2012 half-year€¦ · total assets 101,743 100,668 (1) in accordance with ifrs3 (business...

SANOFIHALF-YEAR2012FINANCIAL REPORT

SANOFI54, rue La Boétie 75008 Paris - France

Tél. : 01 53 77 40 00www.sanofi.com

T A B L E O F C O N T E N T S 2012 HALF-YEAR FINANCIAL REPORT

Translation of the French Language Original

1 | CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 2

CONSOLIDATED BALANCE SHEETS – ASSETS 2 CONSOLIDATED BALANCE SHEETS — LIABILITIES AND EQUITY 3 CONSOLIDATED INCOME STATEMENTS 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 6 CONSOLIDATED STATEMENTS OF CASH FLOWS 7 NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2012 8 A BASIS OF PREPARATION AND ACCOUNTING POLICIES 8 B SIGNIFICANT INFORMATION FOR THE FIRST HALF OF 2012 11 C EVENTS SUBSEQUENT TO JUNE 30, 2012 32

2 | HALF-YEAR MANAGEMENT REPORT 33

A SIGNIFICANT EVENTS OF THE FIRST HALF OF 2012 33 B EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (JUNE 30, 2012) 39 C CONSOLIDATED FINANCIAL STATEMENTS FOR THE FIRST HALF OF 2012 40 D PRINCIPAL RISK FACTORS AND UNCERTAINTIES 63 E OUTLOOK 64 F APPENDIX – DEFINITION OF FINANCIAL INDICATORS 66

3 | STATUTORY AUDITORS’ REVIEW REPORT ON THE 2012 HALF-YEAR FINANCIAL INFORMATION 68

4 | RESPONSIBILITY STATEMENT OF THE CERTIFYING OFFICER HALF-YEAR FINANCIAL REPORT 69

The condensed half-year consolidated financial statements are unaudited but have been subject to a review by the statutory auditors in accordance with professional standards applicable in France.

2 | 2012 Half-Year Financial Report Sanofi

14B1 | CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

18BCONSOLIDATED BALANCE SHEETS – ASSETS

(€ million) Note June 30,

2012 December 31,

2011P

(1)

0BProperty, plant and equipment B.3. 10,723 10,750

1BGoodwill B.4. 39,047 38,582

2BOther intangible assets B.4. - B.5. 22,415 23,639

3BInvestments in associates and joint ventures B.6. 734 807

4BNon-current financial assets B.7. 3,157 2,399

5BDeferred tax assets 3,968 3,633

Non-current assets 80,044 79,810

Inventories 6,588 6,051

6BAccounts receivable B.8. 8,194 8,042

Other current assets 2,028 2,401

Current financial assets 331 173

Cash and cash equivalents B.10. 4,307 4,124

Current assets 21,448 20,791

Assets held for sale or exchange 251 67

TOTAL ASSETS 101,743 100,668

(1) In accordance with IFRS 3 (Business Combinations), Sanofi made adjustments during the Genzyme purchase price allocation period to some of the provisional amounts recognized in 2011 (see Note B.1.).

The accompanying notes on pages 8 to 32 are an integral part of the condensed half-year consolidated financial statements.

2012 Half-Year Financial Report Sanofi | 3

CONSOLIDATED BALANCE SHEETS — LIABILITIES AND EQUITY



(€ million) Note June 30,

2012 December 31,

2011(1)

Equity attributable to equity holders of Sanofi 56,208 56,203

Equity attributable to non-controlling interests 146 170

Total equity B.9. 56,354 56,373

Long-term debt B.10. 10,270 12,499

Non-current liabilities related to business combinations and to non-controlling interests B.12. 1,449 1,336

Provisions and other non-current liabilities B.13. 11,175 10,346

Deferred tax liabilities 6,398 6,530

Non-current liabilities 29,292 30,711

Accounts payable 3,278 3,183

Other current liabilities 6,730 7,221

Current liabilities related to business combinations and to non-controlling interests B.12. 154 220

Short-term debt and current portion of long-term debt B.10. 5,912 2,940

Current liabilities 16,074 13,564

Liabilities related to assets held for sale or exchange 23 20

TOTAL LIABILITIES & EQUITY 101,743 100,668


20BCONSOLIDATED INCOME STATEMENTS


(€ million) Note

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months)

Net sales B.19.4. 17,381 16,128 33,389

Other revenues 673 835 1,669

Cost of sales (5,360) (5,214) (10,902)

Gross profit 12,694 11,749 24,156

Research and development expenses (2,415) (2,297) (4,811)

Selling and general expenses (4,410) (4,201) (8,536)

Other operating income 319 191 319

Other operating expenses (324) (168) (315)

Amortization of intangible assets B.4. (1,675) (1,701) (3,314)

Impairment of intangible assets B.5. (40) (69) (142)

Fair value remeasurement of contingent consideration liabilities B.12. (106) (66) 15

Restructuring costs B.16. (250) (467) (1,314)

Other gains and losses, and litigation — (517) (327)

Operating income 3,793 2,454 5,731

Financial expenses B.17. (272) (234) (552)

Financial income B.17. 45 56 140

Income before tax and associates and joint ventures 3,566 2,276 5,319

Income tax expense B.18. (869) (472) (455)

Share of profit/(loss) of associates and joint ventures 404 556 1,070

Net income 3,101 2,360 5,934

Attributable to non-controlling interests 103 136 241

Net income attributable to equity holders of Sanofi 2,998 2,224 5,693

Average number of shares outstanding (million) B.9.6. 1,319.3 1,308.6 1,321.7

Average number of shares outstanding after dilution (million) B.9.6. 1,327.9 1,313.3 1,326.7

– Basic earnings per share (in euros) 2.27 1.70 4.31

– Diluted earnings per share (in euros) 2.26 1.69 4.29


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(€ million)

June 30, 2012

(6 months)

June 30, 2011(1)

(6 months)

December 31, 2011(1)

(12 months)

Net income 3,101 2,360 5,934

Attributable to equity holders of Sanofi 2,998 2,224 5,693


Other comprehensive income:

• Actuarial gains/(losses) (721) 95 (677)

• Tax effect(2) 186 (51) 138

Items not potentially reclassifiable to profit or loss (535) 44 (539)

• Available-for-sale financial assets 820 215 250

• Cash flow hedges (5) 6 5

• Change in currency translation differences 572 (1,746) (95)

• Tax effect on above items(2) (57) (12) 4

Items potentially reclassifiable to profit or loss 1,330 (1,537) 164

Other comprehensive income 795 (1,493) (375)

Comprehensive income 3,896 867 5,559

Attributable to equity holders of Sanofi 3,793 741 5,330



(2) See analysis in Note B.9.7.



22BCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(€ million) Share

capital

Additional paid-in capital

and retained earnings

Treasury shares

Stock options

and other share-based

payment

Other comprehensive

incomeP

(1)

Attributable to equity holders

of Sanofi

Attributable to non-

controlling interests

Total equity

Balance at January 1, 2011 2,622 50,169 (371) 1,829 (1,152) 53,097 191 53,288 Other comprehensive income for the periodP

(2) — 44 — — (1,527) (1,483) (10) (1,493) Net income for the period — 2,224 — — — 2,224 136 2,360 Comprehensive income for the periodP

(2) — 2,268 — — (1,527) 741 126 867 Dividend paid out of 2010 earnings (€2.50 per share) — (3,262) — — — (3,262) — (3,262) Payment of dividends and equivalents to non-controlling interests — — — — — — (180) (180) Increase in share capital – dividends paid in sharesP

(3) 76 1,814 — — — 1,890 — 1,890 Share repurchase program P

(3) — — (113) — — (113) — (113) Share-based payment plans: • Exercise of stock options 2 26 — — — 28 — 28 • Issuance of restricted shares 1 (1) — — — — — — • Proceeds from sale of treasury shares on exercise of

stock options — — 1 — — 1 — 1 • Value of services obtained from employees — — — 68 — 68 — 68 • Tax effect of exercise of stock options — — — 3 — 3 — 3 Changes in non-controlling interests without loss of control — 5 — — — 5 6 11 Balance at June 30, 2011P

(2) 2,701 51,019 (483) 1,900 (2,679) 52,458 143 52,601 Other comprehensive income for the periodP

(2) — (583) — — 1,703 1,120 (2) 1,118 Net income for the period — 3,469 — — — 3,469 105 3,574 Comprehensive income for the periodP

(2) — 2,886 — — 1,703 4,589 103 4,692 Payment of dividends and equivalents to non-controlling interests — — — — — — (72) (72) Share repurchase program P

(3) — — (961) — — (961) — (961) Reduction in share capital P

(3) (21) (488) 509 — — — — — Share-based payment plans: • Exercise of stock options 2 40 — — — 42 — 42 • Proceeds from sale of treasury shares on exercise of

stock options — — 2 — — 2 — 2 • Value of services obtained from employees — — — 75 — 75 — 75 • Tax effect of exercise of stock options — — — 5 — 5 — 5 Changes in non-controlling interests without loss of control — (7) — — — (7) (4) (11) Balance at December 31, 2011P

(2) 2,682 53,450 (933) 1,980 (976) 56,203 170 56,373 Other comprehensive income for the period — (535) — — 1,330 795 — 795 Net income for the period — 2,998 — — — 2,998 103 3,101 Comprehensive income for the period — 2,463 — — 1,330 3,793 103 3,896 Dividend paid out of 2011 earnings (€2.65 per share) — (3,487) — — — (3,487) — (3,487) Payment of dividends and equivalents to non-controlling interests

—

—

—

—

— — (131) (131)

Share repurchase program P

(3) — — (454) — — (454) — (454) Reduction in share capital P

(3) (42) (1,087) 1,129 — — — — — Share-based payment plans: • Exercise of stock options 3 71 — — — 74 — 74 • Issuance of restricted shares 1 (1) — — — — — — • Value of services obtained from employees — — — 72 — 72 — 72 • Tax effect of exercise of stock options — — — 8 — 8 — 8 Changes in non-controlling interests without loss of control

— (1)

— —

— (1) 4 3

Balance at June 30, 2012 2,644 51,408 (258) 2,060 354 56,208 146 56,354

(1) See Note B.9.7. (2) In accordance with IFRS 3 (Business Combinations), Sanofi made adjustments during the Genzyme purchase price allocation period to

some of the provisional amounts recognized in 2011 (see Note B.1.). (3) See Notes B.9.2. and B.9.3.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(€ million) Note

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) Net income attributable to equity holders of Sanofi 2,998 2,224 5,693 Non-controlling interests excluding BMS(1) 11 12 15 Share of undistributed earnings of associates and joint ventures 19 8 27 Depreciation, amortization and impairment of property, plant and equipment and intangible assets 2,480 2,925 5,553 Gains and losses on disposals of non-current assets, net of tax(2) (40) (35) (34) Net change in deferred taxes (376) (983) (1,865) Net change in provisions 62 356 40 Cost of employee benefits (stock options and other share-based payments) 72 68 143 Impact of the workdown of acquired inventories remeasured at fair value 17 264 476 Unrealized (gains)/losses recognized in income (147) (59) (214) Operating cash flow before changes in working capital 5,096 4,780 9,834 (Increase)/decrease in inventories (486) (345) (232) (Increase)/decrease in accounts receivable (52) (375) (257) Increase/(decrease) in accounts payable 34 27 (87) Net change in other current assets, current financial assets and other current liabilities (265) (182) 61 Net cash provided by/(used in) operating activities(3) 4,327 3,905 9,319 Acquisitions of property, plant and equipment and intangible assets B.3. – B.4. (786) (832) (1,782) Acquisitions of investments in consolidated undertakings, net of cash acquired B.1. –- B.2. (148) (13,444) (13,590) Acquisitions of available-for-sale financial assets (31) (23) (26) Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax(4) 71 71 359 Net change in loans and other financial assets 3 361 338 Net cash provided by/(used in) investing activities (891) (13,867) (14,701) Issuance of Sanofi shares(5) B.9. 74 28 70 Dividends paid: • to shareholders of Sanofi(5) (3,487) (1,372) (1,372) • to non-controlling interests, excluding BMS(1) (9) (11) (17) Transactions with non-controlling interests, other than dividends (20) — — Additional long-term debt contracted B.10.1. 434 7,810 8,359 Repayments of long-term debt B.10.1. (734) (713) (2,931) Net change in short-term debt 925 4,309 (145) Acquisitions of treasury shares B.9.2. (454) (113) (1,074) Disposals of treasury shares, net of tax — 1 3 Net cash provided by/(used in) financing activities (3,271) 9,939 2,893 Impact of exchange rates on cash and cash equivalents 18 (50) 1 Impact of Merial cash and cash equivalents — 146 147 Net change in cash and cash equivalents 183 73 (2,341) Cash and cash equivalents, beginning of period 4,124 6,465 6,465 Cash and cash equivalents, end of period B.10. 4,307 6,538 4,124 (1) See Note C.1. to the consolidated financial statements for the year ended December 31, 2011.

(2) Including available-for-sale financial assets. (3) Including: – Income tax paid (1,266) (1,460) (2,815) – Interest paid (255) (211) (447) – Interest received 39 62 100 – Dividends received from non-consolidated entities 2 3 7 (4) Property, plant and equipment, intangible assets, investments in consolidated entities and other non-current financial assets. (5) Amounts reported for 2011 for issuance of Sanofi shares and dividends paid to equity holders of Sanofi are reported net of dividends taken in the

form of shares, which do not generate cash flows.



24BNOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2012

INTRODUCTION

Sanofi, together with its subsidiaries (collectively “Sanofi” or “the Group”), is a diversified global healthcare leader engaged in the research, development and marketing of therapeutic solutions focused on patient needs. Sanofi has fundamental strengths in the healthcare field, operating via seven growth platforms: Diabetes Solutions, Human Vaccines, Innovative Products, Consumer Health Care, Emerging Markets, Animal Health and New Genzyme. Sanofi, the parent company of the Group, is a société anonyme (a form of limited liability company) incorporated under the laws of France. The registered office is at 54, rue La Boétie, 75008 Paris.

Sanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY).

The condensed consolidated financial statements for the six months ended June 30, 2012 were reviewed by the Sanofi Board of Directors at the Board meeting on July 25, 2012.

25BA Basis of preparation and accounting policies

34BA.1. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

The half-year consolidated financial statements have been prepared and presented in condensed format in accordance with IAS 34 (Interim Financial Reporting). The accompanying notes therefore relate to significant events and transactions of the period, and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2011.

The accounting policies used in the preparation of the consolidated financial statements as of June 30, 2012 comply with international financial reporting standards (IFRS) as endorsed by the European Union and as issued by the International Accounting Standards Board (IASB). Except for the change described in Note A.1.1., the accounting policies applied as of June 30, 2012 are identical to those described in the notes to the published consolidated financial statements for the year ended December 31, 2011.

IFRSs endorsed by the European Union as of June 30, 2012 can be accessed under the heading “IAS/IFRS Standards and Interpretations” at

8TUhttp://ec.europa.eu/internal_market/accounting/ias/index_en.htm U8T

66BA.1.1. New standards and amendments applicable in the period

The new standards, amendments to standards, and interpretations issued by the IASB and mandatorily applicable with effect from the 2012 financial year are listed below; they have no impact on the Group’s consolidated financial statements:

• Amendment to IFRS 7 (Financial Instruments: Disclosures). This amendment applies to annual financial periods beginning on or after July 1, 2011, and has been endorsed by the European Union. It is intended to provide better financial information about transfers of financial assets, in particular securitizations. The amendment does not alter the way securitizations are currently accounted for, but clarifies the disclosure requirements.

• Amendment to IAS 12 (Income Taxes): Recovery of Underlying Assets. This amendment offers a practical solution to be applied when estimating deferred tax assets and liabilities on investment property measured using the fair value model under IAS 40 (Investment Property). Sanofi does not have any investment property measured under IAS 40, and consequently this amendment does not apply to the consolidated financial statements. The amendment is

http://ec.europa.eu/internal_market/accounting/ias/index_en.htm


applicable to annual financial periods beginning on or after January 1, 2012, and has not yet been endorsed by the European Union.

• Amendment to IAS 1 (Presentation of Financial Statements). This requires items of other comprehensive income that are potentially reclassifiable to profit or loss to be presented separately from those that are not, and was early adopted by Sanofi with effect from 2011. This amendment was endorsed by the European Union on June 5, 2012.

A.1.2. New standards and amendments applicable in 2013

The principal new standards and amendments that will be applicable to Sanofi from 2013 are:

• IFRS 10 (Consolidated Financial Statements); • IFRS 11 (Joint Arrangements); • IFRS 12 (Disclosure of Interests in Other Entities); • Amended IAS 27 (Separate Financial Statements); • Amended IAS 28 (Investments in Associates and Joint Ventures); • IFRS 13 (Fair Value Measurement); • Amended IAS 19 (Employee Benefits).

A description of these standards and amendments, and of the expected impact of applying them, is provided in Note B.28. to the consolidated financial statements for the year ended December 31, 2011.

Of the texts listed above, only the amended IAS 19 has already been endorsed by the European Union. In June 2012, the Accounting Regulatory Committee (ARC) issued a recommendation that the first five of the texts listed above should be mandatorily applicable for annual financial periods beginning on or after January 1, 2014 at the latest, with an option for early adoption. Sanofi expects to apply these standards and amendments with effect from January 1, 2013.

