조에티스(ZTS) 2026년 3분기 실적 발표 컨퍼런스콜: 가축 부문이 피부질환 부문 압박 상쇄하며 가이던스 상향

조에티스(NYSE: ZTS)의 2026년 3분기 매출이 보고 기준 및 오가닉 운영 기준 모두 1% 감소한 24억 달러를 기록했다. 가축 및 진단 부문의 호조에도 불구하고 주요 반려동물 제품군, 특히 피부질환 치료제의 지속적인 부진이 이를 상쇄했다.

핵심 요약

• 매출은 가격 1% 하락과 판매량 보합세가 반영되며 1% 감소한 24억 달러를 기록했다. 조정 EPS는 유통 주식 수 감소에 힘입어 1% 증가한 1.75달러를 나타냈다.
• 반려동물 부문 매출은 5% 감소한 16억 달러로 집계됐다. 주요 피부질환 치료제 매출은 경쟁 심화, 프로모션 투자 및 동물병원 내원 건수 감소로 인해 16% 줄었다.
• 가축 부문 매출은 미국에서 5%, 해외에서 9% 증가하며 전체적으로 7% 늘어난 7억 9,700만 달러를 기록했다.
• 반려동물 진단 부문 매출은 기업 인수와 현장진단(POC) 및 영상 진단 플랫폼 도입 확대로 13% 증가한 1억 2,200만 달러를 기록했다.
• 조에티스는 연간 매출 가이던스를 92억 2,000만~93억 2,000만 달러로 좁히고, 조정 희석 EPS 가이던스는 6.25~6.35달러로 상향 조정했다.
• 경영진은 거시경제 여건이나 반려동물 보호자의 지출, 경쟁 구도의 개선을 전제하지 않은 채 2027년 계획을 보수적으로 수립하고 있다.

핵심 재무 데이터

GAAP 실적에는 개발 및 상업화 관련 가정이 수정된 후 과거 인수한 진행 중인 연구개발(IPR&D) 자산과 관련된 손상차손 7,800만 달러가 반영됐다.

사업 및 운영 실적

반려동물 부문, 여전히 실적 압박 지속

글로벌 반려동물 부문 매출은 5% 감소한 16억 달러를 기록했다. 미국 반려동물 매출은 8% 감소한 반면, 해외 실적은 보합세를 유지했다.

주요 피부질환 치료제 매출은 16% 급감한 3억 9,600만 달러를 기록했다. 미국 매출은 주로 아포퀠(APOQUEL)의 점유율 하락으로 인해 13% 감소한 2억 6,600만 달러에 그쳤으며, 사이토포인트(Cytopoint)는 반려견 내원 건수 감소와 보호자의 비용 부담 압박에 영향을 받았다. 해외 피부질환 치료제 매출은 신규 경쟁 제품 진입으로 아포퀠 판매량이 줄어든 유럽 지역의 타격이 가장 커 20% 감소한 1억 3,000만 달러로 집계됐다.

경영진은 프로모션 활동 덕분에 미국 피부질환 치료제 점유율 손실 폭이 2분기 7%포인트에서 3분기 4%포인트로 둔화됐다고 밝혔다. 회사는 정가 인하보다는 선별적인 총액 대비 순매출(gross-to-net) 투자를 선호하는 기조를 유지하고 있다.

미국 시장에서는 제네릭 경쟁 역시 세레니아(Cerenia)와 콘베니아(Convenia)에 부담으로 작용했으나, 판매량 감소 폭은 1분기 제네릭 진입 이후 가장 낮은 수준으로 완화됐다.

심파리카 및 골관절염 통증 치료제, 지역별 엇갈린 흐름

심파리카(Simparica) 제품군 매출은 1% 증가한 3억 5,800만 달러를 기록했다. 해외 매출은 유럽과 중남미에서의 심파리카 트리오(Simparica Trio) 판매 호조에 힘입어 10% 증가한 9,900만 달러를 나타냈다. 반면 미국 매출은 교차 프로모션에 따른 판매량 증가에도 불구하고 벼룩, 진드기 및 심장사상충 관련 내원 감소의 영향으로 2% 줄어든 2억 5,900만 달러를 기록했다.

경영진은 심파리카 트리오가 미국 시장 점유율 22.5%를 유지했다고 밝혔다. 조에티스는 처방용 제품인 심파리카 듀오(Simparica Duo)의 승인이 당초 일정보다 앞당겨진 2026년 말까지 이뤄질 것으로 예상하고 있다.

골관절염(OA) 통증 치료제 제품군은 2% 증가한 1억 3,700만 달러의 매출을 올렸다. 해외 매출은 유럽연합(EU)과 캐나다에서의 레니비아(Lenivia) 및 포르텔라(Portela) 출시에 힘입어 13% 증가한 8,600만 달러를 기록했다. 반면 미국 매출은 골관절염 관련 내원 감소와 안전성 인식 우려가 리브렐라(Librela) 처방 확대에 부정적인 영향을 미치며 12% 감소한 5,100만 달러에 머물렀다.

조에티스는 2027년 레니비아의 미국 승인을 기대하고 있다. 경영진은 또한 2026년 4분기 지속형 사이토포인트의 승인을 거쳐 2027년 상반기 출시가 가능할 것으로 보고 있다.

가축 및 진단 부문, 사업 다각화 효과 제공

가축 부문 매출은 7% 증가한 7억 9,700만 달러를 기록했다. 미국 가축 부문은 소, 돼지 및 가금류 수요에 힘입어 5% 증가한 2억 6,600만 달러를 달성했다. 해외 가축 부문은 소 관련 수요와 노르웨이에서의 어류 백신 판매 호조를 바탕으로 9% 늘어난 5억 3,100만 달러를 기록했다.

반려동물 진단 부문 매출은 두 지역 부문 모두 두 자릿수 성장을 기록하며 13% 증가한 1억 2,200만 달러를 나타냈다. 현장진단 및 영상 진단 플랫폼 도입 확대와 함께 바이탈 래즈(Vital Rads), VPG 등의 기업 인수가 주요 성장 동력으로 작용했다.

