Good day and welcome to the fourth quarter and full year 2015 financial results conference call and webcast for Zoetis. Hosting the call today is John O'Connor, Vice President of Investor Relations for Zoetis. The 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 forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. At this time all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. In the interest of time, we ask that you limit yourself to one question and then queue up again with any follow-ups. It's now my pleasure to turn the floor over to John O'Connor. You may begin, sir.

Thank you, operator. Good morning and welcome to the Zoetis fourth quarter and full year 2015 earnings call. I'm joined today by Juan Ramón Alaix, our Chief Executive Officer; and Paul Herendeen, our Chief Financial Officer. Before we begin I'll remind you that the slides presented on this call are available on the Investor Relations section of our website, and that our remarks today will include forward-looking statements and actual results could differ materially from those projections. For a full list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement in today's press release and our SEC filings including but not limited to our 2014 annual report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and in the company's 8-K filing dated today, February 16, 2016. We also cite operational results, which exclude the impact of foreign exchange. With that I will turn the call over to Juan Ramón. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, John. And good morning, everyone. In today's call I will provide perspective color based on the performance for the full year 2015 and our goals for 2016. Paul will discuss some of the fourth quarter highlights, the 2015 net results and our guidance for 2016 and 2017. In 2015, we affirm Zoetis' reputation as the global leader in the animal health industry with a strong financial performance, continued investment in our future growth and a commitment to creating…

Okay. We can take our first question from Kevin Ellich with Piper Jaffray. Please go ahead. Kevin K. Ellich - Piper Jaffray & Co (Broker): Good morning, thanks for taking the questions. I guess, Paul, could you just go back to the contributions from acquisitions in the quarter? I kind of missed those prepared remarks. And then, Juan Ramón, I wanted to get an update on SIMPARICA as well. I think in the press release it says you expect approval now in Q1. I think previously you said first half of 2016 so I guess what's the change and what should we expect heading into Western Vet? Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Yeah, I'll start, Kevin. Good morning. It's Paul. I'll start with the components of the growth. We had 6% operational revenue growth in the quarter and we recognize the goal was whole percentages here so there's rounding that comes into play but it was 3% from increased APOQUEL sales, 3% from the acquisition of the Abbott Animal Health products, 2% from price increase across the portfolio, and 1% from new products. Then the offset to that was about a 3% decline of what I guess we'll call revenues of all other products. And again, that is primarily related to the change in the business model in Venezuela and countries like India and places that were affected by our efficiency initiative. I hope that answers the question. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Paul. I will take the question on the SIMPARICA. So we submitted to the FDA all the information and based on the normal timing for approval, we expect SIMPARICA to be approved in the U.S. in the first quarter. This all will be depending on final decision of the FDA. Next question, please?

And our next question comes from Louise Chen with Guggenheim. Please go ahead.

Hi. Thanks for taking my question. So I do see slide 18 in your presentation but I was wondering if you could help us better understand the underlying sales growth for the year without the impact from restructuring and SKU reductions? And then also, do you expect your sales growth to accelerate after these programs are completed? And when might we actually see that? Thanks. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Sure. Louise, its Paul. Let me take that, and thank you for asking the question, Louise, because if you just take the headline and say, gee, we're looking at 2% to 4% operational growth in revenue next year, people say, what's up with that? So let's start with from the 2% to 4%, the operational efficiency initiative, the effect on SKUs, and now Venezuela and other markets where we're going to change our model, reduced that by some 600 basis points. You can see that if you look at that slide 18, 600 basis points. So there's 8% to 10% if you're thinking about what our actual expectations are for normalized operational revenue growth in 2016 v. 2015. And if you want to take PHARMAQ out of the equation and go what's the organic portion of that, it's about 200 basis points. So as you look at that slide, again I'll call everyone's attention to it, we tried our level best to help you think about the strength of 2016 because this is quite a strong year by showing you this waterfall slide. So 2% to 4%, 600 basis points on the efficiency initiative, SKU reductions, Venezuela, India, et cetera, gets you to 8% to 10%, and if you want to look at that on an organic basis it would be 6% to 8%…

And the next question comes from Alex Arfaei with BMO Capital Markets.

