`https://www.sec.gov/Archives/edgar/data/1121404/000104746915001974/a2222977z20f.htm
`20F 1 a2222977z20f.htm 20F
`
`Use these links to rapidly review the document
`TABLE OF CONTENTS
`
`Table of Contents
`
`
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`
`Washington, D.C. 20549
`
`FORM 20F
`
`o
`
`(Mark One)
`
` REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
`or
` ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`ý
`
`For the fiscal year ended December 31, 2014
`or
` TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`or
` SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`Date of event requiring this shell company report
`
`o
`
`o
`
`For the transition period from to
`
`Commission File Number: 00131368
`
`Sanofi
`
`(Exact name of registrant as specified in its charter)
`
`N/A
`(Translation of registrant's name into English)
`
`France
`(Jurisdiction of incorporation or organization)
`
`54, Rue La Boétie, 75008 Paris, France
`(Address of principal executive offices)
`
`Karen Linehan, Executive Vice President Legal Affairs and General Counsel
`54, Rue La Boétie, 75008 Paris, France. Fax: 011 + 33 1 53 77 43 03. Tel: 011 + 33 1 53 77 40 00
`(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
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`Securities registered or to be registered pursuant to Section 12(b) of the Act:
`
`AVENTIS EXHIBIT 2132
`Mylan v. Aventis, IPR2016-00712
`
`
`
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`10/13/2016
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`https://www.sec.gov/Archives/edgar/data/1121404/000104746915001974/a2222977z20f.htm
`Title of each class:
`Name of each exchange on which registered:
`
`American Depositary Shares, each representing one half of
`New York Stock Exchange
`one ordinary share, par value €2 per share
`Ordinary shares, par value €2 per share
`Contingent Value Rights
`
`New York Stock Exchange (for listing purposes only)
`NASDAQ Global Market
`
`
`
`
`
`
`Securities registered pursuant to Section 12(g) of the Act: None
`
`The number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2014 was:
`Ordinary shares: 1,319,367,445
`
`Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO o.
`
`If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
`of the Securities Exchange Act of 1934. YES o NO ý.
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
`1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
`such filing requirements for the past 90 days. Yes ý No o
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
`required to be submitted and posted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for
`such shorter period that the registrant was required to submit and post such files). Yes o No o
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer. See definition of
`"accelerated filer and large accelerated filer" in Rule 12b2 of the Exchange Act. (Check one):
`
`Large accelerated filer ý
`
`
`
`Accelerated filer o
`
`
`
`Nonaccelerated filer o
`
`Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
`
`U.S. GAAP o
`
`
`
`International Financial Reporting Standards as issued by
`the International Accounting Standards Board ý
`
`
`
`Other o
`
`If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected
`to follow. Item 17 o Item 18 o
`
`If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the
`Exchange Act). Yes o No ý.
`
`
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`Table of Contents
`
`PRESENTATION OF FINANCIAL AND OTHER INFORMATION
`
` The consolidated financial statements contained in this annual report on Form 20F have been prepared in accordance with
`International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS
`as adopted by the European Union, as of December 31, 2014.
`
` Unless the context requires otherwise, the terms "Sanofi," the "Company," the "Group," "we," "our" or "us" refer to Sanofi and
`its consolidated subsidiaries.
`
` All references herein to "United States" or "U.S." are to the United States of America, references to "dollars" or "$" are to the
`currency of the United States, references to "France" are to the Republic of France, and references to "euro" and "€" are to the
`currency of the European Union member states (including France) participating in the European Monetary Union.
