Thank you for standing by, and welcome to the Elanco Animal Health Zenrelia approval call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I'd now like to turn the call over to Katy Grissom, Head of Investor Relations and ESG. You may begin.
Good morning. Thank you for joining us. I'm Katy Grissom, Head of Investor Relations and ESG at Elanco Animal Health. Our call today is focused on the U.S. FDA approval of Zenrelia. We will not be commenting on the financial performance in the third quarter 2024 full year guidance, or 2025 expectations during this call. The slides referenced during this call were made available in the investor relations section of elanco.com shortly before the call. Today's discussion will include forward-looking statements. These statements are based on our current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. For more information, please see the risk factors outlined on slide 2, as well as in our latest Form 10-K and 10-Q filed with the SEC. We do not undertake any duty to update any forward-looking statement.
The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional, and it is not sufficient for prescribing decisions. Today, we will be providing a technical overview of Zenrelia, including discussing the outcomes of a head-to-head non-inferiority study between Zenrelia and Apoquel that was completed in support of the EU submission for Zenrelia. The study had a primary endpoint of non-inferiority and several additional endpoints. Additional endpoint p-values were not adjusted for multiple testing. Therefore, caution should be exercised in interpretation, as there is potential for error and over-inferring the significance of these endpoints. We are excited to introduce some new faces to the investment community today. During our call, you'll hear from Jeff Simmons, our President and Chief Executive Officer, Bobby Modi, Executive Vice President, U.S. Pet Health and Global Digital Transformation, and Dr.
Mara Tugel, Doctor of Veterinary Medicine and Dermatology and Medical Strategic Lead at Elanco. In terms of the agenda, Jeff will open with context on our view of the long-term strategic opportunity in dermatology. Then Bobby will share our views on the market and introduce us to Zenrelia. Next, Mara will provide a technical overview of the product and key data, including the EU head-to-head study. Finally, Bobby will provide insight into our launch plans and broader commercial strategy. After our prepared remarks, our speakers and our CFO, Todd Young, will be available to take questions. I will now turn the call over to Jeff.
Thanks, Katy. Good morning, everyone. We are excited to share more about the U.S. FDA approval of Zenrelia, a safe, highly effective, and convenient once-daily oral JAK inhibitor for the control of allergic dermatitis in dogs. This approval marks an important milestone and a historic innovation window for Elanco. Zenrelia gives us new innovation in the U.S. veterinary clinic, unleashing a significant growth lever in what has been our most competitively challenged market space. In addition to the significance of Zenrelia on its own, in other parts of our business, we have seen how innovation can increase the relevance of the entire portfolio, and we see that opportunity here. The addition of Zenrelia makes Elanco just the second company to bring veterinarians a comprehensive product portfolio from parasiticides and vaccines to pain and therapeutics, now including dermatology.
Zenrelia also opens the door to our long-term strategic play in dermatology, which has three areas of focus. First, deliver a better experience for dogs and pet owners. Next, simplify the treatment burden for veterinarians. And finally, expand the market. Zenrelia marks an important advancement in the treatment of canine dermatology, offering a convenient and highly effective treatment that has the ability to provide meaningful itch relief to a wide population of dogs. On the call today, we will share data from the head-to-head study versus Apoquel, the market incumbent JAK inhibitor, where Zenrelia has shown to be at least as effective as Apoquel with similar safety profile. Zenrelia also had several additional endpoints in this study, including getting more dogs to clinical remission of itch. From the clinical studies, we have many examples of Zenrelia improving dermatitis in cases that were previously uncontrolled by multiple concurrent treatments.
We believe this, in addition to once-daily dosing from the start, allows Zenrelia to simplify the treatment burden for veterinarians and ultimately create a better experience for dogs and pet owners. And finally, we're excited about the opportunity to expand the dermatology market, which is estimated at $1.7 billion globally today. With Zenrelia already launched in Brazil, we look forward to globalizing the product in the coming years. Additionally, we intend to continue to improve accessibility to more highly effective products by continuing to bring differentiated innovation to the market. We continue to progress our IL-31 short-acting and long-acting monoclonal antibody products and have next-generation dermatology assets in our pipeline. We are focused on building a sustainable leadership position in dermatology, and Zenrelia is just the beginning. With that, I will turn it over to Bobby to introduce you to Zenrelia.
Thanks, Jeff. It is great to be here today and share why we are so excited about entering the canine dermatology market with Zenrelia. Based on my many conversations with veterinarians over the past few years, we know there is significant demand for an effective, convenient, affordable solution when it comes to itchy dogs. So let's start with the market opportunity on slide 7. In the U.S., canine dermatology is estimated to be a $1.1 billion market and has consistently grown faster than the broader pet health market in each of the last 10 years.
Itching is one of the top reasons pet owners bring their dogs to the veterinarian, with approximately 17 million dogs suffering from dermatitis conditions in the U.S. Survey data suggests that on average, one veterinarian sees 56 dogs each week, with about 17 dogs, or 30% of those, presenting with allergic or atopic dermatitis symptoms. Our market research shows that about 6 of these dogs are new derm patients.
We see a great opportunity for Zenrelia to be a valuable solution across acute, chronic, and seasonal allergy cases, each of which represent about 1/3 of the patient population, and with so many new dogs seeking itch relief each week, there is ample opportunity for a new solution to be considered in every veterinarian practice in the U.S., so let's meet Zenrelia, the next level of treatment in canine dermatology. On slide 8, we summarize the key product attributes. Zenrelia is indicated for the control of pruritus associated with allergic dermatitis and the control of atopic dermatitis in dogs 12 months and older. It requires only once-daily dosing from the start. There's no need to dose twice daily for any amount of time, and it works fast with visible improvements from day one.
