Wyeth Q1 2008 Earnings Call Transcript

Wyeth (WYE)

Q1 FY08 Earnings Call

April 22, 2008, 08:00 AM ET

Executives

Gregory Norden - Sr. VP and CFO

Bernard Poussot - President and CEO

Joseph M. Mahady - Sr. VP

Justin R. Victoria - VP, IR

Analysts

David Risinger - Merrill Lynch

Tim Anderson - Sanford Bernstein

John Boris - Bear Stearns

James Kelly - Goldman Sachs

Catherine Arnold - Credit Suisse

Jami Rubin - Morgan Stanley

Seamus Fernandez - Leerink Swann

Roopesh Patel - UBS

Steve Scala - Cowen and Company, LLC

Anthony Butler - Lehman Brothers

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Wyeth First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions]. At this time I would like to turn the conference call to your host Mr. Greg Norden. Please go ahead sir.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thank you operator. Good morning every one and thank you for joining us on the call. We are here to review Wyeth first quarter 2008 performance. On the call with me today are Bernard Poussot, President and Chief Executive Officer of Wyeth; Joe Mahady, President of Wyeth Pharmaceuticals and Justin Victoria, Vice President of Investor Relations.

Now as a reminder, certain statements that are made today 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 we have fully disclosed in our press releases, 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. And let me turn the call over to Bernard Poussot.

Bernard Poussot - President and Chief Executive Officer

Thank you, Greg, and thank you all for joining us on the call this morning. In January, I outlined for you a series of key steps for Wyeth to be successful in 2008.

I said we needed to first secure new product approvals and prepare for their successful launches; second, grow revenue in our core businesses; third, address the platonic situation; fourth, gain traction on project impact; fifth, defend the bottom line and sixth, create greater value for our stock holders.

I'm pleased to say we are doing just that and starting to achieve the objectives I have set for Wyeth. As we expected, our primary engines for revenue growth Inderal, Prevnar and nutritionals continued their strong performance. It's fair to know that we also show positive benefits from foreign exchange. As U.S. prescription growth slows for many branded products in our industry, growth and expansion in international markets become more important. Wyeth's business is in very good shape to take full advantage of that trend as we globalize the company over the last years. And this is now reflected in the fact that more than 50% of our pharma revenue in the first quarter came from international sales.

We are seeing strong growth in our business in key countries and regions including China, Europe and Latin America. In our Consumer Healthcare business and Fort Dodge Animal Health business are following the same pattern of strong international growth. Critical to the core objectives I outlined in January, I'm happy to confirm three important new product approvals so far this year. In February, we received FDA approval of Pristiq for depression. We are confident that with its ease use, Pristiq will become an important new option in the growing SNRI category for depression once is it is fully launched in the next month. And Joe will talk more about Pristiq later.

We also received Canadian approval of Relistor SubQ, methylnaltrexone for OIC in patients with advanced illness receiving palliative care and we remain confident about U.S. and European approvals shortly. This is the first product ever approved to correct what remains a debilitating side effect of opioid use.

And the third product is Xyntha, our enhanced factor VIII product for hemophilia A that is fully animal protein-free throughout its production and formulation. Xyntha was approved in the U.S. in February. It will contribute to our hemophilia franchise, a franchise that we expect to reach $1 billion in annual sales in 2009. So we are gratified to have these three approvals in the first four months of the year and are excited about the prospects for each of these new products.

On our last conference call, I discussed also our strategy for the Protonix franchise and how we intended to address the at risk launch of generic competition to Protonix. The impact of the Teva and Sun generic launches is significant for us this year and in line with our forecast. So let me summarize our position and guiding principles here.

The patent at issue in this case is the kind of fundamental, intellectual property on which our industry is based. We will vigorously defend our patent and pursue our patent infringement case against Teva, Sun and any other generic manufacturers, including our claim for permanent injunction and substantial damages. We have requested a jury trial in the case. Based on recent feed back from the court, we now expect the trial will be in mid-2009.

In January, I talked about the initiation of Project Impact, a company wide program responsive to the Protonix situation. It was designed to first manage our costs and second to take a hard long-term strategic look at transforming the business. We previously announced a 6% head count reduction for 2008, with project impact. We began these near term cost management efforts at the end of last month, with the announcement of a 1200% reduction in our pharmaceutical and consumer sales proceeds. We considered this a necessary step to respond to the challenges presented by the at risk launch of generic competition for Protonix. As you know, it is always difficult to make such decisions, but we have to respond to our changing environment. Joe will comment further in a few minutes on our new sales force deployment. There is much more to come from Project Impact of this program picks up speed later this year, and we expect to talk more about this with you as the year on progress.

All in the senior commercial team of Wyeth is in place, product approvals are being achieved, cost reductions and process improvements are gaining interaction and we have delivered the bottom line for the first quarter. As you can see from our announcement this morning, we are off to a good start for the year delivering earnings consistent with our plan combining strong growth of key franchises while absorbing the significant loss of revenue and profits from Protonix.

Let me wrap up by noting a key milestone on the near term arising. And that's the reporting of the Phase II study of bapineuzumab in Alzheimer's disease. We plan to share top line results of this study with you by mid year and are targeting the full data presentation for late July at ICAD. We will remind you that Alzheimer's disease is a complex and formidable challenge in our research programs contain inherent risks.

Wyeth and Elan made the decision to begin our Phase III program late last year with the support of regulatory authorities and based on a composite of the following information. First, the interim review of data from this Phase II study last year; second, information learned from our other immunotherapy programs and third, the absence of effective treatments for this terrible disease. Wyeth, Elan, the medical community and you, we all are looking forward to the full final Phase II analysis to be completed and announced by mid-year.

