Good morning, everyone. Welcome to Elanco's 2025 Investor Day. Thank you all for being here with us today in New York and also online. First, a bit of housekeeping. 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 forecast. For more information, see the risk factors discussed in today's press release, as well as in our Form 10-K and 10-Q filed with the SEC. We do not undertake any duty to update any forward-looking statement. Our remarks today will focus on our non-GAAP financial measures. References to organic performance exclude the estimated impact of the aqua business, which was divested July 9, 2024, and certain royalty and milestone rights that were sold to a third party in May 2025.
Today's agenda will feature eight of Elanco's senior leaders defining our new era of sustainable, reliable growth. We'll hear from Jeff, Tim, and three of our business leads with a Q&A for them. After a short break, we'll have Ellen, Bob, and Grace, and another Q&A for that group, also moderated by Jeff. Please note that we'll post the full set of presentations when we're done with this morning. With that, it's my pleasure to introduce our President and CEO, Jeff Simmons.
Thanks, Tiffany. Good morning, everybody, and we are excited about the next couple of hours. Thank you for the time that you're investing here in the room, as well as many online. We know December brings a lot of commitments, and we're excited and believe this will be a highly valuable time. So, look, five years ago, we had our last Investor Day. We're quite a different company, and I really believe that the words on this slide are really important. This is all about a sustainable growth company. You're going to hear from ten very vested leaders that your investment's behind, and one of my big jobs here today is to allow you to get to know them a lot better. I also [know] there's four board members here that hopefully you'll have an opportunity, those that are here, to interact with at the break.
We've got our Chairman, Lawrence Kersey, here, the Head of the Finance Committee, Paul Herendien, the Head of the Innovation Committee, Dr. Debbie Kochevar, as well as the Head of Governance, Mike Harrington. They're here and look forward to engaging with you throughout the breaks today, so let's get in, and I want to start with, we did a survey ahead of time and talked to all of you and have been out on the road with a lot of investor conferences, Bob and I, and we heard clearly these are the things you want to hear about: the underpinning of our strategy, IPP, what drives it, the details behind it, with that also getting into the pipeline. And Ellen's going to go deeper, not just on our current innovation, but the engine that's driving it and the next wave and the next, next wave of innovation.
And we'll open and share that as well. And then how that links to just the overall financial outlook. At the bottom of this slide is pretty important to us, and it's really our investor charge. And I want to be really clear to say that we want to be a company that not just delivers, but that we're reliable, that we're consistent, that we do what we say, that we are very transparent. Hopefully, a proof point of that is the detailed press release from this morning. We want there to be great clarity, whether there's good things happening or challenging things happening. We want transparency, and we want to also be very accessible. Bob, later in the day, we'll talk a little bit about the philosophy behind guidance.
As we start to go forward, we're going to talk about three-year commitments today, but also a five-year window of just how we see the business. This is important. That's our investor charge that I think is really important, and we look forward to some individual dialogue. A lot of what we're going to share today is a backdrop for the next three years of dialogue with you as investors. Look at this slide deck as something that we want to be a little bit timeless for the next three years. Okay? I want to get started. I like to kind of say, let's start with what we're going to talk about the rest of the day. I'm kind of the opening act for everybody else.
But let me just share the press release and a little bit of a summary of what's in it. And the first is just the headline of say, hey, we want consistent growth. We've demonstrated that over the last nine quarters, especially over the last four quarters as a mid-single-digit company. And what's coming behind that is a steady flow of a pipeline of new products and then a stronger financial profile. So let me just kind of give you kind of each of these pillars underneath this that you're going to hear about and some of the expectations that we're outlining today. First is consistent, predictable growth, where our expectations are in our algorithm, a mid-single-digit constant currency revenue growth. This will be driven heavily by stronger portfolios, as well as more competitive commercial capabilities and innovation going into those portfolios on a regular basis.
And I think you've seen already a proof point of nine consecutive quarters of growth. The second is what I think really sets us apart and will for a couple more years coming, and that is the basket of innovation that is globalizing right now. Folks, we are in major markets with major differentiated products. Those markets are growing. Our products are taking share. And I've not seen anything in animal health where there's a lot of industries that have one product and one market dependency. We've got this basket. And we are today committing to $1.1 billion next year of innovation from these and the Big Six to double between now and 2028. So that's the basket of innovation that is hitting the market, the Big Six, which we'll get into in great detail with Tim here next.
And then the next wave, what you haven't seen a lot is what Ellen has been doing. We talk a lot about these Big Six. But what I've really challenged Ellen is to come here and say, hey, in the four and a half years, what's changed in R&D? What's the engine? What's the capability? What's the next wave? And what's the next, next wave? We know as investors in animal health, what has been the challenge is the air pockets of innovation where they don't come. And our goal today is to show you and demonstrate the capability and the leadership behind an innovation engine that's going to take ten major projects in development. We got the center of our pipeline is full and it's moving. Today we're committing to five to six potential blockbusters in major markets between 2026 and 2031.
That's a pretty material kind of step out that we're highlighting. Number one question, Bob, and I've gotten over the last three months has been, hey, when is the EBITDA growth coming? It's going to start coming in 2026. The other part of our algorithm is a high single-digit adjusted EBITDA constant currency revenue growth. This is going to be driven really twofold. One is going to be around, yes, stronger portfolios, innovation, better mix. At the same time, it's going to also come from Elanco Ascend. Today was an example of we are performing, we are investing, no regrets on launches. Yes, we announced today a restructuring. We are going to perform and transform. Bob's going to bring an energy to that. Grace, you're going to hear from today around this. High single-digit EBITDA growth starts next year.
And then lastly is just a stronger balance sheet, stronger cash flows. We're committing to $1 billion of cash flow creation over the next three years. And that's going to come also from that EBITDA expansion that you see earlier. And yes, deleveraging matters where we expect to be under three times by 2027. And we've heard clearly from you, we're going to continue that path. Paul, the Finance Committee, kind of holds us accountable very clearly to take this down to the two, two and a half times as we go longer term. That is the backdrop of what we're now going to take the next two and a half hours and give you the underpinning of these outcomes and expectations. Now, what I'd like to do is just take a couple of minutes and give you Elanco's perspective. We put some time into these next three slides.
It's a volatile, dynamic capital market, and you're needing to pick the market you're in and the investment you're in. We think we're a compelling value proposition. We also think we're in the most compelling space. I was on Fox Business this morning, and I spent a few minutes talking about a $40 billion industry headed to $60 billion and why. The next three slides I want to just highlight from you as a ten-year executive officer in Lilly moving over what we've seen and a lot of data that supports these next three slides. Animal health is an attractive market. It is durable, and it has three fundamentals that don't get talked about enough collectively. And I think it's really important. And we'll then follow this up in what it means. We're a $42 billion industry.
We believe that in the next ten years, this industry goes close to $20 billion, and there's no reason why Elanco can't be one of the leaders in that $20 billion of growth. Here's the uniqueness. One, we're a science-based industry. We are pharma-like. We have high regulatory bars. Shoot, in the U.S., we got three regulatory bodies that we serve. That brings complexity and a high barrier of entry. At the same time, we've never seen in Elanco. Tim will talk some about this, the revolution of innovation that's coming from biotech, pharma, plant health. There's a lot of innovation outside that's happening, and Elanco's a good testament. Innovation gets rewarded if you bring it to the market. At the same time, we also think independence matters. We've seen coming out of Lilly, being able to own and have access to innovation is probably better as an independent.
That's the science pharma-like corner. The next that really drives our multiple up in this industry is we're CPG-like. We're very brand-driven. Listen, pet owners more than ever, Bobby will highlight this, love their brands, but so do veterinarians. And that brand loyalty gives a durability that's different. So do protein companies. When we sit in the boardrooms of major protein companies, they want reliable brands they can trust. They don't want to put their brands and the quality assurance at risk. That also then leads to kind of limited patent cliffs. And Ellen has a dimension of life cycle management that's really key. If you have life cycle management, you get that piece into it. The third is it's very value-driven. And I'll tell you the next five years, we see the need to be economically driven is really important. We serve low-margin people and customer bases.
You have to have a holistic value proposition. And I think the vet clinics are going to be more under pressure here. Pet owners, we're seeing it, protein companies as well. It's a cash market, not a payer market. You got to be value-oriented. You got to have customer interface. You got to have the size and the scale to be able to reach these markets. And it's highly complex. Bayer's given us a size and a scale that's very different than five years ago at our investor conference to be able to do this. These are three fundamentals that I believe create a multiple in a market that is very durable in a pretty volatile time.
Now, what we want to do is highlight the five trends in each of the two species that we think are most important that will drive strategy and drive who will win the next ten years, so pet, $17 billion market projected to grow mid-single digit to high single digit. We hear a lot about vet visits. Yes, that's important as maybe an early indicator short term, but you as investors, the next five to ten years, here's the five that we think matter. The pet owner willingness to spend is still resilient. Fewer kids, more pets. The next generation has a willingness to spend if the innovation is there. If there's innovation, there's a willingness to spend, and we see if we can continue to bring this, the willingness will be there.
The second trend is not talked about enough, but I assure you it will play out big in the next 10 years, and that is the pet owner's decision-making power is growing. Yes, vets are important, but the power of the pet owner really matters, so you've got to have CRM data. You've got to have accessibility to that pet owner because that pet owner is going to continue to take on more and more influence, and Bobby will talk some about how we're working on the channel efficiency there. The third is the omnichannel approach. One of the big reasons why the board and us decided to go after Bayer, reach more pet owners and where they want to shop at the price points they want to shop at. That creates convenience. Convenience drives compliance.
This is one of the big underpinning growth drivers that we're already seeing in our business with products like Quattro and Zenrelia, but even Advantage and Seresto. The comprehensive portfolios matter as we've talked about. We've seen Derm come in, watch for Pain to come in next. More portfolio creates more leverage. More leverage is critical as we up the index on corporate clinics. And lastly is the globalization is happening rapidly. You're going to hear this from Romero that the EU and the US were always the pet markets, but watch out. I'm going to use one example. Brazil used to be a developing country in pets. I would say Romero would probably say it's a developed country. And we're seeing that today with our Zenrelia launch. These are the five trends we think that will drive this $17 billion industry up quite significantly. Farm animal.
Bob will talk about being underappreciated, his perspective. It's probably underindexed, and I think it will be one of the big drivers, especially the next five years of that $20 billion of growth. I think it's going to get more of that share than people realize. Here's a few things that I think are important. It will grow slower, probably a little bit less price, but we'll talk about how it flows through the P&L today and why we are really bullish, pardon the pun, on this market. One is animal protein. Five years ago when I stood at the investor conference, there was Meatless Mondays. There were Impossible Burgers. There was a lot of worry. Where's the future? Today, it has totally shifted. Why? Taste, cost, nutrition. A Fairlife Shake is a good example of that, and the healthy food movement, protein is the fastest growing segment.
Animal protein is the fastest growing segment. Just Rabobank, I was at a conference two weeks ago, GLP users. If you're on a GLP, you're consuming close to 60% more poultry, 40% more beef. So you've got all these developed country trends. And then emerging will continue to show GDP growth continues to drive this. So low single-digit growth, but durable growth. The second is we're pointing to ruminants and poultry, 75% of farm animal. Why are we really, really focused on these two segments? They're durable. They got great opportunity. They got a bigger problem set. They're accessible. And we see this is where the great opportunity is. Where swine would be a little bit more regional, probably a little more volatile and a little more opportunistic. Not saying swine's not part of our strategy, but here's where our energy is, ruminants and poultry.
Where actually we've got leadership. The third is livestock needs. Go into the boardroom, go into cattle, poultry veterinarians. Food safety's one. Disease prevention's two. Tim will talk a little bit. Vaccine growth is where this industry is really growing the most because of disease prevention, and then this $1.5 billion market we've been talking about is really sustainability and productivity are converging, and what that means is really that second bullet is sustainability really when you get to the farm, and José's team is leading this. Is all around got to have economic sustainability for farmers. If you can't sell value to farmers, you can't even start in this business, and then you combine what we're seeing as new is CPG value. They got to get to the farm to strengthen their brands, and money is flowing.
Tens and twenty millions of dollars we're seeing flow to the farm, and we're enabling that. Then the environmental backdrop around that still matters to consumers. These next two kind of combine, and Bob will talk about the dynamic of these with bigger portfolios. We're adding to our farm animal portfolio. If you can get to a farm animal customer more efficiently and you've got the right reach and the markets are consolidating a little bit in the countries, you can run your P&L on a 9%-10% OpEx, which concludes to say we've got as strong of an EBITDA line in farm animal as we do in pet health. This is something I think Elanco's mastered, and you're going to hear from two commercial leaders that know how to do this as well as I believe anybody.
So these are the trends that we want to talk more about over the next couple of years with you. And we believe this is what's going to create $20 billion of value. And inside of that, we think we're well positioned. So look, I just kind of say this too. We've had never more relevance as an industry. I speak a lot in industry events. We've never been more relevant, but with relevance comes responsibility. And if you can tap into that responsibility, you can bring out more value than ever. We have Dave Kinard, head of HR here. And our goal here is, if this vision with more purpose of touching every life every day with food and companionship, what do we do? We're seeing it right now, recruiting AI talent.
We punch bigger than our size because of the significance of what we do to society for this next generation. I think watch our talent, our engagement. And if we can unlock that, that's my challenge to Dave and the team. We get another level of performance. Let's move quickly through this next section on just the new Elanco that's been built, especially with kind of a five-year contrast. Look, we're a bigger company today. We see this $4.7 billion. Do the math. We head towards a $6 billion company by the end of the decade. We've got the reach, the mix, the geography split. You're going to hear it in detail by the leaders.
