Executives
Gregory Norden - Sr. VP and CFO
Bernard Poussot - Chairman, President and CEO
Joseph M. Mahady - Sr. VP
Justin R. Victoria - VP, IR
Analysts
Catherine Arnold - Credit Suisse
Anthony Butler - Lehman Brothers
Tim Anderson - Sanford Bernstein
David Risinger - Merrill Lynch
Roopesh Patel - UBS
Seamus Fernandez - Leerink Swann
John Boris - Citigroup
Stephen Scala - Cowen and Company
James Kelly - Goldman Sachs
Chris Schott - JPMorgan
Wyeth Pharmaceuticals (WYE) Q2 FY08 Earnings Call July 23, 2008 8:00 AM ET
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Wyeth Second Quarter Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session, and instructions will be given at that time. [Operator Instructions]. As a reminder, today's call is being recorded.
At this time, I'd like to turn the conference over to Mr. Greg Norden. Please go ahead, sir.
Gregory Norden - Senior Vice President and Chief Financial Officer
Thank you operator and good morning everyone and thank you for joining us on the call. We are here to review Wyeth's second quarter 2008 performance. On the call with me today are Bernard Poussot, Chairman, President and Chief Executive Officer of Wyeth; Joe Mahady, President of Wyeth Pharmaceuticals and Justin Victoria, Vice President of Investor Relations.
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 more fully disclosed in our press release, and 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 Bernard Poussot.
Bernard Poussot - Chairman, President and Chief Executive Officer
Thank you Greg and thank you all for joining us on the call this morning. In addition to discussing our strong financial performance, which I'll get to shortly, let me summarize other highlights for the quarter.
First, in April, we received our third FDA approval for a new medicine this year, that is RELISTOR subcu for OIC in patients with advanced medical illness receiving palliative care. This follows the 2008 approval of PRISTIQ and XYNTHA and is the fifth FDA approval in the past 14 months for Wyeth. RELISTOR is an outstanding example of Wyeth's continuing commitment to develop and deliver medicines that work in another ways and provide important new treatment option for patients. RELISTOR will allow patients to achieve the full pain relief they are seeking without being limited by the GI side effects of opioid therapy.
The second highlight was the release of the preliminary findings from the Phase II study of bapineuzumab in patients with mild-to-moderate Alzheimer's disease. As stated before, these results are encouraging and supportive of our prior decision to initiate Phase III. And the third highlight is our decision to raise guidance based on our strong first half performance and the momentum we see going forward.
And before commenting further on these highlights and our operating performance, I would like to take a moment to note recent leadership changes at Wyeth. As most of you know, Bob Essner retired from the Board of Wyeth at the end of June. I would like to take this opportunity to acknowledge Bob's many accomplishments since his appointment in 2003 as Chairman of the Board and thank him for his outstanding contributions in leading our company.
I'd also like to note another important change in leadership. That is the appointment of Dr. Mikael Dohlsten as President, Wyeth Research, succeeding Bob Ruffolo. Under Bob Ruffolo's leadership, many innovative concepts were integrated into R&D at Wyeth making it more productive and cost efficient with a greater of sense of accountability.
I would like to take this opportunity to thank Bob for his many invaluable contribution to Wyeth. Dr. Dolsten is now on board running our research organization. We're extremely pleased to have him join us and have great confidence that he will bring our research and development organization to the next level. To do so, Mikael shares my conviction that we need to enhance our relationships with the external medical and scientific communities to assist us in identifying new external R&D opportunities and validating our own R&D processes and programs. This will also enable us to better define our growth product, better anticipate regulatory requirements and better satisfy patients' needs.
Turning to our operating performance. For the 2008 second quarter and first half, worldwide net revenue increased 5% and 6%, respectively. Pro forma diluted earnings per share increased 1% for both the quarter and the half. Solid performances from core products in each of our businesses, as well as favorable exchange rates drove this growth.
We continue to implement cost controls for project impact to attempt to offset the impact of the at-risk launch of Protonix generics. But at the same time we're investing more in selected emerging markets as well as R&D to fuel future growth. We're halfway through the year now and we are very pleased with our progress. As a result of the strong year-to-date performance coupled with the momentum we see for the balance of the year, we are increasing our full-year 2008 pro forma diluted earnings per share guidance to $3.47 to $3.55. We believe this represents a strong performance when you consider the impact of the at risk generic Protonix launch.
As we have noted to you before, Wyeth is a very resilient organization, and we have a proven track record of overcoming significant challenges, and we are meeting the challenges of 2008 head on. Key to Wyeth's continued success is both geographic and business diversification. With this in mind, we are focusing our efforts on accelerated international expansion. For the first six months of 2008, 54% of total Wyeth revenue was generated by our international businesses. This March the first time in our history that ex-U.S. revenue exceeded 50% of the total company's revenue. While the erosion of Protonix in the U.S. and exchange rate situations are contributing factors, we are nevertheless experiencing robust growth in all our international businesses.
For the 2008 first half, international revenue grew 22% for Human Pharmaceuticals, 20% for Nutritionals, 19% for Consumer and 21% for Animal Health. But, importantly, excluding the impact of foreign exchange, this business has demonstrated strong fundamental volume growth with international revenue for Human Pharmaceuticals at 12% , Nutritionals at 13% , Consumer at 7% and Animal Health at 11% all in constant dollars.
To drive international growth even further. In January, we identified three key high potential markets for greater focus, that's China, Russia, and the Middle East region. We began initially to concentrate more attention resources and talent in this market, which we refer to as our accelerated growth market.
We believe that increasing our efforts in this market, we have a significant impact on the company as a whole. To achieve our goals in this market, we're putting concrete plans in place that include enhanced financial support and expert programs, dedicated mentors for each market from our executive leadership team, and processes for expedited decision making. We expect these special efforts will yield tangible benefits over the course of the next several years. Diversification along product lines is another aspect of our strategy for success.
