PARIS, Aug. 1 /PRNewswire-FirstCall/ -- In order to give a better representation of our underlying economic performance, sanofi-aventis has decided to present and comment an adjusted(1) income statement. The company has also decided to present its adjusted net income and adjusted EPS, excluding selected items, in US Dollar(3) in order to facilitate the comparison with the majority of large pharmaceutical groups. The adjusted consolidated income statement for the first half of 2007 is provided in the appendices. Consolidated net income for the first half of 2007 was euro2,665 million, compared with euro2,381 million for the first half of 2006.
2007 second-quarter net sales Up 2.3% on a comparable basis (down 2.0% on a reported basis) at euro6, 939 million Up 7.1% excluding the impact of generics of Ambien(R) IR in the United States and Eloxatin(R) in Europe(4) 14.8% growth in net sales for the Vaccines business Ongoing cost adaptation measures -- Selling and general expenses down by 6.3% in the first half, equivalent to an improvement of 2 points of the SG&A to net sales ratio, when compared to first half 2006.
Main events of the quarter
Successful outcome to the Plavix(R) litigation in the United States, which has confirmed the validity and enforceability of U.S. patent covering the active ingredient until November 2011
Withdrawal of the Zimulti(R) application in the United States following a negative recommendation from the Advisory Committee of the FDA. Sanofi-aventis remains committed to making all efforts necessary to make Zimulti(R) available on the U.S. market.
Approval of the labeling update of Acomplia(R) in Europe and confirmation of the positive benefit-risk profile of the product except in patients suffering from ongoing major depression
Approval in the United States of the new antihistamine Xyzal(R), to be marketed by sanofi-aventis and UCB from the fall of 2007
Share buyback program -- The Board of Directors has authorized the company to purchase up to a maximum amount of 3 billion euros of its own shares before the next shareholders' meeting on May 14, 2008
Confirmation of guidance on 2007 full-year adjusted EPS growth excluding selected items as disclosed on May 3rd 2007 (see page 13)
(1) See Appendix 1 for definitions of financial indicators (2) See Appendix 5 (3) U.S. dollar figures obtained by translating euro - denominated figures at the average exchange date for the period: 1.348 for Q2 2007 (Q2 2006: 1.256), and 1.329 for H1 2007 (H1 2006: 1.229) (4) Excluding net sales of Ambien IR(R) in the United States (from April) and of Eloxatin(R) in Europe 2007 second-quarter and first-half net sales
Unless otherwise indicated, all sales growth figures in this press release are stated on a comparable basis(1).
Sanofi-aventis generated second-quarter net sales of euro6,939 million, up 2.3%. Exchange rate movements had an unfavorable impact of 4.1 points, approximately 70% of which related to the U.S. dollar. Changes in Group structure had an unfavorable impact of 0.2 of a point. On a reported basis, net sales fell by 2.0%.
First-half net sales rose by 4.6% to euro14,116 million. Exchange rate movements had an unfavorable impact of 4.4 points, around two-thirds of which related to the U.S. dollar. Changes in Group structure had an unfavorable impact of 0.2 of a point. After taking account of these effects, reported net sales were stable.
Net sales by business segment -- Pharmaceuticals
Second-quarter net sales for the pharmaceuticals business were euro6,320 million, an increase of 1.2%. Net sales of the top 15 products were up 2.5% at euro4,294 million, representing 67.9% of pharmaceuticals net sales, as opposed to 67.1% for the comparable period of 2006. First-half net sales for the pharmaceuticals business totaled euro12,930 million, a rise of 3.7%. Net sales of the top 15 products advanced by 6.4% to euro8,777 million and represented 67.9% of pharmaceuticals net sales, compared with 66.2% for the comparable period of 2006. Excluding the impact of the arrival of generics(3) of Ambien(R) IR in the United States and Eloxatin(R) in Europe, the top 15 products would have achieved growth of 10.7% in the second quarter and 11.3% in the first half.
