Zoetis Inc. 2016 Annual Report
Total Page：16
File Type：pdf, Size：1020Kb
2016 ANNUAL REPORT 2016 FINANCIAL HIGHLIGHTS REVENUE GROWTH AND REVENUE BY REVENUE BY ADJUSTED EBIT MARGIN SPECIES ‡ PRODUCT CATEGORY ‡ 5%† 7%† † 4% 8% $4,888 $4,785 $4,765 40% 34% 20% 26% 10% 32% 25% 28% 26% 2% 12% 14% 2% 10% 2014 2015 2016 2014 Revenue 7% Cattle 34% Anti-Infectives 26% 2015 Revenue 8% Swine 12% Vaccines 26% 2016 Revenue 5% Poultry 10% Parasiticides 14% Adjusted EBIT** Margin Fish 2% Medicated Feed Additives 10% Other Livestock 2% Other Pharmaceuticals 20% Companion Animal 40% Other Non-Pharmaceuticals 4% * Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable REVENUE BY PRODUCT REVENUE BY to Zoetis and reported diluted CONCENTRATION ‡ TOP MARKETS ‡ earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Top Four ** Adjusted EBIT (a non-GAAP financial Products 25% 13% measure) excludes interest expense net of capitalized interest, interest 6% income and adjusted income taxes. 2% 40% 2% 2% † Represents operational revenue 2% 51% growth, which is defined as revenue 2% 60% 3% growth excluding the impact of 3% foreign exchange. 3% 3% 3% 5% Top Ten Product Lines 40% United States 51% France 2% All Other Product Lines 60% Brazil 5% Germany 2% Australia 3% Italy 2% Canada 3% Mexico 2% China 3% Spain 2% Japan 3% Other Developed 6% United Kingdom 3% Other Emerging 13% ‡ Revenue charts exclude revenue associated with Client Supply Services, which represented 1% of total 2016 revenue. $Millions (except per share data) 2014 2015 2016 Net Revenue $ 4,785 $ 4,765 $ 4,888 Net Income Attributable to Zoetis $ 583 $ 339 $ 821 Adjusted Net Income Attributable to Zoetis* $ 790 $ 889 $ 975 Diluted Earnings Per Share $ 1.16 $ 0.68 $ 1.65 Adjusted Diluted Earnings Per Share* $ 1.57 $ 1.77 $ 1.96 Net Cash Provided by Operating Activities $ 626 $ 664 $ 713 Research & Development Expense $ 396 $ 364 $ 376 Total Assets $ 6,588 $ 7,913 $ 7,649 OUR COMPETITIVE ADVANTAGES LETTER FROM OUR CEO OUR THREE INTERCONNECTED CAPABILITIES DIRECT CUSTOMER RELATIONSHIPS Through direct, face-to-face interactions with customers, our colleagues understand their local markets and businesses and are JUAN RAMÓN ALAIX able to tailor solutions that address their CHIEF EXECUTIVE OFFICER animal health and business priorities. INNOVATION Our Research and Development team focuses DEAR SHAREHOLDERS, on developing solutions that create value- generating outcomes for our customers’ most At Zoetis, our colleagues help veterinarians and livestock pressing animal health challenges. A high level of productivity distinguishes Zoetis producers raise and care for animals — farm animals and R&D. In 2016, Zoetis received more than 200 pets that address people’s fundamental needs for nutrition product approvals, including approvals of new and novel products, lifecycle innovations and companionship. for current products, new combinations of products and approvals of portfolio products We create value for our shareholders by serving the needs of in new markets. these customers, continually developing innovative products and driving efficiency throughout our operations as the world leader in animal health. In 2016, Zoetis had a pivotal year in our journey as a stand-alone QUALITY MANUFACTURING AND SUPPLY Our global manufacturing network produces company, which began with our IPO in 2013. Having simplified and delivers a high quality, reliable supply our infrastructure and operations, reduced costs and increased of products at competitive prices and increasing profit margins. We market a our cash flow since then, we transitioned from a successful diverse portfolio — some 300 product lines spin-off into a more agile and cost-effective business. Our sold in more than 100 countries. And that portfolio is incredibly durable — the average transformation has positioned us to grow revenue, improve duration of our top 24 products is 30 years. margins, invest in priority areas for profitable growth, and return excess capital to shareholders. We delivered our fourth consecutive year of operational revenue OUR VALUE PROPOSITION growth and improved profitability since becoming a public GROW REVENUE IN LINE WITH company. Contributing to our growth was the strength of our OR FASTER THAN THE MARKET 1 diverse portfolio, the successful launch of several new products, GROW ADJUSTED NET INCOME and a deep commitment to our business model based on direct FASTER THAN REVENUE customer relationships, highly productive R&D, and high-quality TARGET VALUE-ADDED INVESTMENT OPPORTUNITIES manufacturing. Our dedicated colleagues drove this performance RETURN EXCESS CAPITAL TO with their commitment to our Core Beliefs and a desire to help SHAREHOLDERS solve our customers’ most pressing animal health challenges. 