Just one month after Zoetis ($ZTS) reported a better-than-expected first quarter, Bill Ackman’s Pershing Square Capital Management–a major shareholder that had once pressured the animal health giant to put itself on the block–sold off 6 million shares of the company, it disclosed to the SEC in a recent filing. The hedge fund has now cut its stake in Zoetis from a high of 8% to about 3.8%.
Pershing Square had already slashed its ownership stake to 5% back in May, when it sold off 16.85 million Zoetis shares. Pershing Square’s William Doyle, who had been serving on Zoetis’ board, stepped down because the hedge fund was “pleased” with the company’s “progress in implementing its previously announced initiatives to simplify operations, improve cost structure, and better allocate resources,” it said in an SEC filing.
Ackman backing off of Zoetis is a major coup for the company’s executive team, led by CEO Juan Ramón Alaix. They had been under pressure from Ackman since late 2014, when the investor started buying up shares and griping about the company’s high cost structure. But instead of bowing to suggestions that Zoetis look for a buyer, Alaix and his team drew up a major reorganization plan.
Since then, the company has worked to eliminate 5,000 underperforming SKUs and it started exiting 10 manufacturing plans. It also laid off 165 employees and refocused its R&D efforts on projects most likely to produce the highest returns. That put the company well on the way towards saving $300 million a year by 2017.
In fact, during Zoetis’ first quarter earnings report in early May, it said it may surpass its original cost-savings goal. The company has been able to cut more of its general and administrative expenses than it initially expected it would. “We’ve eliminated layers and redundancies without reducing our interactions with customers,” Alaix said in an interview with FierceAnimalHealth after the earnings release.
Now investors will likely focus on Zoetis’ ongoing efforts to expand its presence in key markets. The company recently introduced Simparica (sarolaner), a once-monthly chewable flea-and-tick repellant for dogs that’s facing stiff competition from similar products made by Merck ($MRK) and Sanofi ($SNY). And it will be integrating Pharmaq, the Norway-based maker of fish vaccines, which it bough last November for $765 million. Zoetis estimates that the market for aquatic health products is $400 million a year and that it’s growing 8% a year–outpacing the growth of both the companion and food-animal markets.