Change Change Q2 2007 on a H1 2007 on a euro million net comparable net comparable sales basis sales basis Lovenox(R) 671 +15.5 % 1,305 +11.8 % Plavix(R) 632 +12.7 % 1,201 +5.7 % Lantus(R) 503 +26.1 % 961 +26.6 % Taxotere (R) 474 +9.0 % 923 +9.5 % Stilnox(R)/Ambien(R)/Ambien CR(TM) 252 -41.8 % 858 +2.3 % Eloxatin(R) 380 -10.2 % 773 -6.8 % Copaxone(R) 307 +20.4 % 596 +19.0 % Aprovel(R) 272 +10.1 % 536 +8.9 % Allegra(R) 198 +13.8 % 399 +17.7 % Tritace(R) 167 -30.7 % 378 -18.9 % Amaryl(R) 103 -8.8 % 197 -14.0 % Xatral(R) 85 -5.6 % 167 -7.7 % Nasacort(R) 87 +19.2 % 166 +20.3 % Actonel(R) 82 -8.9 % 160 -9.6 % Depakine(R) 81 +8.0 % 157 +4.0 % TOTAL TOP 15 4,294 +2.5 % 8,777 +6.4 % TOTAL TOP 15 excl. Eloxatin(R) in Europe and excl. Ambien(R) IR in the USA (from April) 4,130 +10.7 % 8,504 +11.3 %
Second-quarter net sales of other pharmaceutical products were euro2,026 million, down 1.4% (against euro2,054 million(5) in Q2 2006). Restrictions on indications for the antibiotic Ketek(R) resulted in a further decline in the product's net sales in the period (euro9 million, versus euro29 million(5) in the second quarter of 2006).
First-half net sales of other pharmaceutical products fell by 1.6% to euro4,153 million, versus euro4,219 million(5) in 2006 (net sales of Ketek(R) totaled euro39 million, compared with euro88 million in the first half of 2006).
(5) Comparable net sales Geographical split of consolidated net sales by product (Top 15) Change Change Change Q2 2007 net sales on a on a on a (euro million) compar- compar- compar- able United able Other able Europe basis States basis countries basis Lovenox(R) 188 +5.0 % 415 +20.6 % 68 +17.2 % Plavix(R) 431 +7.5 % 64 +30.6 % 137 +23.4 % Lantus(R) 151 +19.8 % 302 +25.8 % 50 +51.5 % Taxotere (R) 204 +9.1 % 178 +5.3 % 92 +16.5 % Stilnox(R)/ Ambien(R)/ Ambien CR(TM) 21 -12.5 % 210 -46.0 % 21 +5.0 % Eloxatin(R) 97 -35.8 % 243 +5.2 % 40 -2.4 % Copaxone(R) 81 +15.7 % 210 +22.8 % 16 +14.3 % Aprovel(R) 209 +6.1 % - - 63 +26.0 % Allegra(R) 18 -5.3 % 116 +13.7 % 64 +20.8 % Tritace(R) 121 -9.7 % 0 ns 46 -54.9 % Amaryl(R) 32 -33.3 % 2 -50.0 % 69 +13.1 % Xatral(R) 42 -27.6 % 28 +27.3 % 15 +50.0 % Nasacort(R) 13 -7.1 % 65 +22.6 % 9 50.0 % Actonel(R) 52 -17.5 % - - 30 +11.1 % Depakine(R) 54 +3.8 % - - 27 +17.4 % Change Change Change H1 2007 net sales on a on a on a (euro million) compar- compar- compar- able United able Other able Europe basis States basis countries basis Lovenox(R) 374 +6.3 % 800 +14.1 % 131 +14.9 % Plavix(R) 854 +5.2 % 86 -21.8 % 261 +22.0 % Lantus(R) 299 +17.3 % 572 +28.5 % 90 +52.5 % Taxotere (R) 402 +11.4 % 346 +4.8 % 175 +15.1 % Stilnox(R)/ Ambien(R)/ Ambien CR(TM) 43 -10.4 % 765 +2.1 % 50 +19.0 % Eloxatin(R) 206 -30.2 % 488 +7.5 % 79 -1.3 % Copaxone(R) 159 +16.9 % 407 +20.1 % 30 +15.4 % Aprovel(R) 418 +5.6 % - - 118 +22.9 % Allegra(R) 35 +6.1 % 208 +16.9 % 156 +21.9 % Tritace(R) 239 -10.8 % 1 -88.9 % 138 -27.0 % Amaryl(R) 64 -37.9 % 4 -42.9 % 129 +8.4 % Xatral(R) 86 -28.3 % 53 +35.9 % 28 +27.3 % Nasacort(R) 26 8.3 % 125 +23.8 % 15 15.4 % Actonel(R) 103 -18.9 % - - 57 +14.0 % Depakine(R) 107 0.0 % - - 50 +13.6 %
Comments by product
