Zoetis Inc. · NYSE:ZTS
Zoetis — Investor Day (May 2023)
121 slides from Zoetis's investor day presentation, May 25, 2023
Slide 1: Shaping Animal Health for the Next Decade
Shaping Animal Health for the Next Decade Zoetis Investor Day May 25, 2023
Slide 2: Introduction
Introduction Steve Frank Vice President, Investor Relations
Slide 3: Forward-Looking Statements; Non-GAAP Financial Information
Forward-Looking Statements This presentation contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects, future operating or financial performance; future guidance, future operating models, disruptions in our global supply chain; R&D c
Slide 4: Agenda
Agenda 9:00 – 9:45 Our Strategy & Ambitions: Kristin Peck, CEO 9:45 – 10:15 Power of Our R&D: Robert Polzer, PhD, EVP and President of R&D 10:15 – 10:45 Delivering Our Value Proposition: Panel Discussion • Jeannette Ferran Astorga, EVP, Corporate Affairs, Communications and Chief Sustainability Offi
Slide 5: Our Strategy and Ambitions
Our Strategy and Ambitions Kristin Peck Chief Executive Officer
Slide 6: What you will hear today
What you will hear today 1 Building on Our Leadership in Animal Health We have the right strategy, talent and capabilities to shape and expand the future of Animal Health. 2 Delivering Growth in a Dynamic and Resilient Industry Animal Health is an essential and attractive growth market, and we are c
Slide 7: Building on Our Leadership in Animal Health
Building on Our Leadership in Animal Health
Slide 8: [insert Purpose video]
[insert Purpose video]
Slide 9: Our Purpose
Our Purpose To nurture our world and humankind by advancing care for animals
Slide 10: Our Vision
Our Vision To be the most trusted and valued animal health company, shaping the future of animal care through our innovation, customer obsession and purpose-driven colleagues
Slide 11: Our Strategic Priorities
Our Strategic Priorities Power our business Lead through Deliver an exceptional through digital innovation across our experience to delight solutions and data diverse portfolio our customers insights Support a workplace Advance sustainability Perform with where our colleagues in animal health for ex
Slide 12: Our Core Beliefs
Our Core Beliefs Our colleagues make the difference Always do the right thing Customer obsessed Run it like you own it We are one Zoetis
Slide 13: Zoetis at a glance
Zoetis at a glance 70+ $8.1B 7 8 Years of Experience Annual Major product Core animal revenue categories species We provide: 100+ Revenue from Medicines Countries where 29 64% companion animal products1 Manufacturing Vaccines Zoetis products Revenue from 35% sites livestock products1 are sold Diagno
Slide 14: We remain committed to the four tenets of our Value Proposition
We remain committed to the four tenets of our Value Proposition Grow revenue Invest in innovation Increase adjusted Return excess capital faster than the market and growth capabilities net income faster to shareholders than revenue
Slide 15: Grow revenue faster than the market
Grow revenue faster than the market Our track-record Path forward - next 3 to 5 years Grow annual revenue Grew revenue operationally mid-to-high single digits2 3% • Broaden existing billion-dollar faster than the core animal franchises health market1 since our IPO • Innovate and build new franchise
Slide 16: Invest in innovation and growth capabilities
Invest in innovation and growth capabilities Our track-record Path forward - next 3 to 5 years >$4B 1 Drive ROIC3 accretion4 Invested in R&D, building billion-dollar franchises • Prioritize R&D investment in the highest and 15 blockbusters2 ROIC opportunities Acquired • Transform the standard of car
Slide 17: Increase adjusted net income faster than revenue
Increase adjusted net income faster than revenue Our track-record Path forward - next 3 to 5 years Grew adjusted net income Enable margin faster than revenue improvement2 annually • Expand revenue in higher margin product categories Expanded margins • Leverage scale to drive bottom line >1250bps per
Slide 18: Return excess capital to shareholders
Return excess capital to shareholders Our track-record Grew dividends by Path forward - next 3 to 5 years ~20% annually 1 Maintain balance between Bought back investments and return of capital >$5B 2 • Reinvest in the business to drive of Zoetis shares growth • Target strategic business development
