Q3 2019 Earnings Call
Please standby your program to about two began.
<unk>.
Welcome to the third quarter 2019 financial results conference call and webcast fours or wettest.
Hosting the call today, Steve Frank Vice President of Investor Relations floors awareness.
The presentation materials add additional financial tables are currently posted on the Investor Relations section I was the latest dotcom.
The presentation slides can be managed by you the viewer and will not be forward it automatically.
In addition, a replay of this call will be available approximately two hours. After the conclusion of this call via Jilin or on the Investor Relations section I was aware <unk> dot com.
At this time, all participants had been placed in a listen only mode and the floor will be open for your questions. Following the presentation.
If you would like to ask a question at that time, Please press star and one on your Touchtone phone.
If at any point. Your question has been answered you may remove yourself from the Q by pressing the pound cake.
And the interest of time, we ask that you limit yourself to one question and then queue up again with any follow ups. Your line will be muted and when you complete your question.
Posing your question please pick up your handset to allow optimal sound quality.
Lastly, if he should require operator assistance please press star zero.
It is now my pleasure to turn the floor over to Steve Frank Steve You may begin.
Good morning, everyone and welcome to the limited third quarter 2019 earnings call and joined today by one remote alike, Our Chief Executive Officer, Glenn David Our Chief Financial Officer, and also by Chris impact our CEO elect.
Before we begin I'll remind you that the slides presented on this call are available on the Investor Relations section of our website.
Our remarks today will include forward looking statement.
Actual results could differ materially from those projection.
For a list and description of certain factors that could cause results to differ I refer you to the forward looking statements in today's press release.
And our FCC filings, including but not limited to our annual report on Form 10-K , and our reports on Form 10-Q .
Our remarks today will also include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principle or U.S. GAAP.
A reconciliation of these non-GAAP financial measures for the most directly comparable U.S. GAAP measures is included in the financial table that accompany our earnings press release and then the company's 8-K finally dated today November seven 2019.
We also say operational results, which exclude the impact of foreign exchange with that I will turn the call over to one or alone.
Thank you Steve.
Good morning, everyone.
Today, you will hear commensurately on the market dynamics on a part of that will be sold from meat and Glenn.
Hi, I'm also pleased to have agreed to back.
Our next seal joining us to show some remarks.
Climate and the future ahead.
I really yeah, Deanna here, let me provide some context around not lucent that market dynamics.
Yeah, I know he listening in thinking they deem as we made facing challenging year Clorox Ryan on capital.
Well I have seen available financing companion animal unfold Buddy.
We have seen a growing appetite in the companion animal market quite spending.
On an operational Becca.
And we once again expect to roll much faster than market in companion animal, Florida 20, making.
Okay, Yes.
Excited by the new products on their lifecycle innovation.
Giving them.
Advanced wafer fees that.
We can skin conditions.
Sites.
The methodology treatment.
Can you maybe I could you kind of neat.
And that's what I think that's been a rewarded for innovation, we have developing gives us space.
We feel continued market penetration I'm not going expansion of our key dermatology products.
Well I'm sorry, the one.
That on track to achieve.
More than $700 million themselves for thinking anything.
In recent years. So I guess, that's also been assessed I mean is procedure embarrassing besides.
This year, we added two new problems dollar passing inside of portfolio.
Social plus to protect that's a game said peaks.
Police and 10 out of that pass hikes.
I'm not real hard 12, <unk> wireless easily injection to prevent how long do you see some ducks.
Additionally, we are planning for long term simparica three youre in the European countries and Canada in the first quarter.
In the U.S., we expect the 88 to complete the reveal option bodyguard three youre at the end of the first part of them.
If approved.
We will launch shortly after.
Based on these assumptions, we project to generate incremental gross sales of her synthetic adrenal in 2020 at around $850 million.
In other areas like campaign.
I was telling people to existing that treatments for dogs and cats represent a significant opportunity.
An indication of how fast it is largely unmet need today.
We are excited by the potential for all the researcher programs, we felt monoclonal antibodies in deciding.
As I mentioned last quarter, we initiated defining that process in the EU and us.
A new fee line monoclonal antibody candidate to treat hostile arthritis painting cats.
