Question-and-Answer Session
Operator
(Operator Instructions) And our first question comes from the line of James Kelly of Goldman Sachs. Please go ahead.
James Kelly - Goldman Sachs
Thank you and good morning. My question relates to Zyprexa and the depot formulation, and thank you for the additional data in Canada and Germany. How do we think about the potential for this indication, I'm sorry, for this formulation to potentially address some of the concerns in foreign markets? Thank you.
John Lechleiter
Right now Jim, as you know, we just filed in both the U.S. and Europe for the depot formulation in the second quarter. We believe that it will provide additional opportunity for us, particularly in those settings, where we know there are patients who have great difficulty complying with the daily oral therapy.
I think at this point, it's very difficult to provide a precise answer in terms of whether the extent to which the depot would compensate for the loss of the oral form. I think it's important to keep in mind, and I think we mentioned in the call that we still have the Zydis, the rapid, the kind of wafer, the dissolving wafer form, oral form of Zyprexa protected in both of those markets. So, we're going to continue to try to hold our ground there with the oral as we launch the depot subsequent to our hoped for approval.
James Kelly - Goldman Sachs
Okay, thanks.
Operator
All right, thank you. Our next question comes from the line of Chris Schott of Banc of America Securities. Please go ahead.
Chris Schott - Banc of America
Great, thank you. Just two quick questions. Good to see you got some pretty strong volume gains this year, but what's interested in that 8% price gain you're seeing in the U.S. market, is there still some benefit from M&A?
And I guess, can you just comment specifically on the U.S. Zyprexa, kind of U.S. -- year-over-year price versus volume trends? Again, it's indicating a strong price benefit. Any moderation expected for that in the second half of the year? Second question is for Derica.
Obviously, you've taken a little bit of debt here with the ICOS acquisition. I was interested in just your thoughts about increasing the company's balance sheet leverage, whether that would be share buybacks or acquisitions, and just what's your appetite for that. Thank you.
Derica Rice
Okay, Chris. This is Derica. Let me try to respond to both of your questions. In regards to Zyprexa in the U.S., in regards to the second quarter and the overall 8% price, yes, we still saw some benefit from the M&A pricing benefit, that is, in the second quarter results, specifically in the U.S., that's a part of the 8% price improvement.
We still expect however, that as we continue throughout the year that the pricing benefit for M&A will continue to dissipate as we do a full year comparable. So, in the second half of this year we think that the pricing impact, in terms of growth, will become more negligible.
Secondly, in regards to Zyprexa, which is a key part of that, we know that with the adoption of the M&A, part of this is driven by the mix of patients between -- on Zyprexa between Medicare and Medicaid. And obviously, as that works itself through as well, then we expect to see the pricing benefits to Zyprexa, which is a part of M&A to dissipate as well in the second half.
On your second question regarding our capital structure, and given the strength of the balance sheet and the improving cash flows that we're seeing, Chris, yes, it is something that we are considering in terms of going forward. Would we potentially lever up our balance sheet more than we have today?
As you are aware, we did take on $2.5 billion of debt associated with the acquisition of ICOS. As we -- as John stated and as you've heard many of us say before, that as we look to pursue business development opportunities more aggressively, clearly, that is the first cause that I would look to, to utilize the leverage in that balance sheet.
Obviously, as well to compliment any additional internal opportunities we have in regards to additional R&D efforts in terms of projects under development. And in the absence of both of those opportunities, meaning that we have fully exhausted all of those, then yes, we may consider other opportunities to lever and potentially we would look to give some of the cash back to the shareholders, as we look to build cash over the next few years.
Phil Johnson
Okay. Next caller, please?
Operator
Thank you. Our next question comes from the Steve Scala of Cowen. Please go ahead.
Steve Scala - Cowen & Co.
Well, thank you. I have two questions. First, if we take the midpoint of your Q3 and full year guidance, it implies Q4 earnings will be flat year-over-year, I think. Why will it be flat? Can you remind us of the reason?
And secondly, what is your latest thinking on the timing of presentation of the TIMI-38 data? Lilly said previously that it would have the TIMI-38 data during the summer. So what is your latest thinking on issuing a press release with the top line results, perhaps in August or September and then, presenting it at a later time? Thank you.
