Phibro at Barclays Healthcare Conference: Strategic Growth Insights

On Thursday, 13 March 2025, Phibro Animal Health Corporation (NASDAQ: PAHC) presented at the Barclays 27th Annual Global Healthcare Conference. The discussion, led by CFO Glenn David, highlighted Phibro’s strong revenue growth and strategic initiatives. The company celebrated the successful integration of Zoetis’ MFA portfolio while acknowledging challenges such as tariff uncertainties.

Key Takeaways

• Phibro reported 11% revenue growth from its legacy business and over 18% including the Zoetis acquisition.
• The Zoetis MFA portfolio transition is progressing smoothly, with minimal overlap and positive customer feedback.
• The "Fibro Forward" initiative is set to boost income growth in fiscal year 2026.
• Industry dynamics remain favorable, with growth in Brazil and poultry products despite tariff uncertainties.
• Phibro plans to focus on income growth outpacing revenue, leveraging its diverse portfolio.

Financial Results

• Revenue growth in Q2 was bolstered by the Zoetis MFA acquisition and strong Q1 performance.
• Legacy business revenue grew 11% in the first half, with EBITDA growth reaching 37%.
• The Zoetis acquisition is expected to contribute an incremental $200 million in revenue, with EPS estimates revised from $0.25 to $0.53.
• Updated 2025 guidance reflects higher EPS due to global scale leverage and lower interest expenses.

Operational Updates

• The transition of the Zoetis MFA portfolio is on track, with IT and regulatory aspects to be completed by year-end.
• The "Fibro Forward" initiative is in early stages, focusing on price optimization and geographic expansion, aiming for significant income contributions by 2026.
• While the legacy business continues to perform well, growth may slow due to tougher comparisons in the second half of the year.
• Phibro is exploring licensing opportunities in the companion animal sector and expanding its vaccine portfolio, particularly in poultry and aqua vaccines.

Future Outlook

• Over the next 3 to 5 years, Phibro aims to grow income faster than revenue.
• Fiscal year 2026 will benefit from a full year of the Zoetis acquisition and contributions from the "Fibro Forward" initiative.
• Beyond 2027, Phibro will continue to focus on income growth through strategic opportunities and portfolio diversity.

Q&A Highlights

• Priorities for the Zoetis acquisition include completing transitional service agreements by early Q4.
• The "Fibro Forward" initiative will address price, SKU mix, and procurement efficiencies.
• Tariffs remain a challenge, but domestic production mitigates some risks, and costs may be passed to customers.
• Demand trends are positive across various species and geographies, with limited impact from avian influenza.
• Vaccine segment growth is sustainable, with ongoing innovations and focus on aqua vaccines.

For further details, please refer to the full transcript below.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Balaji Prasad, Senior Analyst, Barclays: Good morning, everyone. My name is Balaji Prasad. I’m the Senior Analyst for the Specialty Pharmaceutical Sector for Barclays, part of which is also the privilege of covering animal health. So I’m delighted to have Glenn David, the CFO of Fibro Animal Health with me.

Glenn, thank you so much for joining us today and welcome to the Barclays Healthcare Conference.

Glenn David, CFO, Fibro Animal Health: It’s great to be here. Thanks for having me.

Balaji Prasad, Senior Analyst, Barclays: Yes. So Glenn, to maybe a kickstart of proceedings, you recently reported your 2Q results. Can you walk us through some of the key highlights there and how are things progressing now for the rest of the fiscal year?

Glenn David, CFO, Fibro Animal Health: No, I’d be glad to. And Q2 was a very busy quarter for us. We completed the acquisition of our Zoetis MFA portfolio and we had a very successful initial start with the portfolio. We were able to take orders on day one, which was essentially November 1 for us. We had a typical blackout period as we’d expect, but we saw a nice acceleration of sales from the month of November to December.

Also, we saw strong overall performance in Q2, very strong revenue growth, and that was on top of a very strong Q1. So, when you look at the first half of the year, just on our legacy business alone without even including the Zoetis MFA acquisition, our revenue grew 11. When you add in Zoetis on a year to date basis, we had revenue growth of over 18%. So really strong performance for the first half of the year. And even more importantly, our income grew even more rapidly.

And that’s going to be an area of focus for us moving forward is to make sure that we’re really driving EBITDA and income growth faster than revenue. So really strong performance from a revenue perspective, really strong performance from an income perspective. Also, the strong performance was across all areas of our business. Within animal health, our medicated feed additives business grew rapidly, our vaccine business grew rapidly, and our nutritional specialty business grew as well. And then also mineral nutrition and the performance product segments also grew.

