Elanco Animal Health Inc at Piper Sandler Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Westenberg - Piper Sandler - Analyst : And let's just kick it off. You had an exciting launch this quarter, Zenrelia, the second to market with the dermatology product. How is the launch going so far?

Question: David Westenberg - Piper Sandler - Analyst : Well, that's great. It's a good segue into the mid-single-digit growth rate for 2025. How can you -- how should we think about the percentage coming from Zenrelia? And you'll have Quattro, I believe, launching in Q1. And maybe if you don't want to give percentage basis, can you just maybe give us a qualitative measure of how we should think about that contribution next year?

Question: David Westenberg - Piper Sandler - Analyst : Got you. Let's go to the innovation on some of those products you mentioned like Experior and Bovaer. These are new market-building kind of products. Experior, as you mentioned, is going to be a blockbuster. Why do you think the competitors have missed emission opportunity? Do you think you'll see competition in this emission opportunity? Or do you think that they would have to innovate around your patents, which would be a little bit more difficult?

Question: David Westenberg - Piper Sandler - Analyst : Got you. Well, your 2025 guide, well -- or I wouldn't say guide, I would say your high-level ways of thinking about 2025. If you do the math, it implies you're probably not cutting R&D despite the fact that you just had some pretty big launches. You've now caught up in terms of you have a derm product, you have a trio or you have a triple -- multi-parasite combination parasiticide. Are you going to be thinking about new classes of drugs? And it's not new -- I mean you always have. I mean parvo is definitely an innovative class. I would argue Galliprant was a new class. I don't think it's normally necessarily the same kind of insight. So as we look at Elanco three to five years from now, are we going to see some new markets that you've built or are building?

Question: David Westenberg - Piper Sandler - Analyst : Got you. You've used the word like no-regrets launch in terms of Zenrelia. So I personally think that you're still going to see response -- you're going to see adoption from Apoquel nonresponders. I mean, I think the estimate I have is around 20% of dogs don't -- do not respond to Apoquel. Why do you think it's so important to use that marketing spend rather than just having vets feel comfortable after they get used to using something for, say, Apoquel nonresponders?

Question: David Westenberg - Piper Sandler - Analyst : Well, you touched on a little bit the experiences of dermatologists, and they're happy to have another option. So can you -- I mean, you're about a month, two months into the launch here. Can you talk about the conversations with dermatologists? And can you talk about the vet generalists and what the experience has been so far with the two docs?

Question: David Westenberg - Piper Sandler - Analyst : Got you. Well, let's move on to your IL-31. I think your slide deck still had a 2025 approval expectations, but I didn't see anything where it said launch expectations. Wondering if that's intentional? Or is that -- I mean, do you still expect to launch it quickly after approval?

Question: David Westenberg - Piper Sandler - Analyst : Got you. Well, I want to stick with biologics here. When we look at most of the new patient starts when we're looking at the dermatology market, it is on Cytopoint. And we're seeing Librela actually changing the vet visit dynamics. Do you think you're going to see Elanco is the first big competitor or, let's say, the second biggest monoclonal antibody company in five years?

Question: David Westenberg - Piper Sandler - Analyst : Got you. So maybe we can move to Washington right now. The Trump administration was looking at RFK. Now you have a lot of products regulated by the USDA. So can you just maybe talk about what would be at risk with the FDA, maybe it's very little and how you were talking -- thinking about it as a company and predicting that? And then on another regard with Washington, Republican presidents don't necessarily tend to be for -- or less in regulation of gas emissions. If not US, do you think that there's global appetite around global gas emissions?

Question: David Westenberg - Piper Sandler - Analyst : Got you. Moving back to companion animal on Quattro. You mentioned on the call, you do not anticipate it being cannibalistic. When we saw NexGard PLUS launched last year, the year before that, it did seem to just take a lot of share from NexGard. And the Simparica Trio customers did take a lot from Simparica before they eventually took share from the NexGard kind of customers. So can you talk about your strategy that you're implementing to make sure it's market share gaining rather than just cannibalistic?

Question: David Westenberg - Piper Sandler - Analyst : Got it. Well, back to the no regrets 2025 and Quattro's one of those products. I mean, I know you looked at your own internal ROIC on your sales and marketing spend, and you said this is something that can drive revenue enough to support the investments that we're making. Us as investors, how should we track the progress? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 6:30PM, ELAN.N - Elanco Animal Health Inc at Piper Sandler Healthcare Conference I mean obviously, there's just sales, but there could be things like penetration of clinics, how it's impacting other product categories, et cetera. But how to think about that? And how do we think about breakeven that you're going to achieve on the ROIC on the sales and marketing spend?

Question: David Westenberg - Piper Sandler - Analyst : Got you. I just want to talk about some of your product positioning in respect to pricing in the companion animal side. So Merck sounded really great about price optimism for next year. I think Zoetis said it's going to be up higher than normal next year. So when we take products like -- that you're going up against, for example, Trio, Apoquel, I'm guessing that's going to be where they're going to raise prices. You have an opportunity with this bigger gap. Do you think that this is great for getting sales? Or do you think you would raise prices and kind of close that gap? And what are your opportunities with the competitors raising pricing?

Question: David Westenberg - Piper Sandler - Analyst : It's a great segue into vet clinics being down 2.5% this last quarter. You do have some products outside the OTC -- in the OTC arena, including Seresto, $400 million kind of product. So how are you -- describe -- or how would you characterize the current vet visit environment? And how would you describe some of the economic trade downs? Are you seeing any? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 6:30PM, ELAN.N - Elanco Animal Health Inc at Piper Sandler Healthcare Conference

Question: David Westenberg - Piper Sandler - Analyst : Thank you so much, Todd.