We got more blockbusters, which as you all know, because you ask about margin profile compared to our other competitors, we have a lot more leverage to be able to do this with better, higher margin blockbusters. It's a more efficient Elanco, as Grace would say, running manufacturing to get the next 10 million than it was five years ago. Look, we look at it in three categories. We've got leadership in farm, leadership in pet retail. We may be three or four ranked in pet vet, but probably have the highest ceiling of potential with the most innovation. We see the greatest runway there. We're set up well. This would be what I would say the board's chart that the Elanco board and the Elanco executive committee has been very intentional.
A little bit of an iceberg effect to say we're starting to arrive, but we've been very intentional since our independence in 2018. We built a foundation. We wanted an independent company that could reach the world's animals. And that's what we've done. And boy, it took money and it took time. We had to build an SAP system, a supply chain, regulatory. It was hard. But today, I think we're one of two companies that can reach the world's animals independently. Second is we scaled for global reach. We made two acquisitions that were hard and challenging, but they truly got us what we want. Bayer's given us a big R&D budget and an engine that Ellen is utilizing to bring forward the innovation we need. We've got the size, the scale. We've got enough by country strength to out and compete with any of the major players.
Kindred brought us MABS. Today, we are one of two companies leading with growing our lead with monoclonal antibodies, and we'll share some more news on that throughout the day. That's been key. Those acquisitions have been critical, and then Ellen came four and a half years ago, and we knew we had to double down and create an engine to create consistent flow. We also had to get our pipeline, those six products out, and that's been successful to really set us up now to be this sustainable, durable company. You're going to continue to hear the three outcomes from me, from IPP, growth, innovation, cash, and how important those are going forward, so this has been the charge of the board and the committees of the board, as well as the executive team, and we're excited about this new era that we're entering.
The strategy has been the same for eight years. This is our flywheel. It's durable. It's starting to pick up some momentum using the good to great kind of concept. And it's all about consistency. Ellen's charge is a consistent flow of high-impact innovation. And that leads to consistently strengthening portfolios for more value to take more share. And that leads to, at the same time, also driving consistent productivity and being able to do both, grow and transform. And this strategy is going to continue. And it's going to deliver the three outcomes that have been consistent. IPP delivers growth, innovation, and cash. And that delivers total shareholder return metrics that you're interested in. So I will just assure you 9,500 people across Elanco have their objectives tied to these outcomes. And you're going to hear it first from the 10 leaders that are nine leaders today.
Look, the proof points you'll hear today is the quality of growth continues. The durability of that growth continues. This is the one chart that is pretty consistent from five years ago. We've built a basket of innovation. Five years ago, we said $5-$600 million of innovation. That $5-$600 million grew to $600-$700 million with Kindred. Today, we've got a metric for this year of $840-$880 million. And we're committing next year to $1.1 billion. The basket of innovation is our greatest differential to our competitors today. We're durable. We're diverse. And what Ellen is bringing in the next two waves of innovation will strengthen this diversity, but will keep us in big markets. We're not a company, very important point here, dependent on creating markets. We're going to go in the big markets that are already growing to take share.
Yes, we'll be opportunistic, but the next five years of Elanco is really on growing big markets that already exist. Always get challenged and definitely over the last three years, Jeff, aren't you an innovation follower? Maybe we were five years ago, but I think it's starting to change. I think we're definitely leaning in and creating an innovation, as Ellen says, powerhouse that actually can start to create first. The first FDA product with four active ingredients. The first anti-infective in farm animal in more than 10 years. Next generation. First SGLT2 ever approved in animal health here in the U.S. and a few emergency use products as well. And the first derm competitor. I know some would say we're late, but we're bringing a portfolio coming here next.
I would just challenge to say I think you're going to start to see Elanco move into much more of a leadership position. I know that's Ellen's vision. And then on cash, you'll hear from Bob. We know delivering is important. Free cash flow is important. And we'll continue to stay on this charge. Today, we made an announcement, a pretty detailed, I think, three-page press release. I shared some of the news this morning. And I want you to just see this as a proof point that Elanco is performing. We're in a position of strength, but we're going to great companies are disciplined and decisive in a position of strength. And that's what today's announcement's about. We restructured, impacting some jobs. And Bob will get into the details of the financials. I won't do that now.
But what you want to see is this is something to where we are increasing investment, where we can get more capacity and efficiency. And I'll use an example. We are shutting down a German Bayer R&D facility. We've signed a global deal with the CRO, ClinGlobal, to increase significantly our capacity with a lot fewer dollars to create a lot more flow in our pipeline. That's one example. We also did some regulatory changes, gone to some lower-cost countries, all of this to create more cash flow. I got asked last week at an investor conference, can you get us EBITDA growth? And can you keep investing no regrets and win in the big markets? This is an example, an enablement of how we're doing that. Also, we've had a lot of good dialogue on the R&D front.
Today's announcement also said that we've been having very constructive dialogue with the USDA specifically. We've been on the phone as recently as yesterday with them. I will just say that they have done a lot since the government shutdown. We're confident. You'll hear about the brand name Bafrena from Bobby. It's our IL-31. We have all technical sections complete. We have label alignment. We believe we'll have differentiation. Bobby will talk about that. We're still cautiously optimistic for an approval by the end of the year, but mostly for an H1 launch. We've also confirmed an accelerated pathway with the USDA as well on a potential first-in-class immunotherapeutic in a major pet health market where they've granted us conditional pathway to move to be able to bring what we think could be a major pet product in the next two to three years.
That's probably all we're going to talk about that in terms of the details. We've got good clarity on 2026 tariffs, which really with that and the teams put an incremental price increase in place that will really take tariffs for us, we believe will be immaterial in 2026. More details will come from Bob on those announcements. Hopefully, you see that as a company on the move, a company moving in a position of strength. Why will we win? I think we've got a proven strategy, a consistent strategy. Over 97% of all the employees in Elanco know their role in that strategy. We've got a stronger, more stabilized portfolio. You're going to hear about it and the owners here in a minute. We've rebuilt an innovation engine that is moving. We're pivoting to a much stronger financial profile.
Let me conclude as I turn it over to the team on also the foundation of the team and the culture. Why do I do this with investors? I think an investor day once every five years, you need to hear a little bit of how we run the company. And that's the next two slides. This is the team. These are the 10 individuals that are most vested for your investment success. This is the most, I believe, experienced, stable animal health executive team in the industry. And they bring a lot of experience. We're aligned. We spend a lot of time together. We have a meal once a month together. We have a lot of fun. And we're unified, but we are extremely committed to win and succeed. We haven't come this far to not fully deliver in the next five to 10 years.
So let me just highlight a little bit. It all starts with Ellen. Ellen's got 35 years in animal health. She's led BI. She's led the makeups of InterVet that's now Merck, DSM, PepsiCo. Ellen is a drug developer, driving pipelines, very disciplined. The first day she showed up, it's all about consistent flow, Jeff. It's about refilling as much as delivering. And she's done that. Tim, Tim brings executive leadership from all the different major companies. Tim's all about growth. And that growth is very targeted, very much on the major markets of where we can win. And building the portfolio for Ellen from the outside and building the portfolios inside with the commercial leaders. The three commercial leaders, very quickly, we run the U.S. differently than most companies. We split farm animal and pet health.
On the farm animal side, José Simas leads the farm animal, 35 years leading farm animal businesses, a nutritionist. Nobody probably knows the mix between science and economics. He's put us in a number one position in beef and poultry and in swine. Bobby came in with pet experience, CPG experience. It's all about brands, building brands, launches, and omnichannel. That expertise has turned into competitive advantage for us as we've gone forward. Romero is a veterinarian. He's a globalist. He's very disciplined and has one of the strongest leadership teams we have and runs the world in clusters, 52% of Elanco's business. He's probably been the most consistent deliverer that we've had over the last five years. Bob's come in. I've shared a lot with you, a low-margin industry background to really help us drive margin across the company. Two words with Bob is cash and margins.
And today, we announced internally he will lead Elanco Ascend, our five-year company-wide productivity agenda. And he will work in partnership. And you'll hear from both of them today. Grace, Grace is leading manufacturing. She's led our global supply chain. She's come out of Lilly. She's run plants. And it's all about reliable supply and the science of the next wave. And she works very closely with Ellen in that regard. Shiv's all about keeping us agile, competitive, but in control and managing the risk. And Dave Kinard, how we foster our employee value proposition to create another level of engagement beyond our competitors. And everyone's here today and looks forward to engaging with you. And I want you to hear from them directly. And look, what's unique if you walked around, traveled with me through the labs and the manufacturing plants with the people?
I think behind the blue slash, you would see one, the longest-standing brand. There's pride in the legacy. Market research we just completed with our global customer base said, "Hey, Elanco is about value." And so we hire people appropriately, industry-passionate people, purposeful people, and people that have the acumen and the expertise we need and the mastery in those areas. The culture is maybe a little bit Midwest, maybe a little bit from our Lilly roots, but it's, "Hey, one Elanco." And these four behaviors are how people are measured. We're a company quietly. I've kind of shared this with a few of you, but we've had five-year plans five different times. We're just completing after 25 years our fifth five-year plan. That puts a mark for everybody. That's really important all the way down to we have a weekly accountability rhythm that drives these outcomes.
And then lastly, our measures are all linked to growth, innovation, cash through performance management. And a reminder that our bonuses are driven on Elanco cash earnings. That is, EBITDA has got to beat last year. And cash has to beat the cost of capital. And everybody knows that if we don't do that, then bonuses, no matter how the stock performs or how growth performs, it doesn't matter. And that lines up with the TSR that you're interested in. We've also matured the governance as we've matured the company. This has been important to the board. And we've taken this series of steps every year as we've matured as a company to align with a stronger, more independent governance as we've gone forward.
I will end here by saying you're going to hear this financial profile and expectations as we go forward from a lot of the leaders as we link to this. And Bob will close with this with more detail. Okay. Look forward to engaging with all of you. And in the Q&A, I want to turn it over now to Tim to dig into the portfolio. Tim.
Thanks, Jeff. For those who don't know me, my name's Tim Bennington. I'm here today to dig into the portfolio a little bit for you. And then I'll be handing over to Bobby, José, Romero, and Ellen to dig one level deeper so you get to make sure that we get a good perspective. I'm going to cover a little bit my view of where Elanco's at today and just a little background on myself just to get to that point.
I've just clicked over 30 years in the animal health industry. I've been fortunate enough to work for some great companies, most recently Zoetis, Boehringer Ingelheim. I've been able to work with nine of the top 10 brands in the animal health industry, and I've sat at the executive table of three of the big four animal health companies, so I have somewhat of a unique perspective to be able to share with you today. These are the topics that I'll be covering today, but most importantly, let me dive into the two big markets that everybody is interested in, first one being the pet market. From our view, and I say our view, and I'll keep the narrative of our view, we see the market growing to $24 billion by 2030, driven by the parasiticide space, the ever-resilient parasiticide space.
This includes both the OTC and the RX parasiticide space. We have a leading position in the OTC parasiticide space. The RX space, we are not as big as some of our competitors in, but that creates a great opportunity for us. We see derm, vaccines, and pain as key pillars. We see a lot of new entrants coming in, but we see them as the key pillars for growth for the industry and the material drivers. Let me just touch on farm animal. We see it growing to $27 billion. Farm animals are space that you don't hear as much about. It's a very nice business. We like the farm animal business a lot. It's a nice growth business for us. It generates a lot of revenue for us.
It's something that is probably a little easier for us to grow in just because not everyone's looking at this the same way we are. This is a key area for us. We see cattle and poultry as the big drivers for this space. Predominantly, poultry is the biggest driver. Vaccines will be the biggest driver for this. We have a leading position in the U.S. in the farm animal space. We have the opportunity to grow that geographically around the world, which gives us a nice platform to continue to grow the farm animal space over time. One thing that I think the company is very proud of and should be very proud of is those of you that have been following us for a period of time would understand the base.
The base business for Elanco over the last few years wasn't always delivering at the same rate as the rest of the innovation. The base business is now flat, plus or minus 1%. Without a flat, stable base, it's very difficult to continue to grow because you have to play catch-up. You have to play catch-up. We're now at a point where we're at a very stable base for the business. This has been done through cross-selling across the innovation with the existing portfolio and geographic and channel expansion. But the innovation has been the big driver for enabling this base to stabilize. Then, as we look forward, let's talk a little bit about what we call the big six. Jeff referred to the big six earlier. What is the big six? It's Credelio Quattro, Zenrelia, AdTab, Athian, Bovaer, and Experior.
You'll see here we have in 2026, $1.1 billion of growth from the big six. You'll also see the rest of the innovation we have outside of the big six also continues to grow, but we see the big six driving a large portion of our growth moving forward, and then, as we think about beyond 2026, let me give you a slight view into 2028. We see stable base critical. Without the stable base, it's hard to get the growth we need. Big six doubling in size by 2028, and we start to see the impact of Ellen's next wave, which we'll dig deeper into as we move forward. Stable base, big six doubling, start to see the next wave already in 2028. How do we expect to do that? Is one of the questions I'm sure many of you are thinking about.
This is a view of the big six and where we're at today, where it's been launched, where it's headed. And I'll pick on two examples for you. First one being Credelio Quattro. Credelio Quattro is going incredibly well for Elanco, but it's only launched in the U.S. We see great opportunities in the major pet markets: Japan, Australia, Canada, Europe, Mexico, and Brazil. And so great geographic expansion opportunity for Credelio Quattro. If I pick on Zenrelia, already launched in the major pet markets. So different phases. It's more immediate value because obviously just launched in some of these countries, label improvements in some countries. So we expect it to go quite quickly. Quattro will go over time. So it's not just all these things hitting at the same time. Many of these products will grow at different times and different phases.
