Zoetis Inc.

“Zoetis is a wide-moat, high-ROIC animal health compounder trading at 10.5x forward earnings — a 50%+ discount to 2021 highs — driven by an overstated market fear around LIBRELA adverse events. The biologics franchise (LIBRELA, Cytopoint, Simparica Trio) is early in global penetration, the moat is widening, gross margins are pharma-grade at 71.8%, and FCF yield sits near 7%. Leverage has increased (net debt $6.73B, D/E 286%) but remains serviceable given $2.9B operating cash flow. The primary risk of permanent impairment is a regulatory withdrawal of LIBRELA — assessed as low probability but non-trivial. At current prices the risk/reward strongly favors a long-term owner; the appropriate entry is 2-3 tranches as the LIBRELA situation clarifies.”