Welcome to the Fourth Quarter and Full Year 2021 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. A replay of this call will be available approximately 2 hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you, Catherine. Good morning, everyone, and welcome to the Zoetis fourth quarter and full year 2021 earnings call. I am joined today by Kristin Peck, our Chief Executive Officer; and Wetteny Joseph, our Chief Financial Officer. Before we begin, I’ll remind you that the slides presented on this call are available on the Investor Relations section of our website and that our remarks today will include forward-looking statements and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement in today’s press release and our SEC filings, including, but not limited to, our annual report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles, or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and the company’s filings dated today, Tuesday, February 15, 2022. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin.

Thank you, Steve, and welcome everyone to our year-end earnings call for 2021. I am happy to report that Zoetis delivered its strongest performance ever in 2021, thanks to our innovative, diverse, and durable portfolio and the talent and commitment of our colleagues. We grew revenue 15% operationally, which is once again above the anticipated growth rate for the animal health market. These results were highlighted by 27% operational growth in our companion animal portfolio with 1% operational growth in livestock. Our parasiticide, dermatology, vaccines, diagnostics, and monoclonal antibody therapies all contributed to these strong results driven by the positive trends in pet care, trends that we see continuing to be a key growth driver in 2022 and beyond. From a segment perspective, we saw solid balance across our global footprint with the U.S. up 14% and international growing 17% operationally. Operationally, for the year, China grew 25%, Brazil grew 28% and other emerging markets grew 22%, leading the way for our international performance. Another major growth driver for the year has been our global diagnostics portfolio, which grew 21% operationally with significant strength in international markets and the continued launch of VetScan Imagyst, our AI-driven diagnostics platform. Based on the strong revenue performance, we were able to deliver 19% operational growth in adjusted net income for the year while investing significantly in our latest product launches as well as staffing, R&D, and manufacturing projects for future growth. Looking ahead, we believe this momentum sets us up well for 2022. We expect to continue growing revenue faster than the market in the coming year driven by continued strength in pet care, expansion of our diagnostics portfolio internationally, and significant growth in both companion animal and livestock product sales for emerging markets, including China and Brazil. As a result, we are guiding to full-year operational growth of 9% to 11% in revenue. Wetteny and I will discuss more details about the full-year 2022 guidance. But let me share some views on the year and other updates. First, the essential nature of animal health continues to be affirmed by our performance during the COVID-19 pandemic. We have seen the fundamental drivers, such as increased emphasis on pet wellness, a growing global population, and continuous consumption of animal-based proteins, all reinforce the animal health industry as a positive investment choice. In terms of the companion animal market, people’s commitment to the health and well-being of their pets has continued to drive higher spending and new opportunities for innovation, geographic expansion, and increasing levels of care. Pet owners' spending in animal health remains one of the more durable trends in consumer spending as people place a premium on the health and well-being of their pets, even during challenging economic times. In January, the Human Animal Bond Research Institute and Zoetis released the results of a new global survey of more than 16,000 pet owners and 1,200 small animal clinics, which reinforce how deep the connection is between pets and pet owners and how that dynamic relates to views on veterinary care and the related benefits of pet ownership. In the study, 92% of respondents said there was no reason they could ever be convinced to give up their pets and 86% said they would pay whatever it takes if their pet needed extensive veterinary care. The strength of the human-animal bond strongly correlated with higher rates of veterinary treatment for both preventative care and specific conditions in their pets. This study and other research support our focus on advancing an innovative pipeline for pain, dermatology, and parasiticides for pets, and we continue to invest in our field force, direct-to-consumer marketing, and manufacturing capacity to bring these products to market. Moving on to the livestock industry, the need for safe and reliable sources of animal protein continues to be a fundamental growth driver for the industry, particularly in emerging markets. In any given year, weather, disease, and market dynamics may have various regional impacts, but the underlying demand continues to be served locally or through global trade across more than 100 markets, where Zoetis products are sold. We have continued to see Zoetis’ livestock business show modest growth during the pandemic and recent economic challenges based on our strength internationally. We see that international growth continuing this year, while we continue to see declines in the U.S. driven primarily by generic competition in certain product lines. Our competitive strategies in pricing and new lifecycle innovations will help us mitigate some of that impact. Livestock products are a key element of our global strategy and long-term growth, and we have continued to expand our vaccine product lines like Poulvac Procerta for poultry, Alpha Ject Micro for fish, as well as DRAXXIN KP as a treatment for cattle. We are also exploring more livestock innovations around greater efficiency, precision animal health, and more sustainable food production. We have been focusing on our investments in vaccines for prevention and maintaining healthy animals, data analytics for more individualized animal care, and research into other sustainability improvements around immunotherapies. I was particularly excited by two recently announced additions to our precision animal health portfolio: Performance Ranch, a new cloud-based cow-calf management software that simplifies tracking of individual animal performance and health product usage, and our new block yard platform, which is blockchain technology developed in cooperation with IBM to provide a secure way to share information across different segments of the animal production supply chain. For Zoetis, we continue to stay focused on our five strategic priorities for the long term, and we are optimistic about the growth drivers we see for 2022. Pet care will remain a major growth driver for Zoetis globally based on our diverse and innovative portfolio. We see continued growth potential for our dermatology portfolio, which surpassed $1 billion in revenue for the first time in 2021. Our parasiticide, driven by our triple combination, Simparica Trio, as well as Revolution Plus, Stronghold Plus, Simparica, and ProHeart 12, will continue to achieve growth as we gain market share in major markets and look at further lifecycle innovations and label gains across the portfolio. Librela and Solensia, our monoclonal antibodies for the control of osteoarthritis pain in dogs and cats, will continue to increase their revenue in 2022, primarily in the EU, and we are making regulatory progress for these products in the U.S. We received FDA approval for Solensia in January, with the launch expected in the second half of the year, and we still anticipate approval of Librela in the second half of the year, assuming FDA inspections are completed at a facility outside the U.S. As we begin 2022, we are seeing strong demand in the EU for Librela and Solensia, and we remain confident in the blockbuster potential for Librela in 2022 and Solensia in the longer term. We continue to optimize our global supply chain and manage ongoing challenges, which have been creating isolated constraints for Librela, Solensia, and some of our other products. As always, maintaining a consistent reliable supply for our customers is our top priority, and we have been communicating with them about any impacts to their orders. We want to ensure all pets can continue their treatments without interruption, especially for chronic treatment of OA pain. Our global manufacturing network is working around the clock to ensure reliable supply for our customers as they did throughout 2021, and our full-year guidance and strong growth reflect our views on supply. Diagnostics is our next major growth driver in 2022 with a fully integrated point-of-care business that is prime for strong growth internationally, along with the expansion plans for relatively new reference lab operations. We are making significant progress in one of the fastest growing markets for animal health. We are adding more dedicated field force and customer service resources, while developing more offerings that will leverage our portfolio across the continuum of care. And finally, we see significant growth opportunities in emerging markets, including China and Brazil, where we see excellent opportunities for both our companion animal and livestock products based on increased medicalization and other positive trends. Meanwhile, our R&D team, along with external partners, will continue to generate the industry’s most productive pipeline in the years to come, with more than $500 million in R&D spending in 2021, our largest-ever annual investment for R&D. We continue progressing research to address allergies, livestock health, chronic pain and inflammation, chronic kidney disease, and diagnostics through our vaccines, therapeutics, and digital technology platforms. In conclusion, I want to thank our colleagues for delivering another terrific year and for always bringing the value of Zoetis to our customers every day. Zoetis remains well-positioned in terms of our market leadership, financial strength, investment strategies, and diverse portfolio to deliver sustainable growth to investors in 2022 and beyond. Now, let me hand things off to Wetteny.

