Elanco Animal Health Inc

Overview

Elanco Animal Health Incorporated and its subsidiaries (collectively, Elanco, the Company, we, us, or our) is a global leader in animal health, dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets. We partner with farmers, pet owners, veterinarians and society to create value and help our customers improve the health of animals in their care, while also making a meaningful impact on the communities we serve. Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine, sheep and aqua (collectively, farm animal). With this ability to reach the world's animals, we are committed to fulfilling our customer promise: To be your advocate and continually earn your trust, improving the health of animals and creating value through innovative products, expertise and service. Through our customer promise and our commitment to excellence, we strive to advance the well-being of animals, people and the planet, enabling us to realize our vision of Food and Companionship Enriching Life.

With a heritage dating back to 1954, we were formerly a business unit of Eli Lilly and Company (Lilly), becoming an independently incorporated company on September 18, 2018, and finalizing our separation from Lilly in March 2019. In August 2020 we acquired Bayer Animal Health, marking the largest acquisition in industry history. This acquisition enabled us to become a more diverse, durable and global company with greater reach and scale. This acquisition also helped us expand our portfolio, creating a better balance between our pet health and farm animal products and between the U.S. and international markets, while also expanding our omnichannel presence in both the veterinary clinic and in retail markets, including e-commerce.

We have continuously strengthened and expanded our three-pronged strategy: Innovation, Portfolio and Productivity, which remains our foundation for sustained growth and profitability. Over time, we expect to achieve revenue growth and improved profitability by delivering consistent, high-impact Innovation and prioritizing large market opportunities in major geographies. Our focused strategy prioritizes certain assets, including late-stage potential blockbusters, while maximizing life cycle management and refilling the early-stage pipeline to achieve a consistent flow of innovation. We also continue to optimize our diverse Portfolio to grow, leveraging our deep, established customer relationships and expanding product offerings. We will also continue to drive geographic and channel expansion, to reach more of the world's animals. Further, we continue to focus on our strategic Productivity initiatives to improve earnings and cash flows.

In addition, we continue to enhance our approach to sustainability and environmental, social and governance (ESG) principles, focusing on the four interconnected pillars below, which we refer to as Elanco's Healthy Purpose™, designed to create a meaningful impact today and for years to come:

Healthier Animals: We are helping pets and farm animals live healthy, high-quality lives by continuously expanding our portfolio and identifying new and innovative animal care products, practices and services to support animal health and well-being.

Healthier People: We help improve people's lives and livelihoods by promoting animal companionship and enabling healthier and more plentiful and environmentally friendly production of meat, milk, fish and eggs.

Healthier Planet: We are committed to minimizing our own environmental footprint, while leveraging product and service innovations to help our customers advance their own sustainability efforts.

Healthier Enterprise: We are committed to growing our business with integrity and excellence with respect to all stakeholders, fostering an inclusive culture where employees can make a difference – encouraging ownership, growth and well-being.

Our business and operations are exposed to and are impacted by various global macroeconomic factors. For example, in recent years we have been impacted by operating challenges across the globe due to the Russia-Ukraine conflict, conditions related to the COVID-19 pandemic, supply chain disruptions, a rising interest rate environment, foreign currency exchange rate volatility and inflationary pressures, among others. Continued evolution of these conditions has led to economic slowdowns in certain countries and/or regions and volatility in consumer behavior. We continue to monitor these factors and have worked with our customers, employees, suppliers and other stakeholders to mitigate their impacts. For additional information on these macroeconomic challenges and the impact on our business, operations, financial condition and results, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 1A. Risk Factors".

Commercial Operations

We operate our business as a single segment within the animal health industry, dedicated to fulfilling our vision of Food and Companionship Enriching Life. We advance this vision by offering a comprehensive portfolio of products in the pet health and farm animal product categories. Our reported revenue by product category was as follows:

Contract manufacturing represents revenue from arrangements in which we manufacture products on behalf of a third party.

International Operations

Our operations are conducted globally. The United States (U.S.) is our largest market, accounting for 45% of our total revenue in 2023. By total revenue, China, Brazil and the United Kingdom (U.K.) are our largest markets outside the U.S. Emerging market economies are an important component of our growth strategy and will serve as a base upon which we expect to build our commercial and local innovation capabilities. Our reported revenue by geographic region was as follows:

Products

We have a diverse portfolio of products marketed under approximately 200 brands, including products for both pets and farm animals.