Slide 19: Delivering Growth in a Dynamic and Resilient Industry
Delivering Growth in a Dynamic and Resilient Industry
Slide 20: Core Animal Health market has shown steady and resilient operational growth over time
Core Animal Health market has shown steady and resilient operational growth1 over time ~3% 5.4% Growth in 2009 average per year recession since 2008 12% 10% 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012 2013 2014 Axis Title 2016 2015 2017 2018 2019 2020 2021 2022 Source: Vetnosis for historical core anima
Slide 21: Animal Health poised for strong, sustainable growth
Animal Health poised for strong, sustainable growth Innovation and market expansion are increasing opportunities Expected Market Growth ($B)1 Key Market Drivers in the $70B-$85B next 5 – 10 Years ~$45B 1 • Increasing medicalization $55B–$65B 4-6% • Growing human-animal bond CAGR 4-6% • Innovating to
Slide 22: Pet owners are younger, wealthier and more focused on animal care
Pet owners are younger, wealthier and more focused on animal care ~50% of pet owners in the U.S. are Gen Z or Millennials High income households in the U.S.: • Often own one or more pets • Are more willing to spend during a down economy Source: American Pet Products Association (APPA) National Pet O
Slide 23: Human-animal bond is reaching new levels
Human-animal bond is reaching new levels 95% of owners view their pet as a family member1 90%+ of owners would do anything to prevent their pet from suffering1 When faced with a 20% decrease in budget, pet owners say they will not spend less on their pets2 1 Human Animal Bond Study, September 2021 2
Slide 24: Pet medicalization and lifespan are increasing
Pet medicalization and lifespan are increasing • Pets are receiving more medical care as the human-animal bond grows and economies expand • Pets are living longer lives, providing more opportunities for enhanced care and advanced therapies • Our focus on innovation helps meet new market demand and u
Slide 25: Vet clinic trends in U.S. continue positive momentum
Vet clinic trends in U.S. continue positive momentum Vet clinic visits Spend per visit Clinic revenues growing again up ~33% up 39% after decline from since 2017 since 2017 pandemic1 peak (5.9% CAGR)2 (6.8% CAGR)3 1Q23 39% Growth 1Q23 9% Growth $46 B 295 M 1Q23 2% Growth $165 290 M $155 $42 B 285 M
Slide 26: Livestock is poised for continued growth
Livestock is poised for continued growth 2-4% market growth anticipated over the medium to long term 25 ~3% 20 Market size ($) 15 10 5 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Ruminants Swine Poultry Fish Source: Vetnosis for ruminants, swine and poultry; Zoetis internal estimates for fis
Slide 27: Global demographic trends drive animal protein demand
Global demographic trends drive animal protein demand Meat Consumption (Billions of Kg) vs. Global Population (Billions) Population growth, compounding with GDP growth, will increase 12.0 360 meat consumption 11.0 330 10.0 308 310 • Nearly 2 billion more people to 9.0 287 9.7 feed by 2050 globally 8
Slide 28: Alternative proteins failing to show growth after initial launch
Alternative proteins failing to show growth after initial launch Since 2020, U.S. sales of plant-based meat have decreased steadily U.S. Retail Plant-based Meat Volume Equivalent (Millions - Volume Equivalents) 170 162 155 2020 2021 2022 Source: Nielsen
Slide 29: Emerging tailwinds in Livestock should propel the market — and Zoetis
Emerging tailwinds in Livestock should propel the market — and Zoetis Supporting Market Trends Swine demand Global poultry Shift from treatment Impact of Aquaculture growing rebounding in China growth to prevention and Generics double digits sustainability annually Portfolio and Industry-leading Sig
Slide 30: Petcare poised for strong sustainable growth
Petcare poised for strong sustainable growth Younger And Wealthier Pet Owners Stronger Human-Animal Bond Increase in Pet Medicalization Longer Pet Lives New Tech Developments Improving Vet Clinic Spend
Slide 31: Livestock continues to benefit from key fundamental growth drivers
