ZTS Zoetis Inc

Risks Related to Legal Matters and Regulation

Zoetis may incur substantial costs and receive adverse outcomes in litigation and other legal matters.

Zoetis’s operating results, financial condition and liquidity could be materially adversely affected by unfavorable results in pending or future litigation matters. These matters include, among other things, allegations of violation of U.S. and foreign competition law, labor laws, consumer protection laws, and environmental laws and regulations, as well as claims or litigations relating to product liability, intellectual property, securities, breach of contract and tort. In addition, changes in the interpretations of laws and regulations to which Zoetis is subject, or in legal standards in one or more of the jurisdictions in which Zoetis operates, could increase Zoetis’s exposure to liability. For example, in the United States, attempts have been made to allow damages for emotional distress and pain and suffering in connection with the loss of, or injury to, a companion animal. If such attempts were successful, Zoetis’s exposure with respect to product liability claims could increase materially.

Litigation matters, regardless of their merits or their ultimate outcomes, are costly, divert management’s attention and may materially adversely affect Zoetis’s reputation and demand for Zoetis’s products. Zoetis cannot predict with certainty the eventual outcome of pending or future litigation matters. An adverse outcome of litigation or legal matters could result in Zoetis being responsible for significant damages. Any of these negative effects resulting from litigation matters could materially adversely affect Zoetis’s operating results and financial condition.

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

Zoetis’s products have been approved for use under specific circumstances for the treatment of certain diseases and conditions in specific species. There may be increased risk of product liability if veterinarians, livestock producers, pet owners or others attempt to use Zoetis’s products off-label, including the use of Zoetis products in species (including humans) for which they have not been approved. For example, Ketamine, the active pharmaceutical ingredient in Zoetis’s Ketaset product (a nonnarcotic agent for anesthetic use in cats), is commonly abused by humans as a hallucinogen. Furthermore, the use of Zoetis’s products for indications other than those indications for which Zoetis’s products have been approved may not be effective, which could harm Zoetis’s reputation and lead to an increased risk of litigation. If Zoetis is deemed by a governmental or regulatory agency to have engaged in the promotion of any of its products for off-label use, such agency could request that it modifies its training or promotional materials and practices and Zoetis could be subject to significant fines and penalties, and the imposition of these sanctions could also affect its reputation and position within the industry. Any of these events could materially adversely affect Zoetis’s operating results and financial condition.

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Animal health products are subject to unanticipated safety, quality or efficacy concerns, which may harm Zoetis’s reputation.

Unanticipated safety, quality or efficacy concerns can arise with respect to animal health products, whether or not scientifically or clinically supported, leading to product recalls, withdrawals or suspended or declining sales, as well as product liability and other claims. For example, as a result of safety concerns related to Zoetis’s product, PregSure BVD, in 2010, Zoetis voluntarily suspended sales of the product and withdrew the marketing authorization in the European Union (the “EU”) and, in 2011, Zoetis also suspended sales and withdrew the marketing authorization for the product in New Zealand. Also, Zoetis was advised on May 16, 2013, that the European Commission started a procedure regarding the EU marketing authorization for Suvaxyn PCV, a vaccine against Porcine Circovirus 2 in swine. The initiation of the procedure followed a recall of two batches of Suvaxyn PCV as a result of higher than expected adverse reactions, reported mainly in Spain. Zoetis completed a root cause investigation of the higher than expected adverse reactions in these two batches, following which it submitted a proposed variation in July to the European Medicines Agency (the “EMA”) to describe specific adjustments to the manufacturing process to help minimize the risk of future reactive batches. The EMA’s Committee on Medicinal Products for Veterinary Use reviewed the submission at its September 2013 meeting and communicated a list of questions to Zoetis as part of the variation process. The Committee will assess the Company’s response to these questions prior to making a recommendation to the European Commission as to any action with respect to the marketing authorization for this product, including the need for any suspension. Future regulatory actions impacting all or a significant portion of PCV sales could materially adversely affect Zoetis’s operating results.

In addition, Zoetis depends on positive perceptions of the safety, quality and efficacy of its products, and animal health products generally, by its customers, veterinarians and end-users. Any concerns as to the safety, qualify or efficacy of its products, whether actual or perceived, may harm Zoetis’s reputation. These concerns and the related harm to Zoetis’s reputation could materially adversely affect Zoetis’s operating results and financial condition, regardless of whether such reports are accurate.

Zoetis’s business is subject to substantial regulation.

Zoetis is not able to market new products unless and until it has obtained all required regulatory approvals in each jurisdiction where it proposes to market those products. Even after a product reaches market, it may be subject to re-review and may lose its approvals. In connection with the Separation, Zoetis will likely change the location of the manufacture of certain of Zoetis’s products and, because of these changes, may be required to obtain new regulatory approvals. Zoetis’s failure to obtain approvals, delays in the approval process, or its failure to maintain approvals in any jurisdiction, may prevent Zoetis from selling products in that jurisdiction until approval or reapproval is obtained, if ever.

