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ELANCO ANIMAL HEALTH INC

ELANCO ANIMAL HEALTH INC (ELAN) Q1 2026 Earnings Call Transcript

Bullish Medical - Pharmaceuticals 12.41B USA
Next Earnings
2026-05-05

Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals worldwide. It offers pet health products, such as parasiticides, vaccines, and therapeutics that protect pets from fleas, ticks, and internal parasites under the Seresto, K-9 Advantage, Advantix, and Advocate trademarks; prescription parasiticide products, an over-the-counter treatments for the prevention and elimination of fleas and ticks under the Credelio, Credelio Cat, Credelio Plus, Interceptor Plus, Doncit, Drontal, Drontal Plus, and Trifexis trademarks; vaccines portfolio that provides differentiated prevention coverage for a number of important pet health risks; and therapeutics portfolio for the treatment of pain, otitis, cardiovascular, and dermatology indications, as well as osteoarthritis for dogs and cats under the Galliprant trademark. The company also provides farm animal products that help farmers improve animal health and wellbeing, and raise livestock, such as cattle, swine, and poultry. In addition, it offers medicated feed additives, injectable antibiotics, vaccines, insecticides and enzymes, and others under the Rumensin, Baytril, and Experior trademarks for cattle; and under the Maxiban and Monteban trademarks for the control and prevention of intestinal disease in poultry. Further, the company offers other pet health products for cats and dogs under the Atopica, Milbemax, Onsior, and TruCan trademarks; and other farm animal products for poultry, cattle, and swine under the AviPro, Catosal, Denagard, Hemicell, Pulmotil, and Surmax tradmarks. It sells its products to third-party distributors and independent retailers; and directly to farm animal producers and veterinarians. Elanco Animal Health Incorporated was founded in 1954 and is headquartered in Greenfield, Indiana.

Elanco 2025 exceeded expectations with 9% organic revenue growth and a raised 2026 innovation outlook of $1.15B, while accelerating deleveraging and reaffirming a 4–6% top-line growth path and mid-single-digit EBITDA growth.

⭐ Key Highlights

Strong Q4 execution
Elanco delivered 9% organic constant currency revenue growth in Q4 and outperformed the high end of guidance across revenue, adjusted EBITDA and adjusted EPS.
2026 innovation outlook raised
Innovation revenue for 2025 was $892 million and Elanco raised 2026 innovation guidance to $1.15 billion, driven by Credelio Quattro, Experior, Zenrelia, Befrena, and Adtab across global markets.
Leverage and balance sheet
Net leverage improved to 3.6x by year-end 2025, with guidance to finish 2026 at 3.1x–3.3x and a long-term target of 2–2.5x, aided by debt paydown and productivity initiatives.
2026 guidance and margin expectations
2026 full-year guidance: organic revenue growth 4–6%, adjusted EBITDA $955–$985 million, and adjusted EPS $1.00–$1.06, with gross margin +40 bps and OpEx up ~7% as Elanco Ascend drives efficiencies.
Key product momentum
Credelio Quattro continued to gain US Rx parasiticide share, Zenrelia expanded internationally with double-digit share gains and positive early traction in Europe, Befrena approved and slated for a 2Q2026 launch, and Adtab delivering >50% growth in OTC Europe.

✔Positive Signals

  • Outperformed guidance on revenue, EBITDA and EPS in 2025
  • Raised 2026 innovation revenue target to $1.15B
  • Significant improvement in net leverage to 3.6x by year-end 2025 and guidance to 3.1x–3.3x in 2026
  • Zenrelia and Credelio Quattro delivering strong share gains internationally and in US clinics
  • Strategic acquisitions and portfolio expansion (e.g., Befrena approval; AHV pending) expected to enhance growth and margin mix

✖Negative Signals

  • Near-term gross margin pressure due to inflation and higher inventory costs
  • First-half 2026 gross margins expected to be weaker; OpEx rising 7% in constant currency
  • Inflationary environment and competitive pressures contributing to potential headwinds
  • Timing and delivery risk around FDA label updates for Zenrelia
  • Debt reduction and leverage target depend on execution of productivity program and acquisitions

📊Financial Results

  • Q4 revenue $1.14B, up 12% year-over-year; organic constant currency growth 9%
  • Full-year 2025 adjusted EBITDA $901M, up on strong pricing and mix; adjusted EPS $0.94
  • 2025 gross margin 54.9% for the full year, flat versus 2024; 2026 gross margin guidance +40 bps
  • Net debt around $3.2B; net leverage 3.6x; cash flow from operations in Q4 $108M

🔮Future Guidance

  • 2026 full-year guidance: organic revenue growth 4–6% (implies revenue $4.95–$5.02B), adjusted EBITDA $955–$985M, adjusted EPS $1.00–$1.06
  • First-quarter 2026 guidance: revenue $1.28–$1.305B; adjusted EBITDA $290–$310M; adjusted EPS $0.33–$0.36
  • Gross margin expected to rise ~40 bps in 2026; OpEx up ~7%; ongoing investment in launches and R&D
  • Anticipated contribution from AHV acquisition in 2026; greater impact in 2027; deleveraging to 3.1x–3.3x in 2026 and 2–2.5x long-term

💡Interesting Insights

  • Zenrelia international launches show rapid early traction with double-digit market share in countries like Brazil and Japan, suggesting a faster-than-expected international derm opportunity and potential label dynamics in the US.

Detailed Analysis

AI-generated summary of ELANCO ANIMAL HEALTH INC earnings call transcript.

Elanco reported a strong finish to 2025 with 9% organic constant currency revenue growth, led by U.S. Farm Animal and U.S. Pet Health, and beat guidance on revenue, adjusted EBITDA and adjusted EPS. Innovation revenue reached $892 million for the year, with 2026 guidance raised to $1.15 billion as the big six products gain traction globally. The company accelerated deleveraging, ending 2025 at a net leverage of 3.6x and guiding to 3.1x–3.3x for 2026, supported by Elanco Ascend productivity initiatives. The 2026 outlook calls for 4–6% organic revenue growth, adjusted EBITDA of $955–$985 million, and adjusted EPS of $1.00–$1.06, with price increases expected to ramp in 2026 and a favorable mix from higher-margin innovation. Zenrelia, Credelio Quattro, Befrena, Experior and Adtab drove strong product momentum, while the company reiterated its longer-term view of continued growth through portfolio expansion, international expansion, and stronger corporate partnerships, despite near-term margin headwinds from inflation and inventory costs.

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