Wetteny Joseph
Chief Financial Officer. at Zoetis
Thank you, Kristin, and good morning, everyone. As you heard Kristin mention, our ability to execute on our commercial and strategic plans drove another outstanding quarter. We simultaneously executed across product launches, market expansion and market defense to propel us to a strong first half. In the second quarter, we posted $2.4 billion in revenue, growing 8% on a reported basis and 11% operationally. Adjusted net income of $711 million grew 9% on a reported basis and 18% operationally. Quarterly growth was driven by our innovative companion animal portfolio. Globally, OA pain mAb posted $149 million. Our Simparica franchise posted revenue of $384 million, which includes $299 million from Simparica Trio. And our key dermatology franchise contributed $414 million. Our livestock portfolio also saw strong growth with $694 million in revenue. Looking closely at our success and execution, I'd like to focus first on OA pain. As we continue to execute our U.S. launch strategy, we remain confident in our OA pain trajectory. Based on our experience launching other billion-dollar franchises, we know that first-in-class therapies require significantly more market development than lagging lookalikes.
In the U.S., we have reached over 9,000 vets and veterinary technicians through interactive information sessions with our Chief Medical Officer and industry KOLs. This is on top of the thousands of interactions our sales reps and medical teams have had on individual vet visits. These interactions ensure our customers have the tools and resources to reinforce the safety and efficacy of Librela and Solensia with pet owners. Additionally, we are deploying capital to expand our DTC strategy. Pet owners know their pets better than anyone, and we want to help them detect the signs of OA and the available treatment options. We know these therapies are improving lives based on the positive testimonials from pet owners. The positive impact and reception of Librela are reflected in the market adoption. In the U.S., we see record penetration with over 80% of clinics now purchasing the product. No product in our history has penetrated this quickly. Reorder rates are approaching 90%, which is the leading indicator of customer satisfaction.
In Europe, shipment is expanding to moderate and mild OA cases that were largely untreated, now making up more than 65% of total cases. This is just a glimpse into what we expect in the U.S. over time, as Librela continues to expand the addressable market and gain market share. Despite our early success, we still have significant room for continued expansion. Our focus on execution doesn't stop after we launch a product. After more than a decade of exceptional safety and efficacy, our key dermatology franchise is still a critical performance driver, growing 18% operationally in the quarter. In the U.S., derm clinic visits are increasing, driving volume growth across both APOQUEL and CYTOPOINT. The franchise, including APOQUEL, APOQUEL chewable and CYTOPOINT, is designed to cover multiple needs across different dermatological indications, and their different methods of administration suit any vet or pet owner preference.
Our derm products also address a full spectrum of pruritic cases, providing relief from acute and seasonal conditions as well as treatment for dogs with lifelong chronic conditions, which make up the majority of total derm revenue. And vets and pet owners are extremely happy with the results. In global studies, veterinarians report approximately 90% of their satisfaction with APOQUEL safety and efficacy. Our comprehensive portfolio meets vet needs and the needs of their patients, and we are confident in our ability to grow revenue, even in the face of competition. That confidence is fueled by the significant opportunities for market expansion that Kristin mentioned earlier. First, we are targeting the eight million dogs in the U.S. with atopic dermatitis that are either untreated or not treated by a vet through direct-to-consumer advertising, helping to educate pet owners on the signs of an itchy dog and all prescription treatment options.
Additionally, in the U.S., there are three million dogs who are prescribed alternative products like steroids. We are confident in our ability to win these new customers through our proven safety and efficacy. We are also drawing more doses from the same patient base due to trends within pet health care, including reference to injectable therapies, chewable formulations and alternative channel growth, increasing compliance. Lastly, there are many markets where our key dermatology franchise is in the early stages of maturity. These markets should provide long-term growth trajectory, and our outstanding international growth highlights this momentum. Our excellence and execution on our pain launches and key dermatology expansion has contributed to a great first half of the year.