We are pleased with the current make up of our business, Human Pharmaceuticals, Nutritionals, Consumer Healthcare and Animal Health. Combined, the non-prescription businesses of Wyeth will exceed $5 billion in annual revenue in 2008. And rather than narrow our focus, as some in our industry are doing, we will continue to look for growth opportunities in these businesses, both internal and external, through small to mid-scale acquisitions with strategic fit and synergistic opportunities identified.
For instance, Wyeth's Consumer Healthcare announced last weak that it agreed to purchase ThermaCare, a leading over-the-counter heat wrap line from Procter & Gamble. This product line is expected to enhance Wyeth's global position in OTC pain management. Of course, the most important factor in our continued strong performance is the introduction of meaningful new products.
TYGACIL and TORISEL are well on their way to becoming future growth drivers at Wyeth. And we're just in the early stages of introducing PRISTIQ, RELISTOR and Xyntha. You'll hear more about these products in a few minutes.
Finally, I'd like to briefly touch on R&D. At Wyeth, we continued to be focused on products that have the potential to transform medicine and our company as a result. These innovations include PREVNAR 13 in infants and adults and our market expansion efforts with RELISTOR. Our pipeline of innovative therapies includes additional exciting opportunities in oncology, inflammation and neuroscience to just name a few.
Earlier, I mentioned the encouraging Phase II results released last month for bapineuzumab, a protein with a novel mechanism of action that has the potential to become the first disease modifying treatment for Alzheimer's disease. This is a significant milestone for Wyeth and an important step in our efforts to bring new therapies to Alzheimer's patients who desperately need them.
Consider Wyeth's commitment to defeating Alzheimer's. Wyeth has one of the most robust Alzheimer's pipelines in the industry. We currently have more than 10 projects at various stages in development aimed at multiple target in the pathology of Alzheimer's disease and we're using all of our technology platforms, small molecules, biotechnology and vaccines to find and bring new treatments to market. We're looking forward to releasing more data from the bapineuzumab Phase II study at ICAD on July 29th in Chicago. And with that introduction, I'll turn now the call back to Greg for a review of our second quarter financial results. Greg?
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 second quarter was $0.91 versus $0.90 last year, a 1% increase. I'll refer you to our press release for detail regarding the pro forma adjustments. My comments this morning will refer to the as adjusted P&L included at the end of our press release.
Net revenue for the quarter increased 5% to approximately $6 billion. Excluding the effects of the foreign exchange, revenue was comparable to last year. Pharmaceutical revenue grew 5%, and was also comparable to last year, excluding the effects of foreign exchange. With the exception of Protonix, we saw good growth across most of our portfolio of marketed products. Excluding Protonix, Pharmaceutical revenue increased 13% for the quarter. Core franchises such as Enbrel, Prevnar and Nutritionals experienced strong growth and we expect those trends to continue consistent with our guidance given earlier in the year.
Consumer Healthcare revenue grew 7% in the quarter, and 2%, excluding the effects of foreign exchange. Growth was led by a strong international performance, up 17%. We expect to report mid-single digit revenue growth in our Consumer business for the year, reflecting the strength of our international business would offset somewhat by a slowing U.S. business due to the weaker economy.
Revenue for Animal Health increased 12% in the quarter and 7% excluding the effects of foreign exchange. We expect mid-teens revenue growth for the full-year as we benefit from ZULVAC, our important new vaccine for bluetongue virus in cattle and sheep, and PROMERIS, our newly introduced flea and tick product.
Gross margin for the second quarter were 72.5%, within the 72% to 74% range we projected for the full year. Gross margin was impacted in the quarter by pre-operating expenses associated with ramping up PREVNAR 13-valent production at our Grange Castle manufacturing facility as well as one-time charges related to certain inventory and asset write-down.
SG&A growth for the second quarter was 3% versus the prior year and down 1% excluding the effects of foreign exchange. We expect the full-year SG&A picture to look similar to this reflecting our ability to manage these costs overall while still investing in new products such as PRISTIQ, RELISTOR, and Xyntha as well as in our accelerated growth markets.
R&D spending for the quarter increased 1%. For the full year, we expect pro forma R&D expense will be at mid-single digit versus 2007 higher than initially projected. We currently have several Phase III projects that began in late 2007 or early 2008 with increasing clinical trial costs including bapineuzumab, PREVNAR 13-valent and a number of oncology programs such as CMC-544, and SKI-606.
Our investment in R&D is key to our future growth and we are committed to funding the promising projects in our pipeline. Nevertheless, we intent to offset this investment wherever possible with savings from our ongoing efficiency initiatives. Net interest was expense of approximately $19 million in the quarter versus income of about $19 million last year. This is consistent with our guidance and reflects the impact of declining interest rates on our cash balances as well as certain expected cash flows including diet drug payments, debt retirement and share repurchases. I'll note here that year-to date, we have purchased approximately 8.5 million Wyeth shares.
Other income in the quarter was $45 million versus $91 million last year. The key drivers of this decrease include less divesture income in 2008 compared to last year, as well as increased costs related to our hedging program. These are offset in part by a one-time $60 [ph] million milestone payment from Genzyme related to SYNVISC sale. Our tax rate for the quarter was 30.5%. We continue to expect our 2008 full-year tax rate to be approximately 29% to 31%, which assumes that the R&D tax credit will be renewed sometime later in the year, and will be retroactive to January 1st.
Let me also provide an update on where we stand with Project Impact. Right now we're in the process of implementing the ideas that were generated during the first phase of this review. We are on track to achieve approximately a 6% reduction in overall headcount by the end of the year and continued to expect ultimate headcount reduction to approximately 10%.
We anticipate overall cost reductions from Project Impact to yield annual savings of between $1 billion and $1.5 billion to be realized over the next several years. These headcount cost reductions include all aspects of our worldwide operations and will be driven by the timing of certain actions particularly those related to our manufacturing and supply chain efficiency and rationalization initiatives.
