2009 - ir - emerging markets
DESCRIPTION
Emerging Markets IR Seminar 2009TRANSCRIPT
1
Emerging Markets IR SeminarJuly 2, 2009
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Forward Looking Statements
This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. These statements include financial and product development projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future events, operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “plans” and similar expressions. Although sanofi-aventis’ management believes that the expectations reflected in such forward- looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of sanofi-aventis, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in research and development, future clinical data and analysis, including post marketing, decisions by regulatory authorities, such as the FDA or the EMEA, regarding whether and when to approve any drug, device or biological application that may be filed for any such product candidates as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of such products candidates, the absence of guarantee that the products candidates if approved will be commercially successful, the future approval and commercial success of therapeutic alternatives as well as those discussed or identified in the public filings with the SEC and the AMF made by sanofi-aventis, including those listed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in sanofi-aventis’ annual report on Form 20-F for the year ended December 31, 2008.Other than as required by applicable law, sanofi-aventis does not undertake any obligation to update or revise any forward-looking information or statements.
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Agenda
Emerging Markets OverviewHanspeter Spek, Executive VP, Pharmaceutical Operations
Asia Pacific OverviewOlivier Charmeil, Senior VP, Pharmaceutical Operations, Asia Pacific & Japan
Focus on ChinaThomas Kelly, Vice President, Greater China
Focus on RussiaPatrick Aghanian, General Manager, Russia
Intercontinental OverviewAntoine Ortoli, Senior VP, Pharmaceutical Operations, Intercontinental
Focus on BrazilHeraldo Marchezini, General Manager, Brazil
ConclusionChris Viehbacher, Chief Executive Officer
Q&A Session
4
Emerging Markets Overview
Hanspeter SpekExecutive VP, Pharmaceutical Operations
5
A Strong and Experienced Management Team Presenting Today
Antoine Ortoli Senior Vice President, Intercontinental
• VP – Australasia, Middle East, & Eastern Europe
• VP Latin America• GM Portugal• CFO, Pharmaceutical division• Background: Finance
Heraldo Marchezini General Manager, Brazil
• GM, Poland and Baltics• Director & Sales Manager for
Hospital and Oncology, Brazil• Background: Marketing & Sales
Patrick Aghanian General Manager, Russia
• General Director, Russia - Sandoz• GM / Country President of Pharma Division, Russia - Novartis• GM for Russia and CIS, Consumer Healthcare Division - GSK• GM Consumer Healthcare Division, Ukraine - GSK• Background: Marketing & Sales
Thomas Kelly Vice President, Greater China
• GM, China• GM, Shanghai Schering Plough• GM, Novo Nordisk Biotech, Beijing• Background: Marketing & Sales - China
Olivier Charmeil Senior Vice President, Asia-Pacific & Japan
• Sr. VP – Business Management & Support, Pharmaceutical Ops
• GM France• VP, Int’l Operations• Head of Finance, Asia Region• Background: Bus. Development
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Emerging Markets(1) Represent a Strategic Opportunity for Sustainable Growth
Attractive market dynamics Fast growing economies with strong GDP growthDemographic changes Expansion of government healthcare coverageIncreasing purchasing power of growing middle class
Complex environment Heterogeneous healthcare systemsDifferences in local regulatory environment and market accessInvestment in local infrastructureImproving IP environment
RoW43%
India18%
Turkey1%
Mexico2%
China19%
Japan2%
United States5%
Russia2%
Brazil3%
EU 55%
(1) World less North America (USA, Canada), Western Europe (France, Germany, UK, Italy, Spain, Greece, Cyprus, Malta, Belgium, Portugal, Holland, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark), Japan and Australia/New Zealand
(2) UN World population database and IMS
World population(2)
China, India, Brazil, Russia, Mexico and Turkey represent 45%
of world population, but only ~10% of world Rx drugs sales
7
Emerging Markets are a Key Growth Driver Today and… Tomorrow
Growth contribution of Emerging Markets is projected to be around 70% in 2013(1)
Emerging Markets will outgrow per-capita GDPGrowth in Emerging Markets will more than offset the diminishing U.S. growth contributionEmerging Markets are expected to reach >$500bn by 2020, up from less than $200bn in 2008(2)
Contribution to Pharma market growth (%)(1)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2008 2013e
Emerging Markets
Western Europe
North America
Japan
Australia-NZ
(1) IMS MIDAS and IMS Market Prognosis(2) Adapted from IMS, TNS Healthcare, UBS, and Internal Estimates
8
Present in over 100 countriesClose to 30,000 employeesGrowing field force of >15,000 sales representativesLocal manufacturing capabilities and clinical development units
40 production facilities4 R&D sites
Broad product portfolio in all relevant market segments adapted to local needs
Sanofi-aventis has a Well-Established Local Presence in Emerging Markets
R&D Pharma
R&D Vaccines
Production Pharma
Production Vaccines
Distribution Pharma
0 5 000 10 000 15 000 20 000 25 000 30 000
By Function
By Region
2008 Headcount Split in Emerging Markets
Latin America
Others Africa & Middle East
Asia Pacific
Eastern Europe
Production
Management & Support
R&D
Sales Force
9(1) IMS MIDAS MAT Q1 2009, sanofi-aventis including Zentiva, Medley and Kendrick(2) Eastern Europe perimeter includes Russia and Turkey
Sanofi-aventis has the Leading Position in Emerging Markets
Market Share in Emerging Markets(1)Leading company in Emerging Markets(1)
Overall market share of 6%
Commanding positions#1 in Eastern Europe(2) with a market share of 7.8%#1 in Latin America with a market share of 7.7% #1 in Africa/Middle East with a market share of 9.1%#3 in Asia with a market share of 2.9% Pf
izer
+Wye
th
Nov
artis
GSK
Mer
ck +
SP
sano
fi-av
entis
Emerging markets
6%
10
Sanofi-aventis has Consistently Delivered Double-Digit Growth in Emerging Markets
Historical Sales in Emerging Markets - Regional Breakdown (€m)
2008 sales in Emerging Markets were €6,540m, +10.2% (24% of consolidated sales)
A leadership position recently reinforced through acquisitions
> €900m of additional sales2008 Pro forma total sales in Emerging Markets of €7,456m
Top positions in many markets(4)
(1) Growth is on a comparable basis(2) Excluding Japan, Australia and New Zealand
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2005 2006 2007 2008
Net
sal
es in
€m
Eastern Europe
Latin America
Asia Pacific
Africa & MiddleEast
Others
(2)
(3)
5,037
5,8206,280 6,540
Growth(1)
#1 in Brazil#2 in Russia#3 in Greater China(5)
#1 in Mexico#3 in South Korea
#1 in Turkey#3 in South Africa#1 in Algeria #1 in Morroco
(3) Notably including Turkey and Puerto Rico(4) IMS, based on pro forma 2008
(5) Includes PRC, Taiwan and Hong Kong(6) Includes acquisitions of Zentiva, Medley and Kendrick
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23.3%
Sanofi-aventis serves Emerging Markets with a Broad and Diversified Offering
53.9%
22.1%
(1) Vaccines proportion based on worldwide presence including Sanofi Pasteur consolidated sales and 50% of Sanofi Pasteur MSD joint venture non-consolidated sales (€1,272m) in 2008
(2) Consolidated sales, which excludes sales by SPMSD in Europe
72.6%
2008 Emerging Markets Sales as a % of Total Sales
Rx Drugs Vaccines(1) OTC pro forma(3)
Generics pro forma(4)
Total Sales€23,157m
Emerging Markets Sales
€5,098m
Total Sales(2)
€2,861m
Emerging Markets Sales
€814m
Total Sales€1,311m
Emerging Markets Sales
€706m
Total Sales€1,154m
Emerging Markets Sales
€838m
Well-positioned to capture both innovation- and volume-driven growth in markets characterized by out-of-pocket spending and income disparity
(3) Including 15% of Zentiva(4) Including Medley, Kendrick and 85% of Zentiva
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Leading Brands in Emerging Markets Do Not Necessarily Match with Worldwide Top 7
Dorflex®
Lovenox®
Lantus®
Puran®
Dermacyd®
Profenid®
Novalgina®
Top 7 Brazil
39% of sales
Cardace®
Combiflam®
Lovenox®
Amaryl®
Lantus®
Avil®Allegra®
