ZOETIS:
THE WORLD LEADER IN
ANIMAL HEALTH Investor Presentation
March 26, 2015
2
We use non-GAAP financial measures, such as adjusted net income and adjusted diluted earnings per share, to assess
and analyze our operational results and trends and to make financial and operational decisions. We believe these non-
GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating
performance. These non-GAAP financial measures should not be considered alternatives to measurements required by
GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of
liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by
other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the
tables accompanying our earnings release and are posted on our website at www.zoetis.com.
FORWARD-LOOKING STATEMENTS
NON-GAAP FINANCIAL INFORMATION
This presentation contains forward-looking statements, which reflect the current views of Zoetis with respect to business
plans or prospects, future operating or financial performance, expectations regarding products, future use of cash and
dividend payments, and other future events. These statements are not guarantees of future performance or actions.
Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties
materialize, or if management's underlying assumptions prove to be incorrect, actual results may differ materially from
those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they
are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters
can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, including in the sections
thereof captioned “Forward-Looking Information and Factors That May Affect Future Results” and “Item 1A. Risk
Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. These filings and subsequent
filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.
3
GROW REVENUE IN LINE WITH OR FASTER
THAN THE MARKET
GROW ADJUSTED NET INCOME1 FASTER
THAN REVENUE
TARGET VALUE-ADDED INVESTMENT
OPPORTUNITIES
OUR LONG-TERM VALUE PROPOSITION TO SHAREHOLDERS
RETURN CAPITAL TO SHAREHOLDERS
1 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income statement line item,
excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure is not, and should not be viewed as, a
substitute for U.S. GAAP reported net income attributable to Zoetis.
4
HOW WE ARE CREATING SHAREHOLDER VALUE
1 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.
• Leveraging competitive advantages – industry-leading sales force,
R&D and manufacturing quality – to generate operational revenue
growth faster than animal health market growth
• Growing adjusted net income1 significantly faster than revenue
• Demonstrating high level of R&D productivity, delivering approximately
180 product approvals in 2014
• Putting in place capital allocation priorities – increased dividends by
15%, targeted business development and a $500M share repurchase
program in 2014
• Injecting an ownership mindset to our existing culture, focused on
customers, speed and financial discipline to create value for our
shareholders
5
WHAT YOU SHOULD EXPECT FROM US
• Continue to deliver revenue growth in line with or faster than
overall market
• Drive adjusted net income1 growth faster than revenue by
improving gross margin and continuing expense discipline
• Invest in enhancing our competitive advantages
• Improve working capital efficiency through technology initiatives
and management incentives
• Return capital to shareholders while targeting value-added
opportunities to enhance and complement our core business
Multiple drivers of shareholder value
1 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.
6
STRATEGIC FOCUS & CORE BELIEFS PROVIDE ROADMAP FOR SUCCESS PATH FOR CONTINUED LEADERSHIP
LEVERAGE OUR CAPABILITES
1. Leverage our local presence and
customer relationships
2. Invest in innovation to extend our
product portfolio
3. Provide high-quality products and
improve margins
EXTEND OUR REACH
4. Further penetrate emerging markets
5. Remain the partner of choice for external development
6. Expand complementary businesses
7
AT THE CORE OF A $100+ BILLION INDUSTRY
COMPANION ANIMAL
LIVESTOCK
1 Vetnosis Review 2014 2 Vetnosis STORM FORECASTS: 2014-2023
• Pet Supplies
• Vet Services
• Diagnostics
