Zoetis (ZTS) 10-K risk factor changes: FY2020 vs FY2019

*In addition to the other information set forth in [removed: this* *2019* *Annual] [added: this 2020 Annual] Report, any of the factors described below could materially adversely affect our operating results, financial condition and liquidity, which could cause the trading price of our securities to decline.*

*In particular, forward-looking statements include statements relating to [removed: our* *2020* *financial] [added: the impact of the coronavirus (COVID-19) pandemic and any recovery therefrom on our business, our 2021 financial] guidance, future actions, business plans or prospects, prospective products, product approvals or products under development, product supply 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, interest rates, tax [removed: rates, changes in] [added: rates and] tax regimes and [removed: laws,] [added: any changes thereto,] foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends,* *government regulation and financial results.

Our top five products, Apoquel, [removed: Draxxin,] the [removed: ceftiofur] [added: Simparica] product line, the [removed: Revolution/Stronghold] [added: Revolution/Revolution Plus/Stronghold product] line, [added: Draxxin,] and [removed: Simparica] [added: the ceftiofur product line,] contributed approximately [removed: 29%] [added: 31%] of our revenue in [removed: 2019.][added: 2020.]

As a result of generic and other competition, sales of our Rimadyl chewable product in the U.S. [removed: have declined by approximately 24% in the years since their introduction.]

[removed: Over] [added: Some of our products' patents have expired, and over] the next few years, [removed: several of our] [added: additional] products' patents will [removed: expire.][added: expire as described below.]

[removed: Draxxin, containing the active ingredient tulathromycin, is covered by] [added: Corresponding] formulation patents in [removed: the U.S.,] Europe, Canada, Australia and other key [removed: markets,] [added: markets expired in late 2020,] with [removed: terms] [added: the exception of the formulation patents in Brazil and Japan] that [added: both] expire [removed: between November 2020 and February 2021] in [removed: the U.S., Europe, Canada and Australia.][added: 2025.]

The active ingredient tulathromycin is protected in [added: Brazil until 2022 and in] Japan until 2023.

[removed: There are pending] [added: Additional] marketing authorizations for generic tulathromycin products [removed: in Australia and additional authorizations] may be granted in various markets in the future.

[removed: At this time, market] [added: Market] entry [removed: by] [added: of] generic tulathromycin products in the U.S. is [removed: not anticipated before February] [added: expected in] 2021.

[added: -] Several patents covering [added: Excede/Naxcel, part of] the ceftiofur antibiotic product [removed: line (Excede)] [added: line,] began expiring in the U.S. in 2015.

[added: -] The compound patent for selamectin, the active ingredient in our parasiticides [added: Revolution,] Revolution [added: Plus] and Stronghold, expired in 2014.

Generic versions of selamectin are now [removed: marketed] [added: sold] in markets including [added: the U.S.,] Europe, Australia and Canada.

Draxxin, [removed: Revolution/Stronghold,] [added: Revolution/Revolution Plus/Stronghold,] and the ceftiofur product line contributed approximately [removed: 16%] [added: 15%] of our revenue in [removed: 2019.][added: 2020.]

[added: -] In addition, the patent for the active ingredient of Convenia® has [removed: expired,] [added: expired;] however, there are formulation patents relevant to the product line which expire between November 2022 and October 2023.

[added: -] The patent for the active ingredient of Cerenia has expired; however, there are formulation patents relevant to the [added: injectable] product line which expire between [removed: May 2020] [added: 2025] and [removed: January 2027.][added: 2028.]

At this time, there is no indication of [added: an impending] market entry of a generic version of Cerenia in the U.S. [removed: There are pending registrations for generic versions of ProHeart 12 in Australia.]

[added: -] The formulation patent covering ProHeart 12 expired in the U.S. in 2019, but expires in Australia, Canada and Japan in October 2021.

There are also several [removed: new] start-up companies working in the animal health area.

[removed: In certain markets, we] [added: We] also compete with companies that produce generic products, but the level of competition from generic products varies from market to market.

[removed: Further,] [added: In recent years, there has been an increase in] consolidation in the animal health [removed: industry] [added: 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 a decrease in our revenue and profitability and an increase in competition.

In addition to competition from established market participants, new entrants to the animal health [removed: medicines and] [added: medicines,] vaccines [added: and diagnostics] industry could substantially reduce our market share or render our products obsolete.

In addition, livestock producers, particularly swine and poultry producers, and our distributors, have [removed: seen consolidation in their industries.]

This trend has been demonstrated by the significant shift away from the veterinarian distribution channel in the sale of flea and tick products in recent [removed: years.][added: years and has been accelerated by the increase in e-commerce during the COVID-19 pandemic.]

For example, in [removed: February] [added: December] 2020, we submitted [removed: an initial] [added: a final] voluntary disclosure to [added: OFAC and] the U.S. Department of [removed: Treasury’s Office of Foreign Assets Control (OFAC)] [added: Justice] regarding certain transactions [removed: that could potentially have involved] [added: involving] sales of food, medicine or devices to individuals or entities who may have been resident in or had ties to [removed: Iran.][added: Iran potentially in violation of the Iranian Transactions and Sanctions Regulations (ITSR) administered by OFAC.]

[added: Other risks include: (i) potential diversion of management’s attention, available cash, and other resources] from our existing businesses; (ii) unanticipated liabilities or contingencies; (iii) the need for additional capital and other resources to expand into or acquire the new line of business; (iv) potential damage to existing customer relationships, lack of customer acceptance or inability to attract new customers; and (v) the inability to compete effectively.

Our total revenue attributable to antibacterials for livestock was approximately [removed: $1.2] [added: $1.1] billion for the year ended December 31, [removed: 2019.][added: 2020.]

In addition, [added: the]

[added: 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.

Our business may be negatively affected by weather conditions, natural [removed: disasters, climate change] [added: disasters] and the availability of natural resources.

[removed: In addition, the impact of climate change, including increased] [added: Increased] temperatures and rising water [removed: levels,] [added: levels] may negatively [removed: affect] [added: impact] our livestock [removed: customers, including] [added: customers] by increasing the prevalence of parasites and diseases that affect food animals.

Adverse weather [removed: conditions,] [added: conditions and] natural disasters [removed: and climate change] may also have a material impact on the aquaculture business.

[removed: Changes] [added: In addition, changes] in water temperatures could affect the timing of reproduction and growth of various fish species, [removed: as well as] [added: and] trigger the outbreak of certain water borne diseases.

Their animals' health and their ability to operate could be adversely affected if they experience a shortage of fresh water due to human population growth, [removed: climate change] or floods, droughts or other weather conditions.

In the event of a natural disaster, adverse weather conditions, [removed: climate change-related impacts] or a shortage of fresh water, veterinarians or livestock producers may purchase less of our products and our operating results and financial condition could be materially adversely affected.

The U.S., Canada and Mexico reached an agreement to replace [removed: NAFTA] [added: the North American Free Trade Agreement (NAFTA)] with the United States-Mexico-Canada Agreement [removed: (USMCA).][added: (USMCA), which became effective on July 1, 2020, but it remains to be seen what the ultimate impact of the new USMCA will be on our customers.]

[removed: These] [added: The] new [removed: provisions,] [added: provisions of the USMCA,] as well as any other changes to international trade agreements or [removed: policies] [added: policies,] could harm our customers, and as a result, negatively impact our financial condition and results of operations.

As of December 31, [removed: 2019,] [added: 2020,] we had goodwill of [removed: $2.6] [added: $2.7] billion and identifiable intangible assets, less accumulated amortization, of [removed: $1.9] [added: $1.7] billion.

For example, changes in regulations applicable to our industry may make it more time-consuming and/or costly to [removed: research, develop and register products.]

Developing and commercializing new products subjects us to inherent risks and uncertainties, including (i) delayed or denied regulatory approvals, (ii) delays or challenges with producing products in [added: 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 and safety concerns.]

On December 31, [removed: 2019,] [added: 2020,] we had a global manufacturing network consisting of [removed: 27] [added: 29] manufacturing sites located in 13 countries.

Summary of Risk Factors

Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock.

These risks are more fully described in this “Risk Factors” section, including the following:

- The COVID-19 pandemic has negatively affected the global economy; has disrupted our and our customers', suppliers', and vendors' operations; has significantly affected our business and operations; and may materially adversely affect our business, financial condition, results of operations and/or cash flows.

- Our products are subject to unanticipated safety, quality or efficacy concerns.

- Our results of operations are dependent on the success of our top products.

- Generic and other products may be viewed as more cost-effective than our products.

- The animal health industry is highly competitive.

- Disruptive innovations and advances in medical practices and technologies could negatively affect the market for our products.

- Consolidation of our customers and distributors could negatively affect the pricing of our products.

- Changes in distribution channels for companion animal products could negatively impact our market share, margins and distribution of our products.

- Restrictions and bans on the use of and consumer preferences regarding antibacterials in food-producing animals may become more prevalent.

- Perceived adverse effects linked to the consumption of food derived from animals that utilize our products or animals generally could cause a decline in the sales of such products.

- Increased regulation or decreased governmental financial support relating to the raising, processing or consumption of food-producing animals could reduce demand for our livestock products.

- An outbreak of infectious disease carried by animals could negatively affect the sale and production of our products.

- Our R&D, acquisition and licensing efforts may fail to generate new products and product lifecycle innovations.

- We may experience difficulties or delays in the development, manufacturing and commercialization of new products.

- Our R&D relies on evaluations in animals, which may become subject to bans or additional restrictive regulations.

- Manufacturing problems and capacity imbalances may cause product launch delays, inventory shortages, recalls or unanticipated costs.

- We rely on third parties to provide us with materials and services, and are subject to increased labor and material costs and potential disruptions in supply.

- There may be delays and additional costs due to changes to our existing manufacturing facilities and the construction of new manufacturing plants.

- Our business is subject to substantial regulation.

- The misuse or off-label use of our products may harm our reputation or result in financial or other damages.

- Laws and regulations governing global trade compliance could adversely impact our business.

- We may be unable to adequately protect our stakeholders' privacy or we may fail to comply with privacy laws.

- A significant portion of our operations are conducted in foreign jurisdictions, including jurisdictions presenting a high risk of bribery and corruption, and are subject to the economic, political, legal and business environments of the countries in which we do business.

- We may not be able to realize the expected benefits of our investments in emerging markets and are subject to certain risks due to our presence in emerging markets, including political or economic instability and failure to adequately comply with legal and regulatory requirements.

- The alleged intellectual property rights of third parties may negatively affect our business.

- If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage of our research and development efforts.

- We may be unable to adequately protect our information technology systems from cyber-attacks, breaches of security or misappropriation of data, which could result in the disclosure of confidential information, damage our reputation, and subject us to significant financial and legal exposure.

- Certain of our directors may have actual or potential conflicts of interest because of their positions with Pfizer.

- Pfizer's rights as licensor under the patent and know-how license could limit our ability to develop and commercialize certain products.

- We are dependent on Pfizer to prosecute, maintain and enforce certain intellectual property.

- If there is a later determination that the Exchange Offer or certain related transactions are taxable for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the IRS private letter ruling and/or any tax opinion are incorrect or for any other reason, we could incur significant liabilities.

Risks related to our business and industry

The COVID-19 pandemic has negatively affected the global economy; has disrupted our and our customers', suppliers', and vendors' operations; has significantly affected our business and operations; and may materially adversely affect our business, financial condition, results of operations and/or cash flows.

The spread of the novel coronavirus (COVID-19) has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns of non-essential businesses.

While some of these restrictions have been lifted or eased in certain jurisdictions, other jurisdictions have seen increases in new COVID-19 cases, resulting in restrictions being reinstated or new restrictions being imposed.

Even though we are currently designated as an essential business and have continued physical operations with respect to manufacturing and supply chain globally, these measures have impacted and may further impact all or portions of our workforce and operations, the operations and workforce of our customers, and those of our respective vendors and suppliers.

There is no certainty that measures taken by governmental authorities will be sufficient to mitigate the risks posed by the virus, and our ability to continue to perform critical functions could be harmed.

15 |

Generic tulathromycin products are marketed in certain countries including Colombia, Vietnam, Belarus, Russia, Poland and Croatia.

Marketing authorizations for generic tulathromycin products have been granted in Europe and Australia.

