Welcome to the Third Quarter 2023 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, 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 made available approximately 2 hours after the conclusion of the call via dial in or on our Investor Relations section of zoetis.com. [Operator Instructions]. It is now my pleasure to turn the floor over to Steve Frank. Steve, you may begin.

Thank you, operator. Good morning, everyone, and welcome to the Zoetis third quarter 2023 earnings call. I am joined today by Kristin Peck, our Chief Executive Officer; and Wetteny Joseph, 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 that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release and our SEC filings, including, but not limited to, our 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 the company's 8-K filing dated today, Thursday, November 2, 2023. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin.

Thank you, Steve. And welcome, everyone, to our third quarter earnings call for 2023. We generated strong performance in the third quarter, driven by our diverse companion animal portfolio of key dermatology products, pet parasiticides, monoclonal antibodies for osteoarthritis pain and diagnostics. We delivered 8% operational growth in revenue and 13% operational growth in adjusted net income, despite continued market challenges in China. We showed balanced segment growth this quarter with 8% operational growth internationally, and 8% growth in the U.S. Our companion animal portfolio grew 11% and our livestock portfolio grew 3% operational -- operationally in 3Q, in line with our overall expectations. Through the first nine months of the year, we have grown our revenue 7% operationally, as customers place a premium on the animal health benefits that our products delivered, even in times of economic and geopolitical uncertainty. As the market leader in animal health, we compete in an essential global industry that has been resilient during various economic cycles. And we continue growing above the market based on a steady pipeline of new products, lifecycle innovations, and commercial execution. We are on track to achieve our full year operational guidance and have narrowed it around the midpoint of the range, as we continue to balance headwinds and tailwind in the marketplace. We are executing well on the drivers where we have more control, like the successful launch of Librela in the U.S., while also mitigating the downside of macroeconomic declines in China, both of which were not considered in our original guidance this year. Once again, our diverse portfolio across product categories and geographies generate durable, reliable long term growth. We continue to expect our key companion animal franchises to be our core catalysts for growth. We anticipate strong growth and our market leading dermatology portfolio…

Thank you, Kristin, and good morning, everyone. As Kristin mentioned, we had a strong third quarter, with broad-based growth across both our U.S. and international segments across both companion animal and lifestyle portfolios and across both price and volume. For the quarter, we were able to deliver results in line with our expectations, even in light of continued headwinds in China. In the third quarter, we generated revenue of $2.2 billion, growing 7% on a reported basis and 8% on an operational basis. Adjusted net income of $629 million grew 11% on a reported basis and 13% on an operational basis. Of the 8% operational revenue growth, 5% is from price and 3% is from volume. Volume growth consisted of 2% from new products, including our monoclonal antibodies for pain, Librela and Solensia and 1% from our key dermatology portfolio. Our companion animal portfolio was the main driver of revenue growth, growing 11% operationally. Livestock also contributed, with operational growth of 3% in the quarter. Companion animal growth was again driven by our innovative products with double-digit operational growth in our key dermatology portfolio, our monoclonal antibodies for OA pain, Librela and Solensia and Simparica Trio. Our key dermatology products generated $393 million in sales globally, posting growth of 14% on an operational basis with double-digit growth in both the U.S. and international. Globally, our monoclonal antibodies for OA pain posted $77 million in combined revenue in the quarter. Growth came primarily from our European markets as well as from the impact of new launch markets internationally. With the October full launch of Librela in the U.S., our pain products are now available in most major markets. Simparica Trio posted global revenue of $206 million in the quarter, representing growth of 20% operationally versus the comparable 2022 period. Growth was…

[Operator Instructions] We'll take our first question from Jon Block with Stifel. Please go ahead.

