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spk04: Please stand by, your program is about to begin. Welcome to the first quarter 2024 Financial Results Conference call-in 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 the 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 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.
spk10: Thank you, operator. Good morning, everyone, and welcome to the Zoetis First Quarter 2024 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 US GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable US GAAP measures is included in the financial tables that accompany our earnings press release and the company's 8-K filing dated today. Thursday, May 2, 2024. We also cite operational results, which exclude the impact of foreign exchange. And with that, I will turn the call over to Kristen.
spk00: Thank you, Steve, and good morning, everyone, and welcome to our first quarter earnings call for 2024. Today, we reported outstanding first quarter results, underscored by steady demand for our products, a focused strategy, and our purpose-driven colleagues. We delivered 12% operational revenue growth and grew adjusted net income 15% operationally in line with the tenets of our value proposition. Driven by the launch of our osteoarthritis pain franchise, the U.S. led the way with 16% growth and 8% operational growth internationally. More specifically, globally, Librella grew 189% operationally, including $40 million in sales in the U.S. in line with our expectations. The powerful human-animal bond fuels demand for our companion animal portfolio with 20% growth operationally, while livestock declined 1% operationally. This quarter's results, even amidst global uncertainty, are a testament, once again, to the power of our diverse and durable portfolio across markets, species, and therapeutic areas. It also highlights the continued rise and resilience of the animal health industry. Our purpose and performance are rooted in science, which has always been the great disruptor. And as animal health is increasingly essential for nutrition and companionship, caregivers demand even more high-quality innovation. That means we identify the most prevalent areas of unmet veterinary need and invest in, develop, manufacture, and deliver life-changing products that customers have been waiting for. Take, for example, Labrella and Silencia, our injectable monoclonal antibodies to treat OA pain in dogs and cats, which are helping millions of pets return to play. With more than 18 million doses distributed worldwide, we are providing long-lasting relief to animals, many of whom were previously undiagnosed or untreated due to the limitations of NSAIDs. With nearly 40% of all dogs suffering from OA pain globally, We believe just one-third of those are being treated, so we're just scratching the surface of care. And cats are visiting the clinic more often. In fact, we're helping curb clinic fears with BondCat, the first FDA-approved product to alleviate anxiety in cats, which means we're expanding care in a historically under-medicalized area of the market. We understand that social media is a forum for convening. a place for pet owners to connect and to share. But we also have a responsibility to empower our customers to make informed decisions grounded in science and data. We are unwavering in our commitment to rigorous safety and quality standards, which has earned us the trust and confidence of veterinarians worldwide. Backed by that commitment, Labrella and Silencia are safe and effective. They are anchored in 10 years of science and have been used in Europe for more than three years. In the U.S., 78% of veterinarians who are at the center of care are very satisfied with Labrella. This is driven by real world experience and consistent with the feedback we hear in other markets. And our research indicates that 46% of vets globally will treat OA earlier and 65% will treat more dogs now that Labrella is available. To accurately reaffirm the safety and efficacy of these therapies, we are doubling down. working directly with veterinarians who need these products, hosting live sessions with our chief medical officer, and expanding online education and training while deploying capital to expand our DTC strategy. And veterinarians continue to be confident in Labella, as evidenced by a recent blind survey of U.S. vets confirming that perception and intent to prescribe remain unchanged. We remain confident that OA pain could be our next billion-dollar franchise. because we are meeting the needs of an underserved market. We are growing by nearly every metric, including adoption, penetration, reorder rates, patient share, and expanded utilization. And looking at our four-week rolling average in the U.S., we're excited to report that sales steadily increased through April. Our performance speaks to the power of the human-animal bond. Discerning pet owners want options, and they will work with their vets to find relief for their best friends. Beyond OA pain, Duetis has been able to lead the market in other key categories because we deeply understand our customers' needs. This allows us to not only compete in existing markets, but again, to create entirely new ones. And science has created something completely unique to our industry, $2 billion franchises. Our parasitized portfolio expanded the total market based on deep customer insights. Before Semperica and Semperica Trio, we were number five in this category. These innovations changed how we compete. Today, we are number two and continue gaining share and growing the market, even in the face of competition. Similarly, we were first to recognize that new therapies were needed to treat canine itch safely and effectively. That market foresight changed the treatment paradigm and revolutionized pet care. A decade of dermatology has led to three products, 20 major life cycle enhancements, including Cytopoint, the first ever animal health monoclonal antibody, and the first chewable with apical chew. From what was once believed to be just a $100 million market has grown to $1.4 billion because we know what our customers need. Today, more than 18 million dogs are treated for allergic itch and atopic dermatitis, and another 13 million remain untreated globally. We built a billion-dollar franchise and demonstrated the durability of our portfolio. And we will continue growing this franchise, underpinned by strong brand equity, first mover advantage, lifecycle innovation, and strong customer relationships. We've led in parasiticides, dermatology, and now OA pain. And each time our innovations have created new categories in animal health, you've seen the total industry opportunity expand. Now moving to livestock. I am sure you all saw the news this week on the announcement of our agreement with Fibro Animal Health to sell our global medicated feed additives and certain water-soluble product portfolios and related assets for $350 million. This deal is another great example of Zoetis' disciplined capital allocation strategy to focus investments in areas with the greatest growth potential and innovation that are aligned with our key capabilities. I'm confident that under Fibro's management, the global reach of these products will continue to expand to meet customer needs worldwide. We remain very committed to livestock and to sharpening our focus and our core innovative livestock growth areas, including preventatives, antibiotic alternatives, and genetics. In summary, for more than 70 years, Zoetis has been leading the industry with our commitment to innovation. We've invested over $5 billion in R&D since our IPO, which has brought more than 300 product lines to the market. Science is, and always has been, the great disruptor, and at the core of our success in delivering the innovations that veterinarians, livestock producers, and pet owners expect from us. Our pursuit of science has led to breakthroughs in dermatology, like Cytopoint and Apical Chew, in parasiticides with Sempericatrio, and now the latest in OA pain with Urella and Silencia that are revolutionizing animal health. Blazing new trails isn't easy, but time and again, our purpose-driven colleagues have proven their ability to expand our industry leadership and forge entirely new markets. And we remain committed to delivering strong growth through innovative franchises and diverse portfolio while continuing to invest for the future. Looking ahead to the remainder of 2024, our increased operational guidance reflects the resilience of the animal health market and the execution of our strategic growth priorities. We will continue to be disciplined yet adaptable in our approach to the opportunities, potential challenges, and economic shifts that occur throughout the year. And with that, I will turn it over to Watney.
