Total Revenue

Pet Health

Farm Animal

Cattle

Poultry

Swine

Aqua

Contract Manufacturing

1cff0fce43ec19a052fcfab22ffa509e54936650fc6fa6c4d3c10be59211a533

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Additional Paid-in Capital (USD, millions)

76c55f57bc037e7252989543eae4d9bb3d8fb9f01dd68f1254abffab08ae27a4

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1839a9237afb633dcc06ee0c5ea8abf957aa2953d005626a35ef785e8eb7be22

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Elanco Animal Health Incorporated (ELAN) is a global leader in the animal health industry, dedicated to innovating and delivering products and services to prevent and treat diseases in both farm animals and pets. The company offers a diverse portfolio of approximately 200 brands, marketed globally to enhance the health and wellbeing of animals. Elanco's operations focus on providing solutions for pet health and farm animal health, with a strong emphasis on sustainability and food safety  **[0001739104-24-000009_elan-20231231.htm:7]** **[0001739104-24-000039_elan-20240930.htm:25]** **[0001739104-24-000018_elan-20240331.htm:21]** **[0001739104-24-000009_elan-20231231.htm:68]** .

1. **Pet Health** - Offers parasiticides, vaccines, and therapeutics for pets, including products like the Advantage Family, Seresto, and Credelio Family, aimed at protecting pets from parasites and treating various health conditions  **[0001739104-24-000009_elan-20231231.htm:7]** .
   - **Advantage Family** - Provides flea and tick prevention solutions for pets.
   - **Seresto** - Delivers long-lasting flea and tick protection through a collar format.
   - **Credelio Family** - Offers oral treatments for flea and tick infestations.

2. **Farm Animal** - Focuses on products for cattle, swine, poultry, and aquaculture, enhancing efficiency, disease prevention, and sustainability with key products like Rumensin and Baytril  **[0001739104-24-000009_elan-20231231.htm:7]** .
   - **Rumensin** - Improves feed efficiency and growth in cattle.
   - **Baytril** - Provides antimicrobial solutions for various farm animals.

3. **Contract Manufacturing** - Manufactures products on behalf of third parties, supporting the production needs of other companies within the animal health industry  **[0001739104-24-000027_elan-20240630.htm:25]** **[0001739104-24-000004_elanco-12312023exhibit991.htm:1]** .

e503d10eb92b74a527ae5fe0bb2d03002879017e25725f3f3004760501306446

Q1 2023

Q4 2022

5f430e8f878e6303756369c6be6bf0f6594531390b4a701f7ecfb7c8e1cefe88

1. Despite your expanded portfolio with products like Zenrelia and Credelio Quattro, competitive pressures in U.S. pet health vet clinics remain a significant headwind. Can you specify which areas you're still at a competitive disadvantage and how you plan to address these challenges?

2. With Zenrelia's launch, have you identified a percentage of veterinary practices that consider the product label a "nonstarter"? How are you mitigating concerns among these practices to drive adoption in line with your expectations?

3. Experior is expected to surpass $100 million in global sales this year. Can you quantify its current market penetration and elaborate on its long-term growth potential, especially with the recent Heifer clearances?

4. As you introduce Credelio Quattro, how do you anticipate managing potential cannibalization of your existing Credelio user base versus capturing new market share? At what point do you expect Credelio Quattro to become accretive?

5. Given your projection of mid-single-digit revenue growth but only low single-digit adjusted EBITDA growth in 2025, can you elaborate on the factors hindering operating leverage next year and your strategy for driving margin expansion in 2026 and beyond?

