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The following is an excerpt from a 20-F SEC Filing, filed by AVENTIS on 3/8/2004.
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AVENTIS - 20-F - 20040308 - COMPANY_INFORMATION


Item 4.    Information on the Company

Profile and Strategy

    Introduction

        Aventis is a global pharmaceutical group that discovers, develops, manufactures and markets branded prescription drugs and human vaccines to protect and improve the health of patients around the world. Our therapeutic innovations rank among the leading treatments for lung and breast cancer, thrombosis, seasonal allergies, diabetes and hypertension. We are a world leader in human vaccines, offering the broadest range of products in the industry. In 2003, Aventis generated consolidated sales of € 17.8 billion, invested € 2.9 billion in research and development and employed approximately 75,000 people worldwide.

        Aventis is a stock corporation ( société anonyme ) organized under French Commercial Law. According to our By-Laws, our corporate existence shall run through July 17, 2030 except in the event of earlier dissolution or extension by our shareholders.

        Our registered office is at 67917 Strasbourg, France. Our telephone number is +33 3889911 00. Our principal U.S. office is Aventis Pharmaceuticals Inc., 300 Somerset Corporate Boulevard, Bridgewater, NJ 08807-2854.

    Strategy

        As one of the world's leading pharmaceutical companies, our strategy is to create value by discovering, developing and rapidly launching innovative pharmaceuticals to protect, improve and save the lives of patients around the world.

        Since the formation of Aventis in December 1999, we have achieved many of our initial goals. We completed a smooth and successful integration of the two former companies, increased the share of our core business sales attributable to strategic brands and human vaccines from 42% in 2000 to 65% in 2003, grew the share of core business sales in the U.S. from 29% in 2000 to 38% in 2003 and built four blockbusters, i.e. products with annual sales exceeding € 1 billion. We have improved our margins and profitability, and completed the divestment of many non-core activities. Together, these achievements have enabled us to successfully position ourselves as a new global competitor, in the top tier of the pharmaceutical industry.

        In order to build further on this success, we are putting in place the foundations for future growth and value creation. Our strategic initiatives are targeting three areas:

      Accelerating top-line growth

      We intend to rigorously execute our Product Leadership Strategy in order to accelerate and maximize the sales of our currently marketed products. At the same time, we will reduce our reliance on older non-strategic products and complete the divestment of remaining non-core assets.

      Establishing a strong position in our chosen disease areas

      To ensure a steady flow of new innovations and enrich our pipeline, we are focusing our research on selected disease areas where we have the resources and the potential to achieve leadership positions. We will continue to support and accelerate the development and approval of late-stage products while actively pursuing attractive in-licensing opportunities and making targeted acquisitions to complement our in-house innovations.

      Fielding the best teams

      Having the best people in all positions and development plans in place to continuously strengthen the quality and depth of our talent pool is crucial to our long-term success. At the same time, we are focusing on differentiation in reward and recognition of outstanding achievement to continue to build a high-performance organization.

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    Major corporate developments since the formation of Aventis in 1999

December 15, 1999

        Aventis is officially formed following an extraordinary meeting of Rhône-Poulenc shareholders who approved by an overwhelming majority (97.1%) the final steps to complete the business combination of Hoechst and Rhône-Poulenc. On December 20, Aventis shares begin trading under the symbol "AVE" on the Paris and Frankfurt stock exchanges and in the form of American Depositary Shares on the New York Stock Exchange (NYSE).

May 2, 2001

        Sale of industrial gases affiliate Messer Griesheim GmbH closes.

April 3, 2002

        Sale of Aventis Animal Nutrition to CVC Capital Partners closes.

June 3, 2002

        Sale of Aventis CropScience to Bayer AG closes for an enterprise value of € 7.25 billion. Aventis received total consideration of around € 5.7 billion in cash and debt deconsolidation for its 76% interest in this business. In March 2004, Aventis agreed to adjust the purchase price by € 327 million in favor of Bayer.

May 2, 2003

        Aventis closes sale of 17.8 million Rhodia shares (9.9% of Rhodia's share capital) to Crédit Lyonnais, thereby reducing its interest in Rhodia to 27.5 million Rhodia shares (15.3% of Rhodia's share capital) after having acquired all its outstanding bonds exchangeable into shares of Rhodia at the end of 2002.

November 4, 2003

        Aventis divests its entire 11.8% holding (18,180,000 shares) in the Swiss chemical company Clariant. The sale was made to selected institutional investors at a price of CHF 19.25 per share.

December 8, 2003

        Aventis and CSL Limited of Australia sign an agreement under which CSL will acquire Aventis Behring, the therapeutic proteins business of Aventis. Under the terms of the agreement, Aventis will receive up to U.S.$ 925 million, consisting of a cash payment of U.S.$ 550 million upon closing as well as a total of U.S.$ 125 million in deferred payments. In addition, Aventis can receive up to U.S.$ 250 million in additional payments from CSL on the fourth anniversary of the closing of the transaction based on the performance of CSL's share price. The transaction, which is subject to approval by antitrust authorities, is expected to close during the first half of 2004. As of February 2004, the U.S. Federal Trade Commission and most other antitrust authorities reviewing the transaction had cleared it.

January 26, 2004

        On January 26, 2004, Sanofi-Synthélabo, a French pharmaceutical company, announced an unsolicited exchange offer to acquire all of the shares of Aventis through what Sanofi-Synthélabo stated would be substantially identical, separate offers in France, Germany and the United States.

        The principal terms of Sanofi-Synthélabo's unsolicited offer are as follows:

      A default stock and cash option: 5 Sanofi-Synthélabo shares and € 69 in cash for 6 Aventis shares

      An all stock election: 35 Sanofi-Synthélabo shares for 34 Aventis shares

      An all cash election: € 60.43 for each Aventis share

      Aventis shareholders can opt for either or a combination of the above, provided that, in aggregate, 81% of the Aventis shares tendered will be exchanged for Sanofi-Synthélabo shares and 19% of the Aventis shares tendered will be exchanged for cash.

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        Under the terms of Sanofi-Synthélabo's offer, holders of Aventis ADSs may tender all or part of these ADSs to receive Sanofi-Synthélabo ADSs and a cash amount in dollars in lieu of euros on substantially the same terms as described above for shares.

        The offer is conditional on Sanofi-Synthélabo obtaining over 50% of the issued share capital and the voting rights of Aventis on a fully diluted basis, approval of the related share capital increase by Sanofi-Synthélabo shareholders, as well as the expiration or termination of the applicable waiting period under the U.S. Hart-Scott Rodino Act and no order being entered by the U.S. Federal Trade Commission prohibiting the transaction.

        On January 26, 2004, Sanofi-Synthélabo submitted its offer documentation in France to the Autorité des marchés financiers (AMF). At a meeting on January 28 the Aventis Supervisory Board unanimously rejected the offer. The AMF declared the offer acceptable (recevable) on February 3, 2004. On February 13, 2004, we appealed the AMF's decision (avis de recevabilité) . On February 12, 2004, the AMF granted its approval (visa) of Sanofi's information memorandum (note d'information) in respect of the tender offer in France. On February 17, 2004 the offer commenced in France. On February 23, 2004, Aventis appealed the AMF's grant of approval (visa) of the information memorandum.

        Both appeals are currently pending, and arguments are scheduled to be heard on May 6, 2004 with a decision on both appeals expected to be handed down by the end of May.

        At its meeting on February 17, 2004, the Supervisory Board of Aventis unanimously concluded that the public offer of Sanofi-Synthélabo to acquire our shares is not in the best interest of the company, our shareholders and employees. The Supervisory Board, therefore, decided unanimously to recommend to Aventis shareholders not to tender their shares into such offer.

        On February 19, 2004, we filed with the AMF our note d'information in response to Sanofi-Synthélabo's offer documentation in France. On March 4, 2004, the AMF granted its approval of our note d'information .

        As of March 5, 2004, Sanofi-Synthélabo had not formally commenced the offer in the United States.

        We cannot predict whether, or on what timetable, Sanofi-Synthélabo's offer will move forward. As of the date hereof, we believe that such offer cannot close until the earliest of eight trading days following the decision of the court in our appeals of the AMF's declaration that the offer was acceptable (recevable) and its grant of approval (visa) of the information memorandum.

    Main Business Developments in 2003

January

         Taxotere receives European approval as a first-line treatment for non-small-cell lung cancer.

        The U.S. Food and Drug Administration (FDA) approves preservative-free formulation of diphtheria and tetanus vaccine from Aventis Pasteur.

        An FDA advisory panel votes to recommend approval of Ketek (telithromycin) tablets for the treatment of respiratory tract infections; Aventis receives second approvable letter from the FDA.

March

         Lantus receives European approval for pediatric use.

        New analysis of landmark HOPE study shows Delix/Tritace (ramipril) reduces heart failure in high-risk cardiovascular patients.

April

        Aventis Annual General Meeting of Shareholders approves net dividend of € 0.70 per share and a share buyback program of up to € 1 billion.

         Arava is approved for rheumatoid arthritis in Japan.

        Aventis Pasteur donates cell line for Severe Acute Respiratory Syndrome (SARS) vaccine research to the National Institutes of Health (NIH) and Centers for Disease Control and Prevention (CDC) in the United States.

May

         Lantus receives FDA approval for flexible administration.

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        Aventis announces intention not to seek regulatory approval for cariporide, a cardiovascular drug.

June

        Aventis announces regulatory submission for the rapid-acting insulin analogue Apidra (insulin glulisine) in the U.S. and the EU.

        Aventis and Zealand Pharma sign licensing deal — Aventis acquires worldwide rights to type 2 diabetes compound ZP10 (AVE-0010), a GLP-1 analogue.

        Aventis receives FDA approval of an expanded indication in rheumatoid arthritis for Arava (leflunomide) tablets.

         Taxotere (docetaxel) highlighted at ASCO in treating breast cancer; Taxotere regimen shown to provide survival benefits in advanced stomach cancer.

July

        Collaboration agreement signed with ImmunoGen on the discovery, development and commercialization of novel anti-cancer therapeutics.

August

        Aventis launches Lantus (insulin glargine) in France, global rollout continues.

        Aventis announces filing of patent infringement lawsuits to enforce U.S. Patent Number 5,389,618 against two companies seeking to market generic versions of Lovenox (enoxaparin sodium) in the U.S.

September

        Aventis and Regeneron enter into a global partnership to develop and commercialize Vascular Endothelial Growth Factor (VEGF) Trap, an anti-angiogenesis compound under development in oncology and ophthalmology.

        Aventis and the U.S. National Institutes of Health enter into an agreement to research and develop an inactivated virus vaccine against Severe Acute Respiratory Syndrome (SARS).

        Results of TAX 311, a randomized Phase III study, demonstrate improved survival in women with metastatic breast cancer treated with Taxotere (docetaxel) compared to paclitaxel.

