PARIS, Oct. 31 /PRNewswire-FirstCall/ -- The consolidated income statement for the first 9 months of 2006 is provided in the appendices. Consolidated net income after minority interests for the period was euro 3,431 million, compared with euro 1,802 million for the first 9 months of 2005, after the impact of the accounting treatment of acquisitions (primarily the acquisition of Aventis) and restructuring costs (euro 2,232 million after tax in 2006 and euro 3,089 million in 2005).
In order to give a better representation of our underlying economic performance, we have decided to publish and explain an adjusted consolidated income statement(1) for the first 9 months of 2006 and the third quarter of 2006, and to compare them with an adjusted consolidated income statement for the first 9 months and third quarter of 2005 respectively. Adjusted net income for the first 9 months of 2006 was euro 5,663 million, compared with euro 4,891 million for the first 9 months of 2005.
Unless otherwise indicated, all sales growth figures in this press release are stated on a comparable basis(1).
THIRD QUARTER: - Third quarter of 2006 hit by the launch of a generic version of clopidogrel bisulfate in the United States on August 8, 2006, and by measures to curb healthcare costs in France and Germany. - Net sales: euro 6,901 million, down 1.1% (down 4.2% on a reported basis). Excluding the impact of the introduction of generics of 4 products(2) in the United States, sales growth would have been 3.4%. - Increase of 8.4% in R&D expenses. - Adjusted EPS of euro 1.26 (down 12.5%), or euro 1.26 (down 7.4%) excluding selected items(3). FIRST 9 MONTHS: - Net sales: euro 21,017 million, up 2.6% (up 3.5% on a reported basis). Excluding the impact of the introduction of generics of 4 products(2) in the United States, sales growth would have been 8.1%. - Increase of 11.2% in R&D expenses. - Adjusted EPS of euro 4.21 (up 15.0%), or euro 3.87 (up 7.5%) excluding selected items (in particular the gain on the disposal of Exubera(R)). ACOMPLIA(R) LAUNCHED IN 7 EUROPEAN COUNTRIES 2006 GUIDANCE
Barring major adverse events, the Group anticipates adjusted EPS growth of at least 2% for the full year 2006.
2006 third-quarter and 9-month net sales
In the third quarter of 2006, sanofi-aventis recorded net sales of euro 6,901 million, a fall of 1.1%. Exchange rate movements (relating mainly to the U.S. dollar) had an unfavorable effect of 2.4 points. Changes in Group structure had a negative effect of 0.7 of a point. On a reported basis, net sales fell by 4.2%.
In the 9 months to end September 2006, net sales rose by 2.6% to euro 21,017 million. Exchange rate movements (relating mainly to the U.S. dollar) had an favorable effect of 1.6 points. Changes in Group structure had a negative effect of 0.7 of a point. On a reported basis, net sales rose by 3.5%.
Net sales by business segment
Net sales reported by sanofi-aventis comprise net sales generated by the pharmaceuticals business and net sales generated by the human vaccines business.
Pharmaceuticals
Third-quarter net sales for the pharmaceuticals business, which were hit hard by the introduction of generics of 4 products(4) in the United States and the effect of healthcare system reforms in France and Germany, fell by 0.4% to euro 6,254 million. Net sales of the top 15 products advanced by 1.5% to euro 4,221 million, representing 67.5% of pharmaceuticals net sales, against 66.2% for the comparable period in 2005.
Excluding the impact of generics of Allegra(R) and Amaryl(R) in the United States, the top 15 products would have achieved growth of 8.3% in the third quarter and 12.8% to end September.
In the 9 months to end September, net sales for the pharmaceuticals business totaled euro 19,290 million, up 1.3%. Net sales of the top 15 products rose by 5.0% to euro 12,868 million, representing 66.7% of pharmaceuticals net sales versus 64.4% for the comparable period in 2005.
