Zoetis Inc. (ZTS) Earnings Call Transcript & Summary

Sorry, we've got a lot of interesting things I think we'd like to cover today. So we're pleased to have with us today, Kristin Peck, who is the CEO of Zoetis, which is the global leader in animal health care. And given the tone of the conference this morning and a lot of the issues, I think one of the first things we're going to start with is COVID-19. And certainly, this is a slightly different perspective than what we've talked about from the human side.

So Kristin, first, can you just confirm if you know that this is not an issue within companion animals or livestock, this virus?

Sure. So based on the guidance to date from the World Health Organization and the CDC, it does not appear -- this is definitely a zoonotic disease. So it most likely started in bats and/or whatever, snakes to humans. It's not clear at this point that it's zoonotic in the sense of that either humans can give it to dogs or cats, or cats can give it to dogs or humans. I do know there was 1 animal tested who -- tested that the animal had it in him, but whether or not he can shed it remains to be seen. It is -- it's too early -- based on the research we've seen, we do not believe that to be the case.

What type of animal was this?

It was a dog. There's a single dog that was tested that it was in the dog's nose. That's quite different than the dog was shedding it or has actually contracted the disease. And there is no evidence, to date, that either it can go from human to dog or cat or from dog or cat to human. Again, we're early in this whole thing. So I don't want to say that it couldn't, but the current guidance from, at least the CDC and the WHO, is they do not believe it to be zoonotic in that nature.

Well, that's thankful for all of those with pets. So -- and then just in terms of a demand perspective, can you comment what you have seen since the beginning of this year, both in China or anywhere else, impacting demand both on companion animal and livestock?

Sure. I mean from a revenue or from a demand perspective, there are 2 main things that we're watching at least at Zoetis. One is with quarantining and people being nervous to get out that much. We are seeing a reduction in overall vet visits. What remains to be seen is that's a temporary thing. And then once the quarantines are lifted and people feel comfortable traveling, they're making up those vets visits. But even if they are, they might not necessarily be making up those doses of antiparasitics and things like that, that they would have used. So we do see -- one thing we're watching is just a reduction in vet visits and therefore, reduction in number of doses of some products such as parasiticides. But the other thing that we're watching very carefully that we are starting to see, is also a reduction in overall consumption of protein. So as you limit tourism, and you limit travel and you limit people going out to eat, there's a reduction in overall protein consumption. Some of that moves to the grocery sector and people buy it, but it tends to change when it does. So most of us, when we go out, we tend to buy the larger steak. And when we're home, we eat the chicken or the burger. So the nature of what you're buying sort of changes. And I know that I don't make steaks the same size at home that I tend to find in restaurants, so the overall volume changes. So we are watching that as to how that progresses as it spreads to sort of Europe and the U.S. But for us in China we saw, in 2019, a significant outbreak called African swine fever. We were expecting a significant uptick in exports from the U.S. and Brazil and Europe into that market, great demand. I will say the frozen supplies have gotten very low in China. Some of that supply that we, the U.S. and Brazil and other people, ship get stuck at the ports with coronavirus. And then when it did, it was getting frozen since the overall consumption level in China has not held at the same level. But remains to be seen -- I mean at this point, this is all within our guidance range, but what remains to be seen is if this lasts much longer and these consumption patterns of much less eating out at restaurants, much less tourism and travel, that could be a longer term but it's a little too early for us to see. But from a demand perspective, that's really where we see the [indiscernible] risk.

Are you seeing the decreased pet visits in this country also or other part of Europe...

No. I mean that would just be starting that -- we have -- we saw it in China, obviously. I mean a lot of them, they weren't allowed out. I mean vets weren't even allowed to open. So by definition, that happened. We haven't seen that yet in the U.S. or Europe. But that's certainly -- having watched what happened in China, what we're watching for right now as we understand what the potential impact will be. But again, it really depends on how long that is. Because a lot of those will be made up. So sometimes that's more doses that you're missing.

Okay. And on the production side. I think you've said that you have some API sourced out of China. Just -- can you tell us where -- of any other manufacturing plants that you have in China, and just the status of the supply side of the equation here?

