Okay, great. All right, well, why don't we get started? Thanks, and good morning, everyone. Thanks for joining us. We're obviously very excited to have Elanco here with us today, and representing the company is Bob VanHimbergen, who's the Chief Financial Officer of the company, and to his left, Bobby Modi, who is Head of U.S. Pet Health and the Global Digital Transformation. I think I know many of you, but for those of you who don't, I'm Glen Santangelo, and I cover Elanco for Barclays amongst a bunch of other things. We're very excited you all came down here to Miami and spend time with us. Bob and Bobby, thank you guys for sort of joi ning us.
Thank you.
Great to have you.
Great to be here, Glen.
I should mention Tiffany Kanaga is in the front row. She heads the investor relations for the company that I think most of you know as well. Maybe a good place to start, I think would be helpful just to sort of level set the conversation. You came off a very strong quarter, gave very, very strong initial fiscal 2026 guidance. Maybe that's a good place to start, just to sort of bring people up to speed on some of those positive developments that culminated in 4Q25 and provided the foundation for that 2026 guidance. Then we can sorta dig in after that.
Yeah. No, it sounds great. Yeah, thanks for the question. Yeah. So listen, at Elanco, we've been focused on growth, innovation, and cash. We're just operating from a tremendous amount of strength, and we've got just a tremendous amount of momentum. We did beat our guidance in our fourth quarter, really across the board on revenue, earnings, and cash flow. Growth in the quarter was 9% organically. Bobby's business grew 10%, and our U.S. farm business grew 17%. Really, all four quadrants, including the international business, performed well. Internationally, we had nine of our countries grow, and all our top 5 franchises grew. It's just a high quality of business growth there. Then on cash, right?
I mean, so listen, we continue to have good fundamentals around trade working capital and aligned on paying down debt. We delivered to 3.6x , a little bit below what we had guided. That momentum's continuing into 2026, and we've guided 2026 right in line with what we did, what we said at Investor Day with a mid-single-digit top-line growth, a high single-digit EBITDA growth, low double-digit EPS, and then continue to deliver. We expect to get below three in 2027, and that certainly unlocks the opportunity for shareholder return. We're extremely excited about what we've seen across the board. Last thing I'd highlight is a lot of this is enabled by our basket of innovation, where we've got some special products, but the entire basket performs well.
Because of the strength coming out of Q4, we were able to, again, increase the guide for 2026 up to $1.15 billion on that basket.
Yeah. Okay. Thank you for that. Bob talked about some of the growth in U.S. Pet Health, right?
Yeah.
Maybe that stole the show, right, in Q4 2025, and we get obviously a lot of questions on that. If you look at sort of where we were in the, you know, H1 of the year relative to the H2 of the year, we saw some very nice acceleration, and particularly night and day versus 2024. I sort of feel like, you know, Quattro and Zenrelia, they suck all the oxygen out of the room, and that's what people wanna talk about. It feels like there's a lot more, you know, beneath the surface there as well. Maybe you can just sort of comment on, you know, those trends throughout sort of 2025 in your business, you know, with so many success stories to sort of talk about.
Yeah, Glen, thanks for the question. I, you know, what I would remind you is that we grew share in every major category, so pain, vaccines, derm, OTC parasiticides, and RX parasiticides. The total business is healthy. Yes, Quattro and Zenrelia get a lot of the sunshine, but we launched 12 differentiated assets across our OTC and RX portfolio in the last three years, and all of them are contributing meaningfully to growth. The third thing I would say is, yes, we have launched differentiated assets in large growing spaces that have allowed us to extend the growth of those spaces and also capture market share. Those new assets have strengthened our portfolio, which has allowed us to reach new clinics.
For example, we are now in 2,600 clinics that never bought an Elanco product before because we have.
Because they were interested in Credelio Quattro, and that's been a really nice tailwind for our business overall.
That's excellent. You know, one of the things that if I, you know, think back to the middle of last year, one of the concerns people that had with the sort of the innovation outlook and expectations was on the pricing side, right? What strategies Elanco would sort of take. Could you sort of talk about, you know, the volume versus pricing dynamic as 2025 sort of played itself out? You know, we're gonna segue soon and talk about 2026, where I think you guys are excited about sort of the pricing side of the story in 2026 based on the demand that you're seeing. You know, if you could just touch on 25 first and then segue.