Livestock continues to benefit from key fundamental growth drivers Global Population Growth Increased Access to Animal Protein Globally Lack of Relevance of Alternative Proteins Short Term Headwinds Have Dissipated
Slide 32: Driving Our Next Phase of Game Changing Franchises
Driving Our Next Phase of Game Changing Franchises
Slide 33: We have a track record of building billion-dollar franchises
We have a track record of building billion-dollar franchises Petcare Innovation Next Big Opportunity Differentiates Zoetis Expected Zoetis Peak Zoetis 2022 Revenues: Annual Revenue1: Dermatology Parasiticides Osteoarthritis Pain (OA) $1.3B $1.6B $1B+ vs. <$1M in 2013 vs. $373M in 2013 1 Zoetis inter
Slide 34: Beyond today's portfolio, our innovation roots run wide and deep
PICTURE OF FULL TREE Check text Beyond today’s portfolio, our innovation “roots” run wide and deep Today’s franchises demonstrate: • Pipeline delivery and new products • Product lifecycle enhancements Future growth builds on: • Core R&D expertise • Strategic partnerships and business development • E
Slide 35: Our billion-dollar track record: Dermatology
Our billion-dollar track record: Dermatology Developing the next generation of therapies ahead of the competition Protect the market we created Global Dermatology Market • Strong vet relationships ($US B) • Exploration of new claims ~$2.1 - $2.71 • Proven and trusted brands $1.4 • Deep experience in
Slide 36: Our billion-dollar track record: Pet Parasiticides
Our billion-dollar track record: Pet Parasiticides First to market with triple-combination pet parasiticides in U.S., and we continue to innovate with next-generation therapies Global Pet Parasiticides Market Grow faster than the market as ($US B) the market expands • First-to-market advantage in U.
Slide 37: Driving the next billion-dollar opportunity: OA Pain
Driving the next billion-dollar opportunity: OA Pain Revolutionizing pain treatment for dogs and cats to drive outsized growth Creating new market via innovation Global OA Pain Market • Librela approval in the U.S. obtained earlier this ($US B) month, launch expected later this year • Build on stron
Slide 38: Broadening Diagnostics franchise with Vetscan
Broadening Diagnostics franchise with Vetscan We continue innovating to develop market-leading products Expect to grow faster than the Multiple next-gen analyzers Diagnostics market in next 24 months via product innovation and Additional indication on Imagyst scaling international in the near term G
Slide 39: Major, evolving market opportunities: Renal
We are investing in major, evolving market opportunities: Renal Renal Market • 10 million cats and dogs globally (US M$) have chronic kidney disease ~$1,0001 (CKD) • Opportunity to expand treatable population and improve patient outcomes with earlier CKD detection ~$300 • Market creation through inn
Slide 40: Major, evolving market opportunities: Cardiology
We are investing in major, evolving market opportunities: Cardiology Cardiology Market (US M$) • DMVD1 is the most common type of heart disease in older dogs ~$7002 • Strong vet interest for solutions across the continuum of care M • Advances in Dx and Therapeutics ~$250 are raising awareness and dr
Slide 41: Major, evolving market opportunities: Oncology
We are investing in major, evolving market opportunities: Oncology Oncology Market (US M$) • Unmet needs in cancer care treatment and high prevalence in older pets ~$8001 • Potential for broader use of therapies by general practitioners ~$300 • Opportunity for innovative solutions in diagnostics and
Slide 42: Continued commitment to livestock innovation
Continued commitment to livestock innovation Investing in the future of the livestock industry • R&D aligned to new market trends • Strength in vaccines, genetics and our core portfolio • Further developing immunomodulators, precision animal health and sustainable solutions for healthy animals • Dri
Slide 43: Emerging markets represent meaningful growth potential
Emerging markets represent meaningful growth potential Key Current Emerging Medium-Term1 Longer-Term Markets: Growth Markets: Growth Markets: China & Brazil e.g., Eastern Europe, LatAm, e.g., Africa and Southeast Asia 1 3-5-year time period.
