Core Insights - Zoetis, Inc. (ZTS) reported fourth-quarter 2025 adjusted earnings of $1.48 per share, exceeding the Zacks Consensus Estimate of $1.40, and up from $1.40 in the same quarter last year [1] - Total revenues for the quarter increased by 3% year over year to $2.39 billion, surpassing the Zacks Consensus Estimate of $2.37 billion, compared to $2.32 billion in the prior year [1] Financial Performance - U.S. segment revenues decreased by 2% year over year to $1.24 billion, missing the Zacks Consensus Estimate of $1.27 billion [3] - Sales of companion animal products in the U.S. declined by 1% year over year to $1 billion, with growth in parasiticides and dermatology products offset by a decline in monoclonal antibody products for osteoarthritis pain [4] - Livestock product sales in the U.S. fell by 6% to $234 million, primarily due to the divestiture of the medicated feed additive product portfolio [6] - International segment revenues grew by 8% year over year to $1.12 billion, exceeding the Zacks Consensus Estimate of $1.06 billion [8] - Ex-U.S. sales of companion animal products rose by 7% to $599 million, driven by growth in key products [8] - Livestock product sales internationally increased by 9% to $522 million, supported by growth across core species [9] Full-Year Results and Guidance - For the full year 2025, Zoetis reported adjusted earnings of $6.41 per share, up from $5.92 the previous year, and total revenues of $9.47 billion, an increase of 2% year over year [10] - The company provided guidance for 2026, expecting adjusted earnings in the range of $7.00-$7.10 per share and revenues between $9.825 billion and $10.025 billion, indicating operational growth of 3-5% [11][13] Product Developments - Zoetis received EU approval for Lenivia, a long-acting monoclonal antibody therapy for canine osteoarthritis pain, with a commercial launch expected in 2026 [14] - The approval of Lenivia is anticipated to enhance Zoetis' position in the companion-animal biologics market and expand its offerings in the osteoarthritis segment [15]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported global revenue of $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis, with 4% from price and 2% from volume [21][22] - Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion [21][22] - Full year adjusted gross margin of 71.9% grew 120 basis points on a reported basis, with foreign exchange having a favorable impact of 80 basis points [39] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 5% operationally, with the Simparica franchise reporting $1.5 billion in revenue, growing 12% operationally [22][24] - The livestock portfolio achieved $2.8 billion in revenue, reflecting 8% organic operational growth, driven by broad-based growth across geographies and species [24][30] - Companion animal diagnostics delivered 13% operational revenue growth, supported by the launch of new products like Vetscan OptiCell and Imagyst [16][23] Market Data and Key Metrics Changes - International markets contributed significantly, with 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth [7][21] - International companion animal revenue grew 7% operationally, driven by the Simparica and key dermatology franchises [28] - The international livestock portfolio grew 10% on an organic operational basis, with strong performance in cattle and poultry markets [30] Company Strategy and Development Direction - The company is focused on advancing long-acting approvals and maintaining a robust pipeline to extend growth opportunities [8][19] - Strategic actions are being taken to sustain growth through competition, including optimizing channel mix and reinforcing scientific leadership [9][20] - The company aims to leverage its diverse portfolio and robust pipeline, with 12 potential blockbusters in development [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are economic pressures affecting pet owners, demand for animal health services remains strong [10][71] - The company expects gradual improvement in the macro environment as it moves through 2026, with guidance for 2026 set at 3%-5% organic operational revenue growth [18][42] - Management emphasized the importance of innovation and strategic execution in navigating competitive pressures [19][20] Other Important Information - The company completed a convertible bond offering to support a $1.75 billion common stock buyback while maintaining a strong balance sheet [42] - A multi-year initiative to transition the ERP system is underway to enhance operational efficiency and reporting capabilities [38] Q&A Session Summary Question: Competition and Pricing Dynamics for 2026 - Management acknowledged the competitive landscape and the impact of aggressive promotions on growth, particularly in the dermatology space [50][51] - Price increases are expected to return to a normal range of 2%-3%, with volume contributing to growth as well [52] Question: U.S. Companion Animal Operational Growth - The guidance incorporates current market conditions and the company's strong portfolio, with expectations for continued demand despite competitive pressures [55][56] Question: Dynamics of Simparica Trio Growth - Management highlighted the significant room for expansion in the triple combination space, with expectations for continued growth in 2026 [62] Question: Revenue Recognition and Accounting Changes - Management clarified that operational changes have resulted in some revenue deferrals, which will be factored into future guidance [61][63]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported global revenue of $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis, with 4% from price and 2% from volume [21][22] - Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion [21][22] - Full year adjusted gross margin of 71.9% grew 120 basis points on a reported basis, with foreign exchange having a favorable impact of 80 basis points [39] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 5% operationally in 2025, with the Simparica franchise reporting $1.5 billion in revenue, growing 12% operationally [22][24] - The livestock portfolio achieved $2.8 billion in revenue, reflecting 8% organic operational growth, driven by broad-based growth across geographies and species [24][30] - Companion animal diagnostics delivered 13% operational revenue growth for the year, supported by the launch of new products [16][23] Market Data and Key Metrics Changes - International markets contributed significantly, with 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth [7][21] - The international companion animal business grew 7% operationally, driven by the Simparica and key dermatology franchises [28][30] - Livestock performance was particularly strong in the Brazilian cattle market, with broad-based growth across all core species [30][37] Company Strategy and Development Direction - The company is focused on advancing long-acting approvals and maintaining a robust pipeline to extend growth opportunities [8][19] - Strategic actions are being taken to sustain growth through competition, including optimizing channel mix and reinforcing scientific leadership [9][10] - The company aims to leverage its diverse portfolio and innovative capabilities to drive long-term growth and value creation [20][46] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are economic pressures affecting pet owners, demand for animal health services remains strong [10][71] - The company expects gradual improvement in the macro environment as it moves through 2026, with guidance for 2026 set at 3%-5% organic operational revenue growth [18][42] - Management remains confident in the long-term fundamentals of the livestock market, driven by increasing protein consumption and favorable producer economics [18][30] Other Important Information - The company completed a convertible bond offering to support a $1.75 billion common stock buyback while maintaining a strong balance sheet [42] - A multi-year initiative to transition the ERP system is underway, aimed at enhancing operational efficiency and insight [38] Q&A Session Summary Question: Competition and Pricing Dynamics for 2026 - Management acknowledged the competitive landscape and the impact of new product launches on growth, particularly in the dermatology space [50][51] - Price increases are expected to return to a normal range of 2%-3%, with volume contributing to growth as well [52] Question: U.S. Companion Animal Operational Growth - Management indicated that the guidance incorporates current market conditions and the strength of the company's portfolio, despite competitive pressures [55][56] - The demand for animal health remains resilient, with consumers prioritizing spending on their pets [56][71] Question: Dynamics of Simparica Franchise Growth - The Simparica franchise continues to lead in the U.S. market, with significant room for expansion despite recent lower growth rates [62] - Management emphasized the importance of maintaining a strong market position and adapting to competitive pressures [62] Question: Revenue Recognition and Accounting Dynamics - Management clarified that operational changes have led to some revenue recognition shifts, which are factored into the guidance for 2026 [61][63] - The one-month lag in revenue recognition will be addressed with the implementation of fiscal year alignment in early 2026 [61][63]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported global revenue of $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis, with 4% from price and 2% from volume [20][21] - Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion [20][21] - Full year adjusted gross margin of 71.9% grew 120 basis points on a reported basis, with foreign exchange having a favorable impact of 80 basis points [40] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 5% operationally in 2025, with the Simparica franchise reporting $1.5 billion in revenue, growing 12% operationally [21][22] - The livestock portfolio delivered 8% organic operational revenue growth for the year, with $2.8 billion in revenue [24][30] - Companion animal diagnostics delivered broad-based 13% operational revenue growth for the year [14][23] Market Data and Key Metrics Changes - International markets contributed significantly, with 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth [5][20] - International companion animal grew 7% operationally, driven by the Simparica and key dermatology franchises [27] - International livestock grew 10% on an organic operational basis, with strong performance in the Brazilian cattle market [30] Company Strategy and Development Direction - The company is focused on advancing long-acting approvals and maintaining a robust pipeline to extend growth [6][18] - Strategic actions are being taken to sustain growth through competition, including optimizing channel mix and increasing reach with veterinarians [8][19] - The company aims to leverage its diverse portfolio and robust pipeline, with 12 potential blockbusters in development [18][19] Management Comments on Operating Environment and Future Outlook - Management noted that the operating environment is dynamic, with macroeconomic pressures affecting consumer behavior, particularly among Gen Z and millennial pet owners [6][9] - Despite near-term headwinds, management remains confident in the long-term fundamentals of the animal health market, expecting gradual improvement in 2026 [9][17] - Guidance for 2026 includes organic operational revenue growth of 3%-5% and adjusted net income growth of 3%-6% [42][43] Other Important Information - The company is transitioning its ERP system to enhance operational efficiency and align fiscal years globally [39][40] - A convertible bond offering supported a $1.75 billion common stock buyback, returning over $3.2 billion to shareholders through buybacks and dividends [42] Q&A Session Summary Question: Competition and Pricing Strategy for 2026 - Management acknowledged the competitive landscape and the impact of new product launches on growth, particularly in the dermatology space [48][50] - Price increases are expected to return to a normal range of 2%-3%, with volume contributing to growth as well [52] Question: U.S. Companion Animal Operational Growth - Management indicated that the guidance incorporates current market conditions and the strength of their portfolio, despite competitive pressures [56][57] Question: Dynamics of Simparica Trio Growth - Management highlighted that Simparica Trio remains a leading product with significant room for expansion, despite recent lower growth [61][63]

Fourth Quarter and Full Year 2025 Financial Results February 12, 2026 Forward-Looking Statements This presentation contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects, future operating or financial performance; future guidance, future operating models, R&D costs; timing and likelihood of success; expectations regarding products, product approvals or products under development and expected timing of product launches; expectations regardi ...