spk08: Thank you, and good morning, everyone. As Kristen mentioned, we had an outstanding start to the year, driven by the underlying strength of our companion animal portfolio, particularly our innovative products, as well as price growth across all species. In the first quarter, we generated revenue of $2.2 billion, growing 10% on a reported basis and 12% on an operational basis. Suggested net income of $634 million grew 4% on a reported basis and 15% on an operational basis. Our 12% operational revenue growth was due to the underlying strength of our companion animal portfolio aided by the impact of a weak comparative quarter in our US companion animal business. However, the majority of this variability to growth was offset by headwinds related to economic conditions in China the impact of a tough comparative quarter in livestock due to the timing of supply for certain products last year, and inventory destocking related to our U.S. diagnostic sales model change. Of the 12% operational revenue growth, 7% is from price, with 5% growth in volume. While we saw price growth across our portfolio, price was favorably impacted by hyper-refinitionary markets, especially Argentina, which contributed 2% to our overall price growth. The volume growth was driven primarily by new products, including our monoclonal antibodies for OA pain, Labrella, and Silencia, as well as our key dermatology products and Semperica Trio. On a segment basis, the U.S. posted $1.2 billion in revenue, growing 16% on the quarter, while our international segment reported revenue of $1 billion, with operational growth of 8% on the quarter. Our companion animal portfolio was the main driver of revenue growth in Q1, growing 20% operationally. This growth was partially offset by livestock, which declined 1% on an operational basis. We saw double digit operational companion animal growth in both our U.S. and our international segments again this quarter, driven by the strong performance of our innovative products with contributions from both volume and price. Empirica TRIO was the primary driver of growth in the quarter, generating $243 million globally, representing operational growth of 61%. We saw strong demand for TRIO, as well as continued growth in patient share, even with competition. Our OA pain maps were also a significant contributor to growth, posting $131 million in the quarter. Global growth came from the impact of new launch markets, both in the US and internationally. In our early launch EU markets, recent vet surveys showed an increase in monoclonal therapy and expansion into more moderate OA cases. Our key dermatology products were 25% operational in the quarter, with $360 million in global revenue. Wealth within dermatology was driven primarily by our Apricol franchise, where we are seeing solid conversion to Apricol Truable including a modest impact from initial distributor stocking in the US. Cytopoint growth continues to be driven by vet and pet owner preference for injectable methods of treatment. Our global companion animal diagnostics portfolio declined 12% operationally, with declines in the US driven by our distribution model change. These declines were anticipated as our distribution partners sold off their remaining inventory due to our transition to a direct-only model for our U.S. diagnostics portfolio. U.S. declines were partially offset by growth internationally. Our livestock portfolio declined 1% operationally, as expected, driven by a tough comparative quarter in the prior year, especially in the U.S., as well as impacts from the ongoing economic conditions in China. This decline was partially offset by price growth in our other international markets. Now, moving on to revenue growth by segment for the quarter. U.S. revenue was $1.2 billion in the quarter, growing 16%, with companion animal growth of 25% and livestock posting a 7% decline. The companion animal performance in the quarter was driven by Semperica Trio, our key dermatology portfolio, and the impact of the launch of Liguela in the U.S., as well as the impact of a weak comparative quarter. Our outstanding U.S. companion animal growth came in the quarter, where we saw vet clinic visits decrease 1.5%. We continue to see growth in the therapeutic visits, while wellness visits drove the decline. Retail's outgrowth in the retail and home delivery continue to outpace vet clinic fulfillment, which is based on growing pet owner preference for these alternative channels. This dynamic is expected to put continued pressure on total vet clinic visits, without impacting our expectations for revenue. Despite the visit decline, revenue and spend per visit in the clinic grew 4.5% and 6% respectively, which reflects continued pet owner willingness to pay. Turning to product performance, Semperica Trio posted sales of $205 million in the quarter, growing 61%. We continue to be the market leader in the triple combination parasiticide space. Our leading footprint across channels has allowed us to continue to drive dosage growth through increased compliance, even with declines in wellness visits at the clinic. In addition to a weak comparable period in the prior year, we have seen favorable price realization due to more targeted discount programs to vets, as well as channel dynamics. Get Dermatology product sales in the U.S. were $233 million for the quarter, going 27%. we saw growth in both price and volume and across both Apoquil and Cytopoint. Growth also benefited from a weak comparable period in the prior year. Market demand for our dermatology products remains high. In the quarter, we saw growth in both our patient share as well as higher periodic visits in the clinic. Additionally, growth of retail auto-shift programs continued to bolster compliance. At the beginning of April, we made APRICOTruable available through our distribution partners. Our paymabs, LaBelle and Silencia, posted a combined $57 million in U.S. sales in Q1. LaBelle generated $40 million in the quarter, with underlying vet demand continuing to build on the momentum from our full launch in Q4 of last year. Excluding the impact of initial clinic stocking, which we were provided last quarter, we are seeing robust sequential quarter growth in Liguela, in line with expectations. We continue to see good growth in penetration, as well as strong reorder rates, which are approaching 80%, all of which points to positive real-world satisfaction in the clinic and among pet owners. We remain confident, not just in the safety and efficacy of Liguela, but also in our expected performance. As Kristin alluded to, we have seen steady increasing trends in our trailing four-week sales average in the U.S., even into April, after the increased media attention. We continue to see steady progress in Silencia, which had U.S. sales of $17 million in the quarter, more than doubling our prior year Q1 sales. We have indicated the field line market needs significant development, but we are pleased with our progress thus far. Silencia is now the market-leading product for feline OA pain in the U.S., and we have seen a significant increase in the medicalized patient pool since launch. Our U.S. companion animal diagnostics portfolio declined 21% in the quarter, driven primarily by distributor inventory workdowns following our channel strategy change. This destocking is in line with our expectations and has negligible impact on our underlying claim demands. U.S. livestock declined 7% in the quarter, while our underlying business performance in the quarter was as expected. Our results are reflective of a strong comparative period in Q1 of 2023, in which we grew 15% due to the return of supply on several products, primarily in cattle. Sales of swine products declined due to decreased sales of vaccines, as well as Jackson. we saw declines as a result of increased generic competition in our medicated