`
` Brand names appearing in this annual report are trademarks of Sanofi and/or its affiliates, with the exception of:
`
`•
`
`•
`
`•
`
`trademarks used or that may be or have been used under license by Sanofi and/or its affiliates, such as Actonel® a
`trademark of Actavis; Afrezza® a trademark of Mannkind Corporation; Aldurazyme® a trademark of the Joint Venture
`Biomarin/Genzyme LLC; Avilomics® a trademark of Avila Therapeutics Inc.; Cialis® OTC a trademark of Eli Lilly;
`Copaxone® a trademark of Teva Pharmaceuticals Industries; Cortizone10® a trademark of Johnson & Johnson
`(except in the United States where it is a trademark of the Group); Fludara® and Leukine® trademarks of Alcafleu;
`Flutiform® a trademark of Jagotec AG; Gardasil® and Zostavax® trademarks of Merck & Co.; Hexyon® and
`Repevax® trademarks of Sanofi Pasteur MSD; RetinoStat® a trademark of Oxford Biomedica; Spedra™ and Stendra™
`trademarks of Vivus Inc.; Squarekids® a trademark of Kitasato Daiichi Sankyo Vaccine Co., Ltd.; Stargen™ a
`trademark of Oxford Biomedica; Zaltrap® a trademark of Regeneron in the United States;
`
`trademarks sold by Sanofi and/or its affiliates to a third party, such as Altace® a trademark of King Pharmaceuticals in
`the United States; Hyalgan® a trademark of Fidia Farmeceutici S.p.A.; Liberty®, Liberty® Herbicide, LibertyLink® Rice
`601, LibertyLink® Rice 604 and StarLink® trademarks of Bayer; Maalox® a trademark of Novartis in the United States,
`Canada and Puerto Rico; and Sculptra® a trademark of Valeant; and,
`
`other third party trademarks such as Advantage® and Advantix® trademarks of Bayer; Atelvia® trademark of Actavis
`in the United States; DDAVP® a trademark of Ferring (except in the United States where it is a trademark of the
`Group); Enbrel® a trademark of Immunex in the UnitedStates and of Wyeth on other geographical areas; GLAAS™ a
`trademark of Immune Design; Humalog®, Humulin™ and Miriopen® trademarks of Eli Lilly; iPhone® and iPod Touch®
`trademarks of Apple Inc.; Lactacyd® a trademark of Omega Pharma NV in the EU and several other European
`countries; Rituxan® a trademark of Biogen Idec Inc. in the United States and Canada, and Genentech in Japan;
`Unisom® a trademark of Johnson & Johnson on certain geographical areas (except in the United States and Israël
`where it is a trademark of the Group and Canada where it is a trademark of Paladin Labs Inc.); UshStat® a trademark
`of Oxford BioMedica; and Yosprala™ a trademark of Pozen Inc.
`
` Not all trademarks related to investigational agents have been authorized as of the date of this annual report by the relevant
`health authorities; for instance Lyxumia® trade name has not been approved by the FDA.
`
` The data relating to market shares and ranking information for pharmaceutical products, in particular as presented in "Item 4.
`Information on the Company — B. Business Overview — B.6. Markets — B.6.1. Marketing and distribution," are based on sales data
`from IMS Health MIDAS (IMS), retail and hospital, for calendar year 2014, in constant euros (unless otherwise indicated).
`
` While we believe that the IMS sales data we present below are generally useful comparative indicators for our industry, they
`may not precisely match the sales figures published by the companies that sell the products (including our company and other
`pharmaceutical companies). In particular, the rules used by IMS to attribute the sales of a product covered by an alliance or license
`agreement do not always exactly match the rules of the agreement.
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` In order to allow a reconciliation with our basis of consolidation as defined in "Item 5. Operating and Financial Review and
`Prospects — Presentation of Net Sales," IMS data shown in the present document have been adjusted and include:
`
`(i)
`
`(ii)
`
`(iii)
`
`sales as published by IMS excluding Sanofi sales generated by the vaccines business, equating to the scope of our
`pharmaceutical operations;
`
`IMS sales of products sold under alliance or license agreements which we recognize in our consolidated net sales but
`which are not attributed to us in the reports published by IMS; and
`
`adjustments related to the exclusion of IMS sales for products which we do not recognize in our consolidated net sales
`but which are attributed to us by IMS.
`
` Data relative to market shares and ranking information presented herein for our vaccines business are based on internal
`estimates unless stated otherwise.
`
` Data relative to market shares and ranking information presented herein for our animal health business are based on sales data
`from Vetnosis unless stated otherwise.
`
` Product indications described in this annual report are composite summaries of the major indications approved in the product's
`principal markets. Not all indications are necessarily available in each of the markets in which the products are approved. The
`summaries presented herein for the purpose of financial reporting do not substitute for careful consideration of the full labeling
`approved in each market.
`
`CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS
`
` This annual report contains forwardlooking statements. We may also make written or oral forwardlooking statements in our
`periodic reports to the Securities and Exchange Commission on Form 6K, in our annual report to shareholders, in our offering
`circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or
`employees to third parties. Examples of such forwardlooking statements include:
`
`•
`
`•
`
`•
`
`projections of operating revenues, net income, business net income, earnings per share, business earnings per share,
`capital expenditures, cost savings, restructuring costs, positive or negative synergies, dividends, capital structure or
`other financial items or ratios;
`
`statements of our profit forecasts, trends, plans, objectives or goals, including those relating to products, clinical trials,
`regulatory approvals and competition; and
`
`statements about our future events and economic performance or that of France, the United States or any other
`countries in which we operate.