Derica Rice
Okay, Steve, this is Derica. I'll take the first question and I think Jim will fill the second question. In regards -- if you're looking at our first half performance, and I think you have simply stated your question, so just if you look at our first half then you'll know why are we not seeing the similar output in the second half.
As I talked about in some of my opening comments, there's really three factors that's driving kind of the differing performance in the second half versus the first half. We expect to see, on the positive, continued volume trends in the second half similar to what you've seen in the first half.
So that's -- and we're very encouraged by the base operating trends that we're seeing. So we don't anticipate that dissipating through the next six months. There are however, three factors, three additional factors that will occur in the second half that wasn't present in the first half.
First of all, we will deal with the expectation of generic competition for Zyprexa in both Canada and Germany. And we provided a reference that -- and you guys can, I think -- to support your own internal analysis, our Zyprexa sales in 2006 in Canada was approximately $250 million, and in Germany, it was approximately $180 million. So as we expect to see that competition ramping up in the second half, you can see what type of -- what the erosion curve may look like.
Secondly, we also have the, in the second half which we did not have in the first half, the impact of regularly scheduled maintenance shutdowns, in terms of our manufacturing operations, at some of our key frontal operations.
And that will occur in the July-August timeframe. And we expect it also to occur in the December timeframe. So that will obviously have a more negative impact on our gross margins versus what you saw in the first half.
And then secondly -- and thirdly, as we looked at the improving performance trends in terms of our baseline operations, it does give us the opportunity to make some additional investments, both in R&D efforts, in regards to resourcing additional R&D projects, as well as continuing to beef up some of our commercialization efforts, and to make those types of investments, otherwise where we wouldn't have had the capacity without the conclude performance.
And we've seen where that can have a positive impact, such as what we did in the third quarter of last year, where we started off 2006, where we began to increase our investment behind Cymbalta with the larger brand of DPP ads.
And then, you've seen us follow on with that, with the first quarter of this year, with the expansion of our diabetes sales force in the U.S. and increasing that footprint by 40%. So as we continue to see those types of opportunities, where we think we can drive further growth in our business, we will look to make those types of investments.
Jim Greffet
Steve, it's Jim, I'll take a shot at the TRITON study. So, as we mentioned in our prepared remarks, the TRITON TIMI-38 head-to-head Phase III study of prasugrel versus Plavix has now had the last patient visit and we're working full force on processing all the case report forms locking the database to be able to derive the results from the study.
Our desire is to have the full data set come out at the American Heart Association meeting in November. It 's not lost on us that this is a fairly important data point for our investors. And I think our messaging has been pretty clear here, that when we have the results, we'll take stock of where we are in the calendar.
The desire would be to fully leverage the prestige of the American Heart Association and have the debut come out at that meeting. However, if we have the results well in advance of that meeting, or if we have the results as we're crossing an earnings call for example or a quarterly filing, then we'll need to take a hard look at where we are and make a decision accordingly.
So, at this point, it's probably premature to say we will or we won't issue a press release, but we're certainly appreciative of the importance of the data and we'll make sure that it comes out in an appropriate and in timely manner as we can.
Phil Johnson
Next caller, please.
Operator
Thank you. Our next question comes from the line of Bert Hazlett of BMO Capital Markets. Please go ahead.
Bert Hazlett - BMO Capital Markets
Thanks. I have two questions. My first is on Zyprexa LA. When should we see the data for that and could you remind us, if you expect any material advantage, compared to the Zyprexa, oral form, other than dosing with that product?
And then secondly, could you just discuss some of the market dynamics you're seeing in diabetes? You've successfully reinvigorated Humalog or maintained growth there certainly. But Byetta on a week-to-week basis seems -- the growth seems to be slowing a bit. Is there some effect from the DPP4's that you're seeing or is there something more that we should be aware of? Thanks.
John Lechleiter
Bert, this is John Lechleiter. I think with respect to the Zyprexa LA, I think the advantage there is going to be the once monthly, the four week, every four week format, and the opportunity we have to really do a better job helping many patients, who for one reason or another are not able to achieve successfully daily oral medication.