However, various formulation and use patents relevant to the product line extend through to 2024.

A generic version of Excede has entered the market in Mexico.

A generic version of selamectin received marketing approval in the U.S. in November 2019.

A generic version of Cerenia has been registered in Europe and is marketed in the European Union, and there is a pending registration in Canada.

While it is unknown at this time, whether violation of U.S. sanctions laws occurred, our internal investigation is continuing, and we have committed to providing a full report of our findings and any additional transactions with any sanctioned or prohibited persons

to OFAC when completed.

For example, with our July 2018 acquisition of Abaxis, we added new products and services to our existing point-of-care veterinary diagnostics business, and with our recent acquisitions of Phoenix Lab and ZNLabs we entered into the reference lab market.

Other risks include: (i) potential diversion of management’s attention, available cash, and other resources

A number of our customers, particularly U.S.-based livestock producers, benefit from free trade agreements such as the North American Free Trade Agreement (NAFTA).

Most provisions of the USMCA will not begin until all governments ratify the USMCA.

Following our recent CEO transition, we have made a number of changes to our senior management team.

Such leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees.

It may also make it more difficult for us to hire and retain key employees.

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 and safety concerns.

| | |

| --- | --- |

| • | labor problems; |

In addition, labor costs may be subject to

In June 2016, voters in the United Kingdom (U.K.) approved an advisory referendum to withdraw from the European Union, commonly referred to as "Brexit." This referendum has created political and economic uncertainty, over the past few years, particularly in the U.K. and the European Union, and this uncertainty may persist for several years.

On March 29, 2017, the U.K. formally notified the European Council of the U.K.’s intention to withdraw from the European Union under Article 50 of the Treaty of Lisbon.

On January 23, 2020, the U.K. government approved the Withdrawal Agreement Bill pursuant to which the U.K. exited the EU on January 31, 2020, subject to a transition period of 11 months that commenced on January 31, 2020 for trade and relationship negotiations between the U.K. and the EU.

During this transition period, the U.K. is to remain part of the single EU market and its customs union, and the free movement of people between the U.K. and the EU will continue.

A withdrawal of the U.K. without a trade agreement in place at the end of such transition period could significantly disrupt

the free movement of goods, services, and people between the U.K. and the EU, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe.

The uncertainty surrounding the terms of the U.K.'s withdrawal and its consequences could adversely impact consumer and investor confidence, and could affect sales or regulation of our products.

For example, in 2015, we recorded a net remeasurement loss of $89 million on bolivar-denominated net monetary assets, primarily related to cash deposits in Venezuela, as a result of our evaluation of evolving economic conditions in Venezuela, including the devaluation of the Venezuelan bolivar in 2013.

For example, on October 9, 2019, the Organisation for Economic Co-operation and Development (OECD) published the Secretariat Proposal for a “Unified Approach” under Pillar One (Pillar One Unified Approach).

The Pillar One Unified Approach represents an effort by the OECD to address the tax challenges of the digital economy.

The proposal does not ringfence the so-called “digital economy” and instead it seeks to allocate a greater share of taxing rights to the countries where consumers are located regardless of the physical presence of the business.

In addition, on November 8, 2019 the OECD published a public consultation document for the Global Anti-Base Erosion Proposal (Pillar Two).

jurisdictions.

These high-level proposals, which require unanimous consent, in its early stages and specific details have yet not been developed.

The potential impact to our effective tax rate is unknown at this time.

On March 29, 2017, the U.K. formally notified the European Council of the U.K.’s intention to withdraw from the European Union, commonly referred to as “Brexit”, under Article 50 of the Treaty of Lisbon.

At this time, the impact of Brexit to our effective tax rate remains uncertain.

A similar court decision was issued in Australia with regard to the patentability of nucleic acids.

In addition, if interest rates in general continue to rise, our interest expense related to the 2021 floating rate notes will increase.

A discussion regarding our financial condition and results of operations for fiscal [removed: 2019] [added: 2020] compared to fiscal [removed: 2018] [added: 2019] is presented below.

A discussion regarding our financial condition and results of operations for fiscal [removed: 2018] [added: 2019] compared to fiscal [removed: 2017] [added: 2018] can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2018,] [added: 2019,] filed with the SEC on February [removed: 12, 2019] [added: 13, 2020] (our [removed: “2018] [added: “2019] Annual Report”), which is available free of charge on the SEC’s website at www.sec.gov.

We are a global leader in the [added: animal health industry, focused on the] discovery, development, manufacture and commercialization of [removed: animal health] medicines, vaccines, [removed: and] diagnostic [removed: products with a focus on both livestock] [added: products, biodevices, genetic tests] and [removed: companion animals.][added: precision livestock farming technology.]

Within each of these operating segments, we offer a diversified product portfolio for both [removed: livestock and] companion [removed: animal] [added: animals and livestock] customers in order to capitalize on local and regional trends and customer needs.

Through our efforts to establish an early and direct presence in many emerging markets, such as Brazil, [added: Chile,] China and Mexico, we believe we are one of the largest animal health medicines and vaccines [removed: business] [added: businesses] as measured by revenue across emerging markets as a whole.

Our products include over 300 products and product lines that we sell in over 100 countries for the prediction, prevention, detection and treatment of diseases and conditions that affect various [removed: livestock and] companion animal [added: and livestock] species.

A summary of our [removed: 2019] [added: 2020] performance compared with the comparable [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] periods follows:

| | | [added: | | | |] Years Ended December 31, | | | | | | | | | | | | [added: | | | | | |] % Change | | | | [added: | | | | |]

| (MILLIONS OF DOLLARS) | | [removed: 2019] | | | | [added: 2020 | | | | | | 2019 | | | | | |] 2018 | | | | [removed: 2017] | | [added: 20/19] | | [removed: 19/18] | | | [removed: 18/17] | [added: 19/18 | | |]

| Revenue | | [added: | | | |] $ | [removed: 6,260] [added: 6,675] | | | [added: | |] $ | [removed: 5,825] [added: 6,260] | | | [added: | |] $ | [removed: 5,307] [added: 5,825] | | | [added: | |] 7 | | | [removed: 10] | [added: | | 7 | | |]

| Net income attributable to Zoetis | | [removed: 1,500] | | | | [added: 1,638 | | | | | | 1,500 | | | | | |] 1,428 | | | | [removed: 864] | | [added: 9] | | [removed: 5] | | | [removed: 65] | [added: 5 | | |]

| Adjusted net income(a) | | [removed: 1,755] | | | | [added: 1,844 | | | | | | 1,755 | | | | | |] 1,525 | | | | [removed: 1,185] | | [added: 5] | | [removed: 15] | | | [removed: 29] | [added: 15 | | |]

[removed: | (a) | Adjusted net income is a non-GAAP financial measure.] See the *Non-GAAP financial measures* and *Adjusted net income* sections of this MD&A for more information. [removed: |]

The animal health industry, which focuses on both [removed: livestock and] companion [removed: animals,] [added: animals and livestock,] is a growing industry that impacts billions of people worldwide.

[removed: | • |] [added: -] human population growth and increasing standards of living, particularly in many emerging markets; [removed: |]

[removed: | • |] [added: -] increasing demand for improved nutrition, particularly animal protein; [removed: |]

[removed: | • |] [added: -] natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, resulting in fewer resources that will be available to meet an increasing demand for animal protein; [removed: |]

[removed: | • |] [added: -] increasing urbanization; and [removed: |]

[removed: | • |] [added: -] increased focus on food safety and food security. [removed: |]

[removed: | • |] [added: -] economic development and related increases in disposable income, particularly in many emerging markets; [removed: |]

[removed: | • |] [added: -] increasing pet ownership; [removed: |]

[removed: | • |] [added: -] companion animals living longer; [removed: |]

[removed: | • |] [added: -] increasing medical treatment of companion animals; and [removed: |]

[removed: | • |] [added: -] advances in companion animal medicines, vaccines and diagnostics. [removed: |]

In addition to traditional medicines and vaccines, we develop products across additional categories to address the needs of veterinarians and producers to predict, prevent, detect and treat conditions in both [removed: livestock and] companion [removed: animals,] [added: animals and livestock,] including products in [removed: genetics and] [added: diagnostics, genetics,] precision livestock [removed: farming, diagnostics] [added: farming] and digital and data analytics.

Our total revenue attributable to antibacterials for livestock was approximately [removed: $1.2] [added: $1.1] billion for the year ended December 31, [removed: 2019.][added: 2020.]

This trend has been demonstrated by the shift away from the veterinarian distribution channel in the sale of flea and tick products in recent [removed: years.][added: years and has been accelerated by the increase in e-commerce during the COVID-19 pandemic.]

While these factors have mitigated the impact of prior downturns in the global economy, future economic challenges could increase cost sensitivity among our [removed: customers, which may result in reduced demand for our products, which could have a material adverse effect on our operating results and financial condition.]

The animal health industry is [added: highly] competitive.

[removed: Weather] [added: - adverse weather] conditions and the availability of natural [removed: resources][added: resources;]

[removed: Furthermore,] [added: For example,] livestock producers depend on the availability of natural resources, including large supplies of fresh water.

Their animals’ health and their ability to operate could be adversely affected if they experience a shortage of fresh water due to human population [removed: growth] [added: growth, climate change] or floods, droughts or other weather conditions.

In the event of adverse weather [removed: conditions] [added: conditions, climate-change related impacts] or a shortage of fresh water, veterinarians and livestock producers may purchase less of our products.

Adverse weather [removed: conditions] [added: conditions, natural disasters and climate change] may also impact the aquaculture business.

For the year ended December 31, [removed: 2019,] [added: 2020,] approximately [removed: 44%] [added: 42%] of our revenue was denominated in foreign currencies.

For the year ended December 31, [removed: 2019,] [added: 2020,] approximately [removed: 56%] [added: 58%] of our total revenue was in U.S. dollars.

Our year-over-year total revenue growth was unfavorably impacted by [removed: 3%] [added: 2%] from changes in foreign currency values relative to the U.S. dollar.

[removed: | • | drive] [added: - drive] innovative growth - We seek to deliver new products and solutions as well as lifecycle innovations across the continuum of care that spans from disease prediction and prevention to detection and treatment. [removed: We are focused on innovating across vaccines, pharmaceuticals, diagnostics, genetics, biodevices, and other product segments, and across all major species. Where appropriate, we complement internal R&D programs with external innovations; |]

[removed: | • | enhance] [added: - enhance] customer experience - We believe that delighting our customers with compelling and personalized experiences that enable them to provide the best care for animals is critical for our success. [removed: We are focused on providing greater value to our customers through the integration and connectedness of our portfolio and by reducing frictions in the way they engage with us and our products and solutions; |]

[removed: | • | lead] [added: - lead] in digital and data analytics - We believe that healthcare insights enabled by data and digital technology and complemented with our comprehensive portfolio of products and solutions will be critical in enhancing care for animals and improving livestock productivity; [removed: |]

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(a) Adjusted net income is a non-GAAP financial measure.

customers, which may result in reduced demand for our products, which could have a material adverse effect on our operating results and financial condition.

We also compete with companies that produce generic products, following our products’ loss of exclusivity in a given market.

For example, Draxxin currently competes with generic products in key markets including Europe, Canada, Mexico and Australia and we expect generic competition in the U.S. in 2021.

For more information regarding the generic competition we currently have and expect to encounter as patents on certain of our key products expire, see *Item 1.

Business – Intellectual Property*.

Furthermore, weather conditions, including excessive cold or heat, natural disasters and other events, could negatively impact our livestock customers by impairing the health or growth of their animals or the production or availability of feed, as well as disrupting their normal operations.

Uncertainty Relating to COVID-19

We continue to closely monitor the impact of the coronavirus (COVID-19) pandemic and the resulting global recession on all aspects of our business across geographies, including how it has and may continue to impact our customers, workforce, suppliers and vendors.

We are currently designated an essential business globally and have continued physical operations with respect to research and development, manufacturing and our supply chain.

As the pandemic continues to progress, the severity of the impact across markets remains uncertain as the number of cases rises and falls in various jurisdictions leading to changes in the imposition of restrictive measures intended to contain the virus.

Due to numerous uncertainties regarding the continuing COVID-19 pandemic, we are unable to fully predict the impact that it will ultimately have on our future financial position and operating results.