Net sales of Lovenox(R), the leading low molecular weight heparin on the market, rose by 15.5% in the quarter to euro671 million. Growth of the product was driven by its increased use in medical prophylaxis in the United States, where net sales of Lovenox(R) rose by 20.6% to euro415 million. Growth was also sustained in the other countries, where net sales were 17.2% higher at euro68 million. In May, following a priority review, the FDA approved a supplemental new drug application for Lovenox(R)in the treatment of patients with acute ST-segment elevation myocardial infarction (STEMI). Application for approval for the same indication was filed in Europe in the last quarter of 2006. This new indication is expected to further enhance the superiority of Lovenox(R) over non-fractioned heparins.
The results of the EXCLAIM study, presented in July at the XXIst Congress of the ISTH (International Society on Thrombosis and Haemostasis) in Geneva, showed the benefit of extended prophylaxis in acutely ill medical patients with reduced mobility. The results demonstrated that 5 weeks of thrombo- prophylaxis with Lovenox(R) was more effective than a 10-day treatment, giving a statistically significant 44% reduction in venous thromboembolism events.
Following expiry of the Ambien(R) IR patent in the United States on April 20, generics of the product soon became widely available, causing a drop in total second-quarter net sales to euro67 million, compared with euro308 million in the second quarter of 2006. Ambien CR(TM) posted second-quarter net sales of $190 million in the United States, becoming the leading brand of prescription sleeping drug. First-half net sales of Ambien CR(TM) were $385 million.
In Japan, sales of Myslee(R) (not consolidated by sanofi-aventis) were 16.2% higher in the second quarter at euro31 million. First-half net sales rose by 12.6% to euro55 million.
Taxotere(R) once again posted strong growth in the "Other countries" region during the quarter. In Europe, the product recorded growth of 9.1%, while net sales in the United States rose by 5.3%. In June, Taxotere(R) was granted two priority reviews:
-- in Japan, for the treatment of metastatic hormono-refractory prostate cancer; -- in the United States, in association with cisplatin and 5-fluorouracil for the induction (neo-adjuvant) therapy of patients with locally -advanced squamous cell carcinoma of the head and neck prior to chemoradiotherapy and surgery.
In Europe, Eloxatin(R), which is facing competition from generics in some countries including Germany and the United Kingdom, recorded a 35.8% fall in second-quarter net sales to euro97 million. In the United States, the product - which is the market-leading colorectal cancer treatment both as adjuvant and in the metastatic phase - reported a 5.2% increase in net sales to euro243 million. The 6-year survival analysis in the MOSAIC study was presented in June at the 43rd Annual Meeting of the American Society of Clinical Oncology (ASCO) in Chicago. The results showed that FOLFOX4, an Eloxatin(R)based chemotherapy regimen, significantly improved the overall survival of patients with surgicallyresected stage III colon cancer when compared to standard chemotherapy (5-FU/LV).
