ZTS 10-K & 10-Q changes, risk factors and insider trading

In particular, forward-looking statements include statements relating to our future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, anticipated impact or timing of divestitures, interest rates, tax rates, tariffs, changes in tax regimes and laws, impacts of the timing and processing of sales in the International segment, possible impacts of the expected fiscal year alignment of our subsidiaries operating outside the U.S., foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation, taxes and financial results. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, and potentially inaccurate assumptions. However, there may also be other risks that we are unable to predict at this time. If one or more of these risks or uncertainties materialize, or if management's underlying beliefs and assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. You should not put undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they are made.

We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. Our competitors include standalone animal health businesses, start-up companies working in the animal health area and the animal health businesses of large pharmaceutical companies. These competitors may have access to greater financial, marketing, technical and other resources or have significant market share in particular areas. As a result, they may be able to devote more resources to researching, developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions, collaborations or other opportunities. In recent years, there has been an increase in consolidation in the animal health industry, which could result in existing competitors realizing additional efficiencies or improving portfolio bundling opportunities, thereby potentially increasing their market share and pricing power, which could lead to an increase in competition and a decrease in our revenue and profitability. We also face competition from lower-priced generic alternatives to our products that no longer have patent protection. See "--Generic and other products may be viewed as more cost-effective than our products."

IfThere are many difficulties and uncertainties inherent in animal health research and development, the introduction of new products and indications, business development activities to enhance or refine our product pipeline and the commercialization of our products. There is a high rate of failure inherent in medicine and vaccine discovery and development. Failure can occur at any point in the process, including in later stages after substantial investment and following meaningful cost for manufacturing capabilities and inventory to prepare for launch. Some of our top-selling products or product lines have in the past or may in the future experience issues, such as loss of patent protection, material product liability litigation, new or unexpected side effects (or an increased frequency of serious, expected adverse events), manufacturing or supply chain disruptions, regulatory proceedings or enforcement, labeling changes, public regulatory communications, other regulatory correspondence, including “Dear Veterinarian” Letters, negative publicity or social media attention, changes to veterinarian or customer preferences, or ineffectiveness in connecting with veterinarians and customers and/or disruptive innovations or the introduction of competing and/or more effective products, our revenues could be negatively impacted, perhaps significantly. For example, our five top-selling products and product lines, Simparica/Simparica Trio, Apoquel/Apoquel Chewable, Cytopoint, Librela and our ceftiofur line, contributed approximately 41%42% of our revenue in 2024,2025, and certain issues with these top-selling products and product lines could have a more significant impact to our results of operations.

In addition, sinceSince we depend on positive perceptions of the safety, quality and efficacy of our products, and animal health products generally, by our customers, veterinarians and end-users, any concerns as to the safety, quality or efficacy of our products, whether actual or perceived, has and in the future may harm our reputation or materially adversely affect our operating results and financial condition, regardless of whether such concerns are accurate. Public confidence in pharmaceuticals has been challenged in recent years by highly publicized debates about vaccine safety, the spread of misinformation and disinformation on traditional and social media, and increasing skepticism toward public health institutions including animal health institutions. These trends could materially and adversely impact our ability to successfully develop, obtain regulatory approval for, and commercialize our products.

Macroeconomic, business, political and financial disruptions, including public health crises or pandemics, could have a material adverse effect on our operating results, financial condition and liquidity. Certain of our customers and suppliers may be affected directly by economic downturns and could face credit issues or cash flow problems that could give rise to payment delays, increased credit risk, bankruptcies and other financial hardships that could decrease the demand for our products or hinder our ability to collect amounts due from customers or goods from our suppliers. If one or more of our large customers, including distributors, discontinue their relationship with us as a result of economic conditions, public health conditions, sanctions or otherwise, our operating results and financial condition may be materially adversely affected. In addition, economic concerns and geopolitical instability may cause shortages in veterinary healthcare workers or some pet owners to forgo or defer visits to veterinary practices or could reduce their willingness to treat pet health conditions or even to continue to own a pet. Moreover, customers may seek lower price alternatives to our products if they are negatively impacted by the current poor economic conditions. Russia’s invasion of Ukraine, theongoing regionalconflicts conflictand rising tensions in various parts of the Middle East,world, economic weakness in China, thefuture COVID-19 pandemic,pandemics, as well as inflation, are examples of recent global economic conditions that could have an adverse effect on our operating results, financial condition and liquidity.

Infectious disease outbreaks, pandemics, sanctions, geopolitical instability and widespread fear of spreading disease through human contact can cause disruptions to or negatively impact our customers’, our suppliers’ and our distributors’ business operations, which could materially adversely affect our operating results. Furthermore, our exposure to credit and collectability risk and cybersecurity risk is higher in certain international markets, our ability to mitigate such risks may be limited. While we have procedures to monitor and limit exposure to credit and collectability risk and have defensive measures in place to prevent and mitigate cyberattacks, there can be no assurances that such procedures and measures will effectively limit such risks and avoid losses.

