Elanco Animal Health Inc Q1 2025 Earnings Call Transcript

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

Question: John Block - Stifel - Analyst : Great, thanks guys. Good morning. But I'd love to hear just a little bit more about the 2Q guidance. I think the 2Q investments would seem to be dampening the near term EBITDA result. I think you talked about 11% constant currency OpEx spend with 6% for the full year, if you could just talk about the cadence there and then maybe you know the leverage going forward as that spend sort of subsides looking forward.

Question: John Block - Stifel - Analyst : Got it. Very helpful. Maybe just -- I hate to burn one here, but I just want to be really clear. So on the tariffs. If nothing were to incrementally occur from here, you have what, $25 million in EBITDA from the FX moves that's not reflected in the guidance, you'll just sort of for now, keep that in your back pocket to see how the pharma exemption plays out. Maybe if you could just talk to that, and Jeff, I'll just sort of ask an offshoot to the second part of that question. Some of your wording around Zenrelia, the label change or potential seemed a little bit more fulsome or upbeat relative to past. So maybe you can give a little bit more details there on the potential timing behind that if that were to occur. Thank you.

Question: John Block - Stifel - Analyst : Thank you.

Question: Michael Riskin - Bank of America - Analyst : Great, thanks for taking the question, guys, and congrats to the strong start to the year. I'm going to pick up where John just left off on the innovation front. You sound really positive on all the innovation updates. You talked about Zenrelia; you talked about Quattro. $198 million in the first quarter is certainly well ahead of where we had you. I realize there's some seasonality with some of these products in terms of comparing the animal in the first half of the year, but still given these are newer, you still think they would ramp through the year. So could you just walk us through the difference between that and the raising the full-year innovation by $20 million? I think you'd be able to raise even more. So just sort of what you saw, if you could parse out, the jump to $198 million in the first quarter -- just the thought process for the rest of the year.

Question: Michael Riskin - Bank of America - Analyst : Okay, I'll, I mean, you kind of preempted my second question talking about Quattro, but I'll still dig into that. That 10% dollar share that really stuck out to us, given we know what Simparica Trio reported, we've got a pretty good sense of where Nextcare Plus is. That's a pretty impressive 1Q. I guess the footnote there is it's 10% of clinic sales versus sellout. Is there any reason you think that should differ dramatically? I guess I'm just trying to kind of asking, how much prestocking may there have been from vets in that first quarter? Because you would think that that that 10% should just grow over time and that can get you a pretty healthy number for the full year. So just talk about the inning versus out clinic sales there. Thanks.

Question: Michael Riskin - Bank of America - Analyst : Alright thanks, (inaudible).

Question: Andrea Alfonso - UBS - Analyst : Thanks so much, everyone for taking the question. I really appreciate all the color that you've provided so far in Zenrellia. But just probing a little bit more on what you've seen in the quarter to quarter ramp, particularly curious about, you discussed rates. But curious about the makeup of order sizes and initial orders versus reorders, and if you could discuss the receptivity and uptake for the specialists versus the general vets. And if REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 12:00PM, ELAN.N - Q1 2025 Elanco Animal Health Inc Earnings Call I may build on just sort of the question that Michael just raised, would it -- would you be able to characterize whether maybe Zenrelia or Quattro was the relatively greater driver of the $20 million increase in innovation revenue expectations? Thanks so much.

Question: Brandon Vasquez - William Blair - Analyst : Hey everyone, thanks for taking the question. So maybe I'll -- I want to hit on the innovation guidance again, and maybe I can appreciate you typically don't give the revenue buckets, which is fine. But maybe, can you just talk to us about like what are the top three -- I'll take another step In asking this question and put it like -- what are the top three revenue contributors to that innovation bucket in 2025? Just to give investors kind of a little bit of a snippet of what we should be focusing on as the real growth drivers within that segment, and then I had a follow up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 12:00PM, ELAN.N - Q1 2025 Elanco Animal Health Inc Earnings Call

Question: Brandon Vasquez - William Blair - Analyst : Great, that's super helpful. And one follow up here quickly is just -- some this has just been hard to gauge and other competitors have been talking about it as well, but just spend a minute on the macro environment, I know you had a little bit of volatility you want to retail, again, others have seen that too, so not overly surprising. But expectations on how things are holding up so far on the consumer side of things and expectations and how that's trending into the rest of the year. Thanks guys.

Question: Chris Scott - JPMorgan - Analyst : Hey, this is Katerina on for Chris. Thank you so much for taking our questions. The first question is just around tariffs. If you think about mitigating impact in the medium term, do you think there's an ability to offset some of the potential tariff pressure via price increases? And do you think that's something that the market can absorb, or do you expect any price action to meaningfully impact demand, particularly, I guess, on the pet side? And then the second question is just on Zenrelia. Can you remind us how you're thinking about the launch of the product in Europe? So we kind of expect a similar step of an investment ahead of that launch? And then how quickly do you think it can rampant that geography, and maybe anything you can say on what the European label could look like if you had any discussions with the regulators. Thank you.

Question: Navann Ty - BNP Paribas - Analyst : Hi, good morning. I had a question tone on the US retail environment. We know that the (inaudible) indicated a strong US retail environment. Can you discuss the drivers in addition to the cold weather of that challenging US retail environment for Elanco in January, February. And also if you can discuss what we're seeing in terms of positive trends in March and April for your key franchises.

Question: Navann Ty - BNP Paribas - Analyst : Thank you, that's very helpful. And maybe you'll follow up on pricing if you could discuss your price expectations for the year?

Question: Michael DiFiore - Evercore ISI - Analyst : Hey guys, thanks so much for taking my question, and congrats on such a strong launch to the year. It's two for me. I just want to revisit the Zenrelia label change request. It seems like it's progressing quicker than initially expected. Do you still view this requested change potentially taking a few years to materialize? And also, if you can comment on any give any color on vets' willingness to use first line. I know it's been a short while, but given the progress it has there been any change in their willingness to use first line based on what you're hearing in the field? And have a follow up. Thank you.

Question: Michael DiFiore - Evercore ISI - Analyst : Got it.

Question: Michael Riskin - Bank of America - Analyst : Got it. And just my quick follow up just on Experior. Just noticed that based on the USDA Ag data, cattle on feed seems to be below last year's levels, but again, Experior seems to be a significant growth driver. Could you maybe explain this discrepancy and add any color on less cattle on feed, but Experior performing so strongly.

Question: Michael DiFiore - Evercore ISI - Analyst : Great, thanks so much.

Question: Aaron Wright - Morgan Stanley - Analyst : Great, thanks for squeezing me in here. So on distributor stocking, we typically see parasiticide stocking that typically happens in the March time frame. Sometimes it looks more into April, I guess you called up the acceleration in March and April. You have a new product with Quattro presumably there was initial stocking there just because it's a new product alone and then, I guess, can you talk through some of the moving pieces in terms of the stocking-destocking dynamics and pet health, and like was there -- can you quantify any sort of initial stocking, I guess, from a Quattro perspective?

Question: Aaron Wright - Morgan Stanley - Analyst : Okay, great, just wanted to clarify that. And then on, I guess, outside of innovation drivers like Experior, I guess, can you just speak to the underlying health of the livestock market, and how we should think about the quarterly progression from here across that business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 12:00PM, ELAN.N - Q1 2025 Elanco Animal Health Inc Earnings Call