`Annual Report on Form 20F
`20F 1 d20f.htm ANNUAL REPORT ON FORM 20F
`
`Table of Contents
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`FORM 20F
`
`(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
`For the fiscal year ended December 31, 2006
`
`
`
`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 . . . . . . . . . . . . . . . . . . . .
`For the transition period from
` to
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`Commission File Number: 00131368
`
`SanofiAventis
`
`(Exact name of registrant as specified in its charter)
`N/A
`(Translation of registrant’s name into English)
`France
`(Jurisdiction of incorporation or organization)
`174, avenue de France, 75013 Paris, France
`(Address of principal executive offices)
`
`Securities registered or to be registered pursuant to Section 12(b) of the Act:
`Name of each exchange
`on which registered:
`New York Stock Exchange
`
`Title of each class:
`American Depositary Shares, each
`representing one half of one ordinary share, par
`value €2 per share
`
`Ordinary shares, par value €2 per share
`
`New York Stock Exchange
`(for listing purposes only)
`
`Securities registered pursuant to Section 12(g) of the Act:
`American Depositary Shares, each representing one quarter of a Participating Share Series A, par value €70.89 per share (removed from listing and registration on the New
`York Stock Exchange effective July 31, 1995).
`The number of outstanding shares of each of the issuer’s classes of capital or
`common stock as of December 31, 2006 was:
`ordinary shares: 1,359,434,683
`Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405
`of the Securities Act.
`YES NO .
`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 NO .
`Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
`obligations under those Sections.
`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 No
`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):
`
`Accelerated filer
`
`Large accelerated filer
`Indicate by check mark which financial statement item the registrant has elected to follow.
`Item 17 Item 18
`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 NO .
`
`Nonaccelerated filer
`
`https://www.sec.gov/Archives/edgar/data/1121404/000119312507072848/d20f.htm
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`AVENTIS EXHIBIT 2134
`Mylan v. Aventis, IPR2016-00712
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`PRESENTATION OF FINANCIAL AND OTHER INFORMATION
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`
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`The consolidated financial statements contained in this annual report on Form 20F have been prepared in accordance with
`International Financial Reporting Standards (IFRS) adopted by the European Union as of December 31, 2006 and with IFRS issued by
`the International Accounting Standards Board (IASB) as of the same date. IFRS differ in certain significant respects from U.S.
`generally accepted accounting principles (U.S. GAAP). For a description of the principal differences between IFRS and U.S. GAAP, as
`they relate to us and to our consolidated subsidiaries, and for a reconciliation of our shareholders’ equity and net income to U.S.
`GAAP, see Note F to our consolidated financial statements included at Item 18, of this annual report.
`
`
`Our results of operations and financial condition as of and for the year ended December 31, 2004 have been significantly
`affected by our August 2004 acquisition of Aventis and certain subsequent transactions (including the merger of Aventis with and
`into our Company in December 2004). The results of operations of Aventis for the period between August 20, 2004 and December 31,
`2004 have been included in our consolidated income statement and cash flow statement. This resulted in a significant increase in
`revenues and significant changes in other financial statement items in 2004 compared to 2003. The assets and liabilities of Aventis
`are also included in our consolidated balance sheet at December 31, 2004. See “Item 5. Operating and Financial Review and
`Prospects.”
`
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`We have prepared unaudited pro forma income statements for 2004 that present our results of operations as if the acquisition had
`taken place on January 1, 2004, described under “Item 5. Operating and Financial Review and Prospects.” Because of the significance
`of the Aventis acquisition, we present certain 2004 financial information in this annual report, such as sales of particular
`pharmaceutical products, as a percentage of our unaudited pro forma sales, rather than as a percentage of our consolidated sales.
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`
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`Unless the context requires otherwise, the terms “sanofiaventis,” the “Company,” the “Group,” “we,” “our” or “us” refer to
`sanofiaventis and our consolidated subsidiaries. References to “Aventis” refer to Aventis and its consolidated subsidiaries for periods
`prior to August 20, 2004.
`
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`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.