• OTC Health
• Nutrition
• Genetics
• Food Safety
• Herd Health
Management
• Diagnostics
~$24 Billion1
• Medicines
• Vaccines
• Medicated Feed Additives
• Parasiticides
~$24B GLOBAL ANIMAL HEALTH MARKET EXPECTED TO EXCEED $33B BY 20202
ANIMAL HEALTH
8
POWERFUL TRENDS CREATING DEMAND
POPULATION GROWTH
A GROWING MIDDLE CLASS
INCREASING URBANIZATION
PREDICTABLE, SUSTAINABLE AND FUNDAMENTAL ECONOMIC DRIVERS
9
DIFFERENCES BETWEEN HUMAN HEALTH & ANIMAL HEALTH DRIVE SELLING APPROACH
VS
HUMAN HEALTH ANIMAL HEALTH
• DIRECT ACCESS TO
DECISION MAKER
• TIME FOR
CONSULTATION
• HIGHLY FRAGMENTED
CUSTOMER BASE
• PRODUCTS + EXPERTISE
+ SERVICES
• GATEKEEPER
• LIMITED TIME
• GOVERNMENT
AND THIRD
PARTY PAYERS
• ONLY PRODUCT
FOCUSED
10
HIGH-QUALITY PRODUCTS DIRECT SALES INNOVATION
COMPETITIVE ADVANTAGE THREE INTERCONNECTED CAPABILITIES UNDERPIN BUSINESS MODEL
11
LIMITS ON POPULATION & PRODUCTION DRIVE ANIMAL HEALTH SPEND PROTEIN NEEDS FUEL ANIMAL HEALTH
# OF ANIMALS1 PROTEIN
PRODUCTION1
ANIMAL HEALTH
Beef Cattle
1.4% 1.5% CAGR CAGR
Dairy Cattle
1.2% 1.8% CAGR CAGR
Pigs
1.3% 1.7% CAGR CAGR
Poultry
2.1% 2.5% CAGR CAGR
1-2% 2-3%
6%
TOTAL RANGE
PROJECTED GROWTH BY 2023
CAGR2
GLOBAL
LIVESTOCK
1 OECD-FAO Agricultural Outlook 2014-2023 2 Vetnosis STORM from 2013-2018
12
DRIVERS OF PET CARE GROWTH DISTINCT TRENDS IN EMERGING VS. DEVELOPED MARKETS
INCREASED PET OWNERSHIP
HIGHER MEDICALIZATION (ROUTINE CARE)
SPECIALTY CARE
PRICE
EMERGING MARKETS
DEVELOPED MARKETS
5%
CAGR1 GLOBAL COMPANION ANIMAL HEALTH
1 Vetnosis STORM from 2013-2018
13
MARKET POSITION BY PRODUCT CATEGORY
Anti-Infectives #1
Other Pharma1 #1
Medicated Feed Additives (MFA) #2
Vaccines (Biologicals) #2
Parasiticides #3
MARKET POSITION BY GEOGRAPHY
North America #1
Latin America #1
Asia #1
Rest of World #2
Western Europe #2
Eastern Europe #2
WORLDWIDE MARKET LEADER
MARKET POSITION BY SPECIES
Cattle #1
Swine #1
Companion Animal #2
Poultry #3
WELL POSITIONED ACROSS MULTIPLE GEOGRAPHIES, CATEGORIES & SPECIES
#1 WORLDWIDE
Source: Vetnosis Executive’s Guide 2015 1 Includes pain, sedation, internal medicine, etc.
14
2014 reported performance is the total sales revenue and growth reported by each AH company, which might include Non-Animal Health sales and merger/acquisition activity.
$4,785
$3,454
$2,754
$2,347
$1,748 $1,499
$1,174 $1,026 $1,016
$418
20
14
Re
po
rte
d S
ale
s (
US
$M
)
4.9%
2.7%
4.5%
9.1%
0.8% 5.5%
0.3% 4.9% 22.6%
5.1%
ZOETIS LEADS ANIMAL HEALTH INDUSTRY
SINGULAR FOCUS HELPS DELIVER GROWTH, STABILITY AND STRONG RETURNS
Source: Vetnosis Executive’s Guide 2015
2014 AH REPORTED SALES AND % GROWTH (INCLUDING NON-AH SALES)
15
BUSINESS MODEL DRIVES OUTPERFORMANCE
OVER THE LAST THREE YEARS, ZOETIS HAS GROWN IN LINE WITH OR FASTER THAN THE MARKET
4.4%
5.1%
REVENUE CAGR 2010 – 2014
ZOETIS1
Source: IFAH; Vetnosis; Company Filings
1 Zoetis reported revenue growth, excluding the acquisition of King Animal Health, acquired by Pfizer on January 31, 2011. 2 Proforma Sales of AH products (as defined by Vetnosis), which excludes Poultry Devices, Agribusiness, Nutritional Feed Additives, Environmental Health, Diagnostics, Genetics, Contract Manufacturing, E-Learning and Consulting Services. 3 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is calculated before the impact of purchase accounting adjustments, acquisition-related costs
and certain significant items and is a non-GAAP financial measure. Adjusted EBITDA excludes interest expense net of capitalized interest, adjusted income taxes, and adjusted
depreciation and amortization.
$940
$1,078
$1,266 $1,339
22%
25%
28% 28%
2011 2012 2013 2014
Adjusted EBITDA ($M) % of Revenue3
AH MARKET2
16
WORLD LEADER2
10,000+ COLLEAGUES AROUND THE WORLD
300+ PRODUCT LINES 120+
COUNTRIES
MARKET PRESENCE IN
In discovery, development and
manufacture of veterinary vaccines
and medicines
WE PROVIDE
MEDICINES VACCINES DIAGNOSTICS GENETICS
OUR FOCUS
34%
65%
COMPANION ANIMAL HEALTH*
LIVESTOCK HEALTH*
17
• 43% U.S.
• 24% EuAfME
• 17% CLAR
• 15% APAC
FURTHER PENETRATE EMERGING MARKETS
Zoetis combines the local presence and knowledge necessary to serve
the unique needs of individual customers with the global reach and
resources essential to help advance animal health globally.
