All right. Great. Thank you everybody for joining day three of the Leerink Partners global healthcare conference. I'm joined by Elanco CFO, Bob VanHimbergen, Head of the U.S. Business, Bobby Modi. We've got Tiffany Kanaga from IR in the audience, and Eric Saramet from Finance in the audience. Very happy to have you all here, and Bobby, you wanna kick us off with some opening remarks? Yeah, no, great. Hey, appreciate it. Thanks for having us. As I think about Elanco and where we are, we continue to operate with just a tremendous amount of momentum. We ended Q4 on a strong note and really beat our guide across the board on revenue, earnings, EPS. Cash flow came in much stronger, so we're able to deliver even a little bit lower than what we anticipated. It's really driven a lot from our basket of innovation. We ended the year with $892 million of revenue from that basket, which is above what we had guided as well. Because of that momentum, we were able to actually increase our expectations for that same basket in 2026, raising that to $1.15 billion. Just think about the guide we gave just a couple weeks ago for 2026, really right in line with what we highlighted at Investor Day in December with a mid-single-digit top-line growth, high single-digit EBITDA growth, and a low double-digit EPS growth, and then continued performance on trade working capital and cash flow. We do expect to get leverage in the low 3s this year and then getting below three in 2027, and that certainly gives us some flexibility and optionality with shareholder returns. A lot of momentum and really looking forward to the discussion here today. Great. Yeah, I wanted to dig in a little bit more into innovation revenue. So starting with Quattro, really strong H2 performance, doing well in the Kantar Puppy Index. You increased your kind of index output there. How are you thinking about Quattro's positioning in 2026 for puppies? If we think about like the primary growth drivers of Quattro, has that primarily been puppies? Yeah. I think the way to think about the growth for Credelio Quattro is really twofold. First is continued clinic occupancy, so we're only in about 1/3 of the clinics in the U.S., and we have ample opportunity to expand that. The second is our market share within the clinic. Our market share as of December on average was about 40% of the endectocide space, which is relatively low, and we see continued penetration opportunity going forward. Obviously, getting new puppies on Quattro will continue to help grow the brand as puppies that start on a drug tend to stay on the drug, and roughly 35% of the volume on Quattro is essentially new starts, so either new puppies or new adults, and we see that continuing to fuel sort of momentum throughout the growth of the product. Gotcha. When we think about sort of the ground game to grow, clinic penetration, you know, increase kind of patient starts, whether puppies or non-puppies, like what are the main levers you're pulling, and where have you found particular success? Yeah, I think, you know, driving clinic penetration starts with the product itself, and it starts with the degree of differentiation with the product, and Credelio Quattro really differentiated in four vectors. We would say broadest coverage as you think about tapeworm coverage, speed of kill on ticks, so we've got head-to-head study against the competitive products in the marketplace. Heartworm efficacy in month one, and then palatability, which has been a nice surprise as people have tried the product in the market or fed it to their dogs. Palatability is really important 'cause it enables switching, like switching a dog off of an existing product if it's highly palatable, it makes it a lot easier. I think the other big vector as we think about sort of driving occupancy is our direct to consumer campaign and the investment we've put behind those launches and really driving consumer demand to ask for the product by name and create sort of pull at the clinic level going forward. This combination of, you know, we believe is best medicine plus sort of driving consumer pull and medical education is sort of the strategies we think about occupancy going forward. Great. Yeah, jumping to Zenrelia here, you know, your oral derm product, how are you thinking about, you know, the longer term market opportunity in the U.S. just sort of based on the current label and then the broader competitive landscape? Yeah, we're really pleased with the momentum that we're seeing on Zenrelia, and it's really ramped up in Q3 and Q4 of 2025, and we see that momentum continuing in 2026. You'll know that we updated the label in October of last year, and since updating that label, we've got 3,500 clinics to sign on to Zenrelia. We are now in over half of the clinics in the U.S., so just over 50%. We continue to add roughly 600-700 new clinics each and every month from an ordering perspective. It's great that, you know, Q4 was one of our strongest quarters ever, and we were exiting sort of peak derm season, right? We were in off-season time period. We see upside with the current label and continued market share