Elanco Investor Day Summary Company Overview - **Company**: Elanco Animal Health - **Event**: 2025 Investor Day - **Focus**: Sustainable growth, innovation, and financial outlook Key Industry Insights - **Animal Health Market**: - Current size: $42 billion, projected to grow to $60 billion in the next decade [13] - Pet market projected to reach $24 billion by 2030, driven by parasiticides [43] - Farm animal market expected to grow to $27 billion, with poultry as a major driver [44] Core Company Strategies - **Sustainable Growth**: - Commitment to mid-single-digit constant currency revenue growth [8] - Focus on innovation with a commitment of $1.1 billion for the next year, aiming to double by 2028 [9][30] - **Innovation Pipeline**: - Introduction of five to six potential blockbusters between 2026 and 2031 [10] - Emphasis on a diverse portfolio with a strong pipeline of new products [30] - **Financial Goals**: - Targeting high single-digit adjusted EBITDA constant currency revenue growth starting in 2026 [11] - Projecting $1 billion in cash flow creation over the next three years [12] Market Trends and Drivers - **Pet Market Trends**: - Increased willingness of pet owners to spend on pet care [17] - Growing decision-making power of pet owners, necessitating CRM data and accessibility [18] - Shift towards omnichannel approaches to reach consumers [19] - **Farm Animal Market Trends**: - Focus on ruminants and poultry due to their durability and growth potential [21] - Emphasis on disease prevention and food safety as key growth areas [22] Financial Performance and Projections - **Recent Performance**: - Nine consecutive quarters of growth, with a stable base business now flat [46] - **Future Projections**: - Anticipated growth from the "Big Six" products, with significant contributions expected by 2026 [47] - Continued expansion in both pet and farm animal segments, leveraging existing strengths [50] Leadership and Organizational Structure - **Executive Team**: - Experienced leadership with a focus on innovation and market growth [36] - Commitment to employee engagement and performance management linked to financial outcomes [40] Additional Insights - **Restructuring Initiatives**: - Recent restructuring aimed at increasing efficiency and capacity [32] - Strategic partnerships and collaborations to enhance product offerings and market reach [55] - **Regulatory Engagement**: - Ongoing constructive dialogue with USDA for product approvals and market entry [34] Conclusion - Elanco is positioned for sustainable growth through a robust innovation pipeline, strategic market engagement, and a commitment to financial discipline. The company aims to leverage its strengths in both the pet and farm animal markets to capture significant growth opportunities in the coming years.

Elanco Animal Health FY Conference Summary Company Overview - **Company**: Elanco Animal Health (NYSE: ELAN) - **Date of Conference**: December 04, 2025 Key Industry Insights - **Industry**: Animal Health - **Market Size**: The U.S. pet health market is transforming into a growth business, with significant contributions from innovation and differentiated products [7][10] - **Dermatology Market**: The U.S. dermatology market is valued at $1.3 billion, growing at double digits, while the global market is approximately $2 billion [10] Core Points and Arguments Margin Expansion and Cost Management - Elanco is focusing on margin expansion through innovation, with a higher margin on new products compared to corporate averages [3] - The Elanco Ascend initiative aims to improve margins through cost management, automation, and strategic supplier partnerships [5][6] - Expected EBITDA growth in 2026 due to cost measures and investments in R&D and marketing [6] Product Innovations and Market Performance - **Zenrelia**: Achieved significant growth with total sales doubling from Q2 to Q3, and clinic penetration reaching 45% [10][11] - **Quattro**: Exceeding growth expectations, with a focus on broad-spectrum parasiticide market [12][30] - **Experior**: A key product in the farm animal segment, with a market potential of $350 million in the U.S. and Canada [12][23] Farm Animal Business Insights - The farm business represents half of Elanco's operations, with EBITDA margins comparable to the pet side [19][23] - The market for farm products is stable and growing, with a $25 billion market size [23] - Bovaer, another product, has shown strong customer retention rates despite muted growth due to lack of government incentives [24][26] Competitive Landscape and Market Strategy - Elanco is prepared for competitive product launches, having factored them into their business outlook [58] - The company emphasizes differentiation in