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Executives

Justin Victoria - Vice President Investor Relations

Greg Norden - Chief Financial Officer

Joe Mahady – President, Wyeth Pharmaceuticals

Analysts

Tim Anderson - Sanford Bernstein

John Boris - Citigroup

Keyur Parekh - UBS

Steve Scala - Cowen and Company

Seamus Fernandez - Leerink Swann LLC

Chris Schott - J.P. Morgan

David Risinger – Morgan Stanley

David Moskowitz - Caris & Company

Jami Rubin - Goldman Sachs

Wyeth (WYE) Q2 2009 Earnings Call July 23, 2009 8:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Wyeth second quarter earnings call. (Operator Instructions)

I would now like to turn the conference over to our host, V.P. Investor Relations, Justin Victoria. Please go ahead.

Justin Victoria

Thank you, Operator, and good morning, everyone. Thank you for joining us on the call.

We're here to review Wyeth's 2009 second quarter performance and comment on the status of our integration planning with Pfizer.

On the call with me today are Greg Norden, Chief Financial Officer of Wyeth, and Joe Mahady, President of Wyeth Pharmaceuticals. We expect our call this morning to be brief, about 45 minutes.

Before I turn the call over to my colleagues, as a reminder, certain statements that are made today, including our revised 2009 financial guidance, that are not historical facts are, by their nature, forward-looking and involve risks and uncertainties. Actual results may differ materially from such forward-looking information. This has been more fully disclosed in our press release and in our periodic SEC reports, including quarterly reports on Form 10-Q and the annual report on Form 10-K, including under the caption, "Risk Factors."

Now let me turn the call over to Greg Norden.

Greg Norden

Thank you, Justin, and thank you, everyone, for joining us on the call.

This morning, in addition to discussing our financial results for the quarter, I would like to share some observations on the progress of our planned merger with Pfizer. Most important to note is that earlier this week Wyeth shareholders overwhelmingly approved the adoption of the merger agreement with Pfizer. Based on the final vote count, over 98% of shares voted favored the merger, representing approximately 78% of the shares outstanding. This approval was a required step to complete the merger.

The merger still requires the completion of a number of global regulatory approvals. The European Commission cleared the transaction for the European Union at the end of last week. The commission decision included Pfizer's commitment to divest certain animal health assets in the EU. Importantly, no divestitures of human health assets, either marketed products or research projects, were required. The other regulatory reviews that are conditions to closing are well under way and we continue to expect the transaction to close at the end of the third quarter or during the fourth quarter of this year.

The integration planning process with Pfizer is moving along and the Wyeth and Pfizer leadership and integration teams continue to meet regularly. Eight members of Wyeth senior management have already been appointed to assume significant leadership roles in R&D and commercial operations. They, along with all members of the Wyeth management team, are working to ensure a seamless transition of the Wyeth businesses into the combined company post closing.

But our main purpose today is to report and provide our perspective on the performance of our business, so let me review our financial results for the quarter in some detail.

Diluted earnings per share excluding certain significant items for the 2009 second quarter was $0.98, an increase of 8% versus the second quarter last year. I'll refer you to our press release for detail regarding the adjustments for significant items. As usual, my comments will refer to the as-adjusted P&L included at the end of our press release.

While foreign exchange continued to represent a significant headwind, we still delivered solid profit growth through the strong operational performance of core product franchises and effective cost management efforts. Diversity continues to be key to our operational success - diversity of our businesses, our scientific platforms, and our geographic reach.

Overall, Wyeth's worldwide net revenue for the quarter was $5.7 billion, a decrease of 4% versus the 2008 second quarter; however, excluding currency changes, revenue actually increased 2%.

Wyeth has a hedging program in place for certain currencies, but this only partially offsets the unfavorable year-to-year negative impact of foreign exchange on our bottom line. I'll note here that income or costs from our hedging program are recorded in other income, which I'll address in a minute.

Looking at our pharmaceuticals business, revenue for the quarter decreased 4%, but increased 3% excluding the effects of foreign exchange, and Joe will provide more depth on the pharma business in just a moment.

Consumer health care revenue for the quarter was down 5% but adjusting for currency was up 2%, reflecting solid performance from key brands given the macroeconomic environment and the continued movement to private label in this sector.