And just one quick point on the big six. What I showed you up until 2028 wasn't peak sales. It was just the sales as of what we expect in 2028. Those products will continue to grow beyond 2028. And then I think one unique thing about where we're at and the perspective I'd like to give you today about why I think Elanco will win. I've been in many animal health companies over a long period of time. I've never worked in an organization with a portfolio of this much innovation all at the same time. It's a very unique challenge and a great challenge to have. And I think the launch execution you've seen in many products, AdTab, Credelio Quattro, set the example and the tone for what we expect moving forward. But this is why I think Elanco is well positioned to win.
We're going to be in large growing markets, which is where we need to be to generate the value. We have a diverse global portfolio that's very durable, which is key, and we have sustainable growth through the big six and also following closely behind at the next wave, so we're in the right markets. We have a global portfolio, and we have a nice flow of innovation. That's why I think Elanco's set up well for success moving forward. I'll turn it over to Bobby to dig a little deeper.
Thanks, Tim. Good morning. For those of you I haven't met, I'm Bobby Modi, and I have the privilege of leading our U.S. pet health business. Today, I'm going to talk a little bit about how we've pivoted our business to growth, how our portfolio is allowing us to gain share, the strength of our omnichannel capabilities and parasiticides, and our differentiated derm portfolio. First, let's get grounded on the business a little bit. We're roughly a $1.3 billion business and represent roughly 28% of Elanco's total sales. Much like the diversity of total Elanco, our U.S. pet health business is also very diversified, and that diversity allows us to reach the consumer wherever he or she is going. One example of that is our channel diversity. We have a large retail business, and we have a leading presence in the OTC business.
This allows us to reach more than one-third of pet parents that don't visit the veterinarian on a regular basis. The second area of diversity is in the medical spaces we play, unlike many of our competitors. Special thanks to Ellen de Brabander and her entire team for giving us innovation in each of these spaces over the last three years. We are now growing share in all four of these major medical segments. It's diversified innovation coupled with a stable base that's allowed us to lead the industry in growth for two straight quarters in spite of a very difficult macro environment. Now, there's many things that have transpired since I joined Elanco in 2022 that have allowed us to build a sustainable competitive business. The first and probably the most important is differentiated innovation.
Over the last three years, we've launched 12 differentiated assets in our U.S. pet health business across the RX and OTC portfolio. But it's not just innovation. It's actually access to our customers. With the investments we've made, we now have the second largest vet sales force in the country and the largest retail team in the country. This gives us the ability to reach 30,000 clinics, all the major corporate groups, and the 100,000-plus brick-and-mortar stores in the U.S. But it's not just access. It's the scale of our OTC portfolio and the breadth of our RX portfolio that gives us relevancy with our customers. They want and need the brands that we have to offer. And we're all about building enduring brands. And the way we build enduring brands is by expanding our share of voice.
One way we've expanded our share of voice is with the vet community. Since 2022, our share of voice has grown by 110%. That's over 250,000 more contacts today with vets than we had in 2022. But we're not just building share of voice with our customers. We're also building share of voice with our consumers. With award-winning creative and an analytical approach to our direct-to-consumer advertising, we are building novel brands like Credelio Quattro. All of this is underpinned by a very experienced, talented leadership team and a highly engaged organization. We've grown our engagement since 2022 by 23 points. We are now 7 points above the external benchmark from an engagement perspective. With the pending approval of our IL-31 monoclonal antibody, we will be one of two manufacturers that has a comprehensive portfolio with a complete solution set for veterinarians.
This portfolio makes Elanco more attractive to our partners as partners for clinics and corporate groups. Let me give you an example of that. In 2024, we were only growing in 40% of our corporate partners. Today, behind a stronger portfolio, we are growing in 82% of our corporate partners. This shift in the growth rate of our corporate partners from 24 to 25 has translated to a 1,200 basis points improvement in our corporate accounts business. Now let's take a deeper dive in a couple of segments of our business. First, Credelio Quattro. We are incredibly pleased with the performance of Credelio Quattro. It is defying the typical third-to-market archetype. We believe it's defying that archetype both in sales and ramp rate because it's best medicine based on its differentiation.
Four degrees of differentiation, broadest coverage, speed of kill with ticks, heartworm efficacy in one month, and recent feedback from the veterinary community, exceptional palatability. And we're really happy that we are Elanco's fastest blockbuster in pet health, reaching that status in just eight months. But we think there's a lot more to come. Here's why. First, we are participating in an incredible market. The broad spectrum endectocide market is the largest, fastest growing market in U.S. pet health at $1.4 billion in revenue, growing 30%. We're poised to capitalize on that growth and take our fair share. Second, we're only in a third of clinics today. We believe we can continue to add clinics well into 2026 and beyond. And each and every month, we continue to bring more clinics on to Credelio Quattro. Third, our share in the clinics we're in is relatively low.
We're only a 36th share of the broad spectrum and dewormer category in the clinics we're in today. We know we will be able to grow our share in the clinics going forward. Why? Our puppy index. We are bringing more puppies on to Credelio Quattro each and every day. And those puppies will stay on Credelio Quattro as they transition to adults. Additionally, we will continue to invest in direct-to-consumer advertising and drive dispensing out of the clinic. So in short, we're pleased with the performance of Credelio Quattro, but we're just getting started. Now let's talk about our OTC parasiticides business. Many of you know we have a leadership position in the $1.1 billion OTC flea and tick market. The market's actually broken up into two distinct segments: a premium segment and a value segment. Elanco has historically played in the premium segment.
In spite of our 64-share leadership position, we've grown our share 1.4 share points over the last two years, driven by share of voice expansion and optimizing our pricing. I believe the momentum will continue in 2026. I'm pleased to announce that we will bring on a major new retailer in Q1 of 2026 in the premium space. Now let's talk a little bit about the value segment. Prior to 2022, Elanco hadn't played in the value segment. But with great partnership with Grace's manufacturing team and Ellen's R&D team, we were able to take value formulas, utilize existing assets, and bring new innovation to market in the space for Elanco. Over the last two years, we've grown our share 4.4 points, and we're now a 6th share in a space we didn't even play in in 2022.
Playing in the value segment has allowed us to reach new customers and new consumers. Think chain drug, think dollar channel, think mainstream grocery. But we're just getting started. We're committed to this good, better, best strategy, bringing consumers into the value segment and then ultimately trading them up to our premium segment. I'm pleased to announce in 2026, we will launch our first-ever value collar for dogs under the Advantage brand. This innovation has allowed us to bring another major retailer on board in Q1 of 2026. So in short, we have a leadership position in OTC. It allows us to reach consumers that don't regularly visit the vet, and we have ample opportunity for growth. Now let's talk about the second fastest growing and largest space in U.S. pet health dermatology. The dermatology market is roughly $1.3 billion in revenue, growing at double digits.
90% of the value of the market is in two technologies: JAK inhibitors and monoclonal antibodies. We launched our differentiated JAK inhibitor in September of 2024, Zenrelia. We could not be more pleased with Zenrelia, which is differentiated on efficacy, convenience, and value. In Q3, our sales nearly doubled from Q2. In October, we're already over a 5% patient share. We're in roughly 45% of the clinics in the U.S., and we are adding 2,000 clinics each and every quarter. The FDA recently updated their label in September to remove the words "vaccine-induced disease," and the market reacted very favorably to this change, and we brought 1,900 new clinics on to Zenrelia in just two months. We remain committed to a clean label on Zenrelia, one that's consistent with the OUS language, and we've recently submitted new data for the FDA to evaluate.
Now let's talk about the other 40% of the market, the monoclonal antibody space. I'm pleased to announce, pending soon, Bafrenna. Bafrenna will be our differentiated monoclonal antibody, and very similar to Zenrelia, it will be differentiated on efficacy, convenience, and value, and if you've ever had an itchy dog, it may give you a clue as to how we came up with the name Bafrenna, or be your friend. We continue to remain optimistic about a Q4 2025 approval. I will remind you that that approval is not on the critical path for our first half 2026 commercialization, which we are tracking well too, so in summary, Elanco is well positioned to capitalize on growth in the highly attractive dermatology space with two differentiated assets, so in closing, we believe we found a recipe for success.
A broad portfolio with differentiated innovation, with best-in-class execution, all underpinned by a talented and engaged leadership team, will provide us growth for many, many years to come and makes our business durable and sustainable. Thank you for your time today. I'm now going to pass it over to my colleague, José Simas, to talk about the U.S. farm animal business.
Thank you, Bobby. My name is José Simas. I lead the U.S. farm animal business for Elanco, and today I'll talk to you about our leadership position in the market, some very strong industry fundamentals that we operate under. I'll talk to you about creating a new market space and how does that all come together in a unique and differentiated go-to-market or business model. Starting with some descriptors of the U.S. farm animal business, we represent about 20% of the Elanco global revenue, and we are present in the four main species. We lead in three out of the four in the U.S. We are number one in beef. We're number one in poultry. We're number one in swine. That gives us the industry leadership position, and that leadership is underpinned in very, very strong and iconic brands. I'll give you a couple of examples of those brands.
If you look at the top 10 farm animal brands in the U.S., we have the top two. They're not only the top two. They're about twice the size of the remaining leading brands. These two brands are in two market segments that Elanco has created over the years. Rumensin is a 50-year-old brand, and we've seen some growth even recently for this brand, and Experior is the first blockbuster product in the U.S. market in over 10 years. This has put us in a position to have a breakout growth trajectory here more recently. We have outgrown the industry from a top-line standpoint, but we've not only grown double digits here in the past few years. We've done that with growing the bottom line and the top line. We've grown price and volume. We've grown innovation while stabilizing the base.
And more importantly, we run about a 10% OPEX business. That makes it quite an attractive bottom-line business in the context of the overall Elanco goals. How are we able to deliver that growth with that quality? It starts with the scale and the breadth of our presence. We are present on-farm with significant teams with high, high-quality people and the breadth of our solutions across each of the species. So we have health solutions, food safety solutions. We have feed and nutrition solutions in each of those species. So we've got the on-farm presence, the reach. We've a significant breadth of solutions that address critical animal health and producer economic needs. We've got innovation. We not only have blockbuster innovation. We've got portfolio innovation.
And we've had some bolt-on BD and some alliances that really have helped round our portfolio going back to that strong value and broad value proposition for our producers. And thirdly, our very deep customer partnerships. We have a very significant or a very large data set asset in which we collect data with accounting systems, record-keeping systems, health record-keeping systems, nutrition systems of producers. Our Elanco knowledge solutions team structures that data, cleans that data, runs it through a variety of digital tools. And then our veterinarian and PhDs that are customer-facing, they are able to help producers make better business decisions and health decisions. That creates very, very strong partnerships with some customers that have lasted for decades. So our scale enriches our innovation and our deep customer partnerships. This growth has also been enabled by very, very strong industry fundamentals. Earlier, we heard GDP drives protein consumption.
We see that in the global context. In the US, we see from a consumer trend, higher, healthier protein diets. So we're seeing global higher protein demand. The US is a very, very relevant and sizable protein player. It is number one or number two in several of the species. And not only is it a very large industry in the global context, the US is a very large exporter. The third point that is a very strong fundamental of this industry, the reason we are in the right industry, is that our producer base, they are very quick to adopt valuable and differentiated technology. Higher protein demand, protein demand growth. The US is a significant player, significant exporter, and our producer base is quick to adopt differentiated technology, which serves companies such as ourselves, innovative very, very well.
If I give you the example of Experior, you can see recently the speed of adoption is a highly, highly differentiated product. It's the first USDA, apologize, it's the first FDA-approved product with an environmental claim. It's the product in the market with the highest value proposition. It's for reduced ammonia gas emissions and has a very flexible label that gives producers the opportunity to maximize the value of that technology. We see this market space as a $350 million market opportunity. We see runway ahead for Experior to grow, basically driven by our existing customer base. So this is a solution that is in feed, and producers use it at the end of the production cycle. We see opportunity for days of use to be extended as producers learn to use and maximize the value proposition of the product.
Second, there are still new adopters and new adoption to take place with this technology to increase market share and market penetration, and thirdly, price. Duration, adoption, and price are the key drivers of Experior's growth ahead. Let me pivot now how we are pioneering the sustainability marketplace. We see it as a $1.5 billion market space opportunity. We have created market space before, as I mentioned, with Rumensin and Experior. And we're seeing sustainability not only from an environmental standpoint, which is very important, but it's very critical that sustainability delivers value to the producers and brand value to the CPGs. Because our on-farm presence with those data assets, we're actually able to create the ecosystem in which producers can intervene, reduce the carbon footprint, and exchange carbon for value with CPGs, and our data infrastructure and systems have enabled that.
Tens of millions of dollars have been traded already in this industry by producers selling carbon and CPGs buying their carbon enabled by Elanco's infrastructure. How does that come together in this unique value-based model? It starts with a resilient core business, very strong and iconic brands with our reach and scale. We've got innovation, blockbuster portfolio, and bolt-on BDs with a very strong customer-facing expertise with this data engine, and that together is a virtuous cycle in which our core gets stronger and stronger, and we can drive and accelerate that innovation adoption. In summary, we have and we are expanding our market leadership position based on innovation portfolio and value supported by very strong industry fundamentals as we're creating our future area of growth with a new market space. Thank you. With that, I'll pass it on to Ramiro Cabral.
Thank you, José. Good morning. I will give you an update on progress and strategic direction of the international region. We are building a profitable growth engine for Elanco. I will cover these three topics. First, a snapshot of the international region. It represents over 52% of revenue for Elanco. We have two large segments: a $1 billion pet health segment and a $1.4 billion farm animal segment. We have a strong presence in all major geographies. That geographical diversity brings resilience to shocks, to macro shocks, brings durability. Now let's see how we've been performing. We are accelerating. Before, we were a stable base, a durable base. Now we are accelerating growth with quality. We are growing price and volume, pets and farm. We are growing Europe, Asia, Latin America. Broad-based growth, quality growth.
