Zoetis shares slump amid safety concerns for osteoarthritis mAbs; revenue trimmed despite new approvals

What happened

Zoetis has seen its stock drop about 24.8% YTD after safety concerns surfaced for its anti‑NGF osteoarthritis monoclonal antibodies (Librela/Solensia), prompting pharmacovigilance communications and noticeable customer hesitancy. Management has cut revenue expectations in the affected therapy lines even as the company secured several new approvals intended to stabilize overall growth. The DeepValue master report had already listed Librela/Solensia safety outcomes as a primary watch item and warned that material regulatory or adoption setbacks would undermine the growth mix. Zoetis’ strengths — scale R&D, entrenched dermatology and parasiticide franchises, and strong free cash flow supporting a $6B repurchase plus dividends — provide meaningful downside buffers but do not eliminate regulatory or adoption risk. Short term this is an execution and adoption problem that raises the probability of guidance volatility; the key next moves are pharmacovigilance trends, any FDA/CVM label actions, and management’s capital‑return pacing.

Implication

In the near term, investors should assume elevated downside risk because safety communications or label restrictions on Librela/Solensia could materially curtail adoption and companion‑animal revenue growth. Zoetis’ strong free cash flow and the $6B repurchase authorization provide a margin of safety, but buybacks and dividends cannot substitute for sustained organic growth if mAb uptake stalls. Watch upcoming quarterly guidance, product‑level revenue disclosures, and any FDA/CVM communications closely; pharmacovigilance data are the critical input for near‑term positioning. If adverse‑event rates normalize and approvals translate into uptake, the core thesis (scale R&D, resilient dermatology/parasiticides, and cash compounding) remains intact and the pullback may present a buying opportunity. Conversely, material label changes, persistent negative safety trends, or distributor/channel disruption would warrant re‑rating the shares lower and moving to NEUTRAL/HOLD while reassessing long‑term valuation versus execution risk.

Thesis delta

Prior stance (BUY/LONG) remains, but conviction is tempered: the recent safety‑driven revenue cuts and sharp share decline elevate near‑term regulatory and adoption risk. We will move to HOLD/UNDERWEIGHT if pharmacovigilance trends, label actions, or sustained uptake weakness materially impair Librela/Solensia adoption or companion‑animal growth visibility.