And we recently also initiated IND filing process, India, you and U.S., but I can nine well pronoun antibody candidate to treat posture on safety so painting docs.
If approved we would anticipate these products coming to market in 2021.
Meanwhile.
Africa, unless one fever.
Great uncertainties and weather conditions affecting mainly use capital.
Having a significant negative impact on the livestock market.
As a result of these negative impacts.
We expect the overall animal health our market to would also nationally.
Between 3% to 4% in 2018.
Compared to 5.6% in 28 team.
And our smart in our guidance, we expect to outpace the market that we put pressure on growth in revenue of 6% to 7% and these excluding the positive impact of Abaxis.
Turning now to our third quarter results.
We continue our solid performance with 9% operational revenue growth in the third quarter.
Leland by sales of our companion animal and poultry products.
Our companion animal portfolio continues leading the way, we said, 23% operational growth based on some sales of our policy decides.
Our key that mythology brothers and diagnostic portfolio.
Diagnostic revenue from galaxies acquisition.
Accounted for 2% of the overall growth.
Yeah, that's all for livestock, we saw an operational decline of about 4%.
Growth in poultry warfare person, but it was offset by declines in cattle, mainly due to lower feed log placements in the U.S. and the impact of African swine fever in China.
Our third quarter results demonstrate how our diverse portfolio and focus on meaningful innovations.
Our driving our success.
These traits remains the foundation of our consistent long term performance.
In the third quarter, we grew our adjusted net income by 10% operation.
And we continued to benefit from increase in revenue.
Improve gross margins and moderate growth in operating expenses.
We remain confident in our latest innovation.
Future pipeline.
Im going to business to for future growth and deliver our 20, making guidance, which Glenn will discuss later.
As we look ahead, we're making good progress with the innovation and investment.
I will generate that our future growth.
As I said, we are preparing for the launch office in public at real in European markets and Canada.
At the beginning of next year.
With that product currently in production.
Although the lottery reviews remain under way in Australia, New Zealand, Japan with further submissions prospectus in China and Mexico.
In the U.S., we have been expanding our field force.
To better support our growing companion animal portfolio, including the diagnostic products and in preparation for the launch of fashion Pericardial next year once approved.
We also continue to enhance our vaccine portfolio for a lifestyle.
In October .
These receive use the eight approval for full vac consultant.
H VT indeed.
The Companys first vector vaccine for poultry.
It will.
Welcome to protect a game said, both malignancies, and new castle disease highly contagious inpatient effectual foreign policy.
The product compliments, our market, leading innovative vaccine delivery system for poultry producers.
And became the first in what is expected to become an important new goal vaccine plant franchise for for this.
Over the next several years.
Especially international markets.
We also taking important first steps to address African find fever.
Having reached a non exclusive license agreement with the U.S. Department of Agriculture in late September .
This agreement gives us access to three patents and materials related to African swine fever vaccines strengths.
That will be incorporated into our research.
While it could take several years to complete the development I licensing of our vaccine.
Our work with the USAA. Another panelists provides a comprehensive approach to addressing DC influential infectious disease.
In addition to new product approval on lifecycle innovations.
So at this continues to support future growth.
Through business development activities.
Last week.
We announced the accretion offer Fenix lab.
Total based reference laboratory that these highly valued by veterinarian for quality assurance and customer care.
These as radius Healths first entering to the veterinarians reference laboratory space.
And it is expected to further strengthen our overall diagnostic portfolio buildings opened our 20 in their purchase of Abaxis, a leading provider of opposed to occur diagnostic instrument.
We view reference labs as another important part of our comprehensive diagnostic offerings.
And we plan to build our presence in reference lab overtime to.
To organic expansion and although small acquisitions in this space.
Now.
I would like to say a few words regarding our leadership transition.
As we announced in October .
Im not retiring at the end of the year.
It has been an amazing opportunity.
To build a company like has led this over the last seven years.
And I feel very positive about.
Great if future.
Based on our prudent strategy higher and track record of execution.
Diverse and innovative portfolio that underlies our success with our customers.
And the growth investments, we're making for the long term.
I am confident our our talented colleagues.
Our management team led by our next CEO , Chris embed.
We'll continue to capitalize on that many growth opportunities ahead of us writers.
