ELAN - Earnings call transcript Q1 2024 | Elanco Animal Health Incorporated

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Operator

Ladies and gentlemen, thank you for standing by. Welcome, everyone, to the Elanco Animal Health's First Quarter 2024 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Katy Grissom, Head of Investor Relations.

You may begin your conference.

Katy Grissom

morning. Good joining Animal for XXXX First for Call. Earnings us you Health's Elanco Quarter Thank Head Relations. of Grissom, Katy I'm Investor

Joining me our on The on our and President the the Purucker slides call today Chief Scott section call Officer; are referenced Executive Investor during Todd are Investor Relations Young, from Chief this Officer; and Financial Relations. Jeff available Simmons, elanco.com. of

could and risks include are differ our based current that assumptions statements and to forward-looking to on subject These expectations actual statements. will are materially discussion forecast. Today's and results cause uncertainties our from

For forward-looking more do as We in release statements. filed information, the see earnings well SEC. any discussed the not the undertake XX-Q risk as and with today's factors any latest duty XX-K Form update press to

non-GAAP After of and today's we'll prepared are Reconciliations on today these of focus release. measures slides be appendix to Our your remarks press included our will the earnings questions. financial measures. in take remarks, happy the our in non-GAAP

the I'll now call turn Jeff. to over

Jeffrey Simmons

Katy. poised morning, a very exciting XXXX. Thanks, Elanco for everyone. is Good

the momentum business by quarter, reinforced and of our the portfolio first strong continued geographic in results. Our diversity

In the our metrics, range EPS. of adjusted top quarter, the key adjusted our we EBITDA and end revenue, on guidance exceeded

driving customers. creativity of resiliency our permeating and We months. Energy, over is our which the collaboration productive with encouraged The to world. our last outcomes filling the and One the are positive strong has halls by decision-making conversations progress and several pipeline, across late-stage advanced significantly are Elanco and approach

start on Slide the many the cash, points for to with X. remains year and on innovation focus Our growth, year. Beginning proof

start is in business off very underlying to XXXX. encouraging Our a

second in were a quarterly half quarter the our into first quarter to XXXX. the first system of in shift last related impacted year of As purchasing ERP from our you the integration may remember, by customer results

impact the will our of focus growth, excluding $XX $XXX my shift estimated determined we million the underlying As was to on comments year, estimate the last shift. million. I

For in quarter, the revenue fourth year. continued We underlying last late-stage growth the in to range, third growth first X% the building the currency first on confident mid-single-digit our X% innovation. in both quarters constant the quarter, in and estimated at remain X%

our the the of on packages the dialogue timing we Credelio in approval and increased FDA Bovaer, certainty expected Based with Zenrelia, the status Quattro. have submitted, for and

products We differentiated to revenue the the of X with expected in continue from contribution to to the second expect market, products all half bring year.

of million debt we inventory the as built a in products. integration. completing balance net result focus ERP inventory cash system the on as even improving working benefit cash net year-over-year, quarter, improved our On our nearly of sheet new for We operating reduced by and and disciplined $XXX reduced we flow capital

midyear. close our expect We around continue of to business the to Aqua sale

growth currency Finally, year, our we're revenue full expectations increasing at X% growth. constant now for the for X% to

our metrics EBITDA impact on to guidance since unfavorable increased February, constant improving dollar updating are and strength of both We key U.S. of the expectations adjusted EPS. with adjusted currency reflect the

the first in We of $X.XXX performing with sides the X. Moving billion, quarter. in both performance to business quarter. revenue review I'll well Slide first delivered business our of our

competitive revenue innovation this we weather sales, X% January, constant into Reduced a Health, the expected, of increased globally. offset and and the in result and March the industry second momentum in was and adverse includes estimate For headwinds. as supply improved felt see sequentially as was quarter. underlying carrying growth also both February improved as activity to X% dispensing consumer approximately growth macro with X% we This Pet U.S. underlying partially currency by in in

the both our well. channel, for our quarter. brands and retail advantage classic cats performing is market were in business retail dogs analysis brands X-dollar the OTC Based Our on of growth top

portfolio the increased family market retail benefited for Our share higher-than-expected physical from channels. overall advantage availability and and the has

addition, Seresto. by we're encouraged In

campaign a new drove leading DTC growth. This in the indicator bold investment brand. advertising an X-point to this awareness improvement Our share is important season for in the unaided

OTC leadership to are market season. we we drive in-store key as leveraging American and enter North heart across implementing Broadly across brands growth online our the the our of retailers portfolio, initiatives by and parasiticide

pressured our strengthening and continue or In better-than-expected the position, market, result market visits continued driving Elanco's this consistent impact in constraints. performance. competitive U.S. of of labor a clinic innovation, vet Despite strategy be to is primarily capacity and the line share as execution

leading increased year important indicator expanded voice, share expected our significantly the of sales Our as lift force to an portfolio the vet has progresses.

the Additionally, our our of innovation relevance portfolio. elevating is

are enhancing key accounts, platforms on used investing while partnership focused in strategic veterinarians. the corporate also our by We with

Our help marketing breakthrough treatment. of canine late efforts it the the our online or with how and parvo antibody, CPMA, drive pet parvovirus to enhancing awareness virus, continues With tool, both to sales with to we In geared a improving Elanco's community of effectiveness These safe. puppy spreads new campaign game-changing targeting efforts to supply the ramp, expanded each month year. launched veterinarians and are start include keep we veterinary pet intelligence owners sequentially monoclonal tracking owners empowering first-ever and penetration. the raise to April, the towards capacity,

the the owners reordering. to shows and leading outcomes data clinic have are the for clinics improved, in product freezer, puppies, staff when pet Early

continued ramp the expect We throughout product for year. the

led International including growth first with parasiticide Health, our X% currency improved Seresto quarter to European Spain. revenue year-over-year where estimate growth in In line was expectations, basis. markets, constant in for was by moving we underlying OTC the approximately products, Pet by certain a driven on demand Now