        Aventis opens world's most modern biotech insulin plant for the production of the long-acting insulin Lantus in Frankfurt, Germany.

        Aventis and Merck & Co. announce start of human trials using HIV prime-boost vaccine candidates.

        Aventis acquires worldwide exclusive development and marketing rights (except Japan) to antidementia agent AC-3933 (AVE-3933) from Dainippon.

October

         Ketek and Lantus are approved in Japan.

        Aventis submits complete response to FDA approvable letter for Ketek .

        Aventis agrees to sell the North American rights to three gastrointestinal products to Axcan Pharma Inc. representing sales of U.S. $ 42 million in 2002.

November

        Aventis and Vertex Pharmaceuticals voluntarily discontinue phase IIb clinical trials of pralnacasan in rheumatoid arthritis.

        All key sites of the entire supply chain of Aventis Pasteur are now certified Class A.

December

        Second interim analysis of TAX 316 shows that an anthracycline-based regimen including Taxotere significantly improved the survival rate of women with early-stage breast cancer and reduced their risk of a relapse compared with a standard treatment.

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        Submission of a New Drug Application (NDA) is completed for Genasense (oblimersen sodium) used in combination with dacarbazine for the treatment of patients with advanced malignant melanoma.

        Aventis Pasteur completes shipment of approximately 43 million doses of influenza vaccine in the U.S.

        Aventis announces an agreement to sell RPG, its generic drugs business in France, to Ranbaxy of India.

        Funding of pension obligations in Germany accelerated through additional contribution of € 1.5 billion.

        Research collaboration on oncology targets formed with Avalon Pharmaceuticals of Maryland, U.S.

        Aventis submits an electronic Biologics Licensing Application (eBLA) for FDA approval of Menactra , first candidate quadrivalent conjugate meningococcal vaccine.

        New Drug Application submitted to the FDA for once-daily formulation of Allegra-D .

        New Drug Application submitted to the FDA for asthma drug Alvesco .

January 2004

        Aventis and Crucell announce a strategic agreement to further develop and commercialize novel influenza vaccine products based on Crucell's proprietary PER.C6™ cell line technology.

         Taxotere approved in Japan for esophageal cancer.

        The European Commission agrees to replace a commitment obliging Aventis to sell its 15.3% stake in Rhodia with a commitment to divest its 49% stake in Wacker-Chemie within a confidential time frame of several years.

February 2004

         OptiClick insulin delivery device is submitted for approval in Europe and the U.S.

        Five-year ORIGIN trial launched to investigate reduction in heart disease risk with Lantus insulin.

        Aventis and Intercell sign collaboration and license agreement to develop bacterial vaccines.

        The significant subsidiaries of Aventis are set forth on Exhibit 8 which is incorporated herein by reference.

        For information on our principal capital expenditures and divestitures, see "Item 5. Operating and Financial Review and Prospects — Aventis Results of Operations: 2003 compared to 2002 — Capital Expenditures", and "—Disclosure About Liquidity and Capital Resources including Off-Balance Sheet Arrangements — Obligations resulting from business divestitures".

        The net sales and operating income of Aventis broken down by business segment are presented in Note 26 of the Aventis Consolidated Financial Statements included in Item 18 of this report.

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Products

        Our core business comprises activities that we consider to be strategic and intend to retain, notably prescription drugs, human vaccines, our 50% equity interest in Merial, which we account for under the equity method, as well as corporate activities (mainly insurance entities).

        We manufacture and market a wide range of pharmaceutical products and are working to build strong global franchises in selected therapeutic areas such as diabetes, oncology and human vaccines. At the same time, several products are driving our growth in therapeutic areas such as respiratory/allergy, thrombosis/cardiology, arthritis/osteoporosis and anti-infectives. Our marketing and sales efforts are therefore currently focused on the following group of 15 products, which we refer to as strategic brands.

    Prescription Drugs

Respiratory/Allergy

         Allegra/Telfast (fexofenadine), the top-selling product of Aventis, is an effective, long-lasting (12- and 24-hour dosing) and powerful non-sedating prescription antihistamine for the treatment of seasonal allergic rhinitis (SAR or hay fever) and the skin condition chronic idiopathic urticaria (CIU or hives). In 2003, Allegra 30 mg pediatric tablets were approved in the UK as the reference member state for the Mutual Recognition Procedure in Europe, and pediatric exclusivity was granted in the U.S. in January. Our top three markets for Allegra are the U.S. (rank: #1, market share: 35.4%), Japan (rank: #2, market share: 16.6%), and the UK (rank: #3, market share: 11%).

        We also offer Allegra-D , a combination product with an extended release decongestant for effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion. In December, we submitted a New Drug Application (NDA) for a once-daily formulation of Allegra-D . The top three markets for Allegra - D are the U.S. (rank: #1, market share 56%), Mexico (rank: #4, market share 7.6%) and Brazil (rank: #2, market share 23.9%).

         Nasacort (triamcinolone acetonide) AQ Spray is an unscented, water-based metered-dose pump spray formulation unit containing a microcrystalline suspension of triamcinolone acetonide in an aqueous medium. It is indicated for the treatment of the nasal symptoms of seasonal and perennial allergic rhinitis in adults and children six years of age and older. In compliance with the Montreal Protocol to eliminate CFC-based propellant in sprays, we no longer manufacture Nasacort Nasal Inhaler. Our leading markets for Nasacort AQ Spray are the U.S. (rank: #4, market share: 12.7%) and Canada (rank #3, market share: 11.6%).

Thrombosis/Cardiology

         Lovenox/Clexane (enoxaparin sodium) is the most widely studied and used low-molecular-weight heparin (LMWH) in the world. It has been used to treat an estimated 118 million patients in 96 countries since it was first introduced in 1987 and is approved for more clinical indications than any other LMWH. Numerous clinical studies have demonstrated the product's benefits as a safe and effective way to significantly reduce the incidence of deep vein thrombosis in a wide range of patient populations, and also as effective prophylaxis of ischemic complications of unstable angina (UA) and non-Q-wave myocardial infarction (NQWMI) when administered concomitantly with aspirin.

        To better meet a range of pharmacy and nursing needs in the U.S., a new 300 mg/3 mL multiple-dose vial was introduced in March, and prefilled syringes equipped with an Automatic Safety Device and a sharper needle were introduced in the second half of the year. In mid-2003, the U.S. Food and Drug Administration (FDA) approved a supplemental new drug application (sNDA) for Lovenox that provided for revisions to the product labeling regarding the use of Lovenox in patients with mechanical prosthetic heart valves, including pregnant women.

        In February 2003, Aventis filed a Citizen Petition with the FDA requesting that the FDA refrain from approving any ANDA citing Lovenox as the reference listed drug unless (i) until enoxaparin has been fully characterized, the manufacturing process used for the generic product is equivalent to the Aventis manufacturing process, or equivalent safety and effectiveness of the generic product has been proved through clinical trials, and (ii) the generic product contains a 1,6 anhydro ring structure at the reducing ends of between 15% and 25% of its polysaccharide chains. In August 2003, the FDA indicated that further review was required due to the complex issues raised by the petition. On February 12, 2004, Aventis submitted a supplement to the petition that provides additional information regarding the characterization of enoxaparin, further supports the original petition, and addresses third-party comments that were submitted to the FDA on October 17, 2003 in opposition to the petition. The Citizen Petition remains pending.

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         Lovenox is a market leader in all major countries, including the U.S. (rank: #1, market share 86.3%), France (rank: #1, market share 58.3%, Germany (rank: #1, market share 27.8%), Italy, Spain and the UK.

         Delix/Tritace (ramipril) is an ACE (angiotensin converting enzyme) inhibitor for the treatment of hypertension, congestive heart failure after myocardial infarction and nephropathy. Its use has increased widely since the initial publication of the HOPE study in 2000 showed it to be effective in reducing the incidence of stroke, heart attacks and cardiovascular death in high-risk patients. Delix/Tritace is the only ACE inhibitor approved for the prevention of stroke, heart attack and cardiovascular death in people at high risk for cardiovascular events. Delix/Tritace is a market leader in Canada (rank: #1, market share 27%), France (rank: #1, market share: 10.7%), the UK (rank: #1, market share 24%), Germany, Spain and Italy. The U.S. rights were sold in 1998.

        According to a new report published in Circulation , Delix/Tritace significantly reduced the rate of debilitating and potentially fatal heart failure. This sub-analysis of the landmark Heart Outcomes Prevention Evaluation (HOPE) study is the first to demonstrate that an ACE inhibitor can prevent heart failure in patients at high-risk for cardiovascular events.

        The results of the HOPE-TOO (HOPE — The Ongoing Outcomes) study presented in September 2003 showed that Delix/Tritace provided sustained prevention of cardiovascular disease, while also offering increased reductions over time in the risk of new onset of type II diabetes and new onset of heart failure.

Oncology

         Taxotere (docetaxel) is a chemotherapy agent primarily used to treat metastatic breast cancer and non-small-cell lung cancer (NSCLC). Our leading markets for Taxotere are the U.S. (rank: #1, market share 30.2%), France (rank: #2, market share 24.9%) and Japan (rank: #3, market share 12.8%). First launched in 1995 and marketed in over 86 countries, Taxotere is the foundation of our oncology franchise and is being studied extensively in early-stage breast cancer as well as prostate, head and neck, and gastric cancers. In January 2003, Taxotere received EU approval as first-line therapy in combination with cisplatin for patients with unresectable locally advanced or metastatic NSCLC, following FDA approval of the same indication in November 2002. Taxotere is also approved for this indication in Japan.

        The results of an interim analysis of TAX 325, the largest Phase III international study of advanced stomach cancer patients to date, were reported at ASCO in June. These showed that patients with advanced stomach cancer, also known as gastric cancer, who received a Taxotere -based chemotherapy treatment had a marked improvement in median survival rates compared to patients who received a standard treatment.

        Data from TAX 311, a four-year randomized phase III study and the first direct comparison of Taxotere and paclitaxel, showed that women with metastatic breast cancer who were treated with Taxotere had a statistically significant improvement in overall survival and time to disease progression compared to those who were treated with paclitaxel. Landmark phase III data from the second interim analysis of TAX 316, evaluating the use of Taxotere in adjuvant breast cancer demonstrated that an anthracycline-based regimen including Taxotere significantly improved the survival rate of women with early-stage breast cancer and reduced their risk of a relapse compared with a standard treatment.

         Campto (irinotecan) is the current standard of treatment for advanced colorectal cancer. It is indicated for advanced colorectal cancer in combination with 5-fluorouracil (FU) and folinic acid (FA) in first-line treatment as well as monotherapy in second-line treatment. Several Phase III studies are underway and have recently been completed to evaluate the use of Campto in adjuvant chemotherapy in colorectal cancer, advanced gastric cancer, small cell lung cancer, and non-small-cell lung cancer. Aventis markets Campto , which was first launched in 1995 under a license from Yakult Honsha, primarily in Europe, Asia and Africa. Our three largest markets for Campto are France (rank: #2, market share 34.2%), Italy (rank: #2, market share 33.4%) and Germany (rank: #2, market share 31.8%). We do not market this product in North America, South America or Japan.

