--Zoetis notches big stock-trading gains in IPO
--Former Pfizer animal-health unit is world's biggest player by
revenue
--Zoetis CEO says stable industry, emering-market demand will
stoke future growth
(Adds details on Zoetis, Pfizer, sector rivals and historical
comparison throughout.)
By Chris Dieterich and Peter Loftus
NEW YORK--Investors eager to invest in the future of animal
medicine sent stock in Zoetis Inc. (ZTS), formerly a unit of Pfizer
Inc. (PFE), soaring Friday.
Shares jumped 20% as the biggest initial public offering for a
U.S. company since Facebook Inc. (FB) hit the market in May.
"This industry shows steady and predictable growth," said Zoetis
Chief Executive Juan Ramon Alaix, adding that Zoetis's global reach
will allow it to capitalize on opportunities in emerging
markets.
Zoetis, of Madison, N.J., is the largest animal-medicine company
in the world by revenue. It makes vaccines and drugs for livestock
and pets.
Mr. Alaix said investors recognize that Zoetis has the leading
share of an estimated $22 billion global animal-health market that
is expected to grow about 5.7% annually for the next five
years.
Zoetis's shares climbed $5.15, or 20%, to $31.16 in first-day
trading. The company's $2.2 billion offering priced shares at $26
late Thursday, above the $22-to-$25 range initially outlined in
documents filed with the Securities and Exchange Commission. Zoetis
commands a market value of about $15.7 billion based on Friday's
opening stock price.
Analysts said Zoetis makes an attractive investment in part
because animal-drug research and development tends to be less
cost-intensive than that of human medicine development. Animal
health tends to rely on broad array of smaller drugs rather than
costly, blockbuster drugs that take can years to develop, according
to Kevin Kedra, a health-care analyst at Gabelli & Co. in Rye,
N.Y.
"The appeal of this stock is that animal health is a fairly
stable market, as opposed to the up-and-down nature of human
health, which is very much based on patents. This is a much more
consistent, stable business," Mr. Kedra said.
Pfizer, the world's largest drug maker by sales, has been
shedding businesses outside its core medicine franchise to focus on
developing prescription medicines to replace aging products such as
cholesterol drug Lipitor, which now faces generic competition. Last
year, Pfizer sold its infant-nutrition business to Nestle SA
(NSRGY, NESN.VX).
Zoetis reported revenue of $3.2 billion for the first nine
months of last year, or about 7% of Pfizer's $43.9 billion in
overall revenue during that period. Zoetis's revenue increased 1.7%
over that time, while earnings rose 87% to $446 million. Revenue
from livestock represents the bulk of its sales.
Pfizer will retain a roughly 80% stake of Zoetis after the
offering, and current Pfizer shareholders must go into the open
market to buy Zoetis shares. Pfizer executives said last year the
company might consider shedding its post-IPO stake in Zoetis by
allowing Pfizer shareholders to exchange shares for Zoetis. A
Pfizer spokeswoman said Friday the company has several alternatives
that are distributing remaining shares. It will make that decision
in the future based on "what delivers the best after-tax return for
our shareholders," the spokeswoman said.
The company competes primarily with the animal-health segments
of other major drug companies, including Merck & Co. (MRK),
Sanofi SA (SNY, SAN.FR) and Eli Lilly & Co. (LLY).
The deal is the largest IPO from a U.S. company since Facebook's
$16 billion deal May 18. It is also the largest so-called carve-out
to list on a U.S. exchange since U.K. hedge-fund manager Man Group
PLC (MNGPY, EMG.LN) broke away from MF Global Ltd., which was its
brokerage arm, in a $2.9 billion deal in 2007, according to
Dealogic.
J.P. Morgan Chase & Co. (JPM), Bank of America Corp. (BAC)
and Morgan Stanley (MS) served as Zoetis's lead underwriters.
Write to Chris Dieterich at christopher.dieterich@dowjones.com
and Peter Loftus at peter.loftus@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires