?/115; Am. -EAR FINANCIAL REPORT SANOFI HALF-YEAR FINANCIAL REPORT 2017 CONTENTS 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 ................................................................................8 NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2017 ...................................................................................................................................10 A/ Basis of preparation of the half-year financial statements and accounting policies ............................. 10 B/ Significant information for the first half of 2017 ..................................................................................... 14 C/ Events subsequent to June 30, 2017.................................................................................................... 37 2 HALF-YEAR MANAGEMENT REPORT ....................................................................................... 38 A/ Significant events of the first half of 2017 ............................................................................................. 38 B/ Events subsequent to June 30, 2017 .................................................................................................... 41 C/ Consolidated financial statements for the first half of 2017 .................................................................. 42 D/ Risk factors and related party transactions .......................................................................................... 64 E/ Outlook .................................................................................................................................................. 64 F/ Appendix – Definition of Financial Indicators ........................................................................................ 66 G/ Appendix – Research and Development Pipeline ................................................................................ 68 3 STAUTORY AUDITORS’ REPORT .............................................................................................. 70 4 RESPONSIBILITY STATEMENT OF THE CERTIFYING OFFICER — HALF-YEAR FINANCIAL REPORT 71 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. 1 CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS — ASSETS (€ million) Note June 30, 2017 December 31, 2016 Property, plant and equipment B.2. 9,633 10,019 Goodwill B.3. 40,964 40,287 Other intangible assets B.3. 13,849 10,879 Investments in associates and joint ventures B.5. 2,841 2,890 Other non-current assets B.6. 2,928 2,820 Deferred tax assets 4,556 4,669 Non-current assets 74,771 71,564 7,246 6,892 6,857 7,311 2,091 2,211 10,877 10,273 27,071 26,687 28 6,421 101,870 104,672 Inventories Accounts receivable B.7. Other current assets Cash and cash equivalents B.9. Current assets Assets held for sale or exchange TOTAL ASSETS B.21. The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 2 Sanofi  2017 Half-Year Financial Report CONSOLIDATED BALANCE SHEETS — LIABILITIES AND EQUITY (€ million) Note June 30, 2017 December 31, 2016 Equity attributable to equity holders of Sanofi 57,631 57,554 Equity attributable to non-controlling interests 161 170 Total equity B.8. 57,792 57,724 Long-term debt B.9. 15,186 16,815 Non-current liabilities related to business combinations and to noncontrolling interests B.11. 1,287 1,378 Provisions and other non-current liabilities B.12. 8,412 8,834 2,128 2,292 27,013 29,319 Accounts payable 4,303 4,297 Other current liabilities 9,277 10,175 B.11. 234 198 B.9. 3,241 1,764 17,055 16,434 10 1,195 101,870 104,672 Deferred tax liabilities Non-current liabilities Current liabilities related to business combinations and to non-controlling interests Short-term debt and current portion of long-term debt Current liabilities Liabilities related to assets held for sale or exchange TOTAL LIABILITIES AND EQUITY B.21. The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 2017 Half-Year Financial Report  Sanofi 3 CONSOLIDATED INCOME STATEMENTS (€ million) Note Net sales B.20.4. Other revenues June 30, 2017 (6 months)(a) 17,311 June 30, 2016 (6 months)(a) 15,926 December 31, 2016 (12 months)(a) 33,821 519 310 887 Cost of sales (5,670) (4,970) (10,702) Gross profit 12,160 11,266 24,006 Research and development expenses (2,667) (2,514) (5,172) Selling and general expenses (5,046) (4,609) (9,486) Other operating income B.15. 173 265 355 Other operating expenses B.15. (71) (195) (482) B.3. (990) (877) (1,692) B.4. (12) (52) (192) (100) (67) (135) (364) (627) (879) Amortization of intangible assets Impairment of intangible assets Restructuring costs and similar items B.6. B.11. B.16. Other gains and losses, and litigation B.17. Fair value remeasurement of contingent consideration Operating income Financial expenses B.18. Financial income B.18. Income before tax and associates and joint ventures Income tax expense B.19. Share of profit/(loss) of associates and joint ventures Net income excluding the exchanged/held-for-exchange Animal Health business Net income of the exchanged/held-for-exchange Animal Health business B.21. Net income Net income attributable to non-controlling interests Net income attributable to equity holders of Sanofi (7) — 211 3,076 2,590 6,534 (218) (241) (924) 95 50 68 2,953 2,399 5,678 (610) (497) (1,326) 38 98 134 2,381 2,000 4,486 4,421 286 314 6,802 2,286 4,800 64 41 91 6,738 2,245 4,709 Average number of shares outstanding (million) B.8.7. 1,260.3 1,287.6 1,286.6 Average number of shares outstanding after dilution (million) B.8.7. 1,270.6 1,296.6 1,296.0 5.35 1.74 3.66 1.84 1.52 3.42 5.30 1.73 3.63 1.82 1.51 3.39 – Basic earnings per share (in euros) – Basic earnings per share excluding the exchanged/held-forexchange Animal Health business (in euros) – Diluted earnings per share (in euros) – Diluted earnings per share excluding the exchanged/held-forexchange Animal Health business (in euros) (a) The results of the Animal Health business, and the gain on the divestment of that business, are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 4 Sanofi  2017 Half-Year Financial Report CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME June 30, 2017 (6 months) June 30, 2016 (6 months) December 31, 2016 (12 months) Net income 6,802 2,286 4,800 Attributable to equity holders of Sanofi 6,738 2,245 4,709 Attributable to non-controlling interests 64 41 91 (€ million) Note Other comprehensive income: . Actuarial gains/(losses) B.8.8. 282 (924) (106) . Tax effects B.8.8. (60) 253 (22) Sub-total: items not subsequently reclassifiable to profit or loss (a) 222 (671) (128) . Available-for-sale financial assets 325 (422) (105) . Cash flow hedges (28) — 31 . Change in currency translation differences B.8.8. (2,011) (37) 1,090 . Tax effects B.8.8. (51) 83 40 Sub-total: items subsequently reclassifiable to profit or loss (b) (1,765) (376) 1,056 Other comprehensive income/(loss) for the period, net of taxes (a+b) (1,543) (1,047) 928 Comprehensive income 5,259 1,239 5,728 Attributable to equity holders of Sanofi 5,203 1,203 5,634 Attributable to non-controlling interests 56 36 94 The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 2017 Half-Year Financial Report  Sanofi 5 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Additional paid-in capital and Share retained capital earnings (€ million) Balance at January 1, 2016 Stock options and other shareTreasury based shares payment Other comprehensive income (a) Attributable Attributable to equity to nonholders of controlling Sanofi interests Total equity 2,611 52,010 (298) 2,814 912 58,049 161 58,210 Other comprehensive income for the period — (671) — — (371) (1,042) (5) (1,047) Net income for the period — 2,245 — — — 2,245 41 2,286 Comprehensive income for the period — 1,574 — — (371) 1,203 36 1,239 Dividend paid out of 2015 earnings (€2.93 per share) — (3,759) — — — (3,759) — (3,759) Payment of dividends to noncontrolling interests — — — — — — (54) (54) Share repurchase program (b) — — (1,402) — — (1,402) — (1,402) Reduction in share capital (b) Share-based payment plans: . Exercise of stock options (45) (1,655) 1,700 — — — — — 1 16 — — — 17 — 17 7 (7) — — — — — — — — — — — — — — — — — 117 — 117 — 117 — — — (14) — (14) — (14) — (21) — — — (21) 14 (7) 2,574 48,158 — 2,917 541 54,190 157 54,347 Other comprehensive income for the period — 544 — — 1,423 1,967 8 1,975 Net income for the period — 2,464 — — — 2,464 50 2,514 Comprehensive income for the period — 3,008 — — 1,423 4,431 58 4,489 Payment of dividends to noncontrolling interests — — — — — — (56) (56) Share repurchase program (b) — — (1,503) — — (1,503) — (1,503) 6 4 196 96 — — — — — — 202 100 — — 202 100 — — — 110 — 110 — 110 . Tax effects of the exercise of stock options — — — 5 — 5 — 5 Change in non-controlling interests without loss of control — 19 — — — 19 13 32 — — — — — — (2) (2) 2,584 51,477 (1,503) 3,032 1,964 57,554 170 57,724 . Issuance of restricted shares . Proceeds from sale of treasury shares on exercise of stock options . Value of services obtained from employees . Tax effects of the exercise of stock options Change in non-controlling interests without loss of control Balance at June 30, 2016 Share-based payment plans: . Exercise of stock options . Employee share ownership plan . Value of services obtained from employees Change in non-controlling interests arising from divestment Balance at December 31, 2016 6 Sanofi  2017 Half-Year Financial Report (€ million) Balance at December 31, 2016 Other comprehensive income for the period Net income for the period Comprehensive income for the period Dividend paid out of 2016 earnings (€2.96 per share) Payment of dividends to noncontrolling interests Share repurchase program (b) Reduction in share capital (b) Share-based payment plans: . Exercise of stock options . Issuance of restricted shares . Value of services obtained from employees . Tax effects of the exercise of stock options Other movements related to issuance of restricted shares (c) Change in non-controlling interests without loss of control Change in non-controlling interests generated by divestment Balance at June 30, 2017 Additional paid-in capital and Share retained capital earnings Stock options and other shareTreasury based shares payment Attributable Attributable Other to equity to noncomprehensive holders of controlling income (a) Sanofi interests Total equity 2,584 51,477 (1,503) 3,032 1,964 57,554 170 57,724 — 222 — — (1,757) (1,535) (8) (1,543) — 6,738 — — — 6,738 64 6,802 — 6,960 — — (1,757) 5,203 56 5,259 — (3,710) — — — (3,710) — (3,710) — — — — — — (55) (55) — (73) — (2,709) (1,697) 2,782 — — — — (1,697) — — — (1,697) — 3 96 — — — 99 — 99 7 (7) — — — — — — — — — 126 — 126 — 126 — — — 13 — 13 — 13 — 16 — — — 16 — 16 — 27 — — — 27 (5) 22 — — — — — — (5) (5) 2,521 52,150 (418) 3,171 207 57,631 161 57,792 (a) See Note B.8.8. (b) See Notes B.8.2. and B.8.3. (c) Issuance of restricted shares to former employees of the Animal Health business subsequent to the date of divestment. The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 2017 Half-Year Financial Report  Sanofi 7 CONSOLIDATED STATEMENTS OF CASH FLOWS (€ million) Note Net income attributable to equity holders of Sanofi Net (income)/loss of the exchanged/held-for-exchange Animal Health business Non-controlling interests, excluding BMS (b) June 30, 2017 (6 months)(a) June 30, 2016 (6 months)(a) December 31, 2016 (12 months)(a) 6,738 2,245 4,709 (4,421) (286) (314) 21 (3) 5 Share of undistributed earnings of associates and joint ventures Depreciation, amortization and impairment of property, plant and equipment and intangible assets Gains and losses on disposals of non-current assets, net of tax (c) (9) (57) (83) 1,762 1,572 3,301 (79) (27) (244) Net change in deferred taxes (269) (477) (542) (204) (107) 20 Cost of employee benefits (stock options and other share-based payments) 126 111 241 Impact of the workdown of acquired inventories remeasured at fair value 176 — — (9) (122) (83) 3,832 2,849 7,010 Net change in provisions (d) Unrealized (gains)/losses recognized in income Operating cash flow before changes in working capital and excluding the exchanged/held-for-exchange Animal Health business (Increase)/decrease in inventories (502) (514) (323) (Increase)/decrease in accounts receivable 150 103 168 Increase/(decrease) in accounts payable 110 74 447 Net change in other current assets, current financial assets and other current liabilities (e) (1,034) 27 536 Net cash provided by/(used in) operating activities excluding the exchanged/held-for-exchange Animal Health business (f) 2,556 2,539 7,838 — 68 346 B.2. – B.3. (998) (1,200) (2,083) B.1. (381) (345) (426) (105) (123) (208) 440 264 209 (18) (10) (3) (1,062) (1,414) (2,511) — (56) (126) 4,349 — — 99 17 305 (3,710) (3,759) (3,759) (11) (9) (21) (37) 1 (7) 173 (1,700) — — 1,787 (2,582) 1,856 (1,404) — (11) 4,773 (2,576) 96 (2,908) — (5,192) (4,094) (4,101) Net cash provided by/(used in) operating activities of the exchanged/held-for-exchange Animal Health business Acquisitions of property, plant and equipment and intangible assets Acquisitions of investments in consolidated undertakings, net of cash acquired (g)/(i) Acquisitions of available-for-sale financial assets Proceeds from disposals of property, plant and equipment, intangible assets and other non-current assets, net of tax (h) Net change in loans and other financial assets Net cash provided by/(used in) investing activities excluding the exchanged/held-for-exchange Animal Health business Net cash provided by/(used in) investing activities of the exchanged/held-for-exchange Animal Health business Net cash inflow from the exchange of the Animal Health business for BI's Consumer Healthcare business (j) Issuance of Sanofi shares B.1. – B.21. B.8.1. Dividends paid: . to shareholders of Sanofi . to non-controlling interests, excluding BMS (b) Transactions with non-controlling interests, other than dividends Additional long-term debt contracted Repayments of long-term debt Net change in short-term debt Acquisitions of treasury shares Disposals of treasury shares, net of tax Net cash provided by/(used in) financing activities excluding the exchanged/held-for-exchange Animal Health business 8 Sanofi  2017 Half-Year Financial Report B.9.1. B.9.1. B.8.2. (€ million) Net cash provided by/(used in) financing activities of the exchanged/held-for-exchange Animal Health business Impact of exchange rates on cash and cash equivalents Note Net change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period B.9. June 30, 2017 (6 months)(a) June 30, 2016 (6 months)(a) December 31, 2016 (12 months)(a) — (9) 111 (47) (103) (101) 604 (3,072) 1,125 10,273 10,877 9,148 6,076 9,148 10,273 (a) For 2016, cash flows of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations). For the six months ended June 30, 2017, the main cash effect of the exchange of the Animal Health business for Boehringer Ingelheim’s (BI) Consumer Healthcare business is described below in note (j). (b) See Note C.2. to the financial statements for the year ended December 31, 2016. (c) Includes available-for-sale financial assets. (d) This line item includes contributions paid to pension funds (see Note B.12.). (e) In the first half of 2017, mainly due to settlement of tax liabilities and social liabilities. (f) Including: - Income tax paid (excluding the Animal Health business, see note (j)) - Interest paid (excluding cash flows on derivative instruments used to hedge debt) - Interest received (excluding cash flows on derivative instruments used to hedge debt) - Dividends received from non-consolidated entities (1,324) (1,180) (2,096) (114) (180) (401) 30 28 56 14 3 9 (g) This line item includes payments made in respect of contingent consideration identified and recognized as a liability in business combinations. (h) This line item includes proceeds from disposals of investments in consolidated entities and of other non-current financial assets. (i) The main cash effect of the exchange of the Animal Health business for Boehringer Ingelheim’s (BI) Consumer Healthcare business was the receipt by Sanofi of a balancing cash payment of €4,207 million. Consequently, all of the cash flows arising from that exchange transaction during the first half of 2017 are presented in a separate line item, Net cash inflow from the exchange of the Animal Health business for BI's Consumer Healthcare business. (j) For the six months ended June 30, 2017, this line item comprises (i) the receipt by Sanofi of a balancing cash payment of €4,207 million; (ii) reimbursements of intragroup accounts with Merial entities totaling €967 million; (iii) a partial payment of €934 million of the tax on the gain arising on the divestment; and (iv) the cash held by the BI subsidiaries acquired by Sanofi. The total consideration for the sale of the Animal Health business to BI was €10,320 million (see Note B.21.), and the consideration for the acquisition of BI’s Consumer Healthcare business was €6,271 million (see Note B.1.). The accompanying notes on pages 10 to 37 are an integral part of the condensed half-year consolidated financial statements. 2017 Half-Year Financial Report  Sanofi 9 NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2017 INTRODUCTION Sanofi, together with its subsidiaries (collectively “Sanofi” or “The Company”), is a global healthcare leader engaged in the research, development and marketing of therapeutic solutions focused on patient needs. Sanofi is listed in Paris (Euronext: SAN) and New York (NYSE: SNY). The condensed consolidated financial statements for the six months ended June 30, 2017 were reviewed by the Sanofi Board of Directors at the Board meeting on July 28, 2017. A/ Basis of preparation of the half-year financial statements and accounting policies A.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, 2016. The accounting policies used in the preparation of the consolidated financial statements as of June 30, 2017 comply with international financial reporting standards (IFRS) as endorsed by the European Union and as issued by the International Accounting Standards Board (IASB). The accounting policies applied as of June 30, 2017 are identical to those described in the notes to the published consolidated financial statements as of December 31, 2016. IFRS as endorsed by the European Union as of June 30, 2017 are available via the following web link: http://ec.europa.eu/finance/company-reporting/standards-interpretations/index_en.htm A.2. USE OF ESTIMATES The preparation of financial statements requires management to make reasonable estimates and assumptions based on information available during the review and finalization of the financial statements. Those 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 measurement of contingent consideration receivable in connection with asset divestments;  the amount of post-employment benefit obligations;  the amount of provisions for restructuring, litigation, tax risks and environmental risks;  the amount of deferred tax assets resulting from tax losses available for carry-forward and deductible temporary differences;  the measurement of contingent consideration liabilities; and  which exchange rate to use at the end of the reporting period for the translation of accounts denominated in foreign currencies, and of financial statements of foreign subsidiaries, in cases where more than one exchange rate exists for a given currency. Actual results could differ from these estimates. 10 Sanofi  2017 Half-Year Financial Report Management is also required to exercise judgment in assessing whether the criteria specified in IFRS 5 (NonCurrent Assets Held for Sale and Discontinued Operations) are met, and hence whether a non-current asset or asset group should be classified as “held for sale or exchange” and whether a discontinued operation should be reported separately. Such assessments are reviewed at each reporting date based on the facts and circumstances. 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 business operating income plus financial income and minus financial expenses, and before (i) the share of profit/loss of associates and joint ventures and (ii) net income attributable to non-controlling interests. The estimated full-year 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. A.3. SEASONAL TRENDS Sanofi’s activities are not subject to significant seasonal fluctuations. 2017 Half-Year Financial Report  Sanofi 11 A.4. FAIR VALUE OF FINANCIAL INSTRUMENTS Under IFRS 13 (Fair Value Measurement) and IFRS 7 (Financial Instruments: Disclosures), fair value measurements must be classified using a hierarchy based on the inputs used to measure the fair value of the instrument. This hierarchy has three levels:  level 1: quoted prices in active markets for identical assets or liabilities (without modification or repackaging);  level 2: quoted prices in active markets for similar assets and liabilities, or valuation techniques in which all important inputs are derived from observable market data;  level 3: data. valuation techniques in which not all important inputs are derived from observable market The table below sets forth the principles used to measure the fair value of the principal financial assets and liabilities recognized by Sanofi in its balance sheet: Method used to determine fair value Market data Type of financial instrument Note Measurement model Level in fair value hierarchy Valuation technique 1 Market value Quoted market price N/A 2 Income approach Quoted market price N/A Available-for-sale financial assets (quoted equity securities) Fair value B.6. Available-for-sale financial assets (quoted debt securities) Fair value B.6. Available-for-sale financial assets (contingent consideration receivable) Fair value 3 Income approach B.6. Long-term loans and advances and other non-current receivables Amortized cost N/A N/A B.6. Financial assets recognized under the fair value option (a) Fair value 1 Market value B.6. B.10. Forward currency contracts Fair value 2 B.10. Interest rate swaps Fair value 2 B.10. Cross-currency swaps Fair value 2 B.9. Investments in mutual funds Fair value 1 B.9. Negotiable debt instruments, commercial paper, instant access deposits and term deposits Amortized cost Income approach Market value N/A N/A B.9. Debt Amortized cost (b) N/A N/A B.11. Liabilities related to business combinations and to noncontrolling interests (CVRs) Fair value 1 Market value B.11. Liabilities related to business combinations and to noncontrolling interests (other than CVRs) Fair value (c) 3 Income approach Valuation model Exchange rate Interest rate Under IAS 39, contingent consideration receivable on a divestment is a financial asset. The fair value of such assets is determined by adjusting the contingent consideration at the end of the reporting period using the method described in Note D.7. to the consolidated financial statements for the year ended December 31, 2016. The amortized cost of long-term loans and advances and other non-current receivables at the end of the reporting period is not materially different from their fair value. Net asset value N/A Present value of future cash flows Mid Market Spot < 1 year: Mid Money Market > 1 year: Mid Zero Coupon N/A Present value of future cash flows Mid Market Spot < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon N/A Present value of future cash flows Mid Market Spot < 1 year: Mid Money Market and LIFFE interest rate futures > 1 year: Mid Zero Coupon N/A Net asset value N/A Because these instruments have a maturity of less than three months, amortized cost is regarded as an acceptable approximation of fair value as disclosed in the notes to the consolidated financial statements. In the case of debt with a maturity of less than three months, amortized cost is regarded as an acceptable approximation of fair value as reported in the notes to the consolidated financial statements. For debt with a maturity of more than three months, fair value as reported in the notes to the consolidated financial statements is determined either by reference to quoted market prices at the end of the reporting period (quoted instruments) or by discounting the future cash flows based on observable market data at the end of the reporting period (unquoted instruments). Quoted market price  2017 Half-Year Financial Report N/A Under IAS 32, contingent consideration payable in a business combination is a financial liability. The fair value of such liabilities is determined by adjusting the contingent consideration at the end of the reporting period using the method described in Note B.11. (a) These assets are held to fund a deferred compensation plan offered to certain employees. (b) In the case of debt designated as a hedged item in a fair value hedging relationship, the carrying amount in the consolidated balance sheet includes changes in fair value attributable to the hedged risk(s). (c) For business combinations completed prior to application of the revised IFRS 3, contingent consideration is recognized when payment becomes probable. See Note B.3.1. to the financial statements for the year ended December 31, 2016. 