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2015 Analyst Day December 8, 2015
Elanco Overview
©2015 Elanco
Jeff Simmons President, Elanco Animal Health
2
Key Messages
©2015 Elanco
What Should Investors Expect of Elanco
Growth and improving profitability
Proven Track Record, Proven Strategy
How Elanco has become a top 3 player in attractive
animal health industry
Future Sustainable Outperformance
Driven by the right model and key differentiators
3
Headlines
©2015 Elanco
Revenue: We are positioned to outperform long term
Novartis: Acquisition significantly exceeding expectations;
50% greater savings
Margins: Progressing on a path to 30% margins(1)
1
Innovation: Rich pipeline with 7 recent or upcoming
launches
Lilly: One of three core Lilly businesses; Building on an
already strong model
2
3
4
5
4 (1) Operating margins excluding amortization of intangibles
Food Animal Realities: The Case For Animal Health
©2015 Elanco
PROTEIN DEMAND
60% increase in
demand
Middle class
Changing diets
ANIMAL WELFARE
Dynamic animal health
environment, increasing
disease challenges
ONE HEALTH
1 in 2 getting
wrong nutrition,
Healthy food =
Healthy people OPPORTUNITY
Productivity
Innovation
Leadership
Shaping
ENVIRONMENT
Increasingly overusing
environmental resources
Productivity vs Animals
5
@Elanco
TM
#FeedThe9
Facebook.com/
ENOUGHmovement @ENOUGH2050 @ENOUGH2050
11,000
Global
Advocates
1 Million
Impressions
Per Week
Elanco’s Enough Movement
www.enoughmovement.com
6
Companion Animal Realities: Growing Role of the Pet
©2015 Elanco
DOMESTICATION
Pets increasing in
homes, beds
MIDDLE CLASS
More disposable income
EXPANDING
MARKET
Increased spending
OPPORTUNITY Need for veterinary care
Innovation
Ease of use
POPULATION
DYNAMICS
Aging singles
or fewer children
AGING PETS
Pets living longer
lives face age-
related diseases
7
REST OF WORLD
23%
EUROPE
31%
AMERICAS
46%
Demand Trends Result in Attractive Industry Growth $24B Global Market in 2014, Growing 4-5%
AH Spending By Region Industry Growing 4-5% Over Next 10 Years
Source: Vetnosis
Growth in
Animal
Numbers
Pricing
4-5%
Industry
Growth
New Innovation
and PLEs
©2015 Elanco
Therapeutic Area
Source: Vetnosis 2014 data
Species
Ruminants
Pigs
Poultry
Companion
Animal
41%
OPs
Bios
26%
Als
OPs – Other pharmaceuticals
MFAs – Medicated feed additives
BIOs – Vaccines
Paras – Parasiticide
AIs – Anti-infectives
Food
Animal
59%
Paras MFAs
12%
Pharmas
62%
Region
North
America
West
Europe
Eastern
Europe
Far East
Rest of
World
Latin
America
Europe
31%
Americas
46%
Others
23%
Animal Health Industry Components of $24B Global Market
9
Animal Health A Durable Industry
©2015 Elanco
Industry Elanco
Average age of product portfolio is
18 yrs, due to continuous product
improvement and line extensions
Long-lived assets and diversity
of species
23% of portfolio under patent
protection; Elanco revenue of off-
patent products continues to grow
Attractive growth despite low
patent protection
Innovation is rewarded Over 1/3 of Elanco’s growth
(2007-2014) from new innovation
10
OUR VISION: Food and companionship enriching life
FOOD COMPANIONSHIP
6,700 employees
2,304 commercial
force
300+ brands
4,800 SKUs
Top 10 products
are 50% of revenue
Operates
in
countries
70 10.2
years average tenure
High
employee engagement
16% of Lilly
revenue
13% market share
Elanco Overview
Since
1954
Counter-cyclical
transformation
Transition to
core growth
Sustainable
growth driver
$1B to $2.3B
13% CAGR
60% Organic
OMs 17% to 26%(1)
(1) Operating margins excluding amortization of intangible assets.