085fec9b4d85fa3648db7ca89b69936fa38c5fa69d61fd463f704c5cad17edbd

| Name                        | Position                                                                 | Start Date        | Short Bio                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------|--------------------------------------------------------------------------|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Jeffrey Simmons             | President and Chief Executive Officer                                    | 2018              | Jeffrey Simmons has been serving as the President and Chief Executive Officer of Elanco Animal Health Incorporated since 2018. He previously worked at Eli Lilly and Company from 1989 to 2018, holding various leadership roles, including Senior Vice President and President of the Elanco Animal Health division from 2008 to 2018  **[0001140361-24-020680_edge20015633x2_def14a.htm:12]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:12]** .                  |
| David Kinard                | Executive Vice President, Human Resources, Corporate Communications and Administration | August 2020       | David Kinard serves as the Executive Vice President, Human Resources, Corporate Communications and Administration at Elanco. He has led the Human Resources function since Elanco's spin-off from Lilly in 2018. He joined Lilly in 1997 and served in various positions, including Vice President of Human Resources of Lilly International  **[0001140361-24-020680_edge20015633x2_def14a.htm:33]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:33]** .          |
| James Meer                  | Senior Vice President, Chief Accounting Officer                           | September 2018    | James Meer serves as the Senior Vice President, Chief Accounting Officer at Elanco. Prior to this, he was the Chief Financial Officer of Healthx, Inc. and held various financial roles at Appirio, Salesforce, and other companies. He holds a bachelor's degree in accounting and business and an MBA from Xavier University  **[0001140361-24-020680_edge20015633x2_def14a.htm:33]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:33]** **[0001140361-23-016933_ny20006147_def14a.htm:49]** **[0001140361-22-013379_ny20002367x3_def14a.htm:42]** **[0001140361-22-010975_ny20002367x1_pre14a.htm:42]** .                   |
| Grace McArdle               | Executive Vice President, Manufacturing and Quality                       | July 2023         | Grace McArdle serves as the Executive Vice President, Manufacturing and Quality at Elanco. She has held various positions at Elanco, including Vice President of Supply Chain Operations and Executive Director of Manufacturing Strategy and Operational Excellence. She joined Eli Lilly in 2000  **[0001140361-24-020680_edge20015633x2_def14a.htm:33]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:33]** .                                                      |
| Rajeev (Bobby) Modi         | Executive Vice President, U.S. Pet Health and Global Digital Transformation | March 2022        | Rajeev (Bobby) Modi serves as the Executive Vice President, U.S. Pet Health and Global Digital Transformation at Elanco. Before joining Elanco, he was the Vice President and General Manager at Conagra Brands and held various roles at J.M. Smucker Co. He holds degrees in Chemical Engineering and Marketing, Management Strategy, and Finance  **[0001140361-24-020680_edge20015633x2_def14a.htm:34]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:34]** .       |
| Shiv O'Neill                | Executive Vice President, General Counsel, and Corporate Secretary        | March 2024        | Shiv O'Neill serves as the Executive Vice President, General Counsel, and Corporate Secretary at Elanco. She oversees the global legal team and ethics and compliance matters. Previously, she was Senior Counsel at Cummins Inc. and began her career at The Procter & Gamble Company  **[0001140361-24-020680_edge20015633x2_def14a.htm:34]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:34]** . **(Expected start date)**                                      |
| José Manuel Correia de Simas| Executive Vice President, U.S. Farm Animal Business                       | April 2020        | Dr. José Manuel Correia de Simas serves as the Executive Vice President, U.S. Farm Animal Business at Elanco. He rejoined Elanco in this role in April 2020 after serving as President of Trouw Nutrition USA. He originally joined Elanco in 2000 and has held various key roles  **[0001140361-24-020680_edge20015633x2_def14a.htm:34]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:34]** **[0001140361-23-016933_ny20006147_def14a.htm:50]** .                                                                  |
| Timothy Bettington          | Executive Vice President, Corporate Strategy and Market Development       | March 2023        | Timothy Bettington serves as the Executive Vice President, Corporate Strategy and Market Development at Elanco. He has over 25 years of experience in the animal health industry, previously working at Zoetis and Boehringer Ingelheim Animal Health  **[0001140361-24-020680_edge20015633x2_def14a.htm:32]** **[0001140361-23-016933_ny20006147_def14a.htm:47]** .                                                                                              |
| Ramiro Cabral               | Executive Vice President and President of Elanco International            | July 2018         | Ramiro Cabral serves as the Executive Vice President and President of Elanco International. He joined Eli Lilly in 1998 and has held various positions, including Vice President and Head of Operations for Elanco EMEA and Chief Marketing Officer of Elanco  **[0001140361-24-020680_edge20015633x2_def14a.htm:32]** **[0001140361-23-016933_ny20006147_def14a.htm:47]** .                                                                                     |
| Ellen de Brabander          | Executive Vice President, Innovation and Regulatory Affairs               | October 2021      | Ellen de Brabander, Ph.D., serves as the Executive Vice President, Innovation and Regulatory Affairs at Elanco. She oversees global research and development, business development, and regulatory affairs. She previously held R&D leadership roles at PepsiCo, Merial, Intervet, and DSM  **[0001140361-24-020680_edge20015633x2_def14a.htm:33]** **[0001140361-24-018588_edge20015633x1_pre14a.htm:33]** **[0001140361-23-016933_ny20006147_def14a.htm:47]** **[0001140361-22-013379_ny20002367x3_def14a.htm:40]** .                                                   |

