ICYMI: Elanco Shares Jump After 2Q Beat-and-Raise Results

0:00What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time, where lives are being shaped, where decisions are being made. It all starts with a question. Where is the potential? Cotality turns data into clarity, intelligence into insight, insight into action. Because when intelligence moves, we all move forward. Cotality. Intelligence beyond bounds. The thing about AI for business, it may not automatically fit the way your business works.

0:35Jeff Simmons:At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, that isn't always easy. Risk can touch multiple parts of an organization at the same time, often in ways that aren't immediately obvious.

1:14It might involve property, liability, or cyber. It could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation. At that level, managing risk becomes an ongoing discipline, not a one-time decision. At The Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. That means working with companies to identify where they're exposed, decide what matters most, and put practical standards in place so risk is managed as part of day-to-day operations. And when losses do happen, The Hartford can pair that risk control work with insurance coverage grounded in underwriting, risk engineering, and claims experience developed over time.

1:54Learn more at thehartford.com slash risk mitigation.

2:24Get wise. T's and C's apply.

2:30Bloomberg Audio Studios. Podcasts. Radio. News.

2:36Jeff Simmons:You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevec on Bloomberg Radio. Well, out with earnings earlier this morning, the stock is soaring. We're talking about Elanco Animal Health hitting a 52 week high today. It's up about 33 % year to date. The gain, as I look at my Bloomberg, it's up about 16 % in today's session. Again, as we mentioned, reporting earnings this morning, it boosted its adjusted earnings per share and revenue guidance for the full year following better than expected second quarter results. We wanted to know more about the business and hear about the outlook.

3:11Delighted to have with us Jeff Simmons. He is president and CEO of the$8 billion market cap company, Elanco Animal Health. He joins us from Greenfield, Indiana. Anna. Jeff, good to have you here. How are you? Great. Thanks for the opportunity, Carol and Norik. Good to be with you today. Well, I want to talk about the business. I want to start, though, when we've got a member of the C-suite, start big macro, high and wide. When you look at the market and business environment, it's been an interesting year. And there was a lot of volatility. There was a lot of uncertainty. It feels like some things have calmed down.

3:45We've certainly seen that in the equity market. But I'm just curious how you see the business environment today? Yeah, you know, I've pulled out the word volatile through my lens, and I see it dynamic. I think there's a mix of opportunity and challenge out there. But the backdrop that I come from, coming out of pharmaceuticals, but being in animal health for 35 years, I mean, this is an industry that's been growing, I think, in the last three decades, only one year, 2008, we haven't grown. And we're seeing that resilience in the first half of this year, the animal health industry is probably one of the most resilient and it's all around protein and pets and you've got trends here that we're seeing even with the dynamics that you've just mentioned consumer spend and the volatile environments we're seeing resiliency because of these trends i mean the pet owners of the future they're adding they're adding pets to their home pets numbers are up the globalization of pets the willingness to spend on pets is increasing as kids numbers and you know children go down, pets are going up.

4:42And we're seeing that in our results. And then on the protein side, this conversion of, you know, whether it's the new protein diets is also converging with our farmers and the dynamic. I mean, I don't know if you tried to buy cottage cheese lately or meat sticks. So those two trends are creating farmers, veterinarians, pet owners to have a resilience like I haven't seen. And, you know, we've seen eight quarters of accelerating growth and we peaked here, you know, after those eight quarters, not peak, but we've hit a high on adjusted basis of 8%. So where I come from, I see this is one of the most resilient industries right now with some of the consumer trends that are out there.

5:21I'm a dog family. I've had tons of dogs, three Dalmatians at one point. Right now I've got a Weimar owner and an Irish Terrier. So I totally, I feel you, I hear you. What I'm curious about is in terms of growth at the company, what's growing top and bottom lines? Is it existing products? Is it really what's coming in the pipeline? And I'd love to have you talk a little bit about what your pipeline is like, because I've seen changes, certainly in that monthly pill we give the dog. I used to give them two different pills. Now it's one pill and it covers a lot of what ails them and you have to watch out for.

