Elanco Animal Health Q3 Earnings Call Highlights

Key Points

• Elanco raised its 2026 outlook after Q3 revenue increased 11% to $1.265 billion and adjusted EPS rose 42% to $0.27. It now forecasts revenue of $5.155 billion to $5.18 billion and adjusted EPS of $1.17 to $1.20.
• Pet health products drove growth: global pet health revenue rose 14%, led by Zenrelia and Credelio Quattro, while innovation-product revenue climbed 40%. Elanco also increased its full-year innovation revenue target to $1.275 billion.
• Elanco reiterated its 2027 growth targets and plans a full-scale U.S. launch of Befrena in Q1 2027. The company reduced gross debt by $216 million in Q3 and reported a net leverage ratio of 2.9 times.

Elanco Animal Health NYSE: ELAN raised its full-year outlook after third-quarter revenue rose 11%, driven by demand for its pet health products Zenrelia and Credelio Quattro and higher prices across its portfolio.

The animal health company reported revenue of $1.265 billion, up 9% on an organic constant-currency basis. Volume contributed 5 percentage points of that growth and price contributed 4 points, Chief Financial Officer Bob VanHimbergen said on the earnings call.

Adjusted earnings per share rose 42% to $0.27, while adjusted earnings before interest, taxes, depreciation and amortization increased 23% to $243 million. Adjusted gross margin expanded by 3 percentage points to 56.1%, helped by pricing, product mix and productivity improvements.

Elanco exceeded the high end of its quarterly guidance for revenue, adjusted EBITDA and adjusted EPS, Chief Executive Officer Jeff Simmons said. The company also reduced gross debt by $216 million during the quarter, bringing its net leverage ratio to 2.9 times.

Pet Health Products Lead Growth

Global pet health revenue grew 14% on an organic constant-currency basis, including 13% growth in the U.S. and 17% internationally. Simmons attributed much of the increase to Zenrelia and Credelio Quattro, both of which reached record U.S. market share in September.

U.S. Zenrelia sales more than doubled from a year earlier, Simmons said. The product had reached approximately 19,000 veterinary clinics, or about two-thirds of the U.S. clinic base, while average sales per clinic increased 8% from the second quarter.

Credelio Quattro’s U.S. market share rose 9 percentage points year over year in the third quarter, and the product had reached about 55% of U.S. clinics, according to Simmons. He said Quattro became Elanco’s largest U.S. pet health product on a trailing four-quarter basis, surpassing Seresto.

Elanco expects to launch Quattro in Europe in the first quarter of 2027 after receiving a positive opinion for expansion into the European Union. International sales of AdTab, an over-the-counter parasiticide, grew more than 40% in the third quarter, Simmons said.

The company generated $328 million in quarterly revenue from innovation products, up 40% from a year earlier, and raised its full-year innovation revenue target to $1.275 billion.

Befrena Launch and 2027 Outlook

Elanco has opened access to Befrena to all customers, including large corporate accounts, and expects to fill outstanding orders by the following week, Simmons said. The company plans to move from a phased launch to a full-scale U.S. launch in the first quarter of 2027.

Befrena did not materially contribute to third-quarter U.S. pet health growth, but Simmons said it could become the largest contributor to that business’s growth next year. He said Elanco had produced more than 30 commercial batches, with larger-scale test lots and validation remaining as it ramps up production.

For 2027, Elanco reiterated its targets for mid-single-digit organic constant-currency revenue growth, high-single-digit adjusted EBITDA growth and low-double-digit adjusted EPS growth. VanHimbergen said he expects pet health to outpace farm animal, with the latter returning to mid-single-digit growth against tougher comparisons.

VanHimbergen said Befrena’s volume growth will initially dilute gross margin, although he expects overall adjusted gross margin and EBITDA to improve in 2027. Inflation and regional farm animal cycles are among the other potential headwinds management identified.

Elanco also expects Costco’s non-renewal to affect its retail business primarily in the first quarter of 2027. Simmons said other distribution partners are expected to offset the impact and that Elanco expects retail growth overall next year.

Higher Full-Year Guidance

Elanco now expects 2026 revenue of $5.155 billion to $5.18 billion and organic constant-currency revenue growth of approximately 8%, up from its previous forecast of 6% to 7%. It raised its adjusted EPS outlook to $1.17 to $1.20, an increase of $0.06 at the midpoint.

For the fourth quarter, the company forecast revenue of $1.19 billion to $1.215 billion, adjusted EBITDA of $185 million to $200 million and adjusted EPS of $0.16 to $0.19. It expects organic constant-currency revenue growth of 4% to 6%.

VanHimbergen said Elanco remains ahead of schedule toward its cumulative $1 billion free cash flow target through 2028, with $362 million generated as of the end of the third quarter. He added that the company expects net leverage of approximately 2.9 times at year-end.

About Elanco Animal Health (NYSE:ELAN)

Elanco Animal Health Incorporated is a global animal health company that develops, manufactures and markets products for pets and food-producing animals. Its portfolio is designed to help prevent and treat disease, control parasites and support the health and productivity of animals.

The company's products include vaccines, parasiticides, antibiotics, nutritional supplements and other prescription and over-the-counter therapies. Its companion animal offerings address conditions such as flea and tick infestations, internal parasites, osteoarthritis and dermatological disorders, while its farm animal products support the health of cattle, poultry, swine and aquaculture species.

Elanco serves customers in markets around the world through relationships with veterinarians, animal owners, livestock producers, retailers and distributors.

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