`
` This information is based on data, assumptions and estimates considered as reasonable by the Company as at the date of this
`annual report and undue reliance should not be placed on such statements.
`
` Words such as "believe," "anticipate," "plan," "expect," "intend," "target," "estimate," "project," "predict," "forecast," "guideline,"
`"should" and similar expressions are intended to identify forwardlooking statements but are not the exclusive means of identifying
`such statements.
`
` Forwardlooking statements involve inherent, known and unknown, risks and uncertainties associated with the regulatory,
`economic, financial and competitive environment, and other factors that could cause future results and objectives to differ materially
`from those expressed or implied in the forwardlooking statements.
`
` Risk factors which could affect the future results and cause actual results to differ materially from those contained in any
`forwardlooking statements are discussed under "Item 3. Key Information — D. Risk Factors". Additional risks, not currently known or
`considered immaterial by the Group, may have the same unfavorable effect and investors may lose all or part of their investment.
`
` Forwardlooking statements speak only as of the date they are made. Other than required by law, we do not undertake any
`obligation to update them in light of new information or future developments.
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`
`
` Abbreviations used in the Form 20F
` ADR/ADS American Depositary Receipt/American Depositary Share
`AFEP
` Association française des entreprises privées (French association of large companies)
`AMF
` Autorité des marchés financiers (the French market regulator)
`ANDA
` Abbreviated New Drug Application
`ECB
` European Central Bank
`BLA
` Biologic License Application
`BMS
` BristolMyers Squibb
`CGU
` Cash generating unit
`CHC
` Consumer Health Care
`CHMP
` Committee for Medicinal Products for Human Use
`CNS
` Central Nervous System
`COSO
` Committee of Sponsoring Organizations of the Treadway Commission
`COVALIS Health risk prevention committee
`CSR
` Corporate Social Responsibility
`CVMP
` Committee for Medicinal Products for Veterinary Use
`CVR
` Contingent Value Right
`ECHA
` European Chemicals Agency
`ECOVAL
`Internal committee for assessing the environmental risks of our pharmaceutical products
`EMA
` European Medicines Agency
`EMTN
` Euro Medium Term Note
`EPA
` U.S. Environmental Protection Agency
`EPS
` Earnings per share
`EU
` European Union
`FCPA
` U.S. Foreign Corrupt Practices Act
`FCPE
` Fonds commun de placement d'entreprise (Corporate investment funds)
`FDA
` U.S. Food and Drug Administration
`GAVI
` Global Alliance for Vaccines and Immunisation
`GLP1
` Glucagonlike peptide1
`GMP
` Good Manufacturing Practice
`GRI
` Global Reporting Initiative
`HSE
` Health, Safety and Environment
`IASB
`
`International Accounting Standards Board
`IFRS
`
`International Financial Reporting Standards
`ILO
`
`International Labor Organisation
`LEED
` Leadership in Energy and Environmental Design
`LSD
` Lysosomal storage disorder
`MEDEF Mouvement des entreprises de France (French business confederation)
`NASDAQ National Association of Securities Dealers Automated Quotations
`NDA
` New Drug Application
`OECD
` Organisation for Economic Cooperation and Development
`OTC
` Over The Counter
`PaHO
` Pan American Health Organisation
`PRAC
` Pharmacovigilance Risk Assessment Committee
`R&D
` Research & Development
`REACH Registration, Evaluation, Authorization and restriction of Chemicals
`ROA
` Return on assets
`SEC
` U.S. Securities and Exchange Commission
`TRIBIO
`Internal biological risk committee
`TSR
` Total Shareholder Return
`TSU
` Therapeutic Strategic Unit
`UNICEF United Nations Children's Fund
`USDA
` United States Department of Agriculture
`WHO
` World Health Organization
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`Table of Contents
`
`Part I
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`Part II
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`Part III
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`
`
`Item 1.
`Item 2.
`Item 3.
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`Item 4.
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`Item 4A.
`Item 5.
`Item 6.
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`Item 7.
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`Item 8.
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`Item 9.
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`Item 10.
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`Item 11.
`Item 12.
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`Item 13.
`Item 14.
`Item 15.
`Item 16.
`Item 16A.
`Item 16B.
`Item 16C.
