Wetteny Joseph
Executive Vice President and Chief Financial Officer at Zoetis
Thank you, Kristin, and good morning, everyone. 2021 was an exceptional year for us with revenue of $7.8 billion and adjusted net income of $2.2 billion, both exceeding the high end of our November full year guidance range. Full year revenue grew 16% on a reported basis and 15% operationally, with adjusted net income increasing 21% on a reported basis and 19% operationally. Looking deeper into the 2021 numbers, price contributed 1% to full year operational revenue growth with volume contributing 14%.
Volume growth consisted of 6% from other in-line products, 5% from new products including Simparica Trio, and 3% from key dermatology products. Revenue growth was again broad-based with the U.S. growing 14% and international growing 17% operationally. Our strong performance was driven by our innovative, diverse, and durable companion animal portfolio which grew 27% operationally. Our livestock business which faced generic competition on key franchises as well as challenging macro conditions in certain markets grew 1% operationally on a year-over-year basis.
Performance in companion animal was led by our small animal parasiticide portfolio bolstered by full year sales of Simparica Trio which generated revenue of $475 million, an increase of $305 million compared to 2020 sales. Sales of Simparica also grew double-digits for the year with operational revenue growth of 13%. For the year, the Simparica franchise grew 82% operationally with revenue of approximately $0.75 billion. Our key dermatology products performed incredibly well growing 24% operationally with approximately $1.2 billion in revenue for the year performing above our expectations.
Our diagnostics portfolio grew 21% operationally in the year, with strong contributions from our U.S. and international segments, and we'll continue to make meaningful investments in the coming years to drive global growth. We do believe the adoption of diagnostics products and services outside the U.S. represents a larger growth opportunity geographically and feel we are favorably positioned to capture future growth in those markets. Our lifecycle performance in 2021 depicts the importance of geographical diversification.
Generic competition and challenging market conditions weighed on our U.S. performance but were offset by solid growth internationally primarily in emerging markets. The modest livestock growth on a global basis was in-line with our expectations for the year. Moving on to our Q4 financial results, we posted another strong quarter with revenue of $2 billion representing an increase of 9% on both a reported and operational basis. Adjusted net income of $474 million is an increase of 8% on a reported basis and 5% operationally.
Of the 9% operational revenue growth, 1% is from price and 8% is from volume. Volume growth of 8% consisted of 5% from new products which includes Simparica Trio, 2% from key dermatology products, and 1% from other in-line products. Companion animal products led the way in terms of growth growing 21% operationally with livestock declining 6% on an operational basis in the quarter. Small animal parasiticides were the largest contributor to growth in the quarter where our innovative and diverse flea, tick, and heartworm portfolio grew 32% operationally.
Simparica Trio posted revenue of $124 million representing operational growth of 106% versus the comparable 2020 period and the third consecutive quarter with sales exceeding $100 million. Meanwhile, our key dermatology products, Apoquel and Cytopoint, again had significant global growth in the quarter with $316 million of revenue representing 23% operational growth against a robust prior year in which key derm grew 27% in the fourth quarter of 2020. Our livestock business declined 6% in the quarter as a result of generic competition for Draxxin, unfavorable market conditions in the U.S. primarily resulting from elevated input costs as well as softer conditions in China largely driven by reduced pork prices.
Our fish business grew double-digits in the quarter, and along with the strength of our emerging markets, partially offset the broader decline. Overall, livestock performance in the fourth quarter was in-line with our expectations. Now, moving on to revenue growth by segment for the quarter, U.S. revenue grew 9% with companion animal products growing 20% and livestock sales declining by 13%. U.S. pet care vet practice trends remained robust in Q4 with practice revenue growing approximately 8% with visits growing 3% despite challenging prior year comps.
Companion animal growth in the quarter was driven by sales from our Simparica franchise as well as key dermatology products. We are driving growth in both therapeutic areas by making meaningful investments primarily through direct-to-consumer advertising and field force and we continue to be pleased by the return on investment the programs are yielding. Growth of Simparica Trio was again strong in the quarter with sales of $114 million, growing more than 100%. We also met our clean transition targets and continue to take share within the clinics.
