Good afternoon, everybody. I'm Chris Schott at JP Morgan, and it's my pleasure to be introducing Zoetis today. From the company, we'll have a presentation from Kristin Peck, CEO, and then we'll go to a Q&A session after that. Obviously, a lot of exciting things going on at Zoetis, including the recent Librela launch, and we'll hear more about that. L et me turn this over to Kristin, and thanks for joining us.
Hello, everyone. It is great to be back. Thank you, Chris, for the introduction. To share a little bit about Zoetis, but I don't think it would be a presentation at the J.P. Morgan conference if you didn't have the legal disclaimer of forward-looking statements and non-GAAP financials, which you can find more information on these risks and the reconciliations in the deck we posted on our website, as well as in all of our SEC filings.
W ith that said, let's get started. Let me share a little bit about what you're going to hear from me today. We'll talk a little bit about Zoetis and how we've established ourselves as the leader in animal health. A leader in an industry, the animal health industry, which is incredibly resilient through different economic times.
We'll talk about the value of Zoetis' diverse and durable portfolio, and how we've continued to invest in building the capabilities across commercial, R&D, as well as our supply chain, to remain in a leadership position, driving disruptive innovation. F inally, how delivering this value for our customers has meant we've delivered significant value for you, our shareholders.
Let's start with a little bit first about Zoetis. As many of you know about Zoetis, we're an incredibly purpose-driven company for all of our colleagues. Our purpose is to nurture the world and humankind by advancing care for animals. Every colleague who works at Zoetis feels deeply about that purpose. That is our why. And as we think about who we want to be, that really speaks to our mission. We want to be trusted, we want to be valued by our customers.
As you see here, it's really by the innovation that we bring to them, our customer obsession, which really means for us, putting our customers first in everything that we do, and beyond that, continuing to have purpose-driven colleagues and investing in those colleagues. I'll talk a little more about these as I talk about our strategic priorities.
B efore I do that, for those of you in the room who don't like spending your Thursday night reading our 10-K filings or haven't been an investor with us for a long time, let me share a little bit about Zoetis. We IPO'd, as many of you know, about 11 years ago. In 2022, we had $8.1 billion in revenue.
That was split about equally between the U.S. and international, and about 64%, 35% between pet care and livestock, with the remaining 1% being in other. What's really amazing about Zoetis is the diversity of our portfolios, and as you see on this slide, that's across product categories, that's across species, it's also across market. We operate in over 100 markets across the globe.
That is a really broad base, but again, we're also broad around species in therapeutic areas, which has helped Zoetis over the years deliver consistent performance. It is both diverse and durable across different times, and part of that is because we produce medicines, therapeutics, diagnostics, devices, genetics. We also have an incredibly broad portfolio across the continuum of care.
As we look at our strategies to deliver value, it starts, as I talked about from the very beginning, around our mission, around innovation. We have been the leader in innovation in the animal health space since before we IPO'd, bringing truly transformational innovation. This isn't just transformational innovation in new products, but as I'm going to talk about later, it's also around lifecycle management, around 300 of our key product areas.
We'll talk about some of the new categories of unmet medical need, where Zoetis will be bringing innovation. Secondly, we're obsessed with our customers, and you can see that obsession both in how our field force is ranked by our customers, our field force effectiveness. When you really dig into that data, the reason is because they trust our representatives. They see us as a key partner in their future.
What's very different about animal health and human health, one of many things, is that we're a business partner to our customers. They carry our products. They buy directly from us, whether that's a vet or a producer. We are an important business partner for them, and one of the ways we can deliver great value to them is by investing in digital and data, where I think over the last four years, Zoetis has done an absolutely outstanding job.
And you think about investing in digital and data. Obviously, there's new revenue-generating products where we've done this. A s you look at our Imagyst platform in diagnostics, we've been able to deliver great value to our customers through AI-generated diagnostics, but it also helps us make our business much more efficient and effective.
We talked a little bit with those of you who are at Investor Day around our next generation sales engine, which we have in the U.S. and now in most of our major markets across the world, which has helped each of our representatives plan their days and add greater value to their customers. Previously, they might have had to open, say, seven different applications to figure out what the sales were, what the customer was buying, whether the customer has called customer service.
Do they have concerns? What were they interested in? That's now in one place for our reps, making it much more efficient, and importantly, for the customer, making that visit much more valuable, focusing on the issues and topics that the customer finds most important. We've also really been investing, empowering our business through sustainability.
