Innovative Future - Aaron Schacht Executive Vice President - Innovation, Regulatory, & Business Development
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Innovative Future Elanco Investor Day 2020 Aaron Schacht Executive Vice President – Innovation, Regulatory, & Business Development
Today’s Agenda
Elanco Innovative Maximizing Focus on Financial
Today Future the Portfolio Productivity Outlook
Jeff Simmons Aaron Schacht Racquel David Urbanek Todd Young
President & Chief EVP – Innovation, EVP – Manufacturing EVP – Chief Financial
Executive Officer Regulatory, & Business
Harris Mason & Quality Officer, Corporate
EVP – Chief
Development Governance, & Strategy
Marketing Officer
Q&A
2
Growth: ~3%- 4% Average Annual Revenue Growth
Innovation Maximizing Value Of Current Portfolio Overall
Internal Focus Core Defend
Pipeline Significant Brands Portfolio Value Material Brands,
Accretive to Growth Drivers Highly Profitable
External
Innovation
Long-Term
Contribution ~3%-4%
2%-3% 2%-3%
to Average 0%-1%
Annual Total
Revenue (1)%-(2)%
Growth
Launch Omnichannel Geographic Pricing Digital
Enabled by Excellence Leadership Focus Ecosystem
3
Note: All references to forward-looking financials are at constant currency, unless otherwise noted.
What You Can Expect from Today
A better How market A clear An
understanding dynamics guide articulation unprecedented
of our innovation our investment priorities of projected outputs deep dive
capabilities and focus and pipeline structure on Pet Health
areas parasiticides and
therapeutics
4
Focus in Relevant Areas of Need
3 6 9
Technology Platforms Focus Innovation R&D Sites
Increased from two to three by Categories Consolidated over time to nine
adding microbiome as a strategic R&D sites with core competencies
Reduced from 13 to six by 2018 to
platform in 2019
increase organizational focus and
effectiveness U.S. Europe APAC
Greenfield, IN Basel, CH Yarrandoo, AUS
Biologicals Shawnee, KS Monheim, DE Manukau, NZ
Ft. Dodge, IA Cuxhaven, DE Bangalore, IND
Pet Health Farm Animal
Microbiome Parasiticides Pharmaceuticals
Therapeutics Nutritional Health
Chemistry Vaccines Vaccines
5
Pet Health Parasiticides, Therapeutics, and Poultry Vaccines Lead
Industry Growth
Global Industry Revenue Growth Trend, 2017-2019 xx Industry drivers xx Industry drains
PH growth FA growth
Category Total CAGR ’17-’19
Dog & Cat Ruminant Swine Poultry Aqua Other PH growth has been
driven primarily by
Parasiticides +++ = = + = = +++ 6-7% parasiticides and
therapeutics
Vaccines + = - ++ = = ++ 3-4%
In FA, the bulk of
Anti-Infective = = - - = = = 0-1% growth has come
from poultry
Therapeutics +++ - = = = = +++ 8-9% vaccines, while swine
has been a significant
Nutritionals = = = = = = = 2-3%
industry ‘drain’
Other = - - = = = - -1-2%
Aqua is growing fast
Total +++ = -- ++ = = +++ 4-5% (~15%), but off a small
base
CAGR, ‘17-’19 8-9% 0-1% -2-3% 5-6% ~15% 5-6%
Note: Elanco analysis based on Vetnosis, AnimalPharm, and other public and proprietary data sources 6
Industry Dynamics Inform the Structure of Elanco’s Pipeline
Overall Pipeline Composition
# of Projects
By R&D Phase By Category
60 Farm Animal PH Vaccines
Pet Health 8%
PH
40
35 Therapeutics FA
# Projects
10 21% Pharmaceuticals
13 37%
16
20
26 25 30
16 PH
Parasiticides
0
15% FA Nutritional Health
Research Exploratory Full Submission FA Vaccines 8%
Development Development 11%
Balanced R&D portfolio across phases given risk profile FA Pharma and PH Thera/Para categories with most active
projects, followed by PH Parasiticides
Maturing later stage portfolio
Selective approach in Vaccines and FA Nutritional Health
Pet Health with high proportion of research, reflecting future innovation needs
7
Composition of R&D Investment
Funding Choices Take Risk Profile, Innovation Type, and Category Potential into Account
Variable R&D Investment Dollars
