1. business and industrial
2. company
3. merger and acquisition

Juan Ramón Alaix
Chief Executive Officer
DEAR
SHAREHOLDERS,
In 2014, Zoetis continued to distinguish itself as the world
leader in animal health. We generated strong, profitable
growth, built on the core strengths of our business model,
and continued to create value for our customers and
shareholders as we completed our second full year
as a public company.
1
We are excited to be at the center of an industry generating steady and
predictable annual sales of approximately $23 billion in animal medicines
and vaccines. As the growing world population, increasing middle class,
and rising urbanization stimulate global demand for proteins and pets,
Zoetis sees an attractive market opportunity to help keep animals
healthy and productive.
2014
MILESTONES
Our growth in 2014 was reflected in revenue of $4.8 billion, up 7%
operationally1 over 2013, and adjusted net income2 of $790 million, up 13%
operationally — allowing us to again deliver on our commitment to generate
operational revenue growth in line with or faster than the animal health
industry and to grow adjusted net income faster than revenue.
Conducted first Annual Meeting
of Shareholders on May 13
We remained the leader in animal health in terms of overall revenue and
across a broad spectrum of specific geographies, species and product
categories — reflecting a diverse and durable portfolio of products that
underpin our success.
OUR COMPETITIVE ADVANTAGES AND KEY CHARACTERISTICS
Our team achieved this performance based on a number of important
characteristics.
Zoetis continued to benefit from the fact that we are the largest independent
company with a singular focus on animal health. Our focus on animal health
makes a difference in how we serve our customers, create innovative new
products for their needs, and deliver a high-quality supply of medicines and
vaccines. Zoetis has built a strong sense of ownership and accountability
among our people, which helps us allocate our resources toward the creation
of short-term and long-term value for our customers and shareholders.
Our diverse portfolio includes more than 300 product lines that generate a
steady stream of revenue. Our largest single product line in 2014 accounted
for just 8% of our revenue, mitigating risk in our profile, and our top 25
products have an average time in our portfolio of 27 years, demonstrating
our ability to build enduring product franchises.
Our global leadership and scale — with products sold in more than 120
countries — gives us an ability to have a local presence, gain efficiencies and
work with industry and government partners in unique and meaningful ways.
With a global manufacturing network of internal sites and external contractors,
our customers can count on a high-quality supply of the products they need.
Our direct interaction with customers gives us a competitive advantage in
reaching our customers face-to-face, understanding their local markets, and
tailoring solutions that truly address their clinical and business needs. We have
direct access to decision makers — including veterinarians and producers — who
purchase and use our products based on their proven value. Unlike in human
health, there are very few third-party payers directing buying decisions.
1
Operational revenue growth is defined as revenue growth excluding the impact of foreign exchange.
Adjusted net income is a non-GAAP measure and defined as the corresponding reported U.S. generally accepted accounting
principles (GAAP) income statement line item, excluding purchase accounting adjustments, acquisition-related costs and
certain significant items. The adjusted net income measure is not, and should not be viewed as, a substitute for U.S. GAAP
reported net income attributable to Zoetis.
2
2
Launched APOQUEL® in the U.S.
and Europe in January
Received full license for first
vaccine for Georgia 2008 type
infectious bronchitis virus in
poultry on August 27
Granted conditional license
for PEDv vaccine for swine on
September 3
Agreed to purchase animal health
assets of Abbott on November 17
Held inaugural Investor Day on
November 18
Announced $500 million share
repurchase program on
November 18
OUR VALUE
PROPOSITION
GROW REVENUE IN LINE
WITH OR FASTER THAN
THE MARKET
GROW ADJUSTED NET
INCOME FASTER THAN
REVENUE
TARGET VALUE-ADDED
INVESTMENT OPPORTUNITIES
RETURN CAPITAL TO
SHAREHOLDERS
Zoetis’ leadership is also defined by our highly productive research and
development (R&D) capabilities. In 2014, this competitive advantage again
was on display as our R&D team received more than 180 product approvals,
ranging from new product approvals to lifecycle extensions across
additional species, indications and markets. For example, APOQUEL®,
a significant new product for the control or treatment of pruritus — or itching — in dogs with allergic skin conditions, became available
to veterinarians. Other important progress included the receipt of a
conditional license from the U.S. Department of Agriculture (USDA)
for a vaccine to help fight porcine epidemic diarrhea virus (PEDv), a
devastating disease in pigs. And, Zoetis also received a full license from
the USDA for our POULVAC® Bron GA 08 vaccine for poultry, the first
commercially available vaccine to help reduce disease caused by the
Georgia 2008 Type infectious bronchitis virus.