Top 7 India
39% of sales
Plavix®
Aprovel®
Eloxatin®
Essentiale®
Taxotere®
Lantus®
Depakine®
Top 7 China
67% of sales
Lovenox®
Plavix®
Taxotere®
Lantus®
Novalgin®
Aprovel®Histiacil®
Top 7 Mexico
37% of sales
Lovenox®
Plavix®
Lantus®
Taxotere®
Eloxatin®
Aprovel®Ambien®
Top 7 Worldwide
48% of sales
Essentiale®
No Spa®
Lantus®
Plavix®
Magné B6®
Lozap®
Depakine®
Top 7 Russia
50% of sales
Top 7 Products in Emerging Markets in 2008
A well-adapted product portfolio with strong local brands including OTC and mature or off-patent Rx drugs
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Affordability of Medicines is Key to Successful Market Access in Emerging Markets
Pricing strategies and product offerings adapted to each market‘s specificities and dynamics
Tiered Healthcare systemCollective versus individual healthcare spendLevel of regionalizationOut-of-pocket variability
Therapeutic areasProduct lifecyclesVolume based business models
Change of mix in overall portfolio from branded Rx to generics
Public health needsAbility and willingness-to-pay
% Pharmaceutical Spend by Payer(1)
(1) IMS – The opportunity in emerging markets, May 2009
0%10%20%30%40%50%60%70%80%90%
100%
Indi
a
Mex
ico
Braz
il
Chin
a
Russ
ia
% Public % Other private % Out of pocket
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Sanofi-aventis Broadens its Offering of Low-Cost Medicines through Acquisitions
Successful acquisitions of Zentiva, Medley and Kendrick
Regional platforms with competitive development and production capabilities
Large portfolio of affordable and quality medicines
Distribution synergies
#8 generic player globally(2) with a targeted regional approach
#1 in Central & Eastern Europe
#1 in Latin America
(1) Internal sources & company reports on a pro forma 2008 basis(2) IMS MIDAS FY 2008 IMS Health except GERS (France), Cegedim (Romania), Business Credits (Ukraine)(3) Excluding OTC sales
838
179
626
Total
Pro forma 2008 Generics Sales in Emerging Markets(1) (€m)
(3)
15
Nov
artis
GSKJ&J sa
nofi-
aven
tis
Bay
er
0,00
0,25
0,50
0,75
1,00
Strong Brands Drive Ranking as Top OTC Company in Emerging Markets
Ranked #4 OTC player in Emerging Markets
Top 5 flagship brands account for 33%
Relevance of OTC brands in Emerging Markets linked to
Growing awareness of health and well- beingHigh level of out-of-pocket healthcare expenditure
Per-capita OTC consumption in Emerging Markets still low and therefore significant upside remains
OTC Sales in Emerging Markets(1)
(1) Nicholas Hall, 2008
NONO--SPASPA®®
€bn
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Leader in Vaccines in Emerging Markets
Vaccines are important gateway products in Emerging Markets Leadership in Emerging Markets(1)
The largest vaccine portfolioWell-adapted current offering
New pipeline projects (Hexaxim™, Imojev™, Dengue, Rabies mAb)
Strong relationships with local health authorities and NGOsLocal production and distribution partnershipsDouble-digit growth to continue
#1 in Brazil, India, Mexico, Turkey and South Africa
#1 International company in Russia and China
(1) Based on reported FY2008 results and sanofi-aventis internal estimates (2) Growth is on a comparable basis
0
100
200
300
400
500
600
700
800
900
2006 2007 2008
BRIC-MRest of Emerging Markets
Vaccines Sales in Emerging Markets(2)
€814m(€m) + 11% CAGR
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Our Presentation Focuses on Three of the Fastest Growing Emerging Markets
ChinaAgeing population, expansion of wealthy middle class and a better- funded healthcare system will continue to drive market growth of medicines and vaccines
BrazilLarge self-pay market is a major opportunity given our portfolio of mature Rx brands, branded generics and OTC
RussiaGrowing average income and increasing government healthcare funding will support greater drug consumption
2008 Rank(1) 2013 Rank(1)
United States United StatesJapan JapanFrance China
Germany GermanyChina FranceItaly Spain
United Kingdom ItalySpain Brazil
Canada CanadaBrazil United Kingdom
Mexico VenezuelaTurkey TurkeyIndia India
South Korea MexicoAustralia South KoreaGreece RussiaPoland Greece
Netherlands PolandBelgium AustraliaRussia Netherlands
(1) IMS – The opportunity in emerging markets, May 2009
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Asia Pacific Overview
Olivier CharmeilSenior VP, Pharmaceutical Operations, Asia Pacific & Japan
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Huge Potential in Asia Pacific given Socioeconomic and Demographic Trends
The pharma market is estimated at €43bn(1)
Strong growth(1) in Greater China and Russia >20%
Populationm
Healthcare spending
per capita(2)
Healthcare spending
% of GDP(3)
GREATER CHINA 1,360m $350 4.5%
INDIA 1,150m $100 4.9%
INDONESIA 229m $100 2.2%
PAKISTAN 161m $50 2.0%
BANGLADESH 156m $50 3.1%
RUSSIA 143m $650 5.3%
PHILIPPINES 86m $200 3.3%
VIETNAM 86m $250 6.6%
THAILAND 63m $350 3.5%
KOREA 48m $1,500 6.5%
MALAYSIA - SGP 30m $450 4.0%
(1) IMS MAT Q1-09(2) WHO – Per capita total healthcare expenditure ($) in 2006(3) WHO – Total heathcare expenditure as % of GDP in 2006
20
Sanofi-aventis is Well Positioned to Seize Opportunities in Emerging Markets in Asia
RUSSIA
Sales Growth Rank
€380m +34% 2
INDIA
Sales Growth Rank
€195m +7% 11
SOUTH-EAST ASIA
Sales Growth Rank
€917m +8% 3
GREATER CHINA
Sales Growth Rank
€540m +27% 3
14 countries
10,300 employees
10 manufacturing plants
11 clinical research units
Source: Internal data for 2008 Sales and Growth - IMS MAT Q1-09 for Rank
21
Well-Balanced Portfolio with Rx, OTC & Gx and Core & Local Brands
CHINA
RUSSIA
INDIA
SOUTH EAST ASIA
Main ProductsMain ProductsMain Segments2008 sanofi-aventis pro forma sales split (1)
Main Segments2008 sanofi-aventis pro forma sales split (1)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rx Ethical
OTC
Generics
No Spa® Essentiale® Lozap®
Lovenox®
Lactacyd®
Lantus®Plavix®
Plavix®
Plavix®
Tritace® Amaryl®
Taxotere®Aprovel®
Flagyl®Aprovel® Lantus®
Source: Based on (Asia Pacific + Russia) Pro Forma 2008 Sales including Zentiva in Russia
Vaccines
22
Asia Pacific is Key Source of Growth and Innovation in a Complex Environment
Rapid market growth€60bn additional sales in 2008-1350% of worldwide growth (ex Japan)
Key contributor to the "next billion consumers"
Growing middle class China, India, Indonesia
Value as platform for low-cost / high quality services & products
Highly heterogeneousHC systems, income, regions
ProtectionismAggressive low-cost local competitorsImportance of non-Rx medicine
Gx, OTC / OTx, Traditional Chinese Medicine (TCM)
Constant need for flexibilityLocal talent management (development & retention)
Value of Asia Pacific Challenges
23
Fragmented & Heterogeneous Markets in Asia
Strong heterogeneity of healthcare systems(2)
Strong heterogeneity of healthcare systems(2)
Fragmentation of the market(1) Fragmentation of the market(1)
TOP 10 playersWorld: 47%Asia Pacific & Japan: 33%China: 15%
Market share of #1World: 8%Asia Pacific & Japan: 5%China: 2%
Size of a blockbusterWorld: €1bn China: €100mIndia: €25m
Self pay patient influence
Affordability
ReimbursementPayor influence
Outcome driven medication
Dispensing Profitmargin influence
China
Taiwan
ThailandSingapore
Malaysia
Indonesia
India
Philippines
Korea
Russia
Hong Kong
Source: (1) IMS / (2) internal analysis
24
Growth Contributors 2008-2013
Growth Contributors 2008-2013
50% of Worldwide Pharma Market Growth will Come from Asian Emerging Markets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008-2013
50%
Main CountriesMain Countries
Source: IMS Prognosis
China
RussiaIndiaOther Asia PacKorea 50% of incremental market sales
coming from Asian Emerging Countries
1/3 coming from China
China in 2013€50bn
#3 in 2013 (#4 in 2008)
Russia in 2013€16bn
Same size as the UK
25
Our Objective is to Maximize the “Value” Market & Participate in the Growth of the “Volume” Market
Strategic leversStrategic leversAspirationsAspirations
Top 3 in Rx, leader in diabetes
Strong leader in Vaccines
Significant player in affordable care
Significant player in self medication
Shaping force in market evolution
Affo
rdab
ility
Distance from the core
Generics
e.g., New Therapeutic Areas
Core business
1
2
3
4
OTC/OTx
Rx/VxAdjacent Pharma
26
India is a Complex Marketplace
1.41.21.11.0
1.61.5
1.31.2
2.1
1.91.6
1.3
2005 2006 2007 2008
Tier IIRest of Tier IMetropolitan
Key elementsKey elements
Access65% of population lacking access to essential medicines
“Out of pocket” market85% of health expenditures are private