GO
AL
S Deliver integration
Deliver 7 new products
Expand margins(1)
Outgrow industry
Expand margins(1)
2017 - 2020 2015 - 2016 2007 - 2014
©2015 Elanco
5% of Lilly’s revenue at
beginning of period YTD 16% of Lilly’s
revenue
Lilly’s Strategic Intent in Animal Health Components of $24B Global Market
12
Our Commitments: Delivery
©2015 Elanco
What We Said What We Did
Diversify and increase value
proposition
• 5 new businesses
• 9 strategic acquisitions
Provide YZ growth to Lilly Grew revenue 70% from 2010 to 2014
Double profit from 2010 to 2013 Achieved in two years
13
©2015 Elanco
Elanco 13% Revenue CAGR AH Industry 4% Growth CAGR
(8 ppts organic)
(1)
(1) Source: Vetnosis
-5%
0%
5%
10%
15%
20%
25%
2007 2008 2009 2010 2011 2012 2013 2014
14%
10% 10%
15%
21% 21%
6%
9% Elanco
Industry
Gro
wth
Ra
te B
y Y
ea
r
Elanco Track Record of Outgrowing Industry 2007-2014 Period
#8 Top
3
14
15
Lower 2nd Tier AH Company Top Tier
AH
Company
2nd Tier AH Company
Analytics
Dairy Europe
Vaccines
Analytics
Enzymes Vaccines
Vaccines
Aquaculture,
Broaden Global
Presence
Successful M&A History Since 2007 Targeted For Animal Health Capabilities
©2015 Elanco 15
Beyond Product Value Differentiators
Share. Price. Brand Strength.
ANALYTICS TECHNICAL
SERVICE
STRATEGIC
ACCOUNTS
ELANCO
PULSE
INSTITUTE
MARKET
ACCESS
TRACK &
TRACE
Elanco Evolution More Diverse, More Capable
2006
FA
100%
Other
22%
MFA
78%
Current
Cattle
Swine
Poultry
Companion Animal (CA)
Other
3%
32% 32%
16% 17%
MFA
38%
22%
27%
5% 8%
Medicated feed additives
Vaccines
Anti-infectives
Parasiticide
Other
Dedicated
Capabilities
• Manufacturing
Footprint
• M&A
• Integration
• Elanco Knowledge
Solutions and Food
Chain Services
Revenue Mix
Food Animal 68% 17 ©2015 Elanco
Lilly Capabilities Fit Elanco’s Strategy
• Discovery and screening
• Pipeline / Substrate
• Development, Technical Expertise
• 1/3 of combined Elanco revenue and
pipeline came from Lilly molecules
• 10 active R&D projects in
collaboration with Lilly
• 9 projects under assessment
• Elanco capabilities support human
product development
Demand
Creation
Customers
R&D
Other • Shared services
• Functional talent / expertise
• 300 Internal transfers since 2011
AH
Research
Analytics
& Data
Market
Access
Technical
Consultants
Lilly Core Capabilities
Support Elanco...
Which Are Then Combined
With Elanco Capabilities...
To Deliver Value
To Customers
Why Lilly Ownership Model has Been Successful for Elanco
©2015 Elanco
Benefit of Lilly Capabilities
and Support… …With Autonomy
Dedicated Commercial Footprint
Separate Manufacturing Footprint
Independent Board of Advisors
Streamlined Governance
Separate Headquarters
Separate Compensation Structure
19
©2015 Elanco
Today’s Presenters
20
Demand Creation
©2015 Elanco
Eric Graves Vice President, Integration
21
Demand Creation Go to Market Model, Growth Engines
©2015 Elanco
Top 3 Animal Health
Company
Constantly
Optimizing Go To Market Model
Focused Growth
Engines
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2006 2007 2008 2009 2010 2011 2012 2013 2014 Trailing12 mo.
Track Record of Revenue Growth “Big Movers”
• History of
growth –
every year
• Organic (60%)
plus inorganic
from 2007-
2014
• Innovation
and acquired
product
success
Revenue (in $Bil)
Parasiticide
Competition
Commercial Capabilities
Brands and Portfolio
Advanced
strategic
account
management
capabilities
Demand Creation:
Large salesforce and
technical consultants plus
distributor partnerships
Analytics Market Access
Product value
• Supply chain
• Quality
24
Brands and Portfolio Strength
Swine >$500M Poultry >$500M
• Broadest Parasiticide Portfolio
• Growing Therapeutic Portfolio
• Feedlot + Cow/Calf + Stocker
• Dairy Strength + Innovation
• Nursery + Finisher Expertise
• Product Innovation + Industry-
Leading Analytical Tools
Cattle
Swine
Poultry
Companion
Animal (CA)
Other
3%
32% 32%
16% 17%
• Intestinal Integrity #1
• Salmonella Vaccine #1
• Enzyme / Nutritional Health Growth+++
Companion Animal >$1B Cattle >$1B
• Vaccines
Constantly Optimizing Go-To-Market Model
©2015 Elanco
Shared
Demand
Creation
Logistics Partner
Direct
Depending on Segment, Customer, or Product,
Elanco utilizes several paths to the customer
DIRECT
Elanco creates demand and