Sure. So as we look at our overall colleague and sites, we're very happy to say we don't have any colleagues who have been affected and, therefore, also no sites that have been shut down. We did have our site in China, in Suzhou, delayed opening for the extended holidays, but it wasn't a region heavily impacted. We did start up right after the holidays, not with the full crews since people who traveled home couldn't go. But we're pretty much at full -- or back to 100% at our sites in China. There's definitely some slowing in the ports. But as you mentioned, the majority of our APIs, we have 6- to 9-month supply. So we don't see a problem. We have one product, Zoamix, which is a poultry product, where there could be some tight API, depending on how long it lasts, where we could have a challenge, but that's less than 1% of our sales is what we'd say on that product. If you look at where our manufacturing sites sit around the world, we do have significant sites in the U.S. and in Europe, so sprinkled across different markets. We have 2 sites in Italy, they're both pretty small. They're both up and running right now. So we don't see -- Catania and Medellin in Spain. We don't see those as significant issues at the moment. If it did affect some of our larger sites in Europe in either Belgium or Spain, that could be a challenge for us, or certainly in the U.S. if it went after, say, Lincoln, Nebraska or Kalamazoo, Michigan. But absent those sites, we continue to think that from a supply perspective, we should be fine.

Okay. Any questions from the audience on the virus before we move on? Okay. Great. Let's shift gears to the good news that you received at the end of last week, when received U.S. approval for the triple for Trio. Can you talk to us what is the -- if the label with what you got was in line with your expectation? And does that make you feel as comfortable, more comfortable, less comfortable than that $150 million target you have out there?

Sure. So I would say the timing of the approval was as expected in the label -- was as expected, which is always great because it doesn't always work out that way, as you know, with approvals. So we were expecting an approval at around this time, which is why we gave the guidance of launching at the end or shortly thereafter of Q1, which is the guidance we've always given. So the label, as we guided people, we did believe we get puppy claim. We did get the puppy claim. So the label is what we expected. And therefore, it does support -- and the timing is the same. So it supports the guidance that we've given of $150 million incremental sales for Simparica for the year, which is we gave that guidance, as we said, was assuming no sales really in Q1. At the customer level, you will see sales in Q1, mostly as we start to fill the channel and build supply ahead of the launch. But we will not be out at veterinary customers and selling at customer level until probably mid-April time frame.

Okay. And the -- tell us how that the vets now -- and clearly, there's been a lot of noise about this, a lot of expectations. What -- as an owner comes in, what does the vet have to say to that owner that has a dog that said, "Okay, we have this new product coming out." How do you envision that playing out?

Sure. Well, a few things I'd say, we're attacking that opportunity from 2 ends. One, we'd really like the pet owner to be coming and asking for Simparica Trio because they saw this great commercial of how they could...

Will we start seeing this soon?

You'll start seeing that in May. So we needed to be -- again, we need to make sure it's on shelf before we do that. So we'll be watching that probably in the May, June time frame, once we're out in clinics. We'd like the pet owner to come in saying, wow, I found that I can get a single oral dose of complete protection versus trying to remember when -- the frustration for the pet owner is for 2 different pills at not exactly the same time and remember to take them, et cetera. But from the veterinary perspective, they see -- they're very excited about the opportunity. Just for starters because it's the potential for much better compliance at the pet owner level, most pet owners do not remember to take their flea tick or their heartworm for 12 months. Actually, it's generally 4 to 6. And if you look at heartworm, heartworm is a deadly disease. So where if your dog gets it, the treatments are pretty difficult and not always successful. So there's a significant opportunity for just the wellness of the pet with this product. And there's an opportunity for the vet to make sure that they get that sale at the clinic. Sometimes, the pet owner will use heartworm through them, but get their flea tick at the Costco. This is an opportunity to say "This is an innovative, best-in-class protection for your pet. It's simpler, and we're pricing the product at parity today to what Simparica plus ProHeart is, but at a discount to what NexGard plus HEARTGARD." So you're not spending more to get a much better product with better coverage, and it's easier to take.

And what are some of the reasons that an owner may not want to switch? Is it anything to do with either side effects, coverage of the product?

