Zoetis Inc. (ZTS) Earnings Call Transcript & Summary

Good morning, everybody. I'm Chris Schott from JPMorgan. It's my pleasure to be introducing Zoetis today. From the company, we have a presentation from CEO, Kristin Peck, and we'll have Wetteny Joseph, company's CFO, available for Q&A. So with that, Kristin, happy New Year and looking forward to the presentation.

Well, thank you, Chris, and welcome to everyone. It is great to be back at JPMorgan, and I'm excited to share today how Zoetis is defining the next era in animal health, powered by our industry-leading innovation, our science-to-scale model and our disciplined execution. Now everyone's favorite slide, some housekeeping before we get started. Today's remarks will include forward-looking statements and non-GAAP financials. For more information on these risks as well as the reconciliation to our GAAP financials, please visit our Investor Relations website and click on today's presentation. As Chris mentioned, today, I am joined by our Chief Financial Officer, Wetteny Joseph. And together, we are excited to share how Zoetis' momentum and capabilities will shape the future of animal health. So let me get started on the slides now. We are excited to share -- where am I now? Okay. We're excited today to really highlight the essential animal health industry, which has got very strong sectoral tailwinds, which we'll discuss. The industry is projected to grow to $90 billion over the next 10 years, really led by tailwinds in both companion animal and livestock. Next, we'll really highlight the science-to-scale model at Zoetis and how really powered by this model, we can leverage the incredible secular tailwinds of the industry to drive sustainable, consistent growth across our portfolio. We'll then double-click some of the significant growth drivers that we have at Zoetis, which will provide a trajectory of consistent growth that you've seen over the last few years. Hopefully, many of you joined us for our innovation webcast back in December, and we'll talk a little bit more about our robust pipeline that has 12 potential blockbuster drugs. And so we're super excited about those and also expecting a major market approval every year for the next few years. And then Wetteny will join us on stage to discuss how all of this together will help us drive sustainable shareholder value over the long term. So let's start overall with the industry. The animal health industry is an essential industry, and it's really powered on the humans who are going to be doubling by 2050 -- sorry, not doubling, moving to 10 billion by 2050. And more and more, what people want is nutritious protein. They want comfort and they want companionship. So as you look here, we have a market today that's around $50 billion, and it's expected to almost double to $90 billion. And as I move to the next slide, you can look at what that has meant for the compound annual growth rate of the industry and for Zoetis. Looking ahead, there are clear tailwinds as we've discussed to drive the industry. And as you look at the 5% compound annual growth rate that the industry has been having over time has been very strong. But as you look at Zoetis, our compound annual growth rate since our IPO has been 8%. That's significantly above the overall industry. But importantly, we've also driven industry-leading margins. So we've been putting cost discipline and disciplined execution across both of those. And really one of the drivers of that has been the growth in companion animal. And as you look into what's driving that growth is more and more the next generation of pet owners. These pet owners are younger, they tend to be Millennials and Gen Z. And they embrace being pet parents and everything that comes with being a pet parent. They are, therefore, driving an increase and deepening the human animal bond. And as they do that, they're increasing the pet medicalization. They're interested in getting top-quality veterinary care and investing in treatments that it can expand the life of their pets. And indeed, they are. Pets are living longer. And as these pets live longer, they want more advanced therapies. And as you saw and as we'll talk about today, is our future portfolio, they're investing in a lot more in diseases of long life. Many of these diseases also require diagnostics, which is, therefore, driving the diagnostics market. And the growth of the pet care space is also being driven by consumers' desire for convenience, moving more and more to alternative channels which is also, in turn, increasing compliance. We're also seeing incremental growth in the livestock sector as well with really strong tailwinds. One of the greatest tailwind is really the market normalization of what was a very disruptive period for many years. It started with African swine fever. We then had COVID and then post COVID some of the supply and demand imbalances that we saw. But what you've also been seeing is significant mid-single-digit growth over the last