We face competition from products produced by other companies, including generic alternatives to our products. We depend on patents and regulatory data exclusivity periods to provide us with exclusive marketing rights for some of our products. Patents for individual products expire at different times based on the date of the patent filing (or sometimes the date of patent grant) and the legal term of patents in the countries where such patents are obtained. The extent of protection afforded by our patents varies from country to country and is limited by the scope of the claimed subject matter of our patents, the term of the patent and the availability and enforcement of legal remedies in the applicable country and potential legislative or regulatory changes to the underlying patent framework. As a result, we face competition from lower-priced generic alternatives to many of our products that no longer have patent protection. In certain circumstances, our products have become subject to decreased sales and we have been forced to lower our prices and provide discounts or rebates in order to compete with generic products. Generic competitors are becoming more aggressive in terms of launching at risk before patent rights expire and, because of their pricing, are an increasing percentage of overall animal health sales in certain regions. For example, several companies have launched generic versions of our Rimadyl chewable and Draxxin products. In the years since the start of generic and other competition, sales of our Rimadyl chewable and Draxxin products have declined in the U.S., the largest market for these products, by 40%39% and 49%,66%, respectively.

In most markets, companion animal owners typicallyfrequently purchase their animal health products directly from veterinarians. Companion animal owners increasingly have the option to purchase animal health products and, in some cases, veterinary services from sources other than veterinarians, such as internet-based retailers, “big-box” retail stores or other over-the-counter distribution channels. Companion animal owners also could decrease their reliance on veterinarians as they rely more on internet-based animal health information. Because we primarily market our companion animal products through the veterinarian distribution channel, any decrease in reliance on veterinarians by companion animal owners could reduce our market share for such products and materially adversely affect our operating results and financial condition. In addition, companion animal owners may substitute human health products for animal health products if human health products are deemed to be lower-cost alternatives.

Sales of our livestock products could be materially adversely affected by the outbreak of disease carried by animals, which could lead to the widespread death or precautionary destruction of animals as well as the reduced consumption and demand for animal protein. In addition, outbreaks of disease carried by animals may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products due to reduced herd or flock sizes. In recent years, outbreaks of various diseases, including African Swine Fever, avian influenza and highly pathogenic avian influenza, foot-and-mouth disease, bovine spongiform encephalopathy (otherwise known as BSE or mad cow disease), New World screwworm, and porcine epidemic diarrhea virus (otherwise known as PEDv), have impacted the animal health business. The discovery of additional or more severe cases of any of these, or new diseases may 16 | result in additional restrictions on animal proteins, reduced herd sizes, or reduced demand for animal protein, which may have a material adverse effect on our operating results and financial condition. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere.

From time to time, we may implement new business lines or offer new products and services within existing lines of business. There may be substantial risks and uncertainties associated with these efforts. We may invest significant time and resources in researching, developing, marketing, or acquiring new lines of business and/or offering new products and services. Initial timetables for the introduction and development or acquisition of new lines of business and/or the offering of new products or services may not be achieved, and price and profitability targets may prove to be unachievable. Our lack of experience or knowledge, as well as external factors, such as compliance with new or evolving regulations, legislative changes, regulatory interactions, competitive alternatives and shifting market preferences, may also impact the success of an acquisition or the implementation of a new line of business or a new product or service. New business lines or new products and services within existing lines of business could affect the sales and profitability of existing lines of business or products and services. Failure to successfully manage these risks in the implementation or acquisition of new lines of business or the offering of new products or services could have a material adverse effect on our reputation, business, results of operations, and financial condition.

The issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion. In some countries, this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals. These restrictions are more prevalent in countries where animal protein is plentiful and governments are willing to take action even when there is scientific uncertainty. Our total revenue attributable to antibacterials for livestock was approximately $950$713 million for the year ended December 31, 2024. As a result of the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, we anticipate our total revenues attributable to antibacterials for livestock will decrease.2025.

Companies in the livestock industries are subject to extensive and increasingly stringent regulations. If livestock producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd sizes or become less profitable and, as a result, they may reduce their use of our products, which may materially adversely affect our operating results and financial condition. Also, many food-producing companies, including livestock producers, benefit from governmental subsidies, and if such subsidies were to be reduced or eliminated, these companies may become less 18 | profitable and, as a result, may reduce their use of our products. Furthermore, new or more stringent regulations could, directly or indirectly, impact the use of one or more of our products. More stringent regulation of the livestock industry or our products could have a material adverse effect on our operating results and financial condition.

We pursue acquisitions, technology licensing arrangements, strategic alliances or divestitures of some of our businesses as part of our business strategy. We may not complete these transactions in a timely manner, on a cost-effective basis, or at all, due to regulatory constraints or limitations or other unforeseen factors that prevent us from realizing the expected benefits. We may be unable to integrate acquisitions successfully into our existing business, and we may be unable to achieve expected sales, gross margin improvements or efficiencies. We may be subject to litigation or government investigations in connection with, or as a result of, acquisitions, dispositions, licenses or other alliances. While our evaluation of any 17 | potential transaction includes business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved, our due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions or fines resulting from an acquisition target's previous activities, inadequate controls, or costs associated with any quality issues with an acquisition target’s legacy products. Any of these events could cause us to incur significant expenses and could materially adversely affect our operating results and financial condition.

ModificationChanges of foreignin trade policypolicies, by the U.S. or other countries orincluding the imposition of tariffstariffs, onsanctions, importedand goodsother trade restrictions, may harmadversely affect our business.