Pet Health: Our pet health products help pets live longer, healthier and more active lives. Our global pet health portfolio is focused on parasiticides, vaccines and therapeutics. We have one of the broadest parasiticide portfolios in the pet health market based on indications, species and formulations, with products that protect pets from fleas, ticks and internal parasites. Our Advantage Family of brands (Advantage™, K-9 Advantix™, Advocate™, among others) and Seresto™ products are over-the-counter treatments for the prevention and elimination of fleas and ticks and complement our prescription parasiticide products, which include our Credelio Family of brands (Credelio™, Credelio Cat™, Credelio Plus™), Interceptor Plus™, Drontal Family of brands (Doncit™, Drontal™, Drontal Plus™) and Trifexis™. Our vaccines portfolio provides differentiated prevention coverage for a number of important pet health risks and is available in the U.S. only. In therapeutics, we have a broad pain portfolio for dogs and cats across modes of action, indications and disease stages. Pet owners are increasingly treating osteoarthritis in their pets, and our Galliprant™ product offers a convenient at home solution for pet owners. Additionally, we have products that offer treatment for otitis (ear infections) and treatments for certain cardiovascular and dermatology indications.

Farm Animal: Our farm animal products help farmers improve animal health and wellbeing and raise livestock more sustainably, delivering more food while using fewer resources and enhancing the integrity of the food supply. Our farm animal portfolio of products for cattle (beef and dairy), swine, poultry and aquaculture (cold and warm water) is primarily focused on: 1) efficiency and performance; 2) disease prevention and treatment; 3) food safety; and 4) sustainability. Our products include medicated feed additives, injectable antibiotics, vaccines, insecticides and enzymes, among others. Key farm animal products Rumensin™, Baytril™ and Experior™ are used extensively in cattle, while our Maxiban™ and Monteban™ products are valuable offerings for the control and prevention of intestinal disease in poultry.

In 2023, our top five selling products and/or product families were our Advantage Family(cats and dogs), Seresto(cats and dogs), Rumensin(cattle), our Credelio Family(cats and dogs) and Maxiban(poultry). These products and product families combined to represent approximately 31% of our total revenue in 2023, although none represented more than 10% individually. Information regarding our principal products and product families, those that represented approximately 1% or more of our revenue in 2023, is as follows:

Pet Health Products

Farm Animal Products

(1)In February 2024 we announced the pending sale of our aqua business, which includes the Clynav product, to a subsidiary of Merck Animal Health. This sale is anticipated to close around mid-year 2024 pending regulatory approvals and subject to other closing conditions. See Note 19. Subsequent Events to the consolidated financial statements for further information.

A key element of our targeted value creation strategy is to drive future revenue growth through consistent, high-impact innovation. We continue to pursue the development of new chemical and biological molecules, as well as additional registrations and indications for current products. Our future growth depends on both our pipeline of new products, including new products we develop internally, develop with partners or that we are able to obtain through licenses or acquisitions, and the life cycle management of our existing products. In 2023, we received conditional approval from the U.S. Department of Agriculture (USDA) and launched our canine parvovirus monoclonal antibody treatment. This product is the first and only approved therapeutic solution to treat canine parvovirus, one of the most contagious and deadly viruses to dogs, if not treated. Additionally, we received European Medicines Agency (EMA) approval and launched Adtab™, an over-the-counter monthly oral flea and tick product for dogs and cats. In 2021 through 2023, we received 36 regulatory approvals in total for new products in major geographies and have delivered many geographic expansion and life cycle management enhancements of existing products across both pet health and farm animal product categories.

Seasonality

While many of our products are sold consistently throughout the year, we do experience seasonality in our pet health business due to increased demand for certain parasiticide product offerings in the first half of the year. For example, based upon historical results, approximately 75% and 60% of total annual revenue contributed by our higher-margin parasiticide products Seresto and Advantage Family, respectively, has occurred during the first half of the year, which is reflective of the flea and tick season in the Northern Hemisphere.

