Zoetis Earnings: Librela Off to Fast Start in US, With More to Come

As we’d anticipated, Zoetis saw a strong start to 2024, fueled by its companion animal franchises. While management revised its outlook for the full year, our estimates remain within that range, and we’re holding firm on our fair value estimate. Not surprisingly, Librela for canine osteoarthritis got off to a fast start in the US, racking up $40 million in revenue for the first quarter. Despite a Wall Street Journal article last month that raised issues about Librela and potential adverse effects, we have yet to see diminished appetite by veterinarians for this therapy. Management indicated that US reorder rates have approached 80%, which we interpret as strong interest and potentially positive experiences by vets. At this point, we’re inclined to view reports of adverse effects as uncommon events. The wild success of Librela thus far and the impressive penetration of Solensia for osteoarthritis in cats underscore the strength of Zoetis’ wide economic moat, from our perspective. Zoetis has materially enlarged its footprint in large-molecule therapies for companion animals, leaving its main competitors in the dust.