These uncertainties include the severity of the virus, the duration of the outbreak and number of recurrences, the effectiveness of measures to contain and treat the virus, including the timing of widespread vaccinations, governmental, business or other actions in response to the pandemic (which could include actions that result in limitations on, or disruptions to, our manufacturing, transportation and other operations, or mandates to provide products or services), impacts on our supply chain, the effect on customer demand, or changes to our operations.

We cannot predict the impact that the COVID-19 pandemic will have on our customers, vendors and suppliers; however, any material effect on these parties could adversely impact us.

In particular, our livestock customers have been, and may continue to be, negatively impacted by facility closures, reduced packing plant capacity, quarantines, travel bans and labor shortages, and the shift in protein production from foodservice to grocery, among other impacts.

In addition, our companion animal customers have been, and may in the future be, negatively impacted by lack of demand for veterinary services in areas where lockdown and stay-at-home orders are in place.

The impact of COVID-19 on our customers has reduced and could continue to reduce the demand for our products, which could continue to adversely impact our revenue.

The health of our workforce, and our ability to meet staffing needs in our manufacturing operations and other critical functions also cannot be predicted and is vital to our operations.

Further, the impacts of a prolonged global recession and the continued disruptions to, and volatility in, the credit and financial markets, as well as other unanticipated consequences, remain unknown.

In addition, in order to preserve liquidity, we issued debt securities in May 2020 and we may in the future incur additional indebtedness, whether through the issuance of debt securities, drawdowns under our credit facility or otherwise.

An increase in our outstanding indebtedness will result in additional interest expense.

The situation surrounding COVID-19 remains fluid, and we will continue to actively monitor the situation and may take actions that alter our business operations that we determine are in the best interests of our workforce, customers, vendors, suppliers, and other stakeholders, or as required by federal, state, or local authorities.

It is not clear what the potential effects any such alterations or modifications may ultimately have on our business, including the effects on our customers, workforce, and prospects, or on our financial results in fiscal 2021.

We are focused on innovating across vaccines, pharmaceuticals, diagnostics, genetics, biodevices, and other product segments, and across all major species.

Where appropriate, we complement internal R&D programs with external innovations;

We are focused on providing greater value to our customers through the integration and connectedness of our portfolio and by reducing frictions in the way they engage with us and our products and solutions;

We are committed to continuing to be a company our colleagues can be proud of and to attracting, retaining and developing the best, most diverse talent in the industry.

We are further committed to sustaining a diverse, equitable and inclusive work environment for our colleagues;

- champion a healthier, more sustainable future - As the world’s leading animal health company, our business purpose is well aligned with our social purpose.

We strive to make a meaningful difference in society through the three pillars of our sustainability approach: (1) by caring and collaborating with our customers, colleagues, and communities, and the animals that depend on them by improving access to care for animals, by creating a diverse, equitable, and inclusive work environment, and by supporting the veterinary profession; (2) by leveraging our innovation capabilities to develop solutions that improve productivity, keep animals healthy, and fight emerging infectious diseases; and (3) by taking actions to protect our planet that reduce our footprint on the environment.

In

- a significant adverse change in the extent or manner in which an asset is used.

- a projection or forecast that demonstrates losses or reduced profits associated with an asset.

forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the effective tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets*.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in *Cost of sales*, *Selling, general and administrative expenses* or *Research and development expenses*, as appropriate.

| | | | | | | | | | | | | | | | | | |

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36 |

37 |

In certain markets, we also compete with companies that produce generic products, but the level of competition from generic products varies from market to market.

For example, the level of generic competition is higher in Europe and certain emerging markets than in the U.S.

Factors influencing the magnitude and timing of effects of a drought on our performance include, but may not be limited to, weather patterns and herd management decisions.

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.

38 |

| • | champion a healthier, more sustainable future - As the world’s leading animal health company, we strive to make a meaningful difference in society by keeping animals healthy, fighting emerging infectious diseases that threaten our food supply, and supporting livestock producers and the veterinary profession. We believe that we have an important role to play in promoting a safe and sustainable global food supply, taking actions to protect the environment, and in increasing access to animal care around the world. |

| | | | | | | | | | | | | | | | | | | |

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* Calculation not meaningful.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| • | the acquisition of Abaxis in July 2018 which contributed approximately 2%; |

| • | cost improvements and efficiencies in our manufacturing network, |

partially offset by:

| • | the inclusion of Abaxis; and |

| • | tariffs on certain products. |

| • | the inclusion of Platinum Performance, |

| • | transaction costs incurred as a result of the acquisition of Abaxis in July 2018, |

| • | lower royalty income, |

| • | higher interest income in 2019 due to higher cash balances and higher short-term interest rates. |

| • | the impact of the global intangible low taxed income (GILTI) tax, a new provision of the Tax Cuts and Jobs Act (the Tax Act), which became effective for the company in the first quarter of 2019; |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | 19/18 | | | | | | | | | 18/17 | | | | | |

| | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | 19/18 | | | | | | 18/17 | | |

| • | Companion animal revenue growth was driven primarily by increased sales of our key dermatology portfolio, the acquisition of Abaxis, which was acquired in July 2018, increased sales from our parasiticides portfolio across the ProHeart®, Revolution® and Simparica® franchises, including new product introductions Revolution Plus for cats and ProHeart 12 for dogs. |

| • | Livestock revenue decreased primarily due to continued weakness across both the beef and dairy cattle sectors as well as the timing of distributor purchasing patterns for medicated feed additive products impacting cattle. For poultry, growth was driven by increased sales of alternatives to antibiotic medicated feed additive products. |

| • | Livestock operational revenue growth was driven primarily by increased sales in our cattle and poultry portfolios. Cattle products increased due to sales of anti-infectives and vaccines. Poultry products also contributed to growth with increased sales of vaccines and medicated feed additive products. Swine products sales declined due to the negative impact of African Swine Fever in China. |

Corporate expenses increased by $41 million, or 6%, in 2019 compared with 2018, primarily due to higher interest expense, net of capitalized interest, associated with the 2018 senior notes issued in August 2018 and an increase in certain compensation costs not allocated to our operating segments, partially offset by more favorable foreign exchange rates.

| (b) | EPS amounts may not add due to rounding. |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

A significant portion of our revenue and costs are exposed to changes in foreign exchange rates.

In addition, our outstanding borrowings may be subject to risk from changes in interest rates and foreign exchange rates.

The overall objective of our financial risk management program is to seek to minimize the impact of foreign exchange rate movements and interest rate movements on our earnings.

We manage these financial exposures through operational means and by using certain financial instruments.

These practices may change as economic conditions change.

Foreign exchange risk

Our primary net foreign currency translation exposures are the Australian dollar, Brazilian real, Canadian dollar, Chinese yuan, euro, and British pound.

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.

Foreign exchange risk is also managed through the use of foreign currency forward-exchange contracts.

These contracts are used to offset the potential earnings effects from mostly intercompany short-term foreign currency assets and liabilities that arise from operations.

Our financial instrument holdings at December 31, 2020 were analyzed to determine their sensitivity to foreign exchange rate changes.

The fair values of these instruments were determined using Level 2 inputs.

For additional details, see Notes to Consolidated Financial Statements— *Note 3.

Significant Accounting Policies: Fair Value*.

The sensitivity analysis of changes in the fair value of all foreign currency forward-exchange contracts at December 31, 2020, indicates that if the U.S. dollar were to appreciate against all other currencies by 10%, the fair value of these contracts would decrease by $4 million, and if the U.S. dollar were to weaken against all other currencies by 10%, the fair value of these contracts would change by an insignificant amount.

For additional details, see Notes to Consolidated Financial Statements— *Note 9C.

Financial Instruments: Derivative Financial Instruments*.

Interest rate risk

Our outstanding debt balances are predominantly fixed rate debt.

While changes in interest rates will have no impact on the interest we pay on our fixed rate debt, interest on our $300 million aggregate principal amount of 2018 Floating Rate Senior Notes due 2021, as well as interest on our commercial paper and revolving credit facility will be exposed to interest rate fluctuations.

Additionally, as of December 31, 2020, because we held certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our 3.900% Senior Notes due 2028, so that a portion of the fixed-rate interest payable on these senior notes effectively became variable based on LIBOR.

At December 31, 2020, there were no commercial paper borrowings outstanding and no outstanding principal balance under our revolving credit facility.

By issuing the Floating-Rate Notes and by entering into the aforementioned swap arrangements, we have assumed risks associated with variable interest rates based upon LIBOR.

Changes in the overall level of interest rates affect the interest expense that we recognize in our Consolidated Statements of Income.

An interest rate risk sensitivity analysis is used to measure interest rate risk by computing estimated changes in cash flows as a result of assumed changes in market interest rates.

As of December 31, 2020, if LIBOR-based interest rates would have been higher by 100 basis points, the change would have increased our interest expense annually by approximately $4.5 million, as it relates to our fixed to floating interest rate swap agreements and floating-rate borrowings.

See Notes to Consolidated Financial Statements— *Note 9.

Financial Instruments*.

61 |

Zoetis Inc. is a global leader in the [added: animal health industry, focused on the] discovery, development, manufacture and commercialization of [removed: animal health] medicines, vaccines, [removed: and] diagnostic [removed: products with a focus on both livestock] [added: products, biodevices, genetic tests] and [removed: companion animals.][added: precision livestock farming technology.]

We have a diversified business, commercializing products across eight core species: [added: dogs, cats and horses (collectively, companion animals) and] cattle, swine, poultry, fish and sheep (collectively, [removed: livestock) and dogs, cats and horses (collectively, companion animals);] [added: livestock);] and within seven major product categories: vaccines, anti-infectives, parasiticides, [added: dermatology,] other pharmaceutical products, [removed: dermatology,] medicated feed additives and animal health diagnostics.

For more than 65 years, we have been committed to [removed: enhancing] [added: advancing] the health of animals and bringing solutions to our customers who raise and care for them.

Unless the context requires otherwise, references to “Zoetis,” “the company,” “we,” “us” or “our” in this Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2019 (2019] [added: 2020 (2020] Annual Report) refer to Zoetis Inc., a Delaware corporation, and its subsidiaries.

In addition, unless the context requires otherwise, references to “Pfizer” in this [removed: 2019] [added: 2020] Annual Report refer to Pfizer Inc., a Delaware corporation, and its subsidiaries.

[removed: | • |] [added: -] economic differences, such as standards of living in developed markets as compared to emerging markets; [removed: |]

[removed: | • |] [added: -] cultural differences, such as dietary preferences for different animal proteins, pet ownership preferences and pet care standards; [removed: |]

[removed: | • |] [added: -] epidemiological differences, such as the prevalence of certain bacterial and viral strains and disease dynamics; [removed: |]

[removed: | • |] [added: -] treatment differences, such as utilization of different types of medicines and vaccines, as well as the pace of adoption of new technologies; [removed: |]

[removed: | • |] [added: -] environmental differences, such as seasonality, climate and the availability of arable land and fresh water; and [removed: |]

[removed: | • |] [added: -] regulatory differences, such as standards for product approval and manufacturing. [removed: |]

[removed: | • | United] [added: - United] States (U.S.) with revenue of [removed: $3,203] [added: $3,557] million, or [removed: 51%] [added: 53%] of total revenue for the year ended December 31, [removed: 2019;] [added: 2020;] and [removed: |]

[removed: | • | International] [added: - International] with revenue of [removed: $2,972] [added: $3,035] million, or [removed: 48%] [added: 46%] of total revenue for the year ended December 31, [removed: 2019. |][added: 2020.]

Within each of these operating segments, we offer a diversified product portfolio for both [removed: livestock and] companion animal [added: and livestock] customers so that we can capitalize on local trends and customer needs.

In addition, our Client Supply Services (CSS) organization which provides contract manufacturing services to third parties, and our human health products, together represented approximately 1% of our total revenue for the year ended December 31, [removed: 2019.][added: 2020.]

Our [removed: 2019] [added: 2020] revenue for the U.S. and key international markets, together with the percentage of revenue attributable to [removed: livestock and] companion animal [added: and livestock] products in those markets, is as follows:

| (MILLIONS OF DOLLARS) | [added: | |] Revenue | [removed: Livestock] | [added: |] Companion Animal | [added: | | Livestock | | |]

For additional information regarding our performance in each of these operating segments and the impact of foreign exchange rates, see *Item 7.* *Management's Discussion and Analysis of Financial Condition and Results of Operations* and *Item [removed: 8.* [*Financial Statements and Supplementary Data*](#s872E2BAA1BDE9749BE3DA3F38C85C907)*:*][added: 8.]

