We're thrilled to have Elanco at the Cowen Conference again this year. Representing the company, Jeff Simmons, who of course is President and Executive Officer. Jeff, thank you for making it. Great to be here, Steve. Maybe, we could start out the conversation kind of in a broad brush way. If you could talk about the recent guidance and how that sets up the year of 2023 and some of the opportunities. Sure. Thanks, Steve. Yeah, I think at a high level, just everybody, Elanco had an investor conference in December of 2020. We set the stage of Elanco plus Bayer from the acquisition and really went forward. In 2021, had about 5% constant currency growth, pretty consistent quarter to quarter, good integration of the company. 2022 came, and we got to, you know, May, June time period, and many environmental factors that impact a lot of companies here at the conference hit us and some in a more over-indexed way. The economic pullback impacted us on pet retail in a pretty significant way. China lockdowns. We were expecting a full percentage point of growth in China. That had a pretty significant impact to us in 2021. Europe with Novartis and Bayer were pretty heavy in Europe. The economic slowdown, sellout data across the board in all animal health companies, and other factors, supply and other challenges. Competitive innovation. I think from a market standpoint, we had a couple challenges, mostly in U.S. pet vet clinic segment on parasiticides. Of course, the Ukraine War and a few other factors, FX was about $200 million of step-down for us. All of that combined, we were down about 3% in constant currency in 2022. We come into 2023, we set a guide a few weeks ago that really takes a lot of these factors into consideration in what we would say is an improvement, but we would say more of a U-shaped than a V-shaped improvement coming into the year in our guide. We think that China will be, we saw a return to growth in Q4 of 9% after many quarters of decline. We've seen OTC sequential improvement in the OTC business in January, February. We've seen sellout data in Europe get better and improving, and I can go down the line. I think some other things as well. I would say that we expect that for the year we guided midpoint of guide down 1.5%, and we would return to growth more in the second half. In the first half, again, some of these things that would actually impact us would continue. Very importantly, we sell in pet retail, the Bayer portfolio, the Advantage brands and Seresto. It's about 70% of our sales are in the first half, high-margin products. We do see recovery, but we see it against a notional much bigger business than that seasonal business. That's, that's been factored into our, into our guide as well. I think overall though, what are the, what are the things that are gonna really drive? We see 2-3 percentage points of total growth coming from innovation. We see more than two coming from price. We see supply being favorable. We see China being favorable. We think that the majority outside of U.S. vet clinic pet, the majority of our portfolio is holding share. In some places like U.S. farm is actually growing share. Pain, we've grown share, et cetera. In there, we've got a competitive... I guess the last thing, Steve, we've got a competitive, you know, innovation and generic between pain, otitis, and para at about $80 million-$100 million we have calculated in for competitive challenges. Again, a year of growth. We can talk about it, but Elanco entering the next era of probably the biggest growth and innovation that we've seen in a long time. We've said that we are going to get $600 million-$700 million of innovation. We're at about $250 million coming into this year from 2021 to 2025. A pretty big step up. six blockbusters, more than $100 million in animal health. We have a path for six blockbusters between Experior on the market that we've just put on the market now to five more coming between now and the first half of 2024. That opens up growth, that opens up, you know, margin. We will finish our stand-up on our IT systems, April 1, and that'll decrease complexity and stand-up cost and increase free cash flow conversion as we go into 2024 for these new products. That's a lot, but that kinda sets things up. Yeah. That's great. obviously these six blockbusters- Yep. are critically important to the future of the company. We have good knowledge of it. Yep. Tell us what we need to know about the other five? Yep. How we can think about them as relative to their potential, their launch curves. Yeah. I think the first kind of going in order, we expect parvovirus, an antibody, our first monoclonal antibody, which we got from the Kindred acquisition. That is been announced that that'll be approved by the USDA under a conditional approval. We see about 500,000 puppies a year with parvovirus. There's a high interest in this product. We're hoping for a plant inspection in the next weeks, not months. After that plant inspection and approval, and then approval would lead then to state approvals, and we'd be bringing the product on, you know, in 2023. We see that as blockbuster potential globally overall, and again, lots of interest. That's a big milestone for us. We have a plant in Kansas, Elwood, Kansas. It'll be our monoclonal antibody. We will get it approved on small scale, and then We will scale that quite significantly here, and that product will scale more in 2024 as we scale the manufacturing. Next is derm. We've got a series of derm products, one coming from our Lilly history, JAK1 inhibitor. That would go against. Again, the derm market