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on August 5, 2016

Zoetis reports second quarter 2016 results

The company reported revenue of $1.2 billion, growing 3%, and net income of $224 million

Zoetis Inc. has reported its financial results for the second quarter of 2016 and increased its revenue and adjusted net income guidance for full year 2016.

The company reported revenue of $1.2 billion for the second quarter of 2016, an increase of 3% compared with the second quarter of 2015. Net income for the second quarter of 2016 was $224 million, or $0.45 per diluted share, compared with a net loss of $37 million for the second quarter of 2015, on a reported basis.

Adjusted net income for the second quarter of 2016 was $246 million, or $0.49 per diluted share, an increase of 14%. Adjusted net income for the second quarter of 2016 excludes the net impact of $22 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational basis, revenue for the second quarter of 2016 increased 6%, excluding the impact of foreign currency. Adjusted net income for the second quarter of 2016 increased 22% operationally, excluding the impact of foreign currency.

Executive commentary
“We have continued our positive momentum through the first half of the year based on the strengths of our diverse portfolio and dedicated Zoetis colleagues,” said Zoetis Chief Executive Officer Juan Ramón Alaix. “In the second quarter, we delivered 6% operational revenue growth, driven by strong sales of our companion animal products and the positive performance of the U.S. cattle business. We also grew adjusted net income significantly faster than revenue – 22% operationally – as cost controls and efficiency improvements are progressing.

“We also continue to reap the benefits of a productive, world-class R&D organization focused on new discoveries like APOQUEL and SIMPARICA, as well as lifecycle innovations across our approximately 300 product lines,” said Alaix. “Our investments in internal R&D and external business development opportunities have us well-positioned as the world leader in animal health today and into the future.”

“We’ve made a number of operational efficiency changes over the last year that have and will negatively impact our reported revenue growth in 2016. However, our go-forward product portfolio and revised international footprint delivered strong revenue growth in the second quarter and over the first half of 2016,” said Paul Herendeen, Executive Vice President and Chief Financial Officer of Zoetis. “These efficiency improvements and our execution of new product launches have us on track to achieve our updated financial guidance for 2016 and improve our profitability for the long term.”

Quarterly highlights
Zoetis organizes and manages its business across two regional operating segments: the U.S. and International. Within these segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs.

In the second quarter of 2016:
Revenue in the U.S. segment was $594 million, an increase of 10% compared with the second quarter of 2015. Sales of companion animal products grew 17%, due primarily to increased sales of APOQUEL® and several new product launches, including SIMPARICA. Livestock revenue grew 2%, driven by increased sales of our cattle products as a result of improving market conditions and expanding herd sizes. Livestock revenue growth was partially offset by product rationalizations as part of the company’s operational efficiency initiative that impacted poultry and swine; swine also declined due to increased competition.

Revenue in the International segment was $602 million, a decrease of 3% on a reported basis and an increase of 2% operationally compared with the second quarter of 2015. Sales of companion animal products grew 2% on a reported basis and 6% operationally, driven primarily by sales of APOQUEL across a variety of markets and growth in China, primarily from the company’s vaccines portfolio. Growth in companion animal products was partially offset by product rationalizations as a result of the company’s operational efficiency initiative and business reductions in Venezuela. Sales of livestock products decreased 5% on a reported basis and grew 1% operationally, primarily from the addition of revenue from PHARMAQ and growth in China due to favorable market conditions in the swine market. Poultry and cattle products declined primarily due to business reductions in Venezuela and India, in addition to product rationalizations as a result of the company’s operational efficiency initiative.

Zoetis continues to drive demand and strengthen its diverse portfolio of products through life-cycle innovations, strong customer relationships and access to new markets and technologies. The company is focused on improving the performance and delivery of its current product lines; expanding product indications across species; pursuing approvals in new geographies; and developing and marketing innovative medicines, treatments and solutions for emerging diseases and unmet customer needs. Some recent highlights include:

On the companion animal side, Zoetis strengthened its vaccine portfolio, expanding its VERSICAN® Plus and VANGUARD® vaccine franchises with new approvals in Europe and Canada.

  • VERSICAN Plus, a combination vaccine for dogs containing nine vaccine antigens that help protect against ten canine diseases, was first approved in the European Union in 2014, and this quarter received additional approvals in the United Kingdom, Denmark, Sweden and the Netherlands for smaller combinations of the vaccine. These smaller combinations provide veterinarians with further flexibility to tailor their vaccination programs to meet the needs of their patients. Additionally, VERSICAN Plus Rabies gained approval for a new claim – three years’ duration of immunity – in the European Union.
  • VANGUARD® B Oral and VANGUARD® crLyme vaccines were approved in Canada. These vaccines, which were granted United States Department of Agriculture (USDA) licensure in December 2015, help protect against Bordetella bronchiseptica, a common pathogen in canine infectious respiratory disease, and Borrelia burgdorferi, the causative agent of Lyme disease in dogs.

Zoetis also gained approval in Spain for a livestock variation of its WITNESS® diagnostic test kits. This product delivers accurate, fast and clear point-of-care results facilitating timely and informed diagnoses of intestinal disease in cattle, without disrupting clinical consultation.

On the livestock side, the company received approval of a new label claim in Europe for DRAXXIN® (tulathromycin) and DRAXXIN® 25 (tulathromycin injection), one of the company’s largest global product lines, which was first introduced in 2005. This injectable anti-infective is an effective tool for treating swine respiratory disease, and can now also be used to treat respiratory diseases caused by Bordetella bronchiseptica infections in swine.

Zoetis also continues to pursue partnerships that can help broaden and strengthen its product portfolio. In May, Zoetis launched SILEO® (dexmedetomidine oromucosal gel), the first and only medication approved by the U.S. Food and Drug Administration (FDA) for treatment of noise aversion in dogs. SILEO is available from veterinarians by prescription and can be safely administered at home by pet owners to help calm dogs without sedating them. Zoetis markets and distributes SILEO in the U.S. under an exclusive agreement with Orion Corporation, Orion Pharma Finland, which developed and manufactures SILEO. 

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