its product offerings, particularly in the parasiticide market [58] Financial Performance and Deleveraging Strategy - Elanco has successfully reduced its debt from 5.6 times to an expected 3.738 times by the end of 2025, with a goal to be below three times by 2027 [43][44] - The company plans to maintain a balanced capital allocation strategy focused on debt reduction and business investment [61][62] Future Outlook and Investor Day - Upcoming Investor Day will provide detailed insights into growth strategies, manufacturing capabilities, and financial projections for the next three years [67] Additional Important Points - The humanization of pets is driving increased spending on pet health, with consumers willing to invest more in their pets' well-being [36] - Elanco's strategy includes a diverse portfolio to mitigate the impact of declining veterinary visits [37][38] - The company is leveraging its OTC portfolio to cater to consumers who do not visit vets regularly [37] This summary encapsulates the key insights and strategic directions discussed during the Elanco Animal Health FY Conference, highlighting the company's focus on innovation, market growth, and financial stability.

Financial Data and Key Metrics Changes - Elanco reported revenue of $1.137 billion for Q3 2025, representing a 10% increase on a reported basis and 9% organic constant currency growth, primarily driven by volume increases [23][24] - Adjusted EBITDA was $198 million, an increase of $35 million year-over-year, while adjusted EPS rose to $0.19, up $0.06 from the previous year [25] - The net leverage ratio improved to 3.7x, better than expectations, with a target to end the year between 3.7x and 3.8x [6][25] Business Line Data and Key Metrics Changes - U.S. Pet Health revenue grew by 9%, driven by key innovation products like Credelio Quattro and Zenrelia, while international pet health achieved 8% growth [7][23] - U.S. Farm Animal business saw a significant 20% growth, supported by strong performance in cattle and poultry vaccines, while international farm animal grew by 5% [8][23] - Innovation revenue reached $655 million year-to-date, with an increase in guidance for innovation revenue to $840 million-$880 million for the full year [5][9] Market Data and Key Metrics Changes - The U.S. broad spectrum endecto market is currently valued at $1.4 billion, growing at nearly 40%, with Credelio Quattro capturing significant market share [10][40] - The global dermatology market for Zenrelia is estimated at $2 billion, with Elanco capturing approximately 5% market share in launched countries [13][16] - The farm animal market is experiencing strong demand for protein, with a resurgence in the U.S. dairy industry and favorable producer economics driving growth [72] Company Strategy and Development Direction - Elanco's strategy focuses on innovation, portfolio management, and productivity, with a commitment to driving shareholder value through consistent growth and operational execution [6][22] - The company is expanding its product offerings and geographic reach, particularly with the international rollout of Credelio Quattro and Zenrelia [10][13] - Elanco aims to improve its net leverage ratio to under 3x by 2027, supported by a disciplined capital allocation strategy focused on debt paydown [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges, with expectations for continued growth in both pet and farm animal segments [7][32] - The company anticipates a stable operating environment, with a focus on leveraging innovation to mitigate potential declines in vet visit volumes [56][57] - Elanco's management highlighted the importance of maintaining a competitive edge through differentiated products and strategic investments in marketing and distribution [66][72] Other Important Information - Elanco successfully refinanced its $2.1 billion term loan B facility, extending maturities and reducing the cost of debt [26][27] - The company is on track for significant operational efficiencies through the Elanco Ascend initiative, which aims to enhance productivity across various functions [22][66] Q&A Session Summary Question: Clarification on Quattro's sales and peak potential - Management clarified that Credelio Quattro reached $100 million in sales year-to-date as of September, indicating strong market potential and differentiation [37][38] Question: U.S. label aspirations for Zenrelia - Management discussed ongoing efforts to improve Zenrelia's label in the U.S. and the positive momentum in international markets, highlighting strong market share gains [43][45] Question: 2025 EBITDA guidance and OpEx investments - Management confirmed the increase in EBITDA guidance and emphasized a data-driven approach to ongoing investments in innovation and marketing [49][50] Question: Consumer macro pressure and vet visit trends - Management noted that while vet visits are stabilizing, Elanco's diversified portfolio and strong market presence position the company well against macro pressures [53][56] Question: Competitive landscape in derm and parasiticides - Management indicated that competition is accounted for in guidance, with no significant impact observed from new entrants in the parasiticide market [76][77]