in pets right now is about $1.3 billion. It's really two products, Apoquel and Cytopoint. We see a dissatisfaction and also people wanting alternatives in that market. We're coming with a JAK1 first that's differentiated. We don't get into a lot of differentiation, that's efficacy, safety, convenience. That product is moving nicely and again, will be made in manufacturing facilities that we have today, pretty predictable regulatory path being that it's already there. That's an opportunity that we see given the size of that market. We'll follow that. We're hoping to make a submission. We've already made a submission on the JAK, that's again, a path for a first half 2024 approval. Following that will be an IL-31 short-acting monoclonal antibody made in the same facility as the parvovirus antibody, we're hoping for a submission on that in the first half of this year. The next one's the big one, which is the broad-spectrum parasiticide. We say it's differentiated to what's on the market today. That is the path. We've made a submission on that. That's also another key. Why there's not been a lot of broad-spectrum products is the heartworm threshold for the FDA is 100%. We have passed that heartworm threshold. This product, this product again, is progressing nicely in the pipeline, we have a path for a first half approval for that as well. Then a new one that we've highlighted that is new is the Bovaer. Bovaer is a product we've licensed from DSM. It's a feed additive that actually inhibits methane growth and production in the ruminant of a cow. It reduces methane by 30% in dairy and 50% in beef. We see this product, the actual space of methane production in global cattle we see as being over $1 billion, and we see Bovaer's potential in the U.S. We have rights just for the U.S. right now for $200 million. That was expected to be after the middle of the decade, the FDA has communicated with us somewhat of an approval acceleration to a path for a first half 2024 approval. That's the six products that we see that have more than $100 million of potential. Most all of them have accretive margins, accretive growth, and of course, will drive our greatest margin expansion and free cash flow conversion will come from these products. By the way, if anyone has a question in the audience anywhere along the line, just raise your hand. We'll call upon you. When you were talking about- Yeah. Bovaer, having U.S. rights as of right now, does that mean you're seeking global rights or did I misinterpret you? No. I, you know, we've got a great collaboration with DSM. We're working together on manufacturing. The other factor is we were, you know, considering that this had to be contingent upon building a manufacturing plant. We have found a contract manufacturer, so we are. Believe we have a path to product supply in early 2024 as well, if the approval comes. That would be initial. We're working with DSM also on building manufacturing capabilities together on that as well. And, um, on, on parvovirus- Yeah. Is this the kind of thing that should ramp quickly because it's a established and well-recognized unmet need, or is this the kind of thing that awareness will be needed to build, to be built over time? Yeah. I think less on awareness, more on logistics. I think that, first of all, supply will be key. On any first monoclonal antibody, you get approval on the small scale, as I said, then you literally move to that upscale 20 times, you know, size. We're confident, it is again, new space. It is our first monoclonal antibody, I think 2023 sales will be more limited by supply. After that, Steve, I think it's much more about this is a broad every clinic having two, four, or five cases a year, deadly virus. They're gonna wanna have, you know, product availability. We've worked on a supply chain. It's a refrigerator frozen product, we, you know, we've worked through all those logistics. It's more of the breadth, not the depth, being able to be in the 25,000+ clinics. Of course, globalizing it after that. To get the blockbuster status, we'll be globalizing as well. One of your animal health competitors was here just a few hours ago, of course, they are in a lot of these sectors already and they're aware obviously of some competition coming. It was I think their view that their competitive intelligence telling us that there's no major quantum leap coming, that there may be some incremental advance. Would you say that that is perhaps underestimating the threat that Elanco poses, do you think they're that calibration? Well, I think that the great thing about animal health, and I've seen this, parasiticides, this generation of innovation is the fourth or fifth generation. We started with topicals, we went to collars, we went to orals, we went to first broad spectrum, now even more broad spectrum. There's injectable long-acting. Every time a new generation comes, Steve, the market expands. Why? Price elasticity on a monthly basis is not anything that will change the behavior. The good news is this is a durable, expanding, profitable market. We've seen it in para, we've seen it in pain, and we're seeing it in derm, and I believe that will continue. Our goal is and belief is this is gonna expand market, not contract market. We believe, yes, differentiation matters. We also think that the launch capabilities today compared to the past, we will launch better than we've ever launched anything before in this next era of innovation. That's gonna encompass segmentation, you know, it's gonna encompass distribution, targeting. Look at Zorbium. We launched a pain product last