And create significant value for our company.
Customers are not shareholders.
Christine.
As we will accompany since the beginning of as royalties.
And currently serve assets royalties executive Vice President.
Unglued pricing offer us operations.
Business development and strategy.
Having more with increasing for many years.
And does that that she is the right bill for royalties next phase of our growth and industry leadership.
She is some advocate for our customer needs.
Champion authorized rate is a culture and values.
And.
Im inspirational and collaborative leader.
Our people and industry.
A track record of Islam performance through her tenure as royalties.
As well Asker operational experience.
Innovative strategies and deep customer knowledge physician per well two drivers right is continued growth.
She will build on our long term study, which actually felt to develop alongside with the rest of this rental management team.
Brings our own vision two leading the next stage of revenues are John .
I will remain an advisor to the is during the course also 2020 .
Increasing and I are already working more closely to ensure a smooth transition.
And maintained the momentum of our business growth.
Before Glenn discuss our third quarter results.
I have asked creasing to say a few words Christine.
Thank you on demand.
And honor to the name the Nexeo video ads and I look forward to leading our company into its next phase and industry leadership and value creation.
I want to thank why the loan for establishing the whereas as the world's leading animal health company.
And deep respect for while amount and his track record of creating value for our customers and for delivering strong returns for our shareholders.
Innovative mindset has cancer, whereas at the forefront of the industry.
And I Echo warlord confidence in our company solid foundation and prospects for continued growth.
So when it has a diverse and innovative portfolio deep expertise in animal health.
The winning culture shared by our talented colleagues around the world.
We know how to partner with our customary to address their evolving needs across the continuum of care.
Prediction intervention to detection and treatment entities.
We had a promising pipeline and new product and lifecycle innovation and we're focused on making investments in digital technology data and analytics that will fuel our future growth.
As CEO I will continue to drive board with our successful long term strategy.
And we'll look for opportunities to accelerate our progress in the not meaningful areas for that Mary and producer customer.
And I'm committed to building on the strategies diverse portfolio and financial discipline that had been critical to our success.
To that end I've been working with Warner loan Glenn and the rest and is the last team as well as the board over the last few weeks to ensure a seamless transition.
As I look ahead I continue to give you animal health as a very valuable sector for investors.
With steady growth path back as a fundamental macroeconomic drivers of global population growth urbanization and a growing middle class in emerging markets will drive growth in both companion animal and lifestyle.
The long term history, and animal health and awareness is a testament to the resiliency of our business.
The drivers and take care and animal agriculture are fundamental to the world the timing and core to keep those connections with animals.
For both companionship and nutrition I.
I'm excited by the new opportunity. So we think the standard of care with innovative new medicines biologics and integration across the continuum of care.
And agriculture mining, while a key priority for me has been directly connecting with our stakeholders around the world to better understand our perspective, and how we can build better company success.
I look forward to engaging with many of you as part of this process and sharing more and our outlook for the market and plans for 2020 early next year.
And our plan will cover the financial.
Thank you Christian and good morning.
Before discussing our Q3 financial results I'd first like to congratulate Warner modems upcoming retirement and walking Kristen as ANEXIO delivers.
In his role as CEO Warner Moen is where our business through a remarkable transformation from a business your advisors to independent and publicly traded industry leader in our model.
Into revenue and adjusted net income growth well above the market during that period, while managing acquisitions and the significant restructuring.
And from a personal perspective, the supported me to my own transition to CFO during that time as well.
I'm very thankful to work with them over the past decade, and appreciate that we will continue to benefit from his insight and knowledge as he remains an advisor and director on the board.
I'm also very excited to work with crystal and see transitions to her new role.
Buildings loans over the strong foundation and delivering the next phase and group.
Personally worked together as orders for many years and we share a commitment to customers colleagues and value creation that has driven our company success.
Now, let's review the financial results, we delivered another healthy quarter, good operational revenue growth of 9% and adjusted net income growth of 10%.
These quarterly results, which builds upon our strong performance for the first half of year give me confidence in delivering on our full year improved earnings outlook.
For the full year, we are narrowing operational revenue growth at the high in the range, increasing operational growth for adjusted net income and increasing and knowing adjusted diluted EPS.
