Revenue

9 Months Ended

Sep. 30, 2024

Revenue Recognition and Deferred Revenue [Abstract]

Revenue

4. Revenue

A. Revenue from Product Sales

We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers or e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top-selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network.

Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to all 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 companion animals and livestock, within our major product categories.

In the first quarter of 2024, we modified the list of major product categories to include a category for pain and sedation products, which were previously included within other pharmaceutical products. The prior period presentation has been revised to reflect the new product category.

Our major product categories are:

•parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms;

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

•dermatology: products that relieve itch associated with allergic conditions and atopic dermatitis;

•anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa;

•pain and sedation: products that alleviate pain, primarily associated with osteoarthritis and postoperative pain;

•other pharmaceutical: antiemetic, reproductive and oncology products;

•animal health diagnostics: testing and analysis of blood, urine and other animal samples and related products and services, including point-of-care diagnostic products, instruments and reagents, rapid immunoassay tests, reference laboratory kits and services and blood glucose monitors; and

•medicated feed additives: products added to animal feed that provide medicines to livestock.

Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals, as well as products and services in biodevices, genetic tests and precision animal health.

Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, deepening the human-animal bond, receiving increased medical treatment and benefiting from advances in animal health medicine, vaccines and diagnostics.

Our livestock products primarily help prevent or treat diseases and conditions to allow veterinarians and producers to care for their animals and to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive demand for improved nutrition, particularly through increased consumption of animal protein. Second, population growth leads to greater natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve and the global food chain faces increased scrutiny, there is more focus on food quality, safety and reliability of supply.

The following tables present our revenue disaggregated by geographic area, species and major product category:

Revenue by geographic area

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(MILLIONS OF DOLLARS)	2024		2023		2024		2023
United States	$	1,346	$	1,174	$	3,817	$	3,344
Australia	83		84		239		248
Brazil	101		101		301		276
Canada	66		63		202		183
Chile	31		31		93		109
China	61		69		205		255
France	36		34		111		102
Germany	57		50		166		148
Italy	31		26		95		87
Japan	33		34		109		120
Mexico	39		42		129		119
Spain	35		30		100		94
United Kingdom	80		78		230		209
Other developed markets	148		127		413		374
Other emerging markets	220		187		670		605
	2,367		2,130		6,880		6,273
Contract manufacturing & human health	21		21		59		58
Total Revenue	$	2,388	$	2,151	$	6,939	$	6,331

Revenue by major species

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(MILLIONS OF DOLLARS)	2024		2023		2024		2023
U.S.
Companion animal	$	1,068	$	908	$	3,046	$	2,588
Livestock	278		266		771		756
	1,346		1,174		3,817		3,344
International
Companion animal	541		506		1,662		1,540
Livestock	480		450		1,401		1,389
	1,021		956		3,063		2,929
Total
Companion animal	1,609		1,414		4,708		4,128
Livestock	758		716		2,172		2,145
Contract manufacturing & human health	21		21		59		58
Total Revenue	$	2,388	$	2,151	$	6,939	$	6,331

Revenue by species

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(MILLIONS OF DOLLARS)	2024		2023		2024		2023
Companion Animal:
Dogs and Cats	$	1,551	$	1,354	$	4,516	$	3,931
Horses	58		60		192		197
	1,609		1,414		4,708		4,128
Livestock:
Cattle	391		374		1,132		1,102
Poultry	139		127		410		397
Swine	131		129		388		404
Fish	70		57		177		158
Sheep and other	27		29		65		84
	758		716		2,172		2,145
Contract manufacturing & human health	21		21		59		58
Total Revenue	$	2,388	$	2,151	$	6,939	$	6,331

Revenue by major product category

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(MILLIONS OF DOLLARS)	2024		2023		2024		2023
Parasiticides	$	530	$	465	$	1,634	$	1,465
Vaccines	468		449		1,365		1,308
Dermatology	453		397		1,234		1,048
Anti-infectives	274		264		819		796
Pain and sedation	219		147		634		408
Other pharmaceutical	169		166		478		514
Animal health diagnostics	101		95		286		284
Medicated feed additives	91		86		242		257
Other non-pharmaceutical	62		61		188		193
	2,367		2,130		6,880		6,273
Contract manufacturing & human health	21		21		59		58
Total Revenue	$	2,388	$	2,151	$	6,939	$	6,331

B. Revenue from Contracts with Customers

Contract liabilities reflected within Other current liabilities as of December 31, 2023 and 2022, and subsequently recognized as revenue during each of the first nine months of 2024 and 2023 were $4 million. Contract liabilities as of September 30, 2024 and December 31, 2023 were $21 million and $11 million, respectively.

Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of September 30, 2024 is not material.