Zoetis at Morgan Stanley Conference: Strategic Growth and Challenges

On Monday, 08 September 2025, Zoetis Inc. (NYSE:ZTS) participated in the Morgan Stanley 23rd Annual Global Healthcare Conference. The discussion, led by CEO Kristin Peck and CFO Wetteny Joseph, highlighted strategic growth ambitions and challenges. While Zoetis has consistently outperformed the market, challenges such as competition in dermatology and social media impacts on Librela sales were also addressed.

Key Takeaways

• Zoetis targets a 6.5% to 8% revenue growth in 2025, factoring in competition and inventory levels.
• The company plans to expand into renal and oncology markets, with major product approvals expected annually.
• Librela sales have not met expectations, but Zoetis remains confident in its potential.
• Zoetis has grown at an 8% CAGR since its IPO, outpacing the market’s 5% growth.
• Focus remains on innovation, commercial excellence, and expanding the company’s diverse portfolio.

Financial Results

• Raised 2025 operational revenue growth target by 25 basis points to 6.5%-8%.
• Achieved 9% organic operational growth in H1 of the current year, with an 8% increase in the second quarter.
• Livestock sector has grown over 5% for five consecutive quarters, surpassing the market’s 2%-4% growth.

Operational Updates

• Zoetis anticipates major product approvals annually for the next two years, focusing on chronic kidney disease, cardiology, and oncology.
• New launches expected in the fourth quarter for international business and US dermatology approval.
• Parasiticides, including triple combinations, represent a significant portion of prescriptions, with continued growth expected.

Future Outlook

• The company aims to expand into new therapeutic areas, including renal and oncology, while enhancing livestock vaccines and genetics.
• Long-term margin expansion is a focus, alongside managing tariff exposures estimated at $7 to $8 million.

Q&A Highlights

• Librela’s performance has been below expectations, but 75% of users are satisfied, and phase 4 study data is expected soon.
• Long-acting parasiticide products remain a strategic focus, with an emphasis on heartworm solutions.
• The chronic kidney disease market presents a $3 billion to $4 billion opportunity, while oncology offers a $1.7 billion potential.

Readers are encouraged to refer to the full transcript for more detailed insights into Zoetis’s strategic plans and financial performance.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Good afternoon, everyone. Welcome to the Morgan Stanley Healthcare Conference. I’m Erin Wright, Healthcare Services Analyst. For more important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, we’re happy to have Zoetis with us today. Thank you. We have CEO Kristin Peck as well as CFO Wetteny Joseph. Hopefully, we’ll have an interesting conversation with some Q&A and a fireside chat format. I want to open it up to Kristin first to talk a little bit about Zoetis, give a brief intro on the company, and make some intro remarks here. Thanks.

Kristin Peck, CEO, Zoetis: Sure. First of all, thank you guys for coming out today. For those of you who don’t know Zoetis that well, I just might start with a little bit of an introduction. First, on the animal health industry, which has been incredibly resilient through many different economic cycles. That’s because some of the macro secular drivers that drive the industry in both the companion animal side and the livestock side. For starters, that’s global population growth. More people means more need for protein. As you also think about an emerging middle class in a lot of the markets around the world, those are more people eating more protein, but importantly also adopting more pets. Those give very strong growth drivers. You’re also seeing actually an increase in protein consumption per capita in major developed markets, such as in the U.S. right now. These are really strong macro drivers overall.

The last one I’d highlight is the human-animal bond, the changing role that pets play in our lives across geographies, both in emerging markets and developed markets. We’d say they started out in your backyard, they went in your house, they’re now on your bed, and they have their own stroller. It’s really, really strong secular demand. When you think about Zoetis itself, it is the world’s leading animal health company. If you look at the animal health market, that sort of on a compound annual growth rate has grown at 5%. Zoetis has grown at 8% since we IPO’d back in 2013. What’s really driven that growth is a focus on innovation and commercial excellence, which we’ve done year in, year out, with a very diverse and durable portfolio across therapeutic areas.

