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Zoetis (ZTS) FY Conference Transcript
ZoetisZoetis(US:ZTS)2025-05-22 12:00

Summary of Zoetis (ZTS) FY Conference Call - May 22, 2025 Company Overview - Company: Zoetis (ZTS) - Industry: Animal Health Key Points and Arguments Tariffs and Guidance - The company updated its guidance to reflect the impact of tariffs primarily affecting imports of APIs for livestock products from China, revising adjusted net income growth from 6%-8% to 5%-7% while maintaining organic operational revenue growth at 6%-8% [3][5][6] - The situation regarding tariffs remains fluid, and the company has several mitigation strategies available, including inventory management and dual sourcing [6][9][10] Lobbying Efforts - Zoetis is actively lobbying for an animal health exception from potential pharmaceutical tariffs, emphasizing its leadership role in the industry and the importance of U.S. manufacturing [11][12][13] - The company manufactures 75% of its U.S. sales domestically and is a net exporter, which strengthens its position in lobbying efforts [13][15] Librela Product Update - The company does not expect sequential growth for Librela in the U.S. but remains confident in year-over-year growth due to the large unmet market opportunity [16][17][18] - There are 27 million dogs in the U.S. with osteoarthritis (OA), but only 9 million are currently treated, indicating significant growth potential for Librela [19][20] - The company is focusing on educating veterinarians and pet owners to drive adoption and is leveraging post-launch studies to support its marketing efforts [20][22] R&D and Innovation Strategy - Zoetis maintains a balanced R&D strategy, with approximately 50% of spending on life cycle innovation and the other half on new innovations [48][52] - The company is excited about its pipeline, particularly in addressing unmet needs in companion animal health, such as chronic kidney disease (CKD) [59][60] Competitive Landscape - Zoetis is aware of potential competition in monoclonal antibodies but believes its established manufacturing capabilities and product pipeline provide a competitive advantage [61][62][64] - The company has a strong track record with its existing products, such as Apoquel, which has high satisfaction levels among veterinarians and pet owners [68] Financial Performance and Growth - The company aims to grow revenues faster than the industry average and has consistently achieved this, with operational growth rates above 10% in recent years [78][79] - Gross margins remain above 70%, and the company is focused on leveraging its operational efficiencies to drive bottom-line growth [79][80] Market Diversification - Zoetis emphasizes geographic and species diversification, with the U.S. accounting for 55% of its business and no other market exceeding 5% [87][88] - The company expects growth in alternative channels outside of veterinary clinics, which currently account for 21% of U.S. companion animal revenues [89][90] Additional Important Insights - The company is cautious about the timing of implementing mitigation strategies related to tariffs, ensuring that actions are taken only when necessary [6][10] - The feedback from veterinarians regarding label changes for Librela has been positive, aligning with labels in other markets [25][26] - The company is committed to lifecycle management for its products, ensuring continued innovation and market leadership [70][72]