Zoetis Inc.

Welcome to the fourth quarter and full year 2020 financial results conference call and webcast for Zoetis. Hosting the call today is Steve Franks, 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 of this call will be available approximately two hours after the conclusion of this call via dial-in information or the investor relations section of zoetis.com. At this time, all participants have been placed in a listen-only mode. 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 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. In the interest of time, we ask that you limit yourself to one question and then queue up again with any follow-up. Your line will be muted when you complete your question. When closing your question, please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you. Good morning, everyone, and welcome to the Zoetis fourth quarter and full year 2020 earnings call. I am joined today by Kristen Peck, our chief executive officer, and Glenn David, 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 statement 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. The 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 in the company's 8-K filing, dated today, February 16, 2021. We also cite operational results, which exclude the impact of foreign exchange. And with that, I will turn the call over to Kristen.

Thank you, Steve. Good morning, everyone. I hope you and your loved ones are all staying healthy. As we all know, we're still experiencing hard times in many regions as COVID cases continue and new variants of the virus emerge. But I hope you share my optimism that with progress on vaccinations and continued adherence to safety protocols, better days are ahead. The year 2020 will be remembered for COVID-19, but for Zoetis, it also reaffirms the resilience of our business, the essential nature of animal health, and the agility and dedication of our colleagues in the face of industry and personal challenges. Throughout the year, we successfully ensured colleague safety and maintained reliable supply for our customers. We kept driving innovation and strengthening our diverse portfolio of 13 blockbusters and more than 300 product lines across eight species and seven major product categories. We successfully launched our triple combination parasiticides and paracatrio. We also achieved approvals for the first-ever long-acting monoclonal antibodies for osteoarthritis pain in dogs and cats, with Robrelia's authorization for dogs in the European Union and several other markets, and Silencia's first authorization for cats in Switzerland. We also continued to build on our vaccine portfolio in livestock with the approval of our CircoMax M-Hio swine vaccine in the European Union. And in poultry, we continued advancing our recombinant vector vaccines with the approval of Polvac-Proserta HVT-IVD in the U.S. Meanwhile, in diagnostics, we successfully launched VetScan Images, a breakthrough platform using cloud-based artificial intelligence for veterinary clinics. We were able to do all this while staying anchored to our purpose and advancing the five long-term priorities that I set out at the beginning of the year, including sustainability, where we made important progress in our ESG programs and metric reporting. We look forward to sharing our long-term ESG goals in the coming weeks. And finally, we delivered financial results for 2020 that were in line with the guidance we provided last February before the impact of the global pandemic was known. For the full year, we generated 9% operational growth in revenue, primarily based on new products in our companion animal business, the continued strength of our key dermatology portfolio, and growth in China. As part of our long-term value proposition, we once again grew revenues faster than the anticipated growth for 2020 and faster than the historical industry rates of 4% to 6%. As part of our value proposition, we also delivered on growing our adjusted net income faster than revenue. For the full year, we delivered operational growth of 10% in adjusted net income, while adapting our operations to the pandemic and continuing investments in our pipeline and new product launches. We generated strong fourth quarter results, which Glenn will discuss in a minute. And these performance trends give us confidence in our growth drivers and strong momentum for 2021. We expect to continue growing revenue faster than the market in 2021, driven by ongoing strength in pet care, continued expansion in markets outside the US, most notably China, and acceleration of our diagnostics portfolio penetration. We are guiding to operational growth of 9% to 11% in revenue for full year 2021. Growth expectations for the companion animal market are in the mid-single digits, and we expect Zoetis to grow significantly faster than that based on the continued uptake of Sympericatrio, the strength of our key dermatology portfolio, and the launch of monoclonal antibodies in markets outside the U.S. Positive pet care trends during the pandemic, based on increased adoptions and people spending more time with their pets, should continue driving market growth in the near term. Data in the U.S. shows visits to veterinary clinics have rebounded and the average revenue per visit has continued to increase. Over the long term, we see these trends moderating as adoption rates normalize and people eventually return to the workplace. The specialty care regimens and chronic care treatments that began in the pandemic should continue. and our innovative portfolio across dermatology, parasiticides, pain, vaccines, and diagnostics have us well positioned for continued growth and capturing share as these shifts occur. In terms of the livestock market, we expect low single-digit market growth in 2021 as the impact from COVID-19 will still be felt and a number of products experience loss of exclusivity. We expect Zoetis to grow in line with the market even as we face increased headwinds from generic competition for Draxin, our leading anti-infective product. We are confident we can leverage our lifecycle innovation strategies, together with the overall diversity of our livestock portfolio, including swine product sales in China, to help us address the loss of exclusivity for Jackson and maintain livestock growth that will support our 2021 guidance. Longer term, we will continue to invest in livestock innovations and data-driven animal agricultural solutions. As we continue through 2021, we will be building on the progress against our five priorities. driving innovative growth, enhancing customer experience, leading in digital and data analytics, cultivating a high-performing organization, and championing a healthier, more sustainable future. Our investment plans and focus on growth for 2021 include continuing the successful launch of Semperica Trio in the U.S. and other markets, as well as the ongoing adoption of other new parasiticides, Revolution Plus and ProHart 12. driving growth in dermatology through increased use of direct-to-consumer advertising and disease awareness campaigns in the U.S. and globally. Our focus remains on growing this market and increasing customer loyalty to our innovative treatments, which we expect to help us top $1 billion in annual sales for the first time. As noted earlier, we will be investing in the launch of the first monoclonal antibodies for osteoarthritis pain in dogs and cats in Europe in the first half of 2021, and advancing the regulatory process in the U.S. and other markets. While we remain confident in the eventual U.S. approval of these products based on the safety and efficacy data we submitted, at this point, we believe it is unlikely we will receive approvals for Selencia or Labrella in the U.S. in 2021. We continue to work through regulatory reviews and manufacturing inspections with the FDA, and we will continue to keep you updated on this process on future calls. And finally, we're continuing our development of digital and data solutions that will support more individualized animal care and more efficient and sustainable operations for producers. In conclusion, I'm incredibly proud of what our people accomplished in the face of such uncertainty during 2020, and it gives me great confidence in our continued success and full year guidance for 2021. As we navigate through recovery from the global pandemic and capitalize on the growth opportunities we see ahead, my optimism comes from what drove us over the last year. the resilience and essential nature of the animal health industry, the diversity, innovation, and market leadership of our portfolio, and the agility and passion of our colleagues to face any challenge. Now, let me hand it off to Glenn, who will speak more about our fourth quarter results and guidance for the full year 2021.