Good morning, folks. Thank you for all the details on the slides and congratulations on a strong operational performance in 2015. Paul, cost of sales grew at a higher rate than revenues in the quarter, and as a result gross margin was lower year over year and sequentially versus 3Q. I was wondering if you could give us your thoughts there on gross margin. And just a general question for the both of you, your stock has obviously been underperforming despite this strong operational performance. I'm wondering if you could give us your thoughts on that. And is there an opportunity for a more aggressive share buyback at these levels? Thank you. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Sure, it's Paul. I'll take the Q4 margin. That was predominantly due to FX. Again, I would look at the full year and how we came out, and it was in line with what we were expecting. I know, Alex, we've traveled together a little bit. You look at a quarter; there can be a lot of variability that sneaks into the equation. You compare it against this, that and the other thing. Things happen in a 90-day period that smooth themselves out over the year. I would look at the 65%-odd margin that we put on the board for the full year, and that's indicative of the strength. But the one thing in the fourth quarter was FX. FX is hard to forecast when it flows through cost of sales, but it sure does. The second thing I think you asked a question about the share price. We're watching our company along with many others lose value, at least in the eyes of shareholders or people who are holding our stock. We continue to do what…

And the next question is from Erin Wilson with Credit Suisse. Erin Wilson - Credit Suisse Securities (USA) LLC (Broker): Great, thanks for taking my questions. How should we think about the quarterly progression of the U.S. livestock business? And could you characterize the overall health of the U.S. livestock industry just more broadly? And then one on R&D; on the parasiticide front, should we expect that you're ready to launch as soon as SIMPARICA gets approval in the U.S.? And then with the potential flea, tick, and heartworm combination chewable product, longer term, how long in the pipeline, or how far along in the pipeline is this product? And when should we expect it I guess to launch, and is it in the guidance? Juan Ramón Alaix - Chief Executive Officer & Director: So thank you, Erin, for your question. In terms of the launch of SIMPARICA, we are ready to launch as soon as we get approval from the FDA. We're also ready to launch not only in U.S. but also in the European markets. And the team is ready, the plans are in place, and we have a product to supply to the market. You also asked a question about the livestock progression in the U.S. And definitely we have seen that in general the livestock has been performing well in 2015. In terms of the quarters, the fourth quarter has been stronger than expected because already in the last year, we reported very strong revenue growth, and in this year also we grew significantly. And in terms of the different areas of livestock, we see also opportunities in cattle, we see opportunities in poultry, and we see opportunities also in swine. We expect also in 2016, the momentum will continue. We see positive trends in the cattle industry, mainly on beef; that we expect that the number of animals will increase by 3% or 3.5%. And this will expect, also will drive additional use of animal health products. And you also asked about... Paul S. Herendeen - Chief Financial Officer & Executive Vice President: The combination product. Juan Ramón Alaix - Chief Executive Officer & Director: The flea and tick and the heartworm. Definitely, our R&D team is working on developing this product and finalizing all the information for submitting all the dossiers to the FDA. We have not yet communicated when we plan to have this product into the market. As we get closer to the finalization of all the different filings, then we'll communicate to the market. And this has not been included in our guidance for 2017. So next question, please.

We'll go next to John Kreger with William Blair. John C. Kreger - William Blair & Co. LLC: Hi, thanks very much. You mentioned that you had some issues last year with customer service. I think you said mainly around APOQUEL. Can you just expand upon that? Is that issue behind you? How comfortable are you that you will not have any residual issues as we move through 2016? And then, Paul, maybe just talk a little bit more about longer term, your tax rate thoughts? Do you think 30% is the long term right number to use, or is there an opportunity to maybe push that lower? Thanks. Juan Ramón Alaix - Chief Executive Officer & Director: So we have had supply issues for APOQUEL, and the supply issue has been resolved now. We have now the process for the production of the active pharmaceutical ingredient that had been the bottleneck of manufacturing APOQUEL. We have a process which is much more robust and much more consistent. And we are really producing all the product that will be delivered in 2016, and we'll increase significantly the supply to the market. We are also planning to expand APOQUEL to the rest of the world in where the product has been approved, and we plan to do that in 2016. So we are convinced that APOQUEL will deliver significant growth and all the issues that we faced in 2015 will be behind us. We also reported in 2015 that the implementation of the new ERP also created some issues in terms of deliveries of products into the market. We are very pleased now how the implementation of the ERP has been now performed in the U.S. We have now 90% of our orders delivered the same day, which is a significant…

And the next question comes from Chris Schott with JPMorgan.