The strategy for that growth is a three-pronged strategy for a faster, stronger growth for international. First, growing pets through launches, best-in-class launches. Second, growing farm animals by focusing on poultry and ruminant. Third, improving profitability by shifting the portfolio. I'll discuss pet launches, farm animal later. A few comments on that profitability, intentionality, that sharpening the focus of our portfolio. We have shifted from aqua, and we invested into pets, poultry, and ruminants. We have downsized and exited low-margin, low-growth segments of international, and we invested in a no-regret approach, growth mindset approach in launches, and in the core, in a stronger core. We are investing more than 70% of our marketing funds in only five strategic brand franchises.
And a proof point that sharpening of the portfolio is working in Q3. The top 15 brands out of a very broad portfolio grew 9% Q3 year to date and represented more than 60% of sales. We are improving profitability, and we are making the core stronger. Now a few examples of launches, of pet health launches as a source of growth for us. The first one is Zenrelia, and I cannot be more excited about a launch. Zenrelia is beating expectations for customers. It's beating sales expectations, and Zenrelia is beating market share analogs for a second-to-market. In the first wave of launches, where we have been around 12 months in the market, Zenrelia is already exceeding 20% share of the JAKs. It's not behaving like a second-to-market. It's behaving like best medicine. It's an analogy to Credelio Quattro in the US. Zenrelia is beating customer expectations.
The amount of positive feedback from customers that we get around the world is spectacular. It's a different product. Dogs that have been struggling with all treatments available before Zenrelia, many, many of those dogs are responding to Zenrelia. And we get that feedback from dermatologists, key opinion leaders, general practitioners, pet parents, employees. Zenrelia is exceeding expectations. It has a long runway for growth because in this $700 million category, growing double-digit, it's not behaving as a second-to-market. It's behaving as best medicine. We are seeing in the field what we have seen in the head-to-head study that we have shared with the world. Another example of a launch exceeding expectations is AdTab. AdTab validates the platform of pet health launches as a growth engine. It validates the platform of maximizing the Credelio franchise.
AdTab is a channel expansion into OTC of the Credelio family, but with the Advantage brand name. We are leveraging the OTC commercial strength that we gained when we acquired Bayer. AdTab is competing in the fastest-growing segment in OTC, the oral flea and tick segment. In only two years, it's exceeding 50% market share. We tripled brand awareness from last year to this year, and we still have a long way to go. We still have a long way to grow. Also, AdTab is leading in share of search, the most predictive leading indicators of future share of market. AdTab is exceeding expectations. Zenrelia is exceeding expectations, and we are ready for Credelio Quattro. Credelio Quattro will be differentiated. We expect the same momentum that we see in the U.S., and it's in a category of $700 million growing double-digit.
Pet health launches, best-in-class pet launches as a growth engine for us. I will pivot to farm animal next, and we are going to grow farm animals by focusing on the two largest market segments in farm animal international: poultry and ruminants. Poultry is the fastest-growing segment in international animal health farm animal. We are very strong in poultry. We have a very differentiated value proposition for customers. We focus on food safety and intestinal health. We bring millions of dollars to the bottom line of customers by helping them deal with these two specialty areas. We are very strong in poultry, and poultry is as profitable as pets. Fastest-growing, we are strong as profitable as pets. Ruminants is the largest segment in farm animals and is the second in growth, and we are one of the global leaders. Again, we focus on strategy.
We focus on sustainability, and we focus on retail farm, farm retail on parasiticides. Ruminant encompasses beef, dairy, confined and unconfined, sheep that is also important in Europe, Australia, and New Zealand, and with that focus portfolio, we have also a new and refreshed growth strategy for ruminants. We have strengthened the core, as I explained before, with that portfolio shift. We are expanding with Ellen with the next wave of innovation is reach in ruminal projects. We have more ruminal projects in the pipeline than ever before, and we have a pool of alliances opportunities with external innovators, so ruminant is the largest we, a global player, and a refreshed new strategy for growth, so to close, we are building a profitable growth engine. We are growing pets with best-in-class launch execution and phenomenal products. We are growing farm animals by focusing on poultry and ruminants.
And we are improving the profitability of the core portfolio by improving mix, species mix, geography mix, and product mix. We are making Elanco International stronger and faster-growing. We are building a profitable growth engine and confidence that will contribute to our algorithm. So with that, we are going to move into a Q&A session.
Okay. This is your opportunity, everybody. So we look forward to.
We invite questions from the audience.
I'll log here.
Ask you to introduce yourself too before asking your question.
Chris. Yes, Chris.
Great. Chris Schott from JPMorgan. Thanks for hosting, and congrats on all the progress here. I just had two. Maybe first on Quattro, can you just elaborate a bit more in terms of the share you're gaining? How much of that is puppies versus conversion from older therapies or even newer triples? And as part of that answer, maybe just how are you envisioning where share can go in the category as you look out over these next few years? Maybe my second question I'll ask them is on price. You're obviously bringing a lot of innovation to this space. But as we think about kind of competitive responses, how do you think about price evolving the next few years? I'm assuming some incumbents may be more aggressive on pricing to sustain share.
Is that still going to be a tailwind for the business, or do we think about a more balanced price environment going forward? Thank you.
So Bobby, why don't you take Quattro and price in your market, and then we can maybe speak generally, Tim, a little bit on price, how we see it.
Yeah. Great question. So we believe that, and what we're seeing in the data is that roughly 70% of the sales coming into Credelio Quattro are incremental. And that's split pretty balanced between sort of puppies, new users, meaning new adults, and then switchers from sort of existing folks in the category, primarily in dewormers, but a little bit of parasiticides. And we're really happy with that. If you think about other parasiticide launches in the marketplace, they've shown a much higher degree of cannibalization of their own portfolio. And so we're seeing great sort of incrementality there. And actually, we've seen that improve over time as we've gotten deeper into the launch of Credelio Quattro. And then if I would pivot a little bit and talk about sort of pricing in the marketplace, we've been public with our 2026 pricing. It went into the market in December 1.
It's in line with our typical price increases, a little bit larger on the vet side, a little bit less on the OTC side. What I would say is we actually have room to price given how much lower Elanco's products were relative to sort of the competitive portfolio. That's one tailwind. The other tailwind I would say is we've had this approach of a no-regrets launch strategy. Obviously, you don't continue launch offers in perpetuity. We have the ability to sort of back that down. We expect price to sort of continue from a U.S. pet health perspective. Look, we're in a competitive market. There are four major players that make up 80% of the market. Expecting competition and competitive reaction is not new to, frankly, this year or where we've been sort of historically.
The portfolio comment that Bobby made, having Derm, having Zenrelia, Quattro, Bovaer coming, there's no question that counters, Chris, some of the challenges too. I see that playing out. Just overall, Tim, in the animal health market, we've talked about 2% this year. Going forward, we're lapping innovation. Any additional comments on how you see price evolving?
We expect lots of competition. We built that into our plans. Like obviously, we don't launch things in isolation, right? We understand as best we can what our competitors are doing. But we anticipate all the major categories to continue to grow in price. Yes, there'll be lots of competition, but the price will still be a key enabler for growth for many of those. So we've factored that in as we go. And we think everyone will be, yes, competitive. But many of these spaces have had limited competition, very large price increases. I would say that'll normalize over time.
Next.
Hi everyone. Brandon Vazquez from William Blair. Thanks for taking the questions and hosting us today. Maybe first, there's a lot of great innovation. We've got good information there. If we can spend a minute on the base business, because it is important to understand that you can see the benefits of that innovation come through. Just talk to us a little bit about we didn't get as much on the base business. What is it in the base business that's doing better? And what gives you the confidence that that should remain a kind of stable business as we go forward?
Maybe high level. I don't know. José, you've got a big business just to start there, and then we'll maybe go to Ramiro because he's nice.
Yeah. I'll make reference. This all starts with the portfolio. If you see the two examples I've shared, some of the recent organic growth is really associated. It's a 50-year-old brand that is still growing associated with that portfolio, Halo with Experior.
Yeah. I'll give you the same example, same answer. Portfolio really matters, and let me just give you one example. Credelio Cat has been in the market for four years. This year, on the strength of our Credelio portfolio, we saw 15% growth in the number of clinics we brought on to Credelio Cat, and that brand is growing double digits, so we have pushes and pulls, of course, with our base business. Some things getting cannibalized and shrinking, and some things like Credelio Cat growing, and so stable for us means plus or minus low single digits.
And maybe from international, our whole farm animal business is core base, $1.4 billion growing single digit from poultry growing the fastest, the market growing the fastest. We growing the fastest in poultry, but ruminant growing too. So $1.4 billion of base. And then in pets, we have the Credelio family, Credelio Dog, Credelio Cat. They're still healthy brands and even Seresto.
I think too, Brandon, we've been very intentional getting out of Aqua. We saw that as a small market, not a lot of problems. We're going to be opportunistic in swine. I think you've got a more decisive, disciplined Elanco. We've moved out of Bangladesh and gone to a distributor market, same with Argentina. So to me, it's the long tail literally that we're being more decisive on. If you go back five years ago, they were the air pockets that caused the problems, the antibiotic medicated feed additives and small markets that caused, look, it doesn't take much on a quarter to move the materiality. So I think we've rid ourselves of some of that. Innovation into every portfolio, we've got to win in pets, poultry, ruminants. Michael, thank you.
Thanks for taking the question. Mike Ryskin, Bank of America. Great presentation. Thanks for all the detail you provided. Maybe one on the 2026 innovation targets, $1.1 billion. You guys made really great progress there in 2025. A lot of what you highlighted was upcoming launches, Bovaer, Credelio Quattro, OUS. That target's a little bit conservative. Maybe you can just talk a little bit about are you leaving any buffer for upside? Or just what are the moving pieces that you factored in there versus where you could see a little bit of upside to that number?
Do you want to start, Tim, a little bit on that? Yeah.
Sure. So obviously, there's a lot of things that we take into consideration when we think about future opportunities in the market and the growth and price and all of these things, competitive activity. And I would say we've been very clear on what innovation we have coming when we do the assessment, obviously based on market growth, market penetration. So we feel very good about the numbers that we have. It's a great question, but we think the basket of innovation continues to grow, and the basket of innovation will deliver that revenue. And there's pushes and pulls in some of it, but we feel very good about where it's at. So yeah.
Taking a prudent approach, balanced approach, new in the markets. It's early. These markets are evolving. We love the growth in a broad spectrum in ecto, or international derm, but we want to look at that in a very balanced way. So do we see opportunities as the markets grow and our competitive set right now? Yeah, but we've got to balance that
Heather, a follow-up? Yeah.
Yeah. If I could ask a follow-up kind of along the same line. On Zenrelia, you touched on the label updates that you've seen so far and some of the new data you've submitted. Just talk about how important is that the label changes you've seen so far versus the original label, the potential for further label changes. What are the various scenarios as that plays out? What's the timing on that? And just sort of how important is that to the growth opportunity for Zenrelia in the U.S.?
Yeah. I think there's a couple of ways to sort of think about it, Michael, and it's a great question. I think you've got to segment the vet customer base, so there are people today that love Zenrelia, have got great experience in the marketplace, and are using it for everything. It's frontline treatment. I'd say that's probably 10% or so of the Zenrelia users. Then there's another huge swath of people, the balance, that are using Zenrelia, some frontline, some second line, but are using it in line with the current label guidance, which means they have to have a washout period of at least 28 days before and 28 days after, so cleaning up the label will allow us to capitalize on two extra months of usage on those sort of chronic patients.
And then the third segment is there's still roughly 20%-25% of vets that have said that they don't want to adopt Zenrelia with the current label. And so our ability to get, I'm going to say all the clinics, because that's my goal, on board with Zenrelia is really dependent on sort of the label getting updated. But the one thing I will tell you is we've got over a year in market. We have a phenomenal safety and efficacy track record as a result of being a year in the market. And that gives veterinarians more confidence. Time with innovation is actually your friend.
Yep, and I think it's a small industry. So, 36 countries with non-restrictive label. We've been public about the submission we've made. Ellen's got a three-part strategy. The second part is in. Got a white paper in the booster data. So, we'll be hearing on that. But again, I think with pharmacovigilance data for a year, 36 countries, the vet community is pretty tight, and there's no question there's been a bigger boost than we expected from the first label change.
Thank you.
Steve Decker with KeyBank Capital Markets. Thanks for the question. Just on Bovaer, just any data you can provide or color you can give on its effectiveness and safety versus incumbents with the side effects points specifically? Thanks.
Yeah. Look, I think we're going to share more when we get an approval of the product. I would just echo. I feel very good about the degree of differentiation that we will see with this product as we've seen the benefit of differentiation on efficacy, convenience, and value, and we're going to take that similar approach to the front going forward.
And we think an opportunity on all three of those, which we didn't say that as much with Zenrelia out of the gate. But I think we see it right on efficacy, safety, and convenience. So we do see it on all three dimensions.
Yeah. And what I love about our derm strategy is we're in 45% of the clinics with Zenrelia today. That's going to be a natural pull for Bofrena going forward. And then Bofrena, we think as a differentiated asset, will also be maybe for those vets that are on the fence on Zenrelia, a pull to bring Zenrelia on. And so we really see a complement to that portfolio, which is going to be beneficial for our derm business.
I want to be clear, and really, kind of, the new information is we have had a great constructive dialogue and response from the USDA. No, there's no ADUFA. You've all heard this in the USDA, but they have been very responsive after the government shutdown. And kind of the new information today is we do have technical sections complete. We believe we have label alignment. And now we're in that administrative phase. And Ellen's team is on a daily basis working with the USDA. So a real credit to them. And we're in a good position. But the government shutdown was a couple of weeks out of the window of time. So cautiously optimistic by the end of the year.