Financial Data and Key Metrics Changes - Elanco reported revenue of $1.137 billion for Q3 2025, representing a 10% increase on a reported basis and 9% organic constant currency growth, primarily driven by volume increases [23][24] - Adjusted EBITDA was $198 million, an increase of $35 million year-over-year, while adjusted EPS rose to $0.19, up $0.06 from the previous year [25][29] - The net leverage ratio improved to 3.7x, better than expectations, with a target to end the year between 3.7x and 3.8x [6][25] Business Line Data and Key Metrics Changes - U.S. Pet Health revenue grew by 9%, driven by key products like Credelio Quattro and Zenrelia, while international pet health achieved 8% growth [7][23] - U.S. Farm Animal business saw a significant 20% growth, bolstered by strong performance in cattle and poultry vaccines, while international farm animal grew by 5% [8][24] - Innovation revenue reached $655 million year-to-date, with an increase in guidance for innovation revenue to $840 million-$880 million [5][9] Market Data and Key Metrics Changes - The U.S. broad spectrum endecto market is valued at $1.4 billion and is growing at nearly 40%, with Credelio Quattro capturing significant market share [10][40] - The global dermatology market is estimated at $2 billion, with Zenrelia gaining approximately 5% market share in launched countries [13][16] - The farm animal market is experiencing strong demand for protein, with a resurgence in the U.S. dairy industry and a historically small cattle herd size driving producer economics [72][73] Company Strategy and Development Direction - Elanco's strategy focuses on growth, innovation, and cash management, with a commitment to raising guidance based on strong underlying momentum [5][7] - The company is leveraging its diverse portfolio of innovative products to stabilize its base business and drive overall industry-leading growth [21][22] - The Elanco Ascend initiative aims to enhance productivity and efficiency across the organization, contributing to margin expansion starting in 2026 [22][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges, citing strong execution and proactive mitigation strategies for tariff risks [6][32] - The outlook for 2026 includes expectations for continued revenue growth driven by innovation and a stabilizing base, despite competitive pressures [30][31] - Management highlighted the importance of maintaining a balanced approach to guidance, considering competition and macroeconomic factors [57][59] Other Important Information - The company successfully refinanced its $2.1 billion term loan B facility, extending maturities and reducing the cost of debt [26][27] - Elanco plans to provide more insights into its strategy and financial outlook during the upcoming investor day on December 9 [34][78] Q&A Session Summary Question: Clarification on Credelio Quattro's sales - Credelio Quattro reached $100 million in sales year-to-date as of September, indicating strong market potential and differentiation [37][38] Question: U.S. label aspirations for Zenrelia - Management is optimistic about achieving a cleaner label for Zenrelia, supported by positive data and increasing market share in international markets [44][46] Question: 2025 EBITDA guidance and OpEx investments - The updated EBITDA guidance reflects strong performance and continued investments in innovation, with a focus on data-driven decision-making [48][50] Question: Consumer macro pressure and vet visit trends - Management believes that the company is insulated from declines in vet visits due to strong market fundamentals and a diversified portfolio [56][59] Question: Sustainability of livestock growth - The demand for protein is expected to remain strong, with Elanco's strategy focusing on innovation and competitive advantages in the livestock market [72][74]