handles logistics
LOGISTICS PARTNER
Elanco creates
demand, strategic partner
handles logistics
SHARED DEMAND
CREATION
Elanco and strategic
distribution partner
complementing strengths
• Result: Highly efficient model
• $2M revenue per sales rep
Vaccines Non-Parasiticides Geo Expansion
Growth Engines Above Industry Growth Expected
Base Business Growth
Companion
Animal
Therapeutics
Transforming
Food Animal
Emerging
Geographies
Strategic
Accounts
(1) Although overlap exists between growth engine segments, in total they represent >50% of revenue
Growth Engines Companion Animal Therapeutics
Companion Animal Therapeutics
“Veterinary Relevance”
• <1% of total revenue in 2009; >10% in 2016(1)
• Significantly broader portfolio with Novartis
• Supportive macro trends
Pain
Management Otitis Externa Cardiology
Dermatology Surgical
28 (1) Remainder of companion animal portfolio consists of parasiticide products
“New Spaces, Opportunities”
Nutritional Health
Enzymes:
Poultry, swine
Antibiotic alternatives
Supports “clean
label” trend
Immune
Restoration
Dairy
Transforming Food Animal
Vaccines
Cattle (cow-calf)
Swine (respiratory)
Poultry (salmonella)
Aquaculture
Combined <2% of revenue in 2009; 10-15% of revenue in 2016
Growth Engines Transforming Food Animal
29
Growth Engines Emerging Geographies
“Significantly Increased Footprint, Capabilities, Portfolio”
Russia / Africa:
Emerging Geographies
Asia Pacific, Latin America, Eastern
Europe and Africa
(combined approximately 30% of revenue in 2016)
Asia Pacific:
From third tier to top tier
<40 customer facing roles
in China to 200+
Doubled footprint in
Thailand and Vietnam
Doubled footprint in
Africa
Doubled companion
animal team in Russia
Latin America:
Doubled Brazil
companion animal team
50% increase in Mexico
footprint
Doubled Andean region
30
Demand Creation Summary
©2015 Elanco
1 2 3
Brand and
Portfolio Leverage
+ Capabilities for
Complex Go-to-
Market Models
Focused on
Growth
Engines
History of
Growth of
Both Acquired
and Organic
Products
31
Demand Creation Value Beyond Product
©2015 Elanco
Tony Ezell Vice President, Marketing
32
Value Beyond Product Strategic Accounts, Analytics, Market Access
©2015 Elanco
Analytics
“Voice of
the Animal”
Market Access
“Voice of the
Consumer”
Strategic Account
Management
Capabilities
©2015 Elanco
Strategic Accounts(1) 1
Strategic Account Management Process:
2 Portfolio
Analytics
Market Access
Process Efficiency
Training & Development
Revenue
Growth Margins
Expedite
Adoption of
Innovation 3
(1) Approximately 20% of revenue in 2016
Strategic Account Management
34
Industry leading
knowledge
solutions
services &
offerings
Data Analysis &
Optimization
Data Visualization
Disease Prevalence
Process Efficiency Benchmarking
Consulting
Customer Support
In the US, increased
sales per head on
average when
analytics services
are included in
portfolio sale(1) (1) Beef analytics services have been available the longest
while swine analytics are a more recent offering
Beef 55-85%
Poultry 40-50%
Swine 10-20%
Analytics Elanco Knowledge Solutions - A Competitive Advantage
35
Beef – Margin Insight Improving Feedyard Profitability
What it is: A data-driven margin-tracking
tool for feedyard managers
• Predicts estimated real-time margins &
manages exposure to market risk
Value:
• Allows you to analyze cattle
performance, feed consumption &
market prices (cash & futures)
• Comprehensive view of forward-
looking feedyard profit margins
• Provides feedyards a snapshot of
their unmet corn needs and a
window into future cattle needs
Improving profitability in your risk management decision-making
36 ©2015 Elanco
Dairy – Economic Assessment Tool Managing Disease Cost
Understand and improve
transition cow economics
What it is: Assessment to identify, understand and
manage disease cost and incidence throughout The
Vital 90™ Days
Value: By demonstrating economic
outcomes when disease incidence is
reduced, producers are able to
evaluate management
interventions before making
changes that impact profitability
Quote from customer: “Even if I paid $500 for this
assessment, that’s only $1 per cow calving in a year’s time. And,
I saved way more than that in reduced losses as a
result of the changes we made.”