`Item 16D.
`Item 16E.
`Item 16F.
`Item 16G.
`Item 16H.
`
`Item 17.
`Item 18.
`
`TABLE OF CONTENTS
`
`
`
`Identity of Directors, Senior Management and Advisers
`
` Offer Statistics and Expected Timetable
` Key Information
` A. Selected Financial Data
` B. Capitalization and Indebtedness
` C. Reasons for Offer and Use of Proceeds
` D. Risk Factors
`
`Information on the Company
` A. History and Development of the Company
` B. Business Overview
` C. Organizational Structure
` D. Property, Plant and Equipment
` Unresolved Staff Comments
` Operating and Financial Review and Prospects
` Directors, Senior Management and Employees
` A. Directors and Senior Management
` B. Compensation
` C. Board Practices
` D. Employees
` E. Share Ownership
` Major Shareholders and Related Party Transactions
` A. Major Shareholders
` B. Related Party Transactions
` C. Interests of Experts and Counsel
` Financial Information
` A. Consolidated Financial Statements and Other Financial Information
` B. Significant Changes
` The Offer and Listing
` A. Offer and Listing Details
` B. Plan of Distribution
` C. Markets
` D. Selling Shareholders
` E. Dilution
` F. Expenses of the Issue
` Additional Information
` A. Share Capital
` B. Memorandum and Articles of Association
` C. Material Contracts
` D. Exchange Controls
` E. Taxation
` F. Dividends and Paying Agents
` G. Statement by Experts
` H. Documents on Display
`
`I. Subsidiary Information
` Quantitative and Qualitative Disclosures about Market Risk
` Description of Securities other than Equity Securities
`
`
` Defaults, Dividend Arrearages and Delinquencies
` Material Modifications to the Rights of Security Holders
` Controls and Procedures
`
`[Reserved]
` Audit Committee Financial Expert
` Code of Ethics
` Principal Accountants' Fees and Services
` Exemptions from the Listing Standards for Audit Committees
` Purchases of Equity Securities by the Issuer and Affiliated Purchasers
` Change in Registrant's Certifying Accountant
` Corporate Governance
` Mine Safety Disclosure
`
`
` Financial Statements
` Financial Statements
`
`
`
`1
`
`1
`
`1
`
`1
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`3
`
`3
`
`4
`
`19
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`20
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`21
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`80
`
`81
`
`87
`
`88
`
` 137
` 137
` 160
` 178
` 183
` 185
` 189
` 189
` 190
` 190
` 191
` 191
` 195
` 196
` 196
` 197
` 197
` 197
` 197
` 197
` 198
` 198
` 198
` 214
` 215
` 215
` 220
` 220
` 220
` 220
` 221
` 225
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` 233
` 233
` 233
` 233
` 233
` 234
` 234
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` 234
` 234
` 235
` 235
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` 236
` 236
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`Item 19.
`
` Exhibits
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` 236
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`Table of Contents
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`PART I
`
`Item 1. Identity of Directors, Senior Management and Advisers
`
` N/A
`
`Item 2. Offer Statistics and Expected Timetable
`
` N/A
`
`Item 3. Key Information
`
`A. Selected Financial Data
`
`SUMMARY OF SELECTED FINANCIAL DATA
`
` The tables below set forth selected consolidated financial data for Sanofi. These financial data are derived from the Sanofi
`consolidated financial statements. The Sanofi consolidated financial statements for the years ended December 31, 2014, 2013 and
`2012 are included in Item 18 of this annual report.
`
` The consolidated financial statements of Sanofi for the years ended December 31, 2014, 2013 and 2012 have been prepared in
`compliance with IFRS issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union
`as of December 31, 2014. The term "IFRS" refers collectively to international accounting and financial reporting standards (IAS and
`IFRS) and to interpretations of the interpretations committees (SIC and IFRIC) mandatorily applicable as of December 31, 2014.
`
`1
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` Sanofi reports its financial results in euros.
