Zoetis Inc . (NYSE:ZTS), a global leader in animal health, reported robust financial results for the fourth quarter and full-year 2023, with notable operational revenue growth and a positive outlook for 2024. The company's revenue reached $8.5B, and adjusted net income was $2.5B. Zoetis experienced a 7% increase in operational revenue, driven by strong demand for its innovative products, including successful launches of osteoarthritis treatments Librela and Solensia. The companion animal segment was a significant growth driver, particularly with products like Simparica Trio. Despite some headwinds, Zoetis anticipates operational revenue growth of 7% to 9% and adjusted net income growth of 9% to 11% for the upcoming year.
Key Takeaways
- Zoetis reported a strong finish to 2023 with $8.5B in revenue and $2.5B in adjusted net income.
- Operational revenue grew by 7%, with companion animal products driving the growth.
- Successful launches of Librela and Solensia contributed to the company's strong performance.
- 2024 revenue is projected to grow 7% to 9%, with the companion animal segment as the main growth driver.
- Adjusted net income is expected to increase by 9% to 11% in 2024.
- Investments in diagnostics, livestock business, vaccines, and immunomodulators are expected to drive future growth.
Company Outlook
- Projected 2024 operational revenue growth of 7% to 9%.
- Anticipated adjusted net income growth of 9% to 11% for 2024.
- Revenue guidance for 2024 set between $9.075B and $9.225B.
- Capital expenditures for 2024 expected to be between $800M and $850M.
Bearish Highlights
- Expectation of normalized growth rate aligned with industry growth.
- Anticipated flat to 1% growth in US vet clinic visits.
- Headwinds expected in China and from weather conditions in Australia.
- Competition anticipated in the dermatology product market.
Bullish Highlights
- Strong end-market demand and innovative product offerings.
- Growth potential in international markets for new products like Librela.
- Confidence in the ability to grow faster than the market in 2024.
- Investments in pipeline and research and development to address unmet medical needs.
Misses
- 20 basis point headwind in mix and manufacturing costs, primarily from foreign exchange rates.
- Non-recurring items impacting the fourth quarter, such as impairment charges and FX impact.
Q&A Highlights
- Zoetis is not heavily reliant on vet visit growth and expects zero to one percent growth.
- The company is addressing capacity issues in the US through online and retail channels.
- Investments in Librela are expected to become gross margin accretive in 2025.
- Zoetis has seen strong performance from Trio, particularly with puppies, and is gaining market share.
Zoetis remains confident in its strategy and the resilience of the animal health industry, expecting to navigate challenges successfully through portfolio diversity, customer experience, operational excellence, and agility.
InvestingPro Insights
Zoetis Inc. (ZTS) has demonstrated a strong financial performance in the last quarter of 2023, which is further highlighted by the company's strategic financial decisions. According to InvestingPro Tips, management has been actively engaging in share buybacks, a move that can often signal confidence in the company's future prospects and a commitment to delivering shareholder value. Additionally, Zoetis has a track record of raising its dividend for 11 consecutive years, reflecting a reliable income stream for investors.
The InvestingPro Data metrics provide a deeper look into the company's financial health and market position. With an adjusted market capitalization of $84.28 billion and a P/E ratio of 36.19, Zoetis trades at a premium, which is consistent with the company's high earnings multiple. This valuation is supported by a solid gross profit margin of 70.06% for the last twelve months as of Q4 2023, pointing to the company's ability to maintain profitability despite costs. Moreover, the company's revenue growth of 5.74% during the same period indicates a steady upward trajectory.
Investors interested in a more comprehensive analysis, including additional InvestingPro Tips, can explore further by visiting https://www.investing.com/pro/ZTS. There are 13 additional tips available on InvestingPro, offering nuanced insights into Zoetis' financials and market performance. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with valuable, in-depth data.
Full transcript - Zoetis Inc (ZTS) Q4 2023:
Operator: Welcome to the Fourth Quarter and Full-year 2023 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be made available approximately two hours after the conclusion of the call via dial-in or on our Investor Relations section of zoetis.com. [Operator Instructions]. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.
Steve Frank: Thank you, operator. Good morning, everyone, and welcome to the Zoetis fourth quarter and full-year 2023 earnings call. I am joined today by Kristin Peck, our Chief Executive Officer; and Wetteny Joseph, our Chief Financial Officer. Before we begin, I'll remind you that the slides presented on this call are available on the Investor Relations section of our website, and that our remarks today will include forward-looking statements, and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release and our SEC filings, including, but not limited to, our annual report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures, which were not prepared in accordance with Generally Accepted Accounting Principles or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and the company's 8-K filing dated today, Tuesday, February 13, 2024. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin.