Sales and Marketing

Through our global sales force of over 2,000 sales representatives, our veterinary consultants and our key distributors, we seek to build strong customer relationships and fulfill demand for our pet health products primarily with veterinarians and, in some markets, pet owners, and for our farm animal products primarily with farm animal producers, veterinarians and nutritionists.

Our sales representatives visit our customers, including consultants, veterinarians, farm animal producers and resellers, to inform, promote and sell our products and to support customers. Our veterinary consultants are available to provide scientific consulting focused on disease management and herd management, training and education on diverse topics, including responsible product use, and generally have advanced degrees in veterinary medicine, veterinary nutrition or other agriculture-related fields. These direct relationships with customers allow us to better understand their needs and provide us access to customer decision makers. Additionally, our sales representatives and veterinary consultants focus on collaborating with our customers to educate and support them on topics such as local disease awareness and to help them adopt new and more sophisticated animal health solutions, which may include the use of our products. In addition, our sales and marketing organization provides enhanced value by supporting farm animal producers to maximize their yields and reduce their costs. Furthermore, our expertise and data analytics help our customers analyze large amounts of health and production data in order to improve production efficiency and business performance.

Customers

We primarily sell our pet health products to third-party distributors and retailers, as well as directly to veterinarians who typically then sell our products to pet owners. We primarily sell our farm animal products to third-party distributors and directly to a diverse set of farm animal producers, including beef and dairy farmers as well as pork, poultry and aquaculture operations. With the acquisition of Bayer Animal Health, we expanded our omnichannel presence in both the veterinary clinic and in retail markets, including e-commerce. Certain top selling pet health products, including the Advantage Family and Seresto, are offered through these channels. Our largest customer, an affiliate of AmerisourceBergen Corp., is a third-party veterinary distributor and represented approximately 10% of our revenue in 2023. Our second largest customer, which is also a third-party distributor, represented approximately 6% of our revenue in 2023. No other customer represented greater than 5% of revenue during 2023.

Research and Development

Our R&D efforts focus on delivering consistent, high-impact innovation. Our R&D organization is comprised of internal research, development, regulatory and external innovation collaborations and is led by highly experienced individuals with deep technical knowledge and substantial experience in discovery research, clinical sciences, technological development and regulatory expertise across our pet health and farm animal product categories. We believe this approach will allow us to consistently progress our multi-year innovation projects toward regulatory approvals, while ensuring clear visibility to the innovation portfolio composition, value and progress. As of December 31, 2023, we employed over 1,000 employees in our global R&D and Regulatory Affairs organizations.

Our R&D organization utilizes a fully integrated global network of labs, service centers and development sites supported by a network of third-party partners. We also have a significant international regulatory operation that manages new product submissions and ensures ongoing compliance for our existing commercial portfolio. Our global R&D sites are comprised of the following:

Our R&D efforts focus on products that prevent and treat disease, improve and extend quality of life, improve the type of care received by animals and reduce the environmental impact of raising livestock. We seek to concentrate our resources on projects that match our strategy and where we can leverage our broad technical and commercial capabilities. In addition to efforts to support our existing product portfolio, our R&D organization focuses on therapeutics, vaccines, monoclonal antibodies and parasiticides for pets, and pharmaceuticals, vaccines and livestock sustainability projects for farm animals, including a focus on products that reduce emissions produced by farm animals.

New product innovation is a core part of our business strategy. Our approach is a build, buy or partner strategy to develop compelling innovations that originate from our scientists and innovators, academia, agribusiness or external partners including human pharmaceutical, agriculture and biotechnology organizations. We focus our R&D investments on projects that target novel product introductions with new active ingredients, as well as products leveraging known active ingredients in new indications, presentations, combinations and species expansion.

Our R&D efforts are balanced across species, development phases and technology platforms. We apply large and small molecule approaches for both farm animals and pets. Additionally, we employ various delivery strategies for products, including in-feed, injectable, oral and topical formulations developed in conjunction with our manufacturing team to assure production that leverages the capabilities within our internal and external manufacturing network.

Portfolio investment decisions and prioritization are influenced by the probability of technical success, economic value, time to market, portfolio fit and balance. R&D expenses totaled $327 million in 2023, $321 million in 2022 and $369 million in 2021.