We don't foresee any of those as being major issues. We know one of our competitors is saying there's some intestinal worms we don't have, they're not major worms in the U.S., and they're -- most of them are caused by ingesting -- one of them is caused by ingesting fleas during grooming. So we don't see the -- we don't think coverage is going to be the biggest -- to be honest, it's change aversion. I've used product X and it's always worked. Why do I need to change? People feel like they've depended on an XYZ product and why make the change. And to be honest, it's convincing the vet to have that conversation. Oftentimes, and many of you have pets, I'm sure you -- when you bring them to the vet, the vet doesn't always have a conversation about parasitics with you, sometimes it's the front office staff. So it's not just convincing the vet to have this conversation, but convincing the front office staff to have that conversation. Because they're the ones who often remind you, "By the way, you need a refill on your fill in the blank," and we want them to say, "By the way, there's a new product." So it's both the vet and the front office who have an important role to play here.

And if we think about the parasiticide market in the U.S., what percentage now -- and this is obviously flea and tick, what percentage are oral?

I don't have the exact percentage. So if you look at the parasiticide market, it's about $4 billion, $2.5 billion of that is in the U.S., about $1 billion of that is heartworm and the oral -- I don't know, Steve, if you have it, what 50%?

50% oral.

50%.

50% is oral. With Trio, where could you see that 50% going? Because if, in fact, it improves compliance should the oral, therefore, go to 70%, 80%?

That would certainly do. We'd like that to happen.

That would do it? That would do it?

That would definitely do it if we got there, yes. But it's -- we look at the potential market for this product, it's converting the topicals to orals but also getting share from some of the other orals as well.

Okay. And just along those lines, because one of the questions we often get is just about the sale of animal products outside of the vet clinic. And you've talked about that 60% are within the clinic just because they're specialty products, et cetera. And the other 40% could potentially go -- be sold somewhere outside of the clinic. For Zoetis, what percentage of your parasiticide now, so just the flea, tick, heartworm, are sold outside of the clinic?

Very little -- very small percentage.

Like single digits?

Yes.

And in 3 years, where would that be?

Oh, I think it could double. I mean to be perfectly honest, I think the real question -- there's a few things I'd say there. One is, I think consumers would like to be able to get it more reliably. I think there's an opportunity to really increase compliance. If you could ship monthly, the chips you remember to give it to your pet at the same time. And I think vets are starting to see the opportunity to partner with home delivery arm, certainly, whether that's Covetrus or Vetsource, or to be perfectly honest, with Chewy, which has started, as you know, a partnership with vet clinics to actually be their home delivery arm, et cetera. So I think what consumers want is choice. So I do think it could double, but you're still a small percent. I mean even if it doubles, it's still a small percentage. But I think it will grow especially in parasiticides, pretty quickly. And I think there's an opportunity for both the vet and the pet owner for increased compliance if it does.

Okay. And you have launched the Trio in Europe now. Is that correct?

Yes, I was just in the U.K. and was already with customers out there.

How is that very early days? Anything to...

It's going very well. We are not first-to-market there, so it's a very different launch, I would say, than here. We -- I won't give you the spiel as to why I think our product is better than what's on the market, but we do believe our product is better than what's in the market. I was in the U.K., it's more longworm market than a heartworm market, but there's a significant opportunity in longworm there. So we're right on plan. It is already in market, it's already with vets there. The opportunity is just less because it's not as big of a heartworm market, and there's only a few markets where Trio itself would be a major product.

And how is it priced outside of the U.S.?

It's different in every market because the competitive landscape is different in every market. And what I mean by that is, although heartworm is not in longworm [indiscernible] longworm, so it's hard to give you an answer because every market is actually priced very differently depending on who entered and what our competition is in that space.

But it would be the same idea where the combination of the product should be...

It should be, but we're not first-to-market so -- which is a little bit different.

Okay. Any other questions in the audience on Trio or any of the parasiticides? All right. A shift briefly to pain products. You've got 2 monoclonals for canine and feline pain that are currently under review, I believe, with the FDA. Do you expect that -- assuming these products are approved, and I believe you're thinking 2021, are they likely to be a rapid launch? Or are they going to require a little more education because it's so different in the pain area?

