Good afternoon, everybody. I'm Chris Schott at J.P. Morgan, and it's my pleasure to be introducing Elanco today. From the company, we have Jeff Simmons, President and CEO. I was going to kick off with a presentation, and we're going to jump over to Q&A from there. Jeff, I know a lot to talk about with all the progress of the company, so looking forward to the update.
Great. Thanks, Chris. Thanks, J.P. Morgan, and excited to dig in here. I'll point you to our forward-looking statement and disclosure slide before I get started here, but looking forward to jumping in and talking a little bit about Elanco and animal health. We had an investor day in December, and we focused really on these four areas where we focused on our strategy, a really historical pipeline that we're bringing to the marketplace, as well as our financial profile and a little bit of the executive team. What I want to do is put Bob and I a little bit of color and context to that today and give you some of the highlights of that, so an exciting time. If I had to say, boy, the last time we had investor day was five years ago.
Even compared to even a year ago at J.P. Morgan, I think the headline on Elanco is that we're a different company. We've got a very solid, consistent flow of growth coming from historical innovation. I'll get into that in a little bit more detail with a much stronger financial profile. I think if you look here, this is kind of the summary of really our current state of the state as a company. We've got a mid-single-digit growth company right now. It's diverse. It's quality. It's been nine consecutive quarters of growth. It's come in both farm and pet international U.S. volume price. I think second is, historically, in animal health, there's been maybe one innovation in one quarter, or excuse me, in one part of the industry, the segments of the industry that everyone's heavily dependent on.
Elanco's got a basket of innovation. We've launched a flow of innovation. We've got six blockbusters. The last one came in December. We started in 2021 tracking our innovation. We've now got $840 million–$880 million that we're guiding in 2025. We're committing to another $250 million of growth of this basket of innovation in 2026 to $1.1 billion. A billion-plus pipeline now unloaded into the marketplace. Second or third comment here is we've refilled the pipeline. We've got a pipeline now worth $2 billion. In that, we'll talk about it, eight therapeutic areas we're focused on and committing to five to six blockbusters the rest of the decade. A lot of challenge, even a year ago, is, hey, when is the EBITDA going to come? We've committed to an algorithm starting in 2026.
Bob will talk some about this, but a high single-digit EBITDA growth, a low double-digit EPS growth starting this year, and then I just conclude by creating about $1 billion of cash flow over the next three years and delevering under three times by 2027, so that's just a little bit of the underpinning, and I'll add some color and context to this here over the next couple of minutes. I want to start with animal health. We're at the largest healthcare conference, and I will say almost four decades in animal health get asked a lot about why are there high multiples? Why is this a durable industry? Why don't you have patent cliffs? And I would summarize it really in this triangle to say we got really the best of all three dimensions. We got the best of pharmaceuticals. It's regulated. It's science-based.
It's a high barrier to entry. There's a lot of complexities. I jokingly say we got 20 species, not one. And all of that creates a barrier to entry. At the same time, we have a very CPG-like brand driven. Veterinarians and pet owners love their brands. You can get a next-generation product, and you'll keep that dog and that pet owner with the old generation because they're so brand loyal. Even the protein companies, the poultry and beef companies, they're very loyal to their brands because they're small percentages of cost to a high brand value. So all of that really limits patent cliffs and really allows 50-year-old products like Rumensin and Elanco to still be growing. And then the third is we are not a payer market. We are a cash market. So a value proposition really matters. You need interface with farms.
You need to interface with the 30,000 vet clinics in the U.S., and doing that, that's why being a global independent company outside of Lilly, they can have that interface. You need to sell value. If you've got innovation that has value, be careful, be ready, because it will get rewarded. I think this is what's demanding a $42 billion industry that we think could be as much as $60 billion by the end of the decade. I'm going to just double down just on some trends that matter. Kind of, we get talked a lot about, hey, I heard this data point. We, Elanco, believe these five trends will drive the value, the 50% growth in the industry the next five years, and I'm going to start with the pet business. It's a $17 billion industry, growing faster than farms. High single digit, we predict.
