Zoetis Inc.

Welcome to the second quarter 2024 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 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 please 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 second 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 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 8-K filing, dated today, Tuesday, August 6th, 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 good morning, everyone. Thank you for joining our second quarter earnings call for 2024. We had another outstanding quarter, growing revenue 11% operationally and 18% operational growth in adjusted net income. Success was fueled by strong demand for innovative products our ability to capture and expand markets, and the dedication of our purpose-driven colleagues. Segment growth was well balanced, with 12% growth in the U.S. and 10% operational revenue growth internationally, even against a strong comparative quarter. Our innovative companion animal portfolio grew 12% operationally, while our livestock portfolio saw 9% operational growth across species and geographies. It's been an excellent first half of 2024, growing revenue 12% operationally, highlighting that our leadership stems from both industry-leading innovation and differentiated execution. We remain focused on our core strategy, delivering consistent results for our customers, the animals in their care, and our shareholders. And our unwavering commitment to excellence has resulted in the most diverse and comprehensive animal health portfolio. We lead the industry in R&D investment, bringing over 300 science-driven innovations to market, including three of the top five best-selling products in animal health, Apoquel, Semperica Trio, and Cytopoint. With our global footprint and world-class manufacturing facilities, we ensure consistent quality and on-time delivery. Our early investments in digital transformation power an exceptional customer experience while positioning us for future growth. We continuously refine our commercial strategies for effective launches and market penetration. And our powerful brand recognition, targeted direct-to-consumer campaigns, experienced sales reps, and medical experts help us capture new market share and win loyalty. Our customers are at the center of everything we do, from understanding their challenges to exceeding their expectations. Scientific innovation enables us to meet their demands while creating new markets. Our commercial execution allows us to defend and grow that market leadership. The animal health industry has proven essential and resilient in all types of climates, but it's also dynamic and growing, and we are well positioned to seize the opportunity. Look no further than our revolutionary osteoarthritis pain franchise, Labrella for dogs and Silencia for cats. We are developing a market with breakthrough products that are safer and more effective while offering convenience for veterinarians and pet owners. The results speak for themselves. Globally, Labrella grew 142% operationally this quarter, fueled by the successful and ongoing US launch. But again, it's innovation coupled with execution. Take Celestia, for example. Despite launching in Europe three years ago, we reported 60% operational growth this quarter. Our breakthroughs are driving increased feline clinic visits, which in turn expands the total market. We, along with veterinarians and pet owners, are excited about how these safe and efficacious products are revolutionizing first-line treatment for chronic pain in doves and cats of all ages. Given our proven track records of building and scaling billion-dollar franchises, We remain confident about the OA pain trajectory, but we don't just launch products, we cultivate them for long-term success. Our key dermatology franchise exemplifies this commitment, delivering strong 18% operational growth. Driven by Apoquel and Apoquel Chewable, along with Cytopoint, we have transformed the management of atopic dermatitis in dogs, providing safe, effective, and convenient solutions. With over 23 million dogs treated globally and a decade of proven results, Apoquil is the world's number one prescribed oral medication for allergic itch. And it is overwhelmingly endorsed by veterinarians worldwide with approximately 90% satisfaction, reflecting the trust and confidence they place in our market leading brands. And we are still unlocking the opportunity. Today, there are approximately 20 million dogs globally with undertreated or untreated pruritic itch, presenting a vast untapped market. Take the U.S., for example. We estimate that 10 million dogs are currently receiving veterinary treatment for itch, while a majority, or roughly 70%, receive Apoquil or Cytopoint. There are 3 million dogs prescribed alternative options like steroids. Moreover, an estimated 8 million dogs are treated with over-the-counter products or are not treated at all. This highlights the potential addressable market of 11 million dogs in the U.S. alone that could benefit from our safe and effective therapies. Internationally, the trend is similar with room for even more growth as dogs become increasingly medicalized, underscoring a significant global market opportunity that will fuel our ongoing growth. To solidify our leadership and win new patients, we are focused on DTC marketing to raise awareness, enhance medical education to improve compliance and expanding retail partnerships. Our ability to execute extends to the Semperica franchise, which grew 22% operationally for the quarter. We have not only navigated the changing competitive landscape, but embraced new opportunities with confidence and agility. Several pre-trends are fueling our growth. First, Pet owner demographics are shifting. They are younger, more affluent, and connected by the powerful human-animal bond. They are highly engaged and willing to invest in their pet's health and well-being. Second, and Whitney will say more on this, there's a significant channel shift aimed at meeting the evolving needs of these younger pet owners. We are making our products more accessible, ensuring they are available where and when they need them. This combination is a crucial part of our growth strategy. And the results are reflected in our performance. In this dynamic environment, our execution across all phases from launch to expansion to defense sets us apart, showcasing we can introduce, sustain, and grow products in a competitive market. Our focus on innovation and execution cuts across every part of the business to create shareholder value. In our livestock portfolio, the sale of our medicated feed additive and certain water-soluble product portfolios remains on track to close in the second half of the year. Meanwhile, we are focusing on innovative solutions for producers, including preventatives, antibiotic alternatives, and genetics. As the demand for healthy and sustainable animal protein continues to rise, we remain committed to supporting our livestock customers. Our dedication to meeting their needs and adapting to the evolving market conditions ensures that we are well positioned to contribute to their success. Building on our outstanding performance this quarter, we remain confident in our ability to grow faster than the market and through competition as reflected in our raised guidance. While macroeconomic headwinds persist, animal health remains resilient and Zoetis' strong operational execution and innovative, diverse and durable portfolio enable us to navigate all kinds of market conditions effectively. We further demonstrated our commitment to shareholders and confidence in our growth trajectory with a recent announcement of a board-approved $6 billion share repurchase program, which Whitney will elaborate on. The animal health landscape is evolving, and our innovations are at the forefront. And while breakthrough innovation is a cornerstone of our strategy, our success is rooted in multiple drivers of growth. We are not just launching new products, we are transforming existing ones to unlock their full potential and better serve customer needs through lifecycle innovations. That means taking proven therapies and developing new formulations, uses, and delivery methods, maximizing their impact and reach. This translates to value created for customers and shareholders alike by allowing us to bring critical new solutions to market faster, minimizing development risks and costs by leveraging existing safety profiles of proven products, and expanding the reach of established products. Our commitment to lifecycle innovation is just one reason we are the leader in animal health. When combined with our market leadership, deep customer insights, strategic investments, and our purpose-driven colleagues, we are uniquely positioned to deliver against the four tenets of our value proposition. To grow revenue faster than the market, to invest in innovation and growth capabilities, to grow adjusted net income faster than revenue, and to return excess capital to shareholders. Our differentiated execution and innovative, diverse, and durable portfolio ensures we are not just keeping pace, we are setting the pace and redefining what's possible in animal health. With that, let me hand it off to Whitney. Whitney.