A.1.3. New standards, interpretations and amendments issued in the first half of 2012

In March 2012, the IASB issued an amendment to IFRS 1, dealing with government loans. This amendment relates to first-time adoption of IFRS, and hence does not apply to Sanofi.

In May 2012, the IASB issued the 2009-2011 cycle of Annual Improvements to IFRSs, consisting of six amendments applicable to annual financial periods beginning on or after January 1, 2013; these amendments have not yet been endorsed by the European Union. Two of them relate to first-time adoption of IFRS, and hence do not apply to Sanofi. The others deal with:

• IAS 1 (Presentation of Financial Statements): clarification on comparative information;

• IAS 16 (Property, Plant and Equipment): classification of servicing equipment;

• IAS 32 (Financial Instruments – Presentation): income tax relating to distributions to holders of an equity instrument;

• IAS 34 (Interim Financial Reporting): financial information and segment information about total assets and liabilities.

Sanofi does not expect the application of these amendments to have any impact on the Group.


35BA.2. USE OF ESTIMATES

The preparation of financial statements requires management to make reasonable estimates and assumptions based on information available at the date of the finalization of the financial statements. These estimates and assumptions may affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and disclosures of contingent assets and contingent liabilities as at the date of the review of the financial statements. Examples of estimates and assumptions include: • amounts deducted from sales for projected sales returns, chargeback incentives, rebates and

price reductions; • impairment of property, plant and equipment, intangible assets, and investments in associates

and joint ventures; • the valuation of goodwill, and the valuation and useful life of acquired intangible assets; • the amount of post-employment benefit obligations; • the amount of provisions for restructuring, litigation, tax risks and environmental risks; • the amount of provisions for product claims; • the measurement of contingent consideration.

For half-year financial reporting purposes, and as allowed under IAS 34, Sanofi has determined income tax expense on the basis of an estimate of the effective tax rate for the full financial year. This rate is applied to Income before tax and associates and joint ventures. The estimated effective tax rate is based on the tax rates that will be applicable to projected pre-tax profits or losses arising in the various tax jurisdictions in which Sanofi operates.

Actual results could vary from these estimates.

36BA.3. SEASONAL TRENDS

Sanofi’s activities are not subject to significant seasonal fluctuations.


B Significant information for the first half of 2012

B.1. FINAL PURCHASE PRICE ALLOCATION FOR ACQUISITIONS MADE IN 2011

• Genzyme

The final purchase price allocation of Genzyme, acquired on April 4, 2011, is as follows:

(€ million) Fair value at

acquisition date Property, plant and equipment 1,933 Other intangible assets 10,059 Non-current financial assets 103 Inventories 925 Accounts receivable 764 Cash and cash equivalents 1,267 Long-term and short-term debt (835) Liability related to “Bayer” contingent consideration (585) Accounts payable (315) Deferred taxes (2,911) Other assets and liabilities (166) Net assets of Genzyme as of April 4, 2011 10,239 Goodwill 4,575 Purchase price(1) 14,814

(1) Includes the €481 million valuation of the CVRs at the acquisition date

Following the completion of the valuation process during the purchase price allocation period, the amount of deferred tax liabilities was increased by €489 million relative to the provisional allocation as of December 31, 2011 (refer to Note D.1.1. to the consolidated financial statements for the year ended December 31, 2011). Consequently, the comparative figures as published in respect of the 2011 financial year have been revised, in accordance with paragraph 49 of IFRS 3.

• Other acquisitions made during 2011

The other acquisitions made in 2011 (refer to note D.1.2. to the consolidated financial statements for the year ended December 31, 2011) did not require any adjustments to their initial purchase price allocations.

B.2. IMPACT OF CHANGES IN SCOPE OF CONSOLIDATION

The acquisitions made during the first half of 2012 were those of Pluromed, Inc. (Biosurgery) and Newport (Animal Health). The impact of these acquisitions at Group level is not material.

Sanofi made no divestments during the period.

B.3. PROPERTY, PLANT AND EQUIPMENT

Acquisitions of property, plant and equipment in the first half of 2012 amounted to €608 million. This reflects investments in the Pharmaceuticals segment of €495 million, including industrial facilities (€391 million). The Vaccines segment accounted for €80 million of acquisitions during the period, and the Animal Health segment for €33 million.

An impairment loss of €107 million was taken against property, plant and equipment during the period (see Note B.16.).

Firm orders for property, plant and equipment as of June 30, 2012 totaled €332 million.


39BB.4. GOODWILL AND OTHER INTANGIBLE ASSETS

Movements in intangible assets other than goodwill during the first half of 2012 were as follows:

(€ million)

Acquired Aventis

R&D

Other acquired

R&D

Rights to marketed

Aventis products

Products, trademarks and

other rights Software

Total other intangible

assets Gross value at January 1, 2012 2,103 4,262 31,587 17,933 971 56,856 Changes in scope of consolidation — 10 — 61 — 71 Acquisitions and other increases — 53 — 23 28 104 Disposals and other decreases — (1) — (6) (18) (25) Translation differences 27 72 461 307 11 878 Transfers (57) (101) 57 98 (14) (17) Gross value at June 30, 2012 2,073 4,295 32,105 18,416 978 57,867 Accumulated amortization and impairment at January 1, 2012 (1,531) (234) (26,434) (4,308) (710) (33,217) Amortization expense — — (750) (925) (54) (1,729) Impairment losses, net of reversals — (33) — (7) — (40) Disposals and other decreases — 1 — 6 17 24 Translation differences (19) (6) (407) (85) (7) (524) Transfers — — — 9 25 34 Accumulated amortization and impairment at June 30, 2012 (1,550) (272) (27,591) (5,310) (729) (35,452) Carrying amount at January 1, 2012 572 4,028 5,153 13,625 261 23,639 Carrying amount at June 30, 2012 523 4,023 4,514 13,106 249 22,415

Acquisitions of intangible assets other than goodwill (excluding software) in the first half of 2012 amounted to €76 million.

The amount reported for changes in scope of consolidation relates to intangible assets (other than goodwill) recognized in connection with acquisitions made during the period (see Note B.2.).

The “Transfers” line mainly comprises acquired research and development that came into commercial use during the period and is being amortized from the date of marketing approval.

Movements in goodwill during the period were as follows:

(€ million) Gross

valueP

(1) Accumulated amortization

and impairment Carrying amountP

(1) Balance at January 1, 2012 38,606 (24) 38,582 Acquisitions during the periodP

(2) 14 — 14 Translation differences 452 (1) 451 Balance at June 30, 2012 39,072 (25) 39,047


(2) See Note B.2.

40BB.5. IMPAIRMENT OF INTANGIBLE ASSETS

The results of impairment tests conducted in accordance with IAS 36 (Impairment of Assets) as of June 30, 2012 led to the recognition of a charge of €40 million, mainly relating to discontinuation of research and development projects.


B.6. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

For definitions of the terms “associate” and “joint venture”, refer to Note B.1. to the consolidated financial statements for the year ended December 31, 2011.

Investments in associates and joint ventures are as follows:

(€ million) %

interest June 30,

2012 December 31,

2011

Sanofi Pasteur MSD 50.0 305 313 InfraServ Höchst 31.2 78 87 Entities and companies managed by Bristol-Myers Squibb(1) 49.9 249 307 Other investments — 102 100 Total 734 807

(1) Under the terms of the agreements with Bristol-Myers Squibb (BMS) (see Note C.1. to the consolidated financial statements for the year ended December 31, 2011), the Group’s share of the net assets of entities majority-owned by BMS is recorded in Investments in associates and joint ventures.

The financial statements include commercial transactions between the Group and certain of its associates and joint ventures, which are regarded as related parties. The principal transactions of this nature are summarized below:

(€ million) 6 months to

June 30, 2012 6 months to

June 30, 2011 12 months to

December 31, 2011 Sales 182 289 526 Royalties(1) 452 664 1,292 Accounts receivable(1) 188 452 503 Purchases 117 118 236 Accounts payable 29 30 21 Other liabilities(1) 521 485 404

(1) These items mainly relate to entities and companies managed by BMS

B.7. NON-CURRENT FINANCIAL ASSETS

Non-current financial assets comprise the following items:

(€ million) June 30,

2012 December 31,

2011 Available-for-sale financial assets(1) 1,954 1,302 Pre-funded pension obligations 12 6 Long-term loans and advances 681 573 Assets recognized under the fair value option 131 124 Derivative financial instruments 379 394 Total 3,157 2,399

(1) Includes 15.8 million shares in Regeneron Pharmaceuticals, valued at €1,435 million on the basis of the quoted stock market price at June 30, 2012 (versus €678 million at December 31, 2011).

B.8. ACCOUNTS RECEIVABLE

Accounts receivable break down as follows:


2012 December 31,

2011

Gross value 8,338 8,176 Impairment (144) (134)

Carrying amount 8,194 8,042

The impact of changes in provisions for impairment of accounts receivable during the first half of 2012 was a net expense of €5 million.


The table below shows the ageing profile of overdue accounts receivable, based on gross value.

(€ million) Overdue accounts

gross value Overdue

< 1 month Overdue

1-3 months Overdue

3-6 months Overdue

6-12 months Overdue

> 12 months

June 30, 2012 962 344 176 168 133 141 December 31, 2011 1,103 278 227 187 135 276

Accounts overdue by more than one month relate mainly to public-sector customers.

44BB.9. CONSOLIDATED SHAREHOLDERS’ EQUITY

69BB.9.1. Share capital

The share capital of €6T2,643,704,016 consists of 1,321,852,008 shares (the total number of shares outstanding) with a par value of €26T.

Treasury shares held by the Group are as follows:

Number of shares

(in million) % June 30, 2012 4.1 0.31% December 31, 2011 17.2 1.28% June 30, 2011 8.2 0.61% January 1, 2011 6.1 0.46%

A total of 1,551,889 new shares were issued during the first half of 2012 as a result of the exercise of options under stock subscription option plans.

A total of 540,753 restricted shares vested and were issued in the first half of 2012, of which 523,477 had been awarded as part of the March 1, 2010 plan and were issued in March 2012.

70BB.9.2. Repurchase of Sanofi shares

The Sanofi shareholders’ Annual General Meeting of May 6, 2011 authorized a share repurchase program for a period of 18 months. Under this program (and this program only), Sanofi repurchased 7,513,493 shares during the first half of 2012 for a total of €425 million.

The Sanofi shareholders’ Annual General Meeting of May 4, 2012 authorized a share repurchase program for a period of 18 months. Under this program (and this program only), Sanofi repurchased 501,356 shares during May and June 2012 for a total of €29 million.

71BB.9.3. Reduction in share capital

The Board of Directors on April 26, 2012 approved the cancellation of 21,159,445 treasury shares (€1,129 million), representing 1.60% of the share capital as of June 30, 2012.

These cancellations had no effect on consolidated shareholders’ equity.

72BB.9.4. Restricted share plan

The Board of Directors meeting held on March 5, 2012 awarded a performance share plan consisting of 4,694,260 shares, of which 3,127,160 will vest after a four-year service period and 1,567,100 will vest after a three-year service period but will be non-transferable for a further two-year lock-up period.

The plan was measured as of the date of grant. The fair value of each share awarded is equal to the quoted market price of the share as of that date (€57.62), adjusted for dividends expected during the vesting period.

The fair value of the performance share plan is €192 million. This amount is being recognized as an expense over the vesting period, with the matching entry recorded directly in equity. The expense recognized for this plan during the first half of 2012 was €17 million.


The total expense recognized in the first half of 2012 for all restricted share plans was €59 million, compared with €38 million in the first half of 2011. A total of 11,094,356 shares were in process of vesting as of June 30, 2012 (4,661,030 under the 2012 plans, 3,222,140 under the 2011 plans, 2,662,881 under the 2010 plans, and 548,305 under the 2009 plans).

B.9.5. Stock option plan

On March 5, 2012, the Board of Directors granted 814,050 stock subscription options at an exercise price of €56.44. The vesting period is four years, and the plan expires on March 5, 2022.

The following assumptions were used in determining the fair value of this plan:

• dividend yield: 5.28%;

• plan maturity: 7 years;

• volatility of Sanofi shares, computed on a historical basis: 26.69%;

• interest rate: 2.30%.

On this basis, the fair value of one option is €8.42, and the fair value of the 2012 plan is €6 million. This amount is being recognized as an expense over the vesting period, with the matching entry recorded directly in equity. The expense recognized for this plan during the first half of 2012 was €0.5 million. The total expense recognized for stock option plans in the first half of 2012 was €14 million, compared with €30 million in the first half of 2011.

The table below provides summary information about options outstanding and exercisable as of June 30, 2012:

Outstanding Exercisable

Range of exercise prices per share Number of

options

Average residual

life (in years)

Weighted average

exercise price per share

(€) Number of

options

Weighted average

exercise price per share

(€)

From €1.00 to €10.00 per share 14,570 3.05 7.56 14,570 7.56

From €10.00 to €20.00 per share 42,542 4.63 15.87 42,542 15.87

From €20.00 to €30.00 per share 4,100 5.99 28.38 4,100 28.38

From €30.00 to €40.00 per share 253,605 6.75 38.08 253,605 38.08

From €40.00 to €50.00 per share 10,796,054 4.92 43.55 3,612,749 40.48

From €50.00 to €60.00 per share 16,725,911 4.82 53.80 7,414,061 53.57

From €60.00 to €70.00 per share 21,622,870 4.97 64.59 21,622,870 64.59

From €70.00 to €80.00 per share 13,141,280 2.92 70.38 13,141,280 70.38

Total 62,600,932 46,105,777

of which stock purchase options 314,817

of which stock subscription options 62,286,115


74BB.9.6. Number of shares used to compute diluted earnings per share

Diluted earnings per share is computed using the number of shares outstanding plus stock options, restricted shares and performance shares with a potentially dilutive effect.

(in millions) June 30,

2012 June 30,

2011 December 31,

2011

Average number of shares outstanding 1,319.3 1,308.6 1,321.7

Adjustment for options with potentially dilutive effect 3.0 1.8 1.7

Adjustment for restricted shares with potentially dilutive effect 5.6 2.9 3.3

Average number of shares used to compute diluted earnings per share 1,327.9 1,313.3 1,326.7

As of June 30, 2012, 43 million stock options were excluded from the calculation of diluted earnings per share because they did not have a potentially dilutive effect, compared with 56 million as of December 31, 2011 and 61.3 million as of June 30, 2011.

75BB.9.7. Other comprehensive income

Movements in other comprehensive income were as follows:

(€ million)

June 30, 2012

(6 months)

June 30, 2011P

(1) (6 months)

December 31, 2011P

(1) (12 months)

Balance, beginning of period (1,477) (1,102) (1,102)

Attributable to equity holders of Sanofi (1,460) (1,097) (1,097)

Attributable to non-controlling interests (17) (5) (5)

Actuarial gains/(losses):

• Actuarial gains/(losses) excluding associates and joint venturesP

(2) (721) 95 (677)

• Actuarial gains/(losses) of associates and joint ventures — — —

• Tax effects 186 (51) 138

Items not potentially reclassifiable to profit or loss (535) 44 (539)

Available-for-sale financial assets:

• Change in fair valueP

(3) 820 215 250

• Tax effect (59) (10) (5)

Cash flow hedges:

• Change in fair valueP

(4) (5) 6 5

• Tax effects 2 (2) (2)

Change in currency translation differences:

• Currency translation differences on foreign subsidiariesP

(5) 572 (1,746) (65)

• Hedges of net investments in foreign operations — — (30)

• Tax effects — — 11

Items potentially reclassifiable to profit or loss 1,330 (1,537) 164

Balance, end of period (682) (2,595) (1,477)

Attributable to equity holders of Sanofi (665) (2,580) (1,460)

Attributable to non-controlling interests (17) (15) (17)


(2) See Note B.13. (3) Including reclassification to profit or loss: not significant in the first half of 2012 and 2011. (4) Including reclassification to profit or loss: €1 million in the first half of 2012. (5) Including reclassification to profit or loss: €1 million in 2011.


B.10. DEBT, CASH AND CASH EQUIVALENTS

Changes in the Group’s financial position during the period were as follows:


2012 December 31,

2011 Long-term debt 10,270 12,499 Short-term debt and current portion of long-term debt 5,912 2,940 Interest rate and currency derivatives used to hedge debt (527) (483) Total debt 15,655 14,956 Cash and cash equivalents (4,307) (4,124) Interest rate and currency derivatives used to hedge cash and cash equivalents (1) 27 Debt, net of cash and cash equivalents 11,347 10,859

“Debt, net of cash and cash equivalents” is a non-GAAP financial indicator used by management and investors to measure the company’s overall net indebtedness.