When we think about sustainability, that's across just how we operate our business, making sure that we are responsible, that we invest in, you know, moving toward carbon neutrality, but it's also about innovation. It's about delivering for our customers across the globe, more sustainable solutions. It's also about partnering with our communities.
We've certainly done this through the Zoetis Foundation, which has been investing in the U.S. and across the globe in markets to provide scholarships to better educate the veterinarians of the future. I t's also important partnerships in Africa, such as Project Alpha, our partnership with the Bill & Melinda Gates Foundation, to create more affordable, safe food supply for Africa by enabling small farmers to create businesses that make economic sense for them, their families, and for their communities, and we're very proud of this.
We do all of this by investing in our colleagues. Our colleagues are the center of what we deliver. I always say, "Is it customer first or colleague first?" It's colleague first, because I have never met a delighted customer if there wasn't an empowered, engaged colleague at the other end of that relationship. We invest a lot in our colleagues. They're purpose-driven. Over the last few years, we've driven colleague engagement scores of 86% and above.
This just goes to show you what the value of that engaged colleague base across the globe is. Lastly, it's performance with excellence and agility to make sure we can continue to deliver on our commitment to you, to be able to grow our bottom line faster than our top line, and importantly, to find savings to reinvest in the many growth drivers we have at Zoetis.
Let's talk a little bit about what are the drivers in the animal health industry. For starters, it's an incredibly resilient industry because the fundamental drivers of animal health, such as the need and desire for companionship from pets, and the need for more high-quality, safe, and affordable protein sources, isn't gonna change.
We'll talk about later, with an additional two billion more people on this planet by 2050, there's gonna be incredible need to have better, more affordable, and more sustainable protein production. This has really made the animal health business resistant to different economic times. I'll talk in a second about the consistency of that. Even if you go back to 2008 and 2009, in the last recession, the animal health industry still grew 3%.
A lot of that's being driven by the large number of unmet medical needs that are existing in animal health. We'll talk about some of the big categories of the future, where Zoetis will continue to deliver there. It's also being driven by the pet ownership, pet owner willingness to spend.
We'll talk a little bit in a few minutes about what's driving that, some of the major demographic shifts in who's owning pets and how they spend and how they think about their pets. This is not just a trend that we're seeing in the U.S. or in the developed world. The trend in the movement to the increase in the human-animal bond is happening across the world.
As pets move from the backyard, to the house, to the bed, the spend with those pets increases, the number of visits to a vet clinic increase as well. And more and more, we're seeing the investment that producers and markets and countries are placing in creating more sustainable production, and the important role that keeping animals healthy plays in that.
As you see here, the animal health industry, which has historically grown about 4% to 6%, is projected to continue to grow at 4% to 6%, from $45 billion today to $558 billion by 2027, and for that to continue. Y ou might ask why? It's the increasing medicalization of animals, as I talked about, with the growth of the human-animal bond. That is really driving the pet owner space, and we're innovating in important chronic diseases.
As you saw, those new pets that were adopted during COVID, as they age, they're going to get many of these chronic diseases, and Zoetis is delivering disruptive innovation to improve the standard of care and the quality of life of these pets. As you see here, the performance of Zoetis versus the industry.
First, I would point out at the consistency of that growth across the industry, but importantly, as you look at Zoetis' growth, which has been about 3% above that of the industry over time. As you look at the industry growing around 4% to 6%, livestock generally grows a little slower, as I'll talk about, maybe at 2% to 4%, but pet care grows above that. We'll talk a lot about what is driving that growth.
I think as you can see here, this is a phenomenal track record of a company that grew its revenues from our IPO at around $4.6 to 8.1 billion in 2022. L et's start with the pet owners, which are really the group that is driving so much of the growth and really the growth of pet care for us globally. For starters, the pet owners of today are quite different than they were 10 years ago.
They are much younger, and importantly, they're also much wealthier. More and more of pets are being adopted in high-income households, and they have a much stronger human-animal bond. Many of these young people are delaying having kids, and they see their pet as a member of their family that should be treated with the same.
They should have clothes, they should probably have a stroller. They might even have a shrink, these pets today. So it's a very different world than you know, we all remember about ten years ago. What this also means is there's an increase in pet medicalization. We see that in the U.S., but we're seeing it globally.