1 OUR CORE BELIEFS SOLID PERFORMANCE IN 2016 EXPANDED THE APOQUEL® • Grew revenue by 5% on an operational BRAND WORLDWIDE basis, driven by our diverse portfolio Our novel targeted therapy Apoquel and introduction of new products (oclacitinib tablet) is transforming the way veterinarians manage the itching related • Grew adjusted net income* by 17% to skin allergies in dogs and has become operationally — faster than revenue a significant growth driver for Zoetis as growth — and improved our adjusted the first-in-class, Janus kinase inhibitor. EBIT** margin to 32% (or a 400 basis- point increase over 2015) In May 2016, we made Apoquel available without supply limits in the United States • Returned $488 million in excess and other countries where it was launched. capital to shareholders through We gained approvals and launched in dividends and share repurchases new important markets such as Japan We achieved these results despite and Brazil. This helped make Apoquel one several headwinds: the negative impact of our largest selling products in its third of foreign exchange rates; changes in year on the market. We will continue to our operating model in several countries bring Apoquel to new markets and expect such as India and Venezuela; and the that Apoquel, together with our new elimination of approximately 5,000 monoclonal antibody therapy Cytopoint™, SKUs from our product portfolio. We will continue to drive sales growth for our also navigated economic slowdowns dermatology portfolio in the future. in key animal health markets and weathered traditional cycles in our customers’ businesses. INVESTED STRATEGICALLY FOR PROFITABLE GROWTH Our ability to grow our business despite these and other challenges can be HIGHLY PRODUCTIVE INNOVATION measured in our normalized organic Zoetis received approval for more than operational growth of 8%.2 200 new and enhanced products in 2016 and successfully executed several “ WE SEE THE DIFFERENCE OUR CREATED A SIMPLER, MORE important product launches. COMPETITIVE, GROWING COMPANY Strengthened Dermatology Portfolio. CULTURE, ROOTED IN OUR During 2016, we largely completed our Veterinarians have told us that allergic CORE BELIEFS, CAN MAKE. operational efficiency initiative and put dogs and their owners have a variety of ourselves on course to exceed the target needs, and we are proud to offer them OUR COLLEAGUES KNOW THEY of $300 million in cost savings in 2017. At two innovative solutions with our oral ARE EMPOWERED TO SOLVE the same time, we built a more efficient, therapy Apoquel and with Cytopoint, the simpler, and flexible structure for our first monoclonal antibody licensed by the CHALLENGES AND DRIVE RESULTS, company, allowing us to better allocate U.S. Department of Agriculture for dogs AND THEY RECOGNIZE THE IMPACT resources for future growth. This work suffering from atopic dermatitis. Developed and completion of our global enterprise by Zoetis scientists, Cytopoint helps OF THEIR ACHIEVEMENTS ON THE resource planning (ERP) system provide sustained control for four to eight SUCCESS OF OUR COMPANY.” deployment helped us simplify our weeks of the clinical signs such as itching operations and increase capital available associated with atopic dermatitis. to invest in innovation, manufacturing capacity, acquisitions, marketing Simparica®. Zoetis received approvals and and promotion of new products, launched Simparica (sarolaner) Chewables and targeted expansions of our field in the United States, Canada, Brazil, force in high growth countries — all Australia and New Zealand and launched strategies that support future growth it in European countries where it was and value creation. approved in 2015. Simparica offers fast and persistent protection from fleas and ticks, We are already seeing the growth with peak performance that lasts for a full generated by recent investments. For 35 days, without losing efficacy at the end example, we are making good progress of the month. Backed by multiple studies in building our aquatic health portfolio testing it against competitive products, since the 2015 acquisition of PHARMAQ. Simparica is well-positioned to gain share This business contributed $90 million in the companion animal anti-parasitic in revenue in 2016 and delivered on key market valued at more than $4.2 billion product milestones. in 2015, with a compound annual growth rate of about 5% over the previous five 2 years, driven largely by growth of new the information to select heifers based GROWTH THROUGH NEW oral products.3 We see the sarolaner on wellness and other economically PRODUCT INNOVATION molecule as the development platform important traits to build healthier, for a franchise of products.