PricesAmongst the lowest in the world
ProductsInnovation
Competitive landscapeLocal companies
Market evolutionMarket evolution
€3.5bn€4.0bn
€4.6bn
€5.1bn
CAGR 2005-08
+15%
+17%
+11%
+15%
Source: IMS
27
Tackling Value & Volume Strategy in India
Income growth to drive affordability, health awareness and treatment intentMarket to expand from cities to tier IIChronic disease and life style disorders will increaseGrowing medical infrastructure, insurance and Health Care investment to drive hospital based treatmentsBrands currently under price controlPricing, implementation of intellectual property rights and regulatory data protection remain issues
Sanofi-aventis in IndiaSanofi-aventis in India
Pharma. Operations
Manufacturing
Development center
Mumbai, 2,000 people€141m / 11th rank
Mumbai, Ankleshwar, 500 people
Goa, 150 people
Vaccines
CRU
Delhi, 200 people€55m / 40% MS / 1st rank
Mumbai, 20 people
Market Opportunities & Challenges
Drive growth in traditional stronghold in Tier I
Expand growth avenues in Tier II through customized model
Enter OTC segment through umbrella strategy with current classical brands / acquisition
Attain Diabetes leadership
Our strategic objectives in IndiaOur strategic objectives in India
28
3
9
22
44
51
Diabetes Epidemic is Spreading to Asia
(1) China, India, Japan, Korea and SEAs (Indonesia, Thailand, Philippines, Vietnam)Source: International diabetes Federation, WHO, Sanofi-Aventis internal information
35%
11%7%
47%
ROW
EU
US
Asia
2008 Diabetes population
274m
Asia(1) comprises 47% of diabetes patients
globally
Asia(1) comprises 47% of diabetes patients
globallyChina and India having more diabetes patients than US/EU
and growing at a rapid rate China and India having more diabetes patients than US/EU
and growing at a rapid rate
China
India
SEA
Japan
Korea
Prevalent population (m)
5.3%
6.4%
7.4%
8.8%
7.9% 7%
1%
3%
4%
5%
2003-2007 CAGR (%)
US EU AP US EU US AP6%18 32 8% 2% 5% 5%
Prevalence rate among 20+ population (%)
EU8%
29
Asian Diabetes Market Reached ~€3bn in 2008 and is Expected to Continue Growing Rapidly
0
5 000
10 000
2008
2009
2010
2011
2012
2013
2014
2015
2016
OADInsulin
Market Size(€m)
Market size and dynamicsDiabetes (OAD +Insulin)
Market size and dynamicsDiabetes (OAD +Insulin)
Sanofi-aventis Strategy
Sanofi-aventis Strategy
Increase the diabetes diagnosis rateAlign diabetes treatment rate in Asia to the western level standardMarket shaping in implementing international guidelines to improve diabetes care
Develop insulinization rate to the level of Western world (e.g. 37% in Germany, 28% in US)Develop the Basal share in line with guidelines to reach the level of 60% already achieved in KoreaDevelop the Lantus® share further differentiating the product vs. competitors
€8bn
CAGR 08-16
+14%
Source: Internal Analysis
30
Strong Vaccine Performance in Asia Pacific
Fastest growing regionHigh double teen digit growth over the last yearsContinued growth in 2008: €277m, +23%(1)
Fast growing markets: China, Malaysia, Thailand, Philippines
Strong contribution of all franchises
Pediatric vaccines: ActHiB® , Pentaxim®
Strong flu season Continued presence in Travel and other endemic: Verorab®
(1) Russia included(2) All growth on a comparable basis
Diversified vaccines portfolio (%)
Diversified vaccines portfolio (%)
Other3%Pneumo
6%
Travel & Other
Endemic21%
Influenza18%
Polio/Pertussis/Hib
52%
2008 Sales % by Franchise
31
Sustained Growth Opportunities for Vaccines in Asia Pacific
Asia Pacific is expected to outpace any other vaccine market
Large and growing populations
Growing disposable income and emergence of a middle class
Epidemiology
Increasing funding
Expansion of vaccination programs
Sanofi pasteur reinforced leadershipStrong local presence and broad vaccines offering
Leveraging pharmaceutical presence to further boost vaccines growth
(1) Based on Internal analysis and forecasted consolidated internal sales
A fast growing vaccine market(1)A fast growing vaccine market(1)
2009 2013China India Korea Russia Others
€2.0 bn
€3.8 bn
CAGR: 15%
32
Sanofi-aventis is Poised for Growth in Asia Pacific and Russia
1
2
3
4
5
Significant opportunities exist in the region, but Asia is not a “one size fits all” market
Flexible business model to seize growth opportunities (Volume/Value) country by country
Build capabilities (development/LCM, manufacturing) Buy critical mass: external growth/business development
Leverage market access through partnerships and integrated approach
Create long-term value with OTC
33
Focus on China
Thomas Kelly Vice President, Greater China
34
Greater China: Complementary Market Dynamics
Shanghai HQ
Hong Kong
Taipei
Beijing
Mainland China
Area size: 9.6m km2
Population: 1,340m Age above 65: 8%GDP (PPP): €2,941 Bn GDP growth: +9.8%GDP per capita (PPP): $6,000HC spend per capita: $118
Hangzhou
Taiwan
Hong Kong
Source: CIA World Factbook; GDP from official statistics in China, Taiwan and Hong Kong in local currencies, converted to Euro by 2008 average currency exchange rate
Area size: 0.4 m km2
Population: 23m Age above 65: 11%GDP (PPP): $739bn GDP growth: +1.9%GDP per capita (PPP): $31,900HC spend per capita: $1,082
Area size: 0.001m km2
Population: 7m Age above 65: 13%GDP (PPP): $308bn GDP growth: +2.8%GDP per capita (PPP): $43,800HC spend per capita: $1,777
Political harmonization• Improving cross-strait tension,
e.g. direct charter flightsEconomic harmonization
• Talent exchanges• Increasing trade
Healthcare exchanges• Clinical trial capability sharing• TW/HK private hospital entry• KOL development
Complementary markets• Mainland China market is
less developed while TW/HK markets are more mature
• Knowledge shared across markets to improve operations
Shenzhen
35
China Healthcare Funding
18%
33%
49%
Government funding Social fundingOut-of-pocket
Healthcare spending by funding source(1)Healthcare spending~50% is out-of-pocket
~50% is spent on pharmaceuticals
~80% pharmaceutical spend in hospital channel
Government is increasing funding on healthcare
~€96bn from 2009 to 2011
~€27bn surplus in UBMI(3)
~€0.3bn on EPI(4) in 2008
Hospitals heavily rely on profit from drug sales to cross-subsidy its loss in medical services
(1) China Healthcare Statistic Yearbook(2) IMS estimation based research
39%
39%
22%
Hospital In-patient Hospital Out-patientRetail Pharmacies
Pharmaceutical spending by channel(2)
(3) UBMI = Urban Resident Medical Insurance(4) EPI = Expanded Program on Immunization
36
Significantly Improved Funding for Insurance Coverage and Infrastructure Building
26%
70%90% 100%
0%
20%
40%
60%
80%
100%
2003 2007 2011 2020
Medical insurance population coverage(1)
Healthcare reform Establish universal access to basic healthcare services. €96bn over 3 years
Increased public insurance coverage
2/3 of total funding will be on "demand" side by increasing insurance coverageAims to cover most of population by 2011 and 100% by 2020Focus on improving the coverage for rural population and urban unemployedAlready €27bn surplus in UBMI fund
Large-scale infrastructure building (new facilities, major upgrades, hardware purchase and professional trainings)
(1) MOHRSS; Press Research(2) MoH, converted from RMB by 8.81; UBMI is for urban employed population; URMI is for urban unemployed population; RCMI is for rural population;
Healthcare Insurance
UEBMI(for urban employed)
URBMI(for urban unemployed)
RCMI(for rural population)
PHIprivate health insurance
Provider System
Urban Hospital(Class-II / -III hospitals)
Urban CHC(Community Healthcare)
Rural 3-tieredhospital system
Private Hospitals
Drug provision
RDL(Reimbursement list)
NEDL
(National Essential Drug Formulary
and Tendering System)
Focus of reform
37
Regulatory Environment in China
Intellectual Property RightsChina revised its patent law in 1992 and made adjustments in 1997 and 2000 to be compliant with TRIPS(1)
However, enforcement remains an ongoing challenge
New Pharmaceutical Administration Law falls short of addressing MNC's concern for IPR
Drug RegistrationDrug registration process is highly complicated and time consuming
Product registration and clinical trials not done in parallel
Usually takes more than 3-4 years for imported drugs
Timeline often unpredictable
Pricing
For drugs on reimbursement list, retail price ceiling is regulated by central government based on industry average cost structure
Innovative drugs and originator LOE(2) can enjoy 30-35% price premium officially. In practice, premium can be much higher.