Credelio continue Additionally, Europe. in for increased and the to a AdTab family demand for strong see we ramp

existing in leading including as in our driving portfolio our topicals strategic same is We of in availability a of the and share strong Employing voice collars limited the investing on physical with as and the as curve traditional of digital cannibalization U.S., products launch focus direct-to-consumer launch is Europe. AdTab, the of and principles point-of-sale meaningfully region. permitted are well which for OTC advertising,

shifting underlying by of use In Now of growth U.S., to currency from In revenue and benefited Globally, driven cattle. estimate in we X%. X% underlying rotations products our extended Farm approximately poultry, quarter. the the growth and was to XX% Animal. constant the we was poultry

increased programs. of programs Going we as market from antibiotics our forward [indiscernible] important ever year, continues no use expect antibiotic medicine to the this to to shift human no

is March, feed Elanco's opportune cornerstone diverse on share additive cattle, Medicated market In cattle us broadly gain to days portfolio uptick was farm in a increased time. feed while innovation beef. animal at portfolio continue see there to in our of are slight benefiting medicated feed, the this in on Additives Feed we enabling and

We Experior continue U.S. in with the to pleased be trajectory of the

as and expected confidence the in in giving in adoption the us increased as strength blockbuster U.S. heifers in the Continued well Canada that globally product XXXX. will is increased use status approach

driving livestock portfolio Rumensin dairy, Bovaer anticipation and our largest growth one is sales Elanco's sustainability both for Experior across beef and brands. of with demand The for further insulating of

for business of a outside finally, Farm approximately estimate we X%. the Animal decline U.S., And our

to Continued a demand continue by growth to offset for in the for and with poultry year. approach notably China was more take swine, expectations in our regards China, volatility cautious than we in

delivered. global our business, drivers first our growth launched base in the quarter Overall, innovation portfolio and for

of revenue the full to expectations our We pipeline. X% have to currency year the our late-stage X%, constant raised for contributions growth before

in first price across progress On saw we and stabilize. Slide We to our the made productivity X. business portfolio innovation, now quarter. and the portfolio, continues growth Moving core to strategy X%

productivity, as Regarding quarter the planned. restructuring improved and divestiture are operating cash progressing flow first and Aqua

market X. on late starting let's In deliver get XXXX. by to expectations our Slide to into the innovation innovation Now we shared XXXX, high-impact

Over the years, we have management last cycle to in life products delivered over addition regional XX and numerous improvements. X innovations,

million revenue XXXX. million expected from new to generate Importantly, $XXX on we of in product to remain track an $XXX innovations

with Slide innovation launch new or to are of Plus delivered introducing Moving quarterly expectations. performing Credelio by doubling more a our portfolio Today, AdTab, This sales. in products $XXX led than better million Experior disclosure XXXX, than and Cat new we're X. in NutriQuest, XXXX. Credelio line

deliver expect million million of quarter, contributed million. $XXX for from In new now our $XXX contribution to this excluding the sales first pipeline. We basket products product any this to late-stage $XXX year,

contribution next front thrilled us. launch the are in by of of innovation our and in the right market encouraged of is window historic the are our that phase We already

As we and process U.S. rolling iterative. shared regulatory is previously, have the

We several programs. late-stage last have the months several had and productive years over Medicine key engagement FDA specifically Center with for Veterinary more last all X the the on

been Since by approved majority approvability technical in we and of have we agency, late very differentiated started the XXXX, in submissions and confident for these continue products. be sections subsections to of the these the products the

products. all to believe the Quattro to Slide have progressed complete since review of its X. these FDA and Zenrelia February, the Credelio necessary data has Both and we Moving

end all FDA we New the the NADA, products, review, expected Application, sections, full by XX-day be Animal approved both undergoes each For or expect labels, sections, of June. that including administrative in of our approval expectations an approval technical the Drug After QX. will putting final all technical before

product pruritus least confident product dogs differentiated inhibitor, Zenrelia at JAK age. be the dermatitis is atopic more specifically. this from Now little control on the remain a market each will and a targeting of of We XX in current option. months

desire market the and additional provide the the we label shows options optimization prioritize continue will to to of differentiation. Our interest meaningful for clear research as most

quarter. the approval targeting the efficient market very in of window, end third a have to expect We to launch the before product

approval Additionally, several we in effort Zenrelia our XXXX, for in late expect globalization starting markets international ever. fastest

ticks, Quattro, moving a coverage single internal parasiticide parasites Now monthly fleas, Credelio heartworms targeting dose. broad-spectrum for in other our to and

in with broader expect we products shared we As have will previously, market, from coverage. the be differentiated incumbent Quattro

coverage be including known posing Specifically, fleas. zoonotic we effectively to those that risk be eliminating have by expect prevented humans cannot or to of to tapeworms,

to the market. broader Quattro are prevent demonstrate uniquely seeking in will after the this to we FDA first the We coverage expect that ability to the dose and position monthly heartworms Credelio

in quarter Quattro, launch year. the targeting For of we're this fourth

end ingredient U.S. of is for commitment to completion to risk Bovaer, Bovaer market first-in-class solutions expected balancing agenda modernize underscores the We to the process appreciate dairy to in need high regulatory stage our standards process. regulatory FDA's for market. maintaining the for FDA's May. the and review, review final methane-reducing innovation the while the need for the Finally, with with bring science-based The before FDA, the the of quickly our feed