--Ohio producer
37 ©2015 Elanco
Poultry – Health Tracking System Extensive Poultry Health Database
What it is: An extensive database
containing poultry health data from more
than 1,000 production locations across 50
countries established in 1993
Value:
• Helps producers understand and
respond to enteric, respiratory,
immunological and skeletal disease
challenges
• Data can be compared across time,
locations, and diagnosticians
Poultry health and beyond
38 ©2015 Elanco
Swine – Profit Optimizer Determining Optimal Target Weights
Model the most profitable target market weight for a pig group
What it is: Optimization model using
variation in weight, market conditions,
packer grid, and customized growth curves
to determine the most profitable target
weight for a group of pigs
Value:
• Producers are provided an optimum
target weight for maximum
profitability based on expected
future market conditions
• What-if scenarios can be performed
to evaluate multiple possible market
conditions
• Marketing decisions are based on
increasing overall profitability
rather than focusing on cost
39 ©2015 Elanco
1 2
Capability:
Dedicated Global
Market Access Team
Shaping Policy Helping Customers
Make Decisions
Capability:
Elanco Pulse
Institute
Market Access Creating Opportunities
©2015 Elanco
Market Access Helping Customers Make Decisions
41
Market Access Shaping Policy Example: Antibiotics 8 Point Plan
42
Value Beyond Product Summary
©2015 Elanco
1 2 3
Leading
Analytics
Capability
Market
Access
Creating
Opportunities
Strategic
Account
Management
Focus
43
Innovation Model
©2015 Elanco
Aaron Schacht Vice President, R&D
44
©2015 Elanco
30-50% of growth (2007-2014)
from new innovation
of Elanco’s combined revenue
and pipeline originated from
a Lilly molecule
1/3
Rich Pipeline To support growth through
2020 and beyond
Innovation Key to Past and Future Growth
• Human, animal fields largely operated separately
• Life sciences R&D has changed over time, allowing quicker
leverage of human product development
• Elanco sources innovation, talent and expertise from Lilly
with speed plus no associated transaction costs
• Lilly capabilities allow Elanco to efficiently enter into smaller,
fast growing markets including oncology and diabetes
• 19 projects working together are currently in development
or under consideration
©2015 Elanco
PAST
PRESENT
Lilly R&D Supports Elanco’s Strategy
46
©2015 Elanco
R&D Global Footprint
Recently announced closures
Larchwood, Iowa
(USA)
Vaccines R&D
Victoria, P.E.I.
(Canada)
Aqua R&D Hub
Greenfield, Indiana
(USA)
R&D Headquarters
Gaithersburg,
Maryland (USA)
Enzymes R&D
Greensboro, North Carolina
(USA)
New product development Sao Paulo
(Brazil)
R&D Hub
St. Aubin
(Switzerland)
Discovery and CAB1 R&D
Shanghai
(China)
R&D Hub
Kobe
(Japan)
R&D Hub
Cuxhaven/Hannover
(Germany)
Vaccines Research
Basel (Switzerland)
Chemistry, Tech
Development
Australia
R&D Hub
Yarrandoo
(Australia)
FAB2 R&D
47
Multi-Source Innovation Model
Rich and Growing Pipeline
Elanco
Novartis
Lilly External
• Successful multi-
source model in
place for 10 years
• Agnostic to
R&D source
• Variable vs fixed
spending - greater
agility
• Model includes all
necessary tools to
access innovation
• Remain partner
of choice
©2015 Elanco 48
Large Molecules Vaccines Small Molecules
Respiratory
Enteric
Mastitis
Metabolic
Parasiticide
Parasiticide
Dermatology
Pain/Surgical
Cardiovascular
Diabetes, Oncology
CKD, IBD
Pla
tfo
rm
Sp
ec
ies
U
nm
et
Nee
ds
©2015 Elanco
Focused R&D Efforts
Food Animal
Cattle Swine Poultry Fish
Companion Animal
Dogs Cats
49
Key R&D Platforms Delivering Growth And Further Diversification
©2015 Elanco
AQUA DAIRY
Mastitis
Control
$500M
Market
Opportunity
Sea Lice
Control
$200M
Market
Opportunity
ANTIBIOTIC
ALTERNATIVES
Anti-Inflammatory
Immune Modulators
Bio Therapeutics
Novel Vaccines
Enzymes
50
7 Key Products
2015 2016 2016 – 1H’17
Canine Ear Infection
Canine Heartworm
Approved in
Select
Countries
Dairy Immune Restoration
Food Animal:
Feed Additive
Food Animal:
Therapeutic
Aquaculture:
Parasiticide
Companion Animal:
Parasiticide
Potential Approval
in US and
Europe
51
• Novel biotech dairy product
• $500M global market opportunity
• Disruptive technology: Immune modulator (restores immune function)
Effective against broad range of organisms with reduced hassle
• Potential US and Europe approval in 2016
• Helps cows through the “Vital 90” period (60 days prior to calving and
30 days following)
• Helps manage Mastitis, the most common and costly disease in dairy cattle
• Imrestor Launch supported by Vital 90 analytics tool
Recently launched in 4 markets
Imrestor
Interceptor Chewable
• Chewable heartworm protection product
• Addresses $800M market globally
• Broader worm protection
• Chewable formula, convenient dosing
• Further broadens CA portfolio
• Proprietary chewable technology creates platform
for further chewable products
Launched in October 2015
©2015 Elanco 53
Osurnia Novel Formulation for Otitis Externa
In both the US and France,
Vets say owner
compliance is the biggest
challenge when treating
Otitis Externa.
