Zoetis Inc.

welcome to the fourth quarter and full year 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 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 star 2. 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, operator. Good morning, everyone, and welcome to the Zoetis fourth quarter and full year 2022 earnings call. I am joined today by Kristin Peck, our Chief Executive Officer, and Wetney 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. GAAP. 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, Tuesday, February 14, 2023. 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 fourth quarter and full year 2022 earnings call. Today, we reported strong full-year results for 2022, in line with the high end of our guidance from November, and thanks to our diverse portfolio, global scale, and talented colleagues. Our 8% operational revenue growth for the year was driven by our innovative companion animal portfolio, which grew 14% operationally, while our livestock portfolio declined 2% operationally, primarily due to generic competition and market challenges, especially in the U.S. Thanks to our broad global scale and diversity, we delivered well-balanced operational growth across our U.S. and international segments, which grew 7% and 9% respectively. For the year, we generated operational growth in all of our top 13 markets, despite the economic challenges, continued COVID recovery, and political uncertainty created by the war in Ukraine. Reflecting our longstanding value proposition, we grew our adjusted net income faster than sales for the year, with an operational increase of 11% for the full year. And we use this performance and financial strength to continue investing in the R&D, manufacturing capacity, and sales and marketing resources to support our future growth and pipeline. As we begin 2023, we will stay adaptable to the evolving macroeconomic factors and geopolitical tensions around the world and focus on executing our plans. We remain very confident in the fundamental and resilient global demand for animal care. And most importantly, we are confident in Zoetis' ability to continue delivering solid, sustainable growth as we resolve our prior supply constraints and build share of our market-leading franchises. Looking ahead, we are committed to our track record of value creation and above-market performance, even in the face of today's economic uncertainty. We are well positioned with our strategic priorities and capabilities to expand in large and growing product areas like parasiticides, dermatology products, monoclonal antibodies, vaccines, and diagnostics. We are guiding to a range of 6% to 8% operational growth for revenue in 2023 and adjusted net income growth in the range of 7% to 9% operationally, which reflects our increased investment plans for R&D and manufacturing to support growth. As a world leader in animal health, a market that has grown on average of five to six percent through various economic cycles over the last two decades, we feel very positive about how our portfolio, pipeline, and strategies can drive long-term sustainable growth and create value for our customers and shareholders. Whitney will discuss more details about the 4Q results and full year 2023 guidance, but let me provide some additional perspectives on our business and set the stage for some of our growth drivers for the year. First, we have remained the world leader in animal health over the last decade, outperforming the market and bringing groundbreaking innovation to veterinarians, producers, and pet owners who care for animals. We marked our 10-year anniversary as a public company on February 1st, a decade which saw us bring more than 2,000 new products and lifecycle innovations to market, build a diverse portfolio featuring market-leading franchises and 15 current blockbusters, generate consistent above-market revenue growth, and deliver a total shareholder return of more than 500%, all while increasing our market cap from $16 billion in 2013 to about $75 billion today. While we celebrate those accomplishments, I'm even more excited about where we can go in the next decade, and by the talented colleagues, innovative pipeline, and best-in-class capabilities we have brought together at Zoetis. Our colleagues' purpose-driven mindset and steady performance in the face of adversity give me confidence in the continued execution, innovation, growth, and durability of our business. As we turn to 2023, we're focused on five key growth catalysts for the year in dermatology, we see excellent growth opportunities, even after nearly a decade of game-changing innovation that began with the introduction of Apoquil in 2014 and has continued with the success of our first monoclonal antibody, Cytopoint, as well as recent lifecycle innovations like Apoquil Chewable. We continue to see even more opportunity to grow and expand in this market. In pet parasiticides, the largest single product area in animal health, We continue to gain share and are now the second largest in revenue for this category. We've improved supply in 2023. We expect to continue expanding share in this market and supporting our diverse global portfolio, featuring Sempergatrio, our triple combination product. In the area of pain, we are off to a great start with our two monoclonal antibodies for osteoarthritis pain, Labrella for dogs, which became our latest blockbuster in 2022, and Silencia for cats. We are once again revolutionizing care in this category and seeing very positive early reaction to both products in their market as we continue to expand geographies and supply. In terms of the U.S. approval for La Barla, we remain confident in receiving approval in the first half of 23 with a plan for late in the year. In diagnostics, we continue to generate solid above-market growth in international markets, evolve our go-to-market model in the U.S., and drive greater global adoption for vet scan images, our AI-based diagnostics platform. And finally, as population growth and economic mobility drive more demand for animal protein in pets, we see major opportunities in fast-growing emerging markets outside the U.S. where our portfolio is well-suited to meet those evolving needs. Overall, our business continues to be weighted toward higher growth, innovation-driven areas in companion animals, and these will remain our growth drivers for the foreseeable future. Meanwhile, our livestock portfolio will remain a valuable, cash-generating piece of our business as we continue to recover in the U.S. from generic competition and show solid growth in emerging markets. As always, we will stay disciplined yet adaptable in our approach to the new market opportunities, potential challenges, and economic shifts that could occur. And in conclusion, Zoetis remains well positioned in terms of our market leadership, financial strength, investment strategies, and diverse portfolio to deliver sustainable growth in 2023. Thank you, and I'll hand this off to Watney.