Kristin Peck: Thank you, Steve and welcome, everyone, to our fourth quarter and full-year 2023 earnings call. Today, we reported strong full-year results driven by the success of our diverse portfolio across markets and species, game-changing innovation, and the outstanding commitment of our purpose-driven colleagues. We delivered 7% operational revenue growth, growing faster than the industry, propelled by steady demand for innovative products that enable our customers and the animals they care for to thrive. With the ongoing momentum of our monoclonal antibodies for osteoarthritis or OA pain, we saw segment growth of 6% of the US and 9% operational growth internationally. Our companion animal portfolio remains a key growth driver, up 8% operationally, and we saw a return to growth for our livestock portfolio, up 6% operationally. While we continue to operate in an environment of global uncertainty, our diversity across markets, species, and therapeutic areas, has sustained our performance, further demonstrating that animal health is a durable, essential, and growing industry. Our track record of innovation, from pioneering breakthroughs to product lifecycle enhancements, has solidified our position as the industry leader, consistently growing above the market and enables us to create market-leading franchises. We don't just follow trends, we make markets. The launch of Librela and Solensia, the first two injectable monoclonal antibodies for the alleviation of osteoarthritis, is fundamentally improving the quality of life for dogs and cats, and strengthening the human-animal bond. That's why today Librela remains the number one selling OA pain product in Europe. At Investor Day last May, and again at the J.P. Morgan Healthcare Conference, I shared that our own pain franchise could have peak sales exceeding $1 billion, and we are excited about Librela's performance since its US launch in October, which reaffirms that view. Due to high clinic penetration, we've activated our direct-to-consumer or DTC efforts faster than any other product in our history, which we expect to provide a tailwind for commercial growth. Similarly, Solensia has also been well received, with strong clinic penetration around the world, with increased opportunity as we generate more awareness of OA pain in cats. Within our dermatology franchise, we've established ourselves as the trusted partner to veterinarians, and after nearly a decade of impressive growth, we still believe we have room to expand this market. Increasing pet owner's awareness that itch is a medical condition that requires treatment, improved compliance, and the opportunity to address even more unmet needs, underpins our optimism. We remain confident that we can sustain growth thanks to our differentiated products like Cytopoint and Apoquel chewable, the first and only chewable treatment for the control of allergic itch and inflammation in dogs. Our parasiticides portfolio, and particularly Simparica Trio, remains a key growth driver, even in the face of increasing competition. This continued success highlights our strategic execution, label strength, and the efficacy of our products. The performance across our key product franchises not only reinforces our market-leading position, but also better innovation consistently meet the evolving demands in veterinary medicine. As we begin in 2024, we will stay disciplined and adaptable to the evolving macroeconomic and geopolitical backdrop around the world, and focus on executing our plans and continuing to grow faster than the market. Two durable global trends give us confidence in that future growth, the powerful human-animal bond, and the world's growing need for a sustainable supply of animal protein. Our commitment to operational excellence ensures we are ready to scale to meet those demands and navigate unforeseen challenges, while delivering shareholder value. Looking ahead, we are committed to our track record of value creation and above-market performance. Our dedication to innovation remains the cornerstone of our market-leading position. We've consistently demonstrated agility, outpacing the market to bring groundbreaking solutions that meet and exceed customer expectations. We will continue to leverage that advantage and we're guiding to a range of 7% to 9% operational revenue growth in 2024, and adjusted net income growth in the range of 9% to 11% operationally, which reflects our ongoing investments in R&D, supply chains, and commercial excellence, to cultivate new markets, drive growth, and create value. As you've heard me say time and time again, we are confident in our strategy, portfolio, pipeline, and capabilities to deliver value to shareholders and customers, while performing above the market. Our focus positions us well to navigate potential challenges and capitalize on emerging opportunities. In closing, we'll continue our relentless pursuit to exceed customer expectations and invest in advancing the capabilities that differentiate Zoetis. As we look to 2024, I could not be more excited about our future. Our key growth drivers will continue to showcase our commitment to nurturing the world and humankind by advancing care for animals, and our ongoing innovations will expand the market, reaffirm our best-in-class product portfolio, and defend our position amid competition. I want to reiterate the four tenets of our value proposition discussed on Investor Day. We will grow revenue faster than the market. We will invest in innovation and growth capabilities. We commit to growing adjusted net income faster than revenue, and we'll return excess capital to shareholders. While there is need and demand to improve the quality of life for animals, Zoetis will continue leading the way and setting the standard for performance and growth. This is core to our vision, to be the most trusted and valued animal health company, shaping the future of animal care through innovation, customer obsession, and purpose-driven colleagues. Thank you. Now, let me hand it over to Wetteny. Wetteny?
Wetteny Joseph: Thank you, Kristin, and good morning, everyone. As Kristin mentioned, we had a strong year in 2023, with revenue of $8.5 billion and adjusted net income of $2.5 billion. Our full-year revenue was near the top end of our guidance range, while our adjusted net income was slightly below our guidance range, primarily due to the impact of foreign exchange, as well as an impairment charge related to a prior acquisition. Our revenue growth was broad, with strong growth across both our US and international segments, both our companion animal and livestock portfolios, and due to both price and volume. Full-year revenue grew 6% on a reported basis and 7% operationally, with adjusted net income anchoring 7% on both a reported and operational basis. Of the 7% operational revenue growth, 5% is from price and 2% is from volume. Volume growth was driven primarily by new products, including our monoclonal antibodies for OA pain, Librela, and Solensia, as well as our key dermatology products and Simparica Trio. On a segment basis, our US business posted $4.6 billion in revenue, growing 6% on the year, while our international segment reported revenue of $3.9 billion, with operational growth of 9% on the full year. Additionally, while China represents less than 5% of our global revenues, the ongoing economic weakness there continues to impact our business, and represented a half a percentage point drag on our total company operational revenue growth for the year, entirely in volume. Our full-year growth was driven by continued demand for our innovative companion animal portfolio, which grew 8% operationally. Our livestock portfolio also had a strong year, with operational growth of 6%. Performance in companion animal was led by OA pain mAbs, which posted $321 million in global revenue for the year. Growth came from first wave European markets, as well as from the impact of new launch markets in 2023, including the US. We continue to see penetration of our pain mAbs grow within vet clinics, and a high level of satisfaction amongst both vets and pet owners. Our key dermatology products generated $1.4 billion in sales globally, posting strong growth of 8% for the year on an operational basis. Simparica Trio contributed global revenue of $813 million in 2023, representing growth of 9% operationally, despite distributor inventory headwinds in Q1 and aggressive competitive promotions for much of the year. Our companion animal diagnostics portfolio recorded $356 million in revenue and grew 7% operational, with growth contributions from both the US and international. Our livestock portfolio had a strong year, with 6% operational revenue growth, driven by both price and volume. Moving on to our Q4 financial results, which was