The paragraph is an introduction to the Zoetis Third Quarter 2024 Financial Results Conference Call and Webcast. Steve Frank, Vice President of Investor Relations, opens the call, which includes remarks from CEO Kristin Peck and CFO Wetteny Joseph. The presentation materials and financial tables are accessible on Zoetis's Investor Relations website, and a replay of the call will be available. The presentation involves forward-looking statements, and potential discrepancies between projections and actual outcomes are discussed, with references to relevant SEC filings. Additionally, there is a mention of non-GAAP financial measures, with reconciliations available in the earnings press release and the company's 8-K filing. Operational results are presented excluding foreign exchange impacts.

In the third quarter earnings call, Kristin Peck reported strong financial growth for the company, with a 14% increase in revenue and a 15% rise in adjusted net income, driven by robust demand across key franchises. Both U.S. and international revenues grew significantly. The company's diverse and science-driven portfolio, particularly its innovative products for companion animals and livestock, contributed to this success. Notably, the osteoarthritis pain franchises, Librela and Solensia, experienced substantial global growth. The company remains committed to innovation and developing new markets, successfully increasing market share for Librela in the U.S., despite typically slower canine pain visits in this period.

The paragraph discusses the growth and potential of Librela, a pet care product that has become the fourth largest in the U.S. within 11 months, treating 1 million dogs with osteoarthritis (OA) compared to the 8 million receiving other treatments. The brand sees significant potential for expansion as an estimated 17 million dogs suffer from untreated OA due to intolerance to NSAIDs. With OA pain affecting 40% of dogs globally, Librela aims to replicate its European success in the U.S., where revenues have grown 18% year-over-year. The company plans to leverage partnerships and collaborations with veterinarians to promote Librela as a safer, more effective treatment option. The increasing demand for high-quality pet care mirrors human health trends, highlighted by the growing importance of monoclonal antibodies. Additionally, the Simparica franchise also shows strong growth, with a 27% operational increase.

The paragraph highlights the success and growth of the Simparica Trio product in the animal health market. The text discusses how the product, which offers comprehensive parasite protection for dogs, successfully expanded the parasiticides market by addressing significant unmet needs. Despite increased competition, Simparica Trio remains the leading vet-prescribed parasiticide, with high satisfaction among pet owners and increasing prescription rates. The company attributes this success to a strong customer engagement strategy and convenient retail access. Looking to 2025, the company anticipates market growth and increased education about triple-combination treatments, which should further solidify Simparica Trio's position as the preferred choice.

The paragraph discusses the significant growth and innovation within the company's dermatology franchise, highlighting their success in addressing canine dermatological itch with products like Apoquel and Cytopoint. The company has expanded the market from $70 million to over $1.5 billion by focusing on customer-driven development and introducing effective, trusted treatments. Their products, known for rigorous safety standards and compatibility with other medications, provide relief to over 23 million dogs globally. The company sees further growth potential in the market with millions of dogs still experiencing untreated itch.

The paragraph highlights Zoetis' strategic focus on growth and innovation in the animal health market. The company emphasizes its commitment to delivering trusted treatments while adapting through divestitures, such as selling certain product portfolios to Phibro Animal Health. This move is part of a strategy to concentrate on high-growth potential areas like livestock innovation, including preventatives and genetics. A strategic partnership with Danone aims to enhance dairy production's sustainability and resilience, aligning with Zoetis' goals for industry impact and growth. The company anticipates the livestock market to grow 2% to 4% annually and aims for innovative approaches to drive growth, evidenced by strong revenue performance and adjusted guidance.

The article discusses the company's positive outlook for Q4, anticipating a return to above-market growth and meeting revised full-year guidance with strong momentum into 2025. The company attributes its success to a diverse and durable portfolio, focus on customer needs, and dedicated employees. Key strategies include growing revenue faster than the market, investing in innovation, increasing adjusted net income, and returning excess capital to shareholders. Wetteny Joseph highlights the strong performance in the third quarter, driven by a diverse portfolio and demand for companion animal and livestock products. The company reported $2.4 billion in revenue, with an 11% increase on a reported basis and 14% operational growth.