In addition, Zoetis cannot predict the nature of future laws or regulations, nor can it determine the effect that additional laws or regulations or changes in existing laws or regulations could have on Zoetis’s business when and if promulgated, or the impact of changes in the interpretation of these laws and regulations, or of disparate federal, state, local and foreign regulatory schemes. Changes to such laws or regulations may include, among other things, changes to taxation requirements, such as tax-rate changes and changes affecting the taxation by the United States of income earned outside the United States.

Changes in applicable federal, state, local and foreign laws and regulations could have a material adverse effect on Zoetis’s operating results and financial condition. For example, regulatory agencies have recently increased their focus on the potential for vaccines to induce immunity anomalies. Absent a clear understanding of these anomalies, regulatory scrutiny of vaccines may become stricter. Additional scrutiny or regulation of Zoetis’s vaccine products could materially adversely affect its operating results and financial condition.

Zoetis is subject to complex environmental, health and safety laws and regulations.

Zoetis is subject to various federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations govern matters such as the emission and discharge of hazardous

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materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to, and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of Zoetis’s employees. Due to Zoetis’s operations, these laws and regulations also require it to obtain, and comply with, permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke Zoetis’s permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Given the nature of Zoetis’s business, it has incurred, is currently incurring and may in the future incur liabilities under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or under other federal, state, local and foreign environmental cleanup laws, with respect to Zoetis’s current or former sites, adjacent or nearby third-party sites, or offsite disposal locations. See “Business—Environmental, Health and Safety.” The costs associated with future cleanup activities that Zoetis may be required to conduct or finance could be material. Additionally, Zoetis may become liable to third parties for damages, including personal injury and property damage, resulting from the disposal or release of hazardous materials into the environment. Such liability could materially adversely affect Zoetis’s operating results and financial condition. Furthermore, regulatory agencies are showing increasing concern over the impact of animal health products and livestock operations on the environment. This increased regulatory scrutiny may necessitate that additional time and resources be spent to address these concerns in both new and existing products.

Zoetis’s failure to comply with the environmental, health and safety laws and regulations to which it is subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures. Zoetis could also be held liable for any and all consequences arising out of human exposure to hazardous materials or environmental damage. Environmental laws and regulations are complex, change frequently, have tended to become more stringent and stringently enforced over time and may be subject to new interpretation. Zoetis cannot assure you that Zoetis’s costs of complying with current and future environmental, health and safety laws, and its liabilities arising from past or future releases of, or exposure to, hazardous materials will not materially adversely affect Zoetis’s business, results of operations or financial condition.

Risks Related to Zoetis’s International Operations

A significant portion of Zoetis’s operations are conducted in foreign jurisdictions and are subject to the economic, political, legal and business environments of the countries in which Zoetis does business.

Zoetis’s international operations could be limited or disrupted by any of the following:

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The multinational nature of Zoetis’s business subjects it to potential risks that various taxing authorities may challenge the pricing of its cross-border arrangements and subject it to additional tax, adversely impacting its effective tax rate and tax liability.

In addition, international transactions may involve increased financial and legal risks due to differing legal systems and customs. Compliance with these requirements may prohibit the import or export of certain products and technologies or may require Zoetis to obtain a license before importing or exporting certain products or technology. A failure to comply with any of these laws, regulations or requirements could result in civil or criminal legal proceedings, monetary or non-monetary penalties, or both, disruptions to Zoetis’s business, limitations on Zoetis’s ability to import and export products and services, and damage to Zoetis’s reputation. In addition, variations in the pricing of Zoetis’s products between jurisdictions may result in the unauthorized importation of Zoetis’s products between jurisdictions. While the impact of these factors is difficult to predict, any of them could materially adversely affect Zoetis’s operating results and financial condition. Changes in any of these laws, regulations or requirements, or the political environment in a particular country, may affect Zoetis’s ability to engage in business transactions in certain markets, including investment, procurement and repatriation of earnings.

Foreign exchange rate fluctuations and potential currency controls affect Zoetis’s results of operations, as reported in Zoetis’s financial statements.

Zoetis conducts operations in many areas of the world, involving transactions denominated in a variety of currencies. In 2012, Zoetis generated approximately 54% of its revenues in currencies other than the U.S. dollar, principally the euro, Australian dollar and Brazilian real. Zoetis is subject to currency exchange rate risk to the extent that its costs are denominated in currencies other than those in which it earns revenues. In addition, because Zoetis’s financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on its results of operations.

Zoetis also faces risks arising from currency devaluations and the imposition of cash repatriation restrictions and exchange controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Cash repatriation restrictions and exchange controls may limit Zoetis’s ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by its foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. While Zoetis currently has no need, and does not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should it need to do so to fund its operations, it may be unable to repatriate or convert such cash, or unable to do so without incurring substantial costs. Zoetis currently has substantial operations in countries that have cash repatriation restrictions or exchange controls in place, including China and Venezuela, and, if it were to need to repatriate or convert such cash, these controls and restrictions may have a material adverse effect on its operating results and financial condition.

For example, on February 13, 2013, the Venezuelan government devalued its currency from a rate of 4.3 to 6.3 Venezuelan bolivar per U.S. dollar. Zoetis incurred a foreign currency loss immediately on the devaluation as a result of remeasuring the local balance sheets and will experience ongoing impacts to earnings as its revenues and expenses will be translated at lower rates.

