Welcome to the Elanco Animal Health 2020 Investor Day. I'm Tiffany Kanaga, Head of Investor Relations. This event will feature presentations from Jeff Simmons, Elanco President and CEO, Aaron Schacht, EVP Innovation, Regulatory, and Business Development, Racquel Harris Mason, EVP and Chief Marketing Officer, David Urbanek, EVP Manufacturing and Quality, and Todd Young, EVP and CFO. A live question-and-answer session will follow closing remarks from Jeff. Today we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on Slide two and those outlined in our latest SEC filings. The information we provide about our products and pipeline is for the benefit of the investment community. It is not intended to be promotional and is not sufficient for prescribing decisions.
You can find this morning's press release and the slides referenced during this event in the Investor section of elanco.com. The slides in the press release also contain further information about the non-GAAP financial measures that we will discuss today, and we've provided reconciliations to these measures in the slide appendix. With that, I'll turn it over to Jeff to get started.
Thanks, Tiffany. Welcome. I'm Jeff Simmons, President and CEO of Elanco Animal Health. We are excited to introduce the new Elanco and provide a detailed look into the company that we're building. There's been a lot going on in Elanco the last three years, from the strategic review of Lilly and IPO in 2018, signing the Bayer Animal Health acquisition in 2019, and finally closing on the acquisition in 2020, all while responding to three major environmental factors: African swine fever, COVID-19, and a consolidating industry, both among animal health companies and distribution partners. We've worked through these challenges and achieved essential milestones, creating a solid platform for today and our future. We've completed the distribution changes that resulted in increased commercial competitiveness, cash conversion, and market share gains in key pet health products. We've secured financing and remedied antitrust assets.
We've built an ERP system and closed on the Bayer deal. We've completed the sale of the majority of Bayer's 15% stake, and we've expanded our board governance, operational oversight, and innovation expertise. The clarity and closure were key coming into today. Before we go any further, I want to speak directly and candidly to start the day. We have not delivered to your expectations or mine. I want to be clear. Even with the environmental factors, this is unacceptable. We have been a complex, hard story to follow with many moving pieces. We've routinely surprised you and had too many unknowns. Ultimately, this responsibility stops at my desk with me. I am not happy with the performance of our business relative to the potential, nor with the noise that has made us a challenging company to understand.
I will not settle or accept anything less than becoming the strong, reliable execution story all of us expect of Elanco. We will set out to rectify this today and in how we work together moving forward. We're committed to providing greater granularity and clarity. I want to start by summarizing our expectations and what you are going to hear. First, on innovation. Elanco's innovation will create dependable revenue, contributing 2%-3% of growth annually. This starts in 2021 with not five, but eight new launches, contributing $80 million-$100 million in revenue in their first year. We'll deliver an unprecedented view of our pipeline, a detailed makeup of our R&D portfolio, and a clear articulation of projected outputs.
We are increasing the visibility to our R&D portfolio beyond animal health standards, so you have greater understanding of why we are confident our innovation will contribute dependable annual growth through both our potential blockbuster products and compelling portfolio contributions. Regarding growth, we'll grow sales an average of 3%-4% annually and adjusted EBITDA double-digit, increasing free cash flow and delivering. We achieve this by delivering on our innovation, growing our focus brands, and defending our blockbusters from competition while managing cost and selectively reinvesting across our enterprise. We will generate significant cash to reduce our net leverage to less than three times by 2023 while delivering on 60% gross margin and 31% EBITDA margin targets over time. This starts in 2021 with revenue growth of 3%-5%, adjusted EBITDA growth of 20%-25%, and $500 million of debt paydown.
Additionally, we'll establish more reliable and consistent commercial delivery through leadership and structural change. We changed 80% of our commercial leadership team to drive better execution of our portfolio. We added Bayer leadership and key roles and sophisticated our global marketing capability so we're more equipped to drive portfolio growth through a brand and omnichannel approach. We're starting to see early signs of momentum from this change, evidenced by our tightened and raised Q4 guidance. Looking at value capture and cost management, we're accelerating our value capture to deliver $300 million of EBITDA synergies at the high end of our earlier commitment by 2023, two years faster, while managing increased cost from operating as an independent company with two systems through a company-wide productivity agenda. Today, you'll see roadmaps to synergies, cash management, deleveraging, and margin expansion.
We will accomplish all of this with industry-leading transparency, simplified reporting, expanded and strengthened board oversight and governance. We'll provide comprehensive details today to create a baseline for you. We will move to providing guidance for the full year and each upcoming quarter. We'll simplify reporting to provide pet health and farm animal sales for both the U.S. and international, with farm animal species reporting in line with our industry peer. We'll expand and strengthen governance. We'll add three new board members. We also will expand the Finance Committee to include additional operating oversight and create a new innovation and technology board committee. The board continues to be laser-focused on our delivery of consistent innovation, growth, and margin expansion for Elanco's shareholders, customers, and employees. One thing has not changed that I want to note. Elanco's value proposition remains the most significant in our industry.
With the addition of Bayer, our value creation opportunity is more material and more durable than when we launched in September 2018. That's what excites me about Elanco today, along with our tenacious, resilient people driven by their passion to serve our customers, the farmers, veterinarians, and pet owners. Today, we'll detail several important points for you. First, with these milestones behind us, Elanco stands at an inflection point, positioned for accelerated, long-term value creation for shareholders and society. Elanco's three-pronged strategy, innovation, portfolio, and productivity is strengthened and expanded. It remains our foundation for sustained growth and profitability. Innovation will lead our growth in the next few years with a balance of blockbusters with complementary portfolio solutions. Blockbusters matter, and equally as important is innovation delivering consistent, dependable revenue contribution. Our 2021 guidance demonstrates early proof of growth with the innovation contribution from eight new launches.
It makes a blockbuster potential and portfolio solutions while we resume our progress towards our margin targets, and finally, you'll see increased transparency, increased accountability, and governance. Let's start with a look at our long-term growth algorithm. Elanco will deliver 3%-4% average annual revenue growth, complemented by increased profitability to unlock sustainable double-digit EPS growth. As we rebound from 2020, we expect total pipeline revenue of $4.52 billion-$4.6 billion. I will speak more on revenue growth in a moment. As we look at profitability, Elanco will optimize our footprint and operations. We'll transform to a fit-for-purpose structure. We will aggressively continue our company-wide productivity agenda while reporting this to the Finance and Oversight Committee on a routine basis. Ultimately, the stronger combined company will reach our margin goals with expanded long-term opportunity. In 2021, we'll deliver $940 million-$1 billion in Adjusted EBITDA.
Looking at our returns, Elanco will generate significant cash flow and exercise strong cash management to pay down debt, reducing interest cost as quickly as possible, increasing optionality of the business, and most importantly, delivering double-digit EPS growth to unlock value for you, our shareholders. In 2021, we intend to reduce gross debt by $500 million, or one and a half turns of debt, and end the year at approximately five and a half times levered, with intentions to be under three times by the end of 2023. This algorithm will serve as a touchstone for our day. Each of our leaders will provide a deep dive into how we achieve this algorithm. Now, let's take a look at our agenda for the day.
I'll introduce to you the combined Elanco and what we look like now that we've brought together two of the longest-standing brands, 166 years of brand recognition and legacy. I'll share a strategic outlook and the detailed enhanced governance plans. Aaron Schacht, Executive Vice President of Innovation, Regulatory, and Business Development, will deliver an unprecedented look into our pipeline, particularly our R&D efforts in pet health parasiticides, dermatology, noting specific blockbuster candidates and how innovation will deliver dependable revenue growth. Racquel Harris Mason, our Chief Marketing Officer, will walk through our expanded portfolio, our investment approach to optimize growth and profitability, and how we will build portfolios of solutions against key therapeutic needs and the differentiators that will enable our growth. Racquel joined our company in April from the Coca-Cola Company, brings a wealth of CPG experience from J&J and P&G.
Racquel will be a key part of delivering our digital leadership. Dave Urbanek, Executive Vice President of Manufacturing and Quality, will provide perspectives on how we bring our proven Elanco playbook for continuous improvement to the new Bayer footprint to capture value, as well as detailing the next phase of our multi-year productivity agenda. Dave has led our manufacturing organization through significant cost reduction efforts the last four years.
Finally, our CFO, Todd Young, will wrap up our prepared remarks, providing an in-depth look at the roadmap to achieve our long-term targets, how we'll progress our repaying of the debt, and the timeline to get there, as well as sharing our complete 2021 guidance. As you know, Todd joined us after our IPO and brings strong public company financial, tax, and treasury leadership experience, as well as a history of leading through spinoff and separation and stand-up with Baxter and Baxalta.
Finally, we'll look forward to engaging with all of you in a robust Q&A. So now, let's turn our attention to Elanco, who we are and how we got here. We'll start briefly with Elanco's history of transformation and value creation, including the last decade of intentionality that we had to build this global leader. My goal with this slide is for you to see the decade-plus plan of building this leader in animal health that will persist in the future rather than a historical review. It comes back to these three key principles so key to Elanco: innovation, transformation, and value creation. First, Elanco's had a long history of pioneering innovation. First and best-in-class innovation to advance new areas of animal health, from ruminant and intestinal health to revolutionizing the parasiticide market with the first oral combo. In 2007, Elanco began a period of rapid transformation.
At that time, Elanco was driven by just a few brands, lacking portfolio breadth and strength. We set out to adjust our portfolio and strengthen our business in important areas. Every time we acquired a new business, we applied our ingenuity to strengthen the capability and expand commercialization to new areas. Our transformation has always been backed with disciplined accountability, achieving business cases, and creating value that transcended to customers and for our shareholder, Lilly, and now for our investors. In that period, from 2007 to today, our revenue has quadrupled, and the market value has increased approximately 22 times.
Today, after completing what we believe will be the last major acquisition in our industry, we stand as a strategic global leader with a robust, diverse, durable portfolio with more access to the world's animals, at an inflection point, as I said, to grow, innovate, and deliver the next era of value. Stepping back and looking at the industry, as we know, animal health is a durable, resilient growth industry with strong fundamentals that create significant long-term opportunity. The importance of pets and protein, as we've talked, has never become more clear to society than it has as a result of the COVID-19 pandemic. A growing middle class and increased demand for technology to solve challenges creates opportunity across our business, with greater spending power driving increased pet ownership and care, as well as protein consumption.
Meanwhile, continued innovation in technology will give animals a voice like never before, helping us understand animal disease, pain, and well-being in new and interesting ways. As we look at the pet side, we see three key consumer trends: more pets, more attention to our pets with increased care, compliance, and spending, and more spending online. Omnichannel presence, now our sweet spot, has never mattered more. During COVID-19, we saw about a third of pet owners shift their spending online, and the vast majority expect to continue to use this channel. There continues to be long-term opportunity for our growth, as about half of the world's 500 million pets are unmedicalized. In addition to these three consumer trends, pets are living longer lives, creating greater expectation of care, particularly for diseases of aging like cancer and kidney disease.
While there is significant opportunity in pet health, we know that it's a highly competitive market. As we turn our eyes on the farm animal space, the increasing demand for protein across the world, coupled with the growing consumer concern for how animals are raised and their impact on the environment, creates opportunity that Elanco is uniquely positioned to support through new innovations, services, and expertise. Simply said, giving consumers what they want, animals what they need, while using less environment, that's the opportunity for the farm animal business. And we will bring five new products into that space in 2021. Generic competition will continue to pressure this business, while regulatory and trade challenges create hurdles to innovation adoption. In the short term as well, pressure on the food service or restaurant sector will linger as a result of COVID.
Emerging from our Bayer acquisition, though, as we stand back, Elanco's a stronger company, better positioned to capitalize on the industry opportunities and mitigate potential risks. Our expanded global portfolio will help us provide farmers, veterinarians, and pet owners more comprehensive animal health solutions. Today, our business is more evenly balanced between the U.S. and international pet health and farm animal, with new strength in emerging growth economies. Moving to Slide 13, Elanco has eight of the industry's approximately 40 blockbusters, with two more nearing the $100 million threshold. These big brands make up about 35% of our annual revenue and serve as the anchors of our broad portfolios. In pet health, we provide a complete approach to care, from disease prevention and wellness for the youngest puppies to helping older pets remain active, healthy, and happy companions.
We're now the leader in retail and e-commerce and have been outpacing the double-digit industry growth in this market. We have a wide-ranging parasiticide portfolio with the best-in-class product. Our pet parasiticide portfolio, the largest segment of the animal health market, is the broadest in the market. We now offer options from every pet need or preference, lifestyle and budget, from over-the-counter topical treatments and collars, such as the blockbuster long-lasting Seresto collar and flagship Advantage family of products, as well as the veterinary prescribed chewables that prevent worms, ticks, and fleas, and Credelio and Interceptor Plus, and as leaders in parasiticides, you will hear today, we intend to launch a new innovation in this global parasiticide market every year for the next five years, starting in 2021.
Our farm animal portfolio positions us to serve an even broader spectrum of the industry, adding anchor brands from Bayer to our cattle, swine, and aqua portfolios. Meanwhile, poultry continues to be a significant portion of our sales and growth. And in 2021, we'll provide new solutions for the lucrative U.S. poultry Raised Without Antibiotics market. Turning to our capabilities on Slide 14 that are so critical to our success, our expertise in R&D, marketing, and manufacturing, and our highly engaged people position Elanco to create value and long-term success. In R&D, innovative dosing and delivery platforms and our proven late-stage development and globalization capabilities fuel our ability to deliver products that address customers' most significant needs. In sales and marketing, Elanco has omnichannel leadership and time-tested account management expertise. In manufacturing, we have a demonstrated ability to deliver reliable quality supply while driving productivity.
And finally, our people and their passion for this industry set us apart. Historically, high employee engagement scores on the inside of the company translate to differentiated customer experiences on the outside. We have a results-driven culture of ownership and accountability that have been key to our ability to transform. Importantly, engagement, execution, and delivery are measured quarterly at the supervisor level to create disciplined delivery and full accountability. With that backdrop, let's take a deeper look into our long-term algorithm and the strengthened IPP strategy that will produce expanded value. First, on growth, this will be driven by innovation and expanded portfolio, more focused commercial leadership, and greater access to animals and customers through bolstered geographic and channel reach.
