Q2 2025 Zoetis Inc Earnings Call

Steve Frank: Hello. Your program is about to begin. Welcome to the second quarter 2025 financial results conference call and webcast for Zoetis Inc. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis Inc. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion via dial-in or on the Investor Relations section of zoetis.com. At this time, participants have 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 telephone keypad.

Please stand by your program is about to begin.

Welcome to the second quarter, 2025 Financial results conference call and webcast for Zoetis.

uh, hosting the call today, is Steve Frank vice president of investor relations for Zoetis

The presentation materials and additional Financial tables are currently posted on the investor relations section of zoetis.com.

The presentation slides can be managed by you the viewer and will not be forwarded automatically. In addition, a replay for of this call will be available approximately 2 hours after the conclusion.

Via dial in or on the investor relations section of zoetis.com.

At this time, participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation.

Steve Frank: If at any point your question has been answered, you can remove yourself from the queue by pressing star and two. In the interest of time, we ask that you limit yourself to one question and then queue up again if you have any follow-ups. Your line will be muted when you complete your question, and when posing your question, please pick up your handset to allow for optimal sound quality. It is now my pleasure to turn the call over to your host, Steve Frank, Vice President of Investor Relations for Zoetis Inc.

If you would like to ask a question at that time, please press star and 1 on your telephone keypad. If at any point in your question has been answered. You can remove yourself from the queue by pressing star and 2, in the interest of time, we ask that you limit yourself to 1 question, and then queue up. Again, if you have any follow-ups, your line will be muted when you complete your question. And when posing your question, please pick up your handset to allow for optimal sound quality.

It is now my pleasure to turn the call over to your host. Steve Frank vice president of investor relations for Zoetis.

Wetteny Joseph: Thank you, Operator. Good morning, everyone, and welcome to the Zoetis second quarter 2025 earnings call. I am joined today by Kristin Peck, our Chief Executive Officer, and Wetteny Joseph, our Chief Financial Officer. Before we begin, I will remind you that the slides presented on this call are available on the Investor Relations section of our website and that our remarks today will include forward-looking statements and that actual results could differ materially from those projections. 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 SEC 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 principles or U.S. GAAP.

Thank you, operator. Good morning, everyone, and welcome to the Zeta second quarter 2025 earnings call. I am joined today by Kristen PEC, our chief executive officer and Whitney Joseph our Chief Financial Officer. Before we begin I'll remind you that the slides presented on this call are available on the investor relations section of our website and that our remarks today will include forward-looking statements and that actual results could differ materially from those projections 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 filing, including but not limited to our annual report on form 10K and our reports on form 102.

Wetteny Joseph: A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and the company's 8-K filing dated today, Tuesday, August 5th, 2025. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin.

Our remarks today will also include references to certain Financial measures which were not prepared in accordance with generally accepted accounting principles or us gaps. A Reconciliation of these non-gaap Financial measures to the most directly comparable. Us. Gaap measures is included in the financial tables that accompany our earnings press release and the company's 8K. Filing dated today, Tuesday, August 5th, 2025

Kristin Peck: Thank you, Steve, and good morning, everyone. Welcome to our second quarter 2025 earnings call. Thanks to the dedication of our colleagues around the world, we delivered strong, broad-based 8% organic operational revenue growth, a reflection of the strength of our innovation engine and the excellence of our customer-focused execution. We also grew adjusted net income 10% on an organic operational basis, underscoring our focus on operational efficiency. Our international segment grew organic operational revenue 9%, demonstrating our ability to capitalize on key trends that are expanding regional markets. The U.S. grew 7%, excluding the impact of the MFA divestiture. Companion Animal grew 8% operationally, while livestock delivered 6% organic operational growth, driven by sustained demand for our trusted, market-leading solutions.

We also cite operational results. Which exclude the impact of foreign exchange with that, I will turn the call over to Kristen

Thank you, Steve, and good morning everyone. Welcome to our second quarter 2025 earnings call.

Ation of our colleagues around the world. We delivered, strong broad-based, 8% organic, operational Revenue growth. A reflection of the strength of our Innovation engine and the Excellence of our customer focused execution.

We also grew adjusted. Net income. 10% on an organic operational basis. Underscoring, our focus on operational efficiency.

Our International segment grew organic, operational Revenue 9% demonstrating, our ability to capitalize on key trends that are expanding Regional markets. The US grew 7%, excluding the impact of the MFA Devastator.

Kristin Peck: This quarter's performance highlights the strength of our diversified portfolio, with growth across markets, species, franchises, and channels, and balanced contributions from price and volume, a testament to our strategy. With organic operational revenue up 9% in the first half, we are delivering in line with our plan and are well-positioned to carry that progress into the second half. Our consistent performance across economic and competitive cycles reinforces the strength of our business and animal health as one of the most compelling long-term growth sectors. Key franchises collectively delivered another quarter of double-digit performance, underscoring not only their continued momentum, but also the power of our innovation and the disciplined execution that drives value across the business. As you look closer at our companion animal growth drivers, it's clear that innovation is not only our core competency; it's the most powerful way we live our purpose.

Campaign in animal grew 8% operationally while livestock delivered 6%, organic operational growth driven by sustained. Demand for our trusted, market-leading Solutions.

This quarter's performance, highlights the strength of our Diversified portfolio. With growth across markets species, franchises and channels. And balance contributions from price and volume at Testament to our strategy.

With Organic, operational Revenue up, 9% in the first half, we are delivering in line with our plan and our well, positioned to carry that progress into the second half.

Our consistent performance across economic and competitive Cycles, reinforces the business and Animal Health as 1 of the most compelling long-term growth sectors.

Key franchises collectively delivered another quarter of double-digit performance underscoring not only their continued momentum but also the power of our Innovation and the discipline execution that drives value across the business.

Kristin Peck: What's equally clear, our key franchises have significant runway for continued durable growth. Our Simparica franchise, for example, grew 17% operationally, even after nearly two years of competition. Demand continues to rise for comprehensive triple combination protection, the fastest growing segment in the parasiticides market, where Simparica Trio is setting the standard of care, delivering 20% operational revenue growth. With new entrants, the overall category continues to expand, fueled in part by increased promotional activity that is raising awareness of the benefits of triple combination protection. Thanks to our first mover advantage, strong commercial relationships, and a preferred position with key veterinary partners, these efforts are often reinforcing our leadership. Simparica Trio remains the trusted first choice for veterinarians and pet owners alike.

As you look closer at our Companion, Animal growth drivers, it's clear. That Innovation is not only our core competency, it's the most powerful way. We live our purpose and what's equally clear. Our key franchises have significant runway for continued durable growth.

Our simpa franchise, for example, grew 17% operationally, even after nearly 2 years of competition.

Demand continues to rise for comprehensive triple combination protection. The fastest growing segments in the parasitic Size Market or some pericat Trio is setting. The standard of care delivering 20% operational Revenue growth with new entrance. The overall category continues to expand you'll in part by increased promotional activity. That is Raising awareness of the benefits of triple combination protection.

Kristin Peck: In this franchise, our alternative channel strategy, especially in the U.S., the largest market for parasiticides, remains a key source of diversification and differentiation, helping us meet customers where they are and driving stronger compliance by ensuring pet owners have convenient ongoing access to trusted products. We expect these dynamics to continue for the foreseeable future. More than 10 years since launch and with over 12 million dogs treated, our key dermatology franchise continues to deliver, growing 11% operationally, a testament to how durable true innovation can be. This quarter's performance was fueled by particularly strong results internationally, where we are seeing increased uptake among new patients and higher compliance. What continues to set this franchise apart is its depth and versatility. We didn't just create the derm category; we've continued to expand it with complementary treatment options that address a range of needs.

Thanks to our first mover Advantage, strong commercial relationships, and preferred position with key Veterinary Partners. These efforts are often reinforcing. Our leadership Trio Remains The Trusted, first choice for veterinarians and pet owners alike.

In this franchise, our alternative channel strategy, especially in the US, the largest market for parasiticides remains a key source of diversification and differentiation helping us meet customers where they are and driving stronger compliance by ensuring pet owners have convenient ongoing access to trusted products.

We expect these Dynamics to continue for the foreseeable future.

more than 10 years since launch and with over 12 million dogs treated, our Chi Dermatology franchise continues to deliver growing 11% operationally a testament to how durable true Innovation can be

This quarter's performance was fueled by particularly strong results, internationally or we are seeing increased uptake among new patients and higher compliance.

Kristin Peck: Apoquel provides added flexibility for pet owners, while Cytopoint is a convenient injectable solution for longer-lasting relief. Together, these modalities help vets personalize care, improve compliance, and deliver high satisfaction, reducing the likelihood of switching and supporting durable franchise performance. Even after a decade, we see meaningful runway ahead, driven by two powerful dynamics: the continued importance of compliance in chronic disease management and the opportunity to reach more than 20 million dogs who remain under or untreated today. Our confidence is grounded in what sets us apart. We lead through science, designing solutions that address the most persistent needs in animal health and establishing a standard of care that's not easily surpassed. As we shared earlier this year, we're confident not only in our market-leading differentiated portfolio of today, but in the portfolio of the future already taking shape.

What continues to set this franchise apart is its death and versatility, we didn't just create the Derm category. We'd continue to expand it with complimentary treatment options that address a range of needs.

Apple Coke shoe provides added flexibility for pet owners. While cytopoint is a convenient injectable solution for longer lasting relief.

Together, these modalities help vet personalized care, improve compliance and deliver High satisfaction, reducing the likelihood of switching and supporting durable franchise performance.

Even after a decade, we see meaningful Runway ahead driven by 2 powerful Dynamics.

The continued importance of compliance and chronic disease management, and the opportunity to reach more than 20 million dollars.

Remain under or untreated today.

Kristin Peck: In osteoarthritis or OA pain, Librela declined 7% operationally this quarter. We are actively advancing efforts to accelerate adoption, grounded in both the scale of the opportunity and the positive patient impact we continue to see. In the U.S. alone, 27 million dogs suffer from OA, yet only 9 million are currently treated, and today we are reaching just 1 million of them. As with any breakthrough innovation that establishes a new standard of care, adoption rarely follows a straight line. That is why we are taking deliberate steps to develop the market, educating veterinarians and pet owners to ensure a clear understanding of the product's benefit-risk profile and to delay lasting competence. In fact, more than 75% of U.S. patients, past and present, report being extremely or very satisfied with Librela's results.