경영진 가이던스

경영진은 일반적인 계절성과 3분기 프로모션 진행 시점의 영향을 반영해 4분기 매출이 3분기 대비 한 자릿수 후반대 비율로 감소할 것으로 전망했다. 회사는 3분기 실적이 자체 예상치에 부합했으며, 시장 여건과 자체 실적 모두 예상보다 소폭 양호했다고 밝혔다.

2027년 전망과 관련해 조에티스는 거시경제 여건, 반려동물 보호자 지출, 또는 경쟁 환경의 개선을 전제하지 않고 있다. 경영진은 2027년과 2028년으로 예정된 혁신 신제품들이 2027년 매출에는 제한적으로만 기여하고, 그 효과는 연말 및 2028년에 걸쳐 점진적으로 확대될 것으로 예상하고 있다.

회사는 연구개발(R&D) 투자를 지속하는 한편, 매출원가와 판매관리비(SG&A) 부문에서 비용 효율화를 추진할 계획이다.

위험 요인 및 주시 사항

• 연초 이후 미국 동물병원 내원 건수는 3% 감소했으며, 3분기 반려견 내원 건수는 약 5% 줄었다.
• 선진 반려동물 케어 시장에서 동물병원 진료비가 2022년 이후 50% 상승하면서, 반려동물 보호자들의 가격 민감도가 한층 높아졌다.
• 피부질환 치료제 및 구충제 부문에서 경쟁이 여전히 치열하며, 제네릭 의약품이 세레니아와 콘베니아에 지속적인 영향을 미치고 있다.
• 총액 대비 순매출(gross-to-net) 기준의 프로모션 투자는 시장 점유율 방어에는 기여했으나, 실질 판매 가격 하락과 매출총이익률 압박을 초래했다.
• 가축 부문은 양호한 단백질 수요 흐름에도 불구하고 질병, 기상 악화, 전염병 발생 및 현지 생산 주기에 따른 위험에 계속 노출돼 있다.
• 경영진은 신규 파이프라인 출시가 2027년 매출을 유의미하게 변화시키지는 못할 것으로 보고 있으며, 반려동물 시장의 회복 시점에 대해서도 신중한 입장을 유지하고 있다.

애널리스트 Q&A 주요 내용

프로모션 전략: 경영진은 프로모션 덕분에 피부질환 부문의 점유율 손실을 줄이고 심파리카 트리오의 미국 점유율을 유지할 수 있었다고 설명했다. 조에티스는 시장 점유율 추이, 경쟁사의 대응 및 신제품 출시에 따라 이러한 프로그램을 월별 및 분기별로 조정할 방침이다. 아울러 경영진은 과거 사례를 볼 때 경쟁사와의 점유율 경쟁이 안착하기까지는 통상 12~18개월이 걸렸다고 언급했다.

마진 우선순위: 조에티스는 연간 이익률이 기존 예상치에 부합하거나 그보다 양호할 것으로 예상하고 있다. 2027년의 경우 경영진은 R&D 투자를 유지하면서 제조 효율성, 매출원가 및 판매관리비(SG&A) 절감을 중점 추진 분야로 꼽았다.

4분기 전망: 경영진은 3분기 프로모션 활동이 매출 발생 시점에 영향을 미쳤기 때문에 4분기 실적만을 단독으로 평가해서는 안 된다고 당부했다. 회사는 3분기 대비 4분기 매출이 전기 대비 한 자릿수 후반대 비율로 감소할 것으로 예상하고 있다.

혁신 파이프라인: 조에티스는 향후 수년간 매년 주요 시장에서 의미 있는 승인을 획득하는 일정이 순조롭게 진행 중이라고 밝혔다. 중장기 파이프라인에는 만성 신장 질환, 종양학, 심장 질환, 비만, 당뇨병 및 불안증 등이 포함되지만, 경영진은 이들 프로그램이 2027년 매출에 미치는 영향은 제한적일 것으로 보고 있다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Welcome to the Third Quarter 2026 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Mathieu Aussermeier, Senior Vice President, Corporate Finance for Zoetis. Presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com.

The presentation slides can be managed by you, the viewer, and will not be forward automatically. In addition, a replay of this call will be available approximately 2 hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. [Operator Instructions] It is now my pleasure to turn the call over to Mathieu Aussermeier. You may begin.

Mathieu Aussermeier

Thank you, operator. Good morning, everyone, and welcome to the Zoetis Third Quarter 2026 Earnings Call. I am joined today by Kristin Peck, Chief Executive Officer; and Jay Saccaro, Chief Financial Officer and Chief Operating Officer. This morning, we issued a press release announcing our third quarter 2026 financial results. Before we begin, I would like to remind you that the release and corresponding earnings presentation, which we'll reference during this call, are available on the Investor Relations section of our website and that many of our statements today may be considered forward-looking statements and that actual results could differ materially from those projections.

For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release and in our company's Exchange Act reports filed with the SEC. Additionally, today's remarks will include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures can be found in our earnings press release and our company's 8-K filing dated today, November 5, 2026.

We will also reference reported and organic operational growth. Organic operational growth excludes the effect of foreign currency as well as acquisitions and divestitures, which individually impact Zoetis' growth by 1% or more. Unless otherwise stated, all revenue growth performance metrics will be based on organic operational performance. With that, I will turn the call over to Kristian. Kristian?

Kristin Peck

Thank you, Matthew. Good morning, everyone, and thank you for joining us. Today, we reported our third quarter results with revenue and adjusted net income both declining in line with our expectations.

Our diversified portfolio provided some resilience and we focused on defending leadership positions with investments in key franchises. At the same time, we continue advancing the portfolio and innovation pipeline. While challenging dynamics are continuing, we are seeing progress in the actions we are taking and have narrowed our full year revenue guidance to the high end of our range.

As I walk you through our performance, I want to put the industry and company results in perspective, and outline how we are positioning Zoetis for the near and long term. But first, I'm pleased to welcome Jay to his first earnings call with Zoetis. He brings a strong track record and a valuable combination of financial and operating experience, and we're excited to have him on the team.

With that, let me start with what we see across the industry. As you all know, Animal health remains a long-term secular growth industry, driven by a growing global population, looking to eat more protein and adapt and care for more pets. Like most industries, however, Animal Health is not immune to cyclical factors, which affect pet care and livestock differently.