892212b2f581b736f23f838d6b59df2756bc24f02092fbc9d4123d7b3c275444

Total Revenue (USD, millions)

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EPS - Basic (USD)

EPS - Diluted (USD)

263257643950b900f35a7d929ee922e3ae7e8403a995e7eb30d1c12be43a7dce

- **Potential Pricing Headwinds in 2025:** The company expects pricing to return to historical levels over time, which may impact revenue growth as prior pricing benefits might not continue.  **[ELAN_3406471_19]**
- **Front-Loaded Investments Affecting Margins in 2025:** Planned investments in new product launches, such as **Credelio Quattro** and **Zenrelia**, are expected to be front-loaded, potentially suppressing **EBITDA** growth, especially in the early part of **2025**.  **[ELAN_3406471_12]**
- **Slower Growth Expected for Key Products:** Growth rates for key products like **Seresto** and **Advantage** are anticipated to decelerate to **low single digits** in **2025**, down from the approximate **7%** growth observed year-to-date.  **[ELAN_3406471_17]**

873f1f27cf74daf6cc7288c7f33d4252b56e2a228302b0a647f643681f2cc159

- Elanco's revenue includes a one-time benefit of **$10 million to $15 million** from Bayer channel stocking, which is not sustainable and may inflate current performance.  **[ELAN_3387295_14]**
- Future growth depends on regulatory approvals of key products like **Credelio Quattro** and **Zenrelia**, but there is uncertainty regarding FDA approvals and potential delays, posing risks to expected revenues.  **[ELAN_3387295_16]** **[ELAN_3387295_19]** **[ELAN_3387295_12]**
- Elanco has paused sales of **Kexxtone**, a key European cattle product, due to manufacturing issues, resulting in an expected **$20 million** revenue loss and **$18 million** adjusted EBITDA impact for the full year, with the product unlikely to return until late **2025**.  **[ELAN_3387295_12]** **[ELAN_3387295_21]**

cffab0e4361f0788b1555a8768c0d46318754c67d2e5e76feba0c85a4c33d5f7

- **Elanco's launch of Credelio Quattro in Q1 2025 into the $3.8 billion U.S. parasiticides market, with differentiated features and strong sales capabilities, positions the company for significant market share gains.**  **[ELAN_3406471_19]** **[ELAN_3406471_21]**
- **Successful early launch of Zenrelia, with several hundred new clinics adopting the product each week and increasing reorder rates, demonstrating strong efficacy and supporting Elanco's growth in the dermatology market.**  **[ELAN_3406471_20]** **[ELAN_3406471_10]**
- **Elanco's strategic investments in innovative products and robust pipeline, including Zenrelia, Credelio Quattro, Experior, and IL-31 expected in 2025, are expected to drive growth across global markets and strengthen their competitive position.**  **[ELAN_3406471_12]** **[ELAN_3406471_22]** **[ELAN_3406471_14]**

aaa65f0f36fe5b0ce356dc30add216e481114e463943799db0420ce37d3e3a58

- The company's manufacturing slowdown is expected to negatively impact gross margins by **150 to 170 basis points** in 2024.  **[ELAN_3375043_19]**
- Uncertainty regarding FDA approvals for key products persists, as management did not narrow the approval timelines, which may delay revenue growth from these potential blockbusters.  **[ELAN_3375043_23]**
- The restructuring efforts, including shifting to distribution models in markets like Argentina, may lead to revenue headwinds and reflect challenges in strategic focus.  **[ELAN_3375043_12]**