Manufacturing and Supply Chain

We have a global manufacturing network of 18 sites comprised of the following:

(1)In February 2024 we announced the pending sale of our aqua business, which includes these manufacturing sites to a subsidiary of Merck Animal Health. This sale is anticipated to close around mid-year 2024 pending regulatory approvals and subject to other closing conditions. See Note 19. Subsequent Events to the consolidated financial statements for further information.

Our products are manufactured both at the sites listed above that are operated by us and across a network of approximately 140 contract manufacturing organizations (CMOs). Our external manufacturing network centrally governs and provides oversight to our global CMO relationships. We select CMOs based on several factors, including: (1) their ability to reliably supply products or materials that meet our quality standards at an optimized cost; (2) their access to specialty products and technologies; (3) capacity; (4) financial analyses; and (5) local presence. Our external manufacturing network seeks to ensure that all CMOs we use adhere to our standards of manufacturing quality.

Pharmaceutical production processes are complex, highly regulated and can vary widely from product to product. Shifting or adding manufacturing capacity can be a lengthy process requiring significant capital expenditures, process modifications and regulatory approvals. We have in the past invested in, and will continue to invest in, improvements to our existing manufacturing facilities and weintend to continue our efficiency improvement programs in our manufacturing and supply chain organization. Our strong quality control and quality assurance programs are managed and coordinated globally and are in place at all internal manufacturing sites and external manufacturing hubs. We also regularly inspect and audit our internal sites and CMO locations.

To maintain supply of our products, we use a variety of techniques, including comprehensive quality and planning and inventory management systems. We generally seek to develop an appropriate inventory strategy to fill market demand until an alternative source of supply can be implemented, in the event a supplier becomes unable to provide the required materials or product. However, various developments have led, and in the future may lead, to interruption or shortages in supply (for example, with U.S. cattle and pet vaccines in 2023) until we establish new sources, implement alternative processes, bring new manufacturing facilities online or pause or discontinue product sales in one or more markets.

Raw Materials

We purchase certain raw materials and active pharmaceutical ingredients (API) necessary for the commercial production of our products from a variety of third-party suppliers. Principal materials used in our manufacturing operations for key brands are typically available from more than one source; however, we may in some instances obtain certain raw or intermediate materials from only a single source. Our active ingredients for biologics are manufactured primarily in internal facilities, while chemically derived active ingredients are sourced from external partners.

Competition

We face intense competition globally. Competition may vary depending on the particular region, species, product category or individual product. We compete principally on the basis of product quality, price, cost-effectiveness, promotional effectiveness, new product development and product differentiation. Certain Elanco products, both existing and new, may compete with other branded or generic products already on the market or that are later developed by competitors. When competitors introduce new products with ease-of-use, therapeutic or cost advantages, our products may become subject to decreased sales and/or price reductions.

Our primary competitors include animal health medicines and vaccines companies such as Zoetis Inc., Boehringer Ingelheim Vetmedica, Inc., the animal health division of Boehringer Ingelheim GmbH, and Merck Animal Health, the animal health division of Merck & Co., Inc. We also face competition globally from manufacturers of generic drugs, as well as from producers of nutritional health products, such as DSM Nutritional Products AG and Danisco Animal Nutrition & Health, a subsidiary of International Flavors & Fragrances, Inc. There are also several start-up companies working in the animal health area. In addition, we compete with numerous other producers of animal health products throughout the world.

Intellectual Property

Our technology, brands and other intellectual property are important elements of our business. We rely on patent, trademark, copyright and trade secret laws, as well as regulatory exclusivity periods and non-disclosure agreements to protect our intellectual property rights. Our policy is to vigorously protect, enforce and defend our rights to our intellectual property.

Our product portfolio and certain product candidates enjoy the protection of approximately 6,500 patents and applications, filed in over 90 countries, with a concentration in our major markets as well as other markets with strong patent laws and protections. While many of the patents and patent applications in our portfolio are the result of our own work, others have been developed in collaboration with partners, acquired through business transactions or licensed to us by third parties. A subset of our current products or product candidates are covered by patents and patent applications.