I think the pain area in dogs will be slightly easier. Pain already is a category in dogs. It's about a $450 million market today. The good news is, I think most vets are comfortable already with monoclonal antibodies from the Cytopoint experience. So I think that will take some time to, obviously, educate them on the product and the product profile and how to use it. But I think that will be slightly easier. I think the greater long-term opportunity, but the harder conversion is actually cats. And I say that because there is no cat market today. NSAIDs can't be given to cats versus most -- the most majority of the pain market in dogs is NSAIDs. And diagnosing pain and osteoarthritis in cats is something that vets really haven't done because, even if you did, there wasn't really a product for it anyway. So we are very focused right now in 2020 and 2021 in building that market. And how do you recognize pain in the cat? Osteoarthritis, what should the vet be looking for, so that when we launch the product, there's at least an awareness. But as many of you know, cats are still under-medicalized versus dog. So convincing a pet owner to bring their cat to the vet is a little bit of a higher bar. But there hasn't been a reason to convince somebody to do that since there wasn't really a treatment. But we do believe if you can help build awareness of pain and osteoarthritis in cats and what it looks like, you can convince pet owners that there really is a solution that they will bring their pets to the market.

Would it be a stretch to assume that you might look at diagnostics to help try to encourage that? And given that's an area that you've grown into diagnostics, could we leverage that to help people know when their cats may need something?

In the medium term, we'd certainly like to leverage that. But first, you've got to get the cat to the vet, which is -- our primary initial focus actually is even just getting the cat to the vet. Because since when people used to bring their cats to the vet, they got there, and there was nothing. If you have a cat and even if you know they're in pain, which cats tend to hide, as you know, symptoms of most diseases, so you might not be able to recognize it. Even if you did, you probably didn't -- we say that this is comparable to -- for those of us who, I did, had a dog with atopic dermatitis before and I brought to the vet 1,000 times before Apoquel came out, and there was never anything, so I stopped going. So you have to convince someone that there's a treatment that there's -- so I think that's our biggest opportunity initially. And then certainly, we would look at opportunities in diagnostics as well. But we're still trying to just get you to bring the cat to the vet [ this time ].

Okay. Have you -- or when do you expect any first questions back from the FDA from your filings? Because you filed, I think, in the middle of last for one, and a little bit later.

I don't have the exact date, but we're expecting this in the multicycle review. So a few sets of them.

Okay. And is manufacturing capacity something you're working on now, so that if they decide that this is awesome like, Apoquel?

We were working on that a year or 2 ago. We've been looking at -- and the part of the capital expenditure investments that you've seen is building a capacity in monoclonal antibodies for the launch of these 2 products as well as the significant growth we've seen in Cytopoint. So we've expanded capacity at our Lincoln operations as well, as you've probably seen before.

Okay. Anything else on pain?

Can you repeat the timing you're expecting on that approval...

We're expecting approval on dog and cat in 2021. We haven't been specific on when it turns and how many cycle reviews we get.

Okay. Let's switch to a slightly different animal. Let's just talk cattle for a few minutes here.

Great.

It looks like we're at the beginning of a down or, at least, flat cycle in the U.S. What should investors -- how should they view the impact on Zoetis of this trend? And is this what it was like in the last down cycle? Do you anticipate a similar repeat of the cycle?

Yes. I mean the challenge of livestock is the overall commodity itself is cyclical. So as we look at the opportunity in animal health for cattle, it starts with what is the herd. And we are expecting a flattening out of the herd in the U.S., both on dairy and beef. And that probably, we don't -- we expect that to continue not just for 2020, but probably for 2021 as well. What would change that? Well, significant incremental demand in Asia or other factors, et cetera, could make that. But we think you should expect to have a pretty flat herd. The next opportunity then is disease outbreak or weather. I will say, if you looked at our numbers and the industry's numbers in 2019, weather was not our friend. It was good. Good weather is not necessarily good if you're an animal health company because that means animals stay on pasture longer, they come in heavier and healthier and older to the feedlot, which means less use of our products, very good for the animals and not necessarily good for revenues for us. And there wasn't any great disease outbreaks either so -- which is, again, not good for the animal, but drives revenues for us. The third is innovation, and that's, I think, a little bit more of our focus, which is innovation in most species tend to be cyclical. And there's been a number of years now, probably 3 or 4 years, without significant innovation in the cattle space from us or the competition, which is why, overall, the cattle market, for animal health cattle market, has been growing slower than the overall animal health market. I don't expect that to change in 2020, but it could in 2021 and beyond. I think there's opportunities for innovation that could really start to grow the animal health market in cattle, in spaces in the near-term like precision livestock farming, like what we're doing with Smartbow; individual animal care, which I think has great value; genetics is where we're seeing some growth, so certainly with us it's CLARIFIDE Plus, we're the leader in genetic testing; also looking at potentially bringing diagnostics to the farm, which I know you and I talked about before; as well as investing in some immunotherapy, so looking at antibiotic alternatives and ways to keep animals healthier without using antibiotics on farm. So we're certainly investing in some products in our pipeline right now. Probably -- they have potential over the next coming years in immunotherapies as well as research, as you probably saw from our announcement with Colorado State for their incubator and antibiotic alternatives in cattle.

