Zoetis Sees Strong Companion Animal Growth to Offset Softness in Production Animals

Zoetis’ solid fourth-quarter results were a testament to the strength of its companion animal franchise, and we’ve raised our fair value estimate to $186 per share, up from $174, after adjusting our estimates for companion animal gains that will more than offset softness in the production animal segment in the near term and lowering the tax rate now that meaningful tax reform is unlikely to occur. We think the strong European adoption of Zoetis’ new monoclonal antibody Librela for canine arthritis underscores our favorable view of this firm’s intangible assets that support its wide economic moat. Zoetis continues to be the dominant leader in developing and commercializing innovative therapies for key small animal health conditions. With an ongoing launch in Europe and expected U.S. launch in 2022, we anticipate Librela (the first innovative arthritis therapy for dogs in decades) could reach animal blockbuster status ($100 million in sales) this year.