%
91
-2.2%

Eloxatin
45
0.0%
90
+3.5%

Mozobil
40
+8.1%
80
+9.7%

Zaltrap
18
+5.9%
34
0.0%

Others
60
-3.2%
155
+21.6%

Total Oncology
383
+4.4%
795
+8.6%

Second-quarter Oncology sales increased 4.4% to €383 million driven mainly by Jevtana and Thymoglobulin. First-half Oncology sales were up 8.6% to €795 million.

Jevtana sales were up 12.5% to €100 million in the second quarter supported by the performance in the U.S. and Japan. First-half Jevtana sales increased 9.0% to €197 million.

In the second quarter, Thymoglobulin sales increased 8.7% to €76 million driven by the U.S. (up 7.7% to €44 million) and Emerging Markets (up 30.8% to €17 million). First-half Thymoglobulin sales increased 8.2% to €148 million.

Eloxatin sales were stable at €45 million in the second quarter. Second-quarter Taxotere sales decreased 6.5% (to €44 million) due to continued generic competition in Japan. First-half sales of Taxotere and Eloxatin were down 2.2% (€91 million) and up 3.5% (€90 million), respectively.

Diabetes franchise
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Lantus
1,197
-19.2%
2,423
-16.7%

Toujeo
210
+46.1%
402
+59.8%

Total glargine
1,407
-13.5%
2,825
-10.7%

Apidra
93
-2.2%
191
+5.6%

Amaryl
85
-5.4%
174
0.0%

Insuman
28
-14.7%
55
-15.2%

BGM (Blood Glucose Monitoring)
16
-5.9%
33
-2.9%

Lyxumia
7
-12.5%
14
-17.6%

Soliqua
5
–
9
–

Total Diabetes
1,647
-12.2%
3,310
-9.2%

In the second quarter, Diabetes sales decreased 12.2% to €1,647 million, reflecting lower Lantus sales in the U.S. Second-quarter U.S. Diabetes sales were down 23.0% to €814 million. First-half U.S. Diabetes sales decreased 19.1% to €1,653 million. In the second half of 2017, Sanofi expects an accelerated decline of U.S. diabetes sales relative to the first half of 2017. This reflects the phased impact of exclusions in commercial formularies at CVS and United Health as well as a high basis of comparison in last year’s fourth quarter. Second-quarter sales in Emerging Markets increased 8.4% to €383 million. Sales in Europe were €325 million, a decrease of 3.0% in the second quarter. First-half Diabetes sales decreased 9.2% to €3,310 million.

In the second quarter, Sanofi glargine (Lantus and Toujeo) sales decreased 13.5% to €1,407 million. In the U.S., Sanofi glargine sales of €782 million were down 23.9% and reflected the impact of the exclusion from various CVS commercial formularies from January 1, 2017 as well as from the United Health commercial formulary which became effective on April 1, 2017. In Europe, Sanofi glargine sales decreased 2.0% to €248 million due to biosimilar competition in several European markets. First-half Sanofi glargine sales decreased 10.7% to €2,825 million.

Over the quarter, Lantus sales were €1,197 million down 19.2%. In the U.S., Lantus sales decreased 28.1% to €660 million mainly reflecting lower average net price and the aforementioned impact of formulary exclusions. In Europe, second-quarter Lantus sales were €194 million (down 14.0%) due to biosimilar competition and patients switching to Toujeo. In Emerging Markets, sales were up 5.6% to €262 million. First-half Lantus sales decreased 16.7% to €2,423 million.

Second-quarter Toujeo sales were €210 million (up 46.1%) of which €122 million (up 12.3%) were recorded in the U.S., €54 million in Europe (versus €27 million in the second quarter of 2016) and €19 million in Emerging Markets (versus €1 million in the second quarter of 2016). First-half Toujeo sales increased 59.8% to €402 million.
Amaryl sales were €85 million, down 5.4% in the second quarter, of which €69 million were generated in Emerging Markets (down 2.7%). First-half Amaryl sales were stable at €174 million.