We hear a lot about vet visits. We will say we think you're over-indexed on vet visits. We think these five trends matter most. One is really this pet owner's willingness to spend is a big deal. If there's innovation, if there's convenience, it really matters. Believe it or not, the under 35-year-old is willing to spend more. There is definitely fewer kids, but more pets, and there's more willingness to spend. We're seeing that right now today. Even in an economic time where the share of wallet and the pressure is there, we're not seeing that necessarily here. The other is just like on the human side, the pet owner is getting the power. So CRM systems to be able to influence and know what the pet owner wants.
Yes, the veterinarian matters, but the pet owner is taking on more and more power along the way, and I think the next five years, that's going to play out a lot in the channel. The third is why we bought, one of the reasons we bought Bayer, and that is omnichannel matters. Reaching more pet owners where they want to shop at price points they want to shop at, whether that's Chewy, that's Pet Express, Walmart, or in the vet clinic, this really matters, and the doorstep of where your products land is where more and more of the product is landing, is that drop shipping to the pet owner. Having comprehensive portfolios, you need the four legs to the stool on the pet side. You need therapy. You need the vaccines, derm, and para. We're now the second company that has all four pillars to a portfolio.
And then lastly is just the globalization. It used to be seven, eight out of ten homes in America and Europe had pets, two or three in Brazil out of ten, two or three in China. That's accelerating. The humanization of pets outside of the U.S. is accelerating in a big way. And I think these five trends will be what drive a lot more than maybe I think the change in visits is probably being driven a lot more by the convenience of the channel than about the willingness to spend. On the farm animal side, I point out it's bigger than pets. Some people don't realize this. It is a big industry. It grows slower, but it's a lot more durable. Here's the five, I think, trends that matter the most very quickly. First is just this whole global animal protein consumption.
Everybody, five years ago, I stood on the stage and we were talking about Impossible Burgers and Meatless Mondays, and it was going this way. It has come back with a vengeance and a big way. Animal protein matters a lot. Yes, the dietary guidelines is very significant. 1.2-1.6 grams per kilogram of body weight is a major step up, and it wasn't necessarily a government guideline. It is being followed. The U.S. dairy industry invested close to $12 billion last year. There's four Fairlife plants being built right now as we speak. Dairy, poultry, and beef are benefiting from this swing. GLP use, 30%-60% more consumption of meat for people that are on GLPs, and then in the developed world, as GDP grows, the UN says there'll be 50% more growth in the next decade with animal protein than there was before.
The second is we see ruminants and poultry being where there's the most opportunity. This is where they're the more stable. There's more opportunity. This is broiler chickens. This is dairy, beef, and sheep. Pigs have a tendency to be more volatile and a little bit more regional. Livestock health needs continue to be food safety, disease prevention. The new quiet segment that's growing the fastest is this whole area of sustainability. And hold on. It is economic sustainability, productivity, combined with anything you can do to help the CPG brand. The Danone, the Nestlé are spending millions to make sure that the next generation comes to their product. And that mix we can talk about is something that's driving up. We think a $2 billion market. You got to have comprehensive portfolios. And Bob will get into it here in a minute.
This is a more efficient market to reach. We can get low single or high single-digit OpEx. So actually the EBITDA can be very similar to pets because it's an efficient consolidated market. Okay? These are the trends we think are critical. So look, we've never been more relevant as a company. We touch almost every life every day. This whole, really, the three P's of really pets and protein and even planet are really having an impact as we look as a company. This draws a lot of talent. We just had to go out and hire 20 AI talents, Bob and I. And this right here is actually the next generation is pretty excited about our industry as well. Real quick, we're just shy of $5 billion. We've got really, we're set up just like we want to be. A nice mix between U.S. international pet livestock.