Reported revenue growth for the third quarter with 7%, including a negative 2% impact from foreign exchange.
Foreign exchange was primarily driven by the strengthening of the dollar against the Euro Argentinian peso and the Australian dollar.
Operational revenue growth of 9% for the quarter is driven by 1% price in 8% volume.
The volume contribution of 8% includes 3% from key dermatology products, 2% for new products, 2% from legacy Abaxis products and 1% from other in lung products.
Breaking down our operational revenue growth by species companion animal grew 23%, partially offset by livestock declined 4%.
Companion animal revenue growth was driven by our parasiticide portfolio, including new product revenues and plus imports will see dermatology products the impact of the Abaxis acquisition and growth in emerging markets such as China.
Excluding the impact will be back this acquisition companion animal products grew 20% operationally.
Excellent also had strong growth in the quarter benefiting from the acquisition of platinum performance nutrition focus animal Health company.
Lifestyle product declines in the quarter will primarily driven by market weakness in new as beef and dairy sectors.
During executive African swine fever.
In the revenue recovery for the Brazil truck drivers strike that increased revenue in Q3 2018.
Were partially offset by growth in poultry.
Huh.
Such as Sunpower, and Proheart, six and new products, such as Revolution, plus and Proheart 12, which launched in the quarter contributed to strong companion animal growth.
US dermatology sales were $154 million for the quarter growing 28%.
Growth this quarter was driven by market expansion, increasing market share returns on direct to consumer investments and price.
Positive companion animal performance was partially offset by us livestock declines in the quarter driven by cattle and to a lesser expense line.
Sales of our counter products were negatively impacted by unfavorable market conditions in the beef and dairy sectors.
Lower feedlot placements in the quarter impacted sales of our products as well as pricing presser driven by competition.
While we continue to see good adoption and growth of the Fostera gold swine vaccine declines in other product sales led to lower swine revenue this quarter, primarily due to the timing of promotional activities.
These challenges in cattle and swine were partially offset by continued growth in poultry, primarily due to sales of our portfolio of alternatives to antibiotics and medicated feed additives.
In addition, we were able to capitalize on competitive challenges, including lack of efficacy and supply constraints.
To summarize the us business had a very positive quarter with diversity and innovation driving results despite challenging market conditions in the cattle sector.
Our International segment also contributed to growth this quarter with operational revenue growth of 5%.
Companion animal operational revenue growth was 16% while lifestyle declined 1% operationally.
Excluding the impact of these axis acquisition International revenue grew 4% operationally.
Companion animal prior growth was driven by key dermatology products. The addition of legacy Abaxis products and growth in emerging markets such as China.
Excluding the impact of the Vacuous acquisition companion animal operational growth was 13%.
International livestock declined modestly primarily due to the impact of African swine fever, as well as an unfavorable comparison to the prior year, which included the revenue recovery from the Brazil truck driver strike.
Roofing cattle and poultry, partially offset the declines in swine driven by favorable market conditions.
In key markets, including Mexico, the UK and Canada, while poultry benefited from increased sales in China, Australia and Brazil.
Now I'd like to review in more detail a few markets in the quarter.
Beginning with China.
Revenue declined 9% operationally driven by the ongoing impact of African swine fever, which was partially offset by continued double digit growth in companion animal.
Our lifestyle portfolio declined 40% operation in China, driven by swine declines that were partially offset by growth in poultry and cattle.
As indicated last quarter, we expect to full year impact of African swine fever, So our revenue to be approximately $50 million.
While the optic has continued to spread to other markets in southeast Asia, a full year estimate remains consistent.
In the medium to long term, we continue to anticipate that other regions will increase exports of pork and other proteins.
However, we have not seen increases in productions to any significant extent.
Our companion animal products continued to grow significantly in China, increasing 43% operationally.
Sales from Parasiticides vaccines, and Apoquel were the primary drivers of growth aided by field force expansion and effectiveness.
Moving on to Brazil sales grew 1% operationally driven by companion animal growth of 17%, partially offset by a lifestyle decline of 5%.
Companion animal revenue growth in Brazil was driven by our teetotaler portfolio, including side, a point, which launched in the second quarter as well as growth in some Patrick.
