ZTS - Earnings call 4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Fourth Quarter and Full Year 2023 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 not be forwarded automatically.

In addition, a replay of this call will be available approximately 2 hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. my turn now to floor is Frank. Steve Instructions] It pleasure the to over [Operator begin. may you Steve,

Steven Frank

Thank morning, Earnings operator. Chief Financial Quarter joined you, Officer. Good by Executive and Zoetis to today Joseph, Full Fourth Officer; the and Year our Peck, XXXX Kristin Call. Wetteny am everyone, I our and Chief welcome

include Before this of on will available Relations section statements call our remarks I'll and forward-looking the from you our the that actual differ remind begin, that are we slides on that website results presented and materially projections. Investor today could those

a factors press to, and report on to the results For including, and description our and you statements our annual reports forward-looking list filings, of limited release that could to not XX-K refer XX-Q. I certain Form our cause Form today's on in SEC differ, but

references these also XX, the accepted with financial today U.S. of reconciliation financial or include dated release which remarks is accompany earnings principles and filing the to tables GAAP February accordance press accounting to today, Our in company's measures XXXX. the not our in generally directly included most were non-GAAP X-K measures certain Tuesday, comparable financial A prepared GAAP. that will measures, U.S.

which also call I will of over exclude turn to operational We cite foreign results, the impact the exchange. With that, Kristin.

Kristin Peck

that industry, for to operational than purpose-driven they driven year Thank and markets you, and results, Steve, commitment success growth, diverse of call. X% propelled the earnings our enable XXXX growing full steady we thrive. species, the fourth customers the our everyone, for animals Today, outstanding strong and to and and by the innovation our portfolio care year demand revenue innovative by welcome, of quarter game-changing products delivered faster reported colleagues. We full our across our

momentum of operational segment our U.S. OA the we in osteoarthritis With or X% X% growth for monoclonal growth internationally. pain, antibodies of the ongoing saw and

we and X% operationally. for to key saw remains up growth growth portfolio operationally, animal driver, our a companion livestock a Our X% up portfolio, return

global While uncertainty, sustained we continue animal of species markets, across industry. our environment therapeutic and health has demonstrating is essential diversity and our further that performance to operate in a durable, growing an areas

cycle about $X exceeding osteoarthritis make The strengthening still Solensia, performance view. and the our in to breakthroughs of life quality U.S. peak animal as own the JPMorgan sales Investor penetration, pain pain #X human since product we are Our with franchise for to just world high in a our expect medical awareness other Librela with antibodies opportunity Similarly, that provide track to the underpins Healthcare efforts or the penetration could excited unmet to markets. and improving optimism. of product and condition been the increasing DTC OA commercial shared cats more monoclonal address Europe. At thanks life today, itch we bond. also industry clinic reaffirms that that in is dogs injectable growth, treatment, control differentiated this of expand in why position May its launch and again follow we've growth, OA the first have dogs. from requires for dermatology has we and to growing of the Librela our decade market. our Librela's the we've first allergic selling inflammation last above market and for Due strong solidified and is And of innovation leader treatment pioneering more like the well product [indiscernible]. Within our that received I pain ourselves the trends, launch for any billion. direct-to-consumer the which has X improve activated Day We enabled even and chewable, increased can nearly than franchises. October, our at create Cytopoint And veterinarians. to only remains Conference, clinic franchise, established to itch That's which impressive enhancements have partner history, don't consistently trusted record the that we we owners' products faster our fundamentally a alleviation We and we sustain market-leading tailwind the opportunity us of chewable Solensia needs after Apoquel awareness we of confident growth. as believe around generate room remain a as to pet compliance

driver, in medicine. our Simparica key remains execution, competition. but better the key meet in increasing Trio only strength products. The product This of our face label evolving highlights Our demands a continued our across success strategic not and position, franchises even also market-leading veterinary efficacy parasiticide particularly reinforces the performance consistently the innovation and of growth portfolio our

in world that and XXXX, begin geopolitical continuing growth, evolving and trends in powerful plans human executing we sustainable will animal for global adaptable future faster confidence the growing supply us around backdrop the need than we to bond on As a animal world's focus market. and durable the to and the macroeconomic grow give stay Two our disciplined protein. the of and

those demands operational ensures unforeseen while value. navigate to delivering to commitment to we Our and are excellence shareholder scale ready challenges meet

of we creation ahead, to our and committed record track value above-market are performance. Looking

agility cornerstone solutions the market-leading We've of the outpacing and innovation customer bring meet position. remains that demonstrated expectations. consistently to to dedication market exceed Our groundbreaking our

operationally operational to to our and a XXXX adjusted that in range to excellence of growth and in and supply to we're new in which of ongoing guiding the R&D, chain continue commercial value. create X% and to net cultivate reflects will income drive growth X% markets, leverage advantage, investments revenue X% growth XX% We range

and performing to me shareholders capabilities heard strategy, time our say confident value and in pipeline As customers again, the we you've time to market. while above and deliver are portfolio,

differentiate to to opportunities. and exceed focus pursuit advancing that will well and relentless invest Zoetis. Our we expectations emerging potential customer our navigate positions us in closing, on challenges capitalize capabilities the In continue

I not about look more could be our XXXX, excited As to you future.

will animal key showcase drivers value our our ongoing and to commitment I will and our product nurturing want on Our amidst continue of reiterate for our to advancing reaffirm in growth our innovations competition. expand X Investor tenets best-in-class discussed the proposition humankind world the portfolio defend the market, care to position by Day.

We revenue will grow faster market. the than

capital faster in capabilities. We adjusted commit income We and will invest shareholders. innovation you net will revenue, growth return to to and growing than excess

is quality animal animal company, continue health While future customer life through to way to the Thank and purpose-driven and animals, need Zoetis for be This will the care improve to our the and valued colleagues. standard leading there of the vision is shaping growth. and trusted for performance core most and innovation, the setting demand you. obsession

Now let over it hand Wetteny. to me Wetteny?

