Zoetis Inc.

Welcome to the second quarter 2022 financial results conference call and webcast for Zoetis. Hosting the call today is Steve Frank, 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 or on the investor relations section of zoetis.com. At this time, all participants have been placed in a listen-only mode, and 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 telephone keypad. 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-ups. Your line will be muted when you complete your question. When posing 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 Zoetta second quarter 2022 earnings call. I am joined today by Kristen Peck, our chief executive officer, and Whitney Joseph, 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 statements 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. GAF, A 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 the company's 8K filing dated today, Thursday, August 4th, 2022. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristen.

Thank you, Steve, and welcome everyone to our second quarter earnings call for 2022. I am pleased to say Zoetis delivered another strong quarter with 8% operational growth in revenue and 9% operational growth in adjusted net income, driven once again by the strength of our companion animal portfolio. We saw balanced performance across our segments with similar operational revenue growth for both the U.S. and international, 9% and 8% respectively. Our diversity and strength across parasiticides, dermatology products, vaccines, and monoclonal antibodies for pain continue to demonstrate people's desire for innovative and effective care for their pets. We continue to see positive spending trends across the globe for pet care, and we grew 14% operationally in our companion animal portfolio. As anticipated, our livestock portfolio continued to face challenges, declining 1% operationally in the second quarter, largely due to generic competition, primarily in U.S. cattle, and declines in swine products in China due to lower pork prices and COVID-related supply constraints. Overall, our business remains strong thanks to the durability of our global portfolio and a steady pipeline of new products. Even as we face uncertain macroeconomic conditions, continued supply constraints, generic competition, and the war in Ukraine, We remain confident in the resilience of our business and colleagues. As we look to the rest of the year, we are updating and narrowing our guidance to reflect our positive outlook for the remainder of 2022 and the negative impact of recent changes to foreign exchange rates. Watney will walk you through the details in his remarks. As we look at the second half of the year, we remain confident in our long-term growth drivers and our ability to maintain a steady supply for customers. despite inflationary pressures on the global economy and ongoing constraints for certain products. We all know pet owners love their dogs and cats, and PetKit remains a very positive and robust market, showing little impact from broader consumer concerns with inflation or the global economy. As we expected during the pandemic, vet clinic visits are normalizing over time and spending continues to show strong growth based on the latest U.S. numbers. The positive dynamic between pets and pet owners, which I've spoken about before, is proving sustainable and recession-resistant due to people's affinity for their pets, a willingness to prioritize medical care for their pets, and key demographic drivers, such as the increased pet ownership by Gen Z and millennials, and the greater percentage of high-income households owning pets. Our innovative companion animal portfolio is well-suited to address these customer needs. Our key dermatology products continue to demonstrate strong growth, 22% operationally for the first half, and we see opportunity to expand in under-penetrated markets, especially internationally, and introduce lifecycle innovations like Apoquel chewable tablets. We have more to come in the pipeline for dermatology, and we do not foresee any competitors for Apoquel or Cytopoint this year or in the first half of 2023. In terms of parasiticides, the Semperica franchise, including Semperica Trio, is performing extremely well, having grown 47% operationally through the first half of the year, and is gaining share in the industry's largest category. We currently anticipate a competing triple combination parasiticide to be approved in the U.S. in the next six months, with a possible launch next year. However, we believe TRIO will continue to grow based on a strong label, proven efficacy, and the support of DTC marketing in the U.S. and international markets. Our monoclonal antibodies for pain, Librella and Silencia, are performing very well in approved markets across Europe, and we remain very confident in the blockbuster potential of these breakthrough treatments. In terms of the U.S., we have begun early experience trials for Silencia and expect a broader market launch in the fourth quarter. And we still anticipate approval for Labrella later this year, assuming FDA inspections are completed at facilities outside the United States. Meanwhile, our operational growth in international has remained steady throughout the first half of the year at 8%, despite COVID lockdowns in China and revenue reductions in Russia and Ukraine due to the war. Excluding the impact of Russia and Ukraine in the first half, our international sales would have grown 9% operationally. This is the latest example of how our diverse portfolio and global footprint drives steady and sustainable growth for the business. While some markets may be experiencing setbacks in the quarter, other markets like the U.S., Australia, Southern Europe, and other emerging markets are driving our performance. In the second half, we see China returning to stronger growth if COVID stays in check, and we continue to expect the diversity across geographies and species to remain strong. In terms of livestock, we expect continued pressure from generic competition, primarily in U.S. cattle and poultry products. However, we are generating growth across various livestock species in markets outside the U.S., and fish continues to perform exceptionally well. Finally, like many companies, we are managing through supply constraints this year with certain products. We continue working hard to optimize our supply chain this year so we can meet the increasing demand for certain key products. Looking ahead, we will continue to invest in the resources, DTC marketing, and manufacturing capacity we need to support our future growth and achieve results for our customers and shareholders. We are advancing our Driven to Care sustainability goals that were established last year, and we published our 2021 progress update and ESG metrics in the second quarter, highlighting achievements toward our DE&I aspirations, expanded climate goals, and support for the veterinary profession. We are committed to staying on our journey to be the most sustainable animal health company in the world. We also continue to invest in R&D, business development, and new capabilities across the business to enhance our portfolio and ensure our long-term growth. In the second quarter, we continue to receive approvals for new products like Pullback, Proserta, HVT, IBD, ND, expand key franchises like Applequel into new markets, and acquire new businesses to complement our portfolio, such as Base Paws, a pet care genetics company. In closing, Our business continues to perform extraordinarily well in one of the most dynamic markets I've ever seen. Diversity, innovation, and customer focus are our cornerstones for excellence. I want to thank our colleagues for their tenacity, commitment, and resilience as we continue to deliver for our customers and shareholders. Thank you. Now, let me hand things off to Whitney.