Zenrelia effectively controls both itching and skin inflammation associated with multiple types of allergies, including flea, food, and environmental allergies, and atopic dermatitis. Results of the head-to-head study demonstrate the benefits of Zenrelia across multiple endpoints. Notably, in key additional endpoints, more dogs treated with Zenrelia got back to normal itch levels, with 77% of Zenrelia-treated dogs achieving clinical remission from itch, compared to 53% of Apoquel-treated dogs with a similar safety profile. Simply stated, Zenrelia works, and it works really well.
Before I share more about our commercialization plans, we wanted to spend a few minutes reviewing the clinical data associated with the approval and the positive outcomes in the head-to-head study. To do this, I'm excited to be joined by Dr. Mara Tugel, our dermatology medical strategic lead. Dr. Tugel has a background as a clinical practice veterinarian and in immunology research, and currently leads our Zenrelia medical communications and education strategy. Dr. Tugel, over to you.
Thanks, Bobby. I'm excited to present the data we've generated that supports our view of positive differentiation for Zenrelia. As a practicing veterinarian, I witnessed the toll that allergies can take on pets and their owners. Zenrelia is a much-needed addition to a relatively limited number of approved treatment options for dogs with allergic dermatitis. Zenrelia is a Janus kinase, or JAK, enzyme inhibitor. This class of drug has been widely employed in human health, with more than a decade of use in the canine market as well. In allergic dogs, JAK inhibitors regulate the overactive immune response to allergens that leads to the itching and inflamed skin recognized by dog owners. Ilunocitinib is a unique molecule, and the Zenrelia formulation has been optimized to allow for effective control of allergic itch or pruritus with simple, once-daily dosing from the start.
I can tell you from personal experience that anything we can do to streamline treatment of allergic dogs is a benefit to everyone involved: the dog itself, the owner, and the whole veterinary team. Let's dive into the clinical trial data. First, I'll review the details of our U.S. studies and then cover the head-to-head results. Starting on slide 10, in the U.S., we conducted two field studies versus placebo, one to demonstrate effectiveness of the product for the control of pruritus associated with allergic dermatitis, with the other focused on control of atopic dermatitis. In the allergic dermatitis study, treatment success was defined as at least a 50% reduction from baseline in owner-assessed pruritus scores on at least five days during the first week of treatment.
This is a high bar to meet so quickly after starting treatment, but Zenrelia demonstrated 25% success, which was statistically significant compared to placebo. In the atopic dermatitis study, treatment success was defined as at least a 50% reduction from baseline in either owner-assessed pruritus or veterinarian-assessed skin lesions after 28 days of treatment, and Zenrelia achieved an 83% success rate over this longer time frame, which was also statistically significant compared to placebo. The validated assessment scale used to report owner-assessed pruritus in these studies is called the Pruritus Visual Analog Scale, or PVAS. It's a 10-point scale, ranging from 10 being severe itch to anything below two, considered a normal level of itch. It's important to note that Zenrelia was held to a higher bar for improvements in PVAS compared to the metric used in the Apoquel approval studies over 10 years ago.
It's not uncommon for the FDA to modify efficacy requirements over time, and this is relevant when trying to compare the efficacy results between Zenrelia and Apoquel, as noted here on slide 11. For Zenrelia treatment to be considered successful, dogs were required to have at least a 50% reduction in PVAS scores. While treatment success for Apoquel was at least a two-point reduction from baseline on this same scale. A two-point reduction is possible with significantly less improvement in itch than a 50% reduction in score. As an example, if a dog entered the study with a score of 10, a PVAS score of 8 or lower would have been considered a treatment success in the Apoquel study. However, in the Zenrelia study, a PVAS score of five or lower was required to meet the criteria of treatment success.
Rather than trying to compare the efficacy or safety of these JAK inhibitors using separate studies done with different measures of success, it's better to evaluate them under the same circumstances, as was done in the head-to-head clinical study completed for the European submission, which I'll share in a few minutes. Now, shifting to the safety section of the U.S. label, we completed a required margin of safety study for Zenrelia, also known as Target Animal Safety. The study was conducted in healthy laboratory dogs dosed with placebo or one, two, three, and five times the label dose of Zenrelia daily for six months. All dogs completed the study with no serious adverse events. Treatment-related effects were in line with expectations related to the mechanism of action of JAK inhibitors, and the study supports the safe use of Zenrelia at the label dose in clinical patients.
Additionally, as a part of the U.S. submission, we completed a vaccine response study for Zenrelia. For context, JAK inhibitors are immunomodulators. They work by modulating the immune system, so it's important to understand how they may impact the response to vaccinations. In this study, detailed on slide 12, eight 10-month-old, previously unvaccinated laboratory beagles were given three times the label dose of Zenrelia prior to receiving their primary vaccine series. Antibody responses following vaccination were then compared between dogs treated with Zenrelia versus placebo. All but one dog in the three X Zenrelia group met the criteria for successful antibody response to vaccination with modified live vaccines, but only two out of six dogs in the group responded to inactivated or killed rabies vaccine at the primary study endpoint.
There were two dogs euthanized during the study due to complications associated with immunosuppression from three times the label dose of Zenrelia. Ultimately, the results of this study led to FDA's requirement of the boxed warning, which is shown on slide 13. The boxed warning includes a risk of fatal vaccine-induced disease from modified live vaccines and inadequate immune response to any vaccine, instructing veterinarians to hold Zenrelia use for 28 days to three months prior and 28 days after vaccination. The hold period in the boxed warning, plus related market research done with veterinarians, drove the previous communication of potential for a 25% reduction in treatment days for Zenrelia. In alignment with the label, our protocol recommendation for veterinarians will be to discontinue use of the product for at least 28 days before and after vaccine administration.