Great. Thanks very much. Just a couple of here. First, on the 6% impact from the SKU reduction in 2016, I guess now that we're further along in that process, any surprises in terms of customer behavior, in terms of the SKU changes? And I guess is there an opportunity for that number to be lower than 6%, either through uptake of alternatives of those products, or just other initiatives you put in place? And the second question which is as we're looking out 2016, just any dynamics we should be keeping in mind for modeling this year in terms of quarterly progression? I guess are there any particularly difficult or easy comps that we should be watching as we're kind of thinking about the quarters this year? Thanks very much. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Chris. What we evaluated very carefully when we decided to reduce SKUs on how will be the impact to our customers, we made sure that none of the SKUs that we are eliminating has no alternative to our customers. These alternatives can be from our competitors or can be alternatives, in our portfolio. The 6% impact in our revenues is the net result of reduction and also the assumption that some of these reductions of SKUs will be moved to other SKUs in our portfolio. In terms of reaction from our customers, I think in some cases, well, they will like to have these products in their portfolio, but they also understand that more important than offering 13,000 SKUs is ensuring that we have a reliable supply. What we want to make sure that when they place an order, they get the order on time to treat or protect the animals. And this is one of the important…

Our next question is from Jami Rubin with Goldman Sachs. Jami Rubin - Goldman Sachs & Co.: Thank you. Just a couple. First, Paul, maybe you can answer this. On the 2% contribution from price, can you talk about the outlook? How did that look on a global basis U.S. versus outside of the U.S.? And what is the outlook for price increases going forward both in the U.S. and across different geographies. And then, Juan Ramón, just a question for you; as you are now, congratulations, three years as an independent company and it's been very exciting to see how Zoetis has evolved and achieved such tremendous success in a short period of time. Congratulations. But maybe you could just sort of step back and tell us – when I look at the industry, the animal health industry, it doesn't seem that a whole lot has changed. It still remains highly fragmented. We've seen a little bit of movement with Novartis swapping its business to Lilly. You've made a couple small acquisitions. But by and large, the industry hasn't changed much. Do you see more consolidation going forward? Or do you see some of your peers spinning out their animal health businesses like you have done for yourself? And what does this all mean for your future in terms of M&A? Thanks very much. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Jami. And I will try to answer both questions. So in terms of the 2%, so the 2%, as you mentioned, it's a global increase. And in terms of where we see this 2% in the different geographies, definitely we have been very consistent in the U.S. with price increases of around 2%. And in the rest of the markets, it depends. So in…

The next question comes from Doug Tsao with Barclays.

Hi, good morning. Thanks for taking the questions. Maybe if you could provide a little bit more of an update in terms of how you will sort of increase the availability of APOQUEL, is this what we start now in terms of broadening the number of veterinarians who will have access to the product? Or is it going to be focused more on current – expanding to new patients? Also, if you can just provide some commentary in terms of the MFA business and how it's faring right now? One of your competitors spoke about some regulatory headwinds in that business and whether you're seeing those as well? Thank you. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Doug. In terms of the increase for APOQUEL, so let me start saying that we have now two sources of the production of API and the second source that will be a company in Switzerland which is called Siegfried will double the capacity of the production of the active pharmaceutical ingredient. We plan to now offer APOQUEL to more veterinarians and also to offer more available product to existing veterinarians. At the same time, also the plan is to introduce the product in the rest of the markets where the product was put on hold because of product availability. So we are convinced that during 2016 we'll be able to meet all the demand from the market. In terms of MFAs, I think MFAs in our case continue growing very strongly and we have the advantage of – that's right this is the diversity of our portfolio. It's not only diversity in terms of therapeutic areas or in terms of different types of products, but also within the MFAs we have a lot of diversity. And for products that will be maybe facing some challenge because of changes on the approach of the use of antibiotics, and I mentioned in the medical important antibiotics in MFAs with indication of a growth promotion, this will be eliminated but in our portfolio we also have a non-medical important antibiotics in MFAs that can be a good replacement for those that will be eliminated. We have in total in MFAs $500 million in sales and we grew operationally in 2015 by 8%. So definitely we expect that those are probably the only indication of growth promotion which are medically important for human health that will have an impact in the revenues but this impact will be minimum. Next question, please.