Trends in the gearing ratio are shown below:


2012 December 31,

2011 Debt, net of cash and cash equivalents 11,347 10,859 Total equity 56,354 56,373 Gearing ratio 20.1% 19.3%

B.10.1. Debt at value on redemption

A reconciliation of the carrying amount of debt to value on redemption as of June 30, 2012 is shown below:

(€ million)

Carrying amount at

June 30, 2012

Amortized cost

Adjustment to debt

measured at fair value

Value on redemption at

June 30, 2012

Value on redemption at December 31,

2011 Long-term debt 10,270 47 (311) 10,006 12,278 Short-term debt and current portion of long-term debt 5,912 — (1) 5,911 2,937 Interest rate and currency derivatives used to hedge debt (527) — 254 (273) (258) Total debt 15,655 47 (58) 15,644 14,957 Cash and cash equivalents (4,307) — — (4,307) (4,124) Interest rate and currency derivatives used to hedge cash and cash equivalents (1) — — (1) 24

Debt, net of cash and cash equivalents 11,347 47 (58) 11,336 10,857


The table below shows an analysis of debt, net of cash and cash equivalents by type, at value on redemption:

June 30, 2012 December 31, 2011

(€ million) non-

current current Total non-

current current Total Bond issues 9,392 2,988 12,380 11,662 1,324 12,986 Other bank borrowings 525 1,166 1,691 522 562 1,084 Commercial paper — 1,270 1,270 — 695 695 Finance lease obligations 75 12 87 80 12 92 Other borrowings 14 47 61 14 62 76 Bank credit balances — 428 428 — 282 282 Interest rate and currency derivatives used to hedge debt (125) (148) (273) (143) (115) (258) Total debt 9,881 5,763 15,644 12,135 2,822 14,957 Cash and cash equivalents — (4,307) (4,307) — (4,124) (4,124) Interest rate and currency derivatives used to hedge cash and cash equivalents — (1) (1) — 24 24 Debt, net of cash and cash equivalents 9,881 1,455 11,336 12,135 (1,278) 10,857

PRINCIPAL FINANCING AND DEBT REDUCTION TRANSACTIONS DURING THE PERIOD

During the first half of 2012:

• Sanofi redeemed at maturity (on March 28, 2012) a bond issue carried out in March 2011 with a nominal amount of $1.0 billion (€711 million);

• Sanofi contracted a €428 million bank loan, expiring December 2017.

In addition, Sanofi had the following arrangements in place as of June 30, 2012 to manage its liquidity in connection with current operations:

• a €3 billion syndicated credit facility initially expiring December 26, 2012, with two 12-month extension options, available for drawdown in euros (on July 16, 2012, this facility was extended until December 25, 2013);

• a €7 billion syndicated credit facility (€0.725 billion expiring July 6, 2015, €6.275 billion expiring July 4, 2016), available for drawdown in euros or U.S. dollars and with a 12-month extension option.

Sanofi also has in place two commercial paper programs, one in France (€6 billion) and the other in the United States ($10 billion). As of June 30, 2012, a total of €1.3 billion was drawn down under these programs.

The financing arrangements in place as of June 30, 2012 at the level of the Sanofi parent company (which centrally manages the bulk of the Group’s financing needs) are not subject to covenants regarding financial ratios, and contain no clauses linking credit spreads or fees to Sanofi’s credit rating.

77BB.10.2. Market value of debt

The market value of debt, net of cash and cash equivalents at June 30, 2012 was €12,164 million (€11,596 million at December 31, 2011), compared with a value on redemption of €11,336 million (€10,857 million at December 31, 2011).


B.11. DERIVATIVE FINANCIAL INSTRUMENTS

B.11.1. Currency derivatives used to manage operational risk exposures

The table below shows operational currency hedging instruments in place as of June 30, 2012, with the notional amount translated into euros at the relevant closing exchange rate:

June 30, 2012 Of which derivatives designated

as cash flow hedges Of which derivatives not

eligible for hedge accounting

(€ million) Notional amount

Fair value

Notional amount

Fair value

Of which recognized

in equity Notional amount

Fair value

Forward currency sales 2,903 (34) 2 — — 2,901 (34)

• of which U.S. dollar 1,110 (23) — — — 1,110 (23)

• of which Japanese yen 541 (9) — — — 541 (9)

• of which Russian rouble 345 4 — — — 345 4

• of which Chinese yuan 199 — — — — 199 —

• of which Singapore dollar 80 — — — — 80 —

Forward currency purchases 1,197 6 — — — 1,197 6

• of which U.S. dollar 478 2 — — — 478 2

• of which Japanese yen 154 2 — — — 154 2

• of which Russian rouble 87 (4) — — — 87 (4)

• of which Singapore dollar 79 — — — — 79 —

• of which Hungarian forint 76 1 — — — 76 1

Total 4,100 (28) 2 — — 4,098 (28)

As of June 30, 2012, none of these instruments had an expiry date later than October 2012 (except for a forward purchase position of GBP 38 million maturing between 2012 and 2015).

These positions primarily hedge material foreign-currency cash flows arising after the balance sheet date in relation to transactions carried out during the six months to June 30, 2012 and recognized in the consolidated balance sheet as of that date. Gains and losses on these hedging instruments (forward contracts) are calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Consequently, the commercial foreign exchange gain or loss to be recognized on these items (hedges and hedged transactions as of June 30, 2012) in the second half of 2012 is not expected to be material.

B.11.2. Currency and interest rate derivatives used to manage financial risk exposures

Cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of the Group’s financing activities, expose certain entities (especially the Sanofi parent company) to financial foreign exchange risk. This is the risk of changes in the value of loans and borrowings denominated in a currency other than the functional currency of the lender or borrower.


The net foreign exchange exposure for each currency and entity is hedged by firm financial instruments (usually currency swaps or forward contracts), a summary of which as of June 30, 2012 is provided below:

June 30, 2012 (€ million)

Notional amount

Fair value Expiry

Forward currency sales 3,440 (65)

• of which Japanese yen 1,477 — 2012

• of which U.S. dollar 1,293 (63) 2012

• of which Czech koruna 272 3 2012

• of which Australian dollar 147 (5) 2012

• of which Hungarian forint 69 (1) 2012

Forward currency purchases 2,081 3

• of which Pound sterling 979 — 2012

• of which Singapore dollar 298 3 2012

• of which Japanese yen 223 (2) 2012

• of which Swiss franc 220 — 2012

• of which Australian dollar 121 1 2012

Total 5,521 (62)

To limit risk and optimize the cost of its short-term and medium-term net debt, Sanofi uses derivative instruments that alter the interest rate and/or currency structure of its debt and cash. The table below shows instruments of this type in place as of June 30, 2012:

Notional amounts by expiry date

as of June 30, 2012

Of which derivatives designated as fair

value hedges Of which derivatives

designated as cash flow hedges

(€ million) 2012 2013 2014 2015 2016 2019 Total Fair

value Notional amount

Fair value

Notional amount

Fair value

Of which recognized in

equity

Caps

Purchases of caps 0.50% 794 — — — — — 794 — — — 794 — (1)

Interest rate swaps

Interest rate swap, pay floating / receive 2.73% — — — — 500 — 500 36 500 36 — — —

Interest rate swap, pay floating / receive 2.38% — — 1,200 — 1,000 800 3,000 245 3,000 245 — — —

Interest rate swap, pay floating / receive 0.34% — — 386 — — — 386 1 386 1 — — —

Cross currency swaps

- pay € floating / receive JPY floating — 92 — — — — 92 58 — — — — —

- pay € 4.89% / receive CHF 3.26% 180 — — — — — 180 48 — — 180 48 —

- pay € 4.87% / receive CHF 3.38% — — — 244 — — 244 94 — — 244 94 7

- pay € floatingP

P/ receive

CHF 3.26% 167 — — — — — 167 46 167 46 — — —

Currency swaps

- pay € / receive USD 797 — — — — — 797 (2) — — — — —

Currency swaps used to hedge short-term USD investments

- pay USD/receive €P

121 — — — — — 121 1 — — — — —

Total 2,059 92 1,586 244 1,500 800 6,281 527 4,053 328 1,218 142 6


B.12. LIABILITIES RELATED TO BUSINESS COMBINATIONS AND TO NON-CONTROLLING INTERESTS

A description of the nature of the liabilities included in the line item Liabilities related to business combinations and to non-controlling interests is provided in Note B.8.5. to the consolidated financial statements for the year ended December 31, 2011.

Movements in this item during the first half of 2012 were as follows:

Liabilities related to

business combinations

(€ million)

Liabilities related to

non-controlling interests(2)

CVRs issued in connection with

the acquisition of Genzyme(3)

Bayer contingent

consideration arising from

the Genzyme acquisition Other Total

Balance at January 1, 2012 133 268 694 461 1,556

New business combinations — — — 14 14

Payments made — — (52) (28) (80)

Fair value remeasurements through profit or loss (including unwinding of discount)(1) — 56 39 11 106

Other movements(2) (15) — — 1 (14)

Currency translation differences 1 — 11 9 21

Balance at June 30, 2012 119 324 692 468 1,603

Split as follows: • current • non-current

154 1,449

(1) Amounts reported in the income statement line item Fair value remeasurement of contingent consideration liabilities. (2) Put options granted to non-controlling interests. (3) On the basis of the quoted price of one CVR of $ 1.41 at June 30, 2012.

The liabilities related to business combinations and to non-controlling interests reported in the table above are classified as Level 3 instruments under IFRS 7 (refer to Note B.8.6. to the consolidated financial statements for the year ended December 31, 2011), except for the CVRs issued in connection with the Genzyme acquisition which are classified as Level 1 instruments.


48BB.13. PROVISIONS AND OTHER NON-CURRENT LIABILITIES

Provisions and other non-current liabilities consist of the following items:

(€ million)

Provisions for pensions and other benefits

Restructuring provisions

Other provisions

Other non-current

liabilities Total

Balance at January 1, 2012 4,892 1,182 4,158 114 10,346

Increases in provisions and other liabilities 197 40 407 — 644

Reversals of utilized provisions (221) (9) (73) (3) (306)

Reversals of unutilized provisions (115) (1) (73) — (189)

TransfersP

(1) (2) (140) (25) (5) (172)

Unwinding of discount — 21 23 — 44

Currency translation differences 53 3 29 2 87

Actuarial (gains)/losses on defined-benefit plans 721 — — — 721

Balance at June 30, 2012 5,525 1,096 4,446 108 11,175

(1) Mainly comprises transfers between current and non-current.

PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS

Sanofi applies the option allowed by the amendment to IAS 19, under which all actuarial gains and losses under defined-benefit plans are recognized in the balance sheet with the matching entry recorded as a component of equity. Under this method, Sanofi reviews the relevant assumptions (in particular discount rates and the fair value of plan assets) at each balance sheet date.

For disclosures about the sensitivity of pension and other employee benefit obligations, and the assumptions used as of December 31, 2011, see Note D.19.1. to the consolidated financial statements for the year ended December 31, 2011.

The principal assumptions used for the euro zone, the United States and the United Kingdom were reviewed as of June 30, 2012 to take into account changes during the first half of 2012.

Actuarial gains and losses on pensions and other post-employment benefits recognized with a matching entry in equity are as follows (amounts reported before tax):

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months)

Actuarial gains/(losses) on plan assets 111 (33) (290)

Actuarial gains/(losses) on benefit obligationsP

(1) (832) 128 (387)

Decrease/(increase) in provision (721) 95 (677) (1) The movement during the first half of 2012 includes the effect of the reduction in discount rates in the euro zone (-1%).


B.14. OFF BALANCE SHEET COMMITMENTS

There were no material changes in the Group’s off balance sheet commitments during the period.

B.15. LEGAL AND ARBITRAL PROCEEDINGS

Sanofi and its affiliates are involved in litigation, arbitration and other legal proceedings. These proceedings typically are related to product liability claims, intellectual property rights (particularly claims against generic companies seeking to limit the patent protection of Sanofi products), competition law and trade practices, commercial claims, employment and wrongful discharge claims, tax assessment claims, waste disposal and pollution claims, and claims under warranties or indemnification arrangements relating to business divestitures.

The matters discussed below constitute the most significant developments since publication of the disclosures concerning legal proceedings in the Company’s financial statements for the year ended December 31, 2011.

• Ramipril Canada Patent Litigation

On May 11, 2012 the Federal Court in Canada issued its decisions in the Section 8 Actions brought by Apotex and Teva setting the parameters on how the amount of damages owed by Sanofi should be calculated. Sanofi and Teva have reached agreement on an amount to satisfy Teva’s claim, which amount is confidential. Sanofi and Apotex have not yet reached an agreement on the calculation of damages. Sanofi has appealed both decisions to the Federal Court of Appeal. The respective appeals do not suspend the obligation to pay damages pursuant to the Federal Court’s decision.

• Plavix® – Product Litigation

Currently, approximately 250 lawsuits, involving approximately 1,400 claimants have been filed against affiliates of the Group and Bristol-Myers Squibb seeking recovery under state law for personal injuries allegedly sustained in connection with the use of Plavix®. The actions are venued in several jurisdictions, including the federal and/or state courts of New Jersey, New York, California, Ohio, Pennsylvania, and Illinois. The defendants have exercised their right to terminate the tolling agreement, effective September 1, 2012, with respect to unfiled claims by potential additional plaintiffs. At this stage of the litigation, a reasonable estimate of the financial effect of these cases is not practicable.


51BB.16. RESTRUCTURING COSTS

Restructuring costs break down as follows:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) Employee-related expenses 97 351 840 Expenses related to property, plant and equipment 137 82 422 Compensation for early termination of contracts (other than contracts of employment) (1) 24 27 Decontamination costs 11 — 22 Other restructuring costs 6 10 3 Total 250 467 1,314

An impairment loss of €107 million was recognized against property, plant and equipment in the first half of 2012 in connection with the ongoing reorganization of Research and Development activities.

52BB.17. FINANCIAL INCOME AND EXPENSES

Financial income and expenses comprise the following items:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) Cost of debtP

(1) (207) (198) (425) Interest income 39 62 100

Cost of debt, net of cash and cash equivalents (168) (136) (325) Non-operating foreign exchange gains/(losses) 4 (10) 10 Unwinding of discount on provisions (44) (40) (83) Gains/(losses) on disposals of financial assets — 1 25 Impairment losses on financial assets, net of reversals (8) — (58) Other items (11) 7 19

Net financial income/(expenses) (227) (178) (412)

comprising: financial expenses (272) (234) (552) financial income 45 56 140

(1) Including gain/(loss) on interest and currency derivatives used to hedge debt: €35 million for the six months ended June 30, 2012.

53BB.18. INCOME TAX EXPENSE

The difference between the effective tax rate and the standard corporate income tax rate applicable in France is explained as follows:

(as a percentage)

June 30, 2012

(6 months)P

(1)

June 30, 2011

(6 months)P

(1)

December 31, 2011

(12 months) Standard tax rate applied in France 34 34 34 Impact of reduced-rate income tax on royalties in France (7) (13) (11) Impact of change in net deferred tax liabilities as a result of changes in tax laws and rates — 1 (4) Impact of the Franco-American Advance Pricing Agreement, 2006-2010 — — (7) Impact of tax borne by BMS for the territory managed by Sanofi (1) (2) (1) Other items (2) 1 (2)

Effective tax rate 24 21 9

(1) Rate calculated on the basis of the estimated full-year effective tax rate (see Note A.2.).


B.19. SEGMENT INFORMATION

Sanofi has three operating segments: Pharmaceuticals, Human Vaccines (Vaccines), and Animal Health. The “Other” segment consists of all activities that are not reportable segments as defined in IFRS 8 (Operating Segments).

The Pharmaceuticals segment covers research, development, production and marketing of medicines, including activities acquired with Genzyme. Sanofi’s pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health products. This segment also includes all associates and joint ventures whose activities are related to pharmaceuticals, in particular the entities majority owned by BMS.

The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes the Sanofi Pasteur MSD joint venture in Europe.

The Animal Health segment comprises the research, development, production and marketing activities of Merial, which offers a complete range of medicines and vaccines for a wide variety of animal species.

Inter-segment transactions are not material.

B.19.1. Segment results

Sanofi reports segment results on the basis of “Business operating income”. This indicator, which complies with IFRS 8, is used internally to measure operational performance and allocate resources.

Business operating income is derived from Operating income, adjusted as follows:

• the amounts reported in the line items Restructuring costs, Fair value remeasurement of contingent consideration liabilities and Other gains and losses, and litigation are eliminated;

• amortization and impairment losses charged against intangible assets (other than software) are eliminated;

• the share of net profits/losses from associates and joint ventures is added;

• the share attributable to non-controlling interests is deducted;

• other acquisition-related effects (primarily the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments in associates and joint ventures) are eliminated;

• restructuring costs relating to associates and joint ventures are eliminated.


Segment results are shown in the tables below:

June 30, 2012 (6 months)

(€ million) Pharmaceuticals Vaccines Animal Health Other Total

Net sales 14,827 1,400 1,154 — 17,381 Other revenues 645 10 18 — 673 Cost of sales (4,431) (566) (346) — (5,343) Research and development expenses (2,051) (284) (80) — (2,415) Selling and general expenses (3,763) (288) (358) (1) (4,410) Other operating income and expenses (21) (1) 1 16 (5) Share of profit/(loss) of associates 425 (6) — — 419 Net income attributable to non-controlling interests (104) — — — (104)

Business operating income 5,527 265 389 15 6,196 Financial income and expenses (227) Income tax expense (1,583) Business net income 4,386

June 30, 2011 (6 months)


Net sales 13,730 1,308 1,090 — 16,128 Other revenues 816 10 9 — 835 Cost of sales (4,073) (550) (327) — (4,950) Research and development expenses (1,963) (264) (70) — (2,297) Selling and general expenses (3,614) (264) (322) (1) (4,201) Other operating income and expenses 42 (1) (7) (11) 23 Share of profit/(loss) of associates 559 (2) — 13 570 Net income attributable to non-controlling interests (136) — — — (136)

Business operating income 5,361 237 373 1 5,972 Financial income and expenses (178) Income tax expense (1,474) Business net income 4,320

December 31, 2011 (12 months)


Net sales 27,890 3,469 2,030 — 33,389 Other revenues 1,622 25 22 — 1,669 Cost of sales (8,368) (1,404) (654) — (10,426) Research and development expenses (4,101) (564) (146) — (4,811) Selling and general expenses (7,376) (542) (617) (1) (8,536) Other operating income and expenses (13) — (7) 24 4 Share of profit/(loss) of associates 1,088 1 — 13 1,102 Net income attributable to non-controlling interests (246) — (1) — (247)

Business operating income 10,496 985 627 36 12,144 Financial income and expenses (412) Income tax expense (2,937)

Business net income 8,795


“Business net income” is determined by taking “Business operating income” and adding financial income and deducting financial expenses, including the related income tax effects.