Overall it was a strong quarter and we're on track for a solid year. Our new 2008 guidance range for pro forma diluted earnings per share is $3.47 to $3.55. Total revenue for the year is projected to increase mid-single digit, and our increased guidance reflect the strong performances from our core businesses, the benefits of foreign exchange and revised assumptions about Zosyn generic competition.
With respect to Zosyn, we've assumed in our revised guidance that approvals of generic in the US will not occur before the fourth quarter. International regulatory approvals of generics to Zosyn continue to be limited, although we have seen some approvals in Europe and Canada. And PROTONIX remains a fluid situation given the unpredictability of the future actions of the generic competitors. The 2008 guidance is pro forma as it excludes any potential restructuring charges resulting from the company's productivity initiatives. With that I'll turn the call over to Joe Mahady.
Joseph M. Mahady - Senior Vice President
Thanks Greg. The Pharma business had another solid quarter with worldwide Pharmaceutical revenue up 5%, and as noted already, international performance was particularly strong with revenue up 20% versus last year's second quarter. Our biotech business continues to be a core asset and a growth leader with combined biotech vaccine revenue of $2.1 billion for the quarter, up 21%.
Our core brands continued to drive the business. Enbrel, Prevnar and Nutritionals are growing very well, and in line with our earlier full-year projections. Enbrel, the leading product in the biologic modifiers group delivered another strong quarter in international markets with revenue of $692 million, up 36%. Enbrel remains the number one worldwide biotech brand, and the number five global pharmaceutical product in overall sales. While we are cognizant that the current and emerging competitions for Enbrel in the TNF space, it's hard to ignore that first, there are tremendous opportunities to treat additional patients who already meet all therapeutic guidelines for biologic therapies.
Under current guidelines only about 50% of RA patients and 20% of psoriasis patients in the U.S. and Europe received the biologics therapy, they should. Secondly, there is effort to expand these guidelines to cover additional patients or begin therapy earlier. Add to that significant new data, such as our recent COMET data which showed for the first time in the category our therapy that Enbrel with methotrexate can bring a patient's rheumatoid arthritis into remission and halt joint damage. Thus we continue to believe in the growth prospects for Enbrel over the near and long-term horizons.
Worldwide revenue with PREVNAR was $691 million, up 9%. International growth in the quarter was 4% reflecting the timing of large government orders. However, as a result of progress that we have underway in all of our regions, we're projecting strong buying levels in the coming quarters and project 20% plus international growth for PREVNAR for the full year.
In the US, second quarter revenue was strong at $320 million, up 15%. This reflects a solid overall demand and a CDC vaccine stockpile purchase of 500,000 doses in the quarter. Our Phase III clinical program for PREVNAR 13 for infants and toddlers and for adults are progressing well. And the FDA recently granted fast track designation to PREVNAR 13 in infants and toddlers recognizing its potential to address serious unmet medical need. We're excited about the potential of PREVNAR 13 to significantly expand to coverage against invasive pneumococcal disease in children and to open up a whole new opportunity in adults.
Now last of our core franchises, Nutritionals had another strong quarter with revenue of $430 million, up 20%. Key markets such as China, Middle East and Australia showed outstanding performances and we expect this level of growth to continue through the balance of the year.
Now let me address some of our other key brands. As we stated before, the market pantoprazole has been severely disrupted by the at-risk launch of Teva and Sun generic products. Prescription activities continued to demonstrate that Teva and Sun products are being dispensed at a significant level. Meanwhile, we continue to prepare for trial and the patent infringement case. Based on a newly issued schedule from the court, we now expect that trial will not take place until at least the fourth quarter of 2009.
In the quarter, PROTONIX family revenue was $228 million, with $105 million for the brand and $123 million for our own generic products. EFFEXOR family revenue in the quarter was just over $1 billion, up 5%, largely driven by strong international growth. We saw strong double-digit growth in constant dollars in countries such as Germany, the UK, Australia and Belgium. To date, there has not been any launches, of a non-AB rated generic venlafaxine hydrochloride tablet product and we remain confident that any potential impact from such products this year would be modest.
In the US, subscription demand for EFFEXOR continues to decline at a slow rate giving the continued growth of generic in the anti-depressant market and since we have shifted our promotional efforts from Effexor XR to PRISTIQ. We launched PRISTIQ for the treatment of major depressive disorder to healthcare providers in the U.S. in May and recorded sales for the quarter of $16 million. Initial feedback from physicians has been generally positive. The core message focusing on dosing and tolerability is well received and the number of new riders for PRISTIQ is increasing.
In addition and consistent with our expectations, most of today's coverage with payers is in tier-3, however several of the large plans have yet to cover [inaudible]. We expect make further progress with key managed care plans in the coming months. Zosyn had another strong quarter with revenue of $319 million, up 14%. Zosyn remains the workhorse in the category and is our largest selling injectable antibiotic product worldwide.
We've introduced our enhanced Zosyn EF formulation throughout the world and we believe the regulatory authorities are judiciously accessing the risk of having generic results in on the market with different formulations, different labels, different pharmaceutical compatibility and different pharmacofield [ph] quality standards. Premarin family revenue was $271 million in the quarter, up 1%. Here the effect of price continued to offset the continued decline in Rx demand.
Several of our new products are starting to make measurable contributions Tygacil, our latest entry into the injectable antibiotic phase providing physicians a new option, to treat serious, resisting infections with over $50 million in revenue in the quarter. This was driven primarily by growth in the U.S. and supported by further international launches. We have launched in key markets now such as Italy, Greece and Turkey and have now commercialized Tygacil in 50 market.
Torisel for renal cell carcinoma continues to grow in U.S. sales and realized first launch overseas just a few months ago. It grew to $30 million... $32 million in worldwide revenue in the second quarter and U.S. market share is now over 14%. We've launched in 11 markets with an additional 19 lunches planned by year end. The physician satisfaction with the product is high. And we are just preparing to launch Relistor subcu for opioid induced constipation in patients with advanced illness while receiving palliative care.