So there are several reasons, why we are enthusiastic about the positive changes we are making at Wyeth this year and about our opportunity to grow our business for the long term: Our performance, our team, our science, our accomplishments so far this year and our prospects.

So with that introduction, let me turn the call back to Greg for a review of our first quarter financial results.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Bernard. Turning to our financial results, diluted earnings per share on a pro forma basis for the 2008 first quarter was $0.94, the same as last year. I'll refer you to our press release for details regarding the pro forma adjustments and my comments this morning will refer to the as adjusted P&L included at the end of our press releases.

Net revenue for the quarter increased 6% to $5.7 billion, and excluding the effects of foreign exchange; our increase in revenue was approximately 1%. Pharmaceutical revenue also grew 6% and excluding the effects of foreign exchange 1%. With the exception of Protonix, we saw a good growth across most of our portfolio of marketed products. Core franchises such as Enbrel, Prevnar and nutritionals experienced strong growth; we expect those trends to continue, consistent with our guidance given earlier in the year.

For certain products such Effexor and Premarin, year-over-year comparisons reflected the impact of price increases as well as 2007 first quarter supply constraints. For the balance of the year, we expect year-over-year growth for these two products to moderate. Joe will discuss our pharma business in more detail in a few minutes.

Key brands such as Caltrate, Centrum and Advil drove Consumer Healthcare revenue growth of 10%. Excluding the effects of foreign exchange, Consumer Healthcare revenue grew 4%. International consumer revenue growth was very strong in the quarter, up 20% and we continue to expect high single-digit growth in our consumer business for the year.

While first quarter revenue for Animal Health was comparable to last year and down 6% excluding the effects of foreign exchange, we continue to expect strong growth for the full year as we begin to benefit from ProMeris, our newly introduced flea and tick product.

Gross margin for the first quarter was 73.8%, primarily reflecting a favorable product mix and we continue to expect gross margin to be in the 72% to 74% range for the full year.

SG&A growth for the first quarter was 8% versus a prior year and 3% excluding the effects of foreign exchange. This year-over-year change is largely due to the particularly low SG&A spend in the 2007 first quarter. Regarding SG&A expenses for the year, I'd like to confirm the guidance that I gave less quarter and that is that SG&A expenses are projected to decrease approximately 2% versus 2007 levels excluding the effect of foreign exchange. This reflects reductions in marketing, in selling cost directly related to Protonix as well as other savings we are beginning to realize from project impact.

We are on track to achieve head count reductions of approximately 4% by the end of the second quarter and 6% by the end of the year. These include reductions across the entire organization on a world wide basis. The effects of these and other actions will begin to be more noticeable reflected in the quarter-to-quarter comparisons as the year progresses.

R&D spending for the quarter increased 9%, primarily reflecting higher clinical trial costs. Similar to SG&A, the year-over-year increase in this line item also was impacted by relatively low spend in the 2007 first quarter. For the full year, we project R&D expenses will be up slightly versus 2007 as we continue investing R&D in the same time begin to realize the savings from our efficiency initiatives.

Net interest was income of 27 million in the quarter versus 15 million in the first quarter of last year. This increase was predominantly due to higher cash balances as well as the fact that the rate cuts taken in the past several months had not yet had a significant effect in our income earn from our cash in cash equivalents. However, as we move into from the second quarter on the remainder of the year we expect declining interest rates to have a significant impact on this line item. Other factors affecting net interest also include the timing of remaining diet drug payments and the timing and extent of share repurchases. I'll note here that we purchased approximately 7 million shares in the first quarter. As a result of declining interest rates and the other factors I just mentioned we expect net interest to shift to an expense for the balance of the year consistent with our guidance.

I also would like to state that where recent actions by the Fed will have a market impact on our net investment income, we do expect to continue to generate strong cash flow in 2008 and beyond.

Other income in the quarter was $39 million versus $100 million last year, primarily reflecting declines in growth income in other items that we projected earlier in the year. Our tax rate for the quarter was approximately 31%. As most of you know, the R&D tax credit has not yet been renewed for 2008.

For purposes of about full year of 2008 tax rate, we are assuming that the R&D tax credit will be renewed but we can't predict when or if the pending legislation will be finalized. There fore it is possible that we will not record a benefit from the credit until late this year. The full year benefit for Wyeth would be approximately $70 million. And we continue to expect our 2008 full year tax rate to be approximately 29% to 31%.

Turning to guidance for the 2008 full year, we continued to target pro forma diluted earnings per share in a range of $3.35 to $3.49, a decrease of 1% to 5% versus 2007. This estimate reflects the impact of generic Protonix and certain assumptions about generic competition later this year for Zosyn and Effexor. Excluding the effects of loss Protonix revenue and profits, it also represents a strong year-over-year performance driven both by revenue growth in our base business and a continued focus on our cost of doing business. The 2008 estimated pro forma as it excludes any potential restructuring charges resulting from the company's productivity initiatives.

So in summary the first quarter results met our expectations. Looking ahead, foreign exchange had a significant impact on our growth and if the current weakness in the dollar versus other currencies continues at the same level it is today would favorable affect the balance of the year.

The Protonix situation remains very fluid and as for Effexor and Zosyn generic competition, we haven't seen anything so far that would cause us to materially change the assumptions underlying our original 2008 guidance. We'll talk more about these issues as the year progresses and we'll revisit our guidance only if we see a significant change in our outlook.

With that, I'll turn the call over to Joe Mahady.

Joseph M. Mahady - Senior Vice President

Good morning. The pharma business as a whole had a solid growth by the robust pharmaceutical revenues at 6%. International performance was particularly strong with revenue up 24% versus last year's first quarter. The biotech business continues to show strong growth. Biotech revenues for Wyeth were just over $2 billion in the quarter, up 18%.