fit additive products. Moving on to our international segment, where revenue grew 3% on a reported basis, and 8% excluding the impact of foreign exchange. Companion animal grew 14% operationally, and livestock grew 2% operationally. Increased sales of our international companion animal products were driven by ORPA MABs, key dermatology products, vaccines, and small animal parasiticides. This growth was partially offset by impacts in China. Our international OA pain maps grew 67% operationally to $74 million in combined revenue in the quarter. International Libella cells were $59 million, growing 71% operationally. Growth is balanced across new launch markets and our first wave EU markets. We continue to see evolution in the European markets, where we have seen expansion in Lobelus use in moderate OA cases, which, according to the latest vet surveys, now represents the majority of Lobelus patients in Europe. We remain pleased with the success of our DTC advertising campaigns in increasing pet owner awareness of OA. Valencia sales were $15 million internationally in the quarter, going 54% on an operational basis. Our international key dermatology portfolio grew 23% operationally in the quarter, posting $127 million in sales. We saw double-digit operational growth across most of our major markets, driven by higher compliance and new patients. Wealth was also favorably impacted by pre-priced increased buy-ups in Japan and certain European markets. Our international small animal parasiticides portfolio grew 6% operationally, driven by our Semperica franchise, with Semperica Trio going 58% operationally to $38 million in sales. Trio growth benefited from continued uptake in Europe, driven by key account penetration and field force effectiveness, as well as contributions from Trio's launch in China. Semperica posted $56 million in revenue, going 22% on an operational basis in the quarter. This growth was partially offset by a 29% operational decline in our Revolution franchise, which generates a high proportion of sales in China. International livestock grew 2% operationally in the quarter, driven by price increases, especially in high inflationary markets. Price growth was partially offset by volume declines across all of our species, partially driven by a tough comparative period in the prior year due to the return of supply of certain livestock products. The volume declines in livestock were driven by cattle due to a tough comparable period related to supply and worsening market conditions in Australia. Our international swine portfolio saw volume declines driven by China, where we saw lower hog prices as well as a reduction in herd sizes. In sheep, we saw declines from herd reductions due to expected weather conditions in Australia and New Zealand, as well as supply constraints on eight key products. As we mentioned last quarter, we continue to see economic challenges in China, where low consumer spending and high urban unemployment have reduced spending. We are also seeing a slow down in livestock with lower pork prices and smaller herd sizes. The impact on our growth is expected to moderate late in the year, but we expect to continue to see headwinds throughout the year across both companion animal and livestock. Now moving on to the rest of the P&L for the quarter. Adjusted gross margins of 70.7% declined 10 basis points on a reported basis compared to the prior year. Point exchange had an unfavorable impact of 180 basis points on our reported adjusted gross margins. Excluding FX, we saw higher margins due to price increases, favorable mix, and lower freight costs, partially offset by higher manufacturing costs, especially in hyperinflationary markets. Adjusted operating expenses increased 11% operationally, driven primarily by SG&A growth of 10% operationally, mainly due to higher compensation-related expenses, as well as increased advertising and promotion spend on our OA pain maps. R&D grew 13% on an operational basis, driven by higher project spend related to both recent acquisitions, as well as advancements of our pipeline candidates. The adjusted effective tax rate for the quarter was 19.7 percent, a decrease of 80 basis points, primarily due to a higher benefit in the U.S. related to foreign-derived intangible income and a more favorable jurisdictional mix of earnings. And finally, adjusted net income grew 15 percent operationally, despite a $31 million headwind to growth from the non-recurring benefit of our prior royalty settlement. Adjusted diluted EPS grew 17% operationally for the quarter. Capital expenditures in the first quarter were $140 million. In the quarter, we repurchased $339 million of Zoetis shares. Before moving to guidance, I wanted to comment on our recent announcement to divest our medicated feed additive portfolio and certain water-soluble products to Fibro Animal Health. This is a transaction that demonstrates Zoetis' disciplined capital allocation strategy to focus our investments on innovative solutions that advance animal health, productivity, and sustainability. This divestiture will allow us to remain focused on other livestock solutions, including vaccine, biologic, and genetic programs that are more aligned with our strategic priorities. Now moving on to guidance for full year 2024. As we have mentioned, we had an outstanding first quarter that highlighted our ability to deliver through multiple sources of growth. Our performance in companion animal, especially in parasiticides and our key dermatology franchises, exceeded our expectations. Additionally, we continue to be pleased with the progress of the U.S. launch of Librella and are confident in our ability to meet expectations. We are therefore raising our 2024 operational guidance provided during February's earnings call. Note that guidance reflects foreign exchange rates as of late April. The updated foreign exchange rates negatively impacted our reported revenue guidance by approximately 2% and our reported adjusted net income guidance by approximately 4% when compared to our initial guidance issued in February. For the year, we expect revenue between $9.05 and $9.20 billion. representing a range of 8.5 to 10.5 operational growth. Our increase in operational growth is reflective of Argentina's pricing impact, as well as due to performance in our companion animal parasiticides and key dermatology products. We now expect our full year operational growth for Semperica Trio to be double digits, while we expect growth in our key dermatology products to be in the high single digit range. As we stated earlier, we remain pleased with our U.S. launch of Liguela. Our expectations for Liguela for the year remain unchanged. Moving down the P&L, we now expect adjusted net income to be in the range of $2.62 billion to $2.67 billion, representing operational growth of 13% to 15%. And finally, we expect adjusted diluted EPS to be in the range of $5.71 to $5.81, and reported the loaded EPS to be in the range of $5.34 to $5.44. Just to summarize before we go to Q&A, we are very pleased with our start to the year. While our reported results are reflective of various foreign exchange-related headwinds, operationally, we continue to deliver growth across our key therapeutic areas and across most of our major markets. This growth highlights the diversity and dependability that allows us to continually uppace the animal health market. Additionally, we continue to lead the way, creating new markets and launching new innovation that increases the standard of medical care for animals. Now, I'll hand things over to the operator to open the line for your questions. Operator?
spk04: Certainly. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. 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. With that, we will take our first question. It's coming from Michael Ruskin with Bank of America. Please go ahead.
