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<p>Zoetis ranks 93 on Fortune 100 Best Companies to Work For – Europe 2026 list.</p>

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With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

Fortune Sector Leaders: Health Care

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

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CTW.1122.Zoetis

The business of veterinary care technology is both a lucrative and an impactful one—animal health company Zoetis brought in $7.8 billion in revenue in 2021 while developing vaccines and treatments for livestock and pets. Zoetis’s geographic footprint is as wide as its technological scope; the company oversees the production of veterinary biodevices and genetic tests from their design to manufacturing while providing services and products to over one hundred countries. In 2017, Zoetis launched its African Livestock Productivity and Health Advancement (ALPHA) Initiative with a grant from the Bill &amp; Melinda Gates Foundation; ALPHA now provides veterinary technology and training resources to veterinarians and farmers in sub-Saharan Africa. The effort addresses food insecurity by giving small farmers the resources and training to sustainably keep livestock healthy. ALPHA currently operates 16 serology labs across Uganda, Nigeria, Tanzania, and Ethiopia. So far, 11 million chickens and over 45,000 cows have been tested for diseases through these labs. Even more important is the educational element of the initiative: In all, 26,000 farmers and veterinarians have been trained in livestock care and an estimated 1.3 million people have been reached through train-the-trainer programs. That education includes “an emphasis on training women,” senior director of sustainability and innovation communications Christina Lood told <em>Fortune</em>. The Zoetis Foundation has also recently focused on empowering America’s small-business dairy farmers to utilize sustainable technology.

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This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-431-Zoetis

The drug company, which was spun off from Pfizer in 2013, bills itself as the world's leading animal health company, producing medicine and vaccinations for pets and livestock. Those businesses proved relatively pandemic-proof in 2020, as Zoetis's revenue and profit grew by 7% and 9%, respectively.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-472-Zoetis

Zoetis develops and manufactures animal-health medicines and vaccines whose customers include veterinarians, pet owners, and livestock farmers.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

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Zoetis (ZTS): Company Profile, Stock Price, News, Rankings

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Welcome to the Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will now be forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion of this call via dial in or on the Investor Relations section of zoetis.com.

At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions following the presentation. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you, operator. Good morning, everyone, and welcome to the Zoetis fourth quarter and full year twenty twenty four earnings call. I am joined today by Kristen Peck, our Chief Executive Officer and Whitney Joseph, our Chief Financial Officer. Before we begin, I'll remind you that the slides presented on this call are available on the Investor Relations section of our website and that our remarks today will include forward looking statements and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward looking statements in today's press release and our SEC filings, including but not limited to our annual report on Form 10 ks and our reports on Form 10 Q.

Our remarks today will also include references to certain financial measures, which were not prepared in accordance with Generally Accepted Accounting Principles or U. S. GAAP. A reconciliation of these non GAAP financial measures to the most directly comparable U. S.

GAAP measures is included in the financial tables that accompany our earnings press release and the company's eight K filing dated today, Thursday, 02/13/2024. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin.

Thank you, Steve, and good morning, everyone, and welcome to our fourth quarter and full year twenty twenty four earnings call. Today, thanks to the dedication of our purpose driven colleagues, we reported an excellent full year results in line with the high end of our November guidance. We delivered double digit operational revenue growth of 11%, highlighting the strength of our strategy and the enduring demand of our brands. And our relentless focus on execution drove broad based growth across the business. In The U.

S, revenue grew 11%, while internationally, we grew 10% operationally, marking significant revenue milestones even in a competitive landscape. Our ability to grow, defend and launch products across markets drove 14% operational revenue growth in our Companion Animal portfolio alongside solid 5% operational revenue growth for our Livestock portfolio. Reflecting our commitment to shareholders, adjusted net income grew 15% operationally. As we look ahead to 2025, we are confident that the drivers of our 2024 success are sustainable, positioning us for continued above market growth in the mid to high single digit range for this year and beyond. Our confidence is rooted in the diversity of our business model where multiple growth drivers powered by scientific innovation and commercial excellence work together to create and expand markets.

This combination ensures that our market leading franchises deliver long and in some cases decades long growth tailwinds with significant room for further expansion. While Whitney will discuss the quarter, I want to highlight some of the drivers that will carry us into 2025. Our global Simparica franchise grew 28% operationally on the year, even amidst competition. This success is fueled by the ongoing shift toward triple combination treatments, a market that has grown over 40% in the past twelve months. Currently valued at $2,000,000,000 the global triple combination market pioneered and led by Simparica Trio in The U.