Additionally,The U.S. and other countries in responsewhich our products are sourced or sold, or we or our customers do business, may from time to U.S.time tariffsmodify affectingexisting exports,or someimpose governments,new quotas, duties (including China,antidumping haveor institutedcountervailing andduties), maytariffs, economic sanctions, export controls, or other restrictions in thea futuremanner institutethat tariffsadversely onaffects us. Such measures could limit our ability to register our products, source materials, sell products, or conduct our business in certain U.S. goods.markets. While the scope and duration of theseany andexisting trade policies remain uncertain, any future tariffs remains uncertain,new tariffs imposed by the U.S. or other governments on our products or the active pharmaceutical ingredients or other components thereof could negatively impact our financial condition and results of operations.

The impacts from climate change may also impact Zoetis’ and our suppliers’ manufacturing processes. For example, ample amounts of clean water areis needed to produce our products, and the effects from climate change could result in water supply interruptions and low water quality. In addition, increased frequency of natural disasters and adverse weather conditions as a result of climate change may disrupt our manufacturing processes or our supply chain. These disruptions may have a material adverse effect on our business, financial condition, results of operations and/or cash flows.

We depend on the efforts of our executive officers and certain key personnel, including research, technical, legal and regulatory, sales, security, marketing, manufacturing and administrative personnel. Our ability to recruit and retain such talent will depend on a number of factors, including compensation and benefits, work location and work environment. From time to time there may be shortages of skilled labor, which may make it more difficult for us to attract and retain qualified employees or lead to increased labor costs. In addition, we generally do not enter into employment agreements with our executive officers and other key personnel. If we cannot effectively recruit and retain qualified executives and employees, we may not be able to maintain or expand our operations, or our business could be otherwise adversely affected and could, at least temporarily, have a material adverse effect on our operating results and financial condition.

Some of our employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements in certain jurisdictions, including the U.S. As a result, we are subject to the risk of labor disputes, strikes, work stoppages and other labor-relations matters. We may be unable to negotiate new collective bargaining agreements on similar or more favorable terms and may experience work stoppages or other labor problems in the future at our sites. We could experience a disruption of our operations or higher ongoing labor and other operational costs, which 18 | could have a material adverse effect on our operating results and financial condition, potentially resulting in canceled orders by customers, delays in fulfilling orders, unanticipated inventory accumulation or shortages and reduced revenue and net income. We may also experience difficulty or delays in implementing changes to our workforce in certain markets. In addition, labor problems at our suppliers, CMOs or other service providers could have a material adverse effect on our operating results and financial condition.

•the failure of us or any of our vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines, including any changes to Good Manufacturing Practices (GMPGMPs);

TheLabor costs and the materials used to manufacture our products may be subject to availability constraints and price volatility caused by changes in demand, weather conditions, supply conditions, government regulations, economicevolving climatetrade andpolicies other factors. In addition, labor costs may be subject to volatility caused by(including the supplyimposition of labor, governmental regulations,tariffs), economic climate and other factors. Increases in the demand for, availabilityavailability, or the price of,of materials used to manufacture our products and increases in labor costs could increase the costs to manufacture our products, result in product delivery delays or shortages, and impact our ability to launch new products on a timely basis or at all. We may not be able to pass all or a material portion of any higher product, material, transportation or labor costs on to our customers, which could materially adversely affect our operating results and financial condition.

Certain third-party suppliers aremay be the sole or exclusive source of certain products, materials and services necessary for production of our products. We may be unable to meet demand for certain of our products if any of our third-party suppliers cease or interrupt operations,operations faildue to, among other things, escalating tensions or trade disputes in their region, restrictions on the import/export of goods or services, contract manufacturing or supply chain disruptions due to renewfinancial contractsdistress, withour usfailure to mutually agree on contract terms, or otherwisesome failother failure of a contractor or supplier to meet their obligations to us. In such a case, we may be required to renegotiate the terms of our agreement or pursue a strategic transaction or other alternative arrangement with that supplier or others, which may result in increased cost to produce our products or supply disruption.

New products may appear promising in development but fail to reach the market within the expected or optimal timeframe, or at all. In addition, product extensions or additional indications may not be approved by government regulators. Developing and commercializing new products subjects us to inherent risks and uncertainties, including (i) delayed or denied regulatory approvals or label changes, (ii) delays or challenges with producing products in accordance with regulatory requirements, on a commercial scale and at a reasonable cost; (iii) failure to accurately predict the market for new products; and (iv) efficacy, quality and safety concerns. In addition, a failure to continue to identify and develop products, both internally and through external sources, could impact our future success. Once necessary regulatory approvals are obtained, the commercial success of any new product depends upon, among other things, its acceptance by veterinarians and end customers, and on our ability to successfully manufacture, market, 21 | and distribute products in sufficient quantities to meet actual demand. The inability to successfully bring a product to market could negatively impact our revenues and earnings.

The evaluation of our existing and new medicines and vaccines for animals is required in order to develop and commercialize them. Animal testing in certain countries and states has been the subject of increased regulation, controversy and adverse publicity. Our licenses or permits for animal testing could be revoked or put on hold due to animal welfare events that may occur. Some organizations and individuals have attempted to ban or limit animal testing or encourage the adoption of additionaladditional, and burdensome regulations applicable to animal testing and animal welfare.welfare at both federal and state levels. To the extent that the activities of such organizations and individuals are successful, our R&D, and by extension our operating results and financial condition, could be materially adversely affected. In addition, negative publicity about us or our industry could impact R&D projected timelines or harm our reputation or the reputation of our contract research organizations.