Livestock declines in Brazil, this quarter and driven by an unfavorable comparison to the prior year. When sales were recovered due to the resolution of a national truck driver strike that occurred in Q2 of the prior year.
In Mexico sales grew 22% operationally driven by lifestyle growth of 15% and companion animal growth of 46%.
Livestock benefited from sales of our premium products for cattle, while strong companion animal performance was driven by growth in legacy Abaxis products Parasiticides and vaccines.
Other emerging and developed markets also contributed to international growth this quarter, particularly in companion animal driven by Parasiticides and key dermatology products.
Overall, our international segment continued to perform well demonstrating the importance of our global diversity in helping to offset the impact of African swine fever.
Now moving on to the rest of the team now.
Adjusted gross margin of 70.1% increased approximately 140 basis points in the quarter on a reported basis compared to the prior year.
The increase is driven by foreign exchange product mix and price, partially offset by tariffs on certain products and the inclusion of the lower margin legacy Abaxis portfolio.
Total adjusted operating expenses, including the impact of the Abaxis acquisition grew 6% operationally.
The increase is primarily related to compensation related expenses and investments to support future growth of the business.
The adjusted effective tax rate for the quarter was 20.5%.
The increase from the comparable 2018 period is primarily related to the impact of a global intangible low tax income or guilty tax which has affected forwards OLED is in 2018.
Adjusted net income for the core quarter grew 10% operationally and adjusted diluted EPS grew 11% operationally again outpacing revenue growth.
The combination of revenue growth, improving gross margins and disciplined operating expense growth enabled us to deliver strong bottom line results, while still investing strategically for long term sustainable growth.
Now moving on to guidance for the full year.
As a result of our store performance in the first nine months of the year, we are narrowing operational revenue growth at the high end delivering raising operational growth for adjusted net income and raising and narrowing the range for adjusted diluted EPS.
Please note.
Okay.
Maybe just a handful of small questions. Most are actually is clarification suffers clarification for companion animal did you guys see both canine and feline mabs, both targeting us approval in 2021.
A clarification for as half I was little mixed up there is a thought that the drag for 2020 will be less than a $50 million incremental hit in 19, but you still think there could be additional incremental headwinds for 2020, and then lastly.
Not going to 2020 guidance on you, but just when we think about that Cogs in sort of hitting that 70% bogey for 2019, which is certainly impressive.
I would think you still going to have a favorable mix shift from 2020 is companion grows faster than livestock based on all the commentary, but do somebody investments in manufacturing offset that thanks guys.
Hey, good done on that.
Reconfirmed that that Repatha higher bolt on current at least for paying that Laura cats and dogs meeting that.
You on the U.S. and we expect launch 2021 of these proposals.
Yes.
Moving to the ethic on shrine that Peter will it assumption that we had on making that accounted that that we provided today, Lisa assuming that it will not be.
Further spread.
Of African assigned Outsize outside China, we have seen that thesis in Southeast Asia Korea, the Philippines sent to a lesser extent also in that east and that European markets, but that what we expect that customers now are improving that buyers recruiting.
And they are protecting their better.
Again said the Africans high fever.
We are not expecting that China to continue growing them. So five basis, maybe unopened ability to slight increase in reduction in that in China and definitely we see the opportunity if other markets to compensate the gap that it will happen Dempsey offer supply of a meat.
Into the Chinese ablation with more importation from a resilient European Union market, Spain, Germany, and some other markets.
Canada, and the U.S. and do something Thats in our opinion will help also.
To generate that growth in livestock in 2020 .
So moving into the third by some intense 12.
Gross profit.
When you run to cover that yes. It's early thoughts on gross margin are accurate. When you look into 2020, there should therefore will be a favorable mix impact as we would still expect companion animal to grow faster than livestock. In 2020, just one thing to note on that trio being the first year of product launch will not be as favorable to gross margin as the rest of the.
Our portfolio would typically be overtime, we do expect.
That product to have very favorable margin, but with the first year launched as always learnings and efficiencies that will be delivered over time. The other thing to take into account is that FX had a very positive impact in 2019 through our overall gross margin we were not expected to be positive in 2019, probably be somewhat of a detractor in 2020.
