Zoetis Inc. ($ZTS)

All right, guys. Good afternoon. Next up, we have Zoetis. I'm pleased to have on stage with us their CEO, Kristin Peck; and Wetteny Joseph, their CFO. I got a lot to discuss, a lot to get into. Guys, if you have questions, throw up your hand. I'm going to try to go in some sort of order or structure and see if I can abide by that.

So let's start with the updated 2026 guidance. Top line organic operational growth was 0 in the quarter -- in the first quarter. It did have a benefit. And the updated full year guidance calls for 2% to 5%. So some of the incoming that I've been getting is like, look, other than comps, why do things get better for the balance of the year? Maybe if you could just call out maybe some of the drivers there.

Sure. I'll start, Jon, on this. And as we shared on the call, as we look at the balance of the year, there are a number of areas that we anticipate sequential improvement in. You would have seen in the quarter, for the first time in 5 quarters, we saw OA pain actually saw sequential growth. We've been talking about, although modest, but we've been talking about stabilizing OA pain for some time now and our multipronged execution is taking hold, and we're seeing some of that impact as we saw in the quarter. If you look at Simparica franchise, into [indiscernible] worm, we are anticipating to see sequential benefit as we go through the balance of the year as well. Now in derm, we are expecting to see incremental competition there. So as we said, we believe that the -- both the competitive and macro conditions that we saw in the quarter will continue to persist. We're not anticipating that there's any significant improvement on those to drive the year. And as we step back and look at actual revenue dollars, we're not anticipating a significant uplift -- an uptick between the first half and second half. But the comps actually drive a greater and more pronounced view in terms of what the growth rates look like across those. Now you saw strength across livestock. We came into the year after 3 straight years of mid-single-digit growth in livestock and you saw double-digit growth in the quarter. And so we continue to see really strong performance across livestock in emerging markets, and of course, International and in the U.S., diagnostics posting double-digit growth as well, which we continue to drive sustainably. And then, of course, we have the commercial areas that we're executing against that we expect to have contribution as we exit the year as well that will help. But one last point I'll make is that when we gave our guidance initially back in February, we anticipated the first half, second half dynamic. So this is not new. Of course, the performance in the quarter means that the inflection point is greater from processing, but it's not a new dynamic in terms of how we think about our guidance. And because we anticipate that the conditions will continue to persist, we widened the range to accommodate for both incremental entry in terms of competition in derm as well as what we're seeing in the macro.

Okay. And one of the things that some investors struggle with is it does seem like a decent ramp. Part of that, as you discussed on the call, the distributors working down inventory. I know you don't want to be precise. But it would help us, is there a way to frame that headwind around where it landed for the quarter, right? Because some of those numbers, the declines were exaggerated as the distributors had less inventory at the end of the quarter than when they began the quarter. So is there a framework that you can provide when we think about that one?

One thing I'll say is like we always start inventories, and most people in the industry do, before price increases at the high and end at the inventory you have for most of the rest of the year. I want to be clear, those were more normal dynamics. What happened was as demand -- it's more of a demand issue, which was as the market was soft, especially early in the year with weather and things like that, and then the markets of [ pairs ] and derm weren't growing, they weren't reordering. So the inventory levels is much more about a demand issue is what we're saying. So the dynamic that we were paying attention to was sales out of distribution and sales in from us into distribution was where the anomaly was. And that will not persist. And that's the other dynamic that won't persist as you look at the rest of the year. I mean that was a normal dynamic in the sense of where we started, where we ended. What we were expecting to see and what we normally see is them reordering. But I think based on the fact that especially in our portfolio, we in derm and in [ paris ] and in those areas, were really hit by both the macro and overall competition. There wasn't a reorder in the quarter.

Because if we were to try to match the 2, and I know it's not that easy, right? It's like, hey, if we were to match the 2, what went out the door and what were to go back to the distributors, I've been hearing some numbers thrown around, and it just might be from clients and sales side, but it's like $60 million to $80 million, which was the impact that hit you in the quarter because those 2 variables did not match up.

I mean you have to look at -- we wouldn't say it was that simple to look at, and we haven't quantified it overall because there's -- again, you have to believe what would the order, what was the demand, what do they expect of the promo. So that's a lot of why, it's a little complicated. .

