They're hitting the music. All right, they stopped the music. All right, I'm David Westenberg. I cover life sciences tools, animal health and life science tools at Piper. With me today is Wetteny. We have the CEO, Kristin Peck, and the CFO, Wetteny Joseph. Thank you both for coming here. So we'll get right into Q&A. You're coming off your R&D day. One of the things that we did find pretty interesting is your likelihood of approval. Can you remind investors of why your R&D efficiency is so high? And then can you talk about some of the products you're most excited about coming on Innovation Day?
Sure. Well, we were really excited for those who were able to join us for our webcast on Tuesday morning, really focused on R&D. And we talked about the science-to-scale R&D engine that we have. And I think what's really differentiated both for Zoetis and particularly also for animal health is how much more efficient R&D is. And it starts with the fact that we can start in our target species. So if you look at just overall development times, they're significantly faster. If you even talk about the cost of doing it, it's significantly cheaper. So no matter how you look at it, and that really has to do with for us, we start in the target species. So we have validated targets much sooner than you see in human health. But I think what really differentiates Zoetis and our engine, those are very animal health specific.
But I think what really differentiates Zoetis is all the different parts of our engine, including AI, genetics, diagnostics. So we can get to a target faster, and then we can find a molecule even faster because we can leverage all of our genetic data, all of our diagnostic data, all of our biomarker data to speed that process up. So I think when you look at our pipeline, our confidence in that pipeline, especially over the next three or four years, is much higher than you would see in human health. The second part of your question was.
What's on the pipeline updates? Most exciting key takeaways on the pipeline disclosure from Tuesday's call?
Yeah, a few things I'd say. For starters, for those who joined, it's probably the most robust disclosure we've ever provided on it. I think the key takeaways from it is how diverse and balanced it is. We'll be launching a major blockbuster every year for the next four years. As you look at the key slide, which I'm sure most people are focused on, there are 12 blockbuster products in that pipeline. And a blockbuster for us is defined as a product that's at least $100 million. And if you look at sort of year by year, we're really excited in 2026 to get approval for a long-acting Cytopoint. That's through the USDA. So that'll be super exciting. Also, to get a next-generation chemistry platform, which we think will be super exciting. You look at 2027, that's renal CKD. You look at 2028, 2029, you'll see oncology.
And then 2020, 2030, you'll see oncology. So there's a lot of super exciting. And I think as you look at that, we're entering new markets with blockbuster products. And those addressable markets for the two or three biggest combined, even just CKD and oncology, is over $5 billion in addressable market that we'll now be entering. So we're super excited, honestly, every year for the next four years to be launching some exciting new products.
Got it. Well, immediately, I haven't gone through the full Tuesday call, but I think on the highlights, I think the key, the CKD in 2027, I think you gave exact timelines of the second half of 2027. I don't think you've ever talked about that in the past. So can you provide more details on the launch and expectation? And why are you so confident that something that is two years out is you're going to hit that timeline?
Let me just start with CKD for those who didn't have a chance to join. It is a $3 billion-$4 billion addressable market, so I think it's really exciting. I think what's also quite exciting there is there really are no products for CKD today. It's the number one disease. If you think about for cats, 8% of dogs will be diagnosed with it, and really today, it's really diet, monitoring, palliative care. So it's really a significant unmet medical need for both dogs and cats. We have seven assets. Those are mixed between therapeutic assets and diagnostic biomarker assets. Diagnostics will be additive, so we don't need that to really launch our therapeutics, but it would expand the market.
We say that because, and if you join the webcast, our new head of R&D, as of January, who's also a vet, explained it in much more veterinary terms. But the key focus here is that you can address the disease earlier, before the damage to the kidneys, to the cellular structure of the kidneys happens. And that's really what we're focused on. So we think this will be significant. And the first asset that we're launching will be in 2027, as we mentioned.
Gotcha. I think you mentioned the U.S., or sorry, Librela is stabilizing in the U.S. Can you tell us what you're seeing to give you confidence that that is indeed happening, and about sequential growth in Q4 versus Q3, if that is a possibility.