spk13: Great. Thanks for taking the question. First, I want to ask just about the guide change. It seems like there's just so many moving pieces right now. VFX moves, you've got all the price you're taking in Argentina, some of the stocking comments for applicable chewable. And obviously, Librella, just this early in the year to decide to raise the guy, just sort of like what went into that and what do you see as the upside risks or downside risks that as you go through the year? And then just a quick follow-up question. I'll squeeze both in. My question is on margin. You know, with all the price, with all the strength in Companion, gross margin was still a little bit weaker in the quarter. And you're not raising EPS operationally for the year. So just, you know, what's going on with the gross margin and why isn't the flow through Companion Animal Portfolio better? Thanks.
spk08: I'll be happy to take this. Mike, look, we're very pleased with an outstanding quarter to start the year, clearly delivering 12% operational growth at revenue, 15% at adjusted net income from an operational perspective. Could be more pleased with this. In terms of the guidance, of course, there are puts and takes as you laid out. The performance in the quarter, when we think about the prior year comps, we think these are largely offsetting puts and takes that go into the performance. And I think that feeds into the later part of your question, which is how do we decide to go into increasing our guidance from an operational perspective. But when we look at the puts and takes, clearly the performance from our TRIO and key DERM, senior growth as we continue to ramp the launch of Librella, not only in the US, but across international markets, gave us a lot of confidence in terms of underpinning the growth that you saw in the quarter from an operational perspective. Yes, there are some easier comps when you look at the companion animal business, particularly in the U.S. We talked about those at length last year with the destocking and the timing of promotion activity, et cetera. But we also had some headwinds where we had strong comps across livestock in particular because of the timing of supply last year, as well as the China market that we've been talking about as we expected as well in Argentina, given the pricing impacts, et cetera, and in Australia and New Zealand. So when we take a look at those, we think there's probably one to two points of tailwind on a net basis is what we would estimate coming into the quarter. But then when you look at the bottom line, 15% operational growth and adjusted net income, despite the royalty settlement that we had last year, again, is an offsetting element. So we still end up with sort of an operational growth that's in the same range. that we've delivered. And so though it's still early in the year, we have confidence in the underlying market and demand that we see across our products. We're seeing increased periodic visits into the clinic for dermatology. Shrio, despite head-to-head competition, had a phenomenal quarter of 61%, with $243 million of revenue, with the US leading that at 61% as well. So when we take all those into consideration, And we're seeing price realization across the globe, including increased price from hyperinflationary market like Argentina. So it'll give us enough confidence to be able to raise the guidance and still be very confident in delivering the revised guidance that we did today. Now, in terms of margins, let me just make sure I give you cover that. If you look at the headline, right, the gross margins are down about 10 basis points. FX had about nearly 200 basis point headwind. I think it's important to remind everyone there was a significant devaluation in Argentina that occurred two times last year, right? In December, as well as prior to that in August. The December devaluation is actually in our first quarter. Keep in mind, our international operations closed their books a month earlier. So December is actually Q1. So you're seeing the impact of that Argentina devaluation play out, particularly as you look at inventories and the effects on COGS, cost of goods sold, as well as lower in the P&L. And so when you factor those out, we actually had about a 200 basis point expansion operationally in our gross margins, which, again, aided our way into the expansion of adjusted net income and growing that at 15%.
spk04: And our next question comes from John Block with Spiegel. Please go ahead.
spk12: Great. Thanks, guys. Good morning. I guess I'll ask both up front as well. Wendy, I'm getting a lot of questions on Argentina, so I hope this is clear. The strength of the top line was big. You raised the guide revenue by 150 bits for the year. You mentioned 200 bits of year-over-year growth in the quarter from Argentina, if I have that right. But what is the incremental growth contribution from Argentina for the year? I just think everyone's trying to figure out what the raise is call it like ex-Argentina due to that market's hyperinflationary environment. Hope that's clear. Let me know if it's not. And then maybe just to shift gears, you know, Kristen on Librella, very helpful comments on the April run rate. In our checks, we hear about a safe drug that might have some issues in dogs with neurological issues. And so just would love your thoughts on that. And does the company plan to do any, call it follow-up studies, maybe addressing select AEs, that'd be great. Thanks for your time, guys.
spk08: I'll take the Argentina question first, and then Kristen will cover Librella. Look, the way I look at it, as we said in the prepared commentary and you quoted here, there's a 200 basis point contribution to the top line from Argentina in the quarter. And so if I were to say, look, we're still early in the year, and we'll continue to look to take price in that market. And we'll have to watch how that plays out between price and volume as we go to hyperinflationary market. We're pegging what we're looking at based on the actuals and what we anticipate. But again, it's still early in the year. So if you were to pick this 200 basis points and you spread them for the year, in effect, you could say there's 50 basis points contribution to the year if I don't account for any more price from here on, right? And so that's kind of how you look at it. And you said, well, the other 100 basis points in the raise is from the rest of the underlying business. The answer is somewhere between there, right? But certainly there's contribution from the growth we're seeing, which we said is above our expectations, for our Durham franchise, delivering $360 million, growing 25% on the quarter, as well as TRIO, which continues to perform really well for us. And so those, I would say, are significant contributors to the top line guide that we gave. So we're increasing the top line by 150 basis points in terms of the range of operational growth. And Argentina is a piece of that, but I would say there's significant contribution from the underlying business as well.
spk00: Sure, John, and I'll take the second part of your question on Labrella. I mean, first, I really want to underscore that we have the utmost confidence in the safety and efficacy of Labrella. You know, it has been used for over three years across the globe and over 14 million dogs, and it's approved in over 50 countries. And if you overall look at the rate of reported adverse events, It's about 18% per 10,000 or 0.18% globally. And I think it's important to keep in mind that no single adverse event is classified under the EMEA guidelines as more than rare, which is more than 1 to 10 out of 10,000s. So we remain very confident in the safety and efficacy of this product. We watch these reported adverse events very carefully. It's an important part of what every pharmaceutical company does to make sure that we understand any trends that we're seeing. We remain very confident in the data. I really want to underscore, they've been on the market for three years. So we continue to watch the AEs that are coming in. And to be clear, the top adverse events today are number one, lack of efficacy, so it's not working maybe as well as they wanted, polydipsia, which is frequent drinking, and the third being polyurea, which is frequent urination. So the other ones you're talking about remain a rare side effect. In other words, not more than one in 10,000. So hopefully that answers your question.
spk04: Our next question will come from Erin Wright with Morgan Stanley. Please go ahead.