Yeah. Yeah, sure. Maybe I'll take that and then Bobby can answer or add anything else. Listen, pricing in 2025 was 2%, volume 5%, and we're seeing a good balance between the volume with this basket of innovation, not only growing but also stabilizing our base business. We saw 2% of price. We're seeing good volume, 2% price in 2025. We expect that to accelerate in 2026 as we continue to price the value. We have that mentality. Bob's business, we took the highest list pricing out to vet clinics this year. It's the highest that we had in five years.
Listen, you know, we're gonna continue to price the value, and we do see acceleration in 2026 versus 2025 on price. We also expect it to accelerate throughout the year versus you know Q1, Q2, if you will.
Yeah. Okay. So much focus on U.S. pet health, obviously, right? You participate in a lot of other things, right? I mean, you know, outside the U.S. obviously is big. You got farm both in the U.S. and outside the U.S. You know, when you think about those four quadrants, if we exclude U.S. pet health for a second, let's talk about some of those other quadrants. Let's talk about farm in the U.S. and your international business and maybe some of the drivers there, because I think there's a lot more to the story than just Zenrelia and Quattro as we were just sort of talking about.
Yeah. Great. So listen, I'm happy to do it. I'm extremely excited to talk about the farm business. The farm business grew 17% in the fourth quarter, really led by cattle and poultry. Cattle particularly led by just the strength in our Experior product. Right now, Elanco is benefiting from just the small herd size. You know, we believe the liquidation in the U.S. cow herd has stopped. The growth or the rebuilding, if you will, has been stagnant. We kind of expect a flattish year for herd size. But that low supply and high demand for proteins and beef is leading to higher beef prices. Experior wins in that sort of environment.
Experior, we crossed $200 million in revenue in 2025, operating in a TAM of $350 million in US and Canada. We're seeing continued adoption of the product. We're seeing a high retention rate of the product. You know, we have the ability now to take price, and then we expect the geographic expansion to be a longer-term driver of Experior. Strong growth on the U.S. farm side. Now as we move to international, the pet business grew 8% in the quarter. Real strength from our Credelio family, AdTab, as well as Zenrelia. We've got a clean label with Zenrelia and some great market shares already in Brazil. We've got a 40% market share of the derm JAK market.
In Japan, it's 30%. Internationally in Europe, several countries, we've got double-digit shares already, and so some really good performance on Zenrelia. International farm grew 4%, and that's really led by, I'd say ruminants as well as poultry and just that global demand for proteins.
When you put all that together, right? When you talk about AdTab, Experior, you know, and some of the other growth drivers, you keep exceeding your expectations on your innovation bucket, and that's, you know, added I think over $400 million on a year-over-year basis. The expectation is for something maybe less than that, you know, in this upcoming year. Can you talk about, you know, the continuation of those trends and what gives you the confidence to continue to guide that sort of innovation expectation higher?
Yeah. I mean, so great question. Listen, what's unique about Elanco is we have this entire basket. We don't have this. You know, historically, there might have been, you know, a company may have one product in one sort of area of the business and would lean in heavily, but we've got this entire basket now, just really bearing the fruits of a lot of the investment over several years. The entire basket continues to perform well, which it's incredibly important for us for two reasons. One, the margins in this innovation basket are higher than our corporate average. Two, what we're seeing is it's stabilizing our base business. You look last year in Q1, you know, our base business had a little bit deeper drop.
As Quattro and Zenrelia launched, we saw a stable base in Q2, Q3 and Q4. We're gonna continue our no regrets approach to launching these products. We think they are best medicine. And maybe even more importantly, because of just the focus on R&D, we continue to fund the pipeline, and we've got more products coming to the market here in the next five and even 10 years. I know that's something we'll probably touch on later.
Yeah. One of the things I also wanted to talk about, and you touched on it in your prepared remarks, is maybe the leverage that this innovation basket is sort of giving you in other areas of your business that now that you're in the clinics in some of these new, you know, therapeutic areas, but it's maybe strengthening some of your portfolio in other areas, and that may be underappreciated by investors to an extent. You know, Bobby, I don't know if you wanna touch on sort of that leverage multiplier effect that you maybe get from penetrating these clinics in ways that are new versus just a couple of years ago.
