Hey, thanks, guys, and again, trying to stay on time, and good afternoon. I can go with good afternoon now. Next up, we have Zoetis, and pleased to be joined on stage by their CEO, Kristin Peck. A lot to discuss, so if you don't mind, I'll just dive right in.
Absolutely.
We'll get after it, and I'll start with trends. And so, you know, we all sort of see this vet visit data, and vet visit trends remain somewhat subdued. But Zoetis has talked repeatedly about the company's ability to execute due to flexibility, and let's call it the way pet owners order or secure therapeutics. So maybe talk to us, Kristin, does Zoetis continue to experience ongoing resiliency in its companion animal business despite these modest vet visits that we're seeing?
Yeah, I mean, I think as you look at our performance year after year, I think we can deliver in lots of different operating environments. On average, we've been growing around 8% per year. As you looked at, you know, Q1, which you saw a decline in vet visits, we grew 12%. So, I think what we continue to say is, we're not very leveraged to vet visits overall. A lot of our products are chronic products that you know get multiple months at a time, so they're not requested. If you look at dermatology or preventatives, these are products you're gonna, you know, can take continuously. But I think even if you double-click and say, where is the revenue in the, you know, the veterinarian? It's still up.
It's up on a revenue per visit at $4.5, overall at 6%, and it's still, in my view, a supply constraint. There's more demand than there is supply, and I think the previous presenters were actually having that same conversation.
Yeah.
You know, we're very optimistic at the health of the veterinary space going forward, and particularly around animal health. You know, even as consumers are facing challenging times, they're still spending on veterinary health.
Okay. You know, I sort of always joke that you and I could, throughout this time and presentation, order our Apoquel online and secure it in a bunch of different ways.
With your prescription.
And Trio, et cetera. Rough numbers in terms of % of companion animal that goes through that alternative channel.
So what I would say is, you know, you gotta look at the U.S. 'cause it's quite different outside of the U.S., but about 10%... I mean, and people will say, like, "Where could the U.S. business?" It could be 10% of the U.S. business can go through online. But again, I do remind you that a vet prescribed that product, so it's going there, and I think the advantages of online is auto-ship, is what I would say. So as you look at our growth went from 5%-7%, I mean, I think it, it's... You know, is it everyone says, "Well, is it gonna take over everything?" No. The majority of our future portfolio is in injectables, which will be done at the, obviously at the veterinary clinic. But it's going online, but it still requires a veterinary prescription to get there.
I think we see significant advantages to compliance. You can see when you go to auto-ship, which is really the vast majority of Chewy's and most of the online companies' sales.
Helps drive the compliance with the parasiticides.
Yeah, I mean, as you look, you know, we had strong growth in the last few quarters across, you know, independent vets, across corporates, and across online and retail. But online and retail is the fastest growing component that we're seeing, is, you know, it really works for the consumer. Yeah, I don't know.
So continuing to execute in companion animal, maybe just to move over to livestock. You know, I think the initial thought going into the year was low single-digit operational revenue growth in 2024. You had gotten through some of the Draxxin headwinds-
Mm-hmm
- in years prior.
I'm so happy, a livestock question. I haven't seen one of those all day.
There you go. We'll mix it up a little bit today. But now it might even be healthier. Low to mid single digits, is that the right place to be for 2024, specific to livestock? And part of that might be benefiting from some of the hyperinflationary markets that you guys discussed in the last call.
Yeah, I mean, I think that was where, you know, we increased it to low, to sort of, you know, we need it to be a little faster. I think some of that is certainly driven by that. I mean, I would also remind you that we had an incredibly strong comp last year, as you looked at, you know, Q1. So I think Q1 was weak this year, but that was on a very challenging comp. But I do think we'll probably—I mean, what we've guided for years is livestock will go back to its, you know, 2%-4% growth, and I think, you know, that's what you're continuing to see.