As a global company, we are subject to various state, federal and international laws and regulations, including but not limited to, regulations relating to the research, development, quality assurance, manufacturing, data protection, environmental protection, importation, exportation, distribution, marketing and sale of our products, including our in vitro diagnostic products used in human health. In addition, our manufacturing facilities are subject to periodic inspections by regulatory agencies, such as the FDA, the USDA and foreign equivalents. Our failure, or the failure of third parties we rely on, including CMOs, to comply with these regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspectional observation notices, label changes, untitled or warning letters or other public regulatory communications or correspondence, including "Dear Veterinarian" letters, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current products from the market, product seizures, injunctions and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims. Any one of these consequences could materially adversely affect our operating results and financial condition. Furthermore, we cannot predict the nature of future laws, regulations, or changes in tax laws and tariffs, nor can we determine the effect that additional laws or regulations or changes in existing laws or regulations could have on our business when and if promulgated. Changes in applicable federal, state, local and foreign laws and regulations could have a material adverse effect on our operating results and financial condition.

In addition, we will not be able to market new products unless and until we have obtained all required regulatory approvals in each jurisdiction where 20 | we propose to market those products. Delays by government agencies in approving new products or product upgrades or taking action with respect to other regulatory matters could have a negative impact on our growth and profitability. The ability of government agencies to review and approve new products or product upgrades or take other actions can be affected by various factors, including government budget and funding levels, ability to hire and retain key and other personnel, staffing shortages, public health emergencies, and statutory, regulatory, and policy changes. If a prolonged government shutdown or other disruption of normal business operations occurs, it could significantly impact the ability of the USDA, FDA, EPA and other agencies to timely review and process our regulatory submissions, including with respect to new product candidates, which could have an adverse effect on our business. Even after a product reaches market, it may be subject to re-review and may lose its registrations or approvals. We have changed, and may in the future change, the locations of where certain of our products are manufactured and, because of these changes, we may be required to obtain new regulatory approvals. Our failure to obtain approvals, delays in the approval process, including any delays in the United States resulting from federal workforce reductions or hiring freezes, federal agency reorganizations or deregulatory efforts, or any prolonged shutdown of the U.S. government, or our failure to maintain approvals in any jurisdiction, may prevent us from selling products in that jurisdiction until approval or reapproval is obtained, if ever.

The OFAC at the U.S. Treasury Department and the Bureau of Industry and Security at the U.S. Department of Commerce (BIS), The Council of the EU and similar agencies in other countries and territories outside the U.S.,territories, administer certain laws and regulations that restrict its persons and, in some instances, extraterritorial persons, in conducting activities, transacting business with or making investments in certain countries, governments, entities and individuals subject to economic sanctions. Our international operations subject us to these laws and regulations, which are complex, restrict our business dealings with certain countries, governments, entities, and individuals, and are constantly changing. For example, we sell limited humanitarian animal health products, including medicines, diagnosticsmedicines and vaccines, to Russia and Iran,Iran. Although we believe such activities are in compliance with economic sanctions affecting these countries.countries, Violationsviolations of sanctions regulations may be punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment, which could adversely affect our reputation, business, financial condition, results of operations and cash flows. In addition, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees and agents. For example, in December 2020, we submitted a final voluntary disclosure to OFAC and the U.S. Department of Justice regarding certain transactions involving sales of food, medicineagents or devicesoperational todifficulties individualsarising from counterparties or entitiesother who may have been resident in or had ties to Iran potentially in violation of the ITSR administered by OFAC. The sales were made by our Platinum Performance business, which we acquired in August 2019. In July 2023, OFAC provided a No Action letter confirming a final determination that no further action would be taken in the matter. We do not anticipate further communication from the Department of Justice as the statutory response period has lapsed without a response.intermediaries.

A failure to comply with the environmental, health and safety laws and regulations to which we are subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, public regulatory communications or announcements, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures. We cannot assure you that our costs of complying with current and future environmental, health and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous materials will not materially adversely affect our business, results of operations or financial condition.

There has been a broad range of proposed and promulgated state, national and international regulation aimed at reducing the effects of climate change. Such regulations apply or could apply in countries where we have interests or could have interests in the future. The EU adopted the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Reporting Directive (CSRD) that will require disclosure by EU entities, including certain EU subsidiaries of non-EU entities, regarding the risks and opportunities arising from environmental, social and corporate governance issues, and on the impact of companies' activities on people and the environment. Similarly, the State of California passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that imposes broad climate-related disclosure obligations on certain 22 | companies doing business in California, including us. Any new regulation could take several forms that could result in additional costs in the form of investments of capital to maintain compliance with laws and regulations and taxes. Climate change regulation continues to evolve, and it is not possible to accurately estimate eitherthe a timetabletiming for implementationthe emergence of new regulation, their scope or our future compliance costs relating to implementation.implementation and compliance.

