Elanco Animal Health (ELAN) investor relations material

Market trends and industry outlook

• Pet health market is projected to grow from $40B to $60B over the next decade, driven by durable demand and innovation.

• Pet spending remains resilient, with 80% of companies in the sector growing in the first half of the year.

• The farm animal segment is benefiting from global protein demand, with dairy and poultry as key growth drivers and a five-year beef shortage impacting the market.

• Omni-channel and online purchasing are increasing, with 40% of pet care now subscription-based, boosting compliance and sales.

• The company is well-positioned for continued growth, with innovation and commercial execution as core strategies.

Product innovation and portfolio performance

• Innovation is the main growth driver, especially for products like Zenrelia, Quattro, and Befrena, which are gaining share and expanding clinic penetration.

• The derm and parasiticide markets are growing, with differentiated products enabling price increases and new clinic additions.

• Vaccine and therapeutic portfolios are seeing a halo effect from innovation, leading to increased market share and stability.

• Credelio Quattro is expected to become the largest brand family, with international launches planned for next year.

• Zenrelia and Befrena are driving growth in the derm market, with strong adoption and plans for further label improvements.

Financial performance and guidance

• Pricing accelerated in July and August, with broad-based increases across pharma and pet segments.

• Organic growth targets have been raised, with innovation-led growth expected to continue through 2027 and beyond.

• Margin improvements are anticipated through fixed cost leverage and the Ascend program, targeting 60% gross margins.

• Investments in manufacturing and R&D are expected to normalize after 2026, with no anticipated capacity gaps.

• The company remains opportunistic in talent acquisition, leveraging market disruptions to strengthen its team.