`
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`Brand names appearing in this annual report are trademarks of sanofiaventis and/or its affiliates, with the exception of:
`— trademarks used or that may be or have been used under license by sanofiaventis and /or its affiliates, such as Actonel®,
`Optinate® and Acrel®, trademarks of Procter & Gamble Pharmaceuticals, Alvesco®, a trademark of ALTANA Pharma AG,
`Campto®, a trademark of Kabushiki Kaisha Yakult Honsha, Copaxone®, a trademark of Teva Pharmaceutical Industries,
`Exubera®, a trademark of Pfizer Products Inc., Tavanic®, a trademark of Daiichi Pharmaceutical Co. Ltd., TroVax®, a
`trademark of Oxford BioMedica, Mutagrip®, a trademark of Institut Pasteur, Gardasil® and Rotateq®, trademarks of Merck &
`Co., Inc., NanoCrystal®, a trademark of Elan Pharmaceuticals, Uvidem®, a trademark of IDM Pharma, Inc. (IDM), Xyzal®, a
`trademark of UCB;
`— trademarks sold by sanofiaventis and/or its affiliates, such as Altace®, a trademark of King Pharmaceuticals in the United
`States, Arixta® and Fraxiparine®, trademarks of GlaxoSmithKline, StarLink®, Liberty Link® and Liberty® trademarks of
`Bayer AG, Sabril®, a trademark of Ovation Pharmaceuticals in the United States;
`— Cipro® in the United States and Aspirin®, trademarks of Bayer AG, Ivomec®, Eprinex®, Frontline® and Heartgard®,
`trademarks of Merial and Hexavac®, a trademark of Sanofi Pasteur MSD.
`
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`The data relative to market shares and ranking information presented in “Item 4. Information on the Company — B. Business
`Overview — Markets — Competition” is based on sales data from IMS Health MIDAS (IMS) and GERS (for France), retail and
`hospital, for calendar year 2006, in constant euros (unless otherwise indicated).
`
`
`While we believe that the IMS/GERS 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.
`
`
`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:
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`sales as published by IMS excluding sales generated by the vaccines business, equating to the scope of our pharmaceutical
`operations;
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`adjustments to data for Germany, to reflect the significant impact of parallel imports;
`(ii)
`(iii) 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;
`(iv) 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.
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`Product indications described in this 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
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`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 proxy
`statements, 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, adjusted net income, earnings per share, adjusted earnings per share, capital
`•
`expenditures, positive or negative synergies, dividends, capital structure or other financial items or ratios;
` statements of our plans, objectives or goals, including those relating to products, clinical trials, regulatory approvals and
`competition;
` statements about our future economic performance or that of France, the United States or any other countries in which we
`operate; and
` statements of assumptions underlying such statements.
`
`•
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`•
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`•
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`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 risks and uncertainties. We caution you that a number of important factors could
`cause actual results to differ materially from those contained in any forwardlooking statements. Such factors, some of which are
`discussed under “Risk Factors” below, include but are not limited to:
` our ability to continue to maintain and expand our presence profitably in the United States;
`•
` the success of our research and development programs;
`•
` our ability to protect our intellectual property rights;
`•
` the risks associated with reimbursement of healthcare costs and pricing reforms, particularly in the United States and Europe;
`•
`and
` trends in the exchange rate and interest rate environments.
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`•
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`We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results
`to differ materially from those in forwardlooking statements.
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`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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`
`Part I
`
`Item 1.
`Item 2.
`Item 3.
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`Item 4.
`
`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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`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 and profit sharing
` 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
`
`Item 11.
`Item 12.
`Part II
` Defaults, Dividend Arrearages and Delinquencies
`Item 13.
` Material Modifications to the Rights of Security Holders
`Item 14.
` Controls and Procedures
`Item 15.
` [Reserved]
`Item 16.
` Audit Committee Financial Expert
`Item 16A.
`Item 16B.
`Financial Code of Ethics
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`1
`1
`1
`1
`3
`3
`3
`13
`14
`15
`65
`66
`67
`68
`110
`110
`123
`126
`128
`130
`132
`132
`133
`133
`134
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`136
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`139
`139
`139
`140
`140
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`154
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`164
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`165
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`Item 16C.
`Item 16D.
`Item 16E.
`Part III
`Item 17.
`Item 18.
`Item 19.
`
` Principal Accountants’ Fees and Services
` Exemptions from the Listing Standards for Audit Committees
` Purchases of Equity Securities by the Issuer and Affiliated Purchasers
`
` Financial Statements
` Financial Statements
` Exhibits
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`165
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`165
`166
`166
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`167
`167
`168
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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
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`Item 3. Key Information
` A. Selected Financial Data
`
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`SUMMARY SELECTED FINANCIAL DATA
`
`The tables below set forth selected consolidated financial data for sanofiaventis. These financial data are derived from the
`sanofiaventis consolidated financial statements. Sanofiaventis financial statements for the years ended December 31, 2006, 2005
`and 2004 are included in Item 18 of this annual report.