12 Sanofi Volatility A.5. CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION OF THE FINANCIAL STATEMENTS OF VENEZUELAN SUBSIDIARIES In 2017, Sanofi continues to account for subsidiaries based in Venezuela using the full consolidation method, on the basis that the criteria for control as specified in IFRS 10 (Consolidated Financial Statements) are still met. Since the reforms of February 2016, the Venezuelan foreign exchange system has consisted of two categories:  a first category for essential goods to which is applied the “DIPRO” rate, set at a fixed exchange rate of 10 bolivars per US dollar;  a second category to which is applied the “DICOM” rate, which is a floating exchange rate against the US dollar that initially stood at 206 bolivars per US dollar and was approximately 2,640 bolivars per US dollar as of June 30, 2017. Given these changes to the foreign exchange system, recent economic and political developments and the scarcity of US dollar cash in Venezuela, Sanofi recorded a foreign exchange loss of €102 million in the first half of 2016. A.6. NEW PRONOUNCEMENTS ISSUED BY THE IASB AND APPLICABLE FROM 2018 OR LATER During the first half of 2017, Sanofi continued to assess the impact of the first-time application in 2018 of IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers). That assessment confirmed that the new standards are expected to have only a minor impact. An analysis of the new disclosures that may be required to comply with the new standards is ongoing. As regards IFRS 9, Sanofi has yet to decide whether or not to publish restated comparatives. If the comparatives were to be restated, some impairment losses taken against equity investments might be reclassified from prior period profit or loss to Other comprehensive income. During the first half of 2017 the IASB issued IFRS 17 (Insurance Contracts), which applies to entities that issue insurance and reinsurance contracts and hence does not apply to Sanofi. In June 2017, the IASB issued IFRIC 23 (Uncertainty over Income Tax Treatments), which clarifies how to apply the recognition and measurement requirements of IAS 12 (Income Taxes) when there is uncertainty over an income tax treatment. IFRIC 23 is mandatorily applicable to annual accounting periods beginning on or after January 1, 2019, subject to endorsement by the European Union. Sanofi has not early adopted IFRIC 23. 2017 Half-Year Financial Report  Sanofi 13 B/ Significant information for the first half of 2017 B.1. IMPACT OF CHANGES IN THE SCOPE OF CONSOLIDATION Finalization of the exchange of Sanofi’s Animal Health business for Boehringer Ingelheim’s Consumer Healthcare business On January 1, 2017, Sanofi finalized the exchange of its Animal Health business (Merial) for Boehringer Ingelheim’s Consumer Healthcare business. After taking account of preliminary enterprise value adjustments, the exchange values of the two businesses as effectively transferred during the first half of 2017 were determined at €10,320 million for Sanofi’s Animal Health business and €6,271 million for Boehringer Ingelheim’s Consumer Healthcare business. Finalization of the divestment of Merial de Mexico SA de CV is expected in the second half of 2017. Divestment of the Animal Health business Sanofi has recognized a pre-tax gain of €6,137 million within the line item Net income of the exchanged/ held-for-exchange Animal Health business, and an after-tax gain of €4,421 million. This amount may be subject to change to reflect any impact from the price adjustments specified in the exchange agreement. 14 Sanofi  2017 Half-Year Financial Report Acquisition of Boehringer Ingelheim’s Consumer Healthcare business The provisional purchase price allocation for the acquisition of Boehringer Ingelheim’s Consumer Healthcare (CHC) business is as follows (in € million): Fair value at acquisition date (€ million) Property, plant and equipment 72 Other intangible assets 3,985 Inventories 287 Other assets and liabilities (27) Held-for-sale assets 78 Deferred taxes Net assets of Boehringer Ingelheim’s CHC business as of January 1, 2017 (247) 4,148 Goodwill 2,123 Purchase price 6,271 Goodwill represents (i) the capacity to draw on a specialized structure to refresh the existing product portfolio; (ii) the competencies of the staff transferred to Sanofi; (iii) the benefits derived from the creation of new growth platforms; and (iv) the expected future synergies and other benefits from combining the CHC operations of Boehringer Ingelheim and Sanofi. The tax-deductible portion of goodwill has not been determined at this stage, because the purchase price allocations for each acquiring entity have not yet been finalized. The costs incurred in connection with the acquisition of Boehringer Ingelheim’s CHC business amount to €10 million. With effect from January 1, 2017, the performance of the acquired portfolio – which generated net sales of €674 million in the first half of 2017 – is recognized in consolidated net sales within the Pharmaceuticals segment. Acquisitions and investments in joint ventures During the first half of 2017, Sanofi acquired further shares in the biopharmaceutical company Regeneron Pharmaceuticals, Inc. at a cost of €87 million. Sanofi’s investment in Regeneron had a carrying amount of €2,480 million as of June 30, 2017 (see Note B.5.). This represents an equity interest of 22.1% as of that date, the same as at December 31, 2016. Other divestments No other divestments were made by Sanofi in the first half of 2017 that materially affected the scope of consolidation. B.2. PROPERTY, PLANT AND EQUIPMENT Acquisitions of property, plant and equipment during the first half of 2017 amounted to €535 million. These included €393 million of investments in the Pharmaceuticals segment, primarily in industrial facilities (€290 million). The Vaccines segment accounted for €142 million of investments during the period. Impairment losses of €129 million were charged against property, plant and equipment in the first half of 2017, primarily in the Pharmaceuticals segment. Firm orders for property, plant and equipment stood at €561 million as of June 30, 2017. 2017 Half-Year Financial Report  Sanofi 15 B.3. GOODWILL AND OTHER INTANGIBLE ASSETS Movements in intangible assets other than goodwill during the first half of 2017 were as follows: (€ million) Gross value at January 1, 2017 Changes in scope of consolidation Acquisitions and other increases Disposals and other decreases Currency translation differences Transfers (a) Gross value at June 30, 2017 Accumulated amortization & impairment at January 1, 2017 Amortization expense Impairment losses, net of reversals (b) Disposals and other decreases Currency translation differences Transfers Accumulated amortization & impairment at June 30, 2017 Carrying amount at December 31, 2016 Carrying amount at June 30, 2017 Acquired R&D 3,649 — 221 (10) (127) (44) 3,689 (2,290) — (1) 10 88 (16) (2,209) 1,359 1,480 Products, trademarks and other rights 53,107 3,985 188 (16) (2,688) (6) 54,570 (43,997) (1,000) (27) 15 2,309 48 (42,652) 9,110 11,918 Total other intangible assets 58,082 3,985 483 (30) (2,850) (20) 59,650 (47,203) (1,054) (28) 29 2,423 32 (45,801) 10,879 13,849 Software 1,326 — 74 (4) (35) 30 1,391 (916) (54) — 4 26 — (940) 410 451 (a) The “Transfers” line mainly relates to acquired R&D that came into commercial use during the period and is being amortized from the date of marketing approval. (b) See Note B.4. Acquisitions of other intangible assets (excluding software) in the first half of 2017 totaled €4,394 million. This mainly comprises the assets recognized on the acquisition of Boehringer Ingelheim’s Consumer Healthcare business (€3,985 million), plus upfront and milestone payments in Vaccines, Diabetes and Consumer Healthcare. The item “Products, trademarks and other rights” mainly comprises:  marketed products, with a carrying amount of €11.4 billion as of June 30, 2017 (€8.4 billion as of December 31, 2016) and a weighted average amortization period of approximately 10 years;  trademarks, with a carrying amount of €0.2 billion as of June 30, 2017 (€0.2 billion as of December 31, 2016) and a weighted average amortization period of approximately 13 years. The table below provides information about the principal marketed products, which represented 88% of the carrying amount of that item as of June 30, 2017: Gross value Accumulated amortization & impairment Carrying amount June 30, 2017 Amortization period (years) (a) Residual amortization period (years) (b) Carrying amount December 31, 2016 3,985 133 3,852 15 15 — Genzyme 10,584 6,238 4,346 10 6 5,009 Aventis 33,271 32,441 830 9 4 1,095 Chattem 1,305 473 832 22 16 930 938 830 108 9 4 128 50,083 40,115 9,968 (€ million) Boehringer Ingelheim Consumer Healthcare Zentiva Total: principal marketed products 7,162 (a) Weighted averages. The amortization periods for these products vary between 1 and 25 years. (b) Weighted averages. Goodwill amounted to €40,964 million as of June 30, 2017, versus €40,287 million as of December 31, 2016. The change during the first half of 2017 was due to the goodwill recognized on the acquisition of Boehringer Ingelheim’s Consumer Healthcare business (see Note B.1.) and to currency translation differences. 16 Sanofi  2017 Half-Year Financial Report B.4. IMPAIRMENT OF INTANGIBLE ASSETS The results of impairment tests conducted in accordance with IAS 36 (Impairment of Assets) as of June 30, 2017 led to the recognition of a net impairment loss of €28 million, of which €16 million included in Gross profit. B.5. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES Investments in associates and joint ventures are accounted for by the equity method. 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, 2016. Investments in associates and joint ventures comprise: (€ million) Regeneron Pharmaceuticals, Inc. Onduo LLC Infraserv GmbH & Co. Höchst KG June 30, 2017 2,480 December 31, 2016 2,548 50.0 158 181 % interest 22.1 (a) 31.2 64 79 Entities and companies managed by Bristol-Myers Squibb (b) 49.9 40 44 Other investments — Total 99 38 2,841 2,890 (a) Joint ventures. (b) Under the terms of the agreements with BMS (see Note C.2. to the consolidated financial statements for the year ended December 31, 2016), Sanofi’s share of the net assets of entities majority-owned by BMS is recorded in Investments in associates and joint ventures. As of June 30, 2017, the market value of Sanofi’s investment in Regeneron was €10,171 million (based on a quoted stock market price of $491.14 per share as of that date), versus €8,159 million as of December 31, 2016 (based on a quoted stock market price of $367.09 per share as of that date). The financial statements include commercial transactions between Sanofi and some associates and joint ventures that are classified as related parties. The principal transactions and balances with related parties are summarized below: June 30, 2017 (€ million) Sales (a) Royalties and other revenue (a) Accounts receivable and other receivables Purchases and other expenses (including research expenses) (a) Accounts payable Other liabilities June 30, 2016 December 31, 2016 18 28 39 37 67 156 29 63 101 410 392 708 206 179 161 9 66 65 (a) For the six months ended June 30, 2016 and the year ended December 31, 2016, these items include transactions between Sanofi and Sanofi Pasteur MSD during the period from January 1, 2016 through March 8, 2016 (the date of the announcement that the joint venture was to be dismantled; see Notes B.1. and D.1.2. to the consolidated financial statements for the year ended December 31, 2016). B.6. OTHER NON-CURRENT ASSETS Other non-current assets comprise: (€ million) Available-for-sale financial assets Pre-funded pension obligations June 30, 2017 December 31, 2016 1,837 1,583 30 30 Long-term loans and advances and other non-current receivables 644 776 Financial assets recognized under the fair value option 325 329 92 102 2,928 2,820 Derivative financial instruments Total 2017 Half-Year Financial Report  Sanofi 17 The Available-for-sale financial assets line includes the market value of Sanofi’s equity investment in Alnylam: €737 million as of June 30, 2017 and €364 million as of December 31, 2016. This line also includes contingent consideration receivable by Sanofi Pasteur following the dismantling of the Sanofi Pasteur MSD joint venture, as described in Note D.7. to the consolidated financial statements for the year ended December 31, 2016. Changes in the fair value of this asset are reported within the income statement line item Fair value remeasurement of contingent consideration. The amount of the receivable was €396 million as of June 30, 2017 and €458 million as of December 31, 2016. The movement during the first half of 2017 was mainly due to the reclassification of amounts receivable within less than one year to Other current assets. B.7. ACCOUNTS RECEIVABLE Accounts receivable break down as follows: (€ million) June 30, 2017 December 31, 2016 Gross value 7,051 7,506 Allowances (194) (195) Carrying amount 6,857 7,311 The impact of allowances against accounts receivable in the first half of 2017 was a net expense of €18 million (versus €22 million for the first half of 2016). The table below shows the aging profile of overdue accounts receivable, based on gross value: (€ million) Overdue accounts Overdue Overdue Overdue Overdue Overdue gross value <1 month 1 to 3 months 3 to 6 months 6 to 12 months > 12 months June 30, 2017 720 183 184 143 38 172 December 31, 2016 597 133 103 121 42 198 Amounts overdue by more than one month relate mainly to public-sector customers. Some Sanofi subsidiaries have assigned receivables to factoring companies or banks without recourse. The amount of receivables that met the conditions described in Note B.8.7. to the consolidated financial statements for the year ended December 31, 2016 and hence were derecognized was €724 million as of June 30, 2017 (versus €428 million as of December 31, 2016). The residual guarantees relating to those transfers were immaterial as of June 30, 2017. B.8. CONSOLIDATED SHAREHOLDERS’ EQUITY B.8.1. Share capital As of June 30, 2017, the share capital was €2,521,508,052 and consisted of 1,260,754,026 shares (the total number of shares outstanding) with a par value of €2. Treasury shares held by Sanofi are as follows: June 30, 2017 December 31, 2016 Number of shares % of share capital (million) for the period 5.0 0.40% 20.0 1.55% June 30, 2016 0.1 0.01% January 1, 2016 4.0 0.30% A total of 1,722,879 shares were issued in the first half of 2017 as a result of the exercise of Sanofi stock subscription options. In addition, a total of 3,389,221 shares vested and were issued in the first half of 2017 under restricted share plans. 18 Sanofi  2017 Half-Year Financial Report B.8.2. Repurchase of Sanofi shares On May 10, 2017, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under that program (and that program alone), Sanofi repurchased 2,813,722 of its own shares during the first half of 2017 for a total amount of €241 million. On May 4, 2016, the Annual General Meeting of Sanofi shareholders approved a share repurchase program for a period of 18 months. Under that program (and that program alone), Sanofi repurchased 18,426,601 of its own shares during the first half of 2017 for a total amount of €1,454 million. In addition, transactions carried out under the liquidity contract in the first half of 2017 reduced equity by €2 million. B.8.3. Reductions in share capital On April 27, 2017, the Board of Directors approved the cancellation of 36,380,198 treasury shares (€2,782 million including additional paid-in capital), representing 2.89% of the share capital as of June 30, 2017. Those cancellations have no net impact on shareholders’ equity. B.8.4. Restricted share plans Restricted share plans are accounted for in accordance with the policies described in Note B.24.3. to the consolidated financial statements for the year ended December 31, 2016. The principal features of the plan awarded in 2017 are set forth below: 2017 Performance share plan Type of plan Date of Board meeting approving the plan May 10, 2017 Total number of shares subject to a 3-year service period Fair value per share awarded 3,587,465 (a) 81.50 Fair value of plan at the date of grant (€ million) 292 (a) Quoted market price per share at the date of grant, adjusted for dividends expected during the vesting period. The total expense recognized for all restricted and performance share plans in the six months ended June 30, 2017 was €103 million, versus €97 million in the comparable period of 2016. The number of shares not yet fully vested as of June 30, 2017 was 13,376,134, comprising 3,585,804 under the 2017 plans; 3,965,610 under the 2016 plans; 3,573,870 under the 2015 plans; and 2,250,850 under the 2014 plans. On March 5, 2014, the Board of Directors approved a performance share unit (PSU) plan, vesting at the end of a three-year service period and subject to performance conditions. This plan expired on March 5, 2017, resulting in a cash payment of €27 million based on the performance attainment of the conditions. The related expense was recognized on a straight line basis over the vesting period as described in Note B.24. to the consolidated financial statements for the year ended December 31, 2016. B.8.5. Capital increases On March 2, 2017, the Sanofi Board of Directors approved an employee share ownership plan in the form of a capital increase reserved for employees. Employees were offered the opportunity to subscribe to the capital increase at a price of €70.01 per share, representing 80% of the average of the quoted market prices of Sanofi shares during the 20 trading days preceding June 14, 2017. The subscription period was open from June 19 through June 30, 2017. For each tranche of five shares applied for, the applicant received one additional new share by way of employer’s contribution; and for each application for 20 or more shares, the applicant received an additional four new shares by way of employer’s contribution. The plan resulted in a total of 1,528,982 shares being subscribed for, and the issuance of a further 92,116 shares as an employer’s contribution under the terms of the plan. An expense of €21 million was recognized for this plan in the six months ended June 30, 2017. The shares will be issued, and the capital increase recognized in shareholders’ equity, on July 31, 2017. 2017 Half-Year Financial Report  Sanofi 19 On March 3, 2016, the Sanofi Board of Directors approved an employee share ownership plan in the form of a capital increase reserved for employees. Employees were offered the opportunity to subscribe to the capital increase at a price of €57.25 per share, representing 80% of the average of the quoted market prices of Sanofi shares during the 20 trading days preceding June 8, 2016. The subscription period was open from June 13 through June 24, 2016. The plan resulted in a total of 1,756,972 shares being subscribed for, and the issuance of a further 47,014 shares as an employer’s contribution under the terms of the plan. An expense of €16 million (excluding the Animal Health business) was recognized for this plan in the year ended December 31, 2016. B.8.6. Stock subscription option plans On May 10, 2017, the Board of Directors granted 378,040 stock subscription options at an exercise price of €88.97 per share. The vesting period is four years, and the plan expires on May 10, 2021. Sanofi used the following assumptions in determining the fair value of the plan:  dividend yield: 3.56%;  plan maturity: 7 years;  volatility of Sanofi shares, computed on a historical basis: 23.74%;  risk-free interest rate: 0.270%. On that basis, the fair value of one option is €12.21, and the fair value of the stock subscription option plan awarded in June 2017 is €5 million. That amount is recognized as an expense over the vesting period, with the opposite entry recognized directly in equity. The total expense recognized for all stock options in the six months ended June 30, 2017 was €2 million, versus €3 million in the comparable period of 2016. The table below provides summary information about options outstanding and exercisable as of June 30, 2017: Outstanding Range of exercise prices per share Number of options Exercisable Average residual life Weighted average exercise price per share (years) (€) Weighted average exercise price per share Number of options (€) From €30.00 to €40.00 per share 122,061 1.75 38.08 122,061 38.08 From €40.00 to €50.00 per share 1,799,333 1.67 45.09 1,799,333 45.09 From €50.00 to €60.00 per share 3,711,300 3.05 54.18 3,711,300 54.18 From €60.00 to €70.00 per share 2,350,202 0.45 62.33 2,350,202 62.33 From €70.00 to €80.00 per share 1,862,650 6.85 73.62 559,085 72.19 From €80.00 to €90.00 per share 811,540 8.86 89.19 Total 20 Sanofi 10,657,086  2017 Half-Year Financial Report — 8,541,981 — B.8.7. 