• 1,300 APAC
• 900 U.S.
• 800 EuAfME
• 600 CLAR
FIELD FORCE COLLEAGUES BY REGION
2
REVENUE BY REGION1
CLAR
US
EUAFME
APAC
GLOBAL LEADERSHIP, SCALE AND SCOPE
1 Based on 2014 revenue, and excludes CSS which represented approximately 1% 2 As of December 31, 2014
18
WE CALL UPON THREE TIERS OF CUSTOMERS ACROSS ALL MARKETS
DIRECT & TELESALES SALES REPRESENTATIVES,
TECHNICAL SERVICES, DISTRIBUTORS
DISTRIBUTORS
STRATEGIC ACCOUNTS & VETERINARIANS
MIDDLE TIER CUSTOMERS
SMALL PRODUCERS / DEALERS / VETERINARIANS
19
DIVERSIFIED REGIONAL REVENUE TARGETS KEY SPECIES AN INTRODUCTION TO THE U.S. MARKET
2014 U.S. SEGMENT REVENUE – BY SPECIES
39%
37%
11%
8% 5%
Other
Poultry
Swine
Cattle
Equine
Dogs/Cats
2014 Revenue: $2,059M
Livestock
Companion Animal
20
OUR BUSINESS IN THE U.S. MARKET HISTORICALS AND OUTLOOK
1 Defined as income before provision for taxes on income 2 Vetnosis
* Represents Operational/Base revenue growth, which reflects changes in Reported growth excluding the impact of incremental revenues from: the acquisition of King Animal
Health, acquired by Pfizer on January 31, 2011, and Fort Dodge Animal Health (FDAH), acquired by Pfizer on October 15, 2009; government–mandated divestitures of legacy
FDAH and our legacy products in connection with the FDAH acquisition
• Steady, consistent revenue
performance
• 2014 US Revenue
• Livestock: 12% growth
• Companion Animal: 3%
growth
• Continued growth in profitability
• Expected long-term average
revenue growth:
• Mid single digits 13%* 7%* 6%* 7%* 8%*
47% 49%
52%
55%
57%
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2010 2011 2012 2013 2014
Re
ve
nu
e (
$M
)
US Segment Revenue & Earnings1
Reported Revenue ($) Segment Earnings as % of Revenue
21
AN INTRODUCTION TO THE EUAFME MARKET DIVERSE REGION ACROSS COUNTRIES AND SPECIES
2014 EUAFME SEGMENT REVENUE
BY COUNTRY BY SPECIES
40%
28%
13%
12%
5%
Cattle
Equine
Poultry
Swine
Dogs / Cats
Other
18%
15%
13%
13%
9%
8%
24%
Italy
France
UK
Emerging*
Other Developed**
2014 Revenue: $1,141M
Companion Animal
Livestock
* Emerging includes Russia and Commonwealth of Independent States, Africa, Turkey and Egypt, the Middle East, Iran and Caucasus, and Israel.
**Other Developed includes key markets such as Netherlands, Poland and Ireland.
Spain
2%
Germany
22
OUR BUSINESS IN THE EUAFME MARKET HISTORICALS AND OUTLOOK
1 Defined as income before provision for taxes on income 2 Vetnosis
* Represents Operational/Base revenue growth, which reflects changes in Reported growth excluding the impact of incremental revenues from: the acquisition of King Animal
Health, acquired by Pfizer on January 31, 2011, and Fort Dodge Animal Health (FDAH), acquired by Pfizer on October 15, 2009; government–mandated divestitures of legacy
FDAH and our legacy products in connection with the FDAH acquisition; and foreign exchange
† Effective in the first quarter of 2014, revenue and earnings associated with our Client Supply Services (CSS) organization are reported within Other business activities, separate
from our four reportable segments. Reported Revenue for 2013 and 2012 has been restated to exclude the impact of these activities. Prior to 2012, CSS revenue and earnings
were not captured separately, therefore, 2011 and 2010 Reported Revenue has not been restated.