Chronic, recurring
infections are also
challenging.
What are your main challenges or frustrations in treating Otitis Externa?
“Lack of owner
compliance in giving
the medications.”
“Compliance of the
owner to treat their pet
for the required time.”
“Owner
compliance with
treatment.”
“Recurrence once
meds have
stopped.”
• Launched August
2015
• $150M global market
opportunity
• 2nd most common
canine veterinary
diagnosis in US (canine
ear infection)
• Only FDA approved
product with just two
doses
• Same dose for any
dog, regardless of size
or weight
©2015 Elanco 54
Innovation Model Summary Rich Pipeline To Drive Growth
Pipeline expected to drive
2-4+ ppt of growth per year
through 2020
Imrestor
Interceptor
Osurnia
4 additional launches in 12-18 months
Vaccines Product
Line Extensions
Balanced Between
FA and CA
• Rich Pipeline Just
Beginning To
Launch
• Favorable Near
Term Visibility
• Significant 2H 2015
or 2016 Launches
• Combines Best of
Former Standalone
Elanco/Novartis
Projects
• Increasing
approvals to
sustain growth
beyond 2020 ©2015 Elanco
• Food Animal parasiticide
• Food Animal therapeutic
• Aquaculture parasiticide
• Companion Animal parasiticide
55
Manufacturing
©2015 Elanco
Steve Jenison Sr. Vice President, Manufacturing
56
Manufacturing Imperatives
©2015 Elanco
Reduce Costs
Footprint
CMO Consolidation
Lean Manufacturing
Support Elanco
Brand
Reliable Supply
and Consistent
High Quality
Supply is not a given in animal health
Manufacturing Facilities
Vaccine Manufacturing
Other Manufacturing
Recently Announced Closures
Former Novartis Sites
Vacaville, CA
Vaccines
Unique Manufacturing Approach Relative to Human Health
• Animal manufacturing separated
from human pharma
• Bring in animal health “lens”
with external recruiting
• Applying “fit for purpose”
standards to animal health
Breakdown of external spend categories, which
collectively represent 50% of manufacturing costs,
with related savings opportunity:
• Raw Materials
o New procurement process
• CMOs
o Consolidating CMO base
o Bias towards low-cost locations
• CMO Oversight
o Reducing oversight costs through consolidated CMO footprint
©2015 Elanco
Reducing Cost is a Critical Goal External Manufacturing Opportunities
60
Productivity Agenda to Raise Operating Margins
Procurement Actions
CMO Consolidation
CMO Oversight
Lean Manufacturing
Footprint Decisions
Support Optimization
Integration
Savings
Manufacturing
Actions
Support
Manufacturing Actions
Represent Half of
Margin Improvement
Through 2020
Additional
Savings
Through
2020+
2020+ 2015
©2015 Elanco
Financial Review
©2015 Elanco
Brian Kopp Vice President, Finance
62
Business Development, Financial Results and Outlook
©2015 Elanco
Business
Development
• Proven value and growth
• A component of our model
Transition Period
For growth and profitability
Positioned For
Mid-Long Term
Outperformance
©2015 Elanco
• Strategic endpoints
met
• Exceeding hurdle
rates
• Targeted for
capabilities
• Lilly leverage
• Successfully
growing acquired
assets
Business Development Proven Value and Growth Enabler
Implants and Analytics
Dairy
Vaccines
Europe
Enzymes
Vaccines
Analytics
Vaccines
Multiple Capabilities
2007
2011
2013
2009
2015
Business Development
64
Novartis 50% Greater Savings
©2015 Elanco
Engine For
Growth
Accelerated
Integration
Value Exceeding
Expectations
• Created integration
function
• Commercial integration
complete
• Pipelines combined
• 50% greater savings ($300M vs $200M)
• Accretive to earnings(1)
in 2015 vs 2016
• 5% YTD acquired
portfolio growth(2)
• Expanded commercial
footprint o 2nd largest in North America
and Asia Pac
o China #8 to #4
• Broader companion
portfolio
• Cow/calf vaccines
• Aquaculture
(1) Accretive to earnings on a cash basis, excluding integration costs
(2) Proforma, excluding impact of F/X
Business Development
65
Engine For
Growth
Integration
On Track
Value Exceeding
Expectations
Lohmann
©2015 Elanco
• Commercial integration
complete
• SAP implementation in
progress
• Divested nutritional
business
• Portfolio rationalized,
focused growth
strategy
• Strong product
demand
• Enhanced global poultry
position with vaccines
• U.S. and European
vaccine manufacturing
capability
• Established in Breeders
and Layers, growing in
Broilers
Business Development
66
2015-2016 Transition Period for Growth and Profitability
©2015 Elanco
• Disruption, competitive
dynamics
• YTD growth 38%(1)
• 1% organic (food animal
up 4%, companion animal
down 5%)
• Greater organic growth in
Transition Period For Growth…
Transition
2016(1) supported by new innovation and stable
organization, despite competitive headwinds
(1) Excluding impact of FX 67
©2015 Elanco
2015-2016 Operating Margins
Transition
• Acquired Novartis at essentially
breakeven levels
• Significant Operating Margin
improvement YTD
• Targeting 2016 OMs(1) near
pre-Novartis levels
◦ Accelerated integration
◦ Productivity
◦ Global scale
…While Profitability Improves
Elanco
2014 2015 (Q1) 2015 (YTD) 2016
26%
15%
19%
Low
to
Mid-
20%
Operating Margins(1)
(1) Operating margins exclude amortization of
intangibles related to acquisitions.