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 with dilutive effect and restricted shares. (million) Average number of shares outstanding June 30, 2017 June 30, 2016 December 31, 2016 1,260.3 1,287.6 1,286.6 Adjustment for stock options with dilutive effect 3.2 2.8 2.6 Adjustment for restricted shares 7.1 6.2 6.8 1,270.6 1,296.6 1,296.0 Average number of shares outstanding used to compute diluted earnings per share As of June 30, 2017, 0.8 million stock options were not taken into account in computing diluted earnings per share because they had no dilutive effect, compared with 2.4 million as of December 31, 2016 and 2.4 million as of June 30, 2016. B.8.8. Other comprehensive income Movements within other comprehensive income are shown below: (€ million) Balance, beginning of period June 30, 2017 (6 months) 973 June 30, 2016 (6 months) 45 December 31, 2016 45 Attributable to equity holders of Sanofi 992 67 67 Attributable to non-controlling interests (19) (22) (22) 282 (924) (104) — — (2) Actuarial gains/(losses): · Actuarial gains/(losses) excluding associates and joint ventures · Actuarial gains/(losses) of associates and joint ventures, net of taxes · Tax effects (60) 253 (22) Items not subsequently reclassifiable to profit or loss (a) 222 (671) (128) · Change in fair value (excluding associates and joint ventures) (b) 324 (421) (104) · Change in fair value (associates and joint ventures, net of taxes) 1 (1) (1) (60) 83 50 · Change in fair value (excluding associates and joint ventures) (c) (28) — 30 · Change in fair value (associates and joint ventures, net of taxes) — — 1 9 — (10) (1,835) 26 1,033 (176) (63) 57 — — — Available-for-sale financial assets: · Tax effects Cash flow hedges: · Tax effects Change in currency translation differences: · Currency translation differences on foreign subsidiaries (excluding associates and joint ventures) (c)(d) · Currency translation differences (associates and joint ventures) · Hedges of net investments in foreign operations · Tax effects — — — (1,765) (376) 1,056 Balance, end of period (570) (1,002) 973 Attributable to equity holders of Sanofi (543) (975) 992 Attributable to non-controlling interests (27) (27) (19) Items subsequently reclassifiable to profit or loss (a) Items not subsequently reclassifiable to profit or loss and attributable to the Animal Health business divested January 1, 2017: zero in the six months ended June 30, 2016, and €(3) million in the year ended December 31, 2016. (b) Of which reclassified to profit or loss: immaterial amount in the six months ended June 30, 2017, €(8) million in the six months ended June 30, 2016 and €447 million in the year ended December 31, 2016. (c) Includes reclassifications to profit or loss (excluding items related to the Animal Health business): €(23) million in the six months ended June 30, 2017. Amounts reclassified to profit or loss were immaterial in the six months ended June 30, 2016, and €2 million in the year ended December 31, 2016. (d) Items subsequently reclassifiable to profit or loss and attributable to the Animal Health business divested January 1, 2017: €(149) million of currency translation difference reclassified on the divestment of the Animal Health business on January 1, 2017 in the six months ended June 30, 2017, €4 million in the six months ended June 30, 2016 and €(51) million in the year ended December 31, 2016. 2017 Half-Year Financial Report  Sanofi 21 B.9. DEBT, CASH AND CASH EQUIVALENTS Changes in financial position during the period were as follows: (€ million) Long-term debt Short-term debt and current portion of long-term debt Interest rate and currency derivatives used to hedge debt Total debt Cash and cash equivalents Interest rate and currency derivatives used to hedge cash and cash equivalents Debt, net of cash and cash equivalents June 30, 2017 December 31, 2016 15,186 16,815 3,241 1,764 (87) (100) 18,340 18,479 (10,877) (10,273) — — 7,463 8,206 “Debt, net of cash and cash equivalents” is a financial indicator used by management and investors to measure Sanofi’s overall net indebtedness. B.9.1. Debt at value on redemption A reconciliation of the carrying amount of debt to value on redemption as of June 30, 2017 is shown below: Value on redemption Carrying amount at June 30, 2017 (€ million) Long-term debt (104) 15,153 16,765 3,241 2 — 3,243 1,764 (87) — 67 (20) (10) 18,340 73 (37) 18,376 18,519 (10,877) — — (10,877) (10,273) — — — — — 7,463 73 (37) 7,499 8,246 Interest rate and currency derivatives used to hedge cash and cash equivalents Debt, net of cash and cash equivalents 22 Sanofi  December 31, 2016 71 Interest rate and currency derivatives used to hedge debt Cash and cash equivalents June 30, 2017 15,186 Short-term debt and current portion of longterm debt Total debt Adjustment to Amortized debt measured at cost fair value 2017 Half-Year Financial Report The table below shows an analysis of debt, net of cash and cash equivalents by type, at value on redemption: June 30, 2017 December 31, 2016 noncurrent current Total noncurrent current Total 15,050 2,187 17,237 16,657 823 17,480 Other bank borrowings 67 824 891 61 715 776 Finance lease obligations 23 18 41 34 19 53 Other borrowings 13 4 17 13 4 17 Bank credit balances — 210 210 — 203 203 (21) 1 (20) (9) (1) (10) 15,132 3,244 18,376 16,756 1,763 Cash and cash equivalents — (10,877) (10,877) — (10,273) Interest rate and currency derivatives used to hedge cash and cash equivalents — — — — — — 15,132 (7,633) 7,499 16,756 (8,510) 8,246 (€ million) Bond issues Interest rate and currency derivatives used to hedge debt Total debt Debt, net of cash and cash equivalents 18,519 (10,273)) Principal financing and debt reduction transactions during the period Sanofi carried out no bond redemptions or issues during the first half of 2017. Sanofi had the following arrangements in place as of June 30, 2017 to manage its liquidity in connection with current operations:  a syndicated credit facility of €4 billion, drawable in euros and in US dollars, now due to expire on December 17, 2020 following the exercise of a second extension option in November 2015; and  a syndicated credit facility of €4 billion, drawable in euros and in US dollars, now due to expire on December 3, 2021 following the exercise of a second extension option in November 2016. Sanofi has no further extension options for those credit facilities. As of June 30, 2017, there were no drawdowns under either of those facilities. Sanofi also has two commercial paper programs, of €6 billion in France and $10 billion in the United States. During the first half of 2017, only the US program was used, with an average drawdown of $847 million. Neither of the programs was in use as of June 30, 2017. The financing in place as of June 30, 2017 at the level of the holding company (which manages most of Sanofi’s financing needs centrally) is not subject to any financial covenants, and contains no clauses linking credit spreads or fees to the credit rating. B.9.2. Market value of debt The market value of debt, net of cash and cash equivalents and of derivatives and excluding accrued interest, amounted to €7,838 million as of June 30, 2017 (versus €8,663 million as of December 31, 2016). This compares with a value on redemption of €7,499 million (versus €8,246 million as of December 31, 2016). 2017 Half-Year Financial Report  Sanofi 23 B.10. DERIVATIVE FINANCIAL INSTRUMENTS B.10.1. Currency derivatives used to manage operating risk exposures The table below shows operating currency hedging instruments in place as of June 30, 2017. The notional amount is translated into euros at the relevant closing exchange rate. Of which derivatives designated as cash flow hedges June 30, 2017 (€ million) Forward currency sales of which US dollar Notional amount 3,331 Fair value 53 Notional amount — Of which derivatives not eligible for hedge accounting Fair Of which recognized value in equity — — Notional amount 3,331 Fair value 53 1,175 21 — — — 1,175 21 of which Chinese yuan renminbi 596 13 — — — 596 13 of which Japanese yen 311 9 — — — 311 9 of which Singapore dollar 208 — — — — 208 — of which Saudi riyal 129 1 — — — 129 1 Forward currency purchases 1,218 (11) — — — 1,218 (11) of which Singapore dollar 435 (8) — — — 435 (8) of which Chinese yuan renminbi 153 — — — — 153 — of which US dollar 142 (1) — — — 142 (1) of which Saudi riyal 112 (1) — — — 112 (1) 70 — — — — 70 — 4,549 42 — — — 4,549 42 of which Hungarian forint Total The above positions mainly hedge material foreign-currency cash flows arising after the end of the reporting period in relation to transactions carried out during the six months ended June 30, 2017 and recognized in the balance sheet at that date. Gains and losses on hedging instruments (forward contracts) are calculated and recognized in parallel with the recognition of gains and losses on the hedged items. Due to this hedging relationship, the commercial foreign exchange difference on those items (hedging instruments and hedged transactions) will be immaterial in the second half of 2017. B.10.2. Currency and interest rate derivatives used to manage financial exposure The cash pooling arrangements for foreign subsidiaries outside the euro zone, and some of Sanofi’s financing activities, expose certain Sanofi entities to financial foreign exchange risk (i.e., 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). That foreign exchange exposure is hedged by Sanofi using firm financial instruments (usually currency swaps or forward contracts) contracted with banking counterparties. The table below shows financial currency hedging instruments in place as of June 30, 2017. The notional amount is translated into euros at the relevant closing exchange rate. June 30, 2017 Notional amount Fair value Forward currency sales 3,755 66 of which US dollar of which Japanese yen of which Australian dollar 2,161 678 269 35 25 2 Forward currency purchases 2,843 (33) of which Singapore dollar of which US dollar of which Czech koruna 1,473 408 384 (26) (5) 1 Total 6,598 33 (€ million) 24 Sanofi  2017 Half-Year Financial Report Maximum expiry date 2018 2018 2018 2018 2018 2018 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, 2017: Notional amounts by expiry date as of June 30, 2017 (€ million) Of which designated as fair value hedges Notional amount Fair value Of which designated as cash flow hedges Notional amount Fair value Of which recognized in equity 2017 2018 2019 2020 2021 2022 Total Fair value — — 1,550 — — — 1,550 83 1,550 83 — — — 428 — — — — — 428 — 428 — — — — — — — 438 — 438 9 438 9 — — — 438 — — — — — 438 (1) — — 438 (1) — — — — — — 1,000 1,000 (4) 1,000 (4) — — — 866 — 1,550 438 — 1,000 3,854 87 3,416 88 438 (1) — Interest rate swaps pay capitalized Eonia / receive 1.58% pay 3-month Euribor / receive 1.15% pay 3-month US dollar Libor / receive 2.22% pay 1.22% / receive 3-month US dollar Libor pay capitalized Eonia / receive 0.03% Total 2017 Half-Year Financial Report  Sanofi 25 B.11. LIABILITIES RELATED TO BUSINESS COMBINATIONS AND TO NONCONTROLLING INTERESTS For a description of the nature of the liabilities reported in the line item Liabilities related to business combinations and to non-controlling interests, refer to Note B.8.5. to the consolidated financial statements for the year ended December 31, 2016. The liabilities related to business combinations and to non-controlling interests shown in the table below are level 3 instruments under the IFRS 7 fair value hierarchy (see Note A.4.), except for the CVRs issued in connection with the acquisition of Genzyme, which are level 1 instruments. Movements in liabilities related to business combinations and to non-controlling interests during the first half of 2017 are shown below: Liabilities related to non- in connection controlling with the interests (€ million) (a) and other Balance at January 1, 2017 CVRs issued acquisition of Genzyme(b) i Bayer contingent MSD contingent consideration consideration arising from the (European acquisition of Genzyme vaccines business) (c) Other Total 1 1,576 (102) 123 85 1,013 354 Payments made — — (85) — (17) Fair value remeasurements through profit or loss: (gain)/loss (including unwinding of discount) (d) — — 84 15 — 99 (21) — — — 58 37 (2) (6) (77) (4) — (89) 79 935 42 1,521 Other movements Currency translation differences Balance at June 30, 2017 100 365 Of which: · Current portion 234 · Non-current portion (a) (b) (c) (d) 1,287 Put options granted to non-controlling interests and commitment to future buyout of non-controlling interests held by BMS. Based on the quoted market price per CVR of $0.38 as of June 30, 2017 and December 31, 2016. As of January 1, 2017, this comprised a non-current portion of €1,378 million and a current portion of €198 million. Amounts reported within the income statement line item Fair value remeasurement of contingent consideration. As of June 30, 2017, Liabilities related to business combinations and to non-controlling interests mainly comprised the following items:  The Bayer contingent consideration liability arising from the acquisition of Genzyme in 2011. As of June 30, 2017, Bayer was still entitled to receive the following potential payments: o a percentage of sales of alemtuzumab up to a maximum of $1,250 million or over a maximum period of ten years, whichever is achieved first; o milestone payments based on specified levels of worldwide sales of alemtuzumab beginning in 2021, unless Genzyme exercises its right to buy out those milestone payments by making a one-time payment not exceeding $900 million. The fair value of this liability was measured at €935 million as of June 30, 2017, versus €1,013 million as of December 31, 2016. The fair value of the Bayer liability is determined by applying the above contractual terms to sales projections which have been weighted to reflect the probability of success, and discounted. If the discount rate were to fall by 1 percentage point, the fair value of the Bayer liability would increase by approximately 4%.  The MSD contingent consideration liability, originally of €354 million, arising from the 2016 acquisition of the Sanofi Pasteur activities carried on within the former Sanofi Pasteur MSD joint venture (see Note D.18. to the consolidated financial statements for the year ended December 31, 2016). The fair value of this liability was measured at €365 million as of June 30, 2017. The fair value of the contingent consideration was determined by applying the royalty percentage stipulated in the contract to discounted sales projections. 26 Sanofi  2017 Half-Year Financial Report B.12. PROVISIONS AND OTHER NON-CURRENT LIABILITIES Provisions and other non-current liabilities break down as follows: Provisions for pensions & other postemployment benefits 4,377 Provisions for other long-term benefits 720 Restructuring provisions 744 Changes in scope of consolidation 70 3 Increases in provisions and other liabilities 118(a) (a) (€ million) Balance at January 1, 2017 Provisions utilized (358) Other provisions 2,777 Other noncurrent liabilities 216 Total 8,834 — 7 1 81 83 83 332 114 730 (67) (4) (79) — (508) — (113) Reversals of unutilized provisions 4 Transfers 1 — 45 2 (94) Actuarial gains and losses on definedbenefit plans Balance at June 30, 2017 Net interest related to employee benefits, and unwinding of discount Currency translation differences (5) (16) (96) (b) (25) (12) (c) 1 13 2 (25) (2) (67) (8) (196) (282) — — — — (282) 3,881 711 645 2,862 313 8,412 (161) (c) (b) (197) 63 (a) In the case of “Provisions for pensions and other post-employment benefits”, the “Increases in provisions” line corresponds to rights vesting in employees during the period and past service cost, and the “Provisions utilized” line corresponds to contributions paid into pension funds and to plan settlements. (b) Amounts charged and reversed during the first half of 2017 were largely due to reassessments of tax risks and the resolution of various procedures under way with the tax authorities of several countries. (c) Includes transfers between current and non-current. Provisions for pensions and other post-employment benefits For an analysis of the sensitivity of obligations in respect of pensions and other employee benefits, and the assumptions used as of December 31, 2016, see Note D.19.1. to the consolidated financial statements for the year ended December 31, 2016. The principal assumptions used (in particular, changes in discount and inflation rates and in the market value of plan assets) for the euro zone, the United States and the United Kingdom were reviewed as of June 30, 2017 to take into account changes during the first half of the year. Actuarial gains and losses arising on pensions and other post-employment benefits and recognized directly in equity are as follows (amounts reported before tax): (€ million) Actuarial gains/(losses) on plan assets Actuarial gains/(losses) on benefit obligations June 30, 2017 (6 months) 235 47 (a) June 30, 2016 (6 months) 485 (1,409) (b) December 31, 2016 (12 months) 681 (790) (a) The movement during the first half of 2017 includes the effect of the change in discount rates (in a range between -0.25% and +0.25%). (b) The movement during the first half of 2016 includes the effect of the fall in discount rates (in a range between -0.50% and -1.00%). 2017 Half-Year Financial Report  Sanofi 27 B.13. OFF BALANCE SHEET COMMITMENTS Off balance sheet commitments to third parties arise under collaboration agreements entered into by Sanofi (see Note D.21.1. to the consolidated financial statements for the year ended December 31, 2016). Agreements signed during the first half of 2017 gave rise to the following new commitments:  Payments associated with projects in the research phase: €0.4 billion.  Payments contingent on the attainment of specified sales targets once a product reaches the market: €0.5 billion.  Potential milestone payments relating to development projects under collaboration agreements: €0.1 billion. The principal commitments entered into, amended or discontinued during the period are described below: On January 9, 2017, Sanofi and Immunext announced an agreement to develop a novel antibody to treat auto-immune diseases such as multiple sclerosis and lupus. Under the agreement, Sanofi acquired an exclusive worldwide license to INX-021, a monoclonal CD40L antibody currently in preclinical development. A second parallel agreement was signed to support clinical trials. On February 27, 2017, Sanofi and Lonza announced a strategic partnership in the form of a joint venture to build and operate a large-scale mammalian cell culture facility for monoclonal antibody production in Visp, Switzerland. An initial investment of approximately €0.3 billion to finance construction of the facility will be made 50/50 by the two partners. In addition, Sanofi could pay Lonza in the region of €0.8 billion over the next fifteen years, partly as its share of operating expenses and of the cost of producing future batches, and partly to reserve capacity in the new facility. On March 3, 2017, Sanofi Pasteur and MedImmune (a division of AstraZeneca) announced an agreement to develop and commercialize a monoclonal antibody (MEDI8897) for the prevention of Respiratory Syncytial Virus (RSV) associated illness in newborns and infants. On May 30, 2017, ImmunoGen and Sanofi agreed an amendment to the license and collaboration agreement signed in 2003. ImmunoGen has granted Sanofi a fully paid and exclusive license to develop, manufacture and commercialize the full series of compounds developed by Sanofi using ImmunoGen technology. In March 2017, Sanofi and Vivus Inc. discontinued their agreement to develop, manufacture and commercialize avanafil. B.14. 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, 2016. B.14.1. Products Depakine® Product Litigation in France As of June 30, 2017, 44 claims are outstanding in France. In May 2017, the class action was filed against the French affiliate by an association representing the families whose children allegedly sustained personal ® injuries in connection with the exposure to the use of Depakine , a sodium valproate antiepileptic treatment, by the mothers during pregnancy. The French government is finalizing the indemnification mechanism to be operated by the Public Fund through the publication of decrees and orders. 28 Sanofi  2017 Half-Year Financial Report B.14.2. Patents Praluent® (alirocumab)-related Amgen Patent Litigation in the US In February 2017, the US Court of Appeals for the Federal Circuit (“Federal Circuit”) stayed (suspended) the ® permanent injunction for Praluent (alirocumab) injection during Sanofi’s and Regeneron’s appeal. Sanofi and Regeneron have appealed the validity judgment and injunction ruling in the Federal Circuit. In June 2017, oral argument took place in the Court of Appeals for the Federal Circuit. In April 2017, the District of Delaware granted Amgen’s motion to amend the judgment on an accounting of supplemental damages and enhancement of such damages if deemed appropriate. This order is deferred until the Federal Circuit appeal is complete. Praluent® (alirocumab)-related Amgen Patent Litigation in Europe In February 2017, the UK action was stayed (suspended) on terms agreed by the parties. In April 2017, in France, Sanofi and Regeneron filed a response to the complaint (filed by Amgen in September 2016 alleging infringement by alirocumab of its ‘124 (FR) patent) and a separate nullity action. Praluent® (alirocumab)-related Amgen Opposition and Patent Litigation in Japan In May 2017, Amgen filed a lawsuit in the Tokyo District Court, against Sanofi K.K. for patent infringement of two of its Japanese Patents, JP5705288 and JP5906333. Amgen seeks injunctive relief to prevent the infringing manufacture, use and sale of alirocumab, as well as destruction of Praluent and alirocumab, and attorneys’ fees. The validity of these two Japanese patents was challenged by Sanofi in the Japanese Patent Office by filing invalidation actions in 2016. The JPO issued a Preliminary Notice of Trial Decision in March 2017, indicating their intent to maintain some claims of each patent, and invalidate others. Amgen filed corrected claims in the JPO on May 16, 2017, canceling the claims the JPO indicated were invalid. Dupixent® (dupilumab)-related Amgen Patent Opposition and Revocation in Europe Immunex Corporation, an Amgen affiliate, is the registered proprietor of European Patent number EP2292665. The claims of this patent relate to, among other things, human monoclonal antibodies that are capable of inhibiting IL-4 induced biological activity and which compete with one of four reference antibodies for binding to a cell that expresses human IL-4R. In April 2016, Sanofi and Regeneron each filed an opposition in the European Patent Office against EP2292665, seeking its revocation on the basis that, inter alia, the claims are overly broad. In September 2016, Sanofi also filed a civil action in the U.K. High Court (Chancery Division/Patents Court) seeking revocation of the U.K. designation of EP2292665 on similar grounds. In January 2017, at the joint request of Sanofi and Immunex, the U.K. High Court ordered that the revocation action be stayed pending the final determination of the pending European Patent Office opposition proceedings. Dupixent® (dupilumab)-related Amgen Inter Partes Review Petition and Patent Litigation in the US In March 2017, Sanofi and Regeneron filed a petition for Inter Partes Review (IPR) for U.S. patent 8,679,487 with the United States Patent Office Patent Trial and Appeal Board (PTAB). In this petition, Sanofi and Regeneron attack the validity of all the claims of this patent. In April 2017, Immunex filed a complaint against Sanofi and Regeneron for patent infringement and ® declaratory judgment of patent infringement of US patent 8,679,487 with respect to Dupixent in the United States District Court for the Central District of California. B.15. OTHER OPERATING INCOME AND EXPENSES Other operating income for the first half of 2017 was €173 million (versus €265 million in the first half of 2016), while Other operating expenses totaled €71 million (versus €195 million in the first half of 2016). In the first half of 2017, the main component of Other operating income was gains on asset disposals, which amounted to €57 million. 