“Business net income” is defined as Net income attributable to equity holders of Sanofi excluding (i) amortization of intangible assets; (ii) impairment of intangible assets; (iii) fair value remeasurement of contingent consideration liabilities; (iv) other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); (v) restructuring costs (including restructuring costs relating to associates and joint ventures), (vi) other gains and losses, and litigation; (vii) the tax effects of items (i) through (vi); (viii) effects of major tax disputes and, as an exception for 2011, the retroactive effect (2006-2010) on the tax liability resulting from the agreement signed on December 22, 2011 by France and the United States on transfer prices (APA-Advance Pricing Agreement), for which the amount is deemed to be significant; (ix) the share of non-controlling interests in items (i) through (viii). Items (i), (ii), (iii), (v) and (vi) correspond to those reported in the income statement line items Amortization of intangible assets, Impairment of intangible assets, Fair value remeasurement of contingent consideration liabilities, Restructuring costs, and Other gains and losses, and litigation.

The table below reconciles “Business net income” to Net income attributable to equity holders of Sanofi:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months)

Business net income 4,386 4,320 8,795

(i) Amortization of intangible assets (1,675) (1,701) (3,314)

(ii) Impairment of intangible assets (40) (69) (142)

(iii) Fair value remeasurement of contingent consideration liabilities (106) (66) 15

(iv) Expenses arising from the impact of acquisitions on inventories(1) (17) (264) (476)

(v) Restructuring costs (250) (467) (1,314)

(vi) Other gains and losses, and litigation — (517) (327)

(vii) Tax effects of: 714 1,002 1,905 - amortization of intangible assets 615 559 1,178 - impairment of intangible assets 14 20 37 - fair value remeasurement of contingent consideration liabilities 3 5 34 - expenses arising from the impact of acquisitions on inventories 5 78 143 - restructuring costs 77 150 399 - other gains and losses, and litigation — 190 114

(iv) / (viii) Other tax items — — 577

(ix) Share of items listed above attributable to non-controlling interests 1 — 6

(iv) / (v) Restructuring costs of associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (15) (14) (32)


(1) This line corresponds to the workdown of inventories remeasured at fair value at the acquisition date.


81BB.19.2. Other segment information

The tables below show the split by operating segment of (i) the carrying amount of investments in associates and joint ventures, (ii) acquisitions of property, plant and equipment, and (iii) acquisitions of intangible assets.

The principal associates and joint ventures allocated to each segment are: for Pharmaceuticals, the entities majority owned by BMS (see Note C.1. to the consolidated financial statements for the year ended December 31, 2011), and InfraServ Höchst; and for Vaccines, Sanofi Pasteur MSD. The “Other” segment included Yves Rocher as an associate until November 2011.

Acquisitions of intangible assets and property, plant and equipment correspond to acquisitions made during the period.

June 30, 2012 (€ million) Pharmaceuticals Vaccines Animal Health Other Total Investments in associates and joint ventures 423 311 — — 734 Acquisitions of property, plant and equipment 536 108 38 — 682 Acquisitions of intangible assets 98 1 5 — 104

June 30, 2011


Investments in associates and joint ventures 432 338 — 140 910 Acquisitions of property, plant and equipment 540 162 38 — 740 Acquisitions of intangible assets 83 5 4 — 92

December 31, 2011

(€ million) Pharmaceuticals Vaccines Animal Health Other Total Investments in associates and joint ventures 488 319 — — 807 Acquisitions of property, plant and equipment 1,136 323 77 — 1,536 Acquisitions of intangible assets 223 8 15 — 246


B.19.3. Information by geographical region

The geographical information on net sales provided below is based on the geographical location of the customer.

In accordance with IFRS 8, the non-current assets reported below exclude financial instruments, deferred tax assets, and pre-funded pension obligations.

6 months ended June 30, 2012

(€ million) Total Europe of which

France North

America Of which

United States Other

Countries

Net sales 17,381 5,688 1,517 5,668 5,395 6,025

Non-current assets – property, plant and equipment 10,723 6,739 4,020 2,819 2,415 1,165 – intangible assets 22,415 5,102 12,712 4,601 – goodwill 39,047 15,239 16,836 6,972

6 months ended June 30, 2011


France North

America Of which

United States Other

Countries

Net sales 16,128 5,981 1,591 4,843 4,580 5,304

Non-current assets – property, plant and equipment 10,669 7,032 4,049 2,585 2,187 1,052 – intangible assets(1) 21,078 5,458 12,901 2,719 – goodwill(1)/(2) 35,270 14,817 15,041 5,412

(1) Excluding Merial, which had intangible assets of €4,232 million, including goodwill of €1,118 million. (2) In accordance with IFRS 3 (Business Combinations), Sanofi made adjustments during the Genzyme purchase price allocation

period to some of the provisional amounts recognized in 2011 (see Note B.1.).

12 months ended December 31, 2011


France North

America Of which

United States Other

Countries

Net sales 33,389 11,796 3,106 10,511 9,957 11,082

Non-current assets – property, plant and equipment 10,750 6,857 4,128 2,768 2,374 1,125 – intangible assets 23,639 5,537 15,422 2,680 – goodwill(1) 38,582 15,238 16,365 6,979 (1) In accordance with IFRS 3 (Business Combinations), Sanofi made adjustments during the Genzyme purchase price allocation

period to some of the provisional amounts recognized in 2011 (see Note B.1.).

As stated in Note D.5. to the consolidated financial statements for the year ended December 31, 2011, France is not a cash generating unit (CGU). Consequently, information about goodwill is provided for Europe.


83BB.19.4. Net sales

Sanofi’s net sales comprise the net sales generated by the Pharmaceuticals, Vaccines and Animal Health segments.

The table below shows net sales of flagship products and of the other major products of the Pharmaceuticals segment:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) LantusP

® 2,346 1,894 3,916 ApidraP

® 108 102 190 AmarylP

® 213 217 436 InsumanP

® 65 64 132 Other diabetes products 15 4 10 Total Diabetes 2,747 2,281 4,684 TaxotereP

® 309 586 922 EloxatinP

® 759 436 1,071 JevtanaP

® 119 96 188 Other oncology productsP

(1) 305 159 448 Total Oncology 1,492 1,277 2,629 LovenoxP

® 1,015 1,119 2,111 PlavixP

® 1,058 994 2,040 Aprovel P

®P /CoAprovelP

® 641 663 1,291 AllegraP

® 308 335 580 StilnoxP

®P/ AmbienP

®P/ Ambien CRP

®P/ MysleeP

® 254 232 490 CopaxoneP

® 24 233 436 TritaceP

® 180 194 375 DepakineP

® 202 196 388 MultaqP

® 127 131 261 Xatral P

® 69 129 200 ActonelP

® 72 91 167 NasacortP

® 38 74 106 Renagel P

®P / RenvelaP

® (1) 312 137 415 SynViscP

® P/ SynVisc OneP

® (1) 184 89 256 CerezymeP

® (1) 299 166 441 MyozymeP

®P / LumizymeP

® (1) 225 99 308 FabrazymeP

® (1) 121 30 109 Other rare diseases productsP

(1) 189 79 264 Total New Genzyme P

(1) 834 374 1,122 Other products 2,820 2,977 5,927 Consumer Health Care 1,543 1,356 2,666 Generics 907 848 1,746 Total Pharmaceuticals 14,827 13,730 27,890 (1) In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

The table below shows net sales of the principal vaccine types sold by the Vaccines segment:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) Polio/Pertussis/Hib vaccines 518 494 1,075

Influenza vaccines 169 158 826

Meningitis/Pneumonia vaccines 202 183 510

Adult Booster vaccines 233 206 465

Travel and Endemics Vaccines 177 171 370

Other Vaccines 101 96 223

Total Vaccines 1,400 1,308 3,469


The table below shows net sales of the principal products sold by the Animal Health segment:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months) Frontline® and other fipronil products 468 459 764

Vaccines 345 325 662

Avermectin 221 198 372

Other Animal Health products 120 108 232

Total Animal Health 1,154 1,090 2,030

B.19.5. Split of sales

The three largest customers accounted for approximately 6.9%, 5.3% and 5% respectively of the Group’s gross sales in the first half of 2012.


27BC Events subsequent to June 30, 2012

On July 4, 2012, Sanofi signed an agreement with a view to the sale of its direct and indirect equity interest of approximately 19.3% in the Yves Rocher group to Société Financière des Laboratoires de Cosmétologies Yves Rocher, subject to the fulfillment of certain conditions.


2 | HALF-YEAR MANAGEMENT REPORT

A Significant events of the first half of 2012

A.1. PHARMACEUTICALS

A.1.1. Acquisitions and alliances

The following acquisitions and alliances took place during the first half of 2012:

• On April 2, 2012, Sanofi strengthened its presence in biosurgery by acquiring a 100% equity interest in Pluromed, Inc. (Pluromed), an American medical devices company. Pluromed has developed a proprietary polymer technology – Rapid Transition Polymers (RTP™) – pioneering the use of plugs that can be injected into blood vessels to improve the safety, efficacy and economics of medical interventions. Sanofi will commercialize Pluromed’s LeGoo®, a highly innovative gel approved by the U.S. Food and Drug Administration (FDA) and the European Union for temporary endovascular occlusion of blood vessels during surgical procedures.

• On April 19, 2012, Sanofi announced that it had entered into a collaboration with the Michael J. Fox Foundation (MJFF) to conduct a clinical trial to assess the safety and tolerability of AVE 8112, a PDE4 (phosphodiesterase type 4) inhibitor in patients with Parkinson's disease. Under the terms of the collaboration, MJFF will sponsor a Phase Ib clinical trial to assess the safety and tolerability of AVE8112 in patients with Parkinson's disease. All data and results generated by the clinical trial will be owned by MJFF and shared with Sanofi.

• On June 19, 2012, Sanofi and the Joslin Diabetes Center, a teaching and research affiliate of Harvard Medical School, announced a new collaboration to promote the development of new medicines for the treatment of diabetes and related disorders. The collaboration will focus on four key areas within diabetes and related disorders to identify potential new biologics or small drug candidates for the treatment of late complications of diabetes and new insulin analogs with more targeted efficacy. Additionally, research will address the challenges of insulin resistance and personalized medicine, with the overall aim of improving the lives of people living with diabetes.

• At the end of June 2012, Sanofi elected to exercise its options to acquire the exclusive worldwide license for further development, manufacture and commercialization of two gene-based therapies UshStatTM (for the treatment of Usher syndrom 1B) and StarGenTM (for the treatment of Stargardt disease).

A.1.2. Filings for marketing authorization for new products

The following applications for marketing authorization were filed during the first half of 2012:

• In April 2012, Sanofi and Regeneron announced that the FDA had granted a priority review of the Biologics License Application (BLA) for Zaltrap® (aflibercept) in combination with irinotecan-fluoropyrimidine-based chemotherapy in patients with metastatic colorectal cancer previously treated with an oxaliplatin-containing regimen. Under the priority review, the target date for an FDA decision on the Zaltrap® BLA is August 4, 2012. The filing was based on the results of the Phase III VELOUR study.


• In June 2012, Sanofi and its subsidiary Genzyme filed a supplemental Biologics License Application (sBLA) with the FDA in the United States and an application for marketing authorization with the European Medicines Agency (EMA) in Europe for Lemtrada™ 3TP0F

(1)P3T

(alemtuzumab) in the treatment of relapsing forms of multiple sclerosis. Genzyme has requested Priority Review of the sBLA (six month review) and an FDA decision is pending. In the absence of a Fast Track designation, a Standard Review (ten month review) may be assigned.

• In June 2012, Sanofi filed an application for marketing authorization with the Japanese authorities for LyxumiaP

® P3TP1F

(2) P3T (lixisenatide), an investigational once-daily injectable GLP-1

receptor agonist for the treatment of Type 2 diabetes.

The following marketing authorization was granted during the first half of 2012:

• In May 2012, the European Commission granted a marketing authorization in the European Union for the extended use of LantusP

®P (insulin glargine [rDNA origin] injection) for the

treatment of type 1 diabetes in children aged two to five years.

The following applications for marketing authorization were withdrawn during the first half of 2012:

• Following comments received from regulatory agencies in June 2012 regarding the use of semuloprin for the prophylaxis of venous thromboembolism (VTE) in patients receiving chemotherapy, Sanofi decided to withdraw all applications for marketing authorization for semuloparin.

• Sanofi decided not to pursue registration of clofarabine (ClolarP

®P) for the treatment of acute

myeloid leukemia (AML).

87BA.1.3. Alemtuzumab

CampathP

®P/MabCampathP

®P is currently approved in the United States, Europe and a number of

other jurisdictions for certain oncology indications. Genzyme will discontinue its commercialization of CampathP

®P/MabCampathP

®P. This action was not taken for any reasons related to product quality,

safety, efficacy or supply with respect to its currently approved indications, but because Sanofi and Genzyme have decided to focus on bringing Lemtrada™ forward for multiple sclerosis, and there are differences in dosing regimen and the safety profile associated with CampathP

®P/MabCampathP

®P

and Lemtrada™. As we discontinue commercialization of CampathP

®P/MabCampathP

®P, we are

working with healthcare authorities toward our goal of establishing patient access programs through which we will provide CampathP

®P/MabCampathP

®P free of charge for those disease

indications in which it is being utilized today, wherever it is permitted. As part of this process, marketing authorizations for CampathP

®P/MabCampathP

®P have already been withdrawn in several

countries. In certain other countries, like the United States, this process is implemented through a change in distribution but the product will not be promoted. Until approved for multiple sclerosis, Lemtrada™ will not be available for use with multiple sclerosis patients outside of a formal, regulated clinical trial setting in which appropriate patients risk management measures are in place. Sales of CampathP

®P/MabCampathP

®P do not contribute to the achievement of the product sales

milestones. However, the Company’s ability to meet the product sales milestones depends in part on its ability to successfully launch Lemtrada™ with distinct distribution channels and to the extent CampathP

®P/MabCampathP

®P remains available, we cannot predict the extent to which it could interfere

with plans for Lemtrada™ or impact the ability to achieve the product sales milestones.

(1) Lemtrada™ is the trade name submitted to health authorities for alemtuzumab. (2) Under license from Zealand Pharma A/S. Lyxumia® is the intended trademark of lixisenatide. Lixisenatide is not currently approved or licensed anywhere in the world.


Relationship with Bayer HealthCare: Bayer HealthCare (Bayer) has been co-developing alemtuzumab in multiple sclerosis with Genzyme. Genzyme holds the worldwide rights to alemtuzumab and has primary responsibility for its development and commercialization in multiple sclerosis, but Bayer retains an option to co-promote alemtuzumab in multiple sclerosis. Bayer has notified Genzyme of its intention to co-promote under this option. We cannot predict the impact that co-promotion would have on the Company’s ability to achieve the product sales milestones, if any. Following regulatory approval and commercialization, Bayer would receive contingent payments based on sales revenue.

A.1.4. Loss of regulatory exclusivity of our main products

As expected, Aprovel®/Avapro®/Karvea®/Avalide® and Plavix®/Iscover® lost their regulatory exclusivity in the United States in the first half of 2012, respectively on March 30, 2012 and May 17, 2012.

A.1.5. Research and Development

The main developments in the research and development (R&D) portfolio during the first half of 2012 are described below:

• Eight projects entered Phase I: SAR399063 and SAR404460 (in collaboration with CRNH, ASL & 3inature), GPL-DHA/Vitamin D combinations for the treatment of pre sarcopenia; SAR228810, an anti-Aß protofibril monoclonal antibody for the treatment of Alzheimer’s disease; SAR391786 (in collaboration with Regeneron), a monoclonal antibody for rehabilitation after orthopedic surgery; SAR127963, a P75 receptor antagonist for the treatment of brain lesions caused by a head injury; SAR252067 (developed in collaboration with Kyowa Hakko Kirin), an anti-light monoclonal antibody for ulcerative colitis and Crohn’s disease; UshStatTM (developed in collaboration with Oxford Biomedica), a myosin 7A gene therapy for Usher syndrome 1B; and SAR405838 (developed in collaboration with Ascenta Therapeutics), an oral inhibitor of the HDM2 p53 protein-protein interaction.

• One project entered Phase II: SAR292833, a TRPV3 antagonist for the treatment of chronic debilitating pain.

• Two projects in Phase I have been discontinued: SAR114137, a cathepsine S/K inhibitor for the treatment of chronic debilitating pain, and SAR411298, an FAAH inhibitor for cancer pain.

• In February 2012, Sanofi decided not to continue the co-development with Regeneron of SAR164877/REGN475, but will continue to fund development costs until the end of 2012 and will retain entitlement to a royalty on future sales of REGN475.

• In June 2012, Sanofi decided to discontinue the BiTE® antibody project and to terminate its collaboration agreement with Micromet.

