[scuttleslops] ZTS, APO, FISV, TTD, RELY
Zoetis, Q2 ‘26 Earnings Call, August 06, 2026
Zoetis’s second quarter exposed a sharp deterioration in its U.S. companion-animal business rather than a broad collapse across the company. Organic revenue fell 1%, with U.S. revenue down 7% and companion-animal revenue down 6%, while livestock grew 11% and international revenue rose 6%. Management blamed two things happening at once: veterinary visits have been declining for several years as prices have risen faster than general inflation, and competitors are now using heavier discounts and rebates to take patients from Zoetis rather than expanding the underlying markets.
The competitive problem is most obvious in dermatology, the franchise Zoetis largely created with Apoquel and Cytopoint. Global dermatology revenue fell 16%, U.S. dermatology fell 18%, and Zoetis’s U.S. in-clinic share dropped roughly 10 percentage points year over year to 86%. Management said that historically new entrants helped grow these therapeutic categories, but “this is not what we are seeing today”; in a stagnant market, rivals are instead competing through “discounting, rebates, cross-portfolio bundling and other incentives” to steal existing patients.
Zoetis is responding by cutting the effective price customers pay without permanently lowering published list prices. The distinction is important: the company might give a clinic a rebate for making Apoquel its preferred product, bundle several Zoetis drugs together at a discount, or give a pet owner a coupon at checkout. Kristin Peck said these “gross-to-net” investments are deliberately targeted and temporary because once a list price is cut, “it’s very hard to pull back.”
That strategy protects volume but materially worsens near-term economics. Zoetis had previously expected positive price realization, but management now thinks full-year net pricing could be roughly flat to down 1%, and potentially down 2% toward the low end of guidance. The company is effectively saying that preserving a dog on Apoquel or Simparica today is worth accepting a lower realized price if the alternative is allowing a discounted competitor to establish the patient relationship.
Affordability is a separate problem from competition and may prove harder to fix. U.S. flea, tick and heartworm visits were down roughly 7%, while dermatology and osteoarthritis pain visits declined more than 2%, and online and retail channels are no longer growing quickly enough to offset weaker clinic traffic. Management explicitly said dermatology’s weakness is “mostly a competitive situation,” whereas parasiticides are being hurt more by the broader decline in preventative-care spending.
Global franchise sales of Simparica were flat, and U.S. sales declined 6%, but Simparica Trio still held about 21% of the U.S. oral-parasiticide market, almost twice its nearest competitor, while its share among puppies was approximately 28%. That puppy position matters because newly acquired patients can remain on the product for years, but Zoetis is now spending more on rebates and consumer promotions to prevent competitors from disrupting that lifetime relationship.