We expect this recommendation will have very limited impact on the expected treatment days for patients with seasonal or acute allergies, given the shorter duration of treatment typically required in these types of cases. We recognize that veterinarians need clinically relevant data to guide treatment choices and are pursuing a strategy to provide further context around Zenrelia use and vaccines. We intend to initiate conversations with the FDA in the coming weeks. We intend to present information regarding a study evaluating the impact of Zenrelia treatment on the response to booster vaccinations at the International Society for Companion Animal Infectious Diseases symposium in mid-October, and we will continue to work to improve the label over time. Now, let's shift to the head-to-head non-inferiority study, starting on slide 14.
This study is not described on the U.S. label, but was part of the submission process internationally and is a focus of our publication strategy following approval. It was conducted in 338 client-owned atopic dogs, split evenly into two treatment groups and treated per label instructions with either Zenrelia or Apoquel for 56 days, with an optional continuation phase through 112 days. The primary endpoint was non-inferiority at day 28, which essentially assesses whether the treatment in question, in this case, Zenrelia, is at least as effective as the positive control or established treatment, in this case, Apoquel. There were multiple additional endpoints, including mean change in pruritus using PVAS and skin lesions using CADESI-4 over time, proportion of dogs achieving clinical remission, and owner and investigator evaluations of overall treatment response.
As Katy mentioned, these additional endpoints should be interpreted with caution due to statistical limitations. I'm going to highlight a couple that show promising results in terms of clinical relief for dogs with atopic dermatitis. Moving to slide 15, as has been mentioned, the primary endpoint of the head-to-head study was met, with Zenrelia shown to be at least as effective as Apoquel on day 28. To provide additional context around the benefits of Zenrelia, let's review some additional outcomes as well. Moving to slide 16, in a key additional endpoint, Zenrelia provided consistently greater reduction over time, with mean scores for both pruritus and skin lesions significantly lower in the Zenrelia group compared to Apoquel from day 28 through the end of the study at day 112. As we review the mean PVAS over time, there are a few things to notice.
First, Zenrelia begins working from day one, providing similar rapid relief with only once-daily dosing from the start, compared to Apoquel, given twice daily during the first 14 days. At day 28, the Zenrelia group continues to improve, while what we refer to as rebound itch is observed in dogs treated with Apoquel after dosing is decreased to once daily on day 14. This eventually levels off, but you can see from day 28 - 112, the Zenrelia group had consistently lower scores for pruritus. Importantly, Zenrelia got more dogs back to normal levels of itch than Apoquel. As shown on the chart, a normal level of itch is defined as a PVAS score below two.
The mean PVAS score for Zenrelia was below two, starting at day 56 and continued through the end of the study to day 112, while the mean PVAS score for Apoquel did not drop below two during that same time period. Another way of looking at this is presented on slide 17. Here we see the proportion of dogs achieving clinical remission of pruritus at the end of the study was greater for Zenrelia, with 77% achieving a PVAS score below two, compared to 53% for Apoquel. As with many chronic diseases, the ultimate treatment goal in dogs with atopic dermatitis is to get them into clinical remission and minimize the frequency of flare-ups or recurrence of signs. The data I'm showing you here demonstrates Zenrelia's ability to not just decrease itch levels, but to help many dogs actually achieve clinical remission of pruritus.
Owners want their dogs back to normal, and the positive difference in treatment response in this study was recognized by both owners and veterinarians, as noted on slide 18. Pet owners and vets rated Zenrelia higher than Apoquel when asked how well their dogs were responding to treatment of atopic dermatitis. Owner-assessed response to treatment and investigator response to treatment scores were significantly higher in the Zenrelia group compared to Apoquel from day 28 through day 112. And finally, in the head-to-head study, the safety of the two products was similar, with mild gastrointestinal signs being the most frequently reported adverse event in both groups.
To summarize the outcomes of the head-to-head study on slide 19, in client-owned dogs with atopic dermatitis, the primary endpoint was met, demonstrating Zenrelia to be at least as effective as Apoquel, with only once daily dosing from the start and a similar safety profile. In addition, key additional endpoints reflected the following: Zenrelia provided consistently greater relief from clinical signs of pruritus and skin lesions over time. More dogs treated with Zenrelia achieved clinical remission of pruritus, and the positive difference in treatment response was recognized by both pet owners and veterinarians. Importantly, as noted on slide 20, the safety of Zenrelia given at the label dose is supported by two U.S. clinical field studies and the EU head-to-head study, including approximately 600 Zenrelia-treated client-owned dogs over the age of 12 months. I'll now turn it over to Bobby to introduce our commercial strategy.
Dr. Tugel, thank you for the detailed perspective on the study data supporting Zenrelia. I know you're all excited about the approval of Zenrelia, and I'm happy to bring a little Zen to your morning. On slide 22, we're sharing a peek into some of our creative materials, and on the slide, you can click to watch a testimonial video from one of our clinical investigators and his happy clients. Moving to slide 23, I want to highlight the three components of our commercial strategy for Zenrelia. First, vet education. For some vets, we know education and consideration on the boxed warning will be necessary, and that will be a major focus. Second, driving positive experience.
Getting the product in the hands of veterinarians, clinic staff, and pet owners as quickly as possible so they can experience the benefits we saw in the head-to-head study and gain comfort of the benefits of Zenrelia, and finally, accelerating the incentive to buy through value in the initial treatment stages and over the lifetime of the dog, expanding accessibility of efficacious solutions, and ultimately growing the market. First, let's talk about our extensive vet education strategy. With the incumbent JAK inhibitor stocked in nearly every clinic in the country, veterinarians are well aware of the treatment class and the challenges an itchy dog presents for an owner. However, with Zenrelia, we intend to disrupt the status quo.