Now let's move on to our segment results. U.S. revenue grew 12% in the quarter, with companion animal growing 13% and livestock posting 11% growth. For the first time, sales across our U.S. companion animal portfolio surpassed $1 billion in the quarter. Performance was driven by our OA pain mAb, Simparica Trio and our key dermatology franchise. Portfolio growth was largely driven by trends in retail and home delivery, reflecting the evolution of pet-owner preference for convenience and increased compliance on dispensing oral medications. In the clinic, usage of injectable therapeutic treatment is growing to offset the alternative channel shift. Our pain mAbs, Librela and Solensia, posted a combined $71 million in U.S. sales in Q2. Librela generated $53 million, primarily on increased clinic utilization. As I mentioned to date, market adoption is higher than any product in our history. Thus, we are confident in our trajectory.
Solensia posted $18 million in revenue. We continue to be pleased with what we are seeing in the feline OA space. As Kristin mentioned, we see positive trends in feline OA visits, which have nearly doubled since our launch almost two years ago. Simparica Trio posted U.S. growth of 19% in the quarter on $254 million in revenue. We are entering our second year with competition in the triple combination parasiticide market, and we continue to execute on not just defending our leadership position with Trio, but growing it. Again, we do not take a launch-and-done mentality. We posted 26% moving average total growth over the past 12 months, the majority of which was in a competitive market, highlighting not only our first-mover advantage, but also the stickiness of our customer base. Lastly, in the vet channel, Simparica Trio is winning with puppies, a leading indicator of future performance. In the absence of meaningful differentiation, vets and pet owners are reluctant to switch from a safe, efficacious product.
Key dermatology product sales in the U.S. were $283 million for the quarter, growing 17%. APOQUEL was the largest growth driver, with APOQUEL chewable benefiting from increased conversion. CYTOPOINT growth continues to be driven by vet and pet owner preference for injectable solutions, especially for chronic cases. Earlier, Kristin alluded to shifting pet owner demographics in the evolving landscape. Much of our success with Simparica Trio and APOQUEL has been bolstered by our ability to win in the growing retail and home delivery space. The convenience of these channels for self-administered products are increasingly popular with pet owners, and we are committed to making our products available where our customers need them. Currently, Simparica Trio is the best-selling prescription products in the retail channel and APOQUEL is second. We estimate that over 20% of Trio sales and 1/3 of APOQUEL sales now come via the retail channel. Additionally, the alternative channel growth rate for both Trio and APOQUEL exceeded overall growth rate for these products this quarter.
Growing pet-owner preference for alternative channel convenience has led to a decline in product-only clinic visits. This is why visits are not the best indicator of our performance, given we have consistently grown volume in an evolving landscape. Our U.S. companion animal diagnostics portfolio grew 5% in the quarter, returning to growth after Q1 distributor inventory work downs following our channel strategies change. U.S. livestock had a strong quarter, growing 11%, driven primarily from the timing of supply on ceftiofur, which had a soft comparable period last year. Moving on to our International segment. Revenue grew 4% on a reported basis and 10%, excluding the impact of foreign exchange. Companion animal grew 12% operationally, and livestock grew 8% operationally. Our International companion animal portfolio growth was driven by Simparica, key dermatology and OA pain franchises, partially offset by impacts in China.
Our International Simparica franchise grew 35% operationally. Growth was driven by Simparica growing 38% operationally to $59 million in sales in the quarter. We continue to see increased use in Latin America and Eastern Europe as well as price benefits in high inflationary markets. Simparica Trio grew 31% operationally on $45 million in sales, benefiting from key account growth in Europe, continued focus on DTC and the positive impact of our recent launch in China. Our key dermatology franchise grew 19% operationally in the quarter, posting $131 million in sales. We saw double-digit growth across most of our major markets, driven by higher compliance and new patients. Growth was partially offset by headwinds in Japan due to preprice buy-ins in Q1. As we highlighted earlier, we continue to see significant opportunity for growth. Many international markets are in the early stages of market development with significant runway for growth.