Now let me turn to some of our key business franchises. Enbrel started the year strong with international revenues of $606 million, up 36% in the quarter.

Now Amgen will report first quarter Enbrel U.S. and Canadian sales later this week. I'll remind you that, as they noted on their year-end conference call, 2008 first quarter U.S. sales will reflect Amgen's change to a wholesaler distribution model which began in January. And that is reflected in our first quarter alliance revenue. Amgen had estimated this would result in wholesaler inventory build of about 10 days of sales.

Enbrel worldwide is now the number one biotech brand in reported revenue and the number five prescription product overall in the world. Now despite emerging competition in the category, opportunity for growth remains with many patients who qualify for biologic therapy according to accepted treatment guidelines but who have yet to realize the benefits of such therapies. And the long standing safety record of Enbrel remains a hallmark of its profile.

Prevnar posted a strong quarter, as we expected, after some changes in government ordering patterns that had an impact on the preceeding quarter. Such quarterly fluctuations relating to government ordering patterns will continue with Prevnar. In this quarter, revenue was $706 million, up 14% and international performance was particularly strong. The U.S. performance reflects the absence of any CDC stockpiling purchases in the 2008 first quarter. 250,000 doses had been purchased for the stockpile back in the 2007 first quarter. We now have 23 national immunization programs in place for Prevnar, now including Spain, Bahrain, Uruguay and several additional countries have also announced intentions to begin programs as well. These actions reflect the continued emerging data on both the economic and public health impact of Prevnar.

Revenues for our nutritional business were $411 million in the quarter, up 19%. We saw outstanding performance in key emerging markets with China up 50% and the Middle East up 40%. In the first quarter, we also announced the initiation of construction of a state-of-the-art nutritional manufacturing facility in China. And expansion continues in our manufacturing sites in the Philippines and Singapore.

On Protonix, in an effort to mitigate the effect due to the at risk launch of generic competition, we decided to launch our own generic. Our own generic product holds a meaningful share of that generic market and is priced in line with generic competition. We are also continuing to market and supply the branded products to certain customers and we are prepared to continue to supply both products for the foreseeable future. It is important to remind you that the Teva and Sun products continue to be substituted for Protonix on an everyday basis. Our efforts and our direction for the balance of the year will reflect to some extent the future and unknown actions of Teva and Sun in the market.

Effexor family revenue in the quarter was a little over $1 billion, up 15%, reflecting the impact of price increases as well as first quarter 2007 supply constraints. For the full year 2008, we expect Effexor revenue to be comparable to 2007. In that projection is the impact which we expect to be modest of the potential introduction of non-AV rated generic manufacturing tablets in the back half of the year. Additionally, the base patent for Effexor XR will expire in most European countries at end of this year. Another factor that will cause Effexor sales to moderate as the year progresses in the introduction of Pristiq. We intend to shift our commercial emphasis in the depression space to Pristiq. Physicians will keep well controlled patients manufacture Effexor XR. However, all of our emphasis from new patient starts will focus on Pristiq for depression.

We are very excited about the opportunity for Pristiq. As you know, Pristiq will compete in the growing SNRI category in the depression market. Pristiq has unique characteristics that will distinguish it in this class. We've been very pleased with the approval labeling here in the U.S. which prevents Pristiq with a simple, single, once a day 50 milligram dose as both the starting dose and the effective dose for most patients.

Conversely, most SNRI therapy begins at sub-optimal doses. Now minimal hepatic metabolism yields consistent pharmacokinetics in both fast or slow metabolizers with Pristiq and Pristiq also has a very low potential for drug-drug interaction. All this makes it a convenient, easy to used product with a very good pattern of tolerability at the 50 milligram dose. Our pricing of Pristiq should also make it attractive to payers. Pristiq will have a flat price of $3.41 for both the 50 and 100 milligram tablet, and that's about 20% lower than the average daily cost of Effexor. We have recently posted our Pristiq low dose depression studies on clinicalstudyresults.org. They include the pivotal low dose studies that supported the NDA and are the basis of the FDA's determination of efficacy and tolerability profile at Pristiq 50 milligrams. And one other study was posted that included both Pristiq and [indiscernible] where Pristiq did not separate from placebo with statistical significance.

Let me tell you where we are in the launch of Pristiq. We are currently introducing it to select psychiatrists using the approved package insert. Product shipments to wholesalers and pharmacies are starting this month and we are clearing our introductory promotion materials with the FDA and will begin a full launch in May.

Now on another front, Zosyn had a strong quarter with revenues of $342 million, that's up 22%. For purposes of our pro forma earnings guidance, we had assumed that we would see European generic competition for Zosyn at the beginning of the second quarter. And while there have been some approvals in select markets, there is not yet significant generic competition. Our guidance range also reflects an assumption that generic competition would emerge for Zosyn in the U.S. around mid year.

The Premarin family revenue showed growth in the quarter of 15%. This is due to the impact of price as well as the supply constraints for the product that existed back in the first quarter of 2007. We expect to see moderation of this growth rate for the coming quarters with the effective price slightly offsetting decline in demand.

I hemophilia franchise including BeneFIX and ReFacto showed strong growth with collective revenues of $239 million in the quarter, up 35%. BeneFIX growth reflects our reacquisition of full global rights to the product that occurred back in 2007. ReFacto franchise will benefit from the approval of Xyntha. Its improved manufacturing process will eliminate risks of viral contamination, increase product view and allow us to compete in the most advanced segment of the factor VIII market.

Several of our new products continue to show solid starts. Tygacil is showing strong domestic growth and we look forward to launching in as many as 20 additional international markets in the second and third quarters of this year. Torisel is also starting off quite well. Revenue in the quarter was $21 million and we are just launching Torisel in the European markets after year-end approval. U.S. market share is now at nearly 13% with good usage in first line patients and physician satisfaction appears to be solid with the product.