So as we talked about on the call, we remain confident in Librela and in its long-term potential. We're also confident that it will return to growth in 2026. As we've been speaking about, that will be gradual. So we'll obviously update in our Q4 call in February, any sales trends and things like that. But I think what we're really focused on, as we talked about in sort of metrics, is looking at satisfaction. Right now, if you look at pet owners, pet owners who are very or extremely satisfied are over 75%. And so we've talked about the multi-prong strategy that we think will return it to growth. And that's really focused on, first and foremost, making sure that both vets and pet owners understand that OA is a serious disease and treating pain is really important.
Secondly, it's spending time engaging and educating vets and specialists on the disease and on the risk-benefit profile of the product. Then also trying to make sure we share the facts about that product, as well as how many people are really pleased and honored in some of those case studies. And lastly, investing in some phase four studies, which we also talked about, which will provide incremental data for vets, specialists, and pet owners. And we'll be doing that. Some of the studies, as you know, launch starting this quarter, and we'll be launching it throughout 2026. So we're excited about that.
Gotcha. Can you clarify whether or not Librela can return to growth in 2026? I believe what you might have said on the call Tuesday, or maybe it was on the Americas' call, that back half, is that the expectation? And what gives you confidence kind of in the back half?
Sure. Look, we shared on the third quarter call what we are seeing in the product in terms of signs of stabilization. We also highlighted that entering into 2026, although we're not clearly giving guidance quite yet, we anticipate and know that we have some stronger comps in the first half of the year. But our confidence is with all the work that we're doing and what Kristin just highlighted in terms of the multi-prong strategy, that we'll see the product return to growth next year, likely in the second half, given the comps that we talked about.
Gotcha. I want to stick with pipeline just because it was the newest update. So you received approval for Librela in Canada and the EU. How do you expect to differentiate that product from Librela?
Sure, so we are very excited that we received approval for Librela in the EU and in Canada, and we think really what Librela will do is it will expand the market. It'll do that in a few ways. First, providing a more convenient option for pet owners who today, to treat the pain, they have to come in every month, and every three months would be a significant savings. It also provides vets with more flexibility to target treatment to the specific animal and what makes the most sense for that animal and that family, etc., and we think we can differentiate in a few ways. First is around convenience, as I mentioned, so I think that will significantly do it. I think as you also look at it, it targets a different place on the NGF, and that is what gives it a longer lasting.
So it can last instead of one month, three months. And because it's a different product, it also does that at 10 times lower dose. So we're quite excited for it to expand the market. We think there's a lot of people who just don't go on these products because coming in every month just seems like too challenging for them to consider. So we think we're excited for it to expand the market overall, and we do think it will be differentiated.
Gotcha. I want to maybe dive in a little bit further. I mean, I think what we find with Cytopoint versus Apoquel is you actually have different efficacy cases where some will work in some patients, some will work in the other. Just given that it targets a different area, do you think that might be the case where one of them could work where the other one wouldn't be as effective? And if you have any.
Yeah, I mean, they are two separate molecules, so we really can't do a comparison for safety and efficacy, and I think what we'll work on, as we've talked about before, is really starting with specialists to make sure they understand the product and they can help educate other veterinarians about better use cases. These kinds of patients are more targeted for this, but we're really going to make sure that we follow the science on this one, and we work with specialists and vets to best understand which patients are best targeted for that, but that should always be based on the particular case. They are different molecules, so you really can't do a direct comparison on safety and efficacy.
Gotcha. Okay. Can you talk about expectations for U.S. approval? That's Librela.
Oh, sure. So as we talked about on the call, we are currently working directly with the FDA to go through all that. We're actively engaged with them. As you probably know from other approvals, there's normally very different timelines and different authorities, whether that be in the U.S., Canada, or Europe. So there could be a significant range, and we'll obviously provide an update as soon as we get it for the exact timing there.
Got it. Just to clarify, with meds, I don't know whether or not it's USDA or.