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Zoetis may not be able to realize the expected benefits of Zoetis’s investments in emerging markets.

Zoetis has been taking steps to increase its presence in emerging markets, including by expanding its manufacturing presence, sales organization and product offerings in these markets. Failure to continue to maintain and expand Zoetis’s business in emerging markets could also materially adversely affect its operating results and financial condition.

Some countries within emerging markets may be especially vulnerable to periods of local, regional or global economic, political or social instability or crisis. For example, Zoetis’s sales in certain emerging markets have suffered from extended periods of disruption due to natural disasters. Furthermore, Zoetis has also experienced lower than expected sales in certain emerging markets due to local, regional and global restrictions on banking and commercial activities in those countries. In addition, certain emerging markets have currencies that fluctuate substantially, which may impact Zoetis’s financial performance. For example, in the past, Zoetis’s revenues in certain emerging markets in Latin America have been adversely impacted by currency fluctuations and devaluations. For all these and other reasons, sales within emerging markets carry significant risks.

Risks Related to Intellectual Property

The actual or purported intellectual property rights of third parties may negatively affect Zoetis’s business.

A third party may sue Zoetis or otherwise make a claim, alleging infringement or other violation of the third-party’s patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights. If Zoetis does not prevail in this type of litigation, it may be required to:

The costs of defending an intellectual property claim could be substantial and could materially adversely affect Zoetis’s operating results and financial condition, even if it successfully defends such claims. The intellectual property positions of animal health medicines and vaccines businesses frequently involve complex legal and factual questions, and an issued patent does not guarantee Zoetis the right to practice the patented technology or develop, manufacture or commercialize the patented product. Zoetis cannot be certain that a competitor or other third party does not have or will not obtain rights to intellectual property that may prevent Zoetis from manufacturing, developing or marketing certain of Zoetis’s products, regardless of whether Zoetis believes such intellectual property rights are valid and enforceable or Zoetis believes it will be otherwise able to develop a more commercially successful product, which may harm Zoetis’s operating results and financial condition.

If Zoetis’s intellectual property rights are challenged or circumvented, competitors may be able to take advantage of its research and development efforts.

Zoetis’s long-term success largely depends on its ability to market technologically competitive products. Zoetis relies and expects to continue to rely on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret and domain name protection laws, as well as confidentiality and license agreements with Zoetis employees and others, to protect Zoetis’s intellectual property and proprietary rights. If Zoetis fails to obtain and maintain adequate intellectual property protection, it may not be able to prevent third parties from using its proprietary technologies or from marketing products that are very similar or identical to Zoetis’s. Zoetis’s currently pending or future patent applications may not result in issued patents, or be approved on a timely basis, or at all. Similarly, any term extensions that Zoetis seeks may not be approved on a timely basis, if at all. In addition, Zoetis’s issued patents may not contain claims sufficiently broad to protect it

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against third parties with similar technologies or products or provide Zoetis with any competitive advantage, including exclusivity in a particular product area. The scope of Zoetis’s patent claims may also vary between countries, as individual countries have their own patent laws. For example, some countries only permit the issuance of patents covering a novel chemical compound itself, and its first use, and thus further methods of use for the same compound, may not be patentable. Zoetis may be subject to challenges by third parties regarding its intellectual property, including claims regarding validity, enforceability, scope and effective term. The validity, enforceability, scope and effective term of patents can be highly uncertain and often involve complex legal and factual questions and proceedings. Zoetis’s ability to enforce its patents also depends on the laws of individual countries and each country’s practice with respect to enforcement of intellectual property rights. In addition, if Zoetis is unable to maintain its existing license agreements or other agreements pursuant to which third parties grant it rights to intellectual property, including because such agreements expire or are terminated, Zoetis’s operating results and financial condition could be materially adversely affected.

In addition, patent law reform in the United States and other countries may also weaken Zoetis’s ability to enforce its patent rights, or make such enforcement financially unattractive. For instance, in September 2011, the United States enacted the America Invents Act, which will permit enhanced third-party actions for challenging patents and implement a first-to-invent system, and, in April 2012, Australia enacted the Intellectual Property Laws Amendment (Raising the Bar) Act, which provides higher standards for obtaining patents. These reforms could result in increased costs to protect Zoetis’s intellectual property or limit Zoetis’s ability to patent Zoetis’s products in these jurisdictions.

Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies, which could diminish or eliminate sales and profits from those regions and materially adversely affect Zoetis’s operating results and financial condition.

Likewise, in the United States and other countries, Zoetis currently holds issued trademark registrations and has trademark applications pending, any of which may be the subject of a governmental or third party objection, which could prevent the maintenance or issuance of the same and thus create the potential need to rebrand or relabel a product. As Zoetis’s products mature, its reliance on its trademarks to differentiate Zoetis from its competitors increases and as a result, if it is unable to prevent third parties from adopting, registering or using trademarks and trade dress that infringe, dilute or otherwise violate its trademark rights, its business could be materially adversely affected.