But the one area I would really focus on is we've really said, where can we win? Where can we be number one or number two? Pet retail, we're number one. That's one-third of pet owners don't go to the vet. The OTC business, we're number one there. Farm animal, we're number one or number two, and we're number one in taking share right now. And then on the pet vet side, we've got the most innovation and got now the leading U.S. pet health growth company in the U.S. side. So we've really, in the last couple of years, really trimmed down to say, where can we win? This has really been our story since becoming independent. It's had four chapters. It's been intentional. The board, the executives, it hasn't been an easy ride. We know that.
But we have been intentional to get to the point where we are today, which we believe is very sustainable. It was the stand-up as an independent company. A lot of stand-up cost, SAP system. We can now reach 90 countries with SAP regulatory supply chain to reach the world's animals. Only a couple of companies can do that. We had to buy Bayer, and we're glad we did. We went from 30% pet to 50%. We went from $150 million R&D to over $300 million. And that really has given us the strength and the scale to be the company we are today. And Kindred Biosciences brought us the mABs that have really been critical. We're only two companies in animal health that have mABs in the market today, monoclonal antibodies. And then the focus, Ellen and the team develop an R&D engine.
The last three steps in R&D in animal health are the hardest. The last critical set of trials, CMC and regulatory, and I think we've proven. We've taken, we had 12 approvals in December in major markets. Some of those are moving, but the engine works. Six blockbusters. We've had nine in 60-some years. We've had six in the last couple of years, and that's just a sense of our focus here, so a growth innovation cash story. This has been the strategy for 10 years. A real focus here on a consistent flow, trying to avoid the air pockets of innovation, which our industries had challenges with, so a consistent flow, consistently strengthen our portfolio, we've tightened the portfolio places we want to be in. That's been a big part of stabilizing our core. That's been a big part of why we're getting the leverage on the innovation growth.
And lastly, Bob will talk about this and bringing Bob in as a new CFO to really focus heavily on a company-wide initiative called Elanco Ascend to drive a consistent productivity across the company. All of this really is. You've heard me for two and a half, three years say three outcomes matter to you. Three outcomes matter really to our customers and to our employees' incentive plans: growth, innovation, and cash. And just a couple of slides you've all seen on the earnings calls from me. Growth has improved. The quality has improved. We've become a mid-single-digit company. What I like is we've really got four segments or four targets we have: farm and pet, international, U.S. And we're seeing nice growth in all of those and nice growth, volume and price, as well.
This is a chart we showed in December of 2020 saying we're going to create a basket of innovation. We started in 2021, and we have increased, I think now for almost two years straight, our innovation goal. And again, we're guiding to 840-880. We'll report our earnings at the end of February. And our intention here is that we'll be looking at about $1.1 billion of innovation in 2026. What's great about this that's very different from our competitors maybe is that we're not dependent on one innovation in one market. And all of these innovations are becoming globalized as I speak, which is great as well. This is a really key slide. This is what we're kind of calling, you're going to hear a lot from us over the next three years.
If you said we got to get one thing right, it is globalizing these six blockbusters. What I love is they're in major markets. Everybody, we don't need to create markets to create value for you. We're going into markets where we have small market share. The markets are growing, and we believe these are best medicine, and I'll show you some proof points right now to where we believe we can take market share, and that's the exciting piece for us. We have made a commitment that these six blockbusters will double between 2026 and 2028 in overall value, so let's just double-click on a few of these, and then we can get into the Q&A with Chris on these. Credelio Quattro, my prediction in 70 years, this will be our biggest product in the history of the company.
Fastest blockbuster that we've ever had from launch to $100 million. It's only in the U.S. right now. It has four dimensions of differentiation. That differentiation is not making it look like third to market. It's making it look like best medicine. And you can see that on the chart to the left. And actually the trajectory out of the gate, it's actually growing faster in the first year than one of the market leaders. Number two is in the middle. The fastest growing animal health market today is the oral pill broad-spectrum parasiticide in pets in the U.S. It's a $1.4 billion market that's growing at about 30%. So we are coming in and rising with the tide of a fast-growing market. A lot of predictions that maybe long-acting injectables would take the share. I think that's not been the case at all.