What sort of products or services does Zoetis get in precision farming?

Sure. So to make it as simple as possible, there's a Smartbow device, which is a tag in an ear of a cow, then there's sort of wall points around a farm, and the farmer or the producer would get alert on their phone. They get alert on a few things. One, this animal doesn't appear to be eating or it's lying down a lot, which is a sign that an animal is sick, and there's something wrong with it. So how would you know that? Well, the sensor can check -- can sense if an animal is in one position, not moving and is lowered to the ground. It can also sense if it's at a feed bin eating, it's chewing its cuds, so there's a repetitive motion in the ear that lets the system know whether or not that animal is eating. It can also tell us if that animal is in heat, so we should breed it. Breeding is really important in dairy, knowing when to breed because if you miss a cycle, that's another month you're feeding an animal that's not getting pregnant. So these are all significant opportunities that a producer is willing to pay for. And it also speaks to the desire of consumers who want to better understand how animals are being treated. And if you can pull an animal earlier who's getting sick and they don't infect other animals, it's fewer antibiotic use as well. So this is, we think, a significant opportunity. And once you place a system at a farm, and you get a per animal, per year value for that, they're not quick to switch the system. The system takes a lot to install. So we've launched this in Europe, I think a few years ago, it went live. And in the U.S., we're scaling up at the large facilities in the U.S. The U.S. are -- you have to be able to do this at a 5,000 to 10,000 cow operations. So this is, we think, a significant opportunity. And I think if you imagine us linking that data to our genetic data, this is where we talk about data and analytics as a considerable strategy for us from a revenue generating. If I can then tell you the animals that's going to be better to breed, it will stay healthier longer and have better traits, you then breed that animal, I can tell you when to breed that animal and I can keep that animal healthier and demonstrate the value. It's a self-reinforcing concept. And if I can then add diagnostic testing to that, so I know the genetics of the animal going in, I know how it lived, and I know -- I have wellness tests and I can prove how it did throughout its life, it's an even greater value. So we definitely see this as a considerable theme in the future of livestock.

And how much right now of the large farmers, large producers in the U.S., that 5,000 to 10,000 or greater, actually use this type of product?

This is just being launched to the 5,000 to 10,000...

So this is brand new now?

This is brand-new in the U.S. So for us and our competition, the U.S. is -- internationals had it more because they're smaller farms, it was much simpler and the data needs were different. But I would say it's a nascent market in the U.S. with very little penetration today. So we've got it out with a number of customers, I think, 4 or 5 in the U.S. today, but we're looking to scale this year or next.

Okay. Shifting just briefly to DRAXXIN, which is an inject -- an antibiotic for bovine respiratory disease, which goes off patent in 2022, I believe, and it is one of your larger products, 315 -- or whatever you say, 6% of sales. What are -- do you anticipate a typical animal health erosion cycle? Or is this different because of the type of product being in cattle, being where it's used that the erosion pattern might be different?

Sure. I mean first of all, it's a huge target, and there's very few products in the entire animal health space there as large as DRAXXIN is. Its formulation patent does expire in 2021, so we are expecting a competitor to launch in 2021 or 2022. Do I know who they are? No. Would I expect that somebody's entering the space? Yes. We're not expecting the curve of any competitor to be different -- significantly different. It's very different in animal health than human health. We would expect, over a number of years, to lose about 20% to 40% of the sales in this. We're working hard to try to do life cycle innovation around the product that would maintain a lot of those sales. But in livestock, as you know, you still have to run trials for most producers to demonstrate whatever your generic is, is as effective in their operation. You still need a field force, et cetera. So the curve tend to be very different than human health, but we wouldn't expect that this one would be any different than others. We're, again, aggressively investing behind our own data set here and looking at life cycle innovation around the molecule as well.

