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    ZTS
    Earnings call· Sep 2025(Q3 FY25)

    Zoetis Inc. ZTS

    Nov 4, 2025 Source

    Executive summary

    Zoetis Q3 FY25 — Moderated Growth Amid Macro Headwinds, Strong Innovation Pipeline

    Zoetis reported moderated Q3 FY25 growth, with 4% organic operational revenue growth and 9% adjusted net income growth, impacted by strong prior-year comparisons and declining therapeutic vet clinic visits. Despite near-term macro headwinds and competitive dynamics affecting key franchises like OA pain and dermatology, the company remains confident in its diversified portfolio, market-leading innovation, and robust pipeline, which continues to advance new products like Lenivia and Portela. Management is implementing strategic adjustments and cost discipline to sustain profitability and long-term growth.

    Highlights

    5

    • Organic operational revenue grew 4% in Q3 FY25, driven by a diversified portfolio and innovation.

    • Adjusted net income grew 9% on an organic operational basis in Q3 FY25.

    • Livestock segment delivered strong 10% organic operational revenue growth globally.

    • Simparica franchise grew 7% operationally, with Simparica Trio growing 6% operationally globally.

    • Maintained full-year adjusted diluted EPS guidance of $6.30 to $6.40 despite revenue moderation.

    Concerns

    5

    • Overall revenue growth moderated to 4% organic operational in Q3 FY25 due to strong prior-year comps and macro factors.

    • OA pain franchise declined 11% operationally globally, with Librela sales down 15% operationally due to social media misperceptions.

    • U.S. Companion Animal business was flat operationally, impacted by declining therapeutic vet clinic visits.

    • Full-year organic operational revenue guidance narrowed to 5.5%-6.5% from a more measured view of the macro environment.

    • Key Dermatology saw modest share loss in the U.S. due to competitive discounting and sampling.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year 2025 Organic Operational Revenue Growth
    5.5% to 6.5%
    high materiality
    Medium
    Full-year 2025 Organic Operational Adjusted Net Income Growth
    5.5% to 7%
    high materiality
    Medium
    Full-year 2025 Revenue
    $9.4 billion to $9.475 billion
    high materiality
    Medium
    Full-year 2025 Adjusted Net Income
    $2.8 billion to $2.840 billion
    high materiality
    Medium
    Full-year 2025 Reported Diluted EPS
    $5.90 to $6.00
    high materiality
    High
    Full-year 2025 Adjusted Diluted EPS
    $6.30 to $6.40
    high materiality
    High
    Major New Market Approval
    One each year
    medium materiality
    High
    Livestock Growth
    Above market
    medium materiality
    High
    Librela Growth
    Return to growth
    high materiality
    Medium
    Key Franchises (Derm, Parasiticides, OA Pain) YTD Growth
    High single digits
    medium materiality
    Medium

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Global Companion Animal
    Growth partially offset by OA pain franchise decline.
    Simparica franchise revenue: $356 millionSimparica franchise operational growth: 7%Key Dermatology revenue: $469 millionKey Dermatology operational growth: 3%OA Pain franchise revenue: $138 millionOA Pain franchise operational decline: 11%
    		$1.7 billion2% operational——
    Global Livestock
    Strong balanced performance across segments and species, on track for third consecutive year of above-market growth.
    		$725 million10% organic operational——
    U.S. Segment
    Growth moderated due to strong comparable period in Companion Animal, particularly derm and parasiticides.
    		—down 2% reported, up 3% organic operational——
    U.S. Companion Animal
    Growth in Simparica and Key Dermatology offset by declines in OA pain mAbs. Impacted by declining therapeutic vet clinic visits and competitive dynamics.
    Simparica franchise revenue: $263 millionSimparica franchise growth: 2%Key Dermatology revenue: $306 millionKey Dermatology growth: 1%OA Pain products sales: $58 millionOA Pain products decline: 21%Librela revenue: $41 millionLibrela decline: 26% vs Q3 last yearSolensia revenue: $17 millionSolensia decline: 4%
    		—flat organic operational——
    U.S. Livestock
    Broad-based growth with almost all major brands showing improvement, primarily driven by improved supply of ceftiofur and acceleration in vaccines post-MFA divestiture.
    		—14% organic operational——
    International Segment
    Driven by Companion Animal and Livestock performance.
    		—3% reported, 6% organic operational——
    International Companion Animal
    Growth driven by Simparica and Key Dermatology franchises. OA pain mAbs declined due to perception challenges in English-speaking countries.
    Simparica franchise revenue: $93 millionSimparica franchise operational growth: 22%Simparica Trio operational growth: 32%Simparica (single) operational growth: 15%Key Dermatology revenue: $162 millionKey Dermatology operational growth: 7%OA Pain mAbs operational decline: 3%Librela sales: $62 millionLibrela operational decline: 6%Solensia sales: $18 millionSolensia operational growth: 9%
    		—4% operational——
    International Livestock
    Broad-based growth across all species, with cattle driven by price and volume, poultry by vaccine growth, and fish by price increases.
    		—8% organic operational——

    Operational metrics

    18
    Total Revenue
    $2.4 billion1% reported growth, 4% organic operational growth
    Q3 FY25

    Growth moderated as anticipated, driven primarily by price.