S. Is projected to more than double to $4,500,000,000 by 2028. Over 50% of puppies in The U. S. Are now on triple combinations, a clear signal of the market's trajectory.

And veterinarians and pet owners tend to stay with trusted proven solutions, underscoring the importance of our three year first mover advantage in triples. This dynamic combined with the strength of our diverse portfolio and robust channel strategy, driving higher compliance and increasing total value per patient positions us to continue leading in this critical segment. Our osteoarthritis or OA pain franchises, including Librella and Valencia grew revenue 80% operationally in 2024. Librellas U. S.

Launch is the most successful in our history, cementing its blockbuster status in less than four quarters and has quickly become the fourth largest product in our U. S. Pet care portfolio. As Whitney mentioned at the JPMorgan Healthcare Conference in January, true disruptive scientific innovation often follows a nonlinear growth trajectory due to the investment, education and market development required to establish entirely new categories of care. Even so, innovations like Librella are revolutionizing the treatment paradigm, offering new hope for pets and their owners.

With nearly 25,000,000 doses distributed globally, we have already helped millions of dogs regain mobility and improve their quality of life. Just as Labrela is transforming care for dogs, Solencia is doing the same for cats. Now a blockbuster product, Solencia has redefined OA pain management, driving a meaningful increase in feline veterinary visits. By encouraging proactive care, Solencia is bridging long standing gaps in medicalization and strengthening the relationship between cat owners and their veterinarians. This momentum underscores a significant opportunity to drive sustainable growth in the underpenetrated feline segment and demand for future therapies and long acting formulations.

In our key dermatology franchise, we grew revenue 17% operationally for the year. As we shared at JPMorgan, even with over 25,000,000 dogs treated by our differentiated portfolio to curb itch, the total addressable market is projected to grow to 2,500,000,000 by 2028 and eleven percent CAGR. That's because there are still 20,000,000 dogs worldwide who remain untreated or undertreated with a long runway for growth ahead, a diverse, safe and effective portfolio supported by strong customer satisfaction, brand loyalty and future long acting formulation positions us to lead and expand the market. And at the heart of our success is our commitment to living our purpose each day to nurture the world and humankind by advancing care for animals. That means as customer preferences evolve, ensuring our treatments are available where and when they are needed, while always championing the essential role of veterinarians.

This commitment has shaped our omni channel strategy, meeting customers where they are, whether at the clinic or through alternative channels. As a result, Simparica Trio and APOQUEL are the top selling products in U. S. Retail, contributing meaningfully higher compliance. When combining retail and home delivery, approximately 20% of our U.

S. Pet care portfolio flows through alternative channels, driving growth and expanding the total market. We expect this trend to continue into 2025. At the same time, we continue to educate veterinarians and pet owners on the benefits and availability of our treatment, helping to drive informed decisions and better health outcomes. For the year, our livestock portfolio delivered strong 5% operational revenue growth, exceeding our initial expectations of being at the high end of the historical 2% to 4% annual industry growth range.

We achieved this result despite the Q4 divestiture of the medicated feed additive product portfolio and certain water soluble products and related assets. The divestiture was a strategic move to streamline our portfolio, enhance operational focus and prioritize high growth, high value areas that align with our long term strategy. And we remain deeply committed to livestock and to continue to lead with innovative vaccines and lifecycle solutions, including antibiotic alternatives and advanced therapies that enhance disease prevention and support sustainability aligned with our core capabilities. As a result of the MFA divestiture, our press release and slides highlight organic operational revenue growth for the full year and fourth quarter, excluding all divested products and adjusted for foreign exchange. Based on this and building on the momentum from 2024, we are guiding to a range of 6% to 8% organic operational revenue growth in 2025 and will continue to provide updates on this metric throughout the year.

We also expect organic operational growth in adjusted net income in the range of 6% to 8% in 2025. Excluding the impact of interest and taxes, we expect bottom line growth of 8% to 10%, reflecting the strength of our business fundamentals and the robust secular trends driving our industry. Our strong underlying performance and financial discipline ensure we remain well positioned to deliver on our value proposition. This guidance underscores the strength of our portfolio and commercial engine as we continue to grow our key franchises. The industry remains essential and resilient, driven by strong underlying demand and the indispensable nature of our work.