Yes, so I know that is confusing for some. I won't get into there are technical reasons, which goes to because we don't get to choose. It's very specific. It has to do with whether it prevents the disease or treats the disease and the way they define it. So the reason he's saying that a Cytopoint long-acting would be through the USDA. Cytopoint was through the USDA, which is, again, we keep saying different authorities have different timelines because he's saying that would be first. But yeah, Cytopoint is USDA, and Librela and Solensia are with the FDA.
Got it. Sorry, Wetteny, I've been leaving you without questions, so we'll go to the guidance.
is showing here, so.
Yeah. We'll go back to guidance. You raised guidance in Q2. In Q3, you lowered the guide. What has kind of been the change in that?
Yeah, sure. Look, maybe we'll start with what didn't change. We came into the year expecting the back half to be slower versus the first half due to a number of factors, particularly the timing of when we anticipated competitive launches, which tend to be a bit more on the aggressive side initially to get traction on their products. Particularly given just how long and the level of satisfaction our products have in the market, they just have to do more to get those going. And so we anticipated those and anticipated the back half would be a bit slower growth for us. Now, what did change is a couple of things, I would say. One, looking at the U.S., particularly therapeutic visits for derm and for OA pain, we did see those decline in the quarter.
That was, I would say, a deterioration of the macro slightly than what we would have anticipated earlier in the year. The other one is Librela and the performance on Librela through Q3 and what we anticipated for Q4 being slightly worse than what we would have seen. Those two things are the two. Competitive dynamics are about where we would anticipate them. Again, we have a global business in different markets. You see different behaviors slightly. Generally speaking, by and large, they're coming in where we would anticipate as we kind of got into this year.
Got it. I mean, I believe the New Melby launch is a little bit behind schedule in the U.S. How can that play out in, say, Q4? And then for 2026, do you expect heightened competition versus what you came in with in 2025? And of course, you can't give guidance, but I mean, the way we investors should think about it.
Yeah. No, I appreciate that, and look, I think a couple of things that I would say. New Melby has yet to be approved in the U.S. It is approved in Europe and launched. We came into Q3 anticipating the behaviors that I already described and also anticipating that they would continue through Q4 because only a partial quarter in Q3, which is part of what we factored into our guidance for the fourth quarter, is that continuing to be intense for the entirety of the fourth quarter. Now, as you get into next year, of course, the timing of when they get an approval in the U.S. is still something we're watching, but I would say this, when we zoom out, you look at the derm market, it is one that still has substantial room to expand, and we've been expanding that market.
As you know, last year, we clocked in 16% growth in derm with double-digit volume, so this is a market that remains very attractive with significant room to expand, and over time, we expect to continue to do that, and I think other players coming in will be more voices sharing with pet owners, etc., and driving them to clinics, and our products remain very, very much differentiated against everything that we've seen so far that has been approved or launched, including the Melby, by the way, in Europe, based on what we've seen on that product, and that's just our Apoquel film-coated product we believe is differentiated against them, and then on top of that, we have Apoquel Chewable, and we have Cytopoint, and as you heard, we talked about a couple of days ago, there's anticipation of Cytopoint long-acting to come latter part of next year.
So when I look at our products here and I look at the market, there's a lot of reason to be very, very excited about what the future holds. And I won't get into specifics as to how long those dynamics are going to play in terms of competitive intensity in 2026 versus the expansion of the market.
So you answered very well. So, sorry, I am going to dive in a little bit further on the Librela launch. Because I just kind of want to hear about both new Librela, because it is in Europe, and then, of course, the Elanco product has a better label in Europe. So can you talk about some of the dynamics you might have seen in Europe and if we can apply those to what we might see in 2026?
Yeah, sure. Look, it's still early, is what I would say to start with, in particular for New Melby. They just, again, started launching in the third quarter in Europe, and so we'll continue to watch, but I'll go back to what I said, Dave, which is just the confidence we have in our portfolio and the differentiation that we have in terms of what that will mean in terms of how we will participate and lead in the expansion of this market and where we will drive that. Now, what I was alluding to in terms of the product, if you look at our product as film-coated, then the Melby product is not. It does have a larger pill. It has to be taken with food. And the active ingredient can be bitter in that product.