We'll go next to Mark Schoenebaum with Evercore ISI.

Hey, Paul. My email went up during your prepared remarks. I just wanted to say that it was really a brutally awesome prepared remarks section, especially the part about how we should reverse the alphabet, I love that. That's a great idea. But in all seriousness, I had a bunch of questions, but I'll limit it to 1.5 because most people have been doing it. Number one, given all the opacity that – you guys have tried to do everything you can to make it clear but this the confusion, I guess, that FX potentially creates, why not synthetically hedge against the effects on that at least in that net income line especially after the turmoil this year, although you guys have done a great job helping us understand the effect. And then number two, maybe I missed this, but I didn't hear you break out APOQUEL sales on 4Q. I was wondering if you could. I apologize if I just missed it, if you could break those out in the U.S. and also the rest of world. And if you already answered that one, then my question would be the 6% to 8% normalized organic operational growth, what are the components of that for 2016 that you see? Thanks. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Sure, I'll start with the FX. I think when you're looking at trying to hedge operations around the world against foreign currencies, you have two choices. You can either, in non-technical terms, let it fly, which is what we do with respect to operations like many, many other multinational companies do, or you can attempt to hedge. If you hedge, you hedge within a quarter, and the analysis that we've done has suggested that you're essentially chasing down. You…

We'll go next to David Risinger with Morgan Stanley. David R. Risinger - Morgan Stanley & Co. LLC: Yes, thanks very much. My questions are financial. Obviously, you've covered a lot of ground on the business and the outlook. So, Paul, two questions. First, could you please discuss the outlook for 2016 cash flow, including cash flow from operations and then planned uses of cash? And then second, if you could, just comment on the quarterly progression throughout the year, just to make sure that we set up our models appropriately and we understand the different variables to consider. Thanks very much. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Sure, I'll start with the discussion around expected cash flow. Recall that we try to call them out each and every quarter. We have a large amount of expenses that we're incurring with respect to: one, the standup from Pfizer; second, the operational efficiency initiative; and now we add to the list a potential true-up of our international taxes in light of the EC's comments. If you look at our guidance tables, we call out the amount or the expected amount of the acquisition costs that we expect to incur in 2016 and then again in 2017. Those are I would call them – they're not normal and they will go away, and most of them will go away towards the latter part of 2016. But in 2016 it's a fairly significant call on our cash. Secondarily, we continue to be in a phase of investing in our supply chain. We continue to invest capital there, so our CapEx is tracking at a rate that exceeds our ongoing depreciation rate, so net-net we continue to invest there. Of course, we called out that we now have a…