Reimbursement
Basis for most medical insurances
Both national and provincial list
Provincial list can differ by 15%
Reimbursement % and applicable indications differ below province level
To be reconciled with forthcoming National Essential Drug List (NEDL)
(1) TRIPS = The Agreement on Trade-Related Aspects of Intellectual Property Rights(2) LOE = Loss of Exclusivity
38
2 2 3 3 3 4 54 6
79 10
13
16
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008
LocalMNC
Pharmaceutical Market in China
China pharmaceutical market(3)
China is already the world's#7 Rx market(1)
#3 OTC market(2)
#3 Vaccine market(1)
China pharmaceutical market is growing at 22% in the past 6 years, well above world average
To be #3 by 2013(4)
Fragmented market with over 3,000 companies
MNCs account for ~25% of market value in 2008Further consolidation expected
(1) IMS World Review(2) Nicholas Hall(3) IMS China Hospital Audit(4) IMS – The opportunity in emerging markets, May 2009
+22%
€bn
2 3 3 4 4 5 61 1 1 2 22
3
1 11 2 2
23
11
11 1
2
2
23
34
5
6
8
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008
Other therapeutic areasAnti-neoplast & Immuno-modulateCardiovascularAlimentary & MetabolismSystemic Anti-Infectives
€bn
Breakdown by manufacturer
Breakdown by therapeutic area
€24bn
39
Sanofi-aventis: Long-term Commitment in China
'82
China's first office by pharma MNC
'89
Sanofi's first JV in Animal Health
'95
China's first holding investment company in Beijing
Pharma JVs in Hangzhou and Beijing
Vaccine JV in Shenzhen
Clinical Research Unit (CRU) established
CRU expanded to integrated R&D org.
'96'94 '05 '08 '09
Expansion of investments
Lantus Beijing Plant
Vaccines Shenzhen Plant
New Hangzhou Plant
A consistently growing local presence in the largest Emerging Market
40
Sanofi-aventis is an Undisputed Leader in China
# Manufacturer Market Share
CAGR Growth '05-08
1. Bayer 1.9% 33%
2. AstraZeneca 1.9% 29%
3. Pfizer 1.9% 24%
4. sanofi-aventis 1.6% 42%
5. Yangzijiang 1.6% 8%
6. Roche 1.4% 19%
7. Hengrui 1.4% 27%
8. Qilu 1.3% 30%
9. Novartis 1.3% 14%
10. Harbin 1.2% 21%
11. Kelun 1.1% 48%
12. GSK 1.0% 17%
13. MSD 1.0% 22%
14. Asia Pioneer 0.9% 19%
15. Novo Nordisk 0.9% 31%
16. Ruiyang 0.9% 30%
17. Genertec 0.8% 34%
18. Luoxin 0.8% 53%
19. Lizhu 0.8% 3%
20. Shuanghe 0.8% 18%(1) IMS CHPA data; Converted from RMB by 8.81(2) CIDB (Competitive Intelligence Database 2008); Perimeter: private market
Sanofi-aventis sales in Greater China reached €540m, up +27%Ranked #3 in Greater China#4 in China with higher growth than market and top 10 MNCs#1 MNC in vaccines(2)
25% 27%31%
23%
49%
29%
0%
10%
20%
30%
40%
50%
60%
'06-'07 '07-'08
Market Top 10 MNC sanofi-aventis
IMS Sales Growth Rates in China (1)
Multinational Local
IMS Ranking in China (1)
41
Sanofi-aventis China has the Right Portfolio to Address the Needs of Local Disease Profile
200m prevalent populationHeart diseases: 3rd largest cause of death(2)
ARB class growing at ~50%#1 by volume in ARB(1)
Hypertension
(1) 1. Based on IMS CHPA MAT 2008; Aprovel family(2) Chinese Ministry of Health; rates per 100 000
Diabetes~50m prevalent populationEndocrine and metabolic diseases are the 5th leading cause of death(2)
Insulin segment growing at ~35%Fastest growing in diabetes (80%GR MAT Q408)
Increasing fatty liver prevalence as "wealthy disease“- impacting 10% of populationLiver-care is top-of-mind
#1 MNC productDominant in PCI3.5m ACS/stroke population by 2013 (cerebro-vascular diseases: 2nd largest cause of death(2))
Cancer has become the 1st
cause of death(2)
Growing at ~30%, one of the fastest growing TAs in China
Anti-platelet
OncologyLiver care
42
Sanofi pasteur is Building a Strong Position in China
Strong 2008 performance with sales of €77m, up 25.8%(1)
Diversified and balanced portfolio27% of vaccine sales in Asia Pacific#1 MNC with market share of 10%
Leadership position in flu Market share of 23%(2)
Local production platform in construction
Leading multinational company with Hib pediatric vaccine
Market share of 28%(2)
Expanded vaccine EPI program and emphasis on public disease prevention to drive future growth
Travel & Other
Endemic24%
Polio/Pertussis/Hib
32%
Influenza28%
Menigitis1%Pneumo
15%
(1) Internal All growth a comparable basis(2) 2008 sales based on reported FY2008 & internal
2008 Sales % by Franchise
Diversified vaccines portfolio (%)
Diversified vaccines portfolio (%)
43
Sanofi-aventis China has the Right Vaccine Portfolio to Address Major Infectious Diseases
#1 vaccine from a multi-national Leading cause of death among infectious diseases in ChinaChina is the #1 Rabies vaccine market (in value) in the worldIncreasing dog population
Rabies
Influenza#1 Flu vaccineFlu vaccine market significantly under- penetrated with ~2% coverage rateLocal industrial investment will put sanofi pasteur at the forefront of big scale pre- pandemic vaccine production
#1 injectable Polio vaccine registeredPolio global eradication calls for the introduction of the Inactivated Polio Vaccine (IPV)Safe profile of Inactivated Polio Vaccine attracts parentsConversion from OPV (Oral) to IPV is the future trend
博尔维 ®博尔维 ®
Pentaxim®: pediatric pentavalent combination vaccine by 2011Actacel® pediatric tetravalent combination vaccine by 2013VRVg: purified Rabies vaccines by 2014Intanza®:1st Flu intra-dermic vaccine by 2014
Upcoming launches
Pediatric diseases
44
A Regionalization Strategy to Address Local Variances within China
Why?China land area = 9.6m km²Total 31 provinces, including 4 municipalities and 5 ethnic autonomous zonesHuge disparity across regionsDecentralization – close to the customers
How?10 regions created with regional HQ officeRegional support functions
HR, Marketing/medical, Market access, Training
Key achievementsImproved empowerment and accountability to address regional differences
Improved local execution and KOL engagementHealthy competition among areasSales force field increased from 900 in 2004 to 2,100 in 2008Covering 4,250 hospitals in over 120 cities(1)
(1) Field Force based Cities
Xinjiang UygurXinjiang Uygur
HB
NMG
HLJ
SHD
West1
West2
South1
East2
East1
North2
BJ
North1
GZ
HZ
TJ
WHNJ
XJ
CD
SY
SH
South2
45
An Integrated R&D Strategy in China
Expand R&D facility in Shanghai
Establish Biometrics Center
in Beijing
Strategic partner for top academic institutions and
biotech companies
This R&D expansion will allow rapid growth of clinical programs and aim to encompass all activities from drug target identification to late stage clinical trial
Established in June 2005
Execute clinical trials
Participate in many global registration studies
Aims to support global and local trials in both pharmaceuticals and vaccines development
Devote to study design, data management and statistical analysis of global and local phase I-IV clinical trials
Multiple collaborations signed
Strategic partnership with the Shanghai Institutes for Biological Sciences aiming to discover breakthrough drugs for neurological diseases, diabetes, and cancer
Part of the Discovery platform set up in China by sanofi-aventis to establish productive and long-term relationships with top Chinese academic institutions
46
New Industrial Investment to Better Meet the Growing Demand of the Chinese Market
Decision to manufacture Lantus® Solostar® in China€61m investment48m units capacity for Lantus® Solostar® in China
Relocation and expansion in Hangzhou€31m investmentRelocating from downtown to the new development zone
World-Class manufacturing base to produce vaccines in Shenzhen
€90m (1st international investment for vaccine production in China)
25m doses capacity and pandemic readiness
47
Six Key Strategic Objectives for China
1
2
3
4
5
Hypertension Leadership
Plavix® ACS/Stroke Leadership
Diabetes Integrated Solutions
Enter OTC / Consumer HC market
Enter Essential Drug Tendering
Turbo-charge Vaccine Business (Flu, IPV and Rabies)6
48
Conclusion