Our confidence is grounded in what sets us apart we lead through science designing solutions that address the most persistent needs in animal health and establishing a standard of care that's not easily surpassed. And as we shared earlier this year, we're confident not only in our Market leading differentiated portfolio of today, but in the portfolio of the future already taking shape.

Grounded in both the scale of the opportunity and the positive patient impact we continue to see.

In the us alone. 27 million dogs suffer from OA, yet only 9 million are currently treated. And today, we are reaching just 1 million of them.

As with any breakthrough, Innovation, that establishes a new standard of care, adoption, rarely, follows a straight line.

Kristin Peck: Shaping a new market takes time, but we remain confident in our ability to deliver over the long term. We see significant potential in Librela and will continue to invest in unlocking it because the need for chronic pain relief is significant, persistent, and deeply personal for our customers. It also reflects how we are thinking more broadly about sustaining growth through continued innovation, access, and differentiation. Globally, across these franchises, more patients remain unaddressed than treated, and in many cases, the opportunity to expand care exceeds the current market, particularly outside the U.S., where rising pet ownership and medicalization are fueling demand for therapies that support longer, healthier lives, including among aging COVID pets. In livestock, demand for our portfolio remains strong, with 6% organic operational revenue growth led by double-digit gains internationally.

That's why we're taking deliberate steps to develop the markets, educating veterinarians and pet owners to ensure a clear understanding of the products benefit risk profile and to build a lasting confidence. In fact, more than 75% of us, patients pass, and present report, being extremely, or very satisfied with the rebeles results.

Shaping. A new market takes time, but we remain confident in our ability to deliver over the long term.

We see significant potential in Liberia and will continue to invest in unlocking it because the need for chronic pain, relief is significant persistence and deeply personal for our customers.

It also reflects how we're thinking more broadly about sustaining growth through continued Innovation, access and differentiation.

Globally across these franchises more patients, remain unaddressed than treated. And in many cases, the opportunity to expand care exceeds the current market. Particularly outside the US where Rising pet ownership and medicalization, are fueling demand for therapies. That support longer healthier lives, including among aging Co pets.

Kristin Peck: Across species, this business remains an important driver, reflecting multiple years of strong execution and above-market performance. Broader industry dynamics, including rising U.S. protein consumption, continue to reinforce the long-term fundamentals. This quarter, we also advanced our pipeline with the conditional license of our avian influenza vaccine for use in lactating dairy cattle in the U.S. While the revenue impact is limited, it reflects our longer-term focus, a company built on purpose and powered by innovation. Altogether, these results highlight the strength and diversity of our portfolio, driving consistent performance from multiple sources across varying market conditions. Based on our strong first-half performance and what we see in the current macro environment, we are raising our full-year guidance for organic operational revenue growth to 6.5% to 8%.

In livestock, demand for our portfolio remains strong with 6% organic operational revenue growth, led by double-digit gains internationally.

Across species. This business remains an important driver reflecting multiple years of strong execution and above market performance.

Broader industry, Dynamics, including Rising us protein, consumption, continue to reinforce the long-term fundamentals.

This quarter, we also advanced our pipeline with the conditional license of our avian influenza vaccine for use in lactating dairy cattle in the U.S.

While the revenue impact is limited. It reflects our longer term, focus, a company built on purpose and powered by innovation.

Altogether. These results highlight the strength and diversity of our portfolio. Driving consistent performance from multiple sources across varying market conditions.

Kristin Peck: We are also raising our guidance for organic operational growth in adjusted net income to 5.5% to 7.5%, reflective of continued discipline in execution and cost management. Looking ahead, we are well-positioned to deliver our full-year commitment, supported by durable industry trends and our ability to adapt and execute with focus. Our consistent performance across economic cycles and competitive dynamics reflects the fundamental strength of our business, the breadth of our portfolio, and our commitment to delivering differentiated value. That resilience is grounded in the strength of our global manufacturing and commercial capabilities, enabling us to deliver reliably, scale effectively, and support our customers across geographies and market conditions. As we look to the second half of the year, our focus remains clear: execute with discipline, advance meaningful innovation, and stay deeply connected to the needs of our customers.

Based on our strong first half performance. And what we see in the current macro environment, we are raising our full year, guidance for organic operational Revenue growth to 6.5 to 8%

We are also raising our guidance for organic operational growth in adjusted net income to 5.5 to 7.5% reflected of continued discipline in execution and cost management.

Looking ahead. We are well, positioned to deliver our full year commitments supported by durable industry Trends and our ability to adapt and execute with Focus.

Our consistent performance across economic cycles, and competitive Dynamics, reflects the fundamental strength of our business, the breadth of our portfolio and our commitment to delivering differentiated value.

That resilience is grounded in the strength of our global manufacturing and commercial capabilities, enabling us to deliver reliably at scale, effectively support our customers across geographies and market conditions.

Kristin Peck: With a portfolio built to solve real-world challenges and a pipeline aimed at raising the standard of care, we are well-positioned to lead, not just in the markets we serve today, but in shaping the future of animal health. Thank you for your continued support, and with that, I'll turn it over to Wetteny Joseph to walk through the financials. Wetteny?

As we look to the second half of the Year, our Focus remains clear execute with discipline. Advanced meaningful Innovation and stay deeply connected to the needs of our customers. With a portfolio, built to solve real world challenges and up pipeline aimed, at raising the standard of care. We are, well, positioned to lead, not just to the markets we serve today, but in shaping the future of animal health,

Wetteny Joseph: Thank you, Kristin, and hello everyone. In the second quarter, we posted $2.5 billion in revenue, growing 4% on a reported basis and 8% on an organic operational basis, which excludes the impact of foreign exchange and the MFA divestiture. Adjusted net income of $783 million grew 10% on a reported basis and 10% on an organic operational basis. Our organic operational revenue growth was balanced, driven by 4% price and 4% volume. Our performance highlights our diverse and differentiated portfolio, with strong growth across species, geographies, and channels. This broad-based growth underscores our ability to compete and win across the markets in which we operate and to generate durable returns in the face of competition and in challenging macroeconomic environments. Our companion animal portfolio posted $1.8 billion in revenue, growing 8% operationally.

thank you for your continued support. And with that, I'll turn it over to Whitney to walk through the financials. Let me

Thank you Kristen and hello everyone.

In the second quarter, we posted 2.5 billion dollars in Revenue, growing 4% on a reported basis and 8% on an organic operational basis which excludes the impact of Foreign Exchange and the MFA that have messager.

Adjusted net income of 783 million with 10% on a reported basis and 10% on an organic operational basis.

Our organic operational Revenue growth was balanced driven by 4%, price and 4% volume.

Our performance highlights are diverse and differentiated portfolio with strong growth across species geographies and channels.

This broad-based growth underscores our ability to compete and win across the markets in which we operate. And to generate durable returns in the face of competition.

And in challenging microeconomic environments.

Wetteny Joseph: Globally, on an operational basis, our Simparica franchise contributed $448 million, growing 17%, and Key Dermatology posted $460 million, growing 11%. Our global livestock portfolio contributed organic operational growth of 6% on $638 million in revenue. Our livestock business has outperformed our expectations thus far this year, growing 7% on an organic operational basis year to date, compared to low single-digit market growth projections. This also marks the fifth consecutive quarter of organic operational livestock growth above 5%, signaling good momentum that we expect to continue through the remainder of the year. Moving on to our Q2 segment results. U.S. revenue grew 4% on a reported basis and 7% on an organic operational basis. Companion animal grew 9%, and livestock declined 2% on an organic operational basis. The U.S.

Our Companion Animal portfolio posted 1.8 billion dollars in Revenue with 8% operationally.

Million dollars, going 17%, and Chi Dermatology posted $460 million, going 11%.

Our global life cycle. Portfolio contributed organic operational. Growth of 6% on 638 million in Revenue,

I would like to, like business has outperformed our expectations thus far this year going 7% on an organic operational basis year to date compared to low single digit market market, growth projections,

This also marks the fifth consecutive quarter of organic operational, lifestyle growth above 5% signaling good momentum, that we expect to continue through the remainder of the year.

Now, moving on to our Q2 segment results.

Us Revenue grew 4% on unreported basis and 7% on an organic operational basis.

Companion. Animal with 9% and livestock decline 2% on an organic operational basis.

Wetteny Joseph: companion animal business was driven by the performance of our Simparica and Key Dermatology franchises, partially offset by a decline in sales of our OA pain MABS. We have seen vet clinic activity improve throughout the quarter versus the lows in February, and as expected, our business continues to grow above the market despite increasing competition across two of our key franchises. Both our Simparica and Key Dermatology franchises benefited from strong alternative channel sales in the quarter. In addition to organic growth above the vet channel, we also saw tailwinds from certain retailers increasing their presence in this space. This increased presence will further expand the attractiveness of alternative channels that more and more pet owners are choosing for product fulfillment. Our Simparica franchise grew 18% in the quarter on $329 million in revenue.

The US Companion. Animal business was driven by the performance of our sarica and ketogenic franchises partially offset by a decline in sales of our oap Maps.

We have seen vet clinic activity improve throughout the quarter versus the lows in February. As expected, our business continues to grow above the market, despite increasing competition across two of our key franchises.

Both of us in Paris and dermatology franchises benefited from strong alternative Channel sales in the quarter.

In addition to organic growth above the red Channel. We also sell Tailwind from certain retailers increasing their presence in the space.

This increased presence will further expand the attractiveness of alternative channels that more and more pet owners are choosing for product fulfillment.

Our spa franchise, grew 18% in the quarter on 329 million in Revenue.

Wetteny Joseph: Despite intense competition, Simparica Trio has not experienced year-over-year patient share loss since competition launched almost two years ago. During this time, we have seen triple combination share in vet practices expand from 30% to 45%, and our retail channel sales, which drive significantly better compliance and stickiness, have more than doubled. Simparica Trio remains the market leader in the triple combination space and the largest product in the largest therapeutic area in animal health. Key Dermatology sales were $307 million, growing 9%, with growth across both Apoquel and Cytopoint, with growth coming more from volume than price. We continue to see minimal patient share impact due to competition. We see the strongest growth in our Apoquel chewable formulation, which provides easier administration than a film-coated tablet and remains differentiated from competitive entrants.