Great, thanks guys. Good morning. I promise one long question. So in companion animal, the overall revenue was a bit shy of what we had expected, but you really had great performance what we call sort of the big 5 products. So atopic derm, Trio map, the big 5 were all ahead of our estimate. So maybe if you guys can talk a little bit about the ongoing uptake of some of those key big 5 products even with a more difficult consumer, right? Because people view some of those as discretionary. Again, the results were really strong and even despite the more difficult consumer. And then the flip side would just be like anything to site regarding the legacy products, right? So if you back into legacy that might have been modestly down year-over-year. And a quick part B on the follow-up, Kristin, you mentioned faster growth for Zoetis than market and get in '24. I don't think we're really surprised by that. You've done that year in and year out. But can I push you a little bit on how we should think about for Zoetis in '24 versus Zoetis in '23? In other words, if we take into account the OA pain uptake, if you would, could we see accelerated growth for the company in '24 versus '23 when we think about all the moving parts?

Wow. Okay. So John, great question. I think there's like 20 questions on that one. So I don't know how we would do that, but let me start, and then I'll let Wetteny build on it. To your point, we had really strong growth across our franchises. And if you look at dermatology, it's 14% in the quarter, Paris [ph] at 10%, diagnostics at 14% and the overall pain portfolio at 91%. So there really was strong growth across all those. Obviously, leading the growth there will be pain. And as you look into 2024, we see that as well with significant optimism about where that's going to go, we're very pleased with where that launch is. These are both Librela and Solensia, 2 products that are very early in their life cycle with significant growth. And I think if you really double click if you look at international, who already have these products in the market for a while, you're seeing great growth. Importantly, we're continuing to see really strong compliance on those products across Europe. As someone who currently has a dog who has an early experience, who look at their second dose of Librela, the difference that it makes, I really can't see any pet owner taking their dogs off these world-leading medications. So maybe Wetteny, if you want to take on some of the detailed questions you had around derm, paris and Solensia. But to your point, we remain very optimistic looking into 2024 about the strength of our companion animal portfolio and the 11% was in line with what we expected to be honest. But Wetteny, do you want to give more detail on some of that?

Yes, absolutely. Look, the 11% growth operationally in companion animal is right in line with our expectations coming into the quarter. And the overall growth of 8% operational, I would even say, is slightly above. If you recall on the last call, we said expect Q3 to come in somewhere between the mid and the high end of our growth rate. So that's roughly between 7% and 8%, so at the high end of that. But in terms of consumer, look, as we've said time and time again, if you look at the therapeutics category in terms of the value in pet health as well as some of the chronic conditions, as Kristin mentioned, consumers have not been treating those as discretionary. Even when you see some relative softness in pet spend, it doesn't carry over into the health care piece in terms of therapeutics, et cetera. And we've seen that play out in many ways even as I'm sure we'll get into a -- clinic visits are slightly down in the quarter. Clinic revenue is up almost 7%, and we're growing faster than that. Again, retail being a part of that, and we'll get into that in a little bit more detail. When I look at the big products, as you described them, John, derm, Triomabs, all up double digits and up across U.S. and international. I mean our growth this quarter was broad-based, across companion animal livestock U.S. international price, 5% volume on 3%. So really broad-based. And I think that really underscores the breadth of our products as well as our innovation and the value that consumer and pet owners place on products. The legacy products, when I look at in line, keep in mind, when we talk price, we tend to see price lift in those legacy products as well. But when it volume, it wasn't down. In-line products were actually flat on the quarter year-on-year with some lift on price. So hopefully, that helps. But I share the optimism Kristin described with respect to 2024. I mean we have multiple sources of growth, not only the Librela launch in the U.S. You've got continued growth across international markets for Librela and Solensia as well. And of course, we'll have price as a lever in addition to in-line products we just talked about. Livestock is now back to growth, and we'll look at what that looks like when we come back with guidance next year. And then we expect growth across our key franchises as well in terms of derm, paris and diagnostics. So I'll cap it there as a long answer to a long question, but we'll take the next one.

Certainly, we'll take our next question from Erin Wright with Morgan Stanley.