Thank you, Kristin, and good morning everyone. 2021 was an exceptional year for us with revenue of $7.8 billion and adjusted net income of $2.2 billion, both exceeding the high end of our November full-year guidance range. Full-year revenue grew 16% on a reported basis and 15% operationally, with adjusted net income increasing 21% on a reported basis and 19% operationally. Looking deeper into the 2021 numbers, price contributed 1% to full-year operational revenue growth, with volume contributing 14%. Volume growth consisted of 6% from other inline products, 5% from new products including Simparica Trio, and 3% from key dermatology products. Revenue growth was again broad-based with the U.S. growing 14% and international growing 17% operationally. Our strong performance was driven by our innovative, diverse, and durable companion animal portfolio, which grew 27% operationally. Our livestock business, which faced generic competition on key franchises as well as challenging macro conditions in certain markets, grew 1% operationally on a year-over-year basis. Performance in companion animal was led by our small animal parasiticide portfolio bolstered by full-year sales of Simparica Trio, which generated revenue of $425 million, an increase of $305 million compared to 2020 sales. Sales of Simparica also grew double-digits for the year, with operational revenue growth of 13%. For the year, the Simparica franchise grew 82% operationally, with revenue of approximately $0.75 billion. Our key dermatology products performed incredibly well, growing 24% operationally with approximately $1.2 billion in revenue for the year, performing above our expectations. Our diagnostics portfolio grew 21% operationally in the year, with strong contributions from our U.S. and international segments, and we will continue to make meaningful investments in the coming years to drive global growth. We do believe the adoption of diagnostics products and services outside the U.S. represents larger growth opportunities geographically and feel we are favorably positioned to capture future growth in those markets. Our livestock performance in 2021 depicts the importance of geographical diversification. Generic competition and challenging market conditions weighed on our U.S. performance but were offset by solid growth internationally, primarily in emerging markets. The modest livestock growth on a global basis was in line with our expectations for the year. Moving on to our Q4 financial results, we posted another strong quarter with revenue of $2 billion, representing an increase of 9% on both a reported and operational basis. Adjusted net income of $474 million is an increase of 8% on a reported basis and 5% operationally. Of the 9% operational revenue growth, 1% from price and 8% from volume. Volume growth of 8% consisted of 5% from new products, which includes Simparica Trio, 2% from key dermatology products, and 1% from other inline products. Companion animal products led the way in terms of operational growth, growing 21% operationally, with livestock 6% on an operational basis in the quarter. Small animal parasiticides were the largest contributor to growth in the quarter, where our innovative and diverse fleet, tick, and heartworm portfolio grew 32% operationally. Simparica Trio posted revenue of $124 million, representing operational growth of 106% versus the comparable 2020 period and the third consecutive quarter with sales exceeding $100 million. Meanwhile, our key dermatology products, Apoquel and Cytopoint, again had significant global growth in the quarter, with $360 million of revenue, representing 23% operational growth against a robust prior year in which key derm grew 27% in the fourth quarter of 2020. Our livestock business declined 6% in the quarter as a result of generic competition for DRAXXIN and unfavorable market conditions in the U.S., primarily resulting from elevated input costs as well as softer conditions in China, losses driven by reduced pork prices. Our fish business grew double digits in the quarter and along with the strength of our emerging markets, partially offset the broader decline. Overall, livestock performance in the fourth quarter was in line with our expectations. Now, moving on to revenue growth by segment for the quarter, U.S. revenue grew 9%, with companion animal products growing 20% and livestock sales declining by 13%. U.S. pet care vet practice trends remained robust in Q4, with practice revenue growing approximately 8%, with visits growing 3% despite challenging prior-year comps. Companion animal growth in the quarter was driven by sales from our Simparica franchise as well as key dermatology products. We are driving growth in both therapeutic areas by making meaningful investments, primarily through direct-to-consumer advertising and field force, and we continue to be pleased by the return on investment the programs are yielding. Growth of Simparica Trio was again strong in the quarter, with sales of $114 million growing more than 100%. We also met our clean penetration target and continued to take share within the clinics. Key dermatology sales were $216 million for the quarter, growing 22% with Apoquel and Cytopoint each growing significantly. Our investments to support the franchise have been instrumental in driving more patients into the clinic, and we will continue to invest meaningfully in this space as a large portion of dogs with dermatitis remain untreated, representing an opportunity to further expand the market. U.S. livestock fell 13% in the quarter, primarily resulting from our cattle business, which as expected was challenged by generic competition for DRAXXIN as well as elevated input costs continuing to weigh on producer profitability. Our poultry business was negatively affected by reduced disease pressure from smaller flock sizes as well as generic competition, while swine faced competitive pricing pressure on anti-infectives and vaccine products. Moving on to our international segment, where revenue grew 8% on a reported and operational basis in the quarter. Companion animal revenue grew 23% operationally, and livestock revenue declined 2% operationally. Increased sales of companion animal products resulted from growth of our key dermatology products, our monoclonal antibodies for alleviation of OA pain, and our parasiticide portfolio. Several key brands are benefiting from our international DTC campaigns in Latin America and parts of Europe, and we remain excited with the long-term prospects of these programs. Overall, companion animal grew double digits operationally in every major market in the quarter. We are encouraged by the performance of our monoclonal antibodies for OA pain, with Librela generating $15 million and Solensia delivering $3 million in fourth quarter sales. In the fourth quarter, Librela became the number one pain product in the EU in its first year, with the underlying performance metrics being very favorable for future growth. Reordering rates were in excess of 90%, and compliance rates exceeded our initial expectations. In the past, we have highlighted the significant opportunity to expand the pain market. Therefore, we were extremely pleased to see approximately 40% of Librela and Solensia sales for patients receiving medication for the first time. International livestock declined 2% operationally in the quarter as declines in cattle and swine were partially offset by growth in fish and poultry. Cattle declines were largely in the EU and Canada