In developed pet care markets, veterinary service costs have risen 50% since 2022, well ahead of general inflation, alongside softer consumer confidence, that cost pressure is making pet owners more value conscious and deliver it when making trade-offs to care for their pets. The mix of test is also changing. High housing costs are affecting home ownership and pet adoption with fewer [indiscernible] joining households as cat ownership continues to grow. Because dogs are more medicalized than cat, this shift also affects underlying demand for veterinary services. These pressures are reflected in the continued weakness in U.S. clinic visits, which are down 3% year-to-date across categories.

These dynamics, combined with intense competition in key franchises continued to weigh on our companion animal revenue this quarter. At the same time, the bond between people and their pets remain strong. In the U.S., the Human Animal Bond Research Institute's latest survey found that 98% of pet owners experienced health benefits from their pets and 91% said knowing about those benefits makes them more likely to maintain their pet health.

That enduring bond is an important foundation for our industry, but it exists alongside real barriers. 37% of people planning to get a pet setted the cost of ownership as a concern. As the industry leader, we are focused on meeting customers where they are. That means working with veterinary practices to support their profitability and success while developing programs to help pet owners manage the cost of care.

In contrast, livestock is benefiting from growing demand for quality protein sources. We're also seeing growing demand on animal health to improve productivity, support food security and adopt a One Health approach. That demand has contributed to historic industry growth and for Zoetis, underscores the strength of a broad and diverse portfolio. And while we expect livestock to remain a strong contributor over the short, medium and long term, disease, weather and local production cycles will continue to influence year-to-year results, and diversity matters, not only across species, but across geographies.

Growth conditions vary significantly from market to market, reflecting differences in economic and geopolitical conditions, species mix and regulatory environment. In many developed markets, pet care represents a larger and more medicalized share of the animal health market, while in many emerging markets, livestock does.

As a result, the same economic shift can affect markets in very different ways. Tariffs and trade flows continue to evolve and our commercial strategies reflect the conditions in each market. That local focus matters because emerging markets are expected to remain the fastest-growing part of Animal Health with room to bring more animals into regular care, gain share and broaden access to innovation which brings me to what we're doing to defend and grow our leadership.

Building on the actions we've outlined over the past 2 quarters, today, I'll focus on 3 priorities: leveraging the diversity of our portfolio, expanding access to established franchises and advancing innovation. I'll take you through each with examples of how they're showing up across our key franchises.

First, we're leveraging the advantage that comes from the diversity and differentiation of our portfolio. Competition is increasingly playing out product by product, but a range of options within the therapeutic categories and across channels gives us more ways to meet customer needs and compete effectively.

Those choices are especially important in our key dermatology franchise, where share pressure is most acute. We are continuing to sharpen commercial execution, directing resources where they can influence customer decisions and reinforcing the value of our differentiated portfolio with vets and pet owners.

For example, we're using that breadth to drive conversion to ApoC with 2 in the room promotion and in-clinic sampling, highlighting a more convenient alternative that can support treatment compliance. At the same time, we expect U.S. approval of long-acting Cytopoint in the fourth quarter, adding a more convenient option for chronic itch, a segment that accounts for more than 60% of global dermatology doses.

We're using that added diversity to build awareness for the next option in derm with a teaser campaign ahead of approval. Similarly, since the beginning of the year, we banked mounting generic competition for Convenia and Cerenia. We acted swiftly and this quarter, we saw the pace of share gains moderate for the first time since entry. And with recent FDA approval in the U.S. and its coming launch in Canada, Convenia RTU for dogs extends the portfolio with a single injection that can provide up to 14 days of treatment.

Second, we're expanding access to our established franchises and investing in the evidence and medical support that helped us navigate a more selective market. When business are down and owners are weighing the cost of care, the clinical conversation matters, veterinarians need to identify patients who can benefit and have relevant evidence to support treatment decisions.

This is essential role of medical affairs and 1 reason we launched the medical hub, which houses our scientific insights, publications and educational materials in 1 place for veterinary teams. That approach is relevant in parasiticides, where softer end market demand is creating pressure even with double-digit declines in U.S. fleet, tick and heartworm clinic visits, the Simparica franchise delivered modest growth this quarter as expanded access to Simparica Trio drove growth internationally.

Trio's triple combination protection gives Zoetis a differentiated option supported by recent peer-reviewed research on Heartware resistance. One example of scientific evidence supporting the franchise is a recent peer-reviewed speed of kill study available through the medical hub and our continued investments in Phase IV studies provides vets with relevant evidence in a more selective market.

We also now expect approval of SimperGADuo by year-end, ahead of our original time line. broadening the portfolio and extending access to customers with unmet needs. This same strategy applies to OA pain. We're building the category who require a sustained effort to improve disease awareness, and help veterinarians identify more patients who could benefit from treatment.

We're clear-eyed about the work ahead and measured in our expectations. But at the same time, just 4 years ago, alternative to NSAIDs were limited. Today, our portfolio offers dogs and cats monthly or longer acting 3-month pain relief. Recent approvals and launches of Lenibia and Portela extend those options, and we believe broader access will build the category over time.

These are strong franchises in markets we help build. Our focus is to support customers through current pressures while continuing to invest in their growth. Third, we continue to advance innovation while remaining disciplined in how we allocate capital. In this environment, that means taking cost out where needed to operate more efficiently while protecting investments in innovation and advancing our robust pipeline.

Life cycle innovation is central to the first. The examples I've discussed in derm, parasites and OA pain strengthen established franchises and help create resilience in a pressured market. We're applying this same approach to livestock through new formulations and expanded indications across the portfolio, including FDA emergency use authorization of Dectamax for New World.

These extensions help keep our portfolio relevant to evolving customer needs and support franchise contribution over time. Last year, at our innovation webcast, we committed to achieving a significant major market approval every year for the next several years. To date, we have met our 2026 milestones and in some areas, moved ahead of schedule.

For example, Convenia RGU has now received approvals in 2 major markets, both earlier than planned. Beyond life cycle innovation, we're working to create new categories in areas such as renal disease, oncology, cardiology and obesity, where diagnosis is essential to identifying patients who may benefit from treatment.