We are also subject to chemical regulation in the United States and internationally. For example, governmental authorities in the EU and the United States are increasingly focused on preventing environmental contamination from perper- and polyfluoroalkyl substances (PFAS), which may be contained in certain of our products.products or product packaging. Federal and state governments and regulatory agencies, like the European Chemicals Agency, are in various stages of considering and/or implementing laws and regulations requiring the reporting, restriction and/or phase-out of PFASPFAS-containing products (subject to applicable product exceptions).

Third parties may illegally distribute and sell counterfeit or illegally compounded versions of our products that do not meet the exacting standards of our development, manufacturing and distribution processes. Counterfeit or illegally compounded medicines pose a significant risk to animal health and safety because of the conditions under which they are manufactured and the lack of regulation of their contents. Our reputation and business could suffer harm as a result of counterfeit or illegally compounded products which are alleged to be equivalent and/or which are sold under our brand name. We are aware of at least one pharmacy in Brazil that may be engaged in the practice of illegally compounding oclacitinib, the active 21 | pharmaceutical ingredient in our Apoquel product. We are also aware of some counterfeit versions of our Simparica and Apoquel products in Brazil and are coordinating with the local authorities. In addition, products stolen or unlawfully diverted from inventory, warehouses, plants or while in transit, which are not properly stored or which have an expired shelf life and which have been repackaged or relabeled and which are sold through unauthorized channels, could adversely impact animal health and safety, our reputation and our business. Public loss of confidence in the integrity of vaccines and/or pharmaceutical products as a result of counterfeiting, illegally compounding or theft could have a material adverse effect on our product sales, business and results of operations.

Our operations and reputation may be impacted if we do not comply with complex and continually changingevolving laws and regulations regarding data privacy.privacy information and the use of AI.

We collectcollect, store and use personal data of our customers, employees and suppliers, including sensitive personal data, such as health information in our human health business, in a variety of ways. In addition, we havecontinue beento investinginvest in data and digital capabilities and have expanded our diagnostics portfolio. Our customers, employees and suppliers expect that we will adequately protect their data.

Our collection, use, processing, retention, storage, disclosure, transfer, security and sharing of personal data is subject to a variety of data privacy laws and regulations in the United States and other regionsjurisdictions globally where we operate. TheThese legallaws environmentand surroundingregulations are constantly evolving as regulators continue to adopt new measures addressing data privacyprivacy. isMoreover, demandingthe interpretation and application of existing data protection laws and regulations are uncertain and may be inconsistent with theour frequentexisting impositiondata ofmanagement new and changing regulatory requirements.practices.

As a global company, we are faced with the challenge of how to manage a patchwork of laws, rules, regulations and industry standards, including, but not limited to, a growing number of U.S state privacy laws, the EU's General Data Protection Regulation, the U.K.'s General Data Protection Regulation, the Brazilian General Data Protection Law, China’s Personal Information Protection Law and India's Digital Personal data Protection (DPDP) Act. These laws and regulations vary across countries, are complex and can be subject to significant change. Any actual or perceived failure to comply with these current and future laws could result in significant consequences for Zoetis. This includes substantial fines and penalties, regulatory investigations, and civil lawsuits with damages, all of which could have a material adverse effect on our reputation and our business. In addition, with the growing number of new privacy laws and regulatory requirement, the costs associated with compliance with these legal and regulatory requirements are significant and likely to increase in the future.

Our aspirations, goals and disclosures related to environmental, social and governance (“ESG”)sustainability matters expose us to numerous risks, including risks to our reputation.

Our Driven to Care sustainability program includes various ESG aspirations and goals. These goal statements reflect our current plans and aspirations and are not guarantees that we, or third parties we rely on, including CMOs, will be able to achieve them. Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation. Our ability to achieve any goal or objective is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (i) the availability and cost of low- or non-carbon-based energy sources and technologies, (ii) evolving regulatory requirements and rulings affecting ESG and diversitysustainability standards or disclosures, (iii) our ability to recruit, develop and retain talent in our labor markets, (iv) our ability to rely on third-party CMOs to incorporate appropriate sustainability actions, and (v) the impact of our organic growth and acquisitions or dispositions of businesses or operations and (v) potential negative publicity from diversity and inclusion matters.operations.

The standards for tracking and reporting on ESGsustainability matters and continue to evolve. Our processes and controls may not always align with evolving standards for identifying, measuring and reporting ESGsustainability metrics, our interpretation of reporting standards that may be required by the SEC, EU and other regulators may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals. If our ESGsustainability practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, business partner or acquirer could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.

We may be unable to adequately protect our information technology systems from cyberattacks, ransomware attacks, phishing attempts, social engineering schemes and other technology enabled threats, breaches of securitysecurity, data loss or misappropriation of data, which could result in the disclosure of sensitive, personal, confidential or proprietary information, damage our reputation, and subject us to significant financial and legal exposure.