The paragraph highlights the financial growth and success of a company's animal health portfolio, reporting a 14% increase in adjusted net income. Revenue growth was driven by products like OP pain mAbs, Simparica, and dermatology franchises, contributing significantly to the company's revenue. Librela and Solensia are leading treatments for osteoarthritis (OA) pain in Europe and are expanding into the U.S. market, providing new treatment options for patients intolerant to NSAIDs. Despite a decline in overall U.S. clinic visits, therapeutic visits for OA are increasing, contributing to market growth. The Simparica franchise meets pet owners’ needs through convenient channels, with the Trio product becoming a top-seller in the parasiticides category, helping the company rise from fifth to second in market share in the U.S.

The paragraph highlights significant growth in revenue and market share, particularly in the U.S., driven by the adoption of triple combination products for dogs and strong performance in puppy treatment with Trio. The company emphasizes its success in dermatology with key products like Apoquel, offering convenience and efficacy. Despite new competition, the company is confident in its growth trajectory and maintaining leadership in vet clinics. U.S. revenue saw a 15% increase, with companion animal sales up by 18% and livestock by 5%, thanks to the success of OA pain mAbs like Librela and Simparica Trio. Pet owners' preference for retail convenience and home delivery, along with veterinarians' preference for injectables, has boosted compliance and sales, with Librela achieving $55 million in U.S. sales in Q3.

The paragraph discusses the impressive growth and market penetration of various animal health products. Librela is expected to be a long-term growth driver, while Solensia has significantly increased feline osteoarthritis (OA) treatment, with revenues growing by 50% and a 70% increase in feline OA patients since its U.S. launch. Simparica Trio saw 29% growth in the U.S., benefiting from transition from older therapies without losing market share, and was aided by a less promotional pricing strategy. In dermatology, Apoquel led with strong retail performance and growth in its chewable form, while Cytopoint benefited from a preference for injectables. U.S. livestock products grew by 5%, mainly due to cattle volume increases, though this was partially offset by price declines in Draxxin.

In the International segment, the company saw a 7% increase in revenue on a reported basis and a 13% operational increase for the quarter. Both international livestock and companion animals contributed to growth, with livestock rising by 15% operationally and companion animals by 11%. Livestock growth was driven by cattle, poultry, and fish, with contributions from price increases and volume growth due to high demand and improved supply. In companion animals, the Simparica franchise grew 28% operationally, with significant contributions from Simparica Trio and Simparica sales in Europe, China, Eastern Europe, and Brazil. The key dermatology franchise, led by Apoquel and Cytopoint, saw 13% operational growth, benefiting from strong European market adoption, particularly of Apoquel Chewable. The OA pain mAbs franchise grew 27% operationally with $78 million in revenue.

In the article, international sales of Librela reached $62 million with a 26% operational growth, primarily in Europe and new markets. Solensia sales grew by 32% at $16 million. The company's adjusted gross margin increased slightly to 70.7%, while operating expenses rose due to higher compensation costs. Adjusted net income and diluted EPS showed an operational growth of 15% and 17%, respectively. For 2024, the company raised its revenue guidance to $9.2-$9.3 billion, reflecting strong franchise performance despite sell-offs. Expected net income is $2.67-$2.695 billion, indicating 13.5%-14.5% operational growth, with this year's guidance based on mid-October foreign exchange rates.

The paragraph provides financial guidance and outlook for a company, expecting adjusted diluted EPS between $5.86 to $5.92 and reported diluted EPS between $5.33 to $5.39 for the year. The company has experienced strong performance in 2024 with growth from key products. However, revenue growth may decelerate in Q4 due to a divestiture and prior product launches impacting the comparison base. Despite this, they expect growth to align with historical rates and are confident in market demand and dynamics going into 2025. Challenges in China are anticipated to normalize, and they aim to continue growing above the animal health market. The segment concludes by opening the floor for questions from analysts, starting with Erin Wright from Morgan Stanley.

The paragraph discusses the strong performance and future expectations for Librela, a product that has seen significant growth and market penetration. Kristin Peck notes that globally, Librela has grown 123% and is committed to becoming a $1 billion franchise. In the U.S., it has achieved an 85% penetration rate, with over 1 million patients using the product within the first 12 months. With a large addressable market of potentially 8 million more patients still using NSAIDs, there is optimism for continued growth and a focus on increasing compliance. Wetteny is expected to address the details regarding future quarterly progression and investment considerations for 2025, taking into account factors like innovation and product mix changes that can influence profit margins amid various headwinds and tailwinds.