9d8906c6af8c7fbe050d4d12ed92e56ed587cd38720a98b4c56ea929f149813c

- *1. Elanco raised its constant currency revenue guidance due to strong first-quarter performance**, particularly in the U.S. Farm Animal business and International Pet Health segment. The company saw accelerating adoption of **Experior** and growth in **Rumensin**, as well as strong sales of **AdTab** in Europe with less cannibalization of existing products than expected. Additionally, better cash performance improved net working capital and reduced interest expenses.  **[ELAN_3387295_16]**
- *2. Positive progress on late-stage innovation pipeline, including Credelio Quattro and Zenrelia**, is expected to drive growth. Elanco passed the heartworm threshold for **Credelio Quattro** and is confident in obtaining one-month heartworm efficacy approval based on submitted data and dialogue with the FDA's Center for Veterinary Medicine. For **Zenrelia**, Elanco expects an efficient approval-to-launch window and is now targeting market introduction in **Q3**.  **[ELAN_3387295_16]** **[ELAN_3387295_21]** **[ELAN_3387295_10]**
- *3. Strong demand and market share gains in the OTC portfolio**, supported by expanded physical availability and increased brand awareness. The **Seresto** brand saw a **5% increase in unaided awareness**, the highest since acquiring Bayer, driven by new marketing campaigns. The company's omnichannel approach and portfolio diversity are yielding positive results, with a **10% sales increase in March** and momentum carrying into the second quarter.  **[ELAN_3387295_10]**

c957ddad8015c951563206ba460b4decebccd5ce9f4224c9d48e0acf5acad189

- Elanco's **strong innovation pipeline** includes several **potential blockbuster products** like **Credelio Quattro, Zenrelia, and Bovaer**, expected to gain approval in the first half of 2024, which are anticipated to fuel long-term sustainable growth.  **[ELAN_3375043_21]** **[ELAN_3375043_23]** **[ELAN_3375043_1]**
- The company is **confident in sustained revenue growth**, driven by investments in key products such as **Experior, CPMA, and Adtab**, which have shown strong performance and are expected to be significant contributors to growth in 2024.  **[ELAN_3375043_23]** **[ELAN_3375043_1]**
- Elanco is focusing its strategy on **higher-margin businesses** like **pet health and livestock sustainability**, making **disciplined, decisive actions** such as the sale of the Aqua business to improve earnings potential and reduce leverage over time.  **[ELAN_3375043_1]** **[ELAN_3375043_12]** **[ELAN_3375043_21]**

238a295e8af280e22e1f86f6746066973db7cc1be5506aa9a71f206783178463

- **Competition is challenging key products like Galliprant, impacting market share in the Pain segment.** Jeffrey Simmons acknowledged that Galliprant is meeting expectations but is "challenged with some of the competition."  **[ELAN_3397419_20]**
- **Zenrelia, a potential blockbuster product, will have a black box warning, which may hinder its adoption.** Analysts expressed concern that the incumbent product doesn't have a black box, questioning the potential impact on Zenrelia's launch. Jeffrey Simmons responded that they will focus on educating veterinarians, indicating possible initial adoption hurdles.  **[ELAN_3397419_14]**
- **Additional headwinds in manufacturing and increased investments may pressure margins in the second half.** Todd Young mentioned "additional headwinds in manufacturing with some additional losses on some of our vaccine supply" and increased investments in launches, which could affect profitability.  **[ELAN_3397419_15]**

cf8dcd69f253fd486422f254ba18517beb71a7b5b872b6d47e9bbf6c94586009

- **Elanco is set to launch three blockbuster products—Zenrelia, Credelio Quattro, and Bovaer—in the next three quarters, which are expected to drive significant revenue growth and strengthen their market position.**  **[ELAN_3397419_15]** ,  **[ELAN_3397419_20]** ,  **[ELAN_3397419_21]**
- **Despite competitive pressures, existing products like Galliprant are meeting expectations, and the company remains confident in the growth prospects of their Pain market segment due to innovation and a strong pipeline.**  **[ELAN_3397419_20]**
- **Elanco has significantly improved its financial position by reducing over 20% of its debt since the beginning of the year, enhancing cash flow, and focusing on strategic investments.**  **[ELAN_3397419_21]**

b2d035aa93564f91ea43b0a3a6f96f0713d6f47fc48f50750a6a1f8547b9d1c4

1. **Operating Leverage Outlook**  
   **Q:** How will operating leverage develop in 2025 and beyond?  
   **A:** Management expects limited operating leverage in 2025 due to investments in new products like **Zenrelia** and **Credelio Quattro**, which are potential blockbusters. EBITDA growth will lag mid-single-digit top-line growth as they invest to drive these brands. Operating leverage is expected to improve in **2026** and beyond as sales from innovation start driving profitability faster than revenue growth.  **[ELAN_3406471_11]** 