Second-quarter Apidra sales decreased 2.2% to €93 million. Lower sales in the U.S. (down 13.3% to €27 million) were partially offset by double-digit growth in Emerging Markets (up 15.0% to €23 million). First-half Apidra sales increased 5.6% to €191 million.

Soliqua 100/33 / Suliqua (insulin glargine 100 Units/mL & lixisenatide 33 mcg/mL injection) was launched in the U.S. in January 2017 and Suliqua recently in the first European country, the Netherlands. Soliqua 100/33 / Suliqua sales were €5 million in the second quarter and €9 million in the first half.

Cardiovascular franchise
Second-quarter Praluent sales (collaboration with Regeneron) were €42 million of which €29 million was in the U.S. and €11 million in Europe. This reflected significant payer utilization management restrictions in the U.S. and limited market access in Europe. First-half Praluent sales were €76 million versus €33 million in the first half of 2016. In January 2017, the U.S. District Court for the District of Delaware issued an injunction that required Sanofi and Regeneron to stop marketing, selling and manufacturing Praluent in the U.S. starting from February 21, 2017.

However, on February 8, 2017, the Court of Appeals for the Federal Circuit stayed (suspended) the permanent injunction for Praluent during the companies’ appeal. As a result, Sanofi and Regeneron will continue marketing, selling and manufacturing Praluent in the U.S. during the appeal process. The Court of Appeals oral arguments were heard on June 6, 2017. The companies now await a decision from the Court of Appeals on the appeal issues. It is at the Court’s discretion when to issue a decision.

Second-quarter and first-half Multaq sales were €83 million (down 3.6%) and €181 million (up 3.5%), respectively.
Established Rx Products
Net sales (€ million)
Q2 2017
Change
(CER)
H1 2017
Change
(CER)

Lovenox
402
-2.4%
817
-0.1%

Plavix
385
-0.3%
765
-1.0%

Renvela/Renagel
248
+16.8%
494
+9.0%

Aprovel/Avapro
190
+9.1%
383
+11.0%

Synvisc /Synvisc-One
116
+4.6%
206
+2.0%

Myslee/Ambien/Stilnox
64
-19.2%
137
-10.8%

Allegra
34
-12.8%
102
-13.2%

Other
1,120
-7.1%
2,295
-3.7%

Total Established Rx Products
2,559
-2.3%
5,199
-0.9%

In the second quarter, Established Rx Products sales decreased 2.3% to €2,559 million. This reflected a decline in sales in Europe (down 6.3% to €881 million) and the impact of generic competition to Plavix in Japan, which more than offset a solid Emerging Markets performance (up 3.5% to €967 million). First-half Established Rx Products sales decreased 0.9% to €5,199 million.

Lovenox sales decreased 2.4% to €402 million in the second quarter, reflecting increased competition in Europe (down 7.3% to €243 million) following the availability of a biosimilar, which offset the strong performance in Emerging Markets (up 9.7% to €123 million). First-half Lovenox sales were stable at €817 million.

In the second quarter, Plavix sales were down 0.3% to €385 million due to generic competition in Japan that started in June 2015 (sales in Japan were down 31.2% to €64 million). In Emerging Markets, Plavix sales increased 12.8% to €266 million sustained by the performance in China. First-half Plavix sales decreased 1.0% to €765 million.

Second-quarter Renvela/Renagel sales increased 16.8% to €248 million driven by the U.S. performance (up 20% to €209 million). In the U.S. the first generics of Renvela/Renagel powder and tablet formulations were approved in June and July, respectively. In Europe, Renvela/Renagel sales were down 14.3% to €19 million due to generic competition. First-half Renvela/Renagel sales increased 9.0% to €494 million.