Thanks. On Librela, can you talk a little bit about the initial feedback for U.S. practices? Will there be any initial clinic level stocking? I think you said your expectations are intact there. But any lumpiness quarter-to-quarter that we should be thinking about? Has anything changed in terms of your expectations there? And then as we think about margin expansion next year, given Librela won't be at critical mass so that we may weigh on the gross margin. But is there still some underlying operating leverage that we should think about across the business?

Sure. Thanks, Erin. I'll take the first half of the question, and Wetteny can take the second half of the question. We launched in the U.S., the early experience trial in September with 400 clinics. As I mentioned, my dog puppy was actually one of those dogs. We went to a full launch in mid-October once we got a full dose in, and that's really the uptake was really strong. Very pleased with the results. We're obviously still in the early stages, but we're seeing it very similar to what we saw in Europe. Both vets and pet owners are super excited. We make sure that we've got ample supply as both Wetteny and I mentioned, because we do see this as a strong ramp, as you saw what happened in international. International had a supply constraint for a while. And as soon as we open that, we saw where that really went. So we continue to see really strong demand. Penetration is going really well in the clinics in the U.S. and the experience is broadening. There will be some small initial stocking for sure in some of those clinics, but I don't know if I would call that lumpiness going into next year. There definitely was obviously, they stock it. And our hope is we continue to just continue to drive that growth going forward. It is the number 1 selling OA pain product in Europe. We expect it to obviously be the same in the U.S. If you look at the U.S. in particular, Erin, there are 26 million medicalized dogs with OA. So this is a big market that we're going after, and this is a game-changing product. So we really see a very strong potential with this. We think Librela will expand the market. And as we've mentioned before, we really do think Librela and Solensia alone can be a $1 billion portfolio for us. And that's in a market today that was only $400 million. So I think that sort of underscores where we see growth there. But do you want to talk about the margin expansion issue, Wetteny?

Sure. I will. Look, you're right, Erin. In terms of -- as we said, when you look at ABS at peak, once they ramp up, they will be additive and accretive to our gross margins. We believe they're also accretive to our contribution margin, even when there are what I'll say is subscale in terms of getting towards their peak. So as we launch into the U.S., which is a large market, obviously, as you said, we'll see a little bit of a headwind from a gross margin perspective. But given many of the investments that we need to drive this field force, et cetera, already in the books, if you will. There will be some incremental A&P and DTC. And once we have the right level of penetration of the product in clinics, but that's still going to leave room for contribution margin lift in the product. So that will be, I would say, a factor from a gross margin standpoint. But we'll give more precision in terms of guidance for '24 at the next call. But as you can read from us and what we're saying today, we're very excited about '24. We're optimistic on '24, given the levers I just described. So in line with what we said at Investor Day, we expect to grow in the mid- to high single digits. I think you'll continue to see us look for margin expansion given the mix up in companion animal versus large [indiscernible], but I won't give you any more and more specific than that.

Thank you. We'll take our next question from Nathan Rich with Goldman Sachs.

Great. Thank you, so much the question. I wanted to stick with Librela. And Kristin, specifically ask about how vets are diagnosing OA pain and starting dogs on therapy? You obviously talked about the large number of pets that could benefit from this, but relatively few dogs on treatment. I guess, anything you can share in terms of diagnosis rates for practices that were in the early experience program and where those diagnoses are coming from? Are these dogs currently on a pain product and maybe switching to Librela or these new dogs being diagnosed? Anything there would be great. And then a quick follow-up on the international performance of Librela. It looks like it was roughly flat sequentially on a constant currency basis. Any learnings on seasonality or anything like that on the international side, now that that's been on the market for a little bit?