Let me also talk about Relistor SubQ; that's methylnaltrexone for the opioid induced constipation in patients with advanced illness who are receiving palliative care. We are pleased with the Canadian approval and the resulting labeling and profiling of this product. We continue to expect completion of the U.S. review shortly and the European review shortly thereafter.

As you know, the first phase of this study with the IV formulation failed to meet its primary end point in the postoperative area setting. We need to see the results from the second Phase III IV study at mid year before deciding on the path forward for the IV formulation. And I will remind you that we are looking at a potential for broader use of Relistor in opioid induced constipation with oral formulations in Phase II and/or additional indications for the existing subcutaneous formulation. We expect approval of SubQ Relistor for opioid induced constipation be only the first of a number of successes to come for the methylnaltrexone franchise.

Now let me finish with a few comments on Project Impact and specifically describe the recent sales force changes. At the end of the quarter, we announced a reduction in the company's selling effort by more than 1200 personnel with about 1000 related to the primary care selling effort for Wyeth pharma. The balance is from the elimination of Consumer Healthcare products' medical sales force. Clearly, the key impetus for this change was the at risk launch of generic competition for Protonix. Protonix consumed a significant portion of our selling effort. With the availability of an AV rated generic product, there was no basis for maintaining that same sales effort.

Now let me just cover a few other issues on the primary care sales force. We believe that we remain in primary care with significant capacity to deliver on our primary care opportunities. Pristiq will become our number one product with the primary sales force with virtually all of our Effexor capacity being shifted against Pristiq. The remaining primary care capacity will be focused on the Premarin family, Protonix and in selective support of Relistor. Outside of primary care, we believe we are right sized for all of our opportunities in specialty, hospital, trade and managed care markets.

So let me close here. Given a substantial loss of revenue and profits resulting from the at risk generic competition for Protonix, we are pleased with the balance of our portfolio and our start to the year. And we are especially excited about our new product launches and anticipate that they will prove to be valuable additions to our portfolio.

Now let me turn the call back to Greg who will handle our questions.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Joe. We have covered a lot of ground this morning and we know you'll have questions. To allow as many as listeners as possible to participate in the Q&A, please limit yourself to one or at the most two questions. Operator, you can open the line for questions please.

Question And Answer

Operator

Thank you. [Operator Instructions]. We will take our first question in cue from David Risinger, Merrill Lynch. And your line is open.

David Risinger - Merrill Lynch

Thanks very much. I have a couple of questions. First of all, could you comment on you longer term cost savings objectives and could you provide some more details about how you chose a 6% headcount reduction? And how we should think about that 6% figure, why that isn't 12% for example? And second, could you discuss the gross margin strength in the quarter in a little bit more detail. It was obviously quite strong sequentially versus the fourth quarter and versus the year ago first quarter despite the generic effects or hits if you could provide a little bit more color on that, that would be helpful? Thank you.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks David. This is Greg, I'll take that. Just on the headcount reductions, what we said was -- we are going to go for 46% this year and last let me just backtrack. On Project Impact, we basically said we got three phases of Project Impact. Phase I is cost reductions, reduction in work force and really to eliminate and this cost expenses, more in the short term. Phase II is to change how we operate improved performance within the current business model in our current structure and Phase III is a much more strategic, long term look at what should our business look like, what should the footprint of the business look like in over the course of next two or three years. So the headcount of -- the 46% headcount is really part of phase I, okay we are looking for 4% reduction by the end of the second quarter, 6% by the end of the year, we also will Probably add back select head count in high growth areas in areas around the world such as China and other emerging markets that are growing very rapidly and then what we did also say and we continue to say is that we look for headcount reductions up to 10% over the next couple of years as we get more into that peer to more profound aspects of project impact.

On gross margin, quite simply, in the first quarter, you look at the strong growth of Effexor and Premarin, which both are very high margin products. And that is the single biggest reason for the higher margin in the first quarter versus other quarters and for the rest of the year.

Okay, we'll take the next question please.

Operator

Sure, that will come from the line of Tim Anderson of Sanford Bernstein. Please go ahead.

Tim Anderson - Sanford Bernstein

Thank you. A couple of questions. On the upcoming bapineuzumab data, just hoping you can reiterate the timing of the press release. My impression was that that would come out in June, and hoping you can comment on the odds of seeing statistically significant efficacy results from the Phase II trail. Given the low number of patients in each arm, the slow progression of the disease, it seems highly unlikely that you would be able to show statistical significance. And then a quick question on your other pharmaceutical revenue line. In the U.S., you reported 23.5 million for Q1; that was down quite a bit from prior quarters. And can you talk about what goes into that line and what to expect from here?

Justin R. Victoria - Vice President, Investor Relations

Tim, good morning, this is Justin. I'll start with the questions on bapineuzumab. There has really been from Bernard's remarks, there has been no change to our plan for communications of the Phase II results. As we and Elan have noted, we are targeting presentation with full data at ICAD. We are also targeting a press release with top line efficacy and safety conclusions at mid year. Exactly the timing of that press release would depend upon the timing of our analysis of the results. So exactly when and if it's specifically in June is yet to be determined between ourselves and Elan.

The likelihood of statistically significant results is something that we are just not going to comment on at this point in time until we see the results. You'll note that it's a... for Phase II, it's a relatively large study. But overall, it's relatively small, it's 240 subjects enrolled across four dose cohorts. And again, you've got to remember that the purpose of Phase II is really to define progress into Phase III. We have a much more robust program in Phase III with 4000 subjects overall. And the purpose of the Phase II study is to inform our decision to go forward into Phase III. Greg, you have a comment on the other income.