Core Insights - Zoetis, Inc. (ZTS) is anticipated to exceed expectations in its fourth-quarter 2025 earnings report, scheduled for February 12, 2026, with revenue estimates at $2.37 billion and earnings per share (EPS) at $1.40 [1][5] Group 1: Revenue Expectations - The Zacks Consensus Estimate for U.S. segment revenues is projected at $1.27 billion, likely reflecting a decrease from the previous year due to lower sales of companion animal products [3][5] - International segment revenues are expected to rise to $1.06 billion, driven by increased sales of companion animal products [4][5] Group 2: Product Performance - Sales of companion animal products, particularly from the parasiticides portfolio (including Simparica and Revolution) and key dermatology products (Apoquel and Cytopoint), are expected to contribute positively to revenues in both U.S. and International segments [7] - However, sales of monoclonal antibody products for osteoarthritis pain (Librela for dogs and Solensia for cats) are anticipated to decline in the U.S. due to concerns over side effects, potentially offsetting gains from other product categories [8] Group 3: Regulatory Developments - The FDA approved a new indication for Zoetis' Simparica Trio in 2025, which is expected to enhance sales by preventing flea tapeworm infections in dogs [10] Group 4: Historical Performance - Zoetis has a strong earnings surprise history, having surpassed estimates in each of the last four quarters with an average surprise of 5.37% [13]

Core Insights - The fourth-quarter 2025 reporting cycle for the Medical sector is commencing, with major firms expected to release earnings results in the coming weeks, primarily in the pharma/biotech and medical device segments [1] - Johnson & Johnson's strong performance has set a positive tone, while Roche faced challenges due to unfavorable foreign-exchange impacts, particularly from a weak U.S. dollar [1] - Sanofi reported mixed results, beating earnings estimates but slightly missing sales expectations [1] Earnings Trends - As of January 28, 11.7% of Medical sector companies, representing 26% of the sector's market capitalization, have reported quarterly earnings, with 42.9% beating both earnings and revenue estimates [2] - Year-over-year earnings decreased by 15.5%, while revenues increased by 10.3% [2] - Overall, fourth-quarter earnings for the Medical sector are expected to decrease by 2.4%, while sales are projected to rise by 8.7% compared to the previous year [3] Company Highlights - **Zoetis (ZTS)**: Expected to report earnings on February 12, with a consensus estimate of $1.40 per share and revenues of $2.37 billion. The company has an Earnings ESP of +0.84% and a Zacks Rank of 3. Recent performance has been driven by strong demand for companion animal products, although sales of certain monoclonal antibody products may have declined [7][8] - **Pacira BioSciences (PCRX)**: Anticipated to report earnings soon, with a consensus estimate of 85 cents per share and revenues of $196.99 million. The company has an Earnings ESP of +7.38% and a Zacks Rank of 2. Revenue growth is expected from its pain-management product, Exparel, and other products [9][10] - **Apellis Pharmaceuticals (APLS)**: Expected to report earnings soon, with a consensus estimate of a loss of 41 cents per share and revenues of $194.37 million. The company has an Earnings ESP of +4.52% and a Zacks Rank of 3. Revenue growth is likely driven by its geographic atrophy drug, Syfovre [11][12] - **Acadia Pharmaceuticals (ACAD)**: Set to report earnings soon, with a consensus estimate of 12 cents per share and revenues of $292.64 million. The company has an Earnings ESP of +14.92% and a Zacks Rank of 3. Revenue growth is expected from its lead drug, Nuplazid, and its second product, Daybue [13][14] - **Denali Therapeutics (DNLI)**: Expected to report a loss of 75 cents per share and revenues of $18.47 million. The company has an Earnings ESP of +6.11% and a Zacks Rank of 3. Revenue expectations are based on collaboration revenues, with updates on pipeline programs anticipated [15][16]