Recall from the KT study, this is a chronic disease, requires ongoing therapy, but the average length of treatment was something like nine months as we looked across the current oral medication. So, we think there is a significant need here.
I think, we've been pretty clear so far, as we talked about the limited amount of information we've provided, and we don't expect to see differences in terms of other kinds of performance characteristics of the product delivered in this format, versus the oral product.
In terms of data presentation, Jim...
Jim Greffet
Yeah, we think...
John Lechleiter
The early part of next year so we don't anticipate the data coming out from our Phase III studies until the early part of next year. We want to make sure we get the package before the agency did a review and given the competitive space, we're going to keep that data under wraps for a little while, probably the early part of next year.
In terms of your question about Humalog, clearly, there are patients who would have been candidates to start on a starter insulin who are certainly now considering Byetta or who have Byetta as a treatment option.
Nonetheless, obviously, this is a progressive disease and we expect as physicians and patients opt for tighter control of blood sugar, which we know is absolutely key to treating the disease and preventing long term complications, that there's still a great opportunity here with Humalog and with the Humalog mixture.
So, we're going to continue to be very competitive in this space, introduce new delivery devices to improve the quality and caliber of our interaction with the physician health care professional to be helpful for patients and to continue hopefully also to gain share with the Humalog family.
Jim Greffet
May be I just going to switch off my...
John Lechleiter
Yeah. I was going to say Bert just on Byetta as well, just two things, one remember with the sense of expansion that we announced in the first quarter, we've actually increased for Byetta alone the volume of interactive distributions by 30%, compared to the fourth quarter of last year.
Secondly, if you look at our message on Byetta, it continues to be around the same glucose control with the secondary benefit of weight loss. Taking all of those two into account, if you look at the actual results that we're seeing with Byetta, one we continue to see market share gain for the quarter, in both new prescriptions and total prescriptions.
Secondly, if you just went down, and we worked through a lot of the inventory, the sampling issues that we had last year, we've actually seen double-digit growth in the 10 micro milligram prescription.
So, we're actually encouraged by the resurgence of the growth trends that we've seen in both of market share appreciation and the overall growth profile, versus what we were seeing in the second half of 2006.
Phil Johnson
Bert I'm sorry, we got the wrong product. Next caller, please.
Operator
Thank you. Our next question is Tony Butler from Lehman Brothers. Please go ahead.
Tony Butler - Lehman Brothers
Yes. Thanks. Three brief questions. Number one, Derica, could you update us on some of the expansions in the facilities for pens and I believe for insulin and where those facilities may be in progress?
And second, the planned shutdowns, I've heard you or Lilly make comments about planned shutdowns in the past, and while I understand them, I'm curious if you could expand a little bit further, what are all facilities shut down or one or two and is this a rolling process? And really it applies back to Steve's question on gross margin for the remainder of the year.
And thirdly, John, there has been some shift in volume demand for Zyprexa and I'm curious, as you've gone out on the road and spent time with physicians, well, with reps and thus physicians, if you could comment on how there has been or if there is any change in the dialogue between that rep and that physician as it relates to Zyprexa from say a year or even two ago? Thank you.
John Lechleiter
Tony, I'm going to take a stab. This is John. I'm going to take a stab at all three here and Derica may want to comment a little bit on the gross margin in particular.
First of all, we announced, as you know last year, our decision not to complete construction of a facility that we had under way to help us manufacture pens in Virginia. Instead, we're going to add whatever incremental capacity we need to add to help us manufacture more pens and to continue to be very competitive there within our existing facilities.
We also use several contractors to do sub assembly and I think we've got a reasonable network in place that will allow for continued expansion of insulin and other products delivered in this format going forward.
As far as plant shutdown goes, we oftentimes will shut down our plants in Europe, for example, in the summer July forward, it's not usual for us to also shut down a plant for planned maintenance, etcetera. These would be normal occurrences.
Later in the year, in December, for example, so with that in mind, we've looking ahead to the second half of the year, while we expect to see gross margin improvement over 2006. We're not going to continue to see the sort of expansion that characterized the first half of the year.
