Q4 2024 Earnings Summary
- Zoetis is well-positioned to capture significant growth in the triple combination parasiticide market, which is projected to more than double to $4.5 billion by 2028, with Simparica Trio leading the market and exceeding $1 billion in revenue in 2024.
- The company's key dermatology franchise continues to deliver strong growth despite competition, with the market projected to grow to $2.5 billion by 2028 and 20 million dogs still untreated or undertreated, representing a significant market opportunity.
- Zoetis has multiple potential blockbuster products in its pipeline, targeting unmet medical needs such as chronic kidney disease (a $3 to $4 billion market) and oncology (a $1.2 to $1.7 billion market), which are not yet included in their guidance, offering significant upside potential.
- Increased competition in key franchises could pressure growth and margins. Zoetis anticipates new competitors entering the market in 2025, particularly in the dermatology segment, with a second major Apoquel competitor expected this summer. This increased competition may impact Zoetis's market share and require additional investments to support their major brands.
- Foreign exchange headwinds may negatively impact financial results. Zoetis is projecting significant foreign exchange headwinds of approximately $250 million to revenue in 2025. As the company does not forecast FX, there is potential downside risk if adverse currency trends continue, which could affect reported revenues and profits.
- Potential impact of label changes on key products like Librela may limit growth. Label changes for Librela in the U.S. could affect its adoption among veterinarians, especially in transitioning to moderate patients. While management believes it won't change the trajectory much, there is uncertainty regarding how these changes may influence prescription behavior and market growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | Between $9.2B and $9.3B; operational growth of 10%–11% | Between $9.225B and $9.375B; organic operational growth of 6%–8% | raised |
Adjusted Net Income | FY 2025 | $2.67B–$2.695B | $2.7B–$2.75B | raised |
Adjusted Diluted EPS | FY 2025 | $5.86–$5.92 | $6–$6.10 | raised |
Reported Diluted EPS | FY 2025 | $5.33–$5.39 | $5.70–$5.80 | raised |
Adjusted Cost of Sales | FY 2025 | no prior guidance | Approximately 28% of revenue | no prior guidance |
Adjusted SG&A Expenses | FY 2025 | no prior guidance | Between $2.3B and $2.35B | no prior guidance |
Adjusted R&D Expenses | FY 2025 | no prior guidance | Between $680M and $690M | no prior guidance |
Adjusted Interest Expense and Other Income Deductions | FY 2025 | no prior guidance | Approximately $200M | no prior guidance |
Adjusted Effective Tax Rate | FY 2025 | no prior guidance | Approximately 21% | no prior guidance |
Foreign Exchange Headwinds | FY 2025 | no prior guidance | Impact of $250M on revenue and $50M on adjusted net income versus 2024 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | FY 2024 | $9.2B – $9.3B | $9.256B (2,190+ 2,361+ 2,388+ 2,317) | Met |
Reported Diluted EPS | FY 2024 | $5.33 – $5.39 | $5.47 (1.31+ 1.36+ 1.51+ 1.29) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Dermatology & APOQUEL | Emphasized double-digit operational growth across Q1–Q3 (e.g., 16–25%), driven by Apoquel tablets and chewables along with Cytopoint. Large untapped market with 20M+ dogs globally. Proven safety, high compliance. | Reported 17% operational growth for full-year 2024 at $1.6B revenue; Apoquel Chewable launch spurring continued adoption and conversion. Market remains underpenetrated. | Remains a core growth engine |
Competition in Key Product Areas | Discussed new competitors in dermatology and parasiticides, but consistently voiced confidence in defending share due to safety/efficacy profiles and brand equity. | Expects additional competition in dermatology by 2H 2025 but remains confident given large unmet demand and strong portfolio. | Ongoing competitive emphasis |
Librela Label Changes | Mentioned potential discussions with FDA in Q2; no significant updates in Q1 or Q3. | Updated U.S. label includes no new contraindications/warnings; not expected to significantly affect growth. | Resolved with minimal impact |
Chronic Kidney Disease Pipeline | Cited as a longer-term opportunity (4+ years out) in Q1; no mention in Q2 or Q3. | Highlighted as major future market ($3–$4B TAM), with improved diagnostics aiding pipeline development. | Renewed spotlight and sizable potential |