growth driven by, again, same factors as Quattro, continued expansion of clinics as well as share within the clinics. Concurrently, we're also working with the FDA to sort of update the label even further, and we're cautiously optimistic that we'll hear something in the near future regarding that. Great. If you do get a cleaner label, how should we think about your sales and marketing playbook? If that does play out, would there be any change in tactics or strategy in that situation? Yeah, I think you could think about. I mean, we're gonna continue to drive medical education. We feel like sampling is a great tool because people, what sets Zenrelia apart from maybe other players in the market is its efficacy and how well it performs, and certainly the head-to-head data that we have indicates that. I think, but beyond that, I think, a cleaner label may give us the opportunity to go direct to the consumer and drive a little bit more consumer demand on the product. Gotcha. Yeah. On the topic of, you know, having a cleaner label, obviously internationally, Zenrelia does have that, and it's performed quite well. So it sounds like you just touched on some of the learnings from those markets. Like, are there any others that you found particularly useful that you can kinda leverage in the U.S.? I think, you know, we actually have more experience with the launch in the U.S. They probably have more experience with a cleaner label. I think the rules in terms of how you can talk about products is different internationally versus in the U.S. The places that we're all leaning in sort of very similarly is on the medical education, utilizing KOLs and sampling, and we'll continue to do that. We may in the markets that we're allowed, we may start some direct-to-consumer campaigns, OUS, so they may get some experience with what we think is a nice global campaign on Zenrelia. Gotcha. I mean, you've got, as you mentioned, the head-to-head data on the label over there. It seems like that's going well. Can you talk about sort of where Zenrelia wins relative to others in the oral JAK space, whether it's the incumbent or the newcomer out there? I mean, we talk about Zenrelia being differentiated in three vectors: convenience, efficacy, and value. That's sort of the positioning that we like sort of in the marketplace. On the convenience front, which also plays into the value front, it's one pill all the time versus this notion of a loading dose that the incumbent in the marketplace has. Then on the efficacy side, there's obviously real-world experience and actually there's great real-world experience in the U.S. because of our label. We started as more of a second-line treatment and we got handed the toughest cases and the product performed extremely well. But we also have the head-to-head data which supports the efficacy of the product. Yep. Moving to Befrena, how are you thinking about the longer-term opportunity in the IL-31 mAb space given what is differentiated label for current versus the current market, you know, on product and then any future launches in the space? Yeah. We're really excited about the Befrena launch. You know, we said it'll be a two-stage launch this year, and I think our excitement for the launch is anchored in a couple of things. First, when we did market research on the label, 83% of veterinarians said they would adopt the product. That indicates sort of high demand for the product. The second thing is really the portfolio effect on derm. We'll be one of two manufacturers that really has a comprehensive solution kit. We actually have some additional products like Atopica in the derm space, so really giving us the broadest sort of portfolio in dermatology. Lastly, you know, we're in 15,000+ Zenrelia clinics, so those will be great sort of adopters for the Befrena product. I think this ramp rate should be faster than what we'd historically seen on Zenrelia. Gotcha. I'll circle back on the portfolio effect in a minute, but, you know, I know you don't guide by product, but if we had to think about a bigger market or opportunity, should we be more excited for Zenrelia or Befrena? We love all our children equally. I actually think there are reasons to bet on each of those products. That's why we've always talked about the basket of innovation. Like certainly, Credelio Quattro is in the biggest, fastest-growing space and you believe as operating at best medicine, there's opportunity there. Obviously, Zenrelia is the most incremental to our portfolio and with a clean label, it could do even more. You look at Befrena, which already has a clean label and is differentiated in terms of its efficacy on the label, and being one of only two manufacturers in that space, obviously you'll see a lot of potential with that and also highly incremental to the portfolio. I don't know. Depending on the day, you could pick one or the other in terms of your lead horse, but we're excited about the full basket and the potential that it brings. Great. Yeah. Had to ask. Yeah. Jumping back to the portfolio, commentary. You know, you've talked about the potential for improved sales into corporate