*Notes to Consolidated Financial [removed: Statements—Note] [added: Statements—Note] 4.

Segment [removed: Information.*] [added: Information.*] Our [removed: 2019] [added: 2020] reported revenue for each segment, by species, is as follows:

[removed: ][added: ]

[removed: ][added: ]

We refer to [removed: a single product in] all [removed: brands,] [added: different brands of a particular product,] or its dosage forms for all species, as a product line.

We have approximately 300 comprehensive product lines, including products for both [removed: livestock and] companion animals [removed: across] [added: and livestock within] each of our major product categories.

Our livestock products primarily help prevent or treat diseases and conditions to [added: allow veterinarians and producers to care for their animals and to] enable the cost-effective production of safe, high-quality animal protein.

First, population growth and increasing standards of living drive [removed: increased] demand for improved nutrition, particularly through increased consumption of animal protein.

Second, population growth leads to [removed: increased] [added: greater] natural resource constraints driving a need for enhanced productivity.

Finally, as standards of living [removed: improve,] [added: improve and the global food chain faces increased scrutiny,] there is [removed: increased] [added: more] focus on food [removed: quality] [added: quality, safety] and [removed: safety.][added: reliability of supply.]

Livestock products represented approximately [removed: 49%] [added: 44%] of our revenue for the year ended December 31, [removed: 2019.][added: 2020.]

Companion animals are also living longer, [added: deepening the human-animal bond,] receiving increased medical treatment and benefiting from advances in animal health medicines, vaccines and diagnostics.

Companion animal products represented approximately [removed: 50%] [added: 55%] of our revenue for the year ended December 31, [removed: 2019.][added: 2020.]

In addition, our CSS organization, which provides contract manufacturing services to third parties, and our human health products, together represented approximately 1% of our total revenue for the year ended December 31, [removed: 2019.][added: 2020.]

[removed: | • |] [added: -] vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; [removed: |]

[removed: | • |] [added: -] anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa; [removed: |]

[removed: | • |] [added: -] parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms; [removed: |]

[removed: | • | other] [added: - other] pharmaceutical products: pain and sedation, antiemetic, reproductive, and oncology products; [removed: |]

[removed: | • |] [added: -] dermatology [removed: products:] [added: products:] products that relieve itch associated with allergic conditions and atopic dermatitis; [removed: |]

[removed: | • |] [added: -] medicated feed additives: products added to animal feed that provide medicines to livestock; and [removed: |]

[removed: | • |] [added: -] animal health diagnostics: portable blood and urine analysis systems and point-of-care diagnostic products, including instruments and reagents, rapid immunoassay tests, reference laboratory [removed: kits and] [added: kits,] blood glucose [removed: monitors. |][added: monitors and reference laboratory services.]

Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals and agribusiness, as well as products and services in [removed: smaller but fast growing areas, including] biodevices, genetic tests and precision livestock farming.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| United States | | | $3,557 | | | 67% | | | 33% | | |

| Australia | | | $207 | | | 46% | | | 54% | | |

| Brazil | | | $258 | | | 30% | | | 70% | | |

| Canada | | | $210 | | | 50% | | | 50% | | |

| Chile | | | $100 | | | 14% | | | 86% | | |

| China | | | $266 | | | 50% | | | 50% | | |

| France | | | $118 | | | 48% | | | 52% | | |

| Germany | | | $159 | | | 58% | | | 42% | | |

| Italy | | | $90 | | | 56% | | | 44% | | |

| Japan | | | $177 | | | 65% | | | 35% | | |

| Mexico | | | $116 | | | 23% | | | 77% | | |

| Spain | | | $112 | | | 35% | | | 65% | | |

| United Kingdom | | | $178 | | | 63% | | | 37% | | |

| Other Developed | | | $388 | | | 41% | | | 59% | | |

| Other Emerging | | | $656 | | | 28% | | | 72% | | |

[Financial Statements and Supplementary Data](#ie099829c0b414b768acbbd22b285a2c1_142):*

Since January 2014, we launched Apoquel in key markets including the U.S., Europe, Japan, Brazil, Australia and China;

Since 2016, the product has been approved in major markets including Canada, the European Union, New Zealand, Australia, Brazil and Mexico.

An injection given once every four to eight weeks, Cytopoint neutralizes interleukin-31, a protein that has been demonstrated to trigger itching in dogs;

- Fostera® PCV MH was introduced in November 2013 in the U.S. and approved in the European Union in 2015 and Australia in 2017.

It was developed to help protect pigs from porcine circovirus-associated disease (PCVAD) and enzootic pneumonia caused by *M. hyopneumoniae (M. hyo)*.

The one-bottle formulation of Fostera PCV MH allows the convenience of a one-dose program or the flexibility of a two-dose program.

The Fostera franchise also includes Fostera/Suvaxyn® PRRS, which was approved in the U.S. in 2015 and in Taiwan, Vietnam and European Union countries in 2017.

This vaccine offers protection against both the respiratory and reproductive forms of disease caused by porcine reproductive and respiratory syndrome (PRRS) virus.

Fostera Gold PCV MH was approved in the U.S. and Canada in 2018, Brazil and Mexico in 2019 and Australia, Europe (under the name CircoMax Myco) and Japan in 2020.

- Librela® (bedinvetmab), the first injectable mAb therapy for monthly alleviation of osteoarthritis (OA) pain in dogs, was approved in the European Union and Switzerland in 2020, and Canada and Brazil in early 2021;

In 2020, we expanded our line of recombinant vector vaccines with the launch of Poulvac Procerta HVT-IBD, which provides early protection against the contemporary infectious bursal disease (IBD) viruses confronting U.S borders;

Building on this franchise, in 2017, Zoetis received European Commission approval for Stronghold® Plus (selamectin/sarolaner), a topical combination product that treats ticks, fleas, ear mites, lice and gastrointestinal worms and prevents heartworm disease in cats.

In 2018, this product was approved in the U.S., Japan and Canada (Revolution® Plus);

- Simparica Trio®, a triple combination parasiticide for dogs, was approved in the European Union and Canada in 2019, the U.S. and Australia in 2020, and Mexico in early 2021.

- SolensiaTM (frunevetmab), the first injectable mAb therapy for monthly alleviation of OA pain in cats, was approved in Switzerland in 2020; and

- Vanguard®/Versican® is a market leading vaccine line for dogs intended to help prevent a range of diseases.

In 2019, the company received approval for Versican Plus Bb Oral, the first oral vaccine for dogs in Europe.

It provides long-lasting protection against *Bordetella bronchiseptica*, a primary component of the canine infectious respiratory disease complex (CIRDC).

In 2020, the company opened a research lab at Colorado State University in a partnership to explore the livestock immune system and target new immunotherapies with a goal of paving the way for new alternatives to antibiotics in food-producing animals.

In 2020, Pharmaq received approval in Norway for Alpha ERM Salar, an oil-based injectable vaccine that helps protect salmon from red mouth, a common bacterial infection.

Pharmaq also established a new diagnostics lab in Norway, the country with the highest density of salmon fish farmers in the world, that will serve as a hub for research and testing.

In 2020, Zoetis acquired Fish Vet Group to expand the geographic reach and enhance the diagnostics expertise and testing services of the Pharmaq business for fish farmers in major aquaculture markets.

| | |

| --- | --- |

| | | | |

| --- | --- | --- | --- |

| United States | $3,203 | 38% | 62% |

| Australia | $196 | 59% | 41% |

| Brazil | $293 | 72% | 28% |

| Canada | $206 | 54% | 46% |

| China | $200 | 46% | 54% |

| France | $117 | 57% | 43% |

| Germany | $153 | 46% | 54% |

| Italy | $112 | 41% | 59% |

| Japan | $158 | 38% | 62% |

| Mexico | $117 | 79% | 21% |

| Spain | $114 | 68% | 32% |

| United Kingdom | $198 | 38% | 62% |

| Other Developed | $370 | 61% | 39% |

| Other Emerging | $738 | 77% | 23% |

In the fourth quarter of 2019, the company modified the list of major product categories to include a category for dermatology products, which was previously included within other pharmaceutical products.

The prior period presentation has been revised to reflect the new product categories.

| • | Fostera® PCV MH was introduced in November 2013 in the U.S. and approved in the European Union in 2015 and Australia in 2017. It was developed to help protect pigs from porcine circovirus-associated disease (PCVAD) and enzootic pneumonia caused by *M. hyopneumoniae (M. hyo)*. The one-bottle formulation of Fostera PCV MH allows the convenience of a one-dose program or the flexibility of a two-dose program. The Fostera franchise also includes Fostera/Suvaxyn® PRRS, which was approved in the U.S. in 2015 and in Taiwan, Vietnam and European Union countries in 2017. This vaccine offers protection against both the respiratory and reproductive forms of disease caused by porcine reproductive and respiratory syndrome (PRRS) virus. Fostera Gold PCV MH was approved in the U.S. and |

Canada in 2018, as well as in Brazil and Mexico in 2019.

These vaccines help protect against viruses that affect the tilapia industry in Latin America.

| | | | | |

| --- | --- | --- | --- | --- |

| Simparica® | | A monthly chewable tablet for dogs to control fleas and ticks | | Dogs |

provide us with better access to customer decision makers as compared to those in human health.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| Campinas | | Brazil | | Melbourne | | Australia |

| Catania | | Italy | | Olot | | Spain |

| Kalamazoo | | Michigan, U.S. | | Weibern | | Austria |

| Klofta | | Norway | | Wellington | | New Zealand |

| Louvain-la-Neuve | | Belgium | | | | |

| (a) | In August 2019, Zoetis completed the acquisition of Platinum Performance, a leading nutrition-focused animal health business. |

We also have a leased site in Tullamore (Ireland) that we acquired in 2017 where we plan to begin commercial production in the near term.

Both of these sites are owned by us but are not yet ready for commercial production.

As a result of a review of our global manufacturing and supply network, we have exited 8 manufacturing sites since 2015.

| • | Draxxin, containing the active ingredient tulathromycin, is covered by formulation patents in the U.S., Europe, Canada, Australia and other key markets, with terms that expire between November 2020 and February 2021 in the U.S., Europe, Canada and Australia. The active ingredient tulathromycin is protected in Japan until 2023. Generic tulathromycin products are marketed in certain countries including Colombia, Vietnam, Belarus, Russia, Poland and Croatia. Marketing authorizations for generic tulathromycin products have been granted in Europe and Australia. There are pending marketing authorizations for generic tulathromycin products in Australia and additional authorizations may be granted in various markets in the future. At this time, market entry of generic tulathromycin products in the U.S. is not anticipated before February 2021. |

| • | Several patents covering the ceftiofur antibiotic product line (Excede) began expiring in the U.S. in 2015. However, various formulation and use patents relevant to the product line extend through to 2024. A generic version of Excede has entered the market in Mexico. At this time, the market entry of a generic version of Excede in the U.S. is not anticipated before 2024. |

[removed: FORM 10-K][added: FORM 10-K]

| ☒ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | [added: | | | |]

| | [added: | |] For the fiscal year ended | | [added: | | | |]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | [added: | | | |]

| | [added: | |] For the transition period from __________ to __________ | | [added: | | | |]

Commission File [removed: Number: 001-35797][added: Number: 001-35797]

| Zoetis Inc. | [added: | |]

| (Exact name of registrant as specified in its charter) | [added: | |]

| Delaware | | | | [added: | | | | | | | |] 46-0696167 | [added: | |]

| (State or other jurisdiction of | | | | [added: | | | | | | | |] (I.R.S. Employer Identification No.) | [added: | |]

| incorporation or organization) | | | | | [added: | | | | | | | | | |]

| 10 Sylvan Way, | [added: | |] Parsippany, | [added: | |] New Jersey | | [added: | | | |] 07054 | [added: | |]

| (Address of principal executive offices) | | | | [added: | | | | | | | |] (Zip Code) | [added: | |]

| (Registrant’s telephone number, including area code) | [added: | |]

| Title of each class | | [added: | | | |] Trading Symbol(s) | | [added: | | | |] Name of each exchange on which registered | [added: | |]

| Common Stock, $0.01 par value per share | | [added: | | | |] ZTS | | [added: | | | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | [removed: ☒] | [added: | x | | |] Accelerated filer | [added: | |] ☐ | [added: | |] Non-accelerated filer | [added: | |] ☐ | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |] Emerging growth company | [added: | |] ☐ | [added: | |]

The aggregate market value of the voting stock held by nonaffiliates of the registrant as of June 30, [removed: 2019,] [added: 2020,] the last business day of the registrant's most recently completed second fiscal quarter, was [removed: $54,228] [added: $65,094] million.