    Adjusted Net Income
    $754 million5% reported growth, 9% organic operational growth
    Q3 FY25

    Strong growth supported by continued cost discipline.

    Adjusted Gross Margin
    71.6%up 90 bps reported
    Q3 FY25

    Higher margins due to divestiture impact and price benefits.

    Adjusted Operating Expenses
    1%increase operationally
    Q3 FY25

    Reflects ongoing commitment to cost discipline.

    Volume Growth
    flat
    Q3 FY25

    Price was the primary driver of revenue growth.

    Alternative Channels Growth
    21%
    Q3 FY25

    Fueled by pet owner preference and higher compliance, helping sustain Simparica Trio's momentum.

    Therapeutic Vet Clinic Visits
    declining
    Q3 FY25

    Impacted new patient starts across all major therapeutic areas. Different from historical trends where overall visits were down but therapeutic visits were up.

    Overall Vet Clinic Visits
    down ~2%
    Q3 FY25

    While overall visits were down, the key difference this quarter was the decline in therapeutic visits.

    Derm Therapeutic Visits
    down less than 1%
    Q3 FY25

    Improved from prior quarters where declines were larger, showing some encouragement.

    Feline OA Treatment Penetration
    15%
    Current

    Only 15% of affected cats are receiving treatment, indicating significant untapped market potential.

    Librela Doses Distributed
    over 30 million
    Cumulative

    Remains widely used despite recent headwinds.

    Apoquel and Cytopoint Doses
    roughly 120 million
    Cumulative

    Reflects long-standing market presence and high satisfaction levels.

    Untreated/Undertreated Dogs for Itch
    11 million
    Current

    Significant room for expansion in the dermatology market.

    Oral Parasiticides Share of Prescribed Medications
    47%up from 30% over last 2 years
    Current

    Substantial room for further growth in the triple combination space.

    Simparica Franchise Operational Growth (Prior Year Comp)
    27%
    Q3 FY24

    Strong comparable period in the prior year, making Q3 FY25 growth moderation understandable.

    Apoquel Film-Coated Tablet Distributor Stocking Contribution
    $10 million
    Q3 FY25

    Impacted U.S. derm figures in the quarter.

    Key Franchises (Derm, Parasiticides, OA Pain) YTD Growth
    ~9%
    YTD FY25

    Tracking to high single digits for the year, impacted by OA Pain headwinds.

    Key Franchises (Derm, Parasiticides, OA Pain) Q3 Growth
    ~2%
    Q3 FY25

    Reflects the impact of OA Pain and macro headwinds in the quarter.

    Industry KPIs

    7
    MetricValueDetails
    Prescription volumeOral parasiticides share of prescribed medications 47%%
    EPS revenue guidanceFY25 Revenue: $9.4B-$9.475B; FY25 Organic Operational Revenue Growth: 5.5%-6.5%; FY25 Adjusted Net Income: $2.8B-$2.840B; FY25 Organic Operational Adjusted Net Income Growth: 5.5%-7%; FY25 Reported Diluted EPS: $5.90-$6.00; FY25 Adjusted Diluted EPS: $6.30-$6.40USD
    Pipeline clinical milestonesAnticipate a major new market approval each year
    Regulatory approvals filingsLenivia first market approval in Canada
    Therapeutic drug market shareLargely maintaining share
    Price volume mix decompositionPrimary driver was price
    Geographic regional revenue growthU.S. up 3% organic operational; International up 6% organic operational%

    Product announcements

    6
    ProductTypeDetails
    Lenivialaunch
    Portelalaunch
    Apoquel Chewableexpansion
    Cytopointexpansion
    Simparica Trioexpansion
    Apoquel film-coated tabletlaunch

    Risks & headwinds

    5
    Moderated growth due to strong prior-year comps and macro factorsQ3 FY25 and H2 FY25

    Q3 FY25 organic operational revenue growth of 4%

    Mitigation: Diversified portfolio, market-leading innovation, cost discipline, strategic adjustments to commercial structure.

    Declining therapeutic vet clinic visitsQ3 FY25, expected to continue into Q4 FY25

    Declining across all major therapeutic areas in Q3 FY25; U.S. derm therapeutic visits down less than 1% in Q3, but more in prior quarters; overall visits down ~2% in Q3.

    Mitigation: Focus on alternative channels (retail, home delivery), working with vet clients to drive compliance, confidence in long-term market expansion.

    Social media misperceptions impacting Librela salesQ3 FY25

    Global Librela sales declined 15% operationally; U.S. Librela sales down 26% to $41 million; International Librela sales down 6% to $62 million.