Despite intense competition since rocket Trio, has not experienced year-over-year, patient, share loss since competition launched, almost 2 years ago.

During this time, we are seeing triple combination, share in vet practices expand from 30% to 45% and our retail Channel sales which Drive significantly better compliance and sickness have more than doubled.

The bracket here Remains the market leader in the triple combination space, and the largest product in the largest therapeutic area in Animal Health.

Chi Dermatology sales were 377 million growing 9% with growth growth across both AA and cytopoint with growth coming more from volume than price.

The Continuous, the minimum patient share impacts due to competition.

We see the strongest growth in our agricultural formulation, which provides easier Administration than a film coded tablet and remains differentiated from competitive entrance.

Wetteny Joseph: Lastly, as a reminder, we saw growth headwinds from the impact of our initial Apoquel chewable stocking order in the prior year. This impact offsets the new retail stocking tailwinds I noted earlier. Additionally, our combined OA pain MABS declined 12% in the U.S. this quarter on $62 million in sales. Librela declined 16% on $45 million in revenue. As noted last quarter, our ramp-up for Librela in the U.S. has not gone according to expectations, with headwinds impacting product adoption and creating barriers for vet recommendations. As Kristin Peck mentioned, our demand generation efforts remain focused on education to help vets and pet owners overcome perceived safety concerns with Librela. Additionally, we are working on phase four studies to reaffirm the safety and efficacy of Librela when compared to alternative treatments such as NSAIDs. These efforts will help our return to sustained growth and accelerate our trajectory.

Lastly, as a reminder, we saw growth headwinds from the impact of our initial aquacultural stocking order in the prior year.

This impact offsets the new retail stock intelligence. I noted earlier.

additionally, our combined for a payments declined, 12% in the US, this quarter on 62 million in sales,

The world declined, 16% on 45 million in Revenue.

As noted last quarter, our rep up for leella in the US has not gone. According to expectations with headwinds impacting product adoption and creating barriers for vet recommendations.

As Kristen mentioned, our demand generation efforts remain focused on education to help vets and pet owners, overcome perceived safety concerns with LaBella.

Additionally we are working on phase 4, studies to reaffirm the safety and efficacy of lubella when compared to Alternative treatments such as insects.

Wetteny Joseph: We remain confident in Librela long term. Solensia declined 3% on $17 million in sales for the quarter. Organic operational declines of 2% in U.S. livestock are primarily driven by the timing of supply of festicides. Moving on to our international segment, revenue grew 3% on a reported basis and 9% on an organic operational basis. Companion animal grew 8% operationally, and livestock grew 10% on an organic operational basis. International companion animal growth was driven by our key dermatology and Simparica franchises. Our key dermatology franchise grew 15% operationally, posting $153 million in revenue internationally, with strong performance across both Apoquel and Cytopoint. Our growth has been largely driven by the efforts of our field force, who have been instrumental in driving high engagement with our key corporate accounts. This has continued to expand the market through new patient adoption, as well as improved compliance, especially in chronic cases.

These efforts will help our return to sustained growth and accelerate, our trajectory we remain confident in LaBella, long term.

Valencia declined 3% from 17 million dollars in sales for the quarter.

Organic operational. Declines of 2%. In the US. Lifestock are primarily driven by the timing of supply of septear here.

Moving on to our International segment, Revenue grew, 3%, owner reported basis and 9% on an organic operational basis.

Japan animal grew 8% operationally and livestock with 10% on an organic operational basis.

International Companion. Animal growth was driven by a key Dermatology, and to America franchises.

Our Chi Dermatology franchise, grew 15% operation, only, posting 153 million in Revenue International only which strong performance across both aqua and site of points.

Our growth has been largely driven by the efforts of our Field Force, who have been instrumental in Driving High engagement with our key corporate accounts.

This has continued to expand the markets in new patient induction, as well as improved compliance, especially in, chronic cases.

Wetteny Joseph: We continue to see preference for our differentiated products, Apoquel chew and Cytopoint, both of which offer benefits in ease of administration and compliance compared to alternatives. Our international Simparica franchise grew 16% operationally on $119 million in sales, with double-digit growth across both brands. Both brands continue to be among the fastest growing parasiticide brands across international markets, gaining share despite growing competition. Simparica Trio grew 22% operationally on $55 million in sales. Similar to what we are seeing in the U.S., where less than half of dogs prescribed a parasiticide by a vet are currently receiving triples, many international markets have not yet adopted triple combinations as a standard of care, with 30% of our top 10 markets doing less than $1 million in Trio sales this quarter. This represents a continued opportunity for market expansion for our Simparica franchise.

Compared to alternatives.

Our international spherical franchise was 16% operational, only on $119 million in sales, with double-digit growth across both brands.

Both Brands continue to be among the fastest growing for our suicide Brands across International markets, gaining share, despite growing competition.

In Practical Trio, grew 22% operation. Only

on 55 million in sales.

Similar to what we are seeing in the US where less than half of dogs. Prescribed, the person by a vet or currently receiving triples, many International markets, have not yet adopted tropical combinations as a standard of care with 30% of our top 10 markets, doing less than 1 million dollars in Trio sales, this quarter

This represents a continued opportunity for Market expansion for us in America franchise.

Wetteny Joseph: Simparica contributed $64 million in sales, growing 12% operationally. Our growth in both brands has benefited from strong key account relationships, driving stickiness among competitive conversion, as well as increased utilization and expansion of the oral parasiticide market. Internationally, our OFA MABS grew 4% operationally on $83 million in combined revenue. International sales of Librela were $64 million, growing 1% on an operational basis. Despite high vet confidence in Librela in international markets, we are seeing impacts to new patient starts from social media headwinds, particularly in English-speaking markets. We have begun anchoring our U.S. efforts internationally to address these concerns. Solensia sales were $19 million, growing 17% operationally in the quarter. We have seen high satisfaction and balanced growth across key markets and expansion into Latin American and Asian markets.

America contributed 64 million dollars in sales going 12%, operational money.

Our growth in both brands has benefited from strong key account relationships, driving sickness among competitors competitive conversion, as well as increased utilization and expansion of the oil city Side Market.

And internationally, our oil bay maps will operate at 4% capacity, resulting in $83 million in combined revenue.

It's a national sales of Luella. We're 64 million growing 1% on an operational basis.

Despite High vet confidence in LaBella and international markets. We are seeing impacts to new patient starts from social media, headwinds particularly in English-speaking markets,

We have begun echoing, our us efforts International, and to address this concerns.

Valencia sales were 19 million growing 17% operationally in the quarter.

We have seen High satisfaction and balanced growth, of course, key markets, and expansion into Latin American and Asian markets.

Wetteny Joseph: International livestock grew 10% on an organic operational basis in the quarter, with growth across all of our core species. Performance was driven by swine, partly due to tailwinds from China, which are timing related and will gradually normalize in subsequent quarters, as well as vaccine growth in Latin America. Additionally, we saw strong performance in our fish portfolio, driven by high demand for our vaccines across both Norway and Chile. Poultry growth came primarily from vaccine performance in the Middle East and Asia, driven by increased focus on vaccines after our MFA divestiture. Our cattle business benefited from price contributions, particularly in high inflationary markets. Now moving on to the P&L for the quarter. Adjusted gross margins of 73.7% grew 200 bps on a reported basis, for an exchange that had a favorable impact of 130 bps.

International lifestyle grew 10% on an organic operational basis in the quarter with both across all of our core species,

Performance was driven by swine.

Partly due to Tailwind from China, which are timing related and will gradually normalize in subsequent quarters as well as vaccine growth in Latin America.

Additionally, so strong performance in our fish portfolio driven by high demand for our vaccines across. Both Norway and Chile.

F Street. Growth came primarily from vaccine performance in the Middle East and Asia driven by increased focus on vaccines after our MFA diversity.

Our cattle business benefited from Price contributions particularly in high inflationary markets.

Now, moving on to the p&l, for the quarter.

Adjusted gross, margins of 73.7% with 200 basis points. On a reported basis.

Wetteny Joseph: Excluding FX, we saw higher margins due to favorable impact of our MFA divestiture, as well as benefits from price. This was partially offset by higher manufacturing costs in line with our expectations, which have been improving as we work through inventory valued at prior year standards. Adjusted operating expenses increased by 5% operationally. Growth was primarily driven by SG&A increases of 6% operationally, mainly due to the timing of advertising and promotion spend, as well as higher compensation-related expenses. Operational R&D growth was 1% in the quarter, with higher compensation-related expenses partially offset by lower project spend, primarily due to timing. Adjusted net income grew 7% operationally and 10% on an organic operational basis. Adjusted diluted EPS grew 9% operationally in the quarter and 13% on an organic operational basis. Now moving to guidance for full year 2025.

For an exchange, at a favorable impact of 130 basis points.

Excluding effects. We saw higher margins due to favorable impacts of our MFA diversity as well as benefits from price.

This was partially offset by higher manufacturing costs in line with our expectations, which have been improving. As we work through inventory, valued by prior year standards,

just at operating expenses increased by 5% operational.

Growth was primarily driven by sgna increases of 6%. Operation only mainly due to the timing of advertising and promotion, spend as well as higher competition related expenses.

Operational R&D growth was 1% in the quarter with higher compensation related expenses, partially offset, by lower project spend primarily due to timing.

Adjusted net income through 7% operationally and 10% on an organic operational basis.

Adjusted diluted DPS with 9% operational in the quarter and 13% on an organic operational basis.

Wetteny Joseph: Please note that guidance reflects foreign exchange rates as of late July. Consistent with last quarter, our guidance does not include any assumed impact of future tariffs or policy changes. The impact of currently enacted and assumptions on announced tariffs on our business is slightly higher than our estimate as of our May guidance update. However, we feel we can absorb the incremental impact. For the year, we are guiding revenue between $9.45 billion and $9.6 billion and raising our organic operational growth to a range of 6.5% to 8% based on our strong first-half performance. While our first-half organic operational revenue growth of 9% is above our guidance range, we have highlighted all year that our guidance is reflective of headwinds from launch-related competitive impacts in the second half of the year. There is still significant uncertainty on the timing of these events.

now, moving to guidance for a full year 2025, please note that guidance reflects for an exchange rate as of late July,

Consistent with last quarter. Our guidance does not include any assumed impacts of future tariffs or policy changes.

