Net earnings in the year 1997 reached FRF 1,920 million, an increase of 10% over 1996.

The R&D successes registered by Sanofi in 1996 were consolidated in 1997 with marketing approval in the US for two major drugs: the antihypertensive APROVEL® (irbesartan) and the antiatherothrombotic agent PLAVIX® (clopidogrel). APROVEL® also received European approval in 1997.

The strengthening of the marketing and sales networks which took place during the year made it possible to launch APROVEL® as of the beginning of the last quarter of 1997 in several European countries as well as in the US.

The year 1997 was marked by:

q the strengthening of the US dollar and sterling against other European currencies, and stabilization of the Japanese yen,

q the implementation of new measures aimed at containing reimbursed health expenditure in a number of countries.

During this period, Sanofi registered:

q consolidated sales growth of more than 9% at comparable group structure (6% at comparable group structure and constant exchange rates)

q an increase of more than 1% in gross margin to 67.1%.

This improvement is primarily due to:

- in the Pharmaceuticals business, the considerable increase in sales of major established international products, generated directly or through licensees,

- in the Beauty business, actions undertaken to reduce industrial costs

 

This increase in gross margin of FRF 1.6 billion over 1996 was invested in major efforts in two essential areas:

- in Pharmaceuticals, the strengthening of marketing and sales networks to prepare the launch of new products.

- in R&D, the continuation of clinical trials in phases II and III, notably in thrombosis, the central nervous system and oncology.

 

Given these circumstances, consolidated operating profit for all businesses taken together was slightly down from that of the previous year, while registering an improvement in the profitability of the Diagnostics and Beauty businesses. Operating profit amounted to FRF 3,362 million, as against FRF 3,531 million in 1996.

The divestment of non-strategic businesses (injectable generic medicines in the US, the automated ACCESS® Immunoassay System in Diagnostics) released a capital gain of FRF 450 million with a low tax rate.

Sanofi finished the year with net earnings of FRF 1,920 million, up by 10% over the previous year.

Analysis by business

Sales by the Healthcare segment totaled FRF 21.7 billion, representing an increase of 10% (7% at comparable group structure and constant exchange rates)

Pharmaceuticals enjoyed a sustained rate of growth, up by 9% to FRF 19.1 billion, thanks to major established international products. Sales of the top ten products increased by 14%.

Geographically, the most impressive growth was posted in emerging markets (Eastern Europe, Latin America, Asia). South-East Asia, excluding Japan, accounted for 2.6% of consolidated sales in Pharmaceuticals.

Sales by the Diagnostics division reached FRF 1.4 billion, up by 16% over the previous year at comparable group structure.

Animal Health sales rose by 21% to FRF 1.2 billion, mainly due to extremely favorable circumstances in the animal nutrition product market.

 

R&D expenditure rose by 14% to FRF 3,608 million, equaling 16.6% of healthcare sales. Marketing, selling, and general costs increased by 20%. Operating profit of the Healthcare segment was FRF 3,021 million, compared with FRF 3,295 million in 1996.

In a relatively unfavorable market, the Beauty business consolidated its positions during the year, with sales of FRF 4 billion, up by 4% over 1996.

The actions undertaken at the beginning of the year to restore the profitability of the business bore fruit in the course of 1997.

Operating profit was FRF 341 million, against FRF 236 million in 1996, an increase of 44%.

The contribution of associated companies to consolidated earnings amounted to FRF 120 million, against FRF 158 million in 1996.

In 1997, Yves Rocher posted a 3% increase in sales. Commercial efforts devoted to developing home-based group sales was primarily the cause for the drop in net earnings.

Nina Ricci was divested to the family-owned group PUIG on January 8, 1998.

Financial position

Working capital provided by operations reached FRF 2.8 billion, against FRF 3.1 billion in 1996.

Investments for the year amounted to FRF 1.9 billion, against FRF 2.8 billion in 1996. Industrial investments rose to FRF 1.4 billion from FRF 1.1 billion the previous year.

Divestment of assets accounted for FRF 1.3 billion.

The net debt-to-equity ratio at the end of 1997 was 7%, against 11% in 1996.

Earnings per share

Net earnings per share rose to FRF 18.20, up by 8% over 1996.

Financial results for the parent company

At the meeting of the Board of Directors held on February 24, 1998, the Board reviewed the financial statements of Sanofi S.A., which reported a net income of FRF 691 million.

Dividend

The Board of Directors will propose an increase in dividend from FRF 6.60 to FRF 7 per share at the General Meeting of Shareholders to be held on May 12, 1998.

Merger - absorption

At the meeting held on February 24, 1998, the Board of Directors agreed to a proposed merger by which Sanofi SA would absorb its subsidiary companies Sanofi Pharma, Choay SA and Sanofi Gestion France. This proposal will also be submitted to the General Meeting of Shareholders to be held on May 12, 1998. This is part of a strategy introduced at the end of 1997, in which Sanofi's corporate and pharmaceutical division teams are grouped together in the same structure.