year. With digital targeting and segmentation, we went to 12,000 clinics in a little over three to four months. That came from segmentation like we've never had before. We've recently hired somebody that's come on to the executive team that I'll just note that I think is a proof point of our belief in the size and his belief. Tim Bettington was the or the president of Zoetis, U.S. during the Simparica Trio launch, then he was part of BI during the NexGard rollout, he's come on to join our team. His sole focus right now is launch readiness and looking at every one of these levers. Quantum leap or not, we will be very competitive, and we'll have a portfolio. The other is these are customers we're already calling on with one of the leading portfolio. The other thing we have that no one else has is an omni-channel approach with Bayer. As more and more companies now, Chewy has more and more script sales. It sounds like, 2024 and 2025 are going to be very, kind of rich years for new product activity. Lots of, new products coming, likely, a lot of in terms of incremental sales. What comes after that? Yeah. Is that likely to be followed by kind of a lull before we see another wave? Or is this just the beginning of kind of a constant drumbeat of new product activity that we should expect to be? Yeah. I think absolutely is the latter. Ellen de Brabander, that's had, you know, three decades of leading R&D organizations, from DSM to BI and Merial to over at PepsiCo and now Elanco, has come in, and her number one charge was not only drive this late stage, but create a pipeline, internal and external, in spaces we know we can win, and I'll call out a few of them, to where we know that we can be best in class in R&D to where, you know, she said very consistently, "Hey, we need a blockbuster a year." Now we've got a bunch of those coming up here at once, but how do we create a sustainable flow of big innovation in big spaces where we have competitive advantage to win? Here's an example. We've got the first just brought to the market here this year, the first SGLT2 inhibitor for feline diabetes. A pill cat owners now can take injectable two shots of insulin a day out and have a pill. Our plan is to build an entire platform around diabetes. On dermatology, we as an industry have focused a lot upon, you know, the actual problem, the itch, not the actual cause, so we're going to that. This whole area of methane and sustainable, climate-neutral farming on livestock is going to happen this decade. Elanco can be the biggest contributor to that. With 60 years of feed additive, how do we actually and health inside the ruminant and enteric of pigs, that's gonna be a big focus. She's bringing a sustainable capability and filling the pipeline, and our board has got an innovation committee very focused on that charge. Those are two great examples. They're examples, of course, that we're already aware of. What light can you shed, you know, about the pipeline relative to at least the areas where. Yeah. Elanco believes has. Well, I think I'll start in livestock. I mean, we've taken, I think, more market share than any company I know in the U.S. I think globally, it depends with the data, but, I mean, we're leaders in farm animal. You continue to see protein demand grow. You continue to see trade and profitability. You continue to see the need of less environment, more animal protein, giving consumers what they want. Just a few on the livestock side, I mean, taking antibiotics out of animals and replacing that with feed additive and biological, you know, and protein. Elanco's got leadership there. Second is the environmental footprint. You're seeing an industry move from feed conversion to footprint. Productivity is becoming much more of an environmental focus. You say, "Is that economically sustainable?" Well, yes, it is. I mean, there's putting energy into a cow and, you know, sustaining more of it in the cow and creating less waste is a big part of this. That's the second one that builds on, you know, six decades. We're the longest-standing brand in front of veterinarians and farmers globally. On the pet side, I think we come from a history of JAKs and autoimmune and diabetes. I think you'll see us continue to expand our capabilities and knowledge and awareness there. I think, you know, parasiticides with Bayer, Elanco and Novartis, we'll continue to see ways to do that. I think last, Steve, is we've spent a lot of time on omni-channel, being able to say it's not just the product themselves, but meeting more pet owners where they wanna shop, how they wanna shop, and at price points. We will continue to look at OTC. We're bringing three outside the vet scripted products today, this year to the marketplace, all the way to the vet, and more physical availability. Those would be spaces. SGLT2 was a brilliant idea. Kinda hard to believe no one thought of it for, are there competitors developing it, you're aware of that, competitors? We do. I think you can argue that in a lot of spaces. I think as the industry's consolidated, there's definitely some areas of consolidation. That's why the broader aspects of, hey, reaching the world's animals, being able to go inside and outside the vet, being able to, you know, right now through COVID, you know, Autoship has gone up significantly. With Autoship comes compliance. The third trend behind that is RX as a percentage. You put those three trends together, I think it's the ability to not only bring the innovation, but then when you have a third of the U.S., and it's even worse than that outside of the U.S., people that are not