Slide 44: Investing in Capabilities and Innovation that Differentiate Zoetis
Investing in Capabilities and Innovation that Differentiate Zoetis
Slide 45: Our investment in R&D fuels our innovation track record
Our investment in R&D fuels our innovation track record $4B+ Adjusted R&D investment1 over 10 years ($ million and as % of sales) 700 8.6% 7.3%-7.7% 10.0% 8.2% 600 7.6% 7.7% 7.4% 7.3% 7.2% 6.9% 6.7% 8.0% 6.5% 500 400 6.0% 300 $635-$660 507 538 4.0% 200 430 455 462 391 394 360 374 380 2.0% 100 0 0.0%
Slide 46: Actively pursuing business development to enhance our reach
Actively pursuing business development to enhance our reach, capabilities and commercial offerings Recent acquisitions support Our team has a proven track-record of our value-creation strategy integrating and enhancing acquisitions Expands product Furthers R&D Double-digit revenue growth CAGR since
Slide 47: Our global manufacturing footprint supports agile supply chain
Our global manufacturing footprint supports agile supply chain 29 sites globally ~9x mAbs drug substance capacity increase to 69k liters over past 5 years 1 Significant investments in existing and new sites: Atlanta, Tullamore, Kalamazoo, China 1 From 2018 to 2023 estimate.
Slide 48: Building the best customer experience in the industry
Building the best customer experience in the industry Customers recommend Zoetis over peers and are highly satisfied Net Promoter Scores1 60 38 US Peer avg 60 26 Global Peer avg Zoetis Customer Satisfaction2 80% 81% US International 1 2022 Vet NPS Overview – Zoetis internal estimates 2 Percent Satis
Slide 49: Next Generation Sales Engine (NGSE)
Our field is empowered by our world-class Next Generation Sales Engine (NGSE) NGSE leverages digital and data analytics to enhance customer experience and field effectiveness alike Key Outcomes • +30-50% call activity and $7K to $17K Data & Advanced Analytics higher average weekly sales per rep that
Slide 50: Zoetis is proactively building relationships with pet owners
As the pet owner’s importance continues to grow, Zoetis is proactively building relationships U.S. investments in pet owner relationships 2.5M $120M+ Pet owners enrolled in Investing in 2023 Zoetis Petcare Rewards between Zoetis Petcare (vs. 708k in 2018) Rewards and Direct-To- Consumer Marketing in
Slide 51: Integration of sustainability drives innovation and resiliency
Integration of sustainability drives innovation, business resiliency and greater access to care Zoetis strives to be the world's most sustainable animal health company • Supporting the veterinary profession and PLANET increased access to animal care COMMUNITIES ANIMALS Care and Innovation in The Dri
Slide 52: Creating a supportive workplace and culture
Creating a supportive workplace and culture where colleagues can thrive >88% Consistent rate of overall colleague engagement Source: Colleague Engagement survey scores, 2019-2022.
Slide 53: Committed to Creating Value
Committed. to Creating Valu Oe - oetis ad ZO
Slide 54: We remain committed to the four tenets of our Value Proposition
We remain committed to the four tenets of our Value Proposition Grow revenue Invest in innovation Increase adjusted Return excess capital faster than the market and growth capabilities net income faster to shareholders than revenue
Slide 55: Our continued commitment to value creation
Our continued commitment to value creation Key components of our 3 to 5 year outlook Grow revenue faster Invest in innovation and Increase adjusted net Return excess capital than the market growth capabilities income faster than revenue to shareholders • Broaden existing billion-dollar • Prioritize
Slide 56: Key Takeaways
Key Takeaways 1 Building on Our Leadership in Animal Health We have the right strategy, talent and capabilities to shape and expand the future of Animal Health. 2 Delivering Growth in a Dynamic and Resilient Industry Animal Health is an essential and attractive growth market, and we are confident in
Slide 57: Summary
Summary We are well-positioned to grow faster than the market, expand margins and balance capital return with investment opportunities that will increase shareholder value.
Slide 58: Power of Our R&D
Power of Our R&D Rob Polzer Executive Vice President and President, Research and Development
Slide 59: What you will hear today
What you will hear today 1 Our R&D Capabilities Leading the industry in value across the continuum of animal care and our unique approach to innovation. 2 Our R&D Investment Priorities Animal health differs from human health and how we are focusing our investments. 3 Propelling Growth How we address
Slide 60: Our R&D Capabilities
Our R&D Capabilities
Slide 61: Leading the industry in innovation and value across the continuum of care
Leading the industry in innovation and value across the continuum of care over the last 10 years >2000 regulatory approvals 15 blockbusters1 9 of 15 blockbusters delivered in the last 10 years Chemistry Analyzer 1 A blockbuster is a product or product line that has $100M or more in annual revenue. B
Slide 62: Investment in new products balanced with lifecycle innovation
Our investment in new products is balanced with lifecycle innovation New Products1 60%-70% Lifecycle Innovation1 30%-40% 1 Represents range of total Zoetis annual Veterinary Medicine Research & Development (VMRD) expenses for the past 5 years.