You think that livestock, I mean, you know, this year, it was coming out of, pardon me, a little bit, the doldrums of years past, and part of that was Draxxin. But do you think that 2%-4% is, you know, durable? We're on that low- to mid-single-digit growth for your livestock franchise going forward-
Yes
... even off of a more difficult comp, 2025 versus 2024, arguably?
Yes, we do believe the 2%-4%. I mean, firstly, it's what the industry has historically done.
Yeah.
I mean, I think we were a little bit of an anomaly for a while. First, you had African Swine Fever, and then we had Draxxin. And by the way, not just Draxxin, Draxxin and a few other products that also hit LOE. So I think we were a little bit, you know, behind. Once we worked out of that, I do expect the 2%-4%, and I think to get at the high end of that is gonna be, you know, a little more of bringing innovation and things like that to the market, which we continue to do in livestock, but more in the singles, so adding additional vaccines and, you know, Valcor. We've added new products, added new genetics.
So I do think we'll continue to be able to deliver in the 2%-4% range, and I think livestock will continue to do that.
Very helpful. Guys, again, if you have questions, go ahead, throw your hand up or shout out. I'm gonna plow forward, Librela. I thought very upbeat commentary on the first quarter conference call. The four-week rolling average increased steadily throughout April. You commented on that. How about if we move forward, did that trend continue so far in the month of May?
Yeah, we were really pleased with our performance in the quarter, 189% growth, $100 million in sales, $60 million ex-U.S., $40 million in the U.S. Really excited to see the positive momentum that product continues to have. We did give guidance when we were there, that, you know, its four-week rolling average is positive. That trend has continued through May. We're still continuing to see week-over-week growth in that product, and, you know, real excitement. You know, veterinarians, you know, really are excited to see the impact that it makes in pet owners, and I think the overwhelming number of pet owners are really pleased with the product.
Okay. And I asked about this on the call, but I wanna circle back. Should we expect any, call it, longer-term data or studies that the company will initiate? You know, or is the takeaway, look, you've got lack of efficacy, frequent urination or frequent drinking, I think is what you called out.
Top three.
Everything other than that is a rare side effect.
No, that's a rare as well. Everything is a rare or super rare side effect, is what I would say.
Okay.
Those are the top three. That's in the global data that we published. You know, I would say it's an incredibly safe and efficacious product. You know, we've been publishing the global data. As you can see, the product's been on the market for three years, with 14 million dogs already using the product. So, you know, we stand obviously by that.
Stand by it. Don't expect any changes to the label for either Librela or Solensia?
Well, to be clear, we have had label changes in every market that we've launched in.
Going forward, sorry.
Well, that's what I would say. So we have had label changes in every market that we had launched, that's been on the market for at least two years. We had it in the U.K., we had it in Switzerland, we had it in the EU. So could we have it in the U.S.? If it follows like every other market, we would expect a label update in the first two years. That is what we've seen in every other market. I have no idea what the FDA may or may not do.
I certainly don't know that, but I would just say, like, when people ask that question, I don't know what the FDA does, but every other market in the world has so far, that's been on the market for over two years, has done some type of label update type thing.
But nothing that would change your-
No.
or Zoetis' bullishness
That's to say, if you look at the label updates in Europe, it hasn't changed the trajectory in Europe. It's growing dramatically, you know, incredibly well outside the U.S.
Okay. And then, you know, I've got my own thought on the next question I'm about to ask, but I'll ask the expert, obviously.
Okay.
Why do you think there was this, I'll call it the initial social media outcry? I mean, I... We do our own survey work, and we've never seen the level of adoption like Librela. I mean, we had, I think it was 65% of vets in the first six months that had adopted the product. Is it the, you know, up and to the right adoption, combined with at least initially using it in severe, so an older dog, that created some of this negative feedback? I'm just trying to tie it back and get your thoughts on why we did see that reaction, if you would, from, from pet owners or such.