Aprovel/Avapro sales were up 9.1% (to €190 million) driven by product sales to Sanofi’s partner in Japan and sales in China. First-half Aprovel/Avapro sales increased 11.0% to €383 million.

Consumer Healthcare
CHC sales by geography and category are provided in Appendix 1.
Net sales (€ million)
Q2 2017
Change
(CER)
Change
at CER/CS*
H1 2017
Change
(CER)
Change
at CER/CS*

Allergy Cough & Cold
255
+42.6%
-1.6%
669
+52.1%
+6.7%

of which Allegra
106
+6.2%
+6.2%
251
+2.1%
+2.1%

of which Mucosolvan
18
na
na
53
na
na

of which Xyzal
8
–
–
51
–
–

Pain
297
+36.4%
-1.7%
621
+40.8%
+4.1%

of which Doliprane
73
-3.9%
-3.9%
156
+1.9%
+1.9%

of which Buscopan
38
na
na
80
na
na

Digestive
239
+84.9%
+2.2%
468
+69.4%
-3.2%

of which Dulcolax
56
na
na
103
na
na

of which Enterogermina
42
-2.3%
-2.3%
89
+3.5%
+3.5%

of which Essentiale
40
+15.6%
+15.6%
75
-2.8%
-2.8%

of which Zantac
30
na
na
57
na
na

Nutritionals
170
+54.2%
-1.2%
334
+45.0%
-1.2%

of which Pharmaton
31
na
na
48
na
na

Other
202
+12.4%
+2.6%
412
+11.7%
+2.8%

of which Gold Bond
50
+4.3%
+4.3%
100
+3.2%
+3.2%

Total Consumer Healthcare
1,163
+42.5%
-0.1%
2,504
+42.6%
+2.4%
*CS: constant structure

In the second quarter, Consumer Healthcare (CHC) sales increased 42.5% to €1,163 million reflecting the closing of the acquisition of Boehringer Ingelheim CHC business on January 1st, 2017. At constant structure, Sanofi CHC sales were stable in the second quarter and were impacted by an early start of the Cough and Cold season in Europe in the first quarter of the year. At constant structure, first-half CHC sales increased 2.4% to €2,504 million.

In Europe, second-quarter CHC sales were up 44.6% to €308 million. At constant structure, sales decreased 7.8%, following an early Cough and Cold season in the first quarter of 2017. Sales of the Allergy Cough and Cold and Pain products were down 14.5% and 10.3%, respectively. At constant structure, first-half CHC sales in Europe increased 1.6% to €714 million.

In the U.S., second-quarter CHC sales increased 24.0% to €293 million. At constant structure, CHC sales were up 2.5% driven by the Pain and Allergy portfolios. In the allergy segment, Sanofi gained market share thanks to the good performance of Allegra and the launch of Xyzal Allergy 24HR (approved in February as an over-the-counter treatment for the relief of symptoms associated with seasonal and year-round allergies) in a competitive environment. Second-quarter sales of the Digestive category were down 9.3% reflecting lower Zantac sales mostly due to retailer delistings of DUO fusionTM. In the U.S., at constant structure, first-half CHC sales increased 2.5% to €641 million.
In Emerging Markets, second-quarter CHC sales increased 33.9% to €401 million. At constant structure, CHC sales were up 4.6% reflecting the start of recovery in Russia. In the first half, Emerging Markets CHC sales increased 3.0% to €805 million at constant structure.

In the Rest of the World, CHC sales were up 133.3% to €161 million. At constant structure, CHC sales were up 0.6% negatively impacted by lower sales of the Allergy Cough and Cold products in Japan and the Nutritional portfolio in Australia. In the Rest of the World, at constant structure, first-half CHC sales increased 2.8% to €344 million.

Generics
In the second quarter, Generics sales decreased 8.0% to €442 million reflecting lower sales in Europe (down 7.3% to €190 million), the U.S. (down 28.9% to €32 million) and Emerging Markets (down 9.4% to €189 million). In Emerging Markets, sales were impacted primarily by the divestment of a third party distribution business in China and unfavorable phasing in Latin America. First-half Generics sales decreased 5.0% to €910 million.