They haven't really performed to the level of maybe expectation. That's driving more growth here. We see a good $2 billion market in the future here that we can be part of. What's exciting for us is we're only in the U.S. We're only in a third of the clinics, and we're only at about 30% market share. And one good lead indicator I always look at when I pick the data up is I look at the Puppy Index. The Puppy Index is on a relative basis where you were number one in the Puppy Index on a relative basis. And that says two things. You get the puppy, you usually keep the dog, so the future runway. But the second is it's really a lead indicator of confidence of the veterinarian and whether they want to put puppies on a new product. So that's Credelio Quattro.
That product will be launching internationally throughout this next year. Throughout 2026 will be another key driver for our growth. Now I move to the $2 billion derm market. Number one reason pet owners take a dog to the vet is an itching dog. It is a market that's been growing double-digit. We keep saying it's going to lessen and slow, but I think it's a dissatisfied market. And we're seeing about anywhere from 15%–20% in every market new starts. So the market is still, because of all the promotion from us as companies, there's more and more of an expansion here of new and more dogs coming on, mixed breeds, other things that have driven this. So $1.3 billion of the $2 billion is in the U.S., split between JAKs and monoclonal antibodies, two market incumbents. Zenrelia came into the market in 2024.
We did have a label restriction. We've improved that label. Today, I can say at the end of the third quarter, we were at 46% of the clinics on. We more than doubled between Q1 and Q2 share. We nearly doubled again in Q3. And at the end of Q3, we're at about 5% market share. We see the big driver here is efficacy, and a strengthening label has been key. The others were now approved in over 40 countries with not a restricted label. And I think that's had a big impact on the loyal 46% of the clinics that are using this. We've moved to first-line treatment in a lot of them. Second is at the end of the year, we got our next blockbuster, our last of the six, Bafrenna, our second monoclonal antibody, second derm product. This will compete in the mAb sector and U.S. derm.
Approved by the USDA. We will launch this in the first half of the year. All I'll say is we're not getting into the details of the label now. It won't be actually public until we launch the product. But we do see positive differentiation in efficacy, value, and convenience. And when we showed the label to 350 veterinarians, we had about 83% respond that there's a high likelihood of use. What's driving that is really the differentiation and probably the dissatisfaction in derm. So that's a little bit on Bafrenna, getting your friend back, being a friend after an itching dog situation. And then look, Zenrelia is off to an amazing start. I head to Canada tonight. Zenrelia in the first three markets we launched in ahead of the U.S., very important, I think, here, Brazil, Japan, and Canada, where we launched ahead of the U.S.
with a non-restrictive label, we're over 20% market share after a little over a year. We're launching in Europe right now. I would say the efficacy profile, we're the only company out there with head-to-head data that shows strong performance by Zenrelia, and that's playing out. We're excited about the growth of Zenrelia internationally. We're in about, just as I said, 40 countries without a restriction on the label. Experior is a cattle product that has been a quiet sleeper that has gone from $100 million. It's nearing $200 million. It's used mainly just in the U.S. and Canada in feed yards. It's got a very unique label. The cattle herd size and the rebuilding of the U.S. cattle herd with the beef demand has been a real challenge.
Producers are making a lot of money. Packers are not necessarily making as much money. This is actually benefiting the producers in a really strong way. We see a TAM of about $350 million in U.S. and Canada and the ramp rate to continue. Good timing for this product given what's going on in the marketplace. So really, in summary, as I just share a couple of slides on the pipeline, we've got a base business that we're saying is up and down, low single digit. Why? I think it's targeted markets where we can win. Innovation's helping us as well. The big six innovation and the basket around them will be a big driver the next three, four years. We do that right. We're not looking for approvals here for the growth the next three, four years. They also, Bob will share, have a really good margin profile.