2. **Zenrelia Launch Metrics**  
   **Q:** What are early indicators from the Zenrelia launch?  
   **A:** The **Zenrelia** launch is progressing well, with **several hundred new clinics** adopting the product each week. Clinic reorder rates have increased every week for the six weeks since launch. Efficacy has been strong, even in tough cases where other products didn't work, and the product is performing exceptionally well across chronic, seasonal, and acute segments.  **[ELAN_3406471_10]** 

3. **2025 EBITDA Guidance**  
   **Q:** Is 2025 EBITDA growth expected to be back-end weighted?  
   **A:** Yes, investments in new products will be more prominent in the early part of 2025, while revenues from **Zenrelia** and **Credelio Quattro** ramp up over the year. This results in back-end weighted EBITDA growth, with more investments occurring upfront and sales building momentum throughout the year.  **[ELAN_3406471_12]** 

4. **IL-31 Product Update**  
   **Q:** What's the status of the IL-31 product development?  
   **A:** Engagement with the USDA on the **IL-31** product is progressing well, with approval expected in **2025**. Management views it as a blockbuster product differentiated from current options, and it will be a complementary addition to **Zenrelia** in the global dermatology market.  **[ELAN_3406471_14]** 

5. **Pricing Strategy for Key Products**  
   **Q:** What's the pricing approach for Credelio Quattro and Zenrelia?  
   **A:** For **Credelio Quattro**, a value-based approach will be taken, leveraging its differentiation but aiming to capture market share without necessarily pricing at a premium. **Zenrelia** is priced at an average **20% discount** to competitors, with larger discounts for larger dogs to offer great value to consumers.  **[ELAN_3406471_15]** 

6. **Competition in U.S. Pet Health**  
   **Q:** How is competition affecting U.S. pet health?  
   **A:** Competition in U.S. pet health, particularly in the parasiticide segments within vet clinics, remains a headwind. However, new product launches like **Credelio Quattro** are expected to drive growth, mitigate competitive pressures, and help regain market share in the U.S. pet health market.  **[ELAN_3406471_17]** 

7. **Experior's Blockbuster Status**  
   **Q:** What does Experior's blockbuster status mean for growth?  
   **A:** **Experior** is expected to exceed **$100 million** globally in **2024**, achieving blockbuster status. Recent heifer clearances open access to about **40%** more feedlot animals, supporting continued growth and contributing significantly to mid-single-digit growth in 2025.  **[ELAN_3406471_18]** 

8. **Impact of U.K. CMO Situation**  
   **Q:** How is the U.K. CMO bankruptcy affecting operations?  
   **A:** Elanco is working closely with bankruptcy administrators to maintain supply of products in **2024** and is confident in understanding the **2025** EBITDA impact. There is ongoing work to transition supply, and the situation is being managed proactively.  **[ELAN_3406471_23]** 

9. **Innovation Sales Increase**  
   **Q:** What's driving the increase in innovation sales for 2024?  
   **A:** The expected innovation sales have increased to **$420 million - $450 million**, driven by **Experior** ramping faster than expected and growth from **AdTab** and **Credelio Plus** outside the U.S. This reflects strong performance from key innovative products.  **[ELAN_3406471_21]** 

10. **Farm Animal Growth Opportunities**  
    **Q:** What are the growth prospects in farm animal products?  
    **A:** The U.S. clearance of **Bovaer** for dairy offers significant market potential, targeting a substantial market with efficient operational reach. Additionally, **Experior's** expansion into heifers provides further growth opportunities in the farm animal segment.  **[ELAN_3406471_22]** 

86bb53d7e1ee59537ef8d9455c8c14b12ab30ec8f3507da985dab3186b0460a2

Elanco Animal Health Inc (ELAN)

Financials