another strong quarter. We closed Q4 with revenue of $2.2 billion, representing an increase of 8% on both a reported and operational basis, posting our third consecutive quarter of at least 8% operational revenue growth despite a tough comparative, particularly in US companion animal. Adjusted net income of $569 million is an increase of 6% on both a reported and an operational basis. Of the 8% operational revenue growth, 6% is from price and 2% is on volume. Volume growth consisted of 4% growth from new products and a 2% decline in our inline products. Volume from our key dermatology products was flat in the quarter. On a segment basis, our US business posted $1.2 billion in revenue, growing 9% on the quarter, while our international segment reported revenue of $982 million, with operational growth of 8% on the quarter. Our companion animal portfolio was the main driver of revenue growth in the quarter, growing 10% operationally. Livestock also contributed, with operational growth of 6%. We saw double-digit companion animal growth in both our US and our international segments, driven by our innovative products. Our OA pain mAbs were the primary driver of growth, posting $124 million in combined revenue in the quarter. Global growth came primarily from the impact of new launch markets, bolstered by the Q4 full launch of Librela in the US. Simparica Trio generated $208 million globally in the quarter, representing growth of 21% operationally. Price was the primary driver of growth in the quarter, followed by volume growth, driven by expanded DTC advertising support globally, as well as from increased field force focus. Our key dermatology products generated $375 million in sales globally, posting growth of 7% on an operational basis. Our companion animal diagnostics portfolio recorded revenue of $87 million and grew 8% operationally, with growth contributions from both the US and international. Our livestock products ended the year on a strong note, with growth of 6% operationally, growing in both our US and international segments. Growth was driven equally by price, which grew despite headwinds from drags in price decreases, as well as by volume, with growth in Synovex from our expanded label claims. Now, moving on to revenue growth by segment for the quarter. US revenue was $1.2 billion in the quarter, growing 9%, with companion animal sales growing 10%, and livestock sales growing 4%. Companion animal again posted double-digit growth in the quarter, bolstered by the full launch of Librela at the start of the quarter, all while facing a tough comparative quarter with promotional activity and heavier than normal pre-price buying at the end of last year. In the US, vet clinic visits were flat on the quarter and flat for the year, while we continue to see solid clinical revenue and revenue per visit, growth of 6% for the quarter and 7.5% for the year. Our US companion animal revenue growth continues to outpace veterinary clinic revenue growth due in part to our innovative therapeutics, as well as our strong presence in the retail channel. Moving on to product performance, growth in the US was driven by our pain mAbs, Simparica Trio, and our key dermatology portfolio. Our combined pain mAbs posted $58 million in US sales in Q4. We moved to a full launch of Librela in the US early in the fourth quarter, and we have been pleased with the results our field force has been able to drive thus far. Librela posted $44 million in US sales in the quarter, which is at the higher end of our initial expectations. It's important to note that while we are not leveraging distribution for our pain mAbs, there's a significant clinic stocking impact in the first few months after launch. We have seen higher than expected penetration and reorder rates through the end of the year, as well as rapid patient share growth in the canine pain category. Solensia had sales of $14 million in Q4 in the US. We have seen a marked increase in feline vet visits and feline revenue growth in the clinic. In the US, feline OA patients are up 23% for 2023. Simparica Trio posted US sales of $185 million in the quarter, growing 17%. Growth was driven primarily by price as we were in promotions in Q4 of 2022 following our Q3 2022 supply challenges, and in advance of a then expected competitor launch in early 2023. In our second quarter, with competition in the triple combination space, we continue to see patient share growth in Simparica Trio. We remain confident in our ability to compete and grow in this space through the strength of our label, retail channel presence, strong corporate and specialty relationships, and the significant advantage of being first to market. (Indiscernible) dermatology product sales in the US were $252 million in the quarter, growing 6%. Cytopoint sales continue to drive growth through both price and volume, with vet and pet owners referring its injectable method of administration. (Operational) franchise growth is driven by better net price realization on lower volume due to promotional activity at the end of last year. Our US companion animal diagnostics portfolio posted growth of 9% in the quarter. US livestock grew 4% in the quarter, primarily driven by growth in poultry as a result of favorable rotations back to certain medicated feed additives and the extended use of Zoamix, as well as share gain due to competitor supply constraints. Sales of both swine and cattle products increased in the quarter, primarily as a result of increased supply of vaccines that were limited in the same quarter of the prior year. Moving on to our international segment where revenue in the quarter grew 9% on a reported basis and 8%, excluding the impact of foreign exchange. International companion animal grew 10% operationally, and livestock grew 7% operationally. China represented a 3% drag on our international segment operational revenue growth in the quarter. Higher sales in companion animal products was led by our pain mAbs, our key dermatology products, and our small animal parasiticides portfolio. Growth in our OA pain products was equally driven by sales force focus and DTC awareness campaigns in early launching European markets, as well as continued uptake in markets launched earlier this year. Librela sales were $53 million internationally or 93% operational growth in the quarter. Solensia sales were $13 million internationally in the quarter, growing 77% operationally. Our international key dermatology portfolio contributed $123 million in revenue, posting growth of 10% in the quarter on an operational basis. We continue to see benefit to Apoquel from our DTC awareness campaigns across several international markets and conversion to Apoquel chewable has been positive. Growth in Cytopoint continues to benefit from higher rates of conversion from Apoquel and overall market growth. Our international small animal parasiticides portfolio grew 4% operationally, driven by our Simparica franchise, with Simparica posting $48 million in revenue and growing 32% on an operational basis in the quarter, driven primarily by price, a strong parasiticide season, and demand generation in emerging markets. Simparica Trio contributed $23 million internationally, growing 72% operationally, driven by high peak season sales in Australia and continued uptake in Europe, driven by key account penetration and field force effectiveness. This growth was partially offset by a 33% operational decline in our Revolution franchise, which generates a high proportion of sales in China where we had a tough comparative quarter due to the return of supply in Q4 of 2022, as well as the ongoing impact of the current economic conditions. Continuing on to international livestock, which was 7% operationally, driven primarily by price increases in all species, especially in high inflationary markets. Our poultry portfolio also benefited from favorable MFA rotations in certain markets. China had an unfavorable impact on our international livestock sales in the quarter, particularly in our swine portfolio. Now, moving on to the rest of the P&L, for the quarter adjusted gross margins of 67.1% decreased 100 basis points on a reported basis compared to the prior year. On an operational basis, adjusted gross margins decreased by 20 basis points, resulting primarily from higher manufacturing costs, which were partially offset by price increases and lower freight costs. Adjusted operating expenses increased 11% operationally, driven primarily by higher SG&A expenses, which grew 10% operationally, primarily due to higher competition-related expenses, as well as a charitable contribution related to the funding of the Zoetis Foundation. R&D expenses grew 17% on an operational basis, driven by higher compensation-related expenses, as well as portfolio progression of