`
`SELECTED CONDENSED FINANCIAL INFORMATION
`
`
`
`
` (€ million, except per share data)
` IFRS Income statement data (b):
`Net sales
`
` Gross profit
`
` Operating income
`
` Net income attributable to equity
`holders of Sanofi
` Basic earnings per share
`(€) (b)/(c):
`Net income attributable to equity
`holders of Sanofi
` Diluted earnings per share
`(€) (b)/(d):
`Net income attributable to equity
`holders of Sanofi
` IFRS Balance sheet data:
`Goodwill and other intangible
`assets
` Total assets
` Outstanding share capital
` Equity attributable to equity
`holders of Sanofi
` Long term debt
` Cash dividend paid per share
`(€) (e)
` Cash dividend paid per share
`($) (e)/(g)
`
`
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`2014
`
`33,770
`23,080
`6,143
`
`4,390
`
`
`
`3.34
`
`
`
`3.30
`
`
`53,740
`97,392
`2,620
`
`56,120
`13,276
`
`As of and for the year ended December 31,
`2013
`2012
`(a)
`(a)
`2011
`
`
`
`32,951
`34,947
`33,389
`22,315
`24,859
`24,193
`5,105
`6,430
`5,861
`
`2010
`
`32,367
`24,638
`6,535
`
`3,716
`
`4,888
`
`5,646
`
`5,467
`
`
`
`2.81
`
`
`
`2.77
`
`
`52,529
`96,055
`2,641
`
`56,904
`10,414
`
`2.80
`
`3.86
`
`
`
`3.70
`
`
`
`3.68
`
`
`58,265
`100,399
`2,646
`
`57,352
`10,719
`
`2.77
`
`3.65
`
`
`
`4.27
`
`
`
`4.26
`
`
`62,221
`100,672
`2,647
`
`56,193
`12,499
`
`2.65
`
`3.43
`
`
`
`4.19
`
`
`
`4.18
`
`
`44,411
`85,264
`2,610
`
`53,097
`6,695
`
`2.50
`
`3.34
`
`
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
`
`
`
`2.85&zwsp;(f)
`
`3.46&zwsp;(f)
`
`
`
`(a)
`
`(b)
`
`(c)
`
`(d)
`
`(e)
`(f)
`(g)
`
`Includes the impacts of applying IFRIC 21 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this
`annual report).
`The results of operations of Merial, for 2010, previously reported as heldforexchange, have been reclassified and included in net income
`of continuing operations in accordance with IFRS 5.36., following the announcement that Merial and Intervet/ScheringPlough are to be
`maintained as two separate businesses operating independently.
`Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to
`1,315.8 million shares in 2014, 1,323.1 million shares in 2013, 1,319.5 million shares in 2012, 1,321.7 million shares in 2011, and
`1,305.3 million shares in 2010.
`Based on the weighted average in each period of the number of shares outstanding plus stock options and restricted shares with a
`potentially dilutive effect; i.e., 1,331.1 million shares in 2014, 1,339.1 million shares in 2013, 1,329.6 million shares in 2012, 1,326.7 million
`shares in 2011, and 1,308.2 million shares in 2010.
`Each American Depositary Share, or ADS, represents one half of one share.
`Dividends for 2014 will be proposed for approval at the annual general meeting scheduled for May 4, 2015.
`Based on the relevant yearend exchange rate.
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`SELECTED EXCHANGE RATE INFORMATION
`
` The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the
`euro from 2010 through March 2015 expressed in U.S. dollars per euro. The information concerning the U.S. dollar exchange rate is
`based on the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the
`Federal Reserve Bank of New York (the "Noon Buying Rate"). We provide the exchange rates below solely for your convenience. We
`do not represent that euros were, could have been, or could be, converted into U.S. dollars at these rates or at any other rate. For
`information regarding the effect of currency fluctuations on our results of operations, see "Item 5. Operating and Financial Review and
`Prospects" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk."
`
`
`
`
`2010
`2011
`2012
`2013
`2014
`Last 6 months
`2014
`September
`October
`November
`December
`2015
`January
`February
`March (2)
`
`Period
`end Rate
`1.33
`1.30
`1.32
`1.38
`1.21
`
`
`1.26
`1.25
`1.24
`1.21
`
`1.13
`1.13
`1.07
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Average
`Rate
`(1)
`High
`
`(U.S. dollar per euro)
`1.32
`1.45
`1.40
`1.49
`1.29
`1.35
`1.33
`1.38
`1.32
`1.39
`
`
`
`
`1.29
`1.31
`1.27
`1.28
`1.25
`1.26
`1.23
`1.25
`
`
`1.16
`1.20
`1.12
`1.15
`1.10
`1.12
`
`Low
`1.20
`1.29
`1.21
`1.28
`1.21
`
`
`1.26
`1.25
`1.24
`1.21
`
`1.13
`1.12
`1.07
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`(1)
`
`(2)
`
`The average of the Noon Buying Rates on the last business day of each month during the relevant period for the full year average, and on
`each business day of the month for the monthly average. The latest available Noon Buying Rate being March 6, 2015, we have used
`European Central Bank Rates for the period from March 9, 2015 through March 10, 2015.
