Zoetis (ZTS) Q2 FY26 earnings call: guidance and Q&A

Clarify the nature of targeted price actions (gross-to-net) and their impact on guidance, quantify anticipated share loss in Derm/Simparica, and discuss the balance of organizational stability with ongoing leadership evolution.

Kristin Peck clarified that gross-to-net refers to targeted, time-bound investments like promos, bundling, and point-of-sale discounts to protect volume and share, not changes to list price. Wetteny Joseph added that guidance assumes persistence or acceleration of macro/competitive pressures, leading to increased gross-to-net actions. Kristin expressed confidence in the leadership team's ability to execute in the current environment.

“What we're talking about is investments in what -- in the industry will call gross-to-net. So a promo to maintain share at a clinic, it might be a cross-portfolio bundling that if you buy a product, you get a discount. It would be at point of sale to a pet owner to make it more affordable.”

asked by Erin Wilson Wright · answered by Kristin Peck

Further clarify gross-to-net pricing's impact on ASPs and margins, and identify the 2-3 key changes in assumptions between the old and new guidance.

Kristin reiterated that gross-to-net is not a list price reduction but targeted promotions to defend share. Wetteny explained the new guidance assumes persistence of macro and competitive pressure (high end) or acceleration (low end), which would necessitate increased gross-to-net investments. He also noted an additional $60M-$65M top-line and $30M bottom-line headwind from FX.

“In this guidance, not only are we assuming that the level of macro and competitive pressure persists, doesn't reflect that, I would say, on the high end of the guidance. On the low end of the guidance, we're contemplating that they would actually accelerate.”

asked by Brandon Vazquez · answered by Wetteny Joseph

Inquire about other actions being taken beyond pricing, such as cost controls and job cuts, and the competitive landscape outlook for 2027.

Wetteny confirmed ongoing cost and productivity programs, noting SG&A was down 4% and manufacturing costs were down, contributing to margin protection. Kristin stated that with new entrants in Dermatology, volume and market share will remain under pressure, and it will take time to stabilize. The focus is on defending differentiated products and protecting share in a market not growing as fast.

“The second quarter, you saw SG&A down 4% year-on-year. And some of those actions are also reflected in our manufacturing costs that are down year-on-year that are contributing to where margins -- gross margins are landing for us.”

asked by Michael Ryskin · answered by Wetteny Joseph

Clarify the split between market contraction and competitive pressure in Q2 deterioration, quantify ASP impact of rebates, and discuss how rebate changes interact with 2-year customer contracts.

Wetteny stated that both macro factors (e.g., vet visits down ~7% for flea/tick/heartworm) and competitive factors are impactful and converge, especially in a non-growing market. Kristin explained that the gross-to-net impact is hard to quantify as an overall ASP change because it's customer-specific and event-specific, but it's crucial for protecting volume and share. Some contracts are locked for 2-3 years, while others are up for negotiation.

“Across every major category, you see down trends on visits that have an impact. OA pain are down. So were Derm north of 2%. So in each of those areas, that's a macro reflection.”

asked by David Westenberg · answered by Wetteny Joseph

Ask about the expected duration of current promotions (until macro improves or competitive landscape normalizes) and realistic growth expectations for the Livestock business in the second half of the year.

Kristin explained that promotional intensity is a combination of macro and competitive factors, noting Cytopoint pressure is mostly macro, Derm is mostly competitive, and parasiticides are a mix. Promotions will pull back as share stabilizes. Wetteny expects Livestock growth to moderate to the mid-single-digit range in the second half, with strong fundamentals likely sustaining mid-to-high single-digit growth for the full year.

“As we get to more of a stabilization of share, as we look at quarter-over-quarter, that starts to stabilize, I think you'll see us pull back because, again, our aggressive promos and rebating and point of sale right now is focused, as I mentioned, on protecting our share and making sure we protect our volume.”

asked by Christopher Schott · answered by Kristin Peck