And then Ellen has built two waves of innovation past this. Our goal is really to have this consistent flow of innovation. So very quickly, two slides on innovation. We've got eight therapeutic areas that we're focused on. We've got 15 projects. And of the 15 projects, we're committing to five to six blockbusters over the next five years, the rest of the decade. Really, the big message here is in major markets. All of these markets we're pointing to are billion-dollar markets, most of them. They're growing, and we're coming in, we believe, with best medicine. Ellen's also built kind of the next wave behind that. And what we've done really, everybody, is we've moved over $1 billion into the market the last two years, and we've got a $2 billion pipeline.
What's different, I think, about Elanco than maybe five years ago is projects that are in clinical that are differentiated, that are in very major markets. All of that, I think, is key. This is just a little bit of a picture of that, just kind of showing the commitment that we have is five-to-six blockbusters here between now and the end of the decade, and then the next wave that's coming behind that. I would highlight there's really three internal platforms we've built kind of coming out of human pharma. Monoclonal antibodies, we're one of two companies that has monoclonal antibodies. We built manufacturing. We've built an internal new R&D center and a new headquarters we opened in October. Second is all around immunotherapeutics and then small molecule.
Animal Health used usually their parent company for small molecule, so we built those three platforms to drive what I believe is what's got our industry in troubles when we have the air pockets of innovation. Our intention is to have this sustainable flow of blockbusters as we go forward. The third is just on the cash and the balance sheet. We've turned two turns of debt down in two years. Again, as I've highlighted, we're going to generate about $1 billion of cash flow between now and 2028 and break under the three times leverage in 2027. Bob will share a little bit more on this, but we launched last year Elanco Ascend. This is a company-wide productivity initiative. This allows us to give high single-digit EBITDA growth, maximize launches, and generate cash flow.
This is just really an extension of looking at everything from AI procurement across the board. So I close by, hey, how do we win? We got growing momentum. We've got a proven strategy. We've got a more stable base and R&D engine that's proven. We've got the most experienced team when you look at years of animal health. We've also established some things. Bob focused on margin. Tim, with all of his experience, focused on cash. We're the only animal health company that splits the U.S. between pet and farm animal because they're very different businesses. That also has been beneficial. Grace bringing a lot of lean manufacturing experience as we really are driving a gross margin agenda that's pretty significant.
And this is really the algorithm that I've just talked about, our commitments relative to what we're committing to over the next three years that's really going to drive, we think, the next couple of eras of value creation for you as investors, and look, in 2026, we'll get into some of this, Chris, but I think some of the tailwinds and headwinds, we see a nice balance. We think our guidance that we'll put out in February will be balanced and will be on the right side, I think, of expectations, and again, we see a really nice, strong opportunity for us here in 2026, and this was the slide I ended the investor day on. We've got a differentiated company and a durable industry with three pillars we're focused on: growth, innovation, cash, so with that, maybe I turn it over to you, Chris. Great.
And Jeff, while you're grabbing the seat, maybe Bob would love to just bring you in the conversation. You've been in the seat about six months now. Just any thoughts and observations as you've settled into the CFO role?
Yeah. Hey, Chris, thanks for the question. So listen, it's been tremendously fun for me and great to really work in this industry, work with a fantastic global Elanco team and board. And for those that participated and saw our investor day, I think you saw that come through. We've got a lot of momentum. We're operating from a position of strength. The algorithm that Jeff just highlighted today and again back in December of that mid-single-digit top-line growth, the high single-digit EBITDA growth, low double-digit EPS growth, and then continued delever.
There's just a lot of confidence in that algorithm because of, again, the momentum and the strength of the team, so I think about 2026, right? We'll obviously provide some more guidance here in February and formal guidance, but that algorithm applies to 2026 as well. Jeff quickly showed what the headwinds and the tailwinds will be, and certainly, we're taking a balanced approach to what we see, and so we're paying attention to vet visits. We're paying attention to the macro, including inflation and competitive response to our success, but if you look at the tailwinds we have, our innovation growing to $1.1 billion, that continues to scale, and so those margins on that revenue are higher than our corporate average, and so we'll see some profitability come through. We're moving past some launch investments.