`In each case, measured through March 10, 2015.
`
` On March 10, 2015 the European Central Bank Rate was 1.0738 per euro.
`
`B. Capitalization and Indebtedness
`
` N/A
`
`C. Reasons for Offer and Use of Proceeds
`
` N/A
`
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`D. Risk Factors
`
` Important factors that could cause actual financial, business, research or operating results to differ materially from expectations
`are disclosed in this annual report, including without limitation the following risk factors. In addition to the risks listed below, we may
`be subject to other material risks that as of the date of this report are not currently known to us or that we deem immaterial at
`this time.
`
`Risks Relating to Legal and Regulatory Matters
`
`We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such
`patents and other rights were limited or circumvented, our financial results could be materially and adversely affected.
`
` Through patent and other proprietary rights such as data exclusivity or supplementary protection certificates in Europe, we hold
`exclusivity rights for a number of our researchbased products. However, the protection that we are able to obtain varies in its
`duration and scope from product to product and country to country. This protection may not be sufficient to maintain effective product
`exclusivity because of local differences in the patents, in national laws or applicable legal systems, or developments in law or
`jurisprudence, which may give rise to inconsistent judgments.
`
` Moreover, patent and other proprietary rights do not always provide effective protection for our products. Manufacturers of
`generic products or biosimilars are increasingly seeking to challenge patent coverage before the patents expire, and manufacturers of
`biosimilars or interchangeable versions of the products are seeking to have their version of the product approved before the
`exclusivity period ends. Furthermore, in an infringement suit against a third party, we may not prevail and the decision rendered may
`not consider that our patent or other proprietary rights are valid, enforceable or infringed. Our competitors may also successfully
`avoid patents, for example, through design innovation, and we may not hold sufficient evidence of infringement to bring suit.
`
` In certain cases, to terminate or avoid patent litigation, we or our partners may be required to obtain licenses from the holders of
`thirdparty intellectual property rights that cover aspects of our existing and future products in order to manufacture, use or sell them.
`Any payments under these licenses may reduce our profits from such products and we may not be able to obtain these licenses on
`favorable terms or at all. If we fail to obtain a required license for a country where the valid thirdparty intellectual property right exists
`or are unable to alter the design of our technology to fall outside the scope of thirdparty intellectual property rights, we may be unable
`to market some of our products in certain countries, which may limit our profitability.
`
` Also, some countries may consider granting a compulsory license to use patents protecting an innovator's product, which limits
`the protection granted to such products.
`
` We are involved in litigation worldwide to enforce certain of our patent rights against generics, proposed generics and biosimilars
`(see "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal
`or Arbitration Proceedings" for additional information including on litigation related to Lantus® one of the Group's flagship products) of
`our small molecule and biological pharmaceutical products. Even in cases where we ultimately prevail in an infringement claim, legal
`remedies available for harm caused to us by infringing products may be inadequate to make us whole. A competitor may launch a
`generic or a biosimilar product "at risk" before the initiation or completion of the court proceedings, and the court may decline to grant
`us a preliminary injunction to halt further "at risk" sales and remove the infringing product from the market. Additionally, while we
`would be entitled to obtain damages in such a case, the amount that we may ultimately be awarded and able to collect may be
`insufficient to compensate all harm caused to us. A successful result against a competing product for a given patent or in a specific
`country is not necessarily predictive of our future success against another competing product or in another country because of local
`variations in the patents and patent laws.
`
` Further, we have increased the proportion of biological therapeutics in our pipeline relative to traditional small molecule
`pharmaceutical products. We expect to face increasing competition from biosimilars in the future. With the accelerated regulatory
`pathways provided in the U.S. and Europe for biosimilar drug approval, biosimilars can be a threat to the exclusivity of any biological
`therapeutics we sell or may market in the future and can pose the same issues as the small molecule generic threat described
`hereinabove. To the extent that governments could adopt more permissive approval frameworks (for instance regarding the duration
`of data exclusivity that could be shortened, or the scope of new products receiving data exclusivity that could be narrowed) and
`competitors could be able to obtain broader marketing approval for biosimilars including as a substitutable product, our products
`would become subject to increased competition (see also "Changes in the laws or regulations that apply to us could affect the
`Group's
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`bu