In preparation for the Zenrelia launch, we have enhanced the capabilities of our team by hiring a board-certified specialist in veterinary dermatology to play a major role in vet education, and a number of animal health marketing professionals with extensive experience launching and growing some of the most significant blockbusters in the industry, in dermatology and beyond. Additionally, over the past several years, we have refined our launch capabilities, including the digital ecosystem, to engage veterinarians. This provides an enhanced, integrated approach across channels for us to reach and advance conversations with veterinarians in real time. We will leverage these improved capabilities with Zenrelia.
In addition to extensive brand medical education meetings, advisory boards, weekly KOL webinars, and regional dinner meetings, our entire veterinary team will serve as an important day-to-day resource, supporting sales reps and technical conversations with veterinarians on a variety of topics, including questions related to the boxed warning. Finally, as Dr. Tugel mentioned, we intend to present information regarding a study evaluating the impact of Zenrelia treatment on the response to booster vaccination at the ISCAID Symposium in mid-October, and have already submitted the head-to-head study for publication in a veterinary journal. Next, we are focused on driving positive experience. We know that the experience of a simpler dosing regimen, plus the possibility of getting dogs to and stay in clinical remission, can be significant. We will utilize a targeted sample strategy to drive early adoption, focused both on clinic staff and pet owners.
Additionally, we will utilize core marketing assets in the vet clinic to drive awareness of Zenrelia visually and inspire case selection across new pruritic patients or those with allergic flares, hotspots, seasonal restarts, and even dogs that are currently uncontrolled on other therapies. The application and opportunity to consider Zenrelia is quite wide. We expect clinics will quickly begin adopting Zenrelia for patients that are on or under-responsive to current therapies and for acute or seasonal cases. Then we believe it will be easy for vets to reach for Zenrelia more broadly for new starts once they have seen how well it works for even the toughest cases. And finally, we will focus on accelerating the incentive to buy. We expect Zenrelia to be more affordable for pet owners over the long term.
Both the ability to begin with a single dose versus two in the first 14 days, plus the potential to get dogs back to normal as a solo therapy, has the potential to reduce long-term cost of treatment. At launch, the Zenrelia list price will be an approximate 20% discount to Apoquel for nearly all dogs, with even greater savings for the first 14 days of therapy, given the single versus twice-daily dosing. Early indications suggest that most clinics will pass these list price savings along to the client, helping to overcome the cost of therapy objection and increase accessibility for a number of pet owners. Additionally, we will provide introductory offers to vet clinics that meaningfully stock the product before the end of the year and pet owner-specific rebates in early launch stages.
Both customer and sales rep incentives are aligned to drive rapid vet clinic penetration to accelerate accessibility for pet owners. We believe this strategy positions us very well to quickly capture shelf space within the vet clinic and drive initial product adoption so that vets can offer a premium product at an affordable price, inviting more owners to say yes to therapy. Consistent with our broad omni-channel strategy, our go-to-market plan will have Zenrelia available in veterinary clinics, home delivery platforms, and online prescription retailers. We will use our existing distribution partners to ensure broad nationwide coverage and look forward to making our products available in many of our strategic corporate accounts in the coming weeks. Elanco has been preparing for this launch for some time, and the sales force expansion we completed earlier this year positions us very well to deeply engage our customers.
Our field force is very excited to share Zenrelia with their accounts and are off to the races with marketing assets and exciting incentives to drive penetration. Finally, once we have achieved appropriate Zenrelia penetration in the vet clinic, we expect to initiate a broad direct-to-consumer advertising campaign to grow the market, increase brand awareness, and drive continued share gains of Zenrelia. Before we go into Q&A, I'd like to leave you with five key stats that drive my confidence that this will be a successful launch. First, in the U.S. field study, 83% of dogs achieved treatment success for atopic dermatitis, even at the high bar of at least 50% reduction in PVAS scores. Next, in a key additional endpoint in the head-to-head study, 77% of Zenrelia-treated dogs achieved clinical remission for itch, compared to 53% of Apoquel-treated dogs.
Additionally, in the head-to-head study, consistent improvement in mean PVAS scores was observed from day 1 - 56, and clinical remission was maintained to day 112. Next, safety of Zenrelia has been demonstrated in multiple clinical field studies with approximately 600 client-owned dogs over 12 months receiving Zenrelia at the label dose. And finally, Zenrelia is expected to reduce the overall cost of care, with less doses needed in the initial treatment period and a lower likelihood of needing additional concurrent treatment over time. Plus, a list price at launch that is 20% less than the other JAK inhibitor. We are thrilled to bring this differentiated product to a market that is asking for more and better options.
We look forward to the opportunity to get the product in the hands of veterinarians and pet owners as we begin shipping Zenrelia in the coming days. With that, I'll turn the call back to Katy to moderate the Q&A.
Thanks, Bobby. We'd like to take questions from as many callers as possible, so we ask that you limit yourself to one question and one follow-up. Operator, please provide the instructions for the Q&A session, and then we'll take the first caller.
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Jon Block from Stifel. Your line is open.
Thanks, guys, and congrats on the approval. I think the first one I'll ask, Jeff and Bobby, just the approach to market, and I'll try to throw in a handful here, but is the pricing consistent across your four SKUs, like Apoquel's three, or is it weight dependent? And hopefully that made sense. And then just more broadly speaking, you know, almost all vets, pardon me, offer Apoquel. Is there a goal of how many U.S. practices could adopt this by year-end? Bobby, you talked about, you know, trying to really get it into the hands of the vets and into practices. And then, Jeff, sorry, just to throw in 1/3 to the first question, any update on timing of the EU approval?