Slide 63: Building durable franchises through lifecycle innovation
Building durable franchises through lifecycle innovation 2023 Lifecycle Innovation Investment1 ~5% ~5% ~5% ~15% ~35% ~35% Other New Claim New Formulation Geo Expansion New Combination New Species 1 Represents approximate distribution of Zoetis estimated VMRD expenses for 2023.
Slide 64: Investment in key companion animal therapeutic areas
Investment in key companion animal therapeutic areas1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Parasiticides Allergy & Dermatology Pain & Inflammation Renal / Cardio / Oncology New Product New Formulation New Label Claim New Combination New Species Geo Expansion 1 Represents total Zoetis estimate
Slide 65: Our scale and diverse capabilities give Zoetis an advantage
Our scale and diverse capabilities give Zoetis an advantage across the continuum of care PREDICT Genetics Vaccines, robotics and automation PREVENT Data analytics and sensors DETECT Diagnostics TREAT Medicines
Slide 66: Genetics to Therapeutics
Genetics to Therapeutics Leveraging our diverse capabilities to attain rapid understanding of disease pathways, progression and biological targets for intervention Petcare Genetics Risk from Basepaws What’s the animal’s Outcome disease risk? Better identification of Progression Value biological targ
Slide 67: Our incubator model increases efficiency and speed to fuel our pipeline
Our incubator model increases efficiency and speed to fuel our pipeline • Focused resourcing • Advancing 20+ mAb substrates across species and targets in parallel vs. traditional sequential approach • Increases chance of success
Slide 68: Well-balanced investment across the continuum of care
Well-balanced investment across the continuum of care1 ~10% ~10% More than 50 mAbs targets ~25% ~30% across 5 species ~25% Biopharma Bios Pharma Diagnostics Other 1 Represents approximate total Zoetis estimated VMRD expenses for 2023.
Slide 69: Our R&D Investment Priorities
Our R&D Investment Priorities
Slide 70: Animal health is distinctly different from human health
Animal health is distinctly different from human health Innovation combined More predictable and with significant less costly R&D product lifecycle model focus Limited third-party payers; direct selling Greater brand loyalty relationships Complexity of 8 different species and distinct regional needs
Slide 71: Interconnected capabilities and purposeful process ensure consistent delivery
Interconnected capabilities and purposeful process ensure consistent delivery Governance
Slide 72: R&D investment decisions based on four key criteria
R&D investment decisions based on four key criteria A consistent, rigorous and accountable portfolio investment approach Continual portfolio assessments Continual learning Customer Commercial Technical Return on importance value feasibility investment Continual learning Continual portfolio assessmen
Slide 73: Robust portfolio delivery
Robust External Intelligence portfolio delivery requires investment in Proactive Scouting Research Alliances external External innovation Innovation opportunities Due Technology Diligence Assessment Substrate / Product / Expertise Evaluation
Slide 74: Ensuring consistent portfolio delivery
Ensuring consistent portfolio delivery Product profile and market dynamics Risk mitigation Project timeline
Slide 75: Propelling Growth
Propelling Growth
Slide 76: Deliberate investment across market opportunities
Deliberate investment across market opportunities1 ~30% ~40% ~30% Established Opportunities Strategic Differentiation Disruptive Innovation Well-understood market Well-understood market Market creation or segments with high segments where targeted significant expansion confidence in value differenti
Slide 77: Investing for consistent delivery over the next decade
Investing for consistent delivery over the next decade1 Incubator and ~20-30% early research More than 7 years approaches ~45-55% Less than Near-term feed the 4 years longer-term projects feed ~25-35% our product 4-7 years portfolio 1 Represents range of total Zoetis VMRD expenses for the past 5 yea
Slide 78: Future Innovations
Future Innovations
Slide 79: Our growing investment in companion animals
Our growing investment in companion animals1 COMPANION ANIMALS LIVESTOCK ~60% - 65% ~35% - 40% 1 Represents range of estimated VMRD expenses in 2023 and projected VMRD expenses in 2024.