And revenue for our animal health business was down 9% and up 1% in constant dollar terms versus last year's second quarter. The animal health market remains impacted by the global economic downturn.

Gross margin for the second quarter was 73.2%, in line with the 73% to 74% range for gross margin that we project for the full year. The change in gross margin percentage for the quarter reflected only a negligible impact from foreign exchange.

SG&A for the second quarter decreased 9% and was down 4% after adjusting for currency. A key component of SG&A expense is pension expense. We noted previously that we expect an increased pension expense of approximately $250 million for the 2009 full year due to the decline in market value of pension assets in 2008 as a result of global economic conditions. These incremental pension costs are recorded throughout the P&L - in cost of goods sold, SG&A, and R&D.

Excluding the impact of this increased pension expense and adjusting for currency, SG&A spend for the second quarter would have been down 6%. This shows our continued commitment and execution of our cost management efforts, including our ongoing project impact initiative, efforts that will continue through the year to keep our SG&A costs down. Overall, for the full year we expect SG&A to be down.

R&D spending for the quarter increased 7% and was up 8% excluding the effects of foreign exchange. We still project R&D spend will be up slightly on a full year basis. The second quarter includes increased year-over-year Phase III clinical trial costs and reflects the upfront payment of $21 million to Catalyst Biosciences for our collaboration to discover, develop and commercialize Factor VIIa products to treat bleeding conditions such as hemophilia.

Net interest was expense of $83 million in the quarter versus expense of $19 million in the same period last year, primarily reflecting the impact of the declining interest environment on our cash balances, notwithstanding a significant increase year-over-year in our average cash balances. We noted previously that due to the significant decline in interest rates on our investments, we expect net interest expense to increase substantially in 2009.

Other income in the quarter was $243 million versus $45 million last year, a swing of about $200 million. This reflects the recording of income related to our foreign exchange hedging program in the 2009 second quarter versus corresponding costs in the prior year period. Total royalty income, which is also included in other income, was $145 million in the quarter. This figure includes the receipt of a one-time royalty payment of approximately $108 million related to a former royalty franchise. Last year's second quarter included a one-time milestone payment of approximately $60 million related to Synvisc, resulting in a net difference of about $48 million in the quarter from these one-time items.

And finally, our tax rate for the quarter was 29.3%. As you know, the R&D tax credit was not renewed until the fourth quarter of 2008. The improvement versus last year's second quarter primarily reflects the timing of the R&D tax credit renewal. We continue to expect the tax rate for the year to be between 29% and 30%, an improvement from last year as we begin to recognize increased profit from our more tax-advantaged jurisdictions.

So in summary, Wyeth's second quarter and first half results reflect the ongoing strength of our core businesses and our continued productivity efforts. As a result of this performance and our outlook for the remainder of the year, we are raising our guidance for pro forma diluted earnings per share from a range of $3.33 to $3.53 to a range of $3.48 to $3.58. Although we continue to expect that our proposed merger with Pfizer will occur at the end of the third quarter or during the fourth quarter, this guidance assumes stand-alone operation of our business for the full year. This range also excludes charges connected with productivity initiatives and any transaction costs related to the proposed merger with Pfizer.

So in conclusion, we are focused on running our business and meeting our enhanced financial targets while preparing for the integration with Pfizer.

And with that, I'll turn the call over to Joe.

Joe Mahady

Thanks, Greg.

The results from the worldwide Human Pharmaceutical business in the second quarter were strong, contributing significantly to the earnings growth by Wyeth in the quarter. We're delivering the performance that we had projected for the first half of the year; indeed, even better. Our engines of growth are performing well, our new products are making measurable contributions, and the diversity of our businesses has limited our exposure to some of the global market conditions that we see. Of course, prudently managing our spend has yielded further benefit on the bottom line.

Our biotech and vaccine franchise remain pivotal to our performance. Revenue from our biopharmaceutical and vaccines in the second quarter was $2.2 billion, constituting 46% of total Human Pharmaceutical business revenue.

Our key growth products - Enbrel, Prevnar, and our nutritional franchise - collectively generated nearly $2.3 billion in revenue for Wyeth in the quarter, growing at an 18% rate in constant dollars versus last year's second quarter.