as generic competition for DRAXXIN weighed on sales. The decline in swine sales was primarily the result of lower pork prices in China negatively impacting producer profitability. Our fish portfolio grew double digits again this quarter driven primarily by growth of Alpha Flux in Chile, and the growth in poultry was largely attributed to further key account penetration. Now, moving on to the rest of the P&L for the quarter, adjusted gross margin of 69.6% increased 190 basis points on a reported basis compared to the prior year, resulting from favorable product mix, lower inventory charges, favorable FX, and price. This was partially offset by higher freight, manufacturing, and other costs. Adjusted operating expenses increased 12% operationally, with compensation-related costs being the primary driver of the 15% operational increase in SG&A, as well as a 3% operational increase in R&D expenses. Increased international advertising and promotion expense for key brands also contributed to higher SG&A, while R&D had increased project spend in the quarter. The adjusted effective tax rate for the quarter was 18.6%, an increase of 510 basis points, driven by the impact of prior year discrete tax benefits and changes to the jurisdictional mix of earnings. And finally, adjusted net income grew 5% operationally, and adjusted diluted EPS grew 6% operationally for the quarter. In December, we announced a 30% annual dividend increase, continuing our commitment to grow our dividend at or faster than the growth in adjusted net income. In the quarter, we repurchased approximately $200 million of Zoetis shares and announced the authorization of a $3.5 billion multiyear share repurchase program. Because we generate significant free cash flow, we have the ability to grow our business through organic investments and business development and return excess cash to shareholders without consuming our cash balance or being dependent on elevated leverage. Now moving on to guidance for 2022, please note that guidance reflects foreign exchange rates as of late January. We are expecting an unfavorable foreign exchange impact versus the prior year by approximately $160 million on revenue, which is roughly 200 basis points, and approximately $0.12 on EPS, which is about 250 basis points. For 2022, we are projecting revenue between $8.325 billion and $8.475 billion, representing 9% to 11% operational growth. We again expect companion animal to be the primary growth driver in 2022 with the continued strength of our diverse parasiticide portfolio, further expansion of our key dermatology products, the adoption of our monoclonal antibodies for OA pain, and the growth in point-of-care diagnostics and reference labs. We see a very favorable companion animal backdrop for 2022 while expecting certain vet clinic trends to moderate over time; we believe they will remain above pre-pandemic levels. The catalyst for growth in 2022 and beyond stem from a younger pet owner demographic and the standard of care increases, which took shape over the prior two years. Our innovative portfolio, geographic representation, and significant investments in key brands have us positioned extremely well to capture a meaningful portion of that growth. We anticipate modest livestock growth again in 2022 led by the contributions of our emerging markets. The macro trends which make livestock an essential business remain intact, and we believe more normalized growth will occur in 2023. I’d like to touch upon the key assumptions that underpin our expectations for revenue growth. Beginning with companion animal, we do not assume a triple combination product will launch in the U.S. in 2022 to compete against Simparica Trio or competitive entrants for our key dermatology products, Apoquel and Cytopoint. As Kristin mentioned, in 2022, we expect Librela to become a blockbuster product in the first full year of sales with revenue exceeding $100 million largely from the EU markets. We remain very optimistic about the potential of Solensia as well. While the revenue curve will have a different shape due to the lack of an established feline pain market, we review Solensia as a long-term blockbuster product, which suggested a significant unmet need in animal health. In livestock, we expect generic competition to negatively impact DRAXXIN revenue by approximately 20% in 2022 comparable to the impact we saw this year. For the remainder of the P&L, adjusted cost of sales as a percentage of revenue is expected to be approximately 29%, where favorable product mix and price are expected to generate margin expansion. Adjusted SG&A expenses for the year are expected to be between $2.07 billion and $2.12 billion, with the increase from 2021 focused on supporting primary drivers of revenue growth, including investments to support new and existing products as well as diagnostics. Adjusted R&D expense for 2022 is expected to be between $540 million and $560 million. Zoetis is the leader in animal health because of the novel products, disruptive innovation, and life cycle enhancements we bring to the market. Our internal R&D engine remains the primary source of innovation, and we are committed to ensuring it will continue to be significantly funded as a priority in capital allocation. Adjusted interest and other income productions are expected to be approximately $240 million, representing a minimal year-over-year change. Our adjusted effective tax rate for 2022 is expected to be approximately 20%. The increase in 2022 is primarily related to the favorable impact of foreign derived intangible income and nonrecurring net discrete tax benefits that occurred in 2021. Adjusted net income is expected to be in the range of $2.415 billion to $2.470 billion, representing operational growth of 10% to 13%. Our guidance once again reflects our value proposition of growing revenue in line with or faster than the market and growing adjusted net income faster than revenue. We are anticipating a significant increase in capital expenditures in 2022 primarily related to investments in manufacturing expansions in Ireland, the U.S., and China. Finally, we expect adjusted diluted EPS to be in the range of $5.09 to $5.19 and reported diluted EPS to be in the range of $4.75 to $4.87. While guidance represents our expectations for full-year financials, I would like to provide some color on the expected phasing of growth in 2022. We expect top-line growth to be fairly consistent between the first half and second half of the year. However, due to the impact of generic competition for DRAXXIN, isolated supply constraints, and the continued weakness of our swine business in China, we expect growth in the first quarter of 2022 to be lower than the remaining three quarters. In addition, the significant investments we are making early in the year to support revenue growth, primarily in companion animal, including diagnostics, along with very challenging comparative periods for T&E and other expenses, will impact Q1 materially more than the subsequent quarters. Now to summarize, 2021 was another exceptional year, our best performing year with 15% operational revenue growth and 19% operational growth in adjusted net income. Our guidance for 2022 reflects the strength of our innovative portfolio, our ability to successfully launch new products and establish new markets, and our confidence in the end market dynamics for the spaces we compete in. Now I’ll hand things over to the operator to open the line for your questions.