OUR GROWTH
STRATEGIES
LEVERAGE
OUR CAPABILITIES
Leverage our local presence and
customer relationships
Invest in innovation to extend our
product portfolio
Provide high-quality products
and improve margins
EXTEND OUR REACH
“OUR FOCUS ON ANIMAL HEALTH MAKES
A DIFFERENCE IN HOW WE SERVE OUR
CUSTOMERS, CREATE INNOVATIVE NEW
PRODUCTS FOR THEIR NEEDS, AND
DELIVER A HIGH-QUALITY SUPPLY
OF MEDICINES AND VACCINES.”
Further penetrate emerging markets
Remain the partner of choice for
external development
Expand complementary businesses
OPTIMIZE OUR OPERATIONS
Increase margins through optimized
manufacturing and supply network
Implement new efficiency initiatives
across the business
Maintain focus on value creation
CAPITAL DEPLOYMENT FOR GROWTH AND VALUE CREATION
We continued to deploy capital carefully for value-creating business
development activities that add to, or complement, our existing business
base. In our largest acquisition to date as an independent company, we
purchased the animal health assets of Abbott, which are focused on the
veterinary surgical suite. This acquisition will strengthen Zoetis’ companion
animal product portfolio.
Further, we fulfilled our commitment to return capital to shareholders,
while pursuing investments in value-creating business development
opportunities. Specifically, we returned cash to our shareholders through
our quarterly dividend payments, which have increased by 15% in 2015,
and we initiated a $500 million share repurchase program.
3
MOVING FORWARD
As Zoetis enters the final stages of its stand-up and we mature as an
independent company, we are committed to our business model, while
continuing to look for opportunities to be better, simpler and more cost
efficient, consistent with our “Run It Like You Own It” mindset and culture.
Looking ahead to 2015 and beyond, we will continue to concentrate
our investments, resources and talent in the pursuit of future
profitable growth by:
•L
everaging our core capabilities — deepening our direct interaction
with customers; investing in innovative R&D; and delivering high-quality
manufacturing and reliable supply
• Extending our reach — further penetrating emerging markets; remaining
the partner of choice for external development; and expanding into
complementary businesses
•O
ptimizing our operations — improving our manufacturing and supply
network to increase gross margins and support growth; implementing
new initiatives to drive more efficiency throughout the business, while
maintaining our focus on value creation
The animal health industry is supported by strong, steady and predictable
growth drivers and its revenue is expected to grow at a mid-single-digit
rate over the long term — 5% to 6% on an operational basis, according to
industry estimates. Based on our proven business model and our outlook,
we expect to grow our revenue in line with or faster than the market.
Adjusted net income will grow faster than revenue by improving gross
margins and further expense discipline. And, free cash flow will grow
faster than adjusted net income.
In 2015, we will continue to take steps to enhance our competitive advantages,
improve working capital efficiency, achieve margin improvements, and return
capital to shareholders, when appropriate. We look forward to reporting to
you on our progress in each of these areas.
As the world increasingly depends on animals for both nutrition and
companionship, Zoetis remains committed to helping our customers
improve the care of animals and to creating long-term value for you,
our shareholders. Thank you.
Sincerely,
Juan Ramón Alaix
Chief Executive Officer
4
THE ZOETIS
ADVANTAGE
OUR THREE
INTERCONNECTED
CAPABILITIES
CUSTOMER RELATIONSHIPS
Through direct interactions with our
customers, we are able to connect
with them face-to-face, understand
their local markets, and tailor
solutions that truly address their
clinical and business needs.
INNOVATION
Our R&D team focuses on our
customers’ most pressing animal
health challenges. In 2014, we
received more than 180 product
approvals — from entirely new
products to lifecycle extensions
across additional species, medical
indications and markets.
HIGH-QUALITY
MANUFACTURING & SUPPLY
Our global manufacturing network
produces and delivers a highquality, reliable supply of products
at competitive prices. Our diverse
and durable portfolio — some 300
product lines sold in more than
120 countries — addresses
significant animal health problems
and also generates a steady
revenue stream for Zoetis.