Wetteny Joseph

everyone. morning, good and Kristin, you, Thank

had strong with billion of mentioned, and a revenue Kristen $X.X year adjusted net income As XXXX in of billion. we $X.X

income end range, charge near adjusted to acquisition. our top as exchange while an as to prior net of a our Our full guidance was range year guidance slightly primarily related due impairment well of revenue our was below the the impact foreign

adjusted the with products, price and a on by our year, OA operational Our on portfolios driven business well Trio. On X% is reported in bodies Solensia with both key monoclonal X% Volume animal pain, operational growing while U.S. is revenue International and across segment and a and Simparica dermatology operationally Of full broad the from X% the from was revenue revenue and and segments, as X% X% volume. primarily Librela grew our growth growth basis X% on revenue, income $X.X X% on as net basis. our new a of posted reported increasing including growth, to was due of X% our both international year $X.X with billion products price segment strong lifestyle growth with volume. year. Full and billion our reported revenue both and basis, our and growth companion U.S. operational for

our of Additionally, entirely revenue year, to there less X.X while economic volume. and percentage operational our on the company drag ongoing weakness represents for our impact continues China total in a growth global revenues, the than represented business point X%

our X% was operationally. continued which Our full for year animal grew growth demand companion driven innovative by portfolio,

year revenue had European the in Growth the from in launch animal impact posted as came growth new portfolio as of which markets a wave of first operational from lifestyle also led was with markets for pain Our maps, well U.S. year. $XXX global strong in by OA XXXX, companion the X%. Performance million including

our grow vet maps see a pain of clinics satisfaction within continue pet We level penetration vets both owners. of and high and to amongst

posting an operational Our key headwinds the representing QX growth despite X% in Trio growth for dermatology X% and contributed of the $XXX competitive year. basis. products of in promotions $X.X on million of year in Simparica inventory distributor aggressive global sales billion for revenue XXXX, operationally generated much globally, of strong

operationally, XX% diagnostics animal and revenue million international. from companion with the contributions $XXX grew portfolio U.S. both recorded growth and in Our

X% price had by operational with growth revenue and a Our lifestyle portfolio strong driven volume. year, both

growth financial We both in products. from X% reported reported and assisted segment Of another with growth, revenue of with a increase quarter. X% X% million results, the decline was of Volume companion operational of of from of products and X% quarter, and of is basis. a representing business despite a the quarter. On operational on our $XXX Moving growth in $X.X the price X% [indiscernible] in-line an net particularly and $XXX billion, strong while revenue, billion segment X% is flat basis, consecutive on revenue which operational X% on was from quarter least growing reported animals. revenue at an to operational our U.S. the Volume our both our Adjusted the growth on our quarter. closed products operational comparative, posted of revenue X% U.S. QX third in X% tough International posting from growth $X.X million on in is income the increase basis, an volume. of X% new QX

growth growing operationally. in portfolio with of quarter, our both X%. growth animal double-digit saw our segment, contributed revenue animal driven our operational companion in driver the of companion also the innovative international We products. Livestock and growth was Our U.S. by main XX%

were of advertising Global the volume representing the growth million growth launch some bolstered growth support new well Trio DTC $XXX of of driver the OA was generated the operationally. the revenue Our the primary the increased driven Librela growth came the by globally maps in as combined in of primary in globally by focus. of launch posting quarter, field by U.S. Simparica as Price markets, QX XX% driver impact pain from expanded in quarter, followed in growth force $XXX primarily million quarter.

dermatology key X% posting basis. generated globally, million in operational Our products on an sales $XXX growth of

reported revenue of diagnostics both from operationally, and animal contributions and X% U.S. $XX million the companion growth international. Our ] with portfolio [

despite X% headwinds ended was growth ] of with U.S. claims. as from growing products the segments. in decreases International by Cinemex driven [ growth [ year our operationally, with grew Growth ] from both price, expanded lifestyle equally by Our volume well strong our on as label note DRAXXIN which a price and and in

growth at comparative of segment posted year. launch double-digit in sales billion quarter for Now the full quarter, buy-in by with $X.X of livestock moving the X%. to quarter, activity with while U.S. promotional the animal companion In revenue and of XX% year. was for at again tough start revenue the growing a quarter. flat quarter, on on facing and U.S., Companion animal growing in X% visits bolstered preprice sales a by were the growth last the Librela growing vet the clinic flat the heavier-than-normal the end quarter and

the per year. visit for While for we continue revenue of growth solid to and and the X% see revenue quarter clinic X.X%

veterinary due in as the retail Our our in revenue innovative growth revenue our part therapeutics U.S. channel. its to clinic companion to well strong outpace continues as animal presence growth

was by Moving on product in Simparica the dermatology key portfolio. Trio pay maps, and U.S. to driven our our performance. Growth

QX. leveraging distribution we at the to and our which posted fourth maps, the It's maps in the that posted thus pain initial have pleased field the while combined U.S. sales launch far. in in in to Our early $XX are been of sales is the first quarter launch. for to We of with been U.S. higher able a impact few full expectations. stocking results $XX our our in in important million end Librela pain drive moved has after the U.S. force quarter, significant clinic not there's we in months million note Librela