progression product with while ecosystem towards We climate-neutral opportunity companies and stream Several in are market partnering, CPG support reduce the The indicated creating a for We and in forward look to the carbon emissions supply farming, an to opportunity milk large across significant clearance continuing the to U.S. interest milestone gas also Bovaer in portfolio our major their a the help opening livestock Bovaer next farms on-farm chains. quarter. dairies integrating up and for of the sustainability. dairy to shape have their expected third revenue market in country. to the will in-set health, for greenhouse co-ops, mark begin animal expect selling into

peak all very shared today, adjusted These near the X the expected expected term time. in continue $XXX XXXX, the are ramp the growth million products, goal $XXX revenue innovation timing curve our to Elanco's the over growth in with support we expected to in to of meaningful all opportunity of and potential, with late-stage of launch and on X sales second drive and for half million Based decade. are products blockbuster medium to growth continued EBITDA

exciting and product quarters a approval perspective. an us ahead few have from of We launch

to Meanwhile, progressing phases of pipeline from remain all advancing our team Ellen her and programs. projects the focused refilling Brabander, the later-stage on early-stage de

our that in canine many monoclonal will believe and progressing both XXXX, be to development. continue antibody assets research We we approved in are differentiated and IL-XX dermatology for

We ambition continue pipeline a innovation. our deliver high-impact consistent, robust to supporting to see

on first I'll With it our more financial guidance. that, and results to to pass quarter provide Todd

Todd Young

a first Thank today's please Jeff, the morning, so results. of good year-over-year and earnings I on focus will detailed measures, everyone. comments refer release our Today, for press reported quarter our changes adjusted you, and description my to

Slide in on XX. reported of quarter, In and delivered X% the X%. Starting of contributed a we billion constant the $X.XXX first quarter. decline Price revenue, currency

XXXX. in the System the first quarter comparisons ERP year-over-year impacted referenced, the Blackout Jeff that As are occurred for by

Last impact to estimated point each for quarter, a are first $XXX expectations. quarter into of of limited foreign from quarter estimated rates, detriment the XX estimate of $XX million the the underlying second Slide sales million The ahead business on we X% to With area. year, we to X to shifted slightly X the year. in this exchange growth X%, reflecting percentage impacts business our from noted grew first

to benefit that ERP revenue last X%, Health, year-over-year a resupply Pet new growth Bayer of with points declined moving For The the vaccines year, was growth driven year-over-year decline XX were of points to of products including percentage from headwind the X%, constant ERP price, and to Pet Blackout. XX by growth Health a certain an the headwind estimated currency onetime U.S., XX of of Blackout. to distribution In from into percentage to underlying out return sales legacy stock was certain related products. approximately

also and innovation headwinds quarter, faced the lower vet January, from visits. the business the In competitive weather-impacted

our in across constant XX demand estimated the Credelio business and Spain, to points return by Outside Underlying U.S., the led percentage Blackout. approximately declined headwind from to Health in products Pet of currency, Europe. of innovation normalized more growth an ramp with by and the quarter was family higher driven for X% demand patterns a Seresto year-over-year growth in ERP products AdTab

of to was growth U.S., points to the adoption, Blackout. an headwind expanded from grew the Farm headwind year-over-year approximately of Globally, currency, in Farm X% to products. Animal the business an percentage resupply Elanco by ERP business points with growth X growth vaccine demand estimated from The constant In X for the our poultry declined percentage Animal our underlying business Experior Blackout. estimated driven X%, X year-over-year in with ERP and

currency, of our Asian business Outside The swine declined business underlying partially majority a Blackout. in from increased X U.S., in Aqua decline in X% weakness year-over-year demand decline the ERP the Europe. year-over-year by business for the to was driven offset growth of was by with markets, poultry approximately Animal the result ERP an estimated headwind The in of in constant the the percentage Blackout. Farm points

basis Continuing income declined gross of The The on basis Health year-over-year driven was impact Animal balance of headwind XXX XXXX. manufacturing offset in to line down XXX Blackout and with were from from the points Bayer partially remaining point products ERP growth. by quarter to to XX.X%, our XX. as in decline reduce the an the estimated the Slide more margin output Gross XXX basis realized expectations. as statement sheet was price on sales points, by growth of inventory legacy XXX high-margin, work slowing first approximate inflation, we margin

SG&A by increased by expenses R&D quarter. project the driven million, expenses X% primarily increased to as promotional $XX sales $XX ERP Operating health X%, pet million year-over-year system. expenses. expense timing targeted expanded expenses a year. of force, by the $X and employee-related expenses, and increased in grew driven U.S. IT-related Interest savings brands activity last result of employee-related consolidating was to across million pet partially one offset expense primarily compared

last $XX expenses including certain Additionally, by to driven this other operations declined in markets, simplified from million in the $X volatile our quarter year first year, million Argentina.

Moving XX. the from year-over-year $XX quarter. by of negatively quarter The the year. impacted $XX ERP to last EBITDA Slide million was million the estimated an is Adjusted first in $XXX Blackout benefit to million in comparison

year-over-year the $X.XX to The by quarter. the EPS business, higher Health. drive investments to by underlying more our than was long-term the in Adjusted growth to For of year. was the commercial Pet increase in primarily benefit a underlying decline driven offset $X.XX sales, the last revenue decision was comparison from in is slight by first negatively impacted rate. tax quarter performance $X.XX increased by ERP Blackout The favorable an driven estimated

reduction reflects Before me improvement integration. cash the $XXX cash, moving Cash on $X improvement our words from operations on and few million of operating to million Bayer the a and was flow working offer in The ERP the in from in spend Slide debt guidance, inventory our year-over-year XX. savings let our quarter. completion from capital in project

$XX enabled negatively operating quarter the both flow. we XX-month drove investing ended last debt billion, EBITDA improvements was was our by ERP million from the which by net of At paid the as estimated debt, of cash impacted year, Blackout ratio X.Xx, net X.X March, and our turns $X.XXX an of to end We as down X.X the with trailing of in leverage increase.