`
`
`The consolidated financial statements of sanofiaventis for the years ended December 31, 2006 and 2005 have been prepared in
`compliance with IFRS adopted by the European Union and with the IFRS issued by the International Accounting Standards Board
`(IASB). The term “IFRS” refers collectively to International Accounting Standards (IAS), International Financial Reporting Standards
`(IFRS), Standing Interpretations Committee (SIC) interpretations and International Financial Reporting Interpretations Committee
`(IFRIC) Interpretations issued by the IASB. The opening balance sheet as of the IFRS transition date (January 1, 2004) and the
`comparative financial statements for the year ended December 31, 2004 have been prepared in accordance with the same principles.
`
`
`Sanofiaventis reports its financial results in euro and in conformity with IFRS, with a reconciliation to U.S. GAAP. Sanofi
`aventis also publishes condensed U.S. GAAP information. A description of the principal differences between IFRS and U.S. GAAP as
`they relate to the sanofiaventis consolidated financial statements is set forth in Note F to the sanofiaventis audited consolidated
`financial statements included in this annual report.
`
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`1
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`SELECTED CONDENSED FINANCIAL INFORMATION
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`As of and for the year ended December 31,
`2005
`2004
`2003
`
`
`
`
`
` 27,311 14,871
`—
` 20,947 11,294
`—
`2,888
`2,426
`—
`
`2,258
`1,986
`
`
`1.69
`2.18
`—
`1.68
`2.17
`—
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` 60,463 61,567
`—
` 52,210
` 86,945 85,557
`—
` 77,763
`2,686
`2,668
`—
`2,701
`
`
` 46,128 40,810
`—
` 45,600
`4,750
`8,654
`—
`4,499
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`
`
`
`
`
`
`7,448
` 27,311 14,871
`8,048
` 28,373
`1,640
`2,202
`(3,665)
`1,865
`4,034
`
`
`2.30
`1.65
`(4.03)
`2.71
`3.00
`
`
`2.28
`1.64
`(4.03)
`2.70
`2.97
`
`
`9,924
` 60,451 61,056
`9,321
` 52,251
` 86,241 82,846 17,424 17,362
` 77,536
`65
`4,734
`8,638
`53
`4,483
`
`
` 46,403 41,632 12,736 12,599
` 46,023
`0.84
`1.75 (h)
`1.52
`1.20
`1.02
`
`2.31 (h)
`1.80
`1.62
`1.28
`0.88
`
`
`2002
`
`—
`—
`—
`
`—
`—
`
`—
`—
`—
`—
`—
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`2006
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` 28,373
` 21,902
`4,828
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`4,006
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`2.97
`2.95
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`(€ million, except per share data)
`IFRS Income statement data
`Net sales
`Gross profit
`Operating income
`Net income attributable to equity holders of the Company
`Earnings per share: basic (€) (a)
`Earnings per share: diluted (€) (b)
`IFRS Balance sheet data (c)
`Intangible assets and goodwill
`Total assets
`Outstanding share capital
`Equity attributable to equity holders of the Company
`Long term debt
`U.S. GAAP Data (d)
`Revenues from sale of products
`Net income (loss) attributable to equity holders of the Company
`Earnings (loss) per share: basic (€) (e)
`Earnings (loss) per share: diluted (€) (f)
`Intangible assets and goodwill
`Total assets
`Longterm debt
`Equity attributable to equity holders of the Company
`Cash dividend paid per share (€) (g)
`Cash dividend paid per share ($) (g)
`
`(a) Based on the weighted average number of shares outstanding in each period used to compute basic earnings per share, equal to
`1,346.8 million shares in 2006, 1,336.5 million shares in 2005, and 910.3 million shares in 2004.
`(b) Based on the weighted average number of shares outstanding in each period used to compute diluted earnings per share, equal to
`1,358.8 million shares in 2006, 1,346.5 million shares in 2005, and 914.8 million shares in 2004.
`(c) On January 1, 2006, sanofiaventis adopted (with retrospective effect from January 1, 2004) the option offered by amendment to
`IAS 19 (Employee Benefits) to recognize all actuarial gains and losses under definedbenefit pension plans in the balance sheet,
`with the matching entry recorded as a component of shareholder’s equity, net of deferred taxes. See Note A.4 of the consolidated
`financial statements in Item 18 of this annual report.
`(d) Sanofiaventis voluntarily adopted the fair value recognition provisions of Financial Accounting Standard 123, Accounting for
`StockBased Compensation, as of January 1, 2003.
`Certain data as of and for the year ended December 31, 2004 have been reclassified to conform to the presentation adopted under
`IFRS with respect to joint ventures that are no longer accounted for under the proportionate consolidation method.