Looking at profitability, as we've been able to fully understand the acquired Bayer business, we are increasingly confident in our ability to deliver at the top end of our prior synergy range of $300 million and achieve this full savings in the first full three years. Further, Elanco will apply our proven productivity levers and lean manufacturing practices to drive an additional $100 million in cost savings through a multi-year productivity strategy. Ultimately, the stronger combined entity will create greater ability to reach gross margin and adjusted EBITDA goals with expanded long-term opportunity. Elanco will generate significant operating cash flow and will exercise strong cash management to delever, reducing our interest cost as quickly as possible and increasing optionality of the business. Todd will provide a comprehensive roadmap of our debt paydown over the next three years. Let's double-click on the revenue growth portion of the algorithm.
Top-line growth will be led by a number of new launches in key market segments and in areas that round out and strengthen our portfolio, including eight new launches in 2021, many entering markets that are material in size from parasiticides, pet therapy, Raised Without Antibiotics, and one blockbuster potential in cattle. We expect innovation to contribute an average of $80 million-$150 million in revenue annually, including $80 million-$100 million in 2021. We will continue to augment our internal innovation with our proven strategy of seeking out appropriate platforms, alliances, and late-stage technology development opportunities. External innovation will complement our pipeline and primarily be funded within our R&D expenditures. Moving to our existing portfolio, we will maximize the value of our portfolio by investing in focus brands, those significant pet health, poultry, and aqua brands that are accreted to the overall growth.
In the middle are our core brands, the vast majority of our portfolio that in aggregate are stable to growing slightly. This is balanced with our defend brands, Rumensin, Trifexis, and the Advantage family. These are highly profitable material brands where we will work to maximize our profitability and preserve sales. In total, we expect decline in these defend brands to result in a 1%-2% pull on our overall business. Racquel will describe how we'll grow our portfolio with five enablers to growth. These include launch excellence, price, geographic focus, digital, and expanding our omnichannel leadership. Ultimately, you will hear today a robust plan to achieve 3%-4% growth. Turning to Slide 18, Elanco's combination with Bayer has strengthened our IPP strategy. As I've highlighted, innovation will deliver dependable revenue growth.
With an expanded portfolio of capabilities and access to the majority of the world's animals, and our multi-year company-wide productivity agenda will continue unlocking value. This strategy underpins how we'll achieve our growth algorithm. We have the people, the leadership, and the know-how to deliver on this IPP strategy. In addition to achieving our business goals, Elanco believes our business will and must be a force for good. I want to highlight Elanco's Healthy Purpose, the industry's first sustainability and ESG framework launched this fall. Our new Protein, Pet, and Planet Pledges are based on the intersection of company and business outcomes and societal need, improving food security, human physical and mental health, and increasing environmental sustainability. These pledges are aligned with our customer's bigger agenda, and they really create an interdependency in the decade-long mission ahead.
To date, we've engaged stakeholders, conducted materiality assessment, and are now collecting data for our new larger organization. We are committed to an ongoing reporting that is aligned to leading sustainability and ESG frameworks. Before I close, I want to take a moment to highlight our leadership and Elanco board. Everything I've outlined today will be accomplished with industry-leading transparency, strong oversight, and enriched governance. The board brings a robust history, a broad experience in governance, with a unique combination of backgrounds from finance, audit, and systems to livestock production and veterinary medicine, and innovation to digital food industry and consumer insights. Accountability will be led by an expanded Finance and Oversight Committee and a newly created Innovation and Technology Committee to ensure we deliver for our shareholders, employees, and customers.
The Finance and Oversight Committee will be chaired by J.P. Bilbrey, former CEO of The Hershey Company, and will add routine reviews of our company-wide productivity agenda and comprehensive value creation plans. The Innovation and Technology Committee will oversee and advise our R&D agenda and pipeline and will be chaired by Dr. Deborah Kochevar, Dean Emerita of the Cummings School of Veterinary Medicine at Tufts University. We are pleased also to welcome three new members to our board: Bill Doyle, Scott Ferguson, and Paul Herendeen, effective immediately. The new board members will bring significant leadership and expertise across animal health and pharmaceutical innovation, financial discipline, operational excellence, capital allocation, along with an investor perspective. We look forward to the additional perspectives and expertise they will bring as we continue to execute on our IPP strategy. Finally, a few words about the Elanco Executive Committee.
The team brings an important blend of experience and capabilities critical to lead and grow this company. They are committed to propelling the combined company to new levels of industry leadership. Elanco's management structure is designed to speed quality decision-making, draw senior leadership closer to the customer, and accelerate our shift toward a more consumer brand-centric company. Let's get started. I'll turn it over now to Aaron to walk through the detailed view of our R&D approach.
Thanks, Jeff. Good morning. I'm Aaron Schacht, and I lead research and development, regulatory affairs, and business development at Elanco. It's my pleasure this morning to share with you our approach to innovation and provide highlights of our pipeline.
Today, I'll provide an overview of our expected innovation output over the next five years, highlighting critical areas of focus and market opportunity that will contribute to our innovation growth target of 2%-3%. Based on the algorithm Jeff presented, I will describe how Elanco will achieve this 2%-3% growth from innovation. Our approach leverages our scale and capabilities to sustain innovation flow while securing the best ideas that fit and shape our strategy to compete and advance. Today, you can expect a greater understanding of our capabilities and focus areas, how we arrive at the investment decisions and the priorities that drive the makeup of our pipeline, and I'll describe the expected outputs and business outcomes from innovation. Finally, I'll share an unprecedented view of the Elanco pipeline. Let me begin on Slide five.
As we have matured as a company, we've narrowed our focus to areas where our capabilities meet the science and the market need so that we can compete effectively at scale and drive growth through innovation. We have three technology platforms that provide requisite opportunity to find and develop solutions to the most important unmet needs for our customers. First, biologicals or biotechnology. This encompasses our vaccine capabilities, but also includes focus in biopharmaceutical products such as monoclonal antibody therapeutics, engineered proteins, and other large molecules. Second, the microbiome. This is where we leverage the emerging and exciting science of microbes and microbial communities to create products that preserve and promote health of animals, such as probiotics and prebiotics. Finally, chemistry. We have traditional strength in small molecule discovery and development, and we continue to believe that small molecule innovation in animal health will be rewarded.
We purposely concentrate our pipeline in six categories: three in pet health, three in farm animal products, areas where we have either strength today or significant opportunity to innovate for future growth. Finally, nine focused R&D sites located in the U.S., Europe, and Asia-Pacific support these efforts. As we examine the recent market trends in animal health on Slide six, we can discern that over the past three years, growth in the animal health industry has occurred primarily in three areas: pet health parasiticides, therapeutics, and farm animal vaccines. Aquaculture, while not a sizable opportunity yet, has seen strong consistent growth and remains an attractive market. What I'll share today will demonstrate that we're concentrating our innovation efforts in these attractive but competitive areas and have chosen additional opportunities where we believe innovation will drive new growth.
With that in mind, let's take a more detailed look at the makeup of our pipeline here on Slide seven. The chart on the left breaks down our roughly 170 R&D projects by stage of research and development, divided into farm animal and pet health categories. This number excludes product defense and minor geographic rollout activities, thereby representing the bulk of our R&D focus and investment. We have a balanced R&D portfolio across all phases from research through development and into the regulatory phases, supporting a sustainable flow of innovative product candidates. In terms of mix of projects, the research pipeline is slightly weighted towards pet health and reflects both an intentional focus to balance our product portfolio in the future and also the ample scientific potential, particularly in areas like pet therapy.
In the late-stage pipeline, the number of farm animal projects is greater, comprised of new product innovation as well as crucial life cycle brand maximization efforts. The chart on the right shows that most projects are either in farm animal pharmaceuticals, pet health therapeutics, or pet health parasiticides, all areas with either significant Elanco presence or future growth potential. It's important to note that the number of projects does not necessarily correlate to the expected value and output of those projects, which I will cover later in this presentation. Regarding R&D investment, here you see R&D expense broken down by phase, business area, and innovation type. The previous slide showed a significant number of research projects, and here you see those require a disproportionately low level of investment.
The investment requirements for projects grow as they move through the pipeline, resulting in product development accounting for more than 3/4 of variable R&D investment. Roughly 60% of R&D funds are allocated to pet health, which is driven by a group of novel and very attractive development assets with significant funding. Lastly, our pipeline consists largely of new molecular entities, or NMEs, which tend to require complex development programs but offer greater returns. Life cycle management projects, which are typically faster and less risky, play an important role to extend the life cycle of our established products, and these in aggregate receive below 30% of our R&D investment. You'll recognize Slide nine from our third quarter earnings call back on November 6th. The slide demonstrates our strong track record of growing new products and building strong brands since our IPO.
Looking ahead, many of these will become our focus brands as we are establishing a new baseline for tracking innovation growth starting in 2021. This chart on Slide 10 shows a subset of our pipeline with anticipated approvals from 2021 to 2025. As we have described in the past, we project launch equivalents by aggregating these specific and significant shots on goal and then apply probability of success estimates to each asset for an expected number of launches over the period. As such, we expect to gain marketing authorization for more than 25 new significant products over the next five years. On this slide, you can see both pet health and farm animal expected launch equivalents represented by the solid colored bars. The gray portion represents the full potential for product approvals, assuming no attrition. As you can see, we expect a steady flow of innovation.
Shifting to revenue impact and future value creation from innovation here on Slide 11, we depict the sum of probabilized revenues for all projects that are anticipated to enter the market in the 2021 to 2025 window. In 2025, we expect the pipeline to deliver sales in the range of $500 million-$600 million. Based on our 2020 pro forma revenue baseline, this represents a growth contribution of 2%-3% per year over the time period, in line with what we expect in our growth algorithm. The value contribution between pet health and farm animal is expected to become more balanced over time, with important pet health developments entering the market. Further, we would expect higher peak sales potential of our pet health assets in later years compared to farm animal. Slide 12 provides a holistic look at the expectations for our innovation engine.
As an integral part of our IPP strategy framework that Jeff described, we expect to achieve a 10%-12% IRR on an investment of roughly 8%-9% of net sales, creating significant value for Elanco and our shareholders. We project an average gross margin in excess of 60% for our pipeline assets, accretive to our company gross margin. Finally, projected new product sales in 2025 will be in the range of $500 million-$600 million, capably delivering the expected 2%-3% growth from innovation. Now let's move to Slide 13 and dive into the details of products we plan to launch next year. In farm animal, we anticipate five product launches, all of which are expected to have their first market introduction in the first half of the year. Experior will be our first launch in the U.S.
When fed to beef cattle, this first-in-class product reduces ammonia emitted in the waste of the cattle and can play an important role in improving the environmental sustainability of beef production. Early next year, we expect maximum residue levels, or MRLs, for Experior to be established in essential countries, clearing the way for exports of beef from cattle treated with Experior into these markets, driving product launches shortly thereafter. In addition, we will introduce Increxxa for cattle and swine. This is a tulathromycin-based injectable antibiotic which strategically complements our bovine and swine respiratory disease portfolios in key markets. We recently received approval in the EU and expect approval in the U.S. next year as well. With Increxxa included, we will have one of the most comprehensive portfolios for respiratory disease management, doubling our U.S. sales through both the acquisition of Bayer Animal Health and new product introduction.
In the second quarter of 2021, we will launch Cosabody, an innovative in-feed solution for poultry production. Cosabody is a naturally produced IL-10 antibody and represents a novel approach to coccidiosis management, taking advantage of a new mode of action and is consistent with raised-without-antibiotics standards. I'm happy to report that we have successfully developed an encapsulated version of the product with suitable heat stability for dry pellet formulation, delivering on our promise of a dry formulation to meet specific customer requirements. Cosabody will complement Elanco's portfolio in the U.S. and EU in intestinal health. Lastly, we're planning the launch of two additional anti-coccidial products. These additional raised-without-antibiotics entrants will further cement our leadership in coccidiosis management and could double our market share in in-feed anti-coccidials in the U.S. Our intent is to disclose more details on these products in Q1. Let's move to Slide 14 on pet health.
Here we're excited about the expected introduction of three new products into key markets. Last week, we received our first approval for Credelio Plus with marketing authorization in Japan. This will mark the introduction of Elanco's first oral flea, tick, and heartworm combination product. As an oral monthly injectable product for dogs, it enters a $1.5 billion parasiticide market when considering the EU, Japan, and Australia, with potential for additional geographies. We're excited to bring Credelio Plus through veterinarians in Japan next year. The second launch, Credelio Cat, will be introduced in the U.S. market as a first-in-class flea and tick oral product for cats in the middle of next year. This product is well tolerated with proven safety in cats and kittens.
Credelio Cat has enjoyed strong performance in the U.K. and Ireland since its launch in 2018, and we expect the same for the U.S. with an addressable market of over $200 million. The third product launching in pet health in 2021 will be Elura, which is a new formulation of capromorelin, the active ingredient in Entyce for dogs. You'll recall this is one of the programs in the Aratana pipeline, and we have worked to finalize the development and submission, and we've recently received approval in late October from CVM. It is approved as a solution for weight management in cats with chronic kidney disease and will make a great addition to Elanco's growing portfolio of cat-specific products. Chronic kidney disease is a leading cause of morbidity and mortality in cats.
In summary, 2021 will be a significant year for innovation at Elanco as these eight launches are expected to add $80 million-$100 million in new product revenue and include a product with blockbuster potential. This is in line with our long-term algorithm expectations of 2%-3% of innovation per year, giving us a great start with our next wave of innovation. Now that we've addressed the most immediate product introductions, we want to give you a view of products in our pipeline residing in key product categories. We begin with pet health parasiticides on Slide 16. The pet parasiticide market is divided into three subcategories. Ectoparasites, the largest market category, includes products effective against parasites that are found outside of the pet, such as fleas and ticks. Endoparasites include anything that would live inside of the animal, such as heartworms or GI nematodes.
The third space is based on combining endoparasite and ectoparasite ingredients to create a single conveniently dosed product that addresses both internal and external parasites. The U.S. market commands roughly 60% or $3 billion of this $5 billion-plus global market. Elanco is well represented with an estimated 30% market share in each of these three categories, owning six of the estimated 15 blockbusters in this space. However, looking at the robust pace of innovation in parasiticides, predicting future trends is key and allows us to develop products that will drive significant demand in the future. We currently target four main innovation areas that enable us to defend and grow our current market position. First, oral ende ctoparasiticide products. This is the current frontier of innovation and will serve as the basis for competition in pet parasiticides for the foreseeable future.