We have received approval in U.S., Canada and Europe and product has been shipped to U.S. whole sellers. We've had initial introductory discussions on the products with key opinion leaders by our hospital and oncology sales managers and feedback has been encouraging. We are excited about the opportunity with this novel product in this initial use. These patients desperately need to achieve significant pain relief and Relistor allows these patients to achieve that relief with a positive impact on their quality of life. We and our partner Progenics remains committed to continue to explore other indications, other patient populations and other dosage forms with Relistor. We will launch Xyntha in the U.S. factor VIII market and we anticipate approval of ReFacto AF in Europe both in the second half of this year. This will enhance our Hemophilia franchise. That franchise, with benefits in ReFacto showed global revenue in the second quarter of $251 million.
So let me close here. We knew that the Protonix generic impact would make the second quarter quite challenging for the pharma business. However, four factors contributed to delivering a solid performance in the phase of that challenge. We had strong performance across all other core franchisees. We had significant and real growth from our international businesses enhanced by the effect of foreign exchange. We had excellent control of SG&A and increasing contributions from our new products.
Now, let me turn the call over to Greg to take your 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 have questions. Please keep in mind that we will not be able to comment on the Phase II bapineuzumab trail results beyond the top line conclusions that we reported in our press release on June 17th. Additional data from the Phase II study will be presented at ICAD next week. A joined Wyeth Elan investor call is scheduled for July 29, at 6 p.m. Central Time, 7 p.m. Eastern Time following the ICAD presentation where we will be able to address more of your questions on bapineuzumab.
As for today, to allow as many listeners as possible to participate in the Q&A, we ask that you please limit yourself to one or at the most, two questions. Operator, please open the line for questions.
Question and Answer
Operator
Thank you. [Operator Instructions]. Our first question this morning comes from the line of Catherine Arnold with Credit Suisse. Please go ahead.
Catherine Arnold - Credit Suisse
Thanks and good morning. I wanted to pursue further your comments about diversification, and I was wondering, if we think about this in terms of your investments, not just the visible patent losses that are causing a change in your business mix, what are your higher standards of priority there. And then in the same, while related advantage in terms of geographic expansion, could you just give us a little bit more clarity on what you're doing in China, Russia, and Middle East in regards to Pharma versus Animal Health, Nutritionals, I assume where you highlighted China is important in Nutrition. I just wanted to think about that more by business mix. Thank you.
Bernard Poussot - Chairman, President and Chief Executive Officer
Thank you Catherine for your question. I think on the diversification first, I think our strategic direction is to really go where growth is visible, and identify areas of business that we know we can expand. And we just said we would not limit ourselves to just pharma and biotechnology which remain obviously very important core of our company, but we will look at every way that we can go wide using our technologies and know-how and our talent in the various areas of business that we have today.
Regarding the.... more specifically, the geographic expansion, we have some very clear views that if we do what I describe briefly here, contribute more strategic thinking resources, additional talent to some regions of the world, we can boost certain product launches, and certainly the growth of our pharma company. An example is the PREVNAR in China. The PREVNAR has just been approved in China and if we put the right efforts, the right know-how, I mean, resilient to that, in PREVNAR, and dealing with governments and you can imagine in many other regions. And if we're going to accelerate the growth of PREVNAR in China, that can potentially impact the overall growth level of Wyeth. So, these are the kind of opportunities we are now contemplating, and then we need to tell much in Russia can also be today for a company to acquire. So, we're confident that the revision of our plans and targets over these regions will have an impact on the corporation.
Catherine Arnold - Credit Suisse
May I ask a follow-up to that?
Bernard Poussot - Chairman, President and Chief Executive Officer
Sure.
Catherine Arnold - Credit Suisse
In terms of the example you gave in China, in PREVNAR, I think that's a really important one. There maybe some regions where the population opportunity is just so dramatic and the pricing structure that you have globally in terms of the US and Europe may be less appropriate. Is the company being flexible about those kinds of opportunities?
Joseph M. Mahady - Senior Vice President
Yes. Catherine, this is Joe. And I think certainly the vaccine world has demonstrated the need in large population and low net income countries that there has to be pricing flexibility and we are very cautious about that and we have no guidelines which allow us to go into those markets and to date that approach has been quite successful and that's particularly true in such as the probable [ph] countries in Latin America. So that will be part of our strategy.
Gregory Norden - Senior Vice President and Chief Financial Officer
Catherine I'll just circle back to your first question to just to put a little more color on that. If you look at the diversification across our different businesses, in the second quarter, 40% of our business was true pharma, core pharma. 35% was biotech and vaccines, 7% nutrition, 11% consumer and 5% animal health. So, you can see that we increasingly, we are becoming a diversified company across many fronts and as far as the investments go, we're going to place the investments equally across a lot of these different businesses to try to grow all of them, give them all the attention, then and investments that they need to succeed. Take the next question please.
Operator
Thank you guys. Your next question comes from the line of Tony Butler with Lehman Brothers. Please go ahead.
Anthony Butler - Lehman Brothers
Thanks very much. Comment Joe you had made about 20% growth ex-US for PREVNAR, does that include current year's underlying demand? And my second question is as the individuals who may have been... may have had PROTONIX in their bag, I guess in first position I assume they had other products in second and third positions. How is that being rearranged to the existing sales force? How has the positioning in the back changed for them? Thanks very much.
Joseph M. Mahady - Senior Vice President
Tony. Two responses. One is the PREVNAR number for the year does include rate and again that's what we expect, we see very strong buying opportunities that are coming to fruition in each of our regions around the world. And I think the second question on the PROTONIX, obviously, two things occurred, Tony. One is we downsize significantly the primary care sales force in the U.S. with the loss of PROTONIX. So that certainly has taken out some of the supplies so to speak on the sales force side. And those people today now are focusing to some extend on PROTONIX. We still promote PROTONIX extensively [ph] the overall molecule remains a key asset for us, and then of course they can be distributed to cover other assets on PRISTIQ, Premarin family and our new product launches.