Our reputation as a global leader in animal health and our reliance on complex information systems and digital solutions make us inherently vulnerable to malicious cyber intrusion and attack.attack, which have evolved in frequency and sophistication. In addition, we have been investing in data and digital capabilities, including incorporating the use of certain AI capabilities into the development of new technologies and products, and have expanded our diagnostics portfolio, and as a result, there could be an increased likelihood of a cyberattackcyberattack, orransomware breachattacks, ofphishing securityattempts, social engineering schemes and other technology enabled threats, that could negatively impact usus, our third-party partners or our customers. CyberattacksCyberattacks, ransomware attacks, phishing attempts, social engineering schemes and other technology enabled threats are increasing in their frequency, sophistication and intensity, including through the use of AI and have become increasingly difficult to detect.detect; Cyberattacksand could include wrongful conduct by hostile foreign governments, industrial espionage, the deployment of harmful malware, ransomware, denial-of-service attacks, and other means to 22 | threaten data confidentiality, integrity and availability. In addition, despite our efforts to protect sensitive, confidential or personal data or information, we (or our third partythird-party partners) may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromise of sensitive, proprietary, confidential or personal data or information, improper use of our systems or networks, unauthorized access, theft, use, disclosure, modification or destruction of information (including confidential business information, proprietary information, trade secrets, intellectual property and corporate strategic plans), defective products, production downtimes and operational disruptions.

In support of our flexible work environment, many of our workforce work either part-time or full-time remotely, which could increase risks associated with cybersecurity, phishing attempts, information technology and systems which could have a material adverse effect on our business.

The security measures we implement may not always be effective, and our assessment of and response to security events may be inadequate. The costs imposed on us as a resultbecause of a cyberattackcyberattack, ransomware attacks, phishing attempts, social engineering schemes, and other technology enabled threats or network disruption could be significant. Among others, such costs could include increased expenditures on cybersecurity measures, insurance premiums, litigation, regulatory investigations, ransomware payments, penalties, fines, and sanctions, lost revenues from business interruption, damage to the public’s perception regarding our ability to keep our information secure and significant remediation costs. As a result, acyberattacks, cyberattackransomware attacks, phishing attempts, social engineering schemes, and other technology enabled threats, or network disruption could have a material adverse effect on our business, financial condition, and operating results.

In addition, we depend on third parties and applications on virtualized (cloud) infrastructure to operate and support our information systems.systems and are currently in the process of a multi-year implementation process to update our enterprise resource planning (ERP) system to a new fully cloud-based system. These third parties include large established vendors, as well as many small, privately owned companies. Failure by these providers to adequately support our operations or a change in control or insolvency of these providers could have an adverse effect on our business, which in turn may materially adversely affect our operating results and financial condition.

We conduct operations in many areas of the world, involving transactions denominated in a variety of currencies. In 2024,2025, we generated approximately 41%42% of our revenue in currencies other than the U.S. dollar, principally the euro, Brazilian real, Australian dollar, British pound, Canadian dollar and Chinese renminbi. We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenue. In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates, 23 | including changes in countries with highly inflationary economies, between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations. Although the Company employs a variety of techniques to mitigate the impact of exchange rate fluctuations, there cannot be a guarantee that such hedging and risk management strategies will be effective, and our results of operations could be adversely affected.

We are a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health. ForWith overa 70legacy of nearly 75 years, we havecontinue beento innovatingpioneer ways to predict, prevent, detect, and treat animal illness, and continue to stand bysupporting those raising and caring for animals worldwide - from veterinarians and pet owners to livestock producers.

We directly market our products to veterinarians and livestock producers located in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America, and are a market leader in nearly all of the major regions in which we operate. Through our efforts to establish an early and direct presence in many emerging markets, such as Brazil, Chile, China and Mexico, we believe we are one of the largest animal health medicines and vaccines businesses as measured by revenue across emerging markets as a whole. In markets where we do not have a direct commercial presence, we generally contract with distributors that provide logistics and sales and marketing support for our products.

The primary livestock species are cattle (both beef and dairy), swine, poultry, fish and sheep. Livestock health and production are essential to meeting the growing demand for animal protein of a global population. Factors influencing growth in demand for livestock medicines and vaccines 31 | include:

In addition, negative beliefs about animal health products generally could impact demand for our products. For example, the issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens, and the causality of that transfer, continue to be the subject of global scientific and regulatory discussion. In some countries, this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals, regardless of the route of administration (in feed or injectable). In addition, consumer preferences in some markets have impacted the use of antibacterials in food producing animals. Such restrictions and consumer preferences in some cases may negatively impact sales of our antibacterial products, but in other instances may increase sales of our products that can be used as antibacterial alternatives. Our total revenue attributable to antibacterials for livestock was approximately $950$713 million for the year ended December 31, 2024. As a result of the divestiture of our medicated feed additive product portfolio, certain water soluble products and related assets, we anticipate our total revenues attributable to antibacterials for livestock will decrease.2025.

Our revenue, costs and expenses are reported for the year ended December 31 for each year presented, except for operationssubsidiaries operating outside the U.S., for which the financial information is included in our consolidated financial statements for the fiscal year ended November 30 for each year presented.

Our impairment reviews of most of our long-lived assets depend on the determination of fair value, as defined by U.S. GAAP, and these judgments can materially impact our results of operations.GAAP. A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions.assumptions which can materially impact our results of operations. For information about the risks associated with estimates and assumptions, see Notes to Consolidated Financial Statements—Note 3. Significant Accounting Policies: Estimates and Assumptions.