Change on a 2006 Change on a Q3 2006 comparable 9-month comparable euro million net sales basis net sales basis Lovenox(R) 583 +9.2% 1,821 +13.2% Plavix(R) 543 +2.5% 1,688 +11.2% Stilnox(R)/Ambien(R)/ Ambien CR(TM) 538 +33.8% 1,446 +29.9% Taxotere(R) 429 +5.1% 1,315 +9.0% Eloxatin(R) 417 +1.7% 1,291 +11.1% Lantus(R) 412 +30.8% 1,215 +37.3% Copaxone(R) 262 +12.4% 796 +20.4% Aprovel(R) 252 +13.0% 750 +12.4% Tritace(R) 223 -13.9% 706 -5.1% Allegra(R) 156 -55.4% 525 -56.8% Amaryl(R) 106 -43.9% 346 -36.7% Xatral(R) 83 +5.1% 269 +12.1% Actonel(R) 84 0.0% 264 +9.5% Depakine(R) 73 -7.6% 227 -5.0% Nasacort(R) 60 -3.2% 209 -1.9% TOTAL TOP 15 4,221 +1.5% 12,868 +5.0% TOTAL TOP 15 excl. impact Allegra(R) and Amaryl(R) in the USA* 4,120 +8.3% 12,565 +12.8% * Excluding net sales of Allegra(R) and Amaryl(R) in the United States
Third-quarter net sales of other pharmaceutical products fell by 4.3% to euro 2,033 million. Excluding the impact of generics of DDAVP(R) and Arava(R) in the United States(5), net sales of other pharmaceutical products would have fallen by 2.1%.
In the 9 months to end September, net sales of other pharmaceutical products fell by 5.4% to euro 6 422 million. Excluding the impact of generics of DDAVP(R) and Arava(R) in the United States(5), net sales of other pharmaceutical products would have fallen by 2.5%.
Human Vaccines
Third-quarter consolidated net sales for the human vaccines business fell by 7.0% to euro 647 million. The decline in sales during the quarter reflected the postponement to the fourth quarter of shipments of influenza vaccines in the United States, with production of the vaccine delayed by the changeover of two strains and by low yields in the initial production phase for one of these strains. Our objective of shipping 50 million doses of Fluzone(R) in the United States in 2006 is unchanged.
Menactra(R) recorded net sales of euro 78 million in the third quarter and euro 197 million in the 9 months to end September.
Sales of Adacel(TM) (adult tetanus-diphtheria-whooping cough booster), launched in the United States in July 2005, reached euro 46 million in the third quarter and euro 124 million in the 9 months to end September. A new production facility was approved by the FDA in August 2006 and is expected to be operational by the end of the year, making it easier for us to meet demand for certain whooping cough vaccines from 2007 onwards.
In the first 9 months of 2006, consolidated net sales for the human vaccines business were euro 1,727 million, an increase of 19.6%.
Change on a 2006 Change on a Q3 2006 comparable 9-month comparable euro million net sales basis net sales basis Polio/Whooping Cough/ Hib Vaccines 172 +17.0% 492 +16.0% Adult Booster Vaccines 83 -3.5% 261 +20.8% Influenza Vaccines 172 -35.3% 396 +18.6% Travel Vaccines 67 +42.6% 191 +45.8% Meningitis/ Pneumonia Vaccines 102 -3.8% 253 +21.1% Other vaccines 51 15.9% 134 +3.1% TOTAL 647 -7.0% 1,727 +19.6%
Third-quarter sales at Sanofi Pasteur MSD, the joint venture with Merck & Co in Europe, fell by 26.6% on a reported basis to euro 181 million. Excluding Hexavac(R), suspended by the EMEA in September 2005, Sanofi Pasteur MSD would have recorded a 21.9% decline in net sales on a reported basis. This drop in sales was due mainly to the postponement to the fourth quarter of shipments of the Vaxigrip influenza vaccine. In September, Gardasil(R) (a product developed by Merck & Co) was approved in the European Union for use in prevention of high grade cervical dysplasia (CIN 2/3), cervical carcinoma, high grade vulvar dysplastic lesions (VIN 2/3), and external genital warts caused by human papillomavirus (HPV) types 6, 11, 16 and 18. Marketing of the product has already begun in Austria, Germany, Finland, Sweden, the United Kingdom and Ireland. The product is due to be launched in France by the end of the year.
