Sanofi's business activities registered a good increase, up by 9.5% at comparable group structure and constant exchange rates (up by 6.5% on a historical basis), which was responsible for the 12% increase in both operating profit and net earnings excluding capital gains for the first half of 1998.

The rapid sales growth of leading internationally established products and the initial favorable results of the launches of Aprovel® and Plavix® enabled the Group to finance the marketing and sales resources implemented in 1997, and also to ensure a steady increase in Research and Development expenditure.

*Not comparable

A closer look at consolidated earnings at June 30, 1998 reveals:

• an increase of 2 points in operating margin, from 67.6% to 69.6%, chiefly attributable to the excellent performance of the leading internationally established pharmaceutical products and the reduction in cost of goods sold for the Beauty division.
• a 9.9% rise in selling and general expenditure in comparison with the first half of 1997. This expenditure was stabilized at FRF 5.3 billion, the same level as in the second half of 1997.
• overall R&D expenditure increased by 6.8% to FRF1.9 billion, with pharmaceutical R&D increasing by 8.4%.

Operating profit reached FRF 1.735 billion and net earnings before capital gains (net of taxes) totaled FRF 762 million. These two indicators grew by 12% over the previous exercise.

Taking into account net capital gains of FRF 83 million, consolidated net earnings for the first half of 1998 amounted to FRF 845 million. Net profits at June 30, 1997, which included capital gains of FRF 375 million, reached FRF 1.055 billion.

• Sales for the Healthcare business rose to FRF 11.2 billion, up by 9.5% at comparable Group structure and constant exchange rates.

Pharmaceutical sales, up by 10.5%, benefited from the increase in sales of internationally established products, which, for the ten leading products, rose by 13%, excluding Aprovel® and Plavix® . Including sales by licensees, the top four products, Ticlid® (ticlopidine), Depakine® (sodium valproate), Cordarone® (amiodarone) and Fraxiparine® (nadroparin calcium), registered an average increase of 16%.

In the global market, the antihypertensive agent irbesartan (Aprovel® /Avapro® /Karvea® ) which was first launched in September 1997, recorded sales of FRF 352 million during the first half of the year, of which FRF 170 million were consolidated by Sanofi. This product, which is now available in all major markets, has already gained a significant position in the angiotensin II receptor antagonist (AIIRA) class.

The ADP receptor antagonists clopidogrel (Plavix® ), launched in the US in March 1998, posted sales of FRF 173 million at June 30, which was consolidated by Bristol-Myers Squibb. On July 15, 1998, the compound was approved for marketing in the European Union.

Geographically speaking, pharmaceutical sales rose by 3% in France, and by 14% in the rest of the world. The percentage of sales generated outside France increased once again, reaching more than 72%.

Sales by the Diagnostics and Animal Health businesses were stable.

At June 30, 1998, R&D expenditure accounted for 17% of Healthcare sales.

Operating profit for the healthcare sector reached FRF 1.696 billion, up by 7.5% over the corresponding year-earlier period.

The Beauty business, bolstered by the good performance of Yves Saint Laurent and the international launch of "So de la Renta" by Oscar de la Renta, registered sales of FRF 1.7 billion, an increase of 9.7% at comparable Group structure and constant exchange rates. There was continued improvement in cost prices, which ensured an operating profit of FRF 39 million at June 30, 1998, against an operating loss of FRF 31 million at June 30, 1997.

The contribution from associate companies was down in comparison with the corresponding year-earlier period, with Yves Rocher experiencing lower mail-order sales during the first half of the year.

Regarding the financial position, working capital provided by operations rose to FRF 1.6 billion, up by 14% over the corresponding year-earlier period. The net debt-to-equity ratio of 7% was stable in comparison with December 31, 1997.