Thank you.
All right. Thank you very much for taking the question. This is Dave Westenberg at Piper Sandler. So I want to talk about some of the product line extensions specifically in pet health. How do you think about overall growth in the inline portfolio following kind of innovation? And kind of you gave really good details here about what happened with Rumensin. I wanted you to talk about maybe in the 2026- 2028 growth targets. What could possibly happen in inline portfolio? Specifically, you talked about cattle and increasing kind of the packaging. So could you have actually underestimated the inline portfolio growth due to cattle sales? And sorry, I know this is long, but can you just remind us how long before you put it from innovation to inline portfolio? Thank you.
Yeah. Dave, good to see you again. Great question. I'll start with U.S. pet health and then let Ramiro talk about international. Look, there's no question that the portfolio really matters. And the portfolio strengthens the base. So I gave you an example of how that worked in Credelio Cat. We're actually seeing the same thing in our vaccine portfolio. And so you've got this nice balance of we've got innovation in all the segments. We've got a more robust portfolio. And that's helping stabilize the base, right? And again, stabilizing the bases plus or minus low single digits could be up a little bit, could be down a little bit over sort of different quarters or the foreseeable future. But I feel really good about the position that our base is in. And I feel very good about the benefit that the portfolio will offer to the base business.
And I think examples like Zenrelia being behaving as best medicine, it opens the door to clinics that we didn't have access before. So we see this highly differentiated innovation bringing the base up as well.
Great. Thanks. Dan Clark with Leerink. Actually wanted to follow up on that last point. Are you still finding clinics that are sort of not interested in your portfolio products? Do you think the approval of Bovaer will open additional doors? And then just a quick follow-up. I apologize if I missed this. Are you planning on launching Bovaer in Europe? Thanks.
I'm sorry. What was that?
To Europe question. Do you want to first talk about the portfolio effect?
Yeah. Look, I think we have access to 30,000 clinics, which is the broad base of clinics in the U.S. There's no question that the stronger your portfolio gets, the more relevant you become with customer sets. And so yes, there are still customers today that are not Elanco clinics. And I believe that Bovaer will help more of those customers become Elanco clinics in the future. We saw that with Zenrelia. We saw that get even better with Credelio Quattro. And we'll see that ultimately with Bovaer once it gets approved and once we commercialize it.
I would just add to that on the first point. Then I'll get to the second point. Notionally, Elanco is relatively smaller in some of these vet clinics than some of our competitors. So as we launch these products, the turnover gets higher of Elanco products through these clinics. Our value to the clinic becomes more important, enables a deeper conversation than we've had previously. So as that conversation gets deeper, the opportunities present themselves to talk about the whole portfolio differently, where you're blocked out before.
It's a gateway.
Yeah, so it's a gateway and just in terms of Europe, our intention is to have a MAB all around the world for the derm space, and so yes, our intention is to push something out on a global basis.
We have time for two more.
Thomas.
Thank you so much, guys. That was very helpful. Perhaps first on the numbers, if I may. So the innovation basket will grow about $240 million or so year over year based on how you're speaking to it right now. And even dog growth, judging by the high single digit you pointed out and netting out the $25 million from restructuring, what that implies to me is innovation is dropping down at a 30% margin. Is that how we should think about innovations in that margin going forward in terms of additional growth? And I have a follow-up.
Yeah. Romero, we've talked some about this. I think the framework is right. There's pushes and pulls as we look at this. We've talked about a 200-350 basis point improvement in gross margin in the next three years in this window of time. We're going to continue to have investment in launches that will always be. I mean, when you look at the size of these markets, the one thing we probably haven't talked enough about is just it will be a competitive three years, the backdrop we're talking about. We are going to take share, and we're going to go into major markets. And the existing major markets is going to be more competitive than any other time. So what that means is it's going to take a little bit more money.
So, I would say in part of our planning for more, we've had this offset. Yes, with the restructuring today with Ascend, Bob will dig into it a little bit more in our Ascend. We're committing to that 200-350 basis points. Yes, new products will be richer. Meanwhile, we're going to be needing to invest to offset some of that as well.
Got it. And maybe just before I get to my follow-up, should we not assume 50%-60% incremental margin for maybe not 26%, but for future years? Because I would have thought that should be a possibility for high margin pet products.
It will. We've got a farm animal business. We've got plays across the board. We're going to play for EBITDA first, gross margin second. I mean, both of them are critical. But yeah, I think the framework is there. And you've asked me, do we have the potential to be a 60% gross margin company over time? The answer is yes. Not committing to that today in the three-year context, but absolutely we're set up to do that. And you're thinking about it the right way.
Makes sense. The other one I was just going to quickly touch up on is so by my math, the Credelio franchise between the Quattro and the dual is something between $300 million-$350 million. Zoetis is doing something close to $2 billion run rate. And I saw that graph you put up, which was at launch, month nine versus month nine, but Zoetis was putting up close to $1 billion run rate off of their third quarter anyway. So my question is, if Zoetis flea-tick franchise, that brand specifically is about $2 billion, Elanco is about $300-$350 million, can't we reasonably assume Elanco doing something like $700 million-$800 million at least for that franchise at peak?
Do we think the market's going to grow? Yes. Tim, I would ask you to just put a little context to this or Bobby, but I think I don't disagree with the way you're thinking about it. I do think it'll be a more competitive space. We don't know the competitive innovation that is coming, and we do know some, but there'll be some competitive innovation, but broad spectrum insecticide is the fastest growing pet health market. And we do think we have best medicine, which sets us up well. I think next generation afterwards will matter a lot too, and that's something that Ellen's focused on.
But look, it's a huge market. It's a growing market. And we still have relatively low share. So there's opportunity for growth.
Yeah. Absolutely.
The portfolio will matter as much as the individual parasiticide products. Once the portfolio expands, the opportunities will present themselves.
We're hopeful that broad spectrum oral will continue to take share from the other sectors as well, which will do.
There'll be a step up in value.
All right. With that, we are at time, and we'll head to our break.
We'll be around to answer any additional questions during the break. Thank you, everybody. When we're starting back, Tiffany, at what time?
10 minutes.
10 minutes. 10-minute break.
Hi, everyone. I think we have heard a lot about the importance of innovation so far for each of the businesses, from international Romero, Bobby's pet health business, and of course, Joe's H's farm animal business. So let's go a little bit deeper there right now and give more context on what we have done, and especially also on how we have done that. And of course, on top of mind on your video will be, what else can we expect? What is in the pipeline? To what extent will our pipeline continue to drive future growth? My name is Ellen de Brabander. I joined Elanco a little over four years ago. I'm leading the R&D and the regulatory and the external innovation teams. It's actually not my first time in my career that I'm with animal health.
In earlier phases, I also have been leading Merial, that right now is part of BI. There I led the development and approval of the first isoxazoline, that you probably know better as NexGard, and in an earlier phase, I also was leading the R&D for Intervet, that actually is a major building block of Merck Animal Health, so let's go a little deeper here, and let's actually look at what we have achieved in the last couple of years, so four years ago, we had actually a strong development pipeline, as you can see here on the left. We did have five projects, a few of them in an early phase: Bufrena, Zenrelia, and Quattro early development, and a couple of them already in the registration phase. We added then Bovaer as an innovation project.
And fast forward, if you look where we are right now, you'll see that out of those six, our famous big six baskets, five of those are already in the market. Two of those actually have already achieved blockbuster potential. You have heard the Experior story. You have heard Credelio Quattro as the blockbuster story. And three others are basically on track to become a blockbuster over time: AdTab, Zenrelia, and over time Bovaer as well. And the last one, Bufrena, is the one that is in the final phases of the regulatory pathway. You have heard we announced today we have all the technical sections complete. We have clarity on the label. And we do expect the approval and, of course, the launch of Bufrena in the year to come. So if we take a step back, this is quite an achievement. You have a basket of six innovations.
Four years later, each of those actually has achieved approval. That basically means no attrition. Indeed, it actually confirms one of the attractive features of animal health innovation. We have a high probability of success. That is linked to the opportunity we have that we can very early on already do a proof of concept study in the target animals. Very early on, we identify potential winners for innovation. Once they are in development, and once you have your act together, you actually do have a high probability of success to bring them to the finish line. This is quite unusual to have truly six out of six. In general, yes, you can expect a high percentage of the development portfolio to reach the finish line. Apart from those six, we also did have a couple of other major approvals in the U.S.
You've heard the paraform monoclonal story. We did get a conditional approval. Very soon, we will expect the full approval of our paraform monoclonal antibody, our first monoclonal antibody. We also did have the approval for Predalex, the first antibiotic approved by the FDA in more than a decade, and it's used for respiratory diseases for both cattle and swine, and we also did get the approval for TruCan, our first pet health vaccine that actually nicely completes the pet health portfolio in Bobby's business. Well, we have done some more deeper analysis on the last couple of years, and we looked at the number of approvals and launches that actually did reach more than $10 million sales in one year, and as you can see, we compared two periods, the period of 2020-2025, as well as the previous phase, 2015-2019.
What you do see is that as Elanco, we more than tripled the number of launches from new innovations that already did achieve $10 million in one year. Of course, as we know, these new products will continue to grow. What's also interesting is that for each of our competitors, we did see a decline in the number of innovations that actually did reach $10 million. As you know, we are a global organization in a highly regulated business. As we heard earlier today, we want to globalize our innovations. The regulatory agencies are not global. Actually, every agency, they have their own requirements, their own specifics. Usually, what you see, if you want to globalize an innovation, it takes you a couple of years. Here we have what I like to share, the Zenrelia example, because we have implemented a new regulatory strategy.
We have built and submitted the dossiers in parallel, and that basically did allow us to get approval of the top eight markets for Zenrelia in less than 18 months, so way faster than we have ever done, and that new strategy, we will actually continue to use and apply also for Credelio Quattro. I've been asked a lot in the last couple of years, what has changed with Elanco's innovation, so how come? Because these are major proof points of progress in the innovation space, and the question is, OK, what did you do differently? How have you been able to achieve that, and yes, of course, you need a pipeline. I will get into that, and yes, of course, we need good talent. And I will get to that.
But one of the issues that has been usually undervalued, not well understood, but actually does make a huge difference to bring innovation to life is how you get organized. And that's how I would like to go a little deeper in right now. If you look at animal health, like a company like Elanco, we have an innovation portfolio of over 150 projects in the early research phase, in the development phase, in the brand max phase, projects for farm animals, for pets, for the different diseases. It is a complex innovation portfolio, projects with different timelines. Some may take as much as 10 years, others just two or three years. So truly a complex portfolio. And in order to make sure that each of those projects do reach the timeline and their objectives, you need to manage those as a project.
And at the same time, what is necessary, if you want to progress these projects, you need broad and deep technical experts. It's truly a science-based industry. You cannot progress these projects unless you have very detailed scientific expertise in the clinical field. You need, of course, you need chemists to manufacture those and build a process for those new innovations. You need regulatory expertise. So you need a lot of detailed, deep, broad expertise. And you need project leaders to basically make sure that those projects, that complex portfolio, actually does progress in line with your own planning. So that's what we kept in mind when we actually, four years ago, decided to build our new organization. Following the acquisition of Kindred and following the acquisition of Bayer, it was the right moment to build that new organization. And we asked ourselves three questions.
One is, OK, what's the talent that we need? What's the capability we need? And how to best organize ourselves? Second, OK, where actually we have a complex footprint. Where actually do we like to have our capabilities? Where should we have our people? What will we do internally? What will we do with partners? And third, equally important, how do we get organized ourselves to make sure that that complex innovation portfolio does progress in line with the planning? Let me go quickly deeper in each of those three. First, as I said, because we have to manage that global project portfolio, we have built an organization where we have dedicated, mature, very experienced project leaders. As a full-time job, they manage the projects to bring them to the finish line. And in parallel, we have global centers of technical excellence, expertise around the world, fully integrated.
For every project, we make available the best expertise. On top of that, we have a very stable R&D leadership team truly managing this integrated organization. We have built an organization on the legacy of six companies, as you see here. We truly have a blend and the best mix of expertise and experience from around the world from those organizations. As you know, innovation actually is truly teamwork. It's important to have those experts and those scientists. It's important to have the experience. It's not enough. In the end, what really counts is that you are able to build a highly engaged organization where people truly work together in a complex environment. That's not only true for within R&D. I like to stress the point when we talk about innovation. You probably already did hear that earlier on.
Innovation is truly core to every piece and every individual in Elanco. We have as much interaction with Grace, the manufacturing team, to very early on define, OK, where are we going to manufacture this? Of course, easily, we have the interactions with our commercial teams to really define, OK, what should be our target. All of that together is an important mix to make sure we focus on the right projects and then we progress those as we are. Indeed, as you can see here, we have been able to build a highly engaged organization where the engagement is 7% higher than what we can see for the benchmark here. Looking at the footprint, of course, that's an important question. Where actually do you want to do the work? This year, we have actually added capacity.
We have entered a new R&D state-of-the-art facility next to our headquarters in Indianapolis, also part of the new One Health Innovation District that we are building over there. We also have moved in a bigger R&D facility in our India with our India team, where we truly have global centers of excellence supporting the entire organization there. At the same time, we have optimized what are the capabilities we need to have internal, and what are the capabilities where actually we say we better partner because for flexibility or speed, and as you have seen today in the announcement, we have decided to start a partnership to build out our clinical capabilities with ClinGlobal, and that gives us a lot of flexibility and also more scale than we have so far. As I said, also important it is you can have the team and the talent.