Two other vaccines developed by Merck & Co, which are to be marketed by Sanofi Pasteur MSD, were also approved recently by the European authorities:
- Zostavax(R), a vaccine against herpes zoster (shingles) and herpes zoster related postherpetic neuralgia, was approved in May (frozen form); an application for approval of a refrigerated form was submitted in July 2006. - Rotateq(R) was approved in June for the prevention of pediatric rotavirus gastroenteritis.
In the 9 months to end September, Sanofi Pasteur MSD posted sales of euro 467 million, down 11.4%. Excluding Hexavac(R), the joint venture’s sales would have remained stable on a reported basis.
These sales are not consolidated by sanofi-aventis. Net sales by geographical region Change on a 2006 Change on a Q3 2006 comparable 9-month comparable euro million net sales basis net sales basis Europe 2,927 -2.0% 9,157 +1.2% United States 2,464 -5.0% 7,305 +0.2% Other countries 1,510 +8.2% 4,555 +9.9% TOTAL 6,901 -1.1% 21,017 +2.6%
In Europe, third-quarter net sales fell by 2.0%, having been heavily impacted by healthcare system reforms in France and Germany.
The German reforms, especially the pressure on doctors to curb prescriptions, led to a marked deceleration in the pharmaceutical market and on sanofi-aventis local sales during the third quarter. In addition, some of our products were particularly affected by parallel imports. In the 9 months to end September, net sales in Europe rose by 1.2%.
In the United States, net sales were affected by competition from generics of 4 products(2). Third-quarter net sales fell by 5.0%, while net sales for the 9 months to end September showed a slight increase of 0.2%. Excluding the impact on net sales of these 4 products(2), third-quarter sales growth would have been 7.7%, with the growth rate affected notably by the postponement of shipments of the Fluzone(R) influenza vaccine. In the 9 months to end September, excluding the impact of the same 4 products(2) in the United States, net sales would have risen by 17.3%.
Growth in “Other Countries” reached 8.2% in the third quarter and 9.9% in the 9 months to end September. Latin America and Asia continue to post strong growth.
Developed sales(1)
Developed sales give an indication of the overall presence of sanofi-aventis products in the market. Third-quarter developed sales were euro 7,537 million, a drop of 4.0%, reflecting the situation of Plavix(R) in the United States (see comments on developed sales of Plavix(R)). In the 9 months to end September, developed sales rose by 2.8% to euro 23,638 million.
Developed sales of Plavix(R)/Iscover(R):
Change on a Change on a comparable 2006 comparable euro million Q3 2006 basis 9 months basis Europe 420 +3.7% 1,279 +10.0% United States 377 -42.4% 1,894 +0.7% Other countries 175 +16.7% 519 +19.0% TOTAL 972 -19.7% 3,692 +6.1%
On August 8, 2006, Apotex announced that it had launched a generic version of clopidogrel bisulfate 75 mg tablets in competition with Plavix(R). On August 31, 2006, the U.S. District Court for the Southern District of New York granted the motion filed by sanofi-aventis and Bristol-Myers Squibb for a preliminary injunction and ordered Apotex to halt sales of its generic version of clopidogrel bisulfate. However, the Court did not order the recall of products already sold by Apotex.
As a result, sales of Plavix(R) in the United States were hit hard during the third quarter, falling by 42.4% to euro 377 million, of which euro 67 million was recorded after August 8. However, growth in total prescriptions (TRx) of clopidogrel bisulfate remained strong at 12.7.%(6) in the third quarter and 13.4%(7) in the 9 months to end September.
