Full Press Release Details
Contact: Dave Pugh (317) 361-9892 or david.pugh@elancoah.com
Contact: Colleen Parr Dekker (317) 989-7011 or colleen.dekker@elancoah.com
Animal Health Reports Third Quarter 2021 Results Exceeding Revenue Guidance; Raising Full Year 2021 Revenue Guidance
Ind. (November 5, 2021) - Elanco Animal Health Incorporated (NYSE: ELAN) today reported financial results for the third quarter
of 2021, provided guidance for the fourth quarter of 2021, and updated guidance for the full year 2021. The results reflect the inclusion
of the Bayer Animal Health business Elanco acquired on August 1, 2020.
business continues to show good momentum and strong fundamentals since closing the Bayer Animal Health acquisition a year ago, now
with our fourth consecutive quarter exceeding our top-line growth expectations while concurrently making steady headway toward our
long-term margin targets," said Jeff Simmons, president and chief executive officer at Elanco. "As we near the anniversary
of our Investor Day when we established our commitments for the newly combined Elanco, it is clear that 2021 will be a strong step
toward our long-term growth algorithm, with pro forma combined company revenue expected up approximately 7 percent and
outperformance in both sides of our business, while expanding our pro forma combined company adjusted EBITDA margin by approximately
300 basis points. Our teams remain focused on finishing 2021 well and continuing to drive growth in 2022 as we deliver on our vision
of food and companionship enriching life, while generating sustainable value for our shareholders."
quarter, Elanco's results compared to the company's August 9, 2021 guidance are as follows:
| Third Quarter 2021 Results (dollars in millions, except per share amounts) | August Guidance | Actual | Comparison to Midpoint | |||||||||
| Revenue | $1,075 - $1,100 | $ | 1,131 | $ | 44 | |||||||
| Reported Net Loss | $(70) - $(40) | $ | (104 | ) | $ | (49 | ) | |||||
| Adjusted EBITDA | $195 - $220 | $ | 211 | $ | 4 | |||||||
| Reported EPS | $(0.14) - $(0.08) | $ | (0.21 | ) | $ | (0.10 | ) | |||||
| Adjusted EPS | $0.15 - $0.19 | $ | 0.19 | $ | 0.02 |
quarter, Elanco's revenue was $1,131 million, benefiting from increased scale and diversification with the addition of Bayer Animal Health.
On a pro forma combined company basis, Elanco's revenue grew approximately 6 percent, assuming the Bayer Animal Health acquisition had
occurred on January 1, 2020. The company is making progress toward its long-term growth algorithm, reflecting the durability and diverse
nature of the combined business as well as favorable industry fundamentals.
the legacy Bayer Animal Health business contributed $421 million, including $121 million from the Advantage family of products and
$52 million from Seresto, each increasing 9 percent compared with pro forma revenue for the full third quarter of 2020. The global Pet
Health business grew on a pro forma combined basis in the third quarter, driven by the company's U.S. retail performance and continued
strength in international markets.
Farm Animal business also contributed to the upside versus the midpoint of third quarter total revenue guidance, including legacy Elanco
Farm Animal revenue up 8 percent with demand-driven strength in global cattle. China swine was impacted by herd liquidation with re-emerging
African Swine Fever headwinds, creating sharply lower hog prices. International poultry and aqua grew double-digits as many international
markets saw recovery from the COVID-19 pandemic.
Launches and Approvals
is expected to drive Elanco's long-term growth algorithm, with an anticipated two to three percentage point contribution to overall average
annual revenue growth. Elanco has now launched all eight of the planned launches for 2021. Highlights include:
to anticipate the eight total products launched in 2021 to contribute $65 million to $85 million in revenue during the year, and the
company's innovation pipeline to contribute $600 million to $700 million by 2025, which includes $100 million expected from the innovation
portfolio acquired with KindredBio.
Innovation Leadership and Microbiome Carve-Out Initiative
Ph.D., joined the company on October 18, 2021 as executive vice president of Innovation and Regulatory Affairs. de Brabander is a highly
accomplished animal health research and development leader, with a proven track record in developing parasiticide blockbusters as well
as major vaccine products in Pet Health and Farm Animal.
vice president of Elanco Animal Health, Aaron Schacht has transitioned to lead the initiative to carve out Elanco's microbiome
R&D platform as an independent biopharmaceutical company focused on developing solutions for animal and human health. The
initiative, expected to be completed by the end of the first quarter of 2022, will allow Elanco to further concentrate its resources
on the company's high-value, late-stage Pet Health pipeline, while potentially retaining a minority interest in the new
Capital and Balance Sheet
quarter, days sales outstanding was 81 days, up from 75 days in the second quarter of 2021, reflecting higher international revenue and
lower retail revenue in U.S. Pet Health driven by normal seasonality. As of September 30, 2021, cash and cash equivalents were $453 million,
and gross debt was $6.42 billion.