practices, you know, both U.S. and overseas. You know, how are you thinking about the opportunity, maybe the pacing of potential corporate wins, and just really the cadence of RFPs as those come up? Yeah. I think it's important to note that, you know, all the corporates are in different stages. Some have multi-year agreements with other vendors. Some are probably not in a stage where they want to be switching the medicine in their clinics because they're focused on other priorities as they think about what they're overall trying to achieve. I think what you can expect from Elanco, which has historically been underdeveloped in the corporate space, is a gradual build in business, you know, over the next coming, you know, call it one to four years as we bring on more corporate partners and seek more growth. The relevancy of our portfolio allows us to do that, I think better than almost anyone else sort of in the animal health industry. You know, I'll give you one stat. In 2025, we grew net sales with 90% of our corporate partners, and in 2024, we were only doing that with 13% of our corporate partners. Yep. I guess to pull on that thread a little bit, where is the growth coming from? Is it specific products you're placing better, more volumes in specific areas? What's driving that? The growth in U.S. pet health specifically? In the corporate practices, where you're seeing more of an uptick. Yeah. I think what you're seeing is new products and then the portfolio effect of those new products bringing the portfolio along. You know, I just say in aggregate, we grew market share in every major category in 2025. Vaccines, parasiticides, Rx, OTC, OA, pain, and dermatology. You certainly. Yes, we love the growth we're getting from Zenrelia and Quattro, but we also love the halo effect we're getting on the rest of the portfolio. Gotcha. Yep. Shifting to farm here, we should certainly touch on that. Experior's been, you know, a real standout since launch, now north of $200 million in annual revenue. You've talked about a total market of around $350 million, and pulling a couple levers to achieve that, whether it's, you know, expanding days of use, price, continued adoption. How should we think about the importance of each of those three in order to continue to drive what's been, you know, strong Experior growth? Yeah, I mean, so you highlighted that, you know, Experior for us is a blockbuster, $200 million in sales operating in a $350 million TAM between U.S. and Canada. Listen, you know, it's going to be. That's 80% growth just in 2025, but still runway left, and really it's probably all three levers, Dan. You know, I think there's going to be continued adoption with the product as we get to, you know, that next level of producer size. Price, we did take price out in 2026. We'll continue to price to value. And then I'd say a longer term tailwind will just be geographic expansion even beyond U.S. and Canada. Right now, we've got a very strong customer retention. It's north of 90%. As you think about just moving forward, a gradual herd size improvement's gonna be just a longer term tailwind for Experior. Great. You know, on a higher level, can you kind of remind us of where conditions sit in the cattle market? Seems like they're favorable producer economics, so, like, how do we think about duration of that? Yeah. Just to look at Q4 for us, we grew 17% in the U.S. farm business and it's really driven really on Experior and to a lesser extent, Pratolex, but just a good portfolio mix there. But the herd, I mean, right now we're obviously at historically low herd size in the U.S., and we've got high demand for beef, and so you know, what that equates to is high beef prices and favorable economics for the producer and therefore for Experior. As I think about kinda what we see going forward, I think the liquidation of the herd size is flat right now, or it's kinda ceased, and you know, the growth has stagnated, so really a relatively flat herd size here as we move into certainly the next era. For us, I mean, that's good news. Again, gradual herd size and favorable economics for the producer should continue to strengthen the business. If you take a step back and look at the overall macro environment of proteins, and a couple things I'd point to. First is just the new dietary guidelines within the U.S. where, you know, we wanna move from 1.2 - 1.6 grams of protein per kilogram of weight. You've got just the increased use of GLP-1, and so, you know, our belief is when we get to 2035, over 20% of the population in the U.S. will be on GLPs, and we know that population's using or eating more protein to a point of like 40%-50%. The aging population would be the third lever. I would say is the last macro trend that's gonna support the farm business, where by 2030, we expect the population of those 60 years old and older to improve by 25%. The need for that population to have more protein to sustain muscle mass is critical. I think there's just a lot of great macro drivers for the farm business. Gotcha, we were talking about this earlier, but just on the topic of macro, I haven't checked oil