2017 Half-Year Financial Report  Sanofi 29 B.16. RESTRUCTURING COSTS AND SIMILAR ITEMS Restructuring costs and similar items comprise the following: (€ million) June 30, 2017 June 30, 2016 December 31, 2016 (6 months) (a) (6 months)(a) (12 months)(a) Employee-related expenses 124 536 650 Expenses related to property, plant and equipment 154 46 139 42 3 31 1 3 3 43 39 56 364 627 879 Compensation for early termination of contracts (other than contracts of employment) Decontamination costs Other restructuring costs and similar items Total (a) The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. In the first half of 2017, restructuring costs mainly comprised write-downs of industrial assets in Europe and North America, and employee-related expenses arising from headcount adjustment plans in Europe. B.17. OTHER GAINS AND LOSSES, AND LITIGATION In 2017, the line item Other gains and losses, and litigation represents separation costs associated with the process of disinvesting from the Generics business in Europe, before any tax effects. On December 30, 2016 Sanofi transferred to MSD its interest in the Sanofi Pasteur MSD joint venture, generating a pre-tax gain on disposal of €211 million (see Note D.1.2. to the consolidated financial statements for the year ended December 31, 2016). B.18. FINANCIAL EXPENSES AND INCOME Financial income and expenses comprise the following items: (€ million) Cost of debt (b) Interest income (c) Cost of debt, net of cash and cash equivalents Non-operating foreign exchange gains/(losses) June 30, 2017 June 30, 2016 (6 months)(a) (6 months)(a) December 31, 2016 (12 months)(a) (140) (146) (274) 30 28 56 (110) (118) (218) 1 — (21) (17) (17) (33) Net interest cost related to employee benefits (47) (58) (114) Gains/(losses) on disposals of financial assets 52 19 36 Impairment losses on financial assets, net of reversals (6) (12) (487) 4 (5) (19) Unwinding of discounting of provisions (d)) Other Net financial income/(expenses) (123) (191) (856) comprising: (218) (241) (924) 95 50 68 Financial expenses Financial income (a) The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. (b) Includes net gain on interest and currency derivatives used to hedge debt: €27 million for the six months ended June 30, 2017, versus €44 million for the six months ended June 30, 2016 and €86 million for the year ended December 31, 2016. (c) Includes net loss on interest and currency derivatives used to hedge cash and cash equivalents: €(6) million for the six months ended June 30, 2017, versus zero for the six months ended June 30, 2016 and the year ended December 31, 2016. (d) Primarily on provisions for environmental risks, restructuring provisions, and provisions for product-related risks (see Note B.12.). In 2017 and 2016, the impact of the ineffective portion of hedging relationships was immaterial. 30 Sanofi  2017 Half-Year Financial Report B.19. INCOME TAX EXPENSE Sanofi has elected for tax consolidations in a number of countries, principally France, Germany, the United Kingdom and the United States. The table below shows the split of income tax expense between current and deferred taxes: June 30, 2017 (6 months)(a) (€ million) Current taxes June 30, 2016 (6 months)(a) (879) Deferred taxes December 31, 2016 (12 months)(a) (978) (1,869) 269 481 543 Total (610) (497) (1,326) Income before tax and associates and joint ventures 2,953 2,399 5,678 (a) The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. The difference between the effective tax rate (on income before taxes and before associates and joint ventures) and the standard corporate income tax rate applicable in France is explained as follows: (as a percentage) Standard tax rate applicable in France Difference between the standard French tax rate and the rates applicable to Sanofi (c) Tax rate differential on intragroup margin in inventory (d) Tax effects of the share of profits reverting to BMS June 30, 2017 June 30, 2016 December 31, 2016 (6 months)(a)(b) (6 months)(a)(b) 34.4 34.4 34.4 (18.2) (13.3) (10.1) (0.5) (1.8) (0.6) (12 months)(a) (0.5) (0.6) (0.5) Contribution on distributed income (3%) (e) 3.8 4.7 2.0 (f) 1.4 1.3 1.1 3.2 (9.3) (4.8) CVAE tax in France Revisions to tax exposures and settlements of tax disputes Fair value remeasurement of contingent consideration 0.2 0.4 0.4 Other (3.1) 4.9 1.5 Effective tax rate 20.7 20.7 23.4 (a) The results of the Animal Health business are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. (b) Rate calculated on the basis of the estimated effective tax rate for the full financial year (see Note A.2.). (c) The difference between the French tax rate and tax rates applicable to foreign subsidiaries reflects the fact that Sanofi has operations in many countries, most of which have lower tax rates than France. (d) When internal margin included in inventory is eliminated, a deferred tax asset is recognized on the basis of the tax rate applicable to the subsidiary that holds the inventory, which may differ from the tax rate of the subsidiary that generated the eliminated intragroup margin. (e) Entities liable to corporate income tax in France are also liable to pay an additional tax contribution in respect of amounts distributed by the entity. (f) Net impact on the effective tax rate (current taxes, impact of the tax deduction, and deferred taxes). 2017 Half-Year Financial Report  Sanofi 31 B.20. SEGMENT INFORMATION As indicated in Note B.26. to the consolidated financial statements for the year ended December 31, 2016, Sanofi now has two operating segments: Pharmaceuticals and Human Vaccines (Vaccines). The Pharmaceuticals segment comprises the commercial operations of the following franchises: Specialty Care (Rare Diseases, Multiple Sclerosis, Oncology), Diabetes & Cardiovascular, Established Prescription Products, Consumer Healthcare, and Generics, and dedicated research and development, production and marketing activities for all of Sanofi’s pharmaceuticals operations. The Sanofi 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 whose activities are related to pharmaceuticals, in particular Regeneron, Onduo, and the entities majority owned by BMS. The Vaccines segment is wholly dedicated to vaccines and includes the commercial operations of Sanofi Pasteur and dedicated research and development, production and marketing activities for Sanofi’s vaccines operations. This segment also included the Sanofi Pasteur MSD joint venture until December 30, 2016, the date on which the joint venture ended. Each segment includes global support function costs as allocated for internal reporting purposes within Sanofi. The “Other” segment includes all activities that do not qualify as reportable segments under IFRS 8.This segment includes the effects of retained commitments in respect of divested activities. Inter-segment transactions are not material. B.20.1. Segment results Sanofi reports segment results on the basis of “Business operating income”. This indicator is compliant with IFRS 8 and is used internally to measure the performance of operating segments and to allocate resources. Business operating income is derived from Operating income, adjusted as follows:  the amounts reported in the line items Restructuring costs and similar items, Fair value remeasurement of contingent consideration and Other gains and losses, and litigation are eliminated;  amortization and impairment losses charged against intangible assets (other than software and other rights) are eliminated;  the share of profits/losses of associates and joint ventures is added;  net income 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. 32 Sanofi  2017 Half-Year Financial Report Segment results are shown in the table below: June 30, 2017 (6 months) (€ million) Net sales Pharmaceuticals Vaccines Other Total 15,511 1,800 — 149 370 — 519 Cost of sales (4,363) (1,131) — (5,494) Research and development expenses (2,373) (294) — (2,667) Selling and general expenses (4,609) (437) — (5,046) 122 2 (22) 102 Other revenues Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income 17,311 82 (1) — 81 (65) — — (65) 4,454 309 (22) 4,741 June 30, 2016 (6 months) (€ million) Net sales Other revenues Cost of sales Research and development expenses Selling and general expenses Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income Pharmaceuticals Vaccines Other 1,422 188 (827) (268) (348) (1) — — — — — (39) 44 9 — 53 (50) 4,080 — 175 — (39) (50) 4,216 14,504 122 (4,143) (2,246) (4,261) 110 Total 15,926 310 (4,970) (2,514) (4,609) 70 December 31, 2016 (12 months) (€ million) Net sales Pharmaceuticals Vaccines Other Total 29,244 4,577 — 274 613 — 887 Cost of sales (8,349) (2,353) — (10,702) Research and development expenses (4,618) (554) — (5,172) Selling and general expenses (8,743) (743) — (9,486) Other revenues Other operating income and expenses (1) (14) 129 48 — 177 Net income attributable to non-controlling interests (112) (1) — (113) Business operating income 7,824 1,573 Share of profit/(loss) of associates and joint ventures (112) 33,821 (112) (127) 9,285 2017 Half-Year Financial Report  Sanofi 33 The table below, presented in compliance with IFRS 8, shows a reconciliation between “Business operating income” and Income before tax and associates and joint ventures: (€ million) Business operating income (a) Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests (b) (c) Amortization of intangible assets Impairment of intangible assets June 30, 2017 June 30, 2016 December 31, 2016 (6 months) (6 months) (12 months) 4,741 4,216 9,285 (81) (53) (177) 65 50 113 (990) (877) (1,692) (12) (52) (192) Fair value remeasurement of contingent consideration (100) (67) (135) Expenses arising from the impact of acquisitions on inventories (176) — — Restructuring costs and similar items (364) (627) (879) Other gains and losses, and litigation (d) (7) — 211 Operating income 3,076 2,590 6,534 Financial expenses (e) (218) (241) (924) Financial income Income before tax and associates and joint ventures 95 50 68 2,953 2,399 5,678 (a) The results of the Animal Health business for 2016, and the gain arising on the divestment of that business in 2017, are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations). (b) Excluding restructuring costs of associates and joint ventures and expenses arising from the impact of acquisitions on associates and joint ventures, and after elimination of Sanofi’s share of the business net income of Sanofi Pasteur MSD from the date when Sanofi and MSD announced their intention to end their joint venture (€52 million in 2016). (c) Excluding (i) restructuring costs and (ii) other adjustments attributable to non-controlling interests. (d) For 2017, this line item consists of separation costs associated with the process of disinvesting from the Generics business in Europe, before any tax effects. For 2016, this line item consists of the pre-tax gain on divestment of Sanofi’s interest in the Sanofi Pasteur MSD joint venture. (e) For the year ended December 31, 2016, this line item includes an impairment loss of €457 million taken against Sanofi’s equity investment in Alnylam Pharmaceuticals, Inc. (see Note D.29. to the consolidated financial statements for the year ended December 31, 2016). B.20.2. 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 are for the Pharmaceuticals segment, Regeneron Pharmaceuticals, Inc. (see Note C.1. to the consolidated financial statements for the year ended December 31, 2016), the entities majority owned by BMS (see Note C.2. to the consolidated financial statements for the year ended December 31, 2016), Onduo LLC, and Infraserv GmbH & Co. Höchst KG; and for the Vaccines segment, Sanofi Pasteur MSD until March 8, 2016 (see Notes B.1. and D.1.2. to the consolidated financial statements for the year ended December 31, 2016). Acquisitions of intangible assets and property, plant and equipment correspond to acquisitions paid for during the period. June 30, 2017 (€ million) Investments in associates and joint ventures Acquisitions of property, plant and equipment Acquisitions of other intangible assets 34 Sanofi  2017 Half-Year Financial Report Pharmaceuticals 2,831 465 188 Vaccines 10 173 172 Total 2,841 638 360 June 30, 2016 (€ million) Pharmaceuticals Investments in associates and joint ventures Vaccines Total 2,724 259 2,983 Acquisitions of property, plant and equipment 439 149 588 Acquisitions of other intangible assets 580 32 612 December 31, 2016 (€ million) Pharmaceuticals Investments in associates and joint ventures Vaccines Total 2,886 4 2,890 Acquisitions of property, plant and equipment 904 315 1,219 Acquisitions of other intangible assets 807 57 864 B.20.3. 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. June 30, 2017 (€ million) Net sales Non-current assets: · property, plant and equipment · goodwill · other intangible assets Total 17,311 Europe 4,761 9,633 40,964 13,849 5,895 — 3,522 of which France 1,166 North of which America United States 5,861 5,562 3,243 Other countries 6,689 2,599 — 4,853 2,204 1,139 — 5,474 of which France 1,153 North America 5,629 of which United States 5,356 Other countries 5,885 3,423 2,782 — 5,440 2,385 1,083 — 2,140 North of which America United States 12,963 12,391 Other countries 12,179 June 30, 2016 (€ million) Net sales Non-current assets: · property, plant and equipment · goodwill · other intangible assets Total 15,926 Europe 4,412 9,819 39,420 11,094 5,954 — 3,514 December 31, 2016 (€ million) Net sales Non-current assets: · property, plant and equipment · goodwill · other intangible assets Total 33,821 Europe 8,679 10,019 40,287 10,879 6,068 — 3,612 of which France 2,206 3,413 2,850 — 5,430 2,447 1,101 — 1,837 As stated in Notes B.6.1. and D.5. to the consolidated financial statements for the year ended December 31, 2016, goodwill is not allocated by geographical region. 2017 Half-Year Financial Report  Sanofi 35 B.20.4. Net sales and credit risk Sanofi’s three largest customers respectively accounted for approximately 10%, 6% and 5% of consolidated net sales in the first half of 2017, mostly in the Pharmaceuticals segment (versus approximately 11%, 8% and 3% in the first half of 2016). Net sales Sanofi’s net sales comprise net sales generated by the Pharmaceuticals segment and the Vaccines segment (see section C.3.1.1. of the half-year management report). B.21. ASSETS HELD FOR SALE OR EXCHANGE AND LIABILITIES RELATED TO ASSETS HELD FOR SALE OR EXCHANGE Assets held for sale or exchange, and liabilities related to assets held for sale or exchange, comprise: June 30, 2017 26 (€ million) Animal Health business (a) Other December 31, 2016 6,376 2 45 Assets held for sale or exchange 28 6,421 Animal Health business (a) 10 1,165 Other — 30 Liabilities related to assets held for sale or exchange 10 1,195 (a) The Animal Health business was divested on January 1, 2017, (see Note B.1.) except for Merial de Mexico SA de CV, the divestment of which is expected to be finalized in the second half of 2017. In accordance with IFRS 5, the net income/loss of the Animal Health business is presented in a separate line item within the income statement (see Notes B.1. and D.2. to the consolidated financial statements for the year ended December 31, 2016). The table below provides an analysis of the main items included in the line item Net income/(loss) of the exchanged/held-for-exchange Animal Health business: (€ million) Net sales Gross profit Operating income Income before tax and associates and joint ventures (a) Income tax expense (b) Net income/(loss) of the exchanged/held-for-exchange Animal Health business June 30, 2017 — June 30, 2016 1,485 December 31, 2016 2,708 — 1,030 1,850 678 — 452 6,137 449 672 (1,716) (163) (359) 4,421 286 314 (a) In 2017, this line shows the gain arising on the divestment of the Animal Health business in exchange for Boehringer Ingelheim’s Consumer Healthcare business, based on a total consideration of €10,320 million. (b) Income tax expense on the gain on divestment of the Animal Health business. The table below presents basic and diluted earnings per share for the exchanged/held-for-exchange Animal Health business, in accordance with IAS 33 (Earnings Per Share): June 30, 2017 4,421 June 30, 2016 286 December 31, 2016 314 Average number of shares outstanding (million) 1,260.3 1,287.6 1,286.6 Average number of shares outstanding after dilution (million) 1,270.6 1,296.6 1,296.0 – Basic earnings per share (in euros) 3.51 0.22 0.24 – Diluted earnings per share (in euros) 3.48 0.22 0.24 (€ million) Net income/(loss) of the exchanged/held-for-exchange Animal Health business 36 Sanofi  2017 Half-Year Financial Report C/ Events subsequent to June 30, 2017 On July 11, 2017, Sanofi announced that it will acquire Protein Sciences, a privately held biotechnology company based in Meriden, Connecticut in the United States. Under the terms of the agreement between the two companies, Sanofi will make an upfront payment of $650 million and could pay up to a further $100 million upon attainment of certain milestones. The acquisition is expected to close in the third quarter of 2017, subject to customary regulatory approvals. ® On July 14, 2017, Emergent BioSolutions Inc. announced that it is to acquire ACAM2000 , the smallpox vaccine developed by Sanofi Pasteur. Under the terms of the agreement Emergent BioSolutions will make an upfront payment of $97.5 million, and could pay up to a further $27.5 million upon attainment of certain milestones. On July 20, 2017, Sanofi and Ablynx announced a partnership to expand treatments for inflammatory and auto-immune diseases. Under the terms of the agreement, Sanofi could pay Ablynx up to €2.4 billion. On July 31, 2017, 1,621,098 shares (representing approximately 0.13% of the share capital) were issued in connection with the “Action 2017” Sanofi worldwide employee share ownership plan, intended to give employees a greater stake in the Company’s future development and results. 2017 Half-Year Financial Report  Sanofi 37 2 HALF-YEAR MANAGEMENT REPORT A/ Significant events of the first half of 2017 A.1. PHARMACEUTICALS On January 1, 2017, Sanofi and Boehringer Ingelheim (BI) finalized the strategic transaction agreed in June 2016, involving the exchange of Sanofi’s Animal Health business (Merial) for BI’s Consumer Healthcare business in most countries. After taking account of preliminary enterprise value adjustments, the exchange values of the two businesses as effectively transferred during the first half of 2017 were determined at €10,320 million for Sanofi’s Animal Health business and €6,271 million for BI’s Consumer Healthcare business. Finalization of the divestment of Merial in Mexico is expected in the second half of 2017. The divestment of the Animal Health business has generated an after-tax gain of €4.4 billion in 2017, excluding the effect of price adjustments and delayed business transfers (see Note B.1. to the condensed half-year consolidated financial statements). A.1.1. Acquisitions and alliances On February 27, 2017, Sanofi and Lonza announced a strategic partnership to build and operate a large-scale mammalian cell culture facility for monoclonal antibody production in Visp, Switzerland. An initial investment of approximately €0.3 billion to finance construction of the facility will be made 50/50 by the two partners. In addition, Sanofi could pay Lonza in the region of €0.8 billion over the next fifteen years, partly as its share of operating expenses and of the cost of producing future batches, and partly to reserve capacity in the new facility. A.1.2. Filings for marketing authorization for new products ®  On January 4, 2017, Soliqua 100/33 (once-daily fixed-dose injectable combination of insulin glargine 100 ® units/ml and lixisenatide 33 mcg/ml) became available in US pharmacies on medical prescription. Soliqua 100/33 is indicated for the treatment of adults with type 2 diabetes inadequately controlled on basal insulin (less than 60 units daily) or lixisenatide alone. On January 18, 2017, the European Commission granted ® marketing authorization in Europe for Suliqua (the brand name for the same product in Europe) for the ® treatment of adults with type 2 diabetes. Suliqua is authorized for use in combination with metformin to improve control over blood sugar levels when this has not been provided by metformin alone or metformin combined with another oral glucose-lowering medicinal product or with basal insulin. ®  At the start of February 2017, the US Food and Drug Administration (FDA) approved Xyzal Allergy 24HR as an over-the-counter (OTC) treatment for the relief of symptoms associated with seasonal and year® round allergies. Two formulations of Xyzal are now approved for OTC use: 5 mg tablets for ages 6 years ® and older, and 0.5 mg/mL oral solution for ages 2 years and older. Xyzal is an oral antihistamine with a proven 24-hour effect.  On March 28, 2017, Sanofi and Regeneron Pharmaceuticals, Inc. announced that the FDA had approved ® Dupixent (dupilumab) injectable solution, the first and only biologic medicine approved for the treatment of adults with moderate-to-severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable.  On May 19, 2017, Sanofi announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) had adopted a positive opinion for the marketing authorization of ® Insulin lispro Sanofi (insulin lispro 100 units/ml). The CHMP recommended the use of Insulin lispro ® Sanofi to treat adults and children who have diabetes and need insulin to control their blood sugar level, including those patients whose diabetes has just been diagnosed. Approval for the product was obtained from the European Commission on July 19, 2017.  On May 22, 2017, Sanofi and Regeneron Pharmaceuticals, Inc. announced that the FDA had approved ® Kevzara (sarilumab) for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have had an inadequate response or intolerance to one or more disease modifying 38 Sanofi  2017 Half-Year Financial Report 1 ® antirheumatic drugs (DMARDs), such as methotrexate . Kevzara was also approved in the European Union on June 27, 2017 for the same indication. The product may be used as monotherapy in the event of intolerance or contra-indication of methotrexate. The first country to approve the product was Canada, on February 1, 2017. A.1.3. Research and development For an update on our research and development (R&D) pipeline, refer to the appendix in Section G of this half-year management report. The principal R&D announcements during the first half of 2017 were as follows: Phase IV:  On June 11, 2017, positive results were announced from two Phase IIIb/IV trials (ODYSSEY-DM) ® ® evaluating Praluent in patients with diabetes and hypercholesterolemia. In the studies, Praluent , when administered on top of maximally tolerated doses of statins, significantly reduced low-density lipoprotein cholesterol (LDL-C) (ODYSSEY DM-INSULIN study) and non-high-density lipoprotein cholesterol (nonHDL-C) (ODYSSEY DM-DYSLIPIDEMIA study). Both studies also found that a majority of patients reached ® their lipid goals with Praluent 75 mg every two weeks, with an overall safety profile comparable to the ODYSSEY Phase III program. Phase III:  On March 4, 2017, Sanofi and Regeneron Pharmaceuticals, Inc. presented detailed results from the one® year Phase III CHRONOS study, which showed that patients receiving the investigational drug Dupixent (dupilumab) with topical corticosteroids (TCS) achieved significantly improved measures of overall disease severity compared to TCS alone in adults with uncontrolled moderate-to-severe atopic dermatitis.  