• Consistent operational growth;
in line, or faster than the market2
• 2014 EuAfME Revenue
• Livestock: 2%* growth
• Companion Animal: 4%*
growth
• Progressive and strong
profitability improvements
• Expected long-term average
operational revenue growth:
• Low to mid single digits (1%)* 3%* 3%*† 3%*† 2%*
32% 32%
35%
37% 38%
0
150
300
450
600
750
900
1,050
1,200
2010 2011 2012 2013 2014
Re
ve
nu
e (
$M
)
EuAfME Segment Revenue & Earnings1
Reported Revenue ($) Segment Earnings as % of Revenue
23
45%
20%
16%
16%
2%
AN INTRODUCTION TO THE CLAR MARKET
2014 CLAR SEGMENT REVENUE
BY COUNTRY BY SPECIES
2014 Revenue: $815M
38%
24%
10%
9%
4%
15%
Argentina
Other*
Venezuela
Canada
Mexico
Brazil
* Includes key markets such as Chile, Colombia and Peru
Other
Swine
Poultry
Cattle
Equine
Dogs/Cats
Livestock
Companion Animal 2%
1%
24
OUR BUSINESS IN THE CLAR MARKET HISTORICALS AND OUTLOOK
1 Defined as income before provision for taxes on income 2 Vetnosis
* Represents Operational/Base revenue growth, which reflects changes in Reported growth excluding the impact of incremental revenues from: the acquisition of King
Animal Health, acquired by Pfizer on January 31, 2011, and Fort Dodge Animal Health (FDAH), acquired by Pfizer on October 15, 2009; government–mandated
divestitures of legacy FDAH and our legacy products in connection with the FDAH acquisition; and foreign exchange
• Recent acceleration in revenue
growth
• 2014 CLAR Revenue:
• Livestock: 13%* growth
• Companion Animal: 13%*
growth
• Significant improvement in
profitability
• Expected long-term average
operational revenue growth:
• High single digits 5%* 9%* 4%* 6%* 13%*
31%
35%
33% 34%
38%
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013 2014
Re
ve
nu
e (
$M
)
CLAR Segment Revenue & Earnings1
Reported Revenue ($) Segment Earnings as % of Revenue
25
2014 APAC SEGMENT REVENUE
BY COUNTRY BY SPECIES
AN INTRODUCTION TO THE APAC MARKET
Swine
Equine
Poultry
Cattle
Dogs/Cats
Other
24%
15%
15% 9%
8%
29%
India
Thailand
Japan
China
Australia
DIVERSITY AND BALANCE IN GROWTH MARKETS
*Includes markets such as Korea, New Zealand, Taiwan, etc.
2014 Revenue: $720M
Companion Animal
Livestock
Other*
26%
24% 23%
18%
2%
7%
26
OUR BUSINESS IN APAC HISTORICALS AND OUTLOOK
1 Defined as income before provision for taxes on income 2 Vetnosis
* Represents Operational/Base revenue growth, which reflects changes in Reported growth excluding the impact of incremental revenues from: the acquisition of King Animal
Health, acquired by Pfizer on January 31, 2011, and Fort Dodge Animal Health (FDAH), acquired by Pfizer on October 15, 2009; government–mandated divestitures of
legacy FDAH and our legacy products in connection with the FDAH acquisition; and foreign exchange
• Fast growth supported by
emerging markets, tempered by
slower growth in developed
markets
• 2014 APAC Revenue:
• Livestock: 8%* growth
• Companion Animal: (2%)*
decline
• Significant improvement in
profitability
• Long-term average operational
revenue growth expected:
• High single digits
15%* 12%* 8%* 7%* 5%*
28%
31%
34%
38% 39%
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013 2014
Re
ve
nu
e (
$M
)
APAC Segment Revenue & Earnings1
Reported Revenue ($) Segment Earnings as % of Revenue
27
ANIMAL HEALTH R&D HAS DISTINCT ADVANTAGES VERSUS HUMAN HEALTH R&D
More predictable results Higher success rate Shorter cycle time Lower overall cost
28
OUR R&D MODEL IS DIFFERENTIATED BY STRENGTHS IN MULTIPLE AREAS
EXTENSIVE INTERNAL
EXPERTISE & CAPABILITIES GLOBAL GRASP OF
CUSTOMER NEEDS