The following results of clinical trials were released during the first half of 2012:

• In March 2012, data from two Phase II trials with SAR236553/REGN727 (an investigational, high-affinity, subcutaneously administered, fully-human monoclonal antibody targeting the PCSK9 proprotein, in collaboration with Regeneron) were presented at the Annual Scientific Meeting of the American College of Cardiology. These data showed that treatment with SAR236553/REGN727 over 8 to 12 weeks significantly reduced mean low-density lipoprotein-cholesterol (LDL-C) by 40% to 72% in patients with elevated LDL-C on stable dose of statins.


• On April 5, 2012, Sanofi and Regeneron also announced headline results from the Phase III VENICE trial evaluating the addition of ZaltrapP

®P to docetaxel and prednisone for the first-line

treatment of metastatic androgen-independent prostate cancer. The study did not meet the pre-specified criterion of improvement in overall survival. The safety profile was consistent with previous studies of Zaltrap P

®P in combination with docetaxel.

• On April 24, 2012, additional data from the Phase lll CARE-MS ll trial comparing LemtradaP

TM P(alemtuzumab) with the interferon beta-1a Rebif P

®P in patients with relapsing-

remitting multiple sclerosis were presented at the Annual Meeting of the American Academy of Neurology. The data showed that accumulation of disability was significantly slowed in patients with multiple sclerosis who were treated with alemtuzumab versus Rebif P

®P, as measured by the

Expanded Disability Status Scale (EDSS), a standard assessment of physical disability progression. In addition, significant improvement in disability scores was observed in some patients treated with alemtuzumab from baseline compared with patients treated with Rebif P

®P,

suggesting a reversal of disability in these patients. In the trial, patients with pre-existing disability treated with alemtuzumab were more than twice as likely to experience a sustained reduction in disability as patients given Rebif P

®P.

• On June 1, 2012, Sanofi and its subsidiary Genzyme announced top-line results from the Phase III TOWER study, which evaluated the efficacy and safety of AubagioP

®P3TP2F

(1)P3T

(teriflunomide) in 1,169 patients with relapsing forms of multiple sclerosis, comparing a once-daily 7 mg or 14 mg oral dose of teriflunomide versus placebo. With the 14 mg dose, the study showed a statistically significant reduction in the annualized relapse rate and in the risk of sustained accumulation of disability. Analysis of the full TOWER data is ongoing.

• Regarding LantusP

® P(insulin glargine [rDNA origin] injection), Sanofi presented several clinical

study results in June 2012 at the 72nd Scientific Sessions of the American Diabetes Association:

- results from the ORIGIN international clinical trial showed that LantusP

®P had no statistically

significant positive or negative impact on cardiovascular outcomes versus standard care during the study period. These results also showed that insulin glargine delayed progression from pre-diabetes to type 2 diabetes and did not increase the risk of cancer;

- new results from a large-scale epidemiological program conducted by independent researchers in northern European countries and in the United States provided further evidence that there is no increased risk of cancer in people with diabetes treated with LantusP

®P, compared to those treated with other insulins;

- findings from the EASIE study showed that Lantus P

®P produced superior reduction in HbAR1cR

(glycated hemoglobin) versus sitagliptin in patients with early type 2 diabetes not controlled by metformin.

• On June 9, 2012, Sanofi announced data from the GetGoal Duo 1P

Pand GetGoal-L studies

showing that the investigational once-daily injectable GLP-1 agonist LyxumiaP

®P (lixisenatide), in

combination with basal insulin plus oral anti-diabetic agents, significantly reduced HbAR1cR (glycated hemoglobin) in people with type 2 diabetes who were either new to insulin therapy (as early as 12 weeks after initiation) or already treated with insulin (for an average of 3.1 years), with a significant reduction in post-prandial glucose.

(1) Aubagio® is the trade name submitted to health authorities for teriflunomide. This trade name is not currently approved or licensed anywhere in the world.


A.1.6. Capital expenditure

• In January 2012, the new plant at Framingham, Massachusetts (United States) was approved by the FDA and EMA for the production of Fabrazyme®, allowing Genzyme to begin returning supplies of Fabrazyme® to normal levels in the second quarter of 2012 and through the rest of the year.

• In May 2012, the FDA and EMA approved a second filling and finishing line at Genzyme’s plant in Waterford (Ireland), virtually doubling the filling and finishing capacity for Myozyme® and Lumizyme®.

• In May 2012, Sanofi inaugurated a new Lantus® SoloSTAR® production line at its plant in Beijing (China), and announced the second phase of this $90 million project involving the construction of a state-of-the art sterile production facility for insulin cartridges.


56BA.2. HUMAN VACCINES (Vaccines)

• On April 27, 2012, Sanofi Pasteur (the Vaccines division of Sanofi) announced that the Japanese Ministry of Health, Labor and Welfare had approved the company’s standalone Inactivated Poliovirus Vaccine (IPV) against acute flaccid poliomyelitis (ImovaxP

®P Polio), which

will be added to the country’s public immunization program on September 1, 2012.

• On June 22, 2012, Sanofi Pasteur announced that Hexaxim P

TMP (DTaP-IPV-Hib-HepB vaccine)

had received a positive opinion from the EMA as part of a procedure designed to evaluate medicinal products intended for markets outside the European Union. Hexaxim™ is the only fully liquid, ready to use 6-in-1 vaccine to protect infants against diphtheria, tetanus, pertussis (whooping cough), hepatitis B, poliomyelitis and invasive infections caused by Haemophilus influenzae type b.

57BA.3. ANIMAL HEALTH

• On March 30, 2012, Merial (the Animal Health division of Sanofi) completed the acquisition of Newport Laboratories, a privately held company based in Worthington, Minnesota (United States), which is a leader in autogenous vaccines for the bovine and swine markets.

58BA.4. OTHER SIGNIFICANT EVENTS OF THE FIRST HALF OF 2012

91BA.4.1. Litigation and proceedings

For a description of the most significant developments in litigation and proceedings since publication of the financial statements for the year ended December 31, 2011, refer to Note B.15. to the condensed half-year consolidated financial statements.

92BA.4.2. Other significant events

The Annual General Meeting of Sanofi shareholders was held on May 4, 2012, and all of the resolutions were passed. The meeting approved the distribution of a cash dividend of €2.65 per share (paid out on May 15, 2012), appointed Laurent Attal to serve as a director, and renewed the terms of office of a number of other directors (Uwe Bicker, Jean-René Fourtou, Claudie Haigneré, Carole Piwnica and Klaus Pohle). The shareholders also approved the transfer of Sanofi’s registered office in France to 54, rue La Boétie, Paris 8.


B Events subsequent to the balance sheet date (June 30, 2012)

• On July 4, 2012, Sanofi announced the execution of an agreement pursuant to which Sanofi will divest its equity interest of approximately 19.3% in the Yves Rocher cosmetics group to Société Financière des Laboratoires de Cosmétologie Yves Rocher, subject to certain closing conditions. This decision is in line with Sanofi’s policy of focusing on its strategic businesses.

• On July 12, 2012, Sanofi Pasteur received a Warning Letter from the Food and Drug Administration (FDA) following regular inspections conducted at manufacturing facilities in Toronto (Canada) and Marcy L'Etoile (France) this year. Sanofi Pasteur takes seriously the observations regarding the U.S. licensed products and their related production units. We are working diligently with the FDA to implement a series of immediate and ongoing steps to address the issues identified in the Warning Letter and further strengthen our manufacturing operations and quality systems.

• On July 20, 2012, Sanofi and Regeneron Pharmaceuticals, Inc. announced that several trials within ODYSSEY, the Phase III clinical program of SAR236553/REGN727 (a fully-human monoclonal antibody targeting the PCSK9 proprotein), had initiated enrollment of more than 22,000 patients.

• On July 25, 2012, Sanofi Pasteur announced that its tetravalent dengue vaccine candidate had demonstrated proof of efficacy against dengue, a threat to almost 3 billion people, in the world’s first ever dengue efficacy trial. The results of this study conducted in Thailand confirm the excellent safety profile of the vaccine. The vaccine generated antibody response for all four dengue virus serotypes. Evidence of protection was demonstrated against three of the four virus serotypes circulating in Thailand. Analyses are ongoing to understand the lack of protection for the fourth serotype in the particular epidemiological context of Thailand. The full data resulting from this first efficacy trial are currently under review by scientific and clinical experts, as well as public health officials. Detailed results of this study will be published in a peer-reviewed journal and presented to the scientific community later this year. Large scale Phase III dengue vaccine clinical studies with 31,000 participants are underway in 10 countries of Asia and Latin America. These studies will generate important additional data in a broader population and in a variety of epidemiological settings to demonstrate vaccine efficacy against the four circulating dengue virus serotypes.


30BC Consolidated financial statements for the first half of 2012

59BC.1. CONSOLIDATED RESULTS OF OPERATIONS FOR THE FIRST HALF OF 2012

Consolidated income statements for the six months to June 30, 2011 and 2012

(€ million)

June 30, 2012

(6 months) as % of

net sales

June 30, 2011

(6 months) as % of

net sales

Net sales 17,381 100.0% 16,128 100.0%

Other revenues 673 3.9% 835 5.2 %

Cost of sales (5,360) (30.8%) (5,214) (32.3 %)

Gross profit 12,694 73.0% 11,749 72.8%

Research & development expenses (2,415) (13.9%) (2,297) (14.2%)

Selling & general expenses (4,410) (25.4%) (4,201) (26.0%)

Other operating income 319 191

Other operating expenses (324) (168)

Amortization of intangible assets (1,675) (1,701)

Impairment of intangible assets (40) (69)

Fair value remeasurement of contingent consideration liabilities (106) (66)

restructuring costs (250) (467)

Other gains and losses, and litigation — (517)

Operating income 3,793 21.8% 2,454 15.2%

Financial expenses (272) (234)

Financial income 45 56

Income before tax and associates and joint ventures 3,566 20.5% 2,276 14.1%

Income tax expense (869) (472)

Share of profit / (loss) of associates and joint ventures 404 556

Net income 3,101 17.8% 2,360 14.6%

Attributable to non-controlling interests 103 136

Net income attributable to equity holders of Sanofi 2,998 17.2% 2,224 13.8%

Average number of shares outstanding (million) 1,319.3 1,308.6

Average number of shares outstanding after dilution (million) 1,327.9 1,313.3

Basic earnings per share (in euros) 2.27 1.70

Diluted earnings per share (in euros) 2.26 1.69


C.2. BUSINESS NET INCOME(1) FOR THE FIRST HALF OF 2012

In accordance with IFRS 8 (Operating Segments), the segment information reported by Sanofi is prepared on the basis of internal management data provided to the Chief Executive Officer, who is the Group’s chief operating decision maker. The performance of these segments is monitored individually using internal reports and common indicators.

The operating segment disclosures required under IFRS 8 are provided in Note B.19. to the condensed half-year consolidated financial statements.

Sanofi has three operating segments: Pharmaceuticals, Human Vaccines (Vaccines), and Animal Health. The Other segment includes all segments that do not qualify as reportable segments under IFRS 8.

The Pharmaceuticals segment covers research, development, production and marketing of medicines, including activities acquired with Genzyme. Sanofi’s pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health products. This segment also includes all associates and joint ventures whose activities are related to pharmaceuticals, in particular the entities majority owned by Bristol-Myers Squibb (BMS).

The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes the Sanofi Pasteur MSD joint venture in Europe.

The Animal Health segment comprises the research, development, production and marketing activities of Merial, which offers a complete range of medicines and vaccines for a wide variety of animal species.

Inter-segment transactions are not material.

Segment results

Sanofi reports segment results on the basis of “Business operating income”. This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and allocate resources. Business operating income is derived from Operating income, adjusted as follows:

• the amounts reported in the lines Fair value remeasurement of contingent consideration liabilities, Restructuring costs and Other gains and losses, and litigation are eliminated;


• the share of profits/losses of associates and joint-ventures is added;


• other acquisition-related effects (primarily, the impact of the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments in associates and joint-ventures) are eliminated;


(1) Refer to the appendix in section F for a definition.


We believe that investors’ understanding of our operational performance is enhanced by reporting “business net income”3TP4F

(1)P3T. This measure is determined by taking “business operating income” and

adding financial income and deducting financial expenses, including the related income tax effects.

Business net income for the first half of 2012 totaled €4,386 million (up 1.5% on the 2011 first-half figure of €4,320 million), and represented 25.2% of net sales (versus 26.8% for the first half of 2011).



First-half segment results for 2012 and 2011, and 2011 full-year segment results, were as follows.

2012 first-half business net income


Net sales 14,827 1,400 1,154 — 17,381 Other revenues 645 10 18 — 673 Costs of sales (4,431) (566) (346) — (5,343) Research & development expenses (2,051) (284) (80) — (2,415) Selling and general expenses (3,763) (288) (358) (1) (4,410) Other operating income and expenses (21) (1) 1 16 (5) Share of profit/(loss) of associates and joint ventures 425 (6) — — 419 Net income attributable to non-controlling interests (104) — — — (104) Business operating income 5,527 265 389 15 6,196 Financial income and expenses (227) Income tax expense (1,583) Business net income 4,386

2011 first-half business net income


Net sales 13,730 1,308 1,090 — 16,128 Other revenues 816 10 9 — 835 Costs of sales (4,073) (550) (327) — (4,950) Research & development expenses (1,963) (264) (70) — (2,297) Selling and general expenses (3,614) (264) (322) (1) (4,201) Other operating income and expenses 42 (1) (7) (11) 23 Share of profit/(loss) of associates and joint ventures 559 (2) — 13 570 Net income attributable to non-controlling interests (136) — — — (136) Business operating income 5,361 237 373 1 5,972 Financial income and expenses (178) Income tax expense (1,474) Business net income 4,320

2011 full-year business net income


Net sales 27,890 3,469 2,030 — 33,389 Other revenues 1,622 25 22 — 1,669 Costs of sales (8,368) (1,404) (654) — (10,426) Research & development expenses (4,101) (564) (146) — (4,811) Selling and general expenses (7,376) (542) (617) (1) (8,536) Other operating income and expenses (13) — (7) 24 4 Share of profit/(loss) of associates and joint ventures 1,088 1 — 13 1,102 Net income attributable to non-controlling interests (246) — (1) — (247) Business operating income 10,496 985 627 36 12,144 Financial income and expenses (412) Income tax expense (2,937) Business net income 8,795


A reconciliation of our business net income to Net income attributable to equity holders of Sanofi is set forth below:

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

December 31, 2011

(12 months)

Business net income 4,386 4,320 8,795

(i) Amortization of intangible assets (1,675) (1,701) (3,314)

(ii) Impairment of intangible assets (40) (69) (142)

(iii) Fair value remeasurement of contingent consideration liabilities (106) (66) 15

(iv) Expenses arising from the impact of acquisitions on inventoriesP

(1) (17) (264) (476)

(v) Restructuring costs (250) (467) (1,314)

(vi) Other gains and losses, and litigation — (517) (327)

(vii) Tax effects of: 714 1,002 1,905 - amortization of intangible assets 615 559 1,178 - impairment of intangible assets 14 20 37 - fair value remeasurement of contingent consideration liabilities 3 5 34 - expenses arising from the impact of acquisitions on inventories 5 78 143 - restructuring costs 77 150 399 - other gains and losses, and litigation — 190 114

(iv) / (viii) Other tax items — — 577

(ix) Share of items listed above attributable to non-controlling interests 1 — 6

(iv) / (v) Restructuring costs of associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (15) (14) (32)


(1) This line item corresponds to the impact of workdown of inventories remeasured at fair value at the acquisition date.

We also report “business earnings per share”, a specific non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding.

Business earnings per share for the first half of 2012 was €3.32, an increase of 0.6% relative to the first-half figure of €3.30, based on the weighted average number of shares outstanding of 1,319.3 million for the first half of 2012 and 1,308.6 million for the first half of 2011.


Pharmaceuticals segment first-half business operating income, 2012 and 2011

(€ million)

June 30, 2012

(6 months) as % of

net sales

June 30, 2011

(6 months) as % of

net sales Year-on-year

change

Net sales 14,827 100.0% 13,730 100.0% +8.0%

Other revenues 645 4.4% 816 5.9% -21.0%

Cost of sales (4,431) (29.9%) (4,073) (29.7%) +8.8%

Gross profit 11,041 74.5% 10,473 76.3% +5.4%

Research and development expenses (2,051) (13.8%) (1,963) (14.3%) +4.5%

Selling and general expenses (3,763) (25.4%) (3,614) (26.3%) +4.1%

Other operating income and expenses (21) 42

Share of profit/(loss) of associates and joint ventures 425 559

Net income attributable to non-controlling interests (104) (136)

Business operating income 5,527 37.3% 5,361 39.0% +3.1%

Vaccines segment first-half business operating income, 2012 and 20111

(€ million)

June 30, 2012

(6 months) as % of

net sales

June 30, 2011

(6 months) as % of


change

Net sales 1,400 100.0% 1,308 100.0% +7.0%

Other revenues 10 0.7% 10 0.8% 0.0%

Cost of sales (566) (40.4%) (550) (42.0%) +2.9%

Gross profit 844 60.3% 768 58.7% +9.9%

Research and development expenses (284) (20.3%) (264) (20.2%) +7.6%

Selling and general expenses (288) (20.6%) (264) (20.2%) +9.1%

Other operating income and expenses (1) (1)

Share of profit/(loss) of associates and joint ventures (6) (2)

Net income attributable to non-controlling interests — —

Business operating income 265 18.9% 237 18.1% +11.8%

Animal Health segment first-half business operating income, 2012 and 2011

(€ million)

June 30, 2012

(6 months) as % of

net sales

June 30, 2011

(6 months) as % of


change

Net sales 1,154 100.0% 1,090 100.0% +5.9%

Other revenues 18 1.6% 9 0.8% +100.0%

Cost of sales (346) (30.0%) (327) (30.0%) +5.8%

Gross profit 826 71.6% 772 70.8% +7.0%

Research and development expenses (80) (6.9%) (70) (6.4%) +14.3%

Selling and general expenses (358) (31.0%) (322) (29.5%) +11.2%

Other operating income and expenses 1 (7)

Share of profit/(loss) of associates and joint ventures — —

Net income attributable to non-controlling interests — —

Business operating income 389 33.7% 373 34.2% +4.3%


61BC.3. ANALYSIS OF CONSOLIDATED RESULTS FOR THE FIRST HALF OF 2012

93BC.3.1. Net sales

Consolidated net sales for the first half of 2012 were €17,381 million, 7.8% higher than in the first half of 2011. Exchange rate movements had a favorable effect of 4.2 points, mainly reflecting the appreciation of the U.S. dollar, the yen and the yuan against the euro. At constant exchange rates3TP5F

(1)P3T and after taking account of changes in structure (primarily the consolidation of Genzyme

from April 2011), net sales rose by 3.6%.