68
Mid-Long Term Revenue Outperformance
©2015 Elanco
Outperformance
• Optimizing model and share of voice
• Vaccines, enzymes, CA therapeutics
• Leveraging value beyond product
capabilities
• Rich pipeline
• Multiple sources
• 2-4+ ppts of growth per year
through 2020
• Proven value and growth enabler
• Continue to be active in targeted areas
1
2
3
1
2
3
69
Goal: upper 20% to 30% Operating Margins(1) by 2020
We Are Targeting Higher Margins
Integration Manufacturing Operating
leverage and
sales mix
50% greater
integration
savings
Productivity
agenda
Leverage
footprint
Elanco
2014 2015 (Q1) 2015 (YTD) 2016
26%
15%
19%
Low
to
Mid-
20’s
2020
High
20s
to
30%
Operating
Margins(1)
(1) Operating margins exclude amortization of intangibles related to acquisitions.
Revenue
Outperformance
Growth above
industry
Elanco Margin vs Industry Scale Includes Efficiency Advantages
Elanco(2) $3.4B
in Sales (Top 3) Remaining Top 10
AH Companies,
Excluding Zoetis
EBIT
MARGINS
YTD 19%
11-21%
in 2014(1)
Low to Mid-20%
in 2016
Heading to
30%+
(1) Source: Vetnosis: Income Statements FY 2014 report (April 2015)
(2) EBIT margins exclude amortization of intangibles from acquisitions. 71 ©2015 Elanco
Why Not Be More Aggressive With Margins?
There are structural differences in
margins between Elanco and Zoetis
1. Sales mix, primarily vaccines
2. Scale
• Our 2020 goal of high 20’s to 30% OMs(1)
would fall in the top tier in animal health
• Nonetheless, we are striving for greater
efficiency, beyond our 2020 goals
• We will continue to invest in the
business in order to outgrow the industry
• Our track record suggests this is a
successful long term model
Vaccines
• Elanco (8% of sales) vs Zoetis (27%)
• Vaccines have higher margins (typically
high 60’s to mid 70’s gross margins)
Scale
• Zoetis 40% larger than Elanco
(1) Operating margins exclude amortization of intangibles related to acquisitions.
©2015 Elanco
$300M integration savings in 3 years is minimum
commitment (vs $200M in 3 years)
Low to Mid 20’s OMs by 2016 (vs Mid 20’s by
2017-2018)
Rich pipeline to contribute 2-4+ ppts
to growth through 2020
Outgrow industry revenue over mid-long term
Our Commitments
73
Q&A
Elanco Management Team
©2015 Elanco
?
74
Key Messages
©2015 Elanco
What Should Investors Expect of Elanco
Growth and improving profitability
Proven Track Record, Proven Strategy
How Elanco has become a top 3 player in attractive
animal health industry
Future Sustainable Outperformance
Driven by the right model and key differentiators
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Today’s Presenters
©2015 Elanco 76
Jeff Simmons President, Elanco
©2015 Elanco
Jeff Simmons is President of Elanco, the animal
health division of Eli Lilly and Company.
As part of this role, he is also a Senior Vice President and
Executive Officer of Lilly. Elanco is an innovation-driven company
with offices in more than 75 countries and sales over $3 billion.
The company is committed to protein production, companion
animal health and food safety, with an emphasis on helping the
food industry produce a safe and affordable food supply.
In more than two decades with the company, Simmons has held
a number of sales, marketing and management positions, in the
United States and abroad, including serving as country director in
Brazil and area director for West Europe based in the U.K.
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Eric Graves VP of Integration Planning for the Novartis Acquisition, Elanco
©2015 Elanco
Eric Graves is Vice President of Integration Planning for
the Novartis Acquisition. He joined Elanco, the animal health
division of Eli Lilly and Company, in 2003 and has held a range of
roles and responsibilities.