going to the vet or now not wanna go to the vet, being able to reach them where they wanna shop is really important. Our goal is to build out platforms like diabetes and then build out, you know, the ways to approach more and to globalize innovation faster. That'll be something that Tim coming onto our team will focus on. I had a question on. Yeah. You know, as an investor, we doing that. I'll go into it. Right. Yep. Just again. You know, this is a number one, it's our number one capital allocation priority. I mean, I would say to you that we're focused heavily on this. We reduced debt $500 million this past year, as you know. The biggest driver will be as we look even at this year's networking capital, being able to manage the inventory down on our balance sheet. As we've had a cut over, we're gonna have an April on our system, which I mentioned. That's gonna take inventory up temporarily. Our goal and our finance team is focused, the manufacturing team, on how to bring that down. That'll be important. You know, driving sales, especially on the pet side with high margins, gonna get that EBITDA, you know, over $1 billion and go. We're very safe from a covenant perspective. We have had more debt come floating and will come this fall, as you know. You can be assured that I believe we've got durable business with durable cash flow. We've taken our operating expense down over 10% again this past year. Even with inflation, we grew, you know, we grew margin, we grew the EBITDA, and we've held our gross margin pretty well flat. We changed our incentive plans, just so you know, that every employee starts every day having to beat the EBITDA. I would argue to say environmental conditions in the second half of the year have devalued. We think we're way undervalued, but we've got a very durable business that didn't change with valuation. We've got steady cash flows, we've got lots of levers, and, we're set up well as we end this year and go into next year. Okay. obviously you have a lot going on in the product area, a lot of launches. I mean, if you can, mention that this double dynamic. How should we about the line for all of this? Yeah. Spending license support are going trend. The most important line is the top line, that's the energy right now. What I would say is, even after what I would call a 6-month perfect storm with seven or eight things happening to us, we were down 3% constant currency after a year of up 5%. I think it shows there's a lot of durable portfolio that is sustained. We continue to see, I think animal health is seen coming through the economic times, price at historical levels. I think that we're gonna be able to see, we've said more than 2% price. That's gonna drop to the bottom line as you know. Innovation's gonna be more accretive, that's 2 to 3 percentage point as well. I think less disruptions in our supply chain and supply, all of these things that I think are favorable. A China that is quite profitable as a, as a, as an affiliate as well. I would start with the basics to say the top line, and then as innovation feeds it, one of the big criterias with the majority of our innovation is it's got to outgrow our company and it's got to be more profitable to drive the margins up. I start there by saying that is our energy as win share and focus on places where we can gain share and continue to take price in every market possible with increased pricing capabilities, supply chain capabilities. On operating expenses, you know, we brought Bayer and Elanco together. We quickly consolidated three manufacturing sites. We've consolidated any SKUs. Our finance and oversight committee looked at that. We've taken out, again, over $200 million of operating expenses and we'll exceed our $400 million of synergy with Bayer. What I would say is, as we get the system, the final last piece of the system stand up in place, I would say that we will continue to, you know, find ways to drive OpEx, but the big step downs have occurred. I would say, though, a question we get commonly asked, "Well, you're gonna need a lot more operating expense to launch." We're getting the efficiencies and crossing money over to do that. There may be some on a quarter-to-quarter basis, but we don't see a major step up needed in sales force, marketing expense overall. There may be some nominal quarter-to-quarter, but nothing significant to change our operating expense line. Gross margin's gonna be driven a lot by bringing down net working capital and working hard to create more of an efficient supply chain. I think the second is just, you know, the continued better margins on products that really aren't gonna need a new manufacturing footprint. Okay. We earlier were chatting about some of the kind of macro factor, one you touched upon, but I'd like to elaborate on. Friends in vet visit. What does Elanco see kind of light at the end? Well, you know, I think we saw the COVID increase in dogs and vet visits, and I would say that, what we're gonna talk about even three, four years from now, and I really believe this, and we're seeing it in the data, is that COVID made the pet owner's experience globally more convenient, and that convenience has improved. Why has visits stabilized or just come down some but spend gone up? It's because Autoship is better, compliance is better. People are now what we're using four times a year, they're now six, seven, eight times a year. We were, you know, in the Chewy headquarters being a major retail customer of them, and you see Autoship go up, you see compliance go up, and you see spend go up. I think that metric matters. I think