The impact of currently enacted and assumptions. On announced tariffs on our business is slightly higher than our estimate. As of our May guidance update. However, we feel we can absorb the incremental impact,

for the year, we are guiding revenue between 9.45 and 9.6 billion and raising our organic operational growth to a range of 6.5% to 8% based on our strong first half performance.

While our first half organic operational Revenue growth of 9% is above our guidance range. We have highlighted all year that our guidance is, is reflective of headwinds from launch related competitive impacts in the second half of the year.

Wetteny Joseph: Despite these temporary headwinds, we still see significant room for growth long term. We have been pleased with the growth of our Simparica and Key Dermatology franchises despite headwinds and pain, and reiterate our expectation that these combined innovative franchises will grow double digits in 2025. This commitment, along with the strength we have seen in our livestock business, highlights the revenue diversity that is fundamental to our continued above-market growth. We now expect adjusted net income to be in the range of $2.825 billion to $2.875 billion, reflecting operational growth of 5.5% to 7.5% on an organic operational basis. The increase in our expected adjusted net income is driven by improved margin expectations due primarily to lower manufacturing costs, the higher revenue outlook, and expense management, partially offset by the increased impact of tariffs.

There are still significant uncertainty on the timing of these events.

Despite these temporary headwinds, we still see significant rooms for long for growth long term.

And reiterate for expectation that these combined Innovative franchises will grow double digits in 2025.

This commitment along with the strength we have seen in our livestock business highlight, the revenue diversity. That is fundamental to our continued above market growth.

We now expect that just a net income to be in the range of 2.825 to 2.875 billion reflecting operational growth of 5.5% to 7.5% on an organic operational basis.

Wetteny Joseph: Finally, we expect adjusted diluted EPS to be in the range of $6.30 to $6.40 and reported diluted EPS to be in the range of $5.90 to $6.00. Consistent with prior guidance, our EPS projections are based on current share counts and do not consider the future favorable impact of our ongoing share repurchase program. The first half of the year has not been without its challenges. We have navigated tariffs, an uncertain macro environment, competitive pressures, and challenges with Librela. Through all of this, we have driven cross-portfolio growth above our expectations that has given us the confidence to raise our guidance. As we progress into the back half of the year, we remain confident in our ability to meet our commitments as we have done time and again. I will hand things over to the operator to open the line for your questions. Operator?

The increase in our expected adjusted. Net income is driven by improved margin expectations to primarily to lower manufacturing costs. The higher Revenue Outlook and expense management partially offset by the increase impact of tariffs.

Finally, we expect adjusted due to the PS to be in the range of $6.30 to $6.40 and reported the the loaded DPS to be in the range of $5.90 to $6.

Assistance, with prior guidance, our EPS projections are based on current share accounts, and do not consider the future of favorable impact of our ongoing share. We purchase programs.

The first half of the year has not been without its challenges.

We have navigated tariffs on uncertain, macro environments, competitive, pressures and challenges with live. Well,

Through all of this, we have driven cross. Portfolio growth above our expectations, that has given us the confidence to raise our guidance.

As we progress into the back half of the year, we remain confident in our ability to meet our commitments as we have done time. And again,

Now, I hand things over to the operator to open the line for your questions. Operator.

Operator: Absolutely. At this time, if you would like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the queue at any time by pressing star and two. As a reminder, we do ask that you limit yourself to one question and then re-queue for any follow-ups. Your line will be muted once you complete your question. Again, when posing your question, please pick up your handset to allow for optimal sound quality. We will take our first question from Michael Ryskin with Bank of America. Please go ahead. Your line is open.

Absolutely. At this time. If you'd like to ask a question, please press the star and 1 keys on your telephone keypad. Keep in mind, you may remove yourself from the Queue at any time by pressing star and 2. As a reminder, we do ask that you limit yourself to 1 question and then req, uh, for any follow-ups, your line will be muted once you complete your question. And again, when posing your question, please pick up your handset to allow for optimal sound quality.

We'll take our first question from Michael rice, skinned, with Bank of America, please go ahead. Your line is open.

Michael Ryskin: Great. Thanks for taking the question and congrats on the quarter, guys. I want to start first with the Simparica Trio and Derm franchises. At a high level, you spent a lot of time talking about competition and how you have been able to retain meaningful share, not really seeing any incremental erosion. I am just wondering if you have had any change in your go-to-market strategy in terms of how you approach things as you have seen more and more entrants in both of those markets. Are your competitors being more aggressive on price? You called out retail alternate channels. Is that an area you are leveraging to sort of retain your first mover advantage in those markets? For the follow-up, I want to ask on Librela.

Right. Thanks for taking the question and congrats on the quarter guys. Um, I want to start first with uh, the the trio dorm franchises at a high level. You, you spent a lot of time talking about competition, um, and how you've been able to, you know, retain, meaningful, share, and not really seeing any incremental erosion. Um, I'm just wondering if you've had any change in your go to market strategy in terms of how you approach things, as you've seen more and more entrance. In both of those markets, um, are

Michael Ryskin: Kristin Peck and Wetteny Joseph, you guys both emphasized the steps you are taking in terms of medical education, post-launch studies, engaging with pet owners. I just want to get a sense of your expectations on timing when we will see the benefit for that. When do you think Librela can return to growth? Do you think it can start growing again year over year later this year, or if this is more of a 2026 benefit? Thanks.

Batteries being more aggressive on price and you called out, you know, retailed alternate channels, is that, um, is that an area? You're leveraging to sort of retain your, um, your first move Advantage, um, in those markets and then for the fall. But I want to ask on on the Libra. Um, Kristen do I need you guys both emphasized? The steps you're taking, uh, in terms of medical education, post launch studies engaging with pet owners. Um, just want to get a sense of your expectations on timing when we'll see the benefit for that.

Wetteny Joseph: Thanks for the question, Mike. Look, we have been very pleased with the performance across both our Key Derm as well as Simparica, and particularly Simparica Trio. As you know, we have been facing direct competition in Trio for a couple of years now, and you have seen the product just absolutely perform. In the quarter, you saw Trio grow 20%, 19% in the U.S. Our overall Simparica franchise growing 18% on the quarter, and following last year with the first full year of their competition, we grew 25%. Look, as we have been highlighting for some time now, the triple combination space is still a relatively new standard of care that we set in the U.S., and we continue to lead it. Trio is the leading product across flea tick or heartworm combination. This is a market segment that grew 45% last year.

When do you think liberal can return to growth if you need to get a, it can start growing again year over year later this year or this is more of a 2026 uh benefit. Thanks.

Wetteny Joseph: We continue to see strong growth, and we expect to continue to see that end of the market continue to expand as consumers move from older therapies into triple combinations. Even with competitive entrants, we expect that to continue to happen as more awareness will be created by those. We are very confident in long term being able to do that. What I would say is in terms of our go-to-market on this, we have not changed anything. We have remained very disciplined here. As you know, last year in particular, we highlighted and we continue to see better price realization. We are being very targeted about how we do promotions that will drive long-term growth and patient share in this space. This is why you have not seen us have any patient share loss in any quarter since direct competition has come on with Trio.

Thanks for the question, Mike. Uh, look, we have been very pleased with the performance across, uh, both our key durm, uh, as well as some perica and and particularly some probably good Trio. Uh, as you know, we've been, uh, facing direct competition in Trio, for a couple of years now, and you've seen the body, just absolutely perform. Uh, so in the quarter, you saw Trio. Grow, uh, 20%, 19% in the US overall spark of franchise growing 18% on the quarter and Following last year with the first 4 year of their competition. We grew 25%. Look, as we've been, uh, highlighting for some time now, the triple combination space is still relatively new standard of care that we set in the US and we continue to lead it. Uh, Trio, the leading product, uh, across 3 to outworld, uh, combination, uh, We've this is a, a market segment that grew 45%, last

Wetteny Joseph: Again, couldn't be more confident and more pleased, quite frankly, with how we are executing on that front. Similarly, with Key Derm, we grew 17% last year, largely driven by volume. Of course, we saw some price contribution there as well, and you see some price contribution this year. Key Derm grew 11% on the quarter. It is 13% on a year-to-date basis. We have been saying for some time now, if you look at the market that is available to us unaddressed, either untreated or undertreated, it is bigger than the market we are treating today. That just spells for room for expansion here. That is before you even consider compliance, which we have seen nice tailwinds from compliance, particularly as you mentioned in alternative channels where you see increasing compliance both for Trio as well as Key Derm. Again, markets are quite large.

Wetteny Joseph: We are leaders in these markets with multiple products, and we will leverage that leadership position and continue to drive our first mover advantage to continue to lead and grow long term in these spaces. I will let Kristin Peck go ahead and take the Librela question.

Any quarter since there are competition has has come on, which wheel again, couldn't be more confident and more pleased quite frankly with how we're executing on that front. Similarly, we keep them. I mean, we grew 17% last year largely, um, driven by volume. Uh, of course, we saw some price contribution there as well, and you see some price composition this year but key Durham grew 11% on the quarter. It's 13% on a year to date basis. We have been saying for some time now, if you look at the market that's available to us on address either untreated or undertreated, it is bigger than the market, we're trading today. That just spells for room for expansion here and that's that's, before you even consider compliance, which you're seeing, uh, nice tell me from compliance, particularly, as you mentioned in alternative channels, uh, where you see increasing compliance both for for trio as well, as key them. So again, markets are quite large. Uh, we are leaders in these markets with multiple products and we will leverage that leadership position and continue to drive our first mover Advantage. Uh, to

Kristin Peck: Sure. Thanks, Mike. I really think by fundamentally improving the quality of life for dogs with OA pain, Librela is making a big difference. As we mentioned, over 75% of U.S. patients report being extremely or very satisfied with the product. We are quite focused on how we accelerate the adoption of this. As you mentioned, we have been focusing a lot on medical education with vets. We have been partnering with key opinion leaders. We even brought in some of our top vets from Europe who have had the product for over four years to do a tour in the U.S., which has been quite impactful. We are also, as we talked about before, launching a number. We are doing some third-party studies that are underway right now. They should be reading out beginning in Q4 of this year and into next year.

