Wetteny Joseph: Look, I’ll take the cadence point first and then see what Kristin wants to add in terms of Librela expectations. Look, sitting here, I would expect a roughly balanced cadence across the year. Now, let’s take a look at Q1, which is a specific point you raised in your question, Jon. If you look at Q1, certainly, if you look at companion animal in the US, there’s an easier comp. We had destocking the first quarter last year, clearly something we look to see as an easier comp that we come up against. But at the same time, you had a 12% growth quarter in livestock in Q1. And so, I think if you look balance – those don’t completely balance, but it’s livestock growth, both in the US as well as international. And then you have China, which clearly started to more deteriorate in terms of the economic conditions there throughout the year.
So, that becomes a heavier, I would say, headwind coming into Q1 as well as the conditions, weather conditions in Australia, et cetera, having an impact there. So, I think if you balance those out, and last point I’ll make is, Librela, clearly very pleased with how we exit Q4 and enter into Q1, but it’s going to continue to contribute more and more as you go through the year. So, Q2 and Q3 would be more than Q1. Therefore, the contribution from Librela accelerates through the year and it doesn’t have as much relatively speaking in Q1. So, when you take all those into consideration, I actually see a roughly balanced year. Now, we did make references to FX, so from a reported basis that again, taking a look at where the FX rates were a couple weeks ago, you do have a heavier impact in terms of both revenue and bottom line.
On the FX factor, hopefully what we provide in prepared commentary is helpful there. So, that’s the other piece you have to think about. But when I think about operational base growth, I mean, we did exit the year with good momentum as we exited Q4 and into Q1, again looking at US companion animal. But that’s how I think about it. Now, is Q1 going to be higher than Q4 from a Librela perspective? I think if you factor about a quarter to a third of impact coming from stocking, that’s $12 million to $15 million. So, even if you had a flat, that means you grew by $12 million to $15 million going into Q1. I won’t call it exactly here right now. What I would say is we’re pleased with how the product is performing, but we are still in the early stages of this launch.
Operator: Thank you. We’ll take our next question from David Westenberg with Piper Sandler. Please go ahead.
David Westenberg: Hi. Thank you for taking the question. So, last year we saw some discounting in front of the NexGard combo launch. Do you anticipate there might be similar competitive dynamics in front of a Elanco’s Quatro launch? And how are you thinking about that in consideration with the gross margins? And then just the second one on just the DTC efforts in Librela? I don’t think there is DC allowed in Europe, but can you talk about maybe some of the learnings that you learned in Europe in terms of marketing and how they might apply specifically around communication of the vet? The vet obviously is the one that understands the superior safety profile with monoclonal antibodies and may maybe how that messaging can come out. Thank you.
Kristin Peck: Sure. I’ll start with that one and Wetteny can certainly build on it. I mean, I want to first underscore, we had a very strong Q4 with Trio, with 21% growth in the quarter with competition. For the year overall, Trio grew 9%. So, we’re very pleased with that. As we guided and Wetteny mentioned earlier, we’re expecting mid to high single digit growth in Trio for the year. So, this obviously underscores, and we think we’ll see that both in price and in volume. So, we do anticipate, obviously a competitor entering. I’m not exactly sure what – how Purdue or Proctor will do it. Our expectation is that is not a differentiated product. They do mention tapeworm, but you get tapeworm from fleas, and we absolutely control fleas.
So, therefore, that’s really not a differentiated product. So, we are used to having good competitors, obviously with NexGard. I’m sure there’ll be some heavy promotional, but I think our strength, honestly, with our corporate accounts, the experience, switching is low for people with this product. It’s very unlikely someone on Trio is going to switch. We’re doing quite well with retail and auto-ship, which I think also protects us. And we expect a new competitor to expand the market. What we’re seeing a lot is a movement into the triple combos out of topicals, collars, et cetera. So, as we look at that, we’re confident in our Trio number as we look into the year. And with regards to your question on, what do we learn from Librela in Europe?