Sure. A few things I'd say there. Unlike cat pain, which we can certainly talk about if someone has a question on it. Dog OA pain and osteoarthritis has been diagnosed quite well by that. This is not hard to diagnose dogs, unlike cats, do not hide it. You can sense they're less active. They limp. They don't want to go upstairs. It is not hard to diagnose. And a lot of these dogs are already being treated. They're being treated with our product, Rimadyl and other OA products. There's diets for this is not a space where there's not a developed market, a developed protocol for diagnosis. That is not the case in cats, where we do have to really develop protocols for diagnosis. What we saw initially is the first dogs they put on are the most symptomatic dogs, where they know that like they really are really struggling. I think if you look at what we've seen in international is as vets get more comfortable with it, they then start providing it for dogs earlier in the OA pain, which actually is even better. They have greater quality of life over time. So our experience of diagnosis is really coming out of international, which is normally initially the dogs they first put it on are the one suffering the most where their pet owners are begging for it. And then over time, you move into earlier stages of OA. But again, this is not one that is hard to diagnose for vets. They have protocols to do that today. So we're not really as concerned here in the diagnosis part. I think what we really need to do and we see growth in '24 and beyond in '25 and '26 is having that really provide a product like Librela to dog earlier in their disease, which I think will be a good growth driver. And in international, that is definitely not the case. We're seeing phenomenal growth right now. It is definitely not flat. But Wetteny, do you want to get into some of the specifics of the international growth situation there?

Yes, absolutely. Look, if you look at Librela, we delivered $53 million in revenues in Q3. That's a 65% growth operationally. Now if you look at the preexisting markets, they were up about 33%. So that's an incremental $10 million or $11 million in the quarter year-on-year growth in the pre-existing markets. And then new markets that have been launched this year is about $10 million that includes a little bit from the U.S. from the early experience program. So year-on-year growth and then sequentially, I think was your question, and we're still up a few million sequentially. Just keep in mind, Q3 last year, as we said, we have a bit of a tougher comp for Q3, because that's when we released sort of the allocations that we're on and the supply constraints. So that is factoring a little bit, but we still had 33% in the in the EU sort of locations in markets where we had previously launched. So that's still a very robust growth despite the comp.

Thank you. We'll take our next question from David Westenberg with Piper Sandler. Please go ahead

Hi. Thank you for taking the question. Just on 2024 on derm, do you expect the competitive launch outside of the one we already know from Elanco. How comfortable do you feel about your decision to price Apoquel Chewables at parity with your existing products? And are there any analogs for chewables as a competitive differentiator in front of a competitive launch? And just as a quick follow-up on the R&D. It did step down a little bit, and I think you're guiding for it down. Is there anything are we reading in it too much to say maybe there's not a new product -- a significant new product in 2024, 2025 and maybe reading into that too much.

Sure. As we look for competition in dermatology to your question, we are expecting competition in the second half of next year. Our knowledge is that really there's only one that we're aware of at this point that we're expecting in 2024. We obviously don't know when in the second half that it would be coming. But we're well positioned for competition. As we've been preparing for competition for a while. We both have Cytopoint, we have monopole antibodies. We've got Apoquel. We've got Chew. We've got a pipeline behind that of continued life cycle innovations with longer-duration monoclonal antibodies, other species. So dermatology is a critical portfolio for us. We're continuing to grow. We did 14% in the quarter. So we're going to invest heavily behind this to make sure that we can continue to grow both our portfolio and the market overall. And if you look at chewable pricing, our strategy was let's move everybody to a product that's even easier that their dog like even more that they see as a treat, before you have competition, which we're expecting to be in a film coated tablet, similar to the original Apoquel. So we do see this as a really strong defense strategy for us. We've been seeing great as you look at the growth in international in the quarter. It was led by the conversion to Apoquel Chewable. And in the U.S., a lot of the growth in derm for us was also led by retail, which has done really, really well. To your point on R&D, I'll let Wetteny take it, but there's absolutely nothing going on there in the sense of any weakness in our portfolio. But Wetteny, do you want to talk about sort of what drove some of that?

Yes, absolutely. Look, as Kristin just said, we remain on target with our regulatory milestones with respect to R&D spend was up about 13% year-over-year on the quarter. So clearly, well above our revenue growth rate. So what you're seeing in terms of our overall expectations for the year versus where we're landing is just a matter of timing on the span of gross projects, but nothing significant or notable there. Again, we continue to drive innovation, both across new innovation as well as life cycle innovation across our portfolio, and we're very excited about the progress we're making in R&D.