To continue the lead and grow long term in these spaces. So other questions go ahead and take the level of question. Sure. Uh, thanks, Mike. You know, I really think by fundamentally improving the quality of life for dogs, um, with OA pain, you know, Lera is making a big difference. Um, as we mentioned, you know, over 75% of us patients, report being extremely or very satisfied with the product. And we are quite focused on how we accelerate the adoption of this. As you mentioned, uh, we've been focusing a lot on medical education with vets. Uh, we've been partnering, uh, with

Kristin Peck: We really think this will help provide even more clinical validation and support a broader understanding of the product and ultimately adoption. We are also engaging directly with pet owners to educate them on the burden of osteoarthritis and to build awareness and demand. We remain very committed to this. We are seeing the positive impact that Librela is having, and we are confident in the long-term potential of this product, and we continue to be confident in the safety and efficacy.

Opinion leaders. We even brought in some of our top vets um, from Europe who had the product for over 4 years, uh, to do a tour in the US, which has been quite impactful. Uh, we're also as we talked about before, um, launching a number. Um, you know, we're doing some third-party studies, um, they're underway right now. Um, they should be reading out beginning in Q4 of this year. And into next year, uh, we really think this will help provide even more clinical validation, and support a broader understanding of the product and ultimately adoption. We're also engaging directly with pet owners, um, to educate them on the burden of osteoarthritis, um, and to build awareness and, uh, demand. So we remain, you know, very committed to this. Um, we're seeing the positive impact that Lera is having and we're confident in the long term potential of this product and we continue to be confident um, in the safety and efficacy.

Operator: We'll take our next question from Erin Wright with Morgan Stanley. Please go ahead. Your line is open.

We'll take our next question from Aaron. Wright with Morgan Stanley. Please go ahead. Your line is open.

Erin Wright: Great, thanks. It is a little early to talk about 2026, but just in light of the evolving competitive landscape as well as the innovation you have in the pipe, I guess how are you thinking about your ability to still achieve high single-digit 6% to 8% kind of operational growth next year? And some of those higher-level headwinds and tailwinds as we head into not only the second half, but also next year. The second question is on margins. We are stronger in the quarter. I guess can you speak to some of the areas that you continue to address from a cost management perspective? And how do you think about the quarterly progression from an operating margin standpoint from here? Were there some timing benefits or other dynamics at play in terms of the operating margin in the quarter? Thanks.

Great, thanks. So, it's a little early to talk about 2026, but just in light of the evolving competitive landscape as well as the Innovation you have in the pipe, I guess. How are you thinking about your ability to still achieve, you know High single digits, 68% kind of operational growth next year and some of those just like higher level headwinds and Tailwinds. Um as we head into not only the second half but but also next year and then second question is is on margins. Um, we're stronger in the quarter, I guess. Can you speak to some of the areas that that you can continue to address from a

Cost management perspective and and how do you think about the court? I believe progression from an operating margin standpoint from here.

Kristin Peck: Thanks, Aaron. I will start and let Wetteny Joseph build on this. I mean, I think what you have seen in the first half this year that we keep underscoring is the broad-based results that we are delivering. They are led by the innovation in our portfolio and also excellence in our execution. You know, when we talk about the diversity and durability of our portfolio, that is across markets, it is across species, our pipeline, and we really believe this positions us for above-market growth over the long term. You know, we have also said that we expect a major market approval every year for the next few years across our pipeline. So we remain quite confident that we are a secular grower with really strong fundamentals driving not just the industry, but importantly Zoetis Inc. with our pipeline.

You know where there's some timing benefits or or other Dynamics at play, in terms of um, the operating margin in the quarter. Thanks.

Kristin Peck: So Wetteny, I do not know if you want to build on that and also address your question on margin?

Wetteny Joseph: No, look, I appreciate the question and certainly was smiling as Erin was in 2026, knowing that it's a bit early to get into any specifics. I agree, I think the breadth of our portfolio and diversification is what's been really driving our execution and expect that to continue as we move ahead. As I mentioned in a prior question from Mike, significant room to expand across our portfolio. You've seen really strong momentum in livestock, right? I mean, you saw growth in livestock in the quarter at 6%, following 5% and 6% respectively the last couple of years. We see that momentum continuing. These are all elements that we are considering as we build our plans going into next year.

Thanks Aaron. I'll start and let Whitney build on this. I mean, I think what you've seen in the first half this year, um, we keep underscoring is the broad base results that we're delivering. Um, they're led by the innovation in our portfolio and also ex excellence in our execution. You know, when we talk about the diversity and durability of our portfolio, that's a cross Market. It's a cross species, our Pipeline. And we really believe this positions us for above market growth, um, over the long term. You know, we've also said that we expect a major Market approval, um, uh, every year for the next few years, you know, across our pipeline. So we remain quite confident that we are, you know, a secular grower with really strong fundamentals. Driving not just the industry, but importantly, zoet, it's uh, with our pipeline. So when an you want to build on that, then also address your question on margin. Know, look, I I I appreciate the question and, and certainly was smiling as and see my dick knowing that it's, it's a bit early to get into any specifics. But, but I, I agree, I think the breadth of our portfolio and diversification is what's been, uh, really

Wetteny Joseph: On margins, look, I think you saw margins have played out, at least in gross margins, largely as we expected coming into the year, marginally favorable as you look at the Q2. As we said last quarter and when we gave guidance, we do see manufacturing costs being higher as we work through inventory that was built last year. That gets better as we go into the second half. That remains the case for us and we're coming off of the Q2 where we saw that play out again slightly favorably to our plans. You did see us drive 10% growth in adjusted net income on the quarter, really leveraging through cost management. We'll continue to be very mindful and disciplined about how we do that while we keep investing in the long term.

Wetteny Joseph: I think that's really the balance that we continue to achieve and we've demonstrated we're able to do. On top of that, you saw the EPS level, the contributions from our share buybacks. We have continuously done on a regular basis consistently. As we guide, as we raise the guidance here, we continue to not include any forward buybacks in that. It's only the share count as we exit the current quarter. Those are all elements that will play out. Nothing to note specifically in terms of how that might play out across the second half, I would say. I would mention in terms of hotline, you are coming up against a very strong Q3 for us versus last year. Just to remind you, companion animal grew 15% last year in the Q3. The U.S. companion animal grew 18%.

Uh, we do see manufacturing costs, uh, uh, being higher uh, as we work through inventory. That was built last year and that gets better as we go into the second. Half that remains the case for us and we're coming off of a second quarter where we saw that play out. Again, slightly favorably to our to our plans, uh, you did see us drive, 10% growth in adjusted, then income on the quarter, really leveraging. Through a cost management will continue to be very Mindful and disciplined about how we do that while we keep investing in the long term. I think that's really the balance that we're, we continue to achieve and we've demonstrated we're able to do. And then on top of that, you saw the EPS level, the contributions from our share BuyBacks. We have continuously do on a, on a regular basis, uh, consistently. Uh, and as we guide, uh, as we raise the guidance here, uh, we continue to not include any forward Buybacks in that, it's only the share counts as we, as we exit, uh, uh, the current quarter. So, those are all elements that will that will play out that nothing to note specifically in terms of how that might play out across the the, the second half I would say, uh,

Wetteny Joseph: Our assumptions, of course, as we look at the back half of this year in terms of timing of competitive entrants, particularly for Derm, is largely in the Q4. You kind of have to balance those out in terms of how they play out for the rest of the year.

but I would, I would, uh, mention in terms of Topline, uh, you are, you are coming up against a very strong, uh, third quarter for us in the, in, uh, versus last year. Just to remind you, Companion Animal grew 15% last year in the third quarter. The US companion animal group 18%, um, and and our assumptions, of course, as we look at the back half of this year, in terms of the timing of comparative Insurance particular for Durham is largely in the fourth quarter. So you kind of have to balance those out in terms of how they play out for for the rest of the year.

Operator: will take our next question from Brandon Vasquez with William Blair. Please go ahead. Your line is open.

We'll take our next question from Brandon Vasquez with William Blair. Please go ahead. Your line is open.

Speaker 7: Hey, Erin. Good morning. Thanks for taking the question and congrats on the next quarter. I will ask two kind of upfront here. One is just on the follow-up on Librela. I am just kind of curious, can you talk a little bit about what you are hearing on Librela? Why the slowdown? I think we have talked a lot about the positive clinical data around this. I think you even have a randomized control trial for Librela that actually read pretty positively against traditional oral medications. So what are you hearing from the doctors so we can better understand what vets want to see and know in order to kind of re-accelerate the usage there? The follow-up question I will ask just quickly here is, is there anything more granular, Kristin, you can give us in terms of pipeline lifecycle innovation?

Speaker 7: Anything like that that we should expect probably let us call it over the next 12 to 18 months just to give investors an idea of what kind of drivers there can be for growth. Thank you.

Hello, good morning. Thanks for taking the question, and congrats on the next quarter. Um, I'll ask to kind of upfront here. Um, 1 is just on the follow up on my umbrella. I'm just kind of curious. What can you talk a little bit about what you're hearing on librella? Why the Slowdown, I think we talked a lot about the positive clinical data around this. I think you even have a randomized control trial for Libera that actually read pretty positively against um, traditional oral medications. So, um, what are you hearing from the doctor? So we can better understand what that's want to see, and know, in order to kind of re accelerate the usage there and then, uh, the, um, the, the follow-up question, I'll ask just quickly here is, is there anything more granular Christine? You can give us in terms of pipeline life cycle, Innovation, anything like that, that we should expect, uh, a problem. Let's call it over the next 12 to 18 months, just to, um, give investors an idea of what kind of drivers it can be for growth. Thank you.

Kristin Peck: Thanks, Brandon. What we continue to hear is the difference that Librela is making in the dogs that it is going into. As we talked about a little earlier, pet owners, over 75% of them, are extremely or very satisfied. Clearly, the performance of Librela has been lagging our expectations. We have certainly faced headwinds that have really impacted patient adoption and the willingness of vets to recommend. What vets are saying is, can you empower us with better data to have those conversations? That is why we have really been focused on the vet education and importantly, investing in several third-party studies that will give the vets the data they need, that they feel they need to better understand the product and to really drive the accelerated adoption of the product. That is primarily what we are hearing from vets.

Thank thanks, Brandon. I mean look what we continue to hear is the difference that Lera is making um, you know, in the dogs that it's going into. Um, and as we talked about a little earlier, you know, the you know, pet owners are, you know, 70 over. 75% of them are extremely uh or very satisfied but clearly the performance of Lilah has been lagging or expectations and you know we've certainly faced headwinds that have really impacted patient adoption.