    Mitigation: Multipronged strategy: increasing OA awareness, deepening education with specialists/vets, sharing clear science-based information, Phase IV research through independent third-party studies (beginning Q4).

    Competitive dynamics in dermatologyQ3 FY25, expected to continue into Q4 FY25 (e.g., full launch of NUMELVI in Europe)

    Modest share loss in U.S. derm space; heightened competitive dynamics and aggressive promotional activity tied to new product launches in international markets.

    Mitigation: Confidence in differentiated portfolio, value proposition, pricing alignment with quality, focus on market expansion, disciplined execution against short-lived launch promotions.

    Impact of significant price increases by vet customersOngoing

    Not quantified directly, but noted as impacting particularly larger corporate accounts.

    Mitigation: Not explicitly stated, but implies focus on value proposition and customer relationships.

    What to watch in Q4 FY25

    5

    Librela Sales Growth

    2026
    CurrentDeclined 15% operationally globally in Q3 FY25
    TargetReturn to growth

    Why it matters

    Librela has been a significant headwind; its recovery is crucial for overall Companion Animal growth and investor confidence in the OA pain franchise.

    I think executing on our multipronged strategy as we're starting to see the signs of stabilization right now, it gives us confidence that the actions we're taking are going to return Librela to growth and as we mentioned, we believe it will return to growth in 2026.

    Q&A highlights

    6

    What meaningfully changed intra-quarter after guidance was raised? What surprises were seen (competition, destock)? How is competition impacting dermatology, and is guidance conservative enough for 2026, given current tracking below typical 6-8% growth?

    Management noted anticipated deceleration and strong comps, but also a macro impact from declining therapeutic vet clinic visits. They expect Librela to stabilize and return to growth in 2026, and Livestock to continue strong performance. They do not see the Q4 exit as indicative of 2026, but will provide guidance in February. Competitive impacts are seen as short-lived.

    “I don't see how we're exiting the year in the fourth quarter to be a readthrough to what 2026 will be. I think there are a few pieces here that I think are worth considering.”

    asked by Erin Wilson Wright · answered by Wetteny Joseph

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 Performance Overview

    Zoetis reported $2.4 billion in revenue for Q3 FY25, reflecting 1% reported growth and 4% organic operational growth. Adjusted net income grew 5% on a reported basis and 9% on an organic operational basis to $754 million. This moderation in growth was anticipated due to strong prior-year comparisons and broader macro factors, including reduced vet clinic visits. Price was the primary driver of revenue growth, as volume remained flat in the quarter.

    02

    Companion Animal Headwinds & Resilience

    The global Companion Animal portfolio posted $1.7 billion in revenue, growing 2% operationally. While the Simparica franchise contributed $356 million (up 7% operationally) and Key Dermatology $469 million (up 3% operationally), the OA pain franchise declined 11% operationally to $138 million. This was primarily driven by Librela's 15% operational decline globally, attributed to social media misperceptions. The U.S. Companion Animal business was flat operationally, impacted by strong prior-year comps and competitive discounting in dermatology, alongside declining therapeutic vet clinic visits.

    03

    Livestock Segment Strength

    The global Livestock portfolio demonstrated robust performance, contributing $725 million in revenue with 10% organic operational growth in Q3 FY25. This marks the third consecutive year of above-market growth for the segment, supported by strong execution and resilient market demand. Growth was broad-based across geographies and species, driven by improved supply of ceftiofur, increased focus on vaccine growth post-MFA divestiture, and key account penetration.

    04

    Innovation and Pipeline Progress

    Zoetis continues to advance its deep pipeline, with the first market approval of Lenivia, a distinct long-acting molecule for dog OA, in Canada, with a launch expected in H1 2026. Lenivia also received a positive CVMP opinion in Europe. Additionally, Portela, a long-acting monoclonal antibody for feline OA pain, received European approval, with a launch also expected in H1 2026. The company anticipates a major new market approval each year for the next several years, reinforcing its leadership in chronic pain management.

    05

    Strategic Adjustments and Outlook

    Management is evolving its U.S. commercial structure to enhance agility and efficiency, creating a leaner field organization with single point of contact coverage to deepen customer engagement. Despite the moderated revenue outlook, the company maintained its full-year adjusted diluted EPS guidance of $6.30 to $6.40, reflecting continued cost discipline. Zoetis remains confident in its long-term growth potential, supported by its diversified portfolio and innovation engine.

    06

    R&D Leadership Transition

    Rob Polzer, Head of R&D, will retire at the end of 2025 after a decade of service, transitioning to a Scientific Adviser role until the end of 2026 to ensure a smooth transition. Kevin Esch, with extensive R&D experience and a background as a practicing veterinarian, will succeed him as of January 1, 2026. Zoetis will host an innovation webcast on December 2 to provide further pipeline updates.

    AI-generated summary of the company’s earnings call. Not investment advice.