Enbrel continues its position as the world's largest-selling biotech brand. Now Amgen will report their earnings and the North American revenue for Enbrel next week, thus we can't comment in detail on Enbrel's performance in the U.S. and Canada, but we can report an increase of 7% in Enbrel alliance revenue in North America for the quarter.

We continue to generate significant revenue growth for Enbrel in the Wyeth-exclusive markets. Those are the markets outside the U.S. and Canada. We reported Enbrel international revenue of $737 million, up 6% but up 21% over last year in constant dollars. We presented important data for Enbrel in psoriasis, psoriatic arthritis, rheumatoid arthritis, and ankylosing spondylitis this year at EULAR. Importantly, the long-term efficacy and safety profile of Enbrel in these conditions continues to serve as the basis for its leadership position in the category.

Now, Prevnar continues as the world's top-selling vaccine. While we're seeing the availability of GSK's 10-valent pneumococcal vaccine, Prevnar's performance continues to be strong. We achieved a very strong second quarter, with revenue of $784 million, up 13% or a full 24% in constant dollar terms versus the second quarter of last year.

We've expanded to 38 national immunization programs and our next generation product, Prevnar 13, is now under review by regulatory authorities in more than 50 countries worldwide. The FDA has granted priority review status to Prevnar 13 and has assigned an action date for the end of the third quarter. European action is projected around year end. Indeed, we recently received the first approval for Prevnar 13 in Chile.

Prevnar 13 is designed to be the broadest coverage vaccine available for protection of children against pneumococcal disease. We're also developing Prevnar 13 for adult vaccination, with global filings planned for 2010 which we believe will address a real medical need in this older population and provide Wyeth access to a large new commercial opportunity for the Prevnar franchise.

Our Nutritionals business also continues its strong pace, with global revenue of $436 million, up 1% or 9% in constant dollar terms. Constant dollar growth in China, our largest nutri market, was 32% in the quarter. Our capital projects to expand production capacity throughout Asia are proceeding on schedule and commercial product from the first of these expansions has made its way to market. We project solid mid-teens constant dollar growth for the global Nutritionals business for the full year.

Effexor XR and Zosyn Tazocin continue to show the effects of increased generic competition in international markets. Effexor was down 25% and Zosyn down 5% in worldwide quarterly revenue, both performances in line with our beginning-of-the-year projections.

For financial modeling purposes only we have assumed generics for Zosyn in the U.S. in the third quarter. Now, while there is no generic competition for Zosyn in the U.S. to date, we're not changing our modeling assumptions at this time. We are, however, busy supplying the market to meet strong Zosyn demand and will continue to monitor this situation closely.

Our new products - Tygacil, Torisel, Pristiq and Relistor - are showing measurable contributions, with collective revenue in the quarter of about $175 million.

Tygacil is making its mark as an important antibiotic in treating serious infections, with revenues in the quarter of $75 million and strong sales growth. Tygacil's exceeding the launch of every other recently launched injectable antibiotic, including our own Zosyn, in both U.S. revenue and patient uptake. On the development front, our Phase III study with Tygacil in diabetic foot ulcer did not meet its efficacy endpoints, while our hospital-acquired pneumonia program to augment the recently approved community acquired bacterial pneumonia use, continues in Phase II.

Torisel continues to solidify its position in oncology for renal cell carcinoma in patients with poor prognosis. Torisel generated sales of $38 million in the quarter.

Pristiq continues to show progress as an antidepressant in the U.S. market and is beginning to realize measurable sales in the international markets. Worldwide sales have stepped up to $62 million in the quarter and I'd like to remind you that we also remain committed to developing Pristiq for menopausal symptom relief. We're on track to complete our one-year confirmatory safety study in women with vaso-motor symptoms and to submit the data from this study to the FDA in support of our filing for this indication in 2010.

Now, Relistor continues to be reserved for use as a rescue therapy for opioid-induced constipation in the advanced medical illness setting, its current indication. We're exploring additional approaches in the market to gain broader acceptance of its use in addressing intractable constipation in this population and continue to work to develop Relistor for use in additional settings.

Before I close, let me just acknowledge the news from several weeks ago relating to J&J's acquiring the assets and rights of Elan and its collaborative Alzheimer's immunotherapy program with Wyeth. We believe J&J's action speaks as a validation of the work we're doing with this collaboration to bring new therapies to patients for this devastating disease, and we look forward to advancing the development of bapineuzumab and other assets of the program.