(1) IMS Prognosis reinstated forecast, March 2009(2) Nicholas Hall(3) Including potential Essentiale switch to OTC, organic OTC portfolio and Symbion consumer health products
China pharmaceutical market will continue its fast growthHealthcare reform creates new opportunitiesSanofi-aventis is well-positioned to capture the opportunities
Well-suited portfolio to address large population with chronic diseases
Investing ahead of the curve to reach patients in lower tier cities
Unique assets(3) to be leveraged for entry into OTC
Exploring options of entry into the emerging NEDL tendering segment
Comprehensive vaccine portfolio to serve both the public and private sectors and both the adult and pediatric segments
49
Focus on Russia
Patrick AghanianGeneral Manager
50
Sanofi-aventis has been Present in Russia for Almost 40 Years
(1) Sanofi-Aventis Group in Russia is represented by Sanofi-Aventis, Sanofi Pasteur and Zentiva(2) Sanofi-Aventis Group(3) RMBC/IMS, 2008
A Pharmaceutical market of €7.5bn(3)
Moscow
St. Petersburg
Volgograd
Yekaterinburg
Novosibirsk Vladivostok
Present in Russia since 1970
Over 1,350 employees(1)
2 offices in Moscow
31 sourcing plants
2008 sales of €380m, up +34.4%
Rank #2 in the market(3)
45 clinical trials ongoing in 500 clinical centers, with more than 7,000 patients
5151
2.31.20.6
2.5
1.30.7
1.1
0.7
0.3
0.80.8
0.9
2001 2005 2008
Russian Pharma Market Growth has been One of the Fastest in the World and Among the Top 7 EM(1)
Russian pharma market structure and dynamic(3)
€bn
(1) Top 7 EM= 7 pharma emerging markets: Brazil, Russia, India, China, Mexico, South Korea, Turkey (2) Switch from old low expensive drugs to more innovative and high price drugs (UBS “Q-Series®: World Pharma Model, v.1.0”, April 2009)(3) RMBC/IMS at comparable rate, CAGR 2001-008(4) The ONLS program covers 5 millions people classified as “invalids” out of a total eligible population of @15 millions(5) 7 diseases program cover 60,000 patients in 7 nosologies. These are: myeloleucosis, multiple sclerosis mucoviscidosis, Gaucher's disease, hemophilia, oncohematology, hypophysical
nanism, organ and tissue transplantation
GDP/cap. (PPP, $)(1)
Switch effect(2)
Price inflation(1)
CAGR 2000-2008
+9.9%
+26.5%
+23.3%
Retail OTC
7N(5)
Retail Rx
Hospital
ONLS(4)
7.5
4.2
1.6
CAGR: +21.3%
5252
Russian Health Care System: A Hybrid of Free and Reimbursed Systems
Prescription
Retail (RX & OTC) HospitalONLS(1) 7 Diseases(2)
Dispensation
Pricing
Funding
Pharmacies
Free(5)
Out of pocket
64%
Hospitals
EDL(4)
Tenders/Auctions
15%
Pharmacies
Auctions
Federal 100%
10%
Pharmacies
Auctions
Federal 100%
Share (value)(3)
Doctors/Patients DoctorsDoctors Doctors
11%
(1) The ONLS program covers 5 millions people classified as “invalids” out of a total eligible population of @15 millions(2) 7N program cover 60,000 patients in 7 nosologies. These are: myeloleucosis, multiple sclerosis mucoviscidosis, Gaucher's disease, hemophilia, oncohematology, hypophysical
nanism, organ and tissue transplantation(3) RMBC/IMS, 2008(4) EDL (Essential Drug List) – registered prices – could differ from prices in ONLS(5) Except for products on EDL list
Volume Market Specialty Market
5353
The Best Performing Companies have Adapted to the Hybrid Market Structure
Note: Size of the bubble is proportional to the total sales in 2008Source: RMBC/IMS
Top players adopted different strategic focus
% of total sales in State funded channels
Market characteristics Key success factors
• High importance of hospital and reimbursed sales
• Extremely limited for access (e.g. 7N)
• Primary prescription by hospital specialists with retail continuation
• Demand is less elastic to pricing
• Reimbursed channel access and capabilities
• Hospital and specialist coverage and frequency
• Tender/auctions management
• Generic defense
• High proportion of branded generics
• Competition within and across the classes
• Out-of-pocket purchases, affordable pricing
• GP prescribes
• High GP coverage and frequency
• Competitive pricing• Medical and patient
support programs• Develop
blockbusters• Life cycle
management• In pharmacy
superiority• Superior consumer
insight
Rx
OTC
Specialty market
% of total sales in Out-of-pocket channel
NYCOMED
BERLIN-CHEMIE
TEVA
ROCHE
PHARMSTANDART
SERVIERGROUP
BAYERSCHERING
J-C + J&J
Sanofi-Aventis Group
NOVARTIS GROUP
Mainly state funded
Mainly out-of-pocket
Sales balanced between state funded and out-of-pocket channels
Volume market
Optimum balance
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50 60 70 80 90 100
5454
Sanofi-aventis Russia is a Leading Company with Strong Footprints in 4 out of 5 Market Segments…
Market segments rankings - 2008
Source: RMBC/IMS
Servier- Egis PharmStandart Sanofi-aventis
Group Roche Jans.-Cilag + J&J Novartis Group
Gedeon- Richter Novartis Group Novartis
GroupNovo
NordiskNovartis Group
Sanofi-aventis Group
Sanofi-aventis Group
Sanofi-aventis Group AstraZeneca Jans.-Cilag
+ J&J Octapharma Jans.-Cilag + J&J
Novartis Group Berlin-Chemie Roche Sanofi-aventis
Group Roche Bayer
Bayer Bayer Nycomed Novartis Group Bayer Servier-Egis
33% 31% 14% 11% 11% 100%
31% 39% 17% 13% - 100%
Retail Rx Retail OTC Hospital ONLS 7 Nosologies Total
% sales Market
% sales SA Group
4.8 % 6.7 % 6.1 % 6.5 % - 5.2 %MS SA Group
Ranking 2008
1
2
3
4
5
55
…and, besides Plavix®, a Well-Established and Broad Portfolio with Famous and Iconic Brands
NO-SPA®
• Launched in 1963, No-Spa® is now a legendary people’s brand, with close to 100% awareness
• Market leader with high and stable loyalty above 70%
• In 2008 No-Spa won the Effie award “best marketing project for pharmaceutical brand”
ESSENTIALE®
• Registered in 1976, Essentiale® is a legendary people’s brand
• Market leader in OTC hepato-protectors, promoted on TV
• Last year sales grew by +70%
LOZAP®
• Launched in 2005, Lozap® (Losartan) is the leading ARB in the market
• 7 out of 10 ARB patients are treated with Lozap®
LANTUS®• The only 24-hours insulin approved exclusively for use once a
day
• Lantus is leader in its market with 39% MS in value
Source: Sanofi-Aventis Group, Comcon, RMBC/IMS
5656
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50 60 70 80 90 100
Local production/partnering to leverage Diabetes & Oncology franchise and secure market access(Lantus®, Taxotere®, Eloxatin®)
Our Aspiration is to Become a Top Performing Company by Pursuing a Diversified Strategy
Sanofi-aventis strategy Different Strategic Focus of Top Players
1
3
2
4
Note: Size of the bubble is proportional to the total sales in 2008
(1) Reimbursement = Hospital + ONLS + 7 Nosologies channels(2) Anti-coagulants, anti-thrombosis, epilepsy(3) In Cardiovascular, wild asthma, gastro-intestinal, female care and antibioticsSource: RMBC/IMS
Expand and strengthen offering in high priced specialty areas(2)
(Plavix®, Lovenox/Clexane®, Depakine®)
Become the #2 prescription generic player by expanding Zentiva’s strong foundations in mass market(3)
(Lozap®, Trovacard®, Coronal®)
Become #1 international OTC company by developing blockbusters and launching VMS(Essentiale®, No-Spa®, Pinosol®)
Specialty market
% of total sales in State funded channels
% of total sales in Out-of-pocket channel
NYCOMED
TEVA
ROCHE
PHARMSTANDART
SERVIERGROUP
BAYERSCHERING
J-C + J&J
NOVARTIS GROUP
Volume market
Optimum balance
SA 2013
Sanofi- Aventis
57
57
Sanofi-aventis is Poised to Address 35% of Disease Burden in Russia
Although currently not addressed, it is inevitable that the government will implement programs to combat cardiovascular diseases
Ranking of most harmful diseases in Russia Ranking of same diseases in Western Europe
0 5 10 15 20 25 30 35 40
Hypertensive heart disease 2
...
Trachea, bronchus,lung cancers 4
Osteoarthritis 5
Cirrhosis of the liver 5
Tuberculosis 5
Unipolar depressivedisorders 11
Cerebrovasculardisease 27
Ischaemic heart disease 38
DALY (Years per thousand inhabitants)0 5 10 15 20
DALY (Years per thousand inhabitants)
2
4
3
3
0
13
7
11
...
