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Zoetis expects faster revenue growth in '20, sees Simparica Trio launch in Q1

Zoetis Inc. executives told investors on a Feb. 13 earnings call that revenues are expected to grow significantly faster than the industry for full year 2020.

The company reported double-digit growth in earnings and a 7% increase in revenues for the fourth quarter and analysts noted the strong performance in the quarter.

Zoetis is expecting Simparica Trio, a canine triple-parasiticide for fleas, ticks and heartworm, to get U.S. Food and Drug Administration's approval in the first quarter, with a launch following about six to eight weeks later, CEO Kristin Peck said on the call.

The company expects $150 million in global sales for Simparica Trio in 2020, in line with Cowen analyst Steve Scala's expectations mentioned in a Feb. 13 note. Scala expects the company to record total Simparica sales of about $300 million for the year.

Peck said Zoetis expects Simparica Trio, which has been approved in Europe and Canada, to debut through a staged launch in Italy, Spain and the U.K. this month. While the drug faces some competition outside the U.S., the U.S. market does not provide any competition in 2020, Peck added.

Risks regarding antibacterial products

Zoetis' executive vice president and CFO Glenn David mentioned a 10% growth globally in the poultry sector due to the company's portfolio of alternatives to antibiotics in medicated feed additives on the call.

However, Cantor Fitzgerald analyst Louise Chen said in a Feb. 13 note that governments and consumers have begun to shift away from antibacterial products. In the case of increased regulation and change in consumer preference, Zoetis' antibacterial products may take a hit, affecting the company's ability to meet its forecasts.

Investment plans, generic competition

Chen said Zoetis is facing generic competition for its key drugs, which could affect the company's sales. However, as an industry leader, the impact could be offset due to the company's large portfolio and its relationship with its customers.

According to CEO Peck, the company is expecting competition for its dermatology portfolio in the next one to three years. "We do expect a potential small or large molecule entrant. We don't know exactly when that will be, but we have put plans in place to prepare for that," Peck added.

Zoetis' executives see the diagnostics market as really important for the year. Peck said the company has made significant investments in research and development in its diagnostics portfolio.

The company's research and development expenses for 2020 are expected to be between $455 million and $475 million, according to CFO David. He said the company plans on investing in innovation, including monoclonal antibody therapies for osteoarthritis pain in cats and dogs, new poultry vaccines, diagnostics, biodevices, precision livestock farming, and digital and data analytics.

Zoetis also noted that it is expecting approval of its canine and feline osteoarthritis pain medications in 2021.