The current gold standard for spectrum is delivered by pairing an ectoproduct with an endoproduct. Elanco currently offers the best coverage with pairing of Credelio and Interceptor Plus. Single products that combine ectoparasite and endoparasite ingredients have emerged and will gain share due to convenience. As mentioned, we will be present with Credelio Plus in major European countries, Japan, and Australia as of next year. Next, novel mode of action heartworm products. Many currently available heartworm products are from the same class of active ingredient, macrocyclic lactones, and we believe that developing a new chemical class would provide a significant competitive advantage with the potential for breaking resistance that is seen with established active ingredients. Next, season-long, single-dose products are an unmet market need, especially when the form of application allows the veterinarian to keep the business in their clinic.
A single oral dose or single injection approach would be very different from currently available products, especially in the ecto or endoparasiticides, and lastly, OTC innovation. With Bayer's portfolio and commercial strength in OTC channels, we are positioned to be a holistic leader in this space as we continue to develop solutions to unmet needs, such as extended duration. Now I'd like to share an unprecedented view of key projects in our pipeline. Slide 17 gives a rich look at our pet health parasiticide pipeline, covering all areas we just discussed at various stages of development. We have multiple shots on goal in all major areas, including endectoparasiticide products, OTC innovation, long-acting ectoparasiticides, and novel mode of action heartworm products, many of which have blockbuster potential.
These products are staged to play out over the period, which creates the potential for a sustained flow of parasiticide innovation, augmenting our existing position of strength based on valuable brands. We also cover a variety of forms and modes of action, putting us in the fortunate position to have ample choices ahead of us. Our intention is to deliver one parasiticide innovation on average per year through 2025. Keep in mind that this table represents shots on goal for products that we expect to be submitted by 2025, and we could experience attrition or delays, as is normal in any R&D pipeline. This reinforces the importance of having more than one shot on goal in each innovation area. In summary, we have an exciting lineup of differentiated product opportunities.
Not depicted here, but to be noted, is that our research team continues to pursue efforts to discover and progress novel actives and modalities for protecting cats and dogs from parasites with future-safe, convenient, and efficacious products. Now let's move on to pet health therapeutics and, more specifically, dermatology on Slide 18. Even though this category has experienced tremendous growth over the past several years, we still see this as an underdeveloped space dominated by two products offered by a single company. There is potential here to not only introduce new solutions but expand this market. Current treatments in this space address symptoms, itch, and inflammation that cause the undesired behaviors of scratching, biting, or head shaking. There's an opportunity here to develop treatments that address the underlying cause of the behaviors or disease modification and also to expand options in treatment frequency and application form.
Let's move to Slide 19. Here's a high-level view of our near-term pipeline assets in pet health dermatology and therapeutics. Specifically, we're highlighting five dermatology products for dogs and three cat specialty products. The dermatology projects include three oral small molecule projects and two injectable antibody projects aimed at five different target mechanisms of action. We see strong validation for each of these targets, and we believe pursuing these in parallel is the best strategy for ensuring a higher likelihood of success while exploring different efficacy, tolerability, and convenience profiles. While I've explained the investment rationale for this robust dermatology portfolio that projects the first submission in 2022, the other assets will expand our cat portfolio, a species that still lags medicalization rates seen in dogs and will offer future growth potential. Many of these pipeline assets have revenue potential in excess of $100 million.
Beyond these development stage efforts, we have a funnel of exploratory projects in pet therapeutics addressing a range of unmet needs to treat chronic diseases in pets. Now let me share more about Elanco's farm animal pipeline. In farm animal, incremental innovation is more common, often leveraging established active ingredients which benefit from a higher probability of success. Our approach is to target innovation that is desired by our customers, which translates to products that typically serve to balance the health challenges of animals while addressing consumer expectations for a safe and sustainable supply of animal protein. Moving to the next slide, in 2021, we anticipate five product introductions from our farm animal pipeline with strong contributions toward the $80 million-$100 million revenue target.
In addition, we have a full complement of almost 100 projects split among early and late-stage development, leading to a durable flow of innovation over the next five years. Our projects, which stem from and build on a deep understanding of the needs and challenges faced by livestock producers, span therapeutics, parasiticides, vaccines, plus targeted investment in promising nutritional solutions. This pipeline exhibits a good balance of product support and defense, along with the advancement of innovative products with potential to establish new approaches to animal health and well-being. Now that we have covered our development pipeline in some detail, I want to come back and talk about the future of innovation at Elanco. On Slide 22, our three platform areas are represented in more detail: biopharmaceuticals, microbiome, and chemistry. We have exciting projects underway using science and technology that rivals what you would expect to see in human medicine.
These efforts will identify novel actives that become the basis for the efficacy of a product. However, it's equally important that we have the means by which we can incorporate these novel actives into a product, leveraging a range of formulation and delivery strategies for convenient and safe dosing. The future is very bright with the potential for subsequent waves of innovation coming from these efforts. Moving to Slide 23, it's important for you to understand how our innovation model works. Our main focus and foundation is our core R&D model, which enables Elanco to discover, develop, and commercialize products, delivering sustained growth from innovation. We employ a disciplined and pragmatic model for project selection with rich engagement and involvement of commercial, manufacturing, and quality leadership to ensure we select the best projects that fit our strategy and meet our criteria for investment and align the resources of the organization.
We also engage our board of directors through a recently established innovation committee to ensure appropriate challenge, support, and advice from our board experts. This core organic innovation flow is supplemented by a range of external innovation strategies and initiatives, complementing but not distracting our internal focus. These approaches will augment value from innovation in three ways. Licensing provides additional pipeline substrate from external sources. Our recent announcement of the license agreement with Kindred Bio for KIND-030 is a great example of how we scout for and attract opportunities to bolster our pipeline, and we do this within the confines of our planned R&D investment capacity. We see great potential to leverage external partnerships as ways to compete with new product platforms or in new areas or by forging key alliances to strengthen our position in key markets.
A good example here is our emerging connected care platform strategy with an objective of connecting the animal, the animal owner, and the veterinarian in powerful ways. This level of connectedness will drive deep insights for new offerings, reinforcing our position as a trusted partner to those who care for animals. And finally, we see opportunity to capture value, for example, leveraging or repurposing innovation and active ingredients from animal health for human applications. We have a current example with the out-license agreement that we have with Tarsus Pharmaceuticals, who are using lotilaner to create a novel product to treat Demodex blepharitis, an eye condition caused by mites that infest eyelash follicles. Taken together, we have a unique and differentiated innovation model capable of sustaining discovery and development of novel products, complemented and supplemented by external innovation strategies.
In summary, we've shown that we have a world-class innovation engine with clear focus areas and targeted investment. With this strong base for internal innovation, we are versatile enough to complement with external innovation, allowing us to deliver a sustained contribution of 2%-3% annual growth. We have a very robust pipeline, and I've shared in an unprecedented manner a sizable fraction of this pipeline in our key innovation areas. We've got significant momentum as we enter 2021, with eight product launches next year generating $80 million-$100 million in new product revenue. This sets a strong foundation for an exciting period where we expect to deliver $500 million-$600 million in product revenues in 2025. Thank you for your attention. Now I'll hand it over to Racquel.
Thanks, Aaron. Hi, everyone. My name is Racquel Harris Mason, and I'm Elanco's Chief Marketing Officer. Prior to Elanco, I worked in marketing and brand management for P&G, Johnson & Johnson, and Abbott Laboratories. I spent the last 14 years at the Coca-Cola Company, leading brands and portfolios, including Coca-Cola and Coke Zero, the Sprite and Flavors portfolio, and the U.S. McDonald's business. Directing these iconic assets has given me important insights into how to drive results through deep customer and market understanding and effective cross-functional collaboration. I joined Elanco in April of this year because I saw an unprecedented opportunity to bring together the portfolios and the capabilities of two long-standing animal health companies to truly improve animal health and better connect and bring value to our customers, veterinarians, farmers, and pet parents.
Moving to Slide three, this morning, you heard Jeff introduce the long-term growth algorithm and the overall revenue growth opportunity of 3%-4% on average annually. You heard from Aaron how innovation will play a key role in our growth both in the near term and also over the next several years. Now I'll share with you how we plan to maximize the value of our current portfolio to complement innovation and deliver growth. We've organized our current portfolio into the three buckets Jeff introduced: focus, core, and defend brands. We have developed targeted strategies to maximize resource allocation and returns across these three areas. Additionally, we are focused on five key enablers that will enable our growth agenda across our portfolio. Today, I'll walk you through four areas. First, some context on the new Elanco.
Then we'll spend some time on the pet health and farm animal categories, highlighting some of our key brands and species. Finally, I'll cover our five enablers: launch excellence, omnichannel, geographic focus with a special look at China, pricing, and our digital ecosystem. On Slide five, let me start with an overview of the new Elanco. The combination of Elanco and Bayer has diversified our portfolio with the addition of leading over-the-counter pet health products, Seresto, and the Advantage family, strengthened our footprint in pet health internationally, and enhanced our farm animal solutions. The hallmark of our portfolio, both today and in the future, is its durability, created through diverse brand offerings and an integrated approach to selling. As Jeff mentioned earlier, our portfolio is now more balanced between pet health and farm animal.
Globally, blockbusters make up roughly a quarter of the industry, and we have eight of these important products. These well-known brands, Seresto, Rumensin, Trifexis, three in the Advantage family, Maxiban, and Interceptor Plus, contributed roughly 35% of our sales in 2020 on a pro forma basis. These brands serve as pillars within key portfolio areas and are split between our focus brands that will continue to drive growth and our defend brands that we will optimize in the face of competition. The rest of the portfolio, the core brands, are global, regional, and local brands which serve the specific needs of our customers across the world. Moving to Slide six, Bayer has brought exciting capabilities to Elanco. We have combined Elanco's long tradition of veterinary and B2B sales excellence with Bayer's market-leading multi-channel marketing orientation. Bayer's leadership revolutionized and really opened up access to channels beyond just the veterinarian.
Essentially, our strategy is to be where our customers are, whether that's in the store, in the veterinarian's office, or on their phone. Moving to Slide seven, as Jeff mentioned this morning, since August, we have strengthened our commercial approach by organizing around four distinct commercial areas. This allows us to appropriately prioritize and pursue the diverse growth agendas of each geographic area. This is complemented by a global marketing team that improves effectiveness by supporting the balance between global consistency and local differentiation, and we've seen the benefits. Better alignment for the combined organization and a closer connection to customers is resulting in improved competitiveness, driving our raised fourth-quarter revenue guidance. Now I'll cover the pet health and farm animal sectors. Let's start with pet health on Slide nine. The global pet health market is about $10.7 billion, and Elanco has a broad portfolio in the largest segments.
As Jeff described, we continue to see positive trends in underlying pet health markets with important tailwinds that we are well-positioned to capture. We acknowledge this is a competitive market, but through the differentiators of our global reach, omnichannel presence, and experience in direct-to-consumer engagement, we expect to drive growth. Elanco's $2.1 billion pet health business is represented in important market segments. In pharmacologicals, pain is a stronghold for Elanco. We have multiple, well-known and innovative offerings such as Galliprant, Onsior, Deramaxx, and Nocita. In biologicals, our U.S. vaccines portfolio is a valuable asset to veterinarians. In anti-infectives, we added several differentiated Bayer products, including Baytril and Claro. In parasiticides, the largest market segment, Bayer gave us scale and diversity with breadth across channels, delivery mechanisms, and modalities. Let's move to Slide 10 to cover this market in more detail.
Elanco is a significant player in this $5.3 billion global parasiticide market with the brands, capabilities, and innovation to remain a leader. Our brands in this category are well-known and trusted by veterinarians and by pet parents, offering the broadest spectrum of coverage in the industry. The growth of our focus brands, Seresto, Credelio, and Interceptor Plus, and the optimization of our defend brands, Trifexis and the Advantage family, is enabled by our industry-leading capabilities to meet pet parents online, in the veterinarian's office, or in retail stores. We do this at a variety of value-optimizing price points and a variety of treatment options: topicals, collars, and orals. As you heard from Aaron, we're working on building the future of the category. We will broaden our portfolio in 2021 with Credelio Plus, a flea tick and heartworm combination oral product.
We expect to launch in Japan in Q1 of 2021 and in Europe over the course of next year. Our innovation engine is set to deliver a new offering in this space each year on average through 2025. Additionally, we are thinking bigger than just product innovation. Aaron shared opportunities in connected care, and we will leverage our broadening digital ecosystem to differentiate. Elanco is well-positioned with brands, capabilities, and broad innovation to take on the competition across the globe. Our largest focus brand is Seresto, so let's move to Slide 11 and discuss it in greater detail. Seresto has revolutionized the parasiticides business. As one of the top five brands in animal health history, its growth since launch in 2012 has been impressive. The brand is nearing $400 million in sales for 2020, benefiting from its channel diversity, OTC availability, and digital presence, especially in this unique year.
The Seresto collar's polymer-based release mechanism, superior duration with up to eight months of coverage, and unique repellency offer an exceptional value opportunity for dog and cat owners. We continue to see runway for Seresto's growth and are investing in omnichannel efforts and direct-to-consumer engagement to deepen our relationships with current customers and expand reach to new pet parents. Continued expansion and market building in key emerging markets, as well as life cycle management, will maximize the value of this important asset. Now let's cover two important focus brands from the legacy Elanco portfolio. Credelio and Galliprant have been significant innovations for Elanco over the last several years and are both nearing blockbuster status. Credelio delivers state-of-the-art oral parasite protection from fleas and ticks, meeting the needs of even the youngest puppies. The Credelio franchise includes the first flea and tick tablet designed for cats.
Credelio Cat is gaining share in the EU and will launch in the U.S. in 2021. Credelio continues to have runway to peak sales. We will leverage the complementary pairing of Credelio with Interceptor Plus in the U.S. to maximize the value of this brand in the competitive space. Used together, the products provide pet parents with the broadest flea, tick, and worm coverage in the market. Our global expansion and enhanced marketing capabilities will drive this brand. As pets are living longer lives, they're encountering new care challenges, including pain. Galliprant is a first-of-its-kind targeted NSAID for canine osteoarthritis pain and inflammation. Galliprant uniquely targets the source of pain and has a differentiated safety profile that is approved for daily use. This focus product is the fastest-growing pain product in animal health, and we continue to see potential.
We will drive growth by continuing our efforts to position Galliprant as a first-line treatment, driving disease state awareness, and further expanding geographically. Galliprant is a brand that really connects with customers emotionally. We regularly receive notes and even videos from pet parents thanking us for Galliprant, saying things like, "It's given me my dog back." That kind of individual product experience is powerful for veterinarians and pet parents alike. We've talked about Elanco's positioning in the global pet health market and several of our key focus brands that will drive our growth going forward. I'd like to conclude the pet health section with perspective from Joyce Lee, our U.S. pet health leader, on one of our enablers, our omnichannel approach.