We obviously have some major franchises, which I’m sure we’ll talk about today, that’s been driving that growth. We’ve been on the market for over 10 years. Those three franchises of parasiticide, dermatology, and pain really have been driving the growth of the next few years. What we’re really excited about to talk about today is the pipeline. Innovation in animal health comes in many different forms. There is sort of lifecycle innovation on our products, such as adding Apoquel Chewable or looking at long-acting monoclonal antibodies, which we can talk about today. It’s also in disruptive innovations, where we’re going to be launching products over the next few years in huge potential new markets in renal and chronic kidney disease, in cardiology, and in oncology. Excited to share more about all that.

For those of you who don’t know animal health or Zoetis that well, we thought we might give just a little bit of that background.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Great. Thanks. That was very helpful. I want to talk a little bit about your expectations for 2025, especially as we head into 2026 as well. I’ll start with kind of operational revenue growth. You recently raised your target for 2025 by 25 bps to 6.5% to 8% growth in 2025. Can you outline some of those key assumptions across companion animal and livestock? How do we think about the quarterly progression from here and what continues or not into 2026?

Wetteny Joseph, CFO, Zoetis: Sure. As you recall from our earnings call just a month ago, you asked the question, actually, on what we expect in terms of cadence for the back half of the year, coming off of a very strong first half where we grew 9% on an organic operational basis, the second quarter at 8%. Our guidance range at 6.5% to 8% would imply mathematically a slower growth rate in the back half. Therefore, what’s driving that? How should we think about the cadence? We don’t give guidance by quarter. However, we thought some commentary was helpful in that context. Certainly, the two things that I shared and I’ll double-click on now would be in the third quarter, we have a very strong, some say tough, I’d say strong comp.

It’s a positive that we had such growth in the prior year in the third quarter, particularly for companion animal globally, which grew at 15% last year in the third quarter. The U.S. grew companion animal 18%. Some of our franchises, like Simparica franchise, particularly Trio, grew about 30% in that quarter. That makes it a very, very strong comp that we have up against in terms of the third quarter. As we’re here in the quarter, and as we’ve talked about a few times, if you look at distributor inventories in the U.S., for example, those have been in the lower end of the range from where we’ve historically operated at since the first quarter of 2023. In the third quarter, we’ve seen those trend a bit down from where they exited Q2. We’ll continue to monitor those as well.

The other thing that I shared on the call was that when we put scenarios around when we expect competition to come, and particularly for derm, our confidence is very high in terms of the expansion opportunities in these markets that remain, certainly in derm, where we’ve led that market for over a decade. We’re very, very confident in our ability to continue to grow in that market. In the quarter of launch or around the quarter of launch, we expect some level of fairly strong incentives and so on that competitors may drive to get the product in the hands of vets. Therefore, we factor those into our guidance range, which we expect largely to be in the fourth quarter when we think about new entrants coming into them.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. That’s helpful. As we think about 2026, what continues in terms of mid to high single-digit long-term growth? You’re always at that three-point or so premium to the market growth rate, 6% to 9% is that long-term range, the 8% that you talked about. I guess, what would get you to deviate from that at all into 2026?

Wetteny Joseph, CFO, Zoetis: In 2026, just like any other year we approach, we have multiple sources of growth that are driving our business. Without dissecting into details, if you look at the franchises where we’re in right now, we have more remaining market opportunities to capture than what we’re treating today in every category. You see that in dermatology, where we’re treating about 12 million globally, just under 7 million in the U.S., and we have 20 million more to go after that are either undertreated or not treated at all. These are animals that are seeing a vet on a regular basis, so they are medicalized pets who are not using our products. In the case of parasiticides, triple combinations, for example, those are just about 40% to 45% of the prescribed oral medications today, growing at 40% last year. Clearly, there is significant more room to expand in that space.

Osteoarthritis pain, even more so, where you have 27 million in the U.S. alone that have osteoarthritis that are medicalized, only 9 million being treated, and we only have 1 million today. In every category, that’s significant for us, and that’s before we get into any new products that we will have approvals for going forward. The existing franchises have ample opportunity to continue to grow. We see that. Price is an element that we go into each year, evaluating how much price in which market, which products, the value that we bring, the innovation that we continue to bring, position us to continue to take price, even if it’s not at the levels we saw last year or the year before, closer to the historical rates of 2% to 3%. This year, we’re doing about 4%.