What many of you who haven't followed us for a long time are surprised by, is as you look at a market like China, China, we have more pet care sales than livestock sales, and that surprises a lot of people. But we're seeing that more and more in markets across the globe, in Brazil, and in many emerging markets, where this trend of the humanization, the human-animal bond with pets, is really driving significant growth and their willingness to spend.
It's also being driven by Zoetis and by the new technology developments we put in. We today have three monoclonal antibodies, which we'll talk about. N ew technology is really raising the standard of care. W e'll also talk about the clinic spend, which has also been a key driver of growth in the US and around the world.
O n this slide, we're getting it a little bit into what in the US is the trends of both Zoetis' growth as well as for the vet clinics themselves. As you look at here, over the last four years, Zoetis, as a whole, pet care and livestock have grown at around 8.1%. In US business, for our pet care business, we've grown 15.6%.
As you look at vet clinics who've done very well over this time period, so over this time period, they've grown about 7.5%. We constantly get the question, "But vet clinic visits aren't growing that much?" Well, vet clinic visits grew really quickly as everyone adopted the pets, and then you saw a significant decrease in 2022.
I want to emphasize that overall vet clinic visits are above what they were in pre-pandemic. A s you see the growth over the last, you know, four years, so before the pandemic to now, you're still seeing positive growth. In 2023, we saw a bunch of volatility. Some quarters where there was growth, some quarters where there's significant declines. The most recent data that we have for Q4, it showed about 2% growth in the last quarter.
As we've said all along, over history, vet clinic visits normally grow about 1%. But as you look at Zoetis' growth, there's not a strong correlation for our growth with vet clinic visits, which have been flat. It probably looks more like overall revenue in the clinic or revenue per visit, and there's a bunch of important reasons why. Y
ou know, one of them is the innovation that we continue to bring and gaining market share in that, but it's also in the US, the important role that retail is playing in that market. Retail in the US has been growing around 35%. A s you look at the retail market in the US, it's about 14% to 15% of our US pet care business.
As Wetteny's been saying, if you just look at the U.S. retail pet care business, it would be larger than our second-largest market outside the United States. I t is a pretty significant business. A s you look at vet clinic visits, it's not the strong correlation, but I think what you're seeing is strong demand for veterinary care, and that's where Zoetis plays a really important role of driving that with that innovation.
S peaking of that innovation, what Zoetis has done an amazing job of over the last few years is build billion-dollar portfolio franchises in animal health. As you see here in dermatology, if you go back about 10 years ago, our dermatology sales, I think, were $500,000. Today, or actually in 2022, they were $1.3 billion.
We created the dermatology market with Apoquel, and when no one thought really you could ever bring a monoclonal antibody to animal health, much less a monoclonal antibody to the GP practitioner in animal health, we brought Cytopoint, which has been incredibly successful and has demonstrated that the vets are more, more comfortable than you might have imagined in doing monoclonal antibodies when they bring great innovation and a safe and efficacious product.
A s we'll talk about throughout today's presentation, it also underscores the important role of life cycle innovation, as we've continued to add last year in international and in the U.S., Apoquel Chewable. C ontinuing to invest in the life cycle innovation of important brands and important franchises. Secondly is parasiticides, where if you just go about five or six years ago, we were number five in parasiticides.
We've continued to invest in this portfolio and in this franchise, which as of 2022, was $1.6 billion. That's Simparica, Simparica Trio, Rev, Rev Plus, ProHeart 6, ProHeart 12. As you listen to that, that's continued life cycle innovation, that's building and creating more value for our brand through life cycle innovation. And now we're number two in parasiticides, and we're not stopping there.
This is an important market. It's actually the largest market in animal health. It's a $6 billion market, and we're gonna continue to invest in growing our share in this important space. A lot of the excitement here, as Chris said, is obviously around Librela, which is, you know, one of our key pain products, and Solensia. W e are now really looking at growing our monoclonal antibody pain franchise.
We've always had, obviously, Rimadyl, which is an NSAID, but we're really excited for the innovation that these two products are gonna bring. A s you look at the OA pain market, you know, historically, it was around, you know, I don't know, $500 million, maybe $700 million in 2022, with some of the innovation we had already brought there.
We predict that market will be $2 to 3 billion by 2032. I mportantly, as we said at Investor Day, we think Librela and Solensia alone will be $1 billion of that. We really see important innovation like this being disruptive and expanding a market, and we're very excited as we'll talk about, I'm sure it'll be one of the number one Q&A, so I don't want to steal your thunder here, Chris. I will not steal it.
