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Elanco 2020 could be flat as macro pressures persist, achieves clearance for Bayer deal in China


Jan 10, 2020 - Animal Pharm
Elanco 2020 could be flat as macro pressures persist, achieves clearance for Bayer deal in China

By: Sian Lazell

Elanco could be set for a slow 2020 in terms of sales growth, with the year ahead being signposted as a building block for its next era as a company.  

The firm has posted guidance for fiscal 2020 that puts total revenue expectations between $3.05 billion and $3.11 billion. Its core revenues for the same period – excluding strategic exits – are expected to be in the range of $3bn to $3.06bn.

In November 2019, Elanco updated its expected 2019 revenue guidance to between $3.07bn and $3.085bn. The company said while its audit for fiscal 2019 is not yet complete, the anticipated results are consistent with the November guidance and "trending toward the low end of previously issued revenue and earnings per share (EPS) guidance ranges".

The firm added in its anticipated FY2019 results, it continued to grow revenue and expand margins. This was largely driven by targeted growth categories, a portfolio of newly launched products and strategic business development. Elanco noted its performance was offset by nearly $100 million of revenue headwinds from "environmental issues that arose during the year", including the impact of African swine fever and drought in Australia, among other factors.   

In 2020, Elanco is expecting "the emergence of competitive elements" the business has been planning since before it became a standalone company. The firm separated from parent company Eli Lilly in March 2019, after 64 years under the umbrella of the Lilly entity. Chief executive of Elanco Jeff Simmons later explained the firm would be sticking to its core competency as a product-focused company in the future.

Along with its latest guidance, Elanco has highlighted several opportunities for growth during 2020. These include: 

  • Leveraging and expanding its "newly launched innovation portfolio of products", which it said have been "performing well and are early in their lifecycles"; 

  • Resolving contract manufacturing supply disruption;

  • Actively expanding the reach of its companion animal business with a new specialty veterinary sales force and "new capabilities to support changing pet owner preferences"; and

  • Capitalizing on the increasing and shifting demand for animal protein, especially through investment in poultry and aquaculture.

The firm pointed out its guidance for 2020 currently includes only revenues expected from Elanco itself, including full year revenues for products that may be divested. It does not include any expected revenues from the expected acquisition of Bayer Animal Health or impact of transactions related to the acquisition.

The deal for Bayer is continuing to advance and on January 9, 2020, Elanco received unconditional antitrust clearance from the Chinese competition authority for the purchase. The company said antitrust reviews in other jurisdictions are ongoing.

Mr Simmons commented: "In the past year, Elanco has become a stronger, faster and more fit-for-purpose organization, leveraging the advantage of a singular focus on animal health and a portfolio approach to drive growth. This is a resilient, diverse and durable business that grew in 2019, despite significant environmental pressures, including one of the most significant animal disease epidemics in decades. As we move into 2020 our focus continues to be on execution, balanced progress and building Elanco from strength to leadership."

Todd Young, chief financial officer at Elanco, commented: "We built our 2020 plan to balance the strength of industry fundamentals with the external factors facing our business. We are confident in our strategy to drive growth in 2020. Further, our productivity initiatives will enable us to drive EPS growth faster than sales. This year will build the foundation that positions Elanco for the next era of growth as a leading animal health company."

Elanco recently agreed to sell its Osurnia portfolio to Dechra pharmaceuticals and revealed more divestments are to come in light of the deal for Bayer.

The firm has also been undertaking restructuring operations since it became an independent company. In December, it agreed to offload an aquaculture R&D site to the Center for Aquaculture Technologies Canada. 

Reprinted with permission of Animal Pharm News

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