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Well, shares of veterinary drug makers Zoet is are, um, on the move today, higher by 6%. The animal health company raising its full-year guidance after beating across the top and bottom lines in a strong second quarter. And Zoetus CFO, Whitney Joseph, is joining us now to discuss the latest earnings print. Whitney, it's great to see you again. Thanks for being here.

Julie, it's awesome to be with you again. Thank you for having me.

So, I was looking across where you guys were seeing increases. You saw increases in revenue in the US, internationally, among pets, for livestock as well. So, talk to me about what was really driving demand. It seems like it was pretty diversified.

Yeah, the demand is broad-based and diversified, as you said. We're seeing it across the board really. The US grew 12% on the quarter and international grew 10%. Our companion animal business, uh, which is about two-thirds of the company, uh, grew 12% as well, operationally. And not only at the top, we saw really strong growth at the bottom, uh, with adjusted net income growth of 18% operationally. So, this is an outstanding quarter and, quite frankly, a terrific first half, uh, for the company. And the momentum continues, uh, which is why we were able to raise guidance for the second time, uh, in terms of what we're expecting for 2024. So, so we're very excited and our colleagues across the world are hard at work, uh, innovating and delivering for our customers and I couldn't be more pleased.

When are you I want to get your take on the consumer as well because you have some unique insight there. How does the consumer, uh, look to you, Whitney? How healthy, how strong?

Look, the consumer is very healthy, uh, in animal health. The industry at large is very resilient. And what we're seeing is that the consumer, particular pet owners, see pet health as very essential. If you go back across, you know, different economic times, you go back to 2008-2009, the industry still grew about 3%. And what's happened since then is the human animal bond has gotten so much stronger and it's propelling the entire industry, and they see pet health spend as essential. We've done market studies and we asked consumer, "If you had a 20% decrease in your budget, what would what would that do to your spend on your pet health?" And the answer is nothing. They will continue to spend because they see that. And I think our innovation when we're addressing such chronic conditions and osteoarthritis pain, or dermatology, and so on, uh, is really a strong reason why the consumer, the pet owner, because they see the pet as a member of their family, they don't want to see them suffering from these things. And so that tends to be very sticky and they see that as an essential part of it. They'll cut back on other things. They may cut back on some of the toys and some of the other areas, but they see the pet health as being very essential.

Well, and so it sounds like Whitney, even as, you know, as you're aware, we are seeing this turmoil on the market right now. There is new debate about whether we are entering recession. Are you seeing any signs in your business, any places where folks are opting for a cheaper medicine, for example, any kinds of those choices?

No, look, if you look across the board, Julie, our dermatology franchise posted 18% operational growth on the quarter. Our Simparica franchise, 22%. This is parasitic protection, uh, which is a complete solution that we have, triple combination product. Osteoarthritis pain products, which is the latest innovation from us, potentially the next billion dollar franchise for us, and that grew 142% on the quarter. So, everywhere we look, we see the strength. And I think if you look at the pet owner, it's younger. You have millennials and Gen Z, as well as more affluent pet owners that make up the majority of pet ownership in the US. And you see that follow in terms of how essential they see their pet spend and what they're spending on them. So, so we continue to see strength across the board, across different markets and geographies as well. So,

Uh, speaking of the geographies, Whitney, I know China, you know, represents a relatively small part of the business, but I'm just curious, what are the trends you're seeing there with the Chinese consumer?

Look, we've seen coming into this year, we expected China to be soft on the back of consumer backdrop there, and that remains the same as we as we saw it coming in. That hasn't stopped us from delivering 12% operational growth so far on a year-to-date. We think, as we exit the year, particularly, some of the comps will get a little bit easier for us. And so we expect that to normalize in terms of the negative impact that it has. We factored that into the guidance raise that we gave today. So no different than what we expected in China. I would say, though, speaking of innovation, if you look at our dermatology franchise, we've seen really nice strength there. So, there are some green shoots, I would say, in some areas, particularly given, again, innovation in an area of unmet need in that market where, again, we're delivering for pet owner who sees, again, pet health as essential. So it's been a drag for us, not enough to deter, uh, from the outstanding start on the year. Uh, and and we'll see how that looks as we get into next year and beyond.

One more question I wanted to ask you is about pet insurance, which has been a growing trend here. I'm just looking at some figures from the North American Pet Health Insurance Association, which says, uh, that we've been seeing this big increase, um, and average what of 17%, uh, this year over 2023, or that's been the average growth over time. So I imagine, is that a tailwind for you too? And do you think that there's a lot more, um, sort of growth opportunity because more people are insuring their pets?

Well, pet insurance has been growing rapidly. It's still relatively small, Julie. If you look across the US, it's around 3% of pets that are under pet insurance. So the pet owner is definitely looking at optimizing their spend in terms of across different channels. They're using their vet clinic, they're using online, they're using different areas that we see strength for us across those areas. And as I mentioned earlier, very resilient spend in terms of animal health because they see it as very essential. And so pet insurance is a small part of the picture. If you look at the US, they're part their markets outside the US that might get up to as much as 20%, but overall, it really hasn't been a needle mover for us across the board. There are some wellness plans that they're getting to that can help manage some of those. But again, our innovative solutions tend to grow regardless of that area because of the essential nature of pet ownership and seeing them as a member of their family.

Whitney, thanks so much as always for joining the show. Appreciate your time.

Thanks, Josh and Julie.