As we look ahead, we will continue balancing strategic investments in innovation and commercial excellence to sustain our track record of profitable growth and generate long term value for our shareholders. In 2025, our success will be anchored in the same key drivers that have propelled us over the past decade. We operate in highly attractive end markets driven by scientific innovation and market leading franchises. With our global scale, we can launch therapies across geographies and channels ensuring veterinarians and pet owners have access to the best treatments available. And while the operating environment evolves every year with new entrants, shifting geopolitical dynamics, and an evolving regulatory and trade landscape, our agility positions us to navigate these challenges and capitalize on emerging opportunities.

Our success is driven by the strength of our strategy, differentiated execution, innovative pipeline, our colleagues and culture. This is evident in our R and D engine where we expect at least one major approval annually over the next several years with multiple potential blockbusters in our pipeline. These innovations will drive durable, diversified growth across both companion animals and livestock, reinforcing our commitment to addressing unmet needs. Above all, we remain committed to our track record of value creation and delivering performances that outpace the market, positioning Zoetis as a trusted leader in animal health now and in the future. And finally, a sincere thank you to our colleagues whose dedication makes these results possible.

And with that, let me turn it over to Whitney.

Thank you, Kristen. To echo your enthusiasm, 2024 was an excellent year. Our full year performance reflects broad based revenue growth across segments, species, price and volume. The foundation of our ability to continually outperform the animal health industry comes from the diversity of our portfolio and the channels and markets in which we lead. For the year, we posted revenue of $9,300,000,000 growing 8% on a reported basis and 11% operationally, with 6% driven by price and 5% from volume.

We raised our revenue guidance throughout the year and ultimately finished above the high end of our initial range. Adjusted net income grew 10% on a reported basis and 15% operationally to $2,700,000,000 Global revenue growth was driven by our companion animal portfolio, which grew 14% operationally. Leading the way, our Simparica franchise posted $1,400,000,000 in revenue on the year, growing 28% operationally. Simparica Trio exceeded $1,000,000,000 in revenue globally. TMPRACATRIO remains the number one selling canine parasiticide in The U.

S. And the trusted choice for vets and pet owners. As Kristen mentioned, triple combination treatments are the fastest growing segment in animal health and are less than 40% of prescription treatments signaling significant room for continued growth. In OA Pain, we continue to see increased adoption. Librella and Silencia reported combined revenue of $581,000,000 globally for the year, growing 80% operationally.

Over a decade since our first launch, our key dermatology franchise posted operational growth of 17%, generating $1,600,000,000 in revenue. We remain steadfast in our confidence to grow the franchise in the face of competition, and we delivered strong double digit growth balanced across both Avoquel and Cytopoint. We expect continued market expansion driven by higher compliance and new patient growth as we have highlighted that a significant portion of this market remains untreated or undertreated. Lastly, our livestock portfolio also had a strong year with 2,900,000,000 in revenue or 5% operational revenue growth driven primarily by price, while volume growth faced headwinds from the MFA divestiture. On an organic operational basis, livestock grew 7%.

Moving on to segment performance for the year, both The U. S. And international segments saw impressive double digit revenue growth. The U. S.

Posted $5,100,000,000 in revenue, growing 11% on the year, while our international segment reported revenue of $4,100,000,000 growing 10% operationally for the full year. U. S. Growth was led by our companion animal portfolio, which grew 15%, driven by the performance of our Simperico franchise, our OA Pain mAbs and market expansion across our key dermatology franchise. The SIPERICO franchise reached nearly $1,000,000,000 in revenue, growing 26%.

The SIPERICA TRIO was a primary growth driver with nine eighteen million dollars in sales, growing 30%. With high vet and pet owner satisfaction, Trio is the leading parasiticide product in The U. S. Our ability to grow our volume double digits while simultaneously taking price by being more targeted in our promotions highlights our first mover advantage. Our Oripain mAbs reported $271,000,000 in sales in The U.

S, growing 197%. In its first full year in the market, Libella generated $2.00 $1,000,000 in sales and reached blockbuster status in The U. S. Market faster than any product in our history, where it is already the first line choice for severe OA cases. With nearly forty percent of dogs suffering from OA at some point in their lifetime, we are confident that Luella will be a contributor to growth for years to come.

Valencia posted $70,000,000 in U. S. Revenue for the year, growing 58%. For the year, ZOLENCIA accounted for over 70% of clinic revenue in the feline OA category and has continued to substantially grow the market since launch. Key dermatology had an exceptional year, posting growth of 16% on $1,100,000,000 in sales.

As we highlighted, there is a substantial population of untreated or undertreated adults with derm conditions. Our double digit volume growth in key dermatology demonstrates our ability to convert those patients to our differentiated portfolio of treatment options and highlight the continued expansion opportunity in the derm space. U. S. Lifecycle business declined 1% on the year due to the MFA divestiture, which closed on October 31.