I think it probably. I mean, as you looked at the launch in EU and the U.S., it is often used, you know, early on in the most severe dogs. So I think that, you know, and the most severe dogs are the older dogs who tend to have comorbidities, so I think that could be it. I also think we just live in a different world, is what I'd say, in, you know, individual voices and their ability to have outsize. The reality is, the vast, vast, vast majority of everybody on the product is incredibly happy and having a great experience.
You know, I look at it and say, you know, I can't. Obviously, we didn't see that coming, is what I would say, and partly because we've had the product on the market in other, you know, countries in the world for three years, and we didn't see that. So are we in a different space and time in the U.S. with social media and what people's individual experiences and their desires to share that and bring that to life? I mean, I really don't know.
Look, my heart goes out to any pet owner who lost their dog, and I don't know whether it was caused by Librela or it wasn't caused by Librela. The overwhelming safety and efficacy of the product is very, very strong. I obviously wouldn't comment on any individual case, but I also think we have to accept that we live in a different world, and people's feelings on any topic now-
Yep
... they feel the need to share much more aggressively. And so I think our goal, and to get back at one of the other comments, is we wanna be really transparent with our data. We wanna make sure we're sharing the great and positive stories, we wanna make sure we're educating vets, and that we really want to invest in more follow-up publications that can look more deeply at some of the questions that are being asked, that are peer-reviewed journals, et cetera, so that we can get some of that out there. So...
Very helpful. One last. Sorry, please.
What was the updates to label after?
They added different side effects that they had seen over the real world data in those. So, we can give you the different update. They were different in each market.
Okay.
Again, every regulator is independent, and every label started-
On the U.S. label now, or?
I'm sorry, what?
They're already on the U.S. label?
No. Mm-mm. That is what some of these-
Got it.
To be very frank, this is what they're complaining about. Some of these, they say, "Why does the label in Europe different?" As all of you know, the label for almost every product is different in almost every market. It's not because we were hiding anything. Every regulator chooses what to put on a label, and if they choose to add things, which they did in Europe, Europe's had it for three years. The U.S. could choose to add those other side effects that Europe has chosen to add. I mean, it, I think for people who watch human health and animal healthcare companies and know this happens all the time, that's very normal.
But if you've lost your pet and you're looking for someone to blame, and you're saying they didn't—the FDA and the company didn't tell us, we didn't decide our label, as you know. The FDA decided our label, and the FDA can choose to update the label the same way regulators in other markets have, as... So I think what they're asking, what these people would like is, "Why doesn't your label look like it does in Europe and-
Yeah.
Yes.
I think there might have been a question in the back.
Just going back to the livestock.
No, go right ahead. I might have missed you before. Please.
How do you think your go-to-market in livestock changes sale of your medication portfolio? How does that impact the rest of the vaccine?
Yeah, it doesn't really change our go-to-market at all. Obviously, as you look at my livestock portfolio, the sales of that product are a very small percentage of our overall portfolio, so I don't think it changes. Obviously, we'll update our contracts, as we close that transaction at the end of this year, we'll update our contracts. But it's a very small proportion of my overall livestock business, so it doesn't really change my go-to-market in any way for any of the species that we have.
You really go up against,
Yeah, I mean, to be honest with you, those are generally the products with the shortest—with the smallest margin, where there's the most competition, to be frank. There's very little differentiation in that portfolio, and so you're not gonna get a great price. Really, what you're negotiating on is normally your more innovative products that have, you know, you have a lot more, you know, science and, you know, differentiation on. So that's why I would say it, it won't affect it. It won't be that important to us, 'cause they, you know, all. That was one of the reasons we actually looked at this and said, there's not much innovation that we saw in this space for Zoetis.
As we looked at innovation we could drive there, we thought our dollars were much better spent in other spaces, such as vaccines or in genetics or in immunomodulation. I have a strong belief as we look at a disciplined capital allocation, that we wanna be investing in spaces where we think we can get the most disruptive innovation, where our customers want us innovating. Although we could have innovated there, in our margin structure, that's not where the higher margin products will be. We really felt like investing for us, more in vaccines, genetics, and immunomodulation, and antibiotic alternatives, was a much higher return investment for us. For other companies who are in that space, that is a high margin product to them, and they are more than willing to invest in that space.