Reconciliation of 2012 first-half reported net sales to net sales at constant exchange rates3TP6F

(1)

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months) Change

Reported net sales 17,381 16,128 +7.8%

Effect of exchange rates (673)

Net sales at constant exchange rates 16,708 16,128 +3.6%

115BC.3.1.1. Net sales by business segment

Sanofi’s net sales comprise the net sales generated by the Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health businesses.

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)

Change on a reported

basis

Change at constant

exchange rates

Pharmaceuticals 14,827 13,730 +8.0% +4.0%

Vaccines 1,400 1,308 +7.0% +1.5%

Animal Health 1,154 1,090 +5.9% +1.2%

Total 17,381 16,128 +7.8% +3.6%



Pharmaceuticals

Net sales of the Pharmaceuticals segment for the first half of 2012 were €14,827 million, up 8.0% on a reported basis and up 4.0% at constant exchange rates. This reflects the positive effect of the inclusion of Genzyme in the consolidation from April 2011 and the performance of our growth platforms, but also the negative effects of generics competition (primarily Lovenox®, Xatral® and Taxotere® in the United States, and Taxotere®, Plavix® and Aprovel® in Western Europe), the ending of the Copaxone® co-promotion agreement with Teva, the sale of the Dermik business in July 2011, and austerity measures in the European Union.

On a constant structure basis and at constant exchange rates (which mainly involves including the non-consolidated sales of Genzyme for the first quarter of 2011 and excluding sales of Copaxone® for the first half of 2011), Pharmaceuticals segment net sales were down 0.9% in the first half of 2012.

(€ million) Indications

June 30, 2012

(6 months)

June 30, 2011

(6 months)


basis

Change at constant

exchange rates

Lantus® Diabetes 2,346 1,894 +23.9% +16.8 % Apidra® Diabetes 108 102 +5.9% +2.0 % Amaryl® Diabetes 213 217 -1.8% -6.5 % Insuman® Diabetes 65 64 +1.6% +3.1 % Other diabetes products(1) Diabetes 15 4 +275.0% +275.0 % Total: Diabetes 2,747 2,281 +20.4% +14.0% Eloxatin® Colorectal cancer 759 436 +74.1% +61.9% Taxotere® Breast, lung, prostate, stomach,

and head & neck cancer 309 586 -47.3% -50.0% Jevtana® Prostate cancer 119 96 +24.0% +18.8% Other oncology products(1) 305 159 — — Total: Oncology 1,492 1,277 +16.8% +9.9% Lovenox® Thrombosis 1,015 1,119 -9.3% -10.7% Plavix® Atherothrombosis 1,058 994 +6.4% -0.6% Aprovel® Hypertension 641 663 -3.3% -5.9% Allegra® Allergic rhinitis, urticaria 308 335 -8.1% -14.0% Stilnox®/ Ambien®/ Myslee® Sleep disorders 254 232 +9.5% +1.7% Copaxone® Multiple sclerosis 24 233 -89.7% -90.1% Depakine® Epilepsy 202 196 +3.1% +1.5% Tritace® Hypertension 180 194 -7.2% -6.7% Multaq® Atrial fibrillation 127 131 -3.1% -9.2% Xatral® Benign prostatic hypertrophy 69 129 -46.5% -48.1% Actonel® Osteoporosis, Paget’s disease 72 91 -20.9% -23.1% Nasacort® Allergic rhinitis 38 74 -48.6% -50.0% Renagel® / Renvela® (1) Hyperphosphatemia 312 137 — — SynVisc® / SynVisc One® (1) Arthritis 184 89 — — Cerezyme® (1 ) Gaucher disease 299 166 — — Myozyme® / Lumizyme® (1) Pompe disease 225 99 — — Fabrazyme® (1) Fabry disease 121 30 — — Other Rare Disease products(1) 189 79 — — Total: New Genzyme(1) 834 374 — — Other Products 2,820 2,977 -5.3% -7.4% Consumer Health Care 1,543 1,356 +13.8% +11.4% Generics 907 848 +7.0% +7.2% Total: Pharmaceuticals 14,827 13,730 +8.0% +4.0% (1) In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).


UDiabetes division

Net sales for the Diabetes division came to €2,747 million, up 14.0% at constant exchange rates, driven by double-digit growth for LantusP

®P.

Net sales of LantusP

®P, a long-acting human insulin analog, rose by 16.8% (at constant exchange

rates) to €2,346 million, reflecting good growth in the United States (+18.0% at constant exchange rates) and Japan (+20.3% at constant exchange rates) and a robust performance in Emerging Markets (+26.0% at constant exchange rates), especially in China (+47.7% at constant exchange rates), Russia (+22.5% at constant exchange rates) and Latin America (+32.2% at constant exchange rates). Growth in Western Europe was a more modest 4.7% (at constant exchange rates).

Net sales of the rapid-acting human insulin analog ApidraP

®P totaled €108 million in the first half of

2012 (up 2.0% at constant exchange rates), driven by Emerging Markets (+14.3% at constant exchange rates). The supply of 3ml ApidraP

®P cartridges improved in the second quarter of 2012 as

expected.

Amaryl P

®P saw net sales fall by 6.5% at constant exchange rates to €213 million, largely as a result

of competition from generics in Japan (-29.2% at constant exchange rates, at €65 million), and despite 10.5% growth in Emerging Markets at constant exchange rates.

UOncology business

The Oncology business reported net sales of €1,492 million, up 9.9% at constant exchange rates, thanks mainly to a strong performance from Eloxatin P

®P in the United States.

Net sales of EloxatinP

®P saw a marked rebound in the first half of 2012, rising by 61.9% at constant

exchange rates to €759 million. This reflects a recovery in sales in the United States (€634 million, versus €301 million in the first half of 2011) following a legal ruling that prevents generics manufacturers from selling their unauthorized generic versions of oxaliplatin in the United States until August 9, 2012.

TaxotereP

®P reported a 50.0% fall in net sales at constant exchange rates, to €309 million.

This product is facing competition from generics in Western Europe (-74.4% at constant exchange rates, at €32 million) and in the United States (-83.2% at constant exchange rates, at €37 million).

JevtanaP

®P posted net sales of €119 million in the first half of 2012, up 18.8% at constant exchange

rates, driven by the commercial roll-out in Western Europe where sales quadrupled to €44 million. In the United States, sales were down 32.1% (at constant exchange rates) at €60 million.

UOther pharmaceutical products

First-half net sales of LovenoxP

®P fell by 10.7% at constant exchange rates to €1,015 million, due to

competition from generics in the United States where sales declined by 49.2% (at constant exchange rates) to €209 million. Sales generated outside the United States accounted for 79.4% of total worldwide net sales and rose by 9.2% at constant exchange rates to €806 million, driven by Emerging Markets (+15.3% at constant exchange rates, at €312 million) and Western Europe (+5.5% at constant exchange rates, at €444 million).

Net sales of RenagelP

®P/RenvelaP

®P rose by 9.7% on a constant structure basis and at constant

exchange rates (including non-consolidated net sales for the first quarter of 2011) to €312 million, driven by the product’s strong performance in the United States (+20.9% on a constant structure basis and at constant exchange rates).


Synvisc®/Synvisc One® achieved net sales growth of 8.9% on a constant structure basis and at constant exchange rates (including non-consolidated net sales for the first quarter of 2011) to €184 million, thanks mainly to the Synvisc One® franchise in the United States (€153 million, up 14.8% on a constant structure basis and at constant exchange rates).

Net sales of the Ambien® family of products were up 1.7% at constant exchange rates at €254 million, reflecting competition from generics of Ambien® CR in the United States and Western Europe but also a good performance from Myslee® in Japan, where net sales advanced by 5.6% at constant exchange rates to €151 million.

Allegra® saw prescription net sales fall by 14.0% at constant exchange rates to €308 million, due to the effect of a weak pollen season in Japan (-19.6% at constant exchange rates, at €241 million). In July 2012, Sanofi entered into settlements in Japan with generic manufacturers regarding Allegra®; Sanofi does not expect generics to enter this market before March 2014.

Net sales of Multaq® fell by 9.2% at constant exchange rates to €127 million, due to the impact of an amendment to the product indication during the second half of 2011.

Consolidated net sales of Copaxone® were €24 million, compared with €233 million in the first half of 2011; this fall of 90.1% (at constant exchange rates) reflected the ending of the co-promotion agreement with Teva across all territories in the first quarter of 2012.

New Genzyme

The New Genzyme business consists of products used to treat rare diseases, and future products for the treatment of multiple sclerosis (Aubagio® and LemtradaTM).

Because the net sales of Genzyme are consolidated from the acquisition date (start of April 2011), the consolidated net sales of the New Genzyme business for the first half of 2011 do not include sales for the first quarter of 2011. On a constant structure basis and at constant exchange rates (i.e. including non-consolidated net sales for the first quarter of 2011), the New Genzyme business achieved sales growth of 11.3% in the first half of 2012, to €834 million.

(€ million) Indications

June 30, 2012

(6 months)

June 30, 2011

(3 months)(1)

Change on a constant structure

and exchange rate basis

Cerezyme® (1) Gaucher disease 299 166 -4.6% Myozyme® / Lumizyme® (1) Pompe disease 225 99 +13.0% Fabrazyme® (1) Fabry disease 121 30 +86.7% Other Rare Disease products(1) 189 79 +11.2% Total: New Genzyme(1) 834 374 +11.3% (1) In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

Cerezyme® net sales fell by 4.6% on a constant structure basis and at constant exchange rates to €299 million (-9.4% in Western Europe, at €106 million; -7.6% in the United States, at €79 million).

Net sales of Myozyme®/Lumizyme® were up 13.0% on a constant structure basis and at constant exchange rates at €225 million (+9.7% in Western Europe, at €125 million; +17.4% in the United States, at €58 million).

Fabrazyme® reported a strong 86.7% rise in net sales on a constant structure basis and at constant exchange rates to €121 million. This growth was mainly attributable to the resumption of production at the new plant in Framingham (United States) in March 2012.


UConsumer Health Care

Net sales for the Consumer Health Care business rose by 11.4% at constant exchange rates in the first half of 2012 to €1,543 million, thanks to organic growth and the impact of the acquisitions made in 2011 (principally BMP Sunstone in China, and the nutraceuticals business of Universal Medicare in India). Net sales in Emerging Markets were up 24.3% at constant exchange rates, at €724 million. In the United States, sales were virtually unchanged (+0.3% at constant exchange rates, at €340 million) versus the first half of 2011, when distributors were building up inventories of the over-the-counter version of AllegraP

®P (launched in March 2011).

UGenerics

The Generics business reported net sales of €907 million for the first half of 2012, a rise of 7.2% at constant exchange rates. The business was boosted by organic sales growth in the United States (+98.5% at constant exchange rates, at €141 million), where Sanofi launched its own authorized generic versions of LovenoxP

®P and AprovelP

®P. Net sales in Emerging Markets were fairly flat (+1.3%

at constant exchange rates, at €529 million), reflecting lower sales in Eastern Europe.

Net sales of other prescription products totaled €2,820 million, down 7.4% at constant exchange rates (or 4.4% on a constant structure basis and at constant exchange rates).

For comments on net sales of Plavix P

®P and Aprovel P

®P/CoAprovel P

®P, refer to section C.3.1.3.,

“Worldwide Presence of PlavixP

®P and AprovelP

®P” below.


Geographical split of 2012 first-half net sales of the main pharmaceutical products

(€ million) Western

Europe(1)

Change at constant

exchange rates

United States

Change at constant

exchange rates

Emerging Markets(2)

Change at constant

exchange rates

Other Countries(3)

Change at constant

exchange rates

Lantus® 383 +4.7% 1,444 +18.0% 379 +26.0% 140 +20.6% Apidra® 40 +2.6% 32 -12.1% 24 +14.3% 12 +22.2% Amaryl® 16 -5.9% 2 — 130 +10.5% 65 -29.8% Insuman® 48 -4.0% — — 17 +21.4% — — Other diabetes products 13 +225.0% 2 — — — 1 —

Total: Diabetes 500 +5.1% 1,480 +17.2% 550 +21.3% 217 +0.5%

Eloxatin® 9 -62.5% 634 +95.0% 81 -2.5% 35 +3.1% Taxotere® 32 -74.4% 37 -83.2% 147 -7.7% 93 -19.4%

Jevtana® 44 +290.9% 60 -32.1% 15 +275.0% — —

Other oncology products(4) 73 — 169 — 43 — 20 —

Total: Oncology 158 -23.2% 900 +24.6% 286 +6.1% 148 -4.9%

Lovenox® 444 +5.5% 209 -49.2% 312 +15.3% 50 +6.8% Plavix® 180 -18.3% 72* -32.7% 393 +6.1% 413 +14.5% Aprovel® 339 -14.7% 26* +13.0% 204 +2.7% 72 +19.3% Allegra® 7 -12.5% (1) -120.0% 61 +27.1% 241 -19.3% Stilnox®/ Ambien®/ Myslee® 24 -11.1% 40 -14.0% 36 +19.4% 154 +5.3%

Copaxone® 19 -91.4% — — — — 5 -63.6% Depakine® 71 -2.8% — — 123 +5.2% 8 -12.5% Tritace® 80 -9.1% — — 93 0.0% 7 -45.5% Multaq® 23 -32.4% 99 +1.1% 4 +33.3% 1 -100.0% Xatral® 25 -19.4% 12 -83.1% 30 -6.3% 2 — Actonel® 18 -40.0% — — 36 -14.3% 18 -15.8% Nasacort® 11 -26.7% 11 -77.8% 14 +16.7% 2 —

Renagel® / Renvela® (4) 66 — 213 — 21 — 12 —

SynVisc® / SynVisc One® (4) 10 — 153 — 11 — 10 —

Cerezyme® (4) 106 — 79 — 84 — 30 —

Myozyme® / Lumizyme® (4) 125 — 58 — 26 — 16 —

Fabrazyme® (4) 21 — 62 — 18 — 20 —

Other Rare Disease products(4) 46 — 61 — 38 — 44 —

Total: New Genzyme(4) 298 — 260 — 166 — 110 —

Other Products 1,132 -10.0% 285 -11.4% 1,034 -0.7% 369 -13.5% Consumer Health Care 355 +3.2% 340 +0.3% 724 +24.3% 124 0.0% Generics 224 -2.2% 141 +98.5% 529 +1.3% 13 -33.3%

Total: Pharmaceuticals 3,984 -6.7% 4,240 +11.2% 4,627 +10.8% 1,976 -0.7%

(1) France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

(2) World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. (3) Japan, Canada, Australia and New Zealand. (4) In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011). * Sales of active ingredient to the entity majority-owned by BMS in the United States.


Human Vaccines (Vaccines)

In the first half of 2012, the Vaccines business generated net sales of €1,400 million, up 1.5% at constant exchange rates and 7.0% on a reported basis. Growth was impaired by temporary order restrictions on PentacelP

®P in the United States.

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)


basis

Change at constant

exchange rates

Polio/Pertussis/Hib Vaccines (incl. PentacelP

®P and PentaximP

®P) 518 494 +4.9% -0.4%

Influenza Vaccines (incl. VaxigripP

®P and FluzoneP

®P) 169 158 +7.0% +5.7%

• Seasonal influenza vaccines 167 158 +5.7% +4.4% • Pandemic influenza vaccines 2 — — —

Meningitis/Pneumonia Vaccines (incl. MenactraP

®P) 202 183 +10.4% +2.7%

Adult Booster Vaccines (incl. Adacel P

®P) 233 206 +13.1% +5.3%

Travel and Other Endemic Diseases Vaccines 177 171 +3.5% 0.0%

Other Vaccines 101 96 +5.2% -3.1%

Total: Vaccines 1,400 1,308 +7.0% +1.5%

Net sales of Polio/Pertussis/Hib vaccines were virtually unchanged (-0.4% at constant exchange rates) at €518 million, reflecting contrasting factors: a fall in the United States (-7.2% at constant exchange rates, at €210 million) due to temporary order restrictions on PentacelP

®P following

production delays at Sanofi Pasteur, and good performances in Western Europe (+52.9% at constant exchange rates, at €26 million) and Other Countries (+5.7% at constant exchange rates, at €62 million). Net sales in Emerging Markets were flat at €220 million (+0.5% at constant exchange rates).