Lantus(R), the world's leading insulin brand, continues to record excellent performances in second-quarter. Net sales of the product advanced by 25.8% in the United States, 19.8% in Europe and 51.5% in the other countries. SoloSTAR(R), a new disposable pen that can be used to administer Lantus(R) and/or the rapid-acting insulin Apidra(R), has been gradually rolled out in Europe since April. Lantus(R) SoloSTAR(R) is now being sold in France and Germany, and has been very well received. In June, new data on Lantus(R) and Apidra(R) were presented at the 67th Annual Scientific Sessions of the American Diabetes Association (ADA) in Chicago:
-- a meta-analysis from a large-scale data set confirmed the superiority of the basal insulin Lantus(R) over insulin NPH with regard to the risk of hypoglycemia; -- a new study showed that adding Apidra(R) (insulin glulisine) to a Basal insulin and Oral antidiabetic drug Therapy (BOT+ or Basal plus) may provide an effective treatment option for people with type 2 diabetes unable to control their blood sugar (HbA1C > 6.5%), despite good titration (fasting blood glucose [FBG] < 120 mg/dl), with BOT alone.
Allegra(R) enjoyed a good first half, with a favorable pollen season in Japan. In May, the FDA approved Xyzal(R), a new once-daily prescription antihistamine for the relief of symptoms associated with seasonal and perennial allergic rhinitis and for the treatment of uncomplicated skin manifestations of chronic idiopathic urticaria in adults and children aged six and over. Xyzal(R) will be marketed jointly by sanofi-aventis and UCB in the United States from the fall of 2007.
Second-quarter net sales of Tritace(R) were down 30.7% at euro167 million mainly due to the introduction of generics in Canada.
Acomplia(R) is now approved in 42 countries and marketed in 20 countries. Net sales reached euro22 million in the second quarter and euro37 million in the first half. On June 13, the Endocrinologic and Metabolic Drugs Advisory Committee of the FDA issued a negative recommendation on the approval of rimonabant for use in obese and overweight patients with associated risk factors. On June29, sanofi-aventis announced its decision to withdraw the new drug application for rimonabant in the United States. Sanofi-aventis will work towards resubmitting the application at a future date. Sanofi-aventis is confident in the positive risk benefit ratio of rimonabant 20mg when used in the appropriate population, and is committed to making all efforts necessary to make the product available to patients in the U.S. market.
In July, the Committee for Medicinal Products for Human Use (CHMP), after re-evaluation, confirmed the positive benefit-risk profile of Acomplia(R) in the indicated patient population and issued a positive opinion on the labeling update in Europe. The product is now contra-indicated in patients with ongoing major depressive illness and/or ongoing anti-depressive treatment.
Worldwide presence(1) of Plavix(R) / Iscover(R): Change Change euro million on a on a comparable comparable Q2 2007 basis H1 2007 basis Europe 452 +4.1 % 900 +4.8 % United States 759 +2.6 % 1,362 -2.1 % Other countries 205 +21.3 % 388 +19.8 % TOTAL 1,416 +5.4 % 2,650 +3.0 %
On June 19, 2007, the U.S. District Court for the Southern District of New York upheld the validity and enforceability of U.S. patent covering clopidogrel bisulfate, the active ingredient of Plavix(R), and issued a permanent injunction enjoining Apotex from marketing its generic clopidogrel bisulfate in the United States prior to the expiration of the patent. Apotex had launched a generic clopidogrel bisulfate in August 2006, following which the U.S. District Court for the Southern District of New York awarded sanofi- aventis a temporary injunction on August 31, 2006 ordering Apotex to halt further sales of its generic clopidogrel bisulfate, without however ordering a recall of products already shipped. This injunction has been upheld on appeal in December 2006. The main patent protection for this product has now been maintained in the United States until patent expiration November 2011.