Many of Zoetis’s vaccine products and other products are based on, or incorporate, proprietary information, including proprietary master seeds and proprietary or patented adjuvant formulations. Zoetis actively seeks to protect its proprietary information, including its trade secrets and proprietary know-how, by requiring its employees, consultants, other advisors and other third parties to execute proprietary information and confidentiality agreements upon the commencement of their employment, engagement or other relationship. Despite these efforts and precautions, Zoetis may be unable to prevent a third party from copying or otherwise obtaining and using its trade secrets or its other intellectual property without authorization and legal remedies may not adequately compensate Zoetis for the damages caused by such unauthorized use. Further, others may independently and lawfully develop substantially similar or identical products that circumvent Zoetis’s intellectual property by means of alternative designs or processes or otherwise.

The misappropriation and infringement of Zoetis’s intellectual property, particularly in foreign countries where the laws may not protect its proprietary rights as fully as in the United States, may occur even when Zoetis takes steps to prevent it. Zoetis is currently, and expects to be in the future, party to patent lawsuits and other intellectual property rights claims that are expensive and time consuming, and if resolved adversely, could have a significant impact on Zoetis’s business and financial condition. In the future, Zoetis may not be able to enforce intellectual property that relates to its products for various reasons, including licensor restrictions and other restrictions imposed by third parties, and/or that the costs of doing so may outweigh the value of doing so, and this could have a material adverse impact on its business and financial condition.

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Risks Related to Information Technology

Zoetis may be unable to successfully manage its online ordering sites.

In many markets around the world, such as the United States and Brazil, Zoetis provides online ordering sites to customers, often relying on third parties to host and support the application. The operation of Zoetis’s online business depends on its ability to maintain the efficient and uninterrupted operation of its online order-taking and fulfillment operations. Risks associated with Zoetis’s online business include: disruptions in telephone service or power outages; failures of the computer systems that operate its website, including inadequate system capacity, computer viruses, human error, changes in programming, security breaches, system upgrades or migration of these services to new systems; reliance on third parties for computer hardware and software as well as delivery of merchandise to its customers; rapid technology changes; credit card fraud; natural disasters or adverse weather conditions; power and network outages; changes in applicable federal and state regulations; liability for online content; and consumer privacy concerns. Problems in any one or more of these areas could have a material adverse effect on Zoetis’s operating results and financial condition and could damage Zoetis’s reputation.

Zoetis depends on sophisticated information technology and infrastructure.

Zoetis relies on various information systems to manage its operations, and it increasingly depends on third parties and applications on virtualized (“cloud”) infrastructure to operate and support its information technology systems. These third parties include large established vendors, as well as many small, privately owned companies. Failure by these providers to adequately service Zoetis’s operations or a change in control or insolvency of these providers could have an adverse effect on Zoetis’s business, which in turn may materially adversely affect its operating results and financial condition.

In connection with the IPO and the Separation, Zoetis has substantially changed a number of its business processes, including changes in its financial reporting and supply chain processes. In order to support the new business processes under the terms of Zoetis’s transitional services agreement with Pfizer, Zoetis has made significant configuration and data changes within some of Zoetis’s information technology systems. If Zoetis’s information technology and processes are not sufficient to support its business and financial reporting functions, or if Zoetis fails to properly implement its new business processes, Zoetis’s financial reporting may be delayed or inaccurate and Zoetis’s operations may be adversely affected and, as a result, Zoetis’s operating results and financial condition may be materially adversely affected.

In addition, over the next few years, Zoetis expects to implement new business systems to support its operations including an enterprise resource planning system to better integrate its manufacturing, financial, commercial and business operations. Transitioning to new systems, integrating new systems into current systems or any disruptions or malfunctions (including from circumstances beyond Zoetis’s control) affecting Zoetis’s information systems could cause critical information upon which Zoetis relies to be delayed, unreliable, corrupted, insufficient or inaccessible. Any of these potential issues, individually or in aggregation, could have a material adverse effect on Zoetis’s operating results and financial condition.

Even if Zoetis is able to implement these systems successfully, all technology systems, despite implementation of security measures, are vulnerable to disability, failures or unauthorized access. If Zoetis’s information technology systems were to fail or be breached, this could materially adversely affect its ability to perform critical business functions and sensitive and confidential data could be compromised.

Zoetis may be unable to adequately protect Zoetis’s customers’ privacy or Zoetis may fail to comply with privacy laws.

The protection of customer, employee and company data is critical and the regulatory environment surrounding information security, storage, use, processing, disclosure and privacy is demanding, with the

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frequent imposition of new and changing requirements. In addition, Zoetis’s customers expect that Zoetis will adequately protect their personal information. Any actual or perceived significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data or Zoetis’s failure to comply with federal, state, local and foreign privacy laws could damage its reputation and result in lost sales, fines and lawsuits. Despite Zoetis’s considerable efforts and technology to secure its computer network, security could be compromised, confidential information could be misappropriated or system disruptions could occur. Zoetis’s systems and procedures meet the payment card industry (“PCI”) data security standards, which require periodic audits by independent third parties to assess compliance. Failure to comply with the security requirements or rectify a security issue may result in fines and the imposition of restrictions on Zoetis’s ability to accept payment by credit or debit cards. In addition, PCI is controlled by a limited number of vendors that have the ability to impose changes in PCI’s fee structure and operational requirements on Zoetis without negotiation. Such changes in fees and operational requirements may result in Zoetis’s failure to comply with PCI security standards, as well as significant unanticipated expenses. Such failures could materially adversely affect Zoetis’s operating results and financial condition.