Diabetes

         Lantus (insulin glargine) is indicated for once-daily subcutaneous administration in the treatment of adult patients with type 2 diabetes mellitus who require basal (long-acting) insulin for the control of hyperglycemia and for adult and pediatric patients with type 1 diabetes mellitus. Lantus demonstrates a consistent slow, prolonged absorption and a relatively constant concentration/time profile over 24 hours.

        In March, the European Commission granted marketing authorization of Lantus for use in children age six and older with diabetes mellitus. Lantus was approved by the FDA in May 2003 for dosing at any time of

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the day in patients with type 1 or 2 diabetes mellitus. The European Commission had approved this indication in December 2002. Important data was published in November 2003 in "Diabetes Care." The Treat to Target trial showed that nearly 25% more patients treated with Lantus achieved a target goal of A1C £ 7% without having an episode of nocturnal hypoglycemia defined as a blood glucose level of £ 72mg/dL (33.2% goal attainment with Lantus vs. 26.7% with NPH insulin; p £ 0.05).

        In 2003, Lantus was launched in over 40 countries throughout the world, including France, Italy, India, Latin America, Russia, South Africa, Sweden and Switzerland. In September, a new plant for the production of insulin glargine was inaugurated in Frankfurt, Germany to provide additional manufacturing capability to supply Lantus for the continuation of the global rollout . Lantus was approved in Japan in October and was launched in December. In 2003, it became the number one branded insulin analogue in its two largest markets, the U.S. and Germany. Its third largest market is the UK.

         Amaryl (glimepiride) is a new-generation, once-daily sulfonylurea for the oral treatment of type 2 diabetes as an adjunct to diet and exercise. Amaryl reduces the body's blood sugar level primarily by helping the body produce more insulin with a reduced risk of hypoglycaemia and minimal weight gain. Our top three markets for Amaryl are Germany (rank: #1, market share 25%), the U.S. (rank: #6, market share 4.4%) and Japan (rank: #3, market share 9.7%).

         Insuman (human insulin) is a biosynthetic insulin identical to that produced by the human body and is used for treatment of type 1 and type 2 diabetes. Insuman is marketed throughout eastern and western Europe and Latin America. Its largest markets in terms of market share are Germany (21.5%), Austria (11.9%) and France (3.7%). Aventis does not sell this product in the United States.

Arthritis/Osteoporosis

         Actonel (risedronate sodium) is a third-generation bisphosphonate that prevents bone loss by inhibiting bone resorption. Actonel 35 mg once-a-week and Actonel 5 mg daily are indicated for the prevention and treatment of postmenopausal osteoporosis and for the treatment of glucocorticoid-induced osteoporosis either initiating or continuing systemic glucocorticoid treatment ( >  7.5 mg/d prednisone or equivalent) for chronic diseases. Actonel is also approved for treatment of Paget's disease, a rare bone disorder. Actonel is the only osteoporosis treatment that consistently provides rapid efficacy and offers fracture protection within one year. According to the results of a long-term clinical trial presented at ENDO 2003, Actonel helped patients maintain a low incidence of new vertebral fractures over seven years of treatment. Actonel is co-marketed by Procter & Gamble Pharmaceuticals and Aventis through the Alliance for Better Bone Health . The top three markets for Actonel are the U.S., France and Canada.

         Arava (leflunomide) is an oral disease-modifying anti-rheumatic drug (DMARD) with labelling to reduce signs and symptoms, to inhibit structural damage as evidenced by X-ray erosions and joint space narrowing and improve physical function in adults with active rheumatoid arthritis (RA). Arava is a once-daily oral medicine and can be used in both early and established rheumatoid arthritis. Arava is currently available in over 70 countries worldwide, following its U.S. launch in 1998 and European launch in 1999. Arava was launched in Japan in September. Our largest markets for Arava are the U.S. and Germany.

Anti-Infectives

         Ketek (telithromycin) is the first member of a new class of antibiotics known as the ketolides. Ketek was designed to deliver an optimally targeted spectrum of activity for upper and lower respiratory tract infections (RTIs), including those caused by resistant pathogens — with less propensity to induce resistance — and a short treatment regimen. Ketek was first launched in October 2001 in Germany and has been approved in all major EU and Latin American markets. Over 5 million patients worldwide have been treated with Ketek since it was first introduced. Ketek was approved and launched in Canada, Turkey and Japan (where it is outlicensed) in the second half of 2003 and has already reached the status of market leader of the oral solid antibiotic market in Turkey (IMS Retail Sales Audit November 2003) and is near leadership in France (GERS Retail Sales Audit November 2003).

        In January 2003, the U.S. Food and Drug Administration (FDA) issued an approvable letter for Ketek for the treatment of acute exacerbations of chronic bronchitis, acute bacterial sinusitis and community-acquired pneumonia. The FDA did not require additional clinical studies. In October 2003, we submitted a complete response to the FDA's January 2003 approvable letter. The FDA is expected to respond to this new submission within six months of that submission.

         Targocid (teicoplanin) is an injectable glycopeptide antibiotic for treatment of serious staphylococcal infections caused by susceptible Gram-positive bacteria, including those resistant to other antibiotics such as

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penicillins and cephalosporins. In 2003, Targocid was approved for pediatric use in Japan. Our largest markets for Targocid are Italy (rank: #1, market share 86.4%), Japan (rank: #3, market share 17%) and the UK (rank: #1, market share: 62%).

         Tavanic (levofloxacin) is an IV/oral broad-spectrum fluoroquinolone antibiotic in-licensed from Daiichi. This fast-acting bactericidal antibiotic offers once-daily dosing for the treatment of community-acquired pneumonia, acute exacerbations of chronic bronchitis, sinusitis, complicated urinary tract infections and complicated and uncomplicated skin and soft-tissue infections. In 2003, Tavanic was approved in the United Kingdom (EU Mutual Recognition State) for uncomplicated urinary tract infections. We do not market Tavanic in Japan or the U.S.

Central Nervous System

         Copaxone (glatiramer acetate) is the first non-interferon agent indicated for reduction of the frequency of relapses in patients with relapsing-remitting multiple sclerosis (MS). This unique disease-modifying therapy has demonstrated continued efficacy in reducing relapse rates over ten years, and has shown a significant effect on Magnetic Resonance Imaging (MRI) monitored activity and burden of disease. More than 60,000 patients globally have been administering Copaxone treatment. In Europe and Australia, Copaxone is marketed by Aventis and Teva Pharmaceutical Industries Ltd. In the U.S., Copaxone is marketed and sold by Teva and distributed by Aventis until expiration of an agreement in March 2008. At that time, Teva will take over sales, marketing and distribution for the U.S. and will book sales.

         All of the above market share percentages and rankings are derived from sales figures (IMS Health), except for France (GERS). Data based on one moving annual total (MAT ending September 2003).

    Global Dermatology Division

        On September 1, 2003, we formed a global dermatology division comprising the prescription dermatology business Dermik and its products, as well as other dermatology products we commercialize around the world. The Dermik product range consists of innovative prescription dermatology and podiatry products, and the recently established aesthetic franchise. Within the prescription dermatology and podiatry business, Dermik focuses on treatments for a wide variety of skin and nail problems, including acne, nail fungus, pre-cancerous lesions, rosacea, psoriasis, dermatitis and eczema. The leading products in the traditional prescription business currently include: BenzaClin (clindamycin 1%-benzoyl peroxide 5%) Topical Gel, Penlac Nail Lacquer (ciclopirox) Topical Solution (sold as Batrafen in most of Europe), Carac (5 fluorouracil) and Dermatop . The key product within the new aesthetic dermatology franchise is New-Fill , which is currently marketed in 26 countries, including the European Union. An IDE (Investigational Drug Exemption) was filed in the U.S. with the Food and Drug Administration in March 2003.

        A PMA (Premarket Approval Application) was filed with the U.S. FDA in December 2003 to market this injectable drug device under the brand name Sculptra in the United States. A regulatory submission in Canada is planned in 2004.

    Human Vaccines

        Our human vaccines unit business Aventis Pasteur is a fully integrated vaccine company offering the broadest range of vaccines in the industry. In 2003, Aventis Pasteur provided 1.4 billion doses of vaccines to immunize over 500 hundred million people against 20 serious diseases. In 2003, Aventis Pasteur contributed sales of € 1,621 million, an increase of 2.5% (16.6% activity variance) over sales of € 1,580 million in 2002. From 1993 to 2002, Aventis Pasteur exceeded market growth with a compound annual sales growth of 15% versus 12% for the global vaccine industry.

        Aventis Pasteur is a world leader in the vaccine industry and holds a leading position in most countries. In the U.S. and Canada, which account for approximately 50% of the worldwide vaccines market, Aventis Pasteur is one of the top two vaccine companies. North America accounts for 52% of sales.

        In Western Europe, the vaccine business is operated by Aventis Pasteur MSD, a 50-50 joint venture between Aventis Pasteur and Merck & Co, providing vaccines to 19 countries. With a 37% market share Aventis Pasteur MSD is a market leader in Europe, particularly in France, the UK and Germany. Europe accounts for approximately 28% of Aventis Pasteur's sales. In 2003, sales by Aventis Pasteur MSD, which is accounted for using the equity method, were € 591 million.

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        The remainder of sales are generated in emerging countries and Japan. Aventis Pasteur has established a leading position in Latin America, has been expanding its presence in Asia, particularly in China and Japan, and is very active in donors' markets, such as UNICEF.

    Leading brands

      Pediatric combination vaccines: The components of these vaccines vary because of diverse immunization schedules throughout the world. Protecting against up to six diseases, this group of products is anchored by acellular pertussis components in general and by the trivalent vaccine Daptacel in particular. Daptacel , which also protects against diphtheria and tetanus, was launched in 2002 and has become a strong sales contributor due to its synergy with immunization schedules. Tripedia , also for the prevention of pertussis, diphtheria and tetanus, and ActHib for the prevention of Haemophilus influenzae type b, are two further important growth drivers within the pediatric product line. Pentacel is a new vaccine against five diseases that is approved in nine countries and has been a standard of preventive care in Canada since its launch in 1997. Pediacel , another acellular pertussis-based pentavalent vaccine, was registered in the UK in 2002 and is expected to be launched in this country and parts of Latin America and east Asia in 2004.

      Influenza: With a 38% share of the € 1.2 billion influenza vaccine market, Aventis is the world leader in the production and marketing of flu vaccines. Since 1998, sales of the flu vaccines Fluzone and Vaxigrip/Mutagrip have nearly tripled and production capacity was recently doubled to 165 million doses to better meet demand. We expect demand for flu vaccines, to more than double by 2010 in the U.S. alone due to increasingly broad government immunization recommendations.