In the second quarter, Plavix(R) posted sales of $1,019 million in the United States, up 2.6%, reflecting the disappearance of the generic version from the market at the end of the quarter. First-half sales of Plavix(R) amounted to $1,809 million, a decrease of 2.1%.
In Europe, second-quarter net sales of Plavix(R) were up 4.1% at euro452 million, still affected by parallel imports in Germany.
In the other countries, growth in sales of Plavix(R) accelerated in the second quarter to 21.3%, realizing net sales of euro205 million. In Japan, the two-week limit on prescriptions imposed by the authorities was lifted in May, and net sales reached euro12 million for the quarter and euro16 million for the first half. In July, the Japanese authorities granted a priority review to an application for the use of Plavix(R) in acute coronary syndrome.
Worldwide presence(1) of Aprovel(R)/ Avapro(R)/ Karvea(R): Change Change euro million on a on a comparable comparable Q2 2007 basis H1 2007 basis Europe 233 +5.4 % 460 +6.2 % United States 127 +2.4 % 250 +8.2 % Other countries 106 +20.5 % 199 +19.9 % TOTAL 466 +7.6 % 909 +9.5 %
Second-quarter worldwide sales of Aprovel(R)/Avapro(R)/Karvea(R) were up 7.6% at euro466 million. Net sales of the product in the United States rose by 8.2% over the first half.
On April 18, the Cardio-Renal Advisory Committee of the FDA recommended approval of Avalide(R)as an initial treatment for hypertension. Avalide(R) is a fixed-dose combination of irbesartan and hydrochloro thiazide that is currently approved for the treatment of hypertension in patients with blood pressure uncontrolled on monotherapy. If approved, the new indication for Avalide(R) would be the first-line treatment for hypertension in patients who are unlikely to obtain their blood pressure goals on monotherapy.
Net sales by business segment -- Human Vaccines
Second-quarter consolidated net sales for the Human Vaccines business were euro619 million, an increase of 14.8%. The figure for the quarter includes $113 million of H5N1 vaccine sales in the United States, compared with $150 million in the second quarter of 2006. Results for the second quarter were supported by strong growth in sales of pediatric combination vaccines and the oral polio vaccine. Sales of Adacel(TM) (adult and adolescent tetanus- diphtheria-pertusis booster), launched in the United States in July 2005, reached euro51 million for the quarter, an increase of 19.6%. Menactra(R)recorded a 73.9% rise in net sales for the quarter, to euro105 million.
First-half consolidated net sales for the Human Vaccines business were euro1,186 million, an increase of 15.4%.
Construction of a new influenza vaccine manufacturing facility in the United States was completed in July. This facility is due to be operational by late 2008 or early 2009 once it has been licensed by the FDA, and will more than double current annual production capacity at the site to over 100 million doses of vaccines. In June, sanofi pasteur was awarded a $77.4 million contract by the U.S. Department of Health and Human Services (HHS) to retrofit its existing influenza vaccine manufacturing facility in the United States so that it is in a state of readiness to switch to pandemic influenza vaccine manufacture when requested by the HHS. Sanofi pasteur will contribute $25 million to the project. Work will start as soon as the company's new U.S. influenza vaccine manufacturing facility is licensed by the FDA and operational. Combining the capacities of the new facility with that of the retrofitted facility should enable sanofi pasteur to triple its current influenza vaccine capacity in the United States.
Q2 Change H1 Change euro million 2007 on a 2007 on a net comparable net comparable sales basis sales basis Polio/Pertusis/Hib Vaccines 190 +39.7 % 371 +17.8 % Adult Booster Vaccines 94 +4.4 % 219 +31.9 % Meningitis/Pneumonia Vaccines 118 +45.7 % 207 +46.8 % Travel & Other Endemics Vaccines 83 +23.9 % 163 +14.0 % Influenza Vaccines 98 -30.5 % 156 -26.1 % Other Vaccines 36 +50.0 % 70 +34.6 % TOTAL 619 +14.8 % 1,186 +15.4 %
Second-quarter sales at Sanofi Pasteur MSD, the joint venture with Merck & Co in Europe, rose sharply on a reported basis (by 37.5%) to euro196 million, supported by the successful launch of Gardasil(R), which achieved net sales of euro58 million.