We’re continuing to evaluate what that will look like as we get into next year. Certainly not least, but last in my order here, is what’s happening in livestock. You’ve seen consistent growth from livestock since we got over the Draxxin LOE impacts. You’ve seen five quarters straight of 5% plus growth in a market that grows 2% to 4%. We’re continuing to see that momentum as we exit this year. That’s another element that we’re taking into consideration.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: I know, Kristin, and you talked about it too, Wetteny, like in terms of the base business, but Kristin, you’re highlighting the pipeline a lot. Can you talk a little bit about that base business and your expectations there? Presumably, some of the strength is about leveraging your size and your scale and your ability to bundle across the portfolio and those customer relationships that are strong and that are durable. Can you talk a little bit about how you’re thinking about addressing that even more going forward or what can we do on that front to accelerate the base business as well?

Kristin Peck, CEO, Zoetis: Sure. I mean, I think one thing we’ve demonstrated year in and year out is just excellence in commercial execution. Most of the markets we operate in actually are highly competitive, whether you look at companion animal or livestock. I know we’ve met with many of you a few years ago at this conference, and everyone’s extremely worried about when we were going to get competition from BI in parasiticides and how that was going to halt all of our growth in parasiticides. I think what we’ve demonstrated is in highly competitive markets with many entrants, when you have excellent products and an excellent sales force and the data to support your products, we’ve done really, really well.

I think as we look at those core franchises, no one has a broader portfolio of leading products, whether you’re talking about multiple products in dermatology, whether that’s Apoquel, Apoquel Chewable, Cytopoint, Simparica Trio, Simparica, ProHeart 6, ProHeart 12, Revolution. These are not just products. They’re franchises. They’re really important to the vet. You think about adding pain with Librela, Solensia, adding long acting to that. We think of all of our franchises and lifecycle innovation and selling across that portfolio and being able to provide full solutions for our customers. I think if you’ve watched us over the years, working whether it’s with individual small clinics or working with large corporates, it’s meeting our customers where they are and making sure we can provide them the value proposition that works for them. Importantly, engaging the pet owner and making sure they’re coming in and asking for our products.

Over the last five or six years, our increased investment in direct-to-consumer advertising to engage that pet owner and make sure they come in asking for our products as well. Lastly, I want to really emphasize our success, our industry-leading success in alternative channels, such as retail and e-commerce. Engaging with the pet owner where they are, when they have the script and they’re going there to get it, making sure that we engage them in auto-ships, which is really increasing compliance across our portfolio, which is helping as well. As you think about some of our largest franchises, such as parasiticides or dermatology, for both Simparica Trio and Apoquel, 40% of our U.S. sales are currently in alternative channels. That’s really helpful as you keep those people on auto-ship.

We think we can continue to compete with both an excellent broad-based portfolio with commercial excellence and really with engaging the pet owner where they are in alternative channels in retail.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: In terms of the alternative channels in retail, that helps to have different growth than what we’re seeing in terms of the vet office visit trends. You’re less levered to that metric in terms of who’s walking in the front door of that vet. What are you seeing, though, right now in terms of veterinary office visits? At some point, you do want them to actually go to the vet, right? At the same time, you’re able to leverage this alternative channel to bridge to growth in the meantime. What are you seeing in terms of current fundamentals? I know you look at a little bit different data than like VetSource data, for instance.

Kristin Peck, CEO, Zoetis: Let me just take a step back. Overall, the human-animal bond is incredibly important. People will make sure they take care of their dog or their cat. There’s certainly been a lot of focus recently on the cost of veterinary health. That certainly was more on the services side where you saw that go up. That probably did cause a little bit of the decrease in vet visits. Also, those COVID pets were puppies going three times a year, stopped going. You’ve seen some of that. What Wetteny talks about a lot, and I’ll let him get into it, the reality of what’s going on, vet visits have never been a great proxy for us. We talk a little bit more about focusing on revenue per visit and things like that. That’s really for a few reasons.