In August 2006, the Food and Drug Administration approved a new indication for Plavix(R) in patients suffering from acute ST-segment elevation myocardial infarction, to reduce the rate of death from any cause and the rate of a combined endpoint of re-infarction, stroke or death. The same indication was approved in the European Union in September.
In Europe, third-quarter net sales of Plavix(R) rose by 3.7% to euro 420 million. This low rate of growth was largely due to a decline in sales in Germany, reflecting a marked slowdown in the local market.
In Japan, the launch of Plavix(R) as a treatment for the reduction of recurrence after ischemic cerebrovascular disorder continued, subject to the conditions imposed by the Japanese authorities (6-month Post-Marketing Vigilance Period, and prescriptions limited to a maximum of two weeks for a 12-month period).
Developed sales of Aprovel(R)/Avapro(R)/Karvea(R): Change on a Change on a comparable 2006 comparable euro million Q3 2006 basis 9 months basis Europe 214 +8.1% 649 +10.8% United States 126 +8.6% 378 +15.6% Other countries 95 +14.5% 272 +14.3% TOTAL 435 +9.6% 1,299 +12.9%
Third-quarter developed sales of Aprovel(R)/Avapro(R)/Karvea(R) were up 9.6% at euro 435 million.
In the United States, the product posted 8.6% net sales growth in the third quarter. Prescriptions (TRx) rose by 3.2%(6) in the quarter. Total prescriptions of the product in the 9 months to end September rose by 4.4%(7).
Comments by product Geographical split of consolidated net sales by product (Top 15) Q3 2006 net sales Change on a Change on a Change on a (euro million) comparable comparable Other comparable Europe basis USA basis countries basis Lovenox(R) 164 +3.8% 358 +11.9% 61 +8.9% Plavix(R) 391 +3.7% 41 -38.8% 111 +29.1% Stilnox(R)/ Ambien(R)/ Ambien CR(TM) 24 -11.1% 489 +37.4% 25 31.6% Taxotere(R) 174 +7.4% 174 +0.6% 81 +11.0% Eloxatin(R) 144 +2.1% 234 0.0% 39 +11.4% Lantus(R) 131 +22.4% 244 +33.3% 37 +48.0% Copaxone(R) 71 +20.3% 177 +9.9% 14 +7.7% Aprovel(R) 197 +9.4% - - 55 +27.9% Tritace(R) 117 -15.8% 3 - 103 -13.4% Allegra(R) 10 0.0% 97 -66.8% 49 +2.1% Amaryl(R) 38 -43.3% 4 -93.4% 64 +4.9% Xatral(R) 45 -19.6% 25 +92.3% 13 +30.0% Actonel(R) 57 -3.4% - - 27 +8.0% Depakine(R) 52 -13.3% - - 21 +10.5% Nasacort(R) 8 +14.3% 46 -6.1% 6 0.0% 2006 9-month net sales Change on a Change on a Change on a (euro million) comparable comparable Other comparable Europe basis USA basis countries basis Lovenox(R) 515 +6.2% 1,123 +16.6% 183 +14.4% Plavix(R) 1,202 +10.2% 151 -12.2% 335 +31.4% Stilnox(R)/ Ambien(R)/ Ambien CR(TM) 72 -11.1% 1,306 +34.5% 68 +11.5% Taxotere(R) 536 +15.8% 534 +0.9% 245 +14.5% Eloxatin(R) 440 +8.9% 730 +9.3% 121 +34.4% Lantus(R) 386 +29.1% 729 +38.6% 100 +66.7% Copaxone(R) 207 +21.8% 547 +21.0% 42 +7.7% Aprovel(R) 595 +10.2% - - 155 +22.0% Tritace(R) 387 -9.4% 13 +160.0% 306 -1.9% Allegra(R) 43 0.0% 291 -69.3% 191 -15.5% Amaryl(R) 141 -27.7% 12 -93.2% 193 +10.3% Xatral(R) 165 -4.6% 67 +86.1% 37 +19.4% Actonel(R) 185 +8.2% - - 79 +12.9% Depakine(R) 158 -10.7% - - 69 +11.3% Nasacort(R) 32 +10.3% 156 -4.3% 21 0.0%
Net sales of Lovenox(R), the leading low molecular weight heparin on the market, reached euro 583 million in the third quarter, a rise of 9.2%. Growth of the product continues to be driven by its increasing use in medical prophylaxis. Sales in Europe rose by 3.8%, with the growth rate adversely affected by a decline in German sales of the product. In the 9 months to end September, net sales of Lovenox(R) advanced by 13.2%. Filing for approval of Lovenox(R) as a treatment for patients suffering from acute ST-segment elevation myocardial infarction (ExTRACT study) is due to take place in the fourth quarter in both Europe and the United States. This new indication is expected to further enhance the superiority of Lovenox over non-fractioned heparins.