REGULATORY EXPERTISE
WORLDWIDE
PARTNER OF CHOICE FOR
EXTERNAL ALLIANCES
29
A STRUCTURED PROCESS GUIDES PORTFOLIO PRIORITIZATION AND EXECUTION
Led by
decision-makers
from R&D, marketing,
commercial and
alliances CUSTOMER NEEDS
OPPORTUNITY IDENTIFICATION
OPPORTUNITY SELECTION
ANNUAL PROJECT PRIORITIZATION
ZOETIS MARKET GROWTH
30
INVESTMENT DECISIONS ARE BASED ON FOUR KEY CRITERIA
Customer Importance
Technical Feasibility
Return on Investment
Commercial Value
31
LIFECYCLE IMPROVEMENTS ARE DIVERSE AND IMPERATIVE TO MARKET LEADERSHIP
Geographic
Expansion
Claims
Routes/Schedule
of Administration
LIFECYCLE ENHANCEMENTS
Formulations
Combinations
Additional
Species
INNOVATION INTENSITY INNOVATION INTENSITY
32
THE CEFTIOFUR FRANCHISE A REMARKABLE BRAND LIFECYCLE SUCCESS STORY FOR 25 YEARS
MOST RECENT APPROVAL 3Q 2013
FIRST APPROVAL 1988 Naxcel/Excenel
• Sterile Powder
RTU (ready to use)
• Convenient Ready-to-Use
• Longer shelf life
Spectramast
• Broad spectrum for today's mastitis
RTU-EZ
• Reformulated to come out easier
CCFA
• Sustained release; one treatment
33
CROSS SPECIES Parasiticides
Infectious Disease
• Prevention
• Treatment
Pain/Inflammation
DEPTH AND BREADTH OF PORTFOLIO ENSURES SUSTAINED DELIVERY OF VALUE
Companion Animal
Allergy/Dermatology
Sedation/Anesthesia
Renal/Cardiovascular
Livestock
Reproduction
Food Safety
Performance
Complementary
Solutions
Genetics
Diagnostics
Biodevices
SPECIES SPECIFIC
137
TIME TO MARKET1
>7 Years 4-7 Years <4 Years
31 275
BIOPHARMACEUTICALS PHARMACEUTICALS VACCINES
Research Programs
Early Development Projects
Development Projects
1 As of November 2014
34
1 Based on 2014 Adjusted Cost of Goods Sold (COGS), which excludes the impact of purchase accounting adjustments, acquisition- related costs
and certain significant items and is a non-GAAP financial measure. 2 Regulatory inspections from January 2013 through December 2014
KEY FEATURES OF ZOETIS MANUFACTURING
21 TECHNOLOGIES 8 MAJOR MANUFACTURING TECHNOLOGIES AND PLATFORMS
DELIVERING QUALITY, RELIABLE SUPPLY AT A COMPETITIVE COST
3,800 COLLEAGUES
55 INSPECTIONS2
0 CRITICAL
DEFICIENCIES
$1.68 BILLION
Adjusted Cost of goods sold1
200 THIRD-PARTY MANUFACTURERS IN
30 COUNTRIES
300+ PRODUCT LINES
27 MANUFACTURING FACILITIES
35
PROVIDE HIGH-QUALITY PRODUCTS
1. Provides high-quality, trusted products
2. Delivers products with consistent performance
3. Delivers products on time
4. Always has products available when needed
5. Responds quickly to my needs
6. Provides me with good customer service
7. Helps me secure fair and competitive prices
8. Is easy to do business with
92% 86% 80% 80% 80% 79% 76% 75%
CUSTOMERS’ TOP PRIORITIES FOCUS ON SUPPLY
Q: HOW IMPORTANT ARE THESE ATTRIBUTES IN YOUR SELECTION OF AN ANIMAL HEALTH PROVIDER?
➔ Top 5 provider attributes related to dimensions of manufacturing and supply
➔ Zoetis outranked ALL competitors on performance in these areas
2012 Internal Customer Research, Pfizer Animal Health
36
DIVERSE NETWORK OF SITES, TECHNOLOGIES AND EXPERTISE
DIAGNOSTICS/
DEVICES
LONGMONT VAN
BUREN
SALISBURY EAGLE
GROVE
DESIGNED FOR GLOBAL CUSTOMER BASE
BIOLOGICALS STERILES & PHARMAS APIs1 & MFAs2
LAURINBURG
CAMPINAS
MEDOLLA
SHENZHOU YANTAI HSINCHU5
CHARLES
CITY
LINCOLN
KALAMAZOO
GUARULHOS3
WILLOW
ISLAND
CHICAGO
HEIGHTS
OLOT LOUVAIN
LA NEUVE CATANIA
HARIDWAR SUZHOU
WHITEHALL
JILIN4
MELBOURNE
WELLINGTON
SAN DIEGO
DURHAM
Anchor Site Satellite Work Centers
1Active Pharmaceutical Ingredients 2 Medicated Feed Additives 3 Guarulhos is leased back to Pfizer 4 Jilin is a Chinese joint venture
U.S.