Okay. A lot of variables there. How about just what you guys have dialed into expectations? You're going to have Numelvi just recently launched in the U.S. [ Profren ] is supposedly going to go out the door shortly. So when you went ahead and you came up with the construct for the guidance, like what are you assuming the success lack there others for these products?

Sure. Look, there are a number of factors we take into consideration when we put guidance together. And certainly, the launch of these competitive products is what we anticipate. And this is where them being aggressive, particularly initially as they try to position those new products in the market. And those are things that also contributed to the widening of the guidance range that we gave, going from 2 to 3-point range is not typically what we come out with. We didn't come out with the 3 point initially, but we widened it to reflect those. Those are certainly incorporated, in addition to what I answered on the prior question in terms of what are some of the things that offset that in terms of what we're looking at the balance of the year.

Okay. Maybe one more just sort of nuanced question. You obviously printed 1Q, you gave the year. You guys never give specific quarterly guidance. But earlier in the conversation, you mentioned, hey, the comps ease into the back part of the year, and that is part of the dynamic. We have 2Q highly reflective of 1Q from a growth rate perspective, right? So you guys were essentially flattish in 1Q. I think we're 0 to negative 1. Are we thinking through that correctly where 2Q would be representative of 1Q from a growth perspective, and then that pushed sort of, I would say, the inflection point, but the growth right into 2H that's needed?

Look, I think, as I mentioned, we had the first half, second half dynamic in our initial guidance. So we saw some of the stronger content we're up against coming into 2026. Certainly, if you look at OA pain, for example, we started to see some of the headwinds in OA pain last year about the tail end of the second quarter. And therefore, it still is a very strong comp that we have. Though again, we're very pleased with the sequential performance that we saw starting in the first quarter in OA pain and the impact of what we're doing, in addition to the additional products that we're launching in markets like Canada and Europe with Lenivia and Portela as well contributing to what we expect as we go through the rest of the year. We won't give guidance on a specific quarter as we typically wouldn't, nor give an update in mid-quarter. However, those were the factors that we put in that caused us to know that there was going to be a first half, second half dynamic from the beginning.

Okay. So at least just hypothetically speaking, if we are flattish in 2Q, we're sort of abiding by where you're going with it directionally.

It's a consistent view we had on the year from the very beginning.

Okay. Fair enough. And Kristin, for you, Zoetis' competitive response, and you and I caught up a little bit after the call. I'm just curious how you would frame it with targeted promotions, but maybe not pursue a big pricing reset. Is that an accurate characterization of how Zoetis is going to respond in the field?

Yes. I mean, look, I think Zoetis is always really focused on having a differentiated portfolio both on safety and efficacy. We've always focused on leading with innovation and then making sure that we deliver a great customer experience with our reps and with the services that we provide. With that, we remain a premium-priced product. We do not play the pricing games. We do do targeted promotions. We continue to believe we have a differentiated portfolio. And as the market leader in most of the spaces that we're now, if you look at derm and [ paris ], where we're seeing new competitors, we continue to believe we remain differentiated. And we really don't think it creates value for any party by us taking prices down. Will we be more disciplined about price increases? Of course. Will be really more targeted and focused as we think about promotions? We will certainly do that. But we do not intend to reduce prices to compete in this world. I don't think that's, A, necessary but more do I think it creates value. I think especially as you enter market that's not growing right now, as you look at the parasiticides, we hope it returns to growth. It has a lot of ways that it can continue to grow.

All the untreated dogs.

Right. The untreated dogs. And if you look at just parasiticides, dogs moving from singles or topicals or collars, the market has a huge opportunity to grow. We're going to focus on being a market leader and growing the market. We're going to focus on direct-to-consumer advertising, driving loyalty programs with pet owners, things like that, that continue to drive demand. And I think that's our role as the industry leader, is shaping our environment and helping to grow those markets. .

So I'm just going to try to beat this up a little bit, because people don't believe me when I say it, but they'll believe you when you say it. So I had a lot of incoming afterwards. And again, when you and I caught up, I said, look, I have this [ clear liner ] company and they had 90% share, and it's not a great place to be in. But you got to figure out your strategy. They didn't pursue a big pricing reset. And I think our conversation went something like, "Look, Jon, I'm not going to reset prices by 10% or 15% to shrink the market and then compete off that lower or smaller market." Is that fair?

