Executive Vice President and Chief Financial Officer at Zoetis
Thank you, Kristin, and good morning, everyone. As Kristin mentioned, we had a very strong start to the year with continued growth across a number of our core product franchises. Today, I will focus my comments on our first quarter financial performance, the key drivers contributing to our performance and provide an update on our full year 2022 guidance. In the first quarter, we generated revenue of $2 billion, growing 6% on a reported basis and 9% on an operational basis. Adjusted net income of $625 million grew 4% on a reported basis and 8% on an operational basis. Of the 9% operational revenue growth, 3% is on price and 6% from volume. Volume growth of 6% consisted of 5% from new products, which includes Simparica Trio and Librela, 3% from key dermatology products, while other in-line products declined 2%. The decline in other in-line products was expected and largely the result of a difficult comparison to the prior year and the impact of our swine business in China.
Companion animal products led the way in terms of species growth, growing 20% operationally with livestock declining 6% on an operational basis in the quarter. Our small animal parasiticide portfolio was the largest contributor to growth in the quarter, where our innovative and diverse fleas, tick and heartworm portfolio drove growth of 25% operationally. Simparica Trio posted global revenue of $164 million, representing operational growth of 83% versus the comparable 2021 period. In Q1, Simparica Trio was the number one canine parasiticide sold in the U.S. in terms of revenue, and we recently launched Trio in Japan, a sizable international heartworm market. Meanwhile, our key dermatology products, Apoquel and Cytopoint, had significant global growth again with $307 million of revenue, representing 28% operational growth against a robust prior year in which key derm grew 24% in the first quarter.
In Europe, our recently launched monoclonal antibody Librela, which is for osteoarthritis pain in dogs, also meaningfully contributed to growth in the quarter, posting $21 million in sales. Our Global Diagnostics portfolio recorded $98 million in revenue and had operational sales growth of 12% in Q1, growing across both our U.S. and international segments. Growth was largely driven globally by consumable usage and new products. We also continue to see growth in the placement of new devices in international markets. Diagnostics remains a key growth driver for Zoetis, and we continue to make significant investments in our field force, new technologies and reference grew 24% in the first quarter. In Europe, our recently launched monoclonal antibody, umbrella, which is for osteoarthritis pain in dogs, also meaningfully contributed to growth in the quarter, posting $21 million in sales.
Our Global Diagnostics portfolio recorded $98 million in revenue and had operational sales growth of 12% in Q1, growing across both our U.S. and international segments. Growth was largely driven globally by consumable usage and new products. We also continue to see growth in the placement of new devices in international markets. Diagnostics remains a key growth driver for Zoetis, and we continue to make significant investments in our field force, new technologies and reference lab. I think revenue will continue to grow at levels above what we were seeing prior to COVID as the standard of veterinary care continues to increase through innovation, better demographics, higher compliance and more pets. Companion animal growth in the U.S. was driven largely by sales from our parasiticide portfolio as well as key dermatology products.
Growth of Simparica Trio was again strong in the quarter with sales of $147 million in the U.S., growing 77%. We continue to meet our clinic penetration targets and take share within individual clinics with additional runway for future revenue growth. Federal on and satisfaction material is approximately 90% Key dermatology products sales were $194 million for the quarter, growing 23% with APOQUEL and Capon each significantly contributing to growth. Our investment to support the portfolio have been instrumental in driving more patients into the clinic, and we will continue to invest meaningfully in this space as a large portion of dolls with dermatitis remain undertreated, representing an opportunity to further expand the market. In an effort to support all of our long-term sustainable sources of growth in our companion animal portfolio.
In April, we launched our new pet care go-to-market strategy, expanding our U.S. companion animal field force by approximately 40% and creating dedicated and separate diagnostic and pharma coverage for our portfolio of products. U.S. livestock declined 11% in the quarter, primarily resulting from our cattle business. This was expected as we experienced challenges from generic competition for Jackson, which didn't exist in the same quarter last year as well as elevated input costs continuing to weigh on producer profitability. Meanwhile, upholstery business continues to be negatively impacted by the expanded use of lower cost alternatives resulting from reduced disease pressure from smaller foxises as well as generic competition for Zoamix. Swine products sales grew in the quarter as a result of favorable market conditions for producers and higher disease equivalence. Moving on to our International segment, where revenue grew 3% on a reported basis and 8% operationally in the quarter.
Companion animal revenue grew 23% operationally, and livestock revenue declined 3% operationally. Increased sales of companion animal products resulted from the growth of our key dermatology products, monoclonal antibodies for alleviation of ore pain and our parasite portfolio. Semak brands continue to benefit from our international direct-to-consumer campaigns in Latin America and parts of Europe, and we remain excited with the long-term prospects of these programs. We are encouraged by the performance of our monoclonal antibody for OA pain with Librela generating $21 million and Cerencia delivering $3 million in first quarter sales. Librela remains on track to exceed $100 million in revenue this year. As we mentioned last quarter, Librela became the number one pain product in the EU in the first year of launch, with the underlying performance metrics being very favorable for future growth. Reordering rates remain at around 90%. Compliance exceeded our initial expectations, and we'll continue a significant opportunity to expand the pain market with a meaningful percentage of dogs on Librela being new to the market.