Vaccines
Net sales (€ million)
Q2 2017
Change
(CER)
Change
at CER/CS*
H1 2017
Change
(CER)
Change
at CER/CS*

Polio/Pertussis/Hib vaccines
(incl. Hexaxim / Hexyon Pentacel, Pentaxim and Imovax)
469
+37.2%
+31.4%
901
+41.3%
+34.4%

Meningitis/Pneumonia vaccines
(incl. Menactra)
195
+38.1%
+38.1%
290
+8.8%
+8.8%

Adult Booster vaccines (incl. Adacel )
115
+11.5%
-6.5%
194
+4.3%
-13.9%

Travel and other endemic vaccines
113
+10.9%
0.0%
219
+17.4%
+3.8%

Influenza vaccines
(incl. Vaxigrip, Fluzone HD & Fluzone)
98
0.0%
0.0%
136
+14.7%
+14.7%

Dengvaxia
1
0.0%
0.0%
18
-5.0%
-5.0%

Other vaccines
25
+41.2%
+33.3%
42
+33.3%
+25.0%

Total Vaccines
1,016
+26.2%
+19.2%
1,800
+24.5%
+16.5%
*CS: constant structure

Second-quarter Vaccines sales were up 26.2% to €1,016 million and reflected the termination of the Sanofi Pasteur MSD joint-venture in Europe from December 31, 2016. At constant structure, sales were up 19.2% mainly driven by the Polio/Pertussis/Hib franchise and Menactra. In the U.S., sales were up 12.7% to €378 million. In Emerging Markets, sales grew 22.2% to €414 million. In Europe, sales were up 140.4% to €135 million reflecting the termination of SPMSD JV. At constant structure, European sales which are now fully managed by Sanofi Pasteur, were up 31.7%. First-half Vaccines sales grew 16.5% at constant structure to €1,800 million.

In the second quarter, Polio/Pertussis/Hib (PPH) vaccines sales increased 37.2% to €469 million. At constant structure, PPH sales grew 31.4% reflecting increased release of Pentaxim batches in China and strong performance of Hexaxim in Europe as well as in some Emerging markets. At constant structure, first-half Polio/Pertussis/Hib vaccines sales increased 34.4% to €901 million.

Second-quarter Menactra sales increased 41.3% to €181 million reflecting the CDC ordering pattern in the U.S., an outbreak in Australia and phasing in the Middle East. First-half Menactra sales increased 11.8% to €271 million.
Influenza vaccines sales were stable (€98 million) in the second quarter and up 14.7% (€136 million) in the first half driven by the South Hemisphere campaign. For the North Hemisphere, first shipment for U.S. Flu season was completed on July 17th and Sanofi Pasteur expects to deliver a similar number of Flu vaccine doses in the U.S. as in 2016.

Second-quarter Adult Booster vaccines sales were €115 million, up 11.5% and down 6.5% at constant structure due to the continuing impact of Repevax supply disruption in Europe. At constant structure, first-half Adult Booster vaccines sales decreased 13.9% to €194 million.

Second-quarter Travel and other endemic vaccines sales were €113 million up 10.9% and stable at constant structure. At constant structure, first-half Travel and other endemic vaccines sales were up 3.8% to €219 million.
Second-quarter and first-half Dengvaxia sales were €1 million and €18 million, respectively.

In July, Sanofi announced it will acquire Protein Sciences, a U.S. privately held vaccines biotechnology company. This acquisition will allow Sanofi Pasteur to broaden its flu portfolio with the addition of a non-egg based vaccine. The acquisition, which has been unanimously approved by the board of directors of Protein Sciences and a majority of Protein Sciences shareholders, is expected to close in the third quarter of 2017, subject to customary regulatory approvals.

