Elanco, analysts gird for potential blockbusters in coming months
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Elanco Animal Health officials are not shy talking about the “B-word.”
In an hourlong conference call with analysts on Monday, CEO Jeff Simmons said the word “blockbuster” at least six times as he talked about the Greenfield-based company’s pipeline products that could launch this year.
All of those launches depend on U.S. Food and Drug Administration approval. Elanco is still in discussions with the agency over those products. Even so, Simmons has big expectations.
“These potential blockbusters continue to have a path towards U.S. approval in the first half of 2024,” he told analysts.
A few minutes later, he talked about “these large blockbuster differentiated assets that we have” and later said “there’s an anticipation of these blockbusters that are coming.”
Elanco officials increasingly sound sure the new products will be approved, and that they will ring up big sales. In animal health, any product that rings up more than $100 million a year in sales is considered a blockbuster. (In human health, the bar is higher, at $1 billion.)
Some analysts, meanwhile, agree that much of Elanco’s future depends on how well it does with new products this year.
William Blair analyst Brandon Vazquez told clients in a research note Monday he remains “pipeline focused” for Elanco’s improvements in the second half of 2024.
Jeffries analyst Glen Santangelo put it even more bluntly: “Stock depends on three pending approvals,” he wrote in a headline on a research note Monday.
“We see the focus of the Elanco story increasingly on the upcoming product approvals (Credelio Quattro, Zenrelia, Bovaer),” JP Morgan analyst Chris Schott wrote in note to clients on Monday.
It seems that some analysts are waiting to see if Elanco can actually deliver on the launch and blockbuster promises. Of the 11 analysts that follow Elanco, six have a “hold” recommendation, four have a “buy” recommendation and one has a “strong buy” recommendation, according to Yahoo Finance.
Elanco now has about five blockbuster products (or groups of related products), including flea and tick collars pets, a feed additive for poultry for intestinal health, and a feed ingredient for dairy cows.
The new products under FDA review are a broad-spectrum pet paraciticide called Credelio Quattro, a dermatology treatment for pets called Zenrelia, and a feed additive for cattle to reduce methane called Bovaer.
The products, if successful, could go a long way to boosting Elanco’s fortunes and stock, although it is difficult to predict how a health product will perform in the market.
Earlier Monday, Elanco said it planned to restructure operations, resulting in the net loss of 420 jobs, or about 4% of the company’s workforce. It did not say where those cuts will take place. The company has more than 1,000 employees in Indiana.
The move appears to be Elanco’s largest downsizing since it cut 900 jobs across 40 countries in 2020 following its $6.9 billion acquisition of German conglomerate Bayer AG’s animal-health division.
The company said the restructuring is designed to shift resources from its farm animal operations to its pet health operations. It is almost meant to help with the “adoption of innovation products” and launch the three products now under regulatory review.
Shares of Elanco fell as much as 6% in early trading Monday but recovered in midafternoon trading. Shares were up 0.2%, to $16.40 each.