Heart disease 3 times more harmful in Russia than in Western Europe
(1) Launch of Multaq in 2011Note: Burden of disease is assessed using the disability-adjusted life year (DALY), a time-based measure that combines years of life lost due to premature mortality and years of lifelost due to time lived in states of less than full health Source: WHO 2004, McKinsey&Company analysis
Sanofi-aventis products offer
Plavix®, Lovenox®, Multaq®(1), Zentiva
Plavix®, Zentiva
Zentiva Hypertensive heart disease
Trachea, bronchus,lung cancers
Osteoarthritis
Cirrhosis of the liver
Tuberculosis
Unipolar depressivedisorders
Cerebrovasculardisease
Ischaemic heart disease
% of disease burden in
Russia
20%
14%
6%
2%
2%
2%
2%
1%
58
58
Zentiva is Outperforming the Generics Market in Russia
Good basis to develop in mass market with significant investment
Zentiva has many strengths in its current prescription portfolio
Zentiva generic prescription sales in Russia
• Strength in cardiovascular, most important prescription market in Russia
• Strong presence in ARBs (#1), statins (# 5), beta-blockers (# 5)
• Cardiovascular is largest segment of prescription market (16% in 2008) with opportunity to increase share further
• Opportunities to create secondary pillars of growth in other areas
• Growth opportunities in Female care, Asthma & Allergy, Urology
• Sales of un-promoted products in Gastroenterology, antibiotics and Central Nervous System could be boosted by SA investments
• Zentiva's fast registration capabilities could be leveraged to bring more products to Russia
14
2629
35
0
5
10
15
20
25
30
35
40
45
50
2008200720062005
CAGR 05-08
Market 19%
Zentiva 35%Rx products only
Source: RMBC/IMS
€m
5959
OTC Market is Highly Attractive and Represents a Big Opportunity for sanofi-aventis Group
Source: RMBC/IMS* Excludes Zentiva OTC portfolio
OTC market structure 2008,%
Sanofi-aventis sales structure 2008,%
• Strong and continuous growth supported by pharma & medical sales force and media investments
• Growing health awareness• Self-medication fuelled by growing
disposable income• Pharmacy competition with Rx products
Sanofi-aventis has the opportunity to become the #2 in OTC market (#1 international company) by developing different strategic axes:
- Competitive media investments- Launch of “sleeping beauties”- Life cycle management
OTC market is growing fast representing >1/3 of total pharma market and almost half of retail sales
Sanofi-aventis is is well placed to capture OTC market opportunities
+25%
13E
+18%5.2
12E
4.6
11E
4.0
10E
3.4
09E
2.9
08
2.3
07
1.8
06
1.4
2005
1.2
- In-store excellence - Superior consumer insight- Launch of VMS (Vitamins & Mineral Supplements)
Retail OTC market,€m
Rx
OTC
Retailonly
48%
Totalmarket
52%
32%
68%
Berlin-Ch 4.5
Sandoz 4.7
Sanofi-Aventis* 5.0
Novartis 5.0
Pharmstd 10.1
Top players in Retail OTC 2008,%
2013
Rx
OTC
Retailonly
Allchannels
44%
56%
59%
41%
6060
Sanofi-aventis to Become a Top Player in the Large and Fast Growing VMS Market
Nutraceuticals portfolio will allow sanofi-aventis to catch VMS growth opportunity
The Russian VMS market(1) is large and growing faster than total market
In 2008, the VMS market account for 25% of the Russian OTC market and 9% of the total market
706494414343
200720062005 2008
+27%
VMS market*€m
Total Russian pharma market growth 2005-2008 = 22%
(1) VMS market consists of OTC vitamins and minerals products (EUR 229m 2008) and food supplements (EUR 476m 2008)Source: RMBC/IMS
Sanofi-Aventis aims to significantly improve rankings in the VMS market
Sanofi-Aventis aspiration to be #6 VMS player in 2013
2013E2008
4.42.8
12 6Sanofi-Aventis position
Sanofi-Aventis market share, %
61
Growing Vaccines Presence in Russia
Robust 2008 performance:Sales of €30m, +93%(1)
20% market share(2)
Strong contribution of Influenza vaccines, +30% vs 2007(1)
Leadership position in IPVPartnership with the Chumakov Institute for Russia National “Project Health”4.7m doses sold in 2008
Opportunities for expansion Russian Federal MarketCIS countries
(1) Growth is on a comparable basis(2) Based on reported FY2008 results and sanofi-aventis internal estimates
Estimated Vaccines Market Shares (2)
8%
68%2%2%
20%
Sanofi Pasteur GSKMerck NovartisOther
62
62
2003 2008 2013
Sanofi-aventis is Well Positioned to Leverage Specific “Sweet Spots” of Disproportionate Growth
Russian pharma market forecast (€bn)
Retail OTC
7N
Retail Rx
Hospital
ONLS
€15.6bn
€7.5bn
€ 2.3bn
Market structure
“Sweet spots”SA Group strengths
Strong OTC portfolio with current and future blockbusters
High potential with an ability to play in mass market with generics
Leading position with strong oncology and specialty products portfolio
Top Diabetes company with Insulins and OAD portfolio
(1) McKinsey&Company “Drugs, Oil, and Steel – The rise of Russian pharmaceutical market”, December 2008Source: RMBC/IMS, SA Russia analysis
1
2
3
4
Specific areas of the market will represent large growth opportunities: Oncology, Diabetes, Cardiovascular, branded generics(1)
Local production/partnering to leverage Diabetes & Oncology franchise and secure market access1
3
2
4
Expand and strengthen offering in high priced specialty areas
Become the #2 prescription generic player by expanding Zentiva’s strong foundations in mass market
Become #1 international OTC company by developing blockbusters and launching VMS
Sanofi-aventis strategic initiatives
63
Intercontinental Overview
Antoine OrtoliSenior VP, Pharmaceutical Operations, Intercontinental
64
Intercontinental Region: 90 Countries with a Commercial Presence in Almost All Markets
Affiliates S.A.G. Representative Offices Others (agents, distributors…)
€3.0bn sales in 2008 25 subsidiaries and 11 representative offices with 11,600 employees
12 manufacturing plants – 6 clinical research units
Latin America13 affiliates –7,000 employees 2008 Sales: €1,739m, +6.6%
Africa10 affiliates –3,000 employees 2008 Sales: €725m, +16.8%
Middle East-Central Asia2 affiliates –1,600 employees
2008 Sales: €556m, +8.3%
65
0
100
200
300
400
500
600
700
800
900
KSA Brazil Mexico Argentina RSA Venezuela Iran Egypt
A Vast Region with Solid Economic Dynamics and a High Potential
28% of world population, young & fast growing(3)
27.7%
2008
34.7%
2050
Strong GDP growth(1)
Intercontinental ROW
Many ITC economies are driven by oil reserves(2) High growth of healthcare expenditures per capita($)(4)
Oil ReservesOil Production
50.0%
10.7% GDP growth CAGR (06-08)
LatAm
Africa
+7.5%
G8
+8.1%
+4.3%
(1) The World Bank 2007 2008; and FMI(2) Energy Information Administration, 2008(3) Perspective Crédit Agricole March 09(4) Economist Intelligence Unit 2008
1.8bn 3.2bn
ME +8.6%
200620072008
+12.5%+21.5%
+5.0% +17.5%
+5.8%
+15.3% +16.8%
US 2008: $7,558
EU 2008: $4,33354.4% 76.8%
2008
+20.2%
66
0
100
200
300
400
500
1995 2000 2005 2010
Pharma Market Growth, Booming since 1995, is Strongly Correlated with an Accelerating GDP Growth
0
100
200
300
400
500
1995 2000 2005 2010
Pharma market Nominal GDPIndex (100 = 1995)(1) Includes Egypt, Nigeria and South Africa (2) Includes Saudi Arabia, Israel and IranNote: Pharma market = Market demand for Drugs and MedicinesSources: EIU; BCG analysis
0
100
200
300
400
500
1995 2000 2005 20102008 2008 2008
Argentinacrisis
Iraq war
Latin America Africa(1) Middle East(2)
Pharma market x 3GDP x 2.5
Pharma market x 4.5GDP x 3.0
Pharma market x 3.5GDP x 2.5
67
Sanofi-aventis is the Leader of the ITC Market Growing Twice as Fast as the World Market in the last 3 Years
(1) IMS March 09 in MAT(2) IMS Prognosis 2009
ITC Countries SA Ranking (1) SA Retail MSin % (1)
Market Size 08in €bn (2)
Market Growth CAGR 06-08 in %(2)
Latin America #1 7.7% €35.2 +12.4%
Brazil #1 11.9% €14.7 +10.2%
Mexico #1 7.6% €8 .7 +7.2%
Venezuela #3 5.5% €3.8 +35.9%
Africa #1 10.8% €7.8 +10.9%
Algeria #1 17.5% €1.4 +1.8%
Morocco #1 10.5% €0.8 +12.6%
South Africa #3 7.7% €1.7 +14.7%