We've been seeing great excitement for Librela in the U.S., which was approved last year and went into full launch in Q4. I'm sure we'll get into some of that, but really, really excited to continue to build on this. A s I move to livestock, you know, livestock has been a market that over time has grown around 2% to 4%.
I'll talk in a second about the important role that global population growth drives here, but it's also with increased access to the middle class for different protein sources. A lso, we talked, I think about four or five years ago, where alternative protein is going to take over the world, and I have to be honest, they've become less and less relevant over the years.
I think the focus on making sure that we have a sustainable and affordable food supply for the globe has only increased in importance, as we've seen the important implications of some of the wars around the world to global hunger and to ensuring affordability of food. T here's a really important role that we can play at Zoetis in ensuring a safe and affordable food supply.
T here's also been some short-term headwinds for Zoetis that have also passed. We had the important loss of exclusivity of Draxxin, one of our largest products, where we saw tremendous competition over the last two years, and thankfully, we sort of fully lapped that, and we'll continue to see livestock grow.
As we said in Q3, you know, low single digits there, but we believe as we look to 2024 and beyond, you'll see livestock go back to its traditional growth of around, you know, low single digits overall in animal health and for us. I want to double-click for a second on the important role that a growing population plays.
As you look at two billion more people, whether they eat a little bit less protein and a little more vegetables, that's still a significant increase you're going to have to create in food across the world. I mportantly, we have to do that in more sustainable ways. T here's also a very strong correlation in livestock and in our business to the increase in GDP.
As you see more people and an increase in GDP and also household income, protein consumption goes up over time. A s you look at meat consumption versus global population, this is an important growth driver. And so even if. Again, even if people try to eat a little healthier and eat a little less of red meats, they're going to eat more fish and things like that.
T hat's where we really see some of the important tailwinds in livestock in the years ahead. We're seeing great growth in poultry, even with high-pathogenicity avian influenza, which has really affected many markets around the world. We're also seeing a significant shift to prevention and sustainability away from treatment, and we've been leading the way to help do that, at Zoetis.
We've also talked about, there's less of an impact of generics for Zoetis and for many, where we fully lap some of those, big changes. We're also looking at aquaculture, which has been growing very well for us at Zoetis. We've been growing at around double that of the market, and fish is one of the fastest-growing protein sources in the world. T hese are very, very strong trends.
W hat we are planning to do across pet care and livestock is continue to drive innovation. We really have broad and deep roots when you think about innovation. We've talked about some of the big franchises we've launched into the new products, disruptive technologies across our, you know, monoclonal antibodies, across diagnostics, across prevention, such as with some of our vaccines.
Importantly, I've spoken about the role of life cycle innovation, which is critical in the animal health space to extending the life of our products. Many of our products have been around for 25 years, and they still grow. They're still really relevant because we continue to invest in innovating on them. W e don't think all the great ideas start and end within the four walls of Zoetis.
We continue to leverage business development, partnerships, and collaborations around important new technologies and modalities, investing in our R&D across the world, looking at important local diseases in certain markets, and expansion of some of our great franchises into new species, new markets, and new modalities. I nnovation is broad, and it's deep. T here's also significant unmet medical need in entire therapeutic areas that really have not had any innovation in years.
We spoke about some of these at Investor Day, and I want to double-click on at least three of them right now. The first is around the renal market, such as for chronic kidney disease and different renal diseases. Today, there are 10 million cats and dogs who have this, and there really is no treatment. The only treatment today is palliative care, and as someone whose dog passed away from this a mere two months ago, it's brutal. It's a brutal disease.
W e really think Zoetis can help transform this market, certainly through new treatments. W e also think the combination of Zoetis, of our genetics, such as Basepaws, to be able to understand predisposition, diagnostics, to diagnosis early, means we can intervene in this disease before it progresses and causes damage to major organs. We can get those treatments out.
We really believe with this, we can grow this market from $300 million to 1 billion, but most importantly, improve the quality of life and the standard of care for pets and increase the human-animal bond over time. The second major market is cardiology, which is a space Zoetis does not have any products in today.
It's about a $250 million market that we believe with innovation, diagnostic testing, new modalities, and new treatments can grow to $700 million. The last one, which is oncology, where we do have a small product in today. We think we have significant growth over the coming years. You know, we're investing a lot to grow this market.