few years of both the industry and of Zoetis. And really, what's been driving that is an expansion of the global population. That population is looking for nutritious, sustainable, safe and affordable protein sources. That's meant more and more livestock producers have been investing in prevention versus treatment. And looking at precision animal health, digital, data, AI, all spaces where Zoetis really leads the way. So let me highlight how we take that industry and leverage our science-to-scale model to accelerate the growth for Zoetis. We really believe it's our ability at Zoetis to connect discovery to delivery, ensuring that innovation translates into products that provide durable value overall. For Zoetis, it starts by investing in our world-class R&D and then importantly, connecting that with our manufacturing excellence and then our excellent commercial execution. And together, that brings discovery to impact on a global scale. In fact, as you look at Zoetis, Zoetis has led 35% of the regulatory approvals of the industry over the last 10 years. And we've been doing that with our R&D engine that includes 1,600 world-class colleagues. We've invested $5 billion in R&D since our IPO, and we've done that across 15 therapeutic areas and 8 species. We have the most robust and comprehensive pipeline in the industry, and we're advancing care for animals across every stage of life. Our R&D engine is proven. It has delivered over 2,000 regulatory approvals over the last decade. And what starts and what's at the center of that is meeting unmet customer need. But then importantly, that's taking the science that we have, the biology of species, the biology of disease and really innovating the next generation of therapeutics and of preventatives. We've got a full complement of capabilities, as you can see on the slide, and it allows us to deliver solutions across the continuum of care from prediction with our genetics to prevention with our vaccines, to detection with our diagnostics, to treatments across our whole portfolio with both biologics and therapeutics. We're very excited in our ability to continue to drive innovation. And we highlighted that at our innovation webcast in December. And as we showcased, we're expecting a major market approval every year for the next few years. We have a robust pipeline. If you look back to 2025, we were very excited to get the approvals of Lenivia and Portela as well as for high-path avian influenza vaccines for livestock. I'm looking ahead into this year, we're expecting the approval of long-acting Cytopoint as well as the next-generation chemistry platform for our diagnostics business. And as we look into the years ahead, we'll be innovating in entirely new categories across renal, across oncology, cardiology, obesity and metabolic as well as anxiety. We're also excited to bring you the next generation for parasides and vaccines for companion animal as well as really drive innovation across our livestock business with a particular focus on preventatives for our poultry business, for our fish business and for our swine business, again, ensuring that we've got a robust portfolio into the future, focused on the areas of greatest unmet medical need. So let's double-click for a second into some of those new areas that we're talking about entering, which will really be the next wave of innovation. As you can see on this slide, this next wave of innovation will be a $7 billion total addressable market in areas that are largely not even tapped at all today. And it starts with the largest in chronic kidney disease, which is the #1 cause of death in cats, and is a significant disease where there's really very little treatments today to address it. This market could be $3 billion to $4 billion. And today, Zoetis has 7 assets and biomarkers in development. We're also really excited to bring innovation to the market in oncology. Oncology is the #1 cause of death in dogs and the #2 in cats. We've got 4 assets and biomarkers in our portfolio that we believe will create a market of around $1.2 billion to $1.7 billion. We also see significant opportunity in cardiology that today is an incredibly underserved market. We think that market be $0.8 billion to $1 billion, and we've invested in 9 assets and diagnostic biomarkers across that industry to really bring new treatments to life. We're also excited about the opportunity around obesity and metabolic disease that affects 60% of dogs and cats today. That market could be $0.8 billion to $1 billion depending on the product profile. This has been obviously a big area in human health, and we're really excited to bring new innovation here to animal health. And lastly, and importantly, anxiety. 