So, just a really good start to the year for us, a very strong first half with a very strong growth and setting up what was raised to our guidance as well.

Balaji Prasad, Senior Analyst, Barclays: Fantastic. I think we can clearly see the progress and the stock momentum has also reflected or acknowledge some of the progress being made. Now that these MFA acquisition is complete, can you walk us through your key priorities with regard to the acquisition for the rest of the year? And what should we be thinking about for future contribution?

Glenn David, CFO, Fibro Animal Health: Yes. So the main part of the acquisition as you said was complete with the closing of the deal, but there’s still a lot of work to be done. As I said, we’re able to take orders, we’re able to fulfill customers’ orders, which is always the number one priority in any acquisition and that’s been going very well. But there’s still additional things that we need to transition. Through sort of the end of this calendar year, we do have transitional service agreements in place with areas such as IT, with areas such as regulatory in terms of marketing authorizations.

So those are areas that we’re really focused on internally to make sure that we’re able to operate 100% on our own by the end of the year. So that’s sort of priority number one for the company. Outside of the Zoetis MFA acquisition though, some of the other areas of key priorities are a fibro forward growth initiative, which is an initiative that is sort of in its early stages this year. We’re starting to see some benefits in terms of income contribution this year, but we expect that to accelerate as we move into fiscal year twenty twenty six. And then obviously, the focus on the legacy business and continuing to drive good performance in that business as well.

Balaji Prasad, Senior Analyst, Barclays: Understood. Closing the acquisition and then getting orders on day one, that was a good surprise. And as you own the portfolio, MFA portfolio and look through the portfolio or the businesses, were there anything else which came as a surprise for you both a positive or negative surprise? Yes. So this is a

Glenn David, CFO, Fibro Animal Health: business we knew pretty well. We are leaders in the MFA portfolio. So I wouldn’t say that there were any surprises once the business came into our hands, but probably just confirmation of some of the key thesis we had going in. One, there was very limited overlap with our existing portfolio, so virtually no cannibalization of our existing sales, which was a positive and confirmation of our thinking going in. The other thing that’s been very positive since the acquisition has been the reaction from our customers.

We attend many conferences. There are a number of conferences in the last number of months. And we had customers coming over to us saying how happy they were that that we were the ones that acquired this portfolio based on the experiences they have with us as a company and the technical support that we’re able to provide them based on our expertise in the medicated feed additives sector. The other thing that’s been a positive is our ability to recruit new employees. So, in certain areas and certain geographies, there were businesses that we weren’t in before that Zoetis brought a new portfolio or new geographic expansion.

And we’ve been able to recruit really top talent from external as we are becoming a leader in the livestock space. So that’s been progressing very positively as well. So no real surprises, just a lot of confirmation of some of the positive aspects of the deal that we thought would occur.

Balaji Prasad, Senior Analyst, Barclays: Got it. And probably just minor point of clarification, the transitional service agreements would last till the end of the year. Is that the fiscal year or the calendar year?

Glenn David, CFO, Fibro Animal Health: So sort of in between the fiscal and calendar year, they end sort of our Q3, early Q4. Got it.

Balaji Prasad, Senior Analyst, Barclays: Coming back to your updated 2025 guidance that you provided earlier this year, Help us understand apart from the acquisition the other major drivers and also especially what the stock market or investors really like, but also you updated EPS guidance which was well received. So help us understand the drivers there.

Glenn David, CFO, Fibro Animal Health: Yes. So if you look at the updated guidance in Q2, this was the first time we fully incorporated the Zoetis medicated feed additive portfolio into our guidance. If you go back to Q1, we gave some high level estimates of what we thought the contributions would be and we said we’d expect essentially about an incremental $200,000,000 in revenue and about $0.25 in EPS. That’s what we had said initially in Q1. As we acquired the business and continued to learn more, we updated our revenue guidance by about the $200,000,000 if you look at the midpoint.

However, when you look at EPS, the EPS raise was about $0.53 so a lot higher than the initial expectation of the $0.25 There are a couple of things that drove that. A, we’ve seen that we’ve been able to leverage our global scale and infrastructure a little more greatly in terms of acquiring the MFA portfolio. So we have higher profitability there. The other thing from an EPS perspective is the overall interest expense to fund the deal. Based on the final closing price after working capital adjustments and things like that, it was lower than initially anticipated.