Yes. I mean we went from someone who owned basically 100% of the derm market, if you pull out like steroids, and we've lost, give or take, in the U.S., it's different in different markets, say, 7% share. Unless you believe you can grow the market, taking a price reset when you have 93% of the market destroys value for everybody. And so my view, and more importantly, for us and for our shareholders, I don't think that actually creates value. So we want to make sure we're focused on growing the market, making sure that we're building deep relationships with our customers, building customer loyalty. But unless you believe you can more than grow the market 10% taking the pricing down, you can't...

Put yourself in the hole.

Right. I mean at 93% share, that's a losing proposition. So we know we're not going to do that. Is that fair enough?

Yes.

Since you've just you heard it now 3 times.

So I heard loyalty programs on the call, and you just threw it out again. What are you going to do differently? Or what are you going to tweak a bit? I think it's like what can you do to better retain or limit the churn? So can you give some more specific examples around some of these initiatives that you might run in order to sort of better keep your customer base intact?

Yes. I mean I want to be clear, there's 2 different kinds of loyalty programs. There's the vet loyalty program and then there's a pet owner loyalty program. As we think about the vet program, we think about incentivizing both across our portfolio of reps. So the more categories you buy with us, the better the discounts and service you can get, as well as the more of the dollars you spend in each category. So we're going to continue to invest in those loyalty programs with the vets, making sure that it's the right balance across those categories and those growth targets overall makes sense. And then as you think about the pet owner, we've had a My Pet Care Rewards program. And in that, you would scan your invoices, and at the end of every quarter, you get points that would get you a card, with a credit card basically. You could spend back at the vet on anything you wanted on any category, but only at the vet channel. I think in this market where it's a lot more important to be able to afford that bill at the checkout, we instead want to pivot a lot more of our loyalty program to being our loyalty program at checkout, you can get that discount right away. And so we're looking more at being in the loyalty program and really maybe the longer you get more of a discount. So how do we think about loyalty, but giving that discount at point of care when you're checking out versus getting that card that you're then going to get [indiscernible]? So we're thinking differently about that. And how do we find more engagement in that loyalty program and encourage them to stay with product and to buy across more of our products, et cetera.

Have you started to implement some of those initiatives?

So we started, in certain parts of these, we're piloting them in certain customers with different technologies to be able to do that. Again, you need them to get registered and you need the vets to be signed up a little bit here, too. So we're looking at different technologies to do that.

Okay. Okay. Great. Maybe if we just go to -- we have a lot to talk about on life cycle and what you guys have coming through the pipeline. So maybe let's start with Cytopoint+. And just walk us through the timing, I think year-end '26 in terms of approval. Do we also see a launch this year, or could that spill into '27?

Our expectation is the launch would be next year, as we normally from approval to launch, there's going to be a little bit of time. So we are expecting the approval of Cytopoint+, which is our Cytopoint long-acting. So this is indeed Cytopoint that would be a 3-month Cytopoint. We're really excited about that. We think it provides incremental convenience and affordability for the pet owner, which I think will be really compelling. A lot of pet owners find it difficult to get in every month. And so sometimes it's 45 days or 60 days. So being able to go in once and get 3-month dose we think will be a compelling value proposition and certainly help us compete as we'll start to see this year the first competitor in the IL-31 space for monoclonal antibodies.

So just to put some numbers to it, I remember we did work a while back where it was like, hey, the average Cytopoint user was getting 7 months out of 12 treatment. But now, look, if they come in 3 out of 4, it's 9 months. So you're getting sort of that lift on utilization. Is it also a market expander? Some people that sort of stepped away and look, look, I can't lifestyle-wise get in here every month. Now maybe they come in to the equation?

Yes. I mean we think it will be both. We think it will be obviously increased compliance for those that are currently Cytopoint users. But more importantly, for some people who are just, it's a lot, I mean, I work, I can't -- there's no way I can come in every month. it will help expand that market as well.

Okay. And how about the timing for oUS markets for Cytopoint because you do have a pretty good book of business in Cyto oUS.

We do. We have not announced the timing on those, but it will not be in '26.

