Elanco Animal Health, Inc. Q3 FY2024 earnings call

• Jeff Simmons highlighted strong third quarter results with adjusted EBITDA and EPS above guidance, and organic growth expected to accelerate in Q4 and 2025. • Key product launches: Zenrelia and Credelio Quattro received U.S. FDA approval; Bovair saw first on-farm feeding into dairy cows. • Debt paydown: $1.3 billion debt paid down in Q3 via Aqua divestiture, net leverage expected mid-four times by year-end. • Innovation progress: Zenrelia launch progressing well with positive vet feedback, Credelio Quattro set for Q1 2025 launch, Experior cleared for broader heifer expansion, and Appian securing inset carbon credits from Bovair use. • Global expansion: Zenrelia approved in Canada and Japan with less restrictive labels.

Elanco reported organic constant currency revenue growth of 1% in the third quarter. U.S. pet health revenue declined 4% in the quarter, with retail performance returning to growth and new products like Zenrelia contributing. Outside the U.S., Pet Health had constant currency revenue growth of 2% led by AdTab, Credelio Plus, and Seresto. Farm Animal globally grew 3%, with the U.S. business growing 11% led by cattle (Experior expected to reach blockbuster status with sales over $100M globally), while International Farm Animal had a 3% organic constant currency revenue decline due to model changes and a Keckstone product recall.

• Full-year 2024 organic constant currency revenue growth expected at 3%. • 2025 organic constant currency revenue growth expected to accelerate to mid-single digits. • Adjusted EBITDA for 2024 expected $900-$930 million. • UK CMO insolvency expected to impact 2025 adjusted EBITDA by $25-$35 million. • Fourth-quarter organic constant currency revenue growth expected 1%-4%.

• UK court-supervised insolvency of a key CMO, impacting 2025 adjusted EBITDA by $25-$35 million. • Difficult producer economics in the U.S. swine industry, expected to continue impacting investment in 2025.

Q: Michael Ryskin from Bank of America asked about early metrics for Zenrelia, specifically clinic penetration.

A: Jeff Simmons stated clinic penetration is a key metric, with several hundred new clinics per week and reorder rates increasing as the product is used and replenished.

Q: Jon Block from Stifel inquired about 2025 operating leverage.

A: Todd Young explained investments in new products will drive growth, with front-end investment in sales and growth over the year.

Q: Erin Wright from Morgan Stanley asked about Zenrelia pricing and Credelio Quattro's launch.

A: Jeff Simmons discussed value-based pricing for Quattro, and Todd Young mentioned Zenrelia's pricing is on average a 20% discount.

Q: Brandon Vazquez from William Blair asked about Seresto and Advantage's revenue.

A: Todd Young noted Seresto had a good year but expects lower growth, with AdTab contributing to overall pet health growth.

Q: Chris Schott from JPMorgan asked about pricing outlook and Quattro's ramp.

A: Jeff Simmons said pricing will normalize, and Quattro will ramp over the year ahead of the parasitic season.

Q: Mikey Fury from Evercore ISI asked about Zenrelia's vaccine booster study and Quattro's reception.

A: Jeff Simmons said the booster study was well-received, and Quattro is in a growing broad-spectrum parasiticide market.

Q: David Westenberg from Piper Sandler asked about Bovair and Experior margins.

A: Jeff Simmons discussed Bovair's opportunity in dairy and Experior's margin profile, noting its potential in heifers.

Q: Navan Tai from BNP Paribas asked about vet feedback on Zenrelia and CMO supply.

A: Jeff Simmons mentioned the booster study was effective, and Todd Young discussed working with the UK CMO administrator to maintain supply.