Gregory Norden - Senior Vice President and Chief Financial Officer

Yes, Tim, we'll get to with a lot more detail on that but the big side in there its Inderal running against Inderal the first quarter last year. Herceptin, we manufacture Herceptin for Genentech and that runs through other revenue. So it's a whole variety of things seems more than that which we can get to you off line, but these are the two biggest items affecting the U.S. other products. Okay, operator, we'll take the next question please.

Operator

Thank you sir. That will come from the line of John Boris with Bear Stearns. Please go ahead.

John Boris - Bear Stearns

Thanks for taking the question. Joe, just wanted to get a little bit of clarity on what could potentially be the link launch with your P&L label, it seems pretty straight forward at least the label does. Second question just has to do with I think you pointed out some of the features on the, on the product can you just provide some color as far as what positions for you is most important to least important attributes the least important attributes at least in looking at your label with the 50 milligram, it seems as though the nausea rates that you have in there are relatively low, relative to that of Cymbalta. I think it's only about a 4.1% rate relative to 3.8% for placebo. I think you mentioned a little bit about that, but how does that stack up relative to the other features that you have for the product and then just your thoughts on why such a low pricing strategy in the market place for the attributes that you are laying out? Thanks.

Joseph M. Mahady - Senior Vice President

Sure, John. Let me take a stab at all of those in sequence. We really don't see a delay in the launch here. I mean it has been our experience that it's taking about two months to get promotional material through the FDA review process. And again, we only want to do that one way. We don't want to stutter step there with launch material. So we have allowed that two months. It's right on our target and of course we expect a fairly big launch effort here. So we wanted to make sure everything is in place when we do fully launch.

We have again, as I said, started to talk with physiatrists using the package insert only, and that's underway as we speak right now. So we think we are right on target with the launch timing and we don't have any known issues with the FDA review process in terms of any of the promotional materials. And as you say, the label is straight forward.

Let me address your issue of kind of adding some color to the label and our promotional position for the products. We are pretty comfortable that the label is what's going to give us the promotional focus for Pristiq. We have got a, as you noted a... what we think is a very easy to use profile for Pristiq. It's a simple dose, one dose. All of our data from the studies would suggest that there is virtually no reason in aggregate to the loss above the 50 milligram dose, although we never want to conclude that an individual patient might need a little bit more. So we expect that unlike what people have been doing with Effexor for years, there is lots [ph] of titration, 50 milligram as the starting dose is the effective dose for virtually all patients. The tolerability profile at 50 is something that we thought was worth waiting for in doing those additional studies, and we are very pleased that it's visible right there in the labeling. And I think what will entice physicians to use this is we believe it offers them what they have come to like in an SNRI, but in a much simpler, easy to use format. So we think that lines up well.

The price, certainly, many of our payers haven't suggested that we have under priced it. I think they still see that it's priced with a focus around both Effexor and Cymbalta. And for lower doses, it will be relatively comparable as Effexor tends to run higher over time due to titration. It won't provide a significant benefit to that price, and we think that takes away one impediment that has been there for Effexor, and that is the cost of higher dose therapy with Effexor, which we don't think you are going to need in the Pristiq situation.

John Boris - Bear Stearns

Just a quick follow up, if I may. Just on the price point, does that help you get Tier 2 status in a lot of managed care plans right away?

Joseph M. Mahady - Senior Vice President

No, I don't think we are really counting on a lot of Tier 2 status. I think our overall projections for the product count on a mix of Tier 3 and Tier 2 with Tier 1 being almost exclusively today generics.

John Boris - Bear Stearns

Thanks Joe.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Joe. We will take the next question please.

Operator

That will come from the line of James Kelly with Goldman Sachs. Please go ahead.

James Kelly - Goldman Sachs

Good morning. Thank you very much. I have a... well, I have a question and just two quick points just to clarify on guidance. First, on Animal Health, you mentioned some elements of the weakness there mainly in the companion side. We have seen several of the companies with animal health businesses report relatively weak quarters. And I was just wondering, is there anything happening on the livestock side here? Is it cyclical or is it something that's structural happening inside that market? And then two just quick clarifiers. On the tax rate, the 29% to 31% tax rate, does that include the R&D tax credit at some points or not? And then lastly, you might have reiterated this, but I didn't catch it. Is the guidance for the year that revenues overall are going to be comparable to 2007 or is that piece of guidance still... not relevant anymore? Thank you.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, Jim. I guess I'll take all three of those. On animal health, we had a slow first quarter as I mentioned the revenues were flat, they were down 6% excluding impact of foreign exchange. With only what we saw across the U.S. was just the economic pressures and poor weather across a lot of the U.S. slowed into the vet visits. And actually when we look at March, March ticked up a lot versus January and February. Primary state about 15 million in the first quarter and we expect the ramp up in the remainder of the year. So, on the Animal Health business we are still on track for a strong double digit growth in 2008. On the tax rate, the guidance that I gave at the beginning of the year and confirm today at 29 to 31% for the year and yes that does include assumption that we will get the R&D tax credit at some point this year. I mean, it hasn't been renewed yet, don't know when it will be, could be as late as December but we do assume that we get that and as far as the revenue forecast for the year and guidance I did say comparable to 2007. Obviously, real strong exchange rate future for the rest of the year may take that up a bit but for the most part we are still holding to that comparable to may be up slightly. Okay, I'll take the next question please.

Operator

And that question will come from the line of Catherine Arnold with Credit Suisse. Please go ahead.