Okay. Maybe to go to [ Lenivia ] for a second. Can you share your feedback? I know it's early, but where you are in the International markets?

Sure. We just started our early experience for Lenivia and Portela. Those are approved in certain EU markets as well as in Canada. So we're beginning that. We're just doing our first to know. So as we get into our Q2 earnings, we're happy to sort of share sort of where those are starting to read out. And we're looking forward to the full launch as we look into the second part of the year. We, again, very similar to what you were talking about in Cytopoint, we do think a 3-month here will be much more convenient for pet owners and more affordable. And what's different here with Lenivia and Portella is they are not long-acting Librela and [ Santierra ], they're indeed unique molecules. So we're going to very much take the lessons that we learned as we launched Librela and Solensia. We're starting with specialists and sort of some very large GPs, building an early experience. And then we're going to have those specialists help us educate the broader veterinary community as we use the product. So really just being a little more slow and thoughtful and really starting with the specialty group and early experience before we launch fully.

I think if I go back in time, it's off the top of my head, but like, Librela was a rocket ship out of the gate. I think it was like $40 million in that first quarter. So sort of all guns blazing. To your point here, you're going to move a little bit slower, get the specialists, get the support, maybe get some podium and then go from there.

We're really focused on making sure that we have a deep understanding in the specialist community, that they're helping educate the GP community, really investing in the early experience in as many studies as we can to really support these products. We'll continue to do that. And as more and more we'll start talking about dog OA pain and cat OA pain categories, because obviously, as we think about the growth of the category, we're going to be fine if they switch from Librela to a long-acting Lenivia. So we're really going to be thinking overall about monoclonal antibody OA pain. I had a customer, a client here say, "Are you going to put Rimadyl in there?" No, I'm not putting Rimadyl. It will just be looking at injectable OA pain treatment, et cetera.

Okay. We had a couple of doc panels throughout the past couple of days. And they're excited about the longer duration. And then I mentioned like the 3 months versus the 1. Like, well, I mean, are they going to price it 3x? I think so. I mean -- so maybe your thoughts on that. Will you guys just take sort of the duration -- price/time duration, and that's the new price...

It has launched in, again, in certain European countries. And in that launch, it is at a slight discount to the 3 months. Because we believe that everyone isn't getting a full 3 months. And so we're trying to make sure that it's a good value proposition.

Okay. And then on the earnings call, you did mention additional label updates for Librela. And there was a lot going on in the earnings call and that was maybe a little bit missed. So are those label updates U.S.? Are they oUS? And maybe if you could help us out what might be coming out on that front.

Well, there were announcements in the EU. So as we've said, we're going to continue to work with regulators across the globe as we do more and more of these studies to continue to update the labels. So we were just being very clear that we'll -- as we said previously, I think the last few quarters, we're continuing to work with regulators. We'll continue to expect it. We did get an update, obviously, in the EU in the quarter. I mean I don't think they're going to be as -- there's not as probably -- this is more usual course, is what I would say.

8 Not [indiscernible] restrictive in any way?

We're trying to make sure that whatever we're learning about the safety risk profile of the product, that we are capturing all that on our label in each of the markets as we get those. Every market have their own process, as you're well aware. So we'll be -- as soon as we get that information into the markets, we're working with the regulators to update those labels.

Okay. And then just help me tie it back to the model a little bit. Like you mentioned earlier, hey, Librela has sort of stabilized off these lower levels sequentially. When we think forward to '27 and beyond, does this help sort of resuscitate growth specific to OA pain?

Yes. Certainly, if you look at the opportunity, it remains large. We've quoted the size of the market opportunity in the U.S. alone. For example, we have somewhere between $25 million and $27 million with OA, with only about 9 getting treated today. So we believe the solutions, the longer-acting solutions will help us to the point that Kristin already made, expand the market and drive growth across the OA pain franchise for us. And these approvals across Europe and Canada, and we're seeing more and more coming in and we're expecting more, will help us drive that expansion out of the market.

I know it's a small part of the business, but on diagnostics, I mean I go back to the old [indiscernible] there hasn't been new chemistry for a while. You're talking about a next-gen system. Anything that you can give us on features and functionality, the advantages and when you plan to roll that out?