Yeah. I think I spoke about this a little bit earlier, but I think the real opportunity is Elanco's historically been underdeveloped with corporate clinics in the U.S.. Having a full portfolio of products now gives us and differentiated assets which they really want and which consumers are asking for. It gives us a sort of meaningful presence with corporate clinics and allows us to drive further penetration, not just of the differentiated assets, but our entire portfolio. You know, we will be sort of one of two animal health companies with monoclonal antibodies. We'll be one of two animal health companies with a full comprehensive derm portfolio. We've got a differentiated sort of broad-spectrum endectocide .
The nice thing from just an overall leverage perspective, Bob talked a little bit about sort of investing from a no regrets perspective, but we expect our investment to ramp less than the overall sales ramp that we get on innovation, and so that will fuel sort of even a growth to the bottom line.
Okay. I think, you know, it's obvious to say you've been very pleased so far with the launch of Quattro, and you sort of characterize it on the most recent call as a first to market product where you're third to market, obviously. Could you maybe talk about, you know, the product and maybe what differentiates it, and maybe what you're doing a little bit different, you know, on the commercial side that's driving these strong results?
Yeah. Quattro is differentiated in four areas. The first area, I would say, broadest coverage. We're the only broad spectrum that gets tapeworms. The second area that is differentiated is speed to kill, specifically with ticks, which is important as you think about disease transmission. We've run head-to-head studies versus the competitive products in the marketplace. The third area of differentiation is heartworm efficacy in one month, so you don't have to wait to get that. The fourth area of differentiation, which we saw play out in the marketplace, is palatability. Ellen and her team have done a phenomenal job making the product taste great, which allows vets to switch dogs from existing products to a new product much easier.
Then our focus on how we continue to accelerate sort of the growth of Credelio Quattro is twofold. We're just in a third of clinics in the U.S., and so we have an opportunity to increase clinic penetration, and we're adding roughly about 500 clinics each and every month to the portfolio. The second is as of last year, our share in the clinics we were in was only about 40%.
We have our opportunity to increase our endo/ecto share in the clinics we're in over time as we drive more dispensing via consumer demand or DTC going forward.
As a category, right, these combo products are growing very fast, right?
Yeah.
30%. There's clearly a rising tide, lift all boats. You know, could you maybe talk about, you know, the durability of this growth that we've seen? And do you feel like it's coming from, you know, new puppies? You know, it's just sort of people sort of trading up from the legacy products. Like, how should we think about the durability of the growth that we've seen in this combo market?
Yeah, I think it's a great question. I think overall, what's driving the growth of the combo segment is consumers' demand for convenience, right? The ability to get an all-in-one and one pill versus having to take two pills or look at different modes of treatment has really helped. But I think a really good indication of where the market's growing is what's happening with puppies, 'cause typically what you start a puppy on is what they ultimately stay on in their adult life. Two-thirds of puppies now are starting on a combo product, which sort of alludes to the fact that you've got a, you know, in the U.S., you've got a $1.4 billion business that's been growing at 30%.
The fact that 2/3 of puppies are on it indicates that you will sustain that growth sort of going forward.
Okay. All right. Maybe why don't we shift, you know, shift gears and go over to Derm. You know, you launched Zenrelia at the end of 2024. You know, you launched earlier in Europe. Could you talk about maybe the differences in the launch trajectory you've seen outside the U.S. versus inside the U.S. with the label differences between, you know, the two geographies?
Yeah. We've seen a faster acceleration of market share outside the U.S. We've gotten in countries we've been in the market OUS with a clean label, which is every country that we've been there for at least a year, we've seen sizeable share advantages. We were public with a 40% share in Brazil, a 30% share in Japan, and we've now seen double-digit share sort of in Europe.
As we think about that launch. In the U.S., the ramp was a little bit slower. We exited December with double-digit share of the JAK market. Q4 was our best quarter yet. When we got an updated label in the U.S. in October, since then, we've added 3,500 new clinics to Zenrelia. We're now in over half the clinics in the U.S., and we're seeing that momentum sort of carry through in Q1. We think the U.S. will get there. It'll just take us a little longer.
I'm sorry. Since the positive label update in October, could you give us that stat again?
Yeah. Since the positive label update in October, we've had 3,500 clinics.
come onto Zenrelia, and Q4 was our best performing quarter.
is not peak derm season, as many know.