We will go first to Louise Chen with Cantor Fitzgerald. Your line is open.

Hi. Congratulations on the quarter, and thanks for taking my question. So you’ve been very successful over the years in your R&D efforts. And where do you see our next wave of innovation coming from? And is it going to be companion or livestock-focused drugs or diagnostics? Thank you.

Thanks, Louise. Good to hear from you. We are quite excited regarding our pipeline. I really think it is the innovative nature of Zoetis that has made us so successful. As you look at the pipeline, we’re excited about several areas, both across pet care and livestock. In pet care, we continue to innovate in the parasiticide space; it’s a $5 billion market. I think we can continue to bring innovation there, certainly, growing our osteoarthritis monoclonal antibodies for pain, Librela and Solensia, continuing to innovate in the dermatology space. You saw us add Apoquel chewable in Europe, for example; there also leveraging that whole platform of monoclonal antibodies for other indications, we think is a big opportunity. We are really excited about diagnostics, the ability to continue to bring really disruptive innovation there. Certainly, our Imagyst platform and some of the new indications there are a great example. We also think taking a lot of our products and growing them in emerging markets will be valuable. And as you move into the livestock space, we’re excited about vector vaccines and poultry, vaccines in cattle and swine, and then really investing as well in our precision livestock farming and genetics portfolio. You probably saw we launched two new products there over the last few weeks. So we think there is significant innovation across both pet care and livestock, and we believe we have strong platforms in R&D for growth, investing over $500 million in R&D.

