Zoetis Inc. (NYSE:ZTS) Q4 2022 Earnings Call Transcript

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And obviously, a point, if you look at the midpoint of our guidance on growth higher at ANI versus the top line is what I would say on the margin point. And certainly, as you look at continued growth of companion animal outpacing the growth of livestock in the business, that mix will be favorable to us in addition to what I already covered from a price perspective. I think if you look at the atopic derm, we delivered $1.3 billion of revenue in 2022, that’s a 17% increase. And we’re almost at 10 years since Apoquel was launched and it’s just amazing to see that we continue to expand the market, and we believe there is more room to expand not only in the U.S., where we grew 12% in 2022, but particularly in international markets, it takes longer to get to peak sales levels, and we delivered 27% growth in international.

I think we will continue to see really solid growth across the business. We have had double-digit growth in 2023. Though it may not be at the level that you’ve seen in 2021, where we grew to think about 23% and then 17% in 2022, but we continue to see room to continue to expand the derm market here.

Operator: Our next question comes from Erin Wright from Morgan Stanley.

Erin Wright: Great. Thanks. So two questions here. One, how much did the lingering supply chain issues impact on Simparica Trio sales in the quarter, if at all? And how much did the stocking benefit offset that in the fourth quarter? And did you benefit across other product lines in terms of distributor stocking that we should be aware of in terms of that first quarter cadence as well. And just if you could talk a little bit more and maybe you touched on this with the gross margin dynamic. But in terms of overall price, you are taking across the two core species segments here. And then my second question is on Librela. Can you give us an update on the U.S. Librela approval? And what does guidance assume in terms of U.S. contribution from Librela is that material in 2023? Thanks.

Wetteny Joseph: Yes. So let me first touch on your questions around supply, and it’s Trio as well as other products. As we said in the third quarter call, while we had some outages in supply during the year, particularly in the third quarter, competitors actually took advantage of that and run promotions. And we certainly intended to run promotions as we recovered on supply, which we did in the fourth quarter. And so I think the timing of our supply recovery, whether it’s for Trio in the U.S. or for Revolution in China will drive some stocking levels, certainly as we enter into 2023, which we discussed. But I think typically, you’ll see some increase in inventory levels from Q3 to Q4 anyway, because distributors are anticipating our price increases and the intent to drive a little bit of that.

So I would say when I look at across other products, it’s probably more in the range of typical increase that you would see. But if you look at Trio, we’re probably, if I had to bracket it in terms of the impact on Trio, if you back out, what would typically be an increase from Q3 to Q4 anyway. So the incremental contribution in the fourth quarter, I’d put somewhere in the $25 million to $30 million range. So it’s not a significant number for us. And certainly, as we discussed already, we factored that into our guidance, and we expect significant growth from Trio on the year. With respect to Librela, look, we continue to expect and I’m very confident that we will see an approval in a well in the first half of the year, our plans have not changed.

We continue to plan to have an early experience program run on the program once we’ve gotten approval and we have the label set, etcetera, and that will transition into a launch sometime late in the year.

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