Okay. If we could shift gears here. Just maybe a few big picture items. And I know you've been with Zoetis a very long time. But you've been CEO for 2 months and 1 day,

2 months and 1 day.

2 months and 1 day. What -- in those last 2 months, what has been some of the biggest surprises, either positive or negative, that you've seen?

Well, I mean, I'm very excited about the Trio launch. There's very little that's been surprising, I'll be honest with you. I've been with Zoetis. I worked -- I mean, Zoetis, as you know, I worked on the separation from Pfizer. So I've been there since before we were Zoetis. What's really been exciting for me over the last few months is the ability to have been out in our international markets a lot more than I was in my previous role, and to see the new opportunities that we have. So we tend to focus a lot on the U.S. and the opportunities there. But I've had the opportunity -- our second largest market is Brazil, and there's just huge opportunities there. If you look at the growth in our companion animal business in there and in China, I mean, it is dramatic. It is incredible. And I still -- what I am excited about as I move into this role is just incremental opportunities that we have outside of the U.S. I mean the ones in the U.S. were all pretty clear, at least I was leading the U.S. business for the last 4 years. But looking at international and ways to continue to innovate and expand our portfolio and to add value to customers in new ways. So that's been really, I think, probably the most fun I've had in the last few months is just seeing those opportunities.

And your -- how would you list your priorities for this year?

Sure. So our 5 priorities for this year, first and foremost, is continuing to drive our innovative growth portfolio. How have we received the revenue growth that we have and the valuation we do as a company? It's been led by our innovation. We've been the most innovative company in animal health over the last 7 to 8 years. And I think that's what's got us the price premium, helped us really carry the rest of our portfolio. So executing on the launch, obviously, of Simparica Trio in the U.S., investing behind our poultry vector vaccines, ProHeart 12, Revolution Plus, launching Apoquel in China, I mean, this is what I need to continue to make sure that we're the world leader in. The second thing that I focused a lot of my time in the U.S., and I'm looking to expand across the globe, is a real focus on customer experience. We primarily sell to small business owners. And our ability to have the right data, to provide them customized personalized solutions that help them grow their business and be more successful is really an important way that we get more than our fair share of their business, which is really where it's at. So with innovation, I'm pretty sure I can get those sales, but I'd like to also carry some of our legacy products, so investing in that. Third is digital and data. That is both the revenue-generating opportunities I spoke around, precision livestock farming, diagnostic, genetics. But it's also just about enabling my field force, and every colleague have the right information to see trends quickly and to react against those. I would say the fourth priority is continuing to invest in our colleague base. How do we have the innovation and the commercial execution that we do? We have a highly engaged colleague base, and making sure we maintain that culture, empower our colleagues and attract new types of talent is really important to us, so certainly, in digital and data. And lastly, it's a focus on building a healthy and more sustainable future for animal health. I think we do a lot to help the environment, to expand access to care and to create more sustainable farms in Africa, et cetera. But there's huge new markets that we can create by investing in those opportunities. So it's really focusing our energy and our resources on where those opportunities are to expand access to care, to bring innovative solutions to some of the challenges we face in the environment today.

Okay. Steve?

Zoetis, clearly, has been one of the most innovative companies, as you've noted. Would you say that in your development pipeline today, you have products of Apoquel-type potential? That's question number one. Question number 2, you mentioned the channel fill for Trio. What kind of number should we be thinking about? $5 million, $10 million? Can you put a number on that?

So sure, starting with...

Why don't I just repeat it or...

You can go ahead.

Yes. The first question -- well, the second question was on the Trio. What could be the fill in the -- in this quarter as it goes? And the first one was, are there some other blockbusters in the pipeline like Apoquel?