Great. Thanks for taking the question, and congrats on the quarter and strong guide. Just to start, I know you touched on this in the prepared remarks, but I have to ask a follow-up on the Trio competition. We heard from one of your competitors that they may be closer than that. So even though you don’t expect competition and it’s not built into your assumptions for 2022, how would you react if you did see it? How would your assumptions be impacted? And how do you think you would adjust pricing or go-to-market? Sort of how would you see a flow-through? And if I could ask just a quick follow-up to that, on pricing in general across the portfolio, what are your expectations for 2022? Are you going to be able to take more price, less price? Obviously, there is an inflationary environment. You have to think about livestock versus companion differently. So could you just talk us through your assumptions on price across the portfolio?

Yes. So let me take that first. With respect to Trio, we continue to be very pleased with the performance of Trio and really the entire Simparica franchise. When you look at Trio, we delivered $124 million of revenue in the quarter. When you look across the franchise, we continue to see really strong growth. For the year, the franchise grew 82% across the board, so very pleased with that. And we’re putting significant investments behind the product and across Simparica as well in markets where you don’t see heartworm being prevalent. And so we’ve seen Simparica grow 13% on the year. And so we continue to make those investments in our field force as well as advertising and DTC campaigns across – our confidence is that we will continue to see growth even when this competitor is in this space. We have seen that in other cases where other products have come into the market. When you look at the flea tick heartworm market, it’s the biggest market within animal health with $5 billion, and there are other products in the space that have better sizes of $800 million-plus. So as we look here, we continue to see more headroom to continue to grow this brand and this franchise even when there is competition. When I look at price, we delivered 1% of growth in price net in 2021. And we’re probably looking at about the same sort of range when we think about 2022. You have to keep in mind while we see opportunities to take price across the board, particularly in companion animal and behind our innovative brands and seeing really strong demand in the end markets. We will continue to pull that lever. In terms of what’s going the other way, as you’re aware, DRAXXIN is one with competitive – generic competition there with respect to that as well as Zoamix in BMD, we’ve seen that sort of partially offset, I would say, but we still delivered a net price increase in 2021, and we believe even as we look to offset inflation as we have done in 2021, we will have the opportunity to do that. We do look at price on a market-by-market and SKU-by-SKU basis. And so we deliberated about where we can be more aggressive, and we will take those opportunities as we go through.

Hi, good morning. Thanks for the questions. I had two on Librela. Kristin, I think you said you expect Librela to be a blockbuster in ‘22. What have you seen with respect to prescribing patterns for vets that have started to use the product? I mean has this displaced other products? Or are vets just diagnosing OA more? And can – and does the guidance for it being a blockbuster in ‘22 assume a U.S. launch? And then just as a quick follow-up to that, could you just go into more detail on the supply disruption that you mentioned for Librela? Is it an API issue or a factory issue? Just any more details that you could share there, that would be great. Thank you.

Sure. Sure. Thanks, Nathan. We are very excited at the trends we’re seeing in Librela in Europe. For starters, it is now the number one selling OA pain product in Europe, which is pretty incredible given it wasn’t even a full year in Europe. And what’s really exciting about that is we’re seeing 40% of the prescriptions for pets that are new to the category. So I think for a lot of pet owners who are worried about safety or efficacy of the previous portfolios, they really see this as really a game changer. And the people who have been on it, we’ve seen a 90% reorder rate from clinics and very high compliance. So once they are on it, really staying with it, which gives us great confidence as we look into 2022 that we can get Librela to be a blockbuster product. To your question about does that assume a U.S. launch, it definitively does not assume a U.S. launch. We would not – with an approval late in the year, we would not be able to launch Librela in 2022. So that would hit blockbuster status just outside of the U.S. And as you look at some of the supply challenges, the inputs to Librela are the same inputs as you would make a human COVID vaccine. So we’ve been really thoughtful about where we launch and making sure we do market by market, ensure we can supply. We have had challenges intermittently just having to do with the fact that the inputs are the same. So I think our supply chain team has done a phenomenal job. I mean, as a matter of fact, we’re already the number one selling in OA pain, but we are really thoughtful about where we’re launching. A lot of those are getting addressed. The capacity and a lot of those component parts in human health have increased. So we become more confident every quarter we can do that. But that is what was driving some of the short-term intermittent supply challenges we had in Europe. But I think if you look at our obvious guidance for this year, we can clearly see if we’re going to hit $100 million, that we’re pretty confident we can address those.

Yes. And I would just add with Librela in the fourth quarter, we were deliberate about holding back even new patients coming on. We just want to make sure that we can secure the inputs so that when it all comes on, they can stay on given that it’s chronic OA pain conditions. So – and we’ve been able to secure materials and be able to run, and we’re confident in our forecasted demand here to be able to manufacture and deliver those.

Great, thanks. A question on the monoclonal antibody. Can you speak to the pipeline outside of Solensia? And you have significant capacity there and you’ve entered multiple partnerships, including several products. How would you think about the targets there and the timeline? And what’s next on that front? Do you see several monoclonal antibody launches for you over the next 3 to 5 years? And then on diagnostics, you mentioned increased focus internationally. And can you speak to how that strategy is progressing, I guess, both in the U.S. and internationally for reference lab as well as on point of care? And is international reference lab also on your radar screen? Thanks.