Gregory Norden - Senior Vice President and Chief Financial Officer
Again Joe, let me just augment that on rate too. Tony for the first half, the international growth of PREVNAR was about 18% and about half of that was rate and about half of that was true volume growth and we expect that to be give or take a couple of points to trend that we see for the rest of the year as well.
Anthony Butler - Lehman Brothers
Thanks, Greg..
Gregory Norden - Senior Vice President and Chief Financial Officer
Okay, we will take the next question please.
Operator
Thank you. So next question comes from the line of Tim Anderson with Sanford Bernstein. Please go ahead
Tim Anderson - Sanford Bernstein
Thanks. Can you update from what do you expect the impact will be to EFFEXOR from non-AB rated products like that from Osmotica this year and next year. Why won't those do relatively well if they price their products aggressively to something like major mail-order channels, and on your pipeline, I think one of the criticisms sometimes lobbied is that there is not much visibility on meaningful Phase III three drugs beyond bapineuzumab. So, can you talk about what you think of the most promising compounds in Phase II that might be nearing Phase III and on that same line, can you update us on your level of optimism on PREVNAR 13 in the adult population?
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. I take up the business review. So let me cover that. I think at least the beginning part. We've commented on the prospects for a non-AB rated venlafaxine product. The first part of that potential for them is when they enter the market and well there is the likelihood that one or two may enter within the second half. Our deal has been predicated on practices in the US market place. Unlike in AB rated product where there is no need for demand generation, the business is really a process of simple substitutions. When it comes to the establishment of a non-AB rated products, it really require the generation of demand, that means the Physician needs to write that prescription.
So while there are processes in U.S. today that can try and aid that, they are incredibly inefficient processes and very often require significant efforts, significant rebate and today they've not proven to be very successful in generating significant amounts of business. I think there is another questions on the, one was PREVNAR13 adult, we remains very optimistic there, our development program remains on track for the adult indication with PREVNAR13 and again believe that the medical case for the need for this product in the adult population is really quite significant worldwide and so our level of optimism has not changed since we believe the market demand is real and our enthusiasm remains high because we see development proceeding along the originally projected course.
In terms of pipeline products, again, sometimes we decided of talking about products that we think have significant commercial value such as [inaudible], you talked about what we are excited about in Phase 2, indeed we have lot of excitement for some of our Phase 3 compounds in oncology that would be CMC for non-Hodgkin's lymphoma SKI for chronic myelogenous leukemia. Later this year we hope to see HKI move forward into Phase 3 work in breast cancer. So I think the range of compounds that are in the portfolio and as Bernard mentioned earlier, other approaches we're taking with respect to Alzheimer's ACC 001 and enhancing our kind of anti-inflammatory franchise with Trubions products that TRU-015. So I think a lot and indeed some of that we now consider first commercialized product like RELISTOR, where really our phase work has really just got us into the first part of the market and we see the bigger potential for RELISTOR really coming from ongoing work will be going in development in Phase 2 and 3.
Tim Anderson - Sanford Bernstein
Great. Thanks, Joe.
Joseph M. Mahady - Senior Vice President
Okay, operator. We'll take the next question please.
Operator
Operator: Thank you. The next question comes from the line of David Risinger with Merrill Lynch. Please go ahead.
David Risinger - Merrill Lynch
Yes. Thanks very much. First I was hoping that you could quantify the one-time cost of goods charges that held back the gross margin in the quarter and second with respect to bapineuzumab Phase 3 enrollment, I was hoping that you could provide an update on the enrollment in the U.S. trials and also in the ex-U.S. trials? Thank you.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. David, Thanks. I'll take the first one. On the cost of goods in the quarter, there were a couple of things that drove that percent growth a bit higher that revenue and they were three bigger pieces where as I mention, there is pre-operating expenses associated with ramping up the PREVNAR13 valent production [inaudible] and that was a $0.5 million range. They were also some modest inventory write-downs and asset write-downs in the $20 million to $40 million range for those, and then just a couple little miscellaneous things. Frankly, if we take those out, the cost of goods growth was right in line with the revenue growth and the margin would have been half a point higher or so. So, we don't expect that slight decline in margin in the second quarter to continue for the rest of the year. On the second question, Justin, do you want to take that?
Justin R. Victoria - Vice President, Investor Relations
Yes, sure. David, good morning. It's Justin. The Alzheimer's program continues to grip very nicely, Elan is very comfortable with the rate of enrollment and screening of additional patients for the U.S. program, 234 and carriers and non-carriers. They commended very recently that they still hope to complete enrollment by the end of this year or shortly thereafter. As you know, we began enrollment in the U.S. and the ex-U.S. program and the rest of world programs both in carriers and non-carriers running about six months behind them in terms of our initiations so we just began to enroll patients about a month or so ago and we are getting patients enrolled, we are beginning treatment of patients and we have got a large number of patients in screening. So the program is going very well and we are very pleased with the enrollment so far.
Bernard Poussot - Chairman, President and Chief Executive Officer
Thanks Justin. Take the next question please operator.
Operator
Thank you. Our next question comes from the line of Roopesh Patel with UBS. Please go ahead.
Roopesh Patel - UBS
Thanks. Just a couple of questions. First in terms of the revised earnings guidance, I was just wondering what it assumes in terms of the timing of generics now expected for Zosyn and the effects of Effexor XR in the U.S.? And separately on Aprela, I was wondering if you could confirm if a new clinical study will be required to support the U.S. filing and if so, what's the timeline? Thanks.
