Group 1: Fund Performance - Baron Health Care Fund rose 13.10% in Q4 2025, outperforming the Russell 3000 Health Care Index which gained 11.92% and the Russell 3000 Index which gained 2.40% [1] - For the full year, the Fund returned 10.28%, compared to 14.56% and 17.15% gains for the respective indexes [1] - Strong stock selection in biotechnology contributed to the Fund's relative gains in the quarter [1] Group 2: Investment Focus - The Fund seeks to invest in businesses with secular growth opportunities, sustainable competitive edges, and strong management [1] - The healthcare sector is viewed as a strong area in the U.S. economy, offering attractive investment opportunities with positive momentum heading into 2026 [1] Group 3: Elanco Animal Health Incorporated - Elanco Animal Health has a market capitalization of $12.079 billion and closed at $24.31 per share on February 5, 2026 [2] - The stock gained 3.58% over the past month and 111.02% over the last 52 weeks [2] - Elanco operates in an attractive industry with growth drivers such as increased pet ownership and higher spending on pets [3] Group 4: Innovation and Growth Potential - Elanco's management expects innovation revenue to reach $840 million to $880 million in 2025, increasing to $1.1 billion in 2026 [3] - Key innovation products include Credelio Quattro, Zenrelia, Befrena, Bovaer, and Experior, which are expected to drive growth and gross margin expansion [3] - The innovation pipeline includes five to six additional products expected to be approved between 2026-2031, with potential peak sales of $2 billion [3] Group 5: Financial Targets - Management targets 200-350 basis points of EBITDA margin expansion from 2025-2028 [3] - The company aims for $1 billion of cumulative free cash flow from 2026-2028 to pay down debt and reduce net debt to EBITDA from 3.7-3.8 times at the end of 2025 to 2.0-2.5 times by the end of 2028 [3]

Elanco Conference Call Summary Company Overview - **Company**: Elanco Animal Health - **Industry**: Animal Health - **Current Status**: Elanco is experiencing a mid-single-digit growth rate, with nine consecutive quarters of growth across both farm and pet segments [3][5] Core Insights and Arguments Financial Performance - Elanco is guiding for $840 million to $880 million in innovation revenue by 2025, with a commitment to grow this to $1.1 billion by 2026 [4] - The company aims for high single-digit EBITDA growth and low double-digit EPS growth starting this year [5] - Elanco expects to generate approximately $1 billion in cash flow over the next three years and aims to reduce leverage to under three times by 2027 [5][32] Innovation and Product Pipeline - Elanco has launched six blockbusters since 2021, with a pipeline valued at $2 billion across eight therapeutic areas [4][29] - The company is committed to introducing five to six additional blockbusters by the end of the decade [4][29] - Credelio Quattro is highlighted as a significant product, expected to become the largest in the company's history, with a market share of about 30% in the U.S. [22][39] Market Trends - The pet health market is valued at $17 billion and is growing faster than the farm segment, with high single-digit growth predicted [8] - Key trends driving growth include increased spending by pet owners, the rise of omnichannel shopping, and the globalization of pet ownership [9][11] - The farm animal segment, while growing slower, is considered more durable and is expected to grow at mid-single digits [50] Competitive Landscape - Elanco operates in a high-barrier industry with strong brand loyalty among veterinarians and pet owners, which mitigates risks associated with patent cliffs [6][7] - The company is positioned as a leader in both pet retail and farm animal health, with a focus on innovation and comprehensive product portfolios [15][16] Additional Important Insights - Elanco Ascend is a company-wide initiative aimed at driving productivity and cost savings, with a focus on operations and procurement [52][53] - The company is experiencing a shift in pricing strategy, expecting to implement the highest price increases in five years based on the value provided to customers [38][47] - Elanco's strategy includes a balanced approach to capital allocation, focusing on organic investments, debt reduction, and potential small M&A opportunities [55] Conclusion Elanco is positioned for sustainable growth through innovation, a strong product pipeline, and strategic market positioning. The company is focused on enhancing its financial profile while navigating industry trends and competitive dynamics.

Financial Performance and Outlook - Elanco expects organic constant currency revenue growth starting in 2025[10] - The company anticipates adjusted EBITDA growth starting in 2026[10] - Elanco projects over $1 billion in total free cash flow from 2026 to 2028[10] - The company aims to reduce net leverage to below 3x in 2027 and further towards 20x-25x[10] - Elanco expects innovation to deliver $11 billion in revenue in 2026, compared to $840-$880 million in 2025[90] Innovation and Pipeline - Elanco's innovation engine is expected to generate $840-$880 million in revenue in 2025[34] - The "Big 6" products are projected to drive $11 billion in innovation revenue in 2026[39] - The company anticipates 5-6 potential blockbuster approvals between 2026 and 2031, with peak sales exceeding $2 billion[10, 61, 90] - Elanco's "Next Wave" innovation portfolio includes over 15 projects across 8 innovation spaces[58, 59] Market and Industry Trends - The animal health industry is projected to grow from $42 billion to $60 billion[11] - The pet health industry is a $17 billion market experiencing mid-single-digit to high-single-digit growth[16] - The farm animal health industry is a $25 billion market with low-single-digit to mid-single-digit growth[17] Elanco Ascend and Cost Savings - Elanco Ascend is expected to generate approximately $200-$250 million in adjusted EBITDA savings by 2030, net of inflation and reinvestment[71, 90] - The company anticipates approximately $25 million in savings in 2026, $60 million in 2027, and $130 million in cash cost[90]

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.