KX well year We category. patient higher-than-expected as through the and of rates end have [ rapid the the in growth as penetration seen pain share ] reorder

of Solensia in million had sales U.S. QX in the $XX

with promotional was vet driven XX% the visits million the growth We have seen year. XXXX Growth at supply sales competitor to last corporate a as through growth of space, of in promotions of the [indiscernible] in better and in XX%. ability second a U.S., In in injectable label, price [indiscernible] this marked our in line administration. and market. We driven and $XXX quarter this grow activity revenue strength a the increase in price our method primarily through in share we sales clinic. advance XXXX. In of were Trio. on owners see strong in of in referring Simparica both to quarter, end with XXXX in compete products ran confident franchise and growing following to by net the advantage Cytopoint Trio to $XXX [indiscernible] our in QX for volume our vets early patients Dermatology to Simparica presence, growth significant posted [indiscernible] continue continue of launch [indiscernible] retail expected we patient growing being channel and OA of combination is relationships space are first and QX drive the by XXXX. sales specialty X%. realization million growth challenges, due remain trip U.S. [indiscernible] the and competition the quarter, up lower price U.S. volume pet in

that primarily in certain diagnostics as companion portfolio in share quarter, in supply constraints. both medicated poultry result were prior the back X% gains and a competitor as posted vaccines livestock quarter, the U.S. and of of Sales of [indiscernible] well as favorable growth in of limited the to U.S. [indiscernible] as of grew rotation [indiscernible] same the increased to quarter. due increased supply in of of by result extended quarter products X% a growth Our use the the animal driven year. primarily [indiscernible]

earlier represented the revenue reported X% parasiticides launch by on products growth quarter. OA on in X% grew continued operationally drag products impact and uptake exchange. and $XX in animal portfolio. Growth international Librela companion equally International in grew maps, lifestyle animal foreign with as International operational. dermatology DTC in awareness Moving excluding on Higher XX% quarter. key as XX% operational markets our our campaign European X% to in in pain a was and X% grew small sales well by our year. segment, companion segment the markets [indiscernible] million where a the animal our China products was focus and were International of our led quarter revenue sales driven in launched this our pain the growth operational early basis

$XX sales XX% internationally the Solensia were in million growing quarter, operationally.

revenue, dermatology an of key the on international growth Our posting portfolio contributed $XXX million basis. of XX% operational quarter in

Apoquel We from benefits from Cytopoint Apoquel Apoquel to continue higher DTC market our to has markets, chewable of overall and international positive. conversion awareness see conversion benefit several continues [indiscernible] to to from growth. campaigns been and across rates

economic inflationary the in in livestock, Continuing species, return well by This grew emerging of growth which a QX effectiveness. operational in price, Australia high operationally of our in due international by parasiticides supply which and animal had markets. increases Simparica portfolio X% on in comparative XX% we proportion quarter our continued internationally, the operational a high as driven XX% Our driven price by the growing of by especially and a operationally, international growing offset all with to account peak XXXX partially field in conditions. XX% Simparica ongoing decline operationally strong driven driven primarily revolution an $XX where in small Trio posting million grew franchise season by current of generation China, as by impact driven key in a basis contributed was and demand primarily the and X% onto revenue high Europe quarter, season sales tough franchise force markets. Simparica sales in penetration million generates uptake price $XX in

impact MFA poultry certain Our sales markets. in unfavorable [indiscernible] portfolio on from in also China rotations livestock quarter, the our in benefited favorable particularly had international an our portfolio.

XX.X% operationally, Adjusted margin primarily contribution gross from an higher as resulting to SG&A on prior the basis moving competition Adjusted basis XX% for key primarily to were XX a decreased XX% by to due well higher costs. and offset portfolio the decreased driven P&L pipeline driven Foundation. the points funding operational primarily operating gross year. expenses increases the projects. lower freight by as expenses, to adjusted price compared higher margins related basis expenses related increased as basis, grew Zoetis progression the higher the well partially quarter. expenses on which manufacturing by points, of operationally XX% compensation-related expenses as operational XXX was a charitable of which On Now rest on costs, an of reported by R&D basis, of

and deductions and points, an to dispute to for due U.S. grew impairment adjusted benefits acquisition. The the basis benefit the charge income EPS were higher higher Other of the a was adjusted for to diluted in quarter to quarter a decrease the XX.X%, earnings. XXX income Finally, grew net rate in $XXX X% quarter in net and due quarter. the million. intangible quarter, an primarily X% foreign-derived a in operationally tax higher favorable jurisdictional of related an Adjusted mix expenditures were more related effective income fourth tax Capital the operationally

expenditures capital For year, million. $XXX we the full of had

Lastly, to we return capital to excess shareholders. continue

we in our our commitment have we billion adjusted of combination growth to repurchases announced than annual a shareholders $X.X faster returned income. December, year, net through at or increase. and share to approximately dividend a the dividend dividends. For XX% grow In continuing the

Please as foreign of the guidance January. rates our on reflects note moving XXXX. late Now full year for exchange to that guidance

our income, year, foreign adjusted expect in pronounced expecting year FX incredible being exchange negatively our At basis the impact basis points. and the slight points, impact year. half XXX versus impact the have an in net favorability expect are by second significant half XX growth to in first exchange with year. impact the We more by our net we to on in the impact we to growth later early the with foreign to the year. decreasing negatively growth transitioning revenue, On of the of unfavorable prior

do we not actively reminder, a FX. As forecast

these as late remain So rates of January. were estimates assume where they

range both For XXXX, to representing ], projecting $X.XXX X% revenue growth and billion between with operational volume. billion X% across a and [ $X.XXX we price growth are of

animal the expect companion in growth be to driver We primary XXXX.

expect from we growth impact of the the robust the pain see of internationally. expected U.S. in maps With and Librela, launch U.S. to both our

in U.S. key Kristin we exceeding have And are expectation anticipate Trio Our we both expectations. levels single-digit drive current Librela DTC of and in high entrants, dermatology to mid- owner for competitive our the our penetration schedule ahead pet our launched to with portfolio. clinic increased the awareness. Even as mentioned, Simparica of growth efforts

For livestock, exceeded expectations. our XXXX

Our improvements in out as stocks. from year growth as tailwinds, several in including supply certain the in benefited competitive markets well of

is year outlook expectations optimistic key touch our we growth. I'd be the growth. we like our upcoming for to upon in to revenue While that more with expect growth assumptions briefly our it line industry do lifestyle than as for the underpin enter rate was and XXXX, normalize

For trends. we not are current companion clinic animal, to projecting vet significant change the