Sure. We are very excited. It hasn't yet been [indiscernible] so I can't tell you much about an unlaunched product, as I know you would excited to. We do think a new innovative disruptive chemistry is what is needed to really accelerate that and to accelerate our growth especially in the U.S. We do think we're quite differentiated as we think about hematology with our OptiCell. We think we're quite differentiated with images, but we don't believe yet in chemistry. We're as differentiated as we need to be to get more of that competitive capture wins in the United States. We're quite competitive outside the United States, but we're super excited for this launch. And I think it will help us to gain share overall. And more importantly, provide a faster, easier-to-use chemistry instrument to the industry. So we're excited. We are expecting to be sort of launching that and discussing more about the function and features as we get to the second half of this year.

Wetteny, to bring it back to you from a modeling perspective, when we think about some of these life cycle innovations, a lot of are in and around 2027, right? Maybe they have a stub period in '26, but most of them are incremental dollars in '27. So I think about like an up arrow and a down arrow, right? I mean so you have competition that I think is going to become a little bit more acute in '27 versus '26, you'll have full year Befrena, full year Numelvi, some other maybe headwinds as well. But then you have these incremental dollars, they won't be as big as some of the new opportunities, but there will be some incremental dollars from lifecycle innovation. How do we balance the 2? Like is this enough to sustain the lower rate of growth that we're seeing in 2026? Or is it like no, those competitive pressures are pretty persistent, and we want to take a step back in '27 versus '26.

Yes. So it's little early to give a precision on 2027, certainly, Jon.

I got a model.

And appreciate the way that the question is framed, I do think, as we said, we expect some of the macro and competitive pressures that we're seeing to persist through this year and going into 2027. Now we're already well into the competitive launches. If you think about outside of the U.S. in particular, where the [ Numelvi ] has now been out for, I think, 3 quarters now, we have all the competition in derm that's been around for over a year in markets including the U.S. and outside. So it's not to say that we're not anticipating more competition and the intensity to continue, but it's not net new in terms of what we're seeing going into 2027. Now lots of other factors we'll take into consideration as we think about guidance for 27%, but that's a ways from here.

Okay. And Kristin, I think a lot of investors, sell side, we're all trying to figure out like where can Apoquel land in 3 to 5 years? Where can Cytopoint share land in 3 to 5 years? Are there any analogs that think about of for Apoquel will be a 3-player market; for Cytopoint, it would be, we think, a 2-player market and you go out and you sort of say, "Hey, if I look back at Flea and Tick, it went from X to Y after MONOPOLY. What percent of share do you expect to have of 80 JAK and 80 monoclonal 3 to 5 years out for Zoetis?

We've been asked question a lot. Is there another good example of this. I mean, to be frank, there is no other category in animal health where someone was selling $1.7 billion and at 100%, other than steroids, share of our market for as long as we did. So there is no other market. And paris, we've talked about, it's not a great example because paris has always been incredibly competitive. There have been multiple players since the beginning of time. There's multiple modalities. You can do topicals, you can do collars, you can do single agents, you can do triple agents, you can do injectables. And they've all existed for a very long period of time. So to me, there's new innovation. So as you get with [ isoxazolines ] and then you had triple combos, so it's been evolving, but it's a highly competitive market. It always has been. So I'm not sure there really is a great proxy for what that ultimately looks like. We're really just going to remain focused on what we have, which is we have differentiation, we're going to continue to drive that. So we're still the only one with a beef flavor chew. So we've got Apoquel, we've got Apoquel 2. We have Cytopoint and we're expecting Cytopoint+. So our focus is continuing to invest in that and then to look at other species, other new innovations that we can put on top of that. So I think what Zoetis' modality approach has always been is continue to innovate, continue to life cycle innovate and to try to stay ahead of the competition by providing innovative solutions with innovations that matter for our customers.

Okay. Fair enough. I got to get to new offerings, right? You guys, a lot in the pipeline. On the earnings call, you mentioned, hey, maybe we'll start to see some dollars, you phased it differently, in the late '27, 2028. Is that U.S. canine renal that you were sort of alluding to, which we could start to see to come to fruition in late '27, early '28?