Sure. We haven't been specific on what the channel fill will be. And the question whether that channel fill -- or whether or not, as you go through the year, the inventories equal out, I mean, and all I said was if you look at this quarter, we'll start to put some inventory into the channel. If you look at the product, we would expect you're going to have to have -- give it 6 weeks in the channel in order to launch. So we are looking at that. That's probably the level at which you look at a channel fill. I would say on the derm question, is there another Apoquel. If you look at our overall R&D spend, about half of our R&D is on life cycle innovation. And I know when you're building models, you want to know what the big blockbusters are. But with few exceptions, that's about the only one that's ever been the size that it is. So I wouldn't model Zoetis assuming that every few years, you're going to have an Apoquel. And by the way, we certainly didn't think, when we developed Apoquel, that it would be the market that it was. So what's the market for feline pain? I don't know. It doesn't exist today. I can guess what the market size is. I didn't think I had an Apoquel when I launched Apoquel, and certainly, that's why we have the supply problems and challenges we had. We do think there's a lot of really exciting innovation, and I'd also say a new wave of innovation in livestock, which I think has been struggling. But there's also great life cycle innovation, as we've demonstrated around some of our core portfolio that are sizable in and of themselves, so Trio on top of Simparica, ProHeart 12 and ProHeart 6, Revolution Plus and Revolution. So we think there's a lot of really exciting significant blockbuster opportunities in our pipeline. And in our sector, as you know, blockbusters are 100-million-plus products. Do I have another Apoquel? I don't know. I didn't think I had it when I did. So I would say that would be my answer. But I think we're very excited about the opportunity in our pipeline, and I'm really excited also because I think more of it will be across species as well. So continuing to innovate, obviously, in the pet care space where there's still a lot of significant unmet medical need, but bringing the much-needed innovation to the livestock sector as well.

Okay. I think -- those questions in the back, go ahead.

The disruption that COVID is bringing, is it an opportunity for you guys to strengthen your competitive position anyway? Or is it just a question of saying, the impact of some of the global opportunities may be arise either in business development or practically all of the [indiscernible]?

Sure. The potential opportunity that I'm really focused on is, oftentimes, it happens here, is people have supply problems, and that's a challenge that when customers can't get supply, they'll switch and when they have someone who they can trust. One of the things that Zoetis is really focused on, for those who followed us for a long time, is significantly improving supplier reliability. Back to my issue on customer experience, it's a major issue in animal health. When you have 7, 8 species of animals in different continents who get different diseases, being out of stock is a big deal. So one of the decisions we have made in the last 2 weeks is ramping up production, moving production closer to the markets so that, God forbid, there be an issue either ports shutting down or sites having that supply. We think that's probably the only place where there's a significant competitive advantage is being there for your customers as they're trying to make sure that they can take care of animals. You can imagine, if you've got a set of animals who need to be vaccinated and there's no vaccine there; you can't make that up later. I mean their diseases will take effect, et cetera. So this is really important for us to make sure that we are by our customers' sides and that we can supply. So as much as I can do that better than my customers, and I have my inventory where it needs to be, should some of these become challenges, we see that as a potential opportunity. But at this point, it doesn't affect our core species, again, to where we started. We don't believe it's zoonotic right now, from people to dogs or cats, or cats and dogs to people. So there's not really a, per se, an opportunity for us there, other than being better prepared than my competition to support my customers in a challenging time.

We're in the last minute. Just a quick -- your quick thoughts. If it's President Bernie Sanders next year, is there changes to the animal health operating environment? Because it's probably more of a livestock-related question, but just to make sure there isn't.

I would say, we're not significant. The place that we are probably paying the most attention, to be honest with you, is with regards to trade. The biggest issues, if you look at presidential politics for our sector is, for ag, is trade. It's just the support of overall farmers in the U.S., but as well as how easy it is for us to be trading with a lot of parties. What's been really difficult and built uncertainty in the livestock market in the last few years is the trade uncertainty. There's a little more uncertainty to trade right now. It's not good as I think some people think it is. My example is everyone thinks that China is completely open. There's still 63% tariff on U.S. port going into China. We can debate whether or not the Chinese government is really always charging that in the last year, but it's -- it still exists, and that's the decision. So I don't know if Bernie's going to do a trade, but that would be our big watch out. It's just having certainty to trade would be very helpful to our sector overall on livestock.

Okay. With that, we're out of time. Kristin, thank you very much for joining us this year at the conference.

Thank you.

Thank you very much.