So I just think we're very blessed to have other areas that we can invest in that would have a higher ROI. So it wouldn't really change our go-to-market. It is making sure that we focus our R&D dollars and where we think the innovation and disruption will be the greatest, which is where our margin opportunities are highest, and so with our pricing capability.
I'll take us back to Librela for a moment. One last one on Librela, and then I'll pivot off. Just on the earnings call, I think you said the company's expectation for Librela remains unchanged. What are those expectations in the U.S.? The street's sort of in and around $210 million-$215 million. Is that a good number to use when you say, you know, it remains in line with the company's expectations?
We did not give expectations for a Librela number in the U.S. We've given guidance that, you know, we think it could be a billion-dollar franchise in peak sales. I don't think that number is a crazy out of, you know, unreasonable number is what I would say, but we have not provided guidance.
$40 million in 1 Q, but it had an inventory headwind. The inventory headwind is normalized, so to think $210 million-$215 million is a fair representation might be a good place to be.
I would say it's not unreasonable.
Not unreasonable. Okay, fair enough. I got that. Thank you. I'll move forward. I wanna talk about atopic derm. First, your business, and then maybe pending competition. So you had another really good quarter, $360 million. The growth was 24%. Easy comp, but two-year stack still around 20% for the past several quarters.
Mm-hmm.
It seems like you're convinced there's still a really good volume opportunity, and you mentioned on the call, 18 of 31 million dogs have been treated, but arguably 40% of the market is still untreated. Are those in markets that can afford an advanced product or, you know, premium product like that of Apoquel?
Sure, but I'd also even say, even if you look at the 18 million that have been treated, many of those are undertreated. Maybe many of the treated counts as, like, I gave you steroids. That, that counts as a dog that was treated. So I'd say I'm going after obviously the untreated you just spoke about, but I'm also going after a large proportion. Maybe 11 are on our product, so the remaining seven are still, you know, customers that we think are undertreated and still could really benefit. And I think the same way you've seen more competition enter the triple combination market, and it expands the market, we firmly believe more people talking about the need to treat and the benefits of treating an atopic dermatitis will grow the market, is what we absolutely believe.
We still believe there is an opportunity to expand the market by bringing more pets in and keeping more pets more months on therapy.
Okay, so that future competitor might come in and run some advertising or DTC of their own-
Yep
... further increase awareness. We can tap into the other 13 million or a subset-
Yep
... of the 18-
Correct
... that's being treated-
Yes
... suboptimally, if you would.
Absolutely.
Okay, and then let's discuss the chew. I think 40% of the dogs in the international markets are on the chew.
Correct.
What about the U.S.? It looks like this is entirely your market until maybe in and around the end of the year. Where do you expect the U.S. to be from a chew perspective by the end of this year?
So we're aggressively trying to convert Apoquel users to Apoquel Chew.
In some of your commercials, quite honestly, it seems a little more prominent.
Commercials. We also moved Apoquel chew into distribution-
Yep
... to make sure that they were motivated as well to convert as many people. You know, we really believe that pet owners that are on our product and are really pleased with our product have no reason to switch. So as you look at sort of the seasonal and chronic pet owners that have used, you know, Apoquel for a long time and really, really like it, they're gonna stay. And if they even better have a beef-flavored chew versus, you know, going back to film-coated tablets, they're more likely to stay with us, which limits the market for a new entrant to really be focusing on more of the new starts, you know, new dogs to the category space. You know, we're more and more seeing also lots of vets and pet owners preferring Cytopoint and preferring injectable.
So we really feel like our ability to, you know, continue to grow the market and also defend our franchises. I think we've got a very strong lifecycle innovation approach to doing that.