Thank you next question. Please we'll go next to Dave in Western Berg with Guggenheim Securities. Please go ahead.
Hi, Thanks for taking the question in a echo the congratulations so just in terms of market sizing operator can you help us size the market for the cat opportunity given that there is no existing market just any sort of frame Mark said that we can think about in terms of it'd be population Asia et cetera, and then secondly, a competitor.
Called out the ethane.
African swine fever vaccine market as a multibillion dollar market can you maybe give us.
And our framework and probably on the size of that as well do you agree with that assessment, where did the puts and takes there. Thank you.
Okay. So let me clarify some comments on the market side for a cat season than our current device.
So first there is 90 specific prolensa today in the market that developed specifically for a for cash.
As we know that that the number of cats, it's lower than the number of docs on that even more the number of medical I used that cash even lower than that a number of family life gold the ultra in the U.S. and also worldwide.
If I compare the market of dogs in terms of.
Managing that pain is about 404 to 500 million dollar worldwide. So with the comments I made in terms of.
Medications like medical decisions ratings and the number of comps we need that what we should expect that.
The market potential for cat in pain is lower than this up 400 to 500 million that the advantage is that that will be entering into a space that that he is not anywhere.
Matt clear problem.
Addressing that pain in that induction that we think that that we can generate significant growth opportunities in desire.
And how we keep said the afrikaners find fever.
Market.
Well I generally.
The press release related to offer how much has been the impact on the African their high fever or the vaccine.
The vaccine well I think it's something that that it's a distribution because definitely at we see a significant opportunity in a in China. Developing these are vaccine, but also not only Matt in China that we have already had disease, but that also they need to protect the Africans aside.
Fever in other markets, we're convinced that it will can be at one of the top class vaccine products worldwide more than FNB or even more than.
At BCD too so that the opportunity for developing an achievement in this area is significant.
Next question please.
Well go next to David Risinger with Morgan Stanley . Please go ahead.
Thanks, very much and.
Let me.
Let me please add Mike Congrats to you, both Juan Ramon and Kristen.
So my two questions our first with respect to U.S. tick.
Could you help us understand what percentage of the U.S. dog market needs coverage. Obviously, there are no ticks in the South I, just don't know what percentage of dogs reside in tick infested areas in the country and then second or could you comment on lives.
Stock pipeline launch opportunities in the next year. So thank you.
Thank you David Chris Im sure he looked at U.S. take coverage there a significant say coverage across the United States. There are different txcell, establishing making market Gulf Coast Tech, which is actually a very difficult titrate first thing Saudis tegra that caretaker.
Nor axtel, we do believe that most definitely United States need a comprehensive tech protection.
There may be some geography, where it is not a lot, but I think there may vary the text by real insect protection is critical we across the lab.
As we think about our livestock population opportunity at least on the factor leads we are quite focused on driving innovation across life that we announced a partnership at Colorado State to look at antibiotic I'll turn it into the livestock space. We're also really focused on immunotherapies in livestock and I'll turn.
It is to antibiotics that are excited about some projects there as well. We're also looking at precision livestock Ari to make producers more productive and to better predict.
Animals that I had SEC. We're also excited in the area of genetics, where we can breed healthier animals.
Also more productive and as we've talked about in previous calls looking through diagnostics to bring more I should type apartheid diagnostics aircraft that.
Thank you next question. Please go next to nave and Jacobs preview B.S. Please go ahead.
Hi, this broker on for marine.
I had two questions first on Simparica to you want of you're hoping to get more clarity on his are on duration of therapy. So take few products are more seasonable seasonal which is not typically the case my thoughts on products. So how are you thinking about the duration of therapy for somebody go to your true do you expect this to be predominately using the Dixie season.
Good fusion of therapy may be more and secondly on abaxis, you've talked about expansion into or use markets are the key opportunity. So could you provide an update on expansion plan and Javier I didn't fights target markets all regions that might be ideal and longer term could abaxis reached a mercedes.
International markets at the U.S. market. Thank you.
So thank you very much or Florida to person. So let me let me answer the duration of therapy on answering that nobody does that one thing is that what should be the duration of therapy that we believe free should be in many of their markets at 12 months.