Thanks, Erin. Yes, if you look at the monoclonal antibody platform, we do see this very much as a platform for growth, with Librela and Solensia being the second and third. As you know, we also have Cytopoint. We are the only one with any monoclonal antibodies approved right now. So I do think we have a good head start. We do see this similar to what you see in human health with applications across a number of diseases. So we have not been terribly public about that pipeline. I think we’ve talked about a few such as chronic kidney disease, etc. But obviously, in our world, our pipelines are not public, but we are very excited. We have invested in building significant capacity across monoclonal antibodies both in the U.S. and outside the U.S. in multiple facilities just given our excitement on the fact that this is a really important space. We do have a number of partnerships with human health companies and even some small animal health companies in this space. So we’re really excited at the pipeline and believe we can continue to launch new products, new mAbs over time. And I will let Wetteny take the diagnostic question.

Yes, we continue to be very excited about the diagnostics space with growth above the animal health space in general. If you look at 2021, we delivered 21% growth in diagnostics across the year and particularly when you look at – although we grew both across U.S. and international. And we’ve always said that international was the more level playing field where we look to be aggressive, and we continue to make investments across field force, reference labs, etc. here. You’ve seen us innovate in this space with Imagyst, the first AI platform with indication. We look at additional indications coming on there as well. And so we will continue to make those investments, and diagnostics is one of our key growth drivers as we look ahead.

Thanks, guys. Good morning. It seems like you’re implying 2022 companion animal growth, roughly mid to high teens, a very solid growth rate. Maybe I can just put you guys a little bit on some of the key products, any specifics for Trio when we think about 2022 or call the Simparica franchise and/or the atopic derm franchise just maybe in terms of contribution to growth? And then a little bit of a follow-up. Those Librela – certainly the Librela numbers are really solid international numbers, add the gate where the medicalization rates are usually a lot lower. So Kristin, can you just comment, does this still hold where, longer term, this is still like a 70-30 U.S. international split in terms of revenue from those novel therapeutics when we look out a number of years? Thanks, guys.

Sure. I will start with your second question on just Librela, Solensia, and international. They are solid. Look, we are really focused on increasing the medicalization and the adoption of new technologies outside the U.S. I think it’s been a key focus for Glenn David since he has moved into the international group. I mean, as you know, there are a very similar number of animals in the U.S. and outside the U.S. And to your point, historically, the revenue splits have been quite different. But we are really looking at, especially in categories right now where we are the only product out there, derm is one, but even monoclonal OA pain, really thinking of unbranded, really seeing we can raise the standard of care, it’s a key focus for us as well on the diagnostics space, how we increase medicalization outside the U.S. I think it will evolve over time. And I am not sure when it gets to the equal number of animals. But really why we feel we have a lot of optimism internationally, if you think about some of the emerging markets, where they are adopting new technologies, and that curve is quite different. So, if you look at the increase in China, Brazil, across a number of emerging markets, they are really moving up that curve much, much more quickly. And we also see our belief that we can continue to do that in some of the key categories. And to your point and your first question, we continue to see growth potential in derm. We do not expect a competitor in 2022 in derm. Again, I don’t have any data, but you always ask me, why do I leave that, I mean based on just what I know today, we could obviously be wrong. So, we are going to invest aggressively as we have been doing in direct-to-consumer. We still believe there are 6 million untreated dogs in the U.S. alone who have itch and don’t have treatment. And if you saw the growth that we delivered in 2021 across derm, it’s 24% growth and already at over $1 billion, we still see growth in derm. Certainly in paras, we are going to aggressively grow that portfolio through direct-to-consumer advertising amongst other things in 2022 to make sure we have the highest share as we enter. I think the brand equity there has been really strong. So – and I think you also can add in emerging markets across all these continuing to do really well. So, as we look at growth, obviously, growth will be led, as you referenced, by our companion animal business in 2022. And I think what’s important is there is not one key platform that’s driving that. It is multiple. It is derm, it is paras, it is diagnostics, it’s mAbs, it’s emerging markets. So, we do think we have a range of platforms to continue to grow in 2022 and beyond.

Great. Thanks so much for the questions. Just a follow-up on Librela and capacity in the U.S. launch. I guess by the time that drug is approved later this year, do you expect some of these issues will be addressed by then, or should we be thinking about either a gap between approval and rollout or a more targeted rollout as you are dealing with capacity? I am just trying to get a sense of is this something that’s the next few quarters that you are going to be addressing most of this, or is this going to be an ongoing kind of challenge given the kind of broader capacity demands in the industry out there? And then the second question, I was just maybe a longer-term operating margin question. And the guidance implies moderate kind of operating margin improvements in ‘22. As I think about longer term, do you see a kind of sustained period where we are going to see OpEx growth that’s kind of keeping up with overall sales growth so that you are seeing some margin improvement but not a ton, or do we think about a window where there is maybe a larger margin improvement cycle coming as we maybe think out to 2023 and beyond as maybe some of these initial investments on derm, Trio, etc. kind of start to plateau at some point in here? Thanks so much.