So I think that's the first. We'll be looking as we look into the '27, '28 into sort of renal and oncology as being the 2 big new categories. We'll be approaching renal, oncology and cardio very similar to how we're approaching right now long-acting OA pain. We're going to start with early experience. What makes these products different is we're going to be entering into sick animals, which is quite different, and that's sort of a little bit of our learning as we thought about OA pain. So we're going to be starting with early experience and then expanding beyond that. So I think as we're looking at these, renal is the single largest categories, as you probably know, of unmet medical need. Overall in animal health, it's a $3 billion to $4 billion market. It's 40% prevalence in cats, up to 20% prevalence in dogs. There's really nothing today. There's a lot of products needed in this category. First, to prevent the progression of the disease and the damage to the kidneys. And secondly, to manage symptoms. So we have a broad portfolio of multiple products as we talked about as well as diagnostics and biomarkers to be able to watch the progression of the disease to be able to get people to prevent the kidney damage, et cetera. So we're excited to take a more holistic approach to what I think are some pretty big new blue ocean categories.

And they seem huge, and you mentioned $3 billion to $4 billion, and maybe you'll be first there for renal oncology and others. What we've written a little bit too, and it came up reeling with investors is like, are these markets as big or even bigger than some of the ones that you're currently operating in? But does it take longer to cultivate and sort of the ramp and the altitude how you get there is different? And what I mean by that is I walk in my house, and I can tell if my dog is itching or limping. And I can sort of self-diagnose and then you blast with DTC. And we've seen really quick ramps and adoption curves. Or something like renal on oncology, I know they might be a sick dog, but you sort of got to go to the vet. Are you going to the vet? Are they going to run the diagnostics? And does it take longer to do that sort of assessment? So how do you get there? I mean ultimately, x years out, maybe it's a $3 million opportunity. But does it take longer to get there for those reasons?

I'll answer it in a few different ways. One, I don't recommend people self-diagnose their dog with osteoarthritis pain. There could be many things why your dog is limping. So I say that I think if your dog is limping, you know you want to take your dog to the vet. I think if your dog is peeing everywhere and has to pee every 5 seconds and is having accidents, you probably want to bring your dog. So what we want to actually do is diagnosed that before that happens, before you can get the kidney damage. But we're also going to have a product for the disease is already there, and you see it. So as chronic kidney disease develops, if your dog or cat has it, I guarantee you know your dog or cat has it. You still need to get it formally diagnosed. So I don't think the diagnosis part, you still have to go to the vet and understand. We want to make sure that you can diagnose these diseases earlier, and we'll really focus on that. But as I think about all of these sort of chronic diseases and as you look at all those COVID puppies that are now going to be aging into all of these diseases that we're talking about, I think there's a significant opportunity. But I think you want to make sure you're getting the right diagnosis, which is what we're really focused on, understanding what's really going on with your dog or with your cat, diagnosing that carefully and making sure you pick the right therapy. So that will take -- will the ramp, in other words, is this going to be as fast as the ramp in a product in a healthy dog or cat, like derm, your dog has a hotspot, it's playing in the water too long and you're going to give some acute -- some Apoquel to treat that as you treat the hot spot. It's not like that. Yes, there's going to be a little more thoughtful you're going to have to understand. But I think we're going to be launching these products, in my view, as the COVID puppies and COVID cats are all going to be aging and really have this. So I think there's a big opportunity, but I do think we need to be really thoughtful about how we launch these products so that we build the specialist understanding to help the GPs treat diseases that in humans often are actually treated by specialists.

And in retrospect, I need to push on this a little bit, that was the misstep on Librela looking back? It was just too broad, too fast, too quick?

Look, I think there was such excitement for a product that could treat OA pain. Vets are really comfortable treating with monoclonal antibodies. They've already been doing it with Cytopoint for a long time. There was a quick uptake. I think what we probably look back and say is, we should have spent more time with specialists to make sure that we're really understanding how to diagnose -- everyone is truly, again, my dog is limping so I know it has OA pain. It may or may not be OA pain if your dog is limping. So making sure that those vets are really doing that diagnosis, that they're explaining the risk benefit profile of the product, they're understanding the comorbidities. Again, as you get into oncology and some of these diseases, there's often comorbidity. So how do you decide what the best-risk benefit profile for your pet is given the comorbidities of an older dog with probably other conditions.

