BUILDING MARKET LEADERSHIP IN ANIMAL HEALTH JEFFERIES ANIMAL HEALTH DAY MARCH 27, 2014

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1 BUILDING MARKET LEADERSHIP IN ANIMAL HEALTH JEFFERIES ANIMAL HEALTH DAY MARCH 27, 2014

2 JUAN RAMÓN ALAIX CHIEF EXECUTIVE OFFICER, ZOETIS

3 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements, which reflect Zoetis current views with respect to business plans or prospects, future operating or financial performance, and other future events. These statements are not guarantees of future performance. 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 , 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 or on request from Zoetis. NON-GAAP FINANCIAL INFORMATION 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

4 WE WILL COVER THREE TOPICS IN TODAY S PRESENTATION DRIVERS AND TRENDS OF OUR INDUSTRY ZOETIS PRODUCTS, SERVICES AND CAPABILITIES OUR LONG-TERM VALUE PROPOSITION

5 SELECT KEY DRIVERS CONTINUE TO PROVIDE A PLATFORM FOR GROWTH Population Growth A Growing Middle Class Urbanization

6 THESE DRIVERS ARE ALREADY CREATING ADDITIONAL CONSUMPTION OF MEAT 2050 PROJECTED GLOBAL MEAT CONSUMPTION >3x >2x >1x 2013 Consumption based on developed country rates + population growth Consumption based on Latin American rates + population growth Consumption based on population growth only 2013 Global Meat Consumption

7 AND ALSO OF DAIRY 2050 PROJECTED GLOBAL MILK CONSUMPTION Consumption based on developed country rates + population growth Consumption based on Latin American rates + population growth Consumption based on population growth only 2013 Global Milk Consumption >4x >2x >1x 2013

8 DECLINING NATURAL RESOURCES AND THE CHANGING WEATHER ALSO PLAY A ROLE 25-35% of arable land already degraded Water shortages Global climate change Increasing competition for cultivated land Urbanization and industrial pressure Growth in use of crops for energy Positive long term pressure on prices Sustained rewards for companies that can help food systems address the productivity imperative Source: International Soil Reference and Information Centre, Oregon State University, Resource Conversation and Food Security; How to Feed the World 2050, FAO; IPCC Fourth Assessment Report; CGD Global Warming and Agriculture: New Country Estimates Show Developing Countries Face Declines in Agriculture Productivity; The Environmental Food Crisis, UNEP; Livestock s Long Shadow, FAO

9 PRODUCTIVITY IMPROVEMENTS INCREASE A CUSTOMER S WILLINGNESS TO PAY MILK YIELD OF DAIRY COWS Metric tons per dairy cow 10 North America BROILER AND LAYER PERFORMANCE BROILERS: FEED/WEIGHT (LBS/LBS) Europe LAYERS: EGGS/HEN ~32% improvement 2 Asia / Other Developing countries ~30% improvement ANIMAL HEALTH TECHNOLOGY Vaccines and medicines Feed additives Improved production practices Advanced techniques and devices Source: UN FAO; FAPRI; USDA; Hill and Kirkpatrick, Annu. Rev. Ecol. Evol. Syst :1-19.

10 AND OUR PETS ARE BECOMING MORE INTEGRATED INTO OUR HOUSEHOLDS PETS ON THE BED PETS IN THE YARD Major Therapeutic Areas Vaccines Parasiticides PETS IN THE HOUSE Major Therapeutic Areas Vaccines Parasiticides Antibiotics Major Therapeutic Areas Vaccines Higher technology antibiotics Parasiticides Pain/inflammation Internal medicine (oncology, cardiology, etc.) Geriatric and chronic conditions Services E-solutions U.S. 1960s U.S. 1980s U.S. 2000s Emerging markets 2000s Source: American Pet Products Manufacturers Association National Pet Owners Survey, and

11 THE ANIMAL HEALTH INDUSTRY IS VERY DIFFERENT FROM HUMAN HEALTH Direct selling relationships Veterinarians Limited influence of third party payors Pet Owners Sustained R&D productivity Producers Brand loyalty / lower generics pressure Highly Diversified Needs

12 ANIMAL HEALTH IS A LARGE, GROWING INDUSTRY, WITH STRONG FUNDAMENTALS DIVERSE ACROSS MULTIPLE DIMENSIONS GLOBAL GROWTH DRIVERS DIFFERENT FROM HUMAN HEALTH ATTRACTIVE FINANCIAL PROFILE

13 OUR COMPANY CHARACTERISTICS DEFINE WHO WE ARE AS AN ORGANIZATION World leader in discovery, development, and manufacture of veterinary vaccines and medicines Broad diverse portfolio of more than 300 leading medicines, vaccines, and services Unparalleled global reach with sales in 120 countries 9,800+ employees worldwide 36% COMPANION * 64% LIVESTOCK * * As a percentage of 2013 revenues