prices in the past 15 minutes, but they're elevated versus High you know, where they've been historically. How are you sort of thinking of the impact to that, to both the pet and livestock business? Yeah, I mean, so listen, obviously if you know, something is more prolonged, you know, my answer would change. As we sit here today, it's really not a meaningful impact. It's really immaterial to where we are today and what we see for 2026. Obviously, you know, if this war goes on a lot longer, things could change. Gotcha. No, that makes sense. I guess, you know, moving to the cost structure here, you know, Bob, you've come in, you moved pretty quickly. You launched Ascend to drive additional G&A savings. Like, how would you characterize the program having gone thus far in line with expectations ahead? Just what are you thinking at this point? Yeah. No, I'm extremely excited and enthused about the actions that we've taken. Just to remind you, I mean, we're gonna see a couple natural margin improvements just with the basket of innovation continuing to grow. Those margins have a higher margin than our corporate average. Just with volumes improving, we're gonna see some fixed cost leverages. We leveraged just our existing cost base, right? Elanco Ascend comes along, and that's us taking a proactive approach to margins beyond just the two natural levers, if you will. It also has another pillar of really leaning into AI and automation to a new level to bring efficiencies. Elanco Ascend, I'd tell you, across the entire P&L, the manufacturing team's already done some great work. I sat in a workshop with them last week on their ideas, and they're executing a bunch of things to improve what they're doing within the four walls of their facilities. Procurement's already locked in some favorable pricing to what we had in the past with their leveraging their global supply base, and so we'll see that benefit coming through. There's some AI and automation that's supporting some pricing and some gross to net promotional stuff and better visibility to our frontline salespeople, and so we're gonna see that. Then on the restructuring charge that we announced as well in December, very quick action on that. We do expect $25 million of savings from that restructuring action in 2026, and then all the actions will be actually completed here in the year, and so we'll see the full run rate benefit of $60 million starting in 2027. We're right where we wanted to be and, you know, over the entire Elanco Ascend program, we expect $250 million, $200 million-$250 million of EBIT improvement, net of inflation and investment. Listen, I think the team's actioning very quickly. Feel really good about what we've laid out so far. Great. Yep. Just circling back to your commentary on kind of gross margins, I believe you've guided to kind of back half weighted growth in 2026, like how should we think about, given you mentioned improving innovation mix, incremental benefits from scale, like how should we think about the ramp of gross margins throughout your LRP term? Yeah. Great. You're right about 2026. We'll see some natural improvement in margins really in the H2. We do expect pricing to be an accelerator to what we had in 2025. We had 2% price in 2025. We expect that to be a little bit stronger in 2026, but also improve throughout the H2 of this year, but even a contributor over the next three years. We expect and we've guided 40 basis points of gross margin improvement throughout 2026. I think about the next several years, with not only the, you know, again, the natural mix benefit and the cost leverage, with Elanco Ascend, we do see between 200 and 350 basis points of EBITDA margin enhancement by 2028. Gotcha. You know, just wanted to ask you philosophically, Bob, you know, how you think about if the business does overperform, how much of that do you? Again, it probably varies case by case, but how do you think about reinvesting versus letting it flow through to the bottom line? First off, we're highly committed to the three-year algorithm of mid-single-digit top line growth, high single-digit EBITDA growth, and low double-digit EPS growth. All right? Highly committed to that as a team. We will continue our no regrets approach to launches. We are absolutely using data, you know, at least monthly with Bobby, myself, the finance team, the commercial team, and recognizing and understanding the ROI on the investment we're making in DTC. We're also funding R&D to ensure we don't have, you know, air pockets within the innovation pipeline. Elanco Ascend comes in, and that's why it's so important. It allows us to ensure we're dropping through the right level of profitability to the bottom line, but also funding top line growth as well as innovation. My short answer is we're using data to make the decisions, number one, and number two, highly committed to the algorithm that we've given. Got you. I I guess to kind of follow this train of thought, you know, you've had a very, I would say, it seems like the promotional strategy you've taken has gone well, given where, you know, product penetration sits in the clinic