Hello. I'm Joyce Lee, Executive Vice President and President of the U.S. Pet Health Business and Commercial Operations. I'm excited to be leading Elanco's U.S.
Pet Health Business after leading Bayer's North America Pet Health and Farm Animal Business for over four years. The merger of Elanco and Bayer Animal Health has strengthened and accelerated the legacy business of both companies, creating a leader in the over-the-counter and veterinary markets. Through our combined portfolio and our multi-channel capabilities, we are focused on the shopping preferences of pet owners while collaborating with key stakeholders like veterinarians. With the 2021 U.S. Pet Health market expected to be roughly $5.8 billion, growing at approximately 4%, Elanco is positioned to maximize our presence and market share, currently at 23%, to grow faster than the market. Our omnichannel approach in pet health, meeting customers where they prefer to purchase, in vet clinics, through retail, mass, and e-commerce, will fuel continued growth, allowing us to outperform the market.
Currently, e-commerce and retail channels make up roughly $1 billion of animal health industry sales, with double-digit growth over the last decade. Both Elanco and Bayer perform well in this space, with Bayer being the largest in the flea and tick category in e-commerce. With 2021, we will excel at providing customized solutions for our customers based on pet owner insights and market trends. We will transform the way we communicate with veterinarians and pet owners, creating a multifaceted approach focused on disease awareness, early detection, treatment, and post-diagnosis monitoring. We will continue enhancing our capabilities to be a marketing-driven organization with a sales focus. With the combined resilience of our colleagues and our industry and our laser focus on execution, we are positioned to grow our pet health leadership in 2021.
Now let's move to farm animal on Slide 15.
While pet health commands a majority of the mind space for the industry externally, farm animal represents over 60% of the total market. Although the global market has been pressured by African Swine Fever and impacts of the COVID-19 pandemic, the increasing demand for protein will remain a tailwind as we go forward, supporting the industry's long-term durability. The nearly $21 billion market is dominated by ruminants, with poultry and swine each representing about a quarter of the category. Elanco has comprehensive solutions for problems that matter to our customers and drive value for their businesses. We bring our strength in treating cattle and swine respiratory diseases, our comprehensive range of cattle insecticides, and our leadership in poultry gut health and Salmonella prevention. Elanco is well-situated in the farm animal space with leading positions in most major species.
We're the number one player in global poultry and aqua, two areas that are part of our focus brands and have historically been called future protein and health. As part of our simplification approach, we will now provide individual detail for poultry and aqua. While our business has faced near-term pressure in these markets as a result of the pandemic, we believe in their resiliency and importance in satisfying the world's growing protein needs. We also maintain top three global positions in beef and dairy. Overall, Elanco is a leader in this durable growing market. Now we'll take a look at Elanco's two largest species, cattle and poultry. Moving to Slide 16 on cattle. Elanco has a rich legacy in the $7.8 billion global cattle market with capabilities and expertise uniquely tailored to our customers. First, we have the broadest portfolio in the industry.
Our cattle portfolio is anchored by Rumensin, our leading product for beef and dairy cows that improves feed efficiency and prevents and controls coccidiosis. This defend brand has served generations of farmers and remains one of the most widely used feed ingredients in the beef and dairy industry today. Since the U.S. launch of a generic Rumensin in 2019, we have met our market share expectations and believe that this product will continue to deliver value for customers in the years to come. The combination of Elanco and Bayer is highly complementary, bringing together Elanco's strong B2B sales and technical expertise with Bayer's OTC footprint and portfolio marketing capabilities. The combination of the two businesses broadens the offering of products and services available to our large global customers, as well as affording Elanco deeper access to important cattle markets in Latin America and the Pacific Rim.
Next, we are bringing valuable innovation to our global cattle customers. Our combined portfolio and pipeline will significantly expand bovine respiratory disease solutions to address one of the costliest and most significant diseases our beef and dairy customers face globally. I am very excited to help drive the launch of Experior in 2021, the first product to receive an environmental claim as part of its label from the FDA. Experior will provide differentiated value to our customers and has blockbuster potential. Finally, and this is a key differentiator in our commercial abilities, we deliver industry-leading value-added platforms to help drive better customer outcomes. Our exclusive Elanco Knowledge Solutions services deliver resources to help producers with key challenges like animal health, production, and finances. We offer proprietary products to give producers actionable insights to not only tackle challenges but also drive opportunities.
These insights are a valuable part of our overall customer offerings and create measurable loyalty. We typically see EKS customers spend one and a half to two times more per animal on Elanco products than those who don't utilize these services. Now let's discuss poultry on Slide 17. In the $5.5 billion global poultry market, performance is profitability. Elanco offers the most comprehensive portfolio of solutions for performance, flock health, and food safety. With blockbuster focus brands like Maxiban, we are the market leaders with 45% share in control and prevention of intestinal disease, a key challenge for producers. Our Salmonella vaccine franchise continues to lead the industry with a 55% share. These vaccines, coupled with our other food safety solutions, enhance our customers' food safety assurance programs. However, it's more than just performance.
Consumer choice drives this sector, particularly in the U.S. market, where producers and protein companies seek differentiation. Elanco understands the needs of our customers and has focused on building a portfolio of solutions that satisfy the RWA or Raised Without Antibiotics space. As you heard from Aaron, Cosabody will be a novel solution in this space. Additionally, we have two other new products that will launch in the RWA space in 2021. Our poultry customers also benefit from our digital ecosystem. These value-beyond product offerings help drive our customers' operational excellence. We are the experts in advanced data platforms to improve animal health, welfare, and food safety by optimizing farm performance and business results from the barn to the boardroom. Our data analysis offerings complement our comprehensive portfolio and allow us to build deep relationships with our B2B customers. We've talked through our pet health and farm animal businesses.
Now let's talk about our enablers, which support our portfolio growth and build on our legacy of trusted solutions. You heard from Joyce about omnichannel, a key pet health enabler. Now, Ramiro Cabral, our international commercial leader, will provide insight into China, an important geographic focus area.
Hello. I am Ramiro Cabral, leader of Elanco's international business. China is changing rapidly. A growing middle class, increased urbanization, and maturing pet health and farm animal industry. Elanco is ready to capitalize on those trends by meeting customer needs across species and across channels. So this growing middle class contributes to double-digit increase in pet ownership and a rise in demand for animal-based protein. This makes China the fastest-growing animal health market in the world.
With the acquisition of Bayer Animal Health, Elanco has doubled our footprint in China, and we are positioned to unlock growth opportunities both in farm animals and pet health business. We are now a top three among multinational animal health companies, both in farm animals and in pet health. Our business, both of them are expected to grow double-digit in the coming years in China, and collectively, China will contribute about one percentage point of Elanco's overall top-line growth in 2021. So first, farm animals. Elanco has complemented our historical footprint with the addition of Bayer. There is no doubt that African Swine Fever has created significant disruption in the Chinese swine market over the last two years. We continue to be encouraged by the progress made by our customers to repopulate herds and improve biosecurity measures.
We have adapted our commercial presence to align with this new evolution of the market, with a meaningful shift towards industrialized farms. We have invested in key account teams, strategic account management, focus on enhancing our B2B efforts, as well as increased reach and frequency with these customers. Our portfolio has been well-positioned to take advantage of the industry rebound with products like Pulmotil, Denagard. They drive value for our customers and Elanco. We expect growth here to return to more normal levels over the next few years as the domestic pig market begins to stabilize. We are focused on a portfolio shift to increase our offering of antibiotic alternatives. We will leverage our strong existing relationship with producers, and we accelerate sales for nutritional health, biosecurity, and food safety vaccines. Additionally, Aqua, especially warm water portfolio from legacy Bayer, supports this portfolio shift.
These growth drivers will complement our strong core brands to deliver double-digit growth over the coming years. Now shifting to pet health. As I discussed, increasing pet ownership and medicalization drive significant opportunity in the market. Consumer trends in China are following the same path we are seeing in the West. Pet owners are looking for trusted brands, using online channels for research, connections, and purchasing. And for Elanco, e-commerce sales are growing significantly, and the current trends signal that this channel could even account for more than 50% of parasiticide sales by 2025. Additionally, there has been significant consolidation in veterinary hospitals, creating an emerging corporate space that we believe will triple as part of our business over the next five years. We have created an e-commerce team. We are investing in B2B and key account efforts as well.
We expect our pet health business to provide double-digit growth over the coming years. This will be driven mainly by our current parasitic portfolio, Advantage Family, Seresto, and it will be bolstered by geographic expansions of focused global brands like Credelio and Galliprant in the next few years. In summary, there are three things I want you to take away. First, structural industry tailwinds are driving an expected 10% CAGR in the China animal health market over the next five years. Next, Elanco is well-positioned as a top three player with a footprint built for the future and innovation on the horizon. Finally, the expected double-digit growth in our China business will contribute about one percentage point of overall growth for the company in 2021. We are excited about the opportunity to serve our customers and continue building the Elanco brand in this dynamic market.
With that context on omnichannel in China, I'd like to highlight another key element supporting the growth algorithm: pricing. Our market position is built on a comprehensive portfolio and strong long-term relationships with customers that create an essential foundation. Given our broad product range and the competitive environment, we are leveraging our value and portfolio-based pricing approach to best position our brands in the market and capitalize on existing pricing opportunities. As a reminder, animal health is a cash-pay market, unlike human health, so our products must always deliver value to our customers. We operate a holistic pricing approach with disciplined central governance that allows for pricing implementation at the affiliate level. These three elements will allow us to unlock profitable growth. Moving to Slide 21, let's talk about Elanco's digital ecosystem approach. Digital is now a way of life for our customers.
40% of pet owners purchase online, 50% of veterinarians purchase products online, and 52% of farmers use smartphones or tablets to manage their operations. Proprietary research spanning 45 countries has shown that we're going to emerge from this pandemic not only with a ton of masks, but with an entire new set of consumer behaviors. COVID-19 has accelerated the adoption of digital platforms at a rate that condenses years into just a few months. Our goal is to create a closed-loop system that delivers one integrated customer experience that is engaging, leverages data to inform better commercial decisions, and delivers productivity by optimizing our execution at every single touchpoint. Bayer has brought over exciting work in the digital space, building a framework which resulted in a three-to-one retention rate of sales.
We're in the process of taking that framework and building turnkey resources that can be customized by local affiliates. This will help us maintain brand control centrally while enabling affiliates to customize offerings based on market needs. To wrap up our discussion on key enablers, let's talk about launch excellence. You heard from Aaron about the eight expected product launches in 2021. Our global and local teams are readying for the Japanese launch of Credelio Plus, Elanco's first broad-spectrum parasiticide, which just received approval last week. We're also preparing for two important launches for cats in the U.S., Credelio Cat and Elura, both differentiated offerings in their spaces. On the farm animal side, Experior and Increxxa in cattle, Cosabody, and two other RWA products are expected to launch in 2021. Our marketing, commercial, and manufacturing teams have been working together with R&D throughout the development process to ensure launch success.
By reducing silos, we increase efficiency and speed. We've been thoughtful about creating a framework that provides rigor without slowing us down. We've identified the key elements that are critical to success and making sure we get those right. We look forward to the significant opportunity ahead of us. Now let me summarize. Elanco is focused on maximizing the value of our strong, durable portfolio to drive average revenue growth of 3%-4% annually. We have an improved commercial structure to meet the needs of our customers across the world. We will continue to grow our focus brands and optimize our defend brands and will drive commercial success by leveraging our key enablers. We have a diverse and balanced portfolio across brands, species, and geographies that will allow us to maximize value and deliver on our sales growth expectations.
Thank you very much for your time today, and I look forward to interacting with you in the years to come. Now let me hand it over to Dave.
Thanks, Racquel. Hello, everyone. My name is Dave Urbanek. I serve as Elanco's Executive Vice President of Manufacturing and Quality. I have more than 30 years of experience in pharmaceutical manufacturing. Prior to my move to Elanco in 2017, I worked at Lilly, where I had a variety of experiences, including running manufacturing for emerging markets and helping drive the technical improvement agenda in diabetes care. During my career, I have been responsible for many different product types in human and animal health pharmaceuticals, including small molecule, biotech, oral dose, parenteral, and vaccine manufacturing. Let's get started on Slide three.
In the manufacturing and quality, or M&Q organization, we are proud of how our work contributes to Elanco's ability to serve our customers, the pet owners, farmers, and veterinarians that rely on our products. Our focus in M&Q is to reliably supply products while ensuring quality and safety for both our products and people at a competitive cost. This balance serves as a consistent foundation to how we operate and make decisions in our organization, underpinned by an intense focus on employee engagement and inclusiveness in the company's largest function. So let's move to Slide four. Today, I will focus on the M&Q productivity agenda, an essential part of Elanco's margin expansion journey. Later, Todd will discuss the broader margin analysis, putting our efforts into context for Elanco's overall long-term growth algorithm and value creation. Today, I want you to take away four things.
First, we are delivering and beating the expectations we set out for ourselves in savings and cost avoidance from 2018 to 2020. Next, a better understanding of our three productivity levers and how they are deeply rooted in our culture. Third, we see a continued runway to drive cost savings as we move into the next phase of our productivity journey. And finally, my view of the newly combined organization and the expanded opportunity we see through adding the Bayer Animal Health Manufacturing Network. On slide six, I'm pleased to share that we've delivered $250 million of cost savings and avoidance from 2018 to the end of this year. This exceeds our previous communication of $250 million of savings in this period. I credit this overperformance to a very capable, dedicated M&Q organization and senior management team.
We meet weekly to ensure we hit our deliverables in quality, safety, supply, and productivity. This focus and this accountability have allowed us to meet our expectations and create additional opportunities. We exceeded our initial goals by accelerating some of the items to create more benefit over time and through additional technical agenda improvements and projects not in our original scope. And we see runway for more. We continue to expect we can generate at least $100 million in additional cost savings and avoidance in 2021 through 2023 for the legacy Elanco organization. Moving to Slide seven, let's talk about how we're driving these productivity savings. We organize our opportunities into three main levers: operational excellence, our procurement agenda, and our technical agenda. The percentages you see represent the contribution of each lever to our overall savings efforts.
Operational excellence is the rock of our cultural desire for the improvement in M&Q. This encompasses our implementation of lean processes and principles, which increases efficiency, allowing for insourcing, as well as our footprint and structure rationalization efforts. Let me share a couple of examples to bring this to life. In 2018, we consolidated our vaccine manufacturing facility in Larchwood, Iowa, with our facility in Fort Dodge, Iowa. This work created a greater centralized vaccine capability at our largest facility, building off strong existing capabilities at the site, and resulted in a net $15 million of annual savings. Additionally, we have implemented lean manufacturing principles throughout our organization. This has allowed us to create free internal site capacity, and we've taken advantage of this capacity and insourced certain manufacturing of pet health products from external manufacturers into those sites in France and Indiana.