Risks Related to the Notes

Zoetis has substantial indebtedness.

Zoetis has a significant amount of indebtedness, which could materially adversely affect its operating results, financial condition and liquidity. As of June 30, 2013, Zoetis had approximately $3.6 billion of total unsecured indebtedness outstanding. In addition, Zoetis has entered into an agreement for a five-year revolving credit facility and a commercial paper program each with a capacity of up to $1.0 billion. While Zoetis currently does not have any amounts drawn under the credit facility nor any commercial paper issued under the commercial paper program, it may incur indebtedness under these arrangements in the future.

Zoetis may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If Zoetis does so, the risks related to its high level of debt could intensify. Specifically, Zoetis’s high level of debt could have important consequences, including:

The notes are unsecured and effectively junior to Zoetis’s secured indebtedness.

The notes are unsecured general obligations. Holders of existing and future secured indebtedness will have claims that are prior to your claims as holders of the notes, to the extent of the assets securing such indebtedness. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, Zoetis’s pledged assets would be available to satisfy obligations of our secured indebtedness before any payment could be made on the notes. To the extent that such assets cannot satisfy in full Zoetis’s secured indebtedness, the holders of

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such indebtedness would have a claim for any shortfall that would rank equally in right of payment with the notes. In any of the foregoing events, Zoetis cannot assure you that there will be sufficient assets to pay amounts due on the notes. As a result, holders of the notes may receive less, ratably, than holders of our secured indebtedness.

Zoetis is a holding company and holders of the notes will be effectively subordinated to all Zoetis’s subsidiaries’ indebtedness and obligations.

Zoetis conducts its operations through its subsidiaries. Accordingly, payment of its obligations under the notes will depend on the generation of cash flow by its subsidiaries, including its international subsidiaries, and their ability to make such cash available to Zoetis, by dividend, debt repayment or otherwise. Zoetis’s subsidiaries will not have any obligation to pay amounts due on the notes or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments on the notes. Each subsidiary is a distinct legal entity, and under certain circumstances, legal, tax and contractual restrictions may limit Zoetis’s ability to obtain cash from its subsidiaries. In addition, the notes will be structurally subordinated to all existing and future indebtedness and other obligations of Zoetis’s subsidiaries. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding of any of Zoetis’s subsidiaries, creditors of Zoetis’s subsidiaries will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to Zoetis, except to the extent Zoetis may also have a claim as a creditor. As of June 30, 2013, the aggregate amount of assumed total liabilities (including debt, trade and other payables) of Zoetis’s subsidiaries was approximately $5.4 billion. In the event that Zoetis do not receive distributions from its subsidiaries, Zoetis may be unable to make required payments on the notes.

Zoetis may not have the funds necessary to finance the change of control offer required by the indenture governing Zoetis’s senior notes.

Upon the occurrence of a change of control of Zoetis and a downgrade below investment grade by Moody’s Investor Services, Inc. and Standard & Poor’s Rating Services, Zoetis will be required to offer to repurchase all of its outstanding senior notes. Zoetis did not receive any proceeds from the sale of the $1.0 billion aggregate principal amount of the Pfizer-owned notes and Zoetis paid an amount of cash equal to substantially all of the net proceeds that Zoetis received in the senior notes offering to Pfizer prior to the completion of the IPO. As a result of these and other factors, Zoetis may not have sufficient funds available to finance a change of control offer.

Zoetis’s credit ratings may not reflect all risks of your investment in the notes.

The credit ratings assigned to the notes are limited in scope, and do not address all material risks relating to an investment in the notes, but rather reflect only the view of each rating agency at the time the rating is issued. There can be no assurance that such credit ratings will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the applicable rating agencies, if, in such rating agency’s judgment, circumstances so warrant. Credit ratings are not a recommendation to buy, sell or hold any security. Each agency’s rating should be evaluated independently of any other agency’s rating. Actual or anticipated changes or downgrades in Zoetis’s credit ratings, including any announcement that Zoetis’s ratings are under further review for a downgrade, could affect the market prices of the notes and increase Zoetis’s borrowing costs.

Active trading markets may not develop for the notes and the notes may trade at a discount from their initial offering price.

The exchange notes are new issuances of securities for which no public trading market currently exists. Accordingly, a liquid market for the notes may not develop or be maintained. The notes will not be listed on any national securities exchange or be quoted on any automated dealer quotation system. In addition, Zoetis cannot

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assure you that the market for the notes will be free from disruptions that may adversely affect the prices at which you may sell the notes. In addition, the notes may trade at a discount from their initial offering prices, depending upon prevailing interest rates, the market for similar notes, Zoetis’s performance and other factors.

