Core Insights - Zoetis, Inc. (ZTS) reported third-quarter 2025 adjusted earnings of $1.70 per share, exceeding the Zacks Consensus Estimate of $1.62, while total revenues grew 1% year over year to $2.4 billion, missing the estimate of $2.41 billion [1][7] Financial Performance - U.S. revenues decreased 2% year over year to $1.32 billion, missing both the Zacks Consensus Estimate of $1.34 billion and the model estimate of $1.38 billion [3][7] - Sales of companion animal products in the U.S. remained flat at $1.07 billion, with growth in parasiticides and dermatology products offset by declines in monoclonal antibody products for osteoarthritis pain [4][7] - Livestock product sales in the U.S. fell 9% to $253 million, primarily due to the divestiture of the medicated feed additive product portfolio [6][9] International Segment - Revenues from the International segment increased 3% year over year to $1.06 billion, surpassing the Zacks Consensus Estimate of $1.04 billion [8] - Ex-U.S. sales of companion animal products rose 8% to $583 million, driven by growth in key products [9] Guidance and Future Outlook - Zoetis has cut its 2025 revenue guidance to $9.4-$9.475 billion from a previous range of $9.45 billion to $9.6 billion, while maintaining adjusted earnings guidance of $6.30-$6.40 per share [10] - The company secured a positive opinion for Lenivia, a long-acting monoclonal antibody therapy for canine osteoarthritis pain, with a final European decision expected in late 2025 [11][13]

Financial Data and Key Metrics Changes - The company reported $2.4 billion in revenue for Q3 2025, growing 1% on a reported basis and 4% on an organic operational basis, primarily driven by price, as volume was flat [19][5][15] - Adjusted net income was $754 million, reflecting a 5% increase on a reported basis and a 9% increase on an organic operational basis [19][30] - Adjusted gross margins improved to 71.6%, growing 90 basis points on a reported basis [29][30] Business Line Data and Key Metrics Changes - The global companion animal portfolio generated $1.7 billion in revenue, growing 2% operationally, with the parasiticide franchise contributing $356 million (7% growth) and key dermatology posting $469 million (3% growth) [20][19] - The osteoarthritis (OA) pain franchise declined 11% operationally to $138 million, with Librela sales down 15% globally [20][10] - The global livestock portfolio grew 10% on an organic operational basis, contributing $725 million in revenue [20][13] Market Data and Key Metrics Changes - In the U.S., revenue decreased 2% on a reported basis but increased 3% on an organic operational basis, with companion animal flat and livestock growing 14% [21][19] - International revenue grew 3% on a reported basis and 6% on an organic operational basis, with companion animal growing 4% and livestock growing 8% [26][19] Company Strategy and Development Direction - The company is focused on a multi-pronged strategy to return Librela to growth, including increasing awareness of OA as a serious disease and deepening education with specialists and veterinarians [10][11] - The company is evolving its U.S. commercial structure to enhance agility and efficiency, aiming for a leaner field organization [12][13] - The company anticipates a major new market approval each year for the next several years, highlighting its robust innovation pipeline [11][16] Management's Comments on Operating Environment and Future Outlook - Management noted that therapeutic visits have been declining, impacting new patient starts, and emphasized the importance of addressing this trend for future growth [36][66] - The company remains confident in its long-term growth trajectory, supported by a diversified portfolio and strong market fundamentals [15][31] - Management updated full-year guidance, revising organic operational revenue growth to a range of 5.5%-6.5% [15][30] Other Important Information - The company announced the retirement of Rob Polzer, head of R&D, and the appointment of Kevin Esch as his successor [17][16] - The company is investing in manufacturing excellence to support its expanding portfolio, including a new biologics facility [12][11] Q&A Session Summary Question: What changed interquarterly after raising guidance last quarter? - Management noted anticipated deceleration in the second half of the year, competitive launch dynamics, and macro impacts on U.S. clinics as key factors [35][36] Question: How is the competitive landscape affecting the dermatology category? - Management acknowledged competitive pressures but emphasized that patient share gains from competitors have been limited [42][66] Question: What is the outlook for therapeutic visits and when might recovery occur? - Management indicated that therapeutic visits have been declining, impacting patient starts, and recovery timing remains uncertain [66][63] Question: How durable are the growth drivers in livestock? - Management expressed confidence in the sustainability of livestock growth driven by increased protein demand and urbanization trends [72][71] Question: What lessons have been learned from Librela's launch for upcoming products? - Management plans to apply learnings from Librela to new launches, focusing on education and awareness of OA [58][57]

Financial Data and Key Metrics Changes - The company reported $2.4 billion in revenue for Q3 2025, growing 1% on a reported basis and 4% on an organic operational basis, primarily driven by price as volume was flat [26][27] - Adjusted net income was $754 million, growing 5% on a reported basis and 9% on an organic operational basis [27][44] - Adjusted diluted EPS grew 7% operationally in the quarter and 12% on an organic operational basis [44] Business Line Data and Key Metrics Changes - The global companion animal portfolio posted revenue of $1.7 billion, growing 2% operationally, with the Simparica franchise contributing $356 million, growing 7% [27][31] - The livestock portfolio grew 10% on an organic operational basis, contributing $725 million in revenue, reflecting strong performance across segments and species [27][28] - The osteoarthritis pain franchise declined 11% operationally, with global Librela sales down 15% [13][27] Market Data and Key Metrics Changes - In the U.S., companion animal revenue was flat, while livestock grew 14% on an organic operational basis [29] - Internationally, revenue grew 3% on a reported basis and 6% on an organic operational basis, with companion animal growing 4% and livestock growing 8% [37][38] - The international Simparica franchise grew 22% operationally, with Simparica Trio growing 32% [39][40] Company Strategy and Development Direction - The company is focused on enhancing its U.S. commercial structure to better serve customers and improve agility, aiming for a leaner field organization [16][17] - Continued investment in manufacturing excellence and innovation is emphasized, with plans for new product launches and geographic expansions [15][20] - The company anticipates a major new market approval each year for the next several years, reinforcing its long-term growth trajectory [15][22] Management's Comments on Operating Environment and Future Outlook - Management noted that therapeutic visits in U.S. clinics have been declining, impacting new patient starts, but alternative channels are showing strong growth [63][64] - The company is optimistic about returning to growth in 2026, particularly in the livestock segment, which has shown resilience [55][96] - Management expressed confidence in the long-term growth potential of the business and the broader animal health market despite near-term challenges [46][96] Other Important Information - The company announced the retirement of Rob Holder, Head of R&D, and the appointment of Kevin Esch as his successor [22][23] - The company is implementing a multi-pronged strategy to return Librela to growth, focusing on education and awareness of osteoarthritis [14][80] Q&A Session Summary Question: What changed intra-quarter after raising guidance last quarter? - Management acknowledged deceleration in the back half of the year due to strong comps and macro impacts, particularly in U.S. clinics [50][51] Question: How is competition affecting the dermatology category? - Management noted that competitive dynamics have intensified, but they remain confident in their product positioning and market share [58][89] Question: What are the growth drivers for livestock moving forward? - Management highlighted sustainable demand for protein and urbanization as key growth drivers for livestock [96][97]