That makes Diagnostics a strategic enabler of this pipeline. Our investments are building the tools and capabilities to support that work. This quarter, Companion Animal Diagnostics delivered double-digit revenue growth reflecting increased utilization and contributions from the strategic acquisitions of Vital Rad and VPG.

Our market leadership was built on innovation. Sustained it means extending the franchises we have today while building the capabilities that will enable the future of animal health. Before I turn it over to Jay, I want to be clear that while the companion animal market remained soft in the quarter, Zoetis' targeted commercial execution has helped mitigate the macro and competitive pressures. And we will continue to adapt our approach as the market evolves. We remain focused on disciplined resource allocation paired with investments to grow markets and share.

At Zoetis, that means directing resources to defend our key franchises today while advancing innovation for the future to drive strong growth over time. We have the portfolio science and customer relationships to do just that. And with that, I am pleased to hand it over to Jay.

James Saccaro

Thanks, Kristen. I'm excited to be here for my first earnings call with Zoetis. And while I'm just a few months in, my conviction in this company has only grown. The product and organization are world-class and the innovation pipeline spanning CKD, oncology and next-generation life cycle products represents a real catalyst for long-term value creation. My near-term focus is on understanding our business and operations in detail, ensuring our cost structure is as competitive as our portfolio and working alongside Kristen and the team to navigate the current market environment with discipline and transparency.

As I deepen my understanding of the business, we will also be evaluating the financial metrics we share related to guidance, and we look forward to sharing an update with you on the fourth quarter call. With that, let's look at the quarter. We delivered revenue of $2.4 billion, declining 1% on both the reported and organic operational basis, in line with our expectations, driven by a 1% price decline and flat volume. .

Our U.S. segment revenue was $1.2 billion, down 6%, driven by declines in companion animal from our key dermatology portfolio as well as the impact of generics on certain brands. While our International segment was $1.1 billion, up 4%, with growth across livestock, parasiticide and OA pain more than offsetting dermatology headwinds. We delivered adjusted EPS of $1.75 in the quarter, up 1%, driven by the lower share count due to our ongoing share repurchase activity.

Adjusted gross margin was 71%, and down [indiscernible] basis points on a reported basis. Foreign exchange had a favorable impact of 30 basis points. On an operational basis, gross margin was down 60 basis points driven by the impact of our strategic pricing initiatives, product mix and certain inventory-related charges, partially offset by refunds related to prior tariff assessments.

Adjusted operating expenses were $749 million, flat operationally with both adjusted SG&A of $571 million and adjusted R&D of $174 million, also flat, reflecting the continued benefit of our cost and productivity programs, including lower incentive compensation and professional services savings, partially offset by increased R&D investments in data and digital initiatives and our broader project portfolio.

Adjusted net income was $720 million, down 7% on an organic operational basis. You'll see that our GAAP results also included $78 million of an impairment charge on previously acquired in-process research and development assets resulting from updated estimates of development and commercial assumptions.

Let's look more closely at the key drivers of our revenue performance this quarter, starting with companion animal, where globally, we declined 5% on $1.6 billion in revenue, driven by an 8% decline in the U.S. and flat performance internationally. Within companion animal, our performance was driven by key dermatology, which declined 16% globally on $396 million in sales, reflecting competitive headwinds and pricing actions across both segments.

In the U.S., we declined 13% in the quarter on $266 million in revenue, driven by share loss in APOQUEL, which was slowed by our promotional investments, partially offset by volume growth in the chewable formulation, which now represents roughly half of total APOQUEL volume. Cytopoint sales also declined, reflecting canine visit declines of approximately 5% in the quarter with pyritic visits specifically, down 3% and as well as broader affordability pressures on pet owner spending.

Direct competitive impact from new launches in the injectable dermatology space were minimal. Internationally, key dermatology was $130 million, down 20% with pressure most acute in Europe, where new entrants drove volume losses across the APOQUEL franchise. Cytopoint proved more resilient given its differentiation in international markets.

In addition to declines in key dermatology, generic competition in Cerenia and Convenia, continued to pressure U.S. results. And while volume declines moderated to their lowest level since generics entered the market in Q1, we continue to manage through a challenging competitive dynamic.

Partially offsetting these declines, our Simparica franchise grew 1% on global revenue of $358 million. The results were mixed across our segments. Internationally, we grew 10% on revenue of $99 million, driven by strong Simparica Trio momentum across Europe and Latin America, partially offset by expected erosion in Soparka as customers continue transitioning to the triple combination product.

In the U.S., the franchise declined 2% on $259 million in revenue as accelerating declines in fleet, tick and heartworm clinic visits were partially offset by volume gains from our cross-portfolio promotion. Our OA pain meds generated $137 million in sales, increasing 2% globally. We continue to see contributions from the launch of Lenivia and Portella in the EU and Canada, which drove 13% growth internationally on $86 million in revenue with both products gaining traction quickly and early satisfaction scores from veterinarians and pet owners remaining exceptionally high.

Meanwhile, in the U.S. OA pain meds contributed $51 million in total, declining 12%. Lower OA visits and ongoing safety perception headwinds weighed on labrella adoption and daily sales trends, partially offset by Selencia's resilience, supported by stable patient share and increased fee line clinic visits in the quarter.

Companion Animal Diagnostics delivered $122 million in revenue, up 13% globally, with double-digit growth in both the U.S. and internationally. Growth was driven primarily by recent acquisitions in both segments, including Vital Rads in the U.S. and VPG in the U.K. and Ireland, with continued underlying adoption of our point of care and images platforms contributing to the remainder. Innovation across the diagnostics portfolio continues to advance with Opticel gaining traction in hematology and Omnimax, our next-generation point-of-care analyzer on the horizon.

Now moving on to livestock, which delivered $797 million, up 7%, with contributions across both the U.S. and international. U.S. livestock grew 5% on $266 million in revenue, supported by reliable Sepia supply, driving cattle performance, broad-based swine growth and strong poultry vaccine demand.

Internationally, we saw sales of $531 million and growth of 9%, led by cattle strength across the segment and outstanding fish performance driven by higher vaccination rates in Norway. Our capital allocation priorities remain unchanged. We'll continue to invest in R&D and internal innovation, the engine of our long-term growth, while remaining disciplined in pursuing bolt-on business development opportunities.