Risks Related to Zoetis’s Relationship with Pfizer

Zoetis may not achieve some or all of the expected benefits of the Separation and the Distribution.

Zoetis may not be able to achieve the full strategic and financial benefits expected to result from the Separation and the Distribution, or such benefits may be delayed or not occur at all. These expected benefits include the following:

Zoetis may not achieve the anticipated benefits of the Separation and the Distribution for a variety of reasons, which could adversely affect Zoetis’s operating results and financial condition.

As a result of the Separation, Zoetis no longer benefits from Pfizer’s brand, reputation, capital base and other resources.

Prior to the IPO, as a business unit of Pfizer, Zoetis generally used the name “Pfizer Animal Health,” and it believes the association with Pfizer and Pfizer’s globally recognized brand and perceived high-quality products contribute to Zoetis’s ability to build relationships with its customers. Zoetis’s loss of the use of the “Pfizer” name could adversely affect Zoetis’s ability to attract and retain customers, which could result in reduced sales of Zoetis products, and could impact Zoetis’s ability to attract and retain colleagues, which could result in extended vacancies in key or critical positions.

The loss of Pfizer’s scale, capital base and financial strength may also prompt suppliers to reprice, modify or terminate their relationships with Zoetis. In addition, Zoetis’s separation from Pfizer may cause some of our existing agreements and licenses to be terminated. Zoetis cannot predict with certainty the effect the Separation and the Distribution may have on its business, its clients, vendors or other persons, or whether its new brand, Zoetis, will be accepted in the marketplace.

Pfizer may compete with Zoetis.

Pfizer is not restricted from competing with Zoetis in the animal health business, including as a result of acquiring a company that operates an animal health business. Due to the significant resources of Pfizer, including financial resources, name recognition and know-how resulting from the previous management of Zoetis’s business, Pfizer could have a significant competitive advantage over Zoetis should it decide to engage in the type of business Zoetis conducts, which may cause Zoetis’s operating results and financial condition to be materially adversely affected.

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Certain of Zoetis’s directors may have actual or potential conflicts of interest because of their positions with Pfizer.

Certain of our directors are employed by Pfizer or may own Pfizer common stock, options to purchase Pfizer common stock or other Pfizer equity awards. Certain of these holdings may be individually significant to these directors as compared with such director’s total assets. These directors’ positions at Pfizer and/or the ownership of any Pfizer equity or equity awards create, or may create the appearance of, conflicts of interest when these directors are faced with decisions that could have different implications for Pfizer than for us.

To preserve the tax-free treatment to Pfizer and/or its stockholders of the Distribution and certain related transactions, Zoetis may not be able to engage in certain transactions.

To preserve the tax-free treatment to Pfizer and/or its stockholders of the Distribution and certain related transactions, under the tax matters agreement, Zoetis is restricted from taking any action that prevents such transactions from being tax-free for U.S. federal, state, local and foreign income tax purposes. These restrictions may limit Zoetis’s ability to pursue certain strategic transactions or engage in other transactions, including taking certain actions with respect to the 2023 exchange notes and 2023 unregistered notes and using Zoetis common stock to make acquisitions in connection with equity capital market transactions that might increase the value of Zoetis’s business. See “Certain Relationships and Related Party Transactions—Relationship between Zoetis and Pfizer—Tax Matters Agreement.”

The assets and resources that Zoetis acquired from Pfizer in the Separation may not be sufficient for Zoetis to operate as a standalone company, and Zoetis may experience difficulty in separating its assets and resources from Pfizer.

Because Zoetis has not operated as a standalone company in the past, it may have difficulty doing so. Zoetis may currently need, and in the future will be required, to acquire assets and resources separate from those provided by Pfizer to Zoetis, and in connection with the Separation, may also face difficulty in separating Zoetis’s assets from Pfizer’s assets and integrating newly acquired assets into Zoetis’s business. Zoetis’s business, financial condition and results of operations could be harmed if it has difficulty operating as a standalone company, fails to acquire assets that prove to be important to Zoetis’s operations or incurs unexpected costs in separating Zoetis’s assets from Pfizer’s assets or integrating newly acquired assets.

Zoetis may not be able to fully realize the expected benefits of its R&D agreement with Pfizer.

Prior to the Separation, as a business unit of Pfizer, Zoetis had the ability to leverage Pfizer’s proprietary compound library and database to identify, research and develop compounds suitable as new product candidates for the animal health field. As part of the Separation, Zoetis entered into an R&D collaboration and license agreement with Pfizer, which is referred to as the “R&D agreement.” Pursuant to the R&D agreement, subject to certain restrictions, Zoetis will have continued access to Pfizer’s compound library and database for a period of seven years from the Separation date and will have, subject to Pfizer’s approval, the possibility to exclusively license compounds from Pfizer that Zoetis develops under the R&D agreement.

