Investor Contact: Kathryn Grissom (317) 273-9284 or kathryn.grissom@elancoah.com

Investor Contact: Kathryn Grissom (317) 273-9284 or kathryn.grissom@elancoah.com

Media Contact: Colleen Parr Dekker (317) 989-7011 or colleen.dekker@elancoah.com

Elanco Animal Health Reports Third Quarter 2022

GREENFIELD, IN (November 8,

2022) - Elanco Animal Health Incorporated (NYSE: ELAN) today reported financial results for the third quarter of 2022, provided

guidance for the fourth quarter of 2022, and updated guidance for the full year 2022.

"Elanco's Innovation, Portfolio, and Productivity

(IPP) strategy and leadership position in the animal health industry sets us up for sustained value creation. While we continued to

face topline pressure in the third quarter, we delivered 5% adjusted EPS growth, expanded adjusted EBITDA margin by 120 basis points

and reduced gross debt by nearly $170 million," said Jeff Simmons, Elanco president and chief executive officer. "The

Elanco team is focused on execution, - advancing the pipeline, driving market share, price growth, and accelerating our

systems integration. Environmental conditions have worsened from our assumptions in August causing us to reduce our full year

financial outlook to reflect additional foreign exchange headwinds, the global economic slowdown further impacting Europe and U.S.

pet retail markets, and the continued impacts of COVID-19 lockdowns in China."

"Importantly, our R&D team has made remarkable progress

on the pipeline. We see a path toward five products with blockbuster potential approved in the U.S. by the first half of 2024 -

Experior, which doubled revenue sequentially from the second quarter, our monoclonal antibody for canine parvovirus, our broad

spectrum parasiticide, and our two dermatology assets. As we look to 2023 specifically, in addition to our parvovirus product, we

expect approval for multiple innovative pet products, including Bexacat, the first SLGT-2 inhibitor product for feline diabetes and

at least three OTC pet retail products."

Financial Highlights

(1) CER = Constant Exchange Rate, representing the

growth rate excluding the impact of foreign exchange rates.

Certain reclassifications of prior year farm animal species revenue

have been made to conform to the current year's presentation.

Numbers may not add due to rounding.

In the third quarter of 2022, revenue was $1,028 million, a decrease

of 9% on a reported basis, or a decrease of 4% excluding the unfavorable impact of foreign exchange rates, compared with the third quarter

Pet Health revenue was

$471 million, a decrease of 11% on a reported basis or a decrease of 7% excluding the unfavorable impact from foreign exchange rates,

with a 4% increase from price in the quarter. The Advantage Family of products contributed $101 million, representing

a 17%, or $15 million, decline on a reported basis, and 13% decline excluding the unfavorable impact of foreign exchange rates. Seresto

contributed $43 million, representing a 19%, or $8 million, decline on a reported basis and 14% decline excluding the unfavorable impact

for foreign exchange rates. For the third quarter, excluding the unfavorable impact of foreign exchange rates, volume declines as a result

of worsening global economic conditions impacting parasiticide products in Europe and U.S. retail channels as well as competitive pressure

on certain parasiticide products, were partially offset by growth in our global pain portfolio.

Farm Animal revenue was

$545 million, a decrease of 7% on a reported basis or flat excluding the unfavorable impact from foreign exchange rates, with a 3% increase

from price. For the third quarter, excluding the unfavorable impact of foreign exchange rates, increased demand for poultry products and

strength in the aqua portfolio was offset by supply constraints of certain U.S. cattle vaccines and a decline for swine in international

markets, particularly in Asia.

Contract Manufacturing

revenue was $12 million, a decrease of 43% or 36% when excluding the unfavorable impact from foreign exchange rates, driven primarily

by the sale of manufacturing sites to TriRx.

Reported and adjusted gross profit was $556 million, or 54.1% of revenue

in the third quarter of 2022. Gross profit as a percent of revenue declined 150 bps on a reported basis and 160 bps on an adjusted basis,

primarily driven by inflation and unfavorable product mix, partially offset by productivity efforts across our manufacturing footprint

Total operating expense was $376 million for the third quarter of

2022. Marketing, selling and administrative expenses decreased 13% to $298 million, and research and development expenses decreased 17%

to $78 million. The decrease in total operating expenses was primarily driven by disciplined cost management across the business, cost

savings realized as a result of 2021 restructuring activities, increases in R&D productivity, lower promotional spend and the impact

of foreign exchange rates, partially offset by higher legal expenses.