We test indefinite-lived intangible assets for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of 35 | the indefinite-lived intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized. Impairments of identifiable intangible assets other than goodwill, are recorded in Restructuring charges and certain acquisition and divestiture-related costs and Other (income)/deductions—net, as applicable. We did not have any material intangible asset impairment charges for the years ended December 31, 2024,2025, 20232024 and 2022.2023.

We test goodwill for impairment on at least an annual basis, or more frequently if necessary, either by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount or by performing a periodic quantitative assessment. In 2024,2025, we performed a periodic qualitative impairment assessment as of September 30, 2025 and, in 2024, we performed a quantitative impairment assessment as of September 30, 2024, which did not result in the impairment of goodwill associated with any of our reporting units. In 2023, we performed a qualitative impairment assessment as of September 30, 2023, which did not resultunits in theeither impairment of goodwill associated with any of our reporting units.period.

We report information in accordance with U.S. generally accepted accounting principles (GAAP). Management also measures performance using non-GAAP financial measures that may exclude certain amounts from the most directly comparable GAAP measure. Despite the importance of these 38 | measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other companies. We present certain identified non-GAAP measures solely to provide investors with useful information to more fully understand how management assesses performance.

We believe that it is important to not only understand overall revenue and earnings growth, but also “operational growth.” Operational growth is a non-GAAP financial measure defined as revenue or earnings growth excluding the impact of foreign exchange. This measure provides information on the change in revenue and earnings as if foreign currency exchange rates had not changed between the current and prior periods to facilitate a 36 | period-to-period comparison. We believe this non-GAAP measure provides a useful comparison to previous periods for the company and investors, but should not be viewed as a substitute for U.S. GAAP reported growth.

•volume growth from newother in-line products of approximately 3%1%; and

•volume growth from key dermatology productsfranchises of approximately 2%.1%,

Foreign exchange decreased our reported revenue growth by approximately 3%.$36 million, or 1%.

•unfavorablefavorable foreign exchange.exchange; and

•an increase in certainsoftware compensation-related costsexpense;

•higher sellingcharitable and distribution costscontributions;

•higher travel and entertainment expenses, partially offset by:

•lower otherdepreciation general and administrative expenses.expense;

•higher depreciation expense.expense;

Amortization of intangible assets decreased by $13 million, or 9%, in 20242025 compared with 20232024 primarily due to asset impairments taken in 20242025 and 2023,2024, as well as assets that became fully amortized, partially offset by intangible assets placed in service in 20242025 and 2023.2024.

Restructuring charges and certain acquisition and divestiture-related costs were $51 million in 2025 and $53 million in 20242024. Restructuring charges and 2023.certain acquisition and divestiture-related costs in 2025 primarily consisted of charges related to a transition from internal to external innovation and manufacturing of certain products and the closure of a related site, as well as employee termination costs related to organizational structure refinements. Restructuring charges and certain acquisition and divestiture-related costs in 2024 primarily consisted of employee termination costs related to organizational structure refinements, as well as costs related to the sale of our medicated feed additive product portfolio, certain water soluble products and related assets, partially offset by a reversal of certain employee termination costs as a result of a change in strategy from our 2015 operational efficiency initiative. Restructuring charges and certain acquisition and divestiture-related costs in 2023 primarily consisted of employee termination and exit costs related to organizational structure refinements and other cost-reduction and productivity initiatives, as well as costs related to recent acquisitions.

Interest expense, net of capitalized interest, decreased by $14$3 million, or 6%,1%, in 20242025 compared with 2023,2024, primarily as a result of higher capitalized interest in the current period associated with capital projects to support our future growth and higher gains on foreign exchange derivative instruments, partially offset by a higher average debt balance during a portion of the priorcurrent year.

The change in Other (income)/deductions—net is primarily as a result of a gain on the sale of a majority interest in our pet insurance business in the prior period, royalty-related income in the prior period that was predominantly associated with a settlement received from a third-party for underpayment of royalties related to prior periods and anet loss on the sale of our medicated feed additive product portfolio, certain water soluble products and related assets in the2024, currentas period,well partially offset byas lower asset impairment charges in the current period, partially offset by lower interest income in the current period.

Our effective tax rate was 20.4% for 2025 and 20.3% for 2024 and 2023.2024. The higher effective tax rate for 2024,2025, as compared to 2023,2024, was primarily attributable to the favorable impact of a higherlower benefit in the U.S. related to foreign-derived intangible incomeincome, and lower net discrete tax expenses,partially offset by a lessmore favorable jurisdictional mix of earnings (which includes the impact of the location of pre-tax earnings, repatriation costs and the Organisation for Economic Co-operation and Development (OECD) global minimum tax provision (Pillar Two)). Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductiblepermanent itemsdifferences and non-taxablerepatriation items.activity) and higher net discrete tax benefits.

U.S. segment revenue increased by $519$23 million, or 11%,million in 20242025, which was relatively flat compared with 2023,2024, of which $525$166 million resulted from growth in companion animal productsproducts, andpartially $6offset by a $143 million decline in livestock products.

•Companion animal revenue growth was primarily due to growth inincreased sales of Simparica Trio, our mAb products for OA pain, Librela and Solensia, and key dermatology products,products and small animal diagnostics, partially offset by lower sales of our small animal vaccines.Librela.