Results from the CAFÉ study evaluating dupilumab in the treatment of cyclosporine-resistant adults with moderate-to-severe atopic dermatitis were positive, and showed a satisfactory safety profile.  Two phase III studies with dupilumab were initiated during the first half of 2017, one in the treatment of persistent asthma in children aged 6 to 11 years and the other in the treatment of atopic dermatitis in adolescents aged 12 to 17 years.  SAR439684 (PD-1 inhibitor), developed in collaboration with Regeneron, entered Phase III in the treatment of non small cell lung cancer. Phase II:  SP0232/MEDI8897 (collaboration with MedImmune), a monoclonal antibody for the prevention of Respiratory Syncytial Virus (RSV) associated illness in newborns and infants, entered the pipeline in Phase II.  SAR566658, a maytansine-loaded anti-CA6 monoclonal antibody, entered Phase II in the treatment of triple negative breast cancer.  GZ402671/venglustat, a glucosylceramide synthase inhibitor, entered Phase IIb for the treatment of Gaucher disease type 3. The product also entered Phase IIa in the treatment of Fabry disease.  Two Phase II studies have begun to evaluate isatuximab in acute lymphoblastic leukemia and latent multiple myeloma.  A Phase II study has begun evaluating SAR439684 (PD-1), developed in collaboration with Regeneron, in the treatment of basocellular carcinoma. Phase I:  SAR440181/MYK491 (collaboration with MyoKardia) entered Phase I in the treatment of dilated cardiomyopathy (DCM1 myosin activation).  SAR439459 (TGFb inhibitor, monoclonal antibody) entered Phase I as monotherapy and in combination with SAR439684 in the treatment of metastatic melanoma. 1 Prescribing Information Kevzara® (sarilumab). May 2017 2017 Half-Year Financial Report  Sanofi 39 A.2. HUMAN VACCINES (VACCINES) At the end of December 2016, Sanofi Pasteur and MSD (known as Merck in the United States and Canada) ended their European joint venture Sanofi Pasteur MSD (SPMSD). This transaction was treated as a divestment of our share in the joint venture, and the acquisition of the vaccines portfolio reverting to Sanofi. With effect from January 1, 2017, the additional net sales generated by this transaction are reflected in our 2017 first-half consolidated net sales. The amount of those additional net sales for the first half of 2016 is estimated at €97 million. A.2.1. Partnerships and collaborations On March 3, 2017, Sanofi and its vaccines global business unit Sanofi Pasteur announced an agreement with MedImmune, the global biologics research and development arm of AstraZeneca, to develop and commercialize a monoclonal antibody called MEDI8897 for the prevention of Respiratory Syncytial Virus (RSV) associated illness in newborns and infants. According to the US Centers for Disease Control and Prevention, RSV is the most common cause of lower respiratory tract infections in children aged under 1 in the United States and worldwide. A.2.2. Research and development  Volunteers are being recruited to a Phase III clinical trial evaluating the efficacy of the vaccine against Clostridium difficile symptomatic infections. ®  A Phase III trial of the high-dose quadrivalent inactivated influenza vaccine Fluzone QIV HD in patients aged over 65 years is currently in preparation.  Phase III clinical trials are ongoing for the second-generation meningococcal ACYW conjugate vaccine Men Quad TT, indicated for a broader population (from children to seniors). A.3. OTHER SIGNIFICANT EVENTS OF THE FIRST HALF OF 2017 A.3.1. Corporate governance The Annual General Meeting of Sanofi shareholders was held in Paris on May 10, 2017. All of the resolutions submitted to the vote were adopted. The meeting approved a cash dividend of €2.96 per share, payable on May 18, 2017. The meeting also approved the appointment of Melanie Lee and Bernard Charlès as independent directors, and the reappointment of Fabienne Lecorvaisier as a director, to serve for a four-year term expiring at the Annual General Meeting called to approve the 2020 financial statements. In addition, the meeting voted to amend the Articles of Association to allow for the appointment of two employee directors. Further to that amendment, Marion Palme (a German citizen) and Christian Senectaire (a French citizen) were designated as employee directors in June 2017. The new Board of Directors has 16 members, 7 of them women. A substantial majority of the directors are independent. A.3.2. Legal and arbitration proceedings For a description of the most significant developments in legal and arbitration proceedings since publication of the financial statements for the year ended December 31, 2016, refer to Note B.14. to the condensed halfyear consolidated financial statements. The following events have occurred in respect of litigation, arbitration and other legal proceedings in which Sanofi and its affiliates are involved: Patents ®  Lantus Mylan Inter Partes Review Petition in the US In June 2017, Mylan Pharmaceuticals, Inc. filed petitions for Inter Partes Review (IPR) for US Patent Nos. ® 7,476,652 and 7,713,930 regarding Lantus with the United States Patent Office Patent Trial and Appeal Board (PTAB). In these petitions, Mylan attacks the validity of all claims of these patents. ®  Lantus Merck Patent Litigation in the US ® In the patent litigation against Merck on Lantus , the claim construction hearing has been rescheduled for September 20, 2017 and briefing on Summary Judgment Motions on certain issues pertaining to some of the patents-in-suit is now scheduled to begin on November 17, 2017. 40 Sanofi  2017 Half-Year Financial Report ®  Multaq Patent Litigation in the US ® In April 2017, Sanofi and Lupin settled the ongoing patent litigation on Multaq and Sanofi went to trial on the ‘900 patent against Sandoz and Watson. Government Investigations and Related Litigation In March 2017, the Washington State Attorney General’s office issued a civil investigative demand calling for ® ® the production of documents and information relating to pricing and trade practices for Lantus , Toujeo , ® ® Apidra and Soliqua , from January 1, 2005 through present. Sanofi US is cooperating with this investigation. In March and April 2017, two additional actions were filed against Sanofi in New Jersey court on behalf of putative class of diabetes patients alleging violations of the Racketeer Influenced and Corrupt Organizations ® Act, in connection with the pricing of Lantus . B/ Events subsequent to June 30, 2017  On July 10, 2017, Sanofi Genzyme and Alnylam Pharmaceuticals, Inc., the leading RNAi therapeutics company, announced new positive results from the ongoing phase II open-label extension study with fitusiran in patients with hemophilia A and B, with or without inhibitors. Based on those results, Sanofi and Alnylam have announced the launch of a Phase III program (ATLAS) on fitusiran in patients with hemophilia A and B, with or without inhibitors.  On July 11, 2017, Sanofi announced that it will acquire Protein Sciences, a privately held biotechnology company based in Meriden, Connecticut in the United States. Under the terms of the agreement between the two companies, Sanofi will make an upfront payment of $650 million and could pay up to a further $100 million upon attainment of certain milestones. In October 2016, Protein Sciences obtained FDA ® ® approval for its Flublok quadrivalent influenza vaccine. Flublok is the only recombinant protein-based influenza vaccine approved by the FDA. The acquisition is expected to close in the third quarter of 2017, subject to customary regulatory approvals.  On July 21, 2017, the Committee for Medicinal Products for Human Use (CHMP) of the European ® Medicines Agency (EMA) adopted a positive opinion on the market authorization application for Dupixent (dupilumab) for the treatment of adults with moderate-to-severe atopic dermatitis.  On July 31, 2017, 1,621,098 shares (approximately 0.13% of the share capital) were issued in connection with Action 2017, a global employee share ownership plan intended to give Sanofi employees a greater stake in the company’s results and future development. A total of 25,758 employees signed up to the plan between June 19 and June 30, 2017, subscribing for Sanofi shares at a price of €70.01 per share. For each tranche of five shares applied for, the applicant received one additional new share by way of employer’s contribution; and for each application for 20 or more shares, the applicant received an additional four new shares by way of employer’s contribution. 2017 Half-Year Financial Report  Sanofi 41 C/ Consolidated financial statements for the first half of 2017 For definitions of financial indicators, refer to the appendix in Section F of this report. Unless otherwise indicated, all financial data in this report are presented in accordance with international financial reporting standards (IFRS), including international accounting standards and interpretations (see Note A.1 to the condensed half-year consolidated financial statements). C.1. CONSOLIDATED RESULTS FOR THE FIRST HALF OF 2017 Consolidated income statements for the six months ended June 30, 2016 and June 30, 2017 June 30, 2017(a) (6 months) 17,311 (€ million) Net sales Other revenues as % of net sales 100.0% June 30, 2016(a) (6 months) 15,926 as % of net sales 100.0% 519 3.0% 310 1.9% Cost of sales (5,670) (32.8%) (4,970) (31.2%) Gross profit 12,160 70.2% 11,266 70.7% Research and development expenses (2,667) (15.4%) (2,514) (15.8%) Selling and general expenses (5,046) (29.1%) (4,609) (28.9%) Other operating income 173 265 Other operating expenses (71) (195) Amortization of intangible assets (990) (877) Impairment of intangible assets (12) (52) Fair value remeasurement of contingent consideration (100) (67) Restructuring costs and similar items (364) (627) Other gains and losses, and litigation Operating income Financial expenses Financial income Income before tax and associates and joint ventures Income tax expense Share of profit/(loss) of associates and joint ventures Net income excluding the exchanged/held-for-exchange Animal Health business Net income/(loss) of the exchanged/held-for-exchange Animal Health business Net income Net income attributable to non-controlling interests Net income Attributable to equity holders of Sanofi (7) 3,076 — 17.8% 2,590 (218) (241) 95 50 2,953 17.1% 2,399 (610) (497) 38 98 2,381 13.8% 2,000 4,421 286 6,802 2,286 64 41 6,738 38.9% 2,245 Average number of shares outstanding (million) 1,260.3 1,287.6 Average number of shares outstanding after dilution (million) 1,270.6 1,296.6 – Basic earnings per share (in euros) 5.35 1.74 – Basic earnings per share excluding the exchanged/held-for-exchange Animal Health business (in euros) 1.84 1.52 – Diluted earnings per share (in euros) 5.30 1.73 – Diluted earnings per share excluding the exchanged/held-for-exchange Animal Health business (in euros) 1.82 1.51 16.3% 15.1% 12.6% 14.1% (a) The results of the Animal Health business for 2016, and the gain on the divestment of that business in 2017, are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations); see Note B.21. 42 Sanofi  2017 Half-Year Financial Report C.2. SEGMENT INFORMATION C.2.1. Operating segments 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 chief operating decision maker. The performance of those segments is monitored individually using internal reports and common indicators. The operating segment disclosures required under IFRS 8 are provided in Note B.20. to the condensed half-year consolidated financial statements. Sanofi has two operating segments: Pharmaceuticals and Human Vaccines (Vaccines). The Pharmaceuticals segment comprises the commercial operations of the following franchises: Specialty Care (Rare Diseases, Multiple Sclerosis, Oncology), Diabetes & Cardiovascular, Established Prescription Products, Consumer Healthcare, and Generics, and dedicated research and development, production and marketing activities for all of Sanofi’s pharmaceuticals operations. This segment also includes all associates whose activities are related to pharmaceuticals, in particular Regeneron, Onduo and the entities majority owned by Bristol Myers Squibb (BMS). The Vaccines segment is wholly dedicated to vaccines and includes the commercial operations of Sanofi Pasteur and dedicated research and development, production and marketing activities for Sanofi’s vaccines operations. This segment included the Sanofi Pasteur MSD joint venture until December 30, 2016, the date on which the joint venture ended. Each segment includes global support function costs as allocated for internal reporting purposes within Sanofi. The “Other” segment includes all activities that do not qualify as reportable segments under IFRS 8. This segment includes the effects of retained commitments in respect of divested activities. Inter-segment transactions are not material. C.2.2. Business operating income We report segment results on the basis of “business operating income”. This indicator is used internally by the chief operating decision maker to measure the performance of each operating segment and to allocate resources. For a definition of “business operating income”, and a reconciliation between that indicator and Income before tax and associates and joint ventures, refer to Note B.20.1 to our condensed half-year consolidated financial statements. C.2.3. Business net income We believe that understanding of our operational performance by our management and our investors is 1 enhanced by reporting “business net income”. This non-GAAP financial measure represents business operating income, less net financial expenses and the relevant income tax effects. For the six months ended June 30, 2016 and the year ended December 31, 2016, “Business net income” consists of (i) “Business net income excluding Animal Health”, determined as described above, and (ii) “Animal Health business net income”, determined on a similar and comparable basis. 1 Refer to the appendix in section F for a definition. 2017 Half-Year Financial Report  Sanofi 43 The table below reconciles our business operating income to our business net income: (€ million) Business operating income June 30, 2017 (6 months) 4,741 June 30, 2016 (6 months) 4,216 December 31, 2016 (12 months) 9,285 (123) (191) (399) (1,127) (922) (2,054) 3,491 3,103 6,832 — 299 476 3,491 3,402 7,308 Financial income and expenses (a) Income tax expense Business net income excluding Animal Health Animal Health business net income Business net income (a) For 2016, this line does not include the €457 million impairment loss charged against Sanofi’s equity investment in Alnylam. The table below reconciles our business net income to Net income attributable to equity holders of Sanofi: (€ million) Net income attributable to equity holders of Sanofi Amortization of intangible assets (b) Impairment of intangible assets June 30,(a) 2017 (6 months) 6,738 June 30,(a) 2016 (6 months) 2,245 December 31,(a) 2016 (12 months) 4,709 990 877 1,692 12 52 192 Fair value remeasurement of contingent consideration 100 67 135 Expenses arising from the impact of acquisitions on inventories 176 — — Restructuring costs and similar items 364 627 879 Impairment loss charged against the equity investment in Alnylam — — 457 Other gains and losses, and litigation (c) 7 — (211) Tax effects of the items listed above (d): (628) (548) (841) (345) (307) (647) amortization of intangible assets (4) (16) (47) fair value remeasurement of contingent consideration (31) (15) (24) expenses arising from the impact of acquisitions on inventories (56) — — (126) (210) (95) (66) — (28) 111 113 113 (1) (9) (22) 43 (54) (9) (4,421) 13 162 impairment of intangible assets restructuring costs and similar expenses other tax effects Other tax items Share of items listed above attributable to non-controlling interests Associates and joint ventures: restructuring costs and expenses arising from the impact of acquisitions Items relating to the Animal Health business (e) Other Sanofi Pasteur MSD items (f) Business net income — 19 52 3,491 3,402 7,308 (a) The results of the Animal Health business for 2016, and the gain arising on the divestment of that business in 2017, are presented separately in accordance with IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations). (b) Includes amortization expense generated by the remeasurement of intangible assets in connection with business combinations: €919 million in the first half of 2017 and €809 million in the first half of 2016. (c) This line comprises (i) for the first half of 2017, the separation costs associated with the process of disinvesting from the Generics business in Europe, before tax effects and (ii) for 2016, the pre-tax gain on the divestment of Sanofi’s interest in the Sanofi Pasteur MSD joint venture. (d) For the year ended December 31, 2016, this line includes the impact on deferred tax assets and liabilities arising from the reconciling items (in particular amortization and impairment of intangible assets, and restructuring costs) as a result of changes in tax rates, mainly in France (28% standard rate effective as of January 1, 2020) and in Japan. (e) For 2017, this line shows the gains arising on the divestment of the Animal Health business. For 2016, this line shows the elimination of (i) the impact of the discontinuation of depreciation and impairment of property, plant & equipment with effect from the start date of IFRS 5 application; (ii) the impact of the amortization and impairment of intangible assets until the start date of IFRS 5 application; (iii) costs directly incurred as a result of the divestment; and (iv) tax effects of those items. (f) For 2016, this line shows the elimination of Sanofi’s share of the business net income of Sanofi Pasteur MSD from the date when Sanofi and MSD announced their intention to end their joint venture. 44 Sanofi  2017 Half-Year Financial Report C.3. ANALYSIS OF CONSOLIDATED RESULTS FOR THE FIRST HALF OF 2017 C.3.1. Net sales Consolidated net sales for the first half of 2017 amounted to €17,311 million, 8.7% higher than in the first half of 2016. Exchange rate fluctuations had a positive effect of 1.7 percentage points overall; the favorable trends in the euro rate against the US dollar and Brazilian real outweighed unfavorable trends in the Egyptian pound, 1 the Turkish lira and the pound sterling. At constant exchange rates (CER) , net sales were up 7.0%, reflecting the acquisition of BI’s Consumer Healthcare business and the first-time consolidation of Sanofi’s European 1 Vaccines business. At constant exchange rates and on a constant structure basis , net sales rose by 2.0%. Analysis of impact on net sales of changes in structure June 30, 2016 (6 months) 689 97 786 (8) 778 (€ million) BI Consumer Healthcare net sales (a) Net sales effect of first-time consolidation of European vaccines business (SPMSD)(a) Total impact of BI and SPMSD Other items Total impact on net sales of changes in structure (a) Based on an unaudited sales estimate. Reconciliation of net sales to net sales at constant exchange rates and on a constant structure basis: (€ million) Net sales Effect of exchange rates Net sales at constant exchange rates Impact of changes in structure Net sales at constant exchange rates and on a constant structure basis June 30, 2017 (6 months) 17,311 (270) 17,041 17,041 June 30, 2016 (6 months) 15,926 15,926 778 16,704 Change +8.7% +7.0% +2.0% 1 Refer to the appendix in section F for a definition. 2017 Half-Year Financial Report  Sanofi 45 C.3.1.1. Net sales by business segment Our net sales comprise the net sales generated by our Pharmaceuticals and Human Vaccines (Vaccines) segments. June 30, 2017 (6 months) 15,511 1,800 17,311 (€ million) Pharmaceuticals Vaccines Net sales June 30, 2016 (6 months) 14,504 1,422 15,926 Change +6.9% +26.6% +8.7% C.3.1.2. Net Sales by Global Business Unit (GBU) The table below presents net sales for our Global Business Units (GBUs), reflecting the new structure intended to streamline our organization, sharpen our focus and concentrate our efforts on growth drivers. Within that structure, Emerging Markets sales of Diabetes & Cardiovascular and Specialty Care products are included in the General Medicines & Emerging Markets GBU. Following the creation of the Consumer Healthcare GBU, sales of that GBU’s products (previously included in the General Medicines & Emerging Markets GBU) are presented on a separate line for information purposes. June 30, 2017 (6 months) June 30, 2016 (6 months) Change on a reported basis Change at constant exchange rates 2,818 2,414 +16.7% +14.9% Diabetes & Cardiovascular GBU 2,805 3,102 -9.6% -11.4% General Medicines & Emerging Markets GBU(c)(d) 7,384 7,283 +1.4% +0.5% 2,504 1,705 +46.9% +42.6% 15,511 14,504 +6.9% +5.3% 1,800 1,422 +26.6% +24.5% 17,311 15,926 +8.7% +7.0% (€ million) Sanofi Genzyme GBU(a) (Specialty Care)(b) (a) Consumer Healthcare GBU Total Pharmaceuticals Sanofi Pasteur (Vaccines) GBU Total (a) (b) (c) (d) Does not include Emerging Markets net sales. Rare Diseases, Multiple Sclerosis, Oncology and Immunology. Includes net sales in Emerging Markets of Specialty Care and Diabetes & Cardiovascular products. Emerging Markets: World excluding United States, Canada, Western and Eastern Europe (apart from Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico. 46 Sanofi  2017 Half-Year Financial Report C.3.1.3. Net Sales by Franchise The table below sets forth our 2017 first-half net sales by franchise in order to facilitate direct comparisons with our peers. For a detailed reconciliation of net sales by franchise and net sales by GBU for our Pharmaceuticals segment, refer to the table later in this report showing Pharmaceuticals segment net sales by geographical region. (€ million) Rare Diseases Multiple Sclerosis Oncology Immunology Total Specialty Care of which Developed Markets (Sanofi Genzyme GBU) of which Emerging Markets (a)(b) Diabetes Cardiovascular Total Diabetes & Cardiovascular of which Developed Markets (Diabetes & Cardiovascular GBU) of which Emerging Markets (a)(b) Established Prescription Products (a) Generics(a) Consumer Healthcare (Consumer Healthcare GBU) Total Pharmaceuticals Vaccines (Sanofi Pasteur GBU) Total June 30, 2017 (6 months) 1,464 1,045 795 27 3,331 2,818 513 3,310 257 3,567 2,805 762 5,199 910 2,504 15,511 1,800 17,311 June 30, 2016 (6 months) 1,353 790 721 _ 2,864 2,414 450 3,591 203 3,794 3,102 692 5,208 933 1,705 14,504 1,422 15,926 Change on a reported basis +8.2% +32.3% +10.3% _ +16.3% +16.7% +14.0% -7.8% +26.6% -6.0% -9.6% +10.1% -0.2% -2.5% +46.9% +6.9% +26.6% +8.7% Change at constant exchange rates +6.7% +30.0% +8.6% _ +14.5% +14.9% +12.7% -9.2% +23.2% -7.5% -11.4% +10.4% -0.9% -5.0% +42.6% +5.3% +24.5% +7.0% (a) These items are aggregated to form the General Medicines and Emerging Markets GBU. (b) Emerging Markets: World excluding United States, Canada, Western and Eastern Europe (apart from Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico. C.3.1.4. Pharmaceuticals segment Net sales of the Pharmaceuticals segment were €15,511 million in the first half of 2017, up 6.9% on a reported basis and 5.3% at constant exchange rates. At constant exchange rates and on a constant structure basis, net sales growth was 0.6%. The year-on-year increase of €1,007 million mainly reflects the impact of the acquisition of BI’s Consumer Healthcare business (€689 million) and positive exchange rate effects of €240 million, along with the following effects at constant exchange rates and on a constant structure basis:  higher net sales for the Multiple Sclerosis franchise (+€237 million), the Rare Diseases franchise (+€92 million) and the Oncology franchise (+€62 million), and for Consumer Healthcare (+€57 million);  lower net sales for the Diabetes franchise (-€330 million) and for Established Prescription Products (-€61 million). 