Intelligencer Journal/Lancaster New Era

Zoetis scores with animal meds
BY MICHAEL J., de la MERCED, New York Times

Making medicines for livestock and pets may not seem to be as sexy a business as social networking, but Pfizer's animal health unit is poised to enjoy the biggest stock market debut since Facebook's offering last spring.

The Pfizer division, known as Zoetis, raised $2.2 billion in its initial public offering Thursday, exceeding expectations by pricing its stock at $26 a share, above the expected range of $22 to $25 a share. The sale values the company at about $13 billion.

The spinoff is a welcome sign for Wall Street that the IPO market is finally returning, eight months after Facebook's stumbles helped prompt a chill among investors.

In many ways, Zoetis (pronounced "zoh-EH-tis") is as far from a fresh-faced Internet darling as possible. Formed six decades ago, the business focuses on making and selling medicines for livestock and pets.

Zoetis is solidly profitable, having earned $446 million on top of $3.2 billion in revenue for the first nine months of last year. And the company has increased its earnings for each of the last three years.

Zoetis' central pitch to potential investors is relatively simple: It is the biggest player in an industry that is rapidly growing, seizing on rising pet adoption and consumption of meat around the world.

The company's products aren't subject to intense competition from generic rivals, an issue Pfizer often confronts.

And because customers pay for the medicines out of pocket, Zoetis doesn't need to worry about dealing with insurers.

All that has helped generate demand unseen since at least Facebook's $16 billion offering.

Zoetis' stock sale was more than 17 times oversubscribed, according to a person with direct knowledge of the matter. Even major institutional investors received only a fraction of the shares they requested.

"This deal has been talked about for months," said Scott Sweet, the senior managing director of IPOboutique.com. "It's almost a circuslike atmosphere."

In a sign of its belief in Zoetis' prospects, Pfizer plans to hold on to 413.9 million Class B shares, which give it 10 times the voting power of public shareholders.

The company is expected to begin trading today on the New York Stock Exchange, under the ticker symbol ZTS.

If Zoetis succeeds as a public company, analysts expect other drugmakers to consider spinning off their own animal health divisions.