Middle East #5 5.1% €5.7 +9.1%
Intercontinental #1 6.6% €48.8 +11.7%
World Market - - €565.6 +5.6%
68
A Wide and Well Balanced Product Portfolio Top 7 represent 34% of sales –– 85% of portfolio actively promoted
Regional Strategic
Profenid®
Core Products
Generic
Other Base Business
OTC
19%
22%
16%
7%
% of ITC sales
36%
CAGR 06-08 (sales)
8%
15%
20%
69
Numerous and varied launches (>350 in 07/08) to sustain growth
Development of local OTC brands in key markets
Average growth rate > 20% over the last 3 years
Good sales resistance to generification threat (<15% of sales still protected):
Strong Core Products Performance
Successful launches in OTC & Base Business
Public Market Penetration Adapted Marketing mix
4 Key Strategic Pillars Leading to Double-Digit Organic Growth Over the Last 3 Years
Point of sales focus (>20% of field force dedicated to POS in 2008)
Investigation of alternative channels
Active calls to physicians
DTC
CAGR (06-08)
Total OTC +15%
Lactacyd® +43%
Profenid® +20%
Maalox® +10%
CAGR (06-08) Exposed Protected
Aprovel® +21% +32%
Lantus® +35% +41%
Taxotere® +13% +8%
Clexane® +11% +30%
Focus on this dynamic segment (25% of total market & growing of +13% in 2008)
Sanofi-aventis performance (20% of sales & growing of +24% in 2008): Dedicated team, competitive prices and high quality
70
In the Short to Medium Term, we will Focus on 4 Strategic Axes to Strengthen our Leadership
ObjectivesObjectives
#1 in Rx, leader in diabetes
Category leader in OTC
Strong player in affordable care
Leader in generics
Strategic leversStrategic levers
1. Maximize the Rx CoreAttack sustainable business opportunities in existing & new TAs
2. Win in GenericsAchieve local leadership positions in target markets
3. Strengthen OTCRapidly expand presence in OTC segments
4. Serve the 'Next Billion'New business models to reach low-income segments
Affo
rdab
ility
Distance from the core
Generics
New RxMax Core1
23
4
OTC
OTx
Acquisitions &
In-licensing agreements
71
The “Next Billion Consumer” represents an Important Growth Opportunity for sanofi-aventis
Up to $1,000
$1,000-$2,000
Over $3,000 21%(390m)
30%(550m)
37%(690m)
Percent of population by household income bracket (US$/year)
Percent of population by household income bracket (US$/year)
Upper and middle classes
Emerging middle class ("Next billion consumers")
Very low income segments
“Next Billion”
$2,000-$3,000 13%(240m)
Note: use of WRI available countries (27) to calculate NBC segments through extrapolations in different zones and overall ITC Sources: World Resource Institute; EIU; UN human development report; BCG analysis
% of Health expenditure % of Health expenditure
58%
22%
17%
3%
Strong segment potential: 43% of income / 39% of healthcare expenditureUntapped customer segment, traditionally not served by multinationalsOpportunity to build-up a new & innovative business modelSanofi-aventis key assets:
Adapted products portfolio (~ 40% of WHO Essential Medicines list)Capitalization on Medley & Kendrick experiences of this segmentStrong local manufacturing capabilities (12 plants) On-going pilot programs (Brazil, Mexico and Egypt)
72
External Growth will Help Boost our Sales Targeting Generics/OTC Acquisitions and In-licensing Deals
Sanofi-aventis is in well positioned to take advantage of the momentum
Market growth is driven by generics and will further uptakeOTC segment is attractive both in term of sales (US$8bn(1)) and profitability Both Generics and OTC are fragmented segments dominated by local playersEconomic crisis is affecting potential target financials and equity value
Attractive acquisition opportunities in Generics and OTC
Overall market leader in ITC region with top positions in Brazil, Mexico and Africa
Generic and OTC synergizing with existing business platform
A first line partner with strong marketing, sales and regulatory capabilities in the region
Achievement of recent successful acquisitions in Latin America
(1) Nicolas Hall estimate (2007)
Several mid-size Pharma companies (mainly European and Japanese based) willing to penetrate emerging markets through partnerships/alliancesBiotech companies with products in late-stage development looking for partnerships in emerging countries
Attractive in-licensing opportunities in Rx
73
Three Recent Strategic Deals Illustrate Willingness and Ability to Activate the External Growth Lever
2008 sales: ~€153m
#1 generic company in Brazil
Portfolio of 127 generic products
2008 sales: ~€26m
#3 generic company in Mexico
Portfolio of > 50 active ingredients
2008 sales: ~€10m
Top position in OTC segment in Argentina
18 established OTC brands
Reinforce our positions in OTC within ITC strategic countriesCreate strong generics presence in Africa and Middle EastTarget regional players in Middle East and African zones
OTC brands
External growth Focus
April-09 March-09 May-09
74
The Vaccines Market in Latin America is about to Reach €1bn in 2009
High demographic potential Birth cohort of ~10m and aging population
Public market characterized by universal immunization programs
70% of total market valueVery high coverage rateTenders – national or PAHO(1)
Preference for national production
Private market limited to the high-income class
5-10% of the populationMostly innovative products, not available in public programs
Sanofi pasteur market leader in 2008Strong presence and leadership since late 80´s through local subsidiaries
0
50
100
150
200
250
2008
Chile & Others
Argentina
Colombia
CANAC
Brazil
Mexico
Sanofi pasteur sales in Latin America (€m)
(1) Pan American Health Organization
75
Conclusion
Broad and heterogeneous region with solid economic trends in spite of a variable geo-political stability
Leading position (market share of 6.6%) in a dynamic pharma market growing twice as fast as the world market
Growth strategy based on 4 axes: maximize the Rx core, win in generics, strengthen OTC and serve the “Next Billion”
Organic growth and geographical presence enhanced by active business development (Medley, Kendrick, Gramon)
76
Focus on Brazil
Heraldo MarcheziniGeneral Manager
77
Brazilian Indicators Show Limited Vulnerability to Economic Crisis
Large country with significant growth potential
Brazil 10th largest economy worldwide(1)
Population close to 200m(1)
Public debt and inflation under control Public debt / GDP ratio under 40% in 2008(2)
Inflation below 5%(1)
Limited impact of the financial crisis:No deep recession in 2009: assessment of IMF(1) and Brazilian Central Bank between -1% and 0%Recovery forecasted in 2010(1) 2005 2006 2007 2008 2009e 2010e
Population (in m) 184 187 189 192 194 197
GDP growth (in %) 3.2% 4.0% 5.4% 5.1% -1.3% 2.2%
(1) IMF World Economic Outlook Database, April 2009(2) Source: IMF, April 2009
Public debt / GDP ratio evolution(2)
0
10
20
30
40
50
60
1994 1996 1998 2000 2002 2004 2006 2008
%
78
Emergence of a Large Middle Class in Brazil
Brazilian population is ageing, with greater exposure to age and lifestyle- linked diseases:
Proportion of elderly people to double in 2020 vs. 1980Diabetes is the 4th cause of death(1)
Emergence of a large middle class in Brazil with willingness to use pharmaceutical products:
C & B social classes have taken the most important part of national income increase of the last 5 yearsSocial programs set by President Lula have also helped
(1) IMS – The opportunity in emerging markets, May 2009
0%5%
10%15%
1940 1950 1960 1970 1980 1991 1995 2000 2005 2010 2015 2020
% of people >60Source: IBGE, January 2008
Source: Data Popular, June 2008
A: more than 3,200 USD/month, B: between 1,600 and 3,200 USD, C: between 640 e 1,600 USD, D: between 320 e 640 USD, E: less than 320 USD
0%
5%
10%
15%
20%
25%
30%
35%
40%
A B C D EShare of total populationShare of the total income growth for 2002-2007 period
Split of socio-economic classes and income growth over 2002-2007
79
0%10%20%30%40%50%60%70%80%90%
100%
Indi
aM
exic
oBr
azil
U.S.