After internal reinvestment in business development, excess capital is returned to shareholders as demonstrated by the $2.4 billion distributed in 2026 through the third quarter in the form of both buybacks and dividends. Now turning to our updated full year guidance for 2026.

Q3 delivered in line with our expectations, giving us the confidence to update our full year guidance range. We're narrowing our full year revenue guidance to $9.22 billion to $9.32 billion, representing an organic operational decline of negative 2% to negative 1% year-over-year.

We're raising our adjusted net income guidance to $2.6 billion to $2.64 billion, representing organic operational decline of negative 7% to negative 5%. We are also raising adjusted diluted EPS to $6.25 to $6.35.

To close, our diverse portfolio and disciplined commercial execution continue to help us navigate an operating environment shaped by competitive pressure in our key companion animal franchises. Softer clinic visits and ongoing affordability headwinds for pet owners, but we're also seeing strength in livestock and solid momentum in Diagnostics.

Before I turn it over to the operator, I wanted to share a brief word on 2027. While it's too early to provide specific guidance, we will plan prudently for the upcoming year. We will not be assuming improvement in the macro environment or pet owners spending trends, and we expect the competitive dynamics we've mentioned to remain a factor throughout most of the year.

At the same time, we're encouraged by the commercial strategies we're executing and most importantly, we're excited about the innovations planned for 2027 and 2028. While we expect limited revenue contribution from these launches in 2027, their impact should build later in the year and into 2028. We look forward to sharing more about this on our Q4 call. Our focus remains on executing with discipline and positioning the business for improved performance over time. With that, I'll turn it over to the operator for questions. Operator?

Operator

[Operator Instructions] Our first question is coming from Chris Scott with JPMorgan.

질의응답

Christopher Schott

The first one for me would be great just to get additional color on the impact the promotional activities you initiated this year having on the business. I guess specifically, I'm just trying to get my hands around what areas do those seem to be gaining traction? And are there areas where you've not yet seen an impact?

And then my second question was just maybe building on some of those 2027 comments that you just made. Just as you think about the various pushes and pulls, I guess is there any other considerations we should be keeping in mind for next year's numbers. And I try to get my hands around, directionally, do you see -- the Street in the right place with both top line and EPS currently?

Kristin Peck

Great. Thanks, Chris. I'll take your first question, and I'll let Jay take your second. As we spoke about on our last few calls, our pricing strategy is really focused on retaining value and gaining share. And it's really focused on deliberate analytically supported actions that are protecting list price, but really focusing on gross to net investments.

We were quite pleased with the performance of those investments in the quarter, specifically in some of these facts are in our slides that we shared as well. The promotional defense on derm managed to slow U.S. dermatology share loss in the quarter to 4 points in Q3 and it was about 7 points in Q2 overall in derm.

So really pleased with really slowing that overall decline in share loss there. As you think about how they came through in our parasiticides, we're really pleased that we held share in the quarter with Simparica Trio at a 22.5% share, and we remain the market leader in Puppies, which I think is a really important future prediction of sales there. So we were very pleased, again, we're going to stay focused and continue to watch the market has evolved and make sure we're targeting our investments to make sure we continue to protect share and ultimately grow it. Jay, do you want to take the second?

James Saccaro

Sure. So, look, we're in the middle of our budgeting process as we speak. So it's definitely too early to comment very specifically about 2027. But we did want to share some guiding principles I think from our perspective, as we approach 2027, we're going to be conservative or prudent as we put together our numbers.

We've seen some macro trends over the last several quarters. We are not going to assume a market change in macro factors. We've seen some competitive dynamics and while I think we walk away from the third quarter, encouraged by our -- by the activity from a promotional and commercial standpoint.

At the same time, we're not going to assume a change in competitive dynamic in 2027. And then finally, as I come into the role here, one of the things I've spent a lot of time on is the R&D pipeline. It's incredibly exciting, the work that our teams are doing. And the impact over time is going to be substantial. At the same time, it's not going to have a huge impact in 2027.

And so from our perspective, we're going to be very thoughtful as we put together our plan for 2027. It's -- I'm hesitant to comment on street models or anything like that certainly at this point. We're very excited about the long-term prospects that we have, but we're going to be clear eyed as we approach 2027.

Operator

Our next question comes from David Westenberg with Piper Sandler.

David Westenberg

So we followed Parasiticide for a while from topical to oral isoxazoline, there's generally been a consistent pattern in that a new product will come in. It will get some new generational starts. And then the market kind of matures and normalized. We saw this when you launched Simparca, the originally, you did take share, but NexGard kind of settled in and can kind of continue to grow.

Is that what we think we could see in the 2027, 2028 market with Simparica with some of the new entrants and new categories what would make it different? And what kind of indicators would tell you that maybe growth would normalize in that category in '27, '28. And again, I don't want to take away. You did grow 5% in Simparica Trioi overall, but -- just curious on that. And I'll have a follow-up.

Kristin Peck

Sure, Dave. I'll take that first question before your follow-up. As I said, we were pleased with the performance of Simparica in the quarter. The franchise globally did about 1%, we did about 4% growth in Trio specifically. As I was just talking about, we're very pleased that in the U.S., we are the market leader, and we maintained our share at 22.5%, which is almost 2x our next biggest competitor. I also think it's important as you think about parasiticide, is like the U.S. from international. We're seeing significantly higher growth in international overall. And I think you're seeing this because triple combination category is still in its infancy there.

We're really expanding and entering new markets -- so we see Trio is still early in its penetration. And we believe there's really a long runway for growth there. And we're continuing to invest in innovation in this space. As we also mentioned, we are expecting approval of SIMPARICA DUO by year-end. -- which is ahead of its original time line. And I think this will continue to broaden our portfolio.

So I guess the way we see the market, we think there's still significant opportunity to continue to expand this market from single combinations, from topicals and colors into triple combination as well as to gain share. We have a very comprehensive portfolio that we think is differentiated and we'll continue to invest there. Maybe move to your second question.

David Westenberg

Sure. Sorry, Cytopoint, as you noted, has held in the well. There isn't anything in the market like it right now. Bafana does have a label of 4 to 8 weeks have to see, looks pretty competitive as it launches in 2027. Can you walk us through both first, maybe from a defensive strategy perspective early on? And then maybe from an offensive strategy, as you get your own long-acting product? And can you confirm the long-acting is still on time? I think you said Q4, you do expect approval -- how fast is that to roll out?