This has also resulted in a savings of about $15 million annually. These actions are complex and take the collective effort of many people at Elanco, but we built a muscle throughout the organization to identify and execute these types of opportunities. Our next lever is procurement. By negotiating with new suppliers or obtaining better pricing from existing suppliers, we delivered savings for Elanco across the supply chain, from API and drug product to final packaging, warehousing, and distribution in excess of $100 million during 2018 to 2020. Finally, I'll touch on how our technical agenda drives cost reduction and avoidance in manufacturing processes. These science-based improvements generate greater yield and efficiencies in the manufacturing process. I believe our team's technical expertise in science and engineering is a strategic capability that is a key differentiator for Elanco.
Our demonstrated ability to drive process improvements in a compliant manner and successfully implement product technical transfers allows us to drive continuous improvement. Our technical agenda has delivered benefits across our portfolio. One area of impact is fermented products: narasin, monensin, and avilamycin, the active ingredients for Maxiban, Rumensin, and Surmax, respectively. Our strain development lab has improved processes for these mature products, driving over $5 million in annual savings. Additionally, we achieve yield improvements for focus brands like Credelio, Clynav, and various poultry vaccines for gains in profitability as we move forward into the next era of our productivity agenda. Small changes accumulate into a big impact in this area, and our technical capabilities will continue to create meaningful benefit for the company across both legacy Elanco and legacy Bayer M&Q networks. I believe our strategic focus on science and technology is truly a competitive advantage.
This is further strengthened by our partnership and collaboration with Aaron's team in R&D, Racquel's global marketing team, and the commercial regions to ensure quality products with reliable supply and coordination and delivery of product launches. These three productivity levers are deeply rooted in our culture and are delivering structural and sustainable cost improvements. Now, moving to Slide eight. As you know, our productivity efforts are not immediately reflected on the income statement and take time for the reduced cost of goods sold to flow from the balance sheet. On the left-hand side, you can see that our progress over the last several years has allowed legacy Elanco to maintain relatively flat cost of sales despite inflationary pressures. With growing revenue, this has, in turn, led to gross margin improvement, even with the pressure from mix headwinds.
As we move to 2021, we expect flat to reduced cost of sales on the legacy Elanco business, as the improvements and cost savings we are capturing are structural in nature and will persist. Now, Slide nine. I'll discuss how Bayer has expanded our global network and the areas we will focus on for value capture. On the left-hand side, you can see the map depiction of our now 20 global internal sites. Our legacy Elanco network has 12 internal sites after our exit of Larchwood in 2019, down from 17 sites in 2017 as we have sharpened our efforts. In the newly combined organization, we have about 3,500 employees. Bayer has brought several new capabilities to our internal manufacturing organization. For example, differentiated animal health delivery devices, including collars, and a broad regional supply network.
We are currently integrating the legacy Bayer Animal Health M&Q organization into one Elanco team and identifying ways to optimize the overall organization. We are working closely with Racquel and the commercial team to understand the combined portfolio and prioritize our efforts. We are evaluating opportunities for consolidation of site production with both internal and external supply sites. There is continued opportunity for procurement efforts to drive cost savings, especially in places where we have multiple sources of external supply. And finally, we will integrate our proven lean manufacturing principles with legacy Bayer sites to optimize for quality, safety, sustained supply, and productivity through an engaged, highly capable team. Moving to Slide 10. Our productivity agenda remains intact. We continue to see a clear path to the $100 million in additional savings at legacy Elanco from 2021 to 2023.
Additionally, we see opportunities to apply best practices from our three productivity levers to the Bayer business, as I described, which will contribute an additional $40 million-$60 million to the overall synergy projections for 2021-2023. Additionally, recognizing longer lead times within M&Q, we expect incremental savings in future years. We are eager to fully integrate the legacy Bayer Animal Health Network and leverage the value of bringing together two animal health companies unlocked from their previous parent organizations. I will close here on Slide 11. Our M&Q organization has delivered above expectations with a path towards continued savings. This achievement is only possible with the culture we have built in this organization.
From every site, every line, every shift, each employee knows and understands his or her ability to make a direct impact on Elanco through dedication to quality and safety, sustained supply, and certainly our margin expansion journey. It is that ownership mindset that underpins our confidence in our next phase of the cost savings, and we will carry that philosophy into our integration of Bayer. The ability to maintain flat cost of sales is a key element of our long-term growth algorithm. It helps enable the path towards 60% gross margin and annual double-digit EBITDA growth. I hope this discussion has provided helpful color on the impactful work of my team. With that, I'm going to pass off to Todd to discuss our financial outlook and long-term opportunity.
Thanks, Dave. As Jeff mentioned this morning, we have been listening.
This will be a very detailed presentation providing clarity and transparency to support our value creation opportunity. Today, I will cover three sections of information: near-term financial guidance, long-term algorithm expectations, and finally, our cash and capital allocation outlook. First, on guidance, I will give a Q4 update for both revenue, increasing and narrowing our range, and adjusted EPS and EBITDA. I'll provide a 2020 pro forma P&L as if the Bayer Animal Health acquisition occurred on January 1st of 2020 to provide a better reference to our 2021 guidance. Finally, in our commitment to provide greater visibility, we are introducing enhanced revenue reporting categories that will go into effect with the first quarter of 2021. We believe the new structure will make changes in our farm animal business easier to compare to the rest of the animal health industry.
Second, I will build on the presentation from my colleagues to demonstrate how the long-term growth algorithm is paving a clear path toward our long-term margin targets. I'm pleased to say that we are accelerating synergy capture by two years. Third, I will discuss our cash and capital allocation outlook. Our independent company standup is now weeks away from completion in the first quarter, representing the end of a significant cash investment. Looking ahead, repaying our debt remains our top priority, and I will discuss the timeline to achieve a less than three times net debt to EBITDA ratio. Moving to slide four, we are updating our Q4 guidance. We have raised and tightened our range for expected total revenue to be between $1.04 billion and $1.07 billion, from $1.02 billion- $1.06 billion.
The increase of $15 million at the midpoint reflects continued positive momentum in our U.S. farm animal business, as well as strength from the legacy Bayer portfolio in pet health. With respect to our earnings per share, we expect adjusted EPS at $0.06-$0.12. This range is a function of gross margin of approximately 52% and operating expenses between $425 million-$445 million. With respect to operating expenses, our outlook reflects continued cost management initiatives and ongoing reduction in travel expenses, plus value capture actions that are tracking ahead of our expectations. We expect to capture $30 million-$35 million in synergies this year. We expect Q4 adjusted EBITDA between $140 million-$160 million. In the appendix, you will find a summary of the adjustments made to GAAP figures to arrive at our adjusted presentation. Heading to Slide five, I would like to share a 2020 pro forma reference base through EBITDA.
The figures are inclusive of the first half pro forma financials from our October 15th 8-K filing, the third quarter, as reported by Elanco, plus Bayer's pro forma July results, and our updated fourth quarter guidance. This pro forma excludes the revenue and EBITDA associated with the products that we divested as part of obtaining antitrust clearance for the Bayer Animal Health acquisition. Moreover, this pro forma also assumes accounting reclassifications since the start of the year. This reference base is materially correct based on the public filings of Bayer and Elanco. However, due to certain data limitations, including FX rates, these numbers may have some non-material differences to actuals. The reference base is a good faith summary to provide better financial context about the expected performance of Elanco in 2021.
We expect 2020 pro forma revenue of $4.37 billion-$4.4 billion and adjusted EBITDA of $780 million-$800 million, with a margin of approximately 18%. We will have an adjusted gross margin of approximately 54.5% and OpEx of $1.74 billion-$1.76 billion. We realize that 2020 has been a very noisy year for Elanco. While it does not provide a perfect baseline, we believe that offering this pro forma view should help investors understand our 2021 guidance in full context. We have diligently listened to investor feedback, and we are focused on providing increased clarity to bridge between periods. Now let's move to 2021 guidance, starting with Slide six. Our 2021 forecast demonstrates a return to what we believe will be more consistent growth ahead, underpinned by the long-term growth algorithm that we've explored throughout this morning.
We expect 2021 revenue growth of 3%-5%, including an underlying 3%-4% growth from our innovation and portfolio contributions after normalizing for channel and other comparisons, which I will detail in a moment. We expect 2021 Adjusted EBITDA growth of approximately 20%-25%, in step with our double-digit growth algorithm, reflecting margin expansion through productivity gains, pricing discipline, and value capture actions, partly offset by strategic reinvestment and increased standalone operating costs. Finally, we expect a turn and a half of net debt deleverage, including the next $500 million in gross debt paydown. Moving to Slide seven, I will lay out our full 2021 guidance, then explore the drivers of progress compared to last year in the next few slides. We expect 2021 revenue between $4.52 billion-$4.6 billion.
For gross margin, we expect 100 to 200 basis points of improvement compared to our 2020 pro forma, resulting in a range of 55.5%-56.5%. On the OpEx front, we expect levels to be flat to down slightly from our 2020 pro forma to $1.73 billion-$1.76 billion, as our value capture efforts and cost discipline are offsetting incremental costs from the brand new Elanco ERP system and IT infrastructure, as well as normal wage inflation and strategic marketing investments in U.S. pet health and China. As a result, we expect $940 million-$1 billion in adjusted EBITDA, or 21%-22% of revenue. Moving below the line, we project interest expense at $236 million-$244 million, with an average debt level of $6 billion at a weighted average interest rate of approximately 3.5%.
Cash interest costs will be approximately $25 million less than this range because the P&L includes the non-cash amortization of debt issuance fees. We also expect our effective tax rate to be approximately 21%-22%. However, given the favorable depreciation and amortization that we received from the asset step-up from the Bayer Animal Health acquisition and the use of net operating losses in certain jurisdictions, we expect a net cash outflow for taxes of $30 million-$35 million in 2021. Putting the pieces all together, we anticipate adjusted EPS of $0.83-$0.95. Now let's discuss some of the underlying factors behind our 2021 expectations. On slide eight, we provide a revenue bridge from our 2020 pro forma estimate to our 2021 guidance to separate the underlying growth from the one-time headwinds and tailwinds, which we look forward to not having to discuss in future years.
I will start with the items very specific to 2020. Here, we add back the $160 million in legacy Elanco channel inventory reduction, and we subtract the $25 million in legacy Bayer retail inventory expansion. We also adjust for expected foreign exchange headwinds of $20 million-$25 million and for a $35 million reduction in strategic exits at legacy Elanco. As we have discussed previously, the contract with Lilly to produce human growth hormone ends in 2020. Because we expect consistent revenue from 2021 forward, we proactively change the name of this category in our Q3 results to Contract Manufacturing. These four items provide a net benefit of approximately two percentage points of revenue growth in our items other than FX that we do not expect to have to address in future years. Next, I will talk through factors that are more ongoing, including COVID.
As you may remember, we saw meaningful headwinds at legacy Elanco starting in the second quarter, with continued but lessening pressure in the back half of the year. We believe extended headwinds into 2021 will mitigate the level of recapture, getting to approximately $55 million-$60 million of revenue benefit next year. This benefit is largely offset by net COVID headwinds at Bayer as we lap the incremental lift that Bayer's pet retail channel saw in 2020. We also expect $70 million-$75 million in reduced sales from discontinued operations as a result of our decision to exit low-margin sales across both the legacy Elanco and Bayer portfolios. The net COVID benefit, plus the impact from these discontinued sales, becomes a combined drag on 2021 revenue growth of about one percentage point.
Finally, we expect our underlying business to deliver about 3%-4% underlying growth, driven by the $80 million-$100 million in innovation that Aaron outlined, and maximizing the value of the current portfolio for about $55 million-$65 million in growth. As we head to Slide nine and 10, let's examine some of the more specific puts and takes driving that 3%-4% underlying growth. On the pet health side, this range is positively driven by continued momentum in the retail channel, accelerated growth in China, anticipated double-digit growth in our focus brands led by Seresto, Credelio, Interceptor Plus, and Galliprant, and innovation contribution from launching Elura, Credelio Plus outside the U.S., and Credelio Cat in the U.S. In farm animal, we are expecting a recovery bump in the U.S.
As cattle and swine markets appear to have stabilized in the second half of 2020, providing opportunity for a more normal economic and supply and demand backdrop. Additionally, we look forward to new launches in livestock and continued growth in our China swine business. At the same time, there are several headwinds across both sides of the business, reflecting competitive and macroeconomic factors. Back on the pet health side, we anticipate continued competition in parasiticides and potential generic entrants to pressure our defend products, Trifexis, and Advantage. We also recognize the challenge of the tough comparison in cycling last year's COVID-19-related benefit on the legacy Bayer retail portfolio. In U.S. farm animal, we expect approximately a $50 million headwind against our cattle and swine portfolio, including Rumensin.
As we shared on the third quarter call, we foresee continued pressure in global food service and the subsequent protein price implications for our international poultry and salmon operations as the pandemic continues to displace historical dining patterns. This macroeconomic headwind is coupled with expected competitive pressures affecting Maxiban in Europe and Imvixa in Chile. On the whole, we are confident in the 3%-4% growth of our underlying business, and we remain balanced in our assumptions across the portfolio. Starting with the first quarter of 2021, we will start reporting our sales in line with our industry peers. We will discuss pet health as a total category, which we believe is appropriate considering the now relatively small size of our therapeutics business. Moreover, for the foreseeable future, we also intend to disclose Seresto and Advantage family revenue, carrying forward the practice from Bayer.
In farm animal, we will break down our livestock business along our key species: cattle, which will include all ruminants, poultry, swine, and aqua. We expect our pet health growth to exceed our farm animal growth in 2021 versus the 2020 pro forma base, which you will remember was not adjusted for channel destocking. Our swine business should be more stable next year, with U.S. headwinds offset by growth in China. Our poultry and aqua businesses are ready for healthy growth in 2021 once we move past the macroeconomic volatility that we are currently experiencing and that we expect will extend into the early part of 2021. On our Q4 earnings call in February, we will also provide sales and EPS guidance for Q1. We plan to provide quarterly guidance on each earnings call in 2021 in order to offer greater clarity around the expected near-term performance of our business.