We'll go next to Kathy Miner with Cowen & Company. Kathy M. Miner - Cowen & Co. LLC: Thank you, good morning. Two questions, one first on PHARMAQ. When you acquired the company, you had stated that it was growing about 17%. Is that still a good estimate going forward, or could it be higher given their late stage pipeline that you talked about? And also do you continue to expect it to be neutral to EPS this year and then accretive thereafter, or could that accelerate? And the second question just has to do on trends outside of the U.S. in livestock. We saw the issue in France last year where they changed the legislation on antibiotics. Are there any other areas that we should look for in 2016 where there may be similar changes? Thank you. Juan Ramón Alaix - Chief Executive Officer & Director: So Thank you, Kathy, for the questions. In PHARMAQ, what we communicated is that we plan to generate that revenue for $100 million in 2016 and $125 million in 2017 and at the end of the year PHARMAQ reported revenues of close to $80 million, so we see a significant increase in terms of our revenues. What we saw during the due diligence when we acquire in terms of the pipeline, it's performing now with the launch of the product in Chile that it was under this emergency license. And we will continue progressing in the plans that we have for PHARMAQ. So we are very excited about the opportunities of PHARMAQ. We are working also in terms of integrating the two companies, but ensuring that PHARMAQ remains a leader in aquatic health with enough identity to maximize the relationship with the customers that they already built through many years. In terms of the comments that you made, in France, definitely in 2015 we saw an impact because of the change of the legislation in France. This was affecting antibiotics. We expect also that antibiotics will continue having discussions and restrictions in some of the markets. This has been incorporated in our guidance for 2016 and 2017. And we also think that the projections that external sources are making about the total animal health industry and also the growth in antibiotics are consistent with what with our projections. So the industry will be growing about 5%. Antibiotics is expected to grow at half of this rate. The advantage for Zoetis is that it will have in our portfolio, antibiotics which are injectables, which are considered as premium antibiotics that are kept by veterinarians as a resource to ensure that they are treating and in some cases protecting also animals against infections. So we are confident that the impact that it will have in antibiotics will be lower in our revenue, but in any case all these elements have been incorporated in our projections. Next question, please.

We'll go next to Jeff Holford with Jefferies. Jeff, if you want to check your mute button please?

Hi. Can you hear me now? Juan Ramón Alaix - Chief Executive Officer & Director: Yes, we can.

Okay. Great. Thank you. Good morning. I just want to ask a couple of questions around Sanofi and Boehringer. First off, if you expect that business combination or that potential business combination to have any impact on the competitive environment for you as you go forward into 2017 and beyond, any specific areas of concern or opportunity there? And then second, just as you got two European companies coming together there. You've talked very briefly in the past about potential inversions, lack of opportunities, that's potentially two less opportunities now. Just any updated thoughts there is that's really looking beyond you now to potentially look at any kind of inversions or spin-versions out there. Thank you. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Jeff, for the question and definitely the Sanofi/BI merger will create a very strong competitor. It will be the second largest animal health company in our industry. But we don't think that the combination of the two companies will create additional competitive challenge to Zoetis. We have the scale, we have the diversity, and we have the business model that has been proven very successful in the past and will continue also being successful in the future. The productivity that we have in R&D is also showing very high levels. So we are confident that we'll continue growing in line, or faster than market. So we are projecting in fact in 2016 and 2017 we're growing faster than market despite of Sanofi/BI or despite of all these additional consolidations in our industry. Sanofi and BI, they are two European companies that potentially can be, maybe an opportunity for tax inversion, but also creating significant anti-trust issues to Zoetis. So we continue assessing opportunities that, to further consolidate, not with the only objective of saving on tax, but a combination of synergies that we can generate in terms of revenue, in terms of costs, opportunities on reducing our effective tax rate, and definitely creating a value to the company. Next question, please.

Next we'll go for a follow-up with Kevin Ellich with Piper Jaffray. Kevin K. Ellich - Piper Jaffray & Co (Broker): Hey. I was just wondering if you could comment about the, I guess Juan Ramón, did you say you guys have – supply of SIMPARICA is ready for launch? I just wanted to make sure I had that right. Juan Ramón Alaix - Chief Executive Officer & Director: Yes. I said that SIMPARICA product is ready for launch and as soon as we have approval for FDA, we'll be launching that in the U.S. and also in Europe. So we have the product in our warehouses.

And it does appear we have no further questions. I'll return the floor to you, Juan Ramón, for closing remarks. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you very much. And thank you for joining us today. As we continue through 2016, we are determined to make the most of our business model, our interconnected capabilities and the fundamental drivers of growth in animal health. We'll complete our operational changes, becoming less complex, more efficient and more agile. And we'll invest in growth opportunities to strengthen our business. I am confident that these steps will help improve our margins, better serve our customers and build shareholder value over the long term. And I look forward to reporting to you on our progress in each of these areas. Thank you very much.

Okay. Ladies and gentlemen, this does conclude today's teleconference. A replay of today's call will be available in two hours by dialing 800-839-6980 for U.S. listeners and 402-220-6062 for international. Please disconnect your lines at this time, and have a wonderful day.