One, a lot of the sales of some of our biggest products are not at the vet. Two, it’s really the willingness to spend for those big pets and some of the future areas we’re talking about. Maybe you want to talk a little bit just about the vet visit trends overall?

Wetteny Joseph, CFO, Zoetis: Sure. Yeah. Look, if you look at the last three years since 2021, where you saw a peak in visits, which historically have only been about a 1% growth, as you’ve seen double-digit growth in PetCare, by the way, in the U.S., it’s only been about 1%, plus or minus. It’s never been the key driver. Over the last three years, you’ve seen visits, overall visits, down somewhere around 2% to 3% each year. We’ve grown high single to double-digit growth overall for the company. We’ve had PetCare growing faster. Clearly, that is not what drives us. We really focus more on the therapeutic visits into the clinic for getting new patients started and so on.

As you’ve seen in alternative channels, as Kristin was talking about, with 40% of our two largest products being fulfilled outside of the clinic and those growing in the 30% range, that is taking some of what would be otherwise a focus on visits in the clinic to give us more opportunities to continue to grow volume and to drive more compliance through that as well. Meeting the customer and pet owners where they are is a key part of our strategy to help us drive that, which is why you haven’t seen the overall visits impact our results.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Would you ever take a more direct-to-consumer approach similar to the conversations we’re having with Lilly and others on the human pharma side?

Kristin Peck, CEO, Zoetis: That’s good.

Wetteny Joseph, CFO, Zoetis: Go ahead.

Kristin Peck, CEO, Zoetis: We’ve certainly looked at it. I would say, for those of us who’ve been with us a while, we certainly got disciplined quite well when we did Pumpkin pet insurance, where we just tried to fulfill the prescription back then. I think the world has evolved overall. Right now, our focus is selling through the vets. I think they’re pretty happy buying where they buy today. For those of you who aren’t following our industry, you know that we have what’s called MAP pricing at Zoetis for anything that sells at retail or which is minimum advertised price, so that we make sure that there is a reasonable price that the vets can still make a profit, etc. If we’re solving a different problem, maybe perhaps. Our focus really is in leveraging the channels we have today and engaging the pet owner as we need to.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Great. I want to switch gears to Librela. This is something that’s evolving in terms of this more measured launch or ramp for Librela, especially in the U.S., but also internationally to some extent. I guess, give us the latest in terms of Librela, in terms of the feedback that you’re getting from customers. How is that improving? How are you navigating some of the conversations with both clinicians and pet owners on that front? How should we think about, I guess, the quarterly cadence from here?

Kristin Peck, CEO, Zoetis: Sure. I mean, Librela is an outstanding product, as we’ve talked about. It has not lived up to the expectations that we have had in 2025 in the sense of the sales growth cadence for that product. I think a lot of what we’ve heard on social media has been driving that. We really looked at a multi-prong strategy to address it and really looked at what can we learn from that as we think about even future launches. Our strategy right now to return Librela to growth is, for starters, focusing on educating the veterinarian on the risk-benefit profile of the product. The reality is 75% of pet owners on the product love the product. It is game-changing. I just put my second dog on the product. I see the difference that it makes.

I think we stand by and we remain very confident this product is going to return to growth. Secondly, we need to be engaging with pet owners where they are so that they understand that positive story. The reality is the vast majority of pet owners are having a positive experience, but a small percentage of them are, the sort of noisy side of it is overwhelming that. We need to be much more aggressive, obviously, in educating the pet owner about the risk-benefit profile of the product and really engaging where the pet owners are in social media, in a different way than we have historically. Third, we also need to help both vets and pet owners understand that osteoarthritis is a serious disease and that treating it early and taking care of that animal can improve the life of that animal. That animal is in pain.

When they’re in pain, they’re not going to be active, which puts them at a higher risk for a number of other diseases. Making sure they really understand what osteoarthritis is, that it is a disease and that it needs to be treated. We’re really going to do all this with a fourth strategy, which is making sure that we support the product with aggressive phase 4 peer-reviewed studies. In human health, for a long time, they’ve been doing phase 4 studies, as you know, that really never happened in animal health. We’re changing that. We’re making sure we can put a lot more third-party studies out there in journals that are peer-reviewed, so that we can have more data to support the vet, to support the specialist, and better understand how to best use the product to best understand the risk-benefit profile.