Excluding the impact of MFAs, our organic operational U. S. Livestock growth was 6%, which was driven by improved supply of sevastafir. Moving on to our International segment, revenue grew 5% on a reported basis and 10% operationally for the year. International performance was favorably impacted by price increases, especially in high inflationary markets, including Argentina, which contributed more than 1.5% to our total company growth for the year.

Our international companion animal growth was driven by our Simparica, KeyDermatology and OAP Mavs franchises. Our Simparica franchise grew 32% operationally to $357,000,000 in international sales. Performance was driven by Simparica growing 29% operationally to $212,000,000 in sales, driven by performance in Latin America and Eastern Europe. Empirica Trio grew 39% operationally and $145,000,000 in sales, driven by key account growth in Europe, DTC and the positive impact of our Q1 China launch. Key dermatology posted revenues of five fifty one million dollars for the year, growing 18% operationally.

Performance was driven by APOQUEL through new patient growth, especially in Europe. Cytopoint also contributed with new patient growth and compliance in existing patients. Internationally, our OA pay maps grew 34% operationally, posting $310,000,000 in combined revenue. Sales of LUBRELLA were $246,000,000 internationally, growing 33% operationally. Valencia sales were $64,000,000 growing 39% on an operational basis.

Our international livestock portfolio grew 8% operationally to $1,900,000,000 in sales for the year with growth driven by price as well as strong performance in fish, partially offset by headwinds from swine volumes in China. Moving on to our Q4 results. In the fourth quarter, we posted $2,300,000,000 in revenue, growing 5% on a reported basis and 6% operational with 5% driven by price and 1% from volume. Excluding the impact of our MFA divestiture, our Q4 organic operational growth was 9% with 4% coming from volume. Adjusted net income of $632,000,000 grew 11% on a reported basis and 9% operationally.

Revenue in the quarter was driven by our innovative companion animal portfolio. Globally, our Simparica franchise contributed $324,000,000 growing 21% operationally. Our key dermatology franchise posted $417,000,000 or 11% operational growth. And our OAP MAPs contributed revenue of $150,000,000 growing 20% operationally in the quarter. Our Lifecycle portfolio also contributed operational growth of 1% with $726,000,000 in revenue.

Lifecycle organic operational growth in the quarter was 8%. Our Global Companion Animal Diagnostics business grew 10% operational in the quarter on revenues of $96,000,000 Now let's move on to our segment results for the quarter. U. S. Revenue grew 4% in the quarter with companion animal growing 7% and livestock declining 8% due to our MFA divestiture.

On an organic operational basis, excluding the MFA impact, U. S. Revenue grew 8% in the quarter with 12% livestock growth. In Companion Animal, U. S.

Performance was driven by growth in our Simparica, KeyDermatology and OIPN franchises. Vet owners continue to seek the higher standard of care offered by our innovative products and vet clinic revenue remains healthy, growing 7% on an average spend per visit basis despite declining visits overall. Our MAPs are driving higher therapeutic visits. Our SEMPrica franchise posted U. S.

Growth of 17% with $240,000,000 in revenue for the fourth quarter led by SEMPrica Trio. As Kristen highlighted, we expect the triple combination parasiticide market to more than double by 2028 and higher triple combo share amongst puppies is a key indicator of where the market is going. Our key dermatology franchise grew 7% in the quarter, generating $270,000,000 in revenue despite the clinic's stocking headwind from the Apoquel Truable launch last year. Derm visits were 4% in the quarter, highlighting the willingness of pet owners to treat itch. Cytopoint was the largest driver of growth driven by preference for injectable treatments.

Apoquel growth continues to be driven by expansion of Apoquel Truable benefiting from increased conversion and compliance driven by alternative channels. Our ORA payment, Librell and Silencia posted a combined $71,000,000 in U. S. Sales in Q4, growing 22%. Our growth in the quarter is reflective of headwinds from initial clinic stocking in Q4 of twenty twenty three.

Librella now entering its second year in the market generated $53,000,000 growing 21% on the quarter and reaching more than one point two million patients. We remain confident that the market opportunity is significant. Pain related vet visits increased fifteen percent in the fourth quarter, highlighting the demand that has propelled Libuela to the fourth largest product in our U. S. Business and the most successful launch in animal health history.

Organic operational growth in U. S. Livestock of 12% was primarily driven by the timing of supply of septic fuel and volume growth in Jackson. Moving on to our International segment for the quarter, revenue grew 6% on a reported basis and 10% excluding the impact of foreign exchange. Companion Animal grew 13% operationally and Livestock grew 6% operationally.