Oncology Pipeline | Listed among future R&D areas in Q1 but no meaningful updates in Q2 or Q3. | Emphasized as an area of unmet need with ongoing pipeline progress, but limited near-term detail provided. | Continues as longer-term opportunity |
Triple Combination Parasiticide Market | Showed strong performance (Simparica Trio) in Q1–Q3, leveraging first-mover advantage and high pet-owner compliance. | Market now at $2B and projected to grow to $4.5B by 2028. Simparica Trio surpassed $1B in global revenue for 2024. | Accelerating market expansion |
Projected Market Expansions to 2028 | Earlier calls discussed growth but did not explicitly project 2028 figures. | Dermatology projected at $2.5B and triple combo parasiticides at $4.5B by 2028. Large untreated segments remain. | New explicit future projections |
Potential for New Blockbuster Products | Q1–Q2 highlighted OA pain franchise success; minimal talk of “new blockbusters” specifically in Q3. | Cited multiple potential blockbusters in pipeline. Chronic kidney disease and oncology singled out as large new frontiers. | Heightened pipeline optimism |
Reliance on Price Increases in Hyperinflationary Markets | Strong contributions from Argentina noted in Q1–Q3, fueling growth but gradually normalizing. | 2024 benefitted from Argentina price increases; not expecting the same tailwind for 2025. | Contribution diminishing |
Declining Veterinary Clinic Visits | Q1–Q3 indicated slight drops in overall visits but higher spend per visit; alternative channels offset some clinic volume decline. | Overall clinic visits remain down, while spend per visit rose 7%. Vet clinic revenue still healthy. | Fewer visits but increased revenue per visit |
Alternative Channels | Stressed double-digit growth in Q1–Q3 (retail, home delivery), improving compliance (autoship). | 20% of U.S. pet care portfolio now runs through alternative channels. Continues driving compliance and reach. | Consistent expansion |
Continuing to Outperform the Market | Maintained confidence in above-market growth Q1–Q3, citing a diverse, innovative product portfolio. | Achieved 8% reported / 11% operational revenue growth for full-year 2024 and plans to sustain leadership. | Sustained market leadership |
Consumer Spending & Pet Healthcare Resilience | Emphasized that pet owners prioritize healthcare spend, with 86% willing to pay “whatever it takes”; robust across Q1–Q3. | Reinforced essential nature of pet healthcare; continued strong consumer spending. Demographics (millennials, Gen Z) drive growth. | Ongoing resilience and commitment |
Elevated R&D & SG&A Expenses | Q1–Q3 consistently showed increases for pipeline advancement, demand generation, and compensation. | R&D projected at $680M–$690M; SG&A at $2.3B–$2.35B for 2025. Reflective of pipeline progress and organizational needs. | Maintaining higher investment levels |
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Impact of Competition on Guidance
Q: How will competition affect your guidance and investments?
A: We have delivered an outstanding 2024 with 11% operational growth in revenue and 15% adjusted income. Our major franchises, including dermatology, achieved double-digit growth. For 2025, we are factoring in various competitive scenarios, especially in dermatology where new entrants are expected in the second half. Despite this, we anticipate our three major franchise areas to drive double-digit growth. The opportunity remains vast, with 20 million dogs globally untreated or undertreated for dermatology conditions. We are also investing strategically in our key brands through direct-to-consumer efforts and veterinary education, leveraging our field force to drive operational leverage. -
Librela Label Change and Growth
Q: How does the Librela label change impact growth expectations?
A: We are pleased with the launch of Librela, generating $581 million in sales across Librela and Solensia with 80% growth this year, making it our fourth-largest product. The label update helps veterinarians understand the latest real-world adverse event data and is consistent with international labels. We don't expect this to change the growth trajectory significantly. In our guidance for 2025, we did not include new products like long-acting therapies, but we expect strong growth from Librela as part of our three major franchises, which we anticipate will have double-digit growth. In Europe, Librela continues to grow, delivering 33% growth in its third year. -
Pricing vs. Volume Growth
Q: Are you expecting a slowdown in volume growth given pricing contributions?