net anticipate continue before leverage and the from of the We debt We paydown cash divestiture. million $XXX Aqua between the year-end this be debt X.X X.Xx to for $XXX considering year. million between paydown proceeds net to from and expected expect ratio the available free flow

$X.XX to ratio paydown, net this year. the of $X.X mid-Xx to billion, an proceeds between use end in for range at the to continue we which intend debt to expected expect to EBITDA debt We net leading primarily be to adjusted

starting Slide Now our let's to move financial on XX. guidance,

range are reflect the our For tightening full first guidance year, impact to we U.S. outperformance and dollar. the quarter the strengthening of

rates EBITDA We revenue of are updating and EPS of end FX adjusted raising to X%, and to May. reflect the bottom currency our constant early growth as adjusted

As a the not contribution the does divestiture. of impacts pipeline and from late-stage for reminder, our not guidance Aqua anticipated account products our expected does include

we XX, businesses, sales constant base Health is U.S. from Slide currency a accounts the provide outlook cattle Farm reduced further revenue The the portfolio. driven European Pet raised updated Kexxtone, growth for International by expected our higher The primarily and product. On on innovation and improved expectations. details also Animal both for sales

We sales by have of is manufacturing process the the product, paused EMA. review under while the

year $XX expect February million EBITDA, and full million We to of approximately of adjusted revenue the be impact with guidance. our compared $XX

Regarding the $XX million February $XX full FX, higher year, headwind than a guidance. now for expect we million our

now the our On EPS EBITDA to $XX adjusted the bridge of billion, be we unfavorable an adjusted inclusive for Slide $XXX XX, $X million guidance. impact between compared adjusted million foreign provide to to expect February of headwind EBITDA from exchange We incremental and rates.

of are $X we end impact, the by our bottom EBITDA FX million. adjusted top million the $XX the by end guidance increasing Excluding and

the overperformance in reflect currency increased and confidence Our improved year. QX constant assumptions the full

additional guidance February appendix our provides and XX both for expectations raising expense a EPS, to to $X.XX Slide several overperformance to assumptions. of tax. the of in as FX, to updates we improvements full unfavorable despite and result year our our interest $X.XX the For adjusted compared are QX in

the guidance we quarter. XX, our for second financial Slide provide On

revenue billion, expect billion million of EBITDA $X.XXX of $X.XX million $XXX to EPS $XXX adjusted to to of We adjusted and $X.XX $X.XX.

and we of adjusted EPS first result a of the adjusted quarter $X.XX and first quarter last in million the which as of EBITDA growth $XX the revenue, quarter will XXXX, ERP the of quarter XXXX. As approximately rates into the $XXX reported system of second year the for impact million shifted shared in XXXX, second of blackout from

points revenue revenue XX As Blackout on first estimated the to unwind, X XX, second from to the quarter shown in ERP approximately percentage year-over-year the headwind quarter will Slide contributing growth growth. to

Excluding the the X% our of quarter, revenue in Blackout, The and reflect adjusted to is be in results growth our Health our first investment this EPS with plants Slide positively second business. expectations underlying In EBITDA XX. we and will and impact headwinds estimated impact our expected opportunity year. for to X%. year year-over-year slowing the ahead are shift Overall, the the of forward expect launch delivering look currency increased from on growth constant manufacturing ERP later also adjusted to in new products line executing of the quarter, shown as to we the on exciting expectations initial down Pet EBITDA

I'll comments. closing for Jeff Now to it hand back

Jeffrey Simmons

very time Todd. in is and This exciting Elanco, Thanks, our a momentum we business. have across

is over and past sharpen in taken building trajectory focus results. strategic global to positive invest commercial on we've highly committed delivering the set Our quarters. X deeply team are to our The and focused drivers our intensely growth engaged, the actions

driving consistent innovation progress. on is high-impact focus immense Our

CPMA coming more the experienced expected with in X the blockbusters, potential in market, months. X have We already

track we and that's the to on years. deliver from several growth meaningful sales slated are our over next these innovation year, With for next IL-XX product

of we strategy and the our stability our moment off. Elanco's As within leadership paying this team is consistency enter trajectory, in pivotal

growth strong for a our constant Elanco flow with are track we and forward the is XXXX, growing, to on engage the the base and presence, products geographic throughout our factors, all new increase balanced operating These us confidence expectations look diverse for is continuing with full and from exceeding the is to portfolio durability expectations. give of business to improving year. currency year. Our cash combined you deliver to contributions

moderate Katy With to Q&A. over to that, I'll turn it the

Katy Grissom

you Operator, Thanks, questions we yourself please the Q&A so caller. many then Jeff. to provide one the We'd the and take limit for first from as question to ask and one as instructions session, follow-up. take that we'll like callers possible,

Operator

[Operator Stifel. from of line Instructions] Block Our from first the Jon question comes

Jonathan Block

the then gaining market Jeff, to trade can sometimes OTC performance did understand, down. on market. within it consumer my I if some seem ask sure Why commentary. make the interesting Para we that Maybe seemingly And that? And even you for market's comments share follow-up. pressure, of a is normalize like pressure just want if the does under I'll you're I causes weak the if that stocking elaborate on just

than you're you to Initially, seems like looks to going X the shorter out It it Zenrelia, compress launch going called it's something For X like to move to timing. months. that.

changed launch confidence talk So And there. change, what as for will internationally think do how just your then us the what Zenrelia about we or timing you to well? about

Jeffrey Simmons

Jon. Thanks, Yes.