Company sales by geographic region
Sanofi sales (€ million)
Q2 2017
Change
(CER)
Change
(CER/CS)
H1 2017
Change
(CER)
Change
(CER/CS)

United States
2,798
-1.0%
-2.7%
5,562
+0.9%
-0.8%

Emerging Markets(a)
2,629
+10.2%
+6.6%
5,172
+10.7%
+7.5%

of which Latin America
729
+10.1%
+3.9%
1,405
+13.9%
+7.5%

of which Asia (including South Asia(b))
934
+11.7%
+10.0%
1,917
+12.6%
+11.2%

of which Africa, Middle East
626
+4.7%
+1.4%
1,172
+3.2%
+0.4%

of which Eurasia(c)
312
+17.9%
+15.2%
610
+16.1%
+12.6%

Europe(d)
2,350
+6.8%
-1.0%
4,761
+8.6%
+0.4%

Rest of the World(e)
886
+10.3%
-1.1%
1,816
+12.6%
+0.5%

of which Japan
472
+10.0%
-7.5%
1,001
+14.9%
-4.0%

Total Sanofi sales
8,663
+5.5%
+0.6%
17,311
+7.0%
+2.0%
*CS : constant structure

World excluding U.S., Canada, Western & Eastern Europe (except Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico
India, Bangladesh, Sri Lanka
Russia, Ukraine, Georgia, Belarus, Armenia and Turkey
Western Europe + Eastern Europe except Eurasia
Japan, South Korea, Canada, Australia, New Zealand, Puerto Rico
Second-quarter sales in the U.S. were €2,798 million, a decrease of 1.0% or 2.7% at constant structure impacted by the decline of Diabetes sales (down 23.0%) which was not fully offset by the strong performance of the Multiple Sclerosis franchise (up 25.0%), Vaccines (up 12.7%) as well as the launch of Dupixent. In the U.S., at constant structure, first-half sales decreased 0.8% to €5,562 million.

Second-quarter sales in Emerging Markets were €2,629 million, up 10.2% or 6.6% at constant structure driven by Vaccines (up 22.2%), Established Rx products (up 3.5%) and Diabetes (up 8.4%). In Asia, second quarter sales were up 11.7% (up 10.0% at constant structure) to €934 million reflecting strong performance in China (up 17.1% at constant structure to €550 million), driven by the recovery in Vaccines and growth of Established products. In Latin America, second quarter sales increased 10.1% (up 3.9% at constant structure) to €729 million. Second-quarter sales in Brazil decreased 3.0% at constant structure to €284 million. Second-quarter sales in the Eurasia region increased 17.9% (15.2% at constant structure) to €312 million supported by strong growth in Russia and Turkey. Over the quarter, sales in Russia were €163 million up 33.7% and 25.2% at constant structure driven by CHC sales growth. In Africa and the Middle East, sales were €626 million up 4.7% and 1.4% at constant structure. In

Emerging Markets, at constant structure, first-half sales increased 7.5% to €5,172 million.
Second-quarter sales in Europe were €2,350 million, up 6.8% or down 1.0% at constant structure impacted by lower Established products (down 6.9% at constant structure) and CHC sales (down 7.8% at constant structure) which were not fully offset by the strong performance of the Multiple Sclerosis franchise (up 35.8%) and Vaccines (up 31.7%). In Europe, at constant structure, first-half sales increased 0.4% to €4,761 million.

Sales in Japan increased 10.0% to €472 million in the second quarter. At constant structure, sales in Japan were down 7.5% impacted by generic Plavix competition which was partially offset by strong growth of Vaccines sales. In Japan, at constant structure, first-half sales decreased 4.0% to €1,001 million.

R&D update
Consult Appendix 8 for full overview of Sanofi’s R&D pipeline
Regulatory update
Regulatory updates since the publication of first-quarter results on April 28, 2017 include the following:
The European Commission granted marketing authorization for Insulin lispro Sanofi (100 Units/mL) in July for the treatment of diabetes in adults and children. This followed the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) positive opinion in May.