Obviously, launches continue to be part of our future, but obviously, the last 12-15 months, we've had significant investment there. Elanco Ascend, we talked about that investor day and Jeff highlighted, but this is us being proactive on the cost side to not only drop more earnings to the bottom line, but also continue to fund R&D and fund launch investments to continue to grow that top line. And then the last tailwind I'd really highlight would be pricing. And that's been a recurring question and theme that's come out of this conference for us. But listen, I just want to be clear. We are absolutely expecting price in 2026. Our pricing on the U.S. pet side is public. That went out in November, December to distributors. And listen, it's the highest pricing we've taken in the U.S. pet side in the last five years.
And we have and will continue to price based on the value we bring to the market. And I'd tell you the share that we've gained is because of the value that we're bringing to that end customer. So listen, there's a lot of puts and takes, a lot of momentum. I'm excited and certainly more in February, but certainly committing to that algorithm in 2026.
Great to hear. Maybe jumping into individual products, Credelio Quattro coming off a great 2025. Just remind us, market share exiting 4Q, kind of overall with puppies. And then just how do you see this progressing over the next few years? I mean, it seems like this drug could have a very long runway of growth ahead of it.
Yeah. So I think most importantly, it's just the space itself.
I don't think five years ago we would have predicted that monthly oral broad spectrum end ecto would be headed towards $1.5 billion-$2 billion, and I think some of that is stealing from some of the legacy segments. Some of that is stealing from the retail. Some of it is just more compliance. Quietly, we don't talk enough about this, but when you have 12 monthly pills and you're only averaging four to five, moving it to nine or ten, well, how do we do it? Just like Chewy and everybody else, we drop it off at your door and you become more compliant. There's more companies that are capable of doing that. So I think the space growth, watch out, this is a big market. Two is, could anyone ever put four active ingredients in a pill and get the dog to take it?
Has been the monster, and we did it, and people wondered with Praziquantel, would it be bitter? Palatability has maybe been the quiet sleeper of the four dimensions of differentiation, so I think it is we are putting a lot. We're going to lean in heavy. Why we need Ascend to save money is because we're going to spend money because we know you don't take share in these big markets without leaning in, so the multimedia, what Bobby's built, I think is really playing out nicely in derm as well, and then globalization, Chris, you know this. I think we have Credelio, plus international markets. We didn't think, we now know that Quattro will become a big market, and I expect earnings call, the earnings call to be talking about international markets adding.
So yeah, we have a best, we have something special here, and we need to treat it that way.
Absolutely. Zenrelia, yeah, can you just update us on the U.S. business and any trends you've been seeing since the label change and just general feedback you've been getting from vets as that's played out?
Yeah. I would just say that, look, I mean, there was the concern coming out of the gate in the U.S., but here's new data. We have a year of pharmacovigilance data, and it's good. It's strong. It's a safe product. Two is we had a loyal base, and that loyal base has grown. We've added about 2,000 clinics per quarter. And that's really come from, I think, the label change made the loyalists become more loyal and bring on the middle.
There's still a segment that will probably wait until a full label change, but I think that created a little more exuberance. Then we've got nearly 40 countries approved all with a clean label. So you put all that data together, I think that's created a, and then the most important thing, and we're really seeing this now in a competitive market in Europe, is the U.S. is just seeing efficacy. Chris, I mean, we got thrown into second-line, third-line treatment situations, and this product works. And in derm, you got to work. There's nothing more disturbing than an itching dog, and it's probably the only problem in pets where you can say it's working or it's not working visibly as a pet owner. So I think that's the energy. And derm is continuing to grow. The new dog starts, I think, surprising us and our competitors.
There's just a lot more, I'd say, different breeds of dogs, but the more we promote it, more people say, "Oh, the dog's itching. Let's take it in."
Yeah. Building on that topic, I mean, the derm category is becoming more competitive. How do you balance what I'm assuming has been more promotion activity, etc., with those volume trends that you're seeing? So just like health of the category as a whole, how should we be thinking about that?