As far as Zyprexa goes, our approach has been very consistent, Tony, through obviously a challenging period for Zyprexa in the U.S. the past several years. Our message to physicians around the urgent patient, the use of using Zyprexa for the people who stand to benefit most from the product, and for whom the balance of efficacy and the side effect profile are favorable, continues to really resonate.
And I think, physicians understand the benefits Zyprexa can offer those patients and I think as a result, we're seeing moderation in what had been a declining trend any other comments, guys, on the gross margin side?
Phil Johnson
Tony this is Phil. Real quick on the gross margins, we also expect in the second half of this year to bring online capacity for the Zyprexa long-acting injectable formulation and we'll see additional expenses from that capacity we do not have in the first half of the year. Derica?
Derica Rice
Well, just recognize, Tony that when we talk about our planned maintenance shutdown, these are for preventative maintenance and also think about how we actually do manufacturing in the pharmaceutical business versus others where we tend to campaign, so it's not like we can, some of our manufacturing process, you can't stop midstream because of the chemical nature of it.
So, we tend to have very discrete points where we will conclude operations to do the preventative maintenance type work if necessary.
Jim Greffet
It's Jim, let's just go ahead and back through the cycle, so we get all four of us chiming in on one question. There's one other thing on the dialogue on Zyprexa that's probably bears mentioning, and that's brand equity scores.
We run brand equity evaluations on most all of our major products twice a year or so. And for a long period of time if you look at the attributes and the brand equity scores the number of negative attributes coming from our customers on Zyprexa exceeded the number of positives actually.
Over the past six to 12 months we've seen that switch and now there's a greater predominance of positive brand equities score coming from our customers on Zyprexa than negative. We think that is a lot to what John had said on the urgent need and the crisp dialogue we have between our reps and doctors.
That's probably the best proxy for the changing tides in the way that the interaction is going right now with our customers in that space, we feel pretty good about it.
Phil Johnson
Next caller please.
Operator
Our next question comes from the line of Seamus Fernandez of Leerink, Swann. Please go ahead.
Seamus Fernandez - Leerink Swann & Company
Thank you very much. Just a quick question. Can you just update us on the impact of rebate accruals related to Medicare and Medicaid and how we should be thinking about that?
You have you identified the magnitude of the potential earnings impact in your 10Q and I was just wondering if you could give us your thoughts on how we should be thinking about that in the subsequent quarters coming up, and if that will be any form of a contribution in 2008? Thank you.
Phil Johnson
Seamus, this is Phil. Essentially, what we saw with the M&A last year, an implementation was really quite an unusual occurrence and led to some pretty significant shifts in where our business was being generated from. We had to estimate that at that point in time without the actual data, obviously, in hand.
As we received that data from Medicare/Medicaid, sort of three to six months after the fact and the dust settled, we could clearly see that in the second quarter of last year we actually had a much different shift than we had anticipated, and if we would have had the actual data in realtime, would have made a smaller sales discount accrual.
So, essentially for the first half of the year, things worked out fine, but in the first quarter, we had a little different dynamic than in the second quarter. This is leading essentially to this additional, as the earlier caller had asked, incremental pricing benefit over and above the list price.
So the 8% we're seeing for the quarter in the U.S. is impacted in addition to list price increases by the issue of the comparative 2006 where we're having to make these estimates, I think are the five zones and others have mentioned in their calls were very difficult to make at the time given the significant share shift.
So with the best knowledge we have right now, we could say that the first half of the year, we would see residual benefit from M&A on the pricing front, that should dissipate and be relatively negligible in the second half of 2007 as well as in 2008. Does that get to your question? Next caller please.
Operator
Our next question comes from the line of Jami Rubin from Morgan Stanley. Please go ahead.
Jami Rubin - Morgan Stanley
Thank you. Along the lines of prasugrel, I was just wondering if you could comment on how you plan to provide headline data on Byetta LAR, if again are you waiting for a medical meeting or is this something that you could issue in a press release sometime this fall?
And secondly, what are your European -- what is your European regulatory strategy with respect to LAR? If you could comment on that as well. Thanks.