Catherine Arnold - Credit Suisse

Thanks a lot. I would like to ask you about bapineuzumab and Relistor. On bapineuzumab, there has been some debate in the market about the use of the Nora psychiatric test battery as a cognitive end point for the Phase III trial. And I wonder if you could just put this in perspective in regards to the validation and credibility of the end point. I also was hoping you might give an update on the progress for enrollment of the Phase III trial. And then on Relistor, I wonder assuming an April 30th approval, will you be able to launch fairly immediately? And also, will you be giving us the Phase II results of the oral form trial still in mid year as you had suggested before? Thanks

Gregory Norden - Senior Vice President and Chief Financial Officer

Hey Joe, why don't you start with the second and then Justin will take --

Joseph M. Mahady - Senior Vice President

Catherine, again, much the same here. If we presume to get the approval by the end of April, which again, we are fully comfortable about the target, we are going to allow upwards of the two months to make sure that we have promotional materials reviewed and approved out of the FDA. And then we will have again a very full launch with that with the full complement of promotional materials. And this is one way. There is a need for good details on patient dosing. Some of this will be dosed at home. So we want to have a full set of launch materials in place before we have complete launch.

Catherine Arnold - Credit Suisse

Can I ask a follow to that?

Joseph M. Mahady - Senior Vice President

Sure. Did you have a follow up to that?

Catherine Arnold - Credit Suisse

I mean, I just wondered in terms of your promotion, will you be going beyond the institutional setting?

Joseph M. Mahady - Senior Vice President

Sure. I think we see that there will be concentrated pockets of use for the product like this given the unique characteristics of the patients. But we also recognize that perhaps almost every primary care practice will encounter the occasional patient in this significant medical situation. And that's, as I said earlier, we will selectively use the primary care sales force to be able to educate and inform physicians about the availability and the way to use Relistor in those patients.

Justin R. Victoria - Vice President, Investor Relations

And Catherine, excuse me, this is Justin. And with respect to Relistor, we and Progenics still do expect to see the results from the oral studies at mid year and we'll talk about discussing those data with you once we have access to those data ourselves.

With respect to the NTB endpoint and the bapineuzumab program, you are absolutely correct. There has been a great deal of discussion on that externally, but frankly, there has been great deal of discussion between Wyeth and Elan and the regulators on that as well. And that's the most important fact is that we're working in lock step with both the European and the U.S. regulators about the use of end points in our clinical program in Phase III, utilizing the NTB endpoint, utilizing the ADAS-cog point, utilizing end points of function as well. We have yet to finalize the absolute end of the day primary efficacy endpoints for cognition. We'll do that with the regulators once we see the full Phase II results and will lock down the final analytical program for the Phase III program once we see those results with the regulatory authorities. But we've had a great deal of discussion with the regulatory authorities. You have seen Russ Katz's comment recently about the acceptability of cognitive end points other than ADAS-cog specifically acknowledging NTB as an end point of cognition. So I guess the answer there is stay tuned.

On enrollment, I don't have the precise numbers, but Elan's program begin at the end of 2007. And they have enrolled, I am going to say, on the orders of several dozen patients, I think the last time I saw that, the U.S. study -- the ex-U.S. studies by Wyeth will begin in next month. So we are looking forward to rapid enrollment in that program.

Gregory Norden - Senior Vice President and Chief Financial Officer

All right, thanks Justin. Take the next question please.

Operator

That question will come from the line of Jami Rubin with Morgan Stanley. Please go ahead.

Jami Rubin - Morgan Stanley

Thank you. I also have a couple of follow-up question on Relistor and bapineuzumab. On Relistor, I am just wondering if you can provide us color provide on why you are so confident in approval end of the month given the disappointing results in the intravenous formulation in postoperative ileus. And if you can put that indication into broader perspective, because I know the program is still going forward for opioid induced constipation and how the two relate to each other and how you sort of see the commercial opportunities play out, presuming the second Phase III trials fails in postoperative ileus.

And secondly, Justin, maybe you could frame for us potential outcomes for the Phase II data in bapineuzumab. As you earlier said, it's a small trial, typically you don't look for, or you expect to see statistical significance. This is unusual in that you decided to move into Phase III without completing the full Phase II. So if you could frame for us what the potential outcomes are for Phase II. Will we see signs of disease modification? Is it efficacy we are looking for? Is it the safety profile? Whatever color you can provide in terms of scenarios will be appreciated. Thanks.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay.

Justin R. Victoria - Vice President, Investor Relations

Sure, I'll start Jami. The Phase II study as I said, it's designed to evaluate the safety of the product and give us direction in terms of dose. And certainly we are looking for signals of effect of the drug. But how robust those signals are going to be is what we're going to find when we do the analysis of Phase II. So the purpose there is to inform our decisions to go forward with the Phase III. As Bernard noted, one of the key aspects for the decision to go forward into Phase III was the interim analysis of the Phase II study that was conducted in the mid part of last year in 2007. But we also took into account all of the information we gleaned from our immunotherapy program with Elan over the years including AN-1792, the Phase I results from AAD and all of the pre-clinical work that substantiated the beta amyloid hypothesis. And that in conjunction with the very significant unmet medical need of Alzheimer's led us... Elan working with the regulators to endorse the initiation of the Phase III late last year. So, again, I can only say let's wait for the analysis of the Phase II study to see exactly what it teaches us.

Jami Rubin - Morgan Stanley

I mean because you have already moved into Phase III, so is there flexibility in the trial design to make adjustments based on the full Phase II data?

Justin R. Victoria - Vice President, Investor Relations

Until such time as we see the Phase II data, Jami, I just can't comment beyond that.

Jami Rubin - Morgan Stanley

Okay.

Joseph M. Mahady - Senior Vice President

Let me address Relistor. I think it's a very interesting question and is proving to be a very interesting product. We are seeing that between opioid induced constipation and postoperative ileus that we really have two remarkably different patients, two remarkably different conditions, although they may share a similar receptor. And our confidence on the opioid induced constipation is from our interactions with both the FDA and the European authority where we are moving in every way on a path that is indicative of acceptance and approval.

