Results include Bayer Animal Health, which was acquired in August
Elanco Animal Health Inc. reported a 15% increase in revenue for the third quarter of 2020.
Total revenue for the period, which reflect the inclusion of Bayer Animal Health, which Elanco acquired on August 1, was US$889.6 million. Gross margin, as a percentage of revenue, was 50.3%, a decline of 300 basis points as compared with the third quarter of 2019. Total operating expense was US$365.8 million, an increase of 40% compared with the third quarter of 2019, driven by costs from the Bayer Animal Health acquisition.
“In the third quarter, Elanco executed with discipline and urgency to deliver on our stated expectations for the quarter, achieving results at the high end of our guidance while bolstering our competitive position amid lingering pandemic headwinds in our Farm Animal business,” said Jeff Simmons, president and CEO at Elanco. “We closed the quarter as a stronger enterprise, driving sustainable, long-term value creation for shareholders and society.”
Bayer Animal Health products contributed revenue of US$195.6 million in the approximately seven weeks of invoicing during the third quarter. The Bayer Animal Health portfolio experienced the reversal of the retailer stock-in, created by the pandemic trends and anticipation of IT system blackout periods around closing.
Elanco’s business was negatively impacted in the third quarter by an estimated US$35 million, primarily in the Farm Animal business. Although improvements were made in reducing the backlog of animal processing in the U.S. livestock industry, unfavorable macroeconomic conditions and reduced consumption trends pressured prices and producer profitability in poultry and aqua, affecting Elanco’s international business. Despite these near-term headwinds, poultry and aqua remain important growth drivers for Elanco over the long term.
Farm Animal Future Protein & Health revenue decreased 5% for the quarter, driven by lower volume and, to a lesser extent, unfavorable impact from foreign exchange rates, partially offset by an increase in price for legacy Elanco despite the addition of Bayer Animal Health product revenue of US$15.9 million. Legacy Elanco revenue declined as a result of lower levels of demand in certain markets due to the negative impact of the COVID-19 pandemic on poultry and aqua consumption, production and profitability as well as an unfavorable comparison to the prior period as a result of the sellout of the remaining inventory of a product that was phased out in China.
Farm Animal Ruminants & Swine revenue increased 10% for the quarter, driven by the addition of Bayer Animal Health product revenue of US$61.0 million, partially offset by an unfavorable impact from foreign exchange rates and decreased price. Legacy Elanco revenue declined due to lower demand driven by the negative impact of the COVID-19 pandemic on global protein markets, among other things. This was partially offset by increased demand in China’s swine market with favorable producer economics and positive efforts to repopulate herds impacted by African swine fever in 2019.