The number of shares outstanding of the registrant's common stock as of February [removed: 7, 2020] [added: 11, 2021] was [removed: 474,933,945] [added: 475,166,373] shares.

Portions of the registrant’s Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Shareholders (hereinafter referred to as the [removed: “2020] [added: “2021] Proxy Statement”) are incorporated into Part III of this Form 10-K.

| [removed: [PART I](#s28E2257C7ABD9D63E349A3F384DCF031)] [added: [PART I](#ie099829c0b414b768acbbd22b285a2c1_10)] | | | | [added: | | | | | | | |] Page | [added: | |]

| Item 1. | | [removed: [Business](#sE75A652ECF87545F2A61A3F385099F31)] | | | [added: | [Business](#ie099829c0b414b768acbbd22b285a2c1_13) | | | | | | | | |]

| | | [added: | | | |] [Operating [removed: Segments](#s887B9B97676B56D84944A3F3855B53FF)] [added: Segments](#ie099829c0b414b768acbbd22b285a2c1_19)] | | [removed: [1](#s887B9B97676B56D84944A3F3855B53FF)] | [added: | | | [1](#ie099829c0b414b768acbbd22b285a2c1_19) | | |]

| | | [added: | | | |] [International [removed: Operations](#s64EA9D9D72FFF4B945C6A3F385AF554E)] [added: Operations](#ie099829c0b414b768acbbd22b285a2c1_25)] | | [removed: [6](#s64EA9D9D72FFF4B945C6A3F385AF554E)] | [added: | | | [6](#ie099829c0b414b768acbbd22b285a2c1_25) | | |]

| | | [added: | | | |] [Sales and [removed: Marketing](#s020EDEBE275F45154AEFA3F385D542B1)] [added: Marketing](#ie099829c0b414b768acbbd22b285a2c1_28)] | | [removed: [6](#s020EDEBE275F45154AEFA3F385D542B1)] | [added: | | | [6](#ie099829c0b414b768acbbd22b285a2c1_28) | | |]

| | | [added: | | | |] [Research and [removed: Development](#sD29F4E36E0ADAF8D1159A3F3862569F5)] [added: Development](#ie099829c0b414b768acbbd22b285a2c1_34)] | | [removed: [7](#sD29F4E36E0ADAF8D1159A3F3862569F5)] | [added: | | | [7](#ie099829c0b414b768acbbd22b285a2c1_34) | | |]

| | | [added: | | | |] [Manufacturing and Supply [removed: Chain](#s9109B88ED21B0247779AA3F38656E363)] [added: Chain](#ie099829c0b414b768acbbd22b285a2c1_37)] | | [removed: [7](#s9109B88ED21B0247779AA3F38656E363)] | [added: | | | [7](#ie099829c0b414b768acbbd22b285a2c1_37) | | |]

| | | [added: | | | |] [Intellectual [removed: Property](#s1C2D4017A4832C08BBDEA3F386A93C14)] [added: Property](#ie099829c0b414b768acbbd22b285a2c1_43)] | | [removed: [9](#s1C2D4017A4832C08BBDEA3F386A93C14)] | [added: | | | [9](#ie099829c0b414b768acbbd22b285a2c1_43) | | |]

| | | [added: | | | |] [Information about our Executive [removed: Officers](#s202c20bdde2042b3a7d235c8c2de86af)] [added: Officers](#ie099829c0b414b768acbbd22b285a2c1_52)] | | [removed: [11](#s202c20bdde2042b3a7d235c8c2de86af)] | [added: | | | [13](#ie099829c0b414b768acbbd22b285a2c1_52) | | |]

| | | [added: | | | |] [Environmental, Health and [removed: Safety](#s6B26DDCD4AD677B943CEA3F38722F5BF)] [added: Safety](#ie099829c0b414b768acbbd22b285a2c1_55)] | | [removed: [13](#s6B26DDCD4AD677B943CEA3F38722F5BF)] | [added: | | | [15](#ie099829c0b414b768acbbd22b285a2c1_55) | | |]

| | | [added: | | | |] [Available [removed: Information](#s7B256B00DD50EC58208FA3F387507A8C)] [added: Information](#ie099829c0b414b768acbbd22b285a2c1_58)] | | [removed: [14](#s7B256B00DD50EC58208FA3F387507A8C)] | [added: | | | [15](#ie099829c0b414b768acbbd22b285a2c1_58) | | |]

| Item 1A. | | [added: | | | |] [Risk [removed: Factors](#sAA7481F0E159F5EFC12EA3F387744B8C)] [added: Factors](#ie099829c0b414b768acbbd22b285a2c1_61)] | | [removed: [15](#sAA7481F0E159F5EFC12EA3F387744B8C)] | [added: | | | [16](#ie099829c0b414b768acbbd22b285a2c1_61) | | |]

| Item 1B. | | [added: | | | |] [Unresolved Staff [removed: Comments](#s14FB89DC3C0381C32D91A3F387A489D7)] [added: Comments](#ie099829c0b414b768acbbd22b285a2c1_64)] | | [removed: [32](#s14FB89DC3C0381C32D91A3F387A489D7)] | [added: | | | [36](#ie099829c0b414b768acbbd22b285a2c1_64) | | |]

| Item 2. | | [removed: [Properties](#s30CEDD699AAC9026C388A3F387C87337)] | | [removed: [32](#s30CEDD699AAC9026C388A3F387C87337)] | [added: | [Properties](#ie099829c0b414b768acbbd22b285a2c1_67) | | | | | | [36](#ie099829c0b414b768acbbd22b285a2c1_67) | | |]

| Item 3. | | [added: | | | |] [Legal [removed: Proceedings](#s64B62DF9AAA3F89EF3BFA3F387F5E67D)] [added: Proceedings](#ie099829c0b414b768acbbd22b285a2c1_70)] | | [removed: [32](#s64B62DF9AAA3F89EF3BFA3F387F5E67D)] | [added: | | | [36](#ie099829c0b414b768acbbd22b285a2c1_70) | | |]

| Item 4. | | [added: | | | |] [Mine Safety [removed: Disclosures](#s9CFA3BF3E5CF5A2D382DA3F3881A38A0)] [added: Disclosures](#ie099829c0b414b768acbbd22b285a2c1_73)] | | [removed: [32](#s9CFA3BF3E5CF5A2D382DA3F3881A38A0)] | [added: | | | [36](#ie099829c0b414b768acbbd22b285a2c1_73) | | |]

| Item 5. | | [added: | | | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s46ACA2FEF4F761BEBD9FA3F383801815)] [added: Securities](#ie099829c0b414b768acbbd22b285a2c1_79)] | | [removed: [33](#s46ACA2FEF4F761BEBD9FA3F383801815)] | [added: | | | [37](#ie099829c0b414b768acbbd22b285a2c1_79) | | |]

| Item 7. | | [added: | | | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sE5FFBCB1B5FA1D3F835DA3F388C19E1E)] [added: Operations](#ie099829c0b414b768acbbd22b285a2c1_85)] | | [removed: [36](#sE5FFBCB1B5FA1D3F835DA3F388C19E1E)] | [added: | | | [39](#ie099829c0b414b768acbbd22b285a2c1_85) | | |]

| Item 7A. | | [added: | | | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s0E9246811F157193B369A3F38C55A8B8)] [added: Risk](#ie099829c0b414b768acbbd22b285a2c1_139)] | | [removed: [58](#s0E9246811F157193B369A3F38C55A8B8)] | [added: | | | [61](#ie099829c0b414b768acbbd22b285a2c1_139) | | |]

| Item 8. | | [added: | | | |] [Financial Statements and Supplementary [removed: Data](#s872E2BAA1BDE9749BE3DA3F38C85C907)] [added: Data](#ie099829c0b414b768acbbd22b285a2c1_142)] | | [removed: [59](#s872E2BAA1BDE9749BE3DA3F38C85C907)] | [added: | | | [62](#ie099829c0b414b768acbbd22b285a2c1_142) | | |]

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | December 31, 2020 | | | | | |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | [Overview](#ie099829c0b414b768acbbd22b285a2c1_16) | | | | | | [1](#ie099829c0b414b768acbbd22b285a2c1_16) | | |

| | | | | | | [Products](#ie099829c0b414b768acbbd22b285a2c1_22) | | | | | | [3](#ie099829c0b414b768acbbd22b285a2c1_22) | | |

| | | | | | | [Customers](#ie099829c0b414b768acbbd22b285a2c1_31) | | | | | | [7](#ie099829c0b414b768acbbd22b285a2c1_31) | | |

| | | | | | | [Competition](#ie099829c0b414b768acbbd22b285a2c1_40) | | | | | | [8](#ie099829c0b414b768acbbd22b285a2c1_40) | | |

| | | | | | | [Regulatory](#ie099829c0b414b768acbbd22b285a2c1_46) | | | | | | [9](#ie099829c0b414b768acbbd22b285a2c1_46) | | |

| | | | | | | [Human Capital Management](#ie099829c0b414b768acbbd22b285a2c1_49) | | | | | | [11](#ie099829c0b414b768acbbd22b285a2c1_49) | | |

| [PART II](#ie099829c0b414b768acbbd22b285a2c1_76) | | | | | | | | | | | | | | |

| [PART IV](#ie099829c0b414b768acbbd22b285a2c1_274) | | | | | | | | | | | | | | |

| [EXHIBIT INDEX](#ie099829c0b414b768acbbd22b285a2c1_283) | | | | | | | | | | | | [107](#ie099829c0b414b768acbbd22b285a2c1_283) | | |

| [SIGNATURES](#ie099829c0b414b768acbbd22b285a2c1_286) | | | | | | | | | | | | [110](#ie099829c0b414b768acbbd22b285a2c1_286) | | |

| | December 31, 2019 | |

| | or | |

| |

| --- |

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | [Overview](#sC4BF3FD4AA46DE7C34AEA3F3852CBA7F) | | [1](#sC4BF3FD4AA46DE7C34AEA3F3852CBA7F) |

| | | [Products](#s39796E621E57C9A92B2DA3F3857FFB47) | | [3](#s39796E621E57C9A92B2DA3F3857FFB47) |

| | | [Customers](#s93B3FE91966E0EECA65EA3F3860704A5) | | [7](#s93B3FE91966E0EECA65EA3F3860704A5) |

| | | [Competition](#sB37E787630F11DF118D1A3F38678A34C) | | [8](#sB37E787630F11DF118D1A3F38678A34C) |

| | | [Regulatory](#s3FC500136E4A22FE254DA3F386CD0E3A) | | [9](#s3FC500136E4A22FE254DA3F386CD0E3A) |

| | | [Employees](#s85026B1864325A058BD2A3F386FE6CB5) | | [11](#s85026B1864325A058BD2A3F386FE6CB5) |

| [PART II](#s205D613CA4C8D661F27EA3F3884A2445) | | | | |

| Item 6. | | [Selected Financial Data](#s62D3C700040B1FBDC33FA3F36F3944A7) | | [35](#s62D3C700040B1FBDC33FA3F36F3944A7) |

| [PART IV](#s121DB7497C82A5404AD9A3F397BA513C) | | | | |

| [EXHIBIT INDEX](#s85889C9F08D9B2DA2172A3F378BC2C86) | | | | [106](#s85889C9F08D9B2DA2172A3F378BC2C86) |

| [SIGNATURES](#sE969F877E9F8E4A69DE7A3F36DC168A6) | | | | [109](#sE969F877E9F8E4A69DE7A3F36DC168A6) |

We have [removed: 157] [added: 166] owned and leased properties, amounting to approximately 11.1 million square feet, around the world for sales and marketing, customer service, regulatory compliance, R&D, manufacturing and distribution, and administrative support functions.