Key dermatology sales were $216 million for the quarter, growing 22%, with Apoquel and Cytopoint each growing significantly. Our investments to support the franchise have been instrumental in driving more patients into the clinic and we'll continue to invest meaningfully in this space as a large portion of dogs with dermatitis remain untreated representing an opportunity to further expand the market. U.S. livestock fell 13% in the quarter primarily resulting from our cattle business which as expected was challenged by generic competition for Draxxin as well as elevated input costs continuing to weigh on producer profitability.
Our poultry business was negatively affected by reduced disease pressure from smaller flock sizes as well as generic competition while swine faced competitive pricing pressure on anti-infectives and vaccine products. Moving on to our International segment, where revenue grew 8% on a reported and operational basis in the quarter, companion animal revenue grew 23% operationally and livestock revenue declined 2% operationally. Increased sales of companion animal products resulted from growth of our key dermatology products, our monoclonal antibodies for alleviation of OA pain, and our parasiticide portfolio.
Several key brands are benefiting from our international DTC campaigns in Latin America and parts of Europe and we remain excited with the long-term prospects of these programs. Overall, companion animal grew double-digits operationally in every major market in the quarter. We are encouraged by the performance of our monoclonal antibodies for OA pain with Librela generating $15 million and Solensia delivering $3 million in fourth quarter sales. In the fourth quarter, Librela became the number-one pain product in the EU in its first year with the underlying performance metrics being very favorable for future growth.
Reordering rates were in excess of 90% and compliance rates exceeded our initial expectations. In the past, we've highlighted the significant opportunity to expand the pain market, therefore, we were extremely pleased to see approximately 40% of Librela and Solensia sales were from patients receiving medication for the first time. International livestock declined 2% operationally in the quarter as declines in cattle and swine were partially offset by growth in fish and poultry. Cattle declines were largely in the EU and Canada as generic competition for Draxxin weighed on sales.
The decline in swine sales was primarily the result of lower pork prices in China, negatively impacting producer profitability. Our fish portfolio grew double-digits again this quarter driven primarily by growth of Alpha Flux in Chile and the growth in poultry was largely attributed to further key account penetration. Now moving on to the rest of the P&L for the quarter, adjusted gross margin of 69.6% increased 190 basis points on a reported basis compared to the prior year resulting from favorable product mix, lower inventory charges, favorable FX, and price.
This was partially offset by higher freight, manufacturing, and other costs. Adjusted operating expenses increased 12% operationally with compensation-related costs being the primary driver of the 15% operational increase in SG&A as well as 3% operational increase in R&D expenses. Increased international advertising and promotion expense for key brands also contributed to higher SG&A, while R&D had increased project spend in the quarter. The adjusted effective tax rate for the quarter was 18.6%, an increase of 510 basis points driven by the impact of prior year discrete tax benefits and changes to the jurisdictional mix of earnings.
And finally, adjusted net income grew 5% operationally and adjusted diluted EPS grew 6% operationally for the quarter. In December, we announced a 30% annual dividend increase, continuing our commitment to grow our dividend at or faster than the growth in adjusted net income. In the quarter, we repurchased approximately $200 million of Zoetis shares and announced the authorization of a $3.5 billion multiyear share repurchase program. Because we generate significant free cash flow, we have the ability to grow our business through organic investments and business development and return excess cash to shareholders without consuming our cash balance or being dependent on elevated leverage.
Now, moving on to guidance for 2022, please note that guidance reflects foreign exchange rates as of late January. We are expecting an unfavorable foreign exchange impact versus prior year by approximately $160 million on revenue, which is roughly 200 basis points and approximately $0.12 on EPS which is about 250 basis points. For 2022, we are projecting revenue between $8.325 billion and $8.475 billion representing 9% to 11% operational growth.
