Zoetis CEO sees global factors coalescing to spur more growth

Zoetis CEO Juan Ramón Alaix

Animal health industry leader Zoetis ($ZTS)--the Pfizer ($PFE) spinoff that sparked a boom in the business last year--turned in strong second-quarter earnings. The company reported revenue of $1.2 billion for the second quarter of 2014, an increase of 4% from the same period last year.

Revenue in the U.S. totaled $459 million, a 5% increase from the same period last year, the company reported Aug. 5. The company's stateside livestock segment grew 10% and was driven by new vaccines and medicated feed additives--especially products that combat the spread of porcine epidemic diarrhea virus. The company's companion animal segment in the U.S. grew by 1%, a disappointing figure in which growing sales of its Apoquel, for itch and inflammation related to allergy in dogs, were offset by a sharp decline in sales of its Rimadyl product, for pain relief in canines.

In the Asia Pacific, a key market for Zoetis, the company netted $185 million in revenue, an increase of 5% operationally compared to the second quarter of 2013. Sales of livestock products grew by 7%, while the companion animals segment there grew by 1%. Increased sales of equine products in Australia were offset by declining sales of pet products in Japan. In Europe, Africa and the Middle East, Zoetis reported $284 million in revenue, an increase of 4%, and in Central and Latin America, the company pulled in $214 million, an 11% increase.

"In the second quarter, we grew adjusted earnings faster than sales, while facing higher expense growth driven primarily by the ramp-up of our corporate functions and timing of our promotional activities," Glenn David, acting CFO, said in a statement. "We continue making progress on establishing our Zoetis systems and infrastructure as we complete our stand-up programs."

Zoetis also attributed its second-quarter growth to its new product Actogain, which it recently relaunched in the U.S. following regulatory approval to be used in combination with other products as a feed additive to beef up cattle. It comes at a time when Merck's ($MRK) infamous Zilmax feed additive has come under scrutiny, giving it and Elanco's new Optaflexx a chance to dominate the feed additive market.

In a call with analysts, CEO Juan Ramón Alaix said that global conditions look favorable for the company going forward, according to a transcript of the call from Seeking Alpha. Falling feed prices and demand for meat will lead to more demand for Zoetis' drugs, he said: "Overall, worldwide demand for meat protein continues increasing, especially in emerging markets. In these markets, their objective is to increase their local production. But to meet their needs, they still depend on key export markets, such as the U.S. and Brazil, where we also have a significant presence."

- here's the second-quarter earnings report
- get the transcript

Special Report: Top 10 animal health companies of 2013 - Zoetis