Patents for individual products expire at different times based on the date of the patent filing (or occasionally, the date of patent grant) and the legal term of patents in the countries where such patents are obtained. Below is a summary of our recent and upcoming key patent expirations:

•Galliprant is protected by patents in the U.S., Europe, Canada, Japan and other key markets. While patents covering the active ingredient, grapiprant, expired in 2021 in all markets except Japan, patents covering the physical form of the active ingredient remain in force and will expire between 2026 and 2031, depending on jurisdiction. Patent coverage relating to methods of use and formulation will expire in 2035 in most jurisdictions.

•Various formulation and method of use patents encompass our spinosad pesticide product, Trifexis. The Trifexis formulation and method of use patents expired in September 2021 in the U.S., Canada and Australia. At this time, there are no indications of market entries for generic versions of Trifexisin these countries.

•The Seresto formulation patent will expire in the U.S. in September 2027. In Europe, the formulation patents will expire in June 2025, but in some countries, including Spain and the U.K., supplementary protection certificates (SPCs) have been granted that expire in September 2026.

•Patent coverage for Milbemax/Interceptor chewable products extends through July 2024 in Europe and other key markets, and patent coverage for Interceptor Plus extends through October 2028.

•Certain Advantage Family products, including Advantage, K-9 Advantixand Advocateare off patent.

•The U.S. patent for Experior's active ingredient, lubabegron, is currently scheduled to expire in July 2024, with a pending patent term extension application that could extend protection until April 2025. While the patent term extension application is pending, we plan to request available interim patent extensions to maintain coverage. Coverage for Experior methods of use will expire in 2037 in the U.S. and 2035 in other key markets.

Additionally, many of our vaccine products, including the TruCan family of vaccines, are based on proprietary or patented master seeds and formulations. We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, through a variety of means, including by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.

We seek to file and maintain trademarks around the world based on commercial activities in most regions where we have, or desire to have, a business presence for a particular product. We currently maintain more than 14,500 trademark applications and registrations in major regions, primarily identifying products dedicated to the care of livestock and pets.

Regulatory Matters

The sale of animal health products is governed by the laws and regulations specific to each country in which we sell our products. To maintain compliance with these regulatory requirements, we have established processes, systems and dedicated resources with end-to-end involvement from product concept to launch and maintenance in the market. Our regulatory function is Elanco's key interface with the relevant authorities and is responsible for applying for and obtaining the necessary registrations and post-approvals, extending them if appropriate (e.g., developing claims in additional species), updating (e.g., changes to shelf-life or manufacturing site) and ongoing monitoring of safety and efficacy through our global pharmacovigilance system. In this way, the regulatory function ensures registrations remain valid and our products can continue to be sold. To effectively do this, our regulatory function actively engages in dialogue with the relevant authorities regarding policies that relate to animal health products. In most of our markets, the relevant authority is separate from those governing human medicinal products.

United States

Food and Drug Administration (FDA). The regulatory body that is responsible for the regulation of animal health pharmaceuticals in the U.S. is the Center for Veterinary Medicine (CVM), a division of the FDA. All manufacturers of animal health pharmaceuticals must demonstrate their products to be safe, effective and produced by a consistent method of manufacture as defined under the Federal Food, Drug and Cosmetic Act (FFDCA). The FDA’s basis for approving a new animal drug application is documented in a Freedom of Information Summary. Post-approval monitoring of products is required by law, with reports being provided to the CVM’s Office of Surveillance and Compliance. Reports of product quality defects, adverse events or unexpected results are maintained and submitted in accordance with the law. Additionally, as part of the drug experience report, we are required to submit all new information pertaining to the safety or effectiveness of a product, regardless of the source.

USDA. The regulatory body in the U.S. for veterinary biologicals is the USDA. The Center for Veterinary Biologics within the Animal and Plant Health Inspection Service in the USDA is responsible for the regulation of animal health biologicals, which includes but is not limited to vaccines, bacterins, allergens, certain antibodies, antitoxins, toxoids, immunostimulants, certain cytokines, antigenic or immunizing components of live microorganisms and diagnostic components of natural or synthetic origin, or that are derived from synthesizing or altering various substances or components of substances such as microorganisms, genes or genetic sequences, carbohydrates, proteins, antigens, allergens or antibodies. All manufacturers of animal health biologicals must show their products to be pure, safe, effective and produced by a consistent method of manufacture as defined under the Virus Serum Toxin Act. Post-approval monitoring of products is also required. Reports of product quality defects, adverse events or unexpected results are maintained and submitted in accordance with the agency requirements.