Gregory Norden - Senior Vice President and Chief Financial Officer
Thanks. Thanks Roopesh. I will take the first one, then I'll turn the second one over may be to Joe. The revised guidance on Zosyn, if you remember the original guidance, we assume that there would be generic in the U.S., July 1 and in the second quarter outside the U.S. We are sitting here in July and we haven't seen a generic yet and there is lot of work I understand, going on at the FDA with our Citizen Petition and such as Joe mentioned and frankly, we don't have a great deal of visibility after this going forward. So really, in order to put a stake in the ground, what we have determined now for revised guidance is October 1 in the U.S. and outside the U.S. we've seen it in a couple of countries but not many. So again, we pushed that off as well. So October 1 U.S. results is in the guidance. On Effexor, again similar to our initial guidance, we have a modest impact of a non-AB rated generic for Effexor. We know, difficult to quantify, hard to know exactly what's coming; if it's coming, when it's coming. But any impact we have, would be relatively modest on that. Joe, you want to take the question on Aprela?
Joseph M. Mahady - Senior Vice President
Sure. I think... we had mentioned, I think, in one of our earlier calls this year that we were waiting for the results of some bioequivalent work that would be due mid year on Aprela. That study has been completed, the results of that study are fairly encouraging. Roopesh, what it really seems to indicate is that we may have a path forward for filing the NDA on the 0.45 milligram combination product without the conduct of an additional clinical trial. That trailing still requires certainly some formulations and other work to be completed and probably would not take place before the second half next year. The likelihood is that the 0.625, we're thinking mainly to confirmatory as initial Phase II study as we had one outlier in that study. So positive results from the mid-year pharmacokinetic data and the progress on both of those form seems to be laid out now in a relatively clear path forward.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Thanks Joe. We'll take the next question please.
Operator
Thank you. Your next question comes from the line of Seamus Fernandez, Leerink Swann. Please go ahead.
Seamus Fernandez - Leerink Swann
Thanks very much. Just a quick question. Can you just give us Greg, an update on the impact of... or what cost realizations you have achieved so far via project impact given the fact that you are calling for $1 billion to $1.5 billion potential longer term cost reduction and can you also give us a little bit of your thoughts in terms of how those cost savings will progress 2008 and you said over the next several years, can you put a little bit more brackets around that for us? And then the last... second question really is what's the estimated birth cohort of the seven additional national immunization programs that were announced in the, I believe just over the last couple of weeks and when do you expect those sales to start coming in for Prevnar? Thank you.
Gregory Norden - Senior Vice President and Chief Financial Officer
Okay. I will take the project impact question. Okay, let me just talk... from maybe depends [ph] on Project Impact. We want to take this initiative to look really at how we do business in a changing environment. The changing environment for Wyeth with the at-risk launch of a generic pantoprazole and frankly at the changing environment for the industry. I could probably spend 10 or 15 or 20 minutes on this and I will not do that now.
But let me just say what... that we are looking at every facet of our business, and it includes manufacturing supply chain, how many sites and distribution points we have, the operating efficiency on our sites et cetera. Our commercial model, how and where we go to market, look the sales people on the Internet et cetera, R&D efficiency and productivity support services and function.
Now we ultimately expect as I mentioned, the annual savings to be up to be about $1.5 billion. That would be realized and we're now increasing increments each year. To specifically answer your question, there are several hundred million dollars this year across [ph] $300 million, $400 million, $500 million in number this year. That ramps up into '09 where we expect to have much of this by end of '09 and into 2010. But frankly much of this is dependent upon the timing of actions we take in the manufacturing, in our manufacturing sites, in our distribution network around the world. It's largely dependent upon timing of generics, et cetera. So what I will say is that we expect to get the lion's share of this by 2010, perhaps 2011, but, let me remind you that if you look at Wyeth SG&A as a percent of revenue, going back to 2000.
As a percent of revenue, we decreased our SG&A spend every year to the exception of one which is basically flat, every year from 2000. And in 2000, SG&A as a percent of revenue was 37% and in 2008 it's going to be in the 29% to 29.5% range. So, I'm confident that we're going to get the savings, that we have set forth here and probably in a pretty ratable basis, '08, '09, '10 with a little into '11. And without going into even longer dislocation and that was that's probably all I am prepared to say today. On the second question, James, who is going to take that. Justin?
Justin R. Victoria - Vice President, Investor Relations
I have got it. James, you're asking about the additional national immunization programs that have been announced, but not yet launched?
Seamus Fernandez - Leerink Swann
Yes. Thank you.
Justin R. Victoria - Vice President, Investor Relations
Yes, we have got a total of about another 1.5 million patients in that annual both birth cohort and collectively through those seven markets. That would add to the current birth cohort of the existing 24 national immunization programs, which are about a 11 million, which frankly represents only about 10% of the world's birth cohort which is another reason why we are very confused about the continued growth prospects for PREVNAR. Those countries will continue to come on board on a rolling basis any one particular country, coming on board, it is not going to move the needle. But, again it's just the collective effort to continue to grow PREVNAR going forward. So, I don't think you will see quarter-by-quarter a change because of the introduction of the birth cohort for instance in Cyprus or anything of that nature, but collectively they would add to the growth prospects with PREVNAR going forward.
Gregory Norden - Senior Vice President and Chief Financial Officer
Justin, I'd just add to that. I think both third and fourth quarter, well if you look at the efforts and what we'll see coming forward. I would expect to see the third and fourth are both significantly higher PREVNAR quarter than the corresponding quarters in '07. That's the way the penetration appears to be projecting out right now.
Seamus Fernandez - Leerink Swann
All right. Thank you.
Operator
Thanks. And the next question then comes from the line of John Boris with Citi. Please go ahead.
John Boris - Citigroup
Thanks for taking the questions. First question for Bernard, with the changing of the guard on the R&D front, Bernard, I would appreciate any thoughts on, how you'd be looking at or assessing R&D productivity and in particular on the regulatory front, an improvement of efficiency on the regulatory function. Second question, just for Joe very quickly related to bapineuzumab. Have you conducted research with payers and can you maybe just outline for us what the most important features or elements in a product concept that payers are looking for from an Alzheimer's type therapy? And then just one for Greg, you'd outlined with foreign exchanges. Can you just elaborate what the price contribution and volume contribution was in the quarter? Thanks.