And we also entered into a number of swaps to really minimize the interest expense as well. So you take some of the positive factors from the MFA portfolio, but then we also saw strong performance in our legacy business as well. And that did contribute a little bit to the EPS raise being higher than initially expected. Understood.

Balaji Prasad, Senior Analyst, Barclays: And especially the legacy business surprise was something unanticipated. Can you comment about the sustainability of this performance from the non ZOIDIS MFA part of the business?

Glenn David, CFO, Fibro Animal Health: Yes. So, we’re very pleased with how the legacy business is performing and the growth in the first half has been very strong both at a revenue and EBITDA perspective. So, the legacy business in the first half of the year grew 11% revenue, 37 EBITDA. That was ahead of our expectations. I think the one thing to note as we move into the second half of the year, we talked about this throughout the year, is there are easier comps in the first half.

Our business performed weaker in the first half of last year and then very strong in the second half. So we would expect the growth in the legacy business to slow in the second half of the year, but we still do expect growth in the second half as well.

Balaji Prasad, Senior Analyst, Barclays: Got it. You also spoke about the fibro forward growth initiative. I would love to dig a bit more into that and dig through some of the cost saving opportunities that you’ve identified.

Glenn David, CFO, Fibro Animal Health: Yes. So there are a number of areas related to the fibro forward growth initiative and it’s both cost and revenue growth as well. So this is an initiative that really is cutting across all of our business units, all of our geographies, looking for areas where we could operate more efficiently and effectively. And there are a number of areas that we’re focusing on. One being price, are we effectively pricing all of our products?

Do we have greater opportunity to drive more price? Also looking at our SKU mix, is each SKU reaching a certain minimum threshold of profitability? Is there opportunities to shift to higher priced SKUs as well or should SKUs just be eliminated so that we could operate more efficiently. Another area is procurement. Are we fully looking across all of our purchasing, across all of our business and really leveraging our buying power with our vendors and we think there is significant opportunity there as well.

And then we’re also looking at geographic expansion for some of our existing SKUs and other areas that we could drive additional growth in income for the business.

Balaji Prasad, Senior Analyst, Barclays: Got it. Could I maybe just dig into the pricing part of it? I think historically the pricing power on the livestock side has been limited. Of course, it’s not comparable to the companion side. But help us understand what kind of pricing opportunities do you see within this?

Glenn David, CFO, Fibro Animal Health: Yes. So when you look historically, we’ve generally averaged, call it, around 1% to 2% in price. And to your point, in livestock based on some of the competitive dynamics, some products losing exclusivity and then creating pressure on other branded products, pricing opportunity has been a little more limited. The one thing I will point out particularly for fibro and one thing I think fibro does very well is particularly in higher inflationary markets, we price in U. S.

Dollar. So, when we’re saying that we have price of 1%, that is a reported price increase versus an operational impact price increase and there is a difference. So, that’s net of any currency impacts or anything like that. It’s a true price benefit. And that’s something that we’ll continue to do and that eliminates some of the negative impacts of the hyperinflationary markets and then translating that into U.

S. Dollar. But we do think there’s opportunity to generate more than that 1% as we move forward.

Balaji Prasad, Senior Analyst, Barclays: Understood. So, for example, last year, there will be markets like Argentina where you had taken up significantly?

Glenn David, CFO, Fibro Animal Health: Argentina, Brazil, other markets where we just set the price to U. S. Dollar.

Balaji Prasad, Senior Analyst, Barclays: Got it. So combining the Fibro Forward initiative plus the completion of the Azure ADMFA deal, how does it influence or change your focus or strategy at all around the companion animal segments?

Glenn David, CFO, Fibro Animal Health: Yes. So I don’t think it changes our strategy at all around the companion animal segment. I mean, obviously, MFAs are now a bigger portion of our overall business, but we think with the addition of the Zoetis MFA portfolio, the fact that it’s immediately EPS accretive and will generate additional cash for us, as well as the additional EBITDA and cash we expect to get from the fiber forward initiative, we think it just increases to go look either internally or externally for new opportunities of growth. So, if anything, it enhances our ability to focus on some of the higher growth areas, whether that be vaccines, whether that be aqua vaccines, whether that be companion animal as well. We’ll have more operating flexibility, more operating cash to look at some of those opportunities.