Chin
aRu
ssia
Cana
da Italy
S. K
orea
Fran
ceJa
pan
Spai
nGe
rman
y UKTu
rkey
% Public % Other private % Out of pocket
The Brazilian Market Is Largely Out of Pocket
80% of the pharmaceutical spend in Brazil is out of pocket(1,2)
20% of the population has healthcare coverage (stagnant evolution)(3)
Federal government, states and cities spend at hospital level and via “Farmacia popular”
Market characteristics remain challenging
Intellectual property protection
Strict price controls even on OTC products
Pharmacy substitution
(1) IMS Market Prognosis 2009-2013, Latin America Brazil(2) IMS Finding Direction in Times of Change, March 2009(3) ANS – National Health Agency September 2008(4) IMS – The opportunity in emerging markets, May 2009
Total pharmaceutical spend by payer(4)
80
The Emerging Market Opportunity in Brazil
Large market with significant growth potential
9th largest pharma market globally(1)
Pharma market still growing at double-digit rate despite of economic crisis(2)
Importance of private sector Private sector accounts for the vast majority of the total marketExpansion of pharmacy chains and supermarkets
Market growth driven by generics and volume
Generics account for €1.3bn and market is up +17% in volume(4)
Broadening access to affordable medicine
(1) IMS(2) IMS PMB YTD April 2009(3) IMS PMB Apr-09(4) IMS MAT April 09
51%62%
35%
30%
14%
8%
MAT 2005 MAT 2009
Generics (Non-branded generics)"Similares" (Branded generics)Branded products
A Fast Growing Market with Generics Gaining Market Share Rapidly(4)
€5.8 bn
€8.8 bn
81
The Increasing Power of Local Companies
Market share evolutionover the last 5 years
Source: IMS PMB Apr-09
13.6%
18.9%
12.5%
16.2%
6.2%7.3%
5.6%3.1%
0%
5%
10%
15%
20%
MAT2004
MAT2005
MAT2006
MAT2007
MAT2008
MAT2009
Top-5 Multinationals Top-3 LocalsS-A Medley
Local companies gained significant market share over the last 5 years
Top-5 multinational companies lost around 5% market share to the Top-3 local players in 5 years Sanofi-aventis: only multinational firm in the Top-5 in Brazil, even prior to Medley acquisition
The importance of the “Similares” segment in Brazil
Very limited presence of multinational companiesSpecific business model:
Low-cost development (regulatory standards inferior to generics)Low-cost promotion (massive detailing with up to 10 products by call)Low-cost distribution (no important discount in comparison with generics)
82
Sanofi-aventis in Brazil: A Strong Local Presence
Suzano factory, State of São Paulo
Headquarters in the City of São Paulo
Source: IMS MAT April 09
The market leader in BrazilSales of €601m in 2008 Market share of 6.2%(1)
A local manufacturer> 90% of products manufactured locallyManufacturing capacity of over 200m units/year
A tailored approach to the Brazilian market
Customized promotion to specialists and payers for high-price drugsBroad promotion to GPs and consumers for low-price classical products and OTC
83
Sanofi-aventis in Brazil: A « Domestic » Profile with a Diversified Portfolio
Sanofi-aventis offers a broad portfolio…
>50 brands actively promotedTop 7 products represent 39% of sales Each of the top 30 products represent >1% of sales in BrazilMore than 150 products and >500 presentations manufactured
… very similar to local companiesPatented drugs account for less than 3% of total salesGrowth coming mostly from launches of line extensionsNew portfolio of generics with 60 products launched since 2007
84
An innovative approach to target pharmacies launched in Brazil two years agoConexão allows pharmacy detailing, order taking and direct negotiation with pharmacists
More than three-fold increase in sales force dedicated to pharmaciesChange of approach: from merchandising to order taking
Conexão extended coverage of pharmacies from 5,000 to 13,000 (>75% of volume)
~3,800 big chains pharmacies but >40% of volume~9,200 small to medium chains and large independent pharmacies and 35% of volume
Project encompasses the entire Sanofi-Aventis portfolio in Brazil, not just OTC
Volumes in pharmacies included in Conexão grew close to three times faster
Sanofi-aventis in Brazil: Becoming a Preferred Partner for Pharmacies
~13,000 POS> 75% DEMAND
~290 SALES FORCE
85
Sanofi-aventis in Brazil: An Established Leader in OTC
Sanofi-Aventis leads the OTC market in Brazil with 9.7% market share(1)
OTC represent more than 30% of pharma sales
Brazil is our 2nd largest country in terms of OTC sales after France
Broad portfolio with more than 15 products
Leveraging multiple promotional channels
TV, physician detailing, presence in pharmacy (through Conexão), presence in supermarkets via cosmetic products
86
A Unique Opportunity to be #1 in Generics
(1) Pending acquisition subject to certain conditions precedent and expected to occur in the 2nd quarter of 2009
Medley acquisition - A perfect strategic fitBrazil's generics market is very concentrated (80% of the market dominated by four players)Medley: #1 generics player in Brazil
A very good production capacity, an excellent portfolio and sales teamA positive image amongst physicians & patients, especially low-middle class thanks to institutional campaigns
A new growth platform for sanofi-aventis:Allows for launches of “Similares” through portfolio replication Increases industrial capacity and offer expansion opportunities in Latin AmericaKeeping two entities to avoid business rupture and complex integration
With Medley, sanofi-aventis becomes the undisputed #1 pharmaceuticals company in Brazil with a total market share of 12%
14%
41%
83%
3%
35%
12%
15%
9%
38%43%
1
82%
12%4%1%6%
sanofi-aventis Medley Combined Market
Patented Branded DrugsNon-patented Branded DrugsBranded GenericsNon-branded Generics
87
Solid Double-Digit Market Share in Brazil
Sanofi-aventis has a significant lead over peers
Sanofi-Aventis is ranked #1 in each market segment:
Branded Rx drugsGenericsOTCVaccines
Continues to grow with the market
3%3%3%4%4%4%
6%6%
8%
12%
0%
2%
4%
6%
8%
10%
12%
14%
SAN
OFI
-AVE
NTI
S
EMS
NO
VAR
TIS
AC
HE
PFIZ
ER
EUR
OFA
RM
A
BA
YER
MER
CK
SH
AR
PD
OH
ME
CA
STR
OM
AR
QU
ES
GSK
Sanofi-aventis leadership position
Source: IMS PMB May-09 (MAT)
88
Sales of €47m in 2008 Flu leadership position
Flu vaccines: 75% of sales in Brazil23m doses sold in 2008Local partnership with Butantan
Rabies agreement with the federal government
Delivered Yellow Fever for outbreak control
Increased private and institutional immunization rates for Flu and Hep A
#1 Vaccines Company in Brazil
(1) Net Sales at constant exchange rate
Life cycle management of Flu agreement and private market expansion
Introduction of vaccines into the public and institutional markets (i.e. IPV and Pneumo) through expansion of local partnership agreements
Introduction of new innovative vaccines
Acceleration of Dengue vaccine introduction into public sector
Future Growth Drivers
89
A Bright Future for sanofi-aventis in Brazil
Market with impressive growth potential
Pharma market expected to grow more than 50% by 2013(1)
Brazil to become 8th pharmaceutical market in the worldImprovement in market conditions
The Brazilian subsidiary has become a key affiliate for Sanofi-Aventis
Among the top-5 affiliates as of 2010#2 in terms of generic salesA platform for development of new products in Latin America
Brazilian pharmaceutical market to overtake Canada and the UK
Source: IMS – The opportunity in emerging markets, May 2009
2003 Rank 2013 RankUnited States United States
Japan JapanGermany ChinaFrance Germany
Italy FranceUnited Kingdom Spain
Spain ItalyCanada BrazilChina Canada
Brazil United Kingdom
90
Conclusion
Chris ViehbacherChief Executive Officer
91
Growth in Emerging Markets is expected to continue at a double-digit rate reaching close to $280bn in 2013
China will be the most significant contributor to growth over 2008-2013
Traditional Markets sales forecasts are expected to grow at a CAGR of +1.7% over the same period reaching $630bn in 2013
The Most Attractive Areas for Growth are in Emerging Markets
(1) Source: IMS market prognosis 2009-2013
173194
218247
25
67
151
212
0
100
200
300
2008 2009 2010 2011 2012 2013
Emerging Markets China contribution
CAGR: +12.3%
14%
Emerging Markets Sales Forecasts(1)
24%US$bn
92
Many Opportunities Allow for Sustainable Double Digit Market Growth, Despite the Economic Crisis
2/3 of the world's population without access to HealthcareAging populationRising middle class whose buying power increasesHealth needs unmet in many areasDevelopment of pathologies linked to consumer society (diabetes, HTA,…)Strong development of the public health sectorEmergence of health financing systems
Economic crisis Higher regulatory barriers Free price control progressively disappearingWorsening protectionism trend in several countries
Short to Mid Term Challenges
Short to Mid Term Opportunities
93
Sanofi-aventis has Unique Competencies in Emerging Markets
The largest presence in Emerging Markets among peersSignificant sales and strong growth in key countries The ability to deliver affordable medicines (mature Rx brands, OTC, branded generics)
The leadership position in vaccinesA "domestic" profile with strong local commercial presence and manufacturing capabilities
(1) Greater China: China, Hong-Kong, Taiwan
540562601
380443
0
100
200
300
400
500
600
700
Brazil Mexico China Turkey Russia
Sales in Top 5 Emerging Countries in 2008
(1)
(€m)
94
Our Business Model in Emerging Markets is Commercially Viable and Sustainable
2008 Operating margin excluding central administrative and R&D costs
Emerging Markets
Eastern Europe
Latin America
Asia Pacific
Africa & Middle East
44%
40%
47%
45%
43%
(1) Internal analysis - 2008
95
Sanofi-aventis is Committed to Act as a Socially Responsible Company
Deep rooted commitment of sanofi-aventis
80% of the global population has no access to appropriate healthcareSanofi-aventis is committed to an active role in Access to Medicines in Emerging MarketsOngoing programs in 6 principal areas:
Malaria, Sleeping Sickness, Tuberculosis, Leishmaniasis, Epilepsy and Vaccines (polio, measles, mumps, rubella)
Product donations and adapted tier pricing and distribution strategiesPartnerships with public & private national, international organizations
“Access-to-Medicines” programs
96
Emerging Markets Will Remain a Strategic Priority for the Foreseeable Future
Sales Target in Emerging Markets
6,540
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
2008 2013
x2
€m
With the recent acquisitions of Zentiva, Medley and Kendrick, our production in Emerging Markets will expand to support the anticipated growth
64% of our volumes will be sold in Emerging Markets in 2009
Only 55% will be produced in those countries in 2009
Our objective is to double sales in Emerging Markets from 2008 to 2013
Organic growth
Acquisitions
97
Q&A Session