key pipeline projects. Finally, other income and deductions were higher in the quarter due to an impairment charge related to an acquisition. The adjusted effective tax rate for the quarter was 18.8%, a decrease of 200 basis points, primarily due to higher net discrete tax benefits in the quarter, a higher benefit in the US related to foreign derived intangible income, and a more favorable jurisdictional mix of earnings. Adjusted net income grew 6% operationally, and adjusted diluted EPS grew 7% operationally for the quarter. Capital expenditures in the fourth quarter were $198 million. For the full year, we had capital expenditures of $732 million. Lastly, we continue to return excess capital to shareholders. For the year, we have returned approximately $1.8 billion to shareholders through a combination of share purchases and dividends. In December, we announced a 15% annual dividend increase, continuing our commitment to grow our dividend at or faster than the growth in adjusted net income. Now, moving on to our guidance for the full year of 2024. Please note that guidance reflects foreign exchange rates as of late January. We are expecting foreign exchange to have an unfavorable impact on our growth versus the prior year. At net revenue, we expect foreign exchange to negatively impact our growth by 90 basis points, with the impact being more pronounced early in the year and decreasing later in the year. At adjusted net income, we expect FX to negatively impact our growth by 150 basis points, with significant unfavorable impact in the first half of the year, transitioning to slight favorability in the second half of the year. As a reminder, we do not actively forecast FX, so these estimates assume rates remain where they were as of late January. For 2024, we are projecting revenue between $9.075 billion and $9.225 billion, representing a range of 7% to 9% operational growth, with growth across both price and volume. We expect companion animal to be the primary growth driver in 2024. With the expected impact of the US launch of Librela, we expect to see robust growth from our OA pain mAbs, both in the US and internationally. Our current clinic penetration levels for Librela in the US are exceeding our expectations, and as Kristin mentioned, we have launched our DTC efforts ahead of schedule to drive increased pet owner awareness. Even with the expectation of competitive entrance, we anticipate mid to high single-digit growth in both Simparica Trio and our key dermatology portfolio. For livestock, 2023 exceeded our expectations. Our growth in the year benefited from several tailwinds, including improvements in supply in certain markets, as well as competitive out of stocks. While our outlook for the upcoming year is more optimistic than it was as we entered 2023, we do expect our growth rate to normalize and be in line with livestock industry growth. I'd like to briefly touch upon the key assumptions that underpin our expectations for revenue growth. For companion animal, we are not projecting significant change to the current vet clinic trends. We expect US visits to grow flat to 1%, and expect to see growth in therapeutic visits aided by the impact of our OA pain products. For our companion animal parasiticides, we continue to expect meaningful growth from Simparica Trio. We expect new entrants will help continue to drive the conversion from topicals and collars to triple combination of our parasiticides, a space where we are the market leader. In our key dermatology products, we are prepared for competition and confident in our ability to defend and grow our share through our three differentiated dermatology products, the strength of our customer relationships, and the expertise we have gained from almost 10 years in the space. Lastly, while we are not assuming a change in the current economic situation in China, we do expect a headwind to growth, especially in the first half as the situation worsened over the course of 2023. Now, moving on to the rest of the P&L. Adjusted cost of sales as a percentage of revenue is expected to be approximately 29.5%. We continue to make investments to ensure we can support expected future growth in our portfolio, especially in monoclonal antibodies. These investments are driving short-term margin impacts from lower site utilization. This is offset by price increases and favorable product mix. Adjusted SG&A expenses for the year are expected to be between $2.17 billion and $2.22 billion, with the increase from 2023 focused on supporting primary drivers of revenue growth. Adjusted R&D expenses for 2024 is expected to be between $665 million and $675 million. Spend is driven by the advancement of key pipeline projects, as well as higher compensation-related expenses. Adjusted interest expense and other income and deductions is expected to be approximately $210 million. This is significantly higher than the prior year as our growth here is negatively impacted by the non-recurring royalty settlement income we reflected in Q1 of 2023, as well as the impact of lower interest income. Our adjusted effective tax rate for 2024 is expected to be in the range of 20% to 21%. Adjusted in income is expected to be in the range of $2.65 billion to $2.70 billion, representing operational growth of 9% to 11%. Our guidance once again reflects our value proposition of growing revenue in line with or faster than the market and growing adjusted net income faster than revenue. We expect adjusted diluted EPS to be in the range of $5.74 to $.584, and reported diluted EPS to be in the range of $5.34 to $5.44. And finally, we are anticipating capital expenditures in 2024 to be in the range of $800 million to $850 million. These levels remain elevated compared to historical spend levels as we continue to make investments to support our future growth. To summarize, 2023 was another strong year. Even with distributor inventory headwinds entering the year and a challenging economic environment, especially in China, we again outperformed the market. We continue to grow share even in spaces where we face new competition, and we remain confident in our ability to expand existing markets and create new ones in the future. As we move into 2024, our guidance highlights our ability to again grow faster than the market, driven by our innovative product portfolio and multiple sources of growth, as well as our ability to grow our bottom line faster than our pipeline, while making meaningful investments for the future and returning significant excess capital to our shareholders. Now, I'll hand things over to the operator to open the line for your questions. Operator?
Operator: [Operator Instructions] We will take our first question from Erin Wright with Morgan Stanley. Please go ahead.
Erin Wright: Right. Thanks for taking my questions. So, can you talk a little bit about the reorder rates and feedback and expectations around Librela for 2024 in the US and some of those stocking dynamics that we should think about quarter-to-quarter? And then a bigger picture question just on margins and profitability, and there are some moving factors in 2024, such as FX and the ramp up of Librela that weigh on margins, but can you talk a little bit more about the potential margin leverage that you could see across your business as you expand in some of those faster-growing and higher margin categories in 2025 and beyond? And if you could describe a little bit more about that longer term margin leverage. Thanks.
Kristin Peck: Thank you, Erin. I will take the first question on Librela and let Wetteny take that second question. Yes, we were very pleased with how we did with Librela in the first full quarter of launch in Q4. As you saw, we did about $44 million in the quarter, $47 million for the year, including the early experience trial. And really how we achieved that was our penetration was ahead of schedule, as we mentioned in the prepared remarks. Given that penetration, which is in the high 60s, we actually began DTC ahead of what we were expecting. Reorder rates are coming in exactly where we expected, in line with our expectations. So, that makes us really confident as we go into the year. We're looking at what - your other question was what kind of stocking or inventory build we saw in the clinics. It's hard to give you a firm number. It's somewhere between a quarter and a third, I would say, overall in stocking. But look, this is the number one selling pain product in Europe, and we have no doubt it will be that in the US as well. So, we're quite pleased and certainly ahead of our plan on penetration. And look, with our direct-to-consumer advertising investments, we've already started late last year and into Q1 to drive growth in this product in the US. So, I'll let Wetteny take the second question.