Our largest R&D facility is our owned U.S. research and development site located in Kalamazoo, Michigan, which represents approximately [removed: 1.5] [added: 1.6] million square feet.

The largest manufacturing site in our global manufacturing network is our manufacturing site located in Kalamazoo, Michigan, which represents approximately [removed: 0.6] [added: 0.7] million square feet.

No other site in our global manufacturing network is more than [removed: 0.6] [added: 0.7] million square feet.

In addition, our global manufacturing network will continue to be supplemented by [removed: 147] [added: 144] CMOs.

36 |

32 |

| | |

| --- | --- |

| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |

Our shares of common stock have been listed on the NYSE (symbol ZTS) since February 1, 2013.

Prior to that time, there was no public market for our stock.

As of February 7, 2020, there were 474,933,945 shares of our common stock outstanding, held by 1,795 shareholders of record.

Additional information relating to our common stock is included in this Annual Report on Form 10-K in Notes to Consolidated Financial Statements— *Note 16.

Stockholders' Equity*.

Purchases of Equity Securities by the Issuer

On December 6, 2016, our Board of Directors authorized the repurchase of $1.5 billion of our outstanding common stock in a multi-year share repurchase program.

This program was completed as of December 31, 2019.

On December 12, 2018, our Board of Directors authorized a multi-year share repurchase program of up to an additional $2.0 billion of our outstanding common stock.

As of December 31, 2019, there was approximately $1.7 billion remaining under this authorization.

These programs do not have a stated expiration date.

Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs.

We repurchase shares pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act), through repurchase agreements established with several brokers.

Issuer purchases of equity securities for the three months ended December 31, 2019 were as follows:

| | | | | |

| --- | --- | --- | --- | --- |

| | Issuer Purchases of Equity Securities | | | |

| | Total Number of Shares Purchased(a) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs |

| October 1 - October 31, 2019 | 474,206 | $125.95 | 459,300 | $1,792,813,692 |

| November 1 - November 30, 2019 | 717,035 | $119.89 | 716,499 | $1,706,913,621 |

| December 1 - December 31, 2019 | 266,345 | $123.14 | 262,344 | $1,674,474,799 |

| Total | 1,457,586 | $122.46 | 1,438,143 | $1,674,474,799 |

| (a) | The company repurchased 19,443 shares during the three-month period ended December 31, 2019, that were not part of the publicly announced share repurchase authorization. These shares were purchased from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards. |

Dividend Policy, Declaration and Payment

The declaration and payment of dividends to holders of our common stock will be at the discretion of our Board of Directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, cash flows available in the U.S., impact on our effective tax rate, indebtedness, legal requirements and other factors that our Board of Directors deems relevant.

In addition, the instruments governing our indebtedness may limit our ability to pay dividends.

Therefore, no assurance is given that we will pay any dividends to our common stockholders or as to the amount of any such dividends if our Board of Directors determines to do so.

Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from certain of our subsidiaries.

33 |

Stock Performance Graph(a)

The graph below compares the cumulative total shareholder return on an investment in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index for the five fiscal years beginning with the close of trading on December 31, 2014 and ending December 31, 2019.

The shareholder return shown on the graph is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future shareholder returns.

The graph assumes an investment of $100 on December 31, 2014, in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index and assumes dividends, if any, were reinvested.

COMPARISON OF CUMULATIVE TOTAL RETURN

Among Zoetis Inc., the S&P 500 Index and the S&P 500 Pharmaceuticals Index


Our shares of common stock have been listed on the NYSE (symbol ZTS) since February 1, 2013.

Prior to that time, there was no public market for our stock.

As of February 11, 2021, there were 475,166,373 shares of our common stock outstanding, held by 1,748 shareholders of record.

Additional information relating to our common stock is included in this Annual Report on Form 10-K in Notes to Consolidated Financial Statements— *Note 16.

Stockholders' Equity*.

Purchases of Equity Securities by the Issuer

On December 12, 2018, our Board of Directors authorized a multi-year share repurchase program of up to $2.0 billion of our outstanding common stock.

As of December 31, 2020, there was approximately $1.4 billion remaining under this authorization.

The company temporarily suspended share repurchases beginning in the second quarter of 2020.

In January 2021, the company resumed share repurchases under its share repurchase program.

The program does not have a stated expiration date.

Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs.

We repurchase shares pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act), through repurchase agreements established with several brokers.

Issuer purchases of equity securities for the three months ended December 31, 2020 were as follows:

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | Issuer Purchases of Equity Securities | | | | | | | | | | | |

| | | | Total Number of Shares Purchased(a) | | | Average Price Paid Per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Programs(b) | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs | | |

| October 1 - October 31, 2020 | | | 1,026 | | | $162.05 | | | — | | | $1,424,104,390 | | |

| November 1 - November 30, 2020 | | | 617 | | | $161.86 | | | — | | | $1,424,104,390 | | |

| December 1 - December 31, 2020 | | | 641 | | | $161.28 | | | — | | | $1,424,104,390 | | |

| Total | | | 2,284 | | | $161.78 | | | — | | | $1,424,104,390 | | |

(a) The company repurchased 2,284 shares during the three-month period ended December 31, 2020, that were not part of the publicly announced share repurchase authorization.

These shares were purchased from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards.

(b) The company temporarily suspended share repurchases beginning in the second quarter of 2020.

Dividend Policy, Declaration and Payment

The declaration and payment of dividends to holders of our common stock will be at the discretion of our Board of Directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, cash flows available in the U.S., impact on our effective tax rate, indebtedness, legal requirements and other factors that our Board of Directors deems relevant.

In addition, the instruments governing our indebtedness may limit our ability to pay dividends.

Therefore, no assurance is given that we will pay any dividends to our common stockholders or as to the amount of any such dividends if our Board of Directors determines to do so.

Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from certain of our subsidiaries.

37 |

Stock Performance Graph(a)

The graph below compares the cumulative total shareholder return on an investment in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index for the five fiscal years beginning with the close of trading on December 31, 2015 and ending December 31, 2020.

The shareholder return shown on the graph is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future shareholder returns.

The graph assumes an investment of $100 on December 31, 2015, in our common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index and assumes dividends, if any, were reinvested.

COMPARISON OF CUMULATIVE TOTAL RETURN

Among Zoetis Inc., the S&P 500 Index and the S&P 500 Pharmaceuticals Index


| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | [added: | |] Page | [added: | |]

| Audited Consolidated Financial Statements of Zoetis Inc. and Subsidiaries: | | [added: | | | |]

| [removed: [Reports] [added: Reports] of Independent Registered Public Accounting [removed: Firm](#sDF7A157980509F135B3CA3F3DD3BEC07)] [added: Firm] | [removed: [60](#s0A07C99C51FE37106C6EA3F38CA87B7F)] | [added: | [63](#ie099829c0b414b768acbbd22b285a2c1_145) | | |]

| Consolidated Statements of Income for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [63](#sFFC0C048BC972704F03DA3F3557E2736)] | [added: | [66](#ie099829c0b414b768acbbd22b285a2c1_151) | | |]

| Consolidated Statements of Comprehensive Income for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [64](#sAFD1FC60673460A6F8DCA3F355AD2849)] | [added: | [67](#ie099829c0b414b768acbbd22b285a2c1_154) | | |]

| Consolidated Balance Sheets as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] | [removed: [65](#s891C902728AE143982F9A3F355CCA973)] | [added: | [68](#ie099829c0b414b768acbbd22b285a2c1_157) | | |]

| Consolidated Statements of Equity for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [66](#sDA168740D920C3DC8914A3F3561A4464)] | [added: | [69](#ie099829c0b414b768acbbd22b285a2c1_163) | | |]

| Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [67](#s8A20A15BCE71360954FBA3F356A7B629)] | [added: | [70](#ie099829c0b414b768acbbd22b285a2c1_166) | | |]

| [removed: [Notes] [added: Notes] to Consolidated Financial [removed: Statements](#s3867C40549EDF74D2947A3F3DD543A10)] [added: Statements] | [removed: [68](#sE414E059371EE7DDE29CA3F38EB19C26)] | [added: | [71](#ie099829c0b414b768acbbd22b285a2c1_169) | | |]

| Schedule II—Valuation and Qualifying Accounts | [removed: [102](#s348C4A9D16B56ABD60C5A3F36214517D)] | [added: | [103](#ie099829c0b414b768acbbd22b285a2c1_244) | | |]

We have audited the accompanying consolidated balance sheets of Zoetis Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the [removed: three‑year] [added: three year] period ended December 31, [removed: 2019,] [added: 2020,] and the related notes and financial statement schedule II [removed: -] [added: –] Valuation and Qualifying Accounts (collectively, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the years in the [removed: three‑year] [added: three year] period ended December 31, [removed: 2019,] [added: 2020,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control [removed: -] [added: –] Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February [removed: 13, 2020] [added: 16, 2021,] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As of December 31, [removed: 2019,] [added: 2020,] the Company has recorded gross unrecognized tax benefits of [removed: $182] [added: $188] million.

Complex auditor [removed: judgment] [added: judgment, including the involvement of tax professionals with specialized skills and knowledge] was required to assess the valuation of a tax position, which [removed: includes] [added: included] interpretation of relevant tax law, identification of relevant tax elements, the estimate of the more likely than not assessment of tax positions being sustained under examination and the estimate of the amount of the gross unrecognized tax benefit.

The [added: following are the] primary procedures we performed to address this critical audit [removed: matter included the following.][added: matter.]

[removed: We tested certain internal] [added: This includes] controls [removed: over the Company’s unrecognized tax benefit process, including] [added: related to] (a) interpretation of relevant tax law, (b) evaluation of which of the Company’s tax positions may not be sustained upon examination, and (c) estimation of the gross unrecognized tax benefits.

[removed: \- Evaluating] [added: –evaluating] the Company’s interpretation of relevant tax laws and the potential impact on the unrecognized tax benefits by developing an independent assessment of the tax position’s more likely than not to be sustained under examination determination [added: as well as and the estimate of the amount of the gross unrecognized tax benefit, if any, based on our understanding and interpretation of tax laws,]

[removed: \- Reading] [added: –reading] and evaluating the tax opinion, and

[removed: \- Assessing] [added: –assessing] the Company’s transfer pricing policies for compliance with applicable laws and regulations.

[removed: *Assessing deductions] [added: *Deductions] from revenue related to the rebates [removed: accrual*][added: accrual for the U.S. segment*]

As discussed in Note 3 to the consolidated financial statements, the Company records an accrual for estimated rebates as a deduction [removed: to gross] [added: from] revenue when [removed: sales are] [added: the related revenue is] recognized.

Amounts recorded as a reduction in accounts receivable as of December 31, [removed: 2019] [added: 2020] are approximately [removed: $169] [added: $185] million and accruals for deductions from revenue included in [removed: Accrued] [added: accrued] expenses are approximately [removed: $190] [added: $226] million.

Because of the variety of programs offered by the [removed: Company,] [added: Company] in the U.S., the size of the U.S. market, and the length of time between when a sale is made and when the related rebate is [removed: paid] [added: settled] by the [removed: Company significant] [added: Company, challenging] auditor judgment [removed: is] [added: was] required in assessing the estimate of the required rebates accrual.

In particular, the identification of which revenue transactions [removed: will be] [added: were] subject to a rebate and the relevance and reliability of information used to estimate an individual rebate programs’ accrual required [removed: significant] [added: challenging] auditor [removed: judgement.][added: judgment.]

[removed: We tested certain internal controls over the Company’s rebate accrual process for the U.S. segment, including] [added: This included] controls related to the identification of revenue transactions subject to a rebate and the relevance and reliability of information used in the estimated rebates accrual.

We [removed: estimated] [added: tested] the [added: estimate of the] rebates accrual for a sample of U.S. programs, using a combination of Company internal data, historical information, executed contracts, and third-party data and compared our estimate to the amount recorded by the Company.

We evaluated the historical accuracy of the Company’s U.S. rebates accrual by comparing the previously recorded accrual as of December 31, [removed: 2018] [added: 2019] to the actual amount that ultimately was paid by the Company during [removed: 2019.][added: 2020.]

