Elanco Animal Health Incorporated Common Stock Morgan Stanley 24th Annual Global Healthcare Conference

4%. That's just in animal numbers. Elanco's well-positioned there. I think on the pet side, pet grew last year 5%. It grew in all the major markets and all the major companies, 80% of the companies grew in the first half of this year. So we continue to see pet spending for health as a protected budget item as also another contributor to durable growth. Yes, some changing pet behavior. We can talk about pet buying behavior. So, we do see the industry growing from $40 billion to $60 billion over the next 10 years or so because of these trends. Innovation wins. Innovation will be rewarded. In the release today, what we try to do is put a little color on the here and now of some of these trends. So I think in summary, we continue to see the market growing.

We see a responsible market. We see and expect our pricing to accelerate as it has in July and August. That, I would say, is because of really the headline of the release is the need on the pet side has grown. As some of you may know, this tick challenge has actually grown at the highest level since 2017 when CDC recorded, and the itching dog, in the northern hemisphere has continued to be a challenge. So the seasonality used to be a 70/30 Elanco first half, second half is becoming more 50/50. So we have three pet products that we believe are medically differentiated, best medicine, I believe, and they're taking share. They're allowing us to take price and add clinics, and we can put some color to that.

That was the essence of the release, and, again, we can get into a little bit of our strategy and details.

Yeah. I'll toss it to Bobby that's running the business. I just come back to, I think one of the things that needs to, and it came from a lot of our meetings this morning is, look, these are big markets. I'll step back and say, derm is a market that is the itching dog challenge continues to grow and the markets grow. International grew 9%, and the overall market is continuing to grow and broad-spectrum parasiticides is growing, and we're in early innings. We just announced $100 million in derm and a little over $100 million in para in these 2 and 4 billion dollar markets. We're in the early innings with differentiated medicines. So no matter what's happening in the marketplace, we have a lot of runway relative to our share in very big growing markets. Maybe a little color, Bobby, on the U.S.

Yeah. I think our growth is going to be really balanced. I would think about a portion coming from price, innovation being the main contributor to growth across three products. So Zenrelia, Credelio Quattro, and then Befrena, probably more Q4, a little bit in Q3, and then a stable base. That's sort of how we think about the contribution of the business and what's going to contribute to the sustained momentum that we saw in the first half of the year.

Yeah, that's a great question. On pricing, things have played out exactly as we had anticipated. First half of the year, we saw pricing of about 2%, and that's really across pharm and pet. It's across international and U.S. So it's pretty broad-based. But we did say we expected price to accelerate in the second half of the year, and today's press release, we did state that, hey, we have seen that price accelerate 2 months into the quarter. So feel great about what we expected and what we've seen there.

Yeah, and I'd just say broad strokes, what we see in the marketplace is responsible pricing. We see some investments in pockets that tend to be time-bound. That's not been very different in our industry for years to come, and we're not seeing massive price investment that's sustained because frankly, you can't generate a return on that. And what we really lean into is medical differentiation and commercial execution, and largely driven by share of voice. And we think those are the winning formulas for success with our customers.

Yeah, I would start and add here, but it's always typical to have a pocket or two around the world in a certain segment to where there may be. It is a competitive environment. It's not a payer environment, but there's nothing that has changed from the first half in July and August that we see that's any different. Maybe to Bobby Modi's point, what has changed and why we wanted to highlight in the release, the need has increased. The speed of tick kill that we're seeing with Credelio Quattro and the significance of that differentiation has increased because of the need and the willingness to come. We're adding, again, 500 to 600 clinics a month, and that's because I think the differentiation continues to grow through our opinion. The same with the itching dog and Zenrelia, as we highlighted in the competitive derm market in Europe.

We picked up 10 share points in the first semester, and that's 2 points to our competitor, the new incumbent coming in.