And so, again, just to give you some examples of just how we look at our product versus what we've seen so far. Now, by and large, the label is about what we expected on this product in Europe. And again, we'll wait and see what happens in the U.S. with that. But competitive intensity is what we anticipated. We participate in parts of the market that have always been very intense from a competitive standpoint, and we perform very well. You've seen what we've done in the parasiticide space and how we have gotten to number one in the U.S., number two globally in that space. So competition is not something that's foreign to us, and certainly given the breadth of our portfolio and, I would say, differentiation of these products, we feel confident about the future.
Gotcha. You touched on long-acting parasiticides, and you touched on just protectional injectable parasiticides. So I believe, and at least my data suggests that Quantum might not be doing as well as I kind of would have expected. So how are we thinking about injectable parasiticides' ability to grow the overall market and kind of what we would think about pricing and whatnot? Again, sorry, I don't want to take away from that product. It's growing. It's actually growing really, really fast, but relative to what I would have expected.
Yeah. Look, I would say it's doing about what we thought it would be doing. And if you zoom out and look at the parasiticide space, we're still less than half of the space has transitioned from flea and tick to flea and tick triple combination. So there's still a lot of room to go here in terms of what is the current standard of care in that space and how much room there is and our product Trio being a leader here. And again, more room for us to expand. Now, when we talk about triple combination injectables, that's the next frontier, which Quantum is not, right? And I think this is part of why we say it's doing about what we thought because it does not include heartworm, for example. It also has certain dynamics around it. It's a very large gauge needle, etc.
It does present some challenges to practices because of the way that the vials come where you have to reconstitute them, etc., and potential for waste if you don't have enough dogs coming in at the right window of time to use it. All those reasons, we would anticipate what we are seeing right now is what's happening. Triple combination, though, is an area that we're working on clearly, and we have on our roadmap from an innovation standpoint. We are careful to really think about what the profile of the product needs to look like, just like anything we work on, to be meaningful for both veterinarians in practice as well as for the pet owner. What is the longevity that makes the most sense versus 12 months, right?
Pricing will be something we'll take in based on what the value is that we're bringing based on that profile.
Got it. I want to maybe touch on some of the Q3 dynamics around therapeutic visits. And kind of in IDEXX, we are seeing a little bit of wellness, non-wellness recovery. So can you help kind of clarify the differences between what we might see on the IDEXX data and kind of what you guys have said around therapeutic visits?
Yeah, there's some slight differences in terms of what we're talking about here in terms of measurement. What IDEXX is referring to is a broader sector of non-wellness that would include some acute care and hospital-type items, not just therapeutic visits, which is a subset. So when we talk about therapeutic non-wellness, in this case, it's therapeutic visits, specifically periodic visits for derm, and then OA pain visits. Those are the areas that really are meaningful to us that we've always tracked and we've said are the things that are more correlated to our performance in the market, in addition to what happens outside of the clinic, obviously, in terms of the alternative channels, but periodic visits were actually down on the quarter, and we see those having an impact on patient starts, which is what we've seen play out here in terms of the macro.
Got it. I want to switch back to pipeline. You're planning on launching a significant amount of therapeutics over the next 10 years. I think you're mentioning two to three a year. Can you talk about kind of that ability to grow? I mean, I think your goal is still growing a couple hundred basis points above the market. So is that how we get there?
Well, and I think when you think about the pipeline and our growth trajectory, it first starting with the growth of our core portfolio. So I think if you look at it, I think what he's talked about, there's still significant opportunities to grow in derm, in paras, in pain. We haven't talked about livestock yet today, but I think livestock also has yet another year of significant above-market growth. So I think the company has a lot of growth drivers. And then the pipeline has always been what has set us apart above the market. And I think what you hopefully saw from the webcast, the innovation webcast, is we're entering a bunch of brand new markets with over five billion new and addressable markets that we haven't, that no one's in today and no one's entered. So we think there's significant opportunities.