The results of the PREVAIL study, evaluating the benefits of Lovenox(R) in the prevention of deep vein thrombosis after ischemic cerebrovascular events, are due to be presented to the American Society of Hematology in December 2006.
In addition to the decline in sales in Germany consolidated net sales of Plavix(R) were hit by the launch of a generic version of clopidogrel bisulfate 75 mg tablets in the United States. Sales of Plavix(R) raw materials for shipment to the United States (consolidated by sanofi-aventis) fell by 38.8% in the quarter, to euro 41 million. Excluding this effect, Plavix(R) would have recorded 8.4% growth in the quarter.
Net sales of Ambien(R)/Ambien CR(TM) in the United States rose by 37.4% in the quarter to euro 489 million. The product had a market share of 45.2%8 at the end of September, versus 44.7% at the end of June (IMS NPA-3 channels). To end September, prescriptions of Ambien CR(TM) represented some 27% of prescriptions of Ambien(R) brand products.
The pediatric dossier for Ambien(R) was submitted to the FDA on 29 September 2006. In Japan, sales of Myslee(R) (developed sales) reached euro 84 million, an increase of 15.3%.
Taxotere(R) recorded third-quarter growth of 11.0% in “Other Countries” and 7.4% in Europe. In the United States, the product continues to gain market share as an adjuvant breast cancer treatment, despite a difficult competitive environment.
Taxotere(R) was recently approved in the United States and Europe for advanced stage gastric cancer in association with the standard treatment (cisplatin and 5-fluorouracile). On October 23, the European Commission has adopted the positive opinion of the Committee for Human Medicinal Products opinion (CHMP) of the European Medicines Agency (EMEA) on the use in Europe of Taxotere(R) in combination with a classic regimen (cisplatin and 5- fluorouracil) as induction treatment for patients with inoperable locally advanced squamous cell carcinoma of the head and neck, also referred as head and neck cancer. This additional indication was approved in the United States on October 17.
The FDA has granted a pediatric extension for Eloxatin(R) in the United States, extending the data protection period by six months until February 2007. It also extends other regulatory exclusivity periods by 6 months.
To further strengthen its portfolio in oncology, on July 3 sanofi-aventis announced it had signed an agreement with the Japanese pharmaceutical company Taiho giving sanofi-aventis the rights to develop and market the oral anticancer agent S-1, a new proprietary oral derivative of fluorouracil from Taiho. Sanofi-aventis will lead the development and marketing of the product worldwide, except in Japan and some other Asian countries. Taiho will be involved in the development of the product and will have the option of participating in the promotion of the product in any country in which sanofi- aventis markets it.
On October 13, Taiho and sanofi-aventis announced that, based on the recommendations of the Steering Committee of a study conducted by Taiho to assess the S-1 oral anticancer agent as an adjuvant gastric cancer treatment after surgery, the interim efficacy analysis demonstrated superior clinical benefits in the S-1 arm of the study.
