00:00So we spoke in December, and since that time, you've since gotten approval for Befrenna.
00:05That, of course, is all about canine dermatitis.
00:08So I know that you're particularly excited about this one.
00:11How does this set up the rest of your pipeline as we get deeper into 2026?
00:15Yeah, thank you.
00:16Yeah, Elanko had a historical year, our 70th year in 2025.
00:19And Befrenna is our sixth blockbuster in two years, mostly in pet markets, germ and parasiticides, a few cattle products.
00:27And as we've highlighted, that's a little over $800 million in revenue or innovation basket.
00:32And we've kind of made a commitment that, hey, this year we see this thing growing another $250 to $300 million over a billion.
00:39But, hey, Befrenna is all about it.
00:41It even comes back to, you know, being a friend with that pet, how important it is.
00:45An itching dog is one of the most disturbing things.
00:48I've got my yellow lab, Lakin, has got a real problem with that.
00:51Yeah.
00:51And so Befrenna is our second Derm product.
00:54It's a $2 billion market, and it's our first monoclonal antibody in this market, and it's just a great opportunity.
01:03It's grown double digit.
01:04It's a market that's globalizing this humanization of pets.
01:07There's nothing more disturbing than an itching dog, and that's why it's one of the fastest-growing markets.
01:12I hate to see an itchy dog.
01:14So Befrenna, of course, confronting that problem.
01:16You know, you mentioned the pace of innovation, of approvals, of launches.
01:20And, you know, as you mentioned, you're a 70-year-old company.
01:23You're not a new guy on the block here.
01:26So what is in the water?
01:28What has spurred the pace of innovation that you've put in place over the past couple years?
01:32Yeah.
01:32I think, you know, you step back and say we're here at a health care conference.
01:37We're launching the second half of the decade, and a lot of buzz here talking about that.
01:42And my big emphasis that I would highlight is just looking at the trends, animal health, why we're getting greater multiples,
01:50why this is a gem inside of animal or human health is it's heavily focused on the benefits of human pharma.
01:57It's regulated.
01:58It's a high bar to entry.
02:00It's science-based.
02:01But at the same time, it brings brands like consumer brand orientation.
02:04It's a cash market, so it has much longer runways relative to that.
02:08And the pets and the protein trends.
02:10We saw the dietary guidelines kind of really lean towards meat, milk, eggs, and dairy.
02:15That's big.
02:16And the humanization of pets is not just continuing to drive a willingness to spend, but it's globalizing.
02:22There's still a lot of countries with, you know, very, very early in this humanization of pets.
02:28So pets and protein in a durable market where brands can last a long time.
02:32Well, let's break down pets and proteins because, of course, those are your two buckets.
02:36You have companion animals, and then you have livestock.
02:39And, you know, I'm curious, and I asked this to your peers about an hour ago.
02:44When it comes to, you know, where you're seeing the most demand to put your R&D dollar, pets versus livestock, where does that fall right now?
02:54Yeah, I think for us it's in both places.
02:56We've really focused heavily on pets, one, and then I think cattle and poultry also.
03:03And if I just take on the pet side, the reason we've seen so much growth for our innovation, for our customers in value,
03:12and even our share price over the last year and going forward is we're not looking for the next innovations.
03:17We've got major innovations in parasiticides, in derm, in pain, you know, even diabetes, some of these key areas for that aging, more active pet.
03:28But these are existing markets that we have low market share.
03:31So I think people see our growth profile is going to be greater.
03:35We don't need to create new markets.
03:37We're actually going to go into these new ones.
03:38And then over on the cattle and the poultry side, look, we're seeing protein demand continue to grow.
03:44It's food safety.
03:45It's productivity.
03:46It's being able to, you know, prevent disease.
03:48That's important.
03:49I would just say also we're seeing a lot of growth.
03:52The dietary guidelines in these kind of, you know, developed markets, even GLP use on the people's side has caused an increase in 30 to 60 percent demand,
04:03especially in chicken and beef, for people that are using GLPs.
04:07Yeah.
04:07And that also is driving it.
04:10So cattle, poultry, pets.
04:12And we even have a pet retail business with the Amazons and the Chewys that Elanco's number one in,
04:16that there's still a lot of people that would rather get it online.
04:19And we're leaders in that market as well.
04:22Well, when it comes back to the share price, I go back to a phrase you used, the humanization of pets.
04:28Certainly, I've been part of that trend.
04:29I'm pretty sure my cat is like a little man in a cat suit.
04:32But let's talk about how that's being valued in the stock market, because you mentioned your share performance.
04:37It was pretty breathtaking in 2025.
04:40Do you think that that says something about how investors are valuing pet health companies versus human health companies?
04:46Or do you think that's specific to Elanco?
04:48Well, I think it's first we've got a great industry.
04:50We've got over a $40 billion industry that's predicted to double in the next 10 years because of these trends, because of the durability and the globalization.
04:58It's been a very U.S.-centered industry for a while.
05:02And as these trends globalize, and they are, we see a lot of runway for growth.
05:06So we see a $40 billion industry headed to $60, $80 billion quickly because of the trends.
05:12I think specific to Elanco, where we've really been differentiated, and I think for the rest of the decade, we have the potential to lead growth.
05:19It's because we can lead in innovation.
05:22So we're talking about not just a pipeline that's coming.
05:25Our pipeline has doubled in value from $1 billion to $2 billion, but six major blockbusters.
05:31I say, hey, in 70 years, we've got nine blockbusters.
05:34The last two, we've brought six.
05:36So our innovation engine is working.
05:39We are in launch mode as a company, and we're adding a lot of value to customers.
05:42That's, I think, the difference of not just what the stock price has been, but the potential we see going forward.
05:49And as we've established in this conversation, Americans are crazy about their pets.
05:54They're willing to spend up to express that love.
05:57How does that compare internationally?
05:59What are you seeing around the globe in your different markets?
06:02Yeah, the trends are very similar.
06:03Just I think everyone's in a different part of the cycle.
06:06You know, if we're seven, eight out of, you know, 10 homes, I've got a pet here in the U.S.
06:11You know, China and Asia, where I'm heading in a couple weeks, is two to three out of 10 homes.
06:16And so there's one is just the pet ownership is one factor, willingness to spend.
06:22What we're seeing all over the world is the under 30-year-old's willingness to spend is greater.
06:28So we kind of see fewer kids, more pets, willingness to spend on those pets.
06:32And what do they want?
06:33They want healthy, active, longer lives.
06:36They're a part of the family.
06:37They want them being able to get upstairs even when they get older and jump in the bed.
06:41And they want to be able to take care of those, the same aging disease problems with people.
06:46That's why we have so much synergy with this industry where we get our science.
06:50The same things are happening on the pet side.
06:52So it matters.
06:54My two labs to my six kids, I mean, they will, just like you said, they will spend whatever it takes.
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