      Polio: Aventis is the world's major manufacturer of inactivated polio vaccine (IPV), known as IPOL in the U.S. As the aim of global polio eradication approaches, the use of IPV vaccines will increase. As a result, Aventis Pasteur is expanding its production capacity to meet this growing demand. The worldwide polio eradication initiative of the WHO and UNICEF has positioned Aventis Pasteur as a global preferred partner with both oral polio vaccine and IPV vaccines.

      Adult and adolescent boosters: The incidence of pertussis ("whooping cough") is on the rise globally, affecting both children and adults. Its resurgence, combined with an increased awareness of the dangers of vaccine-preventable diseases in general have led to higher sales of this product group in recent years. We expect to submit Adacel , which will be the first trivalent booster against diphtheria, tetanus and pertussis, for U.S. approval in 2004. This product will play an important role in efforts to better control pertussis by not only preventing the disease in adolescents and adults, but thereby breaking the cycle of transmission impacting infants too young to be immunized or only partially vaccinated.

      Meningitis: Targeting meningococcal meningitis, arguably the most deadly form of meningitis, we are the only company to offer a quadrivalent vaccine against this disease in the U.S. The polysaccharide vaccine Menomune has grown rapidly due to use particularly among college students and military personnel. For Menactra , a conjugate vaccine that is expected to offer a longer-lasting immune response, an electronic Biologics Licensing Application was submitted to the FDA in December 2003 for approval in adolescents and adults aged 11-55 years. Meningitis vaccines are expected to become a significant growth contributor due to their anticipated future use in infants under age 2.

      Travelers/endemic area: Offering the widest range of vaccines in the industry, Aventis Pasteur's product offering includes vaccines for typhoid, rabies, yellow fever, Japanese encephalitis, and cholera.

    Merial

        Merial, a 50-50 joint venture with Merck & Co. Inc., is one of the world's leading animal healthcare companies dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers and pet owners to improve the health, well-being and performance of livestock, companion animals and wildlife. The company is also a market leader in the development and production of poultry breeding stock through its subsidiaries Hubbard and British United Turkeys.

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        The animal healthcare product range comprises four major segments: parasiticides, products for the treatment of chronic illnesses in household pets, anti-infectious drugs and vaccines as well as other specialty products for all animal species: poultry, cattle, sheep, pigs, horses, cats and dogs. The company's top-selling products include Frontline , the world's best-selling topical anti-parasitic flea and tick brand for dogs and cats, as well as Ivomec , a parasiticide for the control of internal and external parasites in livestock and companion animals, and Eprinex , a parasiticide for use in cattle.

        Merial's major markets are the U.S., France, UK, Brazil, Japan, Canada, Germany, Italy, Australia and Argentina.

        Operational and North American headquarters are based in Duluth, Georgia (USA); another important regional office is located in Lyon (France) for Europe, Middle East and Africa. The worldwide headquarters and registered office of Merial Ltd are in Harlow (UK).

        Merial has 16 production sites in Europe, North and South America and China, 10 research and development sites worldwide and around 6000 employees.

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Research and Development

        Our ability to rapidly discover, develop and obtain regulatory approval of innovative prescription drugs and human vaccines is critical to our success. We therefore invest substantial human and financial resources in research and development activities. In 2003, our research and development spending on prescription drugs and human vaccines totaled € 2,863 million. To complement our compound portfolio and thereby increase the value of our pipeline, we are:

      Actively and aggressively pursuing attractive in-licensing opportunities to enrich our pipeline

      Streamlining and focusing our internal research on core competencies while exploiting a strong network of external alliances and in-licensing early-stage compounds in selected therapeutic areas

      Pursuing targeted acquisitions in strategic areas to fill technological gaps.

        Research and development of branded prescription drugs is the responsibility of our Drug Innovation & Approval organization, which consists of approximately 5,500 people working at four main locations in France, Germany, Japan and the United States. The key objectives of the global Drug Innovation & Approval function are to:

      Deliver the pipeline

      Increase innovation and productivity and

      Optimize the value of our products.

        The activities of Drug Innovation & Approval are organized along a value chain that performs time-critical activities in parallel instead of sequentially, and follows a network-centric approach. Our discovery efforts focus on selected key disease areas in which Aventis already has or intends to achieve global leadership. These include Alzheimer's disease, asthma, atherosclerosis, diabetes, multiple sclerosis, oncology, rheumatoid arthritis, schizophrenia and thrombosis. At Aventis Pasteur, research is also conducted using vaccine and immunological approaches.


Early-stage activities

        Sites in France, Germany and the U.S conduct drug discovery in our key disease areas. Each site acts as an entrepreneurial unit responsible for managing the project portfolio of the assigned disease groups from the exploratory stage to phase IIa clinical testing. This is achieved through a matrix organization combining efforts of site-based disease groups and expertise from Lead Generation and Lead Optimization.

        Lead Generation scientists are co-located with the site-based disease groups. They work together to identify and validate targets, identify and modify leads, and generate early development compounds and contribute to the project teams until a drug candidate completes phase IIa clinical trials.

        Lead Optimization bridges development from the preclinical to the clinical phase. A key objective of this function is to establish proof-of-concept in man so that only candidates with the greatest chance of success are selected for phase IIb and phase III studies. Lead Optimization is also co-located at the three main discovery sites, and has a small team in Japan.


Late-stage activities

        Late-stage drug development and submission management is conducted globally and coordinated through the Global Drug Development Center (GDDC) located in Bridgewater, New Jersey. Clinical teams at the GDDC coordinate study programs that are performed through the extensive network of Aventis affiliates. The GDDC also oversees the simultaneous submission of global dossiers in key markets.

        Product Realization (PR) is the global function responsible for managing worldwide late-stage (phase IIb and III) clinical projects and optimizing the value of strategic brands by delivering new therapeutic indications and commercially attractive dosage forms. The global PR team is located at the GDDC, and coordinates its activities in conjunction with the European and Japanese Development Centers.

        Global Regulatory Approvals & Marketing Support (GRAMS) interfaces with regulatory agencies and directs simultaneous submissions of global dossiers to obtain approvals in major markets. State-of-the-art electronic document management technologies are used to bring drug candidates through the regulatory approval process. GRAMS also maintains these approvals and ensures surveillance of safety profiles for all Aventis compounds (both in development and marketed).

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        Our human vaccines R&D strategy is characterized by a competitive position in new target areas as well as a commitment to strategic assets that will further develop our leadership position in vaccines. One particular area of research is novel therapeutic vaccines focusing on the potential of vaccines to be used to fight diseases such as HIV and cancer.

        We are working on a number of important new preventive vaccines, which remain the focus of our development efforts:

      RSV (Respiratory Syncytial Virus)  — We are seeking to be the first to the market with a vaccine to fight RSV, which causes severe respiratory infections and is often associated with mortality. This project is now in phase II.

      Dengue  — We are undertaking multiple approaches to develop a vaccine covering the four viral serotypes in order to prevent Dengue fever and it severe complications (hemorrhagic fever) which is prevalent in Asia, Africa and Latin America. This project, currently in phase I, will target people living in affected areas as well as travelers to these regions.

      Meningitis (meningococcal)  — We are expanding development activities to protect infants against the four most prevalent serogroups of Neisseria meningitidis with a newly formulated conjugate vaccine, currently in phase I.

      SARS  — We have participated in international research efforts since the outbreak as a member of the Canadian SARS Research Consortium (CSRC) and by donating samples of our proprietary cell line to the U.S. National Institute of Health (NIH) and the U.S. Centers for Disease Control and Prevention (CDC) for use in isolating and growing the coronavirus thought to be responsible for this disease. This project is currently in early-stage development.

      HIV  — Aventis has been a pioneer in HIV vaccine research due to its long-standing research program (20 years) as well as partnerships with leading government agencies and pharmaceutical companies. Aventis is exploring both prophylactic and therapeutic approaches to developing vaccines to combat HIV (human immunodeficiency virus), which is the virus that causes AIDS. A phase III trial for a prophylactic vaccine in Thailand was launched in late 2003, while phase II trials are underway for a therapeutic vaccine.

      Cancer  — A development program is focusing on colorectal and melanoma cancers, seeking to specifically activate the immune system to destroy cancer cells. Phase I clinical studies using the proprietary ALVAC technology in patients with melanoma and colorectal cancer showed a favorable safety profile.

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    Pipeline

        During 2003, the efforts of our research organization to enhance innovation and productivity made substantial progress. We moved four compounds from early-stage to late-stage development and strengthened the highly promising early-stage pipeline. We now have more than 30 human drug and vaccine candidates in preclinical, over 40 in early-stage and 14 in late-stage development. At the same time, we submitted five new products for regulatory approval, and expanded the range of indications for several of our currently marketed strategic brands through broad life-cycle management programs.


Key Compounds in Late-Stage Clinical Development (1)

Project (2)

  Disease
  Status
 
Alvesco (3) (U.S.)   Asthma   Submitted  
Apidra   Type 1 and 2 diabetes   Submitted  
Genasense (4)   Malignant melanoma   Submitted  
Ketek   Respiratory tract infections   Submitted (5)
Menactra   Meningitis (vaccine)   Submitted  
Sculptra   Facial lipoatrophy   Submitted  
Adacel (U.S.)   Booster vaccine for adults and adolescents   Phase III  
Exubera (6)   Type 1 and 2 diabetes   Phase III  
Pentacel (U.S.)   Pediatric combination vaccine   Phase III  
Teriflunomide   Multiple sclerosis   Phase III  
109,881 (new taxoid)   Breast cancer   Phase III  
0673 (direct Factor Xa inhibitor)   Acute coronary syndrome   Phase IIb  
100,907   Sleep disturbance   Phase IIb  
Pralnacasan (on hold)   Rheumatoid arthritis   Phase IIb  

(1)
The nature of drug discovery and development is such that not all products can be expected to fulfill expectations or meet with favorable regulatory response, so it is possible that some projects in clinical development will not result in marketable products.
(2)
New chemical/biological entities (NCE/NBE) only.
(3)
Cooperation with ALTANA Pharma.
(4)
Cooperation with Genta Inc.
(5)
In response to the second FDA approvable letter of January 2003; Ketek is approved in Europe, Canada, Japan, Latin America.
(6)
Cooperation with Pfizer.

         Alvesco (ciclesonide) — A new-generation inhaled corticosteroid with a competitive safety/efficacy profile. Due to its low systemic exposure, Alvesco offers the potential for use in mild to moderate asthma in both pediatric and adult patients. We are co-developing this compound with Altana Pharma in the U.S. and submitted a new drug application to the U.S. FDA in December 2003.

         Apidra (insulin glulisine) — This rapid-acting insulin analogue for type 1 and type 2 diabetes was submitted for U.S. and EU approval in June. This product is expected to complement our insulin portfolio and particularly our basal insulin Lantus .