By R&D phase By Business Area By Innovation Type
Exploratory Other
Development 4%
17%
Farm
Animal LCM
Research 43% 29%
7%
Pet
Health
57%
Full
NME
Development
67%
76%
Higher late-stage per project development cost Higher investment in PH reflects market dynamics Dedicated investment in NME’s with high
drives investment levels in full development unmet need
NME development is primary driver in PH
R&D fixed costs not reflected per project Intentional LCM investment to grow brands
FA more balanced between NME and LCM
Other reflects platform and discovery
investments to secure future innovation
8A Proven History of Delivering Value Through Innovation
History of successfully
growing innovation brands
since IPO in 2018
Many of these products are
now represented as focus
products
Innovation delivered in
2021 as new baseline for
the future
Slide 17 from Elanco 2020 Earnings – Third Quarter Presentation from November 6, 2020
Available at investor.elanco.com
92021-2025: 45 Opportunities to Deliver 25+ Launches
2021 – 2025: 25+ Launch Equivalents
Pet Health Farm Animal
12 Launch Equivalents / 20 shots on goal Total 15 Launch Equivalents / 25 shots on goal
Year of
Approval
2021 3.0 8 5.0
2022 4.0 1.0 7-10 2.9 2.1
2023 2.6 1.4 5-10 2.8 3.2
2024 1.7 2.3 3-7 1.7 1.3
2025 1.3 2.7 4-10 3.1 2.9
Probabilistic Total Shots on Goal 25+ Probabilistic Total Shots on Goal
Near-Term Opportunities Are Higher Probability Compared to Later Years, Reflecting
Launch equivalents include: the Risk Resolution That Occurs as Projects Progress Through Development
NME launches in first major
geography
Novel combination products
Novel vaccines and microbials
Significant lifecycle/geographic
entries
10Innovation to Deliver Dependable 2%-3% Revenue Contribution
Development Pipeline Contribution to Revenue
$ Millions Near-term Farm Animal
launches establish strong
Pet Health Farm Animal $500-$600 foundation for growth
Significant Pet Health
~2%
CAGR products accelerate
$80-$100 growth in later years
CAGR estimates based on
2020 pro forma revenue of
$4.37-$4.40 billion
2021 2022 2023 2024 2025
11Our Expectations for Innovation
Investment pIRR
~8%-9% 10%-12%
of annual net sales
Customer
Veterinarian
Farmer Gross Margin 2025 Value
Pet Owner
60%+ $500-$600M
on average on in baseline
pipeline assets probabilistic sales
pIRR represents the probabalized internal rate of return 122021 Farm Animal New Product Launches
Farm Animal Five New Launches
Product Species Description Geography Market Size Launch Quarter
Cattle Novel in feed technology Market Creation Q1 2021
with environmental claim
Cattle Injectable tulathromycin +++ Q1 2021
Swine antibiotic in BRD(1)/SRD(2)
Natural IL-10 antibody
++ Q2 2021
Poultry with a novel MoA(3);
Suitable for RWA(4)
(5)
Anticoccidial + Q1 2021
Poultry Portfolio Expansion;
Suitable for RWA + Q2 2021
+ = up to $200M ++ = $200M - $999M +++ = ≥$1B
Note: Elanco analysis based on Vetnosis, AnimalPharm, and other public and proprietary data sources
(1) Bovine Respiratory Disease (2) Swine Respiratory Disease (3) Mode of Action (4) Raised Without Antibiotics (5) Intent to Announce Two RWA Products in Q1 2021 132021 Pet Health New Product Launches
Pet Health Three New Launches
Product Species Description Geography Market Size Launch Quarter
Dog Oral Monthly +++ Q1 2021
Flea/Tick/Heartworm
++ Q2/Q3 2021
Cat Oral Monthly Flea/Tick
Cat U.S.
Cat Oral Solution for Weight Loss + Q1 2021
Management in CKD(1)
+ = up to $200M ++ = $200-$999M +++ = ≥$1B
Note: Elanco analysis based on Vetnosis, AnimalPharm, and other public and proprietary data sources
(1) Chronic Kidney Disease 14Expect to Launch Eight New Products in 2021
Farm (1)
One launch with blockbuster
Animal $80M – $100M potential
Revenue Total of $80-$100M, in-line with
long-term expectations of 2%-3%
annual growth
8
Cat U.S.