Yes, sure. Let me take both. So, going to your first question with respect to Librela, as we said in the prepared commentary, we continue to anticipate approval sometime late in 2022, that is hedging on an inspection that the FDA has to do at a facility outside the U.S. By the time this product gets approved and as we continue to leverage our global manufacturing footprint and our plans, we anticipate having the manufacturing capacity that we need to meet demand across the market. Now, we will certainly leverage our learnings from our launches outside the U.S. in terms of how we go about executing that with respect to early experience programs, etc. But at this point, we are confident in our ability to manufacture to meet customer commitments across that product when it gets approved. Now, going on to operating margins, as we have said, we see opportunity to really invest behind a number of areas to drive long-term sustainable growth. And we are doing so, whether you look at R&D, investments in our field force, for example, investments in advertising campaigns, DTC campaigns behind our brands that we can really drive growth in – particularly in areas where we have an advantage like being the only triple combination in the U.S. as we speak, as well as in the derm area. As we do that, we will be aggressive, but we are mindful to grow the bottom line faster than the top line. And that may narrow the range that you see from time to time. But certainly, the business has the ability to continue to expand margins, and we have demonstrated that. But we are going to be aggressive about those opportunities when we see them, which may narrow that range.

Hi, good morning and congratulations on the quarter. Firstly, on the R&D pipeline, the innovations that you called out and the focus that you called out six, seven areas for innovation, I am not sure if I am reading too much into it, but I thought oncology pipeline was the same. I remember this being flagged as an important carrier in the past. Have you had a change of thought around oncology as a key area of innovation? And just on Librela, does your success in the first year drive you to revisit your thoughts around the longer term opportunity in the clinic pain market? You have called it out as a market which can potentially double over the next few years. Is there an upside risk to those numbers? Thank you.

Sure. As we talk about the pipeline, certainly oncology is in there. We don’t get very specific with regards to that. I don’t believe we have ever said anything specific with regards to oncology historically. It’s certainly an area we are looking at, but I would say some of the other focus areas we talked about, we used to think in the near-term will likely drive more value. As you look at Librela, as the outlook changed. I mean we think that taking a $400 million market that’s been established for a long time in doubling it is pretty aggressive. We are – we probably have more conviction in our ability to do that is what I would say just based on the first two full quarters that we have launched the product outside the U.S. So more confidence there and more confidence as well that we can take what is almost like a nonexistent market in the cat for Solensia and make that a $200 million. So, I am not sure we are willing to say above that. I think doubling a market is a pretty aggressive timeline – pretty aggressive there. But I do think our commitment and our conviction and our ability to do that and do it faster, certainly, I would say, is strong.

Hi, congratulations and good morning. I am just hoping to have some more color about the Solensia rollout in Europe and how that can translate into the U.S. So, just kind of how are you reaching cat owners given the low medicalization of cats and the fact that cat owners don’t really bring their cats into the vet very often? And also, is this a vet-administered product or something pet owners can do at home via injection? Thanks.

Sure. The one thing we have done with Solensia was the learning from Cytopoint. Certainly, as you bring new technologies and create new markets, it starts with really with your KOLs. So our plan, as you probably saw in 2021, was first to start with early experience with some of the key opinion leaders in each of the markets to get them experience, to get them talking for general practitioners to be able to call them and sort of hear their experiences seeing videos. As you think about, you made a really good point. You have seen with regards to pet owners. We are also trying to provide tools for pet owners to be able to know when their cat is in pain. Cats do a great job of hiding it. So, that’s really been a focus on videos to show them what it looks like so they can sort of notice it, giving a big awareness campaign there, and then helping vets understand how to make it easier for people to either bring their cats in or there are some now cat-only clinics or the ability to have vets go out and do injections or have technicians go out and do injections. We are not focused right now on having monoclonal antibodies being able to be done by consumers at their house. This is a pretty advanced technology. Our focus is really on helping to raise awareness, increase the medicalization and make treating these cats easier either at the clinic or at home. There is really no reason, for example, technician, once the vet that has seen it can’t do the monthly injection at home. So, we are just seeing really positive, but it takes a thoughtful creation of the market. And as I talked about before, that would be our plan in the U.S. as well. We will start with early experience, get that – get the KOLs talking, get things able to be seen for multiple cats. And that really helps us, once you get in the GPs, ensure that they are using it and they know how to do it successfully. So, that is our plan as we think about it.

Thanks. Good morning. I guess just two questions for Kristin, specifically with respect to your outlook for the livestock segment in aggregate, anything you could say about growth expectations for the specific species and what – which of those may have more risk based on your current assumption than others? And then just switching gears to the international markets and specifically thinking about regions where you showed 20% plus or stronger growth, Chile, Italy, China, etc., can you just talk maybe a little bit more about the key drivers there? How much of the growth is coming from companion versus livestock? Which markets is the company over-performing? And what are the key drivers of that over-performance? Thanks.

Sure. Thanks, Elliot. I will take the first, and I will let Wetteny take your second one on some of the specific international markets. As we talk about livestock, first of all, it has been hit much harder with COVID than the pet care space. Pet care has actually been a beneficiary of COVID. And it’s, by its nature, a cyclical industry. So, it can go up and go down. Ultimately, we believe as you look at sort of once we get past the DRAXXIN and some of the other big product LOEs, it will go back to mid-single digit growth. But if you double-click that a little way, obviously, the biggest challenge for us specifically has been cattle, and that’s really been led by DRAXXIN, which overall last year declined by 15%, which was in line with our expectations. We expect in 2022 to have a 20% decline as we had a full year with generic competition there. But there is a lot of bright spots as you look at different species to your point. You look at fish, they grew 23% in 2021. We see that as a fast-growing species with really positive fundamentals. We think poultry, which grew last year 6%, may be a little bit more challenged, obviously, in the U.S. with some of the generic competition there. But we are really excited about some of the innovative things that we are launching there. We saw swine last year at 4%. So, livestock is not one, as you know, and it obviously varies by market. And I think it’s important to sort of note as you look at international, it was growing in livestock significantly last year. So, if you really pull out the DRAXXIN effect. As we look at livestock, we do believe it will go back to, for us and for the industry, mid-single digits. For us, we have just got to get out of some of these near-term LOEs. We are also excited about our pipeline there, which we think, again, can drive incremental growth above the market as we launch innovation into that sector. So, I don’t know, Wetteny, you want to take some of the specifics on the international markets, emerging markets, Brazil, China.