Okay, and did I get a chew number from you for the U.S. by the end of the year?
Did not.
Okay. And I'm not gonna get one?
You're probably not, no.
Okay, fair enough. Any questions? Got it. Competition. For several months, I'll sort of lay out what we've heard, and then you can tell me if it's reasonable or not. But we've done our, I think, our homework on Zenrelia. We've repeatedly heard chatter about no induction period, so no two-a-day dosing for the first 14 days, and maybe superior efficacy on the label. Let me go after the second point first. I think the efficacy on your label is around mid- to high 60s, but when I do my work on the channel, I always get back, "Hey, I think it's 80% effective, 85% effective." So maybe let's start there, Kristin. Do you think the real-world efficacy of Apoquel is considerably higher than what-
Yes
... we might see on the... Okay.
I mean, this is one of those spaces where I really feel like if you talk to vets and pet owners, there's very few people who, you know, are like, you know. There's definitely lack of efficacy for every product. There's certain pets who do not respond, and that will be a great market for someone else coming. But oftentimes, it's the class, which would mean whether or not the new competitor would also be effective in that dog, you know, remains to be seen. I don't think lack of efficacy is our biggest complaint about our product. I don't really think there is a biggest complaint other than we really like competition, and we'd like to pay a lot less for your product. That is the number one thing.
Again, I don't think the two pills a day for 14 days, and now that they're beef flavored, really two treats a day for 14... Like, I don't think that's also, I mean, we have heard that they're, you know, if that's your differentiation, that lasts for two weeks, and maybe that's really important for those, you know, some of those new starts that are, you know, really acute. I don't really know, but I have not heard about the significant label differentiation, to be honest. We have heard what you've heard with regards to the induction period. You know, if that really is the movement for somebody. I think vets trust our product. It's been out on the market for over 10 years. They understand the safety, they understand, you know, what to expect. I think there's a huge advantage to that.
Okay. Maybe I'll, you know, go down the road of market share. You alluded to this a little bit earlier, but you think most of the battleground will revolve around the new dogs. Is that fair?
New dogs or dogs that didn't respond for whatever reason, those will be theirs.
Okay, and again, the non-responders, you believe is very different. It's not one less 65%-70%, it's one less real world of-
Correct
... I don't know, 80%-90%.
Correct.
Okay. Then I'll move to maybe your response in pricing. In the past, we've seen you guys get aggressive on, on price, not so much in companion animal, but let's go over to livestock and just traction.
Mm-hmm.
You know, you immediately lowered price to preserve volumes.
Yep.
How are you gonna compete? I don't wanna say, how are you gonna defend here? Is it sort of, Jon, think chew, think distribution, you know, think safety, that's what we'll lead with, and put pricing more secondary and in the background?
I would say, first of all, I don't think livestock is a good- Having a generic competitor and seven of them is a very different place than a innovative competitor with a unique molecule, with a unique label. Like, if you look at Draxxin, it was generic Draxxin. Like, other than, like, you know, the safety and efficacy of my manufacturing site, it was the same exact product. So I don't think that you- I would look at that as a-
As an analog.
... as an analog to what, you know, you would look at in this case. Obviously, until we understand what the label is, what their differentiation is, and what their price is, it's hard to respond to a theoretical. But I would say, I think we have an innovative product. I think we have a beef-flavored chew. I think we have a lot of reasons to believe and years of safety data to say, we don't need to play a price game. Will we run a promotion here and there? Sure. But I would be surprised if this becomes a major... I don't think either party wants a race to the bottom on price.
Yep, and a duopoly of a $1 billion+ market that's still-
Doesn't seem like a smart-
uncapped.
Yes.
Okay, and then, you know, one last question on Apoquel would just be, your conviction on growth in 2025 U.S. So here they come, they're coming to-- I mean, they're gonna have some international markets, but predominantly in the U.S. You know, you've had some price at your disposal and volume growth. Do you still think that U.S. franchise for Apoquel is a grower in 2025?
