Elanco Animal Health Inc Q2 2025 Earnings Call Transcript

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

Question: John Block - Stifel - Analyst : Thanks guys, good morning. Jeff or Bob, can you talk about some of these accelerated investments that you're making in the business? I think it was a slide pointing to an incremental $10 million. Is this around specific to Credelio Quattro that seems to certainly be doing well. And then maybe just a bit of tack on to that first question would be, at a high level, do we think about the business leverageable in 26 ex Ascend and then is Ascend initiatives margin accretive, call it, day one? And then I'll ask my follow-up.

Question: John Block - Stifel - Analyst : Yes. Very helpful. I guess the follow-up, Jeff, at a high level, like the innovation reds are now up $300 million year-over-year at the midpoint. It sort of implies a base as down around 1% change this year. There's some moving parts, right, behind that with like CMO, et cetera. But this is not a 26 question, but at a high level, just your thoughts on the sustainability of like this mid-single-digit growth for the company and more importantly, maybe the crux of the question is like what does that algo look like? In other words, is it a flattish phase and then you have innovation driving 400 to 500 basis points with what you and Ellen and Bob have in the pipeline? Or do you actually see an opportunity to maybe further stabilize the base, get a little price and maybe that can improve and help the overall dynamic? Thank you.

Question: Michael Ryskin - Bank of America - Analyst : Great, thanks for taking the question. Bob, I want to touch on something you mentioned just a little bit earlier in Q&A when you're talking about the margin uplift from innovation gaining scale. If we just sort of look at some of the comments you gave in terms of clinic share and wallet share in 2Q, it looks like Zenrelia sort of in that $10 million range. Quattro was $50 million, if not $50 million-plus. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2025 / 12:00PM, ELAN.N - Q2 2025 Elanco Animal Health Inc Earnings Call Those are really solid numbers after just a couple of quarters if we sort of think about what it could mean for the year. When we think about some of these innovative products, you talked about obviously the margin accretion as they gain scale. You're getting that scale earlier than anticipated, right?So can you talk about the benefit to gross margin, sort of what the threshold levels need to be when a new launch goes from being dilutive to breakeven to really accretive, either from a volume or a revenue perspective. Just talk us through that ramp and the margin benefit there?

Question: Michael Ryskin - Bank of America - Analyst : Okay. Great. Thanks. And then Jeff, you want to follow-up on Zinreliand some of your comments on the label change. encouraging update on getting the fatal vaccine response taken off. I know there's not a lot of data on this. In terms of your launch in external markets, OUS is still relatively early. But how should we think about the benefit of that? I mean anything you can say in terms of how it's ramped in Brazil, in Canada and Japan versus health ramps in the US And therefore, as the US label moves closer the international labels, anything you could say in terms of how that could benefit the uptick in the acceleration in the US?

Question: Andrea Alfonso - UBS - Analyst : Welcome, Bob. Hi Jeff and thank you so much for taking the question. So the 6% organic volume growth in the second quarter was really quite impressive -- just curious how much of that you think was some sort of an impact from delayed visits in 1Q due to weather issues. And as you think about the back half, how do you see those volumes trending. And I guess separately on the 10% constant currency that you reported in Pet health, where do you see that figure stocking up versus the 5% to 6% organic revenue growth that's within your full year expectation. Should we still expect more of a skew towards volume over price? Thank you so much.

Question: Michael DiFiore - Evercore ISI - Analyst : Hey guys, This is Mike DiFiore, in for Umer. Congrats on a great quarter. Two for me. And I may have missed this --

Question: Michael DiFiore - Evercore ISI - Analyst : Sure. Two for me, and I may have missed this in the opening comments, but for Credelio Quattro, now that it's been six months into launch, I was wondering if you'd be able to break down how much is coming from new puppy starts versus switches from other products. And the second one is on the farm animal business. As we think about how to model this segment for the balance of the year, could you perhaps break down the current status and trends of the macro factors affecting each species in the US versus ex US?

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

Question: Navann Ty - BNP Paribas - Analyst : Good morning. Maybe on Bovaer, if you could discuss the progress on the (inaudible). Also interested to hear how you will position the advantage color versus Seresto and maybe a longer term question. So Elanco progressed very well on deleveraging. So I don't know if it's too early to discuss your capital allocation once you reach that 3 times leverage? Thank you.

Question: Erin Wright - Morgan Stanley - Analyst : Great, thanks for squeezing me in. So the implied growth for the second half, I want to pick that apart a little bit in terms of like particularly what's implied in the fourth quarter, it does anticipate that slowdown. I get at the seasonality, particularly across that parasiticide business. But what's driving kind of the more meaningful kind of step down as you continue to ramp in new and existing markets across the new products? How do we think about stocking dynamics, both at distributors and at retail. And anything to call out on that front in the quarter? And is there just conservatism? Like why wouldn't the momentum continue here? Should Credelio Quattro continue to build? Should Pet Health continue to see double-digit growth in the second half. If you could provide some detail, there. And then my second question, which I'll ask upfront is on IL-31. I think you mentioned it's on track, which is great. Where do we stand now in terms of your conversations with the regulators when will we expect to hear something more material in terms of an update on that front? And yes, your confidence in that product?