We have audited Zoetis Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2019,] [added: 2020,] and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively, the “consolidated financial statements”), and our report dated February [removed: 13, 2020] [added: 16, 2021] expressed an unqualified opinion on those consolidated financial statements.

| | | [added: | | | |] Year Ended December 31, | | | | | | | | | | | [added: | | | |]

| (MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA) | | [removed: 2019] | | | | [removed: 2018] [added: 2020] | | | | [removed: 2017] | | [added: 2019] | [added: | | | | | 2018 | | |]

| Revenue | | [added: | | | |] $ | [removed: 6,260] [added: 6,675] | | | [added: | |] $ | [removed: 5,825] [added: 6,260] | | | [added: | |] $ | [removed: 5,307] [added: 5,825] | |

| Costs and expenses: | | | | | | | | | | | | | [added: | | | | | | | |]

| Cost of sales(a) | | [removed: 1,992] | | | | [removed: 1,911] [added: 2,057] | | | | [removed: 1,775] | | [added: 1,992] | [added: | | | | | 1,911 | | |]

| Selling, general and administrative expenses(a) | | [removed: 1,638] | | | | [removed: 1,484] [added: 1,726] | | | | [removed: 1,334] | | [added: 1,638] | [added: | | | | | 1,484 | | |]

| Research and development expenses(a) | | [removed: 457] | | | | [removed: 432] [added: 463] | | | | [removed: 382] | | [added: 457] | [added: | | | | | 432 | | |]

| Amortization of intangible assets | | [removed: 155] | | | | [removed: 117] [added: 160] | | | | [removed: 91] | | [added: 155] | [added: | | | | | 117 | | |]

| Restructuring charges and certain acquisition-related costs | | [removed: 51] | | | | [removed: 68] [added: 25] | | | | [removed: 19] | | [added: 51] | [added: | | | | | 68 | | |]

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s unrecognized tax benefit process.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s rebate accrual process for the U.S. segment.

February 16, 2021

February 16, 2021

(a) Exclusive of amortization of intangible assets, except as disclosed in *Note 3.

(a) Presented net of reclassification adjustments and tax impacts, which are not significant in any period presented.

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| Total Zoetis Inc. equity | | | | | | 3,769 | | | | | | 2,708 | | |

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| Balance, December 31, 2020 | | | | | | 501.9 | | | | | | $ | 5 | | | | | 26.6 | | | | | | $ | (2,230) | | | | | $ | 1,065 | | | | | $ | 5,659 | | | | | $ | (730) | | | | | $ | 4 | | | | | $ | 3,773 | |

Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements.

Share-based Payments* and *Note 16.

Stockholders' Equity.*

For additional information, see *Note 16.

Stockholders' Equity*.

See *Note 14.

Benefit Plans.*

(e) Represents the consolidation of a research and development arrangement with a Belgian company, a variable interest entity of which Zoetis is the primary beneficiary.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Loss on treasury locks | | | | | | (6) | | | | | | — | | | | | | — | | |

| Payment of debt issuance costs | | | | | | (12) | | | | | | — | | | | | | (11) | | |

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We adopted this guidance as of January 1, 2020, the required effective date, on a prospective basis.

The adoption did not have a significant impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, *Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting*.

The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

Adoption of the provisions of ASU 2020-04 is optional and effective as of March 12, 2020, but is only available through December 31, 2022.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements and related disclosures, as well as the timing of the potential adoption.

We adjust our estimates and

Goodwill is not amortized.

- *Identifiable intangible assets, less accumulated amortization*—these acquired assets are recorded at our cost.

| | |

| --- | --- |

59 |

60 |

and the estimate of the amount of the gross unrecognized tax benefit, if any, based on our understanding and interpretation of tax laws,

February 13, 2020

61 |

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| Balance, December 31, 2016 | | 501.9 | | | $ | 5 | | | 9.0 | | | $ | (421 | ) | | $ | 1,024 | | | $ | 1,477 | | | $ | (598 | ) | | $ | 12 | | | $ | 1,499 | |

| Purchases of shares from a noncontrolling interest(b) | | | | | | | | | | | | | | | | (29 | | ) | | | | | | | | | | (14 | | ) | | (43 | | ) |

| (b) | Represents the acquisition of the remaining 55 percent noncontrolling interest in Jilin Zoetis Guoyuan Animal Health Co., Ltd., a variable interest entity previously consolidated by Zoetis as the primary beneficiary. |

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, *Income Statement - Reporting Comprehensive Income*, (Topic 220): *Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income* (ASU 2018-02), which permits companies to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the new federal corporate income tax rate.

In the period of adoption, a company may choose to either apply the amendments retrospectively to each period in which the effect of the change in federal income tax rate is recognized or to apply the amendments in that reporting period.

We adopted the new standard as of January 1, 2019, the required effective date.

The company has elected to not reclassify the stranded income tax effects from accumulated other comprehensive income to retained earnings as the amount is insignificant.

In February 2016, the FASB issued ASU 2016-02, *Leases* (Topic 842), which supersedes FASB Topic 840, *Leases* (Topic 840) which requires lessees to recognize most leases on the balance sheet with a corresponding right of use asset.

Leases will be classified as financing or operating which will drive the expense recognition pattern.

For lessees, the income statement presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively.

Companies may elect to exclude short-term leases.

The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

We adopted the new standard as of January 1, 2019, the required effective date, using the effective date transition method.

As permitted under the effective date transition method, financial information and disclosure for periods prior to the date of initial application will not be updated.

An adjustment to opening retained earnings was not required in conjunction with our adoption.

We have elected not to reassess whether expired or existing contracts contain leases, nor did we reassess the classification of existing leases as of the adoption date.

We did not use hindsight in our assessment of lease terms as of the effective date.

Leases.*

| • | *Identifiable intangible assets, less accumulated amortization*—these acquired assets are recorded at our cost. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Identifiable intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Identifiable intangible assets associated with IPR&D projects are not amortized until regulatory approval is obtained. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated. |

In the fourth quarter of 2019, the company modified the list of major product categories to include a category for dermatology products, which was previously included within other pharmaceutical products.

The prior period presentation has been revised to reflect the new product categories.

| Other emerging markets | | 738 | | | | 710 | | | | 657 | | |

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| Other | | 72 | | | | 83 | | | | 84 | | |

owners.

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| --- | --- |

| Item 9A. | Controls and Procedures |

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

Based upon that evaluation as of December 31, 2019, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at a reasonable level of assurance in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934.

Under the supervision and with the participation of management, including the company's Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in *Internal Control - Integrated Framework*, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.

The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report included herein.

Changes in Internal Control over Financial Reporting

On July 31, 2018, the company completed the acquisition of Abaxis, Inc. (Abaxis).

In our 2018 Annual Report on Form 10-K, we excluded Abaxis from our evaluation of internal control over financial reporting.

Since the acquisition, Zoetis has extended its oversight and monitoring processes that support our internal control over financial reporting, as well as its disclosure controls and procedures, and we continue to integrate the acquired operations of Abaxis.

Beginning with the third quarter of fiscal year 2019, we included the internal controls of Abaxis in our assessment of the effectiveness of Zoetis’ internal controls over financial reporting.

Except for the addition of internal control over financial reporting relating to the integration of Abaxis, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

Based upon that evaluation as of December 31, 2020, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at a reasonable level of assurance in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934.

Under the supervision and with the participation of management, including the company's Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in *Internal Control - Integrated Framework*, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report included herein.

Changes in Internal Control over Financial Reporting

During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

104 |

103 |

Information about our directors is incorporated by reference from the discussion under the heading *Item 1*\-*Election of Directors* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about compliance with Section 16(a) of the Exchange Act is incorporated by reference from the discussion under the heading *Delinquent Section 16(a) Reports* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about the Zoetis Code of Conduct governing our employees, including our Chief Executive Officer, Chief Financial Officer [added: and] Principal Accounting Officer and Controller, and the Code of Business Conduct and Ethics for members of our Board of Directors, is incorporated by reference from the discussions under the heading *Corporate Governance at Zoetis* in our [removed: 2020] [added: 2021] Proxy Statement.

Information regarding the procedures by which our stockholders may recommend nominees to our Board of Directors is incorporated by reference from the discussion under the heading *Corporate Governance at Zoetis* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about our Audit Committee, including the members of the Committee, and our Audit Committee financial experts, is incorporated by reference from the discussion under the heading *Corporate Governance at Zoetis* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about director compensation is incorporated by reference from the discussion under the heading *Corporate Governance at Zoetis* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about executive compensation is incorporated by reference from the discussion under the heading *Executive* *Compensation* in our [removed: 2020] [added: 2021] Proxy Statement.

Information required by this item is incorporated by reference from the discussion under the heading *Ownership of Our Common Stock* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about certain relationships and transactions with related parties and our policies and procedures in relation to such transactions is incorporated by reference from the discussion under the heading *Transactions with Related Persons* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about director independence is incorporated by reference from the discussion under the heading *Corporate Governance at Zoetis-Corporate Governance Principles and Practices-Director Independence* in our [removed: 2020] [added: 2021] Proxy Statement.

Information about the fees for professional services rendered by our independent registered public accounting firm in [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] is incorporated by reference from the discussion under the heading *Item [removed: 4*—*Ratification] [added: 3*—*Ratification] of Appointment of KPMG as our Independent Registered Public Accounting Firm [removed: for* *2020*] [added: for 2021*] in our [removed: 2020] [added: 2021] Proxy Statement.

Our Audit Committee’s policy on pre-approval of audit and permissible non-audit services of our independent registered public accounting firm is incorporated by reference from the discussion under the heading *Item [removed: 4*—*Ratification] [added: 3*—*Ratification] of Appointment of KPMG as our Independent Registered Public Accounting Firm [removed: for* *2020*] [added: for 2021*] in our [removed: 2020] [added: 2021] Proxy Statement*.*

105 |

104 |

[removed: | |] (1) The financial statements and notes to financial statements are filed as part of this report in Item 8. [removed: Financial Statements and Supplementary Data. |]

Financial Statements and Supplementary Data.

| | |

| --- | --- |

| [Exhibit 2.1](http://www.sec.gov/Archives/edgar/data/1555280/000155528018000179/exhibit21mergeragreement.htm) | | [added: | | | |] Agreement and Plan of Merger, dated as of May 15, 2018, by and among Zoetis Inc., Zeus Merger Sub, Inc. and Abaxis, Inc. | [added: | |]

| | | [added: | | | |] (incorporated by reference to Exhibit 2.1 to Zoetis Inc.'s Current Report on Form 8-K filed on | [added: | |]

| | | [added: | | | |] May 16, 2018 (File No. 001-35797)) | [added: | |]

| [Exhibit 3.1](http://www.sec.gov/Archives/edgar/data/1555280/000155528014000335/zoetis2014928-ex31.htm) | | [added: | | | |] Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Zoetis Inc.'s Quarterly | [added: | |]

| | | [added: | | | |] Report on Form 10-Q filed on November 10, 2014 (File No. 001-35797)) | [added: | |]

| [Exhibit 3.2](http://www.sec.gov/Archives/edgar/data/1555280/000155528016000344/ex32zoetisbylawsamendedand.htm) | | [added: | | | |] By-laws of the Registrant, amended and restated as of February 19, 2016 (incorporated by reference to Exhibit 3.2 to Zoetis | [added: | |]

| | | [added: | | | |] Inc.’s 2015 Annual Report on Form 10-K filed on February 24, 2016 (File No. 001-35797)) | [added: | |]

| [Exhibit 4.1](http://www.sec.gov/Archives/edgar/data/1555280/000119312513027025/d381653dex41.htm) | | [added: | | | |] Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Zoetis Inc.’s registration | [added: | |]

| | | [added: | | | |] statement on Form S-1 (File No. 333-183254)) | [added: | |]

| [Exhibit 4.2](http://www.sec.gov/Archives/edgar/data/1555280/000119312513027025/d381653dex42.htm) | | [added: | | | |] Indenture, dated as of January 28, 2013, between Zoetis Inc. and Deutsche Bank Trust Company Americas, as trustee | [added: | |]

| | | [added: | | | |] (incorporated by reference to Zoetis Inc.'s registration statement on Form S-1 (File No. 333-183254)) | [added: | |]

| [Exhibit 4.3](http://www.sec.gov/Archives/edgar/data/1555280/000119312513027025/d381653dex43.htm) | | [added: | | | |] First Supplemental Indenture, dated as of January 28, 2013, between Zoetis Inc. and Deutsche Bank Trust Company | [added: | |]