2017 Half-Year Financial Report  Sanofi 47 Net sales by product and franchise (€ million) Cerezyme® Cerdelga Indication Gaucher disease ® ® Fabrazyme ® ® Aldurazyme ® 381 -3.1% -3.4% 49 +26.5% +24.5% Pompe disease 393 348 +12.9% +11.5% Fabry disease 367 316 +16.1% +13.6% Mucopolysaccharidosis 109 98 +11.2% +10.2% 164 161 +1.9% -0.6% 1,464 1,353 +8.2% +6.7% Multiple sclerosis 796 594 +34.0% +31.3% Multiple sclerosis 249 196 +27.0% +26.0% 1,045 790 +32.3% +30.0% Total Rare Diseases ® Lemtrada® Sub-total: Multiple sclerosis ® Change at constant exchange rates 62 Other Aubagio Change June 30, on 2016 a reported (6 months) basis 369 Gaucher disease Myozyme /Lumizyme June 30, 2017 (6 months) Jevtana Prostate cancer 197 178 +10.7% +9.0% Thymoglobulin® Organ rejection 148 134 +10.4% +8.2% Taxotere Breast, lung, prostate, stomach, and head & neck cancers 91 92 -1.1% -2.2% Eloxatin® Colorectal cancer 90 86 +4.7% +3.5% Mozobil® Hematologic malignancies 80 72 +11.1% +9.7% Zaltrap® Colorectal cancer 34 34 0.0% 0.0% 155 125 +24.0% +21.6% 795 721 +10.3% +8.6% 26 _ _ _ 1 _ _ _ 27 _ _ _ 3,331 2,864 +16.3% +14.5% ® Other Total Oncology Dupixent® Atopic dermatitis Kevzara® Rheumatoid arthritis Total Immunology Total Specialty Care Lantus® Diabetes 2,423 2,860 -15.3% -16.7% Toujeo® Diabetes 402 244 +64.8% +59.8% Apidra® Diabetes 191 178 +7.3% +5.6% Amaryl® Diabetes 174 181 -3.9% 0.0% Insuman® Diabetes 55 66 -16.7% -15.2% Blood glucose meters Diabetes 33 34 -2.9% -2.9% Lyxumia® Diabetes 14 17 -17.6% -17.6% Soliqua ® Diabetes 9 _ _ _ Tofogliflozin Diabetes 9 7 +28.6% +28.6% Other Diabetes Total Diabetes Multaq® Atrial fibrillation Praluent® Hypercholesterolemia Total Cardiovascular Total Diabetes & Cardiovascular _ 4 N/A N/A 3,310 3,591 -7.8% -9.2% 181 170 +6.5% +3.5% 76 33 +130.3% +124.2% 257 203 +26.6% +23.2% 3,567 3,794 -6.0% -7.5% -0.1% Lovenox® Thrombosis 817 818 -0.1% Plavix® Atherothrombosis 765 780 -1.9% -1.0% Renagel®/Renvela® Hyperphosphatemia 494 442 +11.8% +9.0% Aprovel® / Avapro® Hypertension 383 344 +11.3% +11.0% Depakine® Epilepsy 221 206 +7.3% +8.3% Synvisc® / Synvisc-One® Arthritis 206 197 +4.6% +2.0% Allegra® Allergic rhinitis, urticaria 102 114 -10.5% -13.2% Stilnox®/Ambien®/Myslee® Sleep disorders 137 148 -7.4% -10.8% Tritace® Hypertension 124 125 -0.8% +0.8% Targocid® Bacterial infections 72 75 -4.0% -4.0% Lasix® Edema, hypertension 71 77 -7.8% -7.8% 1,807 1,882 -4.0% -5.1% 5,199 5,208 -0.2% -0.9% 910 933 -2.5% -5.0% Consumer Healthcare 2,504 1,705 +46.9% +42.6% Total Pharmaceuticals 15,511 14,504 +6.9% +5.3% Other Total: established prescription products Generics 48 Sanofi  2017 Half-Year Financial Report Rare Diseases franchise Net sales for the Rare Diseases franchise reached €1,464 million in the first half of 2017, up 8.2% on a reported basis and 6.7% at constant exchange rates, reflecting an increase in the number of patients treated worldwide. ® In Gaucher disease, net sales of Cerezyme fell by 3.4% at constant exchange rates (CER) to €369 million, 1 2 as sales decreased in Emerging Markets (-7.1% CER, at €116 million), the Rest of the World region (-12.5% 3 ® CER, at €22 million) and in Europe (-1.4% CER, at €139 million) following the launch of Cerdelga . ® Cerdelga reported net sales of €62 million (+24.5% CER), of which €48 million (+20.5% CER) were generated in the United States. In Europe, net sales rose by 37.5% CER to €11 million, while in the Rest of ® the World region (where Cerdelga is now available in Japan) net sales of the product were up 50.0% CER at €3 million. ® ® Net sales of Myozyme /Lumizyme rose by 11.5% CER to €393 million, driven by sales in the United States (+15.9% CER, at €135 million) and Europe (+5.5% CER, at €169 million). In Emerging Markets, sales were up 23.9% CER at €60 million. This growth reflects the rising number of patients diagnosed with, and treated for, Pompe disease. ® Fabrazyme posted net sales growth of 13.6% CER to €367 million. Sales are advancing in many countries due to the rising number of patients diagnosed with, and treated for, Fabry disease. The product saw sales growth in the United States (+11.6% CER, at €189 million), Emerging Markets (+48.1% CER, at €43 million), the Rest of the World region (+12.5% CER, at €54 million) and in Europe (+6.5% CER, at €81 million). Multiple Sclerosis franchise Net sales for the Multiple Sclerosis franchise reached €1,045 million in the first half of 2017, up 32.3% on a ® ® reported basis and 30.0% at constant exchange rates, on strong performances by Aubagio and Lemtrada in the United States and Europe. ® Aubagio posted net sales of €796 million in the first half of 2017, up 31.3% CER, driven by the United States (+30.7% CER, at €544 million) and Europe (+33.1% CER, at €205 million). The product accounted for 9.0% of total prescriptions in the United States in the first quarter of 2017, rising to 9.3% in the second quarter (source: IMS NPA TRX – Q1 & Q2 2017). ® Net sales of Lemtrada totaled €249 million (+26.0% CER) in the first half of 2017, including €130 million in the United States (+23.5% CER) and €92 million in Europe (+26.7% CER). Oncology franchise The Oncology franchise generated net sales of €795 million, up 10.3% on a reported basis and 8.6% at ® constant exchange rates, thanks largely to public-sector orders for Leukine in the United States, a good ® performance for the franchise in Emerging Markets, and overall growth in sales of Jevtana and ® Thymoglobulin . ® Jevtana achieved net sales of €197 million in the first half of 2017, up 9.0% CER, reflecting sales growth in Japan (+21.1% CER, at €23 million), Europe (+5.6% CER, at €75 million), the United States (+4.0% CER, at €81 million) and Emerging Markets (+27.3% CER, at €15 million). ® Net sales of Thymoglobulin rose by 8.2% CER to €148 million, on good performances in the United States (+7.9% CER, at €85 million) and in Emerging Markets (+18.5% CER, at €32 million). ® Taxotere saw net sales fall by 2.2% CER to €91 million, mainly on the impact of competition from generics in Japan (-46.7% CER, at €8 million), though the effect was partly offset by stronger sales in Emerging Markets (+10.9% CER, at €70 million) and especially in China (+17.2% CER, at €33 million). ® Net sales of Eloxatin rose by 3.5% CER to €90 million. This reflects stronger sales in Emerging Markets (+12.1% CER, at €73 million), especially in China (+10.6% CER, at €51 million), which more than offset a slump in Canadian sales due to competition from generics. 1 World excluding United States, Canada, Western and Eastern Europe (apart from Russia, Ukraine, Georgia, Belarus, Armenia and Turkey), Japan, South Korea, Australia, New Zealand and Puerto Rico. 2 Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. 3 Western Europe and Eastern Europe excluding Eurasia (Russia, Ukraine, Georgia, Belarus, Armenia and Turkey). 2017 Half-Year Financial Report  Sanofi 49 Immunology franchise ® Dupixent (dupilumab, developed in collaboration with Regeneron), a major scientific breakthrough in the treatment of adults with moderate to severe atopic dermatitis, was approved by the US Food and Drug Administration on March 28, 2017 and made available in the US market. In just a few months, the product achieved net sales of €26 million, driven by significant unmet medical need and rapid access to the market. In ® Europe, Dupixent received a positive opinion from the CHMP of the EMA on July 21, 2017. ® Kevzara (sarilumab, developed in collaboration with Regeneron), a treatment for rheumatoid arthritis, was approved by the FDA on May 22, 2017 and made available in the US market, where it has already generated €1 million of net sales. Diabetes franchise Net sales for the Diabetes franchise amounted to €3,310 million in the first half of 2017, down 7.8% on a ® reported basis and 9.2% at constant exchange rates. The main factor was a fall in sales of Lantus in the United States, where Diabetes franchise sales were down 19.1% CER at €1,653 million. We expect the decline in Diabetes franchise sales in the United States to accelerate over the remainder of the year, mainly due to exclusion from the commercial formularies of two of the country’s leading healthcare providers: United Healthcare (from April 1, 2017) and CVS. Outside the United States, Diabetes franchise net sales also fell in Europe (-3.0% CER, at €651 million), but advanced in Emerging Markets (+10.2% CER, at €756 million). ® ® Net sales of insulin glargines (Lantus and Toujeo ) fell by 10.7% CER to €2,825 million. ® Net sales of Lantus fell by 16.7% CER in the first half to €2,423 million. In the United States, sales were down 24.6% CER at €1,350 million, due mainly to a lower average net price, the switching of patients to ® Toujeo , and the effect of exclusions from commercial formularies as described above. Net sales in Europe ® fell by 14.4% CER to €393 million, due largely to the launch of a biosimilar of Lantus and the switching of ® patients to Toujeo . In Emerging Markets, sales were up 7.5% CER at €515 million. ® Toujeo , a new-generation basal insulin, posted net sales of €402 million in the first half of 2017, including €237 million in the United States and €100 million in Europe. ® Net sales of Amaryl were stable CER at €174 million, reflecting growth in Emerging Markets (+2.8% CER, at €142 million) but also a weaker performance in Europe (-31.3% CER, at €11 million). ® First-half net sales of Apidra rose by 5.6% to €191 million. Lower sales in the United States (-1.8% CER, at €56 million) were compensated for by sales growth in Europe (+6.3% CER, at €67 million) and Emerging Markets (+17.5% CER, at €47 million). ® 1 Soliqua 100/33 (injectable insulin glargine 100 units/ml and lixisenatide 33 mcg/ml combination ) has been ® available in the United States since January 2017. Net sales of Soliqua 100/33 reached €9 million in the first half of 2017. Cardiovascular franchise ® In the first half of 2017, net sales of Praluent (alirocumab, developed in collaboration with Regeneron) reached €76 million, of which €53 million was generated in the United States and €19 million in Europe. The relatively limited rise in sales during the period reflects significant restrictions by US payers and restricted ® access to the European market (for further information about ongoing Praluent litigation, see Note B.14. to the condensed half-year consolidated financial statements). ® Net sales of Multaq reached €181 million (+3.5% CER), of which €154 million was generated in the United States (+4.2% CER). 1 Lixisenatide was in-licensed from Zealand Pharma A/S. 50 Sanofi  2017 Half-Year Financial Report Established Prescription Products Net sales of Established Prescription Products in the first half of 2017 amounted to €5,199 million, down 0.2% on a reported basis and 0.9% at constant exchange rates. This reflects a solid performance in Emerging Markets (+5.8% CER, at €1,973 million), but weaker sales in Europe (-4.2% CER, at €1,788 million) and ® reduced sales of Plavix in Japan. In the United States, Established Prescription Products net sales were down 1.9% CER at €750 million. ® Net sales of Lovenox in the first half of 2017 were stable at €817 million. Stronger sales in Emerging Markets (+11.9% CER, at €243 million) offset a drop in sales in Europe (-4.4% CER, at €500 million) reflecting ® competition from biosimilars containing enoxaparin sodium. Net sales of Lovenox also fell in the Rest of the World region (-6.4% CER, at €45 million) and in the United States (-3.4% CER, at €29 million). ® Net sales of Plavix in the first half of 2017 were €765 million, a drop of 1.0% CER, reflecting competition from generics in Japan (-32.4% CER, at €128 million) and Europe (-8.2% CER, at €78 million), although the effect was partly offset by another strong performance in Emerging Markets (+11.8% CER, at €528 million), ® especially China (+13.8%, at €390 million). Sales of Plavix in the United States and Puerto Rico are handled 1 by BMS under the terms of the Sanofi-BMS alliance . ® ® First-half 2017 net sales of Renvela /Renagel were up 9.0% CER at €494 million. The main growth driver was the sales performance in the United States (+11.0% CER, at €416 million), where the first generics of the product were authorized in powder form in June 2017 and in tablet form in July 2017. Generics of this product ® ® are now being sold in some European countries, as a result of which net sales of Renvela /Renagel in Europe slipped by 14.0% to €37 million. ® ® First-half 2017 net sales of Aprovel /Avapro reached €383 million, up 11.0% CER, largely on sales growth in the Rest of the World region (+45.9% CER, at €91 million) and Emerging Markets (+7.6% CER, at ® ® €226 million). In Europe, sales of Aprovel /Avapro were down 9.1% at €60 million. Generics Net sales of Generics for the first half of 2017 totaled €910 million, down 2.5% on a reported basis and 5.0% at constant exchange rates. Emerging Markets generated net sales of €389 million, down 3.7% CER, due mainly to the divestment of a distribution business in China and the timing of sales in Latin America. Sales of generics also fell in Europe (5.3% CER, at €388 million) and the United States (-28.7% CER, at €69 million). These negative effects were partly offset by stronger sales in the Rest of the World region (+34.8% CER, at €64 million). In line with our “Strategic Roadmap 2020”, we have been examining all options for our Generics business in Europe, and have committed to a phased withdrawal from this business that we expect to be complete by the end of 2018. We have however reiterated our commitment to our Generics business in other parts of the world, and will sharpen our focus on Emerging Markets. 1 See Note C.2 to our consolidated financial statements for the year ended December 31, 2016, on page F-32 of our Annual Report on Form 20-F; this document is available on our corporate website, www.sanofi.com. 2017 Half-Year Financial Report  Sanofi 51 Consumer Healthcare Net sales of Consumer Healthcare products reached €2,504 million in the first half of 2017, up 46.9% on a reported basis and 42.6% at constant exchange rates, reflecting the acquisition of BI’s Consumer Healthcare business on January 1, 2017. On a constant structure basis and at constant exchange rates, Consumer Healthcare net sales rose by 2.4%. (€ million) Allegra® Mucosolvan® Other Allergy, cough and cold Doliprane® Buscopan® Other Pain relief Dulcolax® Enterogermina® Essentiale® Zantac® Other Digestive Health Pharmaton® Other Food supplements Gold Bond® Other Other products Total Consumer Healthcare June 30, 2017 (6 months) June 30, 2016 (6 months) Change on a reported basis Change at constant exchange rates 251 53 365 669 156 80 385 621 103 89 75 57 144 468 48 286 334 100 312 412 2,504 237 — 193 430 154 — 275 429 — 85 71 — 112 268 — 220 220 94 264 358 1,705 +5.9% — +89.1% +55.6% +1.3% — +40.0% +44.8% — +4.7% +5.6% — +28.6% +74.6% — +30.0% +51.8% +6.4% +18.2% +15.1% +46.9% +2.1% — +86.5% +52.1% +1.9% — +33.5% +40.8% — +3.5% -2.8% — +25.0% +69.4% — +23.2% +45.0% +3.2% +14.8% +11.7% +42.6% In Emerging Markets, net sales for the Consumer Health Care business rose by 27.2% at constant exchange rates in the first half of 2017 to €805 million. On a constant structure basis and at constant exchange rates (CS/CER), net sales rose by 3.0%, driven by growth for Allergy, Cough and Cold (+8.5% CS/CER, at €170 million) and Pain Relief (+3.0% CS/CER, at €219 million), though the effect was mitigated by lower sales in Digestive Health (-1.7% CS/CER, at €185 million). In Europe, net sales rose by 57.1% CER to €714 million. On a constant structure basis and at constant exchange rates, net sales were up 1.6%, propelled by growth for Allergy, Cough and Cold (+5.7% CS/CER, at €166 million) and Pain Relief (+2.4% CS/CER, at €252 million), which more than offset lower sales in Digestive Health (-1.2% CS/CER, at €161 million) and Food Supplements (-4.5% CS/CER, at €63 million). In the United States, net sales advanced by 21.1% CER to €641 million. On a constant structure basis and at ® constant exchange rates, net sales rose by 2.5%, largely as a result of the launch of Xyzal Allergy 24HR (net sales of €51 million), which was authorized for OTC sale in February 2017. Higher sales for Allergy, Cough and Cold (+13.0% CS/CER, at €242 million) and Pain Relief (+13.0% CS/CER, at €90 million) more than offset lower sales in Digestive Health (-14.2% CS/CER, at €94 million). In the Rest of the World region, first-half Consumer Healthcare net sales were €344 million, up 142.3% CER. On a constant structure basis and at constant exchange rates, net sales rose by 2.8%, driven by Digestive Health (+21.7% CS/CER, at €28 million) and Pain Relief (+3.6% CS/CER, at €60 million). 52 Sanofi  2017 Half-Year Financial Report 2017 first-half Pharmaceuticals net sales by geographical region (€ million) Cerezyme® Cerdelga® Myozyme®/Lumizyme® Fabrazyme® Aldurazyme® Other Total Rare Diseases Aubagio® Lemtrada® Sub-total: Multiple Sclerosis Jevtana® Thymoglobulin® Taxotere® Eloxatin® Mozobil® Zaltrap® Other Total Oncology Dupixent® Kevzara® Total Immunology Sanofi Genzyme (Specialty Care) Lantus® Toujeo® Apidra® Amaryl® Insuman® Blood glucose meters Lyxumia® Soliqua® Tofogliflozin Other Total Diabetes Multaq® Praluent® Total Cardiovascular Total Diabetes & Cardiovascular Lovenox® Plavix® Renagel®/Renvela® Aprovel®/CoAprovel® Depakine® Synvisc® / Synvisc-One® Allegra® Stilnox®/Ambien®/ Myslee® Tritace® Targocid® Lasix® Other Total Established Prescription Products Generics Total Emerging Markets Specialty Care Total Emerging Markets Diabetes & Cardiovascular General Medicines & Emerging Markets Allergy, cough and cold Pain relief Digestive health Food supplements Consumer Healthcare Total Pharmaceuticals Total GBUs Europe(a) Change at CER United States Change at CER 253 62 333 324 72 143 1,187 777 238 139 11 169 81 38 35 473 205 92 -1.4% +37.5% +5.5% +6.5% — -2.8% +3.0% +33.1% +26.7% 92 48 135 189 22 61 547 544 130 +1.1% +20.5% +15.9% +11.6% — — +9.5% +30.7% +23.5% Rest of the world(b) 22 3 29 54 12 47 167 28 16 1,015 297 +31.0% 674 +29.2% 182 116 21 17 77 30 146 589 26 1 27 75 20 2 2 22 26 27 174 — — — +5.6% — — — +4.8% +8.3% +7.7% +5.4% — — — 81 85 1 — 49 4 109 329 26 1 27 +4.0% +7.9% -50.0% — +6.8% -42.9% +30.9% +11.6% — — — 2,818 944 +10.9% 1,577 1,908 367 144 32 41 32 13 9 9 -1 2,554 177 74 251 393 100 67 11 40 32 8 — — — 651 22 19 41 -14.4% +117.4% +6.3% -31.3% -7.0% -3.0% -18.2% — — — -3.0% -4.3% +216.7% +41.4% 2,805 692 817 765 494 383 221 206 102 500 78 37 60 81 17 6 137 124 72 71 1,807 Change at CER Emerging Markets(c) Change at CER Total Franchise Change at CER -12.5% +50.0% +7.7% +12.5% — -2.2% +3.2% +35.0% +45.5% 116 — 60 43 37 21 277 19 11 -7.1% — +23.9% +48.1% +37.0% +5.3% +10.6% +25.0% +25.0% 369 62 393 367 109 164 1,464 796 249 -3.4% +24.5% +11.5% +13.6% +10.2% -0.6% +6.7% +31.3% +26.0% 44 +38.7% 30 +25.0% 1,045 +30.0% 26 11 18 15 6 — 10 86 — — — +28.6% — -33.3% -27.8% +133.3% -100.0% -9.1% -5.6% — — — 15 32 70 73 3 4 9 206 — — — +27.3% +18.5% +10.9% +12.1% -25.0% +100.0% +14.3% +13.8% — — — 197 148 91 90 80 34 155 795 26 1 27 +9.0% +8.2% -2.2% +3.5% +9.7% — +21.6% +8.6% — — — +19.8% 297 +4.3% 513 +12.7% 3,331 +14.5% 1,350 237 56 1 1 — — 9 — -1 1,653 154 53 207 -24.6% +25.0% -1.8% — — — — — — -133.3% -19.1% +4.2% +92.6% +18.2% 165 30 21 20 — — 5 — 9 — 250 1 2 3 515 35 47 142 14 1 1 — — 1 756 4 2 6 +7.5% +3000.0% +17.5% +2.8% -31.8% — -50.0% — — — +10.2% — — +66.7% 2,423 402 191 174 55 33 14 9 9 — 3,310 181 76 257 -16.7% +59.8% +5.6% — -15.2% -2.9% -17.6% — +28.6% — -9.2% +3.5% +124.2% +23.2% -1.1% 1,860 -16.1% 253 — 762 +10.4% 3,567 -7.5% -4.4% -8.2% -14.0% -9.1% +1.2% — +20.0% 29 — 416 6 — 158 — -3.4% -100.0% +11.0% — — +2.0% — 45 159 19 91 6 8 96 -6.4% -27.0% +26.7% +45.9% — +14.3% -14.7% 243 528 22 226 134 23 — +11.9% +11.8% +10.0% +7.6% +13.6% — — 817 765 494 383 221 206 102 -0.1% -1.0% +9.0% +11.0% +8.3% +2.0% -13.2% 20 -9.1% 28 -30.8% 57 -8.3% 32 +11.1% 137 -10.8% 78 35 37 839 -2.5% -10.3% -2.6% -3.4% — — — 113 — — — -27.9% 2 3 6 196 +50.0% — -58.3% -3.7% 44 34 28 659 +4.5% +3.0% +7.4% -2.4% 124 72 71 1,807 +0.8% -4.0% -7.8% -5.1% 5,199 1,788 -4.2% 750 -1.9% 688 -8.4% 1,973 +5.8% 5,199 -0.9% 910 388 -5.3% 69 -28.7% 64 +34.8% 910 -5.0% -11.2% +123.1% — +5.3% — -100.0% — — — +28.6% — — — -0.8% +100.0% — +200.0% 389 -3.7% 513 513 +12.7% 762 762 +10.4% 7,384 2,176 -4.4% 819 -4.9% 752 -5.8% 3,637 +6.6% 669 621 468 334 2,504 166 252 161 63 714 +163.5% +33.9% +62.6% +23.5% +57.1% 242 90 94 2 641 +13.0% +13.0% +550.0% — +21.1% 91 60 28 129 344 +166.7% +625.0% +1300.0% +65.3% +142.3% 170 219 185 140 805 +30.7% +32.9% +13.7% +41.3% +27.2% 669 621 468 334 2,504 +52.1% +40.8% +69.4% +45.0% +42.6% 15,511 4,526 +5.7% 4,897 -0.6% 1,646 +11.3% 4,442 +9.7% 15,511 +5.3% (a) Western Europe and Eastern Europe excluding Eurasia (Russia, Ukraine, Georgia, Belarus, Armenia and Turkey). (b) Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. (c) World excluding United States, Canada, Western and Eastern Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. 