spk03: Great, thanks. Just another one on Librella, just given the sell-out trends that you were mentioning, you know, how do we think about the quarterly progression from here in the second quarter? And then also just like new patient starts, like how does that look since kind of the media attention? And then on livestock and just the broader rationalization kind of of the business with the selling of the feed additives business, which made sense and do you see other opportunities to further prune the portfolio and presumably this lifts your long-term top-line growth targets and margin profile and just on the improved mix alone and the focus you can have on these higher growth, higher margin businesses, you know, what does Zoetis look like in three to five years down the road because it could be, you know, potentially more skewed to that and how do you think about that? Thanks.
spk00: Sure. I'll let Whitney. Why don't you start with Librella performance and the questions you've got there, and then I can take the livestock question after that, Whitney?
spk08: Yeah, I'd be happy to. Look, we delivered $100 million of revenue in Q1 on Librella. That's 189% growth over the prior year. Clearly, the U.S. contributing $40 million is a big part of that, but we're very pleased with the performance across our international markets as well for Librella, and we saw a really strong sequential quarter growth across our international markets. And we continue to see the uptake. We're very pleased as well when surveyed European vet clinics actually are indicating that now they're seeing more than 50% of the cases being moderate cases, which is very encouraging as we continue to progress the product, having been out there for three years. In terms of the progression for the year, clearly we continue to ramp in the U.S. And as Kristen said, and we said in the prepared commentary, as we look at on a rolling four-week basis, Through the quarter and beyond the quarter into April, we continue to see steadily increasing orders of Librella as well, which, again, calls us to be able to be confident in our expectations for Librella as we look at the guidance that we gave as well. We're not going to get into very specific order by quarter, but I would say if you look at the $40 million in Q1, there's very little to no stocking in that number. Now, we did speak at length in February. about the stocking in the initial launch in the fourth quarter. We had about two and a half months at the end of the year for the product launch. And you have to factor holidays as well into that. And we saw a very fast penetration into 60 plus percent in clinics very quickly, which means that there's a lot more stocking in that. And now we give you a range of somewhere between a quarter and a third of that being stocking. I would say it's likely in the high end of that range. So when you factor that into the $40 million this year, this is really substantial sequential growth in LaBella. And as we said, we continue to see momentum in the product. The one thing I would remind everyone is in international, we did have a number of markets that we launched in the second quarter last year. So we'll be lapping those across the international markets. Those include Canada, Brazil, Australia, Japan. And so we'll be lapping those. But we still continue to expect to see strong, meaningful growth in the product as well as sequential growth as we go through the rest of the year is what I would remind you in terms of how we expect progression for LaGrella.
spk00: Sure. And Aaron, I'll take your second question on livestock. You know, as you and I have talked about many times, livestock generally historically in our industry has grown at around 2 to 4%. I know we grew less for a period of time when we were facing the LOE on Draxen and with some large disease outbreak across the globe. But I think what you're seeing is, you know, Zoetis, you know, over the last year and going into this year, is returning more to those historic levels. I think if you look at this year, we expect to be above that level. Again, as Whitney mentioned, Q1 is not a good indication. If you look at sort of the comparable that we had there. So we remain very confident, again, in livestock. We believe we'll end at the higher end of that range. As you look at the divestiture of our medicated feed additive and, you know, water-soluble portfolio and assets, you know, we've continued to be disciplined around our capital allocations. We divested our pumpkin pet care last year. This is something that, you know, as a leadership team, we continue to do. We look at every asset we have, and we want to make sure that we're investing in the highest areas of growth. So I think, you know, that's just something that's just a rigorous part of how we manage the company. And I think if you look at livestock, obviously the divestiture of the medicated feed additives portfolio will increase the overall growth of the company and the overall growth of livestock overall. and also help overall on margins. But, you know, our real focus of the divestiture really had to do with doubling down and investing in what we see our great potential in the livestock industry and really playing to what are our core strengths in preventatives, into antibiotic alternatives, into genetics, as we think about vaccines and biologics and new genetic solutions. So, again, you know, we'll continue to look at our portfolio as we always have and as we've done every year, but remain confident in livestock, and especially this year in our ability to grow faster than the market.
spk04: And our next question is coming from David Westenberg with Piper Sandler. Please go ahead.
spk02: Hi. Thanks for taking the question, and congrats on the quarter. So you gave a lot of commentary on April and Librella cells, and it sounds like there's week-on-week build. Just want to confirm that is, in fact, clinic administration or end market that you're looking at versus, like, stocking or sales out from you. Veterinarians are really behind the product. It seems like there is some consumer... you know, social media kind of stuff. I just want to confirm that the DT sales advertising is on track or if there's any kind of changes there. And then just finally, if I could squeeze in just one more in terms of your assumptions on that high single digit and DERM, what is the assumption in terms of competitive launch there? Thank you very much. And again, congrats on the quarter.
spk08: Yeah, David, look, I'll take a stab at this and then Kristen may add some. First of all, when you look at Labrella sales in the U.S., keep in mind Labrella is sold direct to clinics and the turnaround is very fast. And so there's no sort of channel dynamics to play out in terms of what we're seeing. What we're seeing from week to week is actually coming directly from what the clinics are ordering. And then look, DTC continues to be on track as we said in our prepared commentary. Part of the increase you see in our SG&A spend is really advertising promotion behind our paying franchise, including LaBelle in the US is a big part of that. And then when you think about DERM, of course, very pleased with our performance here. $360 million of 25%. Now there is some soft comp in that, but when we Neutralized so that we still see really really strong underlying growth and strong demand and we continue to be able to take price Across there now, of course, it's still early in the year So as we look at particularly in the back half, we are factoring different scenarios around what's the timing of competition? And while we remain confident our ability to continue to grow our franchises post competition as we're doing in trio This can be some near-term or short-term promotion activity that we are mindful, right? so we do factor those into our thinking and in terms of how we land at the high single-digit range, which is up from what we said last time, which was mid to high single-digit. So clearly our confidence continues to increase there.
spk04: And our next question is coming from Balaji Prasad with Barclays. Please go ahead. Balaji, your line is open. Check your mute function. Okay, we will take our next question from Brandon Vasquez with William Blair. Please go ahead.