Core Insights - The global food system is undergoing a transformation driven by three disruptive forces: consumer demand, supply chain pressures, and technological breakthroughs [2][3] - Leaders in the food and agriculture sectors are redesigning operations around speed, resilience, and precision, focusing on three growth engines: automation and data integration, regional production and flexible sourcing, and consumer-centric product innovation [2][3] Consumer Trends - Consumer preferences are shifting towards health, value, and sustainability, with millennials and Gen Z prioritizing health food spending even during economic downturns [3][8] - The rise of private labels is evident, with 68% of American consumers opting for them as a response to inflation [3][40] Supply Chain Dynamics - The food and agriculture value chain is under pressure, with significant increases in input costs since 2020: fertilizers up 78% and pesticides up 66% [3][19] - Companies are investing in local production to enhance supply chain resilience and meet consumer demands for transparency and traceability [10][19] Technological Innovations - Precision agriculture has led to a 76% reduction in herbicide costs, while automation in the restaurant industry could handle 50% of tasks [2][22][40] - AI and biotechnology are transforming every segment of the value chain, from farm inputs to retail execution [2][12] Value Chain Transformation - The food and agriculture industry is experiencing deep value chain transformations, with companies focusing on cross-industry integration and local sourcing to meet consumer expectations [10][33] - Data-driven traceability systems are being implemented to ensure food safety and quality, thereby enhancing consumer trust [10][33] Regional Insights - North America is leveraging technology to address labor costs, with over 50% of farms adopting automation tools [44][46] - South America is advancing regenerative agriculture practices, with over 80% of farmland in Argentina, Paraguay, and Uruguay using no-till farming [47] - Europe is facing regulatory pressures that are driving innovation, with a goal to convert 25% of farmland to organic by 2030 [48] - The Middle East and Africa are focusing on local food production to combat climate vulnerability, while the Asia-Pacific region is rapidly adopting high-tech agricultural practices [49][50] Future Outlook - Companies that can quickly adapt to these changes and leverage regional innovations will establish sustainable competitive advantages [53] - The key question for businesses is not whether to invest in automation and new supply chain models, but how to act swiftly and which combinations best suit their operations [53]

Financial Performance - Elanco's Q2 2025 revenue reached $1.241 billion, a 5% increase compared to $1.184 billion in Q2 2024 [34] - Organic constant currency (CC) revenue growth was 8% [9, 11] - Adjusted EBITDA for Q2 2025 was $238 million, compared to $275 million in Q2 2024 [34] - Adjusted earnings per share (EPS) diluted was $0.26, compared to $0.30 in Q2 2024 [34] Innovation and Portfolio - Innovation revenue contribution in H1 2025 was $420 million [9, 15] - The 2025 innovation sales target has been raised to $720-$800 million [9, 14, 15] - U S Pet Health segment experienced an 11% revenue increase [9, 32] Financial Outlook and Strategy - The company is increasing organic CC revenue growth guidance for 2025 to 5%-6% [10] - Adjusted EBITDA guidance for 2025 is $850-$890 million [10] - Adjusted EPS guidance for 2025 is $0.85-$0.91 [10] - The company expects a $500-$550 million gross debt paydown in 2025, targeting a net leverage ratio of 3.8x-4.1x [9]

Core Viewpoint - Elanco Animal Health Incorporated appears to be turning a corner after years of market share losses and uneven execution, with a stabilized core business and promising innovation pipeline [1][2]. Business Performance - Investor meetings hosted by William Blair have led to an upgrade of Elanco's stock, highlighting the stabilization of the core business, which constitutes about 85% of sales, due to improved execution [2][3]. - The company's recent product launches in both livestock and pet health are expected to enhance growth, potentially contributing around five percentage points to overall growth in 2025 [4]. Product Pipeline and Innovation - Elanco's Zenrelia (ilunocitinib) received a positive opinion from the European Medicines Agency, with expectations for market approval and supply before the end of Q3 [5]. - New farm animal products like Bovaer and Experior, which currently face little to no competition, may increase demand for older products such as Rumensin [5]. Competitive Landscape - Elanco faces significant competition from larger, well-funded companies like Merck and Zoetis, which are also heavily investing in new product development [6]. - Merck's JAK inhibitor could impact the performance of Elanco's Zenrelia, as it is expected to have fewer safety concerns, while Zoetis has a strong track record of improving existing products [6]. Stock Performance - Elanco's stock is currently up 3.05%, trading at $14.18 [7].

