Good day and welcome to the First Quarter 2016 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is John O'Connor, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. In the interest of time, we ask that you limit yourself to one question and then queue up again with any follow-ups. It is now my pleasure to turn the floor over to John O'Connor. John, you may begin.

Thank you, operator. Good morning and welcome to the Zoetis first quarter 2016 earnings call. I'm joined today by Juan Ramón Alaix, our Chief Executive Officer; and Paul Herendeen, our Chief Financial Officer. Before we begin, I'll remind you that our remarks today will include forward-looking statements and actual results could differ materially for those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement in today's press release and our SEC filings including, but not limited to, our 2015 annual report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and in the company's 8-K filing dated today, May 4, 2016. We will also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Juan Ramón. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, John, and good morning, everyone. We delivered another solid quarter, demonstrating our steady and predictable growth, and confirming the strength of Zoetis as the industry leader in animal health. The diversity of our portfolio in terms of geographies, species and therapeutic areas, as well as our business model continues driving our performance. In previous years, we have seen different species leading our growth based on changes in market trends and the mix of products in our portfolio. For example, in 2013, our growth was driven largely by swine and poultry products. In 2014, it was driven by cattle and…

And we will take our first question from Alex Arfaei with BMO Capital. Please go ahead.

Good morning folks and congratulations on the quarter, and congratulations, John, on the promotion. I'm not sure if I got the April cost sales. If you don't mind repeating what the April cost sales were by region? And could you also comment on some of the vaccines that you are developing on your livestock business, particularly the avian vaccine. Thank you very much. We'd appreciate it. Juan Ramón Alaix - Chief Executive Officer & Director: Okay. So, the first question on APOQUEL. Total revenues for APOQUEL in the quarter were $50 million, and U.S. generated $35 million, and in International markets $15 million. These, I guess, it's answering your question on APOQUEL. You also ask about new vaccines. On new vaccines, we have new vaccines for companion animal, and this has been introduced in Europe as well as in the U.S. I mentioned new vaccines that are in the U.S. covering oral injectable intranasal, and I mentioned this for a specific Bordetella bronchiseptica disease. So, this is something that definitely represents a significant upgrade on our portfolio for companion animal infections. We also launched a new vaccine in China, used for swine, and it is combination of vaccine for PRRS with a combination for swine fever in pigs. So another opportunity for increasing our presence in China, and increasing our presence in the swine market in China. That is a significant opportunity for Zoetis. Next question, please.

And we'll go next to Louise Chen with Guggenheim. Please go ahead.

Hi. Thanks for taking my question. So you guys talked about maybe exceeding your operational efficiency target of $300 million. I was wondering if you could give more color there on the potential upside, and then how this could positively impact your 2017 guidance and margin expectations? Thanks. Juan Ramón Alaix - Chief Executive Officer & Director: Well, we already incorporated in our guidance for 2017 the potential exceeding of the $300 million. At this point, we have not provided any concrete amount of this existing opportunity – is something that in the future. As we move into the programs, we'll be sharing that with you. Next set of question, please.

Thank you. And we'll go next to Erin Wilson with Credit Suisse. Please go ahead. Erin Wilson - Credit Suisse Securities (USA) LLC (Broker): A follow-up to that question on the restructuring, SKU rationalization and overall cost structure initiatives. How should we think about the quarterly progression throughout the year? And then as a second question, how would you characterize the current environment in the U.S. livestock business? You mentioned weather impacting the business in the quarter, but how should we think about the dynamics now? Thanks. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Yes. Erin, it's Paul. I'll take the how do you think about the OpEx roll out. As we said, we expect to enter 2017 with the cost structure trim down to its new inefficient level. We have some work to go on that and I think that if you're a quarterly modeler, I know you are, I think you got to think about it as continuing to show in positive impact through Q4. It's not like we're going to finish this in Q2, we're not going to finish in Q3, there is more to come that you will see evidenced in our cost structure in Q4. So, I don't know if that exactly answers it. But, yes, suffice to say that the improvements will continue to occur throughout 2016 and with a good chunk in Q4 2016. Do you want to take the last one? Juan Ramón Alaix - Chief Executive Officer & Director: Yeah. Let me cover the question on the U.S. livestock. Let me start with the cattle. On the cattle, there are two segments, beef and dairy. Let's talk about beef. Beef, we reported that there were probably milder winter conditions that impacted our premium net products, but the…