5:51So give us an idea of what's really driving growth at the company. Yes, I'll anchor to that. I mean, it's innovation and farmers and veterinarians reward innovation. It's got to be valuable. This is a cash-based business, not a payer business. You've got to add value. Vets make money off from this and pet owners respond to it. And that's exactly what's driving Elanco. We have been focused heavily on a pipeline a few years ago with Blockbusters in it. We brought it through approval. We're now well into the launches. And I shared today five major products with Blockbuster potential. That's more than$100 million of potential in our business.

6:27But all of them are in big spaces. So let's just go down through a few of them that you could relate to. And hopefully we can get your pets on them if they're not. The first one is Cridelio Quatro. A$6 billion market is parasiticides. That's the flea, tick, heartworm. This is the first product the FDA has ever approved with four active ingredients. We give the broad coverage. We give the speed to tick kill that other products don't have. One month heartworm control. And what we're seeing is we've captured 14 % share in just a few months into the marketplace. And it's a real opportunity the market itself this broad spectrum pill is growing at 40 percent And we're bringing what we believe best medicine into that on the second is you know The number one reason people go to the vet is an itching dog The dog can self diagnose here for the pet owner and we've got a portfolio Coming the first one into the market and then we're globalizing it.

7:20We're launching Zen Rully in Europe We think we've got a high efficacy product we've now got over 50 % of users that are using the product saying we're moving it to first line that's a big deal for us and sales more than doubled in the U.S. from Q1 to Q2 and then you know I move over to the cattle business we've got a couple products here that are actually helping with productivity on low cattle numbers that are out there that's why beef prices are a little higher but also having an environmental impact and CPG companies are signing up to say hey this This is important to the next generation of protein consumers.

7:56All right. I have to ask just because one of our producers is asking, and she's got a dog in a dog lover. She says, are these allergy meds for itchy dogs or a skin thing? Can you help us out there? Yeah. So, you know, atopic dermatitis, you know, we're right in the heart of the biggest season, you know, kind of July, August, September. You know, this comes from, you know, just on the same as the human side. But it's what we're doing here is we're actually with the products we're bringing is we're treating that problem. We're bringing that itch down and putting that dog back into a comfort zone where it's not itching.

8:28I have two Labradors, and I've had a Labrador that's been on many different medicines. And this product, Zanreli, is actually working very well for those trouble cases. But it's primarily for atopic dermatitis. All right. Well, Elizabeth and Pearl, thank you for that. So a little bit of advice. Jeff Norah here, also a dog lover. My family, we're proud toy poodle owners here. But curious how you all are navigating the tariff environment right now, especially as it relates to the pharmaceutical space. Yeah. So first of all, we have been very clear in the last quarter and this quarter that we have, you know, put our interventions in place.

9:05We've done everything from, you know, we've got the manufacturing, we believe, in the right place. And we've really mitigated, quantified and actually quantified today 10 to 14 million dollars. We've covered that in our guidance and really tested that against any risk scenario at all on tariffs. As you go to the bigger kind of maybe 232 and some of the discussions that are happening in pharma, we as an industry, all of us have been there, animal health, inside of Washington. We're being heard with a constructive dialogue to say, hey, we're really out of scope. Why? We're not a payer business. We're a cash business, which creates a very competitively priced global environment, which takes us out of scope.

9:41But ultimately, this comes back to what I just talked about. This is about, you know, we are about food, you know, security, food affordability. We're about the American farmer. And that's what animal health does for veterinarians and pet owners. So at this point in time, we believe we're in a good constructive dialogue that we're being heard. And we will, you know, we have a plan to be out of scope relative to pharma because our industry is so different. Well, it is a different industry. And I love that you went there. What is it that maybe Bloomberg investors, Bloomberg audience doesn't understand maybe about your supply chain?

10:15Where is your supply chain? Yeah, the big companies are American based in our industry. That's that's one. And we primarily got manufacturing between Europe and the U.S. We have very small percent, I think, is an industry two to three percent coming out of China with active ingredients. So that that's one. But I think where the discussion goes is economics and pricing, which gets you into this situation. And again, when you don't, we don't have as much patent protection. We have lower margin industries and customers. And it just creates a global competitive price base, especially when you don't have payer.