To set up our conversation around 2021 margins, I will provide an update on our integration of the Bayer Animal Health business, where we are moving with speed and decisiveness made possible by having leadership and value capture targets in place on day one. Since closing the deal on August 1st, we have successfully transitioned the Bayer ERP system to the new system implemented with our partner, Tata Consultancy Services. Integrated our commercial and sales teams, and launched our initial restructuring actions to drive the first $100 million in synergies. As part of that, we announced our intent to reduce about 900 positions across nearly 40 countries, primarily in sales and marketing. These actions begin to decrease duplication, drive efficiency, and optimize our footprint across geographies. Last but not least, with Bayer exiting the vast majority of its 73 million shares two weeks ago, another milestone is behind us.
Moving to the synergy numbers on Slide 12, I'm pleased to say that now we expect to achieve $300 million in synergies, the high end of our original expectations. We anticipate reaching the $300 million by the end of 2023, with potential over time for upside as we combine IT systems and look to optimize our manufacturing footprint. We have stated our synergies in terms of EBITDA, given the importance of reducing our net leverage to less than three times our EBITDA, and as a way to focus our entire company on the importance of cash generation. As we have previously shared, we continue to expect SG&A to be the main source of EBITDA synergies, including the right sizing of our overlapping sales force. Next, let's discuss the cash needs associated with the one-time cost to achieve our synergies on Slide 13.
We expect total costs associated with value capture to be $375 million-$400 million, which is above the approximate one-to-one ratio with synergies that we previously expected. The costs are exceeding our initial expectations due to two factors. First, we are restructuring more headcount than we had originally assumed, as we work to offset higher costs to operate Bayer Animal Health inside Elanco. Second, there are some incremental costs associated with accelerating our synergy timeline by two years. The overall one-time cash costs will be front-end loaded, driven by restructuring activity and the front-end costs of integration. The cash severance costs from our initial restructuring actions are expected to be between $170 million and $190 million. A final note on the integration synergies and cost topic: we have not included the benefit or investment in eventually merging our new ERP system with the Bayer TCS system.
This will not be an insignificant endeavor, but we expect it to meaningfully benefit the company in the long term. Once the Elanco ERP implementation is complete and stable at the end of Q1, we will begin to evaluate the process to integrate Bayer, and we expect that to play out over the next several years. Walking down the P&L again, let's turn to 2021 guidance for gross margin on Slide 14. Again, we start with 2020 pro forma of 54.5%. As Dave demonstrated, we are executing our productivity agenda at legacy Elanco with at least $100 million in expected cost savings and avoidance benefits over the next two years. We also look to maintain pricing discipline, as seen last month when we reported a 2% increase year to date in 2020 for legacy Elanco. We believe our portfolio can continue to drive annual price increases of approximately 2%.
Volume gains in 2021 will drive fixed cost leverage, which is the opposite effect of what occurred for legacy Elanco in 2020. Finally, while value capture efforts are more concentrated in SG&A overall, and especially this early along the curve with our initial restructuring actions focused on sales and marketing synergies, there will be synergies captured in our cost of goods sold in 2021 as well. We expect mix to be neutral in 2021. Putting it all together, we arrive at our expectation for 100 to 200 basis points of improvement from the 2020 pro forma baseline to a range of 55.5%-56.5% in 2021. We aim to hold our cost of goods sold reasonably flat, much like we have done historically at Elanco through our productivity agenda as well as through Bayer synergy realization.
With that, our sales growth, we expect to drop $130 million-$190 million of gross margin improvement from that increased volume and price as we leverage our manufacturing base with higher sales. Turning to operating expenses on Slide 15, as I stated earlier, we anticipate flat to slightly lower levels in 2021. Quick progress along value capture, where we are reducing our cost base by approximately 6%, as well as ongoing cost discipline, will be offset by increases that are mostly one-time in nature. We expect $35 million-$45 million for Elanco ERP and IT infrastructure compared to our costs under the Lilly TSAs. We project a $10 million step-up in depreciation from the inclusion of ERP depreciation from the TCS system that hosts the legacy Bayer business. Additionally, we will reinvest some synergy benefit behind brand support, with $35 million-$40 million backing strategic marketing initiatives in U.S.
Pet health and China to drive increased competitiveness with attractive returns. Let me assemble our revenue, gross margin, and operating expense guidance into a comprehensive EBITDA view on Slide 16. We are driving robust double-digit growth in 2021 that will allow us to achieve between $940 million and $1 billion of adjusted EBITDA. On that note, let's pivot from 2021 to the long-term growth algorithm Jeff introduced you to this morning. I'll focus on the latter two boxes, including our progression toward our 60% gross margin and 31% EBITDA margin targets and expectations for delivering returns over time. As shown on slide 18, we expect to achieve that 60% gross margin level in the 2023 to 2024 timeframe and the 31% EBITDA margin level in 2024. The expansion is built on leveraging our projected average annual top-line growth of approximately 3%- 4%.
We also expect OpEx cost discipline moving past the 2021 one-time increase from exiting the Lilly ERP system, and we are modeling OpEx synergy capture of $110 million-$115 million in 2022 and 2023. Moving to Slide 19, I'd like to spend a moment to remind you about our process of exiting the Lilly systems and around the independent company stand-up as a whole. Our EBITDA growth and moving past significant cash investments like the stand-up will combine to drive the debt deleverage and earnings accretion that I will detail later. Over the last two years, we have made tremendous progress in building the infrastructure to support our business and create a fit-for-purpose Elanco. In March of 2019, we completed the full separation from Lilly.
We also began the transformation of our HR systems, and by the end of 2019, we had exited 65% of the transitional services agreements with Lilly. Throughout 2020, we have continued to exit TSAs, with the remainder primarily supporting the completion of our independent enterprise resource planning system, which will go live in the first quarter of 2021. We are on track to stand up the independent Elanco and exit all Lilly TSAs by the end of 2021 Q1. While we are proud of our progress, and 2021 marks the end of that journey, the independent company stand-up efforts have been cash-intensive. As we shared on the third quarter conference call, we now expect the total cash cost to be in the range of $280 million-$320 million net of certain adjustments. Now, shifting to returns on Slide 21, let me refresh you on our capital allocation priorities.
Debt repayment remains our top focus as we are progressing toward our target net leverage ratio of under 3x. We also will continue to reinvest for growth and efficiencies, like what I outlined in U.S. pet health and China in 2021, and further down the line with the integration of Bayer into our ERP system. We will evaluate accretive, bolt-on, and partnership opportunities as part of our innovation strategy. Finally, over time, as we reach our target ratio, our board will look at opportunities to return cash to shareholders through a dividend and/or share buyback program. On Slide 22, we provide the roadmap to gross debt repayment, fueling net debt deleverage to less than three times by the end of 2023. As noted earlier, we expect to generate Adjusted EBITDA of $940 million- $1 billion in 2021.
Applying good double-digit growth, building on the 20%-25% growth we anticipated in 2021 from the 2020 pro forma, we plan to pay down $500 million in gross debt in 2021, matching the level of our senior note maturity next year. In order to have this amount of free cash, given our cash, interest, and taxes, and continued outflows on our big projects, we expect to improve our working capital performance in 2021 and the amount of cash we need throughout our internal banking system. In 2022, we expect to repay $600 million-$800 million and $700 million-$900 million in 2023. Thus, we would expect that by the end of 2023, our net debt should be between $3.7 billion-$3.9 billion, resulting in net leverage of under three times compared to about seven times at the end of 2020.
Notably, through this deleveraging process and the related reduction in interest expense, we would expect to add about $0.06 to 2022 EPS and about $0.11 to 2023. In conclusion, on Slide 23, Elanco is positioned for sustainable, transparent value creation for our shareholders. I look forward to continuing the collaborative process that my finance team has had with the Audit Committee and the Finance Committee of the Elanco board. I expect that this collaboration will be enhanced by the expanded charter that our newly named Finance and Oversight Committee will be executing against as we deliver on the expectations that I have just outlined. I have summarized what are admittedly some very detailed slides into five brief takeaways. First, we end 2020 with good momentum, raising our fourth quarter outlook while folding that into our pro forma reference base.
Second, while our 2021 guidance is still impacted by some one-time factors that we've isolated, like strategic reinvestment and IT costs and OpEx, there is a clear underlying inflection point. Third, our algorithm provides a clear path toward our long-term margin targets. Fourth, we are accelerating our synergy timeline by two years with additional upside from combining ERP systems over time. Fifth and finally, repaying debt remains our priority, and we expect to reach under three times net leverage by the end of 2023. Now, I'll turn it back to Jeff for some closing comments before our Q&A session.
Hello and welcome back. I'm Tiffany Kanaga, head of investor relations. With us for Q&A is Jeff Simmons, President and CEO; Todd Young, CFO; and Aaron Schacht, head of R&D, regulatory, and business development. We look forward to taking your questions.
To get through as many callers as possible, we ask that you limit yourself to one question and one follow-up each. For those who are dialed in, when you ask a question, please remember to close the webcast in order to prevent feedback. With that, I'll turn it back to the operator for final instructions before taking our first caller.
We will now begin the question and answer session. Please note this event is being recorded. To ask a question, you may press star, then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Michael Ryskin with Bank of America. Please go ahead.
Hey, thanks for taking the questions. So first question, maybe more for Aaron. Really appreciate the detailed presentation on the pipeline and sort of what's coming. I want to focus on the Credelio Plus launch in all U.S. markets in the first quarter of 2021. It looks like that's your Credelio active ingredient and milbemycin oxime, so it'd be the same or at least very similar to what's in Boehringer Ingelheim's triple combo in Europe, NexGard Spectra. And they haven't been able to get that approved in the U.S. because of the FDA requirements for heartworm protection. So my question is, as far as the triple combo parasiticide opportunity in the U.S., I would imagine that Credelio Plus, as it's currently formulated, wouldn't really be amenable to the U.S. market.
Given what you disclosed sort of in that slide on the parasiticide pipeline, the three in development assets, it looks like there's a flea-tick heartworm. Is it fair to say that with the, let's say, 2022 submission, the earliest we could see a U.S. triple would be in the 2023 time range? Then I got to follow on to that.
Thanks, Mike, for the question. We'll have Aaron talk about Credelio Plus first.
Thanks, Michael. Great question, and I think you've deduced things accordingly. That's a product we don't intend to bring to the United States, and it is a product we look forward to launching in Japan and Europe and Australia and perhaps other geographies later. Relative to the parasiticide pipeline, yes, we have shots on goal in that pipeline, more than one, that could become the product that we intend to launch in the U.S., and it'll be in that 2022 to 2025 timeline. And we'll update you when we get closer to a regulatory event pertaining to any of those products.
Okay. Great. Thanks. That's really helpful. And then following question would be on the margin profile. Todd and Jeff, I think you guys have both done a good job reaffirming the deal synergies, the productivity agenda is intact, and if anything, it seems like some of those are tracking ahead of schedule. And yet the long-term targets are pushed out to one and a half to two years to 2024. It's not a complete shock given the recent trajectory, but still, could you help us reconcile those two facts? How much of that is tied to discrete headwinds you saw in 2020 and how far that set you back versus anything in the legacy Elanco business and the margin trajectory there? Or maybe the higher-than-expected Bayer ERP or Elanco IT cost that looks like in 2021, some that's playing a role in offsetting some of the synergies.
So I just want to talk about those two components there.
Todd, will you talk about the pathway to our long-term margin targets?
Sure. Thanks, Mike. Very fair question given that couple-year delay in hitting those margin targets. Overall, there's a couple of factors involved. First, our performance, as Jeff noted early on, has not lived up to our expectations in the back half of 2019 when we had to reduce guidance in Q3 results for Q4 and then the impacts in 2020 from COVID. So those are definitely factors that are impacting our timeline to achieving the margin targets. The other bit is those additional costs in the OpEx side from increased ERP stand-up costs as well as the cost to run Bayer internally. We feel very good that we've been able to capture the synergies earlier. That pivot to taking out more is more heads faster, and that we feel good about from the standpoint of getting back into a closer range.
Then the productivity initiatives that Dave Urbanek went through this morning, we feel good about delivering on the gross margin side of things as we continue to progress both the historic Elanco agenda for productivity, but also then taking that same approach as we integrate the Bayer manufacturing sites into our network.
Thanks so much. Appreciate all the call.
Our next question comes from Erin Wright with Credit Suisse. Please go ahead.
Great. Thanks. This one's for Aaron as well. In atopic dermatitis, I guess, can you speak to your pipeline candidates and the timeline of when that will contribute more meaningfully to top-line growth? And does this include a JAK inhibitor? And will this be more of that portfolio type of approach similar to your competitor in the space and with various different formulations? And I did have one follow-up. Thanks.
Yeah. Thanks, Erin. Good question. Happy to share a little more detail about the dermatology pipeline. As we described in what I presented, we have five really shots on goal there, three that are small molecule-oriented targets and two that are antibody-oriented targets. The first one we'll submit in 2022, and you could expect that product to be directly competing with the current market leader in that category. So an oral, let's call it tyrosine kinase inhibitor, just to keep it simple, and would compete in that market against the leader in that market. The other products in that category, there are multiple blockbuster potential opportunities, both biologic and other small molecules. We're not necessarily looking at multiple products to create necessarily the only opportunity that we have, but individual products can create big opportunities themselves.
Okay. That's helpful. And then my follow-up is on the omnichannel approach. That was obviously a key rationale behind the Bayer transaction. And how do we think about the profit profile of that alternative channel? Obviously, the mix is different, but even within that mix, how should we think about the profitability of that business over time and how that mix will evolve over the next three to five years? And what percent of revenue will this contribute over time? Do you anticipate? I saw kind of in your derm pipeline that there is some OTC launches that you're anticipating as well. How should we think about that mix in terms of prescription versus OTC focus for your business?
Jeff, will you take a moment to say a few words about our omnichannel business?
Yeah. Thank you, Erin. So let me just highlight, Aaron. I think, as we tried to highlight today with the growth algorithm, those enablers that Racquel and Joyce walked through, without question, omnichannel is something that has played out fully and completely from our Bayer thesis in the acquisition. So look for us to continue to grow that part of the business. We haven't been as explicit about the percentage breakdown necessarily, but it is the fastest-growing segment today in animal health globally, especially in U.S. pet health retail here in the U.S. So look for us to continue to expand that, expand a ton within the U.S., bringing legacy Elanco products into that omnichannel and retail approach. I think that's one. As well as, as I shared, bringing a Claro, a scripted product from Elanco, back into the vet clinic. So multiple channels.
