Elanco Animal Health (ELAN) TD Cowen 46th Annual Health Care Conference summary

Financial performance and outlook

• Achieved 9% growth in Q4 2025, with innovation revenue reaching $892 million for the year and leverage reduced to 3.6x.

• 2026 guidance targets mid-single-digit top-line growth, high-single-digit EBITDA growth, and low-double-digit EPS growth, with leverage expected in the low 3s.

• Pricing actions accelerated in 2026, especially in U.S. vet clinics, supporting margin improvement.

• Inflation impact is aligned with CPI, with higher cost inventory expected to flow through in early 2026, but margins are projected to improve by at least 40 basis points.

• Capital allocation prioritizes organic investment and debt reduction, with leverage below 3x expected by 2027 and potential for shareholder returns thereafter.

Innovation and product portfolio

• The innovation basket, led by Quattro and Zenrelia, is projected to generate $1.15 billion in 2026, up from $892 million in 2025.

• Quattro achieved blockbuster status in eight months, with growth driven by share gains, pricing, and global expansion.

• Zenrelia is in about half of U.S. vet clinics, with reorder rates above 80% and strong international uptake; label enhancements could provide further upside.

• Six major product launches are expected over the next few years, with the innovation basket carrying higher margins than the corporate average.

• Elanco Ascend program aims for $200–$250 million EBITDA improvement by 2030, mainly through gross margin gains and operational efficiencies.

Market dynamics and competitive landscape

• Seresto sales are split evenly between U.S. and international markets, with limited generic impact expected before U.S. patent expiry in Q3 2027.

• The animal health industry is projected to grow by $20 billion over the next decade, with robust fundamentals in both pet and farm segments.

• U.S. pet market trends include increased subscription sales and omnichannel shopping, while farm animal protein consumption is projected to grow 5% annually.

• Competitive launches, such as Merck’s new derm product, are factored into guidance, with Elanco emphasizing product efficacy and portfolio breadth.

• No significant risk factors identified for Quattro, with ongoing data-driven investment and monitoring.