Zenrelia, me administrative looking said quarter. with Let question we're quarter. in at third go second the typically, days we process technical sections is that start XX the Again, and into would second The that first. approved, as

we know, our production line made in very very been, you for into products with the said As process Zenrelia much facilities. what and clearly other our like do we that fits and own parasiticides and we've have

So preparing. we've been

that have ready. is product is that We manufactured,

expectation that created to from actually the time we we've for that's the but bring current efficiencies product do market And believe Of why have we approval from to we'll our additional labeling, course, QX. in the that wait launch. is to

that So is our plan. current

for quickly, market yes, to our demand resilient the we Relative even products. some OTC the just real OTC, of dynamics. quite see midst strong in is of fundamentally, That

more the We demand products. we OTC back the continuum the back inside little think to -- of innovation the robust clinic bit market to vet pull coming after -- or I from see the also, entered the kind of a seeing

voice. in what's this I is availability. now driving strategy which portfolio is of share we've of club, grocery, strong, expanded lot think a the put our dollar, and Our work, We're to the that's physical

seen we're Seresto as I and comments. that awareness awareness most price since jump of in I lot really up want Seresto, then constantly Bayer point probably brand optimizing the owning to campaign Boulder unaided product And And owning mentioned volume. is a we've [ on the in think ] the that to X%. seen the I my

And of just market. note in over I the ramping want to U.S. is from classic fastest the in innovation Europe the the AdTab products retail then have the overall, in to. brands even one we

But to look, think saw question, as overall. specific weather your I we impact the

We have seen in the that handle some have We OTC as both a premium occur trade as space. trade-down products. the now portfolio the well can down

out. we've down. and that is January weather We a see seen So carrying it quarter. portfolio playing And actually, the a saw that pretty nice took increase sequential second jump March, seen we XX% improvement. in back. We've into momentum

the So nice to we clinic we is took tailwind we continue that products. this go as purchased Romero place is really have market the strategy off, Bayer see these that we off launching into and approach again, as in when now diversity new paying paying and Bobby a omnichannel vet

Operator

Erin the Wright Morgan Our Stanley. next from of line of comes question

Erin Wilson Wright

associated to of that -- related. change And remind here can upcoming these X about that embedded of -- I'll launches? just certainty the the upfront a expenses in as on remind Can you're thinking bit what's relates those this us it you they're you But those launches? little launches? ask the because guidance us you're how blockbuster with sort making ahead Does increase of does investments around

of launch some instance, then before would give on for sort clarity And on could timing? launch you conversations your And the time change the you with are the be milestones And that line time what next would of that your all? actually or And lines? those at what that approval see second FDA. changed

Todd Young

very the really sales the are ads side. out feel cost training time, ready The to to materials the At teams force laid biggest go. as timing about Erin, thanks and be TV we've from launch on those running We same for the the TV is question marketing good ads. the preparing preparing to today.

not expenses or included in included guide. into guide, the we sales Zenrelia those the Credelio Quattro of And just Bovaer, the haven't like so we've

positive we'll to be today. EBITDA relative We we've continue believe the guidance to out laid

I'll to it turn for the FDA back Jeff question.

Jeffrey Simmons

bit, your question and I Erin. Yes, just might to get it. little broaden a I'll

know Zenrelia of think I products, I blockbuster are us. and these to important. important all really specifically it's Credelio innovation and

me opened So comments I made let just here. call the framing the a add when to I little

we very made are as a pleased the we've and move in closer approval actually, that's our key Since has progress increased we these end of lot the this driven of February, First, with process. to progress happened, assets. certainty

we've dialogue to FDA has rolling constructive, We've frequent. engagement Fee Erin. Yes, Drug believe I on been really, a been fair, agency, from these the common, and is the which the with It's been very the several the or with It's in responding Animal been been questions User iterative. over productive the constructive. months, them, last is Act assets. ADUFA working specific And

that we third of from this And products the have back-and-forth Simply subsections to submissions have been has mentioned. review we what's Both into we're than of estimated progressed. importantly, moving I path Thus, approval. What changed So final quarter. sections and you timing though, the taken when more interaction in and what this XX-day have not changed not certainty February? approved. administrative slightly interactions since the the has time all changed have increased many first is, half these think

technical think What also versus to say including differentiated I sections, is it's hasn't all what continue as half end as half be label, Bovaer. products second the expected X approved these to products is well important be expect the still of offering. contribution revenue in the the expect or changed? the to by current we in And hasn't the that still changed We to we for June. expect first

underway. the nice A they probably approvals, global launches. indicators, and good, highest, to and the for Pet Health. competitive as I again, the on that, well as launch ever been. U.S. to believe need They're we marketing scores in years in needs has company. FDA importantly, Health the your where be as is they've believe the high relative the the lead as we've think, in We're engagement been planning Pet question right U.S. And The positioned what it we is to well and

nice So is that's our lead a preparedness ready. indicator that

as launch as as we've possible will noted. We soon

expect QX for that be right Credelio for now Quattro. QX Zenrelia, We to

Operator

of comes of question the from next Our Ryskin Michael America. line Bank of

Michael Ryskin

I'll same time on both update. well. Congrats quarter the Great. as at and ask the

on launch label approvals, approval especially terms both the Zenrelia new of you've transparent So following up us expectations with differentiation things like in of that. product for in been and and Quattro, timing, terms very

conversations change Are approach get sort you having distributors eyes any for expected in to Trio entering you the date is vets? and be of from date, NexGard in are you're they and XQ? of closer any the the sort Zoetis marketplace seeing inventory? as market Plus? just I'm Zoetis evolving the how doing different the or existing Simparica that go-live the As players, to for to with XQ, derm anything you they build Are going wondering in

my will seems a quicker. follow-up, the like which pretty is provided, flow-through I hope, a on going then to little be meaningful bit be Kexxtone, EU And you there. update

chance XX So Just in cutting exactly there us from what back obviously, bit color look it sort like Is Could at seems what some a that on of any off. forward months? sort of that point? happened should more X, that EU? next just comes you're you the give little we

Jeffrey Simmons

Very you. Yes. questions, Thank good John.