Yes. It's mostly just timing of investments. I mean it varies quarter-to-quarter.

Thank you. We'll take our next question from Michael Ryskin with Bank of America. Please go ahead.

Right. Thanks for taking question. Mostly, I want to focus on Trio. You had a really solid result in the U.S., but it's sort of in that ramping up phase. Can you talk a little bit about what you're seeing in the market between yourself and the key competitors, BI, Merck, Elanco and specifically, BI just flashed NexGard PLUS, we saw a relatively surprising decline in Bravecto revenues from Merck? So I'm just curious, any change to competitive dynamics, anything you're seeing in terms of pricing or stocking or destocking and how that impacts Trio? And then just a follow-up on the very last question. CapEx as well, you slashed the guide this year pretty significantly. I think I heard you say Wetteny, the $725 million to $750 million and previously it was I think, $900 million to $1 billion. So just curious, did that get pushed out into '24 as well? Or is there -- any other change there?

Sure. I'll take the first half of the question, see if Wetteny want to build on it and then Wetteny, if you want to handle the CapEx question. We did see strong growth in Trio in the quarter, 20% in Q3 for Trio. It remains the number 1 fleet tick heartworm in the U.S. by revenue. And really importantly, it's continuing to grow share. It's up 3% in the quarter. It's also growing patient share, which was up 2% in the quarter. So we're expecting solid growth this year. Obviously, we -- there's a new competitor. But in the Q4, I would also say to watch, we got a challenging comp as you look at us in Q4. If you remember, we got back into stock and ran a number of promotions in Q4 of last year. But we continue to expect strong growth for the year there. Even with the destocking that we saw in the U.S. in Q1 and the pre-price buying, as we talked about before that you had in Q4 of 2022. So we see this as a franchise that will continue to grow. A lot of our growth is really being driven by our auto ship, by retail, which remains very strong for us, with our corporate accounts. This is also a category where you do see low switching once you get on a product. So we do believe the broadest portfolio, but continue to see strength in Trio. So we're happy with the growth we've seen there. But Wetteny, anything you add that I miss there, and you want to talk about CapEx?

Yes, sure. Look, on Trio, I think you covered it well, $206 million of revenue in the quarter. That's up 20% operationally. We're very pleased with that, including the patient share gains that Kristin already described. On CapEx, yes, we did reduce our CapEx expectations for the year from about $950 million to $1 billion down to $725 million to $750 million. This is really on timing of project spend. We remain committed to the investments that we're making. And this is still representing about a 25% increase in CapEx year-over-year. So as we said at Investor Day, excise CapEx to remain elevated for the next couple of years, and then we'll start to bring that down sort of in the range of a growth rate that approximates our revenue growth range as you go beyond '24, ‘25-time frame. So again, really just don't matter of timing is what you're seeing from a CapEx standpoint.

Thank you. We'll take our next question from Brandon Vazquez with William Blair. Please go ahead.

Hi. Good morning, thank for taking my question. On the companion animal side of things, it's a nice strong quarter. I think you had said, if I heard you correctly, that in 2023, you expect full year organic growth, double digits. The question being, I think you're at 7% year-to-date. I'm kind of being a little dangerous here and playing with my model live, but I think it implies kind of like a high teens organic growth in companion animal in the fourth quarter. One, am I thinking about that correctly? And then two, what's kind of giving you the confidence that the business can do that, especially, I think Q4 is a little bit more difficult year-over-year comp.

Yes, I'll be happy to take that. Look, we continue to see, as you saw this quarter, 11% operational growth in companion animal. And though we have some tough comps, as Kristin just referenced with the Trio answer on previous question, we are expecting very, very strong growth across companion animal. And keep in mind, we have some comp challenges with respect to livestock, which will decelerate from what it is on a year-to-date basis, about 6% to a low single-digit growth. So as you look at what's factored into the guidance that we just gave in narrowing the range, but still maintaining our midpoint, if you will, you can factor that into your equation in terms of what the livestock versus companion animal mix is as we exit the year.

