Zoetis Inc at Jefferies London Healthcare Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : <_ALACRA_META_ABSTRACT>And since we got the CFO with us, we might as well start with the financial question, Wetteny. Coming off 3Q, a pretty strong quarter, 14% revenue growth this last quarter. Maybe you could just sort of give us a brief overview, quick drivers at a high level and then we can sort of jump right into it.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Okay. All right. Well, why don't we start on the companion animal side because I think that's what garners most of the attention. But I won't ignore livestock because it's still double digits, right? But if we talk about that companion business, growing sort of 15%, how do you break that down between sort of price and volume? Because one of the questions that we get all the time is, is the company taking higher price increases this year relative to what they've done historically? And people question the sustainability of that trend. So maybe just break that down, and then we'll go into the different subcategories.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : All right. So maybe why don't we start to break down these companion categories, and we'll start with derm, since you were just sort of talking about it. Derm was up 16% in the quarter. Now I think -- if I remember back to the second quarter, I think the company spent a lot of time specifically talking about the dermatology franchise and the different opportunities that the company felt like it could continue to grow that franchise, which is, rough numbers, closing around 20% of the company's total revenue. So maybe let's start with Apoquel, which the growth is just continues to get significantly better every quarter since compared to 2023. What would you attribute that strength to? Like what's the company doing different this year that's driving that accelerated growth and leading you to believe that there is still a lot more on the table to achieve?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : I mean, it's just crazy. I mean, we were doing some channel checks with some veterinarians over the past month. And they're talking about how many dogs they see a day, and it feels like a third to 40% of them have some form of atopic dermatitis that could benefit. And you're pretty much in this category largely alone. And so is it really just an education? Or is it -- how do you -- I mean, I feel like these products have been around for a while, but it feels like they're gaining momentum, which feels -- I don't want to say a little later in the cycle relative to what maybe one would have thought given how common or how many dogs are untreated at this point. But it seems like it's still whatever education or marketing efforts company is making seem to be working better than expected.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : All right. Last question on derm and then we'll move on. I think when we started the year, you were expecting sort of mid- to high single digit sort of revenue growth. The company has clearly done better than that. But I'm kind of curious, at the beginning of the year when you gave that guidance, was there may be some level of expectation that there might have been some incremental competition in the year maybe that didn't play out as you thought? Maybe your sort of detailing efforts and marketing efforts were better than expected? Or was it the lack of competition or sort of better execution on Zoetis' front? What do you think drove that big delta relative to what you thought in the beginning of the year?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Okay. Right. You used the word sustainable and durable like you feel like the trends that are in place kind of extent. We won't talk about '25 in particular, but all right. Let's move over to parasiticides. I mean, obviously, the focus is on Trio as the growth 30% this

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Well, that was my next question, sort of. I mean, are you seeing more new dogs or dogs that were previously treated with some other type of collar or prescription in some way, shape or form. So you're saying clearly, when you look at puppies, that's where 50% of them are going to the triple combination right out of the block. So it's a combination of taking market share away from the other products, but also signing up new dogs at -- or younger dogs at a much greater rate than what you've done historically.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : But within parasiticides, I mean, a similar question to dermatology. I think you started the year at mid- to high single-digit growth. And here we are doing something significantly faster than that. And so I guess, obviously, Trio is a big part of that. But is there anything else? Maybe again in the beginning of the year, you might have been expecting some competition that maybe didn't play out the way, or didn't come as soon as you all may be thought, and you have this other big delta in this category as well. Is there anything else to layer into what might have created this delta relative to your initial expectations and obviously, a very positive way?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Okay. Why don't we shift over to the pain market because this continues to get a disproportionate amount of the questions, which I'm sure you guys find somewhat frustrating given how little it contributes at this point relative to the whole portfolio. But obviously, a lot of focus on the US. Librela business in 3Q. That number was maybe a little bit smaller sequentially from 2Q to 3Q by a couple few million, whatever anybody thought and drove this adverse reaction, which is, I'm sure, is frustrating for you, just given how well

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : You want to dare give us any information on 4Q in terms of how things are trending. Is it fair to say that sort of week over week, the momentum continues to build? Is that a reasonable.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : I'm sorry, 4Q, we lapped the launch of the. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 3:00PM, ZTS.N - Zoetis Inc at Jefferies London Healthcare Conference

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : I'm sorry, just to be clear, so in 4Q, the growth should step down because we had the big stocking in 4Q last year, So that's not really representative of the growth, right?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst :

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Yes. Can I ask about the safety profile? We get that question all the time. Certainly, we got a lot in the spring. It feels like that concern has sort of died down, but it comes up from time to time. And so I feel like since we have 30 seconds, we might as well just touch on that topic. And any conversations the company is having with the FDA that the management team would deem to be out of the ordinary or anything unusual or typical relative to a relatively new launch?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : Okay. So I mean, the short answer is nothing out of the ordinary, nothing different in the US in terms of launch-wise relative to what you saw in Europe. And so kind of business as usual. Is that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 20, 2024 / 3:00PM, ZTS.N - Zoetis Inc at Jefferies London Healthcare Conference

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : All right. Maybe at a high level, livestock, you said in the beginning of your prepared remarks grew 11% this quarter, which is obviously much faster than sort of market growth. And so maybe if you could just unpack that for a few minutes since people don't tend to spend enough time -- they don't spend much time there at all. And so maybe you can just sort of give people a quick refresher on sort of what's enabling the company to drive double-digit growth in that area of your business as well, which is not insignificant, right?

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : All right. Maybe just since we only have three minutes off. Just a couple of quick questions on guidance I want to touch on. So the 2024 guidance, I think at this time last year or when the company guided on 4Q, you started 7% to 9%, you walked it up, you walked it up. And then in the third quarter, you walked it up again. And now we're sitting at 10% to 11%, right? So we're up 300, 400 basis points relative to sort of where we started, but that -- which is great. But that kind of implies in the fourth quarter, only 7% operational growth, if I'm doing that sort of correctly. And so for a company that's been executing so well through nine months, it seems inconsistent that 4Q growth would be as low as it is. And so I'm just kind of -- if you can maybe help reconcile how we should think about the implied growth in 4Q.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : That's super helpful. So when we think about that 11% -- and I'm sorry, just sort of to go back on your comments with respect to price, I mean, just less than half of that is coming on the pricing side versus volume. And so when we think about those sort of ability to take price. Arguably, you'll see a little bit of incremental competition last year relative to this year. How do you feel, in the last sort of 20, 30 seconds, about the company's ability to sort of maintain pricing may be at or slightly above those historical trends? And then I'll just lay it out there. When I look at the 2025 consensus numbers, growth is only 5% on consensus, which seems, when I think about that algorithm of, I don't know, 2% to 3% is maybe a reasonable starting place on price, and I'll say, 2% to 3% on volume. Maybe that's the kind of math that people are doing. But I don't know if you can make any high-level commentary without giving us guidance. But like -- it just seems like there's some reasonably conservative assumptions out there.

Question: Glen Santangelo - Jefferies Group, Inc. - Analyst : That's perfect. All right. Wetteny, thank you very much. Really appreciate your comments, and thank you all for joining this afternoon,