Slide 80: Key areas of investment for petcare
Key areas of investment for petcare Protect and expand New innovation Diagnostics franchises including mAbs
Slide 81: Key areas of investment for livestock
Key areas of investment for livestock Genetics Focus on Mitigating Alternatives prevention with greenhouse gas to antibiotics vaccines emissions
Slide 82: Zoetis will continue driving innovative care in animals
Zoetis will continue driving innovative care in animals Consistent Delivery Robust & Diverse Rigorous Process Portfolio Insights from data analytics further boost our innovation capabilities
Slide 83: Panel Discussion
Panel Discussion Jeannette Jamie Brannan Nick Ashton Wafaa Mamilli Ferran Astorga EVP and President, EVP and President, EVP, Chief Digital and International Operations Global Manufacturing Technology Officer and EVP, Corporate Affairs, and Aquaculture and Supply Group President for Communications an
Slide 84: Our Financial Roadmap
Our Financial Roadmap Wetteny Joseph Executive Vice President and Chief Financial Officer
Slide 85: We remain committed to the four tenets of our Value Proposition
We remain committed to the four tenets of our Value Proposition Grow revenue Invest in innovation Increase adjusted Return excess capital faster than the market and growth capabilities net income faster to shareholders than revenue
Slide 86: Grow revenue faster than the market
Grow revenue faster than the market • Broaden existing billion-dollar franchises PATH FORWARD • Innovate and build new franchise Grow annual opportunities revenue mid-to-high • Expand across attractive emerging single digits1 markets • Accelerate commercial excellence to take share 1 Medium to long-
Slide 87: Proven track record of financial performance
Proven track record of financial performance Zoetis has consistently grown faster than the core 15% animal health market 10% 8% 8% 8% 8% 8% 8% 8% 7% 7% 7% 6% 6% 5% 5% 4% 4% 3% 2% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1 2 Zoetis Organic Operational Revenue Growth Industry Operational Reve
Slide 88: Fundamental industry growth drivers are compelling
Fundamental industry growth drivers are compelling Attractive end markets Demographics Standards Global Modernization Global Access of Care Population to Animal Growth Protein Industry Growth
Slide 89: Compelling market position
Compelling market position Established world leader in Animal Health1 By Species By Product Category By Geography Market Leader in Species High Growth Franchise Representing ~90% of Areas3 Other Pharma2 #1 #1 Our Portfolio by Revenue3 North America Companion Animal #1 Anti-Infectives #1 Dermatology
Slide 90: Diverse, durable and innovative portfolio
Diverse, durable and innovative portfolio Diversity across 7 8 151 geographies, Major Product Categories Core animal species Blockbusters species and product categories drives steady +302 ~300 >2,000 Year average Product lines New products and performance market life of key brands in lifecycle innov
Slide 91: Multiple sources of revenue growth
Multiple sources of revenue growth Companion animal Key dermatology Osteoarthritis (OA) parasiticides portfolio pain $1.6B FY221 $1.3B FY221 est. $1.0B+ Peak2 Global Growth in New product diagnostics emerging markets categories 1 Zoetis product category revenue 2 Based on internal Zoetis estimates
Slide 92: Invest in innovation and growth capabilities
Invest in innovation and growth capabilities • Prioritize R&D investment in the highest ROIC opportunities • Transform the standard of care PATH FORWARD through innovative products Drive ROIC1 • Increase supply chain capabilities, accretion2 capacity and agility • Deliver greater value to vets, prod
Slide 93: Track record of ROIC investment discipline
Track record of ROIC investment discipline Return On Invested Capital is our guiding principle 30.00% Zoetis 25.00% S&P 500 Pharma 20.00% S&P 500 Healthcare 15.00% S&P 500 10.00% 5.00% 2019 2020 2021 2022 Source: S&P Capital IQ Note: ROIC including Goodwill is based on Operating Profit after tax tim
Slide 94: Reinvest to drive compelling growth