Can we be shocked at the end? That's always a possibility, but we see nothing in either review that is indicative of anything that is going anywhere, but straight to that approval. So we are highly confident of where we stand there. And we will go back and look at the TOI second study, the issues there Jami really revolve around is it something unique to the patient or in using a formulation, do we need to have higher periods of exposure from more of an IV kind of drip or an IV... a slower IV infusion, an IV bolus that was used in these trails. So there is some more to be learned there. But they're quite different and we are relying on both the Phase II and the Phase III trials for the opioid induced constipation, which were incredibly almost super imposable in terms of the extent of the impact and the overall response rate. So we are very comfortable that that looks to be right on target. And the IV, we have just got some more work to do to see whether we change the formulation of the method of the administration.

Gregory Norden - Senior Vice President and Chief Financial Officer

All right, thanks Joe. We'll take the next question please.

Operator

That question will come from the line of Seamus Fernandez with Leerink Swann. Please go ahead.

Seamus Fernandez - Leerink Swann

Thanks very much. Just two quick questions. One, can you just update us on the Aprela delay and give us an update on the high dose formulation of Aprela? And also what's the earliest time that Osmotica's venlafaxine ER tablet could be launched or could be a competitor in the marketplace under the settlement? Thank you.

Unidentified Company Representative

Let me start with the first question on Osmotica, Seamus. Osmotica, as you know, we reached settlement with Osmotica or their product, their venlafaxine hydrochloride tablet product under their 505(b)(2) application. Under the terms of that settlement, we are not going to comment about the timing under which they might enter the market or the royalty that they may pay Wyeth or supply issues or anything of that nature. But of course, one prerequisite for them being able to come to the market is achieving FDA approval, which they have not yet done. So we shall see what happens. But as Greg noted, we have included in our guidance for the year the impact on Effexor of potential non-AV rated competition. Joe?

Joseph M. Mahady - Senior Vice President

Okay, let me deal with the Aprela question, Seamus. And really it revolves around linking the clinical formulation through the what would be the marketed formulation as we have said, one of these clinical formulations delivered, less bazedoxifine than what had been projected. And that becomes an issue in coming together with a final market formulation. And that particularly affects the high dose formulation where a full dose of bazo is required to offset the impact of the estrogen. And that is clearly where the clinical issue lies. When we had a full dose bazo formulation in the first endometrial safety study, we saw excellent results. We saw excellent results on the low dose in the second study. It was only need the high dose that created the issue. We are in the process now of seeing if we can get that to be marketed formulation, to link to these clinical dosage forms. The next data point for us will be mid year around June when we expect to see the results of ongoing bioequivalent studies. That will inform us of the timing of the path forward. But that will be the next time we see the data.

Seamus Fernandez - Leerink Swann

Thanks.

Gregory Norden - Senior Vice President and Chief Financial Officer

All right, thanks Joe. Take the next question please.

Operator

And that will come from the line of Roopesh Patel with UBS and your line is open

Roopesh Patel - UBS

Thanks. A couple of questions. First on Pristiq in depression, if you could just update as on the status of the dialogue with the EU regulatory authorities as far as this filing is concerned and the expected launch time lines? And then just on Aprela, can you clarify if at this point in time we know whether or not a new clinical study will be required to support the filing in the U.S.? And then lastly, if you can just give us a rough sense for the EPS benefits in this quarter from the impact of Enbrel stocking in the U.S., that will be very helpful. Thank you.

Joseph M. Mahady - Senior Vice President

Why don't I deal with the first two, Greg, which really with Pristiq in the EU, that review is underway. We wouldn't expect to be at a decision point until later in the year. And what we can say is we are dealing with questions on the efficacy profile in Europe. Predominant questions we have seen in the preliminary regulatory [ph] reviews. So again, nothing expected as an action date before the end of the year. On Aprela, there is the possibility based on what we see in the bioequivalents that a new clinical study would be necessary. And again, we won't know that until we come to a final review of the next round of the bioequivalents work.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Joe. Roopesh, I'll take the question on Enbrel. Look, Amgen, is announcing their earnings, their first quarter earnings on Thursday I believe. So, I am actually going to hold all financial in that question until then and would happy to talk to you better than more detail post their call.

Okay, we'll take the next question please.

Operator

Your next question will come from the line of Steve Scala with Cowen, and your line open.

Steve Scala - Cowen and Company, LLC

Thank you. On Protonix generics, will Wyeth's next efforts be a trial in mid 2009 or will you seek earlier action such as the permanent injunction you referred to? Relatedly, can you walk through the key points of the damage calculation that you will propose to the court? Are we talking about something which could exceed $3 billion to $4 billion? And then may I clarify, has or has not the Phase III bapineuzumab trail started? I thought it had, but I was confused by something you said just a moment ago. Thank you.

Gregory Norden - Senior Vice President and Chief Financial Officer

Maybe I'll take all these, and Justin you can correct me on bapineuzumab, if I mistake this. I believe that there is four trials for phase III in bapineuzumab, two by Elan, two by Wyeth. I believe the two by Elan were started towards the end of 2007 and the two on Wyeth are scheduled to begin momentarily over the next several weeks and months. Steve my answer unfortunately on Protonix is going to be short, Protonix were an active litigation on Protonix and we are not going to comment on any aspects of our litigation strategy or any buy products of that on this call. So I am sorry I can't go into more detail on that, Okay I'll take the next question please.

Operator

Thank you. That will come from the line of Anthony Butler with Lehman Brothers and your line is open.