In July, the European Medicines Agency’s CHMP adopted a positive opinion recommending the granting of the marketing authorization of Dupixent (dupilumab) for use in adults with moderate-to-severe atopic dermatitis who are candidates for systemic therapy.

In June, the European Commission granted marketing authorization for Kevzara (sarilumab) in combination with methotrexate for the treatment of moderately to severely active rheumatoid arthritis (RA) in adult patients. In May, the U.S. Food and Drug Administration (FDA) also approved Kevzara for the treatment of adult patients with moderately to severely active RA.

At the end of July 2017, the R&D pipeline contained 47 pharmaceutical new molecular entities (excluding Life Cycle Management) and vaccine candidates in clinical development of which 13 are in Phase 3 or have been submitted to the regulatory authorities for approval.

Portfolio update
Phase 3:
In June, positive results from two Phase 3b/4 ODYSSEY-DM trials in patients with diabetes were announced. In the studies, Praluent (alirocumab), when administered on top of maximally tolerated doses of statins, significantly reduced low-density lipoprotein cholesterol (LDL-C), the primary endpoint of the ODYSSEY DM-INSULIN study, and was superior to usual care in reducing non-high-density lipoprotein cholesterol (non-HDL-C), the primary endpoint of the ODYSSEY DM-DYSLIPIDEMIA study.

In June, a Phase 3 study evaluating dupilumab in persistent asthma despite the use of medium to high dose of Inhaled Corticosteroid and a LABA (Long-Acting Beta Agonist) was initiated in 6-11 years population. Another Phase 3 evaluating dupilumab in moderate-to-severe atopic dermatitis in 12-17 years population was initiated in April.
In May, a Phase 3 study evaluating SAR439684, a PD-1 inhibitor, in 1st line Non-Small Cell Lung Cancer started.

Phase 2:
In July, Sanofi and Alnylam announced new positive results from the ongoing Phase 2 open-label extension (OLE) study with fitusiran in patients with hemophilia A and B, with or without inhibitors. These results were presented at the International Society on Thrombosis and Haemostasis (ISTH) 2017 Congress. The updated clinical results of this study showed that the safety and tolerability profile of fitusiran remains encouraging, with no thromboembolic events. Based on these results, the companies initiated the Phase 3 ATLAS program for fitusiran in patients with hemophilia A and B with or without inhibitors.

In July, a Phase 2 study evaluating SAR439684, a PD-1 inhibitor, in advanced Basal Cell Carcinoma started.

Phase 1:
SAR439459 (anti-TGF-β) entered into Phase 1 in monotherapy and combination with SAR439684 (PD-1 inhibitor) in patients with advanced solid tumors.

2017 Second-quarter and first-half financial results(8)

Business Net Income(8)
In the second quarter of 2017, Sanofi generated sales of €8,663 million, an increase of 6.4% (up 5.5% at CER). First-half sales were €17,311 million, up 8.7% on a reported basis (up 7.0% at CER).

Second-quarter other revenues increased 63.6% (up 61.2% at CER) to €270 million including VaxServe sales of non-Sanofi products of €195 million (versus €89 million in the second quarter of 2016). First-half other revenues increased 67.4% to €519 million of which €368 million were generated by VaxServe (up 108.1% at CER).

Second-quarter Gross Profit increased 6.1% to €6,136 million (up 4.9% at CER). At CER and CS*, Gross Profit increased 0.3%. The gross margin ratio decreased 0.2 percentage points to 70.8% versus the second quarter of 2016. The positive impact of the growing Multiple Sclerosis business, Vaccines and China was offset by the negative U.S. Diabetes net price evolution. In the second quarter, the gross margin ratio of Pharmaceuticals was 72.6%, a decrease of 0.5 percentage points and the gross margin ratio of Vaccines improved 5.2 percentage points to 57.5%. First-half Gross Profit increased 9.5% to €12,336 million (up 7.7% at CER and up 2.8% at CER and CS*). In the first half of 2017, the gross margin ratio improved by 0.6 percentage points to 71.3% versus the first half of 2016. Sanofi
expects its gross margin ratio to be between 70% and 71% at CER in 2017.