Environmental Protection Agency (EPA). The main regulatory body in the U.S. for veterinary pesticides is the EPA. The EPA’s Office of Pesticide Programs is responsible for the regulation of most pesticide products applied to animals in accordance with a memorandum of understanding between the FDA and the EPA for products that are subject to regulation under both the FFDCA and the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). All manufacturers of animal health pesticides must show their products will not cause unreasonable adverse effects to humans or the environment as stated in the act. Within the U.S., individual state pesticide authorities must also approve pesticide products that have been approved by the EPA before distribution in that state. Post-approval monitoring of products is required, with reports provided to the EPA and some state regulatory agencies.

European Union (EU)

The EMA is a centralized agency of the EU responsible for the scientific evaluation of many of the Veterinary Medicinal Products (VMP) developed by pharmaceutical companies for use in the EU. The agency has a veterinary review section distinct from the medical review section for human products. The Committee for Veterinary Medicinal Products (CVMP) is responsible for scientific review of the submissions for VMP, including immunological products. If the CVMP concludes that all requirements for quality, safety and efficacy are met and the product benefits outweigh the risks, it issues a positive opinion that is forwarded to the European Commission, which takes the final decision following the European comitology procedure. The centralized marketing authorization is valid in all of the EU and in Northern Ireland. All countries that are not part of the EU but belong to the European Economic Area (EEA), such as Norway, Iceland and Liechtenstein, have been part of the scientific assessment done by the CVMP. These countries issue a national marketing approval in accordance with the European Commission's decision.

If approval is sought for products that either cannot or do not need to follow the centralized procedure, approval can also be achieved by national approval in an EEA country agency. This national authorization can be mutually recognized by other EEA countries/EU member states (Mutual Recognition Procedure). In addition, national and mutual recognition can be done in a combined procedure (Decentralized Procedure).

A series of regulations, directives, guidelines, EU Pharmacopeia Monographs and other legislation provide the requirements for approval in the EU. In general, these requirements are similar to those in the U.S., requiring demonstrated evidence of purity, safety, efficacy and consistency of manufacturing processes.

The European Food Safety Authority (EFSA) is the agency of the EU that provides scientific advice and communicates with respect to existing and emerging risks associated with the food chain. Based on EFSA’s mandate, it evaluates applications for feed additives, including coccidiostats, enzymes and several nutritionals for animals.

The European Chemicals Agency (ECHA) is the agency of the EU for the safe use of chemicals. Based on the ECHA’s mandate, it conducts the evaluation of biocides for the EU.

We are also governed by each of the national regulatory bodies in the EU.

United Kingdom

The Veterinary Medicines Directorate (VMD) is the main regulatory body in the U.K. responsible for regulating and controlling veterinary pharmaceuticals. A trade agreement between the U.K. and the EU includes regulatory and customs cooperation mechanisms, as well as provisions supporting open and fair competition. The Northern Ireland protocol, which is part of the trade deal, requires that VMD follow EU rules in Northern Ireland. Laws applying to the rest of the U.K. remain largely aligned.

Brazil

The Ministry of Agriculture, Livestock Production and Supply (MAPA) is the regulatory body in Brazil that is responsible for the regulation and control of pharmaceuticals, biologicals and medicinal feed additives for animal use. MAPA’s regulatory activities are conducted through the Secretary of Agricultural Defense and its Livestock

Products Inspection Department. In addition, regulatory activities are conducted at a local level through the Federal Agriculture Superintendence. These activities include the inspection and licensing of both manufacturing and commercial establishments for veterinary products, as well as the submission, review and approval of pharmaceuticals, biologicals and medicinal feed additives. MAPA is one of the most active regulatory agencies in Latin America, having permanent seats at several international animal health forums, such as Codex Alimentarius, World Organization for Animal Health and Committee of Veterinary Medicines for the Americas.