We do believe. I mean, I think we believe that this category is gonna continue to grow. We believe... Again, I would speak to the category versus the product, because we have, like, Apoquel, we have Apoquel Chewable, and we have Cytopoint. We think our dermatology franchise overall, I mean, we will trade in and trade out of Apoquel versus Apoquel Chewable and Cytopoint, the vets will. I believe that this market is still underpenetrated. There are still millions of pets globally that are not served, so I think that market will continue to grow.
Okay.
We will grow with it.
Any questions? atopic derm, librela, I'm gonna move to Trio. Another really good number, I don't need to rattle it off for you in 1Q 2024. Just talk to us about, like, the ongoing success. I mean, you've had NexGard Plus come, right? I mean, a really big brand. They've come to market. The growth has been very resilient. We've done some work that you're winning in puppies. Where is, you know, that winning formula, where does it largely reside for you guys, specific to Simparica Trio, the ongoing share game?
First of all, I think pet owners really love the product. Pets, like, love the product. It's simple, it's easy. I think we've done a really good job. I mean, being first to market and really establishing it, but we've seen others enter the market. They're just growing the market. They're bringing more people in to triple combination. And as you look at... Again, this is a very competitive space and always has been in parasiticides. So as they-- I think as you look at people enter, the first thing they're doing is cannibalizing their existing sales, and then they're growing the market. We're pulling more people into the triple combination market, and I think that's what we've continued to see. I think the reality is vets and pet owners are very happy with the product. We've done a great job in retail.
We're doing really well on autoship, which is increasing compliance. So I think the other reason you're seeing the market grow is-
It's true
... the more times we get more pets on, more pets on autoship, you're getting greater compliance, greater months, and there's no reason to switch. I mean, what's the reason to switch? The pet owners who are on, using the product on their pets, really feel like those dogs are doing well. Like, why am I gonna switch because there's a new product out?
Arguably, that monthly compliance was starting from a pretty suppressed level, right?
Yes.
I mean, it's not like it was 11 out of 12 months to begin with, relatively.
That was four to six.
Yeah, and so it has a long way to go-
Yeah
... and a long way to increase. What's the bigger threat for Zoetis, one or the other or none, if I, if I throw Credelio Quattro at you or Merck's flea and tick injectable?
As you look at it, I mean, we haven't talked about what I would have as well, I mean, there. So-
Well, we're gonna do that.
Innovation.
That's next on 2025 innovation.
Okay. So what I'd say is, do I think Credelio Quattro is gonna dramatically change the landscape? I, I don't, and it, it... By the way, do I think it'll grow and do well? I, I, I'm not arguing that.
Some of that might cannibalize-
While it was-
... our own sales, and-
Yes, and by the way, do you really want to pick up a third parasiticide? Why are you switching? If you're really—if your customers and your vets are really happy with what you're carrying, and you generally carry one or maybe two, do you need a third? Unless it's, there's significant differentiation or you're solving something that pet owners are really worried about, it, you know, they're not getting, having a need met.... I, I guess, I guess I'm a little bit more struggling with what is the big need that people feel is not being met on that one? So I think the compliance that you could get to injectables, is you look at—we already have a, an injectable-
Yeah
parasiticide in ProHeart 6 and ProHeart 12. I think as you look at new disruptive innovations, we're really focused, and we've talked about, you know, sort of long-acting injectables as a key growth opportunity for the industry. So I think that will be the next wave of disruption.
So let's explore that a little bit, 'cause we had a couple panels earlier today, and one of them talked glowingly about ProHeart 12, and he really likes it. But he's also excited about the injectables, and it's got that theme behind it of trying to bring back revenue into the practice-
Yeah
... right after being disintermediated. So for you guys, do we think about a flea and tick offering for an injectable as part of 2025? Or is this that you might sort of try to leapfrog and move more to an injectable triple in whatever time period would accompany that?