Yes, absolutely. Look, one of the most remarkable things, at least in my first year here, that I have come to realize is what we are seeing in terms of trends on companion animal, not just in the U.S., but we are seeing them across the emerging markets. Now if you step back, international is still about just over 50% of our international revenues; our livestock and companion animal is about just over 40%. However, the pace of growth that we are seeing across markets is absolutely phenomenal. Markets like China that used to be mostly livestock is now about 50% companion animal. And elsewhere, even when we talk about Brazil, we are seeing a really great year across cattle, etc. Brazil is growing double digits in companion animal. So, we believe those trends – those same reasons that are driving growth for companion animal, where pet owners prioritize the health of their pets and are willing to spend more on them, we are seeing those across international markets, and we see those outpacing growth versus livestock, although we have seen livestock growth in international markets, as Kristin mentioned. It was 8% growth in livestock in 2021 across our international markets. And if you look at species, fish, for example, is 100% of our fish business is outside the U.S. So, that’s one area of growth that we anticipate as well. So hopefully, that gives you some color looking across international.

Hi, good morning. Could you discuss your expectation on vet staffing in the near term and the potential impact on Zoetis' Companion Animal segment, if any? And then I have a second question on Simparica Trio. Can you give us more details on the label expansion, how significant could be the new indications? Thank you.

Thanks so much. I will start with the vet staffing – short-term and long-term. We did see some challenges in the U.S. in December and January, given absenteeism with COVID, and that was sort of short-term. So, as you look at trends overall in the U.S., we continue to see those to be strong with 8% revenue growth led by a 3% increase in traffic and spend per visit at 5%. Double-clicking on that traffic 3%, we think, again, it will get back to sort of what are our more normal trends. There have been a challenge, as you mentioned, given there are so many more pets being seen, making sure that the staffing levels at both the vets and the technicians remain strong. We are really focused on partnering with both the American Veterinary Medical Association and the American Veterinary Medical College in the U.S. and honestly, around the globe to ensure there is a reliable supply of vets and vet technicians. But importantly as well to make sure that the veterinary profession and vet clinics remain really attractive jobs, and so it’s really partnering with different organizations to make sure that that is the case. I would say everyone is aligned here. I think you are seeing significant increases in compensation for many of these vets. We firmly believe that they are doing the right things to make sure that they can provide the great customer care and pet care that they need to. But obviously, it’s something that we are highly invested in partnering across the industry to make sure that pets get the care that they need and the staffing levels remain high. It is a challenge given the very quick growth in the number of pets that were adopted over the last two years. So, the challenge is there, but we are really confident that in partnership with many other companies, pharmaceutical companies, as well as vet clinics and associations, we can ensure that the vets and the vet technicians can meet that need. Do you want to add anything on the question about Trio label extensions in the future? I don’t think we have been specific about what we are looking at there, and we wouldn’t just for competitive reasons.

Hi, thank you. Just a couple of follow-up questions. First on Solensia and the U.S. launch, can you just clarify that the launch in the second half of this year is just a setup for getting education and preparation as opposed to any supply issues? And will you be coordinating the marketing with Librela in the U.S. once it gets approved? Second question, just to follow up on the derm side of it, for 2022, I don’t think you said a growth target, but clearly, you have got to be pretty optimistic with no competition coming in for this year. Do you think that you could see growth matching the 2021 trends? And do your assumptions for the derm include a U.S. chewable or any feline options? Thank you.

Sure. With regards to Solensia, yes, we are focused when we think about the long term to ensure that we start with early experience. We build that market, and we will obviously launch shortly thereafter. But we are not concerned there on a supply issue. The plans that we have assume supply for exactly what we are planning on doing. So, that is not what’s driving that one. And derm in 2022, we continue to expect robust growth obviously with – right now, as we talked about, we are not expecting competition next year, of course, we could be wrong, but we are not. And therefore, we will invest aggressively, not just in the U.S., but outside the U.S. That does not, to your question, assume that we have Apoquel chewable in the U.S. and nor does that number that we are talking about in derm assume that we are having it for cats. So, we really believe with Apoquel, Cytopoint, Apoquel chewable outside the U.S., we can continue to drive robust growth in 2022 across the category. Great. Look, thank you, everyone, for your questions and your continued interest in Zoetis. Just to summarize, I am really proud of what Zoetis delivered in 2021, having our best year ever. And we see that positive momentum really continuing into 2022, as I think you heard today from both Wetteny and myself, we will continue to build on our diverse global portfolio and really our strength in pet care, diagnostics, and emerging markets to grow faster than the market in 2022 and beyond. And we are committed to the investments in talent, technology, manufacturing, and innovation that will spur our future growth. So, thanks so much, everybody, and talk to you soon.

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