| | | [added: | | | |] Americas, as trustee (incorporated by reference to Exhibit 4.3 of Zoetis Inc.'s registration statement on Form S-1 | [added: | |]

| | | [added: | | | |] (File No. 333-183254)) | [added: | |]

| [Exhibit 4.4](http://www.sec.gov/Archives/edgar/data/1555280/000119312515377110/d39819dex42.htm) | | [added: | | | |] Second Supplemental Indenture, dated November 13, 2015, between Zoetis Inc. and Deutsche Bank Trust Company | [added: | |]

| | | [added: | | | |] Americas, as trustee (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K filed on | [added: | |]

| | | [added: | | | |] November 13, 2015 (File No. 001-35797)) | [added: | |]

| [Exhibit 4.5](http://www.sec.gov/Archives/edgar/data/1555280/000119312517282801/d456656dex42.htm) | | [added: | | | |] Third Supplemental Indenture, dated September 12, 2017, between Zoetis Inc. and Deutsche Bank Trust Company Americas, | [added: | |]

| | | [added: | | | |] as trustee (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K filed on September 12, 2017 | [added: | |]

| | | [added: | | | |] (File No. 001-35797)) | [added: | |]

| [Exhibit 4.6](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm) | | [added: | | | |] Fourth Supplemental Indenture, dated August 20, 2018, between Zoetis Inc. and Deutsche Bank Trust Company Americas, | [added: | |]

| | | [added: | | | |] as trustee (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K filed on August 20, 2018 | [added: | |]

| [Exhibit [removed: 4.7](http://www.sec.gov/Archives/edgar/data/1555280/000119312515377110/d39819dex42.htm)] [added: 4.9](http://www.sec.gov/Archives/edgar/data/1555280/000119312515377110/d39819dex42.htm)] | | [added: | | | |] Form of [removed: 3.450%] [added: 4.500%] Senior Notes due [removed: 2020] [added: 2025] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on | [added: | |]

| | | [added: | | | |] Form 8-K filed on November 13, 2015 (File No. 001-35797)) | [added: | |]

| [Exhibit 4.8](http://www.sec.gov/Archives/edgar/data/1555280/000119312513027025/d381653dex43.htm) | | [added: | | | |] Form of 3.250% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 of Zoetis Inc.'s registration statement on | [added: | |]

| | | [added: | | | |] Form S-1 (File No. 333-183254)) | [added: | |]

| [Exhibit [removed: 4.9](http://www.sec.gov/Archives/edgar/data/1555280/000119312515377110/d39819dex42.htm)] [added: 4.11](http://www.sec.gov/Archives/edgar/data/1555280/000119312517282801/d456656dex42.htm)] | | [added: | | | |] Form of [removed: 4.500%] [added: 3.000%] Senior Notes due [removed: 2025] [added: 2027] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on [added: Form 8-K] | [added: | |]

| [Exhibit 4.10](http://www.sec.gov/Archives/edgar/data/1555280/000119312513027025/d381653dex43.htm) | | [added: | | | |] Form of 4.700% Senior Notes due 2043 (incorporated by reference to Exhibit 4.3 of Zoetis Inc.'s registration statement on | [added: | |]

| [Exhibit [removed: 4.11](http://www.sec.gov/Archives/edgar/data/1555280/000119312517282801/d456656dex42.htm)] [added: 4.12](http://www.sec.gov/Archives/edgar/data/1555280/000119312517282801/d456656dex42.htm)] | | [added: | | | |] Form of [removed: 3.000%] [added: 3.950%] Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | [added: | |]

| | | [added: | | | |] filed on September 12, 2017 (File No. 001-35797)) | [added: | |]

| [Exhibit [removed: 4.12](http://www.sec.gov/Archives/edgar/data/1555280/000119312517282801/d456656dex42.htm)] [added: 4.14](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] | | [added: | | | |] Form of [removed: 3.950%] [added: 3.250%] Senior Notes due [removed: 2027] [added: 2021] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | [added: | |]

| [Exhibit 4.13](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm) | | [added: | | | |] Form of Floating Rate Senior Notes due 2021 (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form | [added: | |]

| | | [added: | | | |] 8-K filed on August 20, 2018 (File No. 001-35797)) | [added: | |]

| [Exhibit [removed: 4.14](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] [added: 4.15](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] | | [added: | | | |] Form of [removed: 3.250%] [added: 3.900%] Senior Notes due [removed: 2021] [added: 2028] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | [added: | |]

| | | [added: | | | |] filed on August 20, 2018 (File No. 001-35797)) | [added: | |]

| [Exhibit [removed: 4.15](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] [added: 4.16](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] | | [added: | | | |] Form of [removed: 3.900%] [added: 4.450%] Senior Notes due [removed: 2028] [added: 2048] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | [added: | |]

| [Exhibit [removed: 4.16](http://www.sec.gov/Archives/edgar/data/1555280/000119312518252910/d601449dex42.htm)] [added: 4.17](https://www.sec.gov/Archives/edgar/data/1555280/000119312520140399/d901166dex42.htm)] | | [added: | | | |] Form of [removed: 4.450%] [added: 2.000%] Senior Notes due [removed: 2048] [added: 2030] (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | [added: | |]

| [Exhibit [removed: 4.17](https://www.sec.gov/Archives/edgar/data/1555280/000155528020000054/a201910-kxexhibit417xd.htm)] [added: 4.1](https://www.sec.gov/Archives/edgar/data/1555280/000155528020000054/a201910-kxexhibit417xd.htm)[9](https://www.sec.gov/Archives/edgar/data/1555280/000155528020000054/a201910-kxexhibit417xd.htm)] | | [added: | | | |] Description of the Registrant’s [removed: Securities†] [added: Securities] | [added: | |]

| [Exhibit 10.1](http://www.sec.gov/Archives/edgar/data/1555280/000155528013000008/zoetisexhibit101.htm) | | [added: | | | |] Global Separation Agreement, dated February 6, 2013, by and between Zoetis Inc. and Pfizer Inc. (incorporated by reference to | [added: | |]

| | | [added: | | | |] Exhibit 10.1 to Zoetis Inc.’s 2012 Annual Report on Form 10-K filed on March 28, 2013 (File No. 001-35797)) | [added: | |]

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | (File No. 001-35797)) | | |

| [Exhibit 4.7](https://www.sec.gov/Archives/edgar/data/1555280/000119312520140399/d901166dex42.htm) | | | | | | Fifth Supplemental Indenture, dated May 12, 2020, between Zoetis Inc. and Deutsche Bank Trust Company Americas, | | |

| | | | | | | as trustee (incorporated by reference to Exhibit 4.2 to Zoetis Inc.'s Current Report on Form 8-K filed on May 12, 2020 | | |

| | | | | | | (File No. 001-35797)) | | |

| | | | | | | Form S-1 (File No. 333-183254)) | | |

| | | | | | | filed on September 12, 2017 (File No. 001-35797)) | | |

| | | | | | | filed on August 20, 2018 (File No. 001-35797)) | | |

| | | | | | | filed on August 20, 2018 (File No. 001-35797)) | | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | filed on May 12, 2020 (File No. 001-35797)) | | |

| [Exhibit 4.18](https://www.sec.gov/Archives/edgar/data/1555280/000119312520140399/d901166dex42.htm) | | | | | | Form of 3.000% Senior Notes due 2050 (incorporated by reference to Exhibit 4.2 to Zoetis Inc.’s Current Report on Form 8-K | | |

| | | | | | | filed on May 12, 2020 (File No. 001-35797)) | | |

| | | | | | | March 28, 2013 (File No. 001-35797)) | | |

| | | | | | | March 28, 2013 (File No. 001-35797)) | | |

| | | | | | | (File No. 001-35797)) | | |

| | | | | | | on Form 10-K filed on March 28, 2013 (File No. 001-35797))* | | |

| | | | | | | on Form 10-K filed on March 28, 2013 (File No. 001-35797))* | | |

| | | | | | | Form 10-K filed on March 28, 2013 (File No. 001-35797))* | | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| [Exhibit 10.24](https://www.sec.gov/Archives/edgar/data/1555280/000155528021000098/exhibit102412-31x20.htm) | | | | | | Amendment No. 1 to Zoetis Supplemental Savings Plan effective December 21, 2020†* | | |

| [Exhibit 10.26](https://www.sec.gov/Archives/edgar/data/1555280/000155528021000098/exhibit102612-31x20.htm) | | | | | | Amendment No. 1 to Zoetis Equity Deferral Plan effective December 21, 2020†* | | |

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The following table sets forth our selected historical consolidated and combined financial data for the periods indicated.

The selected consolidated statements of income data for the years ended December 31, 2019, 2018 and 2017, and the selected consolidated balance sheet data as of December 31, 2019 and 2018 presented below have been derived from our audited consolidated financial statements included in *Item 8.

Financial Statements and Supplementary Data*.

The selected historical consolidated statements of income data for the years ended December 31, 2016 and 2015, and the selected historical consolidated balance sheet data as of December 31, 2017, 2016 and 2015 presented below has been derived from our audited financial statements not included in this 2019 Annual Report.

You should read the selected historical consolidated and combined financial data set forth below in conjunction with *Item 7.* *Management’s Discussion and Analysis of Financial Condition and Results of Operations* and our consolidated financial statements and notes thereto included in *Item 8.

Financial Statements and Supplementary Data*.

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| | Year Ended December 31,(a) | | | | | | | | | | | | | | | | | | | |

| (MILLIONS, EXCEPT PER SHARE AMOUNTS) | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Statement of income data: | | | | | | | | | | | | | | | | | | | | |

| Revenue | | $ | 6,260 | | | $ | 5,825 | | | $ | 5,307 | | | $ | 4,888 | | | $ | 4,765 | |

| Net income attributable to Zoetis | | 1,500 | | | | 1,428 | | | | 864 | | | | 821 | | | | 339 | | |

| Balance sheet data: | | | | | | | | | | | | | | | | | | | | |

| Total assets | | $ | 11,545 | | | $ | 10,777 | | | $ | 8,586 | | | $ | 7,649 | | | $ | 7,913 | |

| Long-term obligations | | 5,947 | | | | 6,443 | | | | 4,953 | | | | 4,468 | | | | 4,463 | | |

| Other data (unaudited): | | | | | | | | | | | | | | | | | | | | |

| Adjusted net income(b) | | $ | 1,755 | | | $ | 1,525 | | | $ | 1,185 | | | $ | 975 | | | $ | 889 | |

| Earnings per share attributable to Zoetis Inc. stockholders: | | | | | | | | | | | | | | | | | | | | |

| Basic | | $ | 3.14 | | | $ | 2.96 | | | $ | 1.76 | | | $ | 1.66 | | | $ | 0.68 | |

| Diluted | | $ | 3.11 | | | $ | 2.93 | | | $ | 1.75 | | | $ | 1.65 | | | $ | 0.68 | |

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| Dividends declared per common share | | $ | 0.692 | | | $ | 0.542 | | | $ | 0.441 | | | $ | 0.390 | | | $ | 0.344 | |

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| Weighted average shares outstanding (in thousands): | | | | | | | | | | | | | | | | | | | | |

| Basic | | 478,128 | | | | 483,063 | | | | 489,918 | | | | 495,715 | | | | 499,707 | | |

| Diluted | | 481,787 | | | | 486,898 | | | | 493,161 | | | | 498,225 | | | | 502,019 | | |

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| (a) | Starting in August 2018, includes the acquisition of Abaxis. Starting in February 2015, includes the acquisition of certain assets from Abbott Animal Health and starting in November 2015, includes the acquisition of Pharmaq. |

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| (b) | Adjusted net income (a non-GAAP financial measure) is defined as reported net income attributable to Zoetis excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Management uses adjusted net income, among other factors, to set performance goals and to measure the performance of the overall company, as described in *Item 7.* *Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP financial measures* and *Adjusted net income*. We believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. Reconciliations of U.S. GAAP reported net income attributable to Zoetis to non-GAAP adjusted net income for the years ended December 31, 2019, 2018 and 2017 are provided in *Item 7.* *Management’s Discussion and Analysis of Financial Condition and Results of Operations—Adjusted net income*. 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. |

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