Kristin Peck

Sure. Thanks. We continue to believe that Cytopoint and the long-acting space in derm is really exciting. As we mentioned, it did fare better in the quarter. I think that's really because there's really -- the customers are honored are quite pleased with the efficacy of the product overall. As you know, we did have a new entrant in that category in the U.S.

To date, they've had limited share given their supply challenges. What we are really excited about as we see in this category is to continue to expand it. We are expecting the approval of Cytopoint long-acting this year. We think Cytopoint will help us expand the category, honestly. It provides a more convenient option that lasts longer, which is really helpful for by pet owners who coming in every month might be a challenge.

I mean this is part of Zoetis' strategy to continue to innovate in each of our key therapeutic areas to both make sure that we can continue to grow our share as well as expand the market overall. And we're really -- we're pleased to have that product, and we look forward to launching it in the first half of next year. So we are on track with Cytopoint long acting, and we think it will be a great addition to continue to build this brand.

Operator

We will move next with Jon Block with Stifel.

Jonathan Block

Jay, I'm arriving at an implied 4Q '26 organic revenue growth rate of around negative 3% of an easy comp. So maybe just -- your thoughts on that, if accurate, any color? And then maybe more importantly, what does this mean for the business looking forward? If you could give us some color there and then I'll ask the follow-up. .

James Saccaro

Sure. So I think as we think about the fourth quarter, it really is important to take it in the context of the third and fourth quarter and also the full year. On a full year -- in the first half, we were down about 1 point. The third quarter was down a bit more than that. And as we look at the third and fourth quarter together, we're talking about a full year growth rate leading to a decline of negative 1% to negative 2%. We historically see some seasonality with higher sales in the third quarter than the fourth quarter.

And in this particular case, with the promotional activity that we pursued in the third quarter, we're anticipating a third to fourth quarter decline in the high single-digit range. Very much in line with our expectations, although I would say the market and our performance has been a little bit better than our anticipation.

But related to that, we always anticipated a deceleration in the fourth quarter versus the third. And so as we think about what this means for the overall health of the business, it really is important to consider it in the context of the third quarter as well.

Jonathan Block

Okay. That's helpful. And then I guess just to pivot, livestock continues to be the bright spot, pardon me, for you guys. You might exit 2026 or pardon, 2026 might have a a comp of high single digits. So maybe if you could just give us some thoughts on sustainability of livestock.

Kristian, you mentioned the protein tailwinds, and that doesn't look like it's going away anytime soon. But just looking forward for this business off a high single-digit comp that might add some screw warm tailwinds in there. How do we think about that for '27 and beyond? .

Kristin Peck

Yes. We were quite pleased with the performance of livestock in the quarter. It grew 7% overall and really underlying that, as you mentioned, is demand for quality protein, and that's really across the globe, I would say. We saw U.S. delivering 5% to the quarter in International at 9% in the quarter. And if you think about that, international livestock is a higher percentage of our business as we've talked about. And that growth was really broad overall across species. .

And we are confident that livestock will remain a strong contributor. Obviously, as we see, there's definitely a little more cyclicality historically in livestock. It's influenced by disease, by weather, by outbreaks, local production cycles overall. But there were a few years, obviously, as you recall, where Zoetis had an LOE and we also had African swine fever outbreak.

But historically, livestock is a solid contributor overall as an industry grower and specifically for Zoetis. We're quite focused in our portfolio, as we mentioned around vaccines and genetics and preventatives, which we think has positioned us well as we see strong continued demand for protein.

Operator

We will move next with Brendan Basques with William Blair.

Brandon Vazquez

Kristian, I wanted to follow up on your commentary about you guys have been pretty successful. It seems like in defending share in some of the gross to net promotional activities, maybe for lack of a better phrase to use there. The question being, do you think that these like gross to net promotional activities are short term in nature?

Is this something you're doing to combat kind of temporary entrants from competitors? Or do you think on a go-forward basis that you'll need to keep this new gross to net? And because part of the question is basically like what are the implications to your margins and your gross margins on a go-forward basis within the companion animal business?

Kristin Peck

Yes. I mean it's a great question. I think our focus right now is with a lot of new entrants in both derm and parasiticides. Historically, as you know, in our space, when new entrants came, they expanded the market. We aren't seeing that right now. And so we've had to be a little more focused on some of these gross to net investments. Ultimately, we think when share settles out, and historically, you've seen that somewhere between 12 and 18 months. .

And what we're really watching for to know how to tweak and we're constantly watching every month, but certainly every quarter is how are we seeing those shares stabilize. When we see 2 quarters where those shares pretty much stayed, we'll have the sense that those shares have stabilized and we can then really focus more on gaining share and growing the market overall. So I don't think these are here forever.

But I think as Jay mentioned in his remarks, I think some of these new products have only recently entered in certain markets, and this is a market-specific investment. And so we think we need to lap those new entrants for both derm and paris to really have a sense of how to continue to adjust our gross-to-net investments.

But I think our strategy, as I mentioned earlier, is making sure it's a very least we defend our share, and we're focused on both growing share and growing these markets ultimately. The reality is there are still way more untreated animals in both of these categories and there are treated animals. So there's significant opportunities to do that. But I think as you combine both the competitive situation right now in macro, the market itself isn't growing as much but we do continue to believe that, that will happen ultimately as we get through the cycle.

Brandon Vazquez

Okay. And on Lenevia, I just want to hit on that for a second because that feels like, clearly, 1 of the areas you guys are still kind of innovators and fast leader there. Early days of Lenevia, I don't know how many pilot accounts you might be having. But any metrics, any total feedback you want to share with us just in terms of -- is this the product you think through '27 might be able to start to reaccelerate the OA pain management section?

Kristin Peck

Yes. We're quite excited on the performance of both Lenivia and Portella, which is a long-acting for cats. We have launched across a number of markets in the EU and Canada. And what we're hearing right now, again, I would like to be clear, this is obviously early days, but the veterinarian satisfaction is high at 97% for Lanevia and about 95% for Portola. Pet order satisfaction is high at 98%.