I'm Lucky actualization of identity that pizza Prolia, three Atlanta, there's more and so it hasn't really kind of volatility potential for compliance on Oh, we may see some high season for I think centrally so depending on.
The warmer weather, but they need to protect family Melissa Gorham across.
Yeah, the year I'm definitely the occasional how high warm you've said 12 malls I need of of protecting against these type of disease.
And I like Oh, we seem to talk about a abaxis based expansion plans, both you actually international.
Sure and when we announced the Abaxis now we talked a lot about the fact that we think we can continue to operate the fact that they definitely you at a much better and drive more efficiencies and drive growth, but acknowledge that the competition in the U.S. is a little deeper as we look at the international 'em, we strongly believe in international their significant growth opportunity it's more.
A little ocean, but a much more fragmented day.
The use of diagnostics also varies dramatically by market.
We're very focused on building our own direct demand generation Salesforce, which has really been lacking across most companies are the operator international we looked at 2019 as he's talking about for Abaxis as a platform year to really establish ourselves there and we you know we plan to move to direct distribution or some of our existing district.
Sure.
Across most markets as we look into 2020. So we do think there's a significant opportunity in a basket I to reach has a similar if not higher share and then we have in the U.S. just given a it has a less mature market with much more fragmentation that will require end market by market approach.
Your next question. Please we'll go next to nascent rich with Goldman Sachs. Please go ahead.
Thanks for the questions and let me also offer my congratulations.
On the Triple combo I'm have you gotten feedback from the after <unk> just on where they are in their their review process and kind of what you know is driving your expectations for maybe a little bit later of an approval than you. Originally expected and then can you also talk about the timing for submission and when you would expect approval before the triple combo.
So in in China, and some of the other geography that you mentioned like Mexico.
Right.
Let me it I mean really or make some comments about the process how for approval in a in distress.
Well, they said something we choose a part of or the non Bala process of Ah Ah questions on the on answers.
ER, we yeah, we got there somebody should not a lot request for information from a if he not related to safety or if he could be.
And we already I'm sort of these are right now we are well wait enough for us for different feedback.
And we expect that define I love to see shown on a she bank that's real.
I laid the first quantum or media.
But that is something that is part of a regulatory discussions with a many of their regulatory on how to do so.
Hello.
We said before that we're expecting approval and launch into first quarter.
We have.
Already obtained approval.
Nah Euro and Canada, and we are launching or do we know there's such quite a in these markets.
And we'll be ready for launching their shortly after approval or in the U.S.
Jay said that we had already taking the steps.
Who have ample supply.
To meet the market needs you Gonna 2020 only space, we've essentially that we provided tend to they have used to under 50 additional revenues aimed at Fortune magazine.
And then you also ask about ER approval time in China.
These unfortunately companies that despite the difficult Johnson.
Ah we Ah we are preparing that the filing in China and then after the filing that probably will get a little bit more clarity on a timely to expect that to launching or in this market. So first that we need to launch a actually but you can assume.
Jim in China.
And then also cycle points that pizza analysts both unfold and we plan also to launch in China, and the laser would it be a lunch in everybody that so even if it would take maybe some years, we have product coming into the market in China that there will generate a very but you do have gotten them into instruments.
Yeah.
Next question please.
Our next questions from Kathy miner with Cowen and company. Please go ahead.
Thank you first again, Juan Ramon and Christian I, Congratulations Ti Vo I'm just a couple of questions first on the canine obtain map that you filed can you tell us if that is to compound that you acquired from next after a couple of years ago.
Second I noticed that awkward the fish sales where were down 9% this quarter into and that's somewhat unusual that's been a growing market is that something temporary where is your it didn't change any outlook and last question. Just when we look at African swine fee for it I think took everyone by surprise what are there any other diseases that your mom.
Turning now could impact your business over the next three to five years. Thank you.
Okay. Thank you for the question. So let me start with the answering the question about the their model profitably for ER docs. So we have.
Multiple programs or you know what.
I in the activity or.
The problem the product that we have now running or to launch eat a an internal a program.
For dogs, they want that we are running through launch for cats is coming from a NEXMET.
You also ask about are really driving the quantitative related to Uh huh.
It is fish well. These we have been a low in a very fast in previous years in ER in fish I.