We have not given guidance on that. The only thing we've been clear on is, it is a space that we are very invested in, and winning in that space really matters. So we were the first with an injectable, which is ProHeart 6 and ProHeart 12. We'll continue to invest in that space and continue to look to grow that, but we have not given guidance on when we're launching that.
Okay. I'll continue to try to go down the road of 2025 innovation. I feel like you guys have talked a little bit around, hey, look, next year. Well, I'll take you back to the Analyst Day.
Right.
You threw out some big opportunities, but you also had a multi-year timeline associated with that. That seems unlikely to land next year in 2025, maybe more 2026 and beyond. For 2025, should we be thinking more about life cycle innovation? If so, what comes to mind would be, you know, longer lasting mAb, IL-31. Maybe if you can talk around that a little bit.
I think what we think is the more near term is, you know, obviously incremental vaccines and things like that, and long-acting mAbs. I know we call that incremental. I think they'd actually be pretty disruptive if you could get long-acting monoclonal antibodies. A lot of, you know, pet owners, you know, do you wanna go every month and things like that, and there's a supply constraint on the vet side. So I think both vets and pet owners and compliance, having a you know, something that was like multi-months would be a huge advantage. I think there's still a space for a single and a multi, you know, one. So I do think we've really said in the near term, you'll see lots of new vaccines, which I know you all don't model, and things like that.
So lots of innovation in the smaller products, but driving good growth and in long-acting mAbs, which I think is a bigger deal than I think some people probably expect. And we have not given guidance beyond that as to some of the other categories we did talk about, which is, renal, chronic kidney disease, cardiology, and oncology as some big spaces.
To go back to the mAbs and longer, longer lasting, what's the optimal dosing interval? I mean, if I look at it, like a month is difficult, right? I mean, compliance can be an issue. Do you have time to come in and for every month? I would think for the practice, it could be maybe a little bit overbearing. On the flip side, a 12-month could be difficult from a cost perspective, right? Because now the pet owner's got to absorb 12 payments of X. Is it three- months? Is it six- months? How do you see that playing out?
Yeah, I mean, I think really what we're hearing is there's a desire more for a three-month as you look to start, and I think if they got comfortable there, then you could continue to expand it. I mean, this is a new space for the veterinary space. You know, I think ProHeart 6 and ProHeart 12 are the first injectables that have really been... You know, they've experienced, how do you price a 12-month? I mean, and so I think vets are starting to get comfortable with how do you price these sort of longer-acting products. But I think as you look at, that's a much less expensive decision than a long-acting mAb has been.
So I think there's finding their comfort to safety and efficacy and how long someone wants to commit, and I think, you know, we'll look at a three-month, and then you can look at something longer than that. But I think that's seems to be where the vets feel like the sweet spot is right now.
Just to take you back and sort of go through the iteration of, you know, of innovation for you guys, it's like you crushed it with Apoquel, here comes competition. I've got the chew. I've got IL-31. There's chatter that's gonna come to market next year, maybe long-acting at that point in time, and there's still an opportunity on the pain mAbs further down the road if someone comes with a competing product, where again, that would be life cycle innovation on longer, longer-acting. Is that fair?
We're always looking at life cycle innovation on everything. I mean, I think that's—you know, we talk a lot about franchises, and I think that matters, which is we look at a space, and we wanna make sure that we're continuing to innovate and grow that market in anything that we enter. And so I think you, you know, you saw Apoquel, you saw Apoquel Chew. Even if you look at Draxxin, Draxxin, Draxxin KP, we are looking at our brands as franchises and looking at how we can continue to expand those. Those are brands that we've invested a dramatic amount of, you know, money in, in building those markets and building that trust. So we'll continue looking at every single space we have and how we can continue to build on that.