Then I think we start to move, as was highlighted by Racquel, into the digital approach that will fuel the omnichannel, which will drive international pet health as well as even a movement into the farm animal business. So look forward to take a higher percentage as you start to look at retail, a higher percentage of Elanco's business. Keeping the vet connected will still be absolutely critical as we go forward, and we think we're building those capabilities, our alliance with VetNow, not just telemedicine, but just other tools and relationships with our distributor as well. So look forward to increase. No question, it's been a key driver in Bayer's success and the momentum of Bayer coming into Elanco.
Thank you.
Our next question comes from Chris Schott with JPMorgan. Please go ahead.
Great. Thanks so much for the questions, and I appreciate all the detail on the call today. Just a quick one for me and then a bigger picture one. Maybe first on the atopic derm TKI that you mentioned as a potential 2022 filing. Could you just elaborate a little bit more on how you differentiate a product like this? Is this something you think you can bring an improved profile to the market, or is this more just about market expansion and tapping into different customers relative to the existing product on the market? And my second bigger picture question one is, when I think back to the pet health side of the business, it seems like there's been some major opportunities on the pipeline side in the industry as we think about derm and parasiticides.
It feels a little bit like Elanco's been playing a bit of catch-up on some of those where a competitor maybe brought those products to market first, and now you're coming a couple of years later. What are the learnings from that, and how do you kind of adjust the organization so that you're maybe more on the first wave of launches for the future opportunities? I'm trying to understand as you have a much bigger footprint now, bigger R&D budget, how you kind of move from playing catch-up to being more, I guess, an innovator or kind of leading innovator in the space. Thanks so much.
Aaron, I'll turn it to you to take the first derm question and then speak more broadly about our pet health pipeline.
Thanks, Chris, very much for all the question on our innovation potential. So relative to the dermatology or the atopic derm market from an oral dog perspective, certainly we see an opportunity to have more dosing convenience and maybe more efficacy. So a better efficacy profile, better dosing experience for owners giving that medicine to their pets. So that's what we'll look for in our product and hope to capitalize upon if we're able to produce that. Relative to your question about really what I think is more of an industry phenomenon, perhaps, than an Elanco phenomenon around the innovation lag that manifests around the first entrant followed by the second, third, fourth, if you just look at the isoxazolines, for example, those products took about a six-year span for the first and the fourth to enter the market. Yes, we were the fourth.
So that gives some credence to your notion that we lagged a little bit. Obviously, with the JAK inhibitor, there's one and not another for several years now. So I think just within animal health, different than human pharma, we don't see the same kind of rapidity of response, perhaps. And a lot of that has to do with maybe waiting to see whether or not the science is going to bear itself out. There's not a lot of disclosure about what's in pipelines to know what might be working and not be working sooner, like you see on human health. And then ultimately, we've got big pipelines with lots of projects, and so it's really a matter of balancing the potential of things we've been working on with moving efforts to new things, so to speak, in a practical manner.
I think at our scale, with our focus and our attention to the science, we will close that gap consistently, and we will move to the front in key categories, and we'll be sharing some of those details with you as things progress.
We'll take the next caller, please.
Our next question comes from John Kreger with William Blair & Company. Please go ahead.
Hi. Thanks very much. I think this is for Todd. I just wanted to clarify some of the savings goals you guys have been talking about this morning. So Todd, I think you guys have talked about $300 million in savings. I've heard $100 million, and I also heard $40 million- $60 million at various points. So can you just, again, step back, clarify what those different targets are, and can we view them each as sort of incremental as opposed to any being kind of overlapped or double-counting? Thank you.
Todd, will you talk about our synergies and our productivity agenda?
Absolutely. Thanks, John, for the question. With respect to the $100 million, that is legacy Elanco productivity initiatives that continue. So that's entirely independent of the $300 million in EBITDA synergies from the Bayer transaction. As we move into the $300 million in synergies from Bayer, $40 million-$60 million of that will come from manufacturing. So the total manufacturing savings between 2021 and 2023, we're expecting to be $140 million-$160 million. Total OpEx synergies during this time period would then be $240-$260 in total. So it is $400 million in total synergies/productivity between 2021 and 2023 that total Elanco will deliver.
Thank you. That's helpful. And then my follow-up relates to specifically the integration goals for the Bayer deal. I think you mentioned you're in the process of reducing the sales headcount by about 900 people across 40 countries, assuming I got that right. Can you just clarify where that stands? Has that been implemented at this point? And are you assuming any revenue-negative synergies as a result of that change?
Todd, I'll let you elaborate.
Sure. So on September 30th, we did announce the first restructuring as part of our overall goal to integrate the two companies. It is approximately 900 people. It actually cuts across manufacturing, R&D, finance, sales, and marketing. Primarily, it is sales with overlapping sales points. So we didn't need a companion animal or pet health rep in Little Rock, Arkansas, from both companies calling on the same vets. Different jurisdictions are moving at different paces. The U.S. has already moved. It's executed and complete. With respect to other places in Europe, we've got work councils and other things that will happen here in Q4 into Q1, and similarly, some things that have to get delayed till Q1. Overall, it's all coming together and being executed on those timeframes.
Thanks for the questions. We'll take the next caller.
Our next question comes from Nathan Rich with Goldman Sachs. Please go ahead.
Hi. Thanks for the question. Thinking about the long-term guidance that you gave, I think the targets would imply about $1.5 billion of EBITDA by 2024 based on the revenue growth and margin targets that you outlined. So that's about $700 million of incremental EBITDA. As we think about synergies and the productivity improvements you just mentioned, as well as the contribution from new products, that gets you, I think, most of the way there. But it would seem to imply that the remaining portfolio, the focus core and defend brands that you outlined, would maybe need to contribute sort of low single-digit growth over that timeframe to get you in line with those targets. Just at a high level, is that generally the right way to think about the framework for the business over the next several years?
Thanks, Nate. I'll have Jeff give a few comments about our long-term algorithm.
Thanks, Nathan. Real, real quick, I think without question, and we were asked very clearly by our investors, give us the granular detail of where the growth is going to come from. That's what we attempted to do today by showing, no question, the lead contributor to our growth will be innovation. We've got momentum there, as Aaron has shown, with eight new products, not just five, and that'll be that 2%-3%. Focus brands will be extremely important to us. This is where, as an independent company, even on the Bayer brands like Seresto and our portfolio of Interceptor Plus Credelio, we're going to be leaning in heavily there. That'll be a contributor to our growth, as we've highlighted. But we are calling out the category of defend brands where there's competitive pressure, their legacy. Typically, new innovation takes from those.
Rumensin, Trifexis, the Advantage family, as we've highlighted, we will defend those and preserve and protect sales appropriately, but do expect decline. When you look at the total aggregate, no question, we see that 3%-4%. We believe it's balanced. We believe that's a plan that we're very committed to. These key five enablers that Racquel talked about will be where we're investing that we know have the greatest returns relative to driving that growth algorithm. You are looking at it correctly, and we'll continue quarter to quarter to give more detail and color what's happening within that growth algorithm.
Great. Thanks. And Jeff, if I could just ask a quick follow-up, could you maybe address the changes to the board? I appreciate the opening comments that you made, but just curious on the role that you see the board playing as you work to kind of execute the strategy over the next several years?
Yeah. Thank you, Nathan. I think without question, we've got a great board, a very engaged board that's been very busy in the first two years as this new company. And if you step back and think about the time we started in September 2018 to now, a lot's changed, a lot's happened, but the accountability for us is there to say we're standing with a greater value proposition than we were two years ago. And the Bayer decision, as we've talked about, has played out. We're adding some new perspectives to these new board members that we welcome. We know that we'll add value.
And then the other two pieces that we've added that we think are very important is an Innovation and Technology Committee that will have oversight, will be heavily engaged with Aaron and his advisory committee as well on ways that we can continue to assure delivery of that pipeline. And then, as Todd mentioned in his presentation, the expansion of finance to finance and oversight that J.P. Bilbrey will play, and some of the new board members will play as well in that committee, looking at our company-wide productivity agenda. Ultimately, when you step back, I think it's expanding of our board, increased perspective, increased experience, animal health, as well as pharmaceutical and innovation that will drive and assure this value creation happens.
We'll move to the next caller. Thanks.
Our next question comes from David Risinger with Morgan Stanley. Please go ahead.
Yes. Thanks very much. And thanks for the comprehensive day. So I guess, first of all, with respect to the Credelio Plus product, so that's a triple. I know that there was a question about it previously, but with respect to a product like that, how does the company sort of think about launching me-toos versus spending more time and energy on R&D for blockbuster products? So I guess the question is, why even spend the time and effort and money and launch process for sort of a me-too type of triple combo versus something that can generate hundreds of millions of dollars for the company? So that's the first question. And then second, with respect to the innovation figures, you've indicated $80 million-$100 million in innovation revenue in 2021. That should scale significantly over time.
And so how can the 2025 value of innovation only be $500 million-$600 million when you will be launching products for four years after 2021? So in that 2022 to 2025 timeframe, it would just seem that that 2025 number should be a lot larger than $500 million-$600 million, given $80 million-$100 million in year one in 2021. Thanks very much.
Thanks, Dave. I'll have Jeff start with a few comments about our innovation approach and let Aaron chime in if he has anything extra.
Thanks, David. Relative to Credelio Plus, I think if you step back and look at a couple, I think, examples, first of all, this is an international parasiticide market that's about $1.5 billion in size. So that's outside of the U.S. and parasiticides. We've got a winning portfolio now when you look at what we have with Bayer as well as Elanco. And so we're entering into that market, not fourth in class, in a lot of places second or third in class, but tied to the portfolio, tied to our omnichannel approach. This is an and not an or gain, Dave. We think that there's, without a question, it's going to complement and supplement. And the best proxy we have is what Credelio has done in the U.S. As we've noted over the last few quarters, the fastest-growing brands that was fourth to market.
But when teamed with an Interceptor Plus, when teamed with our portfolio and teamed with our omnichannel, it's growing. So as I look at even just the Credelio U.S. example, I look at Credelio Plus in a $1.5 billion market. We'll see Europe, Japan, Australia with great potential. So I start there. But I think Aaron and I would agree. This is a supplementing, as Aaron's presentation said, is you supplement, you build out portfolios, you expand and put great marketing against them. And that's one of the changes I think you'll see with us, as well as bring a new parasiticide innovation every year for the next five years that Aaron's talking about, and some of those being significant breakthroughs. So it's an and game, not an or. And we're extremely excited about what Credelio Plus can do entering into this very big market internationally.
We'll move to the next caller. Thank you.
Our next question comes from Kathy Miner with Cowen. Please go ahead.
Thank you. And thank you also for the very detailed presentation today. It was very helpful. A couple of quick questions. First of all, can you tell us how you see the animal health market overall growing? Is it still in that 4%-6% range that's been assumed? Second question has to do with on the pipeline and the $5 million-$600 million assumption for 2025. Do you specifically include any of the blockbusters that might be in there? And I think you mentioned something in the area of cattle and perhaps parasiticide. And the last question is just on the R&D pipeline. Can you also give us a sense of how much is from Bayer? Was there a lot of overlap, or were the two largely complementary? Thank you.
We'll have Jeff start with some comments about the industry, and then Aaron with comments about the pipeline, including Bayer.
Thanks, Kathy. Relative to the marketplace, and the one slide that I shared is we look at the marketplace over the next five years, without question, there will be pushes and pulls. I think that we do see this protein market continuing to climb, as Racquel showed it, 1.5%-2% overall. We see also price and the value because we're in a cash market continuing to grow. And we see the pet ownership and the globalization of pets and the channel approach to pets and pets living longer. There's all the positive ones, but there are some pulls. There's increased competition. There's increased generics. There's increased generics by multinationals as well. So I think some of the growth maybe has been from some of the inorganic activity that's occurred.
So when you balance it out, I'm not sure that I have the crystal ball on exactly what this market's going to do going forward. It is going to grow. It's going to be durable, solid growth. We feel very good relative to our strategy, relative to what we're best at, our portfolio, and our pipeline at that 3%-4% growth over the long term and the guidance of 3%-5% in 2021. Aaron?
Great. Kathy, thanks for the question. I mean, relative to the $500 million-$ 600 million, let's just, and this maybe will address David's question as well, talk about how we construct that. We simply look at the things that would enter the market in a given moment in time, adjusted by the probability that we assess they have sitting here today. So in essence, that's a probability-adjusted number of $500 million-$ 600 million. Some will make it, some won't, and we think that's a good way to estimate what the expected value of a pipeline can be. In that estimate, yes, there are several blockbusters, any of them that would launch between now and that time period in 2025 and generate revenues in that period.
Recognize that something that launches later in the period would have less time to contribute in the period, but maybe more time to contribute outside of the period as they climb towards peak sales. So not everything that launches will reach peak sales in the period, and not everything that is in our pipeline will get to a launch. And that's how we, in essence, sort of make up the estimate that we've given you.
Let's head to the next caller.
Our next question comes from Umer Raffat with Evercore. Please go ahead. Pardon me, is your line on mute, perhaps? Our next question will come from Kevin Kedra with G.Research. Please go ahead.
Hi. Thanks for taking the questions. Thanks for hosting us today. Jeff, I wanted to start with some of the comments you made in the beginning. You were very upfront about some of the challenges that Elanco has gone through and the need for transparency and accountability. So given all the long-term metrics that you've given us, are there any in particular that you believe the board and shareholders should hold you most accountable to? Is it pipeline? Is it revenue? Is it EBITDA growth? Where do you really feel should be the primary focus of that accountability?
Thanks, Kevin. We'll have Jeff give a few comments about accountability and how we'll measure ourselves.
Yeah. Thank you, Kevin, for the question and without question, this increased transparency of today leads to increased accountability internally and as I've said, we have not been pleased with our delivery and how noisy we've been and the surprises that we've had. Take the environment aside. We hold that accountability internally and so that's very important and it really comes back. What we've attempted to do is say, "Hey, our IPP strategy didn't change." As we've said, Kevin, it's expanded and strengthened. It comes back to that algorithm so what metrics matter the most to create the value that you expect as shareholders, and we still believe that we have the leading value proposition in the marketplace in our space today, is starting with that top line. We need that top line.
And now we've given you the elements, and we've got many key elements that will drive that growth that we think will be durable growth. So that 3%-4% growth is metric one, without question. That quickly then converts with a discipline, and I think we're showing that, to turn that into double-digit EBITDA. So EBITDA becomes a very important number for every employee around this company and knowing their part in that, which then leads, of course, to Todd and Todd's team converting that to free cash flow and delivering one and a half turns here in 2021. So I believe it starts there. Aaron knows his role. So is innovation a key metric? Absolutely. And that's quantified, 2%-3%. Marketing, commercial knows their role.
