Elanco Animal Health Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
ELAN$25.74+8.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 16 previous paragraphs and 19 current paragraphs.
11 unchanged; 4 reworded; 4 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Bovaer: In May 2024, the U.S Food and Drug Administration (FDA) completed its comprehensive, multi-year review of Bovaer(R)(3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle. We expect producers to begin feeding the product in the third quarter of 2024.
Current report
Zenrelia: In late July 2024, we received confirmation from the FDA that all major and minor technical sections for Zenrelia TM, a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, are complete. Upon confirmation of all technical sections, we submitted the full New Animal Drug Application (NADA) for final administrative review, which is expected to be complete in 60 days, culminating in final FDA approval for Zenrelia in late September 2024. We currently expect to launch Zenrelia in October 2024 with a box warning. We have also received approval for Zenrelia in Brazil, with expected launch in the second half of 2024, and additional reviews are ongoing in other key markets, including Europe, United Kingdom, Australia, Canada and Japan.
Current report
Aqua Business Divestiture: On July 9, 2024, we closed the sale of our aqua business to a subsidiary of Merck Animal Health, for approximately $1.3 billion in cash, which was paid at closing. Our aqua business included products across both warm-water and cold-water species and generated revenues of $80 million and $90 million during the six months ended June 30, 2024 and 2023, respectively. Assets sold included inventories, real property and equipment, including our manufacturing sites in Canada and Vietnam, and certain intellectual property, technology and other intangible assets, including marketed products. Along with these assets, approximately 280 commercial and manufacturing employees were transferred to Merck Animal Health as part of this divestiture.
Current report
While the accounting for the aqua sale is not yet complete, we expect to record a pre-tax gain on divestiture of approximately $630 million to $660 million during the third quarter of 2024. Income tax expense associated with this divestiture is expected to be in the range of $170 million to $190 million. Upon receipt of the sales proceeds, we paid down $1,222 million in term debt, reducing our leverage and future interest expense. Strategically, this
Removed paragraphs (1)
Previous report
pay us a termination fee of $55 million in cash. Based on our current estimates, we expect to recognize a pre-tax gain on sale in the range of $600 million to $650 million. Income tax expense associated with this sale is expected to be in the range of $170 million to $190 million. See Note 4. Acquisitions, Divestitures and Other Arrangements to the condensed consolidated financial statements for further information.
Reworded paragraphs (4)
Previous wording
Aqua Business Divestiture: On February 5, 2024, we entered into an agreement to sell our aqua business to a subsidiary of Merck Animal Health for approximately $1.3 billion in cash, payable at closing, which we currently anticipate to occur around mid-year 2024. Our aqua business includes products across both warm-water and cold-water species and generated $31 million and $40 million in revenue during the three months ended March 31, 2024 and 2023, respectively. Upon closing of this sale, we intend to use the after-tax cash proceeds to accelerate debt repayment and reduce our leverage and future interest expense. Strategically, this divestiture allows us to prioritize our investments in larger markets with greater long-term earnings potential. The closing of the transaction is subject to customary conditions, including the receipt of applicable antitrust approvals. If the agreement is terminated due to failure to obtain required antitrust approvals, subject to certain conditions, Merck Animal Health will be required to
Current wording
divestiture allows us to prioritize our investments in larger markets with greater long-term earnings potential. See Note 4. Acquisitions, Divestitures and Other Arrangements to the condensed consolidated financial statements for further information.
Previous wording
Restructuring Activities: In February 2024, our Board of Directors authorized a restructuring plan (the restructuring plan) to improve operational efficiencies and better align our organizational structure with current business needs, top strategic priorities and key growth opportunities. Specifically, the restructuring plan was intended to reallocate resources by shifting international resources from farm animal to pet health as we plan for the global launches of certain blockbuster potential products currently under regulatory review. Further, the restructuring plan has impacted how we operate in and sell into the Argentina market, among others, reducing our foreign currency exposure in those markets.
Current wording
Restructuring Activities: In February 2024, our Board of Directors authorized a restructuring plan (the restructuring plan) to improve operational efficiencies and better align our organizational structure with current business needs, top strategic priorities and key growth opportunities. Specifically, the restructuring plan was intended to reallocate resources by shifting international resources from farm animal to pet health as we plan for the global launches of certain blockbuster potential products currently under regulatory review. Further, the restructuring plan impacted how we operate in and sell into the Argentina market, among others, reducing our foreign currency exposure in those markets.
Previous wording
Total expected pre-tax charges associated with the restructuring plan total $50 to $55 million in 2024, of which $39 million was incurred during the first quarter of 2024, the majority relating to cash-based severance costs. The restructuring plan is expected to result in the elimination of approximately 420 personnel across our global organization and annualized net savings of $30 to $35 million. See Note 5. Asset Impairment, Restructuring and Other Special Charges to the condensed consolidated financial statements for further information.
Current wording
Total expected pre-tax charges associated with the restructuring plan total $50 to $55 million in 2024, of which $43 million was incurred during the six months ended June 30, 2024, the majority relating to cash-based severance costs. The restructuring plan is expected to result in annualized net savings of $30 to $35 million. See Note 5. Asset Impairment, Restructuring and Other Special Charges to the condensed consolidated financial statements for further information.
Previous wording
Acquisition and Integration Activity: In 2023 we acquired certain U.S. marketed products, pipeline products, inventory and an assembled workforce from NutriQuest, LLC (NutriQuest) and certain assets including inventory and distribution rights for certain marketed products from NutriQuest Nutricao Animal Ltda (NutriQuest Brazil). Additionally, in April 2023 we successfully completed the integration of the Bayer Animal Health business into our enterprise resource planning (ERP) system. We incurred costs totaling $93 million in 2023 related to integration activities, including the build out of processes and systems to support our global organization. In connection with this integration, we notified our customers of an expected commercial blackout period during specified periods of time in April 2023, during which certain products would not be able to be shipped. Due to this, we believe certain customers modified their purchasing habits, causing a shift of revenue from the second quarter of 2023 to the first quarter of 2023 of approximately $90 million to $110 million, based on our high-level estimates. While first quarter 2023 revenue benefited from this shift in purchases, this resulted in a corresponding decrease in revenue during the second quarter of 2023.
Current wording
Acquisition and Integration Activity: In April 2023 we successfully completed the integration of the Bayer Animal Health business into our enterprise resource planning (ERP) system. We incurred costs totaling $93 million in 2023 related to integration activities, including the build out of processes and systems to support our global organization. In connection with this integration, we notified our customers of an expected commercial blackout period during specified periods of time in April 2023, during which certain products would not be able to be shipped. Due to this, we believe certain customers modified their purchasing habits, causing a shift of revenue from the second quarter of 2023 to the first quarter of 2023 of approximately $90 million to $110 million, based on our high-level estimates. While first quarter 2023 revenue benefited from this shift in purchases, this resulted in a corresponding decrease in revenue during the second quarter of 2023.