One more on innovation, then we'll see what else I can get to. But, are vets gonna be comfortable using, like, a ProHeart 12 and a Bravecto Quantum and mixing? Because the pushback that I've got is, you know, if I use an injectable right now, if I'm using ProHeart 12, I still have to send the pet owner home and hope and cross my fingers that they're gonna go ahead and use a flea and tick every month, right? So I'm not really answering or fully answering compliance. Do you think they'll be comfortable mixing and matching, essentially, like, their own home-brewed triple injectable in that regard?
I don't know. I think that question's better answered by a vet. And by the way, I think it's hard for the vet to answer it today because they don't have the data and the experience and the, you know, clinical data that would support that, is what I would say. I think it remains to be seen what that would look like. I mean, I think they're very comfortable with a ProHeart Plus a flea and tick. I mean, so though, there, you know, I think, but the, you're asking more about the injectables. I don't think we have enough data to say yet how comfortable they would be. I think they'd wanna see the data before they could tell you the answer to that question.
Okay.
So, I think once those are launched and you can get a look at, like, how are they seeing and running trials and things like that, I think you'd have to get comfortable.
Last couple questions, and it might go over to, you know, a Wetteny question here or there, but maybe first before we even go there, diagnostics.
Channel my inner Wetteny as best I can, but if not, Steve's here, and he can answer them.
Abaxis acquisition over 5 years ago. We've seen several different approaches to market, right? Like, you were leaning into labs-
Yeah
... you pulled back. Now, you sort of made this transformation here in North America of, of selling direct. Do you feel like this was the last tweak that was needed, and, and why the decision to, to lean more into the direct sales model?
... Yeah, I think, as we looked at it, you know, we first got it, and then we thought, "You know what? We'll sell it together. The vets gets one sales rep who can answer all your problems," and I would say that didn't work so well. Partly because we have a really broad portfolio, they didn't have enough time to spend, and capital equipment sales were quite different. I think then we changed it about, I think two years ago, we said, "We want a dedicated diagnostics field force that's going to drive, you know, our equipment sales as well as our consumables." Once we got that up and running, we also realized that paying distribution to sell when they were pretty much distributing, to be perfectly frank, they weren't really selling consumables.
They weren't talking about how you think about a wellness visit versus a derm visit versus a pain visit. We said, "We can much better spend that money investing that internally and being able to drive demand." I think we know that we're better at driving demand than trusting distribution. Distribution is great at distributing, and, you know, if you have the demand, meeting that need, but that was really the movement to bring it inside. And I think we looked at our... If you look at our reference lab strategy in the U.S., it's really doubling down on our hubs and being able to meet that need, and really thinking of more innovative technologies. I think we brought disruptive technology to diagnostics, which is what we promised when we did the deal. We brought an Imagyst platform. We have six indications on the Imagyst platform and growing.
I think having an AI diagnostic that can really disrupt has helped us get into clinics where we were really blocked before, by long-term contracts. We are remained very positive and very optimistic on the diagnostic space and on our strategy and on our ability to continue growing.
Can it still be? I think when you did the acquisition, it was thought of, like, premium growth to corporate and gaining share. Are those-
Yeah, I mean, we said, look-
... on the table for Zoetis?
We've been gaining share really quickly and done a great job internationally, which is what we said we would do. We said the U.S. would be slower.
More difficult.
It is difficult, and it is difficult. A six-year contract, you know, you only got 10% that's up every year to negotiate, so.
Very last question, I promise you. Just 2025 margins in some of the moving parts there. Companion arguably grows faster; you get greater scale on Librela in 2025 versus 2024. On the flip side, price has been pretty prominent. Maybe that comes in a little bit, and I'm assuming Apoquel is your highest margin product. So, you know, pushes and pulls; still some conviction that 2025 could be a healthy year for margin expansion for Zoetis?
I don't believe we've given specific guidance, but that was a great story that I like that, but I don't think we've given guidance for 2025 yet.
Okay, we'll have to-
It was a good effort, though.
We'll have to end it there.
Thanks.
Kristin, thank you very much.
Absolutely. Thanks.