Katy Grissom

Mike, Mike.

Jeffrey Simmons

Mike. Mike, me, sorry, Excuse I'm

Michael Ryskin

Katy. Thanks,

Jeffrey Simmons

that. about Sorry

has from and we listen, real and been We've This seen anticipate couple And testing of lot taken time. of be not relative reactions So to come. we've We've over of do years decisions a lot we launch we've Parvo. now Bexacat, new. of competitive the the of see marketplace Mike, lot preparing this very had products muscle marketplace. for this last some to in And building ZORBIUM, quick. And the made a Look, a seriously. is innovations launch.

would prepared. really say well we're I so And

that first would I create basics, the of force. a comes emphasize voice think clinic why to clinic then we've awareness I back to is share to look, thing so sales couple it of penetration. And added that That's the leads

we're Our share important. are the indicator number have credible, a That's That's dramatically in X with relationships They've that key that key of people it's And of territories. voice at. quarters. metrics and lot grown high. looking deep last know that's We one. experienced lead a

adoption. labels differentiation the And to know then because working we these look, We're impacts differentiation. also optimize

approach Quattro, and X-pillar help And able helps. for therapeutics, to and will have also now about. it but Zenrelia existing to this our note vaccines, derm say, why talked would be we've that's us also parasiticides. really portfolio will help derm It I

So to sales launch to next-generation I kind from those campaigns. things of calling as digital point well we're and what as

U.S. I new. thing even meaningfully, all note, accretive market. too, international, big few The derm IL-XX We're it's coming excited growing excited about this that's and last market about us, in it's the large, to. on The to quarter. Zenrelia. look because but is derm would it's look, things also I a just is, a not It's We're

We continues expect vets and research to more indicate for to Zenrelia, be our differentiated, looking it market are options.

engagement we this I the puts fourth on mentioned, as be that is in us key And a a pillar our offering So believe for good us will really high. place.

ever. our the And going see fastest global late back we year earlier to marketplace, launch come in of believe, markets we question, are the this to international be globally, positioned the to some Zenrelia, into Zenrelia

bit little a launch side. that's of So the

manufacturing key product cattle. treats cattle a Jumping is Kexxtone, a in This about product. It controlled-release a that a capsule rumen process. in It's of key to ketosis Europe. is the Kexxtone.

our We focus, have product until was we We market why that's the taken and with the that and we our that probably late And this the to prudent the removal on anticipate believe the market. into product market, that back don't felt that on process. XXXX. to and highlight we off manufacturing working very is the hard see the EMEA, did manufacturing product team and coming it but

Todd Young

impact the inventory as both is Mike, And also write-offs margin some but well. gross

Operator

line of question the Prasad Our comes Barclays. of Balaji next from

Katy Grissom

looks not you. are hearing we it like Balaji,

queue. to the and we'll in on him caller, go the next back then get Let's

Operator

Certainly.

Evercore. line question of comes Raffat Umer the from Our of next

Michael DiFiore

first. for DiFiore for I'll This Two Umer. is me. ask one first the in Mike

Regarding bundling.

You've consistently enhance your your that said in greatly having competitiveness enhance a Pet asset in derm will Health. and, therefore, bundling capabilities your portfolio

prepared for do is, question have happened have follow-up. to in need remarks bundling those discussions pricing to My accounts? partnerships kind solidify that a your with mean Or I and then you I continue you And get established? corporate yet? you wait to launch mentioned of

Jeffrey Simmons

fundamental is wider a no in of this number the right. company, marketplace to principle or general out common of carry Mike, bring board. that's portfolio help practitioner, certain you kind as quite Yes, whether I across going of the the the to vet that's they're That clinic. exactly size what is as And products. practice, is, a only plays mean a corporate going matter in any

corporately, other research interest help And are market high then the a overall to larger that. in shows alternative on that the groups to get you Having another as there's there's no question. and going side derm that is

and going a of Mike, we for desire X that So principles that today play more see and those high happening forward. out,

Todd Young

they we provide off us. from of Yes. purchase customers volumes incentives Mike, all our based to

gives able derm that to So increase just buy by from them get from that and to them as products also other now, then ability savings incentives more volume. us they to us purchase being

that's to So the of portfolio a Vet structure incentive have we're being about that talking side. and in the major only U.S. the full companies by really X having X

Michael DiFiore

my helpful. have Could quarter? in to channel stocking That's a the onetime this. may it. amounted the Got missed and follow-up you brief question is then much And one, of I how quantify Bayer

Todd Young

It $XX million. was about to $XX million

Michael DiFiore

$XX Okay. million?

Operator

question from of the Knyazkova next Ekaterina Our JPMorgan. from line comes

Ekaterina Knyazkova

for is first manufacturing how XXXX about Bovaer. about in think think of of Can launch capacity question terms of you product? also the just kind on us the you we this at implications stand and should and remind point that So where and capacity where

question Any And epidemic impact And that how anything concerned is the that U.S. about? the in watching producers? on then bird particularly could the second or just you're flu thoughts on

Jeffrey Simmons

to it's a product in for go, purchased here from have the Bovaer you ready Thank been be the question. in bagged, United Europe. On ready labeled partnering States Yes. and has that that we manufacturing, contract to manufacturer and is

that's And why the QX So again, we have we've launch targeted do of a ready. product. product

relative HXNX, customers with continuing then closely, to to there's work our this biosecurity measures. monitor the heightened And to sure we're make

look It eyes we a don't things this over issue on. to our and pretty last think keep see couple but I increasing of to we something is want couple stable. the of weeks, we

consumer we'll also keep profitability dairy producer think eyes especially our and the on. I response that are the lead indicators

on And time seen do the we've in point not our this not just at any and overall, I'll business see results HXNX. from emphasize, impact