Gardasil(R) is marketed by Sanofi Pasteur MSD in 18 European countries. To date, the authorities in Germany, France, Italy, Austria, Norway, Luxembourg, Belgium, Switzerland, and the United Kingdom have recommended the vaccination of girls (and in many cases, young women) against human papillomavirus.
First-half sales at Sanofi Pasteur MSD amounted to euro345 million, up 20.4% on a reported basis. Net sales of Gardasil(R) over the period were euro81 million. Sanofi Pasteur MSD sales are not consolidated by sanofi- aventis.
Net sales by geographic region Q2 2007 Change H1 2007 Change euro million net on a net on a sales comparable sales comparable basis basis Europe 3,037 -0.7 % 6,150 -1.0 % United States 2,352 +2.4 % 4,844 +9.2 % Other countries 1,550 +8.5 % 3,122 +9.7 % TOTAL 6,939 +2.3 % 14,116 +4.6 %
In Europe, the impact of healthcare reforms (especially in France and Germany) depressed sales, which fell by 0.7% in the second quarter and by 1.0% over the first half. The introduction of Eloxatin(R)generics across Europe accounted for approximately 1% of the first-half decline in the region's net sales.
In the United States, net sales rose by 2.4% in the second quarter, with growth hampered by competition from generics of Ambien(R) IR following expiry of the patent on April 20. Stripping out the effect of these generics, sales growth in the United States would have been 14.9%. Sales rose by 9.2% over the first half, or by 15.7% if the impact of Ambien(R) IR generics is excluded.
In other countries, second-quarter net sales growth was 8.5%, driven by Latin America, Asia and the Middle East. First-half net sales for the region advanced by 9.7%.
In Japan, sanofi-aventis has pursued its strategy to reinforce its position by announcing the recovery of marketing rights of 7 products (of which Rythmodan(R)- disopyramyde-arrhythmia and Amoban(R) -zopiclone- hypnotic)from January 1st, 2008. These products are currently marketed by Chugai and Mitsubishi.
Adjusted consolidated income statement
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.
Second quarter of 2007
Net sales generated by sanofi-aventis in the second quarter of 2007 fell by 2.0% on a reported basis to euro6,939 million.
Gross profit was euro5,390 million. The gross margin ratio was 77.7%, compared with 78.4% for the second quarter of 2006. The drop in this ratio was due to a fall in "Other revenues" (royalties) from euro358 million to euro291 million, mainly as a result of the effect of U.S. dollar exchange rates on royalties from Plavix(R) and Avapro(R) in the United States and the discontinuation of royalty income from Merial on fipronil. The ratio of cost of sales to net sales improved by 0.2 of a point to 26.5%, despite the arrival of generics of Ambien(R) IR in the United States from end April.
Research and development expenses rose by 0.3% to euro1,101 million, while selling and general expenses were 4.0% lower than in the second quarter of 2006 at euro1,931 million, equivalent to 27.8% of net sales (versus 28.4% for the comparable period of 2006).
Other current operating income and expenses resulted in an income of euro5 million, compared with euro49 million in the second quarter of 2006. The 2007 second-quarter figure includes an expense of euro61 million (euro42 million after tax) related to the harmonization of the Group's welfare and healthcare plans for retirees.
Operating income -- current(1) totaled euro2,329 million. Excluding the effect of the harmonization of welfare and healthcare plans (euro61 million), operating income -- current fell by 2.6%, and represented 34.4% of net sales (versus 34.7% in the comparable period of 2006).