Lantus(R), the world’s leading insulin brand, continues to show excellent performances, with net sales up 30.8% in the third quarter to euro 412 million. In the 9 months to end September, the product posted net sales of euro 1,215 million, up 37.3%. The new disposable pen, Solostar(R), was approved in Europe in September, and the application is currently under review in the United States. The first launches of Solostar(R) are scheduled for the final quarter of 2006.
Acomplia(R), initially launched at end June in the United Kingdom, is now available in Germany, Denmark, Norway, Finland, Austria and Ireland. Third- quarter net sales totaled euro 11 million. Two months after its launch in the United Kingdom, the product is getting very positive feedback from specialists and general practitioners treating obese patients with cardiometabolic risk factors.
In Denmark, Acomplia(R) is reimbursable, subject to prior authorization, for patients with a Body Mass Index of more than 27 with life-threatening obesity-related conditions such as type 2 diabetes or dyslipidemia (low levels of HDL cholesterol plus hypertriglyceridemia) who fail to respond adequately to a weight-loss diet. In Ireland, Acomplia(R) will be reimbursed without restriction in its approved indications by the Department of Health & Children from November 1, 2006.
On October 18, the German Federal Joint Committee (“Gemeinsamer Bundesausschuss” - “G-BA”) announced that it had recommended classifying Acomplia(R) under Section 34 of the Social Code Volume V (“Sozialgesetzbuch Bd. V” -"SGB V”). Section 34 covers products viewed as lifestyle medications which are currently not reimbursed by German statutory health insurance (“Gesetzliche Krankenkasse”). This decision is pending final ratification by the Ministry of Health within a period of two months. It becomes legally binding after publication in the Official Journal of the Government (“Bundesanzeiger”). Sanofi-aventis regards this classification as not only unjustified on public health policy grounds, but also as unlawful. If the G-BA decision were to be ratified, sanofi-aventis intends to challenge the decision to refuse reimbursement under Section 34 in the courts.
The results of the SERENADE trial evaluating rimonabant in type II diabetes patients not receiving treatment will be presented at the World Diabetes Fondation in December 2006.
Regarding the ongoing review of rimonabant(R) in the United States, the company has submitted on October 26, 2006 the complete response to the approvable letter received from the FDA on February 17, 2006.
Adjusted consolidated income statement (unaudited) The adjusted consolidated income statement is presented in Appendix 3.
Refer to Appendix 1 for a definition of “adjusted net income”, and to Appendix 4 for a reconciliation of the consolidated income statement to the adjusted consolidated income statement.
Third quarter of 2006
Net sales generated by sanofi-aventis in the third quarter of 2006 fell by 4.2% on a reported basis to euro 6,901 million.
Gross profit was euro 5,302 million. The gross margin ratio was 76.8%, against 78.7% in the comparable period of 2005. This reduction was mainly due to two factors:
- A 1 percentage point increase (to 26.7%) in the ratio of cost of sales to net sales, due to generics of Allegra(R), Amaryl(R), Arava(R) and DDAVP(R). The third-quarter ratio was in line with that for the first half of 2006. - A 24.2% decline in other revenues (euro 241 million) due to the marked drop in royalties generated by Plavix(R) in the United States.
Research and development expenses continued their increase in the third quarter, and were 8.4% higher than in the third quarter of 2005 at euro 1,075 million. As in the first half of 2006, this rise reflects increasing Phase III clinical trials activity in pharmaceuticals and greater investment in R&D in the vaccines business. Research and development expenses represented 15.6% of net sales, against 13.8% in the third quarter of 2005.
Selling and general expenses were 10.5% lower than in the third quarter of 2005 at euro 1,806 million, equivalent to 26.2% of net sales. During the quarter, there was a slowdown in selling expenses in the United States, Germany and France as sanofi-aventis adapted to the changing market environment. There was a further marked reduction in general expenses.
Other current operating income and expenses totaled euro 96 million, compared with euro 29 million in the third quarter of 2005. This improvement was due to foreign exchange differences, which showed a net gain of euro 27 million compared with a net loss of euro 50 million in 2005.