We expect grow by to our of impact expect products. therapeutic visits and pain X% to U.S. flat visits growth aided in to the see

expect meaningful Simparica For continue an animal parasiticides, to growth Trio. we from

years grow customer defend market our help we ability from our In where gained we new to competition prepared entrants through space expertise in dermatology key the our combination expect for a the our products, continue conversion strength other almost and will X of and share parasiticides, we from the topicals the dermatology have and leader. to [indiscernible] confident space. products, collars to are drive XX the relationships triple differentiated We are and in

assuming growth, XXXX. half worsened not we change are in a economic a situation to over first do the China, we of current while the situation as the especially headwind in in the expect Lastly, course

a moving the rest P&L. XX.X%. to is the of of Now be on to revenue sales as of Adjusted cost expected approximately percentage

year by investments investments driven expense we future make growth can well advancement ensure higher higher significantly This expenses impacts XXXX mix. be by in supporting XXXX, Adjusted are and $XXX of well and projects in of our nonrecurring is expected is revenue with to lower reflected offset as to increase product and and short-term utilization. are expected of is approximately we from expected the favorable expenses. Adjusted We the Adjusted between R&D as lower as as year impacted primary support billion than $X.XX income is key $X.XX growth. impact increases million. and to the This These margin million monoclonal interest competition price for be is growth antibodies. $XXX million. to between expenses in SG&A continue pipeline portfolio, for prior on drivers billion, focused to in expected state negatively related XXXX Spend deductions driving especially the the QX royalty the as other is income by interest here settlement income. of $XXX our be

effective for billion, expected rate XX%. net range in the XX%. $X.XX to to adjusted Adjusted is growth XXXX operational be to tax range XX% income in Our of X% billion of $X.XX to of the representing is expected to be

Our proposition with of than revenue. net reflects our the again line faster guidance in value and growing than or faster revenue income market. growing adjusted once

in growth. To We compared and was the XXXX investments finally, range elevated range be challenging of outperformed and economic expenditures especially future historical levels summarize, EPS of $X.XX million. market. be $X.XX. And $X.XX the We to XXXX in $XXX $XXX to expect the to of diluted in again remain year. a reported we support to strong levels adjusted $X.XX to million the These to EPS anticipating in in even range China. spend entering capital diluted the be inventory with make our to to headwinds year continue are to another distributor environment, as we

expand grow where we spaces and ability create in our new markets new in the continue remain we future. even We existing competition, face in share ones and to to confident

for as sources driven our highlights our grow guidance our bottom faster our we XXXX, and meaningful our while product well investments line into the multiple As ability market, capital as pipeline move than faster ability by shareholders. to and our growth making significant portfolio our than the excess returning to of again future to grow innovative

hand I'll for operator Now the open line things the over questions. Operator? your to to

Operator

[Operator question Instructions] our with Wright Morgan take We will Erin from first Stanley.

Erin Wilson Wright

you Librela of beyond? rates about we weigh in on and a some categories XXXX of XXXX, Librela little reorder margin and a that could a the for in the and leverage. question little that bigger ramp-up more that bit in the about moving expectations And stocking margins. on such and as But think those talk a some longer-term faster-growing margins can could bit you you that can about should quarter-to-quarter. profitability, around are dynamics FX and you if and And margin as So feedback XXXX and and across bit about just little U.S. you more then there those business factors some potential see leverage your higher-margin talk in expand describe the of picture

Kristin Peck

[Audio Wetteny were let the Erin. that prepared expected and ahead second with mentioned Reorder which Librela you, are rates on question. coming in expectations. remarks, given the the question as what we actually schedule, exactly where in first -- I in penetration, of high is will take take we Gap] DTC line expecting. XXs, we in began we that our Thank we

hard I product look, your give in [ It's to number. Europe, #X looking and this or X/X But say, somewhere what makes a in that ] stocking. of kind U.S. no be firm X/X is ]. overall build at you [ it that would have we inventory year. selling in question doubt we what stocking the will between other us pain -- the and as well. the we're clicks. we So It's was as really into saw in confident the go

our we're and So this the advertising and product in we've of And last to growth direct-to-consumer investments late look penetration. plan in certainly on our U.S. ahead quite into QX with drive pleased started already year

So take I'll the let Wetteny second question?

Wetteny Joseph

as said at when beyond, you there up They at we're margins, which in Look, have we've to capacity, overall look you demand. yes, for dilutive started particularly factors able about sure. then being Librela company indeed, at do we XXXX example, Investor are XXXX, monoclonal Day, that being make and the looking built in at of think XXXX. when take moving to our we some Yes, antibodies ramp our peak, as in in production confident sure advantage average, was to if

go products. XXXX below you would accretive animal our we products. As overall And our but companion whether to exit Librela innovative and consider as into companion animal in becomes we innovative it becomes margins, beyond, line through our 'XX XXXX, with still more

So you look we specific won't But livestock. the to companion overall, expect. beyond what if at to think 'XX, give you of guidance here growth terms of continue to I it, in expect I animal outpace

our we're mix SG&A of And to be well. as continue to positioned be levels that able So we margins. monoclonal will into higher get for us. leverage production antibodies, the base And also from favorable as they are to accretive to overall

see faster P&L the those guide should revenue franchises XXXX. will as saw translate make not behind you we're But And R&D the R&D, well. to key products, them of to to demonstrated, continue through our right than as over as expansion all investments in behind So we've our grow in margin we investments the as implies, time. afraid as

offset will some of those, we're to expand. So continue slightly but those positioned investments to

Operator

We'll take our Michael next Ryskin of Bank from question America. with

Michael Ryskin

First, for XXXX touch to and XXXX. on margins maybe I want both

[indiscernible] about XXXX. did lower we in in have expected. of the you're finish guiding looks than expansion also you XXX to 'XX you're would So back But it guiding margin bps like

out you significantly some during came call the especially in called headwinds FX. XQ lower. think And I terms of in

margins of maybe in contribution out, what give onetime for number some should You out of of would some back could headwinds timing, then us XXXX. have sort And impact an Any as call what to 'XX? you some the Zoetis to that Charitable way a cleaner have kind been those Foundation.