Prior to his current role, he was Elanco’s Chief Marketing Officer and
was responsible for all aspects of marketing for Elanco’s existing and
new products and brands. Previously, he led Elanco’s launch into the
companion animal market, where he enjoyed being part of building a
team and business that created growth and value for customers. Part
of this time he was based in Europe, working on the global
companion animal health business with additional emphasis on
integrating a previous acquisition.
Prior to joining Elanco, Eric served as a director of veterinary
marketing at Hill’s Pet Nutrition, Inc., a division of Colgate-Palmolive.
He has also held a variety of positions in companion animal
marketing, sales and operations at both Merial and Merck Agvet.
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Tony Ezell VP, Chief Marketing Officer, Elanco
Tony Ezell is Vice President and Chief Marketing Officer
of Elanco. Ezell joined Lilly in 1992, and over his 23 years has
held many roles in sales, marketing and general management. From
1999 to 2007, Ezell held various leadership positions including
executive director of marketing for the endocrine business unit, as
well as business unit leader of the US acute care business.
In more recent years Ezell has been a leader in Lilly’s market
research organization where he first served as executive director of
market research for Lilly USA. In 2009, Ezell was promoted to vice
president, global market research, and in November 2012 he was
promoted to chief customer officer Eli Lilly and Company. As chief
customer officer, he was responsible for leading Lilly’s enterprise
level customer experience strategy as well as delivering on Lilly’s
marketing and market research capability strategy. His focus was on
ensuring the company consistently connects innovative science with
relevant customer experiences necessary to deliver on both our
product and corporate brand promises.
79 ©2015 Elanco
Aaron Schacht VP, Global Research and Development
©2015 Elanco
Aaron Schacht is Vice President for Global Research and
Development at Elanco Animal Health. Prior to this, he was
the Global Brand Development Leader – Pain in Lilly Biomedicines.
He was the global leader for product development and
commercialization activities for LY951742 – Lilly’s novel CGRP
neutralizing antibody. In 2012, Schacht joined Lilly Biomedicines as
Senior Advisor – Strategy & Business Development for Lilly
Biomedicines. His responsibilities included oversight of Therapeutic
Strategy development, R&D Portfolio Management, and Business
Development for Lilly BioMedicines – Lilly’s largest business unit.
Past roles included serving as Executive Director, Global External
R&D, at Eli Lilly and Company, where he was responsible for
implementation of strategies which aim to leverage novel approaches
to external partnerships as well as Executive Director of LRL Strategy,
Portfolio Management and Project Management. In 2002, during a
short leave from Lilly, Mr. Schacht was co-founder, President and
CEO of Artesian Therapeutics, a Gaithersburg, MD cardiovascular
drug discovery start-up.
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Steve Jenison Senior VP of Elanco Manufacturing
Stephen H. Jenison is Senior Vice President of Elanco
Manufacturing. He oversees internal manufacturing operations
at sixteen facilities in eleven countries. In addition, he oversees
Elanco’s global external manufacturing operations and supply
chain organizations.
Jenison joined Lilly in 1986 as a technical service representative in
Clinton Laboratories. He also held positions at Clinton as financial
analyst and department head of chemical operations prior to
becoming manager – North East Regional distribution center in 1990.
In 1991, he was named the development projects manager in Lilly Research Labs for Gemzar.
Jenison moved to Mayaguez, Puerto Rico in 1992 as the site head. In 1995 he returned to
various manufacturing strategy roles with the global business units and product teams. From
2004-2009 Steve was the Vice President and Manufacturing Information Officer for Global
Manufacturing. In 2010, he began a dual reporting relationship to both Manufacturing and
Emerging Markets. During that position he served as the Vice President of Emerging Markets
and External Drug Product Operations. Prior to joining Lilly, Jenison held various positions in
the inorganic chemicals industry.
Brian Kopp CFO and VP of Strategy and Operations, Elanco
©2015 Elanco
Brian Kopp is Vice President and CFO, and head of
several Elanco capability areas including business
development, alliance management, communications,
IT, strategy and operations.
Kopp has been with Eli Lilly and Company for 18 years, holding a
variety of positions: Director and Sr Director, finance, Lilly USA
Pharmaceutical Ops Manager, Corporate Strategy and Planning Sr.
Analyst, corporate finance and Investment Banking.
Prior to joining Eli Lilly and Company, Kopp worked in various
financial and business development roles at General Motors
Corporation, including capital planning and manufacturing, as well as
international treasury and business development support, primarily
focused on Latin America.