And we'll go next to John Kreger with William Blair. Please go ahead. John C. Kreger - William Blair & Co. LLC: Hi. Thanks very much. Can you just talk a little bit about the strategy around dermatitis in dogs now that you've got IL-31 out there as well as APOQUEL? What are you learning about the market and how best are you using those two products? Thanks. Juan Ramón Alaix - Chief Executive Officer & Director: Well, it's still very early because, first, APOQUEL has been – because of the limitations in terms of supply – has been mostly used in chronic dogs with dermatitis. We expect now that in May we are opening the market without restrictions. They will be expanding the market not only to chronic but also to acute. In the case of IL-31, IL-31 has been introduced as a conditional license. So what we are doing is to gain experience in the market by doing some activity with dermatologists, veterinarian dermatologists. This also has the objective of collecting all the data that will support full license in terms of efficacy of the product, but we are convinced that there are two products that they are very complementary and one is oral, the other one is injectable. There are some dogs which are not managing well swallowing pills. This is something that IL-31 will cover. There also, not everyone is responding the same way to treatment. So we see that APOQUEL, in some cases, is working very well; IL-31, in some of our cases, is also working very well. So the veterinarian will have the option to choose what is the best treatment there, depending on specific cases of dogs with atopic dermatitis or with any kind of skin conditions. Finally, APOQUEL will have broader indications, while IL-31 will have the indication of atopic dermatitis. Next question, please.

We'll go next to Chris Schott with JPMorgan.

Great. Thanks very much for the questions and congrats, John. First, just update on SIMPARICA and how you're thinking about the rollout of the product? I guess, should we think about a slower ramp here, given entrenched competition, and what type of share do you think Zoetis can ultimately capture of this obviously very large end market? Thanks. Juan Ramón Alaix - Chief Executive Officer & Director: So, as I mentioned, it's early, the introduction of SIMPARICA. SIMPARICA has been introduced in the U.S. and in a few European markets. We just plan to introduce the product in the rest of the markets where the product has been approved. SIMPARICA has been launched with very strong publications and comparing SIMPARICA against other products, oral and topical. And we have seen that SIMPARICA, it's showing very positive comparison in terms of faster action. So it's very fast on killing ticks and fleas and also very important. So, the SIMPARICA is keeping full efficacy during the duration of the treatment, which is also very important and much better than some of our competitors. So, we are definitely convinced that SIMPARICA will have a place in the market. I think we are not yet establishing what is the target in terms of market share, but definitely we expect that we'll gain the market share that corresponds to a company that our strength, the capabilities and our operations in the market. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Yeah, it's Paul. I just want to follow-on on that. I think that the overall market size is for parasiticides is about $4 billion. The dogs' portion is about $2.5 billion; the fastest growing segment are the oral parasiticides. But if you want to think about the market, it's kind of in that $2.5 billion market and I think that we believe that there are two things. One, with our footprint and the quality of our salesforces we have the opportunity to certainly penetrate that $2.5 billion market and participate in the fastest growing part. The second thing I want to point out is, this is a self-developed product, and that means the economics of this product to us as compared with the economics of the product to Merial and to Merck that we're in license through third-parties. This is a very good product for us and we're really excited about both the prospects of penetrating their market, but also getting the fruits of our investment in R&D. So this is a great story and we'll see how it plays out.

Thank you, Paul. Juan Ramón Alaix - Chief Executive Officer & Director: Next question, please.

We'll go next to Jeff Holford with Jefferies. Please go ahead.

Hi. Good morning, everyone. Thanks very much for taking my questions. So Elanco licensed a new canine osteoarthritis drug just in the last quarter. I wonder if you could talk about that in terms of why you didn't feel compelled to license that asset and just remind us what products do you have in that area and if you're very active in terms of R&D late-stage development there and how that might impact your franchise? Thanks very much. Juan Ramón Alaix - Chief Executive Officer & Director: Well, thank you for the question, Jeff, and we believe that we have a portfolio in pain, which is very strong. We have RIMADYL in all markets. We also have in the European market another product, which is also complementary to RIMADYL, which is called TROCOXIL and very important. So we have a lot of experience in this area, and this expertise is not only in terms of commercial, but also in terms of R&D. And in R&D, it's an area of focus and we have programs in pain that I'm convinced that will strengthen our portfolio in the future. Next question, please.