         Genasense (oblimersen sodium) — the first targeted pro-apoptotic agent specific to Bcl-2, a critical protein in the pathway of cell death (apoptosis). Based on data from the phase III pivotal trial in patients with metastatic melanoma who received Genasense plus dacarbazine, Aventis and Genta completed submission of a new drug application (NDA) to the FDA for approval of Genasense for use in the treatment of metastatic melanoma in December 2003. The FDA has granted priority review status to the application.

         Menactra  — the first quadrivalent conjugate vaccine for the prevention of meningococcal meningitis (four serogroups), was submitted for U.S. regulatory approval for use in children age 11 and older as well as adults in December 2003. An EU submission for ages 2-55 is planned for 2004 while submission for use in children ages 2-11 will follow in the U.S.

         Sculptra  — an injectable poly-L-lactic acid was acquired in May 2002 from Biotech Industry S.A. of Luxembourg, which developed the product under the name New-Fill . The FDA has accepted the filing of a Premarket Approval Application (PMA) and has also granted an expedited review. Sculptra is a dermal contouring agent that provides lift to help restore lost facial volume in people with lipoatrophy. Lipoatrophy is typically characterized by the loss of fullness, shape, and contour in the face.

         Adacel  — a trivalent vaccine protecting adolescents and adults against pertussis, diphtheria and tetanus. Marketed in Canada and Germany, Adacel is currently in phase III development in the U.S.

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         Exubera  — A novel approach to delivering insulin in a dry powder formulation by inhalation. We are developing Exubera for patients with type 1 and type 2 diabetes in cooperation with Pfizer. A phase III clinical program has been completed and additional studies are underway to strengthen the long-term safety data. Regulatory filings in the U.S. and in Europe are planned for the 2004-2005 time frame.

         Pentacel  — a vaccine protecting against five diseases (diphtheria, tetanus, polio, whooping cough and Hib meningitis) for the U.S. market.

         Teriflunomide  — an orally active immunomodulator that is being developed for the treatment of multiple sclerosis.

         109,881  — a new taxoid , is a cytotoxic agent that blocks cell replication by interfering with normal cellular function, leading to cell death. It has shown indications of improved efficacy in taxane-resistant patients.

         100,907  — a selective serotonin (5-HT2a) antagonist with the potential to improve restorative sleep and sleep continuity by reducing the number of night-time awakenings.

         0673  — a direct Factor Xa inhibitor, is a novel agent for the treatment and prevention of arterial and venous thrombosis that very selectively inhibits the plasma coagulation Factor Xa. This new-generation agent offers the potential to inhibit coagulation without the unwanted side effect of bleeding often observed with other antithrombotics. With a fast on- and offset of action, it represents a promising approach for the treatment of acute coronary syndrome.

         Pralnacasan  — an orally administered ICE (interleukin beta converting enzyme) inhibitor. ICE regulates the production of both interleukin-1 beta (IL-1 beta) and IL-18, key pro-inflammatory cytokines that initiate and sustain the progression of inflammation. Inhibiting ICE may be a useful strategy for curtailing damaging inflammatory processes common to a number of acute and chronic conditions.

         Our early-stage pipeline (phase I/II) includes the following key projects:

 
   
AVE-8062   Cancer
VEGF Trap   Cancer
ALVAC -CEA vaccine   Colorectal tumors
ALVAC -gp100 vaccine   Melanoma
ALVAC -HIV vaccine   HIV
Dengue vaccine   Dengue fever and dengue hemorrhagic fever
RSV vaccine   Respiratory viral infections
Next-generation flu vaccine   Influenza
AVE-3933   Alzheimer's disease
AVE-7688   Hypertension
HP-184   Spinal cord injury
NV1FGF   Peripheral vascular disease
Pralnacasan   Osteoarthritis and psoriasis
Anti-inflammatory compounds   Asthma
AVE-0010   Diabetes
DiaPep277   Diabetes
PPAR agonists   Diabetes
Antiobesics   Obesity
BARI   Metabolism (hypercholesteremia)
Guanylate cyclase activators   Angina
SERM   Postmenopausal osteoporosis

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        In 2003, we submitted five new products for regulatory approval, and expanded the range of indications for several of our currently marketed strategic brands.

    Key regulatory achievements in 2003/4

Product

  Indication
  Achievements
Allegra (LE)   Pediatric exclusivity   Approved in the U.S. (January 2003)
Allegra (LE)   Pediatric tablets   Approved in the UK (EU-RMS) (April 2003)
Allegra-D (LE)   Once-daily administration   Submitted in the U.S. (Dec. 2003)
Alvesco   Asthma   Submitted in the U.S. (Dec. 2003)
ActHib   Hib meningitis vaccine   Submitted in Japan (March 2003)
Apidra (NCE)   Diabetes   Submitted in the U.S. and the EU (June 2003)
Arava (LE)   Rheumatoid arthritis – improvement of physical function   Approved in the U.S. (May 2003)
Arava (NCE)   Rheumatoid arthritis   Approved in Japan (April 2003)
Genasense (NCE)   Malignant melanoma   Submitted in the U.S. (Dec. 2003)
Ketek (NCE)   Respiratory tract infections   Approved in Japan (Oct. 2003)
Ketek (NCE)   Respiratory tract infections   Response to 2 nd approvable letter submitted in the U.S. (Oct. 2003)
Lantus (NCE)   Diabetes   Approved in Japan (Oct 2003)
Lantus (LE)   Flexible dosing   Approved in the U.S. (May 2003)
Lantus (LE)   Pediatrics   Approved in the EU (March 2003)
Lovenox (LE)   300 mg multidose vial   Approved in the U.S. (Jan. 2003)
Menactra   Meningococcal meningitis (A, C, Y and W-135)   Submitted in the U.S (December 2003)
Sculptra   Facial lipoatrophy   Submitted in the U.S. (December 2003)
Targocid (LE)   Pediatrics   Approved in Japan (Jan. 2003)
Tavanic (LE)   Prostatitis   Submitted in the UK (EU-RMS) (May 2003)
Tavanic (LE)   Uncomplicated urinary tract infections   Approved in the UK (EU-RMS) (May 2003)
Taxotere (LE)   1 st line NSCLC   Approved in the EU (January 2003)
Taxotere (LE)   Esophageal cancer   Approved in Japan (January 2004)
Taxotere (LE)   Endometrial cancer   Submitted in Japan (November 2003)
Taxotere (LE)   Hormone-refractory prostate cancer   Submitted in the U.S. (Jan 2004) and the EU (Feb. 2004)

        EU-RMS = European Union Reference Member State for Mutual Recognition Procedure

        NCE = New Chemical Entity

        LE = Line Extension

        NSCLC = Non-small-cell lung cancer

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    Alliances

        In order to supplement our organic growth, reinforce our leadership position in key therapeutic areas and complement our in-house research efforts, we are actively pursuing a targeted in-licensing and technology alliance strategy. In 2003, we added several promising drug candidates to our pipeline via collaborations:

      In June 2003, we signed a licensing agreement with Zealand Pharma for the development and worldwide commercialization of AVE-0010 (ZP-10), a GLP-1 (glucagon-like peptide-1) receptor agonist of the exendin class that offers the potential to become a novel way of treating type 2 diabetes. AVE-0010 is currently in phase I/II.

      In July 2003, Aventis and ImmunoGen signed a collaboration agreement to discover, develop, and commercialize novel antibody-based anti-cancer products.

      In August 2003, we signed a licensing agreement with Dainippon for exclusive worldwide development and marketing rights (excluding Japan) for the antidementia agent AVE-3933. AVE-3933 is a potential cognitive enhancer with a novel mechanism of action under development for the treatment of Alzheimer's disease.

      In September 2003, Aventis and Regeneron Pharmaceuticals entered into a global agreement (excluding Japan) under which the companies will jointly develop and commercialize Vascular Endothelial Growth Factor (VEGF) Trap, Regeneron's lead anti-angiogenesis compound. VEGF Trap is currently in phase I clinical trials to test the safety and tolerability of the compound in patients with solid-tumor malignancies and with non-Hodgkin's lymphoma.


Major partnerships and in-licensing agreements

Compound

  Partner
  Indication
Actonel   Procter & Gamble   Osteoporosis
Alvesco   Altana Pharma   Asthma
AMPA kinase inhibitor   Mercury   Diabetes
Anti-inflammatory compounds   Inflazyme   Asthma
Anti-inflammatory compounds   Millennium   Inflammatory diseases
Antibody-based oncology compounds   ImmunoGen   Cancer
AVE-0010   Zealand Pharma   Diabetes
AVE-3933   Dainippon   Alzheimer's disease
AVE-8062   Ajinomoto   Cancer
Campto   Yakult   Cancer
Cathepsin A inhibitors   Celera   Inflammatory diseases
CpG immunomodulators   Coley   Asthma and allergic rhinitis
Copaxone   Teva Pharmaceuticals   Multiple sclerosis
CRF-1 antagonists   Neurogen   Anxiety/depression
DiaPep277   Peptor   Diabetes
Dynepo   Transkaryotic Therapies   Anemia
Exubera   Pfizer   Diabetes
Genasense   Genta   Cancer
Nicotinic agonists   Targacept   Alzheimer's disease
PPAR agonists   Genfit   Diabetes
Pralnacasan   Vertex   Arthritis (RA and OA)
SERM   ProSkelia   Bone diseases
Tavanic   Daiichi   Bacterial infections
VEGF Trap   Regeneron   Oncology

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        We have more than 300 collaborations in preclinical research, development and technology projects with academic and scientific institutions, biotechnology and other pharmaceutical companies. Our major technology alliances include:

Partner

  Area of collaboration
Affymetrix   Microarray technology
Avalon   Cancer gene discovery
Celera   Genomic information
GeneLogic   Toxicogenomics
ImmunoGen   Antibody technology
Incyte Pharmaceuticals   Genomic information
Ingenuity   Genomic information management
Neogenesis   Screening technology
ProCorde   Cardiovascular functional genomics
Universities of Ulm and Freiburg   Pharmacogenomics

        Aventis Pasteur has an established international network of collaborations:

Vaccine

  Object
  Partner
Flu   Delivery systems   Crucell
Viral   High-yield tissue cultures   Crucell, Vivalis
Dengue   Chimeric approach   Acambis
Dengue   Live-attenuated approach   Mahidol University
HIV   Funding for clinical trials   NIH, others
HIV   Adenovirus   Merck & Co.
Cancer   Antigens – research contracts   Leiden University, NCI, Karolinska Institute, Therion, Eos Biotechnology
Basic research   Privileged access to new findings   Institut Pasteur

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Property, Plant & Equipment

        Our principal production plants and manufacturing facilities are located in France, Germany, Italy, Singapore, the UK and the United States.

        The global Industrial Operations function of Aventis supplies approximately 450 brands in 29,000 presentation forms and consists of a network of 53 sites in 29 countries.

        In 2003, Industrial Operations further refined its strategy to support company goals by efficiently ensuring customer service as well as quality and compliance. 2003 saw the implementation of:

      Product teams now responsible for manufacturing strategic brands along the value chain.