Jim Greffet
Jami, it's Jim. On the Byetta LAR data, we do-- we've said that we will have a readout of that study in Q4 of this year. If you use -- this isn't a commitment but at least is a reference point.
If you look at how the Phase II data was released, there was a press release in the latter part of the year with the top line results of the Phase II and then the full data set was released at the American Diabetes Association meeting the following June.
That's probably a decent proxy for the approach that we might use here. We have said that the data will come out, so I would anticipate that given that there aren't any I think major medical diabetes meetings in the back part of the year, we'll put it out in some sort of a press release or conference call, depending on the time of the data.
The EU regulatory strategy, we haven't talked about in great detail yet. Recall in our contract that Amylin, Lilly is responsible for the filings outside the U.S. We're excited about the opportunity and we'll make sure that we move as quickly as we can.
Stay tuned, as we get farther along in the process, we'll give more clarity on what the timing is.
Phil Johnson
Next caller please.
Operator
Our next question comes from the line of Scott Henry of Oppenheimer. Please go ahead.
Scott Henry - Oppenheimer & Co.
Thank you. I just had a couple of questions on the pipeline. First, on the Zyprexa depot, how should we think about the review times in the U.S. and outside the U.S., as well as, if you could comment on manufacturing, are you comfortable with capacity? And should I assume there will be an inspection prior to approval?
John Lechleiter
I think with respect to review times for depot, we announced obviously that we filed in the second quarter, I think it's reasonable to think in terms of standards, what you might call standard review times in both the U.S. and the EFDEU.
With respect to manufacturing, we have been building a new capacity now for several years, that will enable us to manufacture the product both the powder and the formulated product.
As Derica mentioned earlier, it's our intention to begin to bring those facilities online, later this year, we believe we have capacity that is very adequate for what we believe the anticipated demand for the product will be.
Phil Johnson
Next caller, please?
Operator
Our final question comes from the line of Mario Corso of Summer Street Research. Please go ahead, sir.
Mario Corso - Summer Street Research
Yes, thanks for taking me question. On the Zyprexa depot, you at all concerned that this opens the door for labeling discussions and the fact that the discussions could move in the direction away from class labeling, I know my understanding is that all the manufacturers were asked for cholesterol and metabolic side effect data probably over a year ago, so I'm wondering where you think that whole class labeling issue stands at this point? Thank you.
John Lechleiter
I think whatever consideration the FDA is giving, and what it always does, which is to review data on all the products in the class on an ongoing basis, I think that would be independent of our filing of the Zyprexa depot.
And as such, I don't see in this filing any triggers for action that the FDA would not consider under what you might call ordinary circumstances, it just continues to stay abreast of all of the data for all of these products in the category.
Derica Rice
Okay. Well, I think that that will be the last question we'll take this morning and this is Derica and I just wanted to say thank you for your time this morning. We hope that this hour has been helpful in understanding our performance for the second quarter and our outlook for the remainder of the year.
And John Lechleiter, perhaps you would like to make some summary comments.
John Lechleiter
Thanks, Derica. And thanks to everyone for joining us this morning. We aim to be -- to continue to be delivering on our priorities with the solid financial performance we reported in the second quarter, which included strong sales volume and operating income growth.
We've again increased financial guidance for 2007. We're investing in the business to drive future growth. We have increasing cash flow and a strong balance sheet, which gives us the flexibility to execute on our business development strategy.
The pipeline is progressing well. There are a number of important pipeline catalysts in 2007, including the advisory committee meeting today, and the FDA action date later this year for Evista for breast cancer risk reduction.
The expected submissions of Cymbalta for fibromyalgia and prasugrel for acute coronary syndrome with PCI, plus a readout of results from the Byetta LAR study. The earlier stage pipeline is robust, with a mix of novel approaches, as well as established mechanisms of action.
It also includes the significant number of large molecules reflecting a biotechnology expertise. Already this year we've had eight new molecular entities entered the clinic. We are on track to hit our goal of 15 enemies for the year.
We expect an additional 15 enemies to enter the clinic in 2008. In the Phase of number of factors that challenged our industry, we had a sense of urgency and optimism and our aggressively reshaping the company to win for the benefit of patients and shareholders alike. Thank you.
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