70% of dogs and cats today suffer from some form of anxiety. It could be from the thunderstorm, and we have a product for that like, SILEO, it's separation anxiety and it's GAD, generalized anxiety disorder. This market also could be $0.7 billion to $1.4 billion. This is what will continue to drive the growth of Zoetis into the future. But as we take that portfolio, it's our commercial excellence that turns innovation into impact for our customers and for all of our stakeholders. And it starts with our global scale. We have a direct field force in 45 markets across the globe. This is an award-winning field force. We then combine that with a proven model of execution, combining that sales force with our medical affairs team, our professional service vets and bringing that all together with an omnichannel approach, and combining that with a strong marketing department and direct-to-consumer, and we lead with deep customer insight, both at the veterinarian level, the pet owner and the livestock producer and we bring this to life with the broadest and most diverse portfolio in animal health. And as we think about that, what I'd love to do is double-click into some of the most -- our biggest categories today in the terms of franchises and significant growth drivers for us going forward, starting with Simparica Trio in the parasiticide space. The parasiticide space, as many of you know, is the largest single category in animal health, and Simparica Trio is the market leader. It leads in dogs and it leads in puppies. And this means a long tail of revenue as these dogs live longer and healthier lives. We really see Simparica Trio as leading in market share going forward, and we have a first mover advantage here. 85% of the pet owners on this product are very satisfied with our product. We also believe we can continue to expand this market. Today, only 60% of puppies are getting a triple combination. So we see a long runway for expansion in parasiticides for Simparica Trio as well as for future portfolios and injectables as well. We see the retail expansion as well as direct-to-consumer advertising continue to expand this market, where we are the leader today, and we plan to be the leader going forward. We also want to highlight our strength in dermatology from our diverse and differentiated portfolio. We believe we are well positioned to continue to expand this. Our portfolio today includes Apoquel, Apoquel chewable and Cytopoint. And as I mentioned earlier, we are expecting the approval of our long-acting Cytopoint this year. So we will have the strongest and the largest portfolio of dermatology products, and we have very delighted customers. The majority of our customers have a 90% or higher satisfaction with our products today. We plan to invest in real-world studies to reinforce our leadership against new entrants in this space, but we also importantly believe we can continue to expand this market. There is still a large number of undertreated or untreated pets that we can continue to reach. We reach them by disease awareness as well as investing in direct-to-consumer advertising as well as driving better diagnosis in this market. We, again, believe we can continue to lead this market. Next, we are still in the early phases of the OA market and we believe Zoetis can continue to expand this market with Librela and Solensia. And then obviously, as we'll talk about in a second, adding some of our long-acting products. These products improve the quality of life for pets across the world, millions of dogs and cats. Today, they have a 75% of the pet owners who are very or extremely satisfied with this product. We are really excited about our multi-pronged strategy to return Librela to growth and have been excited at Solensia's ability to continue to expand this market. Indeed, since Solensia's launch, they've expanded this market 84%. We believe we can continue to do this and are very excited about the addition of Lenivia for dogs and Portela for cats. These long-acting therapies will help improve compliance for many pet owners who struggle to go in every month. We think they can continue to expand the market. They've also demonstrated significant improvement in the pets that have gotten them. They work quickly, and they've improved quality of life. So we remain excited to add these products, and we'll expect the launch of these in the first half of 2026. I also want to highlight livestock. As we talked about a little earlier, livestock has been driving mid-single-digit growth. And for Zoetis, it's been driving mid-single-digit growth over the last 3 years. Livestock is an incredibly diversified business for us. And now that we're past some of the disruptive periods, as you look across both poultry and swine and fish and cattle, we see significant diverse and durable growth drivers as we see an expanding population across the globe and more and more desire for nutritious protein, which we believe will continue to drive this market. And importantly, the innovation that Zoetis is leading, especially in the preventative space in vaccines will continue to drive our growth into the future. So now what I'd like to do is introduce Wetteny who will join us to talk about how all of this will drive sustained shareholder value. Wetteny?