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©2015 Elanco
Appendix:
Elanco Product
Examples
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AviPro Vaccine
©2015 Elanco
AviPro – salmonella vaccine for poultry
• Live vaccine that aids in the reduction of Salmonella
Typhimurium, Salmonella Enteritidis and Salmonella
Heidelberg colonization of the internal organs of young
growing chickens
• Reduction of S. Enteritidis colonization of the crop,
intestinal tract and ceca of pullet chickens
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Hemicell
©2015 Elanco
Hemicell – enzyme for poultry
and swine
Most enzyme products are energy-releasing enzymes –
they “open up” feed components the animal is unable to
access on its own. Hemicell is different – it is a unique
and patented energy-sparing enzyme. By breaking
down β -mannans in soybean meal, Hemicell minimizes
the metabolizable energy (ME) loss caused by the FIIR
from β -mannans, allowing more energy to be available
for growth and performance.
• In a 42-day trial of 1,280 male broilers, compared to
control, birds fed a diet that included Hemicell
demonstrated:
• 2.4% improvement in weight gain
• 1.05% better feed conversion
• 2.6% advantage in weight adjusted feed conversion 85
Micotil
©2015 Elanco
Micotil – for treatment of BRD and
ORD in cattle
A proven cattle treatment for Bovine Respiratory
Disease (BRD) and Ovine Respiratory Disease
(ORD)
• Long-lasting treatment with flexible, cost-effective
dose range for both metaphylaxis and individual
pull-and-treat therapy
• Flexible dose range allows stocker and feedlot
producers to more effectively manage animal
weight and risk variation within a truckload of
incoming cattle
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Milbemax
©2015 Elanco
Milbemax – for treatment of internal
parasites, roundworm, hookworm and
tapeworm, in dogs
• Milbemycin oxime (one of active ingredients) interferes
with nerve transmission in invertebrates, which helps
protect against heartworm, roundworm, etc.
• Praziquantel (other active ingredient) causes muscle
spasm in tapeworm, which then disintegrate. It kills all
intestinal forms of tapeworm except Spirometra spp,
which require a higher dosage than standard dose
rate.
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Optaflexx
©2015 Elanco
Optaflexx – Beta agonist for cattle
• Optaflexx is a beta-agonist that allows cattle
feeders to optimize both live and carcass
performance in order to easily respond to
market signals and the Choice-Select spread
• A feed ingredient that increases live weight
gain 22 lbs and hot carcass weight 20 lbs
when fed to steers at 300 mg/hd/d for the last
28 to 42 days of finishing
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Onsior
©2015 Elanco
Onsior – pain management for both
cats and dogs.
• Onsior persists at the site of inflammation long after
it has been cleared from the blood, therefore
providing effective pain relief with just once-daily
dosing
• Onsior is tissue-selective, effective, well-tolerated,
palatable, and convenient
• Its short blood half-life spares highly perfused
organs such as the liver, kidneys, and the GI tract
from prolonged exposure to effective drug
concentrations
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Posilac
©2015 Elanco
Posilac - dairy supplement
A healthy cow supplemented with
Posiliac produces an average of 10
more pounds of milk per day.
• Dairy producers supplement cows with Posiliac to
help produce a little more milk while using few
resources. And a little more milk means a more
successful dairy business and more abundant
food supply for an ever-growing global population.
• The added productivity that Posiliac allows
reduces your cost of production by 3-5%, or
approx. $0.50-$1.50/cwt.
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Rumensin
©2015 Elanco
Rumensin – feed additive for
prevention and control of coccidiosis
in beef and dairy cattle
• Since 1976, cattle producers have relied on
Rumensin to improve feed efficiency and prevent
and control coccidiosis
• For 35 years, Rumensin has demonstrated proven
results and continuous innovation, adding more
profit potential to the bottom line
• Rumensin is a cost-effective feed additive that
improves feed efficiency by providing more energy
from the ration. Research demonstrates that
Rumensin improves feed efficiency by 4 percent and
provides a net return of $23.13/hd
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Trifexis
©2015 Elanco
Trifexis – A monthly chewable tablet for
dogs that provides three types of
parasite protection
• Trifexis kills fleas and prevents infestations, prevents
heartworm disease, and treats and controls adult
hookworm, roundworm and whipworm infections
• Trifexis is a beef flavored tablet that starts killing fleas
in 30 minutes
• There is no need to isolate the dog from pets or
children; pet owners can interact with their dog
immediately after treatment
• Safe for dogs and puppies 8+ weeks and 5+ lbs
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Vira Shield
©2015 Elanco
Vira Shield – vaccine for use in
breeding cattle
• Breeding cattle includes pregnant cows and
heifers
• Aids in prevention of disease caused by infectious
bovine rhinotracheitis (IBR), bovine virus diarrhea
(BVD Type 1 and BVD Type 2), parainfluenza Type
3, and bovine respiratory syncytial (BRSV) viruses
and Campylobacter fetus, Leptospira canicola,
grippotyphosa, hardjo, icterohaemorrhagiae, and
pomona.
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Vira Shield