Kristin Peck: With regards to the pipeline, we do not have any new updates versus what we provided at JPMorgan this year. I do want to underscore, we are expecting a significant approval in a major market every year for the next few years. We talked about long-acting osteoarthritis pain for this year for dog and cat. We talked a lot about what we are expecting in the next 12 to 36 months. You have got approvals within that timeline for long-acting Cytopoint as well as renal, et cetera. So we have a strong pipeline. We are expecting a major approval every year in a major market. We remain very, very excited about that pipeline. I want to underscore that these markets we are talking about are significant markets. Renal is a $3 billion to $4 billion market. We talk about oncology, over $1.5 billion market, even cardiology.

And the willingness of vets to recommend and would, you know investors saying is, can you Empower us with better data to have those conversations? And that's why we've really been focused on the sort of that education and importantly investing in several third-party studies that will give the Vets, the data they need. Um, and you know, they feel, they need to better understand the product and to really Drive The Accelerated adoption of the product. And that's primarily what we're we're hearing, um, from vets and with regards to the pipeline, we don't have any new updates for what we uh, provided at JP Morgan this year, um, but I do want to underscore, we are expecting um, you know, a significant approval and a major Market every year for the next few years, we talked about long-acting osteoarthritis pain. Uh, for this year, for dog and cat. Um, we talked a lot about what we're expecting in the next, you know, 12 to 36 months. You know, you you've got approvals, you know, within that timeline for long-acting sight of Point, as well as renal, Etc. So, you know, we have a strong pipeline, we are expecting a major approval.

Kristin Peck: These are new markets really where very few products exist today. In renal, actually, there really are no products other than palliative care. I think what we continue to demonstrate is our ability to identify opportunities and unmet needs and then deliver new markets. We are really excited about that pipeline.

Um, every year in a day, you major markets. So we remain very, very excited about that Pipeline and I want to underscore that these markets. We're talking about are significant markets. Renal is a 3 to 4 billion dollar market. We talk about oncology, you know, over 1 and a half billion dollar market even Cardiology. So these are new markets, really, we're very few products exist today. And and renal actually there really are no products other than paliative care. And I think what we continue to demonstrate, is our ability to identify opportunities and and unmet needs.

And then deliver new markets. And so we're really excited about that pipeline.

Operator: We'll take our next question from Daniel Clark with Piper Sandler. Please go ahead. Your line is open.

Daniel Clark: Hi. Thanks for taking the question. With increased competition in oral dermatology, are there any strategies to actively leverage and promote Cytopoint, the injectable alternative, in order to maintain and potentially grow market share in the overall dermatology franchise? I know you have mentioned these under-medicalized pets. Is there an opportunity with Cytopoint to go after these and highlight the differentiated benefits of that? Could you just remind us what the growth rate of Cytopoint is versus the orals? Specifically, have you seen any slowdown in biologics or injectables as a category? For my second question, I just wanted to get a clarification on the contract manufacturing human health. There is a big step up there. Is that something just one time, or is that something that is going to occur? Thank you.

We'll take our next question from David westenberg with Piper Sandler, please go ahead. Your line is open

Kristin Peck: Sure. I will start on the derm, and then Wetteny Joseph will build on that and then move to your question on contract manufacturing. I first want to underscore that we have three unique offerings in this space. We believe all three, to be honest with you, remain highly differentiated. If you look at Apoquel, I do not think you can really underestimate the importance of over 10 years of safety and efficacy data on that product. As you think about chewable, that is a really convenient way to provide Apoquel for pet owners. It does not have to be taken with food. It is incredibly palatable. It is not bitter. I think that remains differentiated. For Cytopoint, we are also investing in a pipeline to support this. We are also, as we talked about, expecting approval in the 12 to 36 month timeframe for Cytopoint long-acting.

Alternative, um, in order to maintain and potentially grow market share in the overall and dermatology franchise. I know you've mentioned about these under, uh, medicalized pets. I mean, is there an opportunity with, with sight a point, um, to to kind of go after these, uh, um, and, and highlight the, the, you know, the differentiated benefits of that. And then, can you just remind us what the growth rate of cytopoint is versus, um, the, uh, the, um orals and, uh, specifically. Um, have you seen any slowdown in biologics, or injectables, as a category? And then for my second question, I just wanted to get a clarification on the, um, the contract manufacturing human health. Uh, there's a big step up there. Is that something just 1 time or is that something that's going to occur? Thank you.

Sure. I I'll start on the durman land. Let me uh build on that and then move to your uh, question on contract. Manufacturing. I first want to underscore that, you know, we have, you know, 3 unique offerings in this space. Um, and we believe all 3 to be honest with you, remain highly differentiated, you know, if you look at Apple, I don't think you even, you know, really underestimate the importance of over 10 years of safety and efficacy data on that product. As you think about, you know, chewable, you know, that is, you know, a really convenient way, uh, to provide, uh, Apple quell for, you know, for pet owners. You know, it doesn't have to be taken with food. It's incredibly palatable, it's it's not bitter. I think that remains differentiated and, you know, cite a point. We're also investing in a pipeline to support this. So, we're also, as we talked about expecting approval in the 12 to 36 month,

Kristin Peck: So we are going to continue to invest across this. All three have a unique position. Cytopoint still remains a preferred solution for many vets. It provides long-acting relief. It is very convenient for many of them. It eliminates the need for compliance and things like that for a lot of pets with chronic issues. So we are going to continue to invest behind all three because, as Wetteny Joseph underscored, there is still more of a market to create than exists today. We are really focused on growing that market and growing adoption of all of our products, which we believe remain differentiated even in the current landscape. I do not know if there is anything you want to build on that, Wetteny Joseph, on derm, and take as follow-up.

Wetteny Joseph: Sure. Look, the only thing I would mention is we do talk about the 20 million that are either undertreated or not treated at all. By the way, we are speaking of medicalized dogs here. This is an addressable market that is out there for us to continue to penetrate. The point is, this is not just something we are talking about that is going to happen in the future. We have been addressing this, and we have been expanding the market. We are saying we are going to continue to do that. If you look at last year, where derm grew 17%, the volume growth is double digits. That spells that we are expanding the market both in terms of new patients and compliance, so both contributing to that.

The time frame uh, for uh, site appointment long acting. So we're going to continue to invest across this. All 3 have a unique position, you know, cite a point, you know, Still Remains, you know, a preferred solution for many vets. Um it provides a long acting relief, it's very convenient, for many of them. It, you know, you know, eliminates the need for compliance and things like that. For a lot of uh pets with chronic issues. So we're going to continue to invest behind all 3 because is what any underscored there is still more of a market to create than exists today. Um and so we're really focused on growing that market and growing adoption of all of our products which we believe remain differentiated even in the current landscape. I don't know if there's anything you want to build on that. Let me and Derm and take his follow-ups. Sure. Look, the the only thing I would I would mention is we do talk about the 20 million, uh, that are either undertreated or not treated At All, by the way, we are, speaking of medicalized dogs here. So this is an addressable Market. Uh, that's out there for us to continue to penetrate the point is, this is not just something we're talking about that's going to

Wetteny Joseph: I think that is really important as we talk about what is going to continue to happen. It is not something that has not been already underway. On contract manufacturing, it is still a relatively small number. I know it moved a higher percentage here, but we are still talking very small for the company. It used to be actually a bit higher. It has come down a bit. You saw a little bit of pickup, but nothing specific to note on that one.

Happen in the future. We have been addressing this and we have been uh sort of spending the market. We're saying, we're going to continue to do that. So if you look at last year where uh Durham grew 17% the volume growth is double digits. And so that spells uh that we are extending the market both in terms of new patients and compliance. So both contributing to that. So I think that's really important as we talk about what's going to continue to happen. It's not, uh, something that has not been already underway, uh, on contract Manufacturing.

It's still a relatively small number. I know it moved, uh, uh, sort of a higher percentage here, but we're still talking about something small for the company. It used to be actually a bit higher. It's come down a bit; you saw a little bit of a pickup, but nothing specific to note on that one.

Operator: We'll take our next question from Jon Block with Stifel. Please go ahead. Your line is open.

Speaker 7: Thanks, guys. Good morning. Nice quarter. Just a couple. What was the companion animal growth in the alternate channel for the quarter, if I have got that framing correct? Then, is there a way to quantify some of the stocking? I believe that you referenced earlier in the call, just any details you can give there. Kristin Peck, anything on international Librela? I mean, we are sort of familiar with the struggles or some of the issues in the U.S. But international, it has been quieter, I think, just from like a headline perspective. Yet we did see the growth rate be sell and sort of flat lining, if you would, year over year. Any comments there? Thanks for the color, guys.

Won't take our next question from John. Block with steeple. Please go ahead. Your line is open.

Thanks guys. Good morning, nice quarter. Um, what do you just a couple? What was the companion animal growth in the alternate channel for the quarter if I've got that frame Incorrect and then

You know, is there a way to quantify some of the stocking?

I believe that you referenced earlier in the call just any details. You can get there and

Chris anything on International Lilah. I mean, we're sort of familiar with the struggles or some of the issues in the US.

But International it's been quieter. I think, just from, like a headline perspective yet.

Wetteny Joseph: I will start with alternative channels. We have seen really strong growth here. This is one of the elements of our strategy in terms of omnichannel, where we are meeting the pet owner where they are. This has been continuously and consistently driving growth for us, which is why, again, when we talk about what is happening in the clinic, you also have to bring that piece in. Alternative channels are now about 22% of our total U.S. companion animal and have been growing in the mid-20% range, which is what we saw in the quarter, between 25% and 30%. What you referred to in terms of the stocking was specifically within retail. When we speak in terms of alternative channels, that is both retail as well as home delivery.

We did see the growth rate, D cell, and sort of flatlining, if you would year-over-year. So, any comments there, thanks for the caller, guys.

Yeah, I'll start with alternative channels. We have seen really strong growth here. This is 1 of the elements of our strategy in terms of, on, on the channel where we are meeting. Uh, the pet owner where they are, this has been continuously and consistently driving growth for us, which is why. Again, when we talk about what's happening in the clinic, you also have to bring that piece in alternative channels are now about 22% of our uh, total us Companion Animal.