So, as we view the pharma business here in July, we delivered solid second quarter results driven by good top line performance coupled with effective management of the P&L. We've actually overcome much of the effects of foreign exchange, global economic conditions and generics and grown the bottom line.

As we view the pharma business that will transition to Pfizer, we're putting large segments of our generic exposure with Protonix, Zosyn Tazocin, and Effexor XR in the past. We have our key growth products delivering excellent top line performance. We generated terrific revenue momentum in our emerging or we call accelerated growth markets. We're making progress with new products in both the commercial and development venues. And, of course, we're busy preparing both our people and our products to succeed in the combined company.

So now let me turn the call back to Justin so we might take your questions.

Justin Victoria

Thanks, Joe.

We've covered a good deal of information this morning pretty quickly, and we anticipate that there will be some questions; however, given the short timeframe that we have this morning for the call, I'd like to ask you to please limit yourself to one question and, if needed, get back in the queue and we'll try and get back to a second generation of questions if we may.

So, Operator, please open the line for questions now.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Tim Anderson - Sanford Bernstein.

Tim Anderson - Sanford Bernstein

I have a single question for you, I guess, which is when we're going to learn the results of your go/no go decision for Phase III for your meningitis B vaccine, which seems like it could be the most important kind of new vaccine product apart from your Prevnar franchise? I think we were due to maybe have that decision made by end of year.

Joe Mahady

Thanks for that question, Tim - thanks for the question and thanks for the answer. You're absolutely correct; we're still targeting to have data from Phase II on our meningococcal B vaccine program - which, as you characterized, is a very significant program for us - we hope to have those Phase II data by the end of this calendar year and make a decision about going forward into Phase III. So hopefully we'll have more information to share later in the year on that.

Tim Anderson - Sanford Bernstein

And all of that information you would release, both Phase II results as well as the decision to go into Phase III?

Joe Mahady

Well, Tim, you know, we'll get the Phase II results ourselves right at the end of the year; you've got to give us some time to evaluate it, make our own decisions. We will get the information out into the public domain in due course, but most important for us is to make the decisions effectively internally and then we'll share the basis of the decision externally.

Operator

Your next question comes from John Boris - Citigroup.

John Boris - Citigroup

Just on Protonix, I think following the appellate court decision to uphold the lower court decision to not issue a preliminary injunction, have you rethought your decision to litigate versus settle with Teva? Just any thoughts there.

And then just one question on bapineuzumab: Can we just get an update on the enrollment on the Phase III program in Europe?

Joe Mahady

Yes, I mean, certainly we have assessed the ruling and we had our own kind of expectations for that. We believe right now the real viable course for us is the litigation route. We have always felt strongly about this case and we are prepared to continue to litigate; don't see settlement as really a primary course right now.

Greg Norden

John, you know, Elan reported early this week that they have, again, reminded you that they've completed the enrollment in the North America study in the carrier population; they're targeting to complete the enrollment in the non-carrier group around the end of this calendar year. We're running about a year behind them, given the time we started and the delays we had last year, but importantly we are no up and enrolling in all of the countries outside of North America. We've cleared the regulatory questions and so we're now actively accruing patients. And, as I say, we're running about a year behind them.

Operator

Your next question comes from Keyur Parekh - UBS.

Keyur Parekh - UBS

Just a couple of quick questions on Prevnar 13. One, given the little bit of wrinkle we've seen with the Phase III data as it relates to serotype 6B, how confident are you of an on-time accrual? And with regard to that, have you been notified of an advisory committee meeting?

And, secondly, how do you expect the ACIP to mandate use on a catch-up dose for people currently vaccinated with [inaudible] 7?

Joe Mahady

Yes, look, there are a number of questions there and I think the first is with respect to 6B. I think the issue there is we believe that the overall package of data supports approval of Prevnar 13 across all the serotypes. The 6B, as you mentioned, did miss the primary determined endpoint. It does meet all of its other predetermined endpoints with 6B, and even the one that it missed in the U.S. trial, it just missed that endpoint. I think you answered a question about are we confident? I think the issue is we're scientifically comfortable that these data support the full range of serotypes and, we believe, support approval.