Internationally, our OA pain mAbs grew 35% operationally, posting $79 million in combined revenue. International Librela sales were $63 million, growing 32% operationally. As we highlighted last quarter, we have lapped the launches in our last significant international markets, which occurred in Q2 of 2023. Solensia sales were $16 million, growing 49% operationally. Our International companion animal diagnostics portfolio grew 15% operationally, with strong performance across much of Asia and Europe. International companion animal growth was partially offset by expected declines in China, driven by revolution franchise. International livestock grew 8% operationally in the quarter, driven by price increases, primarily in cattle and poultry in high inflationary markets. We saw strong growth in our fish portfolio this quarter, with contributions from price and volume driven by strong demand for vaccines in Norway. Growth in price in fish was partially offset by volume declines in most of our other livestock species due to a challenging comparable quarter as well as the impact of unfavorable rotations.
As expected, the economic challenges in China persist, putting pressure on certain companion animal products as well as livestock, especially swine. Consistent with what we have said for several quarters, the impact on our growth is expected to moderate late in the year, but continued headwinds are expected throughout the year across companion animal and livestock. Fiscal discipline across the P&L is one of the things that unlocks successful execution. As we move on to some of the highlights, we wanted to reaffirm our continued commitment to reinvesting in our business and our confidence in the returns we see from those investments. Adjusted gross margins of 71.7% declined 70 basis points on a reported basis. Foreign exchange had an unfavorable impact of 130 basis points. Excluding FX, we saw higher margins due to price increases, favorable mix and lower freight costs, partially offset by higher manufacturing costs, especially in high inflationary markets. Adjusted operating expenses increased 9% operationally. Contributing to this growth was SG&A increases of 7% operationally and 17% operational growth in R&D. Improvements in operational gross margin and prudent expense growth contributed to adjusted net income, which grew 18% operationally. Adjusted diluted EPS grew 20% operationally for the quarter.
Lastly, I want to highlight our share repurchase program. In the quarter, we repurchased a record high $533 million in shares. Additionally, on August 1, we announced that we received Board approval for a new $6 billion share repurchase program, our largest program to date. The shares are expected to be repurchased over a multiyear period of up to four years, and the program can be canceled at any time. The company's previous $3.5 billion share repurchase program, which was approved in December 2021, is expected to be completed this year. This commitment reflects continued confidence in our ability to return value to shareholders. Before moving to guidance, an update on the planned divestiture of our medicated feed additives portfolio. As Kristin mentioned, we are expecting this divestiture to close some time in the second half. Our current guidance is not reflective of the sale and may be adjusted subsequent to the close of the deal. As we stated in our April announcement, this portfolio generated approximately $400 million in revenue in 2023, with roughly linear seasonality. Now moving on to guidance for full year 2024. Our outstanding first half performance, particularly in our Simparica and key dermatology franchises, demonstrated our ability to drive growth through execution across our business and gives us confidence going forward. Thus, we are raising our 2024 guidance provided during May's earnings call. Please note that guidance reflects foreign exchange rates of late July.
For the year, we expect revenue between $9.1 billion and $9.25 billion, a range of 9% to 11% operational growth. As we stated earlier, our OA pain trajectory remains on track. Our expectations for Librela for the year remain unchanged. We now expect adjusted net income to be in the range of $2.64 billion to $2.69 billion, representing operational growth of 13.5% to 15.5%. We are maintaining our commitment to grow adjusted net income faster than revenue over the long term, while increasing our investment in demand-generating activities, such as direct-to-consumer advertising. While we saw exceptional leverage this quarter, subsequent quarters may have -- may not have the same level of operating leverage due to the optimal timing of investments.
Finally, we expect adjusted diluted EPS to be in the range of $5.78 to $5.88 and reported diluted EPS to be in the range of $5.35 to $5.45. In closing, before we go to Q&A, the strength and diversity of our portfolio and our relationships as well as our ability to execute on our strategic vision continually allows us to outperform our peers. We have the utmost confidence in our best-in-class portfolio and colleagues to continue to set the benchmark moving forward. Now I'll hand things over to the operator to open the line for your questions. Operator?
