Q2 2026 Elanco Animal Health Inc Earnings Call Transcript
Key Points
- Elanco Animal Health Inc (ELAN) delivered 8% organic constant currency revenue growth in Q2 2026, outperforming guidance and leading to a raised full-year outlook.
- Strong performance in US Pet Health and US Farm Animal, each up 11%, with international pet health up 9%, driven by both price and volume.
- Zenrelia and Credelio Quattro are major growth drivers, with Zenrelia achieving blockbuster status and Quattro gaining significant market share, supported by strong clinic penetration and DTC investments.
- Innovation revenue reached $340 million in Q2, with the full-year target raised to $1.25 billion, reflecting robust demand across the 'big 6' products.
- Balance sheet improvement is ahead of plan, with net leverage reduced to 3.1 times and a revised year-end target of approximately 3 times, enhancing capital allocation flexibility.
- Gross margin expanded by 80 basis points in Q2, driven by favorable product mix and productivity gains from the Elanco Ascend program, with a clear path to 60% gross margin long-term.
- Operating expenses increased 10% in constant currency, driven by higher DTC investments and R&D, which may pressure near-term margins.
- International farm animal growth was only 2% organic in Q2 due to shipment timing to the Middle East, though year-to-date growth is 7%.
- Brenna, a new dermatology product, is supply-constrained with demand exceeding expectations, and unconstrained supply is not expected until early 2027.
- The company anticipates moderating growth rates for Experior due to challenging comparisons, and Bovaer growth remains at a measured pace.
- US pet health growth faces tough comparisons in the second half, though the company expects high single-digit to low double-digit growth.
- Inflationary pressures and high inventory costs partially offset gross margin gains in the first half, with some impact expected to persist.
Good day, and thank you for standing by. Welcome to the Elanco Animal Health reports second-quarter 2026 results conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Tiffany Kanaga, Vice President of Investor Relations and ESG. Please go ahead.
Good morning. Thank you for joining us for Elanco Animal Health's second-quarter 2026 earnings call.
I'm Tiffany Kanaga, Vice President of Investor Relations and ESG. Joining me on today's call are Jeff Simmons, our President and Chief Executive Officer; Bob VanHimbergen, our Chief Financial Officer; and Beth Haney from Investor Relations.
The slides referenced during this call are available on the Investor Relations section of elanco.com.
Today's discussion will include forward-looking statements. These statements are based on our current assumptions, expectations, and are
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