You're saying in terms of
Just the overall growth of the category?
Yeah. Yeah. So look, I think that portfolio matters, differentiation matters. I mean, to get the response we got on the Bafrena market research by showing them this, they went right to the data. It shows it is if it's differentiated. Veterinarians, what do they want?
They want happy pet owners, pet parents, and they don't want them coming back in with a problem, so it's got to work, and it's got to take care of a problem, and today, you got labels out there that are saying X% respond, but that means quite a bit % don't respond, and vets know that, so if the dog's still itching after it's been put on something, they're going to get it changed quickly, and the vet doesn't want them changed in the clinic, so I think it is a market with real opportunity here, but also people ask me, "Is the product good or not?" well, we're going to find out by what it does in the marketplace, different than the parasiticide market.
And can you just elaborate a little bit more on that Zenrelia launch, how you're going to approach the market?
So how aggressively do you go upfront? Is this something we should expect could ramp quickly, or will you give us a
Thank you for the question. It is a monoclonal antibody. So you've got the bioreactor scale up. Good news is we're in Elwood, Kansas, that did the Kindred plant that we purchased. We do our parvovirus monoclonal, so we can make it. We're scaling it. We're scaling it now. But we'll launch in the first half, but it'll be a phased-in launch. Definitely the sales will be more second-half driven. Margins will come as you scale as well. We like the margins of mAbs, but that takes a little while as well, Chris. So it'll be in our guide, but it's definitely something over the next three years that will become a major product.
Yeah. That's helpful.
Any more granularity on it? It looks like you're targeting $225 million-$250 million of maybe incremental innovation based on the slides. How much of that's coming from Quattro versus Zenrelia versus sounds like Bovaer is maybe a smaller piece of that, but just any directional color you can provide?
Yeah. It's a common question we had here. Look, we're going to guide quarterly. We're going to get on the right side of the expectations, but we also are not going to, as we've shared, we're not going to guide by product, by market, or by quarter. The good news is we've got a really we'll get the dynamics of the market and how we're doing in those markets. But what I'll tell you is no question, look at Quattro, look at Experior. AdTab quietly has really grown and become quite a product itself.
And then Zenrelia has probably got the most momentum, then AdTab and Quattro. So we feel very good about how the math adds up in the basket of innovation, but we aren't going to get into the specifics. Again, Bovaer will be more back-end loaded and more 2027-driven to lap that growth that we just had. But that's kind of our concern.
But the globalization of a lot of these products is just something that's really going to drive that, not only in 2026, but beyond. Yeah. Absolutely. You mentioned price. Just directionally, across the portfolio, how much price should we be thinking about for Elanco as we go forward?
Yeah. So think about 2025. We've guided 2% price. We expect, I would expect more than that in 2026 and beyond.
One of the key factors to our price is you think about the lapping of the launches we had this year. All of the Zenrelia and Quattro sales are all volume because we don't have the year-over-year comparison. So we are taking price. Again, it's going to be value-based pricing because of the science and the efficacy and the value we're bringing to the customer. So I would expect pricing to be a little bit better than that 2% as we look forward to the next several years. But again, more formal guidance in February, but price is absolutely going to be a tailwind for us. And I just want to, because clarity matters at these conferences, is we are pricing to value. We're pricing up, as Bob said. I mean, 5%–8% price increases.
There's a gross-to-net thing that'll happen afterwards, but we're not getting share because of price. We're getting share because of efficacy, and that is very clear in the marketplace. And Elanco, it's public. We're taking our prices up because the value is there. Full stop. That's really important for everybody to know.
Right. From a broader perspective, has this string of new approvals in the pet space improved traction with vets across the portfolio? So is there some benefit of, since you're delivering all these new offerings into the office?
There is. Yeah, absolutely. You think about going into a clinic and they're sitting there saying, "Hey, we don't want to take on more inventory. So which area am I going to move out?" So I got three broad spectrum and Dectos. Okay, if I take on derm, then maybe.