Reinvest to drive compelling growth High ROIC investments to support future profitable revenue growth Advertising Digital R&D CapEx 2020-2022 & Promotion & Data 1 Investment $1.5B $1.5B $800M $800M Build Growth Field Selling Broad-based Increase Future Capacity and Productivity/ Sustainable Awarenes
Slide 95: Unique Animal Health R&D model
Unique Animal Health R&D model Compelling innovation with balanced risk Faster Lower cost than development Human Health timelines Higher success Long innovation rates cycles Attractive global No government regulatory position payer
Slide 96: Capital investments prioritize growth and returns
Capital investments prioritize growth and returns Key growth-oriented capital expenditures include additional manufacturing capacity $1B Major Capital Projects: Estimated 2023 CapEx Productivity R&D Maintain Grow Lincoln Atlanta
Slide 97: DTC advertising increases awareness; digital and data drive productivity
DTC advertising increases awareness; digital and data drive productivity
Slide 98: M&A and strategic partnerships
M&A and strategic partnerships • Leverage our scale Access complementary Fill portfolio gaps and acquire new • Partner of choice for spaces products innovation Growth Improve customer Levers Expand experience / offer geographic new services reach Access new Acquire technologies new and IP customers
Slide 99: Increase adjusted net income faster than revenue
Increase adjusted net income faster than revenue • Expand revenue in higher margin product categories PATH FORWARD Enable margin • Leverage scale to drive bottom line performance improvement1 • Optimize and simplify to increase productivity and efficiency 1 Targeted average over the forecast period
Slide 100: Track record of margin expansion
Track record of margin expansion Adjusted net income margin improvement driven by our portfolio mix, ability to take price, and operational efficiency 45% 41% 42% 42% 40% 40% 38% 37% 35% 35% 31% 29% 30% 28% 28% 28% 28% 28% 26% 25% 22% 20% 19% 20% 16% 17% 15% 2013 2014 2015 2016 2017 2018 2019 2020 2
Slide 101: Revenue growth and operational execution drives strong bottom line
Revenue growth and operational execution drives strong bottom line 15% Operational EPS CAGR1 Adjusted Diluted Earnings Per Share2 $4.88 $4.70 $3.85 $3.64 $3.13 $2.40 $1.96 $1.77 $1.42 $1.57 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1 From 2013 to 2022, excludes the impact of foreign exchange
Slide 102: Growth and margin expansion through price increases
Growth and margin expansion through price increases Operational Net Price Increases1 4.0% 3.0% 2.6% 2.4% 2.2% 1.0% 2018 2019 2020 2021 2022 2023E 1 Based on internal Zoetis net price calculations and estimates 102
Slide 103: Companion Animal growth creates margin expansion
Companion Animal growth creates margin expansion Companion Animal is an increasing driver of revenue growth and margin improvement 2013 2022 2027 35% 64% 70%+ 1 Companion Companion Companion Animal Animal Animal Companion Animal revenues as a % of total Zoetis revenues 1 Based on internal Zoetis est
Slide 104: Monoclonal antibodies expected to represent increasing share of Companion Animal revenue
Monoclonal antibodies expected to represent increasing share of Companion Animal revenue 2013 2022 2027 0% 15% 25%+ 1 Companion Companion Companion Animal Animal Animal Monoclonal Antibody Revenues as a % of Total Companion Animal Revenues 1 Based on internal Zoetis estimates
Slide 105: Monoclonal antibodies also expected to expand margins
Monoclonal antibodies also expected to expand margins Sales and contribution margin for Librela and Solensia 70% 60% 50% 40% + Pain mAbs Contribution Margin $1B+ 30% 20% 28% Zoetis Adjusted 10% Net Income Peak Sales Margin1 0% 1 Based on 2022 actual Zoetis adjusted net income margin and internal est
Slide 106: Proven track record of OPEX discipline
Proven track record of OPEX discipline Driving a leaner more efficient structure OPEX as a % of Revenue1 40% 900bps 31% Demand 24% Generation2 600bps 18% G&A / 8% Other 100bps 7% R&D 9% 200bps 7% 2013 2022 1 Percentages may not add due to rounding 2 Demand Generation includes Selling, Marketing, and