Elanco Animal Health FY Conference Summary Company Overview - **Company**: Elanco Animal Health (NYSE: ELAN) - **Date of Conference**: December 03, 2025 Key Points Industry Insights - The animal health industry is experiencing significant growth, particularly in the animal protein sector, with a notable demand for chicken products [2][3] - The market for oral broad-spectrum parasiticides is valued at approximately $1.4 billion and is growing at 40% [10] - The derm market is the second largest, valued at $2 billion and growing at double digits [10] Financial Performance - Elanco has achieved nine consecutive quarters of growth, with an increasing quality and size of growth [3] - The company aims to reduce its debt from 3.7 times to low threes or high twos, prioritizing this as the number one use of cash [7][8] - EBITDA growth is expected to be driven by better margins from blockbuster products and a productivity initiative called Elanco Ascend [8][16] Innovation and Product Development - Elanco has a robust pipeline with six approved products and anticipates a seventh product, IL-31, to be added soon [3][11] - The company is focusing on a mix of farm and pet innovations, which is unique compared to competitors [28] - Quattro, a new product, is gaining market share rapidly, with 75% of its sales coming from competitors' products [22] Market Position and Competition - Elanco is positioned to capture market share from larger competitors like Zoetis, particularly in large veterinary practices [22] - The company is experiencing competitive pressure in the U.S. pet health market, but differentiation in product offerings is key to maintaining value [23] Future Outlook - Elanco is optimistic about its growth trajectory and plans to provide more detailed guidance for 2026 in the upcoming week [4][31] - The company is committed to maintaining a consistent flow of high-impact innovations and believes it is a compelling investment proposition in the animal health space [13] Additional Considerations - The company has launched a five-year productivity initiative, Elanco Ascend, aimed at improving procurement, manufacturing, and overall productivity [16] - There is a focus on both top-line revenue growth and EBITDA growth, with expectations for a meaningful dropdown to EBITDA levels from new product revenues [14][15] Conclusion - Elanco Animal Health is positioned for continued growth through innovation, strategic debt management, and a focus on market differentiation. The upcoming guidance for 2026 is anticipated to provide further clarity on the company's growth trajectory and financial health [31]

Core Insights - The pet care industry is experiencing rapid growth, prompting pharmaceutical companies to focus on innovative treatments for companion animals [1] Company Performance - Elanco Animal Health Incorporated (NYSE:ELAN) is showing strong momentum with recent product launches, Zenrelia and Credelio Quattro, contributing to significant revenue growth [2] - KeyBanc Capital Markets initiated coverage on Elanco with an Overweight rating and a price forecast of $27, indicating that the shares are currently undervalued [4] - Elanco's trailing leverage ratio has improved from approximately 5.5x in 2023 to around 4x currently, with expectations for further improvement due to increased profitability and cash generation [3] Financial Results - For the third quarter of 2025, Elanco reported adjusted earnings per share of 19 cents, reflecting a 46% year-over-year increase, exceeding both company guidance and consensus estimates [5] - Revenue for the same period reached $1.14 billion, surpassing the consensus estimate of $1.09 billion and management's guidance of $1.08 billion to $1.11 billion [5] Market Performance - Elanco shares increased by 3.84% to $22.05, nearing its 52-week high of $23.09 [6]

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]

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 [20][21] - 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 [22] - The net leverage ratio improved to 3.7 times, better than expectations, with a goal to end the year between 3.7-3.8 times [5][22] 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 saw an 8% increase [20][21] - U.S. Farm Animal business achieved a remarkable 20% growth, supported by strong performance in cattle and poultry vaccines [20][21] - International Farm Animal revenue increased by 5%, with growth attributed to poultry and ruminants [7][20] Market Data and Key Metrics Changes - The overall pet health market in the U.S. is experiencing strong growth, with the broad spectrum endecto market reaching $1.4 billion and growing at nearly 40% [9][34] - The global dermatology market is also expanding, with Zenrelia capturing approximately 5% market share in countries where it has launched [12][14] - The farm animal sector is benefiting from a historically small U.S. cattle herd, driving demand for products like Experior, which grew 70% in Q3 [15][51] Company Strategy and Development Direction - Elanco is focused on innovation, portfolio management, and productivity, with a strong emphasis on cash generation and operational execution [4][19] - The company is raising its full-year expectations for innovation revenue to $840 million-$880 million, reflecting broad-based momentum across its product portfolio [4][6] - The strategy includes geographic expansion and leveraging differentiated products to capture market share in both pet and farm animal segments [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges, including tariff impacts, while maintaining strong growth momentum [5][25] - The outlook for 2026 includes expectations for continued revenue growth driven by innovation and a stabilizing base business, despite competitive pressures [27][28] - Management highlighted the importance of maintaining a balanced approach to guidance, considering both competitive dynamics and macroeconomic factors [41][42] Other Important Information - The company successfully refinanced its $2.1 billion term loan B facility, extending maturities and reducing the cost of debt [5][23] - Elanco's innovation pipeline is robust, with several products expected to launch in 2026, including IL31, which is currently under USDA review [17][19] - The company is committed to enhancing productivity through initiatives like Elanco Ascend, aimed at driving efficiencies across the organization [19][49] Q&A Session Summary Question: Clarification on Credelio Quattro's sales - Management clarified that Credelio Quattro reached $100 million in net sales since its launch, not just in Q3, and expressed optimism about its potential peak sales [31][34] Question: Insights on Zenrelia's label update and market share - Management discussed the positive momentum for Zenrelia, highlighting its growing market share and the recent removal of vaccine-induced disease language from its label [35][36] Question: 2025 EBITDA guidance and OpEx investments - Management confirmed the increase in EBITDA guidance and discussed the ongoing investments in operational expenses to support product launches and growth [38][39] Question: Competitive landscape and market dynamics - Management acknowledged the competitive pressures in the derm and parasiticides markets but emphasized that their differentiated portfolio has allowed them to maintain market share [53]