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Zoetis' skin treatments drive growth; positive livestock outlook in 2018

Zoetis Inc.'s skin treatments and a new oral parasite killer were the animal health company's main drivers of second-quarter revenue growth.

Companion animal products grew 10% operationally in the second quarter, with the company's dermatology sales reaching a milestone of $102 million in the quarter, according to CEO and Director Juan Ramon Alaix.

U.S. dermatology sales totaled $74 million for the quarter, with Cytopoint, a canine dermatitis product, bringing in $15 million, CFO and Executive Vice President Glenn David said on the company's earnings call, adding that the product is exhibiting nice sequential growth as clinic penetration and dosing accelerates.

Simparica, the company's new oral parasiticide, had lower sales than in the first quarter, Alaix said, but noted that the company continues to track well with its expectation for the year in the competitive market for such products.

Livestock portfolio

Zoetis' livestock portfolio grew 3% operationally with increases in the cattle and poultry businesses being partially offset by a decline in fish products and flat sales in swine products, according to Alaix.

The company reported 4% operational growth in both the cattle market and in poultry products.

"Export demand for U.S. beef has been increasing due to the lower average retail prices, and we continue to see positive signs in other major beef producers in the market, like Brazil, Argentina, Mexico, Australia and Canada," Alaix said.

Zoetis experienced a 5% operational decline in fish products, with executives attributing the decline to lower uptake of the Salmon Rickettsial Septicaemia, or SRS, vaccine in Chile. However, Alaix said the company still expects double-digit growth for fish products this year and is confident in the market's long-term prospects.

Positive market outlooks

Secretary of Agriculture Sonny Perdue announced on June 22 the suspension of all imports of fresh beef from Brazil because of safety concerns. The suspension will remain in place until the Brazilian Ministry of Agriculture takes corrective action that the U.S. government finds satisfactory, according to the release.

The scandals in Brazil are not helping business, but Zoetis has been managing growth quite well despite the political situation, Alaix said. Brazil is more focused on processed beef rather than fresh beef, he added.

The CEO said on the call that the fundamentals of the U.S. livestock market are strong.

"We expect also that the growth in terms of number of heads in cattle will moderate in 2018, but are still growing, which is positive," Alaix said. "And we expect that in 2018, poultry and swine also will remain positive."

Zoetis announced that the company completed the $85 million acquisition of Nexvet Biopharma July 31. Nexvet is a biologic therapeutics company developing a pipeline of monoclonal antibody therapies for companion animals in pain and other therapeutic areas.

"Our team, R&D team, is now interacting with the R&D team of Nexvet, getting a full understanding of all the products," Alaix said. Once the analysis is complete, Zoetis will announce the launch of products for dogs and cats in both U.S. and European markets.