Slide 107: Key drivers of additional profit growth
Key drivers of additional profit growth Operating expense leverage 2024+ R&D Grow in-line with revenue growth Field Selling Global scale allows us to grow faster Other Selling than G&A but slower than R&D & Marketing Digital and Data Tech growing in-line with revenue growth Other G&A Growing low sin
Slide 108: Free cash flow growth
Free cash flow growth We will normalize Inventory and CapEx to support FCF Inventory Months on Hand CapEx as a % of Revenue 14 14% 13 12% 12 10% 11 8% 10 6% 9 4% 8 7 2% 6 0% 2016 2018 2020 2022 2024 2026 2016 2018 2020 2022 2024 2026
Slide 109: Return excess capital to shareholders
Return excess capital to shareholders • Reinvest in the business to drive growth PATH FORWARD Maintain balance • Target strategic business development to enhance innovation between investments • Grow dividend above adjusted net and return of capital income • Continue systematic share buybacks
Slide 110: Historic capital return
Historic capital return Disciplined and balanced capital allocation priorities Uses of Operating Cash Flow Since the IPO ($US Billion) $3 $3 Return $14B Dividends $3 Reinvest Share Repurchases $5 CapEx BD / M&A
Slide 111: Dividend growth
Dividend growth Track Record: • 10 consecutive years of dividend increases ~ 20% • $3 billion returned to shareholders since IPO CAGR1 $1.50 Key Priority: • Grow the dividend faster than adjusted net income $1.30 $1.00 $0.80 $0.66 $0.50 $0.38 $0.42 $0.29 $0.33 2014 2015 2016 2017 2018 2019 2020 2021
Slide 112: Share repurchases
Share repurchases Track Record: • Reduced share count by 7% since 2013 • Bought back >$5 billion1 of Zoetis shares since the IPO Key Priority: • Consistent and systematic buybacks flexing opportunistically $2.0 $1.6 $1.6 $1.2 $0.8 $0.7 $0.6 $0.5 $0.7 $0.3 $0.3 $0.4 $0.2 $0.0 2015 2016 2017 2018 2019
Slide 113: Our continued commitment to value creation
Our continued commitment to value creation Key components of our 3 to 5 year outlook Grow revenue faster Invest in innovation and Increase adjusted net Return excess capital than the market growth capabilities income faster than revenue to shareholders • Broaden existing billion-dollar • Prioritize
Slide 114: Q&A
Q&A
Slide 115: investor.zoetis.com
investor.zoetis.com
Slide 116: Appendix
Appendix Non-GAAP Financial Measures Disclosure and Reconciliations
Slide 117: Reconciliation Of GAAP To Non-GAAP Financial Measures
Reconciliation Of GAAP To Non-GAAP Financial Measures GAAP Reported to Non-GAAP Adjusted R&D Expense GAAP Reported Non-GAAP Non-GAAP Adjusted (Dollars in millions) R&D Expense Adjustments R&D Expense1 2013 $399 $(8) $391 2014 396 (2) 394 2015 364 (4) 360 2016 376 (2) 374 2017 382 (2) 380 2018 432 (2
Slide 118: Reconciliation Of GAAP To Non-GAAP Financial Measures
Reconciliation Of GAAP To Non-GAAP Financial Measures Reported Revenue Growth to Organic Operational Growth Operational Organic Change from Foreign Operational Efficiency Operational (Dollars in millions) Revenue Prior Year Exchange Growth1 Acquisitions Initiative2 Growth3 2013 $4,561 5% (2)% 7% 201
Slide 119: Reconciliation Of GAAP To Non-GAAP Financial Measures
Reconciliation Of GAAP To Non-GAAP Financial Measures Reported Net Income to Adjusted Net Income Margin (Dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net income attributable to Zoetis1 $504 $583 $339 $821 $864 $1,428 $1,500 $1,638 $2,037 $2,114 Purchase accounting adjustmen
Slide 120: Reconciliation Of GAAP To Non-GAAP Financial Measures
Reconciliation Of GAAP To Non-GAAP Financial Measures Adjusted Net Income to Adjusted EBITDA as a % of Revenue (Dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Adjusted net income attributable to Zoetis1 $709 $790 $889 $975 $1,185 $1,525 $1,755 $1,844 $2,240 $2,297 Interest ex
Slide 121: Reconciliation Of GAAP To Non-GAAP Financial Measures
Reconciliation Of GAAP To Non-GAAP Financial Measures Reported Diluted EPS to Adjusted Diluted EPS 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Earnings per share (EPS)-diluted1: GAAP reported EPS attributable to Zoetis-diluted2 $1.01 $1.16 $0.68 $1.65 $1.75 $2.93 $3.11 $3.42 $4.27 $4.49 Purcha