The timing on the potential FDA decision related to the box warning?
Yeah, we haven't sort of given specific timing, but we feel really optimistic about sort of the data package we submitted, as well as the confluence of data, the pharmacovigilance data we've had for the product being in the market for over a year, plus 40 countries with a clean label and over 1 million dogs on Zenrelia globally. You know, we'll continue to have constructive dialogue with the FDA.
Can we talk more broadly about the success of Zenrelia? I mean, I know the company's gonna increase its investment towards the product and maybe what's sort of driving the attractiveness of that investment. Do you think it's sort of having better head-to-head data? I mean, do you feel like, you know, its pricing is?
Yeah.
-is differential or combination of a-
a bunch of different factors?
I think Zenrelia is a special product, and what makes it special is the efficacy in market. A little bit of a blessing in disguise is, you know, with the warning label that we originally had on the U.S. label, we got pigeonholed to maybe second-line treatment. We were being used on the toughest cases, where pet parents couldn't get relief for their pets and Zenrelia was working. As vets saw this, they really started to believe in the efficacy. I think first differentiated on efficacy, but continues to be differentiated on convenience and value, and I think that's really driving the momentum of the product.
Do you think the market share shifts at all with the third competitor? I mean, I think people know that Merck has launched a product. How do you think the competitive dynamics in the market may shift yet again?
Yeah. I think we have experience with how Zenrelia is doing with a third competitor in Europe. I'd say Zenrelia is doing extremely well. I think what will continue to drive Zenrelia is the efficacy that it brings to pets and ultimately vets seeing those results in the marketplace.
Okay. All right. Can we talk about the pain market a little bit? I think you've disclosed that you view that as having a $2 billion TAM by 2030. Where do you stand today and how we should think about sort of further penetrating that TAM over the coming years?
Yeah. We're really excited about the pain market. You know, we sort of were public in our investor day about a number of assets that we are pursuing in the pain market. Not only are we excited about the future assets that could come to market, but we're also excited about our portfolio today. We actually have a very sizable portfolio. We have a great product in Galliprant, which is the number one branded NSAID for OA relief, and we have seen Galliprant continue to grow this last year, and we expect growth sort of going forward as more vets are shifting back to traditional OA treatment.
Obviously, a lot of scrutiny on that category. Does that factor into your thought process or your conversations at all?
I think the scrutiny on the category helps a product like Galliprant, which is known in the industry for efficacy and safety, and I think that's why we saw the return to growth in 2025. I think, you know, as we think about our innovation going forward, we're really cognizant as to what vets and pet parents are looking for.
Last year you gave that three-year guidance, right? People now have a framework to think about the growth algorithm, you know, but we also have talked about, you know, or the company's talked about its pipeline and, you know, all the opportunities that you have, and we've talked about some of them here today. Help us think about sort of the launch cadence coming up in the next sort of several years and sort of layer that into the conversation around that sort of mid-single-digit revenue growth number that you provided the Street back, three months ago, whenever it was.
Yeah. No, so great. At Investor Day, we laid out, you know, obviously our current portfolio, but then we talked about, call it the next wave, and then I'll say the next next wave. Listen, we're heavily focused on ensuring we don't have an air pocket without some innovative products coming to market, and we've got a fantastic R&D team led by Ellen that's just making sure that the team is functioning well and sharing knowledge and making sure we don't have those air pockets. Listen, what we see is by 2031, we expect to launch another 5-6 potential blockbusters in the market. Beyond that, there's probably another 5-6 in that category beyond that.
Listen, in the next 5- 6, we have an unparalleled sales peak of $2 billion, which is, you know, twice what we had here in 2025. I feel great about kind of the pipeline and also great about just the focus of the global team ensuring that we don't.
Any specific therapeutic areas in that next wave that you wanna sort of call out?
I mean, we don't have to go create a new market, and so we're gonna really focus our attention on the bigger markets, the derms and the paras and have a differentiated product, Glen.
Okay. All right. Could we maybe talk about the 2026 guidance? We got a couple minutes left, so I just wanna touch on this because, you know, it last year, you sort of raised prices 2% and you sort of talked about this year, I think that the pricing was even, maybe even a little bit better this year versus last year, which would imply something greater than 2%. When we look at the volumes that the company sort of generated in the H2 of 2025, and I kind of put all that in a mixing bowl versus your sort of 4%-6% revenue guidance, you know, it doesn't necessarily all add up. How do you bridge that sort of disconnect?