spk11: All right, good morning, everyone. Thanks for taking the question. First on Librella, I'll ask to a front here. On Librella, can you guys talk about are you starting to see any pockets of vets going for maybe the more severe OA dogs and being used in the moderate OA population? Anything you guys can do to kind of help push that market development because that seems to be the bigger opportunity as this grows over the coming years? Follow-up second question is, You're spending over $600 million in R&D now. I think we're about a year out from the nice investor day you guys held for us last year. Any meaningful updates in the pipeline that you guys can share with us, either new products or lifecycle innovation that might be coming in the near to medium term? Thanks.
spk00: Sure. Whitney, do you want to take the first one on Librella, and I can take the R&D question?
spk08: Yeah, I'd be happy to. Look, we continue to be very pleased with the performance of Librella, as we've said, both U.S. and internationally. We did complete a recent survey of vet clinics across European markets. And after three years in the market, we are certainly seeing the transition to having a lot more moderate cases. In fact, vets based on surveys are saying more than 50% of the cases they're seeing now are moderate, and even some mild cases coming into the mix. So that's very encouraging. And again, and that also contributed to an increase in months on therapy going somewhere between seven and eight months now. is what we're estimating based on those surveys with vets. So that progression is what we count on and anticipate, and we're seeing that across international markets. We're still very early in the U.S., but that's the sort of progression we would expect, and we'll continue to educate vets on the product, as we've talked about, to continue to drive that as we move forward. Kristen?
spk00: Sure, and Brandon, to your second question on our R&D, yeah, you probably saw the strong growth in R&D in the quarter that, you know, is really because we remain very confident in our pipeline in many of the key areas that we mentioned at Investor Day, which was, I guess, a little less than a year ago. Really investing behind some of the key therapeutic areas, both our long-lasting monoclonal antibodies, which will be some of the more near-term launches. We are not making any announcements on today's call, obviously, with regards to that, but that's going to be some of the more near-term launches. And then, as we talked about, very excited as you look at renal, as you look at oncology and cardiovascular and diagnostics, to continue to invest in those areas where we see huge potential. As you look at renal cardiology and oncology, we always said, as we said last year, those are more in the four years plus range, so there's no near-term updates there. You know, we continue to launch products. As you look at, as I spoke in my script about BondCat, which is around anxiety for cats, that's really important. It may not seem a huge product overall, but it's an unlock for the rest of our portfolio. If we can get cats to the clinic, we can sell more of a lot of our other products, and more importantly, meet the needs of the cat population, which to date has been very under-medicalized. So I know we don't give you all the visibility that you're dying for in R&D, but I think as you can see, we've continued to deliver on our pipeline And, you know, both in, you know, really innovative products like what you're seeing in L'Oreal and Silencia, but also like lifecycle innovations that will really extend the life of important franchises, such as some of our long-acting monoclonal antibodies, which should be more in the near term.
spk04: Our next question is coming from Steve Scala with TD Cohen. Please go ahead.
spk06: Hi, good morning. This is Chris. I'm for Steve Scala. We had two questions. First, on livestock. Are you seeing any impact on the ongoing outbreak of H5N1 avian influenza? And then second, on the U.S. companion animal market, what underlying trends are you seeing in U.S. pet adoption and abandonment rates? And are you seeing any change in share of wallet, share of consumer pet stem and medicines versus other product categories? Thanks.
spk00: Thanks, Steve. I'll try to take those in wet names. Certainly, if there's anything I missed, you can jump in. Look, we, like all of you, are continuing to watch the outbreak of H5N1. You know, if you look at the portfolio that we have and our capabilities, we stand ready to support both governments and customers across the globe as they look at potential solutions to address H5N1, both on the vaccine side and on the diagnostic side. You know, to date, you know, we have not been requested, you know, to do that. But, you know, I think like many of our peer companies, we stand ready to support government authorities when that's needed. You know, I do want to reassure people. I mean, data's come out that the milk is safe. Data came out from FISS this morning reassuring people that the meat they eat is safe. So we have not seen any impact to our business whatsoever with regards to this. This is a major issue for our customers and our real focus is supporting them through this and making sure that we focus on what we can do certainly around biosecurity surveillance and detection, which we're more and more engaged with the USDA and others given our diagnostics portfolio as well. No, we have not seen any impact to our business to date on that. With regards to the U.S. and looking at, we have not seen a significant U.S. national increase in people bringing their pets back to shelters. I know there's been some isolated here and there, but as an overall U.S., that is not a trend. And those pets that they all adopted during COVID are all aging and continue to be drivers of our growth and not just in the U.S., but globally. And I know there has been some talk around consumer sentiment and is that really changing? Obviously, we've seen some changes in pet collars or treats and things like that. But what's really been clear and what we've talked about for a long time is when you think about animal health care, it's essential. They are not skimping on their animal health care. And if you look at the trends in the quarter, as you look at an increase in periodic visits, as Whitney talked about, the reality is when their animal needs care, they are getting that care. And if you look at, you know, spend per visit in the U.S., we're seeing spend per visit up 6% in the U.S., which means, again, consumers and pet owners want to take care of their animals, and they continue to invest in this. If you look at the strength of the human-animal bond, this is one of the reasons that we say animal health is a very resilient industry, that people will continue to invest in the health of their pets. And that's certainly what we're seeing in the quarter. And if you saw our expanded operational guidance for the year really being driven by our companion animal portfolio, it's what we expect for the year as well.
spk04: Thank you. We'll take our next question from Nathan Ridge with Goldman Sachs. Please go ahead.
spk09: Great. Good morning, and thanks for the questions. First, just a clarification on Argentina and the price increase. I guess, did the price increase you referenced coincide with the December devaluation? It sounds like that price increase wasn't contemplated in the initial operational revenue range for the year. So I guess, as we think about the impact going forward, I'd imagine that contribution should be similar over the balance of the year, I guess, assuming no major change in the currency dynamics in that market. So is that the correct way to think about it? And then on Durham, the company decided to start selling Apoquel chewable through distribution. Could you maybe just talk about the factors that led to that decision and any impact on top line and margins for Apoquel as well as the broader portfolio as you think about the potential benefits of selling that broader portfolio through distribution?