Wetteny Joseph: On the retail side, we did see some stocking from a customer that is building position to, again, continue to drive this momentum that we talk about in alternative channels, which, by the way, helps with compliance, which is a very big advantage going that way. That was largely, if not entirely, offset, particularly when you look at derm, with what we spoke of last year, which is the launch into distribution for Apoquel chew. We talked about that being a headwind for the quarter. In factuality, it became muted or offset by this element. Roughly around the same. Again, no contribution there.

Wetteny Joseph: I would say, as you look at these puts and takes, whether it is this one on the retail side, alternative channel, or China, where we did due to tariffs, see a bit of an uptick in the quarter that we talked about. That will work itself out through the next couple of quarters, or supply in the U.S. for livestock, which is timing. When you put all these together, they all wash themselves out, and it becomes a very straightforward quarter in terms of what you saw from us.

Kristin Peck: Yeah, just to answer your question on Librela and international, we are continuing to see really strong information from both vets and pet owners around how Librela continues to make a significant difference in dogs' lives. I think what you saw in the quarter is some of the bleed over from some of the U.S. headwinds. I think our strategy to address it is, really where you saw some of the slowdown was in the English-speaking markets, where some of the social media sort of bleeds over there. We are really focused on the same strategy you see in the U.S., which is providing these vets greater third-party data to really underscore the difference it is making clinically to build their understanding and to drive and accelerate adoption. The strategy in international is the same as the U.S.

Healthcare compliance, which is a very big Advantage going that way. That was largely, if not entirely offset, particularly, when you look at Derm, uh, with what we spoke of last year, which is the launched into, uh, into distribution for agriculture. So, we talked about that being a headwind for the quarter in, in, in, in a factuality became muted or offset by this, uh, element. Uh, so roughly around the same. So again, no contribution. There I would say as you look at these puts and takes, whether it's this 1 on the retail side alternative Channel or uh, China, where we we did, uh, due to tariffs, um, see a bit of an uptick in the order that we talked about that of, that of work itself out through the next couple of quarters or Supply in the US for livestock, which is timing. We put all these together. They all wash it, uh, themselves out, and it becomes a very straightforward quarter in terms of what you saw from us. Yeah. And just to answer your question on Lera and international, um, you know, we're continuing to see really um, strong information.

From both vets and pet owners around. How liberal it continues to make a significant difference in dogs lives. I think what you saw in the quarter is some of the bleed over from some of the US headwinds um and I think our strategy to address it is you know, really where you saw some of the Slowdown was in the English speaking markets where you know some of the social media sort of bleeds over there but we're really focused on the same strategy you see in the US which is providing these vets uh greater third-party uh data to really underscore, you know, the the difference it's making clinically.

Kristin Peck: They have got more experience, as you have seen there. We are already moved not just from severe but into moderate dogs international, and we are really focused on continuing to grow that. Most of the headwinds we saw were really in more of the English-speaking markets and international in the quarter. We really remain confident in the long-term potential globally for this product, certainly in international but also in the U.S.

To build their understanding and to drive and accelerate adoption. So this the strategy and international is the same as the US. They've got more experience. Um, as you as you seen there were already, you know, moved not just from severe but into moderate Dogs International and we're really focused on continuing to grow that. But most of the, you know, the headwinds, we saw were really more. The English speaking markets, and International in the quarter. But, you know, we really remain confident in the long term potential, uh, globally for this product, certainly and international. But also in the US

Operator: will take our next question from Chris Schott with JPMorgan. Please go ahead. Your line is open.

Michael Ryskin: Great. Thanks so much for the questions. I just want to come back to parasiticides. I think you mentioned in the U.S. you have now moved to about 45% share in vet practices for triples. I was just curious in terms of where you think that market can go over time. What inning of the transition to these newer products are we currently? Also sticking on parasiticides, it sounds like there has not been much of an impact from Quattro, but can you just elaborate a bit more what you are seeing competitively with that new entrant coming this year? Thanks so much.

We'll take our next question from Chris shot with JP Morgan. Please go ahead, your line is open.

Wetteny Joseph: Sure, Chris. I will take the call. Look, in terms of parasiticides, as we have talked about, this is really an exciting end of the market that has the potential for more room to expand. As we said in January, we expect the continued move into triple combinations, as you saw that increase significantly through the vet channel and clearly happening across alternative channels as well. We expect triple combinations to double by the end of 2028. That gives you a pretty strong trajectory, which we are seeing play out both, again, last year and this year. As the first mover here in the U.S., the largest market, we continue to be well positioned. I think you have seen it also show up in terms of puppy shares.

All right, great, thanks so much for the questions. Um, I just want to come back to parasiticides, I think you mentioned in the US. You've now moved to about 45% share in in that practices for triples. I was just interested in terms of where you think that market can go over time, so kind of what inning of the the transition to these newer products. Are we currently uh, and maybe well also sticking on parasiticides, it sounds like there hasn't been much of an impact from Quattro. But can you just elaborate a bit more? What you're seeing competitively with that, with that new entrance, uh, coming this year. Thanks so much.

So, are you sure? Uh, Chris, I'll take a call. Look, in terms of parasitic sizes, we've talked about this; it is really an exciting end of the market that has substantial more room to expand. As we said in January, we expect the continued move into SHIR combinations. As you saw, that increased significantly through the vet channel and is clearly happening across alternative channels as well. We expect triple combinations to double.

Wetteny Joseph: About 60% of puppies are immediately going right onto a triple combination, in addition to those that will convert over time from older therapies to triples. We are seeing this play out, which is why the second part of your question in terms of what we are seeing from Quattro has been relatively small in terms of anything there. Again, given a very high growth in this segment, as that market expands, more entrants will do more advertising, more awareness that triple combinations are the latest standard of care will drive more traffic to the clinic, where we have an advantage and very high level of satisfaction for our product that has been in the market for about five years.

By the end of 2028. So that gives you a pretty uh, strong trajectory which we are seeing play out. Uh, both again last year and this year and as the first mover here in the US, the largest market, uh we continue to be well positioned, I think you see in the also show up in terms of puppy shares, right? So about 60% of puppies are immediately going right? Onto a triple combination in addition to those that will convert over time, uh, from older therapies to Triple. So we are seeing this play out, which is why the second part of your question, it doesn't work. What we're seeing from quatro has been, uh, relatively, uh, uh, uh, you know, small in terms of anything there again, given a very high, uh, growth in this, in this, uh, segment, uh, as that market expands, uh, more entrance will do more advertising, more awareness, to DVC that triple combinations are the latest in their care will drive more traffic through the clinic where we have an advantage uh and very high level of satisfaction for our products to be in the market for about 5 years.

Operator: We'll take our next question from Steve Scala with TD Securities. Please go ahead. Your line is open.

We'll take our next question from Steve. Scala with TD Securities? Please go ahead. Your line is open.

Speaker 7: Oh, thank you. This is Chris on for Steve Scala. On tariffs, has animal health been granted an exemption from recently announced EU pharma tariffs? At a high level, are you seeing any impact of the overall tariff environment on consumer share of wallets spent on animal health or on the share of consumer pet spending dedicated to vet visits and animal health products? Thank you.

Oh, thank you. This is Chris on for Steve Scala. Um, on tariffs, has Animal Health been granted an exemption from Recently announced Authentics and at a high level. Are you seeing any impact of the overall terrorist environment on consumer share of while it's spent on animal health or on the share of consumer spending dedicated to that visits and

Animal Health Products. Thank you.

Kristin Peck: Sure. Thanks, Chris. Look, I think the tariff environment obviously remains dynamic. I want to underscore that Zoetis specifically in animal health is incredibly resilient with strong secular trends. I think what we are really leaning into is our scale, our diversification, our robust supply chain and portfolio, which gives us confidence in our outlook, not just for this year, but going forward. Specifically with regards to your question on are we included, it is not clear. As you probably heard from other pharmaceutical CEOs, it is not clear on the announcement, for example, in the U.K., when that takes place, what is exactly in, what it applies to. I think I want to underscore animal health is different than human health. We, specifically Zoetis, is different than most human health companies. As you think about our manufacturing, 60% of our global manufacturing is in the U.S.

Kristin Peck: We have been investing in U.S. manufacturing for years. If you think about what we sell in the U.S., 75% of what we sell in the U.S., we make in the U.S. We do not have third-party payers. We have got a very diversified supply chain. We have been spending a lot of time in D.C. advocating for the fact that if they are looking at 232 for a national security issue, we do not think that applies to animal health. Obviously, the decision on 232 has not come down yet, so we do not know whether we have been excluded. It still remains pretty unclear with regards to the announcement, even with regards to Europe as to where that stands.

But going forward um specifically with regards to your question on, are we included? It's not clear as you've probably heard from other pharmaceutical CEOs, it's not clear on the announcement, for example, in the UK. Um, when that takes place, what is exactly in what it applies to, you know, I think I want to underscore Animal Health is different than human health. Um, we, you know, specifically Zoetis is different than most human health companies. As you think about our manufacturing, 60% of our Global manufacturing is in the US. We've been investing in US manufacturing for years. Um, and if you think about what we sell in the US, 75% of what we sell in the US, we make in the US, we don't have third party payers. Um, we've got a very Diversified supply chain. Uh, we've been spending a lot of time in DC advocating for the fact that if they are looking at 232 for a national security issue, we don't think that applies, um, to Animal Health. Obviously, the the, you know, decision on 232 has not come down yet. So we are. We do not know whether we have been excluded and it still remains pretty and clearer, um, with regards to the

Kristin Peck: But look, we have embedded in our guidance for the year anything that is already been enacted or what is announced, and we are pretty confident that we can manage costs and we have got the discipline to deliver on the guidance that Wetteny Joseph gave earlier, even in that environment. So again, we are a strong, resilient industry. We have got multiple strategies to address this over multiple time horizons.

Announcement even, um, with regards to Europe as to where that stands. But look, you know, we've embedded in our, um, guidance for the year. Anything that's already been enacted or what's announced. And we're pretty confident that we can manage costs and we've got the discipline to deliver on the result on the guidance that gave earlier, um, even in that environment. So again, you know, we we are a strong resilient industry we've got multiple strategies to address this over multiple time Horizons

Operator: As a reminder, if you would like to ask a question or if you have any follow-up questions, you can register by pressing star and one on your telephone keypad. We will take our next question from Navann Ty with BNP Paribas. Please go ahead. Your line is open.