Wetteny Joseph discusses the success of Librela, highlighting it as the company's most successful launch with approximately $192 million in revenue. Despite not providing specific quarterly guidance for individual products, he expects continued strong growth due to high market penetration. He compares Librela's use to NSAIDs and notes historical trends in OA Pain visits, specifically a peak in Q2, a decline in Q3, and a slight rise in Q4. Joseph emphasizes the company's growth above the animal health market, having raised guidance three times this year, and highlights their ability to grow adjusted income faster than their top line, despite increased investments. He underscores the importance of leveraging past investments, particularly in the U.S. field force, as they plan for the future.

The paragraph discusses the company's strategy to leverage opportunities for growth by investing in direct-to-consumer (DTC) initiatives and advertising for key brands. They aim to grow their bottom line faster than the top line, though the extent of growth depends on their investments. Michael Ryskin from Bank of America asks about inventory management for products like Librela, Trio, and Derm, particularly any stocking or destocking dynamics affecting the third quarter. He also inquires about the impact of an MFA component divestment on full-year 2025 revenue projections, estimated at roughly $350 million annually.

In the paragraph, Kristin Peck and Wetteny Joseph discuss aspects of the company's financials and inventory levels. They clarify that there were no unusual inventory dynamics during the quarter, with U.S. distributor inventories remaining low and the Librela product being shipped directly to clinics. Joseph highlights the revenue and margin figures for a business segment labeled MFAs, noting its seasonal linearity and impact on next year's financial comparisons due to a divestiture. Despite not detailing SG&A and R&D spending, the information provided helps to assess the P&L impact.

In the paragraph, Brandon Vazquez from William Blair asks about the strong performance of the parasiticide segment, particularly Simparica Trio, despite increased market competition. Kristin Peck discusses the success of Simparica Trio, highlighting its status as the number one prescribed parasiticide used in over 13 million dogs. She attributes this success to being first to market, leveraging alternative sales channels, and the overall growth of the oral flea, tick, and heartworm market. Trio's significant share in the puppy market and its comprehensive, convenient product offerings contribute to its continued momentum. Peck also emphasizes the strong partnerships with customers and corporations as a factor in sustaining growth into the coming year.

The paragraph features a discussion primarily led by Wetteny Joseph and Kristin Peck regarding market trends and financial performance. Wetteny Joseph highlights the growth in the oral flea, tick, and hardware market, noting 14% operational growth driven by an 8% increase in volume and 6% in price. He mentions targeted promotions and discounts that have improved price realization for the company. Jon Block from Stifel then asks about the sales strategy for U.S. Librela and its revenue expectations for the fourth quarter, as well as broader revenue projections for 2025 considering factors like China headwinds and other key franchises. Kristin Peck is set to respond to these inquiries.

The paragraph discusses the ongoing sales strategy, emphasizing a continued focus on expanding the use of Librela beyond severe cases to include moderate ones. The main message is to highlight the product's safety and efficacy while targeting the 8 million patients currently using NSAIDs, encouraging a switch to Librela if suitable. The speaker expresses satisfaction with the product's launch and plans to maintain current strategies to increase market penetration. Additionally, Wetteny Joseph mentions that their 2025 guidance will be shared in an upcoming call, highlighting expected growth across their portfolio, particularly in the derm and OA pain sectors, despite potential changes in pricing.

The paragraph begins with commentary on expectations for China's market normalization by Q4 into the next year, reducing headwinds compared to the current year. It mentions the impact of removing certain products related to the MFA and water-soluble product portfolio. The conversation then shifts to a question from David Westenberg about pricing strategies in relation to veterinary CPI and clinic growth assumptions amid declining visit trends. He also asks for clarification on the "reasonable promotion environment" term used, particularly regarding the upcoming parasiticide season and related promotions. Kristin Peck responds, stating that pricing strategies begin by considering the pricing and inflation environment in relevant markets.

The paragraph discusses Zoetis's focus on evaluating their product differentiation on a detailed level and emphasizes that overall veterinary visits are not a reliable indicator for assessing their performance in animal health. While wellness visits might be declining and shifting towards alternative channels, visits related to specific Zoetis products, such as dermatology and pain management, are increasing. Wetteny Joseph adds that key areas like OA Pain and dermatology products continue to perform well, supported by growth in alternative channels, which grew by 34% year-on-year. The paragraph also notes a more disciplined promotional environment compared to the previous year, when competition in the parasiticide space was more intense.