`(e) Based on the weighted average number of shares outstanding in each period used to compute basic earnings (loss) per share,
`equal to 1,346.8 million shares in 2006, 1,336.5 million shares in 2005, 910.3 million shares in 2004, 689.0 million shares in
`2003, and 714.3 million shares in 2002.
`(f) Based on the weighted average number of shares outstanding in each period used to compute diluted earnings (loss) per share,
`equal to 1,357.6 million shares in 2006, 1,346.5 million shares in 2005, 914.9 million shares in 2004, 691.1 million shares in
`2003, and 718.0 million shares in 2002.
`(g) Each American Depositary Share, or ADS, represents one half of one share.
`(h) Dividends for 2006 will be proposed to the annual general meeting for approval.
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`EXCHANGE RATE INFORMATION
`
` Exchange Rates
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`The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the euro
`from 2002 through March 2007 expressed in U.S. dollar 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.”
`
`Selected Exchange Rate Information
`
`Period
`end Rate
`1.05
`1.26
`1.35
`1.18
`1.32
`
`
`1.28
`1.33
`1.32
`
`1.30
`1.32
`1.34
`
`Average
`Rate (1)
`High
`(U.S. dollar per euro)
`0.95
`1.05
`1.14
`1.26
`1.25
`1.36
`1.24
`1.35
`1.27
`1.33
`
`
`
`
`1.26
`1.28
`1.29
`1.33
`1.32
`1.33
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`
`1.30
`1.33
`1.31
`1.32
`1.32
`1.34
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`
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`Low
`0.86
`1.04
`1.18
`1.17
`1.19
`
`1.25
`1.27
`1.31
`
`1.29
`1.29
`1.31
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`2002
`2003
`2004
`2005
`2006
`Last 6 months
`2006
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`2007
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`October
`November
`December
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`January
`February
`March
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`(1)
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`The average of the Noon Buying Rates on the last business day of each month during the relevant period for year average, on
`each business day of the month for monthly average.
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`On March 30, 2007 the Noon Buying Rate was 1.3374 per euro.
`
`B. Capitalization and Indebtedness
`N/A
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`C. Reasons for Offer and Use of Proceeds
`N/A
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`D. Risk Factors
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`Important factors that could cause actual financial or operating results to differ materially from expectations are disclosed in
`this annual report, including without limitation the following risk factors and the factors described under “Cautionary Statement
`Regarding ForwardLooking Statements.” In addition to the risks listed below, we may be subject to other material risks that are not
`currently known to us or that we deem immaterial at this time.
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`Risks Relating to Our Company
` We incurred substantial debt in connection with the acquisition of Aventis, which limits our business flexibility and requires us to
`devote cash resources to debt service payments.
`
`In connection with our acquisition of Aventis, our consolidated debt increased substantially, because we incurred debt to
`finance the cash portion of the acquisition consideration, and because our consolidated debt includes the debt incurred by Aventis
`prior to the acquisition. As of December 31, 2006, our debt, net of cash and cash equivalents was €5.8 billion. We make significant
`debt service payments to our lenders and our current debt level could limit our ability to engage in additional transactions or incur
`additional indebtedness. For more information on our debt, see “Item 5. Operating and Financial Review and Prospectus — Liquidity
`and Capital Resources” in this annual report.
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`We depend on the United States market for a significant part of our current and future operating results. A failure to continue our
`strategy of profitable operations in that market could adversely affect our business, results of operations, financial condition or
`prospects.
`
`We may not achieve our growth strategy if we do not maintain and continue to expand profitably our presence in the United
`States, the world’s largest pharmaceuticals market. We have identified the United States, which accounted for approximately 35.1% of
`our net sales in 2006, as a potential major source of continued future growth and plan to capitalize on our direct presence in the
`United States in the coming years to build a strong position in this market. We face a number of challenges in maintaining profitable
`growth in the United States, including:
` the success of the management organization that we have established in the United States;
`•
` the targeting of new products and customer markets;
`•
` the fact that the United States market is dominated by major U.S. pharmaceutical companies;
`•
` slower growth of the U.S. pharmaceutical market than in recent years;
`•
` aggressive generic competition reinforced by legislative initiatives to further facilitate the introduction of generic drug or
`•
`comparable biologic products through accelerated approval procedures;
` potential changes in health care reimbursement policies and possible cost control regulations in the United States, including
`possible unfavorable developments in coverage of prescription drugs by Medicare;
` increased FDA demands, leading to a potentially longer, more costly and more restrictive approval process for innovative
`products;
` heightened scrutiny of the pharmaceutical industry by the public and the media; and
` exposure to the eurodollar exchange rate.
