Piper sees veterinary medicine challenges continuing through 2027

Investing.com -- Piper Sandler expects veterinary visits to decline 1% to 2% in 2026 and remain roughly flat to down 1% in 2027, with industry growth driven primarily by 3% to 5% pricing increases and limited service-intensity gains.

The firm noted that the veterinary market remains caught between resilient pricing and weak underlying volumes. Cumulative veterinary inflation since 2022 has likely impacted visits and could continue to affect visits for several more years due to lower puppy growth.

More than half of survey respondents now attribute weak industry growth primarily to demand rather than staffing issues. Veterinarians have become modestly more optimistic about near-term patient volumes, but Piper's overall optimism on volume growth has faded.

The firm highlighted Elanco Animal Health (NYSE: ELAN) as a preferred investment, citing the company's position in parasiticides and dermatology, as well as its farm animal portfolio. Piper noted that Elanco's Zenrelia and Credelio Quattro are seeing stronger adoption than competing products from Merck, while Befrena offers additional upside in 2027 as supply constraints ease.

Zoetis (NYSE: ZTS) pipeline products surveyed well, though possibly not enough to defend Apoquel share losses, according to the firm.

In diagnostics, IDEXX Laboratories (NASDAQ: IDXX) inVue FNA adoption remains early, but 25% of veterinarians indicated they could adopt the company's upcoming MultiCue product within one year.

Veterinarians continue to favor Trupanion (NASDAQ: TRUP) as their preferred pet insurer, with 79% recommending coverage. Piper noted that premiums, deductibles and out-of-pocket costs remain meaningful barriers for consumers.

Chewy (NYSE: CHWY) awareness of its veterinary clinics increased more than 20 percentage points to 75%, likely aided by the Modern Animal acquisition. PracticeHub adoption increased 6 percentage points to 36%. Currently, 16% of veterinarians work with Tractor Supply's (NASDAQ: TSCO) Allivet, compared to 36% for Chewy's PracticeHub.

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