10:49You really don't have an insurance base in pets or farmers. So, Jeff, does this mean you don't want to get caught up in the bigger, broader talk about the cost of pharmaceuticals? that that's absolutely right because we're more probably food-based and farmer-based type products and that's why we've got tremendous broad-based support from the veterinarian community the farmer the food community because that's what we are i mean we we're direct to consumers we're supplying products that impact their homes whether that's protein or whether that's their pets and again the cash market versus a payer market is a big deal so the message is yes we are outside of that scope.

11:24Another reason that brings the resiliency. I mean, this patent protein trend is creating a resiliency that I think for your viewers is why this is such an attractive industry and our last 30 years prove it. And I think Elanco, where we are relative to value, is a great company inside of that industry. So what about the White House wanting new drugs to be launched at prices equal to the ones in Europe or elsewhere? What's your view on that? Yeah, I mean, again, I would say back to the out of scope is, you know, we're a regulated industry. We bring products through, but we go right into the marketplace where we're not looking to get on a formula area.

12:04There's no insurance. I mean, this is where we have to go right out on day one, like I'm doing with these new products. And I need to prove a value proposition to you, the pet owner, as well as to the veterinary practice. Or I'm going to farmers and need to say, you know, the only way something works with farmers is it's got to be competitive. So I don't bring an innovation to the market if it doesn't add value immediately. And then I've got to be competitive, whether it's an American farmer versus a Brazil farmer. I mean, that matters, too. So to me, it's a very different marketplace, which causes the reason why we believe strongly we're out of scope of those tariff situations.

12:40Hey, before we wrap, one thing I'm curious about, Jeff, because I love talking with anybody in the drug-related space, but I'm always curious about what drives innovation. What drives innovation when it comes to pet pharmaceuticals, be it for farm animals, be it for my dogs or Nora's puppies? What drives it? Is it cost? Is it efficiency? Like, what is it? Yeah, first of all, there has to be a need. Back to the marketplace. We have to add value. There's a lot of products that have been designed, a lot of good ideas, I say, that never really become innovation because they don't hit value. I have to, as I bring, I'm going to use Cradaleo Quattro, this product, you know, brings three to four points of differentiation right out of the gate that I can come to you.

13:21Hey, I can give you the broadest coverage. You know, I can give you quick, you know, tick kill right away. These things matter. To a farmer, hey, I need to start talking dollars and cents right away to the farmer. It's the only way an innovation works. So that's, we do that, you know, seven, eight years in advance as we move this thing through the pipeline saying, hey, how will this be different? We don't bring a product in Elanco to the market if it isn't best in class or it's first in class and it's got differentiated value. And we have to price it that way right out of the gate as well, which I think substantiates my point.

13:53And back to, again, you know, the significance of what I think is a really attractive industry right now with maybe some of the volatility out there, to your questions, animal health. And, again, our history has shown it. Our last eight quarters have shown it. we've raised our guidance and we look forward to not just 2025, but the rest of the decade, Elenco's set up really well. I will do anything for my scout and my other dog. Yeah. I'm just going to say, do you have a dog? Most important question. Final question. Absolutely. Two Labradors. I think I've been through about four generations of Labradors.

14:25Classic. You know, like the waters. Absolutely. Lillian Lakin. Lillian Lakin. Love that. Hey, Jeff, thanks for carving out some time for us. Jeff Simmons, he's the president and CEO of Elenco Animal Health joining us on this Thursday. That stock, by the way, up 16 % in today's session. So talk about some outperformance.

14:44When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation.

15:19Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Aging is real. And so are the benefits of adding vital proteins, collagen, peptides to your daily routine. Because around the age of 30, your body needs backup to keep your collagen up to help support healthy hair, skin, nails, bones, and joints. Available in the classic collagen peptides, collagen and protein shakes, and new Vital Proteins Collagen Sparkling Waters. So you can stay vital, stay you. Visit vitalproteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration.

15:52This product is not intended to diagnose, treat, cure, or prevent any disease.

15:55Jeff Simmons:Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Healthcare doesn't always work great.

16:28If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com.