Balaji Prasad, Senior Analyst, Barclays: Understood. Can I dig into that a bit more, especially around the companion animal part? So what are the pockets that you think you could operate with a distinct competitive advantage maybe versus other larger established peers within this segment?

Glenn David, CFO, Fibro Animal Health: Yes. So just to give a little history on companion animal, what we currently have within the companion animal space is a nutritional specialty product called REGENZA, which is for joint pain. It’s a very small product. We manage it through distributors. And it was sort of our entry into the companion animal.

We did product in dermatology. That product unfortunately didn’t meet its endpoints and we had to cancel that product. But there are a number of other products that we have that are licensing opportunities where the expense base will not be that significant until the product hits certain milestones. So, as those products progress, we’ll then evaluate what the best go to market approach is for that. We currently do not have a large companion animal field force.

That’s not where our capabilities currently lie, depending on the size of the product and we think the potential that will determine is this something we do through distributors or do we want to expand the field force that we currently have for REGENZA and do that more in house. So those are things that we’ll determine over the coming years based on the potential and the success of some of the products that are currently in development.

Balaji Prasad, Senior Analyst, Barclays: Understood. Maybe changing gears slightly higher up around the industry trends. And there’s a question that I’ve been asking almost every pharmaceutical management over the last couple of days around tariffs and impact on supply chain and how do companies manage to navigate this. It’s fairly volatile environment.

Glenn David, CFO, Fibro Animal Health: Yes. So, in terms of the overall underlying dynamics of the industry, I’ll talk to that first and then talk about tariffs a little bit as well. In animal health, the underlying dynamics of the industry right now are very positive. When we look across beef, when we look across dairy, poultry, swine, the majority of our producers are profitable, prices for meat are very high and the inputs are reasonable. So, we’re seeing most of our customers in a profitable position, which is very good for our industry in terms of our support for them.

We also we get a sort of a dashboard internally which highlights profitability across all sectors and for the most part we see a lot of green and a little yellow. There may be one or two areas of red, but much less than we would typically see. So, the overall dynamics for the livestock industry right now are very positive. As you mentioned, tariffs bring a lot of uncertainty right now, and it changes every day. The good news for us is a lot of our production is within The U.

S. We do have some plants in Brazil as part of the Zoetis acquisition. We acquired a small site in Italy and we also have a site in China as well. Probably our biggest exposure to tariffs is in our mineral nutrition business. But when you look at the dynamics of that business, that is mostly a pass through business.

So, we would expect that if there are significant tariff impacts and we’re not able to source from other markets where there might be lower tariffs that that additional cost will be passed on to the customer.

Balaji Prasad, Senior Analyst, Barclays: Understood. Maybe on the overall food protein segments, help us understand the underlying demand trends across these different species that you’re exposed to and maybe also some of the geographies that you’re present, especially focusing on Brazil or China?

Glenn David, CFO, Fibro Animal Health: Yes. So the largest geography for us is The U. S. With the second being Brazil. And then from a species perspective, our largest portfolio is within poultry, then beef and cattle combined, and then swine.

So U. S. Poultry has been performing very well, particularly in the broiler section and beef and dairy has been performing well in addition. And when you look at Brazil, beef cattle has been doing very well, poultry has been doing very well as well. And also in Brazil, we’ve seen very limited impact from avian influenza.

So, like I said, when we look at our key markets in the key areas, the underlying dynamics and trends in the industry are very positive.

Balaji Prasad, Senior Analyst, Barclays: Got it. And how should we think about the impact of avian influenza, especially, I mean, we saw news last year, probably around 100,000,000 poultry is being called, not a lot from the large scheme of things with poultry where we are looking at billions of chicken per year. But how should we think about the impact of avian influenza?

Glenn David, CFO, Fibro Animal Health: Yes. So avian influenza hasn’t had a big negative impact for fibro this year. When you look at our portfolio, it’s mostly used in broilers. And because of the life cycle of a broiler, producers are able to pretty rapidly react if they do have an avian influenza outbreak in their herd. So we’ve seen very limited negative impact to our business in poultry driven by avian influenza and we wouldn’t expect a significant impact.

Balaji Prasad, Senior Analyst, Barclays: Got it. Shifting to the vaccine side of things, again, historically a pretty strong segment for you and is still seeing pretty strong momentum too. How sustainable is this? And two, are there any innovations that upcoming innovations potentially that you would want to call out?

