Veterinary pharmaceutical maker Zoetis (ZTS) offered a mixed picture at Morgan Stanley's 24th Annual Global Healthcare Conference on Monday, cutting its full-year operational revenue guidance to a range of negative 3% to negative 1%, down from a prior forecast of positive 2% to 5%, while stressing that a robust product pipeline should cushion near-term pricing pressures.
The company also revised its net price realization outlook to negative 1% to negative 2% for the full year. Companion animal segment pricing saw roughly 8% declines in the second half of 2024, according to the firm. However, Zoetis CEO Kristin Peck pushed back against the idea that the softness was permanent.
"What I do really hope investors understand is that this is cyclical, it's not structural," Peck said. "We're not changing our list price and neither are our competitors. Our competitors have actually taken up their list price over the last few years. If we thought this was structural, you would see list prices coming down, and we're not." She described the company as a "frustrated optimist" on the pricing front.
Zoetis reported that parasiticide veterinary visits fell 6.7% in the quarter, with market share declining roughly 1 percentage point. Despite the dip, Zoetis noted its overall parasiticide share remains approximately double that of its nearest competitor. In dermatology, U.S. market share for Apoquel stood at about 87% at quarter-end, down from nearly 100% before three new rivals entered. Patent protection for the film-coated version runs through 2032.
The company's development pipeline features several milestones aimed at offsetting the sales weakness. A chronic kidney disease (CKD) lead product targets regulatory approval by the end of 2025, with an addressable market of approximately $3 billion; Zoetis said about 20% of dogs and 40% of cats will develop the condition. An oncology pipeline candidate carries blockbuster potential with sales exceeding $1 billion. A long-acting formulation of Cytopoint Plus is expected for approval at the end of 2024, while a long-acting injectable parasiticide covering fleas, ticks, and heartworm is not anticipated before 2030.
Retail and home-delivery channels continue expanding at double-digit rates, though the pace has slowed from the prior 30%-plus growth.
Zoetis shares traded at $73.60, near their 52-week low of $71, and were down 41% year-to-date. The stock carried a price-to-earnings ratio of 12.01 and a dividend yield of 2.91%. The company has raised its dividend for 13 consecutive years.
Jay Tiakara, Zoetis chief financial officer and operating officer, said he joined the company because of what he called a "huge value creation opportunity" and cited appreciation for the existing management team.
Zoetis plans to provide additional investor updates in November.