We’re really confident this is a significant market, and this product, again, the confidence that we have in it hasn’t really changed. Our frustration on the fact that it’s been challenged with some of the social media, obviously, is not missed on us. We’re very optimistic and confident that with our multi-prong strategy, we’ll return this product to growth and it’ll be able to help a lot more pets and pet owners help their pets live longer, healthier lives.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Great. When do you think we would have this sort of data readout from phase 4 studies?

Kristin Peck, CEO, Zoetis: Sure. The studies are a whole bunch of them. They’ll start in Q4 of this year and then go in through 2026. We should see a regular cadence of them starting in Q4 of this year.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Great. How do you think about the long-acting fitting into your strategy now from a pain perspective? Will this, you know, help to fill in some of the voids from Librela? Will it be purely additive? How do you think that this will be? They are different, ultimately, different products that are going to be launched, but in the same category. How do you expect to kind of navigate that, as well as addressing some of the, I guess, strategy around your launch process with Librela, the lessons you’ve learned there?

Kristin Peck, CEO, Zoetis: Sure. So just to reiterate, we are expecting an approval for both dog and cat osteoarthritis long-acting pain products in a major market starting this year. For those, again, we don’t have approval yet on either one of those, but they’ll be three-month products. As you think about the one for dog, it is not a long-acting Librela, as we’ve talked about. It is actually a different molecule with a unique binding site where the dose will be, you know, 10 times smaller than what you would have with Librela. They would be both injectable three-month products. What we really see in long-acting is we really see the opportunity to expand the market. The reality is for most pet owners, it’s pretty hard to remember to come in or be able to come in every single month on exactly the right day to get your dog the injection.

We think it can really increase compliance for pet owners. We think that’s ultimately going to be better for pets. We see a significant opportunity for this to expand the market for us. It will provide a unique value proposition to both vets and pet owners. As we both think on the dog and cat side, we really do think this will be a driver of expanding that market. Our intent is to learn as much as we can from Librela as we do that launch. We’ll really start with specialists here to make sure the specialists deeply understand it so they can help the GPs understand how to best use this product, how to use this product in conjunction with, you know, the one-month Librela, etc. We’re really excited to sort of see what that looks like.

We think it has a significant opportunity to expand the market and to really meet a need that we see today for both vets and pet owners.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Given the launch process that you expect in the long-acting, do you anticipate that this will be a material contributor from a financial perspective in 2026, assuming it launches in that timeline?

Kristin Peck, CEO, Zoetis: I don’t think we do.

Wetteny Joseph, CFO, Zoetis: Yeah. We all give sort of contribution in 2026 type of expectations at this stage. What I would say is the long-acting components have been part of the strategy from the beginning, which is why we’re already talking about having these products approved already only two years after launching in the U.S. I think as you think about the long-lasting effects of OA pain, particularly for mild to moderate cases where they’ll be on the product potentially for a long period of time, this compliance component and being able to make it more convenient to come in every three months as opposed to every single month would be very important in terms of addressing the market.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Let’s switch gears to parasiticides. Simparica Trio has been knocking it out of the park in terms of strength across that segment. Where do you stand now in terms of market share? Can you talk a little bit about the competitive landscape, reorder rates, what you’re seeing in terms of engagement across corporates and otherwise, and just an update on Simparica Trio?

Wetteny Joseph, CFO, Zoetis: Simparica Trio, that first-to-market in the U.S. with their triple combination back in 2020, and that first-to-market advantage, plus very high level satisfaction, is why we’ve been very confident that in our competition, which by the way happened in parasiticides, as new competitors come into a standard of care, they actually help drive the expansion of that market, which is what we’re seeing. We knew that would happen. Certainly, in the first year, almost two years now of their competition, you’ve seen Trio continue to drive strong double-digit growth for us. If you look at triple combinations, they are about 45%, under 50% of the overall prescription parasiticides market today. It was only about 30% a year ago. It’s growing at about a 40% clip.