CLAR
APAC
EUAFME
5 Hsinchu is a Taiwanese joint venture
37
NETWORK STRATEGY TO IMPROVE MARGINS
by 2017
FOCUSED EXCELLENCE AND SIMPLIFICATION ▪ Simplify internal plant network
▪ Focus investment on future platforms of growth
▪ Initiate first phase of Centers of Excellence creation
by 2020
INVESTING IN GROWTH ▪ Perform second phase of CoEs creation
▪ Continue investment in future growth platforms
▪ Focus on additional long-term biologics capacity
by 2023
1
2
3
LEAN, FIT AND AGILE ▪ Lean/Six Sigma quality improvement program
▪ Reduce inventory and waste
▪ Focus on speed-to-market improvements
MOVING FORWARD:
200 BASIS POINT IMPROVEMENT BY 2020
38
FOUR ELEMENTS OF VALUE CREATION
Revenue Growth
Operating Margin
Improvement
Value-Added
Business
Development
Return Capital
to Shareholders
• Market leader gaining share with diverse portfolio
• Sustain revenue growth through innovation and lifecycle
development
• Improve gross profit margin through price, mix, efficiency and
optimized manufacturing network
• Leverage existing sales and marketing resources; maintain
R&D productivity
• Minimize G&A costs while supporting global business
• Regular dividend, growing over time
• Share repurchase program
• Focus on supporting R&D portfolio and adding
complementary businesses
• Utilize mix of licensing, partnerships and acquisitions to
strengthen portfolio
39
CURRENCY FOOTPRINTS
28%
12%
7%
7%
7%
4%
4% 3%
28%
EUR BRL CAD AUD GBP
JPY CNY MXN Other
~53% NON-USD SALES
• Exposure to
more than 35
currencies across the globe
• Translation & other
risks
• We focus on
operational
results
2014 Non-USD Revenue by Currency
40
61%
39%
DIVERSE REVENUE STREAM BY MANY DIMENSIONS
REVENUE BY SPECIES1
REVENUE BY PRODUCT CATEGORY1 REVENUE BY SEGMENT2
REVENUE BY PRODUCT LINE
All other
product lines
Top 10
product lines
Note: Based on 2014 revenue
RESILIENT
DIVERSE
DURABLE 36%
34%
15%
12%
Other livestock
Poultry
Swine
Companion animal
Cattle
43%
24%
17%
15%
APAC
CLAR
EuAfME
US
29%
26%17%
15%
10%
Other non-pharma
Medicated feed
additives
Parasiticides
Other pharmaceuticals
Vaccines
Anti-infectives
2%
3%
1 Excludes revenue associated with our Client Supply Services (CSS), which represented 1% of total 2014 revenue
2 Revenue of 1% associated with CSS is included, but not labeled
41
Product Line Product
Category
Year
Introduced
Years on
Market
Ceftiofur injectable line Anti-infective 1988 26
Revolution/Stronghold Parasiticide 1999 15
Draxxin Anti-infective 2004 10
Rimadyl Other Pharma 1997 17
Convenia Anti-infective 2007 7
Clavamox/Synulox Anti-infective 1994 20
Lincomycin line MFA 1967 47
Dectomax Parasiticide 1993 21
Aureomycin MFA 1953 61
Terramycin MFA 1952 62
BMD MFA 1954 60
Vanguard line Vaccine 1978 36
Rispoval® line Vaccine 1982 32
Lasalocid line MFA 1976 38
Vanguard® L4 Vaccine 1978 36
Cydectin Parasiticide 1986 28
Embrex® devices Other 1988 26
Lutalyse Other 1972 42
Suvaxyn® PCV/Fostera™ PCV Vaccine 2006 / 2011 8 / 3
Cerenia Other 2007 7
Orbeseal/Teatseal Other 2001 13
Bovi-Shield® line Vaccine 1998 16
ProHeart Parasiticide 2001 13
Improvac/Improvest/Vivax Vaccine 1998 16
~20% of Revenue
Covered by Exclusive IP
Average Product
Duration of Top 25 =
27 Years
LONG-DURATION PRODUCT FRANCHISES
% of
2014 Sales
~6-8% each
~2-3% each
~1-2% each
Top 25 = 59%
RESILIENT
DIVERSE
DURABLE
42
STEADY REVENUE GROWTH WITH LOW VARIABILITY
2006 – 2014 Animal
Health Industry
Revenue Growth
2009 Animal Health
Industry Revenue
Growth
Low single digits
(excl. currency)
DIVERSE
RESILIENT
DURABLE
1 Data calculated from IFAH Annual Report 2006 and Vetnosis Review 2014
5.1% CAGR1
PROTEIN IS A
DIETARY STAPLE
OWNERS PRIORITIZE
THEIR PET SPENDING
43
PROJECTS
INITIATED
IMPROVING COGS & GROSS MARGINS MODEST IMPROVEMENTS IN NEAR TERM, ACCELERATION BEYOND 2017
2014 Guidance: XX%
2015 Guidance: YY%
Long-term Benefits:
Optimize Manufacturing • Diversity of portfolio
presents challenge to
COGS
• Long timelines to shift
manufacturing network
• Near-term opportunities are
inherent in the business
• Incremental 200 bps of
gross profit margin from
manufacturing network
strategy by 2020
2014 2017 2023
NETWORK
• Price +
• Mix + / -
Enduring Factors:
EFFICIENCY
44
4%*
8%*
20%*
2014
Field Sales,
Marketing,
A&P
G&A
Distribution
Growing to steady state
by year-end 2015
Key assets
with capabilities in place
LEVERAGING KEY ASSETS IN SG&A
Adjusted SG&A1
as % of Revenue
Growth with sales volume
2014 Adjusted
SG&A1: $1,507M
~$950M
~$375M
~$180M
1 Adjusted selling, general and administrative expenses (SG&A) is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted
accounting principles (GAAP) income statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.