`
`We depend on third parties for the marketing of some of our products. These third parties may act in ways that could harm our
`business.
`
`We market some of our products in collaboration with other pharmaceutical companies. For example, we currently have major
`collaborative arrangements with BristolMyers Squibb (BMS) for the marketing of Plavix® and Aprovel® in the United States and
`several other countries, with Procter & Gamble Pharmaceuticals for the osteoporosis treatment Actonel®, with Teva for Copaxone®,
`and with Merck & Co., Inc. for the distribution of vaccines in Europe. We also have alliances with several Japanese companies for the
`marketing of some of our products in Japan. See “Item 4. Information on the Company — B. Business Overview — Markets —
`Marketing and Distribution.” When we market our products through collaboration arrangements, we are subject to the risk that certain
`decisions, such as the establishment of budgets and promotion strategies, are subject to the control of our collaboration partners, and
`that deadlocks may adversely affect the activities conducted through the collaboration arrangements. For example, our alliances with
`BMS are subject to the operational management of BMS in some countries, including the United States. We cannot be certain that our
`partners will perform their obligations as expected. Further, our partners might pursue their own existing or alternative technologies or
`product candidates in preference to those being developed or marketed in collaboration with us.
`
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`•
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`12/20/2016
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`Annual Report on Form 20F
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`Table of Contents
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`The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by
`unforeseen events may reduce sales, delay the launch of new products and adversely affect our operating results and financial
`condition.
`
`Many of our products are manufactured using technically complex processes requiring specialized facilities, highly specific raw
`materials and other production constraints. Our vaccine products in particular are subject to the risk of manufacturing stoppages or the
`risk of loss of inventory because of the difficulties inherent to the sterile processing of biological materials and the potential for the
`unavailability of adequate amounts of raw materials meeting our standards. Additionally, specific conditions must be respected both
`by the Group and its customers for the storage and distribution of many of our products, e.g., cold storage for certain vaccines. The
`complexity of these processes as well as strict company and government standards for the manufacture of our products subject us to
`risks. The occurrence or suspected occurrence of outofspecification production or storage can lead to lost inventories, and in some
`cases product recalls, with consequential reputational damage and the risk of product liability (See “— Risks Relating to Our Industry
`— Product liability claims could adversely affect our business, results of operations and financial condition,” below). The
`investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and the delay of
`new product launches.
`
`We depend on third parties for the manufacture and supply of a substantial portion of our raw materials, specialized
`components, active ingredients and medical devices.
`
`Availability of Raw Materials and Specialized Components. Third parties supply us with a substantial portion of our raw
`materials and specialized components. Some raw materials and specialized components essential to the manufacture of our products
`are not widely available from sources we consider reliable — for example, there is a limited number of approved suppliers of heparins,
`which are used in the manufacture of Lovenox®. See “Item 4. Information on the Company — B. Business Overview — Production
`and Raw Materials” for a description of these outsourcing arrangements.
`
`
`ThirdParty Manufacturing of Active Ingredients. Although our general policy is to manufacture the active ingredients for our
`products ourselves, we subcontract the manufacture of some of our active ingredients to third parties, which exposes us to the risk of a
`supply interruption in the event that our suppliers experience financial difficulties or are unable to manufacture a sufficient supply of
`our products. The manufacture of the active ingredients for Eloxatine® and Xatral® and part of the manufacture of the active
`ingredient for Stilnox® are currently carried out by third parties, as are some of the manufacturing steps in the production of
`Lovenox®. Additionally, under our collaborative arrangement with BMS, pharmaceutical production of Plavix® and Aprovel® is
`conducted partly in sanofiaventis plants and partly in BMS plants.
`
`
`ThirdParty Supply of Medical Devices. Medical devices related to some of our products, such as certain pens used to dispense
`insulin, are manufactured by third parties. Reliance on third parties exposes us to the risk of supply interruptions, including as a result
`of thirdparty manufacturing problems, as well as the risk of product liability for materials not produced by the Group. See “—
`Product liability claims could adversely affect our business, results of operations and financial condition,” below.
`
`
`If disruptions or quality concerns were to arise in the thirdparty supply of raw materials, specialized components, active
`ingredients or medical devices, this could affect our ability to sell our products in the quantities demanded by the market and could
`damage our reputation and relationships with our customers. See also “— The manufacture of our products is technically complex,
`and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, delay the launch of new
`products and adversely affect our operating results and financial condition,” above. Even though we aim to have backup sources of
`supply whene