The paragraph discusses a Q&A session during a conference call where Balaji Prasad from Barclays asks about growth drivers and challenges expected in 2025, specifically focusing on operating expenses (OpEx) and the adoption rate of isoxazolines for dogs. Wetteny Joseph responds, indicating that more detailed guidance will be provided in February, but mentions that they aim to better align their SG&A with revenue growth and highlights the impact of hyperinflationary pricing, particularly in Argentina, as a factor to consider.

The paragraph discusses expected pricing trends and market dynamics, particularly focusing on Argentina and the parasiticide market. It notes that while inflation and currency exchange rates have negatively impacted Argentina's year-over-year performance, pricing is anticipated to stabilize. In the parasiticide market, there is a notable trend towards triple combination products, especially among puppies, indicating continued growth. Despite the lack of detailed data on the shift from other forms like collars to oral medications, triple combinations are clearly becoming more popular. Kristin Peck mentions that the company's slides from the day offer further insights into these trends.

In the paragraph, Glen Santangelo from Jefferies asks Kristin Peck about Zoetis' confidence in implementing another year of above-average price increases, given the competitive and macroeconomic environment. He also inquires about the percentage of the companion business going through alternative sites versus vet offices and its impact on pricing or customer trends. Kristin and Wetteny Joseph discuss the growth of alternative channels, with retail making up about 15% of the U.S. business. Kristin highlights Zoetis' diverse and innovative product portfolio as a basis for pricing decisions, especially in the parasiticides market with products like Simparica Trio. Wetteny notes that the company is implementing a 4.5% to 5% price increase across its portfolio, excluding Argentina, and is still seeing significant volume growth.

The paragraph discusses the company's strong performance and growth expectations for its products Apoquel and Librela. Apoquel has experienced a 16% growth this quarter and is a leading product with high satisfaction rates among consumers and veterinarians. The company is focused on expanding the category by targeting under or untreated dogs, as well as those currently on other treatments. Despite potential competition from Zenrelia, they are confident in Apoquel's continued growth due to its proven safety and efficacy. Regarding Librela, while specific details on uptake aren't provided, there's an indication of positive trends and expectations for further growth in compliance with U.S. regulations.

The paragraph discusses the success of a recent product launch, highlighting its strong performance, particularly in international markets, with sustained double-digit growth and high compliance rates, especially in Europe. The company expresses confidence in maintaining above-industry-average sales growth based on its current product portfolio, citing a history of outperforming the market by an average of three points over a decade. Despite not detailing U.S. compliance extensively, they are pleased with the U.S. launch trajectory. There's also mention of confidence in handling competition by 2025, suggesting an expectation of sustaining growth without relying on new pipeline developments.

The paragraph discusses the company's approach to market growth and innovation. The speaker emphasizes the integration of both existing product portfolios and new launches in their market strategy. They highlight the importance of life cycle innovation, which comprises a significant portion of their R&D spend, in expanding and sustaining market presence. The focus is on long-term market building rather than just sequential growth, creating a "sticky" market that is difficult for competitors to penetrate unless they offer significantly differentiated products. The strategy, which involves continuous innovation and adding new product claims, is expected to allow the company to outperform the industry. Additionally, Navann Ty from BNP Paribas asks questions about competition, particularly regarding Apoquel versus Zenrelia, promotional strategies for new product launches like Credelio Quattro, and progress in areas of innovation such as long-acting injectables and treatments for various diseases.

The paragraph discusses Zoetis's confidence in their dermatology franchise despite new competition. They emphasize their longstanding safety and efficacy record and plan to maintain their current strategies, highlighting customer relationships, product performance, and direct-to-consumer investment. New market entrants are seen as growing the market overall, particularly in the oral isoxazoline class. Zoetis expects increased competition to expand the parasiticides category and views innovation, specifically long-acting products, as a growth driver. Specific launch dates for new products have not been provided, but these are anticipated in the near term. The operator then hands the call over to Kristin Peck for closing remarks, who thanks participants for their interest in Zoetis.

The animal health industry is resilient and essential for animals, people, communities, and the global economy. The company plans to strengthen its market leadership by leveraging its resilience to drive long-term growth and value creation. They express gratitude for continued trust and commitment to shaping the future of animal health. The call concludes with the operator inviting participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.