The MFA divestiture did not have a material impact on our international organic operational growth. Our international companion animal portfolio growth was driven by our key dermatology products, our Simparica franchise and our OA pain mAbs. Our key dermatology products grew 19% operationally with sales of $147,000,000 in the quarter. Growth in key dermatology was driven by new patients and increased share for both Aprico and Cytopoint driven by field force execution and brand marketing campaigns. Reference for truables continues to increase with conversion to applicable in Europe now at 50%.

We saw 32% operational growth in our Simparica franchise internationally with revenue up $84,000,000 on the quarter. Temparica was the main growth driver growing 33% operationally or $53,000,000 in revenues. Temparica Trio with 30% operationally with $31,000,000 in revenues. Internationally, our OPA Mabs grew 18% operationally, posting $79,000,000 in combined revenue. Librello posted sales of $62,000,000 in the quarter, growing 15% operationally.

We see continued growth in prescribing rates and penetration and reorder rates remain high. Solentsea growth of 28% operationally on $17,000,000 of sales is driven by increases in both returning and new OA patients. International Livestock reported sales of $477,000,000 in the fourth quarter, growing 6% operationally. Growth came primarily from price in hyperinflationary markets and in cattle. Moving down to P and L.

Full year adjusted gross margins of 70.7% grew 50 basis points on a reported basis. Oil and exchange had an unfavorable impact of 40 basis points. Excluding FX, we saw higher margins due to price and favorable mix, partially offset by higher manufacturing costs. Adjusted operating expenses increased 10% operationally for the year. Growth was driven primarily by SG and A increases of 9% operationally, largely due to higher compensation related expenses due in part to company performance.

Full year SG and A growth is inclusive of fourth Q4 growth of 11% operationally, reflective of the acceleration of certain demand generating activities into Q4 of twenty twenty four. R and D spend grew 12% operationally for the year on higher compensation related expenses due to company performance and increases in project spend related to internal portfolio advancement. Adjusted net income grew faster than revenue at 15% operationally. Adjusted diluted EPS grew 17% operationally for the year. We remain committed to reinvesting in the business while returning capital to shareholders.

In 2024, we repurchased $1,900,000,000 of Zoetis shares, the most in our history. We also reaffirmed our commitment to buying back shares in August when our Board approved a new multi year $6,000,000,000 share repurchase program. Additionally, we increased our dividend rate 15% during the year while distributing $786,000,000 back to shareholders. In total, we returned over $2,600,000,000 to shareholders in 2024, an increase of over $800,000,000 versus the prior year. Now moving on to our guidance for the full year 2025.

The strengthening U. S. Dollar throughout 2024 has been a headwind to our reported revenue and adjusted net income projections. As a reminder, we do not forecast foreign exchange and our guidance reflects rates as of late January. Our 2025 guidance reflects foreign exchange headwinds of approximately $250,000,000 to revenue and $50,000,000 to adjusted net income versus 2024.

For 2025, we are projecting revenue between $9,225,000,000 and $9,375,000,000 representing an organic operational growth range of 6% to 8% with growth across both price and volume. We expect our performance to be driven by our companion animal business with broad based growth across our Simparica, key dermatology and OA pain franchises. We are projecting these combined innovative franchises to grow double digits in 2025. Our growth estimates include a range of assumptions for new market entrants and conditions across our business. As a reminder, our guidance does not include products that have not yet been approved.

Additionally, guidance does not account for the impact of recent and potential policy changes, including tariffs, tax reform or other regulatory changes. For livestock, 2024 growth was favorably impacted by tailwinds from price, particularly in high inflationary markets, including Argentina. Those impacts normalized as the year progressed and we do not expect similar tailwinds for 2025. Additionally, our reported growth for livestock will be negatively impacted by our MFA divestiture. We will continue to provide organic operational comparisons throughout the year to normalize for this impact.

We expect our organic operational livestock growth to be in line with the livestock industry growth for the year. Now moving on to the rest of the P and L. Adjusted cost of sales as a percentage of revenue is expected to be approximately 28%. Our expected margin improvement is driven by favorable product mix aided by our MFA divestiture. This improvement is partially offset by foreign exchange impacts within our supply chain.