sense underlying question second just is you better give I and Librela. up following to margins of the my on target. then EPS. And us believe Just a quantified underlying don't actually

on XXXX something $XXX So million And U.S., reasonable. I Librela want in point. focus did for what is just for you major $XXX XQ, million to like then -- that's but a given to especially for the in out flat seems couple coming it sort of markets. OUS maybe a concerns of international and the Europe last we've Librela over quarters the like of heard little bit has some side, been

So any going internationally? color on what's on

Wetteny Joseph

Yes, sure, Mike.

this me then take what Kristin to see add. Let and wants

that Indeed, basis about look Keep to in a points XXXX about margin XXX points XXXX, had is when about XXX ended, XX how expansion we at and basis mind, in in margins. you of of we take margins. guiding impact and are So of from QX look at FX.

manufacturing points and roughly consider So of when mix. little basis you're talking about a bit costs you XX

at mix, and had had for year into livestock. continue meeting look, they've Utah, frankly, a at we expect our lifestyle end. and we grow at XXXX, looking really but go national sales actually the strong stronger in year, a we to with as great clearly strong and Now livestock the here clearly we're lifestyle And our team ended in quite

that Librela a a exiting bit as dilutive. is as outperforming a bit So said, the our little I created well Yes, mix. also, and as of expectations year

still FX 'XX. and at points basis XX So basis coming the of of Most impact about points. you is exiting manufacturing costs, look talking XX about mix from you're when headwind here

on on referenced we the our is has that how to here. ended the items commentary that quarter we respect in with finish on impact FX other and impact our The prepared our

prior headwind fourth for in X is quarter. If $X.XX which about items you nonrecurring factor the take XXXX a in look items of FX, like the quarter at the the Those you in are nonoperational impairment acquisition. and charge clearly

what really you that's us here. vast of impacting saw majority the So

Of course, we FX. don't forecast

where here. the our constant for we into bake in is basis, we a margins that, with we happen would expect on what rates if assume essentially expand stay at to end what they January FX would guidance XXXX are. And of XXXX. So

we've depending that's will really here that the what have in past, how how and with guess and an throughout either and is favorable so the impact consistent on our approached will forecasting unfavorable, goes. FX or that XXXX, to I And sit do year going

is about in I little your operational significant other Librela, just question, to a we Clearly, expect pretty you about on part a think Price X% growth the Librela. For we talk X% bit to factor. want when how how will deliver revenue. of maybe

perhaps was, X to that. We levels Librela above continue significant to And with about our expect launch, at X/X to what going in the saw historic you and X%. clearly X the do quarter XXXX to that of QX to We being And again, factor. U.S. pleased is below see of the running be a slightly points. see to $XX in X/X Certainly be stocking. very million price initial

seeing so can the We're as what still discussed In that more we're to. international, you pleased of stages with translate already. we be terms with of but in what in we couldn't that launch, far So we're our pleased seeing. very out we're early would model what

year. If you beginning where look if the of the you growth fourth new the look markets at at at you were base XX% bit are quarter still And another the international, about then have driving the we of launched markets growth.

from another to have those addition $XX $XX new million markets in contribution You million. U.S. the

been from launching we've some we account into happens we launches. there's I really is In as as have here Europe, think do in those markets. So quarter-to-quarter stocking that to what take

that give already If been on the out, you or we've which XX% about few markets take. about We're talking you quarters those growth in launched. quarter, last just has over those factor the consistent focus

we're So the markets. with what more pleased to we're seeing in going international be

Operator

Stifel. Jon move We'll next to Block with

Jonathan Block

any sort also but comp, 'XX Wendy, in You've got of XQ more noting the first half. out? the the headwinds year cadence call you China easier in acute revenue were to

bit at a on basis? a we're full And about the stack just little sort GM, do were than maybe our we was SG&A little bit thinking. SG&A in -- out, at. Do it where investments, Kristin, a despite the you expense So lower guidance what were But how it? look X-year the called for DTC, we the we the think of heads that year, accelerated below

So stocking, FX? that's you you it 'XX seeing seems still XQ only know do to just absorbs expect growth as through if year-over-year. some to in by then of I maybe to the those sorry, Librela items XQ stocking? be U.S. can I'm why low mid-single-digit the don't finally, And Librela, like to just SG&A the up we're due 'XX talk blunted

Wetteny Joseph

balanced point in Librela I expect Look, here, roughly see Look, take add a across would year. expectations. wants I'll look, the cadence and terms Kristin then first sitting the what to of cadence

is specific which your let's a take in a point at raised look Now John. QX, you question,

a if comp. animal in against. QX. in quarter in something destocking U.S., time, we If at this same at livestock you an an in as the look had the in But year. certainly the last companion you growth up easier is We easier see XX% look look clearly quarter we QX, had first to come you comp

think And terms clearly And U.S. have complete in to China, you started the you the to deteriorate so look balance, as which year. in lifestyle both but growth throughout the conditions more well there as economic I then balance it's the if of international.

the as say, conditions a that So conditions coming Australia, et I weather becomes headwind -- are having as QX an would cetera, impact in into there. well heavier

pleased it's think we go we the and Librela, year. point I as clearly with continue I'll exit you going through to into to if out So you balance make and QX and last are more those but more how is, very contribute enter

So be Novella QX and from speaking the as accelerates than QX QX. much and through year relative doesn't have would the contribution to in it more QX. Therefore,

So consideration, see actually I when a take all balanced those into year. you roughly

make Now to did FX. we references

a rates in basis, look again, ago, provide So both hopefully, a prepared couple facto, do at FX is line. a where heavier commentary reported de you from we were terms that, When there. FX in what weeks taking a bottom and impact of helpful of revenue have the

exited momentum think operational companion I it. QX at to the that's how growth, other I with animal, base looking U.S. we But when about. about as think we you exit have think So and QX, again, but piece about that's mean, year the the I did

going is QX in QX to $XX higher if ] perspective, a million think a to $XX Librela to than coming factor quarter is stock that impact from million. [ X/X Now about I from of you be a ] [

