Sanofi-Aventis Q3 Sales Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day ladies and gentlemen and welcome to today's sanofi-aventis third quarter sales conference call. As a reminder, this conference is being recorded. I would now like to hand the call over to your host today, Mr. Sanjay Gupta. Please go ahead sir.

SANJAY GUPTA, IRO, SANOFI-AVENTIS: Hello everyone, and welcome. I would like to begin things, as this is the first conference call for sanofi-aventis, by introducing the new Investor Relations team at sanofi-aventis. I am Sanjay Gupta, the new IRO. In my team in Paris are Arnaud Delepine and Philippe Zeisser, and in New York is Mr. [Philippe Laucher]. Many of us know you and you know us and we will also have the opportunity to see many -- all of you in the coming months.

I would like to remind you that the slides for today's call are available on our website, sanofi-aventis.com. And this call is also being webcasted.

To comment on our performance we have with us today Hanspeter Spek, Executive Vice President of Pharmaceutical Operations, Mr. Leroy, the CFO and [Laurence Lebruch], the Deputy CFO. We will begin by some introductory comments by Jean-Claude, followed by a business update by Hanspeter, and then an update on integration by Jean-Claude again. We will take questions later in the limit of the time available. Jean-Claude?

JEAN-CLAUDE LEROY, SVP AND CFO, SANOFI-AVENTIS: Thank you Sanjay. Good afternoon everybody.

Before giving you first technical comments, because I feel that with this new sanofi-aventis venture we need to give some comments on the technical matter, let me just give you a few words about the business, the way I see it. I guess that here to -- we are here to comment on a rather solid third quarter sales numbers, generally in line with first half's. I would say that this happened as an evidence of the momentum which has been kept during the beginning of integration process. I guess that this is very important to us in the Company, as well as it is to you as investors, to see that this Company is going on doing well whatever the [dealings] are.

To finish with on the general comment, I would just add that what I confirm with the information which has been released by our competitors, it seems to me like you [punch] out so far that we are in a rather good position, again, making comparison at the sales level.

Now, I will go back to follow up the slide presentation to give you some of this technical information I was talking about. So first information, the date of the first consolidation of Aventis into sanofi-aventis will be September 30, 2004. What does that mean? I will talk about sales at that moment, we will see in the later comments, in next conversation what it does mean for results, but for [some] it does already mean [things].

First, as you have seen, we have released also the consolidated sanofi-aventis sales. As a matter of fact, since we are consolidating Aventis as of October 30, it does mean that the sanofi-aventis consolidated numbers do represent the ex -- the old Sanofi, ex-Sanofi Synthelabo, that and only that. So we thought it would not be meaningful for the new Group to give you a good view of the performance.

And so that we decided that we would release also the proforma sales on a comparable basis. And this is the next slide, which is on the proforma combined sales. I know it's a bit technical, but we need actually, I guess, together to define what we do mean -- what is underneath.

The proforma combined sales is to measure sales performance of sanofi-aventis, which does mean including the former sales of Sanofi Synthelabo from 1 part, Aventis from the other part. But not that, only that, that reduced vital sales of products which have been sold at the request of the competition authorities. And I'm talking of Arixtra, Fraxiparine and Campto. So in each sequence, whatever it is, third quarters 2004, 9 months 2004, the comparable in 2003, what was third quarter, 9 months. These corresponding figures of sales for these products have been taken out of the calculation.

Again, just to point out when I was referring to the consolidated shares of sanofi-aventis to begin with, you have understood that Arixtra and Fraxiparine are included in this 9-month performance. Arixtra and Fraxiparine up to the end of August because the divestment occurred at the end of August. So what is important is that we try to give you figures through that proforma combined sales, a good comparison to the sales performance of the Group. In addition to that, as you have seen, the Aventis Behring has been taken out.