12, 2021, Elanco entered into a new debt financing arrangement for a $500 million credit facility, consisting of a senior secured term
loan (Incremental Term Facility) to retire the Senior Notes due August 27, 2021. The Incremental Term Facility bears interest at a floating
rate of LIBOR plus 175 basis points and is payable in quarterly installments through August 12, 2028. The terms of the Incremental Term
Facility, including pledged collateral and covenants, are generally consistent with the terms of the company's existing term loan B credit
facility (Term Loan B).
of the quarter, Elanco had $250 million drawn on its revolving credit facility that was used to fund the $444 million acquisition of
KindredBio. The remainder of the purchase price was funded from cash on hand.
net leverage target remains approximately 5.5x.
Quarter Reported Results
quarter of 2021, total revenue was $1,131 million, an increase of 27 percent, or an increase of 26 percent without the impact of foreign
exchange rates, compared with the third quarter of 2020, driven by the inclusion of the Bayer Animal Health business. Legacy Elanco revenue
in the third quarter was $710 million, an increase of 2 percent year over year. Net loss for the third quarter of 2021 was $104
million, or $0.21 per diluted share, compared with a net loss of $135 million, or $0.29 per diluted share, for the same period in 2020.
revenue increased 31 percent for the quarter, driven by the addition of Bayer Animal Health product revenue of $247 million.
Legacy Elanco revenue decreased 2 percent in the quarter, driven by declines in older generation parasiticides and the impact of divestitures,
partly offset by higher underlying volume trends from newer generation parasiticide and pain products, and price growth.
revenue increased 23 percent for the quarter, driven by the addition of Bayer Animal Health product revenue of $157 million.
Legacy Elanco revenue increased 8 percent in the quarter, driven by global cattle and U.S. swine, double-digit improvement in international
poultry and aqua, and new product launches in 2021, partly offset by generic competition, and lower levels of producer demand in China's
swine market due to herd liquidation.
Manufacturing (formerly Strategic Exits) represents contract manufacturing relationships which are not long-term value drivers for
the company. Contract Manufacturing revenue represented 2 percent of total revenue, including $17 million from the addition of Bayer
Animal Health products.
was $629 million, or 55.6 percent of revenue, in the third quarter of 2021 compared with $448 million, or 50.3 percent, for the third
quarter of 2020. Gross margin as a percent of revenue increased 530 basis points, primarily due to the benefit from the inclusion of
the legacy Bayer Animal Health portfolio and continued improvements in manufacturing productivity and price as well as a decrease in
amortization of inventory fair value adjustments recorded from the acquisition of Bayer Animal Health.
expenses increased $70 million to $436 million in the third quarter of 2021 compared with the third quarter of 2020. Marketing, selling,
and administrative expenses increased $64 million to $342 million, as a result of the inclusion of expenses supporting Bayer Animal Health.
Research and development expenses increased $6 million to $94 million, or 8 percent of revenue, as a result of the inclusion of the Bayer
Animal Health and KindredBio businesses. Elanco continues to make progress toward the company's Investor Day commitment to deliver on
$300 million in cost efficiencies by the end of 2023, including $160 million to $175 million of cumulative synergies to be achieved in
of intangibles increased $45 million to $141 million in the third quarter of 2021 as compared with the third quarter of 2020,
primarily due to the addition of amortization of intangible assets recorded from the acquisition of Bayer Animal Health. Asset
impairment, restructuring, and other special charges decreased by $151 million year over year, to $111 million in the third quarter
of 2021 from $262 million in the third quarter of 2020. Charges recorded in the third quarter of 2021 include costs primarily
related to the $50 million write-down of a Farm Animal portfolio R&D asset, and the establishment of a $26 million liability for
future royalty and milestone payments relating to our canine parvovirus license agreement with KindredBio, which was then
settled upon the closing of the acquisition.
expense was $60 million in the third quarter of 2021, compared with $48 million in the third quarter of 2020, reflecting the increased
debt from the Bayer Animal Health and KindredBio acquisitions.
was $11 million in the third quarter of 2021, compared with income of $115 million in the third quarter of 2020. Other expense recorded
in the third quarter of 2021 primarily consisted of mark-to-market adjustments on equity investments and foreign exchange losses, partially
offset by certain components of net periodic benefit income. Other income recorded in the third quarter of 2020 primarily consisted of
gains recorded on the divestitures of certain products.
Quarter Consolidated Non-GAAP Results
adjusted gross margin, as a percent of revenue, increased 150 basis points, to 55.7 percent compared with the third quarter of 2020.
Adjusted net income for the third quarter of 2021 was $93 million, compared with $60 million in the third quarter of 2020. Adjusted net
income in the third quarter of 2021 excludes the net impact of $197 million primarily related to asset impairment, restructuring and
other special charges, amortization of inventory fair value adjustments, amortization of intangible assets, and an adjustment to a loss
that was previously recorded in relation to the divestiture of products, net of the impact from taxes.
in the quarter was $0.19 per share, compared with $0.13 in the third quarter of 2020. Adjusted EBITDA was $211 million in the third quarter
of 2021, which represents 18.7 percent of total revenue compared with $148 million and 16.6 percent for the third quarter of 2020, respectively.
detail of non-GAAP measures, see the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this press