Okay. See where we can get to in 3 minutes. First, Kristin, on the call, you talked about commercial execution and cost management. So sometimes it's just like thrown out in your earnings call, you don't have time to elaborate much. But maybe if you can elaborate a bit. When I think cost management, are you peeling back on reps or presence in the field? Maybe if you can give us some examples.

Sure. I'll start with cost management and then get to commercial execution. As we think about cost management, we're really focused on, obviously, managing headcount, we will be doing, obviously, as we announced some reductions. But it's really in T&E, projects, consulting, professional services, sort of all those overall categories, to make sure that we can have a leveraged P&L, as we've talked about. So cost management has always been part of the Zoetis value proposition. We're going to continue to make sure our cost base makes sense for the revenue growth overall that we're driving. But the one place that's not going to come out of is anything that generates demand or feeds our future portfolio. We're very focused. We're a long-term growth company. We've got to continue to be investing in our pipeline. That is not coming out of any programs in our pipeline. We're looking at, again, professional services, all the other things that you'd sort of focus on, because we really think commercial execution today and developing that pipeline is where we're going to add value to. So we're going to continue to invest in direct-to-consumer advertising, which as we go into Q2 and Q3, as we naturally would, we'll continue to ramp that up and be more targeted and focused on that. We're going to focus again on some of those targeted promotions that we spoke about. We're going to focus on initiation. So how do we make sure we get those puppies on the paris and how do we make sure we get those -- those dogs are coming in for a first dermatology experience, how do we make sure they're choosing Apoquel Chewable on that or Cytopoint, et cetera. So we're really going to be focused on commercial execution at both the vet and the pet owner space and merging all the tools. And no, we will not be taking any out of our field force or out of our pipeline. I don't know if anything else you want to add there.

No, you covered it.

Okay. Wetteny, back to you just on the growth algo for this year. So the operation organic operational is 2% to 5%. Just to clear something up, like on the earnings call, someone asked, "Hey, could that have the Neogen revenue in there?" And you left the door open, but it's organic operational, right? So don't put that in there?

No. So the definition we laid out for organic operational are any acquisition that's less than 1% of our prior year revenue would be included. So anything that's immaterial in terms of size, and if you look at this, something that we would expect to close sometime in the second half, the contribution will be very marginal here.

Okay. So the stuff could go into the organic...

Especially when we can get to the higher end of the range of the guidance that we gave.

Okay. And then again, within the algo, the expectation is for low to mid-single-digit growth for key franchises, for the year, right? Since 1Q was down 4%, you got to get to high single digits in the back part of the year.

Yes. And my point earlier stands here as well, which is we're not -- comps play a big part as well, as the sequential improvement that we're seeing across parts of the business that we've talked about.

Okay. So that's low to mid -- livestocks, mid-plus call it, for the year?

Yes. I mean it's -- we already started the year pretty strong with 12% growth in livestock. And you've seen mid-single digit the last few years.

And if we follow that, at least the way we run our model, we sort of back into legacy companion animal outside the key franchise. That's sort of how you would...

Yes, with about 1 to 2 points on price.

Okay. And so the 1 to 2 points on price, the team, I'm biased, I think, did some good work in your Qs and you do give a lot of good disclosures. Like the pricing realization in your key franchises has come down. Kristin, to your point, it's not -- you're doing this massive price we said. It's just like a gross to net argument, I'd guess.

That's exactly right.

So it used to be as high as 8% and now it seems to be maybe slightly negative. Your overall price for the year only went from plus 2% to 3% to plus 1% to 2%. So if key franchises is not actually getting price, you're getting a good amount of pricing in livestock, is what's leading to [indiscernible]?

If you look at lifecycle performance, it was both price and volume on -- again, that's the quarter. We're not breaking it down to that level for our guidance. However, this is an aggregate price that we're giving and guiding for the company total across markets and across products. And yes, we are looking at, in terms of our key franchises, the sequential growth in the comps are very important. So in parasiticides, for example, we'll come in from very strong comps, both in total and in price utilization for Trio, coming off of the first half of last year and the year before. So you've seen that decelerate here, but that's factored into our calculations.

Okay. We got to a lot of stuff.