Summary of Key Points Core Viewpoint - Zoetis and Regeneron Pharmaceuticals have faced challenges over the past year, leading to disappointing financial results. However, recent developments indicate a potential recovery for both companies in the near future [1]. Group 1: Zoetis - Zoetis is a prominent player in the animal health sector, with a diverse product portfolio, particularly focused on companion animals [3]. - The company faced difficulties with its key growth products, Librela and Solensia, due to safety concerns that resulted in adverse events in pets [4]. - To counteract these issues, Zoetis has introduced new OA pain treatments, Lenivia and Portela, which have received approval in multiple countries and are expected to help regain market share [5]. - The new treatments are long-acting and require less frequent administration, which is advantageous for both veterinarians and pet owners [5]. - Established products like Apoquel continue to perform well, providing additional support for Zoetis' financial recovery [6]. Group 2: Regeneron - Regeneron has been dealing with intense competition for its leading product, Eylea, which treats various eye diseases [7]. - The company has made strides by launching a higher-dose version of Eylea and obtaining label expansions, allowing for a broader patient base and a more convenient dosing schedule [7]. - These advancements have positively influenced Regeneron's stock performance over the past six months [8]. - Regeneron continues to rely on its successful product Dupixent, which addresses conditions such as eczema and COPD, contributing to its growth [9].

Summary of Zoetis Conference Call Company Overview - **Company**: Zoetis - **Industry**: Animal Health - **Current Market Size**: Approximately $50 billion, projected to grow to $90 billion over the next 10 years [4][3] Key Industry Insights - **Growth Drivers**: - Strong sectoral tailwinds in both companion animal and livestock segments [3] - Increasing global population demanding nutritious protein [4] - Shift towards pet medicalization driven by younger pet owners (Millennials and Gen Z) [6] - **Market Trends**: - Companion animal market growth driven by increased spending on veterinary care and advanced therapies [6] - Livestock sector recovering from disruptions caused by African swine fever and COVID-19, with mid-single-digit growth [8] Company Performance - **Revenue Growth**: - Zoetis has achieved an 8% compound annual growth rate (CAGR) since its IPO, outperforming the industry average of 5% [5] - **Profitability**: - EBITDA margins of 41%-42% and mid-20s return on invested capital (ROIC) [21] - **R&D Investment**: - $5 billion invested in R&D since IPO, leading to 2,000 regulatory approvals over the last decade [9][10] Product Pipeline and Innovation - **Future Blockbusters**: - 12 potential blockbuster drugs in the pipeline, with expectations for major market approvals annually [11][12] - **Key Areas of Focus**: - Chronic kidney disease, oncology, cardiology, obesity, and anxiety in pets, with significant market potential [13][14][15][16] - **Diagnostics and Preventatives**: - Emphasis on expanding diagnostics and preventative care in livestock and companion animals [20] Market Position and Strategy - **Commercial Excellence**: - Direct field force in 45 markets, combining sales with medical affairs and marketing for effective execution [15] - **Product Leadership**: - Simparica Trio leading in the parasiticide space, with high customer satisfaction [16] - **Dermatology Portfolio**: - Strong portfolio including Apoquel and Cytopoint, with plans for long-acting products [17][18] Financial Strategy - **Capital Allocation**: - Focus on innovation, disciplined capital allocation, and returning excess cash to shareholders through dividends and buybacks [24][25] - **Shareholder Returns**: - Over 125% of free cash flow returned to shareholders in the last three years, with a 13% CAGR in dividends [24] Challenges and Outlook - **Short-term Headwinds**: - Anticipated slowdown in companion animal growth due to price increases and macroeconomic factors [27][29] - **Long-term Confidence**: - Sustained growth expected from livestock and diagnostics, with a focus on executing commercial strategies [30][32] - **Future Growth Projections**: - Long-term growth expectations remain robust, supported by industry trends and Zoetis's innovation pipeline [35] Conclusion - **Zoetis's Position**: - Well-positioned to capitalize on the growing animal health market with a strong pipeline, innovative products, and a disciplined approach to capital allocation [26]

44TH ANNUAL J.P. MORGAN HEALTHCARE CONFERENCE Leading the Future of Animal Health January 12, 2026 Forward-Looking Statements This presentation contains forward-looking statements, which reflect the current views of Zoetis with respect to: industry growth and market outlook; business plans or prospects; future operating or financial performance; future guidance; future operating models; R&D costs; timing and likelihood of success; expectations regarding products, product approvals or products under developm ...