Wetteny Joseph: Yes, sure. Look, when looking at margins, yes, indeed there are some moving factors when you think about 2024 and then beyond. We do have Librela in 2023, as we said at Investor Day. If you look at our monoclonal antibodies at peak, particularly as we ramp up production in our capacity, which was built to make sure that we're confident in being able to take advantage of demand, they started out as being dilutive to the overall company average. For example, in 2023. As we go into 2024, Librela becomes accretive to our overall margins, but still below what you would consider our innovative companion animal products. And as we exit 2024 into 2025 and beyond, it becomes more in line with our innovative companion animal products. So, overall, beyond 2024, I won't give you specific guidance here in terms of what to expect, but I think if you look at it, we continue to expect companion animal to outpace the growth of livestock. So, that mix will continue to be favorable for us. And as we get into the higher levels of production for monoclonal antibodies, they're also accretive to overall margins and we're positioned to be able to leverage our SG&A base as well. So, all of those should translate to margin expansion through the P&L over time. But as we've demonstrated, we're not afraid to make the right investments behind our products, behind our key franchises as we see them, investments in R&D, as you saw in 2023. And as the guide implies, R&D will continue to grow faster than revenue as well. So, those investments will slightly offset some of those, but we'll position to continue to expand.
Operator: Thank you. We'll take our next question from Michael Ryskin with Bank of America. Please go ahead.
Michael Ryskin: Great. Thanks for taking the question, guys. First, I want to touch on margins, maybe both for 2023 and 2024. So, it looks like you're guiding - back of the envelope math, you’re guiding to about 100 bps of margin expansion in 2024, but you also did finish 2023 lower than we would've expected. I think 4Q especially came in significantly lower. And you called out some headwinds during the call in terms of FX. You called out some timing, some contribution to the Zoetis Charitable Foundation. Any way you could kind of back that out, give us sort of a cleaner number for what margins should have been in 2023, and then maybe what some of those one-time headwinds would have as an impact to 2024, just to give us a better sense of underlying margins and underlying EPS. And then my second question is just following up on Librela, I don't believe you actually quantified a target. So, I want to - just given what you did in 4Q, a major focus point, is something like $200 million to $250 million for Librela for 2024 reasonable? And especially - that's for US, but then on the O-US side, we've heard some concerns maybe coming out of Europe. And it seems like Librela has sort of been a little bit flat over the last couple of quarters in international markets. So, any color on what's going on internationally. Thanks.
Wetteny Joseph: Yes, sure, Mike. Let take this and then see what Kristin wants to add. So, take a look at margins. Indeed in 2024, we are guiding to about 100 basis points of expansion and margins. Keep in mind, when you look at 2023 and how we ended, Q4 had about 100 basis points of margin impact. And about 80 of that is from FX. So, you're talking about roughly 20 basis points when you consider manufacturing costs and a little bit of mix. Now, looking at mix, we had clearly really strong and quite frankly a strong year in livestock. And we're actually here at the national sales meeting for our livestock with our livestock team in Utah. And look, they've had a great year, and we expect livestock continue to grow as we go into 2024, but clearly ended stronger at the end. So, that created a little bit of a mix, and as well as outperforming our expectations exiting the year is also, as I said, a bit diluted. So, when you look at mix and manufacturing costs, you're still talking about 20 basis points of headwind exiting 2023. Most of the impact here is coming from FX, about 80 basis points. The other items that we referenced in our prepared commentary with respect to impact on the quarter and how we ended, FX as I explained, the impact on our finish here, if you take a look at FX, which is clearly non-operational, and you factor non-recurring items like the impairment charge for the prior acquisition, those two items are about $0.07 of headwind in the quarter, in 2023 in the fourth quarter. So, that's really the vast majority of what you saw impacting us here. Of course, we don't forecast FX. So, what we bake into our guidance for 2024 is essentially what would happen if we assume FX rates stay where they are at the end of January here. And with that, on a constant basis, we would expect to expand margins in 2024. And so, that's really consistent with how we've approached our forecasting in the past. And I won’t sit here and guess at what FX is going to do throughout the year 2024. that will have an impact either favorable or unfavorable, depending on how that goes. For the other part of your question, I just want to maybe talk a little bit about Librela, how we expect Librela. Clearly, when you think about how we will deliver on 7% to 9% operational growth in revenue, price is a pretty significant factor. We continue to expect to be running price above our historic levels of two to three points, and perhaps slightly below what you saw in 2023 at 5%. And then Librela with the US launch clearly is going to be a significant factor. Certainly, $44 million in the quarter in Q4 was - again, very pleased to see that. We do see about a quarter to a third of that being initial stocking. So, you can model that out. In terms of what that would translate to, we're still in the early stages of our launch, but we're very pleased with what we're seeing so far, as we discussed already. In international, we couldn’t be more pleased with what we're seeing. If you look at international, the fourth quarter, you still have about 47% growth if you look at the base markets where we were launched at the beginning of the year. And then the new markets are driving another bit of growth. You have another $12 million contribution from those new markets, in addition to the US $44 million. So, I think what we have to really take into account here is, as we've been launching in markets in Europe, there's some stocking that happens from quarter to quarter as we do those launches. If you factor those out and you just focus on those markets that were already launched, we're talking about 47% growth in the quarter, which has been consistent over the last few quarters, about 50%, give or take growth. So, we couldn’t be more pleased with what we're seeing in the international markets. Kristin?
Kristin Peck: No, it’s great.
Operator: Thank you. We’ll move next to Jon Block with Stifel. Please go ahead.
Jon Block: Great. Thanks, guys. Good morning. Wetteny, any revenue cadence in the year to call out? You've got sort of that easier 1Q 2023 comp, but you were also noting more acute China headwinds in the first half. So, just how do we think about it? Do we sort of look at it on a two-year stack basis? And then on the guidance for the full year, maybe GM fell a little bit below what we were thinking, but SG&A expense, despite the investments, Kristin, that you called out, the accelerated DTC, the SG&A was a little bit lower than where our heads were at. So, maybe you can just talk through those items, why we're only seeing, seems like low to mid-single digit SG&A growth year-over-year. I don't know if some of that's blunted by FX. And then just finally, I'm sorry, Librela, due to the stocking, do you still expect Librela to be up in the US 4Q 2023 to 1Q 2024 as it absorbs the stocking? Thanks, guys.