I think the second question you asked is has there been an advisory meeting scheduled. We know that [inaudible] has an advisory meeting on the calendar, but as yet there is no definite schedule for a Prevnar position on that calendar. Of course, we would be prepared for such if that turns out to be the case.

The third would be with respect to the catch-up dosing; I think you asked the question. I belief is that Prevnar 13 would be suitable for catch up. Again, that's part of what will be discussed not only in the review and approval process as part of labeling, then, of course, would be considered individually by many countries with respect to their national vaccination programs and their guidelines and such. So I think it's something that we feel is appropriate for Prevnar 13 and that's something we will see both from the labeling process and then from the recommending bodies.

Greg Norden

And that would be catch up - Keyur, I understand your question would be catch up including those infants who had received the full potentially three or four-dose course of Prevnar 7 looking to add to their immune protection with a catch up dose of Prevnar 13.

Joe Mahady

Yes, I think those are important elements, but both the switching in mid-series from 7 to 13 and then using 13 as a catch up for infants that have completed a 7 series.

Operator

Your next question comes from Steve Scala - Cowen and Company.

Steve Scala - Cowen and Company

I have a follow up on Protonix. Wyeth said in the Q1 10-Q that the Protonix patent trial could occur prior to the end of 2009. Do you have visibility on the date? When might the appeal of the PI be resolved? And should you prevail in the litigation, could damages, in your view, exceed, say, $2 to $3 billion?

Joe Mahady

Well, Steve, I don't think we're going to talk about what level of damages would be to the dollars. I think we've always said that we believe that the patent is valid; we intend to support the patent and we believe that if the patent is found valid and infringed that there'll be substantial damages to be paid. So I don't think we're going to try and put any quantification on that at this point in time.

Greg Norden

I think while there's no date, the court has indicated that there's the potential for a trial on the liability phase of this before the end of the year, and we would certainly be prepared for that and welcome that.

Joe Mahady

Again, there's no date scheduled as yet.

Greg Norden

And was there another question, Steve? I'm sorry.

Steve Scala - Cowen and Company

Yes, about the appeal of the PI. Do we expect that to happen or are we just going to go to the liability phase of the trial?

Greg Norden

That appeal was denied. We heard back from the court on that. I believe that was discussed in the last Q that the appeal court supported the denial of the PI. We did not overcome that very significant legal burden to get a reversal of that initial decision.

Operator

Your next question comes from Seamus Fernandez - Leerink Swann LLC.

Seamus Fernandez - Leerink Swann LLC

Just a couple of questions on the Nutritionals business internationally, wondering how the supply is shaping up overseas and when the incremental supply is expected to come online?

Joe Mahady

Seamus, we've got three real major capital projects overseas in Philippines, Singapore and a brand new start-to-finish facility in Suzhou, China.

As I mentioned earlier, the first commercial production of those expansions has already been completed and we would expect that really on the back end the largest expansion, which would be China's greenfield site in Suzhou, come onboard around 2011, I think, is the target date for completion there.

We're actually running fairly comfortable right now in being able to supply the markets; probably the first time we could say that now in a couple of years, where we're getting back to a point where we're able to supply Asia in a more comfortable fashion. The other expansions, we believe, are necessary to keep us in that comfort level as we further penetrate the Asian markets and elsewhere in Latin America as well.

Greg Norden

We've indicated, Seamus, that as we complete those three components of manufacturing capacity expansion, as Joe talked about, that'll increase our capacity to support the market anywhere between 60% and 70% versus where we were before we began those programs. So those are very important projects for us and we're pleased to see them on time.

Operator

Your next question comes from Chris Schott - J.P. Morgan.

Chris Schott - J.P. Morgan

Just on Prevnar 13, could you talk a little bit about the level of inventory you've already built here and the dose capacity you expect to have next year? I'm just kind of wondering about if there is in fact a catch up bolus here as discussed at CDC are you in a position to meet demand for that?

Joe Mahady

Yes. I mean, the good news is that the building blocks for both 7 and 13 can be held in the staging process so that you can then shift into the compilation of the final product, so we're very comfortable where we are right now in building inventory that would have been used to either go to 7 and when we make the appropriate switch it goes into full 13 production.