We again expect companion animal to be the primary growth driver in 2022 with the continued strength of our diverse parasiticide portfolio, further expansion of our key dermatology products, the adoption of our monoclonal antibodies for OA pain, and the growth in point-of-care diagnostics and reference labs. We see a very favorable companion animal backdrop for 2022 while expecting certain vet clinic trends to moderate over time we believe they remain above pre-pandemic levels. The catalysts for growth in 2002 and beyond stem from a younger pet owner demographic and the standard-of-care increases which took shape over the prior two years.
Our innovative portfolio, geographic representation, and significant investments in key brands have us positioned extremely well to capture a meaningful portion of that growth. We anticipate modest livestock growth again in 2022 led by the contributions of our emerging markets. The macro trends which makes livestock an essential business remain intact, and we believe more normalized growth will occur in 2023. I'd like to touch upon the key assumptions that underpin our expectations for revenue growth.
Beginning with companion animal, we do not assume a triple combination product will launch in the U.S. in 2022 to compete against Simparica Trio or competitive entrants for key dermatology products, Apoquel and Cytopoint. As Kristin mentioned, in 2022, we expect Librela to become a blockbuster product in the first full year of sales with revenue exceeding $100 million largely from the EU markets. We remain very optimistic about the potential of Solensia as well while the revenue curve will have a different shape due to the lack of an established fee line pain market we view Solensia as a long-term blockbuster product which addresses a significant unmet need in animal health.
In livestock, we expect generic competition to negatively impact Draxxin revenue by approximately 20% in 2022, comparable to the impact we saw this year. For the remainder of the P&L, adjusted cost of sales as a percentage of revenue is expected to be approximately 29%, where favorable product mix and price are expected to generate margin expansion. Adjusted SG&A expenses for the year are expected to be between $2.07 billion and $2.12 billion with the increase from 2021 focused on supporting primary drivers of revenue growth including investment to support new and existing products as well as diagnostics.
Adjusted R&D expense for 2022 is expected to be between $540 million and $560 million. Zoetis is the leader in animal health because of the novel products, disruptive innovation, and livestock enhancements we bring to the market. Our internal R&D engine remains a primary source of innovation and we are committed to ensuring it will continue to be significantly funded as a priority in capital allocation. Adjusted interest and other income and deductions are expected to be approximately $240 million representing a minimal year-over-year change. Our adjusted effective tax rate for 2022 is expected to be approximately 20%.
The increase in 2022 is primarily related to the favorable impact of foreign-derived intangible income and nonrecurring net discrete tax benefits that occurred in 2021. Adjusted net income is expected to be in the range of $2.415 billion to $2.470 billion representing operational growth of 10% to 13%. Our guidance once again reflects our value proposition of growing revenue in-line with or faster than the market and growing adjusted net income faster than revenue. We are anticipating a significant increase in capital expenditures in 2022 primarily related to investments in manufacturing expansions in Ireland, the U.S., and China.
Finally, we expect adjusted diluted EPS to be in the range of $5.09 to $5.19 and reported diluted EPS to be in the range of $4.75 to $4.87. While our guidance represents our expectations for full year financials, I would like to provide some color on the expected phasing of growth in 2022. We expect top line growth to be fairly consistent between the first half and second half of the year; however, due to the impact of generic competition for Draxxin, isolated supply constraints, and the continued weakness of our swine business in China, we expect growth in the first quarter of 2022 to be lower than the remaining three quarters.
In addition, the significant investments we are making early in the year to support revenue growth primarily in companion animal including diagnostics along with very challenging comparative periods for T&E and other expenses will impact Q1 materially more than the subsequent quarters. Now, to summarize, 2021 was another exceptional year, our best-performing year with 15% operational revenue growth and 19% operational growth in adjusted net income. Our guidance for 2022 reflects the strength of our innovative portfolio, our ability to successfully launch new products and establish new markets, and our confidence in the end market dynamics for the spaces we compete in.
Now, I'll hand things over to the operator to open the line for your questions. Operator?