Adjusted SG and A expenses for the year are expected to be between $2,300,000,000 and $2,350,000,000 This change is reflective of a normalization of compensation increases tied to 2024 performance as well as the acceleration of certain demand generating activities into Q4 of the prior year. Adjusted R and D expenses for 2025 is expected to be between $680,000,000 and $690,000,000 We are coming off a multi year cycle of R and D investment at a pace greater than revenue growth, with the output of those investments reflected in the portfolio progress we disclosed at the JPMorgan conference last month. Adjusted interest expense and other income deductions is expected to be approximately $200,000,000 Our adjusted effective tax rate for 2025 is expected to be approximately 21%. Adjusted net income is expected to be in the range of $2,700,000,000 to $2,750,000,000 representing growth of 2% to 4% on an operational basis and 6% to 8% on an organic operational basis. Our growth at adjusted net income is impacted by net interest headwinds due to lowering rates on invested cash versus prior years.

Additionally, while our adjusted effective tax rate guidance for 2025 is within our historical range, it is at the higher end of the range due to higher taxes on foreign earnings. Our organic operational adjusted net income growth is expected to be 6% to 8%. If we further exclude the impact of interest and taxes, our bottom line growth is expected to be between 810%. Lastly, we expect adjusted diluted EPS to be in the range of $6 to $6.1 and reported diluted EPS to be in the range of $5.7 to $5.8 Our EPS projections are based on current share count and do not consider the future impact of our ongoing share repurchase program. In closing, 2024 success was built upon the strength of our broad portfolio and our purpose driven colleagues.

Our success across key brands, geographies and channels is the foundation, which gives us confidence in our ability to sustain above market growth this year and into the future. Now, I'll hand things over to the operator to open the line for your questions. Operator?

Thank We'll take our first question from Michael Ryskin with Bank of America. Please go ahead.

Great. Thanks for taking the question guys. I've got two related ones. I'll sneak them in together. So first, Wettney, in your prepared remarks, you sort of said you have a range of assumptions for new market entrants and market conditions in the guide.

I want to dive into that. There's a lot of competition in the market this year that you already have one on the market for derm. There's a second major applicable competitor expected this summer. So explicitly, could you sort of walk us through what you're factoring into the guide, whether it's in terms of color for growth for those products? You kind of gave some broad comments on growth expectations, but also just sort of incremental headwinds from competition and how that could play out.

And then tied to that, I guess, are you taking on any incremental investments to support your major brands, derm, combo pericylicides, in terms of go to market strategy, commercial efforts, maybe in terms of bundling products together, alternative channels, just sort of how are you adjusting that in the face of some of that growing competition? Thank you.

Thank you, Mike. Happy to take the question on competition. Look, first of all, we have delivered an outstanding 2024 with 11% growth operationally at revenue of 15 percent of just net income. If you look across our key major franchises, we delivered double digit growth across all three of those major franchises, including Durham. And we're in the context of Durham, more than a decade in, we're delivering 17% operational growth.

Included as we usually do with our guidance, as we start the year, we take into consideration a number of factors. We have multiple sources of growth. And while we're not providing individual product guidance, what we're saying is these three major franchise areas we expect to drive double digit growth for us in 2025. And we see the underlying trends that drove our performance in 2024, carry us into 2025 with momentum. Now in terms of competition, we are factoring in various scenarios in terms of what competition might look like.

In the case of derm, we expect those that to be in the second half of the year. Again, not providing individual guidance on derm specifically, but certainly long term, we expect to continue to drive substantial growth in these categories. If you look at derm, for example, we're estimating 20,000,000 dogs globally that are not treated or under treated. We're treating about twelve million today with Abiquella and Cytopoint. There's still seven million that are on other therapies like steroids, for example, and other 13 that are not getting a prescription drug.

So clearly, the opportunity that remains here is actually pretty vast and that gives us a lot of confidence in terms of our long term growth. In terms of investments, look, I think you've seen us do this quite well. At the same time, we are leveraging other investments made in our field force, etcetera, to drive operational leverage through the P and L. In the case of putting support behind our key brands, whether it's DTC, whether it's educational, veterinarians, etcetera, that's something we have demonstrated an ability to do and they have, great returns for us when we do that. We have significant measurements that shows that in those areas that we are factoring into our guidance from a spend standpoint.

Thank you. We'll take our next question from Erin Wright with Morgan Stanley. Please go ahead.

little bit more into Libriella. Just can you speak to how vets are responding following the vet letter and label change? Like has that helped them in terms of understanding kind of how to prescribe? And you mentioned it's not linear, but how do we think about U. S.