While I'm not going to comment on next year, this year it looks like we'll probably complete somewhere in the neighborhood of 70 to 75 million doses of Prevnar and we would expect further improvement going into next year. We have evaluated the possibility of being able to enter into a rapid and significant catch up as talked about by the CDC to support their pandemic flu efforts, and we believe that we would be able to accommodate much if not all of that need as well.

So we're fairly comfortable with supply as we see it today.

Operator

Your next question comes from David Risinger – Morgan Stanley.

David Risinger – Morgan Stanley

Just going back to the meningitis vaccine, I think Novartis is trying to say that Wyeth's vaccine has a much more narrow formulation, I believe, two proteins versus Novartis' four. In terms of the actual efficacy of the vaccine, could you just comment on your level of confidence going into the data that we're going to be seeing later this year and what your expectations are?

Joe Mahady

Thanks, David. There's a lot to cover in that ground and probably not a lot that I can say at this point in time since, as we noted before, we haven't even seen the Phase II data yet.

But we have a vaccine in Phase II. It is indeed a bivalent vaccine with two surface proteins. We presented some data late last year about the very extensive coverage epidemiologically that that vaccine would provide, an extensive body of information about effectiveness against clinical isolates that the vaccine is designed to and has shown in early work to have a very broad coverage.

But really the proof is in the putting. We need to complete the Phase II program, get the product developed and registered. We need to see what the Novartis product, how that bears out, and we'll see how the products come to market years from now.

So it's really premature to be comparing the products. We don't have any head-to-head data and so it's difficult to say exactly how the products will stack up. We're optimistic about the value of our product. We're optimistic about the design and the efficacy data we've seen, and we're going to continue to forge ahead and, as I say, at the end of the year we'll see some Phase II data.

Operator

Your next question comes from David Moskowitz - Caris & Company.

David Moskowitz - Caris & Company

So a couple questions here, just one real quick on other income. Can you tell us what the assumption is for the 2009 guidance on other income?

And then the second question I have is: With regard to the Prevnar 13 adult indication it seems like there'd be a lot of capacity that needs to be added to the system to be able to supply that vaccine. Can you talk about whether or not you think you'd have that capacity in house or you'd have to go out and contract it?

Greg Norden

I'll take the first question and I guess Joe will take the next.

On other income the only thing I can say is if you look at the first quarter in other income and you look at the second quarter, the key drivers are that based on the hedging program we have this year and the hedging program we had last year, this year we have income from the hedging program and last year we had expense. And you're going to continue to see that probably over the remainder of the year as well.

The other component in other income is royalty income and I talked about that as it relates to the second quarter. For the remainder of the year it's liable to be relatively static year-on-year.

And then the third component in other income is where we record our investment writedowns and as you know last year we had significant writedowns, particularly related to our investments in Lehman Brothers and WaMu, etc. This year we're not seeing that type of writedown.

So without giving very specific guidance, other income for the year is pretty much going to follow the trends that we saw in the first and second quarter, okay? We're going to have a lot more other income this year than we did last year and it's pretty evenly spread over the four quarters, so that’s pretty much what's going to drive that.

David Moskowitz - Caris & Company

So I should expect $100 to $200 million per quarter going forward?

Greg Norden

I'm not going to give the exact numbers, but I think you should expect to see similar trends in the third and fourth quarter to what you saw in the first two quarters, yes.

Joe Mahady

On the Prevnar 13 supply as it pertains to adults, we're using now and have the results of our about $1.5 billion investment over the years in expanding both the infrastructure, the capacity and the processing for Prevnar to come to Prevnar 13 supply. We've got our Andover, Sanford, Pearl River and Grange Castle sites involved.

We look at the ability to supply Prevnar 13 for infants and adults as within kind of the footprint of what we can do right now with our existing structure and our existing plan, the improvements in both capacity and process. If we were to go remarkably beyond that to other developing countries and ANC commitments, that might entail a more significant structural investment, but right now we feel pretty comfortable that we have a good plan in place to accommodate both the infants and adult indications.

Operator

Your next question comes from Jami Rubin - Goldman Sachs.