      A "New Products Launch" organization to manage manufacturing and production aspects of new products from early stages of development to market launch.

      Industrial Excellence as the strategy of choice to continuously improve management and manufacturing processes at our sites and to increase efficiency and process quality year by year. Through our Industrial Excellence initiatives, we achieved accumulated cost savings of approximately € 158 million in 2003.

      Various quality initiatives to enhance compliance across the site network and product portfolio. These include Aventis global quality standards, Animal Derived Material Exit Program (ADMEP) and CFR 21 Part 11. Each of our sites is continuously investing in quality and compliance training measures.

Headquartered in Frankfurt, Germany, Industrial Operations comprises:

      Active Pharmaceutical Ingredient (API) Operations, which is responsible for global production, process development and bulk sales of active pharmaceutical ingredients. API employs around 6,500 people in nine countries. The products of API cover 80% of our global demand for active ingredients. API produces more than 300 different active ingredients. As at the end of 2003, there were 14 production sites and five process development sites.

      Drug Product Operations (DPO), which is responsible for global manufacturing of drug products, employs around 12,000 people. The plant network consists of nine major sites for the supply of strategic brands and a further 30 sites supporting local operations abroad and specific niche product markets. On January 1, 2004, DP Operations began moving from a regional to a technology-focused structure.

      Global Quality and EHS oversees quality, environmental and safety issues and compliance at Industrial Operations as well as all of Aventis.

      Global Purchasing provides purchasing services for all functions in Aventis.

Our major Active Pharmaceutical Ingredient (API) sites are as follows:

Location

  Size (m 2 )
  Strategic Focus
France        
  Neuville   300,000   Telithromycin
  Vertolaye   200,000   Mature products
  Vitry   210,000   Docetaxel, mature products

Germany

 

 

 

 
  Frankfurt-Höchst (Biology)   44,000   Bioengineered insulins
  Frankfurt-Höchst (Chemistry)   26,500   Fexofenadine, glimepiride, leflunomide, ramipril, telithromycin
  Frankfurt-Höchst (Diabel)   13,500   Inhaled insulin

India

 

 

 

 
  Ankleshwar   180,000   Mature products

Italy

 

 

 

 
  Brindisi   150,000   Mature products
  Garessio   280,000   Mature products

Singapore

 

 

 

 
  Jurong   40,000   Enoxaparin

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Smaller sites are located in Elbeuf, Ploërmel, Romainville and Villeneuve.

Drug Product Operations (DPO) has nine sites with a strategic brand focus:

Location

  Size (m 2 )
  Strategic brand
France        
  Le Trait   122,000   Lovenox
  Maisons-Alfort   23,000   Lovenox

Germany

 

 

 

 
  Frankfurt-Höchst   54,360   Lantus, Insuman, Apidra

Italy

 

 

 

 
  Anagni   160,000   Targocid
  Scoppito   232,774   Allegra, Amaryl, Tritace, Ketek

United Kingdom

 

 

 

 
  Dagenham   231,500   Taxotere, Campto
  Holmes Chapel   161,596   Nasacort AQ

United States

 

 

 

 
  Kansas City   66,100   Allegra, Amaryl, Tritace, Ketek
  Manati, Puerto Rico   38,283   Nasacort AQ

        Larger Drug Product Operation sites with a non-strategic brand, regional/country focus are also located in Compiegne, France; Alcorcon, Spain; Kawagoe, Japan; Laval (Quebec), Canada; Suzano, Brazil; and Ocoyoacac, Mexico.

        Aventis Pasteur has a large industrial operations network with sites located in North America, Europe as well as in emerging markets such as China, Thailand and Argentina.

        The locations and size of our main manufacturing facilities for human vaccines are as follows:

Location

  Size (m 2 )
  Principal use
Marcy l'Etoile, France   93,000   R&D and bulk production of most of the vaccine active ingredients supplied by Aventis Pasteur, largest site for secondary formulation, filling and packaging (FFP)
Val de Reuil, France   40,000   FFP; some major active ingredient production (flu, OPV, rabies, yellow fever)
Swiftwater, Pennsylvania U.S.   66,000   R&D, production of flu, meningitis and pediatric combo vaccines, FFP
Toronto, Canada   30,000   R&D, production of pediatric combos, industrialization of new products

        The policy of Aventis is generally to acquire our own facilities or lease them under long-term leases. The net book value of our property, plant and equipment was € 4,130 million as of December 31, 2003. Our pharmaceutical production plants and manufacturing facilities are in full compliance and generally adequate to meet our needs for the foreseeable future. However, we conduct annual reviews of our production plants with regard to environment, health and safety issues, quality compliance and capacity utilization. Based on this review, we record, if necessary, impairment losses for the modernization, divestment or closing of specific production plants. We are not aware of any environmental issues that we believe could have a significant effect on the utilization of our industrial assets.

        For more information on our Property, Plant and Equipment, see "Item 5. Capital Expenditures" and Note 3 of the Aventis Consolidated Financial Statements included at Item 18 of this Annual Report.

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Markets

        We have a commercial presence in approximately 85 countries and our products are available in more than 170. Our top four markets are the United States, Germany, France and Japan. A detailed breakdown of our net sales by geographic market is presented in Item 5 of this report. In 2003, we generated 62.5% of our core business sales in these countries compared to 63.5% in 2002. Accounting for over 40% of global prescription drug sales, the United States is the world's largest pharmaceutical market and our single largest national market. In 2003, we generated 38% of our core business sales in the U.S. In Europe, our leading markets are France, Germany, Italy, Spain and the United Kingdom. Japan, the world's second-largest national pharmaceutical market, accounted for 5% of our core business sales in 2003.

    Marketing and Distribution

        We have a global sales force of nearly 20,000, including approximately 4,400 representatives in the United States, 6,000 in Europe, and 1,300 in Japan. The precise composition by therapeutic area fluctuates according to business needs and in line with our focus on strategic brands. In our major markets, we deploy dedicated sales forces specialized in areas such as oncology, metabolism and cardiovascular disease. Several surveys in 2003 in France and the United States indicate that Aventis is highly regarded among prescribers and opinion leaders. In France, Aventis ranked No. 1 in terms of quality of information, drugs and research by general practitioners (Pharmaceuticals Survey); has the strongest level of awareness among hospital chemists and second among cardiologists (IMS Health); and is the best-known laboratory among consumers (Pharmaceuticals Survey; "Express" Survey). In the United States, Aventis was recognized as the company "held in the highest regard" by U.S. allergists, endocrinologists, oncologists and managed care medical directors (Scott-Levin, 2002).

        Although specific distribution patterns vary by country, we sell prescription drugs primarily to wholesale drug distributors, independent and chain retail drug outlets, hospitals, clinics, managed care organizations and government institutions. In the U.S., we have secured inventory management agreements with authorized distributors to ensure that inventory levels of our products are consistent with true demand from authorized distributors' customers. These agreements cover more than 90% of U.S. sales revenue for Aventis prescription medications. Our human vaccines are sold and distributed to physicians and to international organizations for donors' markets.

        Aventis deploys e-commerce systems to manage wholesaler and samples orders, wholesaler inventory status, product shipping status, product location transfers, contract bidding awards and payments, and billing.

        It is standard practice for Aventis (as it is for most pharmaceutical companies) to market and promote its products to physicians through a variety of advertising, public relations and promotional tools. We regularly advertise in medical journals and exhibit at major medical congresses.

        As part of our ongoing efforts to leverage technology to enhance communication of product information to customers, we continued our e-detailing programs in our major markets. E-detailing initiatives included "live" real-time web communication between physicians and sales representatives and "virtual," on-demand detailing, including web-based forums in which physicians can access product information any time. We also maintain product Web sites and Web sites dedicated to therapeutic areas to provide information to customers and patients.

        VaccineShoppe is an innovative e-commerce solution that allows physicians to order vaccines products over the Internet. Processing over 114,000 orders, VaccineShoppe currently services 57% of all U.S. orders. Based on the success of VaccineShoppe in the U.S. market, we have implemented this innovative e-commerce channel in other key countries, including Canada and Argentina.

        In the United States, certain products such as the allergy drugs Allegra and Nasacort AQ , the dermatology treatments Penlac and BenzaClin , are also marketed directly to consumers by way of television, radio, newspapers and magazines. Not all products use all media channels. National advertising campaigns are being used to enhance awareness of conditions such as deep vein thrombosis, osteoporosis, uncontrolled diabetes and influenza in markets such as Germany, France and the U.S. In the U.S., Aventis also makes use of direct-to-consumer advertising of Lantus in diabetes magazines.

        In 2003, we took steps to increase the effectiveness of our commercial operations. Global teams began standardizing best practices in targeting customers and customizing sales and marketing approaches based on the needs and attitudes of customer segments. To support these targeting and segmentation initiatives and streamline their implementation in the field, we introduced new business processes and technology,

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including electronic territory management systems, contact centers and data warehousing and analytics. A global task force uncovered opportunities to improve the company's return on promotional investments for our global strategic brands. The goal for these initiatives is to increase efficiencies, minimize cost redundancies and reinvest the cost-savings to grow our key brands.

        While seasonality does not impact the core pharmaceutical business significantly, sales of individual products may reflect seasonal fluctuations in demand. Allegra/Telfast sales are dependent on the severity of the spring and fall allergy seasons. Sales of the recently launched antibiotic Ketek typically increase from October through March, concurrent with the seasonal incidence of respiratory tract infections. In the northern hemisphere, approximately 80% to 85% of flu vaccine sales are generated in the third and fourth quarters.

        We have entered into and continue to form many partnerships to co-promote/co-market certain products in specific geographic areas. Major arrangements currently include an agreement with Procter & Gamble for the osteoporosis drug Actonel ; Altana Pharma for Alvesco ; Yakult for Campto ; Teva Pharmaceuticals for the multiple sclerosis drug Copaxone ; Daiichi for Tavanic and Fujisawa/Sankyo for Ketek .

    Competition

        We operate in a highly competitive environment in which our prescription drugs compete in all our major markets primarily against other branded, patented drugs from large national and international pharmaceutical companies, e.g. AstraZeneca in cardiovascular and oncology, Bristol-Myers Squibb in oncology, Eli Lilly in osteoporosis, diabetes, and oncology, GlaxoSmithKline in oncology and allergy, Merck & Co. in hypertension and osteoporosis, Novartis in oncology, Novo Nordisk in diabetes, Pfizer in antibiotics and allergy, Roche in oncology and Sanofi-Synthélabo in oncology and thrombosis. In the human vaccines business, we compete primarily against Wyeth, GlaxoSmithKline, Chiron and Merck & Co.