It's important to manage to basically organize yourself well to manage that complex portfolio. When we look at our portfolio, what we have done is we have refocused it. We have rebalanced it, so we have added more farm animal projects. We also have made it very clear when we talk about prioritization what are truly the most important projects. Linked to that, we have allocated our resources. What does that mean? It actually does mean that when we have identified a project as high importance, we basically give it as many resources as it needs to go as fast as it can. That's what you have seen us doing. You have seen us progressing the development portfolio very fast because we did give the key projects like Credelio Quattro as many resources as it needed to go as fast as it can.
Also, we have implemented global processes, global systems, as you would expect us to do, and actually, they set us up very well to now also benefit in full for all the opportunities we see ahead of us that AI will bring us, so you can see us truly moving in that phase as well, so bringing that all together, we have not only tripled the number of innovations that did reach the finish line, we also have been doing it faster because we truly optimized the engine and we allocated our resources, so if we look at our R&D investment, we have been able, as I just said, we have been able to build a highly efficient, science-based, people-driven innovation engine, and we have been able to do that actually in a way that we did reduce the budget because we did basically increase the capacity.
So we did build a highly efficient engine that does free up capacity that did allow us to actually do more projects despite the fact that we did have a reduction in budget. Going forward, what we will see is we will see an increase in the R&D investment to basically accelerate further the development of the portfolio. So we will increase in line with the potential of the portfolio and also in line with the business size. So bringing it all together, you see here what we have done. We have increased the size of our portfolio. So we have more projects in the portfolio. And within that portfolio, we have more, we have doubled the number of projects with blockbuster potential. When we look at individual projects, you see that the blockbusters have a 70% higher peak sales potential than what we did see in the past.
We also have tripled, as I just said, the number of the projects, the throughput of the pipeline. So not only tripled the output, but also did bring the projects to the finish line faster. And when we look at the investment in innovation, we actually have seen that we have more than tripled the value generated per dollar investment in the projects in the development pipeline. So truly a best-in-class innovation engine that we have built in the last couple of years. Let's now look at the future. So of course, the question on your mind will be, OK, what is the pipeline? We just have delivered our development portfolio to the finish line. We have built a highly efficient innovation engine. Is there still a pipeline actually that can drive the portfolio in the future and the innovation grows in the future?
Here, this slide is a nice summary of what we have done. Yes, we have delivered the big six. And they are now in the market, as we have said. In parallel, what we also have done is we have refilled and we have rebuilt the innovation pipeline. We have built a new portfolio. We built a portfolio, a new basket of innovation projects. We group that as the next wave of innovations. And it's a portfolio of projects with first and best-in-class projects. And they will accelerate our penetration in markets where we already are. They also will allow us to enter a couple of new spaces. And we expect these to become in the market between 2026 and 2031. And on top of that, we also have built what we would call a next wave innovation.
Those are projects still in the research phase, but approvable beyond 2032. And this mixture of the big six, the next wave, and the next next wave will drive long-term durability and leadership and will allow us to continue that innovation-driven growth beyond the end of the decade. Let's go a little deeper here. When you talk about new innovations and refilling the pipeline, we follow an approach that many others also would follow. You look first at the markets that are growing and attractive to us as Elanco. Then we truly spent a lot of time together with Tim's team to understand, OK, what are the unmet needs in those markets? Not everything in that market is of interest. So what are the true unmet needs there? And do we see a way, do we see a way to actually address those unmet needs?
And if so, do we then build those capabilities internal? Or do we partner with third parties to address and build products that address that need? And by doing that, we actually have identified eight spaces where we focus our innovation. Five of those are actually markets that are already well known. We are playing in those markets. We still see significant unmet needs. We see an opportunity to come up with new innovation there to address those unmet needs. And those markets are the parasiticides, both for pets as well as for farm animals, infectious diseases, as we just heard before, for the prevention part, dermatology, pain, sustainability. Those five markets together today are about $20 billion. And we see them grow to about $29 billion in the next five years. And for each of those, there is a need for more product-based innovation.
On top of this, we have identified three more spaces also with significant unmet needs, but the market is not yet there, so the market still needs to be developed, but we see a pathway to address those unmet needs as well, and these together, and we talk here about obesity for cats and dogs, chronic kidney disease for cats, as well as dermatology for cats, together we see a market potential of over $2 billion. Well, let's go deeper on our portfolio, the basket of the portfolio for the next phase, the next wave innovation. This is a portfolio, a basket of projects with more than 15 projects in each of those eight spaces that we just mentioned. So at least in each of the spaces, we have one project there. Each of those projects are first or best in class or at least significantly differentiated.
And together, this basket, we see a peak sales potential of over $2 billion, non-risk-adjusted and also not taking into account cannibalization there. But what we do expect from this basket of innovation is five to six new approvals with blockbuster potential between 2026 and 2031. And those 15 projects are mostly from our in-house discovery capabilities that we have built. So a very exciting phase that we see ahead of us here. Let's go a little deeper on how we do that, refilling the pipeline. As said, we have a blended approach. We have the internal approach as well as an external innovation. External innovation, we do especially when we see an opportunity to access new capabilities that are very different and more complementary to what we have in-house. And internally, we very much focus on building specific technical platforms. So we are not so interested in one-off innovations.
We want to build technical platforms that will give us the opportunity to give us a range, a number of new innovations, and in the last couple of years, we have developed two of those. Let me go in more detail there. One is monoclonal antibodies platform, and the second one is a new one, immunotherapeutics. You have heard us talk about the monoclonal antibodies earlier today. We have our powerful product in the market. We have very soon our Brifeno coming, but in parallel, what we also have done is we have built in-house a monoclonal discovery engine that will allow us to actually come with more monoclonal innovations in the future, and some of them are already part of our next wave portfolio. Grace is building the manufacturing capability so this is truly a way to make sure that we fully leverage our internal capabilities.
And I think the benefits of monoclonals are very well understood. They have a high specificity. They have an immediate onset. And the duration of effect is typically between one and three months. In parallel, we have developed a new, really a new platform, new for us and new for the animal health industry. And actually, there's no one else who has yet this product following this platform in the market. This is a platform where what we do is that we inject an antigenic protein into the animal. And then the animal produces its antibodies directly in the animal. So in essence, what we do here is we combine the benefits of a monoclonal, the Tecma platform, with the benefits of a vaccine platform. So we basically see as a benefit here that you see a duration of activity between six and 12 months.
We also see much lower production cost to get these products in the market and still a very good specificity. As we discussed today and shared today in the press release, we already have a first project that is part of our next wave portfolio where we have agreed with the USDA that this project is eligible for conditional approval. So both platforms developed in-house, broadly protected with IP. And we are very, very confident and excited about the potential that they can bring to us in the future. So bringing it all together, we have a strong and a balanced pipeline balanced across phases, balanced across the species, balanced across the regions. We have also built a capability to refill the pipeline.
That in combination with a best-in-class innovation delivery engine as we have built it basically gives us the confidence that yes, we are able to consistently deliver high-impact innovations in the years to come. Let's bring it together and look what it means in numbers here. So we have the big six in the market, as we know, still growing further. And we expect them to deliver over $1 billion of peak sales in the next couple of years. Then immediately thereafter, we will see the next wave innovation basket. And we expect five to six new approvals with blockbuster potential between 2026 and 2031. And in total, this basket has more than $2 billion peak sales potential. And then immediately thereafter, you will see us coming with the next next wave portfolio. It's more early phase right now, truly best-in-class and first-in-class potential there.
And basically, that portfolio will allow us to continue that innovation-driven growth in Elanco beyond 2032. And of course, all of this is still not including any business development opportunities that may come to all of this. So with that, let me conclude. Yes, we truly have come a long way. We've made a lot of progress. But I am confident more than ever before that the best for us is still to come. And with that, let me hand it over to Bob.
Thank you, Ellen. Good morning, all, and welcome. So you can see the agenda for the next 20-25 minutes. But listen, here's a theme you're going to hear over the course of the rest of the session. We are executing from a position of strength. And we've got a tremendous amount of momentum as we move forward. We've been focused on growth, innovation, and cash.
We've built a track record around it. As I think about Elanco moving forward, we're going to continue to be a durable growth company with improved profitability. It's really going to be enabled by the basket of innovation that continues to grow. It's going to be supported by Elanco Ascend that's going to improve margins and then our continued disciplined capital allocation priorities. I talked about growth, innovation, and cash. Let's just look at growth first. We are entering the next era of growth from this basket of innovation. You can see we've built a track record now. We do expect the fourth quarter to be our 10th consecutive quarter of constant currency revenue growth. We also expect the fourth quarter to be our fifth consecutive quarter with mid-single digit growth.
As Jeff highlighted and I'll end the presentation with our algorithm, but we see mid-single digit growth as we move forward into 2026 and beyond. As I look at innovation, back in 2020, we had expected $500-$600 million of revenue coming from our basket of innovation in 2025. We have consistently raised that bar over the last five or six quarters. Every quarter, obviously, this year, we do expect $840-$880 million of revenue from this basket of innovation. And it's the entire basket, but certainly led by Quattro's and Relay and Experior. But as Jeff highlighted, as we move forward, we expect the revenue from innovation in 2026 to be at that $1.1 billion range. And then finally, as we look at cash as our third priority, we have continued to strengthen the balance sheet. Two years ago, our leverage was at 5.6 times.
We've now brought that down to 3.7-3.8 times. And certainly, we've had some one-time opportunities with the aqua divestiture and the royalty monetization that we had earlier this year. But the continued focus on trade working capital and the fundamentals around collecting cash and paying vendors at the right terms has continued to accelerate and improve margins. I'm sorry, the net leverage here on this. EBITDA margins and EBITDA overall will continue to improve. We've seen that in the past. We think about moving forward. We're going to continue to be disciplined with debt pay down. We're going to continue to see growth in EBITDA. And we'll continue to see this leverage decline over the next several years. So as we move on to just Elanco Ascend, I do want to provide a bit of color.
But before I do, I do just want to set out what the expectations are for margins over the next three years. We have guided and expect to be at this 18.9%-19.3% range for EBITDA in the current year. We do see 200-350 basis points of margin enhancements by the time we get to 2028. And you think about how we're going to get there. All right, so we've moved past some challenges we've had in the last couple of years. One of the key items I'd highlight was the impact on lower volumes and reducing inventory. We've made a conscious decision over the last couple of years to conserve cash and pay down debt. And so as a part of that, inventory volumes have come down. Our factories have been underutilized.
And so what we're going to see moving forward is obviously continued volume increases and fixed cost leverage. And so we'll see the benefit of that on EBITDA. The aqua acquisition, that came with about 100 basis points of margin detriment to what we see today. That's obviously behind us. And then launch investments. Certainly, we're going to have launches as we move forward. But as you think about the last 12 or 15 months or so, we've had a higher number of launches than we expect in one period of time, if you will. So if you get past those challenges, you think about the drivers moving forward, two key pieces. One, it's going to be the basket of innovation that continues to grow. This basket has higher gross margins than our corporate average. And so we'll see a natural mix benefit. And then we think about Elanco Ascend.
Elanco Ascend is about building capabilities through AI and automation. It's also about being proactive in reducing cost really across the entire P&L and improving those margins. This is why we have confidence in the 200-350 basis points of margin enhancement over the next three years. Just quickly on Ascend, there are four pillars to the program. I would tell you this is across all four quadrants of the business. This incorporates the corporate functions and back office functions. I want to be very clear about what we see the contribution being from Ascend. We expect EBITDA savings of $200-$250 million by 2030. That's going to be after inflation and after reinvestment into the program. Think about that reinvestment as AI and automation capabilities. Now let's take a quicker look at just some of the pillars of Ascend.
And I'll give you a couple of examples. So you can see the biggest number on the page is going to be in that procurement and operational excellence category. So one of the examples in this bucket is, think about the procurement team. They've done a fantastic job over the last year and continue to make progress identifying suppliers around the globe that's going to continue to be able to provide good quality product raw materials to us, but at a much lower cost. And so we're going to see that natural benefit through over the next couple of years. I mentioned that the entire organization is supporting Elanco Ascend and is leaning in. So think about organizational optimization. Let me give you an example that's a little bit closer to home. We are investing in technology and finance.
That's going to give our finance team global visibility, real-time visibility to the balance sheet and P&L. So our team is going to have visibility to customer data and receivables, inventory levels. On the procurement side, we're going to see when cash is expected to go out the door when we're paying vendors. And what are those terms? I'm going to be able to make sure that I'm comfortable with the terms we're paying our suppliers. And the discounts. Are we getting the right discounts if we're paying early? That makes sense from a business perspective. And so that's just a couple of examples and a specific example on AI and automation that's really going to be across all three pillars. But it's going to give all of us the opportunity to make better data-based decisions. So think about just the cadence of Elanco Ascend coming through the P&L.
We do see about 75% of the benefit improving gross margins. We see about the remaining 25% improving OpEx. And you can see the phasing. We expect about 30% of this to benefit 2026. And then the ratable proration of the benefit moving on in the next four years after that. But I would tell you with the restructuring announcement we made today, you're going to see us front-load some of that save as we execute those programs. And so you'll see the SG&A savings really come a little bit sooner than the next couple of years. Okay. Now getting into the restructuring charge itself. So listen, number one, this program is part of Ascend. But two, and more importantly, I've been part of several restructuring programs in the past.
I can tell you most companies take restructuring charges from a position of weakness where they're responding to an event or responding to a macro environment. This is different. This charge is from a position of strength. And it's improving our competitiveness as a business. So think about just a couple of the bigger buckets. The first one I'd highlight, Jeff and Ellen touched on this a bit. But with the restructuring charge, we are getting out of some of our higher cost R&D footprint that came with the Bayer acquisition. Okay. And we are reshifting those resources to the U.S. as well as leveraging an existing third-party relationship that's going to make Ellen and the team more agile, provide a lot more capacity into what the team's doing, and move a lot quicker as she thinks about bringing product to the market.