14 AND OUR CAPABILITIES AND PORTFOLIO DEFINE OUR COMPETITIVE ADVANTAGE Direct Selling Model World Class R&D High Quality Manufacturing BROAD PRODUCT PORTFOLIO

15 THESE COLLECTIVE STRENGTHS SOLIDIFY OUR POSITION AS #1 IN OUR INDUSTRY MARKET POSITION BY GEOGRAPHY North America # 1 Latin America # 1 Western Europe # 2 Eastern Europe # 1 Asia # 1 Rest of world # 1 MARKET POSITION BY PRODUCT CATEGORY Medicinal Feed Additives (MFA) # 2 Vaccines (biologicals) # 2 Anti-Infectives # 1 Parasiticides # 3 Other pharma* # 1 MARKET POSITION BY SPECIES Poultry # 2 Cattle # 1 Swine # 2 Companion Animal # 2 # 1 WORLDWIDE * Includes pain, sedation, internal medicine, etc. Source: Vetnosis Executive Guide 2013

16 WE BENEFIT FROM OUR DIVERSE BUSINESS MODEL, GEOGRAPHICALLY 2013 Revenue $4,561 MM COUNTRY USA Brazil Canada 2013 REVENUE $1,903 MM $310 MM $184 MM 17.0% 16.0% 42.0% USA EuAfME CLAR Australia United Kingdom France Germany $175 MM $153 MM $150 MM $142 MM APAC Japan $126 MM 25.0% Italy $100 MM Spain $89 MM China $88 MM

17 AND WE SEE THIS BENEFIT FROM OUR DIVERSITY REPRESENTED IN OTHER WAYS Therapeutic Area $4,561 MM 3% Species $4,561 MM 16% 29% 32% 36% 10% 16% 26% 4% 2% 12% 14% Anti-infectives Parasiticides Other Pharmaceuticals Vaccines MFA's Other non-pharmaceuticals Cattle Poultry Horses Swine Other Livestock Dogs & Cats

18 THE ZOETIS LIVESTOCK PORTFOLIO CONTAINS A NUMBER OF KEY BRANDS PRODUCTS PRIMARY SPECIES THERAPEUTIC AREA Ceftiofur injectable line Anti-infectives Anti-infectives Anti-infectives Anti-infectives Vaccines Vaccines Vaccines Rispoval line Vaccines Vaccines Parasiticides Parasiticides Medicated Feed Additive BMD Lasalocid line Lincomycin line LINCO SPECTIN Medicated Feed Additive Medicated Feed Additive Medicated Feed Additive Other

19 OUR COMPANION ANIMAL PORTFOLIO IS EQUALLY STRONG PRODUCTS PRIMARY SPECIES THERAPEUTIC AREA Anti-infectives Anti-infectives 4-way Lepto Vaccines High Titer Vaccines Parasiticides Parasiticides Other Other

20 LET S TAKE A LOOK AT AN EXAMPLE OF THE BEEF CATTLE BUSINESS Beef cow: Mature female that has given birth to a calf Calf: A young animal still nursing the cow Heifer: Female that hasn t given birth Replacement heifer: Female retained for breeding Steer: Male calf that has been castrated Bull: Male at least one year of age Cull cow: Female removed from the herd because of age, injury, failure to reproduce, etc.

21 HERE IS THE LIFECYCLE OF A BEEF COW, BASED ON THE SPRING CALVING SEASON Seedstock & commercial selection (Year-round) Calving (birth) (Feb. April) Branding & pasture turnout (March May) Summer pasture & breeding (March Sept.) Harvest at packing plant (Year-round) Feedyard (Year-round with heavy cattle movement into feedyards in fall and spring) Stocker/ backgrounder (Aug. March) Weaning (Aug. Nov.)

22 OUR PRODUCTS SUPPORT PRODUCERS RIGHT ACROSS THE COW S LIFECYCLE

23 IN 2013, ZOETIS GREW FASTER THAN THE MARKET 6.0% 5.0% 4.8% 4.0% 3.0% 2.0% 2.1% 1.0% 0.0% Zoetis Total Market 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. Source: Vetnosis; trailing twelve months ended December

24 OUR LONG-TERM VALUE PROPOSITION IS DEFINED FIVE YEAR * HORIZON AND EXPECTATION GROW REVENUE IN LINE WITH OR FASTER THAN THE MARKET GROW ADJUSTED NET INCOME FASTER THAN REVENUE FIND PROFITABLE INVESTMENT OPPORTUNITIES AND RETURN EXCESS CAPITAL TO SHAREHOLDERS * Expected Five Year Compound Annual Growth Rate (CAGR)

25 YOUR QUESTIONS

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