        In the U.S. prescription drug market, we ranked 12 th in 2003 (IMS Health, MIDAS MAT Q3/2003) and had a market share of 3.1%. Our principal competitors in this market are Pfizer, GSK, Merck, AstraZeneca, Novartis and Eli Lilly. In 2003, our top-selling products and their market shares in the U.S. were Allegra (35.4%), Lovenox (86.3%) and Taxotere (30.2%). In Canada, Aventis ranks ninth with a market share of 3.5% (IMS Health Canada MAT July 2003), our top three products/market shares were Delix/Tritace/Altace (43%), Lovenox (45%) and Actonel (23%).

        In France, we were once again the number one pharmaceutical company, with a market share of 10.3% (IMS Health, MIDAS MAT Q3/2003). In this market, we also compete with Sanofi-Synthélabo. Our top-three selling products and market shares in 2003 were Lovenox (58.3%), Vasten (16.9%) and Doliprane (15.3%).

        In Germany, we are now the second-largest research-based pharmaceutical company after Pfizer, with a market share of 5.4% (IMS Health MIDAS MAT Q3/2003). In the German market, we compete with the global leaders in the pharmaceutical market, e.g. Pfizer, AstraZeneca, Novartis, Merck & Co., and GSK as well as generic drug companies such as Ratiopharm and Hexal. Our three largest products and market shares are Lovenox (27.8%), Delix (7.1%) and Insuman (21.5%).

        In Japan, where we have a market share of 1.8%, we ranked 20th in 2003 (IMS Health, MIDA MAT Q3/2003). Our key competitors are Takeda, Pfizer, Sankyo, Roche and Daiichi. In 2003, our top three products by sales and their market shares were Allegra (16.6%), Amaryl (9.7%) and Taxotere (12.8%).

        We also face competition, sometimes significant, from generic prescription products, which typically enter the market as patent protection and regulatory exclusivity expire, but they may also gain entry to the market through successfully challenging our patents. Aventis is also subject to competition from over-the-counter and behind-the-counter products, i.e. drugs available without a prescription but only dispensable by a trained pharmacist. This is often the case when, for example, a significant competing prescription drug switches to over-the-counter status, or a competing product sold by prescription in some countries is sold behind-the-counter in a country where our product is sold by prescription only.

        Another competitive issue facing pharmaceutical manufacturers is the increasing incidence of parallel trade, also known as reimportation, which takes place when drugs sold abroad under the same trade name as in a domestic market are then imported into the domestic market by parallel traders, who may repackage and/or resize the original branded product or offer products for sale by alternative means, such as by mail or the internet. The rationale for parallel imports lies in economic advantages arising from different prices for the drugs due to different sales costs, market conditions (e.g. intermediate trading stages) and tax rates or because of national price fixing arrangements. There are indications that parallel trade is

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affecting markets in several regions, including the European Union, the United States, South Africa, the Philippines, India, Russia, Israel, and eastern Europe.

    Regulation

        The pharmaceutical industry is highly regulated. Government laws and regulations control research, development, testing, approval, manufacturing, labeling, and marketing.

    Product Regulation

        Prescription pharmaceuticals must receive regulatory approval before they can be marketed in individual countries. The regulatory requirements involve stringent standards that may vary among different countries. In general, before a drug can qualify for marketing approval, a registration dossier must be submitted to a regulatory authority for review and evaluation. The registration dossier principally contains detailed information about the safety and efficacy of a new medication. It also provides details about the manufacturing process, the proposed production facility and information to be provided to health care providers and/or patients. The registration process can last from several months to several years and depends, among other things, on the laws and regulations of the jurisdiction (country) in which the review takes place, the nature of the medication under review, the quality of the submitted data, and the efficiency of the review procedure.

        The process of developing a pharmaceutical product from discovery through testing, registration and initial product launch typically takes 10 to 15 years and, according to recent research by the Tufts Center for Drug Development, exceeds U.S.$ 800 million. There are three phases to clinical testing of unapproved new compounds in humans:

      Phase I involves the first trial of a new compound in humans. The focus at this phase is an assessment of clinical safety, tolerability, and metabolic and pharmacologic properties. Testing generally is performed in a small number of human volunteers.

      Phase II trials are controlled clinical studies that test the safety and efficacy of the compound in several hundred patients with the targeted disease. The goals of this phase include determining the appropriate dose(s) for further testing and evaluating potential study endpoints, as well as identifying common side effects and risks that may be associated with the drug.

      Phase III trials establish safety and effectiveness for regulatory approval for indicated uses and to evaluate overall benefit-risk relationship. These studies usually include from several hundred to several thousand people.

        The results of these clinical trials are then submitted to appropriate regulatory authorities with the objective of obtaining approval to sell the drug. After approval and commercial launch, additional clinical trials may be conducted to further evaluate the safety and efficacy of the products or to investigate potential new applications.

        The principal regulatory authority with respect to prescription pharmaceuticals in the United States is the Food and Drug Administration (FDA). The FDA administers and executes requirements covering the research and development, testing, approval, safety, effectiveness, manufacturing, labeling, and marketing of prescription pharmaceuticals. Drug safety and efficacy are evaluated pursuant to FDA regulations throughout the life cycle of a product, and in particular at four distinct stages:

    1.
    Preclinical safety assessment;

    2.
    Pre-approval safety and/or efficacy assessment in humans (Phase I, II and III clinical trials);

    3.
    Safety and efficacy assessment during FDA regulatory review (usually completed in 10 to 12 months); and

    4.
    Post-marketing safety surveillance

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        In the European Union, there are two procedures for granting marketing authorization:

      The centralized procedure is compulsory for medicinal products derived from biotechnology and is also available at the request of companies for other innovative products including all new active ingredients. In the centralized procedure the license application is submitted directly to the European Agency for the Evaluation of Medicinal Products (EMEA), in London. After assessing the application, as a rule within the stipulated 210 days the Committee for Proprietary Medicinal Products (CPMP) votes on its acceptance or rejection. Within a further 90 days the European Commission takes a final binding decision. During the decision-making process a Member State can oppose the decision. Approval via the centralized procedure is valid through the European Union without further action and the drug may be marketed within all EU member states.

      The Mutual Recognition Procedure operates by having one country (i.e. the Reference Member State (RMS) carry out the primary evaluation of a new compound. When a first license is granted, the other EU member states then have 90 days to decide if they accept or reject the approval granted by the RMS. If the countries do not follow the decision of the reference country, then the applicant can withdraw the application in these concerned countries or the process can be referred to the CPMP and will be reviewed there. Then the European Commission makes the formal decision based on this evaluation. Taking into account the Commission's decision, each member state will individually take action as necessary to comply with the commission decision.

        In Japan, although the Japanese regulatory authorities now recognize foreign clinical data developed outside of Japan, we still face two particular challenges that make the approval process sometimes difficult for drugs developed outside of Japan. First, the Japanese regulatory authorities request so-called "bridging studies" to verify that foreign clinical data are applicable to Japanese patients. Second, the Japanese authorities require the tests to determine appropriate dosages for Japanese patients be conducted on Japanese patient volunteers. Due to these types of requests, delays of two or three years in introducing a drug developed outside Japan to the Japanese market are possible.

        In recent years, efforts have been made between the European Union, the United States and Japan to achieve shorter development and registration times for medicinal products by harmonizing the individual requirements of the three regions. The process is called the International Conference on Harmonization. For the foreseeable future, however, approval must be obtained in each market.

    Pricing

        In most markets in which we operate, governments exercise some degree of control over pharmaceutical prices. The nature of these controls and their effect on the pharmaceutical industry vary greatly from country to country. In recent years, national healthcare reimbursement policies have become more stringent in a number of countries in which we do business as part of an overall effort to reduce the cost of healthcare. Different methods are applied to both the demand and supply side to control pharmaceutical costs, such as reference pricing, patient co-payment requirements, reimbursement limitations and volume containment measures, depending on the country.

        We believe that the governments in many markets important to our businesses will continue to enact measures in the future aimed at reducing the cost of pharmaceutical products to the public. It cannot be predicted with certainty what future effects the various pharmaceutical price control efforts will have on our pharmaceutical business. These efforts could have significant adverse consequences for the pharmaceutical industry as a whole and, consequently, also for Aventis. Increasing budgeting and price controls, the inclusion of patent-protected drugs in fixed price systems and approved drug lists and other similar measures may continue to occur in the future.

        United States.     In the United States, Medicaid, Medicare and other healthcare programs govern provider reimbursement levels in many cases. The Medicaid program requires that pharmaceutical manufacturers pay rebates to individual states on Medicaid reimbursed pharmaceutical products so that the Medicaid program receives the manufacturer's "Best price." U.S. federal and state governments are actively seeking ways to reduce the costs of pharmaceutical products paid for with federal and state funds. In 2003, legislation was passed that added a prescription drug benefit to the Medicare program. Further attempts to reform Medicaid/Medicare may be expected to modify Medicare and Medicaid, shifting public sector beneficiaries from traditional fee-for-service coverage into managed care plans.

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        France.     In France, the government regulates prices on new prescription pharmaceutical products and price increases on existing drugs. In 2002, the French government introduced another new set of healthcare reforms known as the "Plan Mattei." This plan was aimed at redefining reimbursement conditions and criteria for the pricing of pharmaceutical products through the Drug Pricing Committee, and encouraging generic drug development. A new reference pricing system was introduced in France in July 2003 under which the government will reimburse off-patent products only up to a certain level with patients paying the remainder. In addition, the French health ministry delisted several products deemed to have "insufficient" medical benefit. In return, the government introduced the principle of a "fast-track" procedure to set prices and provide reimbursement for new innovative drugs. This measure could extend by many months the commercialization duration under patent.

        Japan.     The Ministry for Health, Labor and Welfare (MHLW) controls the pricing of pharmaceutical products in Japan. The MHLW determines the drug reimbursement price paid by the National Health Insurance (NHI) to medical institutions. The NHI drug reimbursement price is determined for each prescription drug by the MHLW. The price of a new drug is based on the daily price of comparable drugs, with certain premiums added as necessary. Since the price at which medical institutions purchase drugs can be set at a price lower than the reimbursement price through negotiation with wholesalers, a gap may exist between the selling price and the NHI drug price. Periodically (every 2 years in principle), the MHLW carries out a revision of drug reimbursement prices aimed at bringing NHI prices closer to the market prices.