Operator

of line William Our the comes Brandon Blair. next from Vazquez from question

Brandon Vazquez

It First on was really guidance. encouraging.

talk speed guidance, raise of guidance about macro the times. then a first You also nice is so quarter that uncertain just line. and the in guys the in a bit, kind raising EPS little here up Can in especially what outperforming that especially confidence are specifically on put you gives you

I FX or $X.XX increase think able on just of it about so. headwinds, you're to still top

just pipeline. on And clarification quick a then is the the follow-up

prepared for just comfortable you mentioned one-month Can already clinical is FDA confirm, heartworm will get that looking you that the remarks, Quattro. get is that think I think the Or because the approval in how you feel has you can is you just with efficacy that? data you and that that? approved

Todd Young

to pet you talked for and We're of was great This having portfolio we continued farm really the the seeing both those growth. our about together, accelerating by Experior offset bringing with and Rumensin. growth get our Farm is generic QX adoption performance with thank by solutions ability competition customers, for question. broad-based we that, Brandon, continue side on business. the the U.S. drive and effect in side, to is

vaccine called well really U.S. PRRS that got market. was the strong, to very a continues Prevacent in farm Poultry do and we've

momentum, what across as AdTab, cannibalization expected. that Jeff Pet, Then we of as less as our European of it we're launch and strong great in a Europe Brazil than continue gaining it in from job both countries mentioned topicals launches. as is really Europe. the to originally see doing And collars was earlier, in is International seeing well sales

So the to our big guidance. drivers are those currency of raise constant confidence the

corporate in us do done good That other interest bonuses we better borrow on to cash job of a us means our we we seasonal QX, rest as with of delivering interest in QX. focusing as cash At net EPS, reduce year. don't one, than borrowing on really have effects the we and some to not has on working well capital allows pay of which allowed that, typically to our pay Team performance expense. expected improving cash. rebates. sort the as for That That

we credits finally, then is receiving Indiana better tax from guide. to taxes, allowing thought state expectations and year $X.XX the the tax us full the than up originally pick And on the we're there on a have a little of

With that, to Jeff question. second your transfer half for I'll of the

Jeffrey Simmons

on Thank Brandon. Yes. the heartworm passed is We've have correct. we Relative said to threshold. that that Quattro, you, early

heartworm have high with has. a So control parameter to CBM that the

well as you. assumption data an the had we're yes, from we've as the that making that dialogue X-month CBM. Thank control And with the on we've package submitted the

Operator

line comes of of the question next Rich from Goldman Our Sachs. Nathan

Nathan Rich

I'll I ask the upfront. had and a on derm products, few them

for little any And anticipated. guess, you timing may what year-end? a bit On seems markets the there? shifted are approvals the like changed international expected on Zenrelia, it certain be before I what where approval than there earlier is details

when of was the terms in of And that FDA line the -- the think the of monoclonal product Is time we difference USDA a in in the Zenrelia. timing antibody, in mind made review keep on approved? should also we by versus sort see after XXXX, there might IL-XX that but on I then slide, quarter I know any the the was unchanged submission maybe

Jeffrey Simmons

for the million that all let product that's question. derm first. that's in in noted. to XXXX. hit $XXX IL-XX me And we're just and Nate, contribution made that We've a nice the -- Relative this confirmed our going $XXX you, We Thank just be part the is highlighting Yes. key expected to to million since just portfolio. to progress of we've

that on, and as regulatory just the Zenrelia, capability this to increase that we've in, all Internationally for greater of quicker. it came of is been presence presence, as built Bayer relative submissions working more hard regulatory more pet something to presence, well

markets earlier. packages especially into and hard in added Ellen's on Tim then globalizing And of which side, those terms worked the key we've then being them marketing target has then to countries. matter And customizing team able Bettington really

things those of to accelerate. together All really have come

global product we've X these pet imagine, can regulatory. capabilities are submissions with dialogues from you made see years into authorities, an markets, we're going but all really in markets international we're specifically, last the big outcome on the QX, over and to the noted as haven't come the built been that regulatory that confident the We this the from have

Operator

David of of line Piper the Westenberg from Sandler. comes question next Our

David Westenberg

Congrats on the quarter.

front. the on couple a Just innovation

Quattro other product? -- taking talk of this old-generation, we share if And I'm the about of you just we the talk see kind on bit oral for on on little maybe OTC, specifically? differentiation growth market then kind more from broader namely, broad of just growing First product. parasiticides? just kind about market maybe white spectrum tapeworm, from out, Quattro we seeing kind as topicals, see thinking, growth, the this the as Can play from the space coverage. category of or of you this the product Are a that a seeing taking Are parasiticides the

good not inherited to monoclonal -- on And think or been the could kind These market secondly, have they it had the those of then be ready curious later. maybe be pipeline that of of -- derms course, know coming about that other XXXX, not XXXX, Is I'd fix? injectable products? to an do IL-X was Is but maybe you because pipeline, that Kindred, had I have there in something products I in potential. you injectable derm. just guys incredibly talk only there

Jeffrey Simmons

Great you questions. Great. for the questions. Thank Yes.

pipeline. we've relative a will do Yes, lots not and do manufacturing derm But work monoclonal of inside have of acquisition, into to follow to to we with have make to KindredBio. We've we as generation highlighted, that. very products noted of the antibodies next Kindred's that. portfolio plant now happy that details there long-acting We're was continue Let lot technologies as we the of and that's with to and relative that play start that do well will the just progress a It's behind and Parvo the me the with come product. other derm making it.