Net sales of Influenza Vaccines rose by 5.7% (at constant exchange rates) to €169 million in the first half of 2012. Most of these sales were generated in Emerging Markets (€150 million), supported by the record performance of seasonal influenza vaccines in the southern hemisphere.

Meningitis/Pneumonia Vaccines posted net sales of €202 million, up 2.7% at constant exchange rates, driven by Emerging Markets (+27.7% at constant exchange rates, at €62 million). MenactraP

®P

generated net sales of €167 million, up 10.5% at constant exchange rates.

Net sales of Adult Booster Vaccines rose by 5.3% at constant exchange rates to €233 million on a strong performance from Adacel P

®P (€160 million, up 11.8% at constant exchange rates), mainly in

the United States.

Net sales of Travel and Other Endemic Diseases Vaccines were flat at €177 million.

Sales generated by Sanofi Pasteur MSD, the joint venture with Merck & Co., Inc. in Europe (which are not consolidated by Sanofi), were €332 million in the first half of 2012, up 7.7% on a reported basis. Growth was driven by the travel and other endemics vaccines franchise (+26.1% on a reported basis, at €82 million). Sales of GardasilP

®P, a vaccine that prevents papillomavirus

infections (a cause of cervical cancer) fell slightly by 2.0% on a reported basis, to €87 million.


Geographical split of 2012 first-half Vaccines net sales


Europe(1)

Change at constant

exchange rates

United States

Change at constant

exchange rates

Emerging Markets(2)

Change at constant

exchange rates

Other Countries(3)

Change at constant

exchange rates

Polio/Pertussis/Hib Vaccines (incl. Pentacel® and Pentaxim®) 26 +52.9% 210 -7.2% 220 +0.5% 62 +5.7%

Influenza Vaccines (incl. Vaxigrip® and Fluzone®) — — 6 — 150 +1.4% 13 +9.1%

Meningitis/Pneumonia Vaccines (incl. Menactra®) 2 +100.0% 136 -5,4% 62 +27.7% 2 -40.0%

Adult Booster Vaccines (incl. Adacel®) 34 -19.0% 166 +6.3% 22 +83.3% 11 0.0%

Travel and Other Endemic Diseases Vaccines 12 +9.1% 53 +17.1% 90 -8.2% 22 0.0%

Other vaccines 5 -16.7% 79 -2.6% 9 +12.5% 8 -16.7%

Total: Vaccines 79 +2.6% 650 -0.3% 553 +3.6% 118 +0.9%

(1) France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

(2) World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand. (3) Japan, Canada, Australia and New Zealand.

Animal Health

Net sales for the Animal Health business amounted to €1,154 million in the first half of 2012, up 1.2% at constant exchange rates (5.9% on a reported basis), partly driven by the performance of Emerging Markets (+8.6% at constant exchange rates).

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)


basis

Change at constant

exchange rates

Frontline® and other fipronil products 468 459 +2.0% -3.5%

Vaccines 345 325 +6.2% +3.4%

Avermectin 221 198 +11.6% +5.1%

Other Animal Health products 120 108 +11.1% +7.4%

Total: Animal Health 1,154 1,090 +5.9% +1.2%

Net sales for the companion animals franchise increased by 1.0% at constant exchange rates to €784 million. The slight decrease in sales of the Frontline® / fipronil family of products (-3.5% at constant exchange rates, at €468 million) was due to bulk buying by distributors of veterinary products in the United States during the first half of 2011.

Net sales for the production animals franchise advanced by 1.7% at constant exchange rates to €370 million. These include the contribution from Newport Laboratories from April 2012 onwards.


Geographical split of 2012 first-half Animal Health net sales


EuropeP

(1)

Change at constant

exchange rates

United States

Change at constant

exchange rates

Emerging MarketsP

(2)

Change at constant

exchange rates

Other CountriesP

(3)

Change at constant

exchange rates

FrontlineP

®P and other fipronil products 138 -0.7% 262 -5.5% 43 -4.9% 25 -12.0%

Vaccines 88 -11.1% 71 +10.0% 176 +8.8% 10 +33.3%

Avermectin 30 -3.3% 125 +9.4% 28 +3.7% 38 0.0%

Other Animal Health products 42 -2.3% 47 +20.0% 20 +23.5% 11 -15.4%

Total: Animal Health 298 -4.5% 505 +2.0% 267 +8.6% 84 -3.8%

P

(1)P France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria,

Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. P

(2)P World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

P

(3)P Japan, Canada, Australia and New Zealand.

116BC.3.1.2. Net sales by geographical region

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months)


basis

Change at constant

exchange rates

Western EuropeP

(1) 4,361 4,631 -5.8% -6.4%

United States 5,395 4,580 +17.8% +8.8%

Emerging MarketsP

(2) 5,447 4,919 +10.7% +9.9% • of which Eastern Europe and Turkey 1,327 1,350 -1.7% +1.0%

• of which Asia (excluding Pacific region) 1,381 1,152 +19.9% +12.2%

• of which Latin America 1,675 1,481 +13.1% +14.2%

• of which Africa 507 470 +7.9% +9.4%

• of which Middle East 494 418 +18.2% +15.6%

Other CountriesP

(3) 2,178 1,998 +9.0% -0.7%

• of which Japan 1,529 1,368 +11.8% +0.9%

Total 17,381 16,128 +7.8% +3.6%

P

(1)P France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria,

Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. P

(2)P World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

P

(3)P Japan, Canada, Australia and New Zealand.

In the Emerging Markets region, net sales reached €5,447 million, up 9.9% at constant exchange rates (or 7.7% including Genzyme in the first quarter of 2011). In China, net sales totaled €606 million, up 22.4% at constant exchange rates, reflecting strong performances by Plavix P

®P and

LantusP

®P. In Brazil, sales were €780 million, up 14.7% at constant exchange rates, driven by the

Consumer Health Care business and the contribution from Genzyme. Russia reported sales of €399 million, a rise of 8.1% at constant exchange rates. In the United States, net sales increased by 8.8% at constant exchange rates (or +1.0% including Genzyme in the first quarter of 2011) to €5,395 million, as strong performances from LantusP

®P,

EloxatinP

®P and the Generics business (including Sanofi’s own generic version of LovenoxP

®P) more

than offset the impact of generics of TaxotereP

® Pand competing generics of LovenoxP

®P.

Net sales in Western Europe fell by 6.4% at constant exchange rates to €4,361 million (or -6.5% including Genzyme in the first quarter of 2011 and excluding Copaxone P

®P), hit not only by

competition from generics of TaxotereP

®P (-74.4% at constant exchange rates) and PlavixP

®P (-18.3%

at constant exchange rates) but also by the impact of austerity measures. In the Other Countries region, net sales were flat (-0.7% at constant exchange rates). In Japan, net sales came to €1,529 million (+0.9% at constant exchange rates, but -2.6% including Genzyme in the first quarter of 2011), reflecting a fine performance from Plavix P

® P(+15.7% at constant exchange

rates, at €388 million), the impact of biannual price cuts, and a fall in AllegraP

®P sales (-19.6% at

constant exchange rates, at €241 million).


C.3.1.3. Worldwide presence of Plavix® and Aprovel®

Two of the Group’s leading products – Plavix® and Aprovel® – were discovered by Sanofi and jointly developed with Bristol-Myers Squibb (BMS) under an alliance agreement. In all territories except Japan, these products are sold either by Sanofi or by BMS in accordance with the terms of the alliance agreement (1).

Worldwide sales of these two products are an important indicator because they facilitate a financial statement user’s understanding and analysis of our consolidated income statement, particularly in terms of understanding our overall profitability in relation to consolidated revenues, and also facilitate a user’s ability to understand and assess the effectiveness of our research and development efforts. Also, disclosing sales made by BMS of these two products enables users to have a clearer understanding of trends in different lines of our income statement, in particular the lines Other revenues, where we record royalties received on those sales; Share of profit/loss of associates and joint ventures, where we record our share of the profit/loss of entities included in the BMS Alliance and under BMS operational management; and Net income attributable to non-controlling interests, where we record the BMS share of profit/loss of entities included in the BMS Alliance and under our operational management.

Geographical split of 2012 and 2011 first-half worldwide sales of Plavix® and Aprovel®

(€ million)

June 30, 2012 (6 months) June 30, 2011 (6 months) Change on a reported

basis

Change at constant

exchange rates Sanofi(2) BMS(3) Total Sanofi(2) BMS(3) Total Plavix®/Iscover®(1) Europe 231 14 245 278 24 302 -18.9% -18.6% United States — 1,780 1,780 — 2,415 2,415 -26.3% -30.4% Other countries 774 63 837 639 145 784 +6.8% -2.4% Total 1,005 1,857 2,862 917 2,584 3,501 -18.3% -23.1%

(€ million)

June 30, 2012 (6 months) June 30, 2011 (6 months) Change on a reported

basis

Change at constant

exchange rates Sanofi(2) BMS(3) Total Sanofi(2) BMS(3) Total Aprovel®/Avapro®/ Karvea®/Avalide® (4)

Europe 312 58 370 354 66 420 -11.9% -12.2% United States 16 92 108 — 209 209 -48.3% -51.4% Other countries 261 47 308 223 99 322 -4.3% -10.2% Total 589 197 786 577 374 951 -17.4% -20.2% (1) Plavix® is marketed under the trademarks Plavix® and Iscover®. (2) Net sales of Plavix® consolidated by Sanofi, including sales of generics, and excluding sales to BMS (€80 million for the six months

to June 30, 2012; €112 million for the six months to June 30, 2011). (3) Translated into euros by Sanofi using the method described in Note B.2. to the consolidated financial statements for the year

ended December 31, 2011, on page F-12 of the Annual Report on Form 20-F; this document is available on www.sanofi.com. (4) Aprovel® is marketed under the trademarks Aprovel®, Avapro®, Karvea® and Avalide®. (5) Net sales of Aprovel® consolidated by Sanofi, excluding sales to BMS (€70 million for the six months to June 30, 2012; €86 million

for the six months to June 30, 2011).

Worldwide sales of Plavix®/Iscover® fell by 23.1% at constant exchange rates in the first half of 2012 to €2,862 million, reflecting competition from generics in the United States and Europe. In the United States, where exclusivity was lost on May 17, 2012, sales (consolidated by BMS) were 30.4% lower at constant exchange rates, at €1,780 million. In Europe, net sales of Plavix® were down 18.6% (at constant exchange rates) at €245 million. In Japan and China, the product continues to be a success, with net sales of €388 million (+15.7% at constant exchange rates) and €184 million (+24.4% at constant exchange rates) respectively.

(1) Refer to note C.1 to the consolidated financial statements for the year ended December 31, 2011, on page F-35 of the

Annual Report on Form 20-F; this document is available on www.sanofi.com.


Worldwide sales of AprovelP

®P/AvaproP

®P/KarveaP

®P/AvalideP

®P for the first half of 2012 were €786 million,

down 20.2% at constant exchange rates, largely due to the loss of exclusivity in the United States on March 30, 2012.

94BC.3.2. Other revenues

Other revenues, which mainly comprise royalty income under licensing agreements contracted in connection with ongoing operations, amounted to €673 million, versus €835 million in the first half of 2011, a drop of 19.4%.

The year-on-year fall was mainly due to license revenues under the worldwide alliance with BMS on PlavixP

®P and AprovelP

®P, which came to €445 million in the first half of 2012, versus €659 million in

the first half of 2011 (-32.5% on a reported basis), due to the loss of exclusivity in the United States for AprovelP

®P (on March 30, 2012) and PlavixP

®P (on May 17, 2012).

95BC.3.3. Gross profit

Gross profit reached €12,694 million in the first half of 2012 (73.0% of net sales), compared with €11,749 million in the comparable period of 2011 (72.8% of net sales). This represents growth of 8.0%, and an increase of 0.2 of a point in the gross margin ratio.

The gross margin ratio for the Pharmaceuticals business fell by 1.8 points to 74.5%, reflecting a drop in license revenues (-1.6 points) and a deterioration in the ratio of cost of sales to net sales (-0.2 of a point); this latter trend was mainly attributable to the adverse impact of generics (mainly of TaxotereP

®P in the United States), partially offset by productivity gains and lower raw materials prices

for heparins.

The gross margin ratio for the Vaccines business improved by 1.6 points to 60.3%.

The gross margin ratio for the Animal Health business also improved, by 0.8 of a point to 71.6%.

In addition, consolidated gross profit for the first half of 2012 was adversely affected by an expense of €17 million (0.1 of a point) arising from the workdown during the period of acquired inventories remeasured at fair value in connection with the acquisition of Genzyme. In the first half of 2011, this expense was €264 million (1.6 points).

96BC.3.4. Research and development expenses

Research and development (R&D) expenses came to €2,415 million (versus €2,297 million in the first half of 2011), representing 13.9% of net sales (versus 14.2% in the first half of 2011). Overall, R&D expenses rose by €118 million, or 5.1% on a reported basis. After including Genzyme’s costs for the first quarter of 2011, R&D fell slightly year-on-year, by 0.5%.

R&D expenses for the Pharmaceuticals business increased by 4.5% or €88 million. After including Genzyme’s costs for the first quarter of 2011, R&D expenses fell by 2.0% or €43 million, reflecting ongoing transformation initiatives and the rationalization of the project portfolio.

R&D expenses for the Vaccines business rose by €20 million (+7.6%), due mainly to clinical trials on the dengue fever vaccine and various influenza-related projects.

In the Animal Health business, R&D expenses increased by €10 million (+14.3%) versus the first half of 2011.


C.3.5. Selling and general expenses

Selling and general expenses totaled €4,410 million, versus €4,201 million for the first half of 2011, a rise of €209 million, or 5.0% on a reported basis. They represented 25.4% of net sales, against 26.0% in the first half of 2011. After including Genzyme’s costs for the first quarter of 2011, selling and general expenses fell by 0.9%.

The Pharmaceuticals business reported a rise of €149 million (+4.1%). After including Genzyme’s costs for the first quarter of 2011, selling and general expenses for the Pharmaceuticals business fell by €102 million (-2.7%) year-on-year, reflecting tight cost control (especially in mature regions) and synergies unlocked by the integration of Genzyme.

In the Vaccines business, selling and general expenses rose by €24 million (+9.1%), due partly to unfavorable trends in the U.S. dollar/euro exchange rate and partly to higher promotional spend on influenza vaccines.

Selling and general expenses for the Animal Health business increased by €36 million (+11.2%), reflecting unfavorable trends in the U.S. dollar/euro exchange rate and higher promotional spend on the companion animals franchise.

C.3.6. Other operating income and expenses

Other operating income amounted to €319 million in the first half of 2012 (versus €191 million a year earlier), and other operating expenses to €324 million (versus €168 million a year earlier).

Overall, other operating income and expenses represented a net expense of €5 million in the first half of 2012, compared with net income of €23 million in the first half of 2011. This deterioration of €28 million is mainly due to increased provisions for litigation in North America.

This line also includes a net operational foreign exchange loss of €11 million, compared with a net operational foreign exchange gain of €13 million in the first half of 2011.

C.3.7. Amortization of intangible assets

Amortization charged against intangible assets amounted to €1,675 million in the first half of 2012, compared with €1,701 million in the first half of 2011. The year-on-year reduction of €26 million was mainly due to:

- reductions: a fall in amortization charged against intangible assets recognized on the acquisition of Aventis (€770 million in the first half of 2012, versus €1,059 million in the first half of 2011), as some products reached the end of their life cycles in the face of competition from generics;

- increases: amortization charges generated from the second quarter of 2011 on intangible assets recognized on the acquisition of Genzyme (€487 million in the first half of 2012, versus €242 million in the first half of 2011).

C.3.8. Impairment of intangible assets

This line showed impairment losses of €40 million recorded against intangible assets in the first half of 2012, compared with €69 million in the first half of 2011.

In the first half of 2012, impairment losses related primarily to the discontinuation of R&D projects.

The impairment losses booked in the first half of 2011 mainly related to Zentiva generics following a downward revision of sales projections, and the discontinuation of a joint project with Metabolex in diabetes.


101BC.3.9. Fair value remeasurement of contingent consideration liabilities

Fair value remeasurements of contingent consideration liabilities recognized in accordance with the revised IFRS 3 represented an expense of €106 million in the first half of 2012, compared with an expense of €66 million in the first half of 2011.

This expense relates primarily to the contingent value rights (CVRs) issued in connection with the Genzyme acquisition, contingent consideration payable to Bayer as a result of the Genzyme acquisition, and contingent purchase consideration on the acquisition of TargeGen (see Note B.12. to the condensed half-year consolidated financial statements).

102BC.3.10. Restructuring costs

Restructuring costs amounted to €250 million in the first half of 2012, compared with €467 million in the first half of 2011, and mainly relate to the Group’s transformation program initiated in 2009.

In the first half of 2012, these costs essentially comprised impairment losses against property, plant and equipment attached to R&D sites, and employee-related expenses incurred under plans to adjust headcount in industrial functions in Europe.

In the first half of 2011, they mainly comprised employee-related expenses incurred under plans to adjust headcount in support functions, sales forces and R&D in Europe, along with industrial site rehabilitation costs and accelerated depreciation of property, plant and equipment.

103BC.3.11. Other gains and losses, and litigation

Nothing was reported on this line for the six months ended June 30, 2012.