Thank you, Kristin. Good morning, everyone. Building on everything you just heard, this slide truly depicts how our strategy shows up in our results and our track record. We have delivered 8% to 9% revenue growth over the last 5 years with 41% to 42% EBITDA margins and mid-20s ROIC, and we have done so consistently and at scale. This is truly a powerful combination, and it stems from a repeatable formula. We invest in innovation. We focus on our commercial execution, and we drive disciplined capital allocation. And as we look ahead, what's even more important is that we have the focus and the discipline to keep delivering even as we scale into these new exciting areas that Kristin highlighted earlier, and we still are expanding our existing franchises. Now we have a tremendous innovation model. And it doesn't just drive top line revenue growth, it delivers superior returns. What you can see on this page is something we think is very unique and very attractive about Zoetis. Our ROIC sits well above the S&P 500 and the health care and pharma benchmarks. What this means is that our science-to-scale model is not just scientifically sound. It is capital efficient. That efficiency, in turn, gives us the confidence to keep investing in the business to drive margin expansion and sustain earnings growth. So everything you've seen so far on our track record is actually a direct result of how we deploy capital. Our capital allocation framework and therefore, our priorities are very clear and very consistent. We invest in the business to fund our industry-leading R&D engine, to drive capacity and drive efficiency, which leads to sustained top line growth and margin expansion. We pursue external business development opportunities both in terms of bolt-ons that strengthen our existing portfolio and complementary technologies that also drive acceleration of our strategy. And then we return excess cash to our shareholders. This is through a combination of dividends and share buybacks. And this combination, in turn, drives this cycle to continue to drive our business as we sustain a strong balance sheet and an investment-grade profile, which means we have the flexibility to act, whether it's periods of uncertainty or opportunistic environments. Over the last 3 years, we have returned over 125% of our free cash flow back to shareholders. This slide showcases the strength and consistency of our cash generation as well as our commitment to delivering cash back to shareholders as depicted by the 13% CAGR in our dividends and our steady buybacks. During our innovation webcast back in December, we are very happy to share our excitement and the strength of our pipeline and the confidence that, that gives us in the future of our business. And then recently, we launched a bond offering and had immediate execution of buybacks associated with that bond offering, which really shows that conviction in life. I'm very pleased to announce today that we have actually completed the buybacks that were associated with the bond offering. That brings our total buybacks over the last 12 months to over $3.2 billion, all while maintaining a strong balance sheet and the flexibility to keep investing in our business at the same time. And all of this brings us where we actually started the conversation. Animal health is a very resilient and growing industry with strong secular tailwinds across both companion animal and in livestock. Zoetis is uniquely positioned to capitalize on that strength on that growth with our proven science-to-scale model and the commercial capabilities to actually build enduring brands and franchises. We have multiple and diverse growth drivers and a very robust near to midterm pipeline, including 12 new potential blockbusters. And our capital allocation discipline and approach means that we're about to continue creating and sustaining shareholder value through growth, margin expansion and strong returns. This combination really supports our confidence in our ability to continue leading this industry over the long term. Thank you very much for your time today. With that, we'll turn it over to Chris to drive Q&A.