We see significant more room for that to continue to expand even as new competitors come into the space because they’re actually helping to drive more education, more awareness about this therapy that incorporates heartworm and U.S. has our own prevalence throughout the U.S. That’s what’s driving that space, and we expect to continue to lead in that as we expand. That’s just in the U.S. You see that also outside the U.S., giving the opportunities as you’ve seen some of the growth rates that we’ve reported on Simparica franchise and Simparica Trio specifically. We’ll continue to look for those. Our market share will continue to gain share in this space. If you look at where we are, about 45% of the market right now is triple combinations, but puppies are actually seeing 60% of new puppies are getting on triple combination.

We lead in that space as well with a share on puppies that’s higher than our overall share. We like the leading indicators that we see here in terms of where we are in terms of helping to lead the expansion of that space.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: It’s a pretty brand loyal category, right? Do you have any metrics around that in terms of retention across this category typically?

Wetteny Joseph, CFO, Zoetis: A couple of things that I would say, yes, it is brand loyal. You don’t see switching, particularly if you don’t see differentiation of any level of significance coming in from any competitor, which we don’t today. You have first-to-market, very high level of satisfaction, very little to no differentiations coming in. You tend to see that drive growth inconsistency. One thing we do see also is, as Kristin mentioned earlier, about 40% of Trio is sold outside of the clinic. In those alternative markets where you see auto-ship, that’s even stickier, I would say, relatively speaking. That tends to drive even more compliance. Whereas you see about five or six months of compliance in parasiticides in the U.S., on auto-ship, it goes all the way up to 11 months of usage. That is another element that drives even more stickiness here.

Continuing, again, you don’t see switching in this space.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. What about what’s next in parasiticides? Can you talk a little bit about injectable products, long-acting injectable products, and how that kind of fits into your strategy as well?

Wetteny Joseph, CFO, Zoetis: Yeah, that is the next, I would say, evolution in terms of what’s going to happen from an innovation perspective. We already have a long-acting heartworm product. We have a 6-month and 12-month heartworm product in this. We know how that sort of mechanism works. Just like other players in this space, we’re continuing to drive that. We have not given any timeframe around what that might look like, but certainly, there’s more opportunity to continue to drive innovation in this space.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: I think you did mention, though, that new canine parasiticides will be in the next two years, but not necessarily injectable. Is that the case? Within five years, we should have long-acting parasiticides. Is that still roughly the timeline?

Wetteny Joseph, CFO, Zoetis: We have not given a timeline on long-acting parasiticides.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Got it. Do you think you’ll be first to market in a long-acting combination in the U.S. market for parasiticides?

Kristin Peck, CEO, Zoetis: I think the focus for us, we are, again, we already have long-acting in parasiticides today with regards to ProHeart. I think it’s triple combination long-acting, I think, is the one that most people are talking about. Given that we haven’t given guidance on it, it’s hard to say we’ll be first for something we haven’t given guidance on. I think the reason we say that is we already have injectable. There’s a competitor that has an injectable. When you’re competing against a really simple, chewable triple combination oral, until you have the, it’s all your solution, it’s a long-acting injectable for a triple combination, we really think that’s what’s going to be where the focus is. Although we have long, we already have long-acting today in a one, we think the future is really going to be around the triple combination.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Let’s go to atopic dermatitis or your derm category. You anticipated competition coming. Obviously, some of that’s played out, some of it’s not relative to your expectations. Can you talk about a new entrant coming in, how you’re anticipating to navigate that, what’s your approach to the market, what’s your go-to-market strategy, and what you have embedded in terms of competition in your guidance?

Wetteny Joseph, CFO, Zoetis: Yeah. If you look at derm, stimulatory parents, where we see significant room to expand, we see massive room to expand in dermatology, even as we’ve been in this market now for 12 years. You’ve seen us really expand that market last year, double-digit growth, including double-digit volume growth, by the way, in derm for us last year. We are finding ways to continue to expand that market. We think there’s a lot more to go, $11 million more to go in the U.S., roughly, and even more so outside the U.S. We have three products here that are very much differentiated positively. You look at a film-coated tablet, a chewable, which we don’t expect the competition that’s launching to be in a chewable, and an injectable Cytopoint product.