* Certain amounts and percentages may reflect rounding adjustments.
45
THE VALUE OF OUR R&D ENGINE
Maintaining the portfolio • Global effort to maintain
marketability of ~14,000 SKUs
1 Adjusted research and development expenses (R&D) is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting
principles (GAAP) income statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. 2 Zoetis internal data
* Certain amounts and percentages may reflect rounding adjustments.
Nurturing lifecycle development • More than 600 product approvals
over the last 5 years2
• Average duration of top 25 products
= 27 years
Track record of innovation • APOQUEL, CONVENIA, CERENIA,
DRAXXIN, FOSTERA, IMPROVAC
PEDV, RIMADYL
~40%*
~45%*
~15%*
2014
Regulatory &Maintenance
LifecycleInnovation
New ProductInnovation
% of Adjusted R&D1
46
STABILIZING OUR TAX STRUCTURE
40%*
34%*
41%*
29%
27%
~29%
25%
30%
35%
40%
45%
Effective Tax Rate
on Adjusted Income1
• Stabilized tax rate
• Elements driving down
2014 tax rate were not
structural
• Best-in-class operating model
• Incentive tax rulings in
Belgium and Singapore
• Modest improvement over time
• “Evolution” not “revolution”
1 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income
statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure
is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.
* Calculated on a carve-out basis
47
INCREASING RETURN ON NET ASSETS
STRONG ADJUSTED NET INCOME GROWTH
ON A RELATIVELY FIXED NET ASSET BASE
Zoetis Adjusted Net Income2 Growth
Zoetis Revenue Growth
Market Growth
Zoetis Adjusted EBITDA1 Growth
1 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is calculated before the impact of purchase accounting adjustments, acquisition-related
costs and certain significant items and is a non-GAAP financial measure. Adjusted EBITDA excludes interest expense net of capitalized interest, adjusted income taxes, and
adjusted depreciation and amortization. 2 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income
statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure
is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.
2
48
CAPITAL ALLOCATION PRIORITIES FOR ZOETIS
ACTIVE MANAGEMENT OF CAPITAL STRUCTURE
BUSINESS DEVELOPMENT OPPORTUNITIES
RETURN CAPITAL TO SHAREHOLDERS
FR
EE
CA
SH
FL
OW
ALLOCATED AMONGST HIGH ROI ALTERNATIVES
49
ENHANCING OUR LONG-TERM VALUE PROPOSITION WITH BUSINESS DEVELOPMENT APPLYING DISCIPLINED PORTFOLIO MANAGEMENT FOR GROWTH
AREAS OF FOCUS
Support for R&D Portfolio
New chemical entities, biological
substrates & technologies
Complementary Areas
Devices, Diagnostics, Food Safety
Portfolio Gaps & Geographical
Opportunities
ASSESSMENT CRITERIA
Strategic Fit
Clear Synergies
Financial Value
Anti-trust Considerations
Position of Strength: Core Capabilities and Scale
Experienced in Licensing, Acquisitions, Integrations & Divestitures
Partner of Choice for Animal Health Community
BUSINESS DEVELOPMENT STRENGTHS AND EXPERIENCE
APPENDIX
51
RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION 2014
in USD millions
GAAP
Reported
Purchase
Accounting
Acquisition
related costs
Certain
Significant
Items
Non-GAAP
Adjusted
Revenue $4,785 $0 $0 $0 $4,785
Cost of Sales 1,717 (4) 0 (33) 1,680
Gross Profit 3,068 4 0 33 3,105
Gross Profit as % of Revenue 64.1% 64.9%
Selling, general and administrative expenses 1,643 0 0 (136) 1,507
Research & Development Expenses 396 (2) 0 (1) 393
Amortization of intangible assets 60 (45) 0 0 15
Total Operating Expenses 2,099 (47) 0 (137) 1,915
Total Operating Expenses as % of Revenue 43.9% 40.0%
Restructuring charges and certain acquisition related costs 25 0 (8) (17) 0
Other (Income) / Expenses 7 0 0 (18) (11)
Income/(loss) before Interest and Taxes 937 51 8 205 1,201
Interest Expense 117 0 0 0 117
Income before provision for taxes on income 820 51 8 205 1,084
Provision for taxes on income 233 17 3 37 290
Income from continuing operations 587 34 5 168 794
Net income attributable to non-controlling interests 4 0 0 0 4
Net income attributable to Zoetis 583 34 5 168 790
52
RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION 2013
in USD millions
GAAP
Reported
Purchase
Accounting
Acquisition
related costs
Certain
Significant
Items
Non-GAAP
Adjusted
