What makes Zoetis's business attractive is the depth and breadth of its offerings, which include vaccines, anti-infectives, and parasiticides, serving a diverse array of pet and livestock species. This wide-ranging portfolio of blockbuster drugs is built along much the same lines as that of its former parent company, Pfizer.
Zoetis's blockbuster portfolio
Zoetis defines a "blockbuster" drug as any pharmaceutical product that generates at least $100 million per year. Using that metric, the company maintains an impressive 13 blockbuster products. This blockbuster portfolio positions Zoetis as the leader among the major animal pharmaceutical companies.
Diving deeper into its leading market position: Zoetis is the No. 1 animal pharma company when it comes to companion animals (pets), livestock cattle, and fish markets. The company is No. 2 in swine and No. 3 in poultry.
|Product Category||2020||2019||Year-Over-Year Change|
|Vaccines||$1.48 billion||$1.48 billion||(0%)|
|Anti-infectives||$1.21 billion||$1.25 billion||(4%)|
|Parasiticides||$1.17 billion||$966 million||21%|
|Dermatology||$941 million||$770 million||22%|
|Other pharmaceuticals||$821 million||$780 million||5%|
Overall, Zoetis has over 300 product lines on the market today, and it's still growing. Much like Pfizer, Zoetis dominates its core markets, offering multiple brands that earn billions per year. Granted, the human health market is significantly larger than its animal counterpart -- but for Zoetis, this also means less competition from other drug makers.
Generic competition coming
That said, there are some potential bumps in the road ahead. Zoetis has long enjoyed the success of its blockbuster portfolio, but as with the human pharma market, patents don't last forever. Draxxin, one of the company's high-earning livestock products, has recently gone off-patent. The company has noted that as generic competition arrives, it expects Draxxin's sales to decline by as much as 20% to 40% in the coming years.
Luckily for Zoetis shareholders, no single product accounts for more than 10% of revenue. This means that a drug like Draxxin going off-patent won't completely alter the company's financial performance, although it can still have an impact.
As with many things in life, the best strategy is diversification. Zoetis will continue to face generic competition in some of its drugs, but it doesn't have all of its eggs in one basket.
Strong drug pipeline
Innovation is a key factor in supporting Zoetis's future growth. The company develops and maintains a drug pipeline, with an average top product age of 29 years. It also consistently releases new products and makes improvements. This is illustrated by the more than 1,100 new products and enhancements to existing products introduced in the past five years.
Zoetis's pipeline also holds significant blockbuster potential. Last year, the company released Simparica Trio, a "triple threat" parasiticide that protects against heartworm disease, kills ticks and fleas, and treats and prevents hookworms and roundworms. This is the first product to combine protection for fleas, ticks, and heartworms in one treatment. Trio brought in $150 million in net revenue in its first year despite the pandemic.
Looking to future products, Zoetis plans to introduce Librela and Solensia later this year. These two drugs, the first of their kind, use long-acting monoclonal antibodies to treat pain associated with osteoarthritis in cats and dogs. Solensia is the first osteoarthritis treatment for felines to ever go to market, and management expects both Librela and Solensia to become blockbuster products.
The Pfizer of animal healthcare
For growth investors eyeing the animal healthcare industry, Zoetis looks poised to continue growing thanks to key trends in pet adoption, spending on pets, and innovation in veterinary care. Livestock growth trends are also positive, supported by the growing global demand for protein.
Simply put, Pfizer and Zoetis have mastered how to develop drugs and bring them to market. It shouldn't be a surprise that Zoetis was once a part of Pfizer, but given how successful Zoetis has become, perhaps the student will one day teach the master.