And as a reminder, if you would like to ask a question or if you have any follow-up questions, you can register by pressing star and 1 on your telephone keypad.

Speaker 7: Hi, good morning. Thanks for taking my question. One pipeline question. Do you still expect approval of the long-acting OA pain this year? How is the dialogue with the FDA and/or the EC? We know that the long-acting will be marketed under a different brand name than Librela and better dosing and COGS. Could you discuss your expectation on the safety profile if possible? Thank you.

We'll take our next question, from Nan. Thai with BNP para. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my questions. Uh, 1 pipeline question. If you do, you still expect approval of the long-acting, OA pain, um, this year? And how is the dialogue with the FDA and or the EC? Um, and we know that the long acting will be marketed under a different brand name than Libra and better dozing and and cogs. And could you discuss your expectation on the safety profile? If possible. Thank you.

Kristin Peck: Sure. We are still expecting approval in a major market for OA pain. It is similar to the guidance we gave before this year for both OA pain in dog and in cat. To answer your question, this new long-acting monoclonal antibody for OA pain will be a three-month product that would have a longer duration, which we really think gives both vets and pet owners a more convenient option. It is a new antibody, as you mentioned before, and it is targeting a unique binding site, which we believe will lead to longer-lasting effects with a 10x lower dose. We are obviously in current conversation, so I certainly cannot comment on a label that does not exist yet. We are very excited for this, and our guidance for an approval this year has not changed.

Sure. Um,

All right, we have not, we are still, um, expecting a.

Market for 08.

Uh, the similar to the guidance we gave before this year for both OA, pain, and dog, and in cat. Um, and to answer your question, this new long-acting monocle antibody for oap, will pain will be a 3-month product, um, that would have a longer duration, which we really think is both vets and pet owners are more convenient option. It is a new antibody as you mentioned before. Um, and it's targeting a unique binding site, which we believe will lead to longer lasting effects with a 10x lowered, um, dose. Um, and you know, we are obviously in current conversations so I certainly can't comment on a label that does not exist.

Yet, um, we're very excited for this, and our guidance for an approval this year has not changed.

Operator: We'll take our next question from Daniel Clark with Leerink Partners. Please go ahead. Your line is open.

Speaker 7: Great. Thank you. I appreciate the color that you now expect the competing launch in derm to be in Q4. I just wanted to clarify, was that always when you expected to launch? If that has changed, how did that impact your expectations for the year? Thank you.

We'll take our next question from Dan Clark with lying Partners. Please go ahead. Your line is open.

Wetteny Joseph: Look, we have been very consistent, though our approach to guidance, as always, is we expect certain launch-related promotional activity, which are not long-term in nature, to happen when there's a launch. When we come into guidance, we model a number of scenarios across the spectrum, both in terms of the time horizon as well as what the label might look like and how aggressive a competitor might be, again, in that short-term window for launch. It puts us across the spectrum, similar to the range of guidance that we give. It was always in the back half of the year with various scenarios that span across that. As we learned more, we continued to fine-tune those as well.

Great. Thank you. Um, appreciate the color, um, that you now expect, um, you know, the competing launch in Durham to be in 4 q. Uh, just wanted to clarify was that always when you expected to launch and if that's changed, like, how did that impact? Your expectations for the year? Thank you.

Wetteny Joseph: That all is reflected in the guidance that we gave today, by the way, which includes a raise both at revenue adjusted net income, considering these areas as well as the current macro environment that we're operating in.

Just a guidance. Uh, as always is, we expect certain launch related, promotional activity, uh, which are not long-term in nature to happen when there's a launch. And so when we come into guidance, we Model A number of scenarios across the Spectrum. Both in terms of the time a horizon as well as what the label might look like. And what the and how aggressive, uh, competitor might be again, in that short term window for launch. And so it puts us, uh, across the Spectrum, similar to the range of guidance that we give. And so, it was always in the back half of the year, uh, with various scenarios that that span as we learned more, we continue to do fine-tune those, um, uh, as well. So, that all is reflected in the guidance that we gave today, by the way, uh, which includes a race both at revenue or just in net income. Uh, considering uh, these these areas as well as the current macro environment,

That we're operating in.

Operator: We'll take our next question from Sid Sahu with HSBC. Please go ahead. Your line is open.

And we'll take our next question from Sid sahu with HSBC. Please go ahead. Your line is open.

Speaker 7: Sure. Thanks for taking the question. Congrats on the quarter. I just wanted a quick clarification on the OA pain franchise. Earlier in May, you said that you had club data under other franchises expected to grow double digits this year. What is the current expectation in the second half? My second question would be slightly longer term. How do you see a faster bottom line growth in terms of when most of the portfolio is basically maturing? Where are the opportunities to control cost? Thank you.

Uh so what is the current expectation uh in the second half uh and my second question would be slightly longer term. Uh

How do you see?

a faster, bottom line growth, uh, in terms of

When most of the portfolio is basically maturing uh, where are the opportunities to control cost?

Wetteny Joseph: Yeah, the sound wasn't great, but I think I got the gist of the question. We came into the year indicating that we expect our key franchises, so this is across derm, Simparica, as well as OA pain combined, will go double digits. You saw us post 14% growth in the first quarter across those, 11% growth in the second quarter, including the performance from Librela, which we said was below our expectations. We still delivered double digits. In the prepared commentary, we are indicating we continue to expect double-digit growth across those three. We have not given product-specific guidance. Your question related to OA pain specifically, this is consistent with how we've approached guidance. We won't go into specific expectations for that, but maintain our expectation for double-digit growth across the key franchises. I think the second question you asked, certainly, we remain very disciplined.

Wetteny Joseph: We continue to look at ways to manage cost across the landscape. That also is important as we continue to look at driving investment in areas that we see growth for the business. However, I will particularly address one piece, which is maturing portfolio. I think if you look at across our key franchises I just spoke about, as I mentioned earlier, when we look at the addressable market, and we size the addressable market, by the way, in terms of medicalized pets. So they're already seeing a vet on a regular basis. So they're very much attainable. We're saying that size is greater than what we are currently serving today. That gives us ample room in these areas.

Thank you. Yeah. Um, the, the sound wasn't great, but I think I got the gist of the question. Uh, we came into the year, um, indicating that, we expect our key franchises. So, this is across, uh, durm, uh, Sara as well as oil pain. Combined we go double digits. Uh, you saw us Post 14% growth in the first quarter across those 11% growth in the second quarter, including, uh, the performance on Liberia, which we said, was below our expectations, we still deliver a double digits and in the prepared commentary, we we are indicating we continue to expect double digit growth across those 3, we have not given product specific guidance. And so your question related to oil being specifically, this is consistent with how we've approached guidance and so we won't go into specific expectations for that but uh maintain our expectation for double digit growth across the key franchises. I think I think the second question you asked, uh, certainly we remain very disciplined, we continue to look at ways to manage costs across the landscape. Uh, that also

Wetteny Joseph: I think the fact that derm has been around, we revolutionized this space, 11 years ago, and we're continuing to talk about how much more room there is to grow because in animal health, it does take longer to build these markets, and we continue to expand them as we've demonstrated time again. This is not a signal that these markets are mature, and we have differentiated products across them. That's not the reason to be disciplined around cost management. That is just good business and to drive delivery to our customers and continue to innovate.

Uh, is important. As we continue to look at driving investment in areas that we see growth for the business. However, I will particularly address 1 piece which is maturing portfolio. I I, I couldn't uh, uh, you know, I, I think if you look at across our key franchises, I just spoke about as I mentioned earlier, when we look at the addressable market and we and we size the address for Market by the way, in terms of medicalized pets. So they're already seeing an event on a regular basis. So they're very much uh, attainable. And we're seeing that size is greater than what we are currently serving today. That gives us simple room in these areas. I think the fact that Derm has been around, we revolutionize the space, uh, you know, 11 years ago. And we're continuing to talk about how much more room there is to grow. Because in Animal Health, it does take longer to build these markets and we continue to expand them as we've demonstrated time again. This is not a signal that these markets are mature and we have differentiated products across them. That's not the reason.

To be disciplined around cost management. That is just um good business and to drive delivery to our customers and continue to innovate.

Operator: There are no further questions on the line at this time. I will turn the program back to our CEO, Kristin Peck, for any closing comments.

Kristin Peck: Thank you. As always, I want to thank everybody for joining the call today and obviously for your questions. I hope what you saw in our performance and in our discussion today is that our strategy is clear. We are customer-first and purpose-led as an organization, and we've been able to adapt. We are really built to adapt. We really strongly believe this positions us for sustainable long-term growth, which will create enduring value for our shareholders. As a leader in what we think is still a very young and fast-growing industry, we have set the standard for innovation and execution. We've been outperforming the market in a complex environment, and we're continuously raising the bar to meet the evolving needs in our industry. I really think this quarter's performance is a direct result of our colleagues' efforts around the world.

And there are no further questions on the line at this time, I'll turn the program back to our CEO. Kristen peek for any closing comments,

Kristin Peck: As we came together in July to celebrate Purpose Month across Zoetis Inc., it was really, honestly, a powerful reminder of our shared purpose and how that can deliver for animals and for the people who care for them and the communities we serve. Thank you all so much for joining us today. We look forward to continuing the discussion.

Thank you. Uh, as always, thank, I want to thank everybody for joining the call today, and obviously, for your questions. I hope it. Uh, you saw in our performance and in our discussion today is that our strategy is clear. We are customer first and purpose-led as an organization and we've been able to adapt. We are really built to adapt, um, and we really strongly believe this positions us for sustainable long-term growth, which will create enduring value for our shareholders, you know, as a leader in what we think is still a very young and fast growing industry. We have set the standard for Innovation and execution. We've been out for performing the market in a complex environment and we're continuously raising the bar to meet the evolving needs in our industry. And I really think this course, performance is a direct result of our colleagues around the world. And as we came together, in July to celebrate purpose month, across the Zoetis, it was really honestly a powerful reminder of our shared purpose and how that, you know, can deliver for animals and for the people who care for them and the communities we serve. So thank you all so much for joining us today. We look forward to continuing the discussion

Operator: This does conclude the second quarter 2025 financial results conference call and webcast for Zoetis Inc. Thank you again for your participation, and you may now.

This does conclude the second quarter, 2025 Financial results conference call and webcast for Zoetis. Thank you again for your participation and you may now