Rating Action

• Sanofi
• AA/stable - affirmation
• S-1+ short-term rating – affirmation
• Senior unsecured debt AA - affirmation

Rating Rationale

The affirmation mainly reflects our base case, including our expectation of a temporary deterioration in credit metrics in 2018 owing to two major acquisitions in H1 2018 (Ablynx and Bioverativ). It also mirrors our belief that credit metrics in H2 2018 will significantly outperform those in H1 2018, which were held back by lower cash generation by vaccines, the ongoing patent expiry pressure on key blockbuster anti-diabetic drug Lantus, and the effects of acquisition-related debt. We believe credit metrics are likely to regain levels commensurate with the ratings by 2019, thus only one year after the acquisitions.

Rating Change Drivers

• Upside: increasing operating margins and free cash flow generation
• Downside: Inability to maintain at least 60% FFO/ SaD and FCF/ SaD of 40%

For the rating report please click HERE.

Stress testing & cash flow analysis
No stress testing was performed. Scope performed its standard cash flow forecasting for the company.

Methodology
The methodology used for this rating(s) and/or rating outlook(s):
Rating Methodologies: Corporate Ratings, 2018; European Pharmaceuticals Rating Methodology, 2018
are available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rating was requested by the rated entity. The rated entity did participate in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, Sanofi internal sources, third parties and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory Disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Olaf Tölke, Managing Director
Person responsible for approval of the rating: Werner Stäblein, Executive Director
The ratings/outlooks were first released by Scope on 07.09.2017.

Potential conflicts
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings.

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