Libriella contributions in terms of what's embedded in the guide for 2025? And just to confirm, the long actings and other pipeline products are not embedded in your guidance, for this year? And then just the last one, just on the margin improvement year to year in 2025, can you talk a little bit about what's driving that in terms of the mix shift with the MFA divestiture or anything else to call out? Thanks.

Thanks, Erin. I'll take the rubella questions and let Whitney take the margin question. A quick answer, no new products are included. The long acting are not included in the guidance, as I think Whitney managed, what I mentioned. Look, we're really pleased with the launch of Librella with $581,000,000 in sales across Librella and Valencia and 80% growth on the year.

We're really pleased. It is the most successful launch in history as we've mentioned. It's also now the fourth largest product for Zoetis with twenty five million doses. Forty percent of dogs suffer from OA. And what we really see as we look forward is continued growth in this category.

We did get the Dear Vet letter which helped what the update in, adverse events were using real world data. And we obviously, you know, showed you the label that we implemented based on that. And I think that really underscores our commitment for transparency, which we've been doing all along with regards to the adverse events. You know, I would highlight that there were no contraindications, no warnings and no precautions in that label. But we, you know, we're really pleased to be able to share that with veterinarians consistent with our purpose and consistent with our commitment.

And I think veterinarians have found that quite helpful. That label, as we had mentioned to you many times is, you know, we expected it to be consistent with our label and international where we continue to be driving growth as you saw throughout 2024. So The U. S. Label looks largely like a label in Europe or Canada.

And we really look forward to continuing to grow this franchise. Whitney, do you want to take the second question on margin?

Sure. Before I get to the margin, maybe just one more point I'll make on Libriella. You asked about how we factor that into our guidance. Clearly, we've combined the three major franchise areas and we're calling double digit growth across those. As you've seen in Libriella, even after three years in the market outside The U.

S. And Europe, we delivered 33% growth in Libriella in the third year. So we are expecting annual growth to be strong to robust across these franchises across the ORA pain as we go forward even if we're not giving specific guidance on individual product. On margins, you're right, MFA divestiture is accretive to our gross margins and our bottom line margins as well. In addition to that, we have mix as we see more of our growth driven by companion animal products that drives favorable mix for us from the margin standpoint as well.

And from a price, as we've said consistently, we are expecting to see price be above the 2% to 3% that we've typically done historically, but below the 6% we did this year or nearly 5% we did the prior year. Part of that is lower contribution from some of these hyperinflationary markets that we saw in the prior year is why you see that, but still we're taking price and therefore that's contributing to our margins. One of the offsets as we've seen with the U. S. Dollar strength over the last number of years is FX.

And we do see that being an offset in addition to increased manufacturing costs that we have. But net net, and on the FX side, it's about 50 basis points headwind at the gross margin level.

Thank you. We'll take our next question from John Block with Stifel. Please go ahead.

Thanks guys. Good morning. Just Wendy, any thoughts on the revenue cadence for 2025? Arguably competition will pick up in some key areas. You called it out, but that's more back part of the year.

You got arguably an easy comp in the fourth quarter. So curious on the cadence. And then just for R and D, flat year over year, you walked through some of that. Is this sort of a new beginning for you guys where this can be considered a more leverageable, call it, line item going forward? Thanks.

Yes. So look, John, first on the revenue cadence, as I mentioned, the most important aspect here is we look at the trends that are driving our business and demand across our products, and the momentum we had in 2024, we see that entering into 2025. So that gives us a lot of confidence and that's baked into our guidance here. As I said on the earlier question, we are factoring a number of scenarios around new entrants that may come in and those are more so on the back half of the year. So that would imply a stronger first versus second half.

I wouldn't necessarily call out an easy comp in Q4 from an organic operational perspective, maybe from a reported perspective given the divestiture of MFA. As I said in the prepared commentary, when you factor out the MFA, it's a 9% operational growth organic operational growth quarter for us. And then we had the comps, from the prior year where we launched both Liguela and Aprocal True in the fourth quarter of the prior year. When you add that into consideration, the growth rate in the fourth quarter is above 10%. And so I think that's a solid quarter and I wouldn't call that an easy comp necessarily as we look at 2025.

In terms of R and D, look, we're very pleased with the progress that we're seeing across the pipeline and we showcased those with the updates we provided last month at the JPMorgan conference. We tend to let the pipeline drive where the investment is and not necessarily deliberately drive that as a leverageable component. Now we did say two years ago almost at Investor Day, we expected the R and D line to grow above revenue for some time and then it would sort of move back towards sort of top line revenue growth rate and we're seeing that. But I think that's more of a factor of where the pipeline is. Certainly as major items go through certain cycles and development, they tend to drive more spend.

