Elanco Lifts 2026 Outlook After Q3 Revenue Climbs 11%

Elanco Animal Health raised its full-year revenue and earnings guidance after third-quarter revenue rose 11% to $1.265 billion, powered by pet health demand for Zenrelia and Credelio Quattro and higher prices across the portfolio. Adjusted earnings per share jumped 42% to $0.27. The company beat the high end of its own quarterly guidance on revenue, adjusted EBITDA and adjusted EPS.

On an organic constant-currency basis, revenue grew 9%. Volume supplied 5 percentage points of that growth; price supplied 4, Chief Financial Officer Bob VanHimbergen said on the earnings call. Adjusted EBITDA rose 23% to $243 million. Adjusted gross margin expanded 3 percentage points to 56.1%, helped by pricing, product mix and productivity gains. Elanco also cut gross debt by $216 million in the quarter, bringing net leverage to 2.9 times.

What is driving the pet health business?

Global pet health revenue grew 14% organically at constant currency, with 13% growth in the United States and 17% internationally. CEO Jeff Simmons credited much of the increase to Zenrelia and Credelio Quattro, both of which hit record U.S. market share in September.

U.S. Zenrelia sales more than doubled from a year earlier. The dermatology drug had reached roughly 19,000 veterinary clinics — about two-thirds of the U.S. clinic base — while average sales per clinic climbed 8% from the second quarter.

Credelio Quattro told a similar story. Its U.S. market share rose 9 percentage points year over year, and the parasiticide had reached about 55% of U.S. clinics. Simmons said Quattro became Elanco's largest U.S. pet health product on a trailing four-quarter basis, overtaking Seresto. Elanco expects to launch Quattro in Europe in the first quarter of 2027 after receiving a positive opinion for European Union expansion. International sales of AdTab, an over-the-counter parasiticide, grew more than 40%.

Innovation products delivered $328 million in quarterly revenue, up 40% year over year. Elanco raised its full-year innovation revenue target to $1.275 billion.

What comes next for Befrena?

Elanco has opened Befrena, its injectable allergy treatment, to all customers including large corporate accounts, and expects to fill outstanding orders within the following week, Simmons said. The company plans to shift from a phased rollout to a full-scale U.S. launch in the first quarter of 2027.

Befrena did not materially contribute to third-quarter U.S. pet health growth. Simmons said it could become the largest contributor to that business's growth next year. Elanco has produced more than 30 commercial batches, with larger-scale test lots and validation still ahead as production ramps.

The 2027 picture is more mixed. Elanco reiterated targets of mid-single-digit organic constant-currency revenue growth, high-single-digit adjusted EBITDA growth and low-double-digit adjusted EPS growth. VanHimbergen expects pet health to outpace farm animal, with the farm business returning to mid-single-digit growth against tougher comparisons.

Befrena's volume growth will initially dilute gross margin, though VanHimbergen still expects overall adjusted gross margin and EBITDA to improve in 2027. Management flagged inflation and regional farm animal cycles as further headwinds. Costco's non-renewal will hit the retail business mainly in the first quarter of 2027, but Simmons said other distribution partners should offset the impact and Elanco still expects retail growth next year.

How much did guidance rise?

Elanco now expects 2026 revenue of $5.155 billion to $5.18 billion and organic constant-currency growth of roughly 8%, up from its prior 6% to 7% forecast. It lifted adjusted EPS guidance to $1.17 to $1.20 — a $0.06 increase at the midpoint.

For the fourth quarter, the company guided to revenue of $1.19 billion to $1.215 billion, adjusted EBITDA of $185 million to $200 million and adjusted EPS of $0.16 to $0.19. It expects organic constant-currency revenue growth of 4% to 6%.

VanHimbergen said Elanco remains ahead of schedule toward its cumulative $1 billion free cash flow target through 2028, having generated $362 million through the end of the third quarter. He added that the company expects net leverage of approximately 2.9 times at year-end.

Elanco, listed on the NYSE under the ticker ELAN, develops and markets vaccines, parasiticides, antibiotics and nutritional supplements for pets and food-producing animals, serving veterinarians, livestock producers, retailers and distributors worldwide.