While the R&D agreement is intended to bolster Zoetis’s post-Separation R&D capabilities, certain terms of the R&D agreement may limit its ability to achieve this expected benefit, including:

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Each of the foregoing terms and Pfizer’s other rights under the R&D agreement and related licenses (if any), could limit Zoetis’s ability to realize the expected benefits of the R&D agreement. If Zoetis fails to achieve the expected benefits of the R&D agreement, it may be more difficult, time consuming or expensive for it to develop and commercialize certain new products, or may result in its products being later to market than those of its competitors. Zoetis may experience delays in new product development, which may result in Zoetis’s loss of the first-in-class products in a given therapeutic area.

For a summary description of the terms of the R&D collaboration and license agreement, see “Certain Relationships and Related Party Transactions—Relationship between Zoetis and Pfizer—Research and Development Collaboration and License Agreement.”

Zoetis is dependent on Pfizer to prosecute, maintain and enforce certain intellectual property.

Under the patent and know-how license agreement (Pfizer as licensor), Pfizer is responsible for filing, prosecuting and maintaining patents that Pfizer licenses to Zoetis. Pfizer also has the first right, and in some cases the sole right, to enforce such patents in the animal health field, and in the case of the human health field, subject to certain exceptions, the sole right to enforce the licensed patents. If Pfizer fails to fulfill its obligations or chooses to not enforce the licensed patents under these agreements, Zoetis may not be able to prevent competitors from making, using and selling competitive products, which could have an adverse effect on Zoetis’s business.

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

Under the patent and know-how license (Pfizer as licensor), Pfizer licenses to Zoetis certain of its intellectual property. If Zoetis fails to comply with Zoetis’s obligations under this license agreement and Pfizer exercises its right to terminate it, Zoetis’s ability to continue to research, develop and commercialize products incorporating that intellectual property will be limited. In addition, in circumstances where Pfizer has an interest in the licensed intellectual property in connection with its human health development programs, Zoetis’s rights to use the licensed intellectual property are restricted and/or in limited instances, subject to Pfizer’s right to terminate such license at will. These limitations and termination rights may make it more difficult, time consuming or expensive for Zoetis to develop and commercialize certain new products, or may result in Zoetis’s products being later to market than those of Zoetis’s competitors.

For a summary description of the terms of the patent and know-how license (Pfizer as licensor), see “Certain Relationships and Related Party Transactions—Relationship between Zoetis and Pfizer—Intellectual Property License Agreements.”

Zoetis’s historical combined financial data is not necessarily representative of the results Zoetis would have achieved as a standalone company and may not be a reliable indicator of Zoetis’s future results.

Zoetis’s historical combined financial data included in this prospectus does not reflect the financial condition, results of operations or cash flows Zoetis would have achieved as a standalone company during the periods presented or those Zoetis will achieve in the future. This is primarily the result of the following factors:

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Zoetis’s financial condition and future results of operations, after giving effect to the Separation, will be materially different from amounts reflected in Zoetis’s historical combined financial statements included in this prospectus. As a result of the Separation, it may be difficult for investors to compare Zoetis’s future results to historical results or to evaluate Zoetis’s relative performance or trends in Zoetis’s business.

Zoetis has incurred and will continue to incur significant charges in connection with the Separation and incremental costs as a standalone public company.

Zoetis will need to replicate or replace certain functions, systems and infrastructure to which Zoetis no longer has the same access after the Separation. Zoetis may also need to make investments or hire additional employees to operate without the same access to Pfizer’s existing operational and administrative infrastructure. These initiatives may be costly to implement. Due to the scope and complexity of the underlying projects relative to these efforts, the amount of total costs could be materially higher than Zoetis’s estimate, and the timing of the incurrence of these costs is subject to change.

Prior to the Separation, Pfizer performed or supported many important corporate functions for Zoetis. Zoetis’s combined financial statements reflect charges for these services on an allocation basis. Following the Separation, many of these services are governed by Zoetis’s transitional services agreement with Pfizer. Under the transitional services agreement, Zoetis is able to use these Pfizer services for a fixed term established on a service-by-service basis. However, Zoetis generally has the right to terminate a service earlier if it gives notice to Pfizer. Partial reduction in the provision of any service requires Pfizer’s consent. In addition, either party is able to terminate the agreement due to a material breach of the other party, upon prior written notice, subject to limited cure periods.

Zoetis pays Pfizer mutually agreed-upon fees for these services, based on Pfizer’s costs of providing the services. During the two years following the IPO, the markup for these services will be 0% and, for the remainder of the term of the agreement, Pfizer may introduce a markup of 7%, which Zoetis believes is consistent with arm’s length pricing for the services provided. However, since the transitional services agreement was negotiated in the context of a parent-subsidiary relationship, the terms of the agreement, including the fees charged for the services, may be higher or lower than those that would be agreed to by parties bargaining at arm’s length for similar services and may be higher or lower than the costs reflected in the allocations in Zoetis’s historical financial statements. Third party costs are passed through to Zoetis at Pfizer’s or its affiliates’ cost. In addition, while these services are being provided to Zoetis by Pfizer, Zoetis’s operational flexibility to modify or implement changes with respect to such services or the amounts Zoetis pays for them is limited.