China

The Ministry of Agriculture and Rural Affairs (MARA) is the regulatory body that is responsible for the regulation and control of pharmaceuticals, biologicals, disinfectants, medicinal feed additives, pesticide and feed/feed additives for animal use. There are three organizations under the MARA that regulate animal health:

The Institute of Veterinary Drug Control (IVDC) is responsible for the evaluation of new applications, renewals, variations, manufacturers, quality methods and tissue residue methods for pharmaceuticals, biologicals, disinfectants and medicinal feed additives.

The feed/feed additive office is responsible for the registration and renewal of feed and feed additives.

The pesticide bureau is responsible for the registration and renewal of pesticide products.

Rest of World

Country-specific regulatory laws typically have provisions that include requirements for certain labeling, safety, efficacy and manufacturers’ quality control procedures (to assure the consistency of the products), manufacturing site standards, as well as company records and reports. Many other countries’ regulatory agencies either refer to some or all of the requirements of the U.S. or EU and may have additional specific local requirements. Most authorities also consider the standards set by international animal health entities, including the World Organization for Animal Health, Codex Alimentarius and the International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH).

Joint FAO/WHO Expert Committee on Food Additives. The Joint FAO/WHO Expert Committee on Food Additives is an international expert scientific committee that is administered jointly by the Food and Agriculture Organization of the United Nations (FAO) and the World Health Organization (WHO). It provides a risk assessment/safety evaluation of residues of veterinary drugs in animal products, exposure and residue definition and maximum residue limit proposals for veterinary drugs. Similarly, the Joint FAO/WHO Meeting on Pesticide Residues (JMPR) is an international expert scientific group administered jointly by the FAO and WHO. JMPR reviews residues and analytical aspects of the pesticides, estimates the maximum residue levels, reviews toxicological data and estimates acceptable daily intakes for humans of the pesticides under consideration. Elanco works with this committee to establish acceptably safe levels of residual substances in food-producing animals after treatment with veterinary drugs or pesticides. This in turn enables the calculation of appropriate withdrawal times for our products prior to an animal entering the food chain.

Advertising and Promotion Review. Promotion of animal health products is controlled by regulations in many countries. These rules generally restrict advertising and promotion to those claims and uses that have been reviewed and endorsed by the applicable agency. We conduct a review of promotion material for compliance with the local and regional requirements in the markets where we sell animal health products.

Import and Export of Products. The importation and exportation of animal health products is controlled by regulations in many countries. In some jurisdictions this may include obtaining separate permits or licenses by product or by company or filing notices with applicable regulatory agencies prior to import or export of product. We ensure compliance with local, regional and global regulations in the markets where we import/export our animal health products.

International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products. VICH is a trilateral (EU-Japan-U.S.) program launched in 1996 aimed at harmonizing technical requirements for veterinary product registration. Several other countries have obtained observer status, for example, Canada, New Zealand, Australia, South Africa and the U.K., or are linked to VICH on the basis of the VICH Outreach Forum, a VICH initiative with the main objective of providing a basis for wider international harmonization of technical requirements. In addition, the World Organization for Animal Health is an associate member of VICH.

Environmental, Health and Safety

In addition to the laws and regulations discussed above, we are also subject to various federal, state, local and foreign laws and regulations, both within and outside the U.S., relating to environmental, health and safety (EHS) and sustainability matters. These laws and regulations govern matters such as the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of our employees. Due to our operations, these laws and regulations also require us to obtain and comply with permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke our permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Certain environmental laws impose joint and several liability, without regard to fault, for clean-up costs related to the disposal or release of hazardous substances into the environment, including at third-party sites or offsite disposal locations, or at sites that are currently owned or operated (or were formerly owned or operated) where such a disposal or release occurred. Although our current reserves for environmental remediation obligations are not material, we could be subject to liability for the investigation and remediation of legacy environmental contamination caused by historical industrial activity at sites we own or on which we operate. We are also monitoring and investigating environmental contamination from past industrial activity at certain sites. In connection with past divestitures, we have undertaken certain indemnification obligations that may require us, in the future, to conduct or finance environmental clean-ups at sites that we no longer own or operate. We have also entered into indemnification agreements in connection with certain of our past acquisitions, pursuant to which we are, or may be, indemnified for various environmental clean-ups. However, such indemnities are limited in both time and scope and may be further limited in the presence of new information or may not be available at all.