On the footprint side, we are certainly investing in facilities that's supporting the innovation and the growth there. But then there's also some opportunities where we are reducing scale in some of the product lines that are declining. And then G&A, as I mentioned, the entire team is supporting Ascend through G&A. And so the entire back office functions and corporate support functions will see opportunity as, again, we support AI and automation and also leverage our shared service center environment. So just some more detail on the charge itself. You can see we will become a more simpler and efficient organization. We do expect about 600 roles to be eliminated as part of the charge itself. There will be about 300 roles that will be rehired in low-cost countries.
As I think about the save, we'll expect about $25 million coming through in 2026 and about $60 million in 2027 and beyond. Now the charge itself is $175 million. That does incorporate about $50 million of non-cash charges associated with impairments of the facilities that we're exiting. And so the net cash cost of the charge is about $130 million that you'll see over the next two years. Cash payback's about two and a half years. But again, I would highlight because of the significant fixed costs associated with the R&D facility from the Bayer acquisition, when you exclude that, our payback's closer to 1.4 years, which is obviously just a fantastic metric when you think about restructurings.
So with that, I would like to invite Grace to come up and spend just a few minutes talking through the capabilities that she's built in manufacturing and then also how her and the team are leaning into Elanco Ascend.
Great. Hi, everyone.
Excited to be here to talk about the manufacturing organization, what our focus is, and where we're going on our track record. So Grace McArdle is my name. I'm responsible for the manufacturing quality organization. And really, our role within manufacturing, it's quite direct. It is we need to reliably supply the product. We need to enable growth. We need to offset and work hard to offset inflation. And we need to continue to improve our margins. And with that, let's start with a snapshot of our manufacturing footprint. So balance between internal manufacturing sites and our external manufacturing organization. We're very much well primed to reliably supply to enable the growth that we see coming and also to give us the agility that we need in terms of our launches as well. And with a strong footprint, we have been building an even stronger manufacturing organization.
It's really anchored on four key pillars. We've got streamlined processes that are based on our single enterprise-wide systems. We have been making the strategic decisions around our manufacturing footprint, which also then feeds into the key targeted and timed investments that we need to actually enable growth and innovation. And I think we can all say that we've got a unique partnership with Ellen and the research and development team in terms of how do we actually speed up the pipeline and also how do we actually launch with agility as well. You'll often see in this industry, months can go by between the actual approval of a product and actually having the product available for launch. We've got a couple of great examples most recently with Zenrelia, where we actually had product available in the market within days after the actual approval was achieved.
So the four pillars that we have, they've really helped us and enabled us to deliver very much a demonstrated track record of the productivity improvements, which has yielded about $200 million of savings since 2021. They're anchored on excellence and how we're managing our global technology platform and our systems. They're equally anchored on the processes, the tools, the systems, the visibility, and the governance that we've actually put in place so that we are really on top and delivering on the productivity commitments that we are making and will make. And then the final point I'll make is how we uniquely combine our procurement efforts and the science of our business as well. Bobby and Romero both mentioned the Credelio family.
Since 2017, with the sourcing and the science that we've deployed, we've actually managed to reduce the cost of the active ingredient by 70%, resulting in a 15% improvement in the average gross margin for that product family. Another great example is Jose was mentioning the iconic Rumensin brand, 50 years on the market. With the technology, the science, and the process improvements that we've done over the last 50 years, if not, we would now require six duplicate plants to actually support the volume that we have for Rumensin. So what does all this mean? It really means that we are primed with a productivity muscle that is well positioned to develop, to deliver, and to accelerate the productivity commitments that we're making as part of Elanco Ascend in the region of $200-$300 million for manufacturing and quality. We've got the systems. We've got the tools.
We've got the visibility and we've got the processes that give us confidence that we will be able to do this and to also accelerate it as well, from the work that we do on active ingredient sourcing and science to our digital agenda that is anchored on the investments that we've already made in our enterprise-wide systems. We operate, as you've heard today, in a highly regulated environment, and many of our programs, they play out over a number of years. Within manufacturing and quality, we execute our plans. We're delivering results and are very much primed to deliver and accelerate this over the next number of years, and with that, I'll hand back to Bob.
Thanks, Grace.
So before we move on to the next section, I do just want to summarize what Grace and I have highlighted here. So the total Elanco program, including the restructuring charge, we do see $200-$300 million of gross margin improvement over the next five years, $50-$100 million of OPEX save. And some of that is going to be reinvested in the capabilities, again, surrounding AI and automation. And we're going to have inflation. And so that bucket's call it $75-$125 million. But we do see $200-$250 million of net EBITDA dropping in the bottom line by 2030. So now let's take a look at cash flow and capital allocation. So we do see accelerating free cash flow over the next several years. You look at the left side of the chart, we do expect over $1 billion in free cash flow.
You see 2028, there is a bit of a spike compared to 2026 and 2027. I would remind you that incorporates $130 million of restructuring cash. When you normalize for the restructuring, the ramp seems pretty normal. Okay. Now on net leverage, we do expect to end the year at $37-$38. We expect to be in the low threes by end of 2026 and expect to get below three in 2027. It's really enabled by two things. It's going to continue to be focused and disciplined around paying down debt. Number two, it's going to be the continued growth that we see in EBITDA. If we just take a snapshot of our capital allocation priorities and summary here, you can see we do expect some flexibility as we get out the next couple of years.
Our first priority is going to continue to be investing in the business, and so that's investing in R&D and continuing to fund the opportunities that Ellen and the team see. It's going to be supporting Grace to ensure she's got the right capabilities within the manufacturing facilities to bring the best costed product to the market, and then it's going to be continue to have this no regrets approach to our launches and supporting the commercial leaders you saw earlier today. Now, M&A will be a part of our growth strategy moving forward. I would tell you, as you think about the next several years, these are going to be smaller tuck-under opportunities that could enable more innovation and build out our portfolio. But to be clear, these will not derail us from our deleveraging timeline of getting below three in 2027.
Then when we do, that's going to give us the flexibility to return cash to shareholders. All right. The longer-term target, as Jeff laid out, we do expect our net leverage ratio to be in that two to two and a half times on a longer-term basis beyond 2027. Moving on to just the outlook for the business. As I think about the next three years, and to be clear, including in 2026, we do see mid- to high single-digit growth in the pet side. We expect and forecast mid-single-digit growth on the farm side. That base, we expect to be stable. And so that stable means maybe up, maybe down, low single digits. That could shift by quarter. You heard the leaders earlier today. It could shift by geography. But overall, Elanco, we expect mid-single-digit growth again in 2026 as well as the next three years.
Now, on profitability, I just want to highlight something that was unique to me as I joined the organization. I'd been with the team probably about a week, and I walked into Jeff's office and I asked him, "Hey, why don't we spend a lot of time talking about the farm business externally?" What was unique to me is that it's half our business. It's very stable. It's a great cash flow business. But when you look at the profitability, it's on par with the pet side. Although gross margins are lower, the OPEX efficiency is significant. In the U.S., for instance, OPEX is 10% of sales, and so what you see is a much deeper drop of profitability to the bottom line.
And so as I think about total Elanco, the total profitability is going to improve over the next three years again by that 200-350 basis points. So the overall summary, and Jeff flashed this a bit, but just to reiterate, our outlook as we think about the next three years, and again, in 2026, we expect mid-single-digit growth on the top line, high single-digit growth on EBITDA, and low double-digit growth on EPS. Those are all in constant currency growth targets. I'd highlight free cash flow again. We expect over $1 billion of generation in the next three years. And then net leverage getting below three in 2027, which again opens up flexibility as we think about shareholder return. And then the longer-term target of two to two and a half times.
And so finally, I want to remind you, we are working from and operating from a position of strength with a lot of momentum. Firmly believe we are a durable growth business with improved profitability. We see that accelerating cash flow to improve our balance sheet. And we are going to maintain financial discipline and transparency. And that financial discipline means we look with a fine-toothed comb and consider our organic investments as well as our inorganic investments to make sure they have the right returns for shareholders. And then on transparency, I do just want to take a minute and talk about our philosophy around guidance. We will continue to be transparent. We're going to continue to provide quarterly guidance. Now, our guidance is going to be balanced. It's going to have a little bit of a wider range.
It's going to be incorporating upsides and downsides because of uncertainty. But we will be transparent with the pushes and the pulls so you have the confidence in the numbers that we commit that we'll deliver them. So with that, I'd love to invite my colleagues for the Q&A session.
We'll take questions again for Bob, Grace, Ellen, and Jeff.
All right. Questions.
Hi, everyone. Brandon Vazquez from William Blair. Thanks for taking the questions again. Bob, maybe for you to start, I'll be the annoying analyst and ask you the question. You have a lot of momentum going for you. Why is mid-single digits kind of the baseline of growth that we should expect? Feels like with new products, geography expansion, things like that, this could be a high single-digit growth business. What would prevent you from doing higher than mid-single digits?
Yeah, I mean, so thanks for the question. Right. So again, we do see the pet side being at that mid to high single-digit growth. But the farm business is half of our business, which we see growing at that mid level, which is above what we believe the market growing at. I would tell you, we're going to continue to be prudent with guidance. Right. So we want to be disciplined. We think about the pushes and the pulls. We think about competitive response. And so that's maybe how I would think about it. But again, we've got the momentum. We've got Elanco Ascend continuing to improve margins. So again, we feel good about the top line. We feel great about the profitability dropping through. And then the capital allocation discipline, just making sure that we are going to be providing the best results for our investors.
I would also say, Brandon, I mean, we're going to be lapping a lot of launches. There'll be a lot of variation as you come back around the next year on the compares and quarter to quarter. So we want assurance that we can deliver this consistently. And I think to Bob's point on guidance too, we're going to be very transparent, even more so on what the pushes and pulls are. And you've met the commercial leaders here. We're going to be able to put a little bit more transparency to that. But we want to be consistent. We want to be reliable.
As a follow-up, Ellen, you spent a lot of time on a lot of the great things coming up in the waves, and it was very helpful to see all of that. How do you think of the current product portfolio and how much of your time you're spending on lifecycle innovation? Right. At some point, Quattro will be an old drug. What is left within some of those legacy products that you're still spending time on to ensure that they remain competitive over time? Thanks.
Yeah, great question, and let me be clear. Yes, a significant part of our people and our dollars are focused on truly supporting the business, the products already in the market, and driving further geographic expansion, so not only for the big six, but actually for the entire portfolio, so we have a significant number of our people actually focusing indeed on getting most out of our current product portfolio in the market and making sure it stays compliant. Because as you know, the regulatory requirements change, so if you don't do anything, you may even run out of compliance, so yes, absolutely, we focus on that, and that's partially linked to what I said before. We have a very robust resource allocation methodology in place, so some of those actually for us are highest priority projects.
So we give it whatever it needs to make sure that even the brand max actually gets what it needs.
So think about that. And I think something Ellen's done very significantly different than maybe five years ago is separating out lifecycle management. So you're not competing a vaccine in poultry against a Zenrelia that's coming down the pipeline. I think it's been a masterful approach. And let me just use one example. Food safety poultry, everybody. I mean, when you look at Salmonella poultry, Ellen, it's the top concern of our global poultry customers. What Romero and José have done with Ellen's team is we just continually added strength and lifecycle management and claims and manufacturing adjustments to make us number one in that space. So it will be key to that stable base of plus minus low single digit. Yeah. Karim.
Thanks. Ellen, question just on, it sounds like you're moving the model towards more CROs, use of CROs, externalizing the clinical trials. Is that right?
No, I think it's more balanced, Karim. So we're very targeted to find, okay, what are the capabilities we need in-house and what are the capabilities where we partner. So no, some of the capabilities we actually do bring in-house because we think we can do it better and faster. And in other cases like this, the clinical announcement we announced today, we said, you know what, actually, given our needs, it's better to partner because this is actually the right partner for us to make sure that we can drive our very strong pipeline where we have a lot of things going on in parallel that we say, let's now partner with this one, ClinGlobal, to make sure we have the capability. So truly, it is a balanced approach.
But within clinical, it's balanced? Or for the clinical piece, you are doing more outsourcing?
It is balanced overall for the different areas, technical development or clinical. But even within clinical, it is balanced as well. So we have our own clinical facilities. We do a lot of clinical work in-house at our own farms. And we are even growing that, for example, the one in Australia, Yarrandoo. But indeed, we also partner with others where we think it does make sense because of the capabilities already in place.
And Karim, sorry, I just want to add. I think Tim's point about this is historical. The amount of stuff that's come through and now in clinical, I mean, we're at max capacity. By today, shutting down that German facility and going with ClinGlobal, we're five to six X the capacity and cost efficiency. So some of it's just faster capacity with more reliability with a long-term relationship we've had with ClinGlobal. You've been close to them for a long time.
Yeah. My concern would just be that we've seen on the human pharma side, there are definitely limitations to externalizing the clinical trials. And so that you can get extra capacity, but it comes with some issues. So that's kind of where my question's coming from.
Yeah. No, I think it's well said, so we are very confident this is a partner we know. We know the people. We know the capabilities. We know how to work together, and that's why we are confident to say, let's extend that partnership. Because indeed, our next wave portfolio truly is in a phase where we need to do a lot of clinical work in the next couple of years to bring them to the finish line and get those approvals between 2026 and 2031.
Thank you.
Chris Schott from J.P. Morgan. Just can you come back to immunotherapeutics in terms of that platform? Just help us a little bit in terms of how broad of a portfolio should we think about here and the value proposition. Is it frequency of dosing? Is it you can go after different categories? I'm just trying to get a sense a little bit of what drives that, kind of the excitement around that piece and then one follow-up after that.