So I think there is some replacement and you got to have some switching to occur. I think that's one dynamic that definitely is there. And then you start going up the chain from the buying groups to the small corporates to the larger corporates. Once you start getting pet demand that's going into these corporate clinics saying, "I want Quattro. I want Zenrelia," that's given us the leverage we need to take the share as we go up that chain. We haven't gone up that aggressively because it takes some margin to go up that. And now we've got the demand. We're on the right side, I think, of the demand side now for that.
Excellent. Farm animal has accelerated for Elanco and the broader industry. Just how durable do you see that growth? What's the runway look like for this one? For that segment of business? Yeah.
So listen, so the farm business, it's half of our business. And Chris, you may know this. I'm extremely excited for the value that it brings to our portfolio. So we expect that farm business to grow at mid-single digits over the next several years. As I highlighted on Investor Day, the profitability of the farm business is underappreciated. The EBITDA % value that it provides is the same as our pet side. And that's because the operational cost to run the business is much lower. In the U.S., for instance, our OpEx as a % of sales is 10%. All right? So we've seen a lot more drop to the bottom line. And so it's something that from the CFO's perspective, it's a great business. It's a great cash generation business. We're going to continue to see the growth. We're going to continue to innovate.
But it's an important part of our portfolio, and we think it's, again, a stable business that's going to grow at mid-single digits and provide some good profitability. Excellent. Shifting over to Elanco Ascend, maybe just starting with, where are the cost savings coming from with this program? Where are you most focused? Yeah. So think about, I'll call it four or five pillars, right? And so the largest bucket's really going to be in the operations and the procurement, those two buckets. So the operations is going to continue to see benefit as we continue to perform better within our four walls through continuous improvement opportunities. On the procurement side, we've got a global supply base, and as volumes are ramping and just negotiations with new suppliers, we're getting raw materials at a fraction of what we paid in the past. And so those are the two bigger buckets.
But I would also say in our gross-to-net approach and rebate approach, there's going to be some opportunities there. And so those three, by the way, will improve gross margins. And then we took a restructuring charge, as you know, and that's going to attack some of the G&A cost as well. And so those are the four buckets enabled by the fifth bucket, which will be AI and automation. And so that's really going to enable really the other four buckets. And as you think about where these benefits fall through the P&O, about 75% is going to hit gross margin, 25% through G&A. And then the last thing I'd leave you with, Chris, is on that restructuring announcement we made, we very quickly started executing.
As I think about some of the phasing of the overall Elanco Ascend benefits, we're going to see about 30% of that achieved in 2026, and then more radically as we get beyond. Okay. So post 2026, we're kind of pretty flat. Pretty flattish. Okay. And then maybe last minute or so here, you're targeting less than three times leverage by 2027. What does capital allocation look like once you get down to that three times level? Yeah. So first off, no change to our capital allocation strategy. And you're right. So we guided, we'd end at 3.7-3.8 at the end of this year. We expect to be in the low threes by the end of 2026, and then below three in 2027. Our capital allocation strategy is going to be consistent. We're going to continue to focus on investing organically in the business.
And so that includes the manufacturing facilities to make sure we're bringing the best costed product to the market. We'll continue to obviously have a no regrets approach to launches and fund innovation. So we'll invest organically as a first priority. Very second close priority is going to be bringing down leverage through paying down debt. All right? And so we'll see that as number two. M&A will be a part of our growth strategy as we think going forward. But listen, it is going to be small, tuck-under opportunities that will not derail us from getting below three in 2027. And when we get there, obviously that opens up optionality to shareholder return. And certainly as we move closer to that date, we'll give more color, but certainly we'll have a mix of dividends and share buybacks.
But again, more color as we work with our board and more color as we get closer to that timeline.
Great. Well, I think we're just about out of time. Thanks so much for the comments today. And congrats on the progress.
Yeah. Thanks, Chris. Thanks, Chris. Thanks everybody.