on the pet side. What is the data telling you in terms of continuing to spend on promotional activity here? Yeah. You know, the largest spend for our business is direct to consumer advertising and primarily TV or digital in that form. You know, today, other than our OTC brands, the lion's share of that spend exists on Credelio Quattro. What we are seeing is we're still on the steep part of the curve in terms of return on investment. We were really pleased with the ROI that we saw last year, and we measured the return in a couple different ways, market mix modeling, A/B testing, and we've got the same sort of approach going into this year, and we actually increased the budget for Credelio Quattro from a spend perspective this year. You know, as Bob said, we talk every month on, you know, how the business is trending, and where we think we are on the curve. But we think we have more opportunity to continue to spend. Makes sense. I guess shifting gears to the pipeline, you've got a lot in the works. You highlighted that at your Investor Day in December, sort of, you know, kinda wave one, wave two, I forget what you called it, next wave, next next wave maybe. Next wave. We're not very original. The finance guy came up with that one. I believe it. How do you sort of, you know, think about the indications that in either of those waves or both that are sort of the most exciting today? Yeah, you're right. At Investor Day, we laid out kind of the next wave, which we would define as call it five-six potential blockbusters by 2031. Then we've got like that next next wave, which we think is another five plus that could be blockbusters. Listen, you know, we've kind of highlighted we have over 15 products, you know, across that mix, and we did add two new areas into the investment areas, if you will, being mAbs and immunotherapy. Listen, our focus is gonna continue to be on the bigger markets, the derm and parasiticide markets. We don't think we need to go create a new market. Our plan's gonna be to participate in these markets and bring differentiated product, and be first to the market. It's really, you know, it's really a tribute, you know, really our R&D team and Ellen with how she's changed the model and we collaborate, you know, a lot differently within the R&D team to ensure that, one, you know, we're not gonna have an air pocket with a lack of innovation coming through, but two, globalizing the products that we have, and not only some of the products we've recently launched in the last, call it 18 months, but also, you know, the plans moving forward. Feel really great about, you know, what that team's done and what we see over the next 10 years. When we think about sort of the, again, every indication is different, but speaking in broad strokes, when we think about the commercialization strategy for these upcoming launches, like you've had two recent ones go well. How do you sort of apply the learnings from Credelio Quattro and Zenrelia to create a playbook for these future launches? Yeah. Look, I think it starts with best medicine. Our innovation philosophy is either first in class, best in class, or highly differentiated, and that's what you should expect us to bring to market with future innovation. Then, you know, when you have best medicine, you wanna anchor that best medicine on medical education. I think one of the key components of success is a share of voice. What you've seen us do is expand our physical sales force, not just in the U.S., but globally as well. You've seen us bring new capabilities to bear, like inside sales and digital, to really increase our share of voice by over 100%, on a touchpoints basis. The other vector of where we're driving share of voice is really leaning in with our distributor partners and you know, taking their 400 reps that are in the field and using them to amplify sort of the noise about our products or the equity about our products going forward. We'll take that same approach as we think about future innovation. Great. Actually shifting gears to distributors, been some movement in the space. You've got MWI and Covetrus merging. How do you think about the potential impacts to your business given that, like you just mentioned, you sort of partner with them to amplify your sales message? Yeah. I think in the short term it's business as usual. I think they've gotta go through their regulatory process, which I think in this case may take a little bit longer than maybe some other deals that have gone through. We have a great relationship with Covetrus and a great relationship with MWI, and so if the two companies come together, we don't really see any change in our business or any material impact in terms of how we would operate. You know, we're gonna continue to lean in on the share of voice comment. You know, my conversations with both partners is, you know, their intent is not to scale back sort of their representation in the field. They feel like there's other ways they can create growth synergies, and we think we would be a benefactor of those growth synergies. Great. We should probably touch on tariffs as well. I know it's