2017 Half-Year Financial Report  Sanofi 53 C.3.1.5. Human Vaccines (Vaccines) Segment In the first half of 2017, net sales for the Vaccines segment were €1,800 million, up 26.6% on a reported basis and 24.5% at constant exchange rates, reflecting the ending of the Sanofi Pasteur MSD (SPMSD) joint venture in Europe. On a constant structure basis and at constant exchange rates, Vaccines net sales rose by 16.5%, driven mainly by the performance of the Polio/Pertussis/Hib franchise across all geographical regions. In the United States, Vaccines net sales increased by 13.0% CER to €665 million. Net sales for the Vaccines segment in Emerging Markets were up 17.3% CER at €730 million. In Europe, Vaccines net sales reached €235 million (+126.7% CER, reflecting the ending of the SPMSD joint venture). On a constant structure basis and at constant exchange rates, Vaccines net sales in Europe advanced by 18.4%. (€ million) Polio/Pertussis/Hib Vaccines (including Pentacel®, Pentaxim® & Imovax®) Meningitis/Pneumonia Vaccines (including Menactra®) Travel and Other Endemics Vaccines Adult Booster Vaccines (including Adacel®) Influenza Vaccines (including Vaxigrip® & Fluzone®) Dengvaxia® Other vaccines Total Vaccines June 30, 2017 (6 months) 901 290 219 194 136 18 42 1,800 June 30, 2016 (6 months) 627 261 184 184 116 20 30 1,422 Change on a reported basis +43.7% +11.1% +19.0% +5.4% +17.2% -10.0% +40.0% +26.6% Change at constant exchange rates +41.3% +8.8% +17.4% +4.3% +14.7% -5.0% +33.3% +24.5% Polio/Pertussis/Hib vaccines posted 2017 first-half net sales of €901 million, up 41.3% CER. On a constant structure basis and at constant exchange rates, net sales for this franchise were up 34.4% on the resumption ® of normal supply levels of Pentacel , the timing of orders from the US Centers for Disease Control and ® Prevention (CDC), and increased deliveries of batches of Pentaxim in China. Net sales of Meningitis/Pneumonia vaccines totaled €290 million, up 8.8% CER, due mainly to trends in ® orders for Menactra from the CDC in the United States and increased sales in Australia following an outbreak of meningitis. Travel and Other Endemics vaccines posted a 17.4% rise in net sales to €219 million in the first half of 2017. On a constant structure basis and at constant exchange rates, net sales rose by 3.8%. First-half 2017 net sales of Adult Booster vaccines were €194 million, up 4.3% CER. On a constant structure basis and at constant exchange rates, net sales were down 13.9% due to supply chain issues for ® Repevax in Europe. Net sales of Influenza vaccines advanced by 14.7% CER to €136 million, largely on sales growth in Brazil. ® Net sales of Dengvaxia for the first half of 2017 were down 5.0% CER at €18 million, reflecting the end of the public vaccination program initiated in the Philippines in early 2016. 54 Sanofi  2017 Half-Year Financial Report 2017 first-half Vaccines net sales by geographical region (€ million) Polio/Pertussis/Hib Vaccines (including Pentacel®, Pentaxim® & Imovax®) Meningitis/Pneumonia Vaccines (including Menactra®) Adult Booster Vaccines (including Adacel®) Travel and Other Endemics Vaccines Influenza Vaccines (including Vaxigrip® & Fluzone®) Dengvaxia® Other vaccines Total Vaccines Europe (a) Change at CER United States Change at CER Rest of the world (b) Change at CER 140 +143.1% 219 +43.9% 83 +27.0% 459 +26.3% 1 -66.7% 219 +5.4% 22 +162.5% 48 +2.2% 46 +84.6% 121 -7.1% 13 — 14 -27.8% 43 +175.0% 71 — 28 +21.7% 77 -1.3% — -100.0% 3 — 19 -5.0% 114 +20.7% — 5 235 — +300.0% +126.7% — 32 665 — +33.3% +13.0% — 5 170 — — +26.2% 18 — 730 -5.0% -50.0% +17.3% Emerging Change Markets (c) at CER (a) Western Europe and Eastern Europe excluding Eurasia (Russia, Ukraine, Georgia, Belarus, Armenia and Turkey). (b) Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. (c) World excluding United States, Canada, Western and Eastern Europe (apart from Eurasia), Japan, South Korea, Australia, New Zealand and Puerto Rico. C.3.1.6. Net Sales by Geographical Region (€ million) United States Emerging Markets(a) of which Asia (including South Asia(b)) of which Latin America of which Africa and Middle East of which Eurasia (c) Europe (d) Rest of the world (e) of which Japan of which South Korea Total net sales June 30, 2017 (6 months) June 30, 2016 (6 months) Change on a reported basis Change at constant exchange rates 5,562 5,172 1,917 1,405 1,172 610 4,761 1,816 1,001 211 5,356 4,599 1,700 1,146 1,170 515 4,412 1,559 850 170 +3.8% +12.5% +12.8% +22.6% +0.2% +18.4% +7.9% +16.5% +17.8% +24.1% +0.9% +10.7% +12.6% +13.9% +3.2% +16.1% +8.6% +12.6% +14.9% +17.1% 17,311 15,926 +8.7% +7.0% (a) World excluding United States, Canada, Europe, Japan, South Korea, Australia, New Zealand and Puerto Rico. (b) India, Bangladesh and Sri Lanka. In 2016, South Asia was included in the Africa, Middle East and South Asia region. The presentation of 2016 net sales has been amended accordingly in the interests of comparability. (c) Russia, Ukraine, Georgia, Belarus, Armenia and Turkey. (d) Western Europe and Eastern Europe (excluding Eurasia). (e) Japan, South Korea, Canada, Australia, New Zealand and Puerto Rico. In the United States, 2017 first-half net sales were up slightly year-on-year at €5,562 million (+0.9% CER). Solid performances from the Specialty Care franchise (+19.8% CER at €1,577 million), Vaccines (+13.0% CER, at €665 million) and Consumer Healthcare (+21.1% CER, +2.5% CS/CER, at €641 million) offset a 19.1% drop in net sales for the Diabetes franchise to €1,653 million. In Emerging Markets, net sales reached €5,172 million (+10.7% CER). Good performances from Vaccines (+17.3% CER, at €730 million), the Specialty Care franchise (+12.7% CER, at €513 million), Diabetes (+10.2% CER, at €756 million) and Established Prescription Products (+5.8% CER, at €1,973 million) outweighed lower sales of Generics (-3.7% CER, at €389 million). In Asia, 2017 first-half net sales rose by 12.6% CER to €1,917 million, driven by a good performance in China (+17.1% CS/CER, at €1,147 million). In Latin America, net sales were €1,405 million, up 13.9% CER, with strong growth in Argentina (+38.4% CER) and Brazil (+11.1% CER). The Africa and Middle East region posted 2017 first-half net sales of €1,172 million, up 3.2% CER, as fine performances in Egypt (+39.3% CER) and South Africa (+14.7% CER) more than compensated for lower sales in Saudi Arabia (-31.6% CER) and Morocco (-9.3% CER). Net sales in the Eurasia region advanced by 16.1% CER to €610 million, the strongest performers being Turkey (+17.3% CER) and Russia (+16.7% CER). 2017 Half-Year Financial Report  Sanofi 55 In Europe, net sales for the first half of 2017 were €4,761 million, up 8.6% CER and up 0.4% on a constant structure basis. Sales growth for the Specialty Care franchise (+10.9% CER), Vaccines (+126.7% CER, or +18.4% CS/CER) and Consumer Healthcare (+57.1% CER, or +1.6% CS/CER) offset a fall in sales of Established Prescription Products (-4.2% CER), Diabetes (-3.0% CER) and Generics (-5.3% CER). In the Rest of the World region, net sales rose by 12.6% CER to €1,816 million. In Japan, net sales for the first half of 2017 reached €1,001 million, up 14.9% CER, mainly as a result of the acquisition of BI’s Consumer Healthcare business. On a constant structure basis, sales in Japan were down 4.0%, due mainly to ® competition from generics of Plavix . C.3.2. Other revenues Other revenues advanced by 67.4% to €519 million in the first half of 2017 (versus €310 million in the first half of 2016). This year-on-year increase reflects a higher level of sales of non-Sanofi products by VaxServe, which have been recorded within Other revenues since 2016. C.3.3. Gross profit Gross profit amounted to €12,160 million in the first half of 2017 (70.2% of net sales), versus €11,266 million in the first half of 2016 (70.7% of net sales, a year-on-year decrease of 0.5 of a percentage point). The 2017 first-half figure includes an expense of €176 million arising mainly from the consequences of acquiring the inventories of the BI Consumer Healthcare business. The Pharmaceuticals segment improved gross margin by 0.5 of a percentage point to 72.8%, thanks largely to the performance of the General Medicines and Emerging Markets GBU (especially in Latin America and China), and more generally to positive sales trends. Gross margin was also boosted by the performance of the Multiple Sclerosis franchise, which partly offset the negative effect of lower sales for the Diabetes franchise in the United States. The Vaccines segment improved its gross margin by 2.6 percentage points to 57.7%. C.3.4. Research and development expenses Research and development (R&D) expenses amounted to €2,667 million in the first half of 2017 (versus €2,514 million in the first half of 2016) and represented 15.4% of net sales (versus 15.8% in the first half of 2016). Overall, R&D expenses rose by €153 million (+6.1%), comprising €127 million for Pharmaceuticals (+5.7%) and €26 million for Vaccines (+9.7%). The year-on-year increase in R&D expenses was due partly to the integration of BI Consumer Healthcare products and of Sanofi products that were previously in the SPMSD portfolio, and partly to progress on development projects in oncology (isatixumab, PD-1) and for sotagliflozin. C.3.5. Selling and general expenses Selling and general expenses were €5,046 million in the first half of 2017 (29.1% of net sales), compared with €4,609 million for the first half of 2016 (28.9% of net sales). By segment, the year on-year increase was €348 million (+8.2%) for Pharmaceuticals and €89 million ® ® ® (+25.6%) for Vaccines. This rise mainly reflects the launch costs of Dupixent , Kevzara and Xyzal , plus investment in marketing and sales efforts in key emerging markets and in the European vaccines business. C.3.6. Other operating income and expenses Other operating income for the first half of 2017 reached €173 million (versus €265 million in the first half of 2016), while other operating expenses totaled €71 million (versus €195 million in the first half of 2016). In the first half of 2017, the main component of other operating income was gains on asset disposals, which amounted to €57 million. Overall, other operating income and expenses represented a net gain of €102 million in the first half of 2017, compared with a net gain of €70 million a year earlier, a net year-on-year improvement of €32 million. 56 Sanofi  2017 Half-Year Financial Report C.3.7. Amortization of intangible assets Amortization charged against intangible assets in the first half of 2017 was €990 million, versus €877 million in the comparable period of 2016. The €113 million year-on-year increase mainly reflects a €133 million rise in amortization expense during the period following the recognition of intangible assets in connection with the exchange transaction with BI finalized on January 1, 2017, based on the provisional purchase price allocation. This increase was partly offset by a reduction in amortization charged against intangible assets recognized on the acquisitions of Genzyme (€458 million in the first half of 2017, versus €431 million in the first half of 2016) and Aventis (€204 million in the first half of 2017, versus €276 million in the first half of 2016) as some assets reached the end of their life cycles. C.3.8. Impairment of intangible assets In the first half of 2017, this line item comprises impairment losses of €12 million taken against various Pharmaceuticals segment intangible assets. For the first half of 2016, this line item showed impairment losses of €52 million comprising (i) impairment losses taken against rights relating to a number of marketed products in the Pharmaceuticals segment (€32 million) and the Vaccines segment (€1 million) and (ii) net impairment losses of €19 million taken against various R&D projects in the Pharmaceuticals and Vaccines segments. C.3.9. Fair value remeasurement of contingent consideration Fair value remeasurements of contingent consideration, mainly relating to acquisitions (in accordance with the revised IFRS 3), represented a net expense of €100 million in the first half of 2017 versus a net expense of €67 million in the first half of 2016. Those remeasurements relate to contingent consideration payable to Bayer as a result of an acquisition made by Genzyme prior to the latter’s acquisition by Sanofi (€84 million), and to the contingent consideration arising from the dismantling of the Sanofi Pasteur MSD joint venture (€16 million); see Note B.11. to our condensed half-year consolidated financial statements. C.3.10. Restructuring costs and similar expenses Restructuring costs and similar expenses amounted to €364 million in the first half of 2017, compared with €627 million in the first half of 2016. In the first half of 2017, restructuring costs mainly comprised write-downs of industrial assets in Europe and the United States, and employee-related expenses arising from headcount adjustment plans in Europe. C.3.11. Other gains and losses, and litigation In the first half of 2017, the line item Other gains and losses, and litigation represents separation costs associated with the process of disinvesting from the Generics business in Europe, before tax effects. C.3.12. Operating income Operating income for the first half of 2017 was €3,076 million, 18.8% higher than the 2016 first-half figure of €2,590 million. This year-on-year change reflects an improvement in gross margin and lower restructuring costs, which outweighed the effects of increases in R&D expenses and in selling and general expenses. C.3.13. Financial income and expenses Net financial expense was €123 million for the first half of 2017, an improvement of €68 million relative to the 2016 first-half figure of €191 million. Financial expenses directly related to our debt, net of cash and cash equivalents (see the definition in section C.5. below) amounted to €110 million, down from €118 million in the first half of 2016. The year-on-year change in net financial expense was attributable mainly to:  a higher level of gains on disposals of financial assets (€52 million, versus €19 million for the first half of 2016);  a reduction in the net interest cost on pension plans (€47 million, versus €58 million for the first half of 2016). 2017 Half-Year Financial Report  Sanofi 57 C.3.14. Income before tax and associates and joint ventures Income before tax and associates and joint ventures for the first half of 2017 was €2,953 million, compared with €2,399 million for the first half of 2016, a rise of 23.1%. C.3.15. Income tax expense Income tax expense was €610 million in the first half of 2017, versus €497 million a year earlier, giving an effective tax rate stable year-on-year at 20.7%. The increase in income tax expense was mainly due to the higher level of income before tax and associates and joint ventures. The level of income tax expense is also significantly impacted by tax effects of amortization and impairment of intangible assets (€349 million in the first half of 2017, versus €323 million in the first half of 2016) and of restructuring costs (€126 million in the first half of 2017, versus €210 million in the first half of 2016). 1 The effective tax rate on our business net income is a non-GAAP financial measure. It is calculated on the basis of business operating income, minus net financial expenses and before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests. We believe the presentation of this measure, used by our management, is also useful for investors as it provides a means to analyze the effective tax cost of our current business activities. It should not be seen as a substitute for the effective tax rate on consolidated net income. The effective tax rate based on business net income was 24.5% for the first half of 2017, versus 22.9% for the first half of 2016 and 23.3% for 2016 as a whole. C.3.16. Share of profit/(loss) of associates and joint ventures Associates and joint ventures contributed net income of €38 million in the first half of 2017, versus net income of €98 million in the comparable period of 2016. This line item includes Sanofi’s share of the profits and losses of Regeneron, including the impact of the fair value remeasurement of our share of the acquired intangible assets of Regeneron. C.3.17. Net income excluding the exchanged/held-for-exchange Animal Health business Net income excluding the exchanged/held-for-exchange Animal Health business amounted to €2,381 million in the first half of 2017, versus €2,000 million in the first half of 2016. C.3.18. Net income/(loss) of the exchanged/held-for-exchange Animal Health business In accordance with IFRS 5, the net income or loss of the Animal Health business is presented within a separate line item, Net income/(loss) of the exchanged/held-for-exchange Animal Health business, for the 2016 comparative periods. On January 2, 2017, Sanofi and Boehringer Ingelheim (BI) confirmed that they had finalized the strategic transaction agreed in June 2016, involving the exchange of Sanofi’s Animal Health 2 business (Merial) for BI’s Consumer Healthcare business in most countries . Consequently, for the first half of 2017 this line item shows the gain of €4,421 million on the divestment of the Animal Health business, net of taxes and before the impact of price adjustments and delayed business transfers. C.3.19. Net income Net income for the first half of 2017 was €6,802 million, versus €2,286 million for the first half of 2016. 1 2 Refer to the appendix in section F for a definition. The transfer of the business in Mexico is due to be finalized during 2017. 58 Sanofi  2017 Half-Year Financial Report C.3.20. Net income attributable to non-controlling interests Net income attributable to non-controlling interests for the first half of 2017 amounted to €64 million, against €41 million for the first half of 2016. This line item mainly comprises the share of pre-tax profits paid to BMS from territories managed by Sanofi (€43 million, versus €44 million in the first half of 2016); the year-on-year ® fall was directly related to competition from generics of clopidogrel (the active ingredient of Plavix ) and of ® irbesartan (the active ingredient of Aprovel ) in Europe. C.3.21. Net income attributable to equity holders of Sanofi Net income attributable to equity holders of Sanofi amounted to €6,738 million in the first half of 2017, compared with €2,245 million in the first half of 2016. Basic earnings per share (EPS) was €5.35, compared with €1.74 for the first half of 2016, based on an average number of shares outstanding of 1,260.3 million for the first half of 2017 and 1,287.6 million for the first half of 2016. Diluted EPS was €5.30, compared with €1.73 for the first half of 2016, based on an average number of shares after dilution of 1,270.6 million for the first half of 2017 and 1,296.6 million for the first half of 2016. C.3.22. Segment results 1/ Business operating income Business operating income (as defined in Note B.20.1. to the condensed half-year consolidated financial statements) amounted to €4,741 million in the first half of 2017 versus €4,216 million in the first half of 2016, an increase of 12.5%. It represented 27.4% of net sales, compared with 26.5% in the first half of 2016. The table below shows business operating income for the six-month periods ended June 30, 2017 and 2016: June 30, 2017 (6 months) 4,454 June 30, 2016 (6 months) 4,080 Change +9.2% Vaccines 309 175 +76.6% Other (22) (39) -43.6% (€ million) Pharmaceuticals Business operating income 4,741 4,216 +12.5% The following tables present our segment results for the first half of 2017, the first half of 2016, and the year ended December 31, 2016: First half of 2017 June 30, 2017 (6 months) (€ million) Net sales Pharmaceuticals 15,511 Vaccines Other Total 1,800 — 17,311 149 370 — 519 Cost of sales (4,363) (1,131) — (5,494) Research and development expenses (2,373) (294) — (2,667) Selling and general expenses (4,609) (437) — (5,046) 122 2 (22) 102 Other revenues Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income 82 (1) — 81 (65) — — (65) 4,454 309 (22) 4,741 2017 Half-Year Financial Report  Sanofi 59 First half of 2016 June 30, 2016 (6 months) (€ million) Net sales Other revenues Cost of sales Research and development expenses Selling and general expenses Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income Pharmaceuticals Vaccines Other 14,504 122 (4,143) (2,246) (4,261) 110 1,422 188 (827) (268) (348) (1) — — — — — (39) 44 9 — (50) 4,080 — 175 — (39) Total 15,926 310 (4,970)) (2,514)) (4,609)) 70 53 (50) 4,216 Year ended December 31, 2016 December 31, 2016 (12 months) (€ million) Net sales Other revenues Cost of sales Research and development expenses Selling and general expenses Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income Pharmaceuticals Vaccines Other Total 29,244 274 (8,349) (4,618) (8,743) (1) 129 (112) 7,824 4,577 613 (2,353)) (554) (743) (14) 48 (1) 1,573 — — — — — (112) — — (112) 33,821 887 (10,702)) (5,172)) (9,486)) (127) 177 (113) 9,285 The tables below provide an analysis of business operating income for the Pharmaceuticals and Vaccines segments. Pharmaceuticals segment first-half business operating income, 2017 and 2016 June 30, 2017 (6 months) 15,511 (€ million) Net sales 149 Other revenues as % of net sales 100.0% 1.0% Cost of sales (4,363)) Gross profit 11,297 Research and development expenses (2,373)) (15.3)% Selling and general expenses (4,609)) (29.7)% Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income 60 Sanofi  2017 Half-Year Financial Report (28.1)% 72.8% 122 June 30, 2016 (6 months) 14,504 122 Change +6.9% 0.8% +22.1% (28.6)% +5.3% 72.3% +7.8% (2,246)) (15.5)% +5.7% (4,261)) (29.4)% +8.2% 28.1% +9.2% (4,143)) 10,483 110 82 44 (65) (50) 4,454 as % of net sales 100.0% 28.7% 4,080 Vaccines segment first-half business operating income, 2017 and 2016 (€ million) Net sales Other revenues June 30, 2017 (6 months) 1,800 370 Cost of sales (1,131)) Gross profit 1,039 as % of net sales 100% 20.6% (62.8)% 57.7% June 30, 2016 (6 months) 1,422 188 (827) 783 as % of net sales 100.0% Change +26.6% 13.2% +96.8% (58.2)% +36.8% 55.1% +32.7% Research and development expenses (294) (16.3)% (268) (18.8)% +9.7% Selling and general expenses (437) (24.3)% (348) (24.5)% +25.6% 12.3% +76.6% Other operating income and expenses Share of profit/(loss) of associates and joint ventures Net income attributable to non-controlling interests Business operating income 2 (1) (1) 9 — 309 — 17.2% 175 2/ Business net income Business net income is a non-GAAP financial measure that we use to evaluate our operational performance. For a definition of “Business net income” and a reconciliation with Net income attributable to equity holders of Sanofi, see Section “C.2.3. Business net income” and Section “F/ Appendix – Definition of financial indicators”. Business net income for the first half of 2017 was €3,491 million, 2.6% higher than in the first half of 2016 (€3,402 million, including €299 million of Animal Health business net income). Business net income excluding Animal Health amounted to €3,491 million, compared with €3,103 million in the first half of 2016. That represents 20.2% of net sales, compared with 19.5% in the first half of 2016. 3/ Business Earnings Per Share We also report “business earnings per share”, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding. Business earnings per share was €2.77 for the first half of 2017, 4.9% higher than the 2016 first-half figure of €2.64, based on an average number of shares outstanding of 1,260.3 million for the first half of 2017 and 1,287.6 million for the first half of 2016. 