$XX won't going means here. exactly into you how pleased stages still call by we're So I you the launch. with we the had now, but flat $XX performing, is even in product it early that a million Right if of million is to QX. grow this are what I say would

Operator

with David We'll take next Sandler. Westenberg Piper question our from

David Westenberg

of monoclonal Do in ] Europe there combo obviously that there some learnings safety Europe. learned can Librela. a second we year, one front profile of might terms launch. the of in talk the of launch? And allowed then out? messaging with you maybe last and consideration can maybe one [ efforts is with how you you Quattro on So DC are dynamics anticipate thinking front be the antibodies the in similar marketing gaurd gross superior they in saw you next some in the in that the how specifically about Elanco's that on think DTC about how and competitive discounting just of I is just apply But margins? the don't understands communication vet around might that come And

Kristin Peck

with very Sure. that it. I'll certainly I can first XX% I quarter had start Trio on want with strong the underscore, growth we with and mean Wetteny in build one competition. to a with QX

Trio grew overall year, X%. the For

Wetteny high that mentioned as very single-digit earlier, the and we pleased guided for expecting mid- with to So year. in we're Trio growth we're

both in volume. underscores and that in we'll So obviously see and price this we everything think

sure [indiscernible] obviously, a So will not we do it. how anticipate, I'm ] entering what Quatro -- competitor [ do exactly

to is fleet expectation ]. taper, get but Our from not that They tapeworm product. fleet then mention [ [ do you ] differentiated is control a we have

not differentiated So a therefore, really that's product.

next quite to But going accounts, us. a is market. What there'll to ], to movement et with the we're the entree competitors, having a think someone product. And promotional. our is sure honestly, this corporate triple is combos into I for seeing protects low good collars, of expect switch. with with experience our abused be we ship, the out well switching some we competitor retail I'm doing So unlikely and expand think auto with [ strength, gaurd I obviously, heavy very It's We're topicals, also lot which a cetera. new people

into So we have we pets and what with in Trio we do learned awareness do in for have regards are who the dogs confident that we as can that, number to seeing your pain the and osteoarthritis question Europe, them to branded cannot Europe, Librela people encouraging And we're impact look from And of bring advertising vet. awareness. in disease cats Librela both on as but look for our so we at year. we real with overall disease to advertising

that go vet to owners have be then turn should a where new is I they time had there and think product pet the it's a that not been a long them seen. could encouraging product to they and

when it's from We branded. even are really seeing positive direct-to-consumer uplift advertising not

what that? So to I know into add don't you want

Wetteny Joseph

think [indiscernible] the be the drug I going U.S. face been of of in to us to competition more Look, the Trio for share performing covered And competition. you it in in face gaining be really pleased. patient well

to been that think I a power speaks we've about, being of the our our of label lot what strength first is to which market. and talking the relationships,

our as mid- until XXXX we're reaction in heavy we growth do, hold to they confident be here. franchise, single-digit and going new we're promotion competitor but so happens and that we well. and into when what very across of on a to in in there'll with specific continued won't our growth ability on, see Trio thinking factor initial look, saying some see But So comes we're that some see [indiscernible] in grow the label to

Operator

Goldman We'll take from our Sachs. next question with Nathan Rich

Nathan Rich

on to wanted ask the franchise. Derm I

the China. market? in that had market guidance headwind share you can you're impact this type about assuming livestock you maybe to strategies XXXX? about that you for side expect maybe more think the franchise mid- product? for Could or of that's companion competitive overall. the does the guess, China entry in in occur that I specifically, I you And follow-up to year? high to that from talked And of against defend the on frame then talk on And growth putting headwind quick the a are Apoquel single-digit place within you likely a

Kristin Peck

if you're strong can -- derm to Look, take given And the overall the on in price Sure. saw growth at at we question. looking in late derm and China prepriced that, I'll Wetteny understated think X%. I follow I question, your both saw buy-in is that we XXXX. obviously just the growth in and want that underscore the quarter up

high single-digit will As that XXXX, see in derm for franchise our guidance that launch. growth we we expectation look for is competitor to at a mid- our the

and expand to dogs are continue we've There to million market as this the U.S. talked grow about. expect We XX in

dogs still sort million You of is and with million X.X untreated are have over steroids and There products. but who treated X [indiscernible] over-the-counter

dogs on these So a we XX on respectively. We've we've expand. Look, can to products had believe the this strongly products. millions market, market X of we been X continue and had is years,

Our we're tablet. doing by both at And and products on to We've them in more this we're Cytopoint, Europe. look We're in pet continuing investing we're pet focused the film-coated chewable at trusted moving vet Apoquel long-acting. vest. you more have been proven pet the term really short to owners really in by U.S. in we're prefer. to in and if competition, on efficacious And the a this that, quite and they're on focused innovation been and look chewable over the a doing successful also time switch the a preference build compliance for trusted seeing to to owners. They're owner by safe our And expecting come in be and and

in So franchise. we We're this single this franchise, market of are digits high our in mid- guidance defend to we that continue going grow believe can confident cycle demonstrates space the this to we take and to do our grow to world, the you brand, over share. Wetteny, to continue just defend China? innovation to life our but U.S. time around bring not want to the

Wetteny Joseph

across into on confident various Yes, course, of laid the course, sure. expectation grow. timing, to entry, there's have there, broad we're of be have, a point expectation high competitor But of range that course, we how And guidance. derm label will will cetera, around playing to out that that play in out. that scenarios and our into in plays of et our ability growth they pricing, we mid- one single-digit a

around in decade been this a has been for we've franchise one. this space. On Our on consistent China,

continue of to half also We're we 'XX. not to the bit sort half the into 'XX, little our second it at least there less but have is. I of XXXX, of the to remain first and improve first of half ignore situation first where half expecting similar of the economic year, a we to think stronger still nor headwind see the into comps so through broad

You as confidence in remaining BMO there well. see swine are consumer and continue fairly consumption depressed to prices

decade. long those contribution strong course, we market. the a term, growth. expecting be over a exceptionally But of term, last in we're all to to expect It China So growth near be factors, has well done to the continue to us that not for

in comps fact, some In the declining first we'll see on half China.