Meanwhile, international livestock declined 3% operationally in the quarter. opportunity to expand the pain market with a meaningful percentage of dogs on Librela being new to the market. Meanwhile, international livestock declined 3% operationally in the quarter. This decline was driven predominantly by our swine portfolio in China. As we indicated over the past several months, increased port supply in the market like to a significant decline in pork prices, which impacts producer profitability. In addition, our first quarter of 2021 presented a difficult comparative period as pricing and producer profitability in that quarter had been at an all-time high. While we expect China to return to growth in the back half of the year, we anticipate a challenging second quarter for our swine portfolio. Partially offsetting our decline in swine was growth in our fish, poultry and cattle portfolios.
Our fish portfolio grew double digits again this quarter, driven by growth of the AlphafluxCLIce treatment product and AlphaGeLivVac vaccine for SRS in Chile. Sales of cattle products grew in key markets due to favorable market conditions and pricing in Brazil and Australia as well as demand generation efforts in emerging markets such as Turkey and China. Now moving on to the rest of the P&L for the quarter. Adjusted gross margin of 71.6% improved Advertising and promotion as well as direct-to-pet owner campaigns for key brands. R&D expenses increased 4% operationally due to higher compensation costs. The adjusted effective tax rate for the quarter was 18.9%, a decrease of 20 basis points, driven by the impact of favorable discrete tax items and settlements with certain tax authorities, slightly offset by changes in the jurisdictional mix of earnings. And finally, adjusted net income grew 8% operationally and adjusted diluted EPS grew 9% operationally for the quarter. Capital expenditures in the first quarter were $115 million.
We are still anticipating a significant increase in capital expenditures for the full year 2022, primarily related to investments in Ireland, the U.S. and China to support manufacturing capacity needed to meet our long-term growth demands. In the quarter, we returned over $0.5 billion to shareholders through a combination of share repurchases and dividends. We purchased approximately $361 million of Zoetis shares, representing our largest dollar-based quarterly share repurchase ever. Now moving on to guidance for the full year 2022. Foreign exchange rates on our updated guidance are as of late April and reflect the recent strengthening of the U.S. dollar. Please note that any update to our full year guidance are related directly and only to foreign exchange and that the ranges of our operational growth rates for revenue of 9% to 11% and adjusted income of 10% to 13% remained the same as our previous February guidance. We are holding these top and bottom line operational growth rates the same despite the conflict in Russia and Ukraine, negatively impacting our expected full year operational growth by 1%.
We feel we can offset this impact with the strength of our companion animal portfolio. Beginning with revenue for the full year 2022, we are decreasing both the low and high end of the range by $100 million to reflect the impact of foreign exchange. We are now projecting revenue of between $8.225 billion and $8.375 billion while maintaining our expected operational growth of 9% to 11%. and bottom line operational growth rates the same despite the conflict in Russia and Ukraine, negatively impacting our expected full year operational growth by 1%. We feel we can offset this impact with the strength of our companion animal portfolio. Beginning with revenue for the full year 2022, we are decreasing both the low and high end of the range by $100 million to reflect the impact of foreign exchange. We are now projecting revenue of between $8.25 billion and $8.375 billion while maintaining our expected operational growth of 9% to 11%. For adjusted net income for the year adjusted net income is now expected to be in the range of $2.365 billion to $2.4 billion, while maintaining our expected operational growth of 10% to 13%.
And finally, we expect adjusted diluted EPS to be in the range of $4.99 to $5.09 and reported diluted EPS to be in the range of $4.65 to $4.77. Sales of companion animal products will be the primary growth driver in 2022 with the continued strength of our diverse prior silicide portfolio, further expansion of our key dermatology products, the adoption of our monoclonal antibodies for OA pain and growth in point-of-care diagnostics. We also continue to see a very favorable global companion animal backdrop for 2022. For livestock, the fundamental macro trends, which make animal protein on essential business remain intact, and we believe more normalized growth will occur in 2023. While our guidance represents our expectations for the full year, I would like to provide some color on the expected phasing of growth for the remainder of 2022. We expect top line operational growth for Q2 to be slightly below Q1 as today business and certain supply chain activities.
We also expect a similar foreign exchange impact in Q2 that we experienced in Q1, where reported revenue was negatively impacted by about 3%. In addition, the significant investments we are making early in the year to support future revenue growth, including field force expansion in the U.S. and incremental DTC advertising will drive opex growth in Q2 at a faster rate than revenue, impacting Q2 bottom line profitability more materially than in the back half of the year. We expect that foreign exchange in Q2 will have a negative impact to the bottom line of about 5%. Our full year 2022 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. Our success is derived from our diversified portfolio of enduring brands driven by multiple sources of in-line growth, and agile and disciplined innovation engine and our infrastructure to develop and expand markets globally. We extract to continue to execute across multiple dimensions of our business and capitalize on favorable end market dynamics for the foreseeable future.
Now I'll hand things over to the operator to open the line for your questions. Operator.