And what we're seeing is what we expected, which is that Lanevia and Portela are providing a really good opportunity to grow the market. Having a product that is more convenient, that is once every 3 months has really helped expand the market. So obviously, we've seen some cannibalization, as you saw. But as you looked overall at OA Pain and International, we saw growth, and that's really been driven by Lenivia and Portella and sort of the positive both veterinarian and tecowner uptake of those products. We continue to expect approval of Lanevia in the U.S. in 2027. So we'll be excited to bring that product to the U.S. as well.

Operator

Our next question comes from Erin Wright with Morgan Stanley.

Erin Wilson Wright

Great. So I'm curious if you're seeing, and I'll ask both mine upfront. But are you seeing continuing stabilization in the share loss through the fourth quarter? And should we anticipate any changes to the pricing and promotion strategy. You did a promotion in August, September seems like you feel okay with that. Do you double down?

Like are you doing more in terms of pricing or promotions on that front? And are you seeing also a competitive response, a lack of competitive response you could potentially see stabilization quicker than expected?

And then I guess my second question is more on kind of margins and into next year. And what does this all mean kind of from a margin standpoint? And what are some of maybe some of the mitigating factors we should consider on the cost side? And Jay, as you look at this business and you think about some of those opportunities from an efficiency perspective, how do you think about that?

Kristin Peck

I'll take your first question, and I'll let Jay take your second. As we spoke about, we are pleased with the performance of the promotions. We are adjusting month by month, quarter by quarter with those plans. As I said, we're going to watch overall share and look for overall stabilization. But we also need to be cognizant of when new products will be entering or when supply will be expanding in some of these markets. .

So although we're pleased to move from a negative 7% to negative 4%, as we talk about derm share loss overall from Q2 to Q3, our goal is to get that to 0 and to be growing back to be clear. So we'll continue to watch that. We're pleased that we are slowing that decline right now. Our goal, obviously, is to get that to stabilization on that share.

And importantly, to get that stabilization as high a share as we possibly can. So we'll continue to look at the promos we think help drive that. We do like this focus on gross to net versus list because it helps us make sure that we have clear outcomes to the programs that we run, clear metrics we can see that we're delivering. And as we think about some of those overall programs, they're really focused on things like measuring new auto ship starts, new patient starts, loyalty at the clinic.

So we'll continue to invest in those. We have obviously seen some competitive responses as we expect, but nothing that we weren't expecting overall. And we'll continue to monitor and provide an update as we get to Q4 on the continued strategy here. Jay, do you want to take the second question?

James Saccaro

Just overall, as we think about margins, the full year margin is shaping up in line or better than our expectations. So we're pleased with the progress on both the competitive initiatives we put in place, but also the cost initiative.

You'll note, SG&A declines 1% on an overall basis as we expect from an overall year standpoint. Now -- and again, it's important not to look at the fourth quarter in isolation. Some of the comments I made relative to revenue impact not only gross margin but also impact SG&A leverage in the quarter. So you have to look at it in a broader context, second half or even more broadly than that.

Now as we go to next year, there's a couple of drivers that we're going to be very focused on. First of all, we do have a world-class manufacturing and supply chain organization. I've been really impressed with the work that, that team is doing. The amount of manufacturing of product that we have done is just astounding. And so using that as a competitive advantage, especially in this environment, I think, can be really, really important to our success over time but also in 2027.

And then secondly, I noted SG&A declines this year. As we look to next year, we'll continue to focus on savings initiatives we have opportunity. We've pursued some cost savings initiative this year. We'll have further impact from those next year. At the same time, we'll continue to invest in R&D for success. I think 1 of the things I've walked away from over the last several months the remarkable pipeline that we have in place. So we're going to fund those initiatives for success. There will be some benefit in '27, but much more prominent '28 and '29. So we'll fund those for success. -- but really target gross margin and SG&A or cost of goods and SG&A as areas where we focus our initiatives on.

Operator

Our next question comes from Matt DeLatori with Goldman Sachs. .

Matthew Dellatorre

Great. Maybe just on derm. If we look at the franchise sales decline, could you just help us break out how that split between volume and some of the price gross to net promotions and then last quarter, you all highlighted that retail channel growth had moderated versus prior being more of an offset to some of the clinic weakness. Could you just give us an update there on what you're seeing and if the outlook has improved at all?

Kristin Peck

Sure. I'll let Jay take some of the specifics on the derm breakout you're looking on volume versus price and then I can take the -- I'll start on the first one and then Jay can take the 1 on derm. What we saw in the quarter overall is the retail sector, whether you think of both online and in-store, if you compare it to 2025, that growth has slowed.

Home delivery, on the other hand, has been stronger as we look at it. But we were very pleased with in the quarter that I think helps contribute to the defense both Semparica and Derm is real investments in retail, relooking at our MAP pricing there, which I think has made us more -- really strengthened us in the retail channel overall. So we're continuing to invest -- a lot of pet orders find that quite convenient. -- we're seeing advantages to compliance there overall.

So we'll continue to invest in that sector. I think overall, given it's had such a strong number of years, that growth is slowing a little bit with more of that getting made up more recently as you think about home delivery. But I don't know if you want to take the question on derm.

James Saccaro

Sure. So overall, as we think about the entire third quarter performance, we highlighted in our remarks earlier, roughly flat volume with down 1% or so in price. Dermatology had a little bit more of a prominent impact than that from a pricing standpoint. But overall, the franchise was down 16%. It was virtually all -- in fact, it was all gross to net investments that we made versus any changes to list price across the portfolio of derm. .

Operator

Our next question comes from Navann Ty with BNP Paribas.

Navann Ty Dietschi

Can you give us further the international companion animal performance, which was flat this quarter. Have you seen more competitive or macro pressure there?

And then in OA pain, if you could discuss cannibalization in the markets where you have launched Lenivaia and Portella. And maybe my last question on the breakthrough innovation pipeline, if you're on track for the late 2027 approval.

Kristin Peck

Sure. I'll start on the first and Jay, you can know if you have anything you want to build. We did see flat growth overall in international in the quarter. That really had to do with similar trends that you might have seen in some of the developed markets in Europe with pressure overall on derm.