Perfect . Appreciate it. Obviously, a lot of exciting things in the pipeline over time. I do want to start maybe the conversation on the nearer term, there's been some controversies there. Can you just level set us to start with, I know we're seeing a bit of a step down in companion growth second half of this year versus what we've historically seen for Zoetis. So maybe a 2-part question. One, drivers of that; and two, your confidence that this is a shorter-term trend versus a longer-term drag in the business?

Yes, sure. Look, Chris, as we've just highlighted, when you zoom out, this is an industry that has proven to be very resilient and the dynamics and underlying secular trends that are driving the industry, we believe are sustainable, and we are well positioned to drive those. So when we think about not only our existing franchises, that have ample room to keep growing and expanding. And we think about the exciting new areas that we're going into that meet the greatest unmet needs and really quality of life and so forth across so many disease areas, we're very excited about what future holds. Now the question is where are we navigating today and what does it look like? And I think if you think about on the companion animal side as you went there, if you look at the human animal bond that has driven what you've seen so far, certainly, the prioritization of health of pets continues to be of highest importance to pet owners, who actually, if you think about Millennials and Gen Z, they see themselves as pet parents and these are members of their family. So there's no question about their ability and interest to continue to spend and support those. But certainly, we've seen very significant price increase in the U.S., particularly through corporate-owned clinics that the consumer is looking to absorb what that looks like over a period of time, given how significantly those price increases have happened, and we've seen that play out in terms of the macro here. But keep in mind, Zoetis is also broadly geographically diverse. So we're operating in markets around the world, 100 markets where our products show up, and you see that diversification still showing up in how we perform. And so we're looking at a year that is sort of in the 5.5% to 6.5% range to quote our last guidance and really robust growth all the way down to the bottom line as we continue to exercise discipline through the P&L even as we're continuing to invest in these very exciting areas for the future. So we're very confident in the future of the business despite what is some macro headwinds in some of our markets. But clearly, livestock has been performing really, really well for us, and we see that continuing to drive growth for us in addition to the other areas, I have to mention diagnostics and so forth.

And just to follow up on that macro piece of it, what do you think it takes to see those headwinds lift a bit. Is this just we've to annualize some of the trends we're seeing? Is this about some of the new product introductions you have coming? I'm trying to get a sense of like how long of a cycle we should be thinking about where that could be weighing on growth?

Well, I think this is going to be a combination of what happens naturally and what we're doing about it in terms of our execution. So we're very, very much focused on our commercial execution. We have such a broad portfolio. The question is how do we present those to not only veterinary clinics, but also the pet owner who is looking at how do they keep their pets healthy and so forth. So we think given the various products that we have across our portfolio, we're well positioned to drive those in terms of the value that we bring to the pet owner and what it means to drive prevention in terms of some of our offerings to avoid some of the other more acute cases and conditions that might develop over time and so forth. So we believe we're well positioned to really exercise and execute both in this market that we're in, regardless of how long it might take for it to cycle through and again, the broad diverse areas that we operate around the world...

And I know you're not giving guidance, but just I think we're all trying to get our hands around what 2026 looks like. So I guess is it fair to assume growth, maybe somewhere between where we're in 4Q and your historic 6% to 8% range is how to think about that? Or if you can't comment on that, just maybe qualitatively, just some pushes and pulls to help us maybe get better handle on that year.

Yes, I'd be happy to judge some of the qualitative elements. And it's not a surprise to you, Chris, that I'm not going to try to what the growth range is going to be for '26. You have to stay tuned and join us in February to hear more about how we're thinking about the year and how we're executing in this environment that we're in and given the strength of our portfolio. But here's how I think about it. When you zoom out, we have multiple levers that drive our growth. The first is price and I know price is a topic that everyone is talking about, and I just spoke about how aggressively our customers have taken price. But it still is a lever for us, and we have historically been very consistent about how we approach price and we've done so in a range of about 2% to 4%, 2% to 3%. So I think that's what we're looking at in this year, 2025, as we said, it's about a 4% or coming down from where it was the prior 2 years. So that's one. We are very confident in our existing franchise areas that there is substantial more room to expand those. So we expect to grow in derm and parasiticide as we look ahead. Now of course, we are taking into consideration the sort of the short-term transitory impacts of initial launches from competitors and navigating those and executing through those because we operate in a lot of very competitive spaces. So this is not new to us, right? So we'll do that across those sectors. Livestock, we talked about having posted 2 years of growth that's around 6%. And on a year-to-date basis through third quarter growing above that. And so we'll update what that looks like for the full year '25, but certainly, as we look ahead, the trends that have been driving that, we see those continuing. And so that's an element we'll look at. Diagnostics has had a great year in 2025. We expect to continue to drive robust growth there. And then last but not least, certainly, I alluded to this earlier, but our discipline to execute through the P&L to drive bottom line growth even as we invest in the business is something we'll continue to exercise.

And maybe just one longer-term one. Given the pipeline you laid out, maybe some transitory stuff in the near term. Is 6% to 8% growth still a reasonable way to think about Zoetis as we think about a 5-year time horizon or 8-year time horizon as this new portfolio comes to market?