And then as they get on the other side of that, it's not as much. So that will ebb and flow from time to time. But we don't look at that necessarily as a leverageable line item that we're deliberately moving because the long term delivery of our innovation drives where we drive investments there.

Thank you. We'll take our next question from Brandon Vasquez with William Blair. Please go ahead.

Hi. This is Russell Yuan on for Brandon Vasquez. Thanks for taking the question. So, looking at a high level, are you guys able to give us any sense as we go into 2025 on how the entire pet population is kind of trending? Now that we're past COVID years, are we back to normal growth rates and growing year over year?

Or if not, is there anything we kind of need to keep in mind for the backdrop to get a normalized growth rate? I know we sometimes hear about a lagging effect from weak macro where pets are not replaced as they die. So kind of just curious on what you're seeing. Thanks.

Sure. What we continue to see is the strength of the human animal bond, and that relationship. If you look back to historical numbers, normally there's not significant changes in the number of pets. The only one exception obviously in the last twelve years was COVID. But we're expecting the pet population to remain relatively stable.

That's what it's done historically. I think what's really changed and what's driving the fundamental growth of the industry is the fact that the human animal bond makes animal health, essential and very resilient. You know, eighty six percent of pet owners would spend whatever it takes. And those incremental pets that were adopted, you know, during, COVID are aging. And as they age, they're going to get more diseases of, you know, chronic diseases, etcetera.

So we see very strong fundamental drivers with more millennials and Gen Z adopting pets, Their relationship with those pets, they're delaying having kids as they're having kids. And those pets are important parts of their family's life. And they're making sure that those pets are taken care of. So we see very strong growth drivers, based on the human animal bond, based on who's adopting those pets, as well as an aging pet population. So we think those are fundamental drivers that Zoetis' innovation and commercial excellence will only emphasize more.

Thank you. We'll take our next question from Balaji Prasad with Barclays. Please go ahead.

Hi, good morning. A couple of questions for me. Firstly, when you clarified that none of the expected approvals within the next twelve months have been factored into the guidance, curious to understand, maybe excluding FX, what are the upside risk to guidance that you can see from here? And on the same line, of the three buckets of approvals, the drivers as you can describe that for, is there any way to quantify the approvals in the second bucket in the twelve to thirty six months, what the TAM for these approvals are and what are the investments into this?

Sure. Look, in terms of confirming that we have not factored in new approvals and that's consistent with how we have approached guidance historically. So those are not in here. We did highlight how much FX headwind we see at the top line, roughly $250,000,000 given where spot rates are.

And as a reminder, we do not forecast FX. So the quantification we're providing is strictly off of the current spot rates versus where the average rates were through 2024. In terms of upside, look, I think we have a very diverse portfolio and a diversity centers across geography, across our products, etcetera. You saw us deliver across our three major franchises and companion animal, all three had double digit growth and double digit growth in terms of volumes as well. So I think the underlying trends here are strong, as we enter into 2025 and we'll be more pleased.

Of course, the factors that we put in in terms of where competitive interest might come in could be a factor that might move us in any direction in terms of the timing of those, and what some of the short term, sort of dynamics might be around those. And those are the things that might move us one way or the other, which is why we provide a range in our guidance. But we're very, very excited about how we're entering the year and the demand profile that we're seeing across our products and the opportunities we have before us.

I can pick up the second question on the, the TAMs for the new product categories. I mean, I wanted to start with, we have more drivers of growth to improve the standard of care than any other company. And we, as we talked about in our pipeline, we have multiple blockbusters. And at JPMorgan, we discussed what the total addressable market for some of these new therapies would be. To your point in the twelve to thirty six month window, we have chronic kidney disease products.

And as we mentioned, that's a $3,000,000,000 to $4,000,000,000 market. We also mentioned oncology and that's a $1,200,000,000 to $1,700,000,000 market. And then in the longer term, we were also talking about cardiology. I also just want to double click for a second on the long acting portfolio because I really think these are going to be significant growth drivers. There's a lot of people who can make it in every month.

So it will both increase compliance, which will grow the market as well as meet a lot of pet owners who just the monthly is too much for them. And they would be much more convenient to come in four times a year versus 12 times a year. So we really think as we look at potential approval every year for the next several years and really more drivers of growth for the short, medium and long term for the company, we remain really excited about the potential unmet needs that we can address.

Thank you. We'll take our next question from Chris Schott with JPMorgan. Please go ahead.

Zoetis (ZTS) Q4 2024 Earnings Call Transcript

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