Zoetis may not be able to replace these services or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to those that Zoetis receives from Pfizer under the transitional services agreement. Additionally, after the agreement terminates, Zoetis may be unable to sustain the services at

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the same levels or obtain the same benefits as when it was receiving such services and benefits from Pfizer. When Zoetis begins to operate these functions separately, if Zoetis does not have Zoetis’s own adequate systems and business functions in place, or is unable to obtain them from other providers, Zoetis may not be able to operate its business effectively or at comparable costs, and its profitability may decline. In addition, Zoetis has historically received informal support from Pfizer, which may not be addressed in the transitional services agreement. The level of this informal support may diminish or be eliminated in the future.

If there is a later determination that the Distribution 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, then Pfizer and its stockholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.

Pfizer has received a private letter ruling from the IRS substantially to the effect that, among other things, the Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the U.S. Internal Revenue Code of 1986 (“the Code”). Completion by Pfizer of the Distribution was conditioned on, among other things, the continuing application of Pfizer’s private letter ruling from the IRS and the receipt of an opinion of tax counsel, to the effect that, among other things, the Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The ruling and the opinion rely on certain facts, assumptions, representations and undertakings from Pfizer and Zoetis regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not otherwise satisfied, Pfizer and its stockholders may not be able to rely on the ruling or the opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the private letter ruling and opinion of tax counsel, the IRS could determine on audit that the Distribution or certain related transactions are taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the private letter ruling, or for other reasons, including as a result of certain significant changes in the stock ownership of Pfizer or Zoetis after the Distribution. If the Distribution or certain related transactions are determined to be taxable for U.S. federal income tax purposes, Pfizer and/or its stockholders could incur significant U.S. federal income tax liabilities, and Zoetis could incur significant liabilities under applicable law or under the tax matters agreement.

Risks related to the Exchange Offer

You may not be able to sell your unregistered notes if you do not exchange them for exchange notes in the exchange offer.

If you do not exchange your unregistered notes for exchange notes in the exchange offer, your unregistered notes will continue to be subject to the restrictions on transfer as stated in the legend on the unregistered notes. In general, you may not reoffer, resell or otherwise transfer the unregistered notes in the United States unless they are:

Holders of the unregistered notes who do not tender their unregistered notes will have no further registration rights under the registration rights agreement.

Holders who do not tender their unregistered notes will not have any further registration rights under the registration rights agreement or otherwise and will not have rights to receive additional interest.

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The market for unregistered notes may be significantly more limited after the exchange offer, and you may not be able to sell your unregistered notes after the exchange offer.

If unregistered notes are tendered and accepted for exchange in the exchange offer, the trading market for unregistered notes that remain outstanding may be significantly more limited. As a result, the liquidity of the unregistered notes not tendered for exchange could be adversely affected. The extent of the market for unregistered notes and the availability of price quotations would depend upon a number of factors, including the number of holders of unregistered notes remaining outstanding and the interest of securities firms in maintaining a market in the unregistered notes. An issue of securities with a similar outstanding market value available for trading, which is called the “float,” may command a lower price than would be comparable to an issue of securities with a greater float. As a result, the market price for unregistered notes that are not exchanged in the exchange offer may be adversely affected as unregistered notes exchanged in the exchange offer reduce the float. The reduced float also may make the trading price of the unregistered notes that are not exchanged more volatile.

Your unregistered notes will not be accepted for exchange if you fail to follow the exchange offer procedures and, as a result, your unregistered notes will continue to be subject to existing transfer restrictions and you may not be able to sell your unregistered notes.

We will not accept your unregistered notes for exchange if you do not follow the exchange offer procedures. We will issue exchange notes as part of the exchange offer only after timely receipt of your unregistered notes, a properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you want to tender your unregistered notes, please allow sufficient time to ensure timely delivery. If we do not receive your unregistered notes, letter of transmittal and other required documents by the Expiration Date of the exchange offer, we will not accept your unregistered notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of unregistered notes for exchange. If there are defects or irregularities with respect to your tender of unregistered notes, we will not accept your unregistered notes for exchange.

Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes.

Based on interpretations of the staff of the SEC contained in no action letters with third parties unrelated to us, we believe that you may offer for resale, resell or otherwise transfer the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act so long as the conditions described in “The Exchange Offer—Purpose of the Exchange Offer” are satisfied. However, in some instances, including those described in this prospectus under “Plan of Distribution,” you will remain obligated to comply with certain prospectus delivery requirements of the Securities Act to transfer your exchange notes. In these cases, if you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your exchange notes under the Securities Act, you may incur liability under the Securities Act. We do not and will not assume, or indemnify you against, this liability.

An active trading market may not develop for the exchange notes.

There is no existing trading market for the exchange notes. We have not applied for, nor do we intend to apply for, listing or quotation of the exchange notes on any exchange or any automated dealer quotation system. We cannot assure you that a trading market for the exchange notes will develop or exist. Therefore, we do not know how liquid the market for the exchange notes might be, nor can we make any assurances regarding the ability of holders of the exchange notes to sell their exchange notes, the amount of exchange notes to be outstanding following the exchange offer or the price at which the exchange notes might be sold. As a result, the market price of the exchange notes could be adversely affected. Any such disruptions in the market for debt securities may have an adverse effect on holders of the exchange notes.

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