Research and Development (R&D) expenses increased 6.2% to €1,358 million (up 5.1% at CER) in the second quarter. At CER and CS*, R&D expenses were up 3.1% reflecting mainly the increased spending on our development programs in immuno-oncology (isatixumab, PD-1) and sotagliflozin. First-half R&D expenses increased 6.1% to €2,667 million (up 4.6% at CER and up 2.6 % at CER and constant structure).

Second-quarter selling general and administrative expenses (SG&A) were up 7.1% to €2,568 million (up 6.1% at CER). At CER and CS*, SG&A expenses were down 0.9% mainly reflecting disciplined cost management. General expenses decreased 5.1% at CER and CS*, and Marketing expenses benefited from the reduction of the Diabetes sales and marketing spending in the U.S. These savings offset launch costs for Dupixent, Kevzara and Xyzal as well as commercial and marketing investments behind key Emerging countries and Vaccines. In the second-quarter, the ratio of SG&A to sales increased 0.2 percentage points to 29.6% compared to the second quarter of 2016. First-half SG&A expenses increased 9.5% to €5,046 million (up 7.7% at CER and up 0.4% at CER and CS*). In the first half of 2017, the ratio of SG&A to sales was 0.2 percentage points higher at 29.1% compared to the same period of 2016.
Second-quarter other current operating income net of expenses was €68 million versus -€23 million for the same period of 2016 and included a minor capital gain. First-half other current operating income net of expenses was €102 million versus €70 million in the first half of 2016.

The share of profits from associates was €51 million in the second quarter versus €30 million for the same period of 2016. The share of profits from associates included Sanofi’s share in Regeneron profit. In the first half, the share of profits from associates was €81 million versus €53 million for the same period of 2016.

In the second quarter, non-controlling interests were -€30 million versus -€23 million in the second quarter of 2016. First-half non-controlling interests were -€65 million versus -€50 million for the same period of 2016.

Second-quarter business operating income increased 9.8% to €2,299 million. At CER, business operating income increased 8.5%. At CER and CS*, business operating income increased 4.1%. The ratio of business operating income to net sales increased 0.8 percentage points to 26.5% versus the same period of 2016. In the second quarter, the business operating income ratio of Pharmaceuticals was 27.3%, 0.2 percentage points lower and the business operating income ratio of Vaccines increased 8.1 percentage points to 20.0%. First-half business operating income was €4,741 million, up 12.5% (or up 10.1% at CER). At CER and CS*, business operating income increased 5.8%. In the first half of 2017, the ratio of business operating income to net sales increased 0.9 percentage point to 27.4%.
Net financial expenses were €60 million in the second quarter versus €74 million in the second quarter of 2016. First-half net financial expenses were €123 million versus €191 million in the first half of 2016.

Second-quarter (and first-half) effective tax rate was 24.5% compared to 23.2% in the second quarter of 2016.
Second-quarter business net income(9) increased 1.0% to €1,696 million (down 0.5% at CER). The ratio of business net income to net sales increased 0.5 percentage points to 19.6% versus the same period of 2016 (excluding Animal Health business).

(8) See Appendix 3 for 2017 second-quarter and first-half consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.

* Adjusted for BI CHC business and termination of SPMSD and others.
First-half business net income increased 2.6% to €3,491 million, (up 0.3% at CER). The ratio of business net income to net sales increased 0.7 percentage points to 20.2% compared to the first half of 2016 (excluding Animal Health business).