2017 Half-Year Financial Report  Sanofi 61 C.4. CONSOLIDATED STATEMENTS OF CASH FLOWS Summarized consolidated statements of cash flows (€ million) Net cash provided by/(used in) operating activities Net cash provided by / (used in) investing activities (a) Net cash inflow from the exchange of the Animal Health business for BI’s Consumer Healthcare business Net cash provided by/(used in) financing activities June 30, 2017 (6 months) 2,556 June 30, 2016 (6 months) 2,539 December 31, 2016 (12 months) 7,838 (1,062) (1,414) (2,511) 4,349 _ _ (5,192) (4,094) (4,101) Impact of exchange rates on cash and cash equivalents (47) (103) (101) Net change in cash and cash equivalents 604 (3,072) 1,125 (a) The main cash effect of the exchange of the Animal Health business for BI’s Consumer Healthcare business was the receipt by Sanofi of a balancing cash payment of €4,207 million. Consequently, all of the cash flows arising from that exchange transaction during the first half of 2017 are presented in a separate line item, “Net cash inflow from the exchange of the Animal Health business for BI's Consumer Healthcare business”. Net cash provided by operating activities came to €2,556 million in the first half of 2017, against €2,539 million in the first half of 2016. Operating cash flow before changes in working capital for the first half of 2017 was €3,832 million, versus €2,849 million in the first half of 2016. Working capital requirements rose by €1,276 million in the first half of 2017, as opposed to an increase of €310 million in the first half of 2016, mainly as a result of movements in other current assets, current financial assets and other current liabilities (€1,034 million). Net cash used in investing activities totaled €1,062 million in the first half of 2017, compared with €1,414 million in the first half of 2016. Acquisitions of property, plant and equipment and intangible assets totaled €998 million, versus €1,200 million in the first half of 2016. There were €638 million of acquisitions of property, plant and equipment, most of which (€393 million) were in the Pharmaceuticals segment, primarily in industrial facilities (€290 million). The Vaccines segment accounted for €142 million of acquisitions of property, plant and equipment during the period. Acquisitions of intangible assets (€360 million, versus €612 million in the first half of 2016) mainly comprised contractual payments for intangible rights under license and collaboration agreements. Acquisitions of investments during the first half of 2017 totaled €486 million, net of cash acquired and after including assumed liabilities and commitments; this compares with €468 million in the first half of 2016. The main items in the first half of 2017 were the acquisition of the SPMSD vaccines portfolio (€152 million), purchases of additional shares in Regeneron (€87 million), contingent consideration paid to Bayer in connection with the acquisition of Genzyme (€84 million), and an equity injection into Onduo (€56 million). After-tax proceeds from disposals amounted to €440 million in the first half of 2017, and arose mainly from the sale of some Consumer Healthcare products to Ipsen (€83 million) and the divestment of the equity interest in SPMSD (€127 million). After-tax proceeds from disposals in the first half of 2016 amounted to €264 million and arose from the sale of the equity interest in Nichi-Iko Pharmaceutical Co., Inc. and the sale of product ® rights relating to Oenobiol . Net cash inflow from the exchange of the Animal Health business for BI's Consumer Healthcare business comprises the following items for the first half of 2017: (i) the receipt by Sanofi of a balancing cash payment of €4,207 million; (ii) reimbursements of intragroup accounts with Merial entities totaling €967 million; (iii) a partial payment of €934 million of the tax on the gain arising on the divestment; and (iv) the cash held by the BI subsidiaries acquired by Sanofi. The total consideration for the sale of the Animal Health business to BI was €10,320 million (see Note B.21. to the condensed half-year consolidated financial statements), and the consideration for the acquisition of BI’s Consumer Healthcare business was €6,271 million (see Note B.1. to the condensed half-year consolidated financial statements). Net cash used in financing activities amounted to €5,192 million in the first half of 2017, compared with €4,094 million in the first half of 2016. The 2017 first-half figure includes the dividend payout to our shareholders of €3,710 million (versus €3,759 million in the first half of 2016) and the effect of changes in our share capital (repurchases of own shares, net of capital increases), amounting to €1,601 million (versus €1,387 million in the first half of 2016). The net change in cash and cash equivalents in the first half of 2017 was an increase of €604 million, compared with a decrease of €3,072 million in the first half of 2016. 62 Sanofi  2017 Half-Year Financial Report C.5. CONSOLIDATED BALANCE SHEET Total assets were €101,870 million as of June 30, 2017, versus €104,672 million as of December 31, 2016, a decrease of €2,802 million. Our debt, net of cash and cash equivalents was €7,463 million as of June 30, 2017, compared with €8,206 million as of December 31, 2016. We believe the presentation of this non-GAAP financial indicator, which is reviewed by our management, provides useful information to measure our overall liquidity and capital resources. We define “debt, net of cash and cash equivalents” as (i) the sum total of short term debt, long term debt, and interest rate derivatives and currency derivatives used to hedge debt, minus (ii) the sum total of cash and cash equivalents and interest rate derivatives and currency derivatives used to hedge cash and cash equivalents. To assess our financing risk, we use the “gearing ratio”, another non-GAAP financial measure. This ratio (which we define as the ratio of debt, net of cash and cash equivalents, to total equity) fell from 14.2% as of December 31, 2016 to 12.9% as of June 30, 2017. Analyses of our debt as of June 30, 2017 and December 31, 2016 are provided in Note B.9. to the condensed half-year consolidated financial statements. We expect that the future cash flows generated by our operating activities will be sufficient to repay our debt. The financing arrangements in place as of June 30, 2017 at the Sanofi parent company level 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 was €57,792 million as of June 30, 2017, versus €57,724 million as of December 31, 2016. The year-on-year change reflects the following principal factors:  an increase of €6,738 million representing net income for the first half of 2017;  decreases: the dividend payout to our shareholders (€3,710 million), currency translation differences (€2,011 million, mainly on the US dollar), and repurchases of our own shares (€1,697 million). As of June 30, 2017 we held 5.0 million of our own shares, recorded as a deduction from equity and representing 0.40% of our share capital. Goodwill and Other intangible assets (€54,813 million in total) rose by €3,647 million year-on-year, the main factors being:  increases: movements related to the acquisition of BI’s Consumer Healthcare business (€2,123 million of goodwill and €3,985 million of other intangible assets); and  decreases: amortization and impairment charged during the period (€1,082 million) and movements in currency translation differences (€1,884 million, mainly on the US dollar). Investments in associates and joint ventures (€2,841 million) decreased by €49 million. Other non-current assets were €108 million higher at €2,928 million. The main movements during the year were a €373 million appreciation in the value of the equity investment in Alnylam. Net deferred tax assets were €2,428 million as of June 30, 2017 versus €2,377 million as of December 31, 2016, a rise of €51 million. Provisions and other non-current liabilities (€8,412 million) fell by €422 million, mainly due to the impact of net changes in defined-benefit pension plan obligations (€282 million). Liabilities related to business combinations and to non-controlling interests decreased by €55 million to €1,521 million. The main reason for changes in this item is the impact of contingent consideration payable to Bayer as a result of an acquisition made by Genzyme prior to the latter’s acquisition by Sanofi. 2017 Half-Year Financial Report  Sanofi 63 D/ Risk factors and related party transactions D.1. RISK FACTORS The risk factors to which Sanofi is exposed are described in our Annual Report on Form 20-F for the year ended December 31, 2016, filed with the US Securities and Exchange Commission on March 3, 2017. The nature of these risks has not significantly changed during the first half of 2017. These risks may materialize during the second half of 2017 or during subsequent periods. D.2. RELATED PARTY TRANSACTIONS Our principal related parties are defined in Note D.33. to the consolidated financial statements included at 1 item 18 of our Annual Report on Form 20-F for the year ended December 31, 2016 (page F-96) . Note B.5. to the condensed half-year consolidated financial statements provides a description of the principal transactions and balances for the six months ended June 30, 2017 with associates and joint ventures that qualify as related parties. The Group did not enter into any transactions with key management personnel during the first half of 2017. Financial relations with the Group’s principal shareholders fall within the ordinary course of business and were immaterial in the first half of 2017. E/ Outlook 2 At constant exchange rates, we expect 2017 full-year business earnings per share (EPS) to be broadly stable relative to 2016, barring major unforeseen adverse events. The currency impact on 2017 business EPS is estimated to be approximately +1% at June 2017 average exchange rates. We are therefore raising our previously announced guidance, which was for business EPS to be in a range from -3% to stable relative to 2016. 2 Full-year business net income for 2016 was €7,308 million, giving business earnings per share of €5.68. 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:  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;  trends in exchange rates and interest rates; and  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. 1 2 This report is available on our corporate website: www.sanofi.com. Refer to the appendix in section F for a definition. 64 Sanofi  2017 Half-Year Financial Report Forward-Looking Statements This document contains forward-looking statements as defined in the US 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, Sanofi’s ability to benefit from external growth opportunities and/or obtain regulatory clearances, risks associated with intellectual property and current and future intellectual property litigation and the outcome thereof, trends in exchange rates and prevailing interest rates, the instability of economic conditions, the impact of cost containment initiatives and subsequent changes thereto, and 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) 1 made by Sanofi, including those listed under “Risk Factors” and “Cautionary Statement Regarding ForwardLooking Statements” in Sanofi’s annual report on Form 20-F for the year ended December 31, 2016. For an update on litigation, refer to Note B.14. “Legal and arbitration proceedings” to our condensed half-year consolidated financial statements for the six months ended June 30, 2017, and to section “A.3.2. Legal and arbitration proceedings” and section “D/ Risk factors and related party transactions” on pages 40 and 64 respectively of our 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 See pages 4 to 18 of our 2016 Annual Report on Form 20-F, available on our corporate website: www.sanofi.com 2017 Half-Year Financial Report  Sanofi 65 F/ Appendix – Definition of Financial Indicators F.1. NET SALES ON A CONSTANT STRUCTURE BASIS AND AT CONSTANT EXCHANGE RATES When we refer to changes in our net sales at constant exchange rates (CER), that means that we have excluded the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period. When we refer to changes in our net sales on a constant structure basis, that means that 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; and  for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period. F.2. BUSINESS INCOME F.2.1. Business operating income We report segment results on the basis of “Business operating income”. This indicator is used internally by our chief operating decision maker to measure the performance of each operating segment and to allocate resources. For a definition of “business operating income”, and a reconciliation between that indicator and Income before tax and associates and joint ventures, refer to Note B.20.1 to our condensed half-year consolidated financial statements. F.2.2. Business net income We believe that investors’ understanding of our operational performance is enhanced by reporting “business net income”. This non-GAAP financial measure represents business operating income, less net financial expenses and the relevant income tax effects. For the year ended December 31, 2016 and comparative periods, “Business net income” consists of (i) “Business net income excluding Animal Health”, determined as described above and (ii) “Animal Health business net income”, determined on a similar and comparable basis. We also report “business earnings per share”, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding. Business net income is defined as Net income attributable to equity holders of Sanofi determined under IFRS, excluding the following items:  amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature);  fair value remeasurement of contingent consideration relating to business combinations or to disposals;  other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); 1  restructuring costs and similar expenses ; 2  other gains and losses (including gains and losses on major disposals of non-current assets ); 2  other costs and provisions related to litigation ;  the tax effects of the items listed above;  the effects of major tax disputes;  the 3% tax on the distribution of dividends to equity holders of Sanofi; 1 2 Presented in the line item Restructuring costs and similar expenses in the consolidated income statement. Presented in the line item Other gains and losses, and litigation in the consolidated income statement. 66 Sanofi  2017 Half-Year Financial Report 1  those Animal Health items that are not included in business net income ;  the portion attributable to non-controlling interests of the items listed above; and  the impairment loss taken in 2016 against our shares in Alnylam, which reflected a decline in the market value of those shares as of December 31, 2016 relative to their historical cost, most of the decline having occurred when Alnylam decided to discontinue the revusiran development program on October 5, 2016. Business net income also includes Sanofi’s share of the business net income of Sanofi Pasteur MSD from the date when Sanofi and MSD announced their intention to end their joint venture. The most significant reconciling items between our business net income and Net income attributable to equity holders of Sanofi relate to the purchase accounting effects of our acquisitions and business combinations, particularly the amortization and impairment of intangible assets (other than software and other rights of an industrial or operational nature). We believe that excluding those non-cash charges enhances an investor’s understanding of our underlying economic performance, because we do not consider that the excluded charges reflect the combined entity’s ongoing operating performance. Rather, we believe that each of the excluded charges reflects the decision to acquire the businesses concerned. The principal purchase accounting effects of acquisitions and business combinations on net income are:  amortization and net impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature), net of taxes and non-controlling interests; and  the incremental cost of sales incurred on the workdown of acquired inventories remeasured at fair value, net of taxes. We believe (subject to the limitations described below) that disclosing our business net income enhances the comparability of our operating performance, for the following reasons:  the elimination of charges related to the purchase accounting effect of our acquisitions and business combinations (particularly amortization and impairment of finite-lived intangible assets, other than software and other rights of an industrial or operational nature) enhances the comparability of our ongoing operating performance relative to our peers in the pharmaceutical industry that carry those intangible assets (principally patents and trademarks) at low book values either because they are the result of in-house research and development that has already been expensed in prior periods or because they were acquired through business combinations that were accounted for as poolings-of-interest;  the elimination of selected items such as the incremental cost of sales arising from the workdown of inventories remeasured at fair value, major gains and losses on disposals, and costs and provisions associated with major litigation improves comparability from one period to the next; and  the elimination of restructuring costs and similar items enhances comparability because those costs are incurred in connection with reorganization and transformation processes intended to optimize our operations. We remind investors, however, that business net income should not be considered in isolation from, or as a substitute for, Net income attributable to equity holders of Sanofi reported in accordance with IFRS. In addition, we strongly encourage investors and potential investors not to rely on any single financial measure but to review our financial statements, including the notes thereto, carefully and in their entirety. We compensate for the material limitations described above by using business net income only to supplement our IFRS financial reporting and by ensuring that our disclosures provide sufficient information for a full understanding of all adjustments included in business net income. Because our business net income is not a standardized measure, it may not be comparable with the nonGAAP financial measures of other companies using the same or a similar non-GAAP financial measure. 1 Comprises (i) impact of the discontinuation of depreciation and impairment of property, plant & equipment with effect from the start date of application of IFRS 5 (Discontinued and Held-for-Sale Operations) included in business net income; (ii) impact of the amortization and impairment of intangible assets until the start date of IFRS 5 application; (iii) costs directly incurred as a result of the divestment; and (iv) tax effects of those items. 2017 Half-Year Financial Report  Sanofi 67 G/ Appendix – Research and Development Pipeline N : New Molecular Entity R : Registration Study         Immuno-inflammation MS, Neuro, Ophthalmology Oncology Rare Disease Diabetes Solutions Cardiovascular & metabolism Infectious Disease Vaccines Registration N Dupixent® Anti-IL4Rα mAb Atopic dermatitis, EU Dengvaxia®(1) Mild-to-severe dengue fever vaccine SAR342434 insulin lispro Type 1+2 diabetes PR5i DTP-HepB-Polio-Hib Pediatric hexavalent vaccine, U.S. (1) Approved in 18 countries to date Phase 3 dupilumab Anti-IL4Rα mAb Asthma, Nasal polyposis N N N N N 68 Sanofi  isatuximab Anti-CD38 naked mAb Relapsed refractory multiple myeloma SAR439684 PD-1 inhibitor 1st line NSCLC N sotagliflozin Oral SGLT-1&2 inhibitor Type 1 & type 2 diabetes Clostridium difficile Toxoid vaccine VaxiGrip® QIV IM Quadrivalent inactivated influenza vaccine (6-35 months) patisiran siRNA inhibitor targeting TTR Hereditary ATTR amyloidosis Pediatric pentavalent vaccine DTP-Polio-Hib Japan GZ402666 neoGAA Pompe disease Men Quad TT 2nd generation meningococcal ACYW conjugate vaccine fitusiran siRNA targeting Anti-Thrombin Hemophilia 2017 Half-Year Financial Report Phase 2 dupilumab Anti-IL4Rα mAb Eosinophilic oesophagitis N Rabies VRVg Purified vero rabies vaccine SAR425899 GLP-1R/GCGR dual agonist Type 2 diabetes Tuberculosis Recombinant subunit vaccine SAR439684 PD-1 inhibitor Advanced CSCC (Skin cancer) Fluzone QIV HD Quadrivalent inactivated influenza vaccine – High dose SAR100842 LPA1 receptor antagonist Systemic sclerosis SAR439684 PD-1 inhibitor Advanced BCC Adacel+ Tdap booster sarilumab Anti-IL6R mAb Uveitis isatuximab Anti-CD38 naked mAb Acute lymphoblastic leukemia Shan 6 DTP-HepB-Polio-Hib Pediatric hexavalent vaccine SAR566658 Maytansin-loaded anti-CA6 mAb Solid tumors HIV Viral vector prime & rgp120 boost vaccine SAR439152 Myosin inhibitor Hypertrophic cardiomyopathy SP0232(2) Respiratory syncytial virus mAb GZ389988 TRKA antagonist Osteoarthritis N N SAR422459 ABCA4 gene therapy Stargardt disease N-R N efpeglenatide Long-acting GLP-1 receptor agonist Type 2 diabetes SAR156597 IL4/IL13 Bi-specific mAb IPF, Systemic Scleroderma N N olipudase alfa rhASM Deficiency Acid sphingomyelinase deficiency(1) venglustat Oral GCS inhibitor Gaucher related Parkinson’s disease, Gaucher disease type 3, Fabry disease N R N N N-R ® Combination ferroquine / OZ439 Antimalarial (1) Also known as Niemann Pick type B (2) Also known as MEDI8897 Phase 1 N N N N N SAR440340 Anti-IL33 mAb Asthma & COPD SAR439794 TLR4 agonist Peanut allergy GZ402668 GLD52 (anti-CD52 mAb) Relapsing multiple sclerosis UshStat® Myosin 7A gene therapy Usher syndrome 1B SAR228810 Anti-protofibrillar AB mAb Alzheimer’s disease (1) Also known as MYK491 N N N N N SAR408701 Maytansin-loaded anti-CEACAM5 mAb Solid tumors N N SAR428926 Maytansin-loaded anti-Lamp1 mAb Cancer N SAR440181(1) DCM1 Myosin activation Cardiovascular indication SAR247799 S1P1 agonist Cardiovascular indication SAR439459 TGFb inhibition mAb Metastatic melanoma SAR407899 rho kinase Microvascular angina SAR438335 GLP-1R/GIPR dual agonist Type 2 diabetes Herpes Simplex Virus Type 2 HSV-2 vaccine SAR341402 Rapid acting insulin Diabetes Zika Inactivated Zika vaccine Respiratory syncytial virus Infants 2017 Half-Year Financial Report  Sanofi 69 3 STAUTORY AUDITORS’ REPORT Period from January 1 to June 30, 2017 Statutory auditors’ review report on the half-yearly financial information To the Shareholders, In compliance with the assignment entrusted to us by your 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-yearly consolidated financial statements of Sanofi, for the period from January 1 to June 30, 2017;  the verification of the information contained in the half-yearly management report. These condensed half-yearly 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. 1. 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 we would 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 the accompanying condensed half-yearly 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. 2. Specific verification We have also verified the information presented in the half-yearly management report on the condensed halfyearly consolidated financial statements subject to our review. We have no matters to report as to its fair presentation and consistency with the condensed half-yearly consolidated financial statements. Neuilly-sur-Seine and Paris-La Défense, July 31, 2017 The statutory auditors French original signed by PricewaterhouseCoopersAudit Stéphane Basset 70 Sanofi  Philippe Vogt 2017 Half-Year Financial Report ERNST & YOUNG et Autres Nicolas Pfeuty 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 starting on page 38 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 31, 2017 Olivier Brandicourt Chief Executive Officer 2017 Half-Year Financial Report  Sanofi 71 English translation and language consultancy: Stephen Reynolds & Jane Lambert Photo credit (Cover): © Cecilie_Arcurs / iStockphoto.com 72 Sanofi  2017 Half-Year Financial Report