U.S. segment earnings increased by $473$102 million, or 17%,3%, in 20242025 compared with 2023,2024, primarily due to higher revenue,revenue and lower cost of sales, partially offset by higher cost of sales and operating expenses.

•Companion animal operational revenue growth was driven primarily by the growth inincreased sales of our Simparica franchise products, key dermatology products,products and our mAb products for OA pain, Librela and Solensia, small animal parasiticides and vaccine products.Solensia.

•Livestock operational revenue growth was due to increased sales ofin cattle,our poultrycattle and fish products, partially offset by a decline inlower sales of sheeppoultry products. Excluding the impact of the MFA divestiture, livestock revenue increased across all species. Sales of cattle products grew due to price, partially offset by volume declines as compared to the prior year period due to prior year supply recoveries. Sales of products in our poultry portfolio grewlargely due to price and sales of poultry products grew due to higher demand generationfor effortsvaccines in key poultry markets.markets and price. Sales of our fish portfolioproducts grew due to increased vaccine sales in Norway,Norway partially offset by lower sales of parasiticides inand Chile. Sales of sheepswine products declined primarilyincreased due to supplyhigher constraintsdemand infor Australiavaccines compoundedand bygeographic poor market conditions.expansion.

A summary of our 2026 performance compared with the comparable 2025 periodperiods follows:

Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the threesix months ended MarchJune 31,30, 2026, approximately 47%46% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, euro and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the threesix months ended MarchJune 31,30, 2026, approximately 53%54% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was favorably impacted by approximately 4%2% from changes in foreign currency values relative to the U.S. dollar. For operations in highly inflationary economies, we translate monetary items at rates in effect at the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Historically our consolidated financial statements, which have a year-end of December 31, have reflected financial information of subsidiaries operating outside the U.S. (the “International Subsidiaries”) on a one-month financial reporting lag with a year-end of November 30. In 25 | connection with our multi-year process to transition our enterprise resource planning (ERP) system, effective January 1, 2026, we eliminated the one-month financial reporting lag by our International Subsidiaries and adjusted their year-end to December 31 (the “Fiscal Year Alignment”).

The elimination of this financial reporting lag represented a change in accounting principle which the Companycompany considers preferable because it provides investors more timely access to financial information about these subsidiaries. This change in accounting principle was applied retrospectively to all periods since January 1, 2024. The condensed consolidated financial statements as of and for the three and six months ended MarchJune 31,30, 2025, the Condensed Consolidated Balance Sheet as of December 31, 2025 and the related Notes to Condensed Consolidated Financial Statements have been recast to reflect this change in accounting principle. In addition, we plan to recast the condensed consolidated financial statements as of and for the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025 and the consolidated financial statements as of and for the twelve months ended December 31, 2025 and 2024 when they are presented as comparatives in future financial statements.

The operational changes in connection with the Fiscal Year Alignment to date also included a shift implemented in the first quarter of 2026 to the timing of annual price increases in certain International Subsidiaries so that the price increase and anticipated customer buying preceding the price increase would occur in the same calendar year. In addition, processing of certain customer orders from December 2025 was delayed to the first quarter of 2026.

Total revenue increaseddecreased by $64$6 million, orwhich 3%,was inrelatively flat, for the three months ended MarchJune 31,30, 2026, compared with the three months ended MarchJune 31,30, 2025, a decrease of $12$41 million, or 1%,2%, on an operational basis. The decrease in operational revenue was primarily due to the following:

•volume decrease related to the impact of the divestiture of our medicated feed additive portfolio, certain water soluble products and related assets (MFA divestiture) of approximately 1%, partially offset by:

•pricevolume growth from other in-line products of approximately 2%; and2%.

Foreign exchange increasedfavorably reportedimpacted total revenue growth by approximately $76$111 million, or 4%.2%.

Cost of sales as a percentage of revenue was 28.3%27.3% in the three months ended MarchJune 31,30, 2026, compared with 28.1%26.8% in the three months ended MarchJune 31,30, 2025. The increase was primarily a result of:

•unfavorablefavorable manufacturing and other costs, partially offset by:costs.

SG&A expenses increaseddecreased by $14$22 million, or 2%,4%, in the three months ended MarchJune 31,30, 2026, compared with the three months ended MarchJune 31,30, 2025, primarily as a result of:

•lowerhigher advertisingprofessional and promotionconsulting expense.

RSG&DA expenses increaseddecreased by $18$8 million, or 11%,1%, in the threesix months ended MarchJune 31,30, 2026, compared with the threesix months ended MarchJune 31,30, 2025, primarily as a result of:

•an increase in certain compensation-related costs to support innovation and portfolio progression; and

Amortization of intangible assets decreased in the three and six months ended MarchJune 31,30, 2026 versus the comparable prior year period.period primarily due to assets that became fully amortized in the prior year.

Restructuring charges and certain acquisition and divestiture-related costs in the three and six months ended MarchJune 31,30, 2026 were primarily relateddriven toby employee termination costs dueunder toa comprehensive cost and productivity program, with the six-month period also reflecting employee termination costs from additional organizational structure refinements.

Interest expense, net of capitalized interest, increased in the three and six months ended MarchJune 31,30, 2026 versus the comparable prior year periodperiods primarily as a result of a higher average debt balance in the current period.periods.