Well, we're not updating sort of long-term growth expectations at this time. But I think the long-term secular trends that we talked about certainly would support continuing to drive robust growth for us and very attractive for the overall industry. And again, we continue to lead in terms of meeting those unmet needs in those areas that will drive a market that's going from about $50 billion to nearly doubling over the next 10 years.

Great. One more financial one. Capital deployment, I think you mentioned the repo kind of being executed against. Just priorities right now. I mean, I look at your stock price and given the pipeline you have, it seems like it's a great value. So how are you thinking about capacity to keep doing repo, how you're balancing that against dividend or tuck-in acquisitions or...

Well, I think you know that we agree with you on that it's a great value. And certainly, we demonstrated that with what we did over the December time frame with the bond offering, convertible bond and subsequent buybacks. And certainly, when we think about our future, we're very excited and confident about what the future looks like, which we want to demonstrate in that. But it's all around how we continue to drive long-term shareholder value. And that's the lens that we look at all this with, and that's what we'll continue to factor in and maintaining a very strong balance sheet because we also want to make sure we're operating and running a long cycle innovation business. And so we have to keep doing those things today that's going to drive the business tomorrow. And that discipline is also always a factor for us as we think about how much buybacks. But we've done so consistently. And this buyback that's supported by the bond offering is in addition to our normal program that we've been running and that will continue to run as well.

Great. Can you talk about a little bit in the core business, Dermatology. You're targeting in your slides a 7% to 8% CAGR for the category. I know you've had great success in building this up, but it's been a category you've been building over a decade. So just help us a little bit about just like where we are in penetration and what gives you confidence that there still is such a long runway of growth ahead for the market?

Yes. I mean I think we are very proud of the entire sector that we built. I think we have the broadest and most differentiated portfolio in animal health. We've talked a lot about Apoquel. It's been around for more than a decade, Apoquel chewable in the last few years, Cytopoint with almost a decade, but we're continuing to innovate. We're obviously seeing an opportunity with long-acting, which we're expecting approval on. We're looking at other species. But even if you focus just on the species where we are today, there's significant unmet medical need in both underpenetrated, so dogs that might just be getting steroids today or completely unpenetrated, dogs that are getting nothing that are suffering today. And we really do believe, as you have more people entering the space, building disease awareness, encouraging more diagnostics of pets, we think you can continue to access this significant unmet medical need. This is obviously in developed markets like the U.S. and Europe, but I would also highlight the opportunity outside of that in some of the developing markets where we recently launched or where they're really expanding and spending more money on their pets. So we continue to believe there's significant opportunities to expand this market, and we're also excited to continue to innovate in the space as well.

Great. Can you just elaborate on some of the trends you're seeing ex U.S. where the market is less developed, but you've had maybe full competition for a bit longer period of time. Anything surprising with the trends that you've been seeing there?

Are you talking about within Derm in Europe?

Derm specific.

Yes. Well, we have had some of the overall launches. I mean, look, I think our position is incredibly strong. One of the -- I think our best demonstrations of this is how challenging it was to switch customers from Apoquel to Apoquel chewable and how long that took. They were so happy with their Apoquel. They thought why would I change? I'm like a [ beef flavored tube ]? That's why you change. But it was challenging. And I said that it was even hard for us to switch customers, I think we're seeing that. So look, there's a huge effort around pricing and promotions that we've seen in Europe for many of our new competitors to get their products on shelf. Those are limited. You'll run those promotions to get penetration. I think when you -- we're really focused on our head-to-heads as we've talked about, and basically demonstrating that we have a differentiated and great portfolio and there's really no need to change. So we have seen some of the promotions to be aggressive as we've spoken about, but we were expecting that, and that was planned. That's what you would do if you were trying to get penetration in the market.

Yes. And just the latest views on the U.S. side of the market in terms of timing of competition, kind of behavior of competition as it comes out.