How should we think about maybe some embedded conservatism or, you know, just not wanting to get ahead of yourself? Like, how do I think about that revenue guidance in the context of the individual pieces that all seem like they're doing better than the guidance might imply?
Yeah. I mean, yeah, first off, I mean, I think we feel great about the guidance we gave. It's right in line with the algorithm that we showed at Investor Day. We absolutely have a tremendous amount of momentum, really across all four quadrants. I'd highlight, you know, we are lapping some bigger growth numbers we had from this basket of innovations. We grew that basket $400 million in 2025, and we're expecting to grow about another $250 million on top of that here in 2026. Listen, we said we're gonna be grounded with guidance and we're just, you know, being, you know, cognizant of the macro trends that we see, as well as competitive response to the success that we've had.
Again, we feel great about the guide that we gave, that mid-single-digit growth.
Yeah. Let's just go down the income statement a little bit. Obviously, the Adjusted EBITDA, sort of that high single digit growth outlook, you know, kind of implies some modest margin expansion. Talk about sort of the margin trends in the business as this innovation bucket continues to grow faster than your overall total and, you know, maybe layering in some new product launches over the next couple of years as well. Just sort of talk about the general margin trends and some of the tailwinds maybe to that margin trend to drive that faster EBITDA growth.
Sure. Yeah. I'll highlight really three things. First is this basket of innovation growing. Again, these margins carry a margin profile higher than our corporate average, so that'll be accretive. Number two, I'd say we're gonna continue to leverage our existing cost base, and so as volumes, you know, accelerate, we're gonna see some fixed cost leverage. Then the third lever is gonna be Elanco Ascend, which is our proactive approach to improving margins really across the P&L, where we expect $200-$250 million of net EBITDA improvement by 2030. 75% of that's gonna be through gross margin, 25% through OpEx. Listen, this covers the work we're doing from the four walls of our manufacturing facilities.
It incorporates the procurement team that's already done a fantastic job of locking in some better pricing, leveraging AI and automation to really improve efficiency across the P&L. Then, you know, we also, you know, announced a restructuring charge at the end of December. We're well on path to executing those commitments, and we expect $25 million of savings coming through in 2026 from that program. We expect to conclude all of those actions and get a $60 million run rate benefit in 2027.
Okay. Listen, we're out of time, but I wanna give you all the last word to figure out how we can sort of tie all this together. I mean, obviously a lot of trends are going in the company's favor now with the innovation basket. It feels like there's still opportunities in the pipeline. You're able to sort of take pricing, but even, you know, the strength is even beyond just U.S. pet health, right? It feels like a little bit more of a diversified strength if you sort of will. If you will. I mean, we've been recommending the stock for a couple of years now. 2024 could've gone a little bit better for us personally than and yourselves and that all sort of worked itself out and then some in 2025.
As we sort of sit here, maybe with a more bullish outlook, is there something that you think that you wanna leave investors with, that you think maybe they should spend more time on, may not be fully appreciating, maybe we didn't spend time on it here today? Let me give you the last word to sort of close it out on what you wanna leave, or the message you wanna leave the investors with.
Yeah, great. No, so great, thanks for allowing me to do that. One, I think the industry is fantastic. We expect the industry to grow by $20 billion over the next decade, and that's gonna be a mix between the pet side as well as the farms. I think we talked a bit about farm and the financial profile of that business. Listen, there's some macro dynamics behind it that supports it, but also just the profitability of that business is unrecognized. Although it's got lower gross margins than the pet side, the EBITDA performance is and the margins are in line with the overall business, including pets. That's an underappreciated aspect to the business. Again, you know, we talk a lot about vet clinics being down.
Yeah.
I would tell you, there's never been a more willingness to spend from the end consumer and take care of their pets. We have an omni-channel approach which ensures that we, you know, we can be and provide product to the consumer where they wanna shop. Listen, I think our basket of innovation is gonna continue to grow, and the globalization opportunity we have with these products, and then continued strength, strengthening of the balance sheet just makes us someone that's gonna participate and continue to lead in this animal health industry.
Okay. Bob and Bobby, thank you very much. We'll leave it there.
Thanks, Glen. Appreciate it.