Wetteny Joseph: Look, I'll take the cadence point first and then see what Kristin wants to add in terms of Librela expectations. Look, sitting here, I would expect a roughly balanced cadence across the year. Now, let's take a look at Q1, which is a specific point you raised in your question, Jon. If you look at Q1, certainly, if you look at companion animal in the US, there's an easier comp. We had destocking the first quarter last year, clearly something we look to see as an easier comp that we come up against. But at the same time, you had a 12% growth quarter in livestock in Q1. And so, I think if you look balance - those don't completely balance, but it's livestock growth, both in the US as well as international. And then you have China, which clearly started to more deteriorate in terms of the economic conditions there throughout the year. So, that becomes a heavier, I would say, headwind coming into Q1 as well as the conditions, weather conditions in Australia, et cetera, having an impact there. So, I think if you balance those out, and last point I'll make is, Librela, clearly very pleased with how we exit Q4 and enter into Q1, but it's going to continue to contribute more and more as you go through the year. So, Q2 and Q3 would be more than Q1. Therefore, the contribution from Librela accelerates through the year and it doesn't have as much relatively speaking in Q1. So, when you take all those into consideration, I actually see a roughly balanced year. Now, we did make references to FX, so from a reported basis that again, taking a look at where the FX rates were a couple weeks ago, you do have a heavier impact in terms of both revenue and bottom line. On the FX factor, hopefully what we provide in prepared commentary is helpful there. So, that's the other piece you have to think about. But when I think about operational base growth, I mean, we did exit the year with good momentum as we exited Q4 and into Q1, again looking at US companion animal. But that's how I think about it. Now, is Q1 going to be higher than Q4 from a Librela perspective? I think if you factor about a quarter to a third of impact coming from stocking, that's $12 million to $15 million. So, even if you had a flat, that means you grew by $12 million to $15 million going into Q1. I won't call it exactly here right now. What I would say is we're pleased with how the product is performing, but we are still in the early stages of this launch.
Operator: Thank you. We'll take our next question from David Westenberg with Piper Sandler. Please go ahead.
David Westenberg: Hi. Thank you for taking the question. So, last year we saw some discounting in front of the NexGard combo launch. Do you anticipate there might be similar competitive dynamics in front of a Elanco’s Quatro launch? And how are you thinking about that in consideration with the gross margins? And then just the second one on just the DTC efforts in Librela? I don't think there is DC allowed in Europe, but can you talk about maybe some of the learnings that you learned in Europe in terms of marketing and how they might apply specifically around communication of the vet? The vet obviously is the one that understands the superior safety profile with monoclonal antibodies and may maybe how that messaging can come out. Thank you.
Kristin Peck: Sure. I'll start with that one and Wetteny can certainly build on it. I mean, I want to first underscore, we had a very strong Q4 with Trio, with 21% growth in the quarter with competition. For the year overall, Trio grew 9%. So, we're very pleased with that. As we guided and Wetteny mentioned earlier, we're expecting mid to high single digit growth in Trio for the year. So, this obviously underscores, and we think we'll see that both in price and in volume. So, we do anticipate, obviously a competitor entering. I'm not exactly sure what - how Purdue or Proctor will do it. Our expectation is that is not a differentiated product. They do mention tapeworm, but you get tapeworm from fleas, and we absolutely control fleas. So, therefore, that's really not a differentiated product. So, we are used to having good competitors, obviously with NexGard. I'm sure there'll be some heavy promotional, but I think our strength, honestly, with our corporate accounts, the experience, switching is low for people with this product. It's very unlikely someone on Trio is going to switch. We're doing quite well with retail and auto-ship, which I think also protects us. And we expect a new competitor to expand the market. What we're seeing a lot is a movement into the triple combos out of topicals, collars, et cetera. So, as we look at that, we're confident in our Trio number as we look into the year. And with regards to your question on, what do we learn from Librela in Europe? So, we cannot do branded advertising for Librela in Europe, but we can do overall advertising for disease awareness and encouraging people who have pets, both dogs and cats with osteoarthritis pain, to bring them to the vet. And we are seeing real impact of that disease awareness. I think it's been a long time where pet owners have not had a product that they could turn to, and encouraging them that there is a new product and that they should go to the vet and be seen. We are seeing really positive uplifts from direct-to-consumer advertising, even when it's not branded. So, I don’t know, Wetteny, if you wanted to add into that.
Wetteny Joseph: Yes. Look, I think you covered it, Kristin. Trio’s been performing really well for us in the face of direct competition in the US. Couldn't be more pleased, and to be gaining patient share in the face of competition, I think that speaks a lot to what we've been talking about, which is the power of our relationships, the strength of our label and being first to market. So, look, there'll be some initial, I'm sure heavy promotion that happens when a new competitor comes in. We factor some of that into our thinking here. But until we see the label and see what they do, we won't home in on specific reaction and so on. But we're very confident in our ability to continue to grow the franchise. And we're saying we're going to see mid to high single digit growth across Trio in 2024 as well.
Operator: Thank you. We'll take our next question from Nathan Rich with Goldman Sachs. Please go ahead.
Nathan Rich: Great. good morning and thanks for the questions. I wanted to ask on the derm franchise. I think you had talked about mid to high single digit growth for the franchise overall. I guess specifically, are you assuming a headwind within that guidance from the competitive entry that's likely to occur against Apoquel this year? And can you talk about the strategies you're maybe putting in place to defend market share for that product? And then a quick follow-up on China, could you maybe frame the type of headwind that you expect in China in 2024? And does that impact more on the companion or livestock side of the market? Thank you.
Kristin Peck: Yep, sure. I'll take the derm question, and I think Wetteny can follow up on your China question. Look, we saw strong growth both in the quarter and overall in derm at 8%. And I just want to underscore that that growth is obviously understated given the price, if you're looking at the pre-price buying that we saw in late 2022. As we look at our guidance for mid to high single-digit growth for our derm franchise in 2024, that is the expectation that we will see a competitor launch. We expect this market to continue to expand and grow, as we've talked about. There are 85 million dogs in the US who have pruritus. There is still over 6 million untreated dogs and 3.5 million who are treated, but with steroids and sort of over-the-counter products. So, we strongly believe this is a market we can continue to expand. Look, we've had two products been on the market seven and 10 years, respectively. We've had millions of dogs on these products. Our products have been proven over time to be safe and efficacious, and they're trusted by pet owners. They're trusted by vets, and we're seeing more and more a switch to Cytopoint, both a preference for compliance by both the pet owner and the vet. And our competition, we're expecting to come in a film-coated tablet. And if you look at that, we're really focused on investing in applicable chewables and moving them to chewables, which pet owners really prefer. We've been successful in doing this in Europe. We're quite focused on doing this in the US and we're also continuing to look at innovation in the short term, on the long acting. So, we are going to defend this franchise. We're confident in this franchise. Our guidance of mid to high single digits demonstrates that we believe we can continue to grow this market in the US and around the world, not just defend our brand, but continue to bring lifecycle innovation to the space over time to grow our share. Wetteny, do you want to take China?