Yeah, great question. Yeah, it's true. We are very excited about that. At the same time, it is an early phase, and so we are truly still defining how broad could it be. What is the scope? What type of indications? But what we have seen so far only confirms our excitement, and that's why indeed we have been able to get to progress one of the leading candidates already as part of the next wave portfolio. But if you look at the potential benefits, you can immediately see why we are excited. Because indeed, if you have the much lower cost versus a traditional monoclonal and still good specificity and a way longer duration, and think of what you can see with vaccines, those are all elements and benefits when you say, yes, that truly opens up a new world of opportunities.
This is kind of a key tipping of exposure here. If you look at our IP protection, the capability we've built, we've got an entirely new platform here in Pet Health. This also was highlighted today in the announcement. We do have one key asset that is under conditional and accelerated pathway with USDA that Ellen's team's opened up, and we see this as a major Pet Health in an existing market to replace and not really cannibalize what we have, so I just want to share that you ask a question in a major new area that we're exposing today.
Yeah, in essence, we activate the immune system of the animal not to attack a microorganism that usually is happening with a bacteria or a virus, but basically to address other therapeutic needs.
And just maybe a financial one. Appreciate all the detail today. Just when we think about that 2028 EBITDA target, can you just put some context how much of the Ascend kind of program is reflected in 2028? I'm just trying to kind of bridge between some of the near-term numbers and that 2020 target.
Yeah. Yeah. So, good question. So, 30% of the Ascend benefit's going to come in 2026. All right. It's going to be a little bit heavier weighted in the front end because of the restructuring charge. But think about the gross margin improvement to be a little more ratable over the next four years. And that's because a lot of it's procurement. It's going to come through as product is purchased and then sold, obviously. So think about a little bit heavier weighted in 2028 and then more ratable on the back end.
Remember too, the bringing down of inventory for cash was something that Todd Young, I, others talked about for a few years. Maybe just Grace briefly, as you think about absorption in the plant and the gross margin trajectory, what you see at a high level?
Yeah, I certainly think we've gone through that phase. We continue to make the footprint decisions that we need to. So we divested our site, for example, in Manitowoc earlier on this year. Just today, we announced the closure at the end of 2026 of our Kansas City plant as well. So we're continuing to refine our footprint strategy to ensure that the asset base that we have is well utilized, that we're driving the right level of absorption now to our plants as well.
Thanks for the question. Mike Ryskin, B of A. I kind of want to bridge something you discussed in the first part, Jeff, with a lot of your presentation in the second half, Ellen. Jeff, you kind of talked about a lot of the blockbusters and the launches you've had in the last couple of years, Quattro's and Zenrelia. These are going into well-established markets that are proven markets. You're not doing any market building. If I think about some of the things you're talking about in the next wave in terms of the immunotherapeutics, but also obesity, kidney, these would be relatively new areas where you're building categories. So I kind of just want to ask, that's a different challenge. That's a different tackle because there is market building, market defining. So just talk about your strategy there versus going into something super established like derm or pain.
And then maybe as part of a bigger question there is, if we think about the companion animal market over the last 50 years, I see it as dominant four categories: para, derm, pain, vaccines. Right? That's really been it. Is there room for more? How do we gauge the consumer's willingness to spend in these additional categories like obesity, kidney disease, things like that?
Yeah, I think a new platform to a pet owner doesn't matter. What matters is the value proposition. Look at ISOX when you and I, I mean, seven, eight years ago, look at how big that category has grown. It's going to be $2 billion. Derm 10 years ago, Tim and I wasn't there. What I see is, hey, the first four problem sets in pet are going to stay the same. Pain will emerge and go from one to two, as Tim said, et cetera. So if you look at that, if immunotherapeutic comes in, has a better margin profile, has a lot better efficacy and maybe safety profile, you are going to go after and take share from that market and grow that market because it's going to be a better value proposition for the pet owner.
And remember my second trend, the pet owner will have more influence and more control. So getting to them with that will be important. So I don't see a new platform. If Ellen brings something, I actually love the solution set on the proposed label she's saying for these next round of assets. So now look, is there more room? Absolutely. USOS, we now have eight targets. So obesity, we believe, CKD, I think we all are chasing that. But our criteria is best or first in class. I would call out ruminant and poultry. The problem set, the durability, there's breakthrough opportunity here in productivity and disease prevention at another level done with some of these platforms as well. And there are some synergy here with these platforms and ruminant and cattle and poultry.
The area we got to continue to build and grow that we don't have as much relative to the competitors, we've been open about this, is the bios, the vaccines. And that will come. Part of the way to win that battle is to bring a new platform.
Thank you. Dan Clark with Leerink. Just wanted to ask on the philosophy around sales and marketing spend. I appreciate all the color on kind of the rest of the cost structure, but how are you thinking about that growth over the next couple of years? Is there a willingness to reinvest any incremental gains? Is that an area to drive additional margin expansion? How are you thinking about that?
Yeah, Dan, hey, great question. So this is where Ascend is so important. It's giving us the opportunity to think through and make choices about where we're investing. And so Ascend is about being efficient. Jeff mentioned I came from a low-margin industry. And I think the point was because I came from a low-margin industry, I had to focus and make the right choices for where we invest. Okay? And that's what Elanco Ascend is going to do. So you're going to see us, the mix of where we're spending OpEx is going to shift more towards marketing and R&D and less on areas like back office support because we're going to be leaning into automation and AI.
But I would continue to say we are going to continue to use data that's going to drive our decisions under this no-regrets approach to launches and using that data to determine when we'll continue to and when we'll stop spending on marketing with these launches. But listen, again, no-regrets approach, we've seen the success here. As I think about moving forward, so next year you're going to see Ascend, we're going to continue to spend on marketing, but we're going to see EBITDA growth as well. Okay? So Ascend's going to help us with the mix. Ascend's going to help us with dropping EBITDA to the bottom line. And then again, finally, listen, we're going to continue to be prudent with our approach and focus on executing the portfolio that we have.
The procurement also is an active ingredient strategy that Grace has. Credelio is a great example, bringing COGS down significantly. And we have some of that in, and we have some speculation we can do more. I don't know. That's a big part is active ingredient procurement approach. Is that?
No, I think that's very fair, and it's a tried and tested approach that we have been using, and again, to my point, it's a highly regulated industry, so the actual timeline in terms of implementation, you need to start early, and then it's executed over a number of years as regulatory approvals come through for our changes, but absolutely, that's a large part of the foundation that we've built in manufacturing and are going to continue to execute on.
Hi, Chris LoBianco here for Steve Scala at TD Securities. What do you think are the major unmet needs in companion animal parasiticides? And do any of your near-term blockbusters in 2026- 2031 address those unmet needs?
Do you want to share that? And maybe Tim, if you want to have a few comments too on this. Do you want to start, Ellen, and then?
Yeah, sure. So on the parasiticide, the major unmet needs what we see, of course, we always focus on needs, whether it is safety, efficacy, or convenience. One of the three or a combination of the three, that is where we look at. And those are still unmet needs and opportunities in the biggest parasiticide market as well. Think of longer duration, think of addressing resistance. So those are the type of focus areas where we say, is there an opportunity for us to actually bring the next generation of parasiticides here?
Anything to add, Tim, or is that?
Yeah, I would just add that different pet owners will look for different things. So one product is not going to fit everything. So there'll be lots of opportunities to expand on that and continue to grow the category over time as different generations of pet ownership come into the marketplace and look for different opportunities.
We have seen probably less international impact from a long-acting injectable. And we think part of the message there is broad coverage matters, convenience matters. Also, long-acting injectables bring some speculation right now from the pet owners. So we've actually seen not the competitive front in ruminant markets as maybe was speculated by the market, but more to come. There's more to play out there. But I think people want convenience. They also want to be assured they're going to be okay for their pets.
Yeah, I guess, question. I guess I'll combine the two. But in terms of your thoughts on the mid-single digit growth, how much is volume versus price? And then also there's been comments by competitors that there's been trialing or free sampling and other things in the market. And so your level of confidence that, I guess, adoption that you're seeing in the market around parasiticides and dermatology, that's actually leading to durable response and, I guess, market share gains.
Yeah, we've seen in the industry 2% price pretty consistently over the last two decades, and we're guiding to that this year. We are going to lap these new products. So I think that will be beneficial that we haven't seen in price coming back around. Bobby's already highlighted. I mean, publicly, we've taken a very value-based approach with more value, more differentiation. We're pricing up given our value offering, and we'll keep an Elanco value-based approach on price. So I think what you see in mid-single digit is you're going to see probably the trajectory we've been on. There might be ups and downs year to year, and the remaining will be in volume, and volume will come from stronger portfolios you heard earlier. I think that's important. No question, Bobby mentioned it, but I know José and Romero would say the same.
This will be a competitive three years. I think we're very well suited. The industry is going to grow $20 billion, we believe, over the next 10 years. And the first next five is going to get a good share of that. And we believe we're well suited. Back to the slide I showed, why in the three channels, farm and pet retail, we've got leadership, and we got broad portfolios that can meet most any customer where they want to shop value-wise. And that portfolio is going to give competitive strength over maybe a competitor trying to offer. There's always going to be a short-term deal, but portfolios win in this industry, and they always have. And I think pet vet, we are smaller, but that's a positive. We're notionally smaller. We got a $300 million parasiticide business in the U.S. coming with Quattro.
You're going to see, I talked at the break, a lot less cannibalization from Elanco. But yes, there will be some quarters that we may report competitive activity, but we're confident in the long-term trajectory because of the portfolios.
This is JP for Umer, Evercore ISI.
Hey, JP.
With the current corporatization of the vet clinics in America, I think it's very important to understand where are the sales dynamics and strategies you guys are used to better perform in that segment.
Yeah, you asked me about that last week, JP. I'll turn it to the guy that does it every day here and Bobby. I want to just share a couple of comments relative to the corporate environment.
Yeah, I think you got to take a step back and understand the corporate landscape. So there's many corporate clinics in the U.S. They all operate a little bit differently, and they all have different contract cycles with their partners. But roughly 70% of the corporate clinics have one or two preferred partners, one of two preferred partners, so typically two partners. And we believe that our portfolio is a strategic and competitive advantage. So our portfolio gives us more relevancy because it can be a one-stop shop for that corporate clinic. It also allows us to sort of bundle our products so we don't have to get as competitive on a specific category in order for us to compete.
As part of our Salesforce expansion that we made about 16-18 months ago, we expanded our corporate accounts team in anticipation of the broad portfolio giving us relevancy with that group going forward.
We have time for one more question if there's one.
Steve Decker with KeyBank. I think you guys mentioned earlier in the presentation that the appetite for protein was the highest since 1983. Well, at the same time, we have cattle inventory at low since I think around 1950. I guess what needs to happen to see the rebuilding of the herd in your view? Thanks.
Yeah, José? José talks to me about this every day. Keep it to two minutes. No, I'm just kidding. This is an exciting time here.
The way to think about it is cycles and trends. If you think about the last, there's a lot of numbers out there. But if you think about the last 50 years, let's take 1990, 1970 as a reference, the output of protein has continued to increase while the animal numbers have decreased. That's the overall trend. About 20% less animals, 20% more meat output, and almost twice double the milk output. That's the general trend. That is driven and enabled by technology, genetics, and products as the ones we provide. That's the general trend. Every 10 years, there is a cycle that is either weather-related or economics-related. Cattle herd goes down, and then there's an economic incentive for the cattle herd to be rebuilt. We are at that nadir bottom. The economic incentive is out there.
We're seeing cows slaughter going down and that cycle now reverting, and we see the signals of the herd being rebuilt.
You think everyone has a prediction, but then mentioned producer versus packer. But you're thinking the next couple of years in terms of.
Yeah, I should have mentioned these cycles. They are two- or three-year cycles. So, high level, every 10 years, there is a cycle, a two- or three-year cycle where, on the rebound of a two- or three-year cycle from a producer standpoint, and again, that demand and that signal is out there.
And we serve producers, and it's very profitable for producers right now, not so much for packers, but producers buy Elanco products. Yeah, let me close, and then we can have some time at lunch with the rest of the team. I want to thank Tiffany and her team and all the work that they put into this and this executive team, very much so. And we've had a good time putting this together as really a backdrop to be able to work with you for the next couple of three years. As Bob said, this is 2016- 2018. This is our framework, and we understand these are the expectations we've outlined. And I really leave with this final slide. And the message is what we are desiring to be is what we've actually become over the last two years, and that's consistent, reliable growth company.
We know that mid-single digit top line will bring leverage to the bottom line, and it's all about these three outcomes. I hope you hear Elanco to be a very consistent, constant message, and then we deliver against that. We want to make this straightforward for you as an investor. We want to be the most compelling value stock that you have in the most durable segment. This growth, innovation, and cash underneath each one of these, and we'll come back to this with all of you as investors, are our expectations. Sure, there'll be ebbs and flows. There'll be quarter-to-quarter differences, but we really are confident in the next three years that these are the expectations. Underpinning this is a very durable industry. This $20 billion of growth, we deserve our share of that, and we believe, hopefully, you saw a team.
Each one of these teams has eight to 10 people at their table that would represent a lot of what you saw today, and you can be assured, hopefully, today that that $20 billion of growth in animal health will be a great place to put investment money, and it'll be a great place to put it with Elanco, with the team, the culture, and who we have. Thank you again for time that you spend with us. Expect transparency, accountability, and accessibility from Elanco. Thank you. Have a good close to your year and a happy holiday, and we look forward to some engagement at lunch, and for those online, we'll look forward to engaging with you in the future. Thank you.