We did see strong growth overall in parasiticides there. So I think some of the same sort of trends we've been seeing overall in markets where we've had new competitors entering. And if you go market by market, obviously, there, you have to see that the timing may obviously overall.

I think your second question was on breakthrough innovation, I believe. We are very excited, as Jay said, around our innovation. As we mentioned, we're committed to achieving a significant major market approval every year for the next several years.

We were really pleased that all the milestones that we've outlined for 2026 are on track, and we've got a few that have moved forward. We'll see a number of launches of some of these products into 2027. We'll see those ramp as they go through the year, obviously, but also very excited to your point on the breakthrough innovation.

Those are the creation of new categories as we outlined in some of our slides that's around conditions such as chronic kidney disease, cardiology, oncology, obesity, diabetes, anxiety, these are important new categories where there are very limited products out there today.

And this is something that Zoetis has always been known for, really creating new categories and bringing innovation. So we remain quite excited on all these. And importantly, we look forward to sharing a more comprehensive update to that pipeline at JPMorgan, where we'll update all the sort of expectations as we look at the years to come.

Operator

Our next with Christopher LoBianco with TD Cowen.

Christopher LoBianco

We had 2. First, can you quantify the impact of any onetime factors or one-offs in the quarter like stocking or onetime purchases in second -- can you provide any color on the product profile of CENTERA to do? Is this product met for Rx or OTC usage?

James Saccaro

Sure. As it relates to onetime items, really in the third quarter, we did have the promotional activity that I commented on, and that really impacts the shape of sales growth between the third and fourth quarters. And so that's something that we periodically do. You'll recall, we've done these in past years.

As we evaluate 2027, we'll evaluate the appropriate promotional activity, but beyond that, which did sort of impact the sales contour between Q3 and Q4, there were really no onetime items to point out. And like I say, that's something that we'll evaluate next year, what is the right shape of promotions as we go through the year as it relates to the product profile.

Kristin Peck

For Duo, we're quite excited to get expect approval for Duo this year and launch it next year. It will be an Rx product. It is not an over-the-counter product. It will be part of the Simparica family. The focus of this product is meeting an unmet need, which is there's many areas of the country where there's flees, ticks and intestinal words, but heartworm is not a major area or areas where hardware is huge and they want to move to our product ProHeart -- and it really meets that need. So it's a product really focused on suite of heartworm and intestinal worms. So we're excited to get approval there and then add this to our overall Simparica family.

Operator

We will move with our next with Andrea Alfonso with UBS.. .

Andrea Zayco Narvaez Alfonso

My question was really -- I appreciate all the color that you provided on sort of the definitive competition by channel. I guess -- any color on the efforts by channel? How does it vary between retail versus independents? And how do we think about the competitive intensity there? And then, I guess, separately, I'll squeeze as soon as with 2 big distributors coming together imminently, how are you approaching distributor relationships versus more direct engagement with practices .

Kristin Peck

Sure. I'll take those questions as a comprehensive because I think what you're really talking about overall is channel -- and I think as we think you have to pay attention to all those. Obviously, we have had a strength in the corporate side historically. We'll continue to invest there. We think there's still a lot more that our teams are focused there on making sure that there's for 1 of 2.

We want to be the largest there. So there's very targeted promotions meeting each of those individual corporate strategies there. It's also focusing on independents. We have a loyalty program there that we're quite focused on. That's obviously part of our targeted promotions as we talked about, is how do we gain share in some of those independents -- so we'll be focused there. We talked a lot about investing in sort of retail where you get an opportunity for auto ship there's really great movement as well in the box store side as well.

So these are all important. And as we think about distribution, they've always been an important channel for us. Some of our customers prefer to place 1 order across all those. So we're going to continue to make sure that we're available wherever both the vet and the pet owner wants to access our products. And so we'll look at channels holistically and make sure we have a targeted strategy that meet each of those different channels needs.

Operator

We will move next with Stephen Beckert with KeyBanc Capital Markets.

Steven Dechert

I guess just on the growth in net investments on the vet clinic side, are you in the process of sort of the product bundling with clinics? Have you mainly worked through all those contracts? And how often can you revisit those contracts for further changes? And then on a key derm internationally on the organic growth being down 20%, a little worse maybe than we expected. But I guess new elVi and Zenrelia have been in that market in Europe for a while. So I guess, just maybe what changed this quarter with the competitive dynamic?

Kristin Peck

Sure. So your first question on gross to net and product bundling. We have always had a broad portfolio. We have the broadest portfolio. We've always been able to leverage that portfolio as we think about overall promotions. We're going to continue to do that. As we think about some of those clinics, we look at our overall share there. We try to make sure that they're buying across our portfolio.

I think that will remains see an important strategy for us. obviously seeing some competitors try to copy that where they can, but they don't have as broad a portfolio but importantly, as we've talked about before, it's really the innovation that we bring that pulls this forward. And as we think about approvals we had this year and all the launches we're going to have next year.

I think that sets up that portfolio play that we're talking about. And we look at each of those programs on a quarter-by-quarter basis. The contracts, as you think about some of the corporates. Each contract is slightly different. Normally, there are 2- to 3-year contracts where you can obviously revisit those -- but we're very pleased with how we're positioned there. And again, I think our innovation is what really differentiates us overall.

And your question on Derm and International, you were referencing Europe where we have had some of that competition for a while. But international is quite broad, as you know. And I think the competitive dynamics are quite different in different markets. As you think about even some of our top 5 markets, if you pull in, say, Brazil or Australia. In some of those markets, these are products that are sold almost like over-the-counter in retail stores. where the strategies are quite different.

And I think some of our competitors are positioned a little differently than us as well as some of those pricing dynamics in some of those other markets. So yes, the Europe might look a little bit more in some of the markets like the U.S.

But as you get outside of Europe, those market dynamics are quite unique in certain large markets that are top 5 markets for us, such as, say, Brazil or Australia.

Operator

There are no further questions in queue I will now turnhe call back over to CEO, Kristin Peck, for any additional or closing remarks.

Kristin Peck

Well, thanks, everyone, for joining us today. As always, we really appreciate your questions and your continued interest in Zoetis. And we look forward to keeping you updated at future conferences and seeing you again on the Q4 call next year. Thanks, everybody.

Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.