Jami Rubin - Goldman Sachs

Joe, I'm wondering if you can comment around the dynamics of Enbrel? Both sales in the U.S. and overseas continue to be strong and we did see a nice sort of reacceleration in sales in the U.S. Can you talk about the dynamics of the TNF-Alpha? Obviously, Enbrel struggled in the first quarter on inventory issues and reimbursement concerns. Maybe if you can provide us some color on what you're seeing. There's also new competition.

And if you could also talk about the reimbursement environment in Europe. Is there any reason to be concerned about the risk of pressure on price in this category going forward just because of restrictive government budgets?

Joe Mahady

Jami, that sounds like a request for a brand review, but we'll take a shot at it.

Look, it was a very good quarter, I think, for Enbrel. As you noted, some of the improvement in Enbrel is a function of what's going on in the market, and a portion of it was really getting back to a more appropriate comparison with the second quarter of last year. As you noted, first quarter Enbrel had to work against the change in wholesaler dynamics that occurred back in the first quarter of '08, so second quarter we're running a more trued-up kind of comparison.

There was a little bit of improvement in the U.S. market with some factors. We saw a little improvement in the quarter with respect to visits to rheumatologists. We saw a little improvement in the number of reversals of claims at the pharmacy counter. I'd stop short of calling either one of those changes terrific improvement; it was some minor drifting back to better results. And we would hope that if the economy solidifies we'll see that improve further.

These are patients that really can only stretch their medicine so far or go without medicine, so I think ultimately the first quarter's always a tough one because of the change in managed care plans and new [inaudible] programs. Some of that has worked its way out and we see good activity in the U.S.

Elsewhere in the world we see pretty terrific performance from the TNF category and particularly for Enbrel. There's a lot of competition; you noted it. Certainly, Humira probably the most significant of that competition in Europe. We see new entries offering some options with respect to either presenting a little better data as they do in efficacy in psoriasis or other choices that might suggest a little better profile on convenience.

What we think still stands kind of firmly in Enbrel's spot is the fact that many physicians still consider the selection of the biologic as a significant decision. In a nutcase, Enbrel's long-term safety data and actually maintaining its long-term efficacy continue to stand well in support of Enbrel's selection.

We have not seen remarkable change or pressure on reimbursement in the rest of the world. We're really comfortable where it is. Certainly, we pay significant attention to that, but we believe Enbrel still offers an incredible value and not much else like that, but right now we have not seen any kind of diminution of realized price through most of the world.

Operator

Your next question comes from John Boris - Citigroup.

John Boris - Citigroup

Just one for you, Joe, on Prevnar in international markets. If we look at the sequential growth last year on Prevnar it was about 13%. This year it was much, much more modest. Can you just address some of the economic factors that might be going on in ex U.S. markets that may be resulting in a slowing in that sequential growth and/or competitive variables, most notably from GSK in that they have at least indicated that they've rolled out in 30 markets globally. So any commentary there would be helpful.

Joe Mahady

Yes, a couple of quick points. Number one, we are working off a much more significant base in the picture. We've got a lot of foreign exchange that's in the head-on comparison that's coloring a little bit the year-on-year.

I'll be very clear, in the quarter we don't see much impact at all from the GSK product. In our projections, I think, as we have made them before and reiterate them now, we don't see significant impact from them in our projections for the year for Prevnar.

To some extent there might be some economic conditions worldwide which on a country to country basis come into play, but, quite frankly, many countries continue to queue up, some in the second quarter where they have implemented NIPs, and we have others that we believe are properly queued to take the step to NIP in the reminder of 2009.

So the global economic picture has really not been a major impediment for the Prevnar franchise.

Justin Victoria

So as we look to close today let me note that Wyeth has delivered yet another strong quarter in challenging times, and we'll continue our efforts to deliver strong financial results for the balance of the year, as reflected in our increased guidance and as we further our efforts to plan for a successful integration with Pfizer.

Thank you all for joining us on the call this morning and thank you for your support of Wyeth. And, Operator, we can close out the call now.

Operator

Thank you.

Ladies and gentlemen, this conference will be made available for replay after 10:00 a.m. today through July 30, 2009. You may access the AT&T teleconference replay system at anytime by dialing 1-800-475-6701 and entering the access code 103866. International participants may dial 320-365-3844, again with the access code 103866. Those numbers again, 1-800-475-6701 and 320-365-3844, with the access code 103866.

That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

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