Bernard Poussot - Chairman, President and Chief Executive Officer
John, I'll take the first question on the R&D evolution. I think Bob Ruffalo, as I mentioned briefly put in place a very robust and innovative and creative processes in our research organization. I think there is a sense of accountability of each member of a R&D organization has been brought to a level I never seen before.
So, all these processes metrics put in place are going to be... gain [ph] going forward to keep this sense of urgency and deliverable. I think what Mikael Dohlsten is doing is to build additional processes to make sure that we understand earlier to the kind of issues regulatory authorities or payers might run into so that in the early stage, we can decide to beef up certain doses or development plans. Mikael has a large experience and a significant connections in both the medical and scientific community to bring the people that we need to accompany basically our development activities and help us deliver on product that we satisfy the most stringent regulatory requirements. We know those on that doing away and we need to beef up our preparedness and understanding of those early on. So, I think we're going to, as I said, bring the consolidation to its next level.
Joseph M. Mahady - Senior Vice President
I think John on the issue of what they are looking for at bapineuzumab obviously, I think this is still a category where the straight demonstration of direct clinical benefit is going to get a lot of attention from payers. However, of course, given what we are suggesting is the pharmacologic approach of bapineuzumab. The ability to maintain life function is going to be something that's going to be very, very important for payers in demonstrate that beyond simple symptom relief types of measures and that's something that is important in the clinical development plans and particularly going to be important for the very serious health technology assessment organization whether it would be in the US or overseas such as nice [ph].
Gregory Norden - Senior Vice President and Chief Financial Officer
Okay. And John I'll take your question on price volume. So the second-quarter increase in revenue was 5%, 5.5%, almost all that was foreign exchange and less than half a percentage was price. So there wasn't a lot of price in the second quarter. Okay, I'll take the next question, please operator.
Operator
Thank you. Our next question comes from the line of Steve Scala with Cowen. Please go ahead.
Stephen Scala - Cowen and Company
Thank You. What does your new guidance range assume for possible additional Protonix generics supplied from Teva. I think you said that the situation was fluid, but I don't think you said what was assumed in the guidance. And secondly, a question on the pipeline. Has the PRISTIQ VMS trial started and if not, will that happen soon and is the Viviant complete response still on track for year-end and will that trigger and at the advisory review earlier next year? Thank you.
Joseph M. Mahady - Senior Vice President
Okay, I'll take the question of Protonix [inaudible]. We haven't really given forecast on PROTONIX this year, we did in the beginning of the year. I don't think I'm going to do that now. I cannot predict what Teva will do, I can't predict what they'll do and when they'll do it. So all I know is, well I know as of today and right now, I think we are just going to wait and see where that goes over the course of the next couple of months. The second question, Joe, I will turn it over to you.
Joseph M. Mahady - Senior Vice President
Yes, I think there were two questions. One was at [inaudible], have we started the trial and that trial is to confirm cardiovascular profile safety has started. The second one is whether or not we were on track with our complete response for VIVIANT, that is on track for year-end and it is our expectation fully that following the FDA's review and complete response data would be moving to an FDA advisory panel.
Stephen Scala - Cowen and Company
Thank you.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Thanks, Joe. Take the next question, please.
Operator
Thank you. Yes, sir. Next question comes from the line of James Kelly with Goldman Sachs. Please go ahead.
James Kelly - Goldman Sachs
Great. Thank you and good morning. Two questions. One as we think in PREVNAR overseas about the opportunity in the birth cohorts, especially when we start talking about these very large opportunities like China. Is it all some important to think a little bit about what the penetration rate in some of these markets are, some of the more commoditized or more competitive vaccines or whether its flu or MMR things like that? Are there important differences in some of these markets that we need to be thinking about as we build out these models? And then secondly, and I apologize if you did mention this. Could you talk to how much of the PRISTIQ revenues were stocking and how do you expect that to influence the run rate through the quarters of the year? Thanks.
Gregory Norden - Senior Vice President and Chief Financial Officer
Well, let me take the first one and let Joe take the other one. Sales in.... I don't think you can gauge here anything based on sales of PRISTIQ for the second quarter. It was pretty much a ship in to wholesalers, out to the retailers $15 million for the quarter. So I don't think there is anything that can be gauged positive or negative from that...
Joseph M. Mahady - Senior Vice President
No we had a typical initial stocking and that's what you see in the quarter. On the PREVNAR, I think you have to really look quite differently across the world in terms of penetration rates. For instance as Bernard mentioned earlier, the approval of PREVNAR in China. Obviously, in that particular situation we would anticipate that our first foray into the market there is going to be for private market patients, individual physician decision to prescribe followed hopefully at some point particularly as the target of our AGM strategy to see if we can indeed realize a government-sponsored vaccination program for PREVNAR in China. In other parts of the world, the government actually have quite expensive track record in fairly high penetration with their NIP [ph] program and where we have had PREVNAR added to those programs. They have certainly mimic the penetration of some of the long-standing pediatric vaccines. So it's pretty variable and in some places of course PREVNAR is setting brand new precedent with respect to penetration.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Thanks, Joe. We will take the next question. Please. operator.
Operator
Thank you. Our next question comes from the line Chris Schott with JPMorgan. Please go ahead.
Chris Schott - JPMorgan
Great. Thank you. Just had two quick questions. First on the PROTONIX generic sales, could you just talk is that your end market sales for those products or is that your profit on the unauthorized generic conservative amount of margin around that business? And then secondly on PREVNAR 13 a manufacturing question, just talking about your expectations for PREVNAR 13 dose capacity at the time of the potential launch. I know PREVNAR 7 took some time to scale up and was just issued and any comments you might have on the manufacturing complexity of 13 relative to 7? Thanks.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. I will take the one, the first one on PROTONIX, Chris. That's our sales to the end user. Okay, on the PROTONIX we got two components, Protonix is our branded sales, which are normal sales and are generic which again are generic sales. There is noting goofy about that. It is the sales that we get to the end user on that. Next question, Bernard, you want to take that?