Revenue $4,561 $0 $0 $0 $4,561
Cost of Sales 1,669 (2) 0 (42) 1,625
Gross Profit 2,892 $2 0 $42 2,936
Gross Profit as % of Revenue 63.4% 64.4%
Selling, general and administrative expenses 1,613 1 0 (188) 1,426
Research & Development Expenses 399 (1) 0 (7) 391
Amortization of intangible assets 60 (46) 0 0 14
Total Operating Expenses 2,072 (46) 0 (195) 1,831
Total Operating Expenses as % of Revenue 45.4% 40.1%
Restructuring charges and certain acquisition related costs 26 0 (22) (4) 0
Other (Income) / Expenses (9) 0 0 1 (8)
Income/(loss) before Interest and Taxes 803 48 22 240 1,113
Interest Expense 113 0 0 0 113
Income before provision for taxes on income 690 48 22 240 1,000
Provision for taxes on income 187 16 8 81 292
Income from continuing operations 503 32 14 159 708
Net income attributable to non-controlling interests (1) 0 0 0 (1)
Net income attributable to Zoetis 504 32 14 159 709
53
RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION 2012
in USD millions
GAAP
Reported
Purchase
Accounting
Acquisition
related costs
Certain
Significant
Items
Non-GAAP
Adjusted
Revenue $4,336 $0 $0 $0 $4,336
Cost of Sales 1,563 (4) (9) (1) 1,549
Gross Profit 2,773 4 9 1 2,787
Gross Profit as % of Revenue 64.0% 64.3%
Selling, general and administrative expenses 1,470 1 (1) (18) 1,452
Research & Development Expenses 409 0 0 (10) 399
Amortization of intangible assets 64 (49) 0 0 15
Total Operating Expenses 1,943 (48) (1) (28) 1,866
Total Operating Expenses as % of Revenue 44.8% 43.0%
Restructuring charges and certain acquisition related costs 135 0 (43) (92) 0
Other (Income) / Expenses (46) 0 0 25 (21)
Income/(loss) before Interest and Taxes 741 52 53 96 942
Interest Expense 31 0 0 0 31
Income before provision for taxes on income 710 52 53 96 911
Provision for taxes on income 274 17 19 62 372
Income from continuing operations 436 35 34 34 539
Net income attributable to non-controlling interests 0 0 0 0 0
Net income attributable to Zoetis 436 35 34 34 539
54
RECONCILIATION OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATION 2011
in USD millions
GAAP
Reported
Purchase
Accounting
Acquisition
related costs
Certain
Significant
Items
Non-GAAP
Adjusted
Revenue $4,233 $0 $0 $0 $4,233
Cost of Sales 1,652 (34) (6) (31) 1,581
Gross Profit 2,581 34 6 31 2,652
Gross Profit as % of Revenue 61.0% 62.7%
Selling, general and administrative expenses 1,453 2 (3) (5) 1,447
Research & Development Expenses 427 (1) 0 (19) 407
Amortization of intangible assets 69 (49) 0 0 20
Total Operating Expenses 1,949 (48) (3) (24) 1,874
Total Operating Expenses as % of Revenue 46.0% 44.3%
Restructuring charges and certain acquisition related costs 154 0 (114) (40) 0
Other (Income) / Expenses 48 0 1 (77) (28)
Income/(loss) before Interest and Taxes 430 82 122 172 806
Interest Expense 36 0 0 0 36
Income before provision for taxes on income 394 82 122 172 770
Provision for taxes on income 146 27 44 47 264
Income from continuing operations 248 55 78 125 506
Net income attributable to non-controlling interests 3 0 0 0 3
Net income attributable to Zoetis 245 55 78 125 503
55
RECONCILIATION OF ADJUSTED NET INCOME
TO ADJUSTED EBITDA 2011 – 2014
in USD millions 2011 2012 2013 2014
Adjusted Net Income1 $503 $539 $709 $790
Interest Expense2 36 31 113 117
Interest Income2 0 (1) (3) (6)
Income Taxes2 264 372 292 290
Depreciation2 117 119 138 131
Amortization2 20 18 17 17
Adjusted EBITDA3 $940 $1,078 $1,266 $1,339
% of revenue 22.2% 24.9% 27.8% 28.0%
1 Adjusted Net Income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income
statement line item, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. The adjusted net income measure
is not, and should not be viewed as, a substitute for U.S. GAAP reported net income attributable to Zoetis.
2 Interest Expense, Interest Income, Income Taxes, Depreciation and Amortization include charges as included in adjusted net income
3 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is calculated before the impact of purchase accounting adjustments, acquisition-
related costs and certain significant items and is a non-GAAP financial measure. Adjusted EBITDA excludes interest expense net of capitalized interest, adjusted
income taxes, and adjusted depreciation and amortization.