New Product Launches Multiple launches across species
and geographies
Pet
Health
(1) Raised Without Antibiotics 15Market Overview: Pet Health Parasiticides
Category Size Market Attractiveness
Endecto(2) History of market growth through innovation
, $1.1B
Strong demand through high media spend
Increased customer access through diverse channels
Ecto(1),
$3.0B $5.3bn
$5.3B Strong margin profile across all three sub-categories
Increasing competition due to market attractiveness
Endo(3),
$1.1B
Elanco’s Innovation Focus Areas
U.S. INT’L 1 2 3 4
~60% ~40% Oral endecto Novel mode of Single dose, OTC-specific
action heartworm season-long ecto innovation
prevention
Note: Elanco analysis based on Vetnosis, AnimalPharm, and other public and proprietary data sources
(1) Ectoparasiticides include products that are effective against external parasites (such as fleas and ticks)
(2) Endectoparasiticides include products that are effective against both external and internal parasites (such as intestinal worms or heartworms) in a single product 16
(3) Endoparasiticides include products that are effective against internal parasitesPet Health Parasiticide Pipeline
Robust Pipeline with Intention to Deliver One Parasiticide Innovation on Average Per Year Through 2025
Peak Sales Regulatory Total of 11 parasiticides
Identifier Description Species Market Focus
Opportunity Events assets with regulatory
events by 2025
Credelio Plus Oral Monthly JP/EU/AUS 2020 Approved (JP)
1 Flea/Tick/Heartworm
Dog
Veterinary
lotilaner/mibemycin oxime 2021 Launch
Five projects with
Credelio Cat 2020 Approved regulatory events
2 lotilaner
Oral Monthly Flea/Tick Cat U.S. Veterinary
2021 Launch between 2021-2024, with
3 3x Endecto(1) Assets Dog an average of one per
Global
4 • Flea/tick/heartworm
Veterinary year expected
• Varied gastrointestinal parasite spectrum Cat Submission
5 Range
Dog Attractive future market
6 2x Extended Duration Ecto(2) Assets (average of one
• 2 different forms
U.S. OTC per year) categories well-covered
7 Cat with multiple shots on goal
2024
8 2x Novel MoA Endo(3) Assets Global
Dog
9 • Different spectrums and novel mechanisms Veterinary
10 2x Season-Long Duration Novel Ecto Assets Global
• Flea/tick efficacy Dog
11 • Different delivery forms Veterinary
$10-$49M $50-$99M ≥$100M Table represents total shots on goal, based on current pipeline
(1) Endectoparasiticides include products that are effective against both, external and internal parasites in a single product and does not account for expected attrition. Peak sales
(2) Ectoparasiticides include products that are effective against external parasites (such as fleas and ticks) opportunity is deterministic considering all shots on goal. 17
(3) Endoparasiticides include products that are effective against internal parasitesMarket Overview: Pet Health Dermatology
Category Size Market Attractiveness
Relatively underdeveloped market with strong growth history and more upside potential
Zoetis
~70% Elanco
~13% Top four reasons for a vet consultation is dermatology (not considering preventive care)(1)
Virbac
Historical success based on amelioration of symptoms (itch, inflammation)
~5%
Almost purely incremental opportunity for Elanco, outside of Atopica and otitis externa
$1.2B Other ~12% Dominated by two products, offered by a single company
Elanco’s Innovation Focus Areas
1 2
U.S. INT’L
Diversity in mode of action and type of Itch/inflammation relief and
~62% ~38% molecule (small molecule/biologic) disease modification
Note: Elanco analysis based on Vetnosis, AnimalPharm, and other public and proprietary data sources 18
(1) Vet Practice Report April 2015Pet Health Therapeutics Pipeline
Development of Diversified Dermatology Assets and Specialized Cat Portfolio
Market Peak Sales Regulatory
Identifier Description Species
Focus Opportunity Events
Total of eight pet
Elura Oral Solution for Weight Loss U.S. 2020 Approved
1 Management in CKD(1)
Cat
Veterinary
therapeutics assets with
capromorelin 2021 Launch
regulatory events by 2025
U.S. Submission
2 1x Transdermal Post-Operative Pain Asset Cat
Veterinary Six therapeutic assets
3x Oral Anti-Inflammatory Assets 2022 with planned