Glenn David, CFO, Fibro Animal Health: Sure. So, our Vaccines segment has been one of our highest growth segments. We’ve seen very good performance, not only last year, but this year as well. On a year to date basis, Our vaccine business is growing about 17%. A lot of that growth is driven by South America and a particular product we have called IV VAR that treats bronchitis.

And we have a product on the market that treats a certain strain that there’s no real competition for at this point in time. As you know, understanding where competitors are and coming out with products, there’s not a lot of visibility to that. So, we do believe that others are working on a similar product. We don’t know when they’ll be on the market, but we do feel very confident in the efficacy and the safety profile of our product. And we’ve had significant penetration, particularly in Brazil, with this product and we’d expect to have continued good performance as we move forward.

Balaji Prasad, Senior Analyst, Barclays: Got it. And continuing on the vaccine trend, looking at swine and the impact African swine fever had five, six years ago. Is that something that you would want to partner and work in conjunction with any one of the vaccines front?

Glenn David, CFO, Fibro Animal Health: Yes. So right now our vaccine portfolio is primarily focused on poultry. We don’t really have significant offerings in the swine space. One of the areas from a development perspective that we are focused on for vaccines is aqua vaccines, and that’s something that we do have a number of products under development. But from a swine perspective, it’s not currently an area of focus for us.

Balaji Prasad, Senior Analyst, Barclays: Got it. Coming towards the end of the question, the couple of minutes left, I would really want to think about fibro, a major transformative equation completed. What next in terms of your long term priorities over the next three to five years, Glenn?

Glenn David, CFO, Fibro Animal Health: Yes. So I think when you look at fibro and if you just looking at the next three to five years, I think it’s always helpful also to look back a little bit at sort of the previous three to five years. So when you look at the previous three years or so, I think fibro has done a very strong job of growing revenue very rapidly in a livestock market that was growing sort of in the low single digits. And while the while Fibro was able to drive significant revenue growth, the EBITDA didn’t quite follow or the income didn’t follow at the same pace as there were strong strategic decisions made to invest in certain other areas. I mean, you sort of leveled the level of spend and with fiber forward growth initiative, we’re looking at how we could continue to grow income faster than revenue.

So, when I look at the next three to five years, A, particularly as we look at fiscal year twenty twenty six, I think there are a number of exciting opportunities as we look at fiscal year twenty twenty six. First of all, in fiscal year twenty twenty five, we have about seven months of the Zoetis acquisition.

Balaji Prasad, Senior Analyst, Barclays: Right.

Glenn David, CFO, Fibro Animal Health: And the reality is it’s even a little less than that because of inventory impacts and transition timing. So, as we move into fiscal year twenty twenty six, a big growth driver will be the fact that we have a full twelve months of the Zoetis acquisition. The other component is additional contributions from the fibro forward growth initiative. We’ve mentioned that we’re sort of in the early stages of that in fiscal year twenty twenty five. We expect the growth contribution from that to accelerate as we move into fiscal year twenty twenty six and then we would expect continued growth just from the legacy business.

But as we move beyond that into fiscal year twenty twenty seven and beyond, I think you’ll see a continued focus from us on how do we not only drive revenue, but how do we continue to make sure that we’re driving income at a faster pace than revenue. And I think with the broader portfolio, with the diversity of the portfolio, both geographically as well as therapeutically, we’ll have opportunities to do that.

Balaji Prasad, Senior Analyst, Barclays: That’s extremely helpful. And maybe a question probably slightly on the personal side. So I had a privilege of hosting you last year at the same time. You were just one month into fibro and now it’s one year, one month. So So I would love to see what were the surprises that you found at fibro, hopefully more positive.

Glenn David, CFO, Fibro Animal Health: Yes. No, it’s been a very positive year and obviously a very busy year with the doing sort of the largest acquisition in the company’s history. But I think one of the things that has just been a really positive surprise at fibro is the quality of the colleagues that work at fibro and the deep expertise, particularly in the livestock area. You see that every day as you interact with people who really understand the business, have come from a number of different companies with varied backgrounds, just a very strong management team with deep expertise in the Livestock business. And you also see that as you begin to interact with customers, their appreciation for the technical expertise and how we’re able to support them in operating the business.

So it’s been a really good one year and one month start to the job.

Balaji Prasad, Senior Analyst, Barclays: Fantastic. I think that will be a great spot to leave this conversation at. I look forward to hearing more updates from you on the business. And thank you for joining us at the Bakken Conference. Thank you much, Raj.

Appreciate it.

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