In the first half of 2011, this line contained amortization expense of €517 million, representing the backlog of depreciation and amortization that was not charged against the tangible and intangible assets of Merial from September 18, 2009 through December 31, 2010 because these assets were classified as held for sale or exchange during that period in accordance with IFRS 5.

104BC.3.12. Operating income

Operating income for the first half of 2012 was €3,793 million, compared with €2,454 million for the first half of 2011, an increase of 54.6%.


C.3.13. Financial income and expenses

Net financial expense for the period was €227 million, compared with €178 million for the first half of 2011, an increase of €49 million.

Financial expenses directly related to net debt (defined as short-term and long-term debt, plus related interest rate and currency derivatives, minus cash and cash equivalents) were €168 million, versus €136 million in the first half of 2011. This rise reflected:

- a modest increase in average debt combined with stable average interest rates, which led to a slight rise in financial expenses in the first half of 2012;

- a reduction in financial income, due to a fall in the average amount of cash held by the Group in the first half of 2012.

The impact of the unwinding of discount on provisions amounted to €44 million in the first half of 2012 (versus €40 million in the first half of 2011), while there was a net financial foreign exchange gain of €4 million in the period (versus a net foreign exchange loss of €10 million a year earlier).

C.3.14. Income before tax and associates and joint ventures

Income before tax and associates and joint ventures for the first half of 2012 was €3,566 million, compared with €2,276 million for the first half of 2011, an increase of 56.7%.

C.3.15. Income tax expense

Income tax expense totaled €869 million in the first half of 2012, versus €472 million a year earlier.

This item includes the tax effects of amortization of intangible assets (€615 million in the first half of 2012, versus €749 million in the first half of 2011 (including the impact of the Merial backlog, see note C.3.11. above)) and of restructuring costs (€77 million in the first half of 2012, versus €150 million in the first half of 2011); the overall impact is an increase of €207 million in income tax expense.

The effective tax rate(1) was 28.0%, compared with 27.5% in the first half of 2011. The difference relative to the standard corporate income tax rate applicable in France (34%) is mainly due to royalty income being taxed at a reduced rate in France.

C.3.16. Share of profit/loss of associates and joint ventures

The share of profit/loss of associates and joint ventures for the six months ended June 30,2012 was €404 million, versus €556 million for the comparable period of 2011. This line mainly includes Sanofi’s share of after-tax profits from territories managed by BMS under the Plavix® and Avapro® alliance, which fell by 23.9% to €417 million (versus €548 million in the first half of 2011). This fall was mainly attributable to lower sales of Plavix® in the United States (-26.3% on a reported basis) due to competition from generics.

(1) Calculated on the basis of business operating income minus net financial expenses, and before (i) the share of profit/loss of associates and joint ventures and (ii) net income attributable to non-controlling interests.


109BC.3.17. Net income

Net income for the first half of 2012 was €3,101 million, compared with €2,360 million for the first half of 2011.

110BC.3.18. Net income attributable to non-controlling interests

Net income attributable to non-controlling interests amounted to €103 million for the six months ended June 30, 2012, compared with €136 million a year earlier. This line mainly comprises the share of pre-tax profits paid to BMS from territories managed by Sanofi (€92 million, versus €125 million in the first half of 2011); the year-on-year fall was directly related to increased competition from generics of clopidogrel (the active ingredient of PlavixP

®P) in Europe.

111BC.3.19. Net income attributable to equity holders of Sanofi

Net income attributable to equity holders of Sanofi for the first half of 2012 totaled €2,998 million, compared with €2,224 million for the first half of 2011.

Earnings per share (EPS) was €2.27, 33.5% higher than the 2011 first-half figure (€1.70), based on an average number of shares outstanding of 1,319.3 million for the first half of 2012 (compared with 1,308.6 million for the first half of 2011). Diluted EPS was €2.26, versus €1.69 for the first half of 2011.

112BC.3.20. Business net income3TP9F

(1)

Business net income reached €4,386 million in the first half of 2012, compared with €4,320 million in the first half of 2011, an increase of 1.5%; it represented 25.2% of net sales, against 26.8% in the first half of 2011.

Business EPS for the first half of 2012 was €3.32, versus €3.30 for the comparable period of 2011 (+0.6%), based on the average number of shares outstanding.



C.4. CONSOLIDATED STATEMENT OF CASH FLOWS

Condensed consolidated statement of cash flows

(€ million)

June 30, 2012

(6 months)

June 30, 2011

(6 months) Net cash provided by / (used in) operating activities 4,327 3,905

Net cash provided by / (used in) investing activities (891) (13,867)

Net cash provided by / (used in) financing activities (3,271) 9,939

Impact of exchange rates on cash and cash equivalents 18 (50)

Impact of the cash and cash equivalents of Merial — 146

Net change in cash and cash equivalents – (decrease) / increase 183 73

Net cash provided by operating activities came to €4,327 million in the first half of 2012, against €3,905 million in the first half of 2011.

Operating cash flow before changes in working capital for the first half of 2012 was €5,096 million, versus €4,780 million for the comparable period of 2011, reflecting the contribution from Genzyme from the second quarter of 2011. Working capital requirements rose by €769 million during the first half of 2012, compared with €875 million a year earlier; the improvement was mainly due to a drop in royalties payable by BMS on sales of clopidogrel in the United States.

Net cash used in investing activities totaled €891 million in the first half of 2012, compared with €13,867 million in the first half of 2011.

Acquisitions of property, plant and equipment and intangible assets reached €786 million (versus €832 million in the first half of 2011); the main items were investments in industrial and research facilities (€595 million), together with contractual payments for intangible rights under license and collaboration agreements (€104 million).

Acquisitions of investments in the period amounted to €179 million, net of cash acquired and after including assumed liabilities and commitments; the main items were the acquisitions of Pluromed and Newport, and payments of contingent consideration relating to the acquisition of Genzyme. In the first half of 2011, acquisitions of investments came to €13,467 million, net of cash acquired; after including assumed liabilities and commitments, they totaled €13,958 million, and mainly comprised the acquisitions of Genzyme (€13,547 million) and BMP Sunstone.

After-tax proceeds from disposals amounted to €71 million in the first half of 2012, mainly on the divestment of trademarks (€35 million, primarily in the United States and France) and of financial assets in the United States (€13 million). In the first half of 2011, proceeds from disposals amounted to €71 million, arising mainly on the sale of intangible assets in Brazil (€36 million).

Financing activities generated a net cash outflow of €3,271 million in the first half of 2012, versus a net cash inflow of €9,939 million in the first half of 2011. The 2012 first-half figure includes net external funding raised (net change in short-term and long-term debt) of €625 million (compared with €11,406 million in the first half of 2011), and the Sanofi dividend payout of €3,487 million (versus €1,372 million in the first half of 2011). It also includes acquisitions of treasury shares amounting to €454 million.

After the impact of exchange rates and of the cash and cash equivalents of Merial, the net change in cash and cash equivalents in the first half of 2012 was an increase of €183 million, compared with an increase of €73 million in the first half of 2011.


63BC.5. CONSOLIDATED BALANCE SHEET

Total assets were €101,743 million at June 30, 2012, versus €100,668 million at December 31, 2011, an increase of €1,075 million. In accordance with IFRS 3 (Business Combinations), Sanofi made adjustments during the Genzyme purchase price allocation period to some of the provisional amounts recognized in 2011 (see Note B.1. to the condensed half-year consolidated financial statements).

Debt, net of cash and cash equivalents as of June 30, 2012 was €11,347 million, compared with €10,859 million as of December 31, 2011. Sanofi defines “debt, net of cash and cash equivalents” as short-term and long-term debt, plus related interest rate and currency derivatives, minus cash and cash equivalents. The gearing ratio (debt, net of cash and cash equivalents as a proportion of total equity) rose from 19.3% to 20.1%. Analyses of debt as of June 30, 2012 and December 31, 2011 by type, maturity, interest rate and currency, are provided in Note B.10. to the condensed half-year consolidated financial statements.

The financing arrangements in place as of June 30, 2012 at the Sanofi parent company level (where most of the Group’s financing operations take place) are not subject to covenants regarding financial ratios and do not contain any clauses linking credit spreads or fees to Sanofi’s credit rating.

Other key movements in the balance sheet are described below.

Total equity stood at €56,354 million as of June 30, 2012, virtually unchanged compared with December 31, 2011 (€56,373 million). This stability reflected the following factors:

- reductions: payments to shareholders (Sanofi dividend payout for the 2011 financial year: €3,487 million);

- increases: net income for the first half of 2012 (€3,101 million), and the net change in the cumulative translation difference arising from the depreciation of the euro against other currencies (€572 million, mainly on the U.S. dollar).

As of June 30, 2012, Sanofi held 4.1 million of its own shares, representing 0.3% of the capital, and recorded as a deduction from equity.

Goodwill and other intangible assets, representing a combined value of €61,462 million, fell by €759 million, primarily as a result of the following factors:

- increases: the impact of acquisitions (€14 million of goodwill and €71 million of other intangible assets), mainly those of Pluromed and Newport, plus the effects of the translation into euros of assets denominated in other currencies (€805 million, mainly on the U.S. dollar);

- reductions: amortization and impairment charged during the period (€1,769 million).

Provisions and other non-current liabilities (€11,175 million) increased by €829 million, mainly due to a €633 million rise in provisions for pensions and other long-term employee benefits.

Net deferred tax liabilities (€2,430 million) were €467 million lower, mainly due to reversals of deferred tax liabilities on the remeasurement of acquired intangible assets (€629 million).

Current and non-current liabilities related to business combinations and to non-controlling interests (€1,603 million) increased by €47 million, reflecting the remeasurement during the period of contingent value rights (CVRs) and contingent purchase consideration payable to Bayer, both of which arose as a result of the Genzyme acquisition.


D Principal risk factors and uncertainties

The risk factors to which Sanofi is exposed are described in our Annual Report on Form 20-F for the year ended December 31, 2011, filed with the U.S. Securities and Exchange Commission on March 6, 2012. The nature of these risks has not significantly changed over the first half of 2012. These risks may materialize during the second half of 2012 or during subsequent periods.


32BE Outlook

We anticipate our 2012 full-year business earnings per share3TP10F

(1)P3T will be 12% to 15% lower than

2011 at constant exchange rates, barring major unforeseen events. This guidance takes into account the loss of PlavixP

®P and AvaproP

®P exclusivity in the U.S., the performance of our growth

platforms, the contribution from Genzyme, costs controls, and other generic competition.

We define “business earnings per share” as “business net income” 3TP11F

(1)P3T divided by the weighted

average number of shares outstanding.

Business net income for the full year ended December 31, 2011 amounted to €8,795 million, giving business earnings per share of €6.65.

This guidance has been prepared using accounting methods consistent with those used in the preparation of our historical financial information. It draws upon assumptions defined by Sanofi and its subsidiaries, in particular regarding the following factors:

• trends in exchange rates and interest rates;

• growth in the national markets in which we operate;

• healthcare reimbursement policies, pricing reforms, and other governmental measures affecting the pharmaceutical industry;

• developments in the competitive environment, in terms of innovative products and the introduction of generics;

• respect by others for our intellectual property rights;

• progress on our research and development programs;

• the impact of our operating cost control policy, and trends in our operating costs;

• the average number of shares outstanding.

Some of the information, assumptions and estimates concerned are derived from or based, in whole or in part, on judgments and decisions made by Sanofi management that may be liable to change or adjustment in future.



Forward-Looking Statements

This document 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 projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, 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’s 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, 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 EMA, 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 labeling and other matters that could affect the availability or commercial potential of such product candidates, the absence of guarantee that the product candidates if approved will be commercially successful, the future approval and commercial success of therapeutic alternatives, the Group’s ability to benefit from external growth opportunities, trends in exchange rates and prevailing interest rates, the impact of cost containment policies and subsequent changes thereto, the average number of shares outstanding as well as those discussed or identified in the public filings with the Securities and Exchange Commission (SEC) and the Autorité des marchés financiers (AMF) made by Sanofi, including those listed under “Risk Factors”(1) and “Cautionary Statement Regarding Forward-Looking Statements” in Sanofi’s annual report on Form 20-F for the year ended December 31, 2011. For an update on litigation, refer to Note B.15. “Legal and arbitral proceedings” to our condensed half-year consolidated financial statements for the six months ended June 30, 2012 and section “D. Principal risk factors and uncertainties" on page 63 of the half-year management report.

Other than as required by applicable law, Sanofi does not undertake any obligation to update or revise any forward-looking information or statements.

(1) Refer to pages 4 to 18 of our Annual Report on Form 20-F for the year ended December 31, 2011, which is available on our website: www.sanofi.com.


33BF Appendix – Definition of financial indicators

64BF.1. NET SALES ON A CONSTANT STRUCTURE BASIS AND AT CONSTANT EXCHANGE RATES

113BF.1.1. Net sales at constant exchange rates

When we refer to changes in our net sales “at constant exchange rates”, we exclude the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period.

Reconciliation of 2012 first-half reported net sales to net sales at constant exchange rates

(€ million)

June 30, 2012

(6 months)

Reported net sales for the first half of 2012 17,381

Effect of exchange rates (673)

Net sales at constant exchange rates for the first half of 2012 16,708

114BF.1.2. Net sales on a constant structure basis

When we refer to changes in our net sales “on a constant structure basis”, we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:

• by including sales generated by entities or product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on sales information we receive from the party from whom we make the acquisition;

• similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period;

• for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period.

65BF.2. BUSINESS NET INCOME

“Business operating income”, adopted in order to comply with IFRS 8, is an indicator that we use internally to measure operational performance and allocate resources. Business operating income is derived from Operating income, adjusted as follows:

• the amounts reported in the lines Fair value remeasurement of liabilities related to contingent consideration, Restructuring costs and Other gains and losses, and litigation, are eliminated;


• the share of profits/losses of associates and joint-ventures is added;


• other acquisition-related effects (primarily the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments in associates and joint-ventures) are eliminated;



“Business net income” is defined as Net income attributable to equity holders of Sanofi, excluding (i) amortization of intangible assets; (ii) impairment of intangible assets, (iii) fair value remeasurement of contingent consideration liabilities; (iv) other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); (v) restructuring costs (including restructuring costs relating to associates and joint ventures), (vi) other gains and losses, and litigation; (vii) the tax effect related to the items listed above; as well as (viii) the effects of major tax disputes and, as an exception for 2011, the retroactive effect (2006-2010) on the tax liability resulting from the Franco-American Advance Pricing Agreement (APA) signed on December 22, 2011 on transfer pricing, for which the amount is deemed to be significant, and (ix) the share of non-controlling interests in items (i) through (viii). Items (i), (ii), (iii), (v) and (vi) correspond to those reported in the income statement line items Amortization of intangible assets, Impairment of intangible assets, Fair value remeasurement of contingent consideration liabilities, Restructuring costs and Other gains and losses, and litigation.

We also report “business earnings per share” (“business EPS”), a non-GAAP financial measure that we define as business net income divided by the weighted average number of shares outstanding.


16B3 | STATUTORY AUDITORS’ REVIEW REPORT ON THE 2012 HALF-YEAR FINANCIAL INFORMATION

Period from January 1, 2012 to June 30, 2012

This is a free translation into English of the Statutory Auditors’ review report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

To the Shareholders,

In compliance with the assignment entrusted to us by your Shareholders' annual general meetings and in accordance with the requirements of article L.451-1-2 III of the French monetary and financial code (Code monétaire et financier), we hereby report to you on:

- the review of the accompanying condensed half-year consolidated financial statements of Sanofi, for the period from January 1, 2012 to June 30, 2012;

- the verification of the information contained in the half-year management report.

These condensed half-year consolidated financial statements are the responsibility of the board of directors. Our role is to express a conclusion on these financial statements based on our review.

I. Conclusion on the financial statements

We conducted our review in accordance with professional standards applicable in France. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that the financial statements, taken as a whole, are free from material misstatements, as we would not become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that these condensed half-year consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 – the standard of IFRSs as adopted by the European Union applicable to interim financial information.

II. Specific verification

We have also verified the information given in the half-year management report on the condensed half-year consolidated financial statements subject to our review. We have no matters to report as to its fair presentation and consistency with the condensed half-year consolidated financial statements.

Neuilly-sur-Seine and Paris-La Défense, July 27, 2012

The Statutory Auditors

French original signed by

PricewaterhouseCoopers Audit Ernst & Young et Autres Xavier Cauchois Christian Chiarasini


4 | RESPONSIBILITY STATEMENT OF THE CERTIFYING OFFICER HALF-YEAR FINANCIAL REPORT

“I hereby certify that, to the best of my knowledge, the condensed half-year consolidated financial statements have been prepared in accordance with the applicable accounting standards and present fairly the assets and liabilities, the financial position and the income of the Company and the entities included in the scope of consolidation, and that the half-year management report on page 33 provides an accurate overview of the significant events of the first six months of the financial year with their impact on the half-year consolidated financial statements, together with the major transactions with related parties and a description of the main risks and uncertainties for the remaining six months of the financial year.”

Paris, July 27, 2012

French original signed by

Christopher A. Viehbacher

SANOFIHALF-YEAR2012FINANCIAL REPORT

SANOFI54, rue La Boétie 75008 Paris - France

Tel: + 33 (0)1 53 77 40 00www.sanofi.com

2012 half-year€¦ · total assets 101,743 100,668 (1) in accordance with ifrs3 (business...

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