Pfizer Inc.’s (NYSE: PFE) animal medication spin-off, Zoetis Inc., is oversubscribed several times which is driving it to be the richest initial U.S. public offering since Facebook’s (NASDAQ: FB) IPO in May of 2012. Zoetis plans to offer 86.1 million shares Thursday through J.P. Morgan, BofA Merrill Lynch and Morgan Stanley. Based on the expected pricing range of $22 to $25 a share, Pfizer will likely receive more than $2 billion from the offering. Zoetis is expected to begin trading this Friday on the NYSE under ZTS.
With over $4 billion in revenues, Zoetis is the largest company in the $22 billion animal health care industry. The company has the largest sales organization in the industry and offers more than 300 product lines in over 120 countries. Over the past seven years, Zoetis has received approximately 25% of all animal health medication approvals granted by the FDA and approximately 20% of all animal vaccine approvals granted in the U.S. For the three months ending April 1, 2012, Zoetis’ adjusted net income growth was 26% to $152 million versus 4% revenue growth during the same period. For the year ending December 31, 2011, adjusted net income grew by 83% to $503 million as compared to 7% in revenue growth during the same period. As a percentage of revenues, the company’s largest markets are the United States (39%) and Europe (27%). Approximately 27% of the company’s revenues are generated from emerging markets like Brazil, China and India. Zoetis targets five primary animal species with its products. The largest species segments are companion animals (dogs, cats, horses) which represent 24% of sales and cattle with 38% of sales.
Zoetis’ prospectus lists a number of distinctions between the animal and human health care industries which contribute to make the animal health segment very interesting. These differences include faster and less expensive R&D, more diverse product portfolio, strong partnerships with customers, primarily self-pay, strong brand loyalty and relatively low generic competition. Going forward, Zoetis expects to continue to expand in emerging markets and further expand its product portfolio. Zoetis will likely be viewed by investors as a unique pure play investment in the animal health industry. Note: VetDepot’s employees or owners may own shares in companies mentioned in this article.