Asset impairment, restructuring, and other special charges were $26

million in the third quarter of 2022, compared to $111 million in the third quarter of 2021. Charges recorded in the third quarter of

2022 primarily related to costs associated with the implementation of new systems, programs, and processes due to the integration of Bayer

Animal Health. The integration go-live has been accelerated from mid-year 2023 to early in the second quarter of 2023.

Reported net interest expense of $60 million in the third quarter of

2022 was flat in comparison to the third quarter of 2021. The impact of the partial repayment of the company's senior notes in April 2022

was offset by the impact of rate increases on variable rate debt and debt extinguishment losses recorded upon the retirement of a portion

of the company's Term Loan B. Adjusted net interest expense was $58 million, or a decline of $2 million compared to the third quarter

The reported effective tax rate decreased to negative 17.1% in the

third quarter of 2022 compared to 20.0% in the third quarter of 2021, primarily driven by the jurisdictional location of Elanco profits.

The adjusted effective tax rate decreased from 23.5% in the third quarter of 2021 to 16.7% in the third quarter of 2022, primarily driven

by the jurisdictional location of Elanco profits.

Net loss for the third quarter of 2022 was $49 million and $(0.10)

per diluted share on a reported basis, compared with a net loss of $104 million and $(0.21) per diluted share for the same period in 2021.

On an adjusted basis, net income for the third quarter of 2022 was $96 million, a 3% increase as compared to the third quarter of 2021,

or $0.20 per diluted share, a 5% increase compared with the same period in 2021.

Adjusted EBITDA was $205 million in the third quarter of 2022, a decrease

of 3% compared to the third quarter of 2021. Adjusted EBITDA as a percent of revenue was 19.9% compared with 18.7% for the third quarter

of 2021, an increase of 120 basis points.

Working Capital and Balance Sheet

Cash flow from operations was $189 million in the third quarter

of 2022 compared to $89 million in the third quarter of 2021. The increase in cash from operations in the third quarter of 2022 reflects

a lower reported net loss and the benefit of a net $73 million cash interest rate swap settlement. The settlement provided a cash benefit

in the third quarter of 2022 that will negatively impact operating cash flow over the next four years as this cash acceleration reverses.

As of September 30, 2022, Elanco's net leverage ratio was

5.2x adjusted EBITDA, a decrease of 0.1x compared to June 30, 2022, driven by lower net debt and better adjusted EBITDA. Elanco expects

net leverage to be between 5.2x and 5.3x adjusted EBITDA at year end.

For further detail of non-GAAP measures, see the Reconciliation of

GAAP Reported to Selected Non-GAAP Adjusted Information tables later in this press release.

Select Business Highlights Since the Last

Elanco is updating financial guidance for the full year 2022, summarized

in the following table:

Elanco is reducing and tightening its full year revenue guidance

range by approximately $100 million at the midpoint to reflect worsening macro-economic and environmental pressures compared to its

expectations in August, including the continued strength of the U.S. dollar, economic impacts from China's continued COVID-19

lockdowns and the impact of the global economic slowdown on Europe and U.S. pet retail markets. For the full year 2022, the

unfavorable impact of foreign exchange rates is expected to be approximately $225 million, or 5%, compared to 2021, an incremental

$20 million compared to August guidance. The company has updated its guidance for reported net income, adjusted EBITDA,

reported EPS and adjusted EPS to reflect the expected impact of the strengthening U.S. dollar and reduction in revenue.

"Our reduction in revenue guidance of $100 million dollars

reflects our updated assumptions on environmental conditions. In Europe, our business increased 1% in the first half of 2022, but

declined 9% in the third quarter because of the economic slowdown in the region impacting consumer behavior. In August, we expected

China to decline 1% for the full year but the impact of continued COVID-19 lockdowns and protein producer profitability pressures

have led us to update our outlook to be a 16% to 18% decline. Despite these current global economic challenges, and the unfavorable

impact of foreign exchange rates, we remain confident in our ability to expand margins over time, generate cash to pay down debt,

and bring differentiated innovation to the market," said Todd Young, executive vice president and Chief Financial Officer.