spk08: I'll take the first one, Nathan, just on Argentina. Look, clearly the devaluation occurred prior to us issuing guidance, and we have plans and continue to see our ability to take price fairly significantly in that market, perhaps beyond what we factored in. And so, yes, we won't sit here and forecast what FX is going to do or what's going to happen in Argentina. It is a hyperinflationary market after all, so we'll continue to monitor that. And so when we're only through one quarter here, and we're all on our way through the second quarter, so we're factoring that into our thinking as well, and we are seeing an ability to continue to do that, but we can't sort of forecast, forecast for the rest of the year what will happen there. So we are a bit measured in how we treat that. I would say a portion, again, to review what I said earlier, A portion of our increase is certainly coming from that. You know, I would say somewhere between, you know, a third to a half of the increase that we're giving in terms of operational guidance is coming from that because we are getting the operational lift from price there. And the rest of it coming from the rest of the underlying business, as we've talked about, is how I would think about that. In terms of DERM, I'll start and then see if Kristen wants to add. Look, clearly we have products in DERM with Apoquil and CiderPoint. They've been in the market for over 10 years and seven years. respectively, and the level of satisfaction on these products is very high among vets and pet owners. We've launched what I call chewable as an important element because, one, there's a preference for pet owners and perhaps pets to have a palatable chewable. And so we see that as one meeting a need in the market as well as an important part of a defense strategy. And so as we anticipate competition in Durham, we believe that competition will most likely be a film-coated tablet And the conversion to apical chewable is important to us. We are seeing that conversion occur across international markets. In particular, if you look at Europe, we now have about 40% conversion to chewable after being in the market the last couple of years. So that's very encouraging. We just launched in the US at the same time as we launched the Brella. And so we want to look to potentially accelerate that transition and that conversion, hence what went into the thinking here. And so it's still relatively early. There's only a little bit of contribution in the quarter here, perhaps out of the 25% growth you saw in key during, there might be two points coming from that. And so we'll see some more of that occur in the second quarter. But it is an important part of our defense strategy.
spk04: We will take our next question from Balaji Prasad with Barclays. Please go ahead.
spk05: Good morning, Erin, and apologies for missing my spot earlier. And also in case my questions are a repeat. So on Liberla, I'm curious to understand how has your messaging changed, if at all, with the vets and how they use all the triage for draws that they want to trade? And what does this mean for the total addressable market, one? And two, can you help us understand the quarterly cadence for the rest of the year? I think the understanding before was that 1Q was expected to be the weakest quarter and second half stronger than 1H. On the back of this print, does this alter the quarterly cadence in any way? Thank you.
spk00: Sure. I'll take your first question, Balaji, on Librella and, you know, what name it protects, you can take the second one on quarterly cadence. You know, as we think about how we're approaching vets, you know, vets are at the center of care, and our focus has always been around ensuring vets are educated on the products that they understand it, they understand how it should be used, when it should be used, et cetera. Certainly, since a lot of the social media, we've been more committed than ever to make sure that vets have better access to a lot of the education we've always been providing. And we've significantly increased our education with vets and their access. So things that we've done, we've done over 1,000 webinars. We have daily sessions with our chief medical officer, Dr. Richard Goldstein, to make sure they can have interactive sessions We have an always-on customer support team. And I think really what you're seeing with regards to the vets and how they feel about the product is the confidence that they have access to the education that they need. And if you look at that, that is why you're seeing such a strongly positive experience, not just from pets, but from vets who really are confident in the product. As Whitney mentioned, their confidence in prescribing the product more, their confidence in the safety and efficacy of the product. You know, as we've talked about, we invest a lot at Zoetis in veterinary education, and we always have. and our vet operations in every market. So I think this is something that's been our strength. Clearly, with the social media, we have doubled down to ensure there's more access to this veterinary education to make sure that any vet who wants to understand more has access to experts, both internally as well as external KOLs, so they can best understand the product. And that, again, underscores our confidence in this product that we've talked about and the fact that we continue to believe this product will be a category, not just Librella, but Librella and Silencia, we continue to commit. This will be a billion-dollar franchise for Zoetis, and that is really rooted in the safety and efficacy of this product and an investment we're putting into both vets and pet owners to make sure they understand the product.
spk08: Yeah, and Balaji, in terms of quarterly cadence, and I'll answer the question specifically with respect to Librella. If you mean it for overall, I can certainly recap. that conversation. But look, clearly 40 million contribution in the first quarter. And keep in mind, we continue to see really strong growth across our international markets, which was 71% on the quarter as well. So those will continue to drive growth for us. We won't get ultra specific in terms of the exact contribution as the quarters go, but we would expect a continued ramp up from that 40 through the year. And then of course the fourth quarter in terms of percentage growth, we'll be lapping the 44 million that we delivered in the fourth quarter in the first quarter of launch.
spk04: Thank you. We'll take our next question from Glenn Santangelo with Jefferies. Please go ahead.
spk01: Oh, yeah, thanks for taking my question. Hey, Kristen, obviously the outlook for TRIO and DERM continues to be encouraging here, but, you know, just given the recent, you know, launch at BI and, you know, the Elanco launches that presumably may be coming in the second half, if you could just, you know, look out to 2025 for a second, I'm kind of curious if you anticipate any sort of noticeable shift in the competitive landscape or anything that you think might impact your ability to take price? And the reason I ask is some are getting concerned about increasing competition and a weakening consumer at the same time maybe would impact the company's ability to take price increases consistent with what you have done historically. So any sort of high-level commentary, I think, would be helpful. Thanks.
spk00: Sure. I'll start, and then, Wetni, you can certainly build on this one. You know, we remain very confident, and it's really based on our historical performance, and I think you can look at that. We invest in the lifecycle innovation across our franchises. You know, we were number five, let's be clear, guys, in paras when we entered with Comparica and Comparica Trio. we're now number two we're facing competition from the leader in parasiticide and we grew our share 0.7% you know if you look at q1 in the US so even with very strong competition we continue to grow share so you know we remain confident we can continue to grow our parasiticides and our dermatology franchises even with competition I mean Paris has always been a very competitive space and with most companies operating there. We think our strength obviously with the vets, our strength with pet owners, really seeing tremendous growth in our franchises for both Trio and Derm in alternative channels in home delivery and retail. And we see great strength there as you look at the auto ship. We continue to increase auto ship there, which absolutely increases compliance, which we think is really important. As you look at, for example, the alternative channels, they grew 55%. Now, that was a little bit of a weaker comp if you look at last year, but even if you adjust for all that, that's 25% plus growth in the alternative channels. So we really believe that we can continue to grow this franchise based on the strength of our products. the strength of our portfolio, our lifecycle innovation, if you look at what we're doing with Chewable, as well as leveraging some of these new channels, which have the benefit of increased compliance. So back again, it's our confidence not just for 24, but for 25. I don't know, Whitney, if you want to add anything on that.