Hi, Jon. Thanks for the question, Bobby, so our approach to pricing is dictated by market research, and there were really two objectives that we had as we were thinking about market research. The first objective was we wanted to grow the market, and we think that there are 6 million dogs that are undertreated or not treated today, and so a more affordable price point ultimately will allow us to sort of expand the marketplace. The second thing I would say is that we wanted a fast adoption. We wanted more and more clinics to take this on as early as possible, and so we think an attractive launch price point with incentives allows us to do that.
In general, John, our pricing structure varies by size, but on average, we have a roughly 20% discount per size of dog on the vast majority of dogs when compared to Apoquel. There's obviously some nuances and trade-offs when you compare it to three doses versus four doses. Our hope and our goal, John, is to make sure every clinic stocking Zenrelia in their clinics. What we know today from market research is that 70% of veterinarians want another tool in their toolkit. So we're incentivizing our reps, and we're giving clinics incentives to purchase, and we expect a very fast ramp of this product.
John, on international, again, this will be the fastest global launch of any launch we've had. We launched last week in Brazil. We have dogs on Zenrelia now. We've made nine submissions in other geographies. We do expect some other non-European approvals in Q4, early Q1. And on Europe, no, we're not gonna get real specific other than to say 2025 .
Okay. That was great. Thanks. And I'll pivot for my second question. Dr. Tugel, I'll go to you in great detail on the head-to-head, and thanks for all that information. You know, it seems like using Zenrelia in acute and seasonal seems pretty straightforward and clear, but we'd love to get some details from you on how you think your colleagues will approach Zenrelia for chronic. You know, is it just confusing, and they may stay away? Is the washout period gonna give them enough comfort? And maybe the last thing to throw at you, the booster data, which seems imminent from Elanco.
I think you guys talked about maybe October. Would that be something where your colleagues say, "You know, that's real world." That's how it, you know, it really will work with dogs 12 months or older, and maybe that gives them enough confidence to go ahead and use it more frequently in chronic, where most of the dollars reside. Thanks for your time.
Yeah, thanks for the question, John. I think an important thing to remember when you think about how veterinarians might use Zenrelia in the more chronic cases is that veterinarians don't have as many approved treatment options in general for lots of different disease states. So they're used to navigating things like challenging labels or not having all of the information that they need in order to provide relief for their patients, and so veterinarians are really good at customizing treatment for an individual patient. That's really how we approach each case. Vaccination schedules also vary widely among different veterinarians and different clinics, and so for some cases that are more chronic, some of those dogs are only receiving vaccinations every three years, whereas in some clinics, there are vaccinations that are given more frequently as well.
Ultimately, what I can tell you, because of my position here in managing our medical strategy and getting to communicate with dermatologists and other key experts that are preparing for this launch right alongside with us, is that they are very eager for Zenrelia and do see it having a role in both the acute and seasonal side, as well as the chronic space. Now, your other question about the upcoming study information is a great one, and we're very excited to share more information.
As a reminder, the Boxed warning is very clear on the label, and as a company, we will abide by the FDA's guidance in terms of promotional use of the product, and we'll recommend that veterinarians follow the holding period and hold treatment for at least 28 days before and 28 days after vaccination. We're also, from a medical strategy side, very committed to generating additional data that helps veterinarians better understand how they can use the product beyond what's available in the label studies.
Hey, John, this is Bobby. I'll just add one additional comment. Just on the chronic usage, the average chronic usage of Apoquel today in the market is roughly 300 days. So you can imagine that there are many chronic patients that are below that 300-day mark. And so you can still be compliant with the Zenrelia label and the washout period without worrying about interrupting treatment schedule for many of those chronic patients.
All right, thanks. We'll take the next caller, please.
Your next question comes from the line of Michael Ryskin from Bank of America. Your line is open.
Great. Thanks for taking the question. Kind of follow up on some of the points that Jon brought up before me. Bobby, maybe this is putting it a little bluntly, but some of your comments at the end in terms of, you know, first, you're gonna position Zenrelia to make sure that vets stock it and slowly get used to it, and then over time, maybe they'll even prefer it to Apoquel. That kind of sounds to me like you're positioning it as a second-line treatment to begin, and then over time, again, once you build that experience and familiarity with it, it'll start to really compete with Apoquel and eventually displace it.
Is that a fair assessment, just thinking about the vaccine use cases that you talked about, just the added work that goes into it from the vet's perspective of having to juggle the timing of when they can use it, how they can use it? You know, you talked about the seasonal component just now, but there are also occasionally emergency vaccines, so there's just added risk around that. So how would you describe that?
Hi, Michael. Thanks for the question. Here's what I would say. We've been preparing for this launch for a really long time, and as Jeff and Todd have said for a long time, this is a no-regret launch, meaning we're putting every resource behind it to make sure we can have a rapid and fast adoption. And let me put this in perspective for you. We already have orders in hand that we will start shipping today and some on Monday. We've had numerous outreach from veterinarian customers over the last 12 hours to place orders, even before our release of the product was approved. And we have our first Zenrelia meeting scheduled on Sunday, September 29th, and we already have 2,200 veterinarians lined up to sort of see this meeting.
I mean, what I can tell you is there's a lot of demand in the marketplace for the product. And we think because this is largely a vet-prescribed product, we think we want to focus on educating the veterinarian, mainly on the differentiation that Zenrelia has in terms of efficacy and convenience. But we will also use that opportunity for vets that have concerns on what's the right protocol as it relates to the label, to follow the FDA as they think about sort of different treatment options.