Operator

We'll take with Balaji Prasad our next question from Barclays.

Balaji Prasad

A couple.

and wanted points most of understand any particular the FX of mean dynamics revenue way have EPS weakening, other I export basis impact XXX just better, to severe the dollar on revenues nearly currency the thought currencies the of hurting Firstly, around. from billion and that been would $X-plus you? considering is I -- general I XXX $X with here. Why billion return to my understanding is be is and going basis points

on the letter is understand FDA how the health on Librela P the letters current found and the what with of FDA to number. kinds inclusion your FDA. Zoetis value on status secondary of end or around side that normal and with frequent received I as communication the points, issues Librela's question are Second animal the wanted with promotion these is with that the now regard to

Kristin Peck

about a well materials are modifications well I let talking the is referencing clarification, statistical minor request data. on change materials. this some and clarification our promotional the addressed were and by made I represented we how isn't We just promotional is to the uncommon. for The FDA. accepted the mean concerns a and see Wetteny then what so second uneventful would resolved take letter in the you're was and Sure the November. We your I'll first addressed. Honestly, you're immediately Balaji, question take back request letter -- for it.

you So I year, that second question? to easily was don't issue. But -- do a resolved minor the Wetteny, last take that want was

Wetteny Joseph

we Yes, And don't sure. FX. again, currency On dynamics. forecast

dollar see year, a tend there's and if a And strengthen have clearly line a inventory significant time. August. And has the December dollar, currencies to what at Argentina, But that that little at that really that back of think a also X ended we on been continues impact impact against the as bit the there if on out on bit we operate to bit of those and the of So like there's And in. follow the you is little some higher we receivables impact last of on number we've are in is. look report you the a you effect of markets top books in effect the both we versus talked in delayed rates about. there's disproportional the drops terms Argentina, we inflationary effect see delayed follow a little back I if of it on FX

a have which down the line. the by you to you is impact, So time see bottom why those, greater they collect impact

significantly combinations it So average how are year, the the ended Argentina, a board, throughout volume. relative bit more how our at given look you in play saw Brazil, if stronger That's dollar But their pronounced those year. what percentage they Turkey, of across the value. revenues, than the you're seeing the out. of ended really you

Operator

Vasquez We'll William with take from Blair. Brandon question next our

Brandon Vazquez

through management or looks that much headwind working for a to about even be maybe you lot a we at of guys And quantify Are R&D buying you can in the in get going of was? may you share bit that? Is off guys the like how specific expect level. can of to of higher you a be R&D cycle next line. area talk and that, quarter. that forward able follow-up should the spending talk in not there to you're the that prepriced money year, maybe still kind First, And us, in that a anything still a with Are headwind pipeline it product to all? a then little about leverage

that helpful. to share us there anything be So you'd be would with able

Wetteny Joseph

compared XXXX Look, that that into are prior the level will us sure. say, reprice XXXX. what the of on be XXXX, customer as And exiting position year the average which where momentum in First, into I exit and buying Kristin we cover prior more in our there's reprice our our Yes, had some the as given always was to than carried position in -- a to there first in one increases and where say, would also, higher price prepriced 'XX, better January then the take would I going we I'll second one. we buying quarter underlying than, actively impact certainly we're market the walking the but into really year. buying managed say, orders of gave terms strength XXXX, year

we So always the those, manage there's some in more actively numbers. level but

Kristin Peck

R&D. to pipeline. regards our with we question the Obviously, very And confident are in Sure.

I pipeline. animal if innovation most it year health. at market in we you exceeded the company due think -- to we've years, how every the last look our innovative is And the for growth the been in XX

both short, different investing Health, medium We are for than makes difference. a really long In health, term. Animal the and human that

will Apical as launched which sort key at You call like our life as innovations well. look that pretty what chewable, such I looking of cycle also disruptive enhancements support brands. just we significantly at We're

of vaccines franchises a really sort look in business. well our of lot diagnostics as to as unmet health chronic innovation, talked term X- looking tackle. long at our really kidney at at spaces X-year there's to disease cardiology, looking invest business. of the of looking investing about continuing and our renal, in well, such new long need animal in behind we've medium we're we're immunomodulators short As medical We're and that oncology excited as for livestock you really some to at to the really behind And new important diabetes, acting. spaces, important term and excited our as genetics

a have we we portfolio. diverse diverse have So very because a pipeline

very continuing that confident we're to in that. invest and So behind remain

Operator

JPMorgan. take from our Schott Chris question with We'll next

Christopher Schott

X Just me. for

the capacity? there of business, Is dynamics the X% that macro Just Librela targeting your I'm then it these this we're Is vet on second mostly was back a not you're market is the your in how at opportunity for do trying here. be the latest on still just question the dynamics? point? the the monoclonals showing color any appreciated. get visit inning ramp to would my where primary know of more this underlying perspective, for sense ex of coming in U.S. this driver of year. markets? or growth to kind just largest U.S. penetrated Just is inning it's see growth. X% growth I for color like to And I'm you From but seventh what second And ex

Kristin Peck

they're we mean, are not times I X% not over very before starting as you of business. That to what Sure. is see first, historically the to our obviously, where clinic on time. I X% that view spoken many it's we've about levered inconsequential in is historically vet mean that's visits been.

really flat has there's year U.S. back the the remains the look year revenue addressed by and capacity some market X.X%. saw So I it's going spot per visits, into also up think that's although strong end view we online, revenue happening vet we of for you retail and think ship we're been we of auto really sort some supporting But which it. There But to is as saying What's visit and to issues normal. more in stuff being really I demand.