Thank you. We'll take our next question from Balaji Prasad with Barclays. Please go ahead.

Hi. Good morning. A couple of questions from me. Firstly, to the extent you can without commenting on any '24 guidance. Can you highlight some of the macro factors and how you expect that to change? Speaking -- looking at the diagnostic space of consumer trends, better option volume? And secondly, a bit more specific. Can you speak about your Librela supply plans? You recently opened a facility, a new facility in Lincoln and what impact does that have for supply costs and margins?

Sure. I'll start with the beginning and then Wetteny maybe you can build on it. We continue to see very strong macro drivers in animal health. It's really led by the humanization of pets, which is a global trend. It's also led we continue to look at 2024 as to who's adopting those pets, which is more of millennial and Gen-Z and importantly, more income households, who are really raising the standard of care that they want to spend on their pets. We see this as important drivers as we bring real innovation to the market with Librela, with Solensia certainly continuing with Cytopoint which is growing very strongly. So we look at the drivers of pet care globally, which is really who's adopting the pest, how they want to spend on their pets and looking at revenue per clinic, which continues to grow very strongly, which is what we're really correlated against. It's something that continues into 2024. These are strong macro drivers for us. As we've spoken about on the livestock side, we really believe that market historically, and we believe in the future will continue to grow. 2% to 4%, low single digits. And as we said, we were going to return to that growth rate as we start to fully lap the challenges with DRAXXIN. So as you look at livestock, what's driving that is a growing middle class and more consumption of protein, with the whole Ozempic thing aside, which really hasn't really impacted livestock or the consumption of protein globally, really because of who is really driving a lot of that growth, which is middle classes across the globe, and more and more people entering that and seeing and upgrading their protein. So we look at those macro drivers, and we really don't see any changes if we look into not just 2024, but 2025 and 2026. And when we bring innovation to those markets, we believe we can continue to grow ahead of that. So Wetteny, I'm not sure if I missed anything there, and if you want to take the second half of the question?

No, I think you covered the macro dynamics well, Kristin. On the supply question with respect to Librela, we are very confident in our supply plans to meet the demand expectations for Librela that we have certainly for '24 and beyond. Mentioning the Lincoln facility, certainly in addition to both our internal capacity and third party that we are using, we continue to invest internally. And I think if you look at Lincoln that will be a factor, particularly as you go beyond 2024, with respect to supply planning fully well and other maps as well. So again, very confident in our ability to meet those demand expectations, and we've already factored the ramp that we saw in Europe in our thinking around demand there as well.

Thank you. We’ll take our next question from Chris Schott with JPMorgan. Please go ahead

This is Ekaterina on for Chris. Thank you so much for taking a question. So first, very quickly, just on veterinary visits and the pressure we've been seeing there recently, can you just remind us how sensitive Zoetis is to be dynamic and maybe your latest thinking around how visits are going to trend maybe into 4Q and potentially into 2024, if you want to comment on that. And then the second question is just on U.S. cattle. Can you just elaborate a little bit more on the dynamics you saw in the quarter? Because I think one of your competitors mentioned the timing of the cattle kind of was shifted earlier this year. Is this something that you saw as well? And does that potentially create a headwind for you as you think about the fourth quarter?

Thanks, Ekaterina. I'll take your first question and Wetteny can build on me and then take the second. That business were flat year-to-date, which is what we've expected and what we talked about previously. In the quarter, they were down around 1.5% and as you discussed, we're really not as reliant on vet visits. The better proxy for us is revenue because again, remember that a lot of our products don't need to be purchased in the clinic. If you look at both auto ship, as you look at retail, you look at chronic medications, all of this continues to have us a higher correlation with overall revenue growth in the clinic. Historically, as we talked about before, vet clinic visits are flat to maybe 1% and if you look at where they stand today, they're still ahead of where they were pre-pandemic. So we don't pay as much attention to that vet clinic visit. If you look at revenue in the clinic, our growth in companion animal was higher than even that number, and that's because we're driving so much innovation there overall. So if you look at vet clinics business, we're not as tied to that number as we continue to say. So I don't know if there's anything I miss there Wetteny, what you want to build on, and then you want to take the second question?