Wetteny Joseph: Yes, sure. And one point on derm, of course we have a mid to high single-digit growth expectation that we laid out in our guidance, of course, across a broad range of expectation. There’s various scenarios around competitor entry, timing, pricing, et cetera, will play into that. And the label that they have, of course, will be playing into how that plays out. But we're confident in our ability to grow. Our franchise has been around for a decade in this space. On China, we've been consistent on this one. I think we continue to see sort of the broad economic situation there to remain where it is. We're not expecting it to deteriorate nor improve, at least through the first half of our year. And we also have stronger comps similar to the second half of 2023, a little bit less so into the first half of 2024, but still headwinds into the first half of 2024. You continue to see consumer confidence being low and swine prices remaining fairly depressed in consumption there as well. So, all those factors. Of course, long-term, we continue to expect China to be a strong growth market. It has done exceptionally well for us over the last decade, but in the near term, we're not expecting that to be a contribution to growth. In fact, we'll see some declining comps in the first half on China.
Operator: Thank you. We'll take our next question from Balaji Prasad with Barclays. Please go ahead.
Balaji Prasad: Hi. Good morning, everyone, and thanks for the questions. A couple. firstly, I just wanted to understand the currency dynamics better, considering that most of the nearly 100 basis points based on revenue and 150 basis points based on EPS seems to be growing from here. Why is FX so severe and any particular currencies hurting you? I mean, my general understanding is with $4 billion plus of export revenues and dollar weakening, I thought the impact would have been the other way around. Second question is around the FDA letter that Zoetis has received on Librela number. I want to understand how frequent or normal are these kinds of letters on the animal health side and the issues that FDA found with Librela’s promotion, with the inclusion of the P value on the secondary end points? And what is the current status now with regard to your communication with the FDA? Thank you.
Kristin Peck: So, I'll take your second question first and then let Wetteny take it. I assume you're referencing the letter back in November. Honestly, the letter is uneventful and was well addressed. We immediately resolved the request for clarification. What you're talking about was a request for clarification on our promotional materials. We just made a minor change to the promotional materials and how we represented some statistical data. The concerns are well addressed and the modifications were accepted by the FDA. I mean, this isn't uncommon. So, I don't - that was easily resolved last year. That was a minor issue, but Wetteny, do you want to take the second question?
Wetteny Joseph: Yes, sure. On currency dynamics - and again, we don't forecast FX, so we tend to report out what we see the impact is. And the dollar continues to strengthen against the number of currencies that we operate in. And there's a little bit of a disproportional effect that we see on some of the higher inflationary markets like Argentina. If you follow Argentina, there've been two really significant drops in terms of FX rates versus the dollar, if you follow back, as we ended last year, both in December and I think back in August, and there's a little bit of a delayed effect on those. Clearly, there's an impact on top line that we've talked about, but there's also a little bit of a delayed effect if you look at the impact it has on inventory and receivables that are on the books at the time. So, by the time you collect those, they have a greater impact, which is why you see the impact down the bottom line. So, combination of Argentina, Brazil, Turkey, those are more pronounced than their relative percentage of our revenues, given how significantly they devalue. That's what you’re seeing play out. But really across the board, if you look at how the dollar ended the year, it ended a bit stronger than you saw throughout the average of the year.
Operator: Thank you. We'll take our next question from Brandon Vazquez with William Blair. Please go ahead.
Brandon Vazquez: Hi, everyone. Thanks for taking the question. First, can you talk a little bit about the pre-price buying the quarter? Are you able to quantify how much of a headwind that was? And then maybe talk about should we expect that to be a headwind going forward at all? Are you guys still working through that? And a follow-up to that maybe higher level, is there anything in the pipeline or kind of in product cycle management that you guys can share with us? You're still spending a lot of money in R&D, and even for next year, it looks like that may not be a specific area to get leverage off of the R&D line. So, anything that you'd be able to share with us there would be helpful. Thank you.
Wetteny Joseph: Yes, sure. I'll take the first one and then Kristin will cover the second one. Look, there's always some level of pre-price buying in our - as we exit the year, given what our price increases are going to be. I would say compared to the prior year where there was higher than average pre-price buying ending 2022 into 2023, which had the effect on 2024, we more actively managed customer orders in terms of pre-price buying exiting 2023, and that gave us really first the underlying market strength and momentum that we carried into, but also I would say our order position walking into January 2024 was certainly in better position than say the prior year. So, we more actively manage those, but there's always some level in the numbers.
Kristin Peck: Sure. And the question with regard to R&D, obviously we are very confident in our pipeline. I think we've been the most innovative company in animal health. And as you look at the how we exceeded market growth every year for the last 11 years, it is due to the innovation in our pipeline. We are investing both for the short, medium, and long-term in animal health different than human health. That really makes a difference. You look at sort of what I call like lifecycle enhancements that we just launched such as Apoquel chewable, which will significantly support our key brands. We're also looking at pretty disruptive innovations as well. As you look at sort of the short one-to-three-year term of innovation, we're excited really for some of our long actings. And we've talked a lot about investing in the medium to long term in really important new franchises as well such as renal chronic kidney disease spaces, looking at cardiology, looking at oncology and diabetes. There's really important spaces of unmet medical need in animal health that we're really excited to tackle. We're continuing to invest behind our diagnostics, as well as behind our livestock business, looking at new vaccines and immunomodulators in our genetics business. So, we have a very diverse pipeline because we have a diverse portfolio. So, we're continuing to invest behind that and remain very confident in that.
Operator: Thank you. We'll take our next question from Chris Schott (ETR:1SXP) with J.P. Morgan. Please go ahead.
Chris Schott: Great. Thanks so much for the questions. Just two for me. Just latest on vet visit growth. I know it's not the primary driver of growth for your business, but you're targeting 0% to 1% this year. And I'm just trying to get more color on what’s the underlying kind of dynamics here. Is this mostly still vet capacity? Is it macro dynamics? Just any color there would be appreciated. And then my second question was just coming back to Librela ex-US. From your perspective, how penetrated is the market for monoclonals at this point? And where do you see the largest opportunity for growth in these markets? I'm sure you have a sense of like, are we in the second inning or the seventh inning of the ramp ex-US? Thanks.