We've been really bad historically at predicting. I mean we're all -- we're all expecting -- we were expecting at the end of last year. We'll be expecting this year, certainly from Merck. We've seen the competition now for a while from Zenrelia. And look, we continue to be proud of the way we performed and really confident in our portfolio going forward.

When I look out to '27 and beyond, so as we get through some of the whatever near term noise of promotions around launches. Is it fair to think about Zoetis being able to grow at kind of that industry average rate in dermatology as we can just wash through this initial launch cycle?

Look, we continue, as I said, to be excited about the opportunity to continue to expand the market. I mean also continue to expand compliance. I mean the advantage of bringing long-acting is you're going to increase compliance. So I think there's just so many different levers to continue to expand the market and we think new competitors entering some of these spaces, again, increases awareness, increases focus in the clinic on treating what is a really important disease. So we remain very optimistic even as we get multiple competitors. Again, we'll continue to innovate as well, which Zoetis has continued to do.

Great. Pivoting over to Librela. Talk a little bit some of the learnings you've had for this franchise over the last year or two with -- as the headlines, et cetera? And then just as we think about the priorities for '26, like what are you most focused on for the -- to return the franchise to growth?

Sure. I think as we've talked about it, we remain very confident in Librela and Solensia and in the risk-benefit profile of both of these products. I mean 75% of pet owners are extremely or very satisfied with the product. That being said, we've obviously faced a lot of challenges, and we've been very humble and reflective about what we've learned. The first thing we've learned is we should have spent more time with specialists. So as they started getting these news and the people felt that they had experts that they could lean to that were not Zoetis experts. So we're going to apply that to the launches of Lenivia and Portela. As we talked about, we're expecting launch of those in the first half of 2026, but those will be slower ramps. We will focus first on really early experience programs, primarily with specialists also with some GPs really sharing those learnings, making sure that they then can help bring on the GPs in the future. So I think our first learning was spending more time there. Our second learning was we should have paid more attention to social media, which animal health was not really big in the space for a very long time. So we've really built our capabilities for sensing as well as really engaging. We also need -- we've been focused on doing a better job of getting those incredibly positive stories of the large population of pet owners who are very and extremely satisfied, getting them to tell their story. So there's a lot that I think as we look back that we want to do differently, where also the big learning is animal health never really invested in Phase IV trials. As we look at every product launch in the future, not just in OA pain, but every product category, we've expanded our outcomes research, our medical affairs organization. And we're going to invest in Phase IV trials, so we can continue to provide robust data, both in trials as well as real-world analysis from some of the larger practices that will do retrospective analyses. We're really looking at a comprehensive Phase IV study program for every product going forward.

Great. In the last couple of minutes here, just maybe switching gears to Trio. Where do we stand at this point in terms of penetration for triples? And where do you think that can go over time?

Yes. penetration for triples in the U.S. is about half of the market. So there's still tremendous room to continue to drive triple combinations, both from legacy sort of treatments as well as those that are over-the-counter and so forth and [ collars ] and topicals, et cetera. So we're very excited about that. And given Trio is the #1 product in the U.S. and the largest market for triple combinations, given [ heartworm ] prevalence and so forth, we're very well positioned to continue to capitalize on that, not to mention the first-mover advantages in the very high level of satisfaction pet owners and vets have with Trio.

And just from a competitive standpoint, any changes you've seen in terms of intensity of promotional activity as we've had a new competitor kind of introduced in the last year?

Parasiticides is one of the most competitive spaces in animal health, always has been. I won't make a prediction, but I suspect it will continue to be very competitive. And we have really gained a lot of share in the space over the last few years, given our innovation and we remain focused on that, both driving innovation as well as the commercial excellence that it takes, given the benefits of our product and where we stand and the differentiation that we have. So very excited to continue to drive that. And certainly, we're not -- competition is not new for us. We operate in a lot of competitive spaces every day. Like I said, we're very good at hand-to-hand combat as well.

Great. Well, I think we're out of time. Thank you so much for all the comments. Really appreciated.