You look at sort of, and there's also multiple assets in those, as we talked about, so seven in CKD. So the first will be a monoclonal antibody for dogs. But as you see in there, there's also one coming for cats. There's multiple biomarkers coming, diagnostics that will grow. I mean, I think there's significant drivers of growth, but I don't want to underestimate the core portfolio, even OA pain returning to growth. That's going to be a growth driver as well. So I think the company has a lot of drivers of growth and that the pipeline has always been what's helped us really grow even faster.
Gotcha. I think maybe one thing investors might underestimate is how you always come kind of the first to market with a lot of different products. So can you talk about your market leadership and your ability to come with these first-to-market and educate vets and kind of what that does for margin profile, growth profile, etc.?
Yeah. I mean, I think it's great that when we're first to market. I think there's also cases with us that I think really we're best at is best product, and we talked a lot on the call about the sort of science-to-scale engine. And what I mean by that is you're seeing someone else come with an injectable flea and tick right now, and it's not doing as well as you just said, as maybe you hoped. I think what we're really focused on is delivering products that vets and pet owners really value and then building those markets, but it's really understanding what are they looking for? And as you look at, for example, oncology, it's making sure that it can be available right at the general practitioner. There's very few specialist vets in the United States.
We'll start with those specialist vets, but if you can't reach the general practitioner, the market size isn't going to be that great. But then you also have to understand what can a pet owner expect and can they manage side effects, etc. So we talked a lot on the call also about anxiety and obesity and metabolic disease. They affect a significant number of pets, but you have to understand what can the pet owner handle, what can a pet at home handle. So I think what really differentiates us isn't just that we are first to market. We also have really thought about what it takes to build that market. We're going to be launching diagnostics with the therapeutics. We're going to look at expanding those markets.
And we've demonstrated that whether you look at dermatology or whether you look at pain, we're really good at building those markets in a thoughtful way. But it's also because we understood the market and we launched a product that really met that need.
I think the other thing I would add is when you step back and you look at the setup here, this is a market, and we talked about this on Tuesday. The drivers of the industry are very strong and very positive. You have pets that are aging. They're living longer, which means then they have more of the chronic-type conditions. And you have increased medicalization across the world, particularly markets outside the U.S., where you're seeing growth rates, by the way, outside the U.S. in Japan, animals that are about similar to what we're seeing in the U.S. with a lot more room to grow. Well, why does that matter? Well, it matters because then you're applying a much broader portfolio we have today to those increasing needs.
So that puts us in a great position to best leverage an already strong and positive market landscape, but then our portfolio can be applied to that more than anyone else. Then we add the things that we're working on, which we're very excited about, that we'll also capitalize on it. I do think that if I want to really share with investors that zoom out in terms of the health of the industry, I would start there and then apply what we're working on.
Given that we have one more minute, I want to talk about just two different things. Number one, I mean, the multiple of the stock is maybe the lowest since I've covered it. So what do you think investors are missing? And Wetteny, would you be increasing share purchases just given the fact that we do have a lower multiple than what you've said historically?
One thing I would say is share purchase is a one sort of tool in our overall framework for capital allocation. As you know, we focus first and foremost on investing in the business and reinvesting in it, and certainly, Tuesday's Innovation Webcast was a real showcase of how serious we are about that and the impact we're looking to make and the value to bring to the market, so that's first and foremost, and we'll continue to do that. Of course, we do look for M&A to augment and perhaps accelerate some of our strategic objectives, and we'll pull on those levers as well, and maintaining a strong balance sheet is important to us, and then we return to shareholders. We do that both in dividends, obviously, as well as buybacks, and what you've seen us do consistently is that.
Now, clearly, when you listen to the call and you see the excitement we have, not only in our existing portfolio, but what we're working on, there's a disconnect, I would say, between the conviction we have in the future versus where the stock is right now, and one thing I would say in terms of buybacks is we'll always look at that disciplined capital allocation to decide how we execute on buybacks and how we maintain a healthy balance sheet as well and so forth in terms of looking at that.
Got it. Well, we're out of time. Thank you so much.
Thanks, everybody.
Thanks.