Where we stand right now, given the level of satisfaction, 11, 12 years of safety and very high level of satisfaction, we believe we’re well positioned to continue to lead in the growth and the expansion of the market globally, even after competitors come in. In terms of our expectations, I mentioned earlier, we did factor various scenarios in the range of growth that we have for the year because we do expect some level of promotional activity initially that we want to be very disciplined about how we react to those. That’s factored into our guidance in this year, where we expect to see, we’ve seen an approval and expect launch in the fourth quarter of our international business, as well as potentially in the U.S., where we haven’t seen an approval yet here. Those are factors that we baked into our guidance for 2025.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Can you talk about your relationship with distributors there? Can you get in front of some of the competitive dynamics that are at play? Can you better leverage the chewable version, switch people to Cytopoint, or leverage those distribution relationships where you can in terms of minimum revenue or volume commitments on that front?

Wetteny Joseph, CFO, Zoetis: Certainly, we have a number of levers here that we are executing already or will be executing in terms of our strategy. I think from a, you know, if you look at chew, this is a preferred product by pet owners and by pets because it’s a chew that is flavored and so on. That is going to continue to drive that conversion itself. We’ve seen conversion of chew in Europe in the almost 60% range, mid to upper 50%, and in the U.S. already across 40% conversion. That is already on the way, but it’s because it’s meeting a need and it’s a differentiation that pet owners certainly appreciate. That’s just one lever among others that we’ll continue to execute on as we look ahead.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: What about Cytopoint long-acting? What’s the latest in terms of timeline on that front?

Kristin Peck, CEO, Zoetis: We haven’t updated that yet. We’ll get updating all those in the next few months.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Renal oncology, what’s next in the pipeline? What are you most excited about? What I think CKD, the one that’s nearer term of the two, probably. Can you give us an update there? I think you previously, it was a multi-billion dollar kind of opportunity for you, but can you talk about the strategy, what you’re focused on, and then which one you’re more excited about in terms of CKD-specific oncology?

Kristin Peck, CEO, Zoetis: Sure. What we’re really excited about in the pipeline overall, I just want to take a step back, is that we are expecting a major approval every year for the next two years. As we think about some of the new therapeutic areas beyond the sort of long-acting for osteoarthritis pain and for derm, chronic kidney disease and renal is the single largest opportunity in animal health. It’s a $3 billion to $4 billion market. Based on what we know today, it could be even larger. It’s a category where there’s really no treatment for dogs or for cats. We’re super excited to be able to provide a therapeutic for this. It’s a significant category for a number of reasons. A, the % of dogs and cats who will get it. They also tend to get it much earlier in life, honestly.

If you start treating it, the outcomes for these pets are significant. It’s also one where it’s easy to diagnose with diagnostics out today. We’re even looking at even better diagnostics for the future. This is already something that most vets are already screening for today. It’s a significant opportunity that we’re really excited about. As we’ll talk about, we’ll update all of our pipeline information that we gave and confirmed at JPMorgan last year. If you want to go back and sort of see the timing on those, you can go back to our JPMorgan deck from last year. Really super excited about that pipeline in renal and chronic kidney disease. We’re also really excited, in a similar timeframe, for oncology. Oncology is probably, give or take, a $1.7 billion opportunity, what we know now. It could be larger.

We’re looking for products that can be applicable across a number of different cancer targets, obviously, here. It’s a significant opportunity also as diagnostics are increasing. The more diagnostics increase, the more the size of that market will grow. Many pets are not really tested now because even if they were tested, there’s really very few treatments out there for oncology. Most of those are sort of off-label human health. We see this as a significant opportunity where so many pet owners are desperate enough they’ll be trying human health, things like that. We really think that’s a big opportunity. Slightly farther out, we’re also really excited about cardiology. I think as pets live longer lives, you’re seeing a lot more of these cardiovascular events. You’re also seeing certain breeds that are very popular right now tend to suffer from more cardiovascular events.