innings. still seeing being think is early revenue, Librela over et cetera. And dogs. portfolio, that severe your of really So used overall think correlated I in the to given where growth we that, I time. to and really with we primarily we're really our regards outside question with product are much right strength the And in more the we're strong see obviously, second is U.S., now, growth, just

I dog in it say, now. moderate right ] least hurts ]. [ I it's -- mean, know think, I [ somewhere I my hip getting everyone I at mean into think around XXs, doesn't me. that my will more But obviously,

in long I exists the animals can control living and pain think, the stairs. we before that osteoarthritis up critical. is reality is more early, walk the so they're And And can't

in grow And moderate we're can the can here it with grow those -- is getting market what think animals osteoarthritis that, change the trying paradigm we Librela of first-line into to So really I and do and our use dogs. the we more we for more to continue think getting franchise. pain more we

Solensia, grow we the pain both know, in Librela continue to have in we're where we early pain So with cats. regards osteoarthritis globe still with innings awareness certainly osteoarthritis for with across believe and we to to

Operator

Scala TD take Stephen We'll Cowen. our from with question next

Unknown Analyst

Steve. Chris is This for on

We have X questions.

path formulation? of First, a on Librela. is at-home To approval treatment capacity And what to administrative debt longer-term an the are compliance? regulatory degree headwind for then constraints, the there U.S.

Kristin Peck

pet that monthly sure in owners get making injections for Obviously, can Sure. their critical. is

things is capacity certainly can is certainly this the we're focused visit, tech. on. that that by quite think And really ] paradigm the how injection I I So to with about ABM is the focused, an change vets the techs people be and industry partnering to that with first after a of corporates vet like that. really something clinics we've been But done lots to [ and think vet think of and

the capacity So issues. we believe of some vet there are solutions to really address

a issue just and U.S. issue, So far, the is way, not vet global. this globally, it's capacity by

second key delivery. question is affected products. regard hasn't to it your home of the our far, And So growth with

to want one? You take that

Wetteny Joseph

seeing Solensia ability I as the any look can both to direction think Librela even as that we of help with the maps. we're our not I OA formulations, an really pain think and be significant think impact said, Look, our where in only in we're in impact of terms to here. make And the grow Yes. path really portfolio, but will not we direction will and isn't terms ahead, across important. regulatory the innovation, this, Livestock maps, though Kristin I longer-acting that going our

et see we don't that do impact initial I beyond has a that for to are being do the see visits significant the as cetera. that, a it, able pet us. but techs injection And varies the the bit, where think to vet and

Operator

question We'll BNP Navann Ty with take our next from Parabas.

Navann Ty Dietschi

I ones have on Librela X one and on Trio.

Trio, remaining the mostly accretive first from With from Simparica XXXX, potentially currently they what rather younger on from on Librela. and the investments you you expect than BI's uptake Trio explain help Are And The like Mexico large XXXX. to gross dogs campaign to in can plus? BI homes then mostly. and -- from switches you us become current one Librela just SG&As to in margin do the a are continued testing in addition and see on puppies clarification,

Wetteny Joseph

Librela. the be we penetration our and running I'll because to investments, above launched take and course, the Librela, you already we going already making on across we've the of as heard DTC our started and on expectations, in doing DTC one first we're as commentary, Look, markets well. are prepared levels international are and Europe

force make investments As we years or ahead, going our we look did field back ago. significant about in so X.X

incremental those see beyond our as mentioned and investments The look the picture, to at investments, drive on in earlier, able and saw if don't is those expectations I margin particularly expectations demand take of and we're to you Librela you dilutive because we XXXX XXXX, on right? us leverage gross So outperform it product. advantage

As you go into XXXX, leverage company the overall margin Librela margins are above. actually to accretive

is the companion below that the in you our gross for So gross it's but animal margins see innovative that, company, would Librela XX%-ish above brands. margins

innovative will we you -- company. to XXXX, levels, see well beyond get average. above above which As is those at the start

Trio, years a for seen gain growth, really share, hopefully, helps is to that's U.S. been Trio, we market. in switching as now. XX% and which effication strong low that said, we've X product continue patient double-digit again, the performance So in have in safe that the grew when you clarify we've posting in has point. means, almost

So pleased with we're seeing. we're very if don't I Kristin, know add. what to you want

Kristin Peck

U.S. specifically the We're doing on quite label. puppies of are with regards puppies. well I Trio mean topics to

want Simparica. So I I emphasize that. the wasn't to it original just on know

a single to agent new lot puppies triple certainly conversion dual So and we lot see see a a movement we more I really, oral. and to people if customers from and combination mean, looking starts, at of of from a to topical you're

but So quite to question. there's doing other lots of your product, of market we're ways puppies that [indiscernible] for us for to part gain share that with continue well

Operator

to back no this I'll remarks. are questions the further And there call time. turn any speakers at closing for the

Kristin Peck

about in revenue ongoing difference doing. owners the in interest We faster every in pets Great. the of we support, that quality supply high essential their a than know grow food for our bond underscore XXXX, single to proposition questions. will the to very operational that And the the for for of and safe grow we I reiterate to human so that day that again value care strategy digits. And Thank continued all animal line much your by enduring expect human we're remain undergo a health expectations animal is with our that everything durable. strength and you I want confident colleagues want because mid- all and Zoetis. the honestly, need to health pet just not market and industry for make to secure and

are to look our must diversity, experience, and exceptional we commitment forward for a operational great committed industry to is in broadening health we updated firmly and to We DTC our future innovative The need on portfolio because these pipeline, times joining of you franchises. support portfolio the progress programs our and day. our the today, animal challenges to resilient in customer are we building and calls. excellence investing navigate us Thanks agility, uncertainty, even billion-dollar our poised and Have to a keeping in guys.

Operator

you participation. Thank does conclude you. your This for program. today's Thank

disconnect time. at You may any

Zoetis (ZTS) 13 Feb 242023 Q4 Earnings call transcript