But I would summarize by saying it is that 3%-4% top line that leads to the double-digit growth in EBITDA and adjusted EPS. So those are the key metrics, and the accountability is clear. And we have the leadership team and the strategy in place and a business with momentum as well as we head into this end of the fourth quarter and into 2021. Thank you, Kevin.
Thanks. And following up for Aaron on the pain pipeline, you guys mentioned with Galliprant, you guys have a leadership position there. Didn't hear too much detail on what you guys are developing within pain. So maybe you could kind of flesh out how you plan to build on that leadership position and defend it against potential new competitive entrants.
Question, Kevin. We'll have Aaron say a few words about our pain innovation.
Yeah. I appreciate the question, Kevin. Pain we see as a therapeutic area that has a wide spectrum of opportunities to intervene, whether it's in the acute setting, in a surgical suite with Nocita, or on a hospital discharge with a product like Onsior, or for chronic administration for moderate pain with something like Galliprant. So we're very happy with what we have and very confident in what it can do. I think in terms of pipeline, we didn't disclose a lot. We don't intend to disclose everything today. But rest assured that we intend to continue to lead in the pain space. We see important targets to innovate against going forward and have those efforts underway. And we actually think the products that we have are well established, and we'll encounter what competition brings into the market when it happens.
Thanks. Next question.
Our next question comes from Navann Ty with Citi. Please go ahead.
Hi. Thanks for taking my question. Can I please ask about the net leverage guidance in 2021? It is higher than what I had and not only related to lower EBITDA. So do you expect lower cash generation or any one-off? And my second question is on Credelio Plus. Could you discuss maybe the coverage protection versus the leading Simparica Trio? Thank you.
Thanks. We'll start with Todd to discuss our net leverage. And then I will pass to Aaron to discuss Credelio Plus.
Thank you for the question. As we think about the cash needs of the company in 2021, I'll start with our EBITDA at the midpoint of our guidance, about $970 million. That won't be enough to pay off $500 million of debt on its own because from that, we have to take out approximately $270 million for cash, interest, and taxes. So that gets us to $700 million. I'll add back to that EBITDA, $50 million or so for stock comp and certain other non-cash items in the EBITDA calc. So from that $750 million, we then have to take out $250 million for one-time costs related to our stand-up, as well as the severance costs and integration related to Bayer. So that gets me to $500 million. Once I pay the $500 million of debt off, we've got no cash.
How do I put on and spend the approximately $150 million of CapEx? That will come from working capital improvements as well as cash on our balance sheet. We feel that as we work through these two systems and need multiple cash accounts in every country, that we are improving our efficiency and expect we'll be able to move cash around more easily in 2021, which will allow us to take some of the cash off the balance sheet. All of those things combined will let us pay down the $500 million of gross debt, but we're not expecting to pay down $500 million of net debt in 2021.
Great. In terms of Credelio Plus and sort of the spectrum of activity, obviously, this is the combination of an ectoparasite product molecule and an endoparasite molecule. What we see is flea and tick coverage, heartworm prevention, roundworm, hookworm, and whipworm protection in terms of GI nematodes, but also some lungworm control.
Thanks. Next question.
Our next question comes from Navin Jacob with UBS. Please go ahead.
Hi, everyone. This is Shri Krishnadi Puraman from Navin Jacob. Thanks very much for joining us today. It's very helpful and comprehensive. I just have a couple of questions. So on the Defend brand, you stated in the past that Rumensin has held in better than expected in 2020. Are you expecting the same level of erosion in 2021 for the product? And then on the other Defend products, can you help us quantify the downside to these numbers? What percent decline in share are you expecting for these products? And then I just want to be just clear. The $80 million-$100 million in expected pipeline revenue in 2021, can you tell us what you think the peak revenue for those products are?
Jeff, can you give a few words about our Defend brands?
Yeah.
Yeah. Thank you for the question. So as we highlighted, and we'll continue to speak at a high level and won't get down into the brand specifics, but we do see an erosion over time into the net portfolio as we've looked at the algorithm going forward over this period of 1%-2%. Specifically to Rumensin, yes, we have done better than expected. As we've said, though, as we enter into kind of year two, we do believe that we'll continue to see decline, and that decline will lessen. And we feel very good relative to our defenses, which is a portfolio approach, continuing to support that product with our value-added services and continuing to innovate around that product like we will with Experior and bringing the Bayer products.
But I think when you step back and look at our Defend brands, Advantage, Trifexis, Rumensin, we continue to see increased competition. We will see decline. We'll invest accordingly where we think the best efforts are on those brands for protecting and preserving in key places. But they will continue to decline. We see that at 1%-2%.
Aaron, will you say a few words for the second question about peak sales potential for products launching next year?
Sure. The mix of products for next year is a wide range of products: farm animal product, one blockbuster potentially there with Experior, and then the other products we described. I think we're not going to comment specifically on what we see in terms of aggregate peak sales of these eight products because they all vary in terms of different time. but we're confident in their ability to play the role we expect them to play to deliver that $500 million-$600 million by 2025, but then also continue to add and grow revenues beyond that period.
We'll move to the next caller.
Our next question will come from David Westenberg with Guggenheim Securities. Please go ahead.
Thanks for taking the question and great job today. Just one question on Experior. How did you size the market, and how should we track it over the next couple of years to say, indeed, it's on track to become a blockbuster? And then in terms of margin on that product, should we think about that as kind of a Rumensin margin size? Thank you.
Thanks, Dave. I'll have Jeff give a few words on Experior.
Yeah. Thank you, David. Great question on Experior. We do believe that this product has blockbuster potential. We look at it primarily in the U.S. beef market and looking at the value that it brings. I would want to make a couple of comments here. The label claim is reducing ammonia levels relative to pounds of hot carcass. So this is a high need for our customers as well. We look at the total value proposition. And then we lean against that the importance of trade. I want to emphasize that trade is absolutely critical, and that's why we've held on actually launching the product. And some new information that actually happened today, maybe Aaron, you can share just briefly on that, has been one of the key milestones to the launch.
Sure. I woke up to an email this morning indicating that we did receive, in essence, approval from the South Korean government for the maximum residue levels for the product as well as the analytical method. So we are set to now receive an administrative document next week that, in essence, cements that. But we feel fully confident now that meat product produced with Experior can be imported into South Korea, which really rounds out the market potential to 78% of the import markets are now able to receive meat product that's been produced using Experior. I think it also highlights the deliberate process we've used.
If you think about the development of Experior, we started first with a single product approval, a set of combination product approvals so it could be used in combination with other products in our portfolio for producers, leading then to market access such as MRLs and analytical method approvals. And now we've moved downstream to where the packers get involved to take the meat from the feedlot producers and get it ready for export. So we are deliberately moving our way down, and that'll take a deliberate market creation kind of strategy in concert with all of these key customers.
Yeah. I would emphasize again the collaborative approach, working with our customers, and when you ask the question about margin, we'll be making this product in one of our manufacturing plants that actually makes Rumensin, and so we'll be working on the margin profile, but it will be accretive as we go forward to our margin profile, and again, a farm animal launch in cattle will do this the right way with our customers, and it will build over time, and we'll keep you updated. The plan is to launch this in Q1 of next year.
We'll move to the next caller.
Our next question will come from Elliot Wilbur with Raymond James. Please go ahead.
Thanks. Good afternoon. First question for Todd. I was wondering if you could perhaps give us some color or insight into operating cash flow expectations consistent with the timeline that you've offered up for some of the other financial parameters. I know initially when the deal was announced, the expectation was for $1 billion in operating cash flow in year two. I'm assuming that's now a late 2023 exit rate number or 2024 target. Just wanted to see if, in fact, that's correct. And then I want to follow up and go back to your commentary around contribution from the pipeline in 2025, the $500 million-$600 million in revenue. That's based on 25 products roughly. It would imply roughly $20 million in revenue per product.
It was not clear to me if that revenue expectation is discounted from what you expect the peak potential could be for each asset or if the conservatism in that outlook is based on the fact that you've only included 25 of potential 45 launches? Thanks.
Thanks for the questions. We'll start with Todd on our operating cash flow roadmap, and then Aaron can say a few words with details about our pipeline.
Thanks, Elliot. The cash flow, you characterized it correctly. This $250 million of one-time items that we have in 2021 will be a big factor that it starts to dissipate in 2022 and 2023. The other part is as we deleverage our cash interest, it'll run in that similar range, $225 million next year will also come out. And then we'll have the growth from the top line, that 3%-4%. As the gross margin improves, we'll also increase operating cash flow. That's why we expect to go from paying down $500 million of gross debt in 2021 up north of $600 million in 2022 and north of $700 million in 2023.
Aaron?
Yeah. To follow up on the question around the pipeline contributions, in essence, not every product launches in the first year and then delivers one portion of the total sales divided by the number of launches. What we have is roughly five significant products playing out each year. Then by the fifth year, of course, the ones that launch in the first year will have had five years to grow and subsequently less time for each of the rest. So it's an aggregate of each of the year's wave of launches coming through and the revenues, probability adjusted. So we don't assume all of them hit. As we highlight, 45 shots on goal to give roughly 2025 launches or so over the period. We don't know exactly which 2025 it's going to be.
So we basically probabilize the revenues of all 45 and then project that over time as they enter the market.
We'll head to the next caller.
Our next question comes from Balaji Prasad with Barclays. Please go ahead.
Hi. Good afternoon. Thanks for the questions. Also thanks for a comprehensive presentation by the team. A couple of questions on the portfolio side and a follow-up on China. Firstly, could you comment on Elura capromorelin? So how will the oral version be more efficient versus a transdermal patch and innovation like transdermals, which has struggled in the market? How do you plan to position this? And within portfolios, again, you recently tied up with Kindred on the parvovirus mAb. Can you speak if there's going to be more of a strategy that you would still pursue? And if so, what gaps in the pipeline are you seeing to fill? Thanks. And I'll follow up on China.
Aaron, would you give a couple of comments on Elura and Kindred?
Yeah. Great. Thanks for the question, Balaji. So on Elura, this is an oral formulation of capromorelin that'll be given to the cat. And it's indicated for the weight loss associated with chronic kidney disease. And so it really is a chronic treatment paradigm. And obviously, the data is very robust, and the product has a history of performing to affect appetite in dogs. And so we're really building on those proven properties of the product, the proven safety of the product to now indicate it for a very specific challenge associated with cats and maintaining weight as part of the chronic, really, consequences of kidney disease. So we believe that has a value proposition to veterinarians. They'll understand which cats are good candidates for this, and they'll see the benefits of it as they implement it as part of the treatment paradigm.
We think that will help us create this market in a straightforward manner. Relative to the Kindred parvovirus vaccine, excited about the opportunity to work with the Kindred team on developing this further. That's an example of where we're bolstering our pipeline, looking at a novel innovative therapeutic to add to our lineup of important products for veterinarians. Will we continue to explore and pursue things like that? We will always look at what's out there from an external innovation standpoint. We don't want to have any regrets to introduce innovation that's relevant to our customers. But we'll do so within the constraints of our strategy and our financial requirements and expectations for how we create value. Anything that meets those criteria will be moving to partner around those things.
Thanks, Aaron. Shifting to China, I think you commented that growth will return to normal levels over the next few years. I just wanted to clarify that. Do you expect to see accelerated growth over the next few years driven off a lower base? And secondly, what levers do you see which will drive a disproportionately great amount of this business towards you and not your peers? Thanks.
Thanks. We'll have Todd give a couple of words about China growth.
Thank you for the question. We are already back to sort of 2018 levels. The base has come back to a higher level than when it was on the African Swine Fever given the growth we've seen in our swine business here in 2020. In total, we're about $90 million of revenue for China for Legacy Elanco and just over $100 million from Legacy Bayer. As we move forward, we expect that to provide about 1% of our growth in 2021. The combination of the scale that we're getting from a combined entity with a focus on China of getting into the pet health market and the continued progress on our farm animal side with the addition of warm water aqua is driving that level of growth.
From a competitive set, we have great relationships with the key players that are really industrializing the pig farming in China, and that relationship, as well as the quality of the products that Ramiro took us through this morning, are really the key drivers of our growth going forward.
We'll take the next caller.
Again, if you have a question, please press star then one. Our next question comes from Umer Raffat with Evercore ISI. Please go ahead.
Hi guys. Thanks for taking my question. And thank you for bearing with us on phone issues on our end. I was looking at Credelio Plus, and I was quite intrigued at the heartworm coverage molecule you guys chose to go with, which is milbemycin. And it looks like the worm coverage molecule being used in Simparica Trio, which is moxidectin, the potency of moxidectin and the efficacy might be higher than milbemycin that you guys are using. And on top of that, Simparica Trio has pyrantel, which is an additional compound that you guys don't have. So I'm curious to hear your thoughts on having a two-compound molecule rather than three-compound molecule, as well as the choice of compound, more importantly. And in that vein, I've also noticed historically effective doses of milbemycin, which is the molecule you're taking.
The historic effective doses aren't as effective anymore on the new strains. So I'm curious what specific dose of milbemycin are you fitting into Credelio Plus? Thank you.
Aaron, will you give a few comments, please?
Sure. Thanks, Umer. Yeah. Obviously, we started the program for Credelio Plus many years ago. And milbemycin oxime is a molecule that Elanco has a lot of success with. It's one of the active ingredients in Trifexis. And so we felt confident in that molecule to bring the efficacy, particularly for heartworm treatment. And outside the U.S., that's a more important consideration for how to use a heartworm product than necessarily prevention, as we see in the U.S. And so it's within that context that that product has been tested and optimized for those markets. Obviously, looking forward, we're going to pay careful attention to things like heartworm resistance and the waxing and waning of activities of active ingredients. I spoke to that in my comments this morning.
We'll look at the rest of our pipeline to really deliver on the efficacy opportunities to basically protect animals against heartworm disease and potentially bring new molecules that address resistance that can be seen with some of the more mature molecules.
I guess, should we assume Credelio Plus is a starter molecule for you guys for the Trio opportunity and that a true high-efficacy version will come later?
I think you can assume that it's a proven product on its own, and it will be relevant in those markets. And you shouldn't expect that we'll stop there.
Thank you so much.
I'll turn it back to Jeff to wrap up.
Thank you. Thanks, Tiffany. I want to just thank everyone today for your interest, your investment in Elanco. We hope we provided you the transparency and the detail. Be assured that we're accountable to this plan. We look forward to engaging with you going forward. Have a happy holiday and stay safe. Thank you.