A: Our pricing expectations for 2025 are slightly above our historical 2–3% but below the 6% taken in 2024. While price contributes to growth, the underlying demand trends remain strong across our products. We anticipate double-digit volume growth in our major franchises. In livestock, we are projecting 2–4% growth, aligning with industry rates. Depending on where we fall within our guidance range, we may see a balance between price and volume contributions. -
Pipeline Prospects and Upside Risks
Q: What are the upside risks to guidance excluding FX, and can you quantify the potential of upcoming approvals?
A: We have not factored new product approvals into our 2025 guidance, consistent with our usual approach. Excluding FX, there's a $250 million headwind at the top line due to currency impacts. Our diverse portfolio provides upside potential, with strong underlying trends driving demand across geographies and products. Regarding our pipeline, we have multiple blockbuster opportunities with significant addressable markets: $3–4 billion for chronic kidney disease products and $1.2–1.7 billion for oncology. Our focus on long-acting therapies also represents substantial growth potential. -
Revenue Cadence and R&D Expenses
Q: How should we think about revenue cadence and R&D expenses in 2025?
A: The momentum from 2024 is carrying into 2025, with strong demand trends. Competitive pressures are expected more in the back half of the year, implying a stronger first half. We wouldn't characterize the fourth quarter as an easy comparison since, excluding the MFA divestiture, we achieved 9% operational growth. On R&D expenses, we don't view it as a line item for deliberate leverage but let the pipeline drive our investments. While R&D growth may align more closely with revenue growth going forward, it can vary with the development cycles of major projects. -
Simparica Trio Growth Expectations
Q: What are your expectations for Simparica Trio in 2025?
A: Simparica Trio had a phenomenal year, exceeding $1 billion in sales and becoming the #1 seller in the U.S., with 28% growth despite significant competition. There is still substantial growth potential, as only 50% of puppies are on a triple combination parasiticide, leaving the other half as an opportunity. Once pets start on a parasiticide, they are unlikely to switch, making this a sticky category. We believe we can continue to grow both the market and our share in 2025. -
Dermatology Franchise Amid Competition
Q: How are you positioning your dermatology franchise against new competition?
A: Our dermatology franchise delivered 17% growth in 2024, reaching a $1.64 billion portfolio. Even with competition in the fourth quarter, we saw 11% revenue growth. The market remains robust and is expected to grow to $2.5 billion by 2028, with 20 million dogs still untreated or undertreated. We focus on higher compliance, increasing auto-ship enrollments, and are exploring our long-acting portfolio to drive growth. We see balanced demand between Cytopoint and Apoquel, with both products showing strong growth. -
Pet Population Trends
Q: How is the pet population trending as we enter 2025?
A: We expect the pet population to remain relatively stable, consistent with historical trends except during COVID. The strength of the human-animal bond continues to drive resilience in animal health. With 86% of pet owners willing to spend whatever it takes, and more millennials and Gen Z adopting pets, we see strong fundamental drivers. Additionally, pets adopted during COVID are aging and will require more chronic disease management, supporting ongoing growth. -
Blockbuster Potential of Approvals
Q: Can you comment on the blockbuster potential of expected approvals?
A: We have multiple drivers of growth to improve the standard of care. The total addressable market for our upcoming therapies is significant: chronic kidney disease represents a $3–4 billion market, while oncology offers a $1.2–1.7 billion opportunity. We are excited about meeting these unmet medical needs and have more growth drivers for the short, medium, and long term. -
Pipeline Assets Data
Q: Have your pipeline assets in renal and oncology generated pivotal data?
A: We do not provide specific information regarding our molecules in development. The guidance we have provided with respect to product launches is our current outlook. -
Increasing Puppies on Triple Combo
Q: What could drive more puppies onto triple combo parasiticides?
A: Awareness and market growth are key factors. Currently, less than 40% of the market uses triple combination therapy, which is growing at 40%. As more new puppies are added, they are more likely to start on these therapies, and once they do, they are unlikely to switch. New entrants bring additional attention to this fastest-growing segment. The triple market is $2 billion today and is expected to grow to $4.5 billion by 2028.
Research analysts covering Zoetis.