behind that is also the ability to price behind that. Steve, I think those are the things we're seeing. I think the thing to watch here in the short term is the capacity inside the clinics. The labor situation is getting better. We're hearing leading indicators of that, but we've got to watch that. That's one indicator. The other is the economic confidence in Europe. We've seen sellout data continue to go down. It got a little better the last few months, but, you know, the Northern European market is, we've seen consumers back down and back away, and we're hoping that seeing some early green shoots this year, hopefully that improves. China pets, I would just highlight China pets, we've seen, I was on the phone this morning with China. I mean, the actual major retailers, there's less vets in China, so retailers matter to, or, you know, vet dispensing shops. There's a lot of them that shut down, and they're kind of almost rebuilding the physical infrastructure after the COVID lockdown. Those are the things to watch. Autoship, compliance, and spend are the things that I think we're seeing still remain resilient in this industry. We're down to just a few minutes. We kind of touched upon a lot of this already, but I think investors are most battling that operational capability is pipeline. What is it that investors, if they had a better handle on it, would have a different view of Elanco? Well, I think that we. Let's get to the obvious first, which is, look, we've had a lot of change with Bayer coming in. There's been a continuous amount of change. Then the second half of 2022, it was an unstable year for a lot of markets, but it was for us, is I think the most important thing, Steve, is we've got a guide we're confident in and creating the stability and confidence quarter to quarter that I think is gonna be the base, the first thing. I think when we went through 2021 and we were delivering quarter after quarter, and that was most important. I think seeing the return to growth is gonna be important. That is in the second half of the year. I think, this, you know, the belief in the pipeline, actually seeing it come to the marketplace is important. What I would say is from last quarter to this quarter, our confidence remains even stronger. We brought a new blockbuster into the pipeline into 2024 with Bovaer. These are in, you know, I think rich, big markets that are high margin markets, that are high growth markets, and Elanco's position and ready to actually go in and take share. I think that's probably not understood. There's been a lot of incremental innovation in animal health. Elanco's six blockbusters are big markets where we're positioned to be very competitive, a lot of them U.S. markets, to take a lot of share. That's probably in the ultimate, probably, I wouldn't say misunderstanding, but the biggest thing that's gonna change the trajectory of the value of the company. Prior to the pandemic, there was a kind of a emerging concern about the replacement of by other protein sources. There's been less talk about that recently. Where does that stand and what is the trend of that? Yeah. You know, we've seen consistent delivery of consistent growth of protein. Low- single digit growth, but it's been very persistent. GNP growth is the driver internationally, but actually on the Western side, you continue to see we consumed more meat in the U.S. last year than ever. You continue to see this Western diet of less carbs, more protein. I think the biggest thing that's most important, Steve, here is the number one reason the next generation is not consuming at the same levels is the impact on the environment more than on nutrition. For the beef industry, dairy, and others, the importance of being able to say, "Hey, climate neutral farming is a reality. We can actually have no impact on the footprint if we can handle enteric methane and do the right thing with waste," that will change, I think, and sustain the trajectory of animal protein. No one's predicting Rabobank or anyone that this is gonna slow. We can't change the world's diet. We gotta change some of the perceptions about what's happened on the footprint environment. In our last few seconds, what will be the biggest surprise to investors at Elanco 10 years from now? What do you know about the company that you don't think investors are savvy to that 10 years from now... Yeah. we will realize that we missed that very important then? I think standing up a company to reach the world's animals is very difficult. We've spent about $1 billion over the last four years to go independent, stand up, integrate Bayer. Today we can be over, in over 100 countries, and we're reach 19 species of animals with SCP regulatory. An SGLT2 inventor can't reach the world's cats, he comes to us. DSM last year, we got something to reduce methane. We need data. We need to reach, you know, farmers and veterinarians in an incredible way. No one can do it. DSM picks Elanco. They talked to all the major animal health companies. I believe that it's gonna be very difficult for many more companies to say, "I'm gonna build an independent company to reach the world's animals." I believe that 10 years from now, we've got a company and a brand, longest standing brand in front of farmers, veterinarians and pet owners that can reach the world's animals. I think that is what is sustainable, different. That is our Hedgehog that we can do best, that I believe will be remembered 10 years from now. Sounds exciting. Okay. We look forward to, monitoring your progress, and thank you. Thanks. for the discussion. Thank you. Thank you.