Financial Data and Key Metrics Changes - Fourth quarter revenue was $1.02 billion, representing a 1% reported decline, but organic constant currency growth was 4% [46] - Adjusted EBITDA for the fourth quarter was $177 million, an increase of $12 million on a reported basis [54] - Full year adjusted EPS came in at $0.91 compared to $0.89 in 2023, reflecting a year-over-year growth [58] Business Line Data and Key Metrics Changes - Total Pet Health revenue increased 6% in constant currency in the fourth quarter, with U.S. Pet Health growing 2% and international Pet Health growing 11% [47][48] - U.S. Farm Animal business achieved $223 million in sales, a 6% increase, driven by cattle market expansion [49] - International Farm Animal revenue was flat, impacted by the Kexxtone recall and strategic changes in certain geographies [50] Market Data and Key Metrics Changes - The U.S. dermatology market is projected to surpass $2 billion, with Zenrelia capturing significant market share [80] - The global carbon market for Bovaer is estimated to be $2 billion, with strong demand from farmers [38] - The U.S. dairy farmers earned approximately $10 million in credits from using Rumensin in the fourth quarter [39] Company Strategy and Development Direction - The company is focused on growth, innovation, and cash generation, with expectations for 2025 organic constant currency revenue growth of 4% to 6% [12][73] - Strategic divestiture of the aqua business has allowed for debt reduction and increased investments in product launches [10][20] - The company aims to leverage its comprehensive portfolio to enhance market share in both Pet Health and Farm Animal sectors [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in accelerating fundamentals for 2025, despite challenges from foreign exchange impacts [14][72] - The company anticipates continued growth from innovation and a stabilization of its base business [13][42] - Management highlighted the importance of effective commercial execution and the positive reception of new product launches [72] Other Important Information - The company achieved a net leverage ratio of 4.3 times at the end of the year, down from 5.6 times at the start of 2024 [20] - The company launched five new U.S. product approvals in 2024, contributing to a robust innovation pipeline [28] - The company expects adjusted EBITDA for 2025 to be between $830 million and $870 million, factoring in foreign exchange headwinds [64] Q&A Session Summary Question: What is the expected penetration of Zenrelia by year-end 2025? - Management indicated that Zenrelia is experiencing strong adoption, with a focus on increasing clinic penetration through aggressive sampling and direct-to-consumer efforts [81][84] Question: What factors contribute to the accelerating revenue growth in Q1 2025? - Management noted that the growth is driven by the ramp-up of Zenrelia and Credelio Quattro, alongside the absence of headwinds faced in the previous year [88][89] Question: What gives confidence in the innovation contribution for 2025? - Management highlighted strong momentum from products like Experior and AdTab, as well as the growth potential in the dermatology market with Zenrelia and Quattro [96][97] Question: How is the early launch of Credelio Quattro performing? - Management reported positive initial momentum, with strong veterinarian interest and a comprehensive commercialization strategy in place [115][116] Question: What are the dynamics behind the surge in Galliprant sales? - Management attributed the surge to its strong safety profile and effective marketing strategies, expecting continued performance into 2025 [120] Question: How does the company view the competitive environment in dermatology? - Management acknowledged competition as a headwind but emphasized the growing market and unmet needs that present opportunities for growth [125][126]