still sort of a fluid situation, but could you just remind us what's embedded in your guidance at this point? I can't even remember what tariffs are half the time. Like, what are you thinking about the latest developments here? Yeah, I mean, a couple things. First off, listen, tariffs, it's really immaterial to us. The recent noise we saw really at the end of February was embedded into our guide. That was not much different from the clarity we had at the end of the year. Listen, tariffs as of now, it's really an immaterial non-issue for us. Listen, I feel good about really the proactive approach we've taken in the last, call it, six to seven months. We've got great visibility with the finance team. I mean, like, just about real-time information from the team to Jeff and me on, you know, what the impact is. two, because of that data, we've been able to think through mitigating strategies, whether it's pricing, supply base manufacturing. As of now, you know, not an issue for us, but certainly it is dynamic and, you know, we'll stay on top of it. Again, I feel great about how quickly we're getting visibility to data so we can shift if we need to. Just how are you thinking about capital deployment from here? You've talked about you're getting close to your target leverage. Like once you get there, what are you thinking in terms of where that excess capital could go? Great question. Yeah, so really no change in really what we've said historically. Our first priority is gonna continue to be invest in the business organically and pay down debt, and you've seen us do that here over the last couple years. We've brought down leverage 2 turns. You know, we had a couple one-time items to do that, but I think you'd also see the trade working capital improvement we've made to continue to improve and pay down debt. We did get to 3.6 times at the end of the year. We do expect to get in the low threes here at the end of 2026 and get below 3 in 2027. I'd highlight it. I'd say small tuck under M&A will be a component of our growth strategy, but it's not gonna derail us from the deleveraging timeline. That is still a top priority for us. Listen, we get below three, you know, I'd say that that's gonna open up the optionality to shareholder return. I think there's gonna be a component of that shareholder return, you know, kicking off as well as continuing to pay down debt. We do expect leverage to get to that 2-2.5 x, and it's gonna be twofold. It's gonna be the growth in EBITDA to get us there, as well as just being efficient on the trade working capital pay to pay down debt. When you talk about tuck under M&A, are there any, you know, commonalities between targets that look particularly interesting to Elanco? Yeah, I mean, it's gonna be think about, you know, areas that could really unlock R&D capabilities or it's a great product and we can leverage our size and distribution network to really expand a product. I'd say from a financial lens, you know, a couple of the bars that I'm holding: one, don't derail our deleveraging in the next couple years; two, I want it to be accretive to the three-year algorithm we gave on Investor Day. What that means, if we gave MSD sales growth high single-digit, EBITDA growth low double-digit, EPS growth, I want these acquisitions to be accretive to that. Right now we did announce a small acquisition at, on day of earnings. 2026, it's not gonna be a material impact, but 2027 I expect it to start being accretive to that, so that'll be good news. Then the last thing that I highly focus on, the most important measure for me with M&A is when does ROIC exceed WACC? I generally want that in this industry between three and five years, but I'd tell you, the HV acquisition we made is on the shorter end of that timeframe. I feel great about, quite honestly, that Jeff and the entire leadership team really focused on the priorities around capital and the discipline around M&A. Feel great again about the overall strategy over the next several years. Great. I think last question for both of you, two-parter. What are you most excited about for the Elanco story over the next 12 months, and what do you think investors are missing the most right now? I mean, I'll just give you know, my thoughts. I think the pharm business is still underappreciated. You know, although gross margins are lower in that business, the EBITDA margins are on par with the pet side, so it's incredibly efficient with OpEx to run the business. It's a good cash business, and again, those big macro tailwinds will, I think, continue to move that business forward. To me, that's the most underappreciated piece of the story. I think it goes without saying, I'm most excited about the basket of innovation, not that we just have in the U.S., but what we have globally across pharm and pet, and what that means for the growth across all four quadrants of our business. You know, even though I'm the pet guy, I would just say that the pharm business is the most underappreciated thing about Elanco from investors. All right. Great. We can wrap it there. Bob, Bobby, thank you for the time. Yeah. Thank you. Yeah. Thanks.