As you know, vets are used to dealing with protocols, assessing patients, and then ultimately sort of making their decisions. We're very confident, based on the clinical data that Mara, Dr. Tugel, has shared with you on the efficacy differentiation as well as the convenience differentiation and going forward. And so I would just say, based on that, we absolutely think that it can be a first-line treatment for veterinarians going forward.
Do you have another one, Mike?
Yeah, sure. Just a follow-up. Bobby, you talked about, you know, being able to place units immediately. Anything you can talk about manufacturing capacity, inventory you already have on hand? You know, there's a, as you said yourself, there's gonna be a potential for a nice, you know, immediate rollout of the drug as vets reach for that second option. So just talk about capacity that's available for the next 3-6 months. If you could put a dollar amount on it and sort of what your max capacity is, that'd be helpful. Thanks.
Yeah. As I said earlier, Mike, we've been preparing for this launch for a long time, and we've got great sort of one Elanco effort going on, all the way from R&D, regulatory, and manufacturing. And the great news is we have inventory already geared up in our warehouse, ready to go, and we believe we'll be able to fulfill the orders that come in over the next weeks and months without any issue.
All right, thanks. We'll take the next caller, please.
Your next question comes from the line of Balaji Prasad from Barclays. Your line is open.
Hi, good morning, and, thanks for the call. Just a couple, Firstly, thoughts around pricing. So why is the price lower when you're only the second player in the market, have data that you believe and know is better, and there's a clear need by vets for more tools to treat, atopic dermatitis? Or maybe just to put this differently, did you expect a challenging market conversion if you had priced it at par? That's the first question.
Secondly, I also want to get your thoughts around how would you position this versus Apoquel chewables, where there is a certain, treat element to the pet, that it's a reward element to the pet with the chewables. I guess also that all leads to another thing, which is, is it reasonable to assume that the chewable is in the works at Elanco? Thanks.
Bobby, you wanna start on pricing?
Yeah. Thanks, Balaji. So just to reiterate on pricing, we set our pricing based on market research, and our market research was driven on really two clear objectives. The first is to grow the marketplace, and we know that there are two things that will allow us to grow the marketplace. One is positive differentiation and efficacy, and the second is price, as many vets have cited that as a barrier for pet owners to continue to treat their dog. And we think the launch pricing that we've gone out with has the ability to address both of those and bring many of those 6 million untreated dogs back into the marketplace.
And then, you know, the second thing I would say is, we're focused on fast adoption, and there's no secret that an aggressive price point at launch creates fast adoption, and that's ultimately what we're trying to do as we grow the market and take market share sort of going forward. And then, just related to your question on chewables, you know, our market research is very clear. When we ask vets what they're looking for in derm solutions, they really point to three things. They point to affordability, differentiated efficacy, and convenience. And we're really pleased that Zenrelia hits the mark on all three of those, and we think we're gonna see rapid uptick in adoption.
I'll just mention also, quickly, Balaji, I mean, Ellen has put together, and this has been, you know, constructed over many years, and it went even before the Kindred Bio acquisition that we made. We've got a rich pipeline in derm. Today marks the beginning of a long journey of being a major leader in dermatology, and as we've mentioned, we've got our IL-31 monoclonal antibody that is coming short-acting next year, long-acting after that, as well as a set of other derm assets that are next generation. So as Ellen has said, a consistent flow of high-impact innovation in major markets. Derm is one of those major markets. This is a $1.7 billion market. Zenrelia, we believe strongly, will catalyze this market to expand and grow, and that's what we're gonna do with this launch.
Great. Thanks, Jeff.
Your next question comes from the line of Brandon Vazquez from William Blair. Your line is open.
Good morning, everyone. Thanks for taking the question, and congrats on the approval. I wanted to focus. I think we were talking a little bit about this before, but I'll ask it slightly different. If I'm looking at the TAM estimates you guys provided this morning, I think it's about 65% of the market is specific to allergy, and I think your head-to-head study is in atopic derm specifically, and the FDA labels for allergic outcomes were pretty different for Zenrelia and Apoquel. Maybe this is a question for Dr. Tugel. Like, talk to us about how you think vets are gonna see this. What level of data do you have within allergy, given that that seems to be most of the market, given it's just hard now without a head-to-head in allergic specifically?
Thanks for the question, Brandon. One of the most important things to consider here is that even though it's very tempting, I discourage you from comparing these studies directly on the label because they were conducted at different times with different study designs and totally different patient populations. You're right that what they were looking at was allergic dermatitis dogs versus specifically the atopic dermatitis dogs. However, what we're looking for in general is still reduction in itch and also improvement in skin lesions. So the clinical outcomes are the same. Because we have the head-to-head clinical data, that's really where we need to look in order to compare efficacy. Before we do that, though, I'll just remind you that on slide 11, you can see the difference in the outcome measure for the allergic dermatitis studies.
That's really critical when you are looking at the difference because remember that Zenrelia was actually held to a higher bar in terms of efficacy, and that's not uncommon for the FDA to actually change the outcome measures or preferred way of looking at efficacy over time. When you look at the head-to-head study, as you mentioned, we see great results there, and the atopic dermatitis dogs tend to be some of the most challenging cases. So it's actually a really great way to compare the two products. And what we saw there was that Zenrelia not only met the primary endpoint to being at least as effective as Apoquel, but actually showed numerous positive outcomes in the additional study endpoints that give us great hope that veterinarians and pet owners are going to see additional clinical relief from Zenrelia. And it did all of that with similar safety.
Thanks. We'll take the next caller.
Your next question comes from the line of Umer Raffat from Evercore ISI. Your line is open.