In addition to clean-up actions brought by federal, state, local and foreign governmental entities, private parties could raise personal injury or other claims against us due to the presence of, or exposure to, hazardous materials on, from or otherwise relating to such a property. We have made, and intend to continue to make, necessary expenditures for compliance with applicable EHS laws and regulations.

Human Capital

Employees. As of December 31, 2023, we employed approximately 9,300 full time employees and approximately 500 fixed-duration employees, which are individuals hired for a pre-defined length of time (typically one to four years). Approximately 30% of our global workforce is U.S.-based, while slightly more than 10% of our global employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements, primarily in Germany and the U.S.

Our Culture. At Elanco, we are committed to fostering an inclusive culture where employees can make a difference, encouraging ownership, growth and well-being. We are committed to creating a culture built on the foundation of the three following values that guide our decisions and the four following behavioral pillars that guide our actions:

Values:

Integrity – Do the right thing in the right way.

Respect – Respect people, our customers and the animals in their care.

Excellence – Be accountable. Continuously improve. Deliver with discipline.

Behavioral Pillars:

Involve – We seek participation and input to gain commitment and passionate performance and create an engaged community. We act with humility as One Elanco, collaborating for the best outcomes for the entire company.

Deliver – We focus on the essential, build mastery and diligently deliver on our commitments to our colleagues, customers and shareholders.

Own – We are accountable and empowered. We ask questions and raise concerns. We are fully invested in Elanco's success.

Innovate – We bring an innovative mindset that drives continuous improvement of our processes, products and services.

At Elanco, this culture drives employee performance, and our employees are driven by these values and behavioral pillars. Leadership and employees are encouraged to evaluate performance with these values and behavioral pillars in mind.

Inclusion, Diversity, Equity and Accessibility (IDEA). We are focused on delivering consistent high impact innovation and maximizing the value of our current portfolio. This effort is enhanced by an inclusive workforce with diverse backgrounds, strengths and perspectives. Our efforts to strengthen IDEA are critical to sustaining a purpose-driven culture and strengthening our promises to our employees and customers.

Formed in 2015, our Global Elanco Inclusion, Diversity, Equity and Accessibility Council (EIDEAC) serves as a catalyst for a culture where IDEA is embraced and recognized as business-result drivers. Within this framework, employee development is better supported and opinions and diverse backgrounds are embraced, making us a stronger company. Current EIDEAC focus areas include cultivating dynamic Employee Resource Groups, delivering a high quality annual Multi-Cultural Summit and supporting enterprise-wide aspirational goals for representation of women (globally) and people of color (U.S.) in leadership.

Total Rewards. We invest in our workforce by offering competitive salaries, incentives and benefits. Our pay for performance philosophy is designed to create ownership and help ensure we attract and retain talent, as well as reward and recognize top-performing employees through merit increases and other rewards. We benchmark our total rewards annually to ensure our compensation and benefit programs remain competitive with our peers. Our benefits are one way we support our employees’ well-being and live up to our employee promise.

Development. We offer our employees opportunities to advance their careers at Elanco and are passionate about equipping employees with skills and development opportunities to help them thrive while continually meeting the ever-changing needs of our customers and other stakeholders in a dynamic and growing industry.

Beyond professional growth and development, Elanco employees actively engage in initiatives aligned to Elanco's Healthy Purposeto advance the well-being of animals, people, the planet and our enterprise, enabling us to realize our vision of Food and Companionship Enriching Life.

Available Information

Our website address is www.elanco.com. On our website, specifically within the "Investor Relations" section, we make available, free of charge, our annual, quarterly and current reports, including amendments to such reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the U.S. Securities and Exchange Commission (the SEC). In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, including Elanco, that file electronically with the SEC at www.sec.gov.

Information relating to corporate governance at Elanco, including our Corporate Governance Guidelines, Code of Conduct, Financial Code of Ethics, Articles of Incorporation, Bylaws, Committee Charters; information concerning our executive officers and members of our Board of Directors; and ways to communicate are also available on our website, www.elanco.com. We will provide any of the foregoing information without charge upon written request to Elanco’s Corporate Secretary, Elanco, 2500 Innovation Way, Greenfield, Indiana 46140. Information relating to shareholder services is also available on our website.

Information contained on our website is not part of, or incorporated by reference, in this Form 10-K.