We'll go next to Mark Schoenebaum with Evercore ISI.

Hello. Hi, guys. Thank you for taking my questions. It's actually Vlad Nikolenko on behalf of Mark Schoenebaum. Congrats with the strong quarter and, John, congrats on promotion. So I have two somewhat related questions. First, more about macro trends in general. So your official guidance for 2016 and 2017 implies a strong operational growth in terms of revenue like mid to high single-digits. So I'm wondering if we can think about this revenue growth over the longer term that just will continue to grow in line with the rest of the industry – animal health industry or at some point, we need to expect some slowdown of this trend. And second, somewhat related question is about segments. Do you have more color about the potential long-term growth in different segments of products, antibiotics versus vaccines versus other pharmaceuticals and other segments that you report? Thank you. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Vlad, and let me first describe what are the macro trends. So we see that the overall macro trend that maybe are is lowering down the growth in some markets. It's not affecting the same way to our industry. And one example, so we have seen that in Brazil, the GDP, it's declining, while the GDP for agriculture including their livestock is growing. So, again, so it's – in the animal health industry, I think we cannot extrapolate the macro trends which are affecting other sectors to our trends. And our trends are based on population, it's still continue growing; middle class, which is still increasing, and also they need to improve productivity because – well, the world is being challenged with the need of more food with fewer resources. And companies like us is that we can bring this type of…

We'll go next to Douglas Tsao with Barclays. Please go ahead.

Hi. Good morning. Thanks for the questions. Just on the IL-31, what is your expectation in terms of timing for going from a conditional to a full approval and just obviously there's some limitations in terms of your promotion of the product right now. Just how widely is that being used in terms of veterinarians? Juan Ramón Alaix - Chief Executive Officer & Director: Thank you, Doug for the question. So we expect but there is something that will depend on the final approval from the USDA. We expect this approval by the end of the year. So now what we are doing, it's a gaining experience and also collecting the data in terms of efficacy and this will be submitted to the USDA for final approval of the product and is related to the U.S. we have similar partner in Canada and a different one in Europe. Also, we expect in Europe this product approved in the future. So today it's used under this conditional license. So the use is quite limited because we're just going to fewer customers in the U.S. mostly veterinarian dermatologist, some other customers are using the product. Now the objective is not really to generate significant revenue growth but to gain experience of the product and making sure that the product it's generating the amount of data that would support full license. We're convinced that IL-31 will be an important product in our portfolio and very important so it's – Zoetis, it's developing a franchise which is this skin conditions, itching, atopic dermatitis. And with two products in the market I think it might have been that we have very strong position with it the future opportunities. Next question please.

We are going next to Jami Rubin with Goldman Sachs.

Good morning. This is Divya Harikesh on behalf of Jami Rubin. Just wanted to get your latest thoughts on capital allocation. Are there other assets that look more attractive at current valuation or areas that are of particular interest to you. Also how much leverage would you consider given the market's increasing concern on leverage levels for companies. Thank you. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: This is Paul. I'll take that on the capital allocation front. Of course, we continue to – I think like most companies and we focus first on what kind of capital can we allocate within our company to drive incremental revenue and profit growth that is always going to be very high return activity. So, first thing we do is try to max out programs inside that can drive revenue and that falls in the bunch of categories that's – yeah that could be incremental salesforce, it could be investment in DTC advertising to grow markets, it could be incremental investment in R&D to develop new products. It could be incremental CapEx to create a technology platform. So it's all those things. So we do that first. The second piece which is I think what you're asking about is outside. So we look outside on what sorts of opportunities do we see. We see a very consistent flow of what I'll call smaller deals that we do every single year that none of which I think on an individual basis is going to be exciting to the market at large, but in the aggregate help us one, feed our R&D effort because we can acquire technologies and things that feed R&D. Second is small add-ons that we just continually do and yeah that can be anywhere from $40 million…