I know this is a big market on, on the human health side, and we're happy to take questions during Q&A in what is different a little bit about the animal health space here. But this is a space, again, where pet owners are more willing than ever to spend, to treat their animals, who have cancer.
They're spending, you know, you'd be surprised, thousands of dollars today, but mostly on human chemo, mostly on radiation and surgeries. What they want is transformative care, like you're seeing on the human health side, that we believe can be brought to the animal health side, and to create a market that could be at least $800 million as well by 2032.
I know you don't see a beautiful chart like this on the slide for livestock, 'cause livestock is an industry, a lot more of singles and doubles. There's lots of innovation we're bringing there, to vaccines, to parasiticide, but livestock is more of a singles and doubles business. We're bringing new products to market, but they may be a vector vaccine in poultry, or they may be a new vaccine for tilapia, or a new vaccine for salmon, or a new genetic test that can better predict disease in cattle.
These are smaller products, but they're important, and they help drive the 2% to 4% growth. But importantly, they also really drive to our sustainability goals, to have a more safe, affordable, and sustainable food supply across the globe. With that, I wanna really underscore what does this mean for you as our investors?
At Investor Day, we outlined the four tenets of our value proposition. The first is about driving revenue growth, and we, our focus is driving revenue growth at or above the market, which we have consistently done, as we demonstrated on that slide before. With the market growing at 4% to 6%, historically, Zoetis has driven 8% growth. We really believe this is a fundamental, you know, value driver for you, and we do this by investing in innovation and growth capabilities.
That's certainly in our R&D, where last year, as we guided to you, we've been growing our R&D spend at close to 2x our revenue, and that's because we have confidence in our pipeline and confidence in disruptive technologies in there that will drive the future growth of Zoetis. T hose investments go beyond R&D.
We're also investing in building capacity in monoclonal antibodies, where in animal health, you can't produce them in the same facility as a human health one. T he capacity we're building is ensuring that we can launch that future pipeline. It also means investing in direct-to-consumer advertising to maximize the value of the assets that we have.
W e're looking at DTC even in Europe now. It's got to be unbranded, but building disease awareness and awareness of new therapeutics in important areas such as pain, that we've been doing, as well as dermatology in Europe, so investing in DTC. And with that, we believe that we can continue to get scale and drive adjusted net income faster than revenue to make sure that we can enable margin improvement.
As you look over the last, you know, 10, 11 years, we improved margins by 1,250%. As you look at the years to come, we're focusing on how we can leverage our scale and continue to expand our margins overall. I'm sure Wetteny's really excited for the question. I won't steal your thunder either, Wetteny, because that's always one of the questions.
L astly, it's to return excess capital to you, our shareholders, which we've continued to do. We've literally consistently grown our dividend 20%, and we've bought back $5 billion in shares in the last 10, 11 years. We've delivered a total shareholder return of 625% to our shareholders.
So we've made sure that this value we're delivering for our colleagues and for our customers means great value for you, our shareholders, which we're going to consistently do. W ith that, what I hope you got from this is, first, that Zoetis has built significant market leadership, and that we're not resting on our laurels in that market leadership.
We're going to continue to invest in the capabilities across our company to make sure that growth is sustainable and that we don't just maintain that market leadership, but that we grow it. I hope you also understand that we operate in an incredibly durable and resilient industry with fundamental growth drivers that are sustainable. Really, we're talking about the human-animal bond, the desire for companionship, and the need for a safe, affordable food supply going forward.
That by investing in this, we've created significant value for you, our shareholders, that we're committed to continuing to do. With that, I think that's a pretty good overview, and I'd like to invite Wetteny up for a Q&A with Chris.
Thank you for the comments there. Let me get the mic over here. Can you guys hear me? There we go. That one's working. As we mentioned during the presentation, I'm gonna kick off here with some questions on Librela. S hocking, I know. Just would love some feedback, though, on the U.S. launch and how that's progressed so far. So maybe just how is uptake trending relative to expectations? Any surprises? Just any kind of color-
Sure!
on these first few months here.
We had pretty high expectations for Librela, based on how well it's performed in international. A s we look at it, we ran an early experience trial, as you probably know, which we started in September, and then went into a full launch in October, and we're very pleased with how it's performing against our high expectations. Wetteny and I track this very carefully.
