Earnings Preview: Wyeth 2Q profits seen flat

OVERVIEW: Wyeth had been benefiting from a diverse product mix, with seven drugs or vaccines each producing annual sales of $1 billion or more, until No. 4 seller Protonix, for severe heartburn, got generic competition at the start of the year. In response to expected lost sales, Wyeth began trimming its 50,000-person work force, aiming for about 5 percent by the end of this year and up to 10 percent by 2011.

More importantly, Wyeth has so far succeeded in fending off legal challenges to the patent for the world's top-selling antidepressant, extended-release Effexor XR, delaying generic competition until 2010; the main patent had been set to run until 2017. The drug had sales of $3.8 billion last year.

During the second quarter, Wyeth got FDA approval for Relistor, a shot to treat opioid-induced constipation, but the agency again held up approval of osteoporosis treatment Viviant, requiring more information on strokes and blood clots among patients in research studies.

Last week, Wyeth agreed to buy ThermaCare, a leading over-the-counter heat wrap, from Procter & Gamble. The move boosts Wyeth's already impressive line of consumer products, from pain relievers Advil and Anbesol to cold and flu medicines Dimetapp and Dristan, plus Chapstick, Centrum vitamins and more.

BY THE NUMBERS: Analysts polled by Thomson Financial expect, on average, earnings per share of 87 cents and revenue of $5.69 billion. In the year-earlier period, earnings per share also were 87 cents, while revenue was $5.65 billion. In the first quarter, earnings per share fell to 89 cents from 92 cents per share in the 2007 period, due to restructuring costs.

ANALYST TAKE: Cowen and Company analyst Steve Scala is expecting "below-average" sales and earnings per share for the quarter, with Protonix revenues dropping by about two-thirds and only slight increases in sales for Effexor and hormone replacement therapy Premarin.

Charles Butler at Lehman Brothers writes that Wyeth should meet Wall Street expectations. He thinks management may discuss progress in efforts to shift patients to Pristiq, the successor drug to Effexor XR, a crucial step ahead of its mid-2010 patent expiration.

WHAT'S AHEAD: Wyeth has a highly anticipated Alzheimer's drug, known chemically as bapineuzumab, in development with partner Elan Corp. Officials with the two companies are to discuss results of midstage human testing with the investment community next Tuesday evening.

STOCK PERFORMANCE: Shares rose 14.8 percent to $47.96 during the second quarter. In the first half of 2008, shares rose 7.9 percent.