Kristin Peck: Sure. I mean, starting on the first, we are not very levered, as we've spoken about many times before to vet visits. I mean, obviously, they're not inconsequential. Our view of zero to one is that's where it's historically been. That is historically what you see in vet clinic visits over time. So, I think we're really saying it's back to a normal. What's really happening is there's strong end market demand. There remains some capacity issues in the US, but I think some of that's being addressed by more stuff going to auto-ship and retail and online, which has also been supporting it. But we really sort of view the year, as you look into the year for 2023, although we saw flat vet visits, we saw revenue and revenue per visit up 7.5%. So, we really are seeing really strong growth, obviously overall in revenue, and we're much more correlated over time with that, just given the strength of our portfolio, et cetera. And to your second question with regards to Librela outside the US, I think we're still early innings. And really where I think we see the growth is, right now that product is primarily being used in severe dogs. I think getting it into more moderate dogs, I mean, I think, obviously, at least as someone, in my 50s, I will say my hip hurts right now, but everyone doesn't know that who is around me. And so, the reality is, osteoarthritis exists in animals long before they're limping and can't walk up the stairs. And the more we can control that pain early, I think is critical. So, I think what we're really trying to change the paradigm is getting Librela in first line use for animals with osteoarthritis pain, and getting it into more of those moderate dogs. And we think the more we can do that, the more we can continue to grow the market here and grow our franchise. So, we know, we believe we're in early innings across the globe with regards to osteoarthritis pain with both Librela and certainly with Solensia, where we still have to continue to grow awareness for osteoarthritis pain in cats.
Operator: We'll take our next question from Steven Scala with TD Cowen. Please go ahead.
Chris LoBianco: Hi, this is Chris on for Steve. We have two questions. First on Librela, to what degree are US vet capacity constraints a headwind to longer term treatment compliance? And then is there a regulatory path for the approval of an at-home owner-administered formulation? Thank you.
Kristin Peck: Sure. Obviously, making sure that pet owners can get in monthly for their injections is critical. So, vet capacity is certainly something that we're quite focused on, but I think after the first visit, this is an injection that can certainly be done by a vet tech, and I think the industry's really focused. And we've been partnering with corporates, with the AVMA, with lots of people to really think about how to change the paradigm of vets to vet techs and clinics and things like that. So, we believe there are solutions to really address some of the vet capacity issues. So far globally, and by the way, this vet capacity issue is not just a US issue. It's global. So far, it hasn't affected the growth of our key products. And your second questions with regard to home delivery, you want to take that one?
Wetteny Joseph: Yes. Look, I think the regulatory path to that isn't really the direction we're going in terms of where we think we can make an impact here. Livestock innovation not only in our OA pain mAbs, but across our portfolio, are really, really important. And as I look ahead, I think longer acting formulations, both Solensia and Librela, will be the direction that will help with this, even though, as Kristin said, we're not seeing any significant impact in terms of our ability to grow the mAbs. I think initial visits where the vet has to see the pet and do the injection beyond that, the techs are able to do it, et cetera. And that varies a bit, but, but we don't see that as being a significant impact for us.
Operator: We'll take our next question from Navann Ty with BNP Paribas (OTC:BNPQY). Please go ahead.
Navann Ty: Hi, good morning. Thanks for taking my questions. I have two, one on Librela and one on Trio. The first one on Librela, with continued investments in 2024, what are the remaining SG&A needs in addition to the current DTC campaign? And just a clarification, do you currently expect Librela to become potentially gross margin accretive in 2025? And then on Trio, can you help us explaining the switches from the NexGard Plus? Are they mostly from BI’s own NexGard rather than from Simparica Trio, and you see uptake from BI on younger dogs and puppies mostly? Thank you.
Wetteny Joseph: I’ll take the first one on Librela. Look, of course, we are going to be making investments and we already started, because as you heard in the prepared commentary, our penetration levels are running above our expectations, and we've launched DTC on Librela, and we're already doing DTC across Europe and international markets as well. As we look ahead, we did make significant investments in our field force going back about a year and a half or so ago. So, we're able to leverage those investments and we don't see incremental investments beyond those to drive our expectations and take advantage of demand on the product. The gross margin picture, as I mentioned earlier, it is dilutive if you look at 2023, and particularly because you saw us outperform expectations on Librela in 2023, right? As you go into 2024, Librela margins are actually accretive to the overall company margin leverage. So, 70%-ish gross margins for the company, Librela is above that, but it is below the gross margins that you would see in our innovative companion animal brands. As we get beyond 2024, you will start to see it at those innovative levels, which is well above the company average. So, hopefully that helps clarify that point. Trio, as we've said, we've seen really strong performance in Trio, posting double-digit growth. Trio grew 17% in the US in Q4, and we continue to gain patient share, which means again, switching is low when you have a product that's safe, efficacious, and been in the market for almost four years now. So, we're very pleased with what we're seeing. I don't know, Kristin, if you want to add anything.
Kristin Peck: The only add, we're doing quite well with puppies. You asked specifically with regards to puppies. I mean, puppies are on the Trio label, so I just want to emphasize that. I know it wasn't on the original Simparica. So, I mean, really you are looking at new starts, we see a lot of puppies and we see a lot of conversion from single and dual-agent customers to a triple combination, and certainly a movement to more people from topicals to oral. So, there's lots of ways for us to continue to gain market share for that product, but we're doing quite well with puppies, to answer that other part of your question.
Operator: And there appears to be no further questions at this time. I'll turn the call back to the speakers for any closing remarks.
Kristin Peck: Great. Thank you all so much for the questions, and honestly, for continued interest in Zoetis. I want to underscore that the enduring strength of the human-animal bond for pet owners’ expectations of human quality healthcare for pets, and the need for safe and secure food supply, all underscore the animal health industry is essential and very durable. We remain confident about our strategy and the ongoing value proposition, because we know that our colleagues will make a difference every day in everything that we're doing. And with their support, I want to reiterate that we expect to grow faster than the market again in 2024, not just in line, and to grow operational revenue by mid to high single digits. We are firmly committed to investing in our innovative pipeline, our portfolio, and the DTC programs we need to support the broadening and building billion-dollar franchises. The animal health industry is resilient even in times of uncertainty, and we are poised to navigate these challenges because our portfolio diversity, our commitment to exceptional customer experience, operational excellence and agility, and we look forward to keeping you updated on our progress on future calls. Thanks much for joining us today, guys. Have a great day.
Operator: Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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