We'll go next to David Risinger with Morgan Stanley. David R. Risinger - Morgan Stanley & Co. LLC: Right. Thank you very much. So, I was a little bit on and off the call. I just have a couple of questions on the guidance changes. So for the 2016 guidance, Paul, what percentage of the EPS guidance increase was due to operations and what percentage was due to FX? And then for 2017, obviously, you haven't updated that guidance for operating performance; you've only updated it for FX. When do you expect to update it for operating performance? Could we expect that after the second quarter results or do we have to wait until the company goes through its full-year annual planning in the fall? Any color on that would be helpful. Thank you. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Yeah. Sure. Thanks for the question, David. It's Paul. I'll take that. I'll go through the – the factors in – the midpoint in the range $0.10 up, $0.03 from FX, $0.04 from stronger operational performance and then the tax rate was a $0.03 helper as well and that gets you to the $0.10 raise at the midpoint of our range in 2016. You're quite right. 2017, we said, we updated our 2017 guidance solely for the favorable change in FX rates. It's 2017 guidance. We're one quarter into 2016. We have a pretty broad range there. You can surmise that our outlook continues to be in that range or we would have adjusted – or adjusted that range. So there is no set time at which we would change our operational view of 2017, but to the extent that we were outside the range for 2017, we'd change it. I'll stop there. Next question, please?

And we'll go next to Kathy Miner with Cowen & Company. Kathy M. Miner - Cowen & Co. LLC: Thank you. Good morning. First, I just had a follow-up on the sarolaner. Could you confirm that you do have full supply now so you're ready for full global launch? And was there any stocking in the first quarter of sarolaner? Second question has to just do on the SKU reduction, you've targeted 5,000 or roughly in total. Can you give us a sense of sort of where that's out right now and does that – is that something that just sort of goes away slowly as the year unfolds or is it more dramatic that they're kind of there until year-end? And also a sense of what therapeutic categories those SKU reductions are coming from. So as we sort of look at that, we can get sense of where some of those reductions will be coming. Thank you. Juan Ramón Alaix - Chief Executive Officer & Director: Okay. Let me start with sarolaner, SIMPARICA now. The name in the market is SIMPARICA and we have no restrictions for this product. We have enough of our product to introduce the product in all markets and where the regulatory authorities have approved. And this, in the U.S., all new markets and we also have operations for Canada and some other countries. So it's something that we don't see any restriction. So, at the time of the launch in the U.S. and also in Europe, there is no any significant loading of the product in the country. So, most of the product was related to samples that we provided to the veterinarians to get familiar with the product. So, we have not generated significant revenues in the first quarter, but we expect that…

And we do have a follow-up from Erin Wilson with Credit Suisse. Erin Wilson - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks so much. Also, I still don't see a balance sheet in the release. I guess my bigger question here is what can you accomplish in the way of working capital improvements near-term, and to address the high inventory days? And then also, how much was the distributor stocking contribution in the quarter? I assume that's related to the vaccine business. Was that material? Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Yeah, it's Paul. Let me take the balance sheet and working capital questions. Yeah, we are working very hard to shrink and then eliminate the gap between when we report our earnings and when we release the balance sheet. We are expecting to file our Q Friday of this week. So, yeah, we've shrunk it to a couple of days. It had been substantially more than that. That's just a – we could not shrink those days in the context of also changing all of our ERP systems et cetera. So we are working on that and our goal is, to be like most other companies, to have our balance sheet on the same day to report earnings. So just know that that's a priority for us and we'll get there. With respect to working capital, you pointed out to the day sales of inventory that we are on at the end of the year. We expect that we can have some pretty sizable improvements in our investment and working capital efficiency. Now with the – thank some higher power of the completion of our SAP implementation where we have every part of our company up on one instance of SAP, we now…

And it appears we have no further questions. I'll return the floor to Juan Ramón for final comments. Paul S. Herendeen - Chief Financial Officer & Executive Vice President: Great. Juan Ramón Alaix - Chief Executive Officer & Director: Thank you very much for your attention. And looking forward for following quarters and also the interaction with all of you. Thank you.

And this does conclude today's teleconference. A replay of today's call will be available in two hours by dialing 800-757-4761 for U.S. listeners and 402-220-7215 for international. Please disconnect your lines at this time, and have a wonderful day.