The World Health Organization has yet to offer definitive proof that animals can infect humans with COVID-19.
However, there had been cases where humans infected the animals, including tigers, minks, lions, and domestic cats and dogs.
This might seem insane to some since we’re not even done vaccinating humans yet, but it definitely presents a large and potentially lucrative market.
Recently, Russia launched the first and only registered COVID-19 vaccine for animals, Carnivac-Cov.
Not to be outshone, Zoetis (ZTS), the leader in animal healthcare in the United States, also started working on its own COVID-19 vaccine.
In fact, Zoetis has already commenced testing its candidate on some great apes at San Diego Zoo earlier this month.
So far, the company administered two vaccine shots to three gorillas, four orangutans, and six bonobos.
Zoetis’ efforts date back to last year when news broke that dogs and cats in Hong Kong were also getting infected with COVID-19.
While the USDA has not yet approved the vaccines for dogs and cats, the organization is leaning towards giving the green light for minks.
As it turns out, minks are extremely susceptible to COVID-19, so vulnerable that Denmark actually ordered a mass culling of millions after an outbreak in November 2020.
To date, several zoos have already reached out to Zoetis to avail of its experimental COVID-19 vaccine.
Considering that all these started with the cross-species transmission, experts are also hoping to learn more about it with the help of the company to prevent future pandemics.
Zoetis is ideally positioned to lead this charge since it’s the frontrunner in the pharmaceutical sector for pets and livestock.
This company used to be a branch of Pfizer (PFE), but was later spun off in 2012 to stand on its own.
In terms of competitors, the two most relatable companies to Zoetis are Elanco Animal Health (ELAN) and IDEXX Laboratories (IDXX).
Both offer virtually the same products, but Zoetis is the biggest among the three with approximately $75 billion in market capitalization.
In comparison, IDXX has roughly $41.55 billion, while ELAN has $13.61 billion.
Knowing that there’s more than a single way to expand its business, Zoetis has been favoring acquisitions as one of its growth options.
In the past years, Zoetis has been on a buying spree, making no less than eight acquisitions so far.
Half of these are geared towards veterinary diagnostics, with the intention of dominating the fastest-growing sector of the animal healthcare industry.
All its recent acquisitions put Zoetis directly in competition with IDEXX, which is currently the undisputed leader in the veterinary diagnostics space.
To show the disparity of their current standing, IDEXX raked in $2.4 billion in revenue from diagnostics in 2020, while Zoetis only generated $305 million.
Needless to say, Zoetis has a lot of catching up to do.
Zoetis initiated its venture with a splashy $2 billion acquisition of Abaxis in 2018, which provided the ex-Pfizer company with a powerful foundation in the diagnostics sector.
This was immediately followed by a $35 million deal to buy ZNLabs in 2019. In that same year, Zoetis bought Phoenix Lab for $150 million and then continued its streak to acquire Ethos Diagnostic Science in 2020.
Apart from its venture in the diagnostics space, Zoetis has been working on bolt-on acquisitions to enhance its operations.
A good example is its $140 million acquisition of Performance Livestock Analytics in 2020, which added a software platform that Zoetis could market to farmers to help them make their farms more efficient.=
Another one is its $20 million deal with Fish Vet Group, which basically created the same platform as Performance Livestock Analytics but modified it for fish producers.
Looking at Zoetis’ acquisitions, the company is clearly building a diverse portfolio of products that go beyond pharmaceuticals.
It’s evident that it aims to enhance its leverage on tangential businesses like diagnostics and even farm management.
While these new revenue sources are definitely interesting, they’re not moving the needle just yet. Zoetis is still primarily relying on its sales of pet and livestock drugs.
Aside from developing a COVID-19 vaccine, Zoetis has been working on a strong drug pipeline.
Despite separating from Pfizer, the strategies it implemented in building its extensive and diverse portfolio of blockbuster products pretty much follow the same path and trajectory as its previous parent company.
For context, “blockbuster” drug is any product that generates a minimum of $100 million in sales annually.
Using this metric, Zoetis holds an impressive lineup of 13 blockbuster products.
In 2020, Zoetis released a “triple threat” product called Simparica Trio, which can protect dogs from heartworms, eliminate ticks and fleas, and treat and prevent hookworms and roundworms.
This is the first-ever product that offers combined protection for all three—fleas, heartworms, and ticks—in a single treatment.
Despite the financial impact of the pandemic, Simparica Trio still raked in an impressive $150 million in its first year.
Reviewing its future product pipelines, Zoetis has two more potential blockbusters slated this year: Librela and Solensia. These two will also be the first-of-a-kind treatments for osteoarthritis in cats and dogs.
Delving deeper, Zoetis holds No. 1 spot in the companion animals or pets, fish, and livestock cattle segments. It ranks No. 2 in the swine market and No. 3 in the poultry sector.
In total, Zoetis has more than 300 product lines launched in the market, and the company still has more lined up for release soon.
Akin to Pfizer’s approach, Zoetis’ style is to dominate in select core markets, developing numerous blockbuster brands that generate billions every year.
Admittedly, the human healthcare market is substantially more profitable than its animal counterpart, but for Zoetis, this also represents significantly less competition from other drug developers.
At this point, Zoetis is not only in a strong position in the animal healthcare industry, but also dominating in a market that still has incredible room for growth.
In 2020, the total pet industry market was estimated to be worth $99 billion in the United States alone.
More importantly, this segment is projected to climb in the mid-single digits in the next few years.
A key approach in Zoetis’ growth is its strategy to develop and sustain a product pipeline with an average lifespan or age of at least 30 years.
The company also constantly launches new drugs and announces enhancements to their current products.
These are seen in the over 1,100 new products and improvements Zoetis has introduced over the past five years.
Judging from the company’s performance and future plans, it’s reasonable to expect a $200 price target for Zoetis over the next 12 months, which would indicate about 26.50% upside potential based on the current trading levels.
Taking into consideration the potential 5% downside risk, shares could pull back to reach $153 before starting to rebound again.
Meanwhile, the highest price target for Zoetis could be $210.
Overall, I believe Zoetis is a stable company with strong upside potential in the next months, and growth investors would be remiss to ignore the achievements of this company.