Operating income - current was down 6.5% at euro 2,481 million, and represented 36.0% of net sales as opposed to 36.8% in the third quarter of 2005.
Operating income was down 7.7% at euro 2,479 million.
Net financial expense was euro 53 million, against euro 19 million for the third quarter of 2005, when sanofi-aventis recorded a gain of euro 64 million on the disposal of various holdings (mainly Transkaryotic and Viropharma).
Interest expense on debt came to euro 92 million, compared with euro 104 million in the third quarter of 2005.
Income tax expense was euro 743 million, against euro 829 million in the third quarter of 2005. The effective tax rate was 30.6%, versus 31.1% in the comparable period of 2005.
The share of profits from associates was euro 116 million, compared with euro 175 million in the third quarter of 2005. This item was hit by the situation affecting Plavix(R) in the United States, and reflects the decline in the share of after-tax profits from territories managed by BMS (primarily the United States) under the Plavix(R) and Avapro(R) alliance (euro 56 million, versus euro 112 million in the third quarter of 2005).
Minority interests totaled euro 100 million, against euro 91 million in the third quarter of 2005. This line includes the share of pre-tax profits paid over to BMS from territories managed by sanofi-aventis (euro 95 million, versus euro 82 million in the third quarter of 2005).
Adjusted net income was down 11.6% at euro 1,699 million.
After excluding selected items, adjusted net income was also euro 1,699 million, down 6.6% on the 2005 third-quarter figure of euro 1,819 million (see Appendix 5).
Adjusted earnings per share (EPS) was euro 1.26, 12.5% lower than the 2005 third-quarter figure of euro 1.44, based on an average number of shares outstanding of 1,348.0 million in the third quarter of 2006 and 1,337.1 million in the third quarter of 2005.
After excluding selected items, adjusted EPS was also euro 1.26, 7.4% lower than the 2005 third-quarter figure of euro 1.36 (see Appendix 5).
First 9 months of 2006
Net sales generated by sanofi-aventis in the first 9 months of 2006 were euro 21,017 million, an increase of 3.5% on a reported basis.
Gross profit was euro 16,307 million, 2.6% higher than in the first 9 months of 2005. The gross margin ratio was 77.6%, versus 78.3% in the comparable period of 2005. The ratio of cost of sales to net sales increased by just 0.6 of a point to 26.6%, due to the impact of generics of Allegra(R), Amaryl(R), Arava(R) and DDAVP(R) in the United States. Other revenues rose by only 2.5% (euro 888 million) in the first 9 months of the year, affected by the significant decline in royalties generated by Plavix(R) in the United States in the third quarter.
Research and development expenses were 11.2% higher than in the first 9 months of 2005 at euro 3,219 million, representing 15.3% of net sales (versus 14.3% in the 9 months to end September 2005).
Selling and general expenses were 1.7% down on the first 9 months of 2005 at euro 5,867 million, equivalent to 27.9% of net sales. Selling expenses were virtually unchanged year on year due to the reduction in the third quarter, while general expenses were lower than in the comparable period of 2005.
Other current operating income and expenses totaled euro 236 million, against euro 98 million on the 9 months to end September 2005. This line includes the income generated by the agreement with Prasco on the marketing of authorized generics in the United States. Net foreign exchange differences were neutral in the first 9 months of 2005, compared with a net loss of euro 44 million in the comparable period of 2005.
Operating income - current advanced by 4.3% to euro 7,355 million, and represented 35.0% of net sales, an improvement of 0.3 of a point on the first 9 months of 2005.
Other operating income and expenses totaled euro 520 million, compared with euro 44 million in the first 9 months of 2005. This line includes gains on disposals of euro 548 million, of which euro 460 million (euro 384 million after tax) related to Exubera(R) and euro 45 million to the sale of the residual 30% interest in an Animal Nutrition business.
Operating income was up 11.5% at euro 7,872 million.
Net financial e