Net financial expense was euro39 million, compared with euro63 million in the comparable period of 2006. Interest expense on debt was euro55 million, against euro85 million in the second quarter of 2006.
Income tax expense came to euro695 million, compared with euro707 million in the second quarter of 2006. The reported tax rate was 30.7 %, against 29.7% for the comparable period of 2006.
The share of profits from associates was stable at euro210 million (versus euro212 million in the second quarter of 2006). The share of after-tax profits from territories managed by BMS (primarily the United States) under the Plavix(R) and Avapro(R) alliance was flat (euro136 million, versus euro139 million in the second quarter of 2006), reflecting the discontinuation of a clopidogrel bisulfate generic in the United States during the quarter and unfavorable currency effects. The contribution from Merial increased, while the contribution from Sanofi Pasteur MSD was affected by the launch costs of Gardasil(R).
Minority interests totaled euro99 million, compared with euro93 million in the second quarter of 2006. This line includes the share of pre-tax profits paid to BMS from territories managed by sanofi-aventis (euro93 million, against euro88 million in the second quarter of 2006).
Adjusted net income was down 6.3% at euro1,678 million.
Adjusted earnings per share (adjusted EPS) was euro1.24, 6.8% lower than the 2006 second-quarter figure (euro1.33), based on an average number of shares outstanding of 1,351.9 million in the second quarter of 2007 and 1,346.0 million in the second quarter of 2006.
Excluding selected items (see Appendix 5), adjusted net income was euro1,740 million, 3.2% down on the 2006 second-quarter figure of euro1,797 million and adjusted EPS was euro1.29, 3.7% down on the 2006 second-quarter figure of euro1.34.
Expressed in dollars(3) and excluding selected items, adjusted net income was $2,346 million, 3.9% up on the 2006 second-quarter figure and adjusted EPS was $1.74, 3.6% up on the 2006 second-quarter figure.
First half of 2007
In the first half of 2007, net sales generated by sanofi-aventis were stable at euro14,116 million on a reported basis.
Gross profit was euro10,959 million. The gross margin ratio was 77.6%, against 78.0% for the comparable period of 2006. This fall was mainly due to the effect of U.S. dollar exchange rates on royalties from Plavix(R)and Avapro(R), the presence in the U.S. market of a generic of clopidogrel bisulfate during the period and the discontinuation of royalty income on fipronil. The ratio of cost of sales to net sales, which was helped by a favorable product mix over the period, was 26.3% compared with 26.6% for the comparable period of 2006.
Research and development expenses totaled euro2,182 million, 1.8% higher than in the first half of 2006(around 5% excluding currency effects). Selling and general expenses were down 6.3% at euro3,804 million, representing 26.9% of net sales (versus 28.8% in the first half of 2006). This improvement reflects measures implemented by sanofi-aventis in 2006, especially in France, Germany and the United States. Selling expenses and general expenses each fell by the same proportion over the period.
Operating income -- current rose by 3.6% to euro5,048 million, representing 35.8% of net sales (versus 34.5% in the first half of 2006).
Other operating income and expenses represented an expense of euro50 million, as opposed to an income of euro519 million in the first half of 2006. In the first half of 2007, a restructuring charge of euro50 million (euro35 million after tax) was recognized for the restructuring plan begun in France in 2006, while the first half of 2006 included euro553 million of gains on disposal, mainly on the sale of the Exubera(R) rights (euro460 million, euro384 million after tax) and of the residual stake in Animal Health business (euro45 million, euro31 million after tax).
Net financial expense was euro71 million, against euro93 million for the comparable period of 2006. Interest expense on debt came to euro111 million, compared with euro158 million in the first half of 2006.
Income tax expense totaled euro1,290 million, compared with euro1,539 million in the first half of 2006, giving a reported tax rate of 26.2% (versus 29.0% in the first half of 2006). In 2007, this line included a euro223 million gain relating to provisions for and settlements of tax dis