Yes, sure. The only thing I would add on the vet clinic visits is you see our growth continues to outpace that of the clinic growth. And the vet visits were not as they're important, right? But we're not as sensitive to visit because therapeutics and chronic indications tend to power through that. And you can still see volume growth even as visits are down. And then the retail piece, which is continuing to grow. We've seen an additional 24% points as a percentage of our pet care revenues in the U.S. each year. So we've gone from 11% from about 5% just a few years ago. So we continue to see that in the quarter, it was up about 35%, if you look at our retail sales. So those are the factors I would add. With respect to the cattle dynamics and livestock in general, I would say clearly, we've had a very strong start to the year through the first 9 months. Livestock is up about 6%. Clearly, we're signaling that will come down in the fourth quarter. And that's really more of a factor of variability across quarters, given the timing of supply that we've had in the prior year versus the current year. The timing of when we've taken price adjustments for Jackson, for example, which impacted Q2 versus Q3 as well as Q4 this year as we're anticipating a step in that -- at the end of the year. So that will put some more pressure on Q4. We factored all that into our guidance that we've just issued today, which we are still in line with our expectations that we started the year with, which is right around our midpoint, we just narrowed it. So all those are in. With respect to capital dynamics around, we haven't seen anything that would say there's a pronounced shift with respect to the cattle run here. But again, we factored all these items into our thinking and what we've just iterated today from a guidance standpoint.

Thank you. We'll take our next question from Steve Scala TD Colin. Please go ahead.

Hi. This is Chris on for Steve. Thanks a taking a question. We had 2. First, on the U.S. on the parasiticide market, can you provide an update on the estimated volume share of topical today? And then looking ahead to 2024, what is the risk of significant pricing pressure on Trio from the month of Credelio Quattro. Assuming a non-inferior product label type seems like the main level they could both to grow their market share. And then a clarifying question on U.S. Librela, can you confirm that U.S. sales were 0 in Q3? And then looking ahead to Q4, do you still expect sales to be immaterial for the full year?

Yes. Look, I'm not sure if I got the second question, but I'm going to give it a shot and then ask you to clarify. On the parasiticides market, we still estimate in terms of volume, nearly half is still in the collars and topicals, but from a value perspective dollars, we're significantly leaning on the calls and prescription. As those are at higher price points. I think you're asking a specific question about share for specific products within the topicals and collars and I don't have that to hand. But if it was a different question, I'll ask you to clarify after I give you an answer on Librela. So Librela, in the third quarter was minimal. As you know, in September, we had an early experience program. That was only about 400 clinics very limited with KOLs to get them using the product and being able to talk about it, et cetera, and helping with refining protocols and so on. And so the number was like $3 million in the quarter, not meaningful at all. And given the timing of the full launch in October and with the holidays coming, it is not going to have a meaningful impact on the full year growth again on that point. But I'll ask you to clarify if I didn't get the question right on Paris.

It appears disconnected at this time.

Next question?

And there are no further questions at this time. I'll turn it back to Kristin for closing remarks.

Great. Thank you, everybody. Great questions today. Once again, we want to reiterate that we remain confident in our ability to achieve our full year guidance based on the diverse and innovative portfolio that continues to drive our success. We are firmly committed to continuing to invest in that portfolio as we look at the opportunities ahead of us, through DTC and building our capabilities to support our growth, but we'll also continue to manage our costs and ensure we're creating value for our shareholders. We continue to grow faster than the market by focusing on our people and our colleagues and on operational excellence and agility. They deliver every day for our business and for our customers. So we look forward to updating you on the full year and our long-term value proposition and hopefully seeing many of you in San Francisco at the JPMorgan Healthcare Conference to kick off 2024. Thanks, everybody.

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.