Every week, we're looking at everything from the penetration, which is the number of clinics carrying the product. We're looking at those clinics and how many are reordering, and then we're also looking at the average size of those reorders. We're very pleased as we look at sort of, you know, all of those and how they're tracking to the end of the year to set us up.
You know, as we talked about before, there's probably some stocking that's in that number. Maybe it's about 20% of those sales will be stocking, but it's what we're really excited about is the reorder rates and the picking up of that sale.
Really, it's the anecdotals. I'm sure if any of you are following the product on social media, just the impact that it's having on these pets, these pets that didn't wanna go up the stairs or didn't wanna climb on the bed or didn't wanna go out for that walk, are thrilled to do it. I t's also transforming families' lives. W e're super excited so far of how it's going, and I'm sure we'll provide lots more guidance in a few weeks.
Yes.
When we report our earnings.
Great. Just on this product, how much education do you think is gonna be required from this market? It seems like it's something vets have been waiting for years, but is there still gonna be an education process before that's fully rolled out?
I think you'll see education in 2024, not about. By the way, this is very symptomatic. You don't have to convince a pet owner that their dog has osteoarthritis. They see it, they know it. It's different in cats, and I'm happy to talk about that if you want.
But I do think what's important, and this is the reason why we did an early experience trial and why I think you'll see it, is for the vets getting comfortable of, Well, how fast does it work? How long do I have do I wanna be giving NSAIDs with it to, you know, make sure the dog's not in pain?
How fast do they need to be? Is it every 30 days exactly that I need? T hey're getting comfortable with that. What's the margin of error there? I think the other thing we think will be part of the education is moving them more into the moderate cases. A s we saw in international relaunch, it starts in the most severe cases.
Those pets, like, honestly, my own, who went odd in the early experience trial, who is 14 years old, you know, didn't wanna get up. I had to carry her up the stairs. I mean, those are the first pets they feel they have to bring it to. T hose pets, like my own, unfortunately, who passed away about a month and a half ago, you know, they tend to be end of life with other comorbidities.
W hat we're looking at in education is getting the comfort, seeing how safe and efficacious it is and has been, for example, in international, and getting that more into the moderate cases. I think that's a little bit more of where we're focusing on education, but it's certainly not in knowing your dog has it. I think you know.
Yeah.
Cats are quite different. They tend to hide it quite well. T hat's why we launched Cat Pain IQ, as you know.
uploading videos so you can better diagnose: is your dog. Is your cat, you know, you know, getting fat because it's eating too much, or is it just not moving? Like, little things like that, that are helpful.
Maybe this is something away with the guidance, but just how are you, as we think about kind of 2024 uptake, just are you comfortable, generally speaking, where street expectations are on this one? Do you think we're kind of in the right zip code in terms of the ramp?
Look, we'll come back with more specific guidance, of course, next month. W e're very pleased, as Kristin said. We set high expectations. I mean, if you step back for a second, we launched a product in Europe initially at the end of 2021.
Full year of launch, first full year is 2022, and the product, the uptake was just phenomenal. W e've factored those already into our thinking, into our supply plans, which, by the way, we've really put the plans together to be able to capitalize on the demand in case you see a much earlier transition into those moderate cases, and you see things really take off.
We've put the supply plans and capacity in place to be able to capitalize on that, and we're very confident being able to, to do that across not only the U.S., but across our, our other markets that we've launched the product. So that has implications in terms of what happens through the P&L, which I'm sure we'll get into here in the Q&A session today, but we're very, very, well-positioned to be able to capitalize on that.
Then just to keep on the larger products, Trio in 2023, it was a bit choppy, kind of quarter to quarter. Can you just maybe talk through some of the moving pieces that impacted results last year? P robably more importantly, just as you think about the dynamics heading into 2024, what should we be keeping in mind?
Look, we entered 2023 with expecting competition to come in for Trio, right?
We were first to market, almost four years ago, so we had a four-year head start in terms of triple combination space. If you think about parasiticides, as Kristin mentioned, it's the largest segment within animal health. It's about $6 billion. It's growing about 5% to 6%.
About eight to 10 years ago, you had all indications come out and really start to shift the market from the topicals and collars into much better safety and efficacious solutions in the oral indications. You've seen significant growth, even as second, third, and fourth players came into this space. Now, triple combinations are a relatively new standard of care. Starting in 2021, we launched Trio in the U.S., at least for the U.S., which is the biggest market.