Hey, guys, this is Michael DiFiore in for Umer. First, congrats on the approval and thanks for taking my question. It's two for me. Just wanna drill down on the specific adverse events in the label. One of the more, I guess, salient areas of differentiation between Zenrelia and Apoquel is on rabies. In fact, if you read the FOI document for Zenrelia, the language on, you know, public health concerns since regarding rabies, it does come up, whereas in Apoquel, there's really no issue. So my question is perhaps for the vet community is, like, how big of a difference or deal breaker is this? Especially since I believe rabies vaccinations are given once a year. And I have a follow-up.
Mara, do you wanna take that one?
Absolutely. Thanks, Mike. So you're absolutely right. Rabies is the primary public health concern when you think about-
Right.
Veterinary medicine. Some rabies vaccines are one year, as you said. Most veterinarians are starting to move more toward a three-year rabies vaccination protocol. And to get back to your original question, the difference in the labels is really driven by the serological results from the vaccine response study. So that's why you see the additional language around rabies. And this study was a small study, of course, because in these toxicity studies, we use as few animals as possible. And this is part of why our medical strategy is really focused on also generating additional data to help veterinarians better understand the potential impact of Zenrelia on vaccination over time.
Got it. Okay, and then my follow-up is just regarding the timing before the timing of discontinuation of Zenrelia before you start vaccination. Obviously, it could be three months before or at a minimum one month before. How are vets thinking about that? I mean, and how is Elanco, to the extent that you can comment on this, how is Elanco modeling sales peak around or with regards to this time restriction?
Absolutely. So the reason that there's a range there is that ultimately it's up to the individual veterinarian to decide how they're going to approach the holding period for an individual pet. Remember that some of these dogs might have other disease processes going on as well. They might not just have allergic itch or atopic dermatitis. Some of these dogs are going to be 2 or 3 years old, and some of them are going to be 10 or 12 years old and have other things going on, and so veterinarians have a lot more flexibility when it comes to vaccination schedules than we do on the human side, for instance, where the CDC guidelines are pretty straightforward, so ultimately, we really believe that veterinarians are empowered to make this decision for individual pets, and you do see a range there that they can abide by.
Yeah, Mike, and this is Bobby, and I would say if we've provided previous guidance that we expect Zenrelia to be a blockbuster, we're not going to give individual product guidance. But what I would tell you is, we also said earlier that we expect roughly a 25% reduction in treatment days. And what I can tell you is we believe that's a conservative estimate. And the reason we believe that is you've got to look at the breakdown of the market.
Roughly 2/3 of the patients are either acute or seasonal, which means they're using the product for 20 days on average or 70 days on average, and we don't think the vaccine interference affects them. And then if you think about the balance, there are those patients, they're chronic patients, with the mean time being sort of 300 days. And so you could think about at least 28 days before and at least 28 days after sort of falls into that window. And so we think, you know, our recommendation for veterinarians is obviously going to be to follow the label guidelines, but we think there'll be minimal impact.
Thanks. We'll take the next caller.
Your next question comes from the line of Chris Schott from JP Morgan. Your line is open.
Great. Thanks so much, and appreciate all the details today. Just two questions for me. I guess first on this boxed warning, do you believe there's a path to get this removed from the label, or is the approach here more better educating about the actual kind of impact to vaccinations and managing through this? I'm just trying to get a sense of, like, are you viewing this as a temporary dynamic or just what we're going to be thinking about for Zenrelia throughout the life of the product? And the second question is, maybe just coming back to this, more the chronic use of Zenrelia. I'm still just trying to you know kind of think about how you envision vets thinking about this withdrawal impact.
It seems like on one hand, you've got a drug with deeper efficacy than Apoquel, and that's obviously going to appeal to some vets and pet owners, and I totally understand that in the acute market. But the thing about chronic, it seems like it's going to be balanced against the dog needs to come off drug for a few months around every vaccination and symptoms returning. So I'm just I'm trying to get a sense of, like, is the chronic piece going to be a longer uptake, or do you think you can also get quick uptake in that market as well? Thank you.
Thanks, Chris. Let me take the first one. You know, we're going to take a two-prong approach. First will be, as Dr. Tugel said, a medical approach, providing data and you know, creating data and creating publications that will actually help veterinarians better understand, you know, the comprehensiveness of Zenrelia and how it works in as many conditions as possible against both acute, seasonal, and chronic. On the regulatory side, we will begin to engage immediately with the CVM and discuss an approach on how we can continue to improve the label, and I'll hold there until we have more engagement. We'll continue to update you, but that'll be a two-prong approach, medical and regulatory. Both of those are in play, as we've talked.
Yeah, Chris, this is Bobby. Maybe I'll take your question on the chronic use, and I start again with the average chronic use is sort of 300 days, and so there's a possibility to use the product with the recommended washout period without really any interference in sort of the chronic treatment. The second thing I sort of direct your attention to is what we said in our prepared comments with the fact that there are many patients that are on concomitant or multiple treatments. And so we think veterinarians will look for a way to simplify treatment for those patients and the potential side effects of being on multiple treatments, which will be another easy way in towards sort of a chronic market.
The third thing I would just say is, when you're a chronic patient, affordability is a big concern, and we think sort of the value proposition that Zenrelia offers will be very attractive for both veterinarians as well as pet parents going forward.
Thanks. We'll take the next caller.
Your next question comes from the line of Navann Ty from BNP Paribas. Your line is open.
Hi, good morning. Congrats, as well. My first question is on. So we know the focus on vet education, but can you discuss DTC and rebate strategy to attract new patients? And my second question, if you could help us sizing market expansions in terms of new patients, Apoquel non-responders, and independent clinics. Thank you.