This year, we Ah we catch some challenge as related to the P.D., we actually even a isn't going away.
We just.
Most of our revenues are concentrated in that in someone in OEM Chile.
But we expect turn continue developing new machines to protect animals.
Different and chevron and to reduce the use of antibiotics, which is today.
The only treatment or they only protection against infections.
For efficient like.
Gasoline over the last year or other.
Fish definitely as we continue.
Investing that information, we are confident that reach will be a growing opportunities in the future.
Next question please.
We'll go next to Gregg Gilbert with Suntrust. Please go ahead.
Thank you good morning, a couple longer term ones here first can where we've got us Samir overall industry, but is there an area or areas you'd like to see Florida, the more of a leader than it is today and secondly.
Hi.
On the companion side.
You think type owners are anywhere close maxi now and what they can afford and what they choose to afford.
Caring for their pets.
We think hardware and not in this category, but thinking three to five years plus down the line.
Biotech products et cetera, maybe just comment on that model. Okay. Thank you.
Okay. So let me answer the first question on the increasing that we've covered at the second so what are we where we see that we can improve our market share and then become even if some of the of at least at all becoming leader and the Indonesian coal, we announced that ER, we Oh pay no cooler.
Oh Ah Ah you would've seen in Florida, Bovie, which is related to Vectoring technology. It's an idea that that we believe that ER. We view that are growing up relatively before so we are starting that we see one vaccine, but they're very objective. He said because they're below but I don't think set off a vector.
Actually seemed to cover a move people visiting the improperly and this will tell us that also the Max you might be able to reach we saw our leadership even that Ah you know what Jeff said fractionation would usually make the machine that is usually not in country.
To protect that.
Chicken before a country Prolia injecting X and we see a I'm, not saying, where we Uh huh last share that they'll although not shown that that's right.
I have the shekel not in any way, we seem that that we have been improving their significantly. She is the launch of Ah Ah Shibani got followed by a the launch of the Russian plush.
So hard on 12 pizza, but actually the site and we expect also we are the launch of bank deal.
To become a.
Much stronger leader in but actually beside them today.
Greetings.
Sure I came back.
You know we've seen.
He said over the last few years any spends per pet I think a lot that have to do the democratic share shifts and developed markets.
Our people, having fewer children spending more time with our pets millennials in particular are much more engaged at their pets.
He spoken about the increasing pending starts when they move further back out to your house and then ultimately add to your bad So we don't see any and in this market. It's been a very resilient business even in times that economic challenges I people that continue to spend on their part. So we don't see right now any indicator that spending.
I will be going down so I think it remains a strong market. If you look to the future and if he looked at the urbanization and the emerging middle class in emerging market, we see significant growth there as you add more markets.
More pets and medical I like that.
Next question please.
Our next to Kevin I wish with Craig Hallum. Please go ahead.
Hi, Thanks, So one quick one you know thinking about African swine fever in different way down the road when it's time to re populate the heard just wondering how much benefit that could bring to silhouette, especially given your your presence in genomics in genetics.
Sure.
Let me okay.
Population, I mean, essentially China and some of these other geography will be populate we believe when they do a them won't move more to industrialize production.
More away from many small backyard farms.
We think that does play to the strength of innovative companies like say, let us. So we do see the teacher at African sorting out. So that's why fever as they go down meeting more technologically based production, which we think it will be an increase for us and certainly if we're able to create a vaccine for African swine fever they'd be in warranty expense.
Next question please.
And there appears to be no further questions I'll return the floor to Juan Ramon for closing remarks.
Thank you very much on seems a bit would be my last earnings call I want to thank you all of you.
What are those who for or do you have given to me and as revenues over the last seven years.
Because being that an amazing.
Germany, and I'm very proud of the value that we concentrated.
I know that you will enjoy the same ongoing commitment to our volume provision from increasing that Glenn on device profile, our leadership team and.
The data scientists into the next phase of growth.
In closing I remain confident.
No brighter future offers right is this company on the its people have the capabilities.
Experience on customer focus.
Continue delivering world class Shoals for our customers I'm not shareholders. Thank you very much.
And this will conclude today's program. Thanks for your participation you may now disconnect.
HM.
[noise].
[noise].