Another category where there’s really only one product out there today to treat this. We see these as big new opportunities, big new waves of growth, where Zoetis has demonstrated its ability over time to build some of these markets. We’re super excited for what this could look like. We’re also really excited on the livestock side at opportunities in both genetics and in vaccines, where that’s really going to be a focus. Most consumers want to eat protein that, you know, hasn’t been treated. You want to just keep animals healthier. We look across our entire portfolio and whether it’s lifecycle innovation, adding a liver-based chew, making something long-acting, or really creating entire new categories.

I think this is something Zoetis has continued to do really, really well and differentiates Zoetis in animal health, but also animal health versus human health, which has a much higher ROI in its R&D, for starters, because it costs us less to run our trials, but importantly, because we start in our target species.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: In oncology, there were definitely prior iterations of B-cell, T-cell lymphoma in monoclonal antibodies. I would think that there’s opportunities there, especially with the expanding diagnostics alongside that, whether it’s your diagnostics or other diagnostics as well. Canine lymphoma being a big area. Is that a key area of focus for you? Also, just on the diagnostic front, since we’re on that, is that also an innovation driver for you going forward?

Kristin Peck, CEO, Zoetis: Yeah, we’re super excited about the success of our innovation in diagnostics as we’ve talked about before. Certainly, our Images platform we’ve been talking about for a few years. It’s our AI diagnostics there, where we’ve got over six indications. It’s a platform that we can put anything you can basically take a picture of, whether that is blood or urine or fecal, you name it, anything you can take a picture of, we can therefore analyze. We’re really excited at the growth of that. The OptiCell, which is our hematology one, and looking at future innovations, obviously, for a new platform around chemistry. We’re very excited about diagnostics and really how that is synergistic and symbiotic with our core business. To your point, how we can launch more there. I’d also add to that genetics.

If you think about Basepaws and the companion animal side, as well as our livestock genetics being big growth drivers. I think what’s unique about Zoetis is because we’re in all these different businesses, both the genetics, the diagnostics, and the therapeutics, we can better understand disease and make sure that we can help both pet owners and vets better diagnose and put the animal on the right treatment.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Okay. Great. Your business mix has evolved dramatically even since the IPO with a greater proportion of your total revenue associated with higher margin, faster growing companion animal products. Can you talk a little bit about that margin flow-through, how you see that playing out, your long-term margin targets, and what you’re anticipating heading into 2026, you know, what can ultimately kind of drop through? I think we’ve all wanted to see maybe a little bit more of that drop through. At the same time, you’re investing and you’re investing in growth, right, and growth opportunities. How do you balance that? How do you think about margin expansion longer term?

Wetteny Joseph, CFO, Zoetis: Sure. You alluded to the next shift in the business, which we’ve seen over the last decade, and we see more of that as we look ahead. Even as livestock has momentum and we’ll continue to see growth in livestock, companion animal will grow faster than livestock, which drives the mixture that you’re alluding to. In addition to our day-to-day price in the business, even as we’re making investments that we have in the past, we see significant opportunity to leverage the P&L, including as G&A, etc., as you look ahead. I think the one thing that has created some noise, if you look backwards, is just FX, clearly, when you look at what that does, both at gross margin and bottom line operating margins.

When you look at our reporting on a cost and currency basis, it’s very clear the leverage opportunity that we’ve seen and we’ve actually delivered in the business over the years. We see more room to continue to drive bottom line growth faster than top line there.

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Any update on tariff exposures?

Wetteny Joseph, CFO, Zoetis: We did update last quarter. We added another $7 million or $8 million to what we said in the first quarter, and we still absorb those in the guidance that we gave. There’s nothing new really to highlight there versus what we said a month ago.

Kristin Peck, CEO, Zoetis: Yeah, I mean, we still won’t have clarity on most of that, if you...

Erin Wright, Healthcare Services Analyst, Morgan Stanley: Yes. Unfortunately, we’re all in the dark there. Thank you so much. Appreciate the time. Great conversation. Thanks, everyone, for listening in.

Wetteny Joseph, CFO, Zoetis: Thanks, everyone.

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