Yeah. So let me start with the marketing strategy, and our marketing strategy is really simple, and it's about focusing on the vet, right? It's about educating them on the benefits and the differentiation of Zenrelia, both from an efficacy and a convenience perspective, but also how to appropriately manage the boxed label. We believe that that use is believable, and so the second tenet of our strategy is all about experience and getting this in the hands of veterinarians, so they can apply it with their staff, but also with patients that would come in and see the efficacy differentiation that we sort of referenced in the head-to-head study.
Then the third thing is just accelerating the incentive to buy and really creating accessibility, and we'll do that with an attractive price, but also aggressive offers that we ultimately think will expand the market. What I would tell you is, once we've sufficiently accomplished those objectives, we will look at a robust brand-building strategy where we want consumers to go into the vet clinic and ask for Zenrelia by name, and we'll do that with a robust DTC sort of media investment strategy. As I think about the size of the market, just recall there's roughly 17 million itchy dogs in the United States. We'd say that roughly 6 million of them are untreated or undertreated. And then recall that we also mentioned that about roughly six new itchy dogs each and every week.
Thanks. We'll take the next caller.
Your next question comes from the line of Erin Wright from Morgan Stanley. Your line is open.
Great, thanks for taking my question. So in terms of the adoption curve, how should we be thinking about sales of this product in 2025, and when does it reach blockbuster status? And what sort of market share do you think you can capture ultimately? And then nearer term, how do stocking dynamics, does that hit in the fourth quarter? And is that already embedded in guidance at this point? Thanks.
Thanks for the question, Erin. It's Todd. Yeah, we haven't given guidance for 2025 or when this will hit blockbuster, but, you know, we do fully expect it will deliver a blockbuster, given all the efficacy, convenience, and value benefits we're gonna provide to the vet community across the U.S. With respect to stocking, yeah, we've assumed in our guidance for 2024 that we'd be launching this product. It's coming a little earlier than we expected, given we said we'd launch in Q4, and we're launching today. But overall, it's already embedded. So thanks for the question.
And then on the omni-channel approach for the product, I guess that's a pretty big market in terms of the online channel for derm today. I guess, how are you thinking about approaching that and how the communication goes in terms of the safety dynamics and safety protocols around the vaccine timing? Thanks.
Thanks for the question, Erin. This is Bobby. I would say we're focused on the vet, first and foremost, and we're gonna educate the vet, and make sure they understand how to prescribe the product and ultimately sort of recommend it to pet parents going forward. You know, our strategy on the retail side, which we talked about, has been physical availability, which basically means we wanna be everywhere our consumers are looking for our products.
As you know, given how big our business is in that space, we have great relationships with online pharmacies going forward, and we expect to apply those relationships to the launch of Zenrelia. What we've seen is a preponderance of sales stay with the vet, but still a high percentage of sales going to online pharmacies, as it related to chronic oral dose sort of products or solutions, and we expect the same thing to occur with Zenrelia over time.
Thanks. We'll take the next caller.
Your next question comes from a line of Steve Scala from TD Cowen. Your line is open.
Hi, this is Chris for Steve. Congrats on the approval, and thanks for taking our questions. We had two. On Zenrelia, on the Zenrelia clinical trial, did you have any data on Zenrelia efficacy in dogs that were unresponsive but previously treated with Apoquel? And then on the head-to-head study, are you able to claim that the efficacy difference was statistically superior to Apoquel? Thank you.
Thank you for your questions, Chris. In regards to your first question, the clinical trials were conducted in a way such that there were no other treatments that could have interfered with our ability to understand the efficacy of Zenrelia, and so dogs had to have been off of or not prior treated with Apoquel. That being said, we also have great energy and excitement coming from the dermatology community because they see the difference in efficacy and are very excited to try Zenrelia in those patients. Your question about the head-to-head study is great, so recall that if you look on slide 16, you can see the difference in mean itch scores as measured by PVAS over time.
The three big findings that we see in terms of additional endpoints are that not only is Zenrelia significantly lower the mean itch scores and also improved skin lesions in a significant way over time. It also got more dogs back to that clinically normal level of itch, which is less than two on the PVAS scale. This can be referred to or thought of as clinical remission from itch, because this is a chronic disease state. Lastly, what I think is most important is that there is a statistically significant difference in terms of owner and veterinary assessment of response to treatment. Owners and vets actually saw the difference between Apoquel and Zenrelia in this study. All right, thank you.
I'm gonna pass it over to Jeff to just give a couple closing comments.
Thank you for joining us today, and I start by saying this is an exciting day for veterinarians and pet owners. This is an advancement in one of the biggest challenges that pet owners face. It's the number one reason, as we say, that pet owners bring their vets, their dogs to the vet, and we're bringing Zenrelia. It works really well. It's going to do what we ultimately wanna do in Elanco, make animals' lives better, which ultimately makes life better, and we're excited about that. I also wanna thank the broader Elanco team, Dr. Tugel, Bobby, and their broader team for bringing this advancement to the marketplace. It was truly a team effort, and then ultimately, Elanco is in a historic window right now of innovation like never before.
Zenrelia now is the fourth of the six potential blockbusters that we're bringing to the market by the end of 2025, that will deliver the expected $600 million-$700 million of innovation, and it's a busy time in Elanco. We're extremely excited to jump into this $1.7 billion global canine dermatology market that we see Zenrelia and our pipeline helping to expand that market and also bring this pet comprehensive portfolio from the four-dimensional approach that we've talked about, and look, be assured, Elanco is in execution mode. We will launch like we've never launched a product before globally with Zenrelia, and it all comes back to the key drivers of our value proposition, growth, innovation, and cash. Thanks for your time today. We look forward to engaging with all of you individually as necessary going forward. Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect.