CEO Jeff Simmons says the company is ‘entering 2021 with good momentum’
Elanco Animal Health reported US$1.14 million in revenue for the fourth quarter of 2020, a 45% increase from the same period the previous year.
US$743.4 million of that revenue was from the legacy Elanco portfolio and US$396.3 million from the legacy Bayer portfolio.
The company has increased its financial guidance for the full year 2021 with revenue of US$4.55 billion to US$4.63 billion. It provided financial guidance for the first quarter of 2021 with revenue of US$1.15 billion to US$1.17 billion.
“Elanco is entering 2021 with good momentum,” said Jeff Simmons, president and CEO at Elanco. “Fourth quarter revenue surpassed our guidance as U.S. Pet Health, U.S. Farm Animal, and China swine outperformed our expectations.”
Simmons said the previously announced eight product launches planned for 2021 are on track. Those products are expected to generate US$80 million to US$100 million in revenue in 2021.
“Additionally, we are rapidly executing on the necessary actions to drive synergies from the Bayer Animal Health acquisition, taking important steps toward being an agile, fit-for-purpose animal health leader,” he said.
Farm Animal Future Protein & Health revenue increased 2% for the quarter, driven by the addition of Bayer Animal Health product revenue of US$27.5 million and increased price for legacy Elanco products. Growth was partially offset by volume declines in the legacy Elanco business 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 and, to a lesser extent, an unfavorable impact from foreign exchange rates. Revenue for the legacy Elanco business declined by US$22.9 million or 11%.
Farm Animal Ruminants & Swine revenue increased 33% for the quarter, driven by the addition of Bayer Animal Health product revenue of US$121.7 million and increased price for legacy Elanco. Legacy Elanco volume declined due to lower demand driven by generic competition, an unfavorable comparison to the prior-year period which had higher sales from the commercial agreement for Posilac, and, to a lesser extent, the negative impact of the COVID-19 pandemic on global protein markets. These impacts were partially offset by increased demand in China’s swine market with continued favorable producer economics and positive efforts to repopulate herds affected by African swine fever in 2019. Revenue for the legacy Elanco business declined by US$22.8 million or 8%.
Gross profit was US$543.5 million, or 47.7% of revenue, in the fourth quarter of 2020 compared with US$376.9 million, or 47.9%, for the fourth quarter of 2019. Gross margin declined 20 basis points, primarily due to amortization of inventory fair value adjustments recorded from the acquisition of Bayer Animal Health more than offsetting the benefit from the inclusion of the acquired gross profit, price improvement for legacy Elanco, and continued improvements in manufacturing productivity.
Total operating expenses increased $233.6 million in the fourth quarter of 2020. Marketing, selling and administrative expenses increased US$188.2 million to US$374.1 million, as a result of the inclusion of expenses supporting Bayer Animal Health. Research and development expenses increased US$45.4 million to US$112.7 million, or 10% of revenue, because of the inclusion of the Bayer Animal Health business.