3 • Differentiated assets with diverse MoAs(2) submissions between
Global
4 - Atopic dermatitis/pruritis Dog
Veterinary 2022 and 2025
- Allergy/inflammation
5 - Pruritis/inflammation
Submission
Range Robust dermatology
Oral Cat Asset Global
6 • Anemia associated with CKD(1)
Cat
Veterinary
pipeline with oral anti-
(average of
one per year) inflammatory and
7 Global injectable monoclonal
2x Injectable Monoclonal Antibody Assets Dog
8 Veterinary antibody products
2025
Portfolio Enhancements $10-$49M $50-$99M ≥$100M
Table represents total shots on goal, based on current pipeline
and does not account for expected attrition. Peak sales
opportunity is deterministic considering all shots on goal. 19
(1) Chronic Kidney Disease (2) Mode of ActionFarm Animal Focuses on Driving Customer Outcomes
in High-Value Areas
Identify Customer Leverage Core Create New
Needs Strengths Platforms
Focus on un-met needs or dissatisfaction Technology platforms Replace older technology
in large, addressable spaces
Portfolio enhancements Revolutionize the space
Enter new categories
Technology Platforms
Small Molecules, Biological Agents, Microbiome
20Farm Animal Pipeline
Well-Stocked Pipeline with Breadth and Depth to Support Core Species
Peak Sales Regulatory
Identifier Description Species Market Focus
Opportunity Events Five launches in 2021,
including breakthrough
Experior Novel In-Feed Technology with U.S., CAN Approved Launch
1 Cattle innovation, anti-infectives
lubabegron Environmental Claim Livestock
and anti-coccidials
Increxxa Injectable Tulathromycin for Cattle
2 tulathromycin BRD(1)/SRD(2) Swine
Global Livestock EU
>90 additional projects in
2021
Cosabody Nutritional Solution with Novel Farm Animal, including early
3 IL-10 MOA(3)
Global Livestock
development and research
4 Poultry
Anticoccidial Portfolio Expansion.
U.S. Livestock
5 Suitable for RWA(4) Diverse array of assets,
spanning cattle, poultry,
50+ Total Projects swine, and aqua, as well as
• Parasiticides Full
• Therapeutics Development all focus innovation areas
• Nutritionals Peak Range
& Submission
• Vaccines Various
• Other Species, Various Markets
40+ Total Projects Incl. Aqua
Early
• Parasiticides
• Therapeutics Development
• Nutritionals & Research
• Vaccines
Table represents total shots on goal, based on current pipeline
Portfolio Enhancements $10-$49M $50-$99M ≥$100M and does not account for expected attrition. Peak sales
opportunity is deterministic considering all shots on goal. 21
(1) Bovine Respiratory Disease (2) Swine Respiratory Disease (3) Mode of Action (4) Raised Without AntibioticsResearch Platforms at Elanco – Pioneering Next Generation Products
Innovation
Biopharma Microbiome Chemistry
1 Biotherapeutics 4 Microbiome Modulation 7 Parasiticides
2 Rationally Engineered Vaccines 5 Microbial Delivery Platforms 8 Therapeutics
3 RNA/DNA delivered Biologics 6 Microbes and Drug Discovery
Novel Actives
Products
22Elanco Innovation Model
2
Internal R&D Complemented by External Initiatives Provide
Entry Points
1 Complement into New
& Supplement Elanco Connected Platforms
License of KIND 030
Core R&D Care Strategy Categories
Pipeline
Alliances
Product
Development
Licenses/ Product/Platform
R&D Technology Licenses Molecule Licenses Collaboration Joint Ventures Commercial Alliances
Growth
External
Launch/
Exploratory Product Submission/
Research Commercialization/ Internal
Development Development Approval
Lifecycle
~2%3%
External Innovation Ventures
3
Capture
Out-License Additional
of Lotilaner for Value
Human Indications from Elanco
Innovation
23Dependable 2%-3% Annual Revenue Growth from Innovation
Annual innovation contribution of 2%-3% revenue growth, with 60%+
gross margin and IRR of 10%-12%
Strong start in 2021: Eight expected launches, delivering $80-$100M
Innovation Compelling pipeline transparency, pursuing high-value targets in
Takeaways parasiticides, dermatology, and Farm Animal
Clear growth areas allow for targeted investment, leading to $500-
$600M in new product revenue in 2025
Robust innovation capabilities, leveraging best talent and assets
from a decade of transformation
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