Animal Health: Rolling Over

Research evidence excerpt

Animal Health: Rolling Over

Idea

May 15, 2026 09:55 AM GMT

Morgan Stanley & Co. LLCMAnimal Health | North America Erin Wright

Equity Analyst

Rolling Over Erin.Wright1@morganstanley.comLinda Bolduc +1 212 761-6137

Linda.Bolduc@morganstanley.com +1 617 856-8009

What’s Changed Michelle Foley

Research Associate

Zoetis Inc. (ZTS.N) From To Michelle.Foley@morganstanley.com +1 212 761-4056

Price Target $160.00 $115.00 Natasha Arya

Elanco Animal Health Inc (ELAN.N) Natasha.Arya@morganstanley.com +1 212 761-6294

Price Target $24.00 $23.00

Craig Hettenbach

We break down the key debates reverberating across the Animal Equity Analyst

Craig.Hettenbach@morganstanley.com +1 212 761-6435

Health sector, following a notable ZTS 1Q shortfall that spurred John Y Park

concerns over price wars, channel destock, retail friction, brand ResearchJohn.Park@morganstanley.comAssociate +1 212 761-4029

& generic competition as well as lofty '26 goals, triggering Jialin Jin

meaningful value destruction across the group. ResearchJay.Jin@morganstanley.comAssociate +1 212 761-3913

Healthcare Services & Distribution

Key Takeaways North America

Industry View Attractive

ZTS's woefully disappointing 1Q print sent shockwaves across Animal Health with

concerns of price wars and greater brand as well as generic competition.

For ZTS, the lack of transparency around qtr-to-qtr stocking and subsequent 1Q

destock is concerning, offering incremental risk in '26 amidst competition.

Retail friction w/ online (i.e., CHWY) Rx denials from vet corporate hospital

chains will also likely continue to offer a building headwind.

Notably, we believe ZTS didn't leave much room for error in its 2026 operational

revenue guide, in light of aforementioned variables. Why not kitchen sink?