Elanco Animal Health Inc

Previous wording

Elanco 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. 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 a heritage dating back to 1954, we consistently innovate to improve the health of animals and to benefit our customers while fostering an inclusive, cause-driven culture for our employees. We operate our business in a single segment, directed at advancing the well-being of animals, people and the planet, enabling us to realize our vision of Food and Companionship Enriching Life.

Current wording

Elanco 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. 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, prior to the divestiture in July 2024 (see Note 4. Acquisitions, Divestitures and Other Arrangements to the condensed consolidated financial statements for further information), aqua (collectively, farm animal). With a heritage dating back to 1954, we consistently innovate to improve the health of animals and to benefit our customers while fostering an inclusive, cause-driven culture for our employees. We operate our business in a single segment, directed at advancing the well-being of animals, people and the planet, enabling us to realize our vision of Food and Companionship Enriching Life.

Previous wording

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 wording

Bovaer: In May 2024, the U.S Food and Drug Administration (FDA) completed its comprehensive, multi-year review of Bovaer® (3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle. Producers began feeding the product to cattle in the U.S. during the third quarter of 2024.

Previous wording

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 wording

Zenrelia: Final FDA approval for Zenrelia®, a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, was received in September 2024. Launch of the product followed shortly after final approval, with the first sales of Zenrelia occurring in late September. We have also received approval for Zenrelia in Brazil, which launched in September 2024, and in Canada and Japan. Additional reviews are ongoing in other key markets, including Europe, United Kingdom and Australia.

Previous 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.

Current wording

generated revenues of $81 million in 2024, through the divestiture date, and $132 million during the nine months ended September 30, 2023. Strategically, this divestiture allows us to prioritize our investments in larger markets with greater long-term earnings potential.

Previous wording

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 wording

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. We recorded a pre-tax gain on divestiture of $640 million during the third quarter of 2024. Income tax expense associated with this gain on divestiture was $171 million, a majority of which will be payable in 2025. 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 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. 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 $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.

Current wording

During the nine months ended September 30, 2024, we incurred $45 million of charges associated with the restructuring plan, the majority relating to expected 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

Macroeconomic Factors: As a global company with products sold in more than 90 countries, our operations are exposed to and are impacted by various global macroeconomic factors. We face continuing market and operating challenges across the globe due to, among other factors, the Russia-Ukraine conflict, conditions related to supply chain disruption, higher interest rates, foreign currency exchange rate volatility and inflationary pressures. Continued evolution of these conditions has led to economic slowdowns in certain countries and/or regions and volatility in consumer behavior. We anticipate global macroeconomic pressures to continue throughout 2024.

Current wording

Macroeconomic Factors: Our operations are exposed to and are impacted by various global macroeconomic factors. We face continuing market and operating challenges across the globe due to, among other factors, the Russia-Ukraine conflict, conditions related to supply chain disruption, higher interest rates, foreign currency exchange rate volatility and inflationary pressures. Continued evolution of these conditions has led to economic slowdowns in certain countries and/or regions and volatility in consumer behavior. We anticipate global macroeconomic pressures to continue throughout 2024.