We've seen the product really take off, but we've had four-year head start, and that is very important in this space, given how pet owners really identify to the brand and safety record and efficacy of the product. W e're very confident in our ability to grow through competition on this product.
Although coming into 2023 with the initial launch, we knew there'd be some promotions that they would run, and they have that would maybe, in short periods, see some impact on the product. But we're really pleased with how the product has performed. Of course, in the Q1, we had the impact of destocking from distributors.
That impacted the results, but since then, you've seen really strong growth for Trio through Q2. Q3, we posted 20% operational growth for Trio, right? And more importantly, is that we actually grew our patient share even with a competitor in this space. Now, we're expecting others to come into the space, but we're very pleased with our position and our label and having a four-year head start.
Do you think that first competitor was kind of the bigger one in terms of the impact you would have expected? A s you think about potential launches in 2024, that seemingly would be a smaller impact you'd be expecting. Is that fair to say?
Look, yes, and we expect the product to grow as we go into 2024 as well.
As you look at the competitor that entered, Boehringer Ingelheim, they were number one. T hem entering with, you know, they had Heartgard and NexGard in doing that, that was the biggest player, and I think, you know, as you look at the threat to the space t hat we're seeing in. You know, I wanna underscore one of the points that Wetteny made, which is this market has continued to grow.
We were, you know, I think, third or fourth to market with Simparica, and then, but the market still grew. It's not like our competitors didn't grow when we entered. We expanded the market, and as you're seeing here, they're expanding the market as well for orals, moving more from topicals and collars, et cetera. W e think there's still significant opportunity for the market to grow here.
On your other major market with Derm, it seems like we saw some, you know, last two quarters, especially some nice growth there. Just help us in terms of the underlying growth of that category, in terms of how penetrated it is, and another one, as we think about kind of competition potentially coming in, is there opportunity to keep seeing the pie expand, I guess, with more players coming in?
Sure. Look, as Chris said, we basically created this market, right? W ith $1.3 billion of revenues in 2022. Of course, we'll report our results in February for 2023. L ook, we've really, if you look at this market, we're treating about 8 million dogs on Derm. There's still about 6 million in the U.S.
that are untreated, and if you look outside the US, even more than that. T here's still room to continue to drive growth in this space, even as, again, we expect competition to come at some point. Now, I've been in the company for two and a half years, and it feels like I've been expecting competition for five.
Every year we think it's coming, you know. I think we're well positioned, though, if you look at how. Our franchise is set up. We have a JAK inhibitor now in two formats, right? We have a film-coated tablet, we have a chewable tablet, and then we have an mAb, which is an injectable with Cytopoint.
If you look across the markets, that gives us a really strong position to be able to leverage those strengths and the rest of our innovation to drive growth even through competition, if and when it comes into the space.
Okay. Just one on the macro side. I know the company's less levered to specific vet visits, as you laid out in the presentation, but just underlying health of the consumer right now, I mean, is there any areas we're seeing pockets of weakness or any concerns that there may be some economic sensitivity to the business?
There's economic sensitivity, you know, at certain levels. I would say what's a little bit different this time is who adopted the pets and how they think about their pets. A gain, underscoring, with more of those pet owners, the millennials and Gen Z, who are not having kids and see this pet as the center of their world, their willingness to spend when their animal gets sick is very high.
You know, historically, where you can see weakness in really difficult times, it will drive you from a four-six to a three, for example. You tend to see it in wellness. Do I have to buy 12 months or, you know, all my parasiticides, maybe I delay my vet visit.
In many of their biggest growth categories for us, they're symptomatic. You're not gonna let your dog be in pain. Like, it's just, it's not where they make the trade-off. You know, you know, sometimes what you're seeing is maybe they buy fewer new collars, leashes, and outfits and strollers, but they're not, as you look at just vet clinic spend.
Spend and spend per visit are still growing significantly, and so I guess what we'd say is the demand remains strong from the pet owner for you know. There's been capacity constraints to meet that demand in the vet clinics, but it's not a weakness in overall demand for veterinary care or for veterinary products.
Great.
I would just add, look, if you look at the results for Q3, for example, Derm grew 14%. eight points of that was volume, and we're seeing increase in periodic patients into the clinic. C learly, even under the umbrella of macro concerns that everyone's looking at, we're seeing increase in volume across the segment for us.
Great. Well, I think we're just about out of time here. Really appreciate all the comments, and, thanks for joining us today.
Thank you .