spk08: Look, the only thing I would say, two things. One, we are not seeing a weakening consumer. You saw us post high double-digit growth across Trio and our key Durham franchise. And even if we normalize for some of the tailwinds from last year, we still have high double-digit growth across each of those. And so that certainly demonstrates continued demand for our products and our innovation. The other one I would say is, look, as we look ahead, and we're not going to give guidance specific to 2025 here, but we're confident in our ability to grow in the face of competition. Now, there can be some short-term promotional activity that might have some impact, but beyond those, we're confident in our products, and we'll see what the labels are that we're going to compete against.
spk04: Thank you. We'll take our next question from Chris Schott with JP Morgan. Please go ahead.
spk14: All right, great. Thanks so much. Just two questions for me. Just continuing on TRIO, can you quantify, I think there was a channel dynamic benefit you saw here, and just give us a little more color on maybe the size of that. And the second one was Labrella US. Should we expect a similar dynamic in the US that we saw ex-US where initial uptake is more in the severe range? OA pets, which I think would be maybe a little bit less sensitive to some of the headlines we've seen over the past month, and the moderate piece of the business is happening kind of a year or two or further out? Or is the U.S. market, you're thinking, different where those severe and moderate may be scaling kind of simultaneously with each other? Thanks so much.
spk00: Sure. Thanks, Chris. I'll let you take, Whitney, the trio question. I can follow up on the umbrella.
spk08: Yeah, absolutely. Look, the short answer is no. There's no channel dynamics that we're seeing here. As I mentioned just a moment ago, we did have dynamics last year in the quarter where you saw destocking coming from promotional timing of promotions in the prior year and more pre-priced buy-ups. And so that did provide some tailwind here. So we posted 61% growth on TRIO globally, and that's the same percentage growth in the U.S., $205 million growing 61%. And if you were to say, there's no precision here, but I would say our internal estimates is that if we factor in the tailwinds from last year, that may account for about half of the growth that we're seeing. So you're still remaining very significant growth on TRIO, and there's no channel dynamics in terms of inventories to speak of in the current year.
spk00: Sure. And on your second question with regards to Librella in the U.S., I mean, what we have seen historically in Europe and in markets that launched first is it is often put into the severe dogs who are desperate for a new therapy initially and moving to the moderates. But we've learned that lesson after three years in Europe. And so we're making sure as we launch in the U.S. that we get into that moderate. As you think about the early experience trial, for example, that we did in the U.S., we made sure there was a balance of mild, moderate, and more severe cases so that they have experience and they can see the impact of the product in that As you even look at some of the data that Whitney spoke about earlier, which is we have more than 50% of outside the U.S. of patients right now in moderate, mild to moderate cases, which I think is tremendous growth. And what you're seeing when you do that is also an increase in compliance. So compliance is now between seven and eight months, up from six to seven months outside the U.S. So our goal as we were launching in the U.S., as we designed the early experience trial and as we, you know, market with vets, is to make sure that this is a product that can be a first-line therapy, you know, for mild, moderate, and severe cases, and making sure that we can, you know, get that conversion into mild and moderate, similar to where we are in Europe, faster in the U.S. So that is certainly our focus as we think about growing that brand in the U.S.
spk04: Thank you. We'll take our final question from Navan Tai with BMP. Please go ahead.
spk07: Hi. Good morning. Thanks for taking my questions, and thanks for the call on Librella. I have some follow-ups. What is the early effect from the vets from your online education sessions, and how many vets approximately did you reach out to so far? Also interested in your early dialogue with the FDA, if any. Is that just common surveillance after a product launch so far? Thank you.
spk00: Sure, thank you. With regards to your first question on the vets we've reached out to, we've reached out through our tech bulletins with letters directly from our chief medical officer. Almost every vet in the U.S., any vet who's a customer of ours in the U.S., we think that that's really critical. Any of those vets can join, for example, our opened office hours with our chief medical officer, Richard Goldstein. We've invited vets to these webinars and really working with our veterinary operations group in every area across the U.S. to make sure they have access not just to internal and external, so thousands of vets have attended these webinars to date. Again, this is something we normally do. Obviously, we put it, you know, it's having, you know, more urgency to make sure that, you know, we have more ways to engage with us to make sure that the veterinarian's questions are answered. And as I think as you look at the fact that our four-week trailing sales continue to accelerate, as Wetany mentioned, is demonstration that vets feel they're getting the education they need to confidently prescribe this product appropriately there. And with regards to the questions with regards to our interactions with the FDA, as you know from covering us, those are regular conversations we have with the FDA, you know, all the time. That's normal course of business for any company as you launch a new brand. As you, you know, expand that and sharing the information in the U.S. and having a dialogue around that, sharing the global information with them. So that's a usual course of what we would do as we launch a product. And honestly, APN1 is a product on the market for years. So we continue to be a usual course. collaborate with the FDA to make sure that they have all the information they need there so there's nothing out of the ordinary there and the normal engagement with the FDA and there are no further questions at this time I'll turn the call to the speakers for any closing remarks thank you look Sorry, back to me. Thank you. Look, I really want to thank everyone for joining today. I want to reiterate that this was an outstanding performance this quarter. I really want to thank our colleagues for their commitment. And I hopefully you'll see our focus on creating shareholder value. I think it's a strong start as we look forward to continued momentum in 2024. You know, we are customer obsessed from unrivaled R&D investment to expanded manufacturing capabilities to a world class purpose driven colleagues. Everything that we do at Zoetis is aimed at anticipating and addressing what we believe are the most pressing needs in veterinary care, even before they're widely recognized by many others. And our scientific breakthroughs have firmly established us as a trusted and preferred partner to our customers. And we will continue to invest in the talent, the pipeline, and the capabilities that will support Zoetis' future growth. So we remain committed to the safety and efficacy of our products and of our industry-leading products because our treatments change lives. Based on our track record of performance, I think our customers agree as well. So thanks so much for joining us. We look forward to engaging throughout the quarter.
spk04: Thank you, and this does conclude today's program. Thank you for your participation. You may disconnect at any time.
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