So that being said, we decided also that [actually] the old concept of Sanofi Synthelabo was to be kept for the new sanofi-aventis Group that we had to define. What was the content of that? And we took 1 definition, which is to say that we would like to report on the economic performance of obviously the proforma combined sales, plus the research of the products which belong to sanofi-aventis.

In turn, that does mean that as for the [explanatory] matter of Sanofi Synthelabo, we will include the worldwide sale of these products, which are in partnership with Bristol Myers Squibb, I mean obviously Plavix and Avapro. And the best part of the [indiscernible] the Japanese part of the sales which are made through the JV, which is our [in turn]. That does mean that other sales of interesting -- very interesting products, such as Actonel, for example, will not be reported this way in through developed sales just because of the fact that this is not a sanofi-aventis product. This is the reason for the different classification in that [last sales].

Now, a few comm -- before giving the opportunity to Hanspeter to comment on the performance on sales in the quarter and 9 months, just to give you a few figures and a few explanations again on that chart showing the proforma combined sales. You'll see we have spread -- split the third quarter and the 9 months. And as you see, we have made the segmentation obvious, pharmaceutical activities and vaccines. This is going to be our primary segmentation for reporting purpose from now on.

In addition to that, these figures are shown on a comparable basis. What do we mean by comparable basis in that instance? We do mean several things.

First, obviously this does not include the currency impact. As you have seen in the press release for the first quarter sales on a global basis, I mean Pharma plus Vaccines, we had a negative 4% impact on the third quarter, when we do show a 4.6% negative impact for 9 months.

Now, some of you have read some reports already on the screens and are wondering what it does mean as far as the parameter is concerned. As I said before, all the products which have been sold for antitrust authorities [transferring] are excluded totally of any period in this comparison. In addition to that, you would remember that there were some products, and mainly Azmacort and Trandolapril, which were sold by Aventis during the first part of the 2004 year.

Now, of Q3 they are excluded of the [part] reason, if I were to give you the impact of these products which have been sold, I would give the following kind of information. As far as the third quarter is concerned, this would be reported as a 1.3% decrease in sales as well as it would show that the 1.2% negative impact on the 9-month basis. So in turn, you have seen that we have not yet used as reported a concept on this proforma combined sales. This is because so far we thought that it would be too much of figures.

But if some of you would like to make a fair reporting of that on this concept, let's just -- I would tell you that on the first quarter -- on the third quarter, we would show up a 5.4% increase in sales on a so-called reported basis, as well as this would tell you that as of the end of September, 9 months now, we would show up a 4.7%.

But now, I guess that this is something which is going to be more important when at the end of the year we describe in the comment about the result. As far as the sales are concerned, I guess that the comparable basis is the most appropriate way of reporting on our sales. And quarter 10.7%, 9 months plus 10.5%, I guess this is what we have to comment now in more detail with Hanspeter.

HANSPETER SPEK, EVP PHARMACEUTICAL OPERATIONS, SANOFI-AVENTIS: Yes, good morning. Good afternoon. If you look at the first chart, this is on page 8, I hope you will agree that it is a very, very nice picture to look at. The top 15 leading products of the new Group, which represent approximately 62% of overall sales. Frankly because out of the 15 products, 13 products show a high two-digit growth rate, and there are only 2 products which are suffering.

First of all Allegra, which is suffering from a weak season in Japan and from the well-known issues in the U.S. market.

And second then, of course, Tritace, [indiscernible]. This is suffering from out of patent situation in Europe. And that is mainly the United Kingdom and Germany, where we have significant losses in value sales, but I think it is worth mentioning that through a very proactive price policy, we have managed to stabilize our value sales. In Germany, for example, it's close to 60% because we proactively lowered our prices.

Now on the fast-growing major products, what to say more in detail, Lovenox doing extremely well, even stronger in the U.S. We, of course, hope to benefit in the mid and near future from the circumstances coming from the non-registration of the AstraZeneca product, which we have been watching very, very closely.

We have then Plavix, perhaps on first glance it's a …