Anthony Butler - Lehman Brothers

Thanks very much. Joe, you alluded to the effects of sales force with begin pushing Pristiq once you get the full materials approved and I am just curious does that imply Pristiq moves in the first position and whether be any marketing for effects or going forward once that product comes fully to market and then second Greg you made comments about 6% head count reduction by year end in 4% by the end of Q2 why is this in two trenches goes to say why isn't it 6% by the end of Q2 and why is it the second trench being delayed. Thanks.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, Tony, I will take the second question and turn it over to Joe for the first. Basically there is three tranches on head count reductions in broad buckets and I'll go through those. The first head-count reduction was the end of March, which was directly related to the Protonix in the consumer health sales fore that Joe alluded to and that happened. Okay so that's just trench number one. Now we also have a significant head-count reduction plan for the second quarter in various locations around the world and for lack of a better term message that's a second trench and then outside the US in certain some locations, where it takes just a little bit longer to kind of finalize these actions because you unique circumstances in other countries, so there will be some head-count reduction actions in various countries around the world, this is still latter part of the year, just as a matter of logistics and being able to get it done and going through the normal hurdles that you have to do to clear that, so that's pretty much here in on that and Joe I will turn it over to you on the affects question.

Joseph M. Mahady - Senior Vice President

Tony, I mean virtually all of the effort will go to Pristiq. There will be limited gains from where we support things such as other indications here and there. But think of our picture as virtually being shifted to Pristiq.

Anthony Butler - Lehman Brothers

Thanks Joe.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks. We will take another question please.

Operator

And that will come from the line of Burke Handwit [ph] with BMO Capital Markets. Your line is open

Unidentified Analyst

Thanks, a question or two on bapineuzumab as well. Regarding the Phase III studies, is there a provision for an interim look there and when should the first DSM meet for any of the trials? And then with regard to one of the trials, you appear to be pre-screening for Apo-e4 non-carriers in one of the lawn trials. Are you doing that across all the trials and why are doing that and what impact would that have -- what percentage of all patients are Apo-e4 non-carriers? Thanks.

Justin R. Victoria - Vice President, Investor Relations

Thanks Burke, this is Justin. We are indeed in the Phase III programs segregating at Apo-e4 carriers versus non-carriers is great noted they were four Phase III studies overall and they are split by Elan and Wyeth. And each of those has been slit subsequently into Apo-e4 carriers and non-carriers. We are dosing the non-carriers at half milligram per kg and the non-carriers are at half, one and above. And we noted... we and Elan noted on the conference call that based on the interim analysis of the Phase II that there appeared to be somewhat higher incidence of vasogenic edema in carriers. And thus, we have elected to dose Apo-e4 carriers at a lower dose.

In general, in the Alzheimer's population, about 50 to 60% of the population are positive for Apo-e4 in both. With respect to interim analysis, we haven't comment about any provisions of interim analysis in the phase III program to date and frankly I don't have it at my fingertips any schedule about the assembly meetings on that we'll have to follow up if you want that.

Unidentified Analyst

Thanks.

Gregory Norden - Senior Vice President and Chief Financial Officer

All right, thanks Justin. We'll have one more question and turn it over to Bernard for a couple of closing remarks.

Operator

Thank you. That question will come from David Risinger with Merrill Lynch, please go ahead.

David Risinger - Merrill Lynch

Yes, thanks very much. Just a follow up. Could you comment on Xyntha in some more detail that seems like a product that you are enthusiastic about and if you could talk to us about the longer term opportunity for that, that will be helpful. Thank you.

Joseph M. Mahady - Senior Vice President

Sure. I mean we have evolved at Wyeth into a fairly strong hemophilia franchise, and I think our projections for both the factor eight category as well as it could benefit take us to a picture of growing is to by 2009 $8 billion franchise. Since they give us that's really the next section in providing surety about viral safety although the category has been generally free a major calamities a viral compromise in recent years, and this could remain a very significant concern of patients and their families and Xyntha just takes it the next step, completely eliminating the risk from both the formulation and the manufacturing process, and of course the final product. So it's not a market where we see, David, a lot of switching, but as new patients come in and as patients become for one reason or another just out of side with existing therapy, we think Xyntha becomes kind of a standard product, a standard bearer [ph] for people to switch to.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Joe. Bernard, I would like to just turn it over to you for a few closing remarks.

Bernard Poussot - President and Chief Executive Officer

Yes,I just wanted to thank everyone for joining us this morning. As you heard I guess, we are encouraged with our start of the year. I think the most important feature of the quarter is our resetting three new product approvals we said this was a critical to our 2008 success and we got those and that's very --very important as you have noticed our core in line products are also performing well, and that's critical to our numbers going forward international income for growth was very strong double digit growth in all regions including Asia, Latin America, as I mentioned. You have noticed that we are actively managing the Protonix impact on our business and for that we are using project impact, we've generating a lot of energy into our company to manage a middle of a P&L and very well significantly cost reductions in the back half of the year. And that will certainly defend our bottom line.

So we expect 2008 to continue to be a challenging year, but there is much yet to accomplish and I think we made a solid start. We look forward to the opportunity to update you on our progress in all these various areas in the next month in quarter. But thank you again for your all participation today.

Gregory Norden - Senior Vice President and Chief Financial Officer

Okay, thanks Bernard. All right, operator, we are ready to close the meeting, thank you.

Operator

Thank you. And ladies and gentlemen, this conference call will be available for replay after 10:00 AM Eastern Time today through April 29th 2008 at midnight. You may access the AT&T teleconference replay system at any time by dialing 18000-475-6701 And enter the access code of 915153, international participants may dial 320-365-3844. Those numbers again are 1800-475-6701 and 320-365-3844 using the access code of 915153. 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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