Bernard Poussot - Chairman, President and Chief Executive Officer
Yes, the next question was the manufacturing capabilities we are building for Viviant [ph] going forward. I would tell you that with the potential we see that's only on children's side and not on the adults. So, we are going to change basically the findings on the profession of adults and elderly especially population against pneumococcal. We have to plan for big volume and we are gearing towards building 150 million doses capabilities thoroughout our network in the years to come. So this is not small nevertheless we have produced 40 plus million doses of PREVNAR 7 this year onwards which presents already a significant number of doses, but we're marching towards 150 million.
Chris Schott - JPMorgan
Thanks, Bernard.
Bernard Poussot - Chairman, President and Chief Executive Officer
We'll take the next question, please.
Operator
Thank you. Our next question comes from the line of David Moscovitz [ph] with Harris and Company [ph]. Please go ahead
Unidentified Analyst
Yes, thanks very much. Two questions. One, I am still a little bit unclear on the Phase III dosing regiment for the ApoE4 non-carrier patient population. Could you please review that for us? And also from a strategic standpoint, you guys were talking about building on nutritional consumer and health and so forth. I'm wondering given the success you are having with Protonix, the talk about biosimilars in the past and the recent interest of major pharma in generic companies, what would you think about getting into that businesses at this point? Thanks
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Justin, will take the first one.
Justin R. Victoria - Vice President, Investor Relations
Yes, David. It's Justin. The dosing being floored in the non carrier subject in both the U.S. and rest of the world studies involved 0.5, 1.0 and 2.0 milligram per kilogram in various cohorts compared to a placebo group.
Unidentified Analyst
Thanks.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. On the biosimilar, I think it is obvious that being today, the fourth largest biotech company in the world, we have to make biologics and that's something we continue to look at, Protonix being relative to our own innovation rates and the way Enbrel and [inaudible] in addition to bring to accompany obviously that is something we put into continue on.
Unidentified Analyst
Okay. And just a quick follow-up on the revenues in that trial. I think can I hear that you believe the Elan trial could finish up by late '08 or early '09 and you guys are six months back. So does that mean you guys are somehow targeted towards the mid '09 time frame for finishing up your phase III trial?
Justin R. Victoria - Vice President, Investor Relations
No David the question asked and I answered was with respect to enrollment. Elan has commented publicly that they expected complete enrollment by the end of '08 early '09. All patients in the study will be dosed for 18 months in a double blind portion of the study. So you need to extend that time frame for about 18 months and again we are running about a six month gap between the US and the rest of all world study.
Unidentified Analyst
Thanks, Justin. I misspoke. Appreciate it.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Thanks, Justin. I think we will take two more questions. Please, operator?
Operator
All right. Great. Our next one then comes from the line of Shan Syler [ph] with Lindenberg [ph]. Please go ahead.
Unidentified Analyst
Yes good morning. On those what you highlighted in your scripted remarks, can you give us some sense of when that will be fully launched and can you also give us some color as to what you expect from the current indication in terms of market and well how you see additional indication that rolling out?
Joseph M. Mahady - Senior Vice President
Yeah having fully launched. We just really had our launch meeting last week Shan [ph]. So we are just really getting out there now with the very, very beginning of the demand generation indeed, we are so waiting on FDA to finish their review of initial promotion materials of it. So, let's take and longer than we might have expected. So, we are here in the U.S. I think you'll start to see prescription activity even without promotion, we have been picking up prescriptions here and there in the U.S. and expect that will rollout. As we move to second half of the year, we've got both Canada, we just launched and Europe now which is expected to launch as well or with the same similar indication of this advanced illness population receiving palliative care. Beyond that expansion to other indication really will take completion of significant clinical programs and I don't think you would see the addition of a second indication at least for a couple of years and those would be in more chronic models of pain and using various dosage forms both subcu and oral.
Unidentified Analyst
Thanks.
Operator
Thank you.
Gregory Norden - Senior Vice President and Chief Financial Officer
Okay. Okay. Thanks, Joe. Okay we will turn... one more question before I turn it over to Bernard for some closing remarks, please.
Operator
Very good. Thank you. And that last question comes from the line of John Boris with Citi. Please go ahead.
John Boris - Citigroup
Just had a follow-up question on Protonix but it was already asked and answered. Thanks.
Justin R. Victoria - Vice President, Investor Relations
Thanks, John. Okay, Bernard.
Bernard Poussot - Chairman, President and Chief Executive Officer
Okay. Just first of all, let me thank you for being with us this morning and let me reiterate that given our current performance today and the prospects for the balance of the year, we are raising a pro forma 2008 earnings guidance as we taken as necessary steps to attempt to offset the impact of growing competition of Protonix while growing the rest of the business.
So let me also recap some of the key factors that we expect will lead to continue [inaudible]. Number one continued strong fundamental international growth. Two large core franchises like Enbrel, Prevnar, Nutritional, which shows strong growth potential still ahead. Three new products such as TYGACIL and TORISEL, PRISTIQ and RELISTOR which are starting to make significant contribution. Four, we are controlling our costs, selectively reinvesting where growth is achievable such as in emerging markets and in research. Five, the growing [inaudible] of our business, which we think, constitutes an additional strength to Wyeth. And sixth, we've seen encouraging results from our Phase 2 study of bapineuzumab in Alzheimer's disease. So we will continue these efforts and are looking forward to keeping you up-to-date on our progress. And with that thank you very much.
Operator
Thank you and ladies and gentlemen this conference will be available for replay starting today Wednesday July 23rd at 10 AM Eastern time and it will be available through next Wednesday July 30th at midnight Eastern time. And you may access the AT&T executive playback service by dialing 1800-475-6701 from within the United States of Canada or from outside the United States of Canada, please dial 320-365-3844 and then enter the access code of 929880. Those numbers once again are 1800-475-6701 from within the U.S. or Canada or 320-365-3844 from outside the U.S. of Canada and again enter the access code of 929880. And that does conclude our conference for today. Thanks for your participation and for using AT&T's executive teleconference. You may now disconnect.
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