In the second quarter of 2017, business earnings per share(8) (EPS) increased 3.1% to €1.35 on a reported basis and 1.5% at CER. The average number of shares outstanding was 1,258.2 million in the second quarter of 2017 versus 1,286.8 million in the second quarter of 2016.

In the first half of 2017, business earnings per share(8) was €2.77, up 4.9% on a reported basis and up 2.7% at CER. The average number of shares outstanding was 1,260.3 million in the first half of 2017 versus 1,287.6 million in the first half of 2016.

2017 Guidance
Sanofi raises full-year 2017 business EPS(8) guidance to broadly stable at CER, barring unforeseen major adverse events. The currency impact on 2017 business EPS is estimated to be approximately +1% at the average June 2017 exchange rates. As announced in the first quarter 2017 financial results, Sanofi previously expected full-year 2017 business EPS to be stable to -3% at CER, barring unforeseen major adverse events.

Reconciliation of IFRS net income reported to business net income (see Appendix 4)
In the first half of 2017, the IFRS net income was €6,738 million reflecting the acquisition of BI’s CHC business and full consolidation of Sanofi’s European vaccine operations. The main items excluded from the business net income were:

A net gain of €4,421 million resulting from the divestment of the Animal Health business.
An amortization charge of €990 million related to fair value remeasurement on intangible assets of acquired companies (primarily Aventis: €204 million, Genzyme: €458 million and BI CHC business €133 million) and to acquired intangible assets (licenses/products: €71 million). An amortization charge of €487 million related to fair value remeasurement on intangible assets of acquired companies (primarily Aventis: €100 million, Genzyme: €227 million and BI CHC business €67 million), and to acquired intangible assets (licenses/products: €34 million) was recorded in the second quarter. These items have no cash impact on the Company.

An impairment of intangible assets of €12 million (recorded in the second quarter). This item has no cash impact on the Company.

A charge of €100 million (of which €64 million in the second quarter) mainly reflecting an increase of Bayer contingent considerations linked to Lemtrada (charge of €84 million of which €63 million in the second quarter 2017).
Expenses of €176 million (of which €88 million in the second quarter) arising from the impact of the acquisition of BI CHC business and the European Vaccines business on inventories.

Restructuring costs and similar items of €364 million (of which €245 million in the second quarter) mainly related to the organizational transformation at the industrial level in Europe and North America.

A €628 million tax effect arising from the items listed above, comprising €345 million of deferred taxes generated by amortization charged against intangible assets, €126 million associated with restructuring costs and similar items, €56 million associated with the impact of acquisition on inventories and €31 million associated with fair value remeasurement of contingent consideration liabilities. The second quarter tax effect was €380 million, including €163 million of deferred taxes on amortization charged against intangible assets, €83 million associated with restructuring costs and similar items, €28 million associated with the impact of acquisition on inventories, €25 million associated with fair value remeasurement of contingent consideration liabilities (see Appendix 4).

A tax of €111 million on dividends paid to shareholders of Sanofi.
(8) See Appendix 3 for 2017 second-quarter and first-half consolidated income statement; see Appendix 10 for definitions of financial indicators, and Appendix 4 for reconciliation of IFRS net income reported to business net income.

An expense of €43 million net of tax (of which €19 million in the second quarter) related to expenses arising from the impact of acquisitions on associates and joint-ventures.

Capital Allocation
In the first half of 2017, net cash generated by operating activities was €2,299 million after capital expenditures of €688 million and an increase in working capital of €1,185 million. This net cash flow funded acquisitions and partnerships net of disposals (€246 million) and restructuring costs and similar items (€438 million). The swap between BI CHC business and Sanofi Animal Health business generated a net cash flow of €4,349 million, partially used to finance share repurchases (€1,698 million) over the period. As a consequence, net debt decreased from €8,206 million at December 31, 2016 to €7,463 million at June 30, 2017 (amount net of €10,877 million cash and cash equivalents).