So, we cannot do branded advertising for Librela in Europe, but we can do overall advertising for disease awareness and encouraging people who have pets, both dogs and cats with osteoarthritis pain, to bring them to the vet. And we are seeing real impact of that disease awareness. I think it’s been a long time where pet owners have not had a product that they could turn to, and encouraging them that there is a new product and that they should go to the vet and be seen. We are seeing really positive uplifts from direct-to-consumer advertising, even when it’s not branded. So, I don’t know, Wetteny, if you wanted to add into that.
Wetteny Joseph: Yes. Look, I think you covered it, Kristin. Trio’s been performing really well for us in the face of direct competition in the US. Couldn’t be more pleased, and to be gaining patient share in the face of competition, I think that speaks a lot to what we’ve been talking about, which is the power of our relationships, the strength of our label and being first to market. So, look, there’ll be some initial, I’m sure heavy promotion that happens when a new competitor comes in. We factor some of that into our thinking here. But until we see the label and see what they do, we won’t home in on specific reaction and so on. But we’re very confident in our ability to continue to grow the franchise. And we’re saying we’re going to see mid to high single digit growth across Trio in 2024 as well.
Operator: Thank you. We’ll take our next question from Nathan Rich with Goldman Sachs. Please go ahead.
Nathan Rich: Great. good morning and thanks for the questions. I wanted to ask on the derm franchise. I think you had talked about mid to high single digit growth for the franchise overall. I guess specifically, are you assuming a headwind within that guidance from the competitive entry that’s likely to occur against Apoquel this year? And can you talk about the strategies you’re maybe putting in place to defend market share for that product? And then a quick follow-up on China, could you maybe frame the type of headwind that you expect in China in 2024? And does that impact more on the companion or livestock side of the market? Thank you.
Kristin Peck: Yep, sure. I’ll take the derm question, and I think Wetteny can follow up on your China question. Look, we saw strong growth both in the quarter and overall in derm at 8%. And I just want to underscore that that growth is obviously understated given the price, if you’re looking at the pre-price buying that we saw in late 2022. As we look at our guidance for mid to high single-digit growth for our derm franchise in 2024, that is the expectation that we will see a competitor launch. We expect this market to continue to expand and grow, as we’ve talked about. There are 85 million dogs in the US who have pruritus. There is still over 6 million untreated dogs and 3.5 million who are treated, but with steroids and sort of over-the-counter products.
So, we strongly believe this is a market we can continue to expand. Look, we’ve had two products been on the market seven and 10 years, respectively. We’ve had millions of dogs on these products. Our products have been proven over time to be safe and efficacious, and they’re trusted by pet owners. They’re trusted by vets, and we’re seeing more and more a switch to Cytopoint, both a preference for compliance by both the pet owner and the vet. And our competition, we’re expecting to come in a film-coated tablet. And if you look at that, we’re really focused on investing in applicable chewables and moving them to chewables, which pet owners really prefer. We’ve been successful in doing this in Europe. We’re quite focused on doing this in the US and we’re also continuing to look at innovation in the short term, on the long acting.
So, we are going to defend this franchise. We’re confident in this franchise. Our guidance of mid to high single digits demonstrates that we believe we can continue to grow this market in the US and around the world, not just defend our brand, but continue to bring lifecycle innovation to the space over time to grow our share. Wetteny, do you want to take China?
Wetteny Joseph: Yes, sure. And one point on derm, of course we have a mid to high single-digit growth expectation that we laid out in our guidance, of course, across a broad range of expectation. There’s various scenarios around competitor entry, timing, pricing, et cetera, will play into that. And the label that they have, of course, will be playing into how that plays out. But we’re confident in our ability to grow. Our franchise has been around for a decade in this space. On China, we’ve been consistent on this one. I think we continue to see sort of the broad economic situation there to remain where it is. We’re not expecting it to deteriorate nor improve, at least through the first half of our year. And we also have stronger comps similar to the second half of 2023, a little bit less so into the first half of 2024, but still headwinds into the first half of 2024.