        Germany.     Since the late 1980s the German government has imposed a wide range of supply- and demand-side restrictions intended to curb the level of overall spending on pharmaceuticals. A reference pricing system that requires patients to pay the difference between the actual price of the prescribed drug and the reference price has been in existence since 1989. In practice, patients are not generally willing to pay the difference. As a result, pharmaceutical companies face the decision either to adopt the reimbursement price or risk a substantial drop in prescriptions. Since 1993, all prescription drugs have been subject to patient co-payments that depend on the pack size. German legislation introduced in 2001 requires the negotiation of pharmaceutical expenditures between the Institutes of Statutory Health Insurance (SHI) and the National Association of SHI-accredited Physicians, and stipulates individual prescription limits for physicians. The legislation is also aimed at increasing prescriptions of generic and imported drugs. In addition, sickness funds and pharmacists have agreed on a quota for sales of imported pharmaceuticals (parallel imports) of 5.5% of the German market for 2002, which was intended to increase to 7% in 2003. To encourage greater use of generics, generic substitution by pharmacists, commonly referred to as the aut-idem law, was introduced in February 2002. Under healthcare legislation that came into effect on January 1, 2003, pharmaceutical companies are required to provide a 6% rebate on innovative medicines which are not covered by pharmacy substitution or reference pricing but are reimbursed by the statutory health insurance. A law on the modernization of the health insurance system came into effect on January 1, 2004. Then — among other things — the industry's obligatory discount to the sickness funds will increase from 6% in 2003 to 16% for one year. In addition the reimbursed medicines will be subject to a 10% co-payment with a minimum of € 5 and a maximum of € 10 per product pack. The price of imported medicines has to be 15% or € 15 lower than the price of the reference product. The drug price ordinance will change.

        Italy.     A series of cost-cutting initiatives were introduced in Italy in 2002, including the introduction of a reference pricing system and a 5% pharmaceutical price cut (which increased to 7% in 2003). A new reimbursement system, which will set maximum reimbursement limits by therapeutic class, became effective in January 2003. Under the new system, government reimbursements will be set at a level determined by the Health Ministry's Pharmaceutical Committee (CUF) based on sales by defined daily dose for all active ingredients. Products priced at levels above the reference prices are no longer be reimbursed unless their prices are reduced. The maximum price reduction per product has been set at 13%. Starting in January 2004, a new public body, the National Drug Agency, will take over all the responsibilities of CUF with respect to prices.

        United Kingdom.     The Department of Health has power, now contained in the Health Act 1999, to limit prices of pharmaceuticals and control the profits of pharmaceutical companies. Against this background, a voluntary agreement called the Pharmaceutical Price Regulation Scheme (PPRS) has been concluded between the industry association and the Department of Health. Within a framework relating to profit (as defined), manufacturers are free to set initial prices but restricted in making subsequent price changes. The current form of the PPRS runs from 1999 to 2004. The National Institute for Clinical Excellence (NICE) is empowered to issue guidelines in relation to therapeutic areas and guidance on the clinical effectiveness and cost

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effectiveness of particular treatments. Guidance by NICE influences the extent to which supply of the product is financed within the National Health Service.

    Intellectual Property

        Aventis invested € 2.9 billion in R&D activities in 2003, and we are committed to rigorously protecting the value of the intellectual property associated with these activities.

        Intellectual property includes patents, trademarks, registered designs and copyrights as well as all of the inventions and innovations of significant commercial value which arise from our drug discovery, development, manufacturing, marketing and other business activities.

        We have obtained patents covering our important pharmaceutical products in major markets and we intend to secure patent protection for products currently under development. We routinely monitor the activities of our competitors relating to our intellectual property, and we intend to enforce our intellectual property rights as necessary.

        In the United States, the Hatch-Waxman Act of 1984 significantly influences the effectiveness of regulatory protection for prescription drugs (other than biological products). This Act assures that a newly approved drug or indication benefits from a statutory period of exclusivity (five years for a new drug and three years for a new indication for an existing drug) during which the U.S. Food and Drug Administration (FDA) will not grant marketing approval to generic competitors, even in the absence of patent protection on the original product. However, the expiration of the five-year exclusivity period does not reduce any patent protection that may otherwise apply. The same Act, however, has greatly accelerated the approval process for generic competitors using the same active ingredients once the statutory exclusivity (also referred to as "data exclusivity") has expired. The Act may actually encourage more aggressive legal challenges to the patent protection of the original products.

        Our portfolio of strategic brands sold in the United States is subject to the overlapping provisions of patent protection and Hatch-Waxman data exclusivity. These products may be subject to increased risk of competition from generics approved by the FDA. In particular, data exclusivity has expired with respect to a number of our products, including some strategic brands, and applications for approval of generic versions have been, or at any time can be, filed by third parties. The following is a description of U.S. patent and data exclusivity coverage of our strategic brands sold in the United States:

Actonel (risedronate sodium)

        Procter & Gamble holds the New Drug Application (NDA) for Actonel that was filed with the FDA. The U.S. patent claiming the active ingredient, risedronate sodium, as a compound expires in December 2013, and patents covering different formulations expire in 2017 and 2018. Non-patent data exclusivity as a new chemical entity and covering various indications expired in 2003.

Allegra/Telfast (fexofenadine)

        Since 2001, Aventis Pharmaceuticals Inc., the U.S. pharmaceutical business of Aventis, has filed patent infringement lawsuits against six companies that sought approval of Abbreviated New Drug Applications (ANDAs) to market generic versions of Allegra capsules, tablets and Allegra-D in the U.S. In addition, one company has filed a "Section 505(b)(2)" application with FDA. Although the exact nature of the Section 505(b)(2) filing has not been disclosed, such applications may be used to seek approval for, among other things, combination products, products that do not demonstrate bioequivalence to a listed drug and over-the-counter versions of prescription drugs. Aventis also brought a patent infringement lawsuit against the Section 505(b)(2) filer. In the U.S., Aventis holds multiple method of use, formulation, process and composition patents with respect to Allegra . Under applicable federal law, marketing of FDA-approved generic fexofenadine HCl products may not commence unless and until a decision favorable to a generic challenger is rendered in the applicable patent litigation or until 30 months have elapsed since the suit was filed, whichever comes first. Regulatory exclusivity for tablet formulations of Allegra expired in 2003. A court date for all pending cases has been set for September 2004.

Amaryl (glimepiride)

        Non-patent data exclusivity for Amaryl in the U.S. expired in 2000. The U.S. patent claiming the active ingredient, glimepiride, as a compound expires in April 2005.

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Arava (leflunomide)

         Arava non-patent data exclusivity was extended to March 2004 due to the approval of our pediatric exclusivity request.

Lantus (insulin glargine)

         Lantus has non-patent data exclusivity in the U.S. until October 2005 (extended from April 2005 due to pediatric exclusivity). The U.S. patent claiming the active ingredient, insulin glargine, as a compound expires in March 2015.

Lovenox/Clexane (enoxaparin sodium)

        Aventis has two patents listed with the FDA which relate to Lovenox/Clexane: U.S. Patent No. 4,692,435 which expires December 2004, and U.S. Patent No. 5,389,618 (" '618 Patent") which expires February 2012. An application for reissue was filed on the '618 Patent in May 2003 seeking modifications in the granted patent. The '618 patent will remain in force as a granted patent during the reissue proceeding. If the application is approved, Aventis believes that the '618 patent could be reissued in an amended version prior to year-end 2004.

        In June of 2003, Aventis was notified by two generic companies that they were seeking approval for generic versions of Lovenox in the U.S. Aventis brought patent infringement suits as to both generics on the '618 patent within 45 days of receipt of the notice. Under applicable federal law, marketing of FDA-approved generic enoxaparin may not commence unless and until a decision favorable to a generic challenger is rendered in the applicable patent litigation or until 30 months have elapsed from receipt of the notice, whichever comes first. A trial date of April 2005 as to both generics has been set. The non-patent data exclusivity (New Chemical Entity) expired as to Lovenox in 1998.

Nasacort AQ (triamcinolone acetonide)

         Nasacort AQ currently has two U.S. formulation patents expiring in 2016. Data exclusivity for this product has expired.

Taxotere (docetaxel)

        The U.S. patent claiming the active ingredient, docetaxel, as a compound expires in May 2010, and a number of other U.S. patents covering this drug expire between 2012 and 2013. Non-patent "data exclusivity" in the U.S. for Taxotere in combination with cisplatin for one indication expires in November 2005. All other U.S. data exclusivity has expired.

Delix/Tritace (ramipril)

        Aventis does not market Delix/Tritace in the United States. In the largest markets for this drug, patents claiming the active ingredient, ramipril, as a compound expire in Germany and Great Britain in 2004, in France in 2006 and in Italy in 2007. Aventis holds other patents in certain of these countries that expire between 2005 and 2008. In Canada, the patent claiming the active ingredient as a compound expires in 2018. However, abbreviated submissions for generic versions of Delix/Tritace have been filed with the Canadian health authorities, thus triggering ongoing litigation over patent infringement and validity. In addition, an ANDA for a generic product has been filed in the U.S., where Aventis manufactures ramipril for the U.S. marketer. If a generic ramipril is approved for marketing in the U.S., it could negatively affect our revenues from manufacturing the product for U.S. distribution.

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Non-Core Business

    Aventis Behring

        The therapeutic proteins business, Aventis Behring, which we consolidate in full, is a global leader in the therapeutic protein and recombinant products industry, providing a wide range of innovative, high quality therapies and unique support services to patients worldwide. Sales in 2003 totaled € 1,008 million, a 5.6% decline from € 1,068 million in 2002 (+3.3% activity variance). An agreement to divest this business was signed with CSL Ltd. of Australia in December 2003. The transaction, which is subject to approval by antitrust authorities, is expected to close during the first half of 2004. As of February 2004, the U.S. Federal Trade Commission and most other antitrust authorities reviewing the transaction had cleared it.

    Rhodia

        As of December 31, 2003, we held a 15.3% equity stake in the specialty chemicals group Rhodia, which was formerly a unit of Rhône-Poulenc and was listed on the Paris stock exchange as well as the New York Stock Exchange in 1998. As a condition for the U.S. and EU approvals of the business combination to create Aventis, a deadline of April 2004 had been set for Aventis to reduce its 25.2% stake in Rhodia to below 5%. In May 2003 we sold 9.9% of Rhodia's share capital to Credit Lyonnais, reducing our stake to 15.3% (27.5 million shares). Subsequent to this sale, we consider Rhodia a marketable investment and no longer account for it using the equity method. On January 30, 2004, the European Commission agreed to replace a commitment obliging Aventis to sell its 15.3% stake in Rhodia with a commitment to divest its 49% stake in Wacker-Chemie within a confidential timeframe of several years. In parallel, the U.S. Federal Trade Commission has extended its separate deadline for our disposal of the Rhodia stake by one additional year, until April 22, 2005.

    Wacker-Chemie

        Following the successful completion in January 2001 of the first stage of an agreement reached in December 2000 to sell the 50% equity stake held by Hoechst AG in Wacker-Chemie GmbH, we indirectly own a 49% equity interest in Wacker-Chemie through Hoechst. Discussions with the Wacker family are continuing concerning the terms and the timing of the second stage of the transaction or to find a mutually acceptable alternative solution.

    DyStar

        Through Hoechst, we hold a 35% stake in the textile dyes business DyStar, which we account for using the equity method. The other DyStar shareholders are Bayer, which also has a 35% interest, and BASF, with a 30% interest. At present, the three shareholders of DyStar are jointly evaluating opportunities to divest their stakes in the company and have initiated a sales process.

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BROKERAGE PARTNERS