Navigating a changing pack: ZTS at a competitive crossroads

Research evidence excerpt

Navigating a changing pack: ZTS at a competitive crossroads

Continued

Exhibit 1: ZTS has a healthy innovation stack, but more meaningful drivers (oncology, renal, cardiology, etc.) are not arriving in the near-term (3-6 months)

Selective pipeline disclosures vary across Animal Health companies. Innovation visibility dependent on each company’s level of disclosure (MRK & BI are selective).

Source: Company Reports, BofA Global Research

BofA GLOBAL RESEARCH

Pricing power under pressure from new entrants

The pricing backdrop has turned less favorable, particularly in dermatology, which

pressures ZTS’s historically premium positioning. While peers like ELAN have taken

substantial price over the past year (roughly +low-double digits), absolute pricing still

sits meaningfully below ZTS in derm (19-24% lower), with newer entrants like Numelvi

further undercutting (11-16% below ZTS; see Exhibit 2). Notably, ZTS has not lowered

Apoquel/Apoquel Chewable pricing over the past year and is instead continuing to take

price (guiding to ~1–2%). With customers increasingly cost-conscious and viable lower-

priced alternatives available, we see limited scope to drive incremental demand at

current price levels, with some risk of further volume pressure (read more on the price of

pet parenting from our piece with Bank of America Institute here). Consistent with this

backdrop, our channel checks have not pointed to a meaningful uptick in sales rep

activity or promotional intensity to drive additional demand/penetration in clinics in

recent months (see further detail on our channel checks here).

Exhibit 2: Apoquel is priced above peers (even after considering recent price incr. from ELAN)

Average price per pill for a 30-day supply of dermatology products on Chewy