of to had there number work we've the the noted, increase asked us of But treatments. the USDA And to and do. as number dogs continued was

really that so actually time And It wasn't specific. is requirement It extended the product was what line. specific.

market a this in. market, seen as innovation Look, play health. couple come it's principles question. very a of to most animal great consistently parasiticide the the is Relative largest the And in out it's

believe innovation size innovation that market. recently, seen the we the is in of increases of last over couple the have same. will that innovations First our usually come We've the do

[ seen you our portfolio see in the that get rapidly. legacy as is impacted second soonest the innovation and Heather's And ] own The we've well. and had most

as So that we see important.

broader is third is fastest. the one the growing The spectrum oral

believe that this with broadest with Why So things approach being puts and when to and coverage, you inside clinic it X-pillar we having if to the in it's across combined our climb able very combine we to marketplace. ship Credelio these that Quattro a believe have differentiated, have Zenrelia, it the available. Quattro, strong brand approach together, being coverage drop X continues omnichannel homes the position. broadest we want the And you we that wouldn't awareness and have to

broadest So play these all excited as that and we're of this coverage over are we the we that. second factors the product do year, to the bring into animal half largest here market health

Operator

line Our TD next the question from Cowen. Stephen Scala of comes from

Christopher LoBianco

Scala. Steve on on We for just had This one technical Chris is aspect. approval the question

risk disclose So activities finally, you approval granted? was technical technical once and in review was hopefully associated approvals any June? administrative those granted? is launch granted, what are group will of you technical promotional once Can once with And undertake FDA level

Jeffrey Simmons

Yes.

final approval approval, final and is label. We everything when be public for will wait, will course, on of

of news side. will products, and that we nothing and when on the material that And technical appropriately. And XX-day share there's will approval and final if the administrative approved Thank that then promptly so is these relative come between after you. sections we being have to any informing

Operator

of Ty comes of question line Navann from the Paribas. BNP next Our

Navann Ty Dietschi

have I please. questions, X

first The on one innovation.

discuss tried incrementally of with So of stronger upcoming the discussions portfolio? relevance power from higher Elanco's sales your the we've pricing expect you to do innovations, force early

I activist on then a separate investor. have question And

If you date Board appointment to March. and with Wallace the and interactions of could discuss Ancora since late since your dialogue to and the Turner

Jeffrey Simmons

for you Thank questions. the

this holistically. launching, said we with we've at As will look

the and especially, only looking will will rewards product of but side, value-based approach, and We new know holistic take, the of also portfolio. not at the we market take we a the a approach, the innovation innovation the differentiation that on course, pet

into the certain also now of offering clinics. And X will Todd the -- look of we mentioned we portfolio earlier, as will at all standpoint pillars this from

We pricing value-based side but opportunities, products. on a potentially the will we'll volume the look approach take at of

concentrated to as that go value the and that's against we've be keeping our to that the you we decision, principle agenda into of with front continue focus was was all here XXXX. to communicated, we're come is the was a happy and the Relative investor around that and behind to that that investors focus rationale that execute in rest executing mentioned, energy and inside agreement the to we've this publicly company, the of the an of us,

Operator

Our from Prasad Barclays. the for last comes of Balaji question day

Balaji Prasad

So for a couple me.

what and Is administrative of any exactly review. significance can Firstly, to approvals administrative happens on technical clarify review you during the here? the One. be an approval And this this for of period? rescinded technical goal

Two, is or obviously, this on your I'm market a your seen very you'd market Trio. parasiticide what expectations of incremental discussions side, posted Simparica with kind from dislocation from seen and parasiticide is trying any the on strong have And competitor number the to linked of the gauge what part FDA? there you this, on label have within color to market. the expansion

Jeffrey Simmons

thanks questions. Balaji, for Yes, the

need there's changes. that approval. for nuances we've the the all they highlighted, believe information has always and But we regulatory process, the as CBM On

And administrative straightforward. June. on do other new process the And any for administrative We not the And are noted end the we days. follow. is the pretty expect it's will line, believe, on to sections a be we path, time of then for technical dynamics approved by the And typically, there. ADUFA XX process

disclosed our And trio with but in and We parasiticide this desiring you market one our us clinic, capability get market globally to coverage than more the the any as do market detail shift. see we've of won't Quattro I've label, highlighted, outside clinic, here. do marketplace. in broadest the then capabilities broader And the vet we valued relative great believe relative gives into believe opportunity the is is and inside growth, to the already we the the vet as

the thank you for again So question.

Katy Grissom

And to we'll send you -- close. I'll Jeff, it to

Jeffrey Simmons

Yes.

Elanco. Thanks very you. quickly, thank for your in Just interest

Pet for U.S. really Farm price drivers third nice key Animal, points, proof and I a and the in and both 'XX again through portfolio, company company, showed 'XX say consecutive row, third quarter this quarter believe for the the International even growth and to this is our continue outside solid diverse innovation, and growth, quarter X company the of cash, We inside volume. Health, from

side, innovation existing momentum nice our certainty there We're and proof quarter. $XXX to and in the really noted highlight that late-stage We've got the increased innovation, our On in we points guide I the February. increasing want the the innovation. progress note we million in all

gone And up and also for come is Aqua then on midyear and sale is capital mentioned, as conversion as down, track working Todd the inventories the has cash tracking. net has

going So to to and inside and engagement focus our our is and ultimately, forward, that energy to -- anchoring and executing is Elanco, We've think quarter-to-quarter. not delivered quarter growth, keep is innovation high, back I continue another do cash.

look time today. the you with forward again you Thank throughout engaging for the quarter. to We

Operator

participating. for you We thank Thank concludes you. This conference today's call.

Elanco Animal Health (ELAN) 8 May 242024 Q1 Earnings call transcript