Elanco Animal Health Incorporated (ELAN) Earnings Call Transcript & Summary

Good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be introducing Elanco this morning at the 40th Annual JPMorgan Healthcare Conference. From the company, we have Jeff Simmons, President and CEO. Before I turn it over to Jeff, I want to remind folks that to ask a question. please feel free to use the ask a question feature on the website, and I'll work those into the Q&A post the presentation. With that, Jeff, Happy New Year. Thanks for joining us and looking forward to the presentation.

Thanks, Chris. Happy New Year to you. Thank you to JPMorgan and to everyone for the work you do in covering Aanimal Hhealth, and we appreciate the opportunity to engage with you and our investors here over the next couple of days. First of all, I'll ask you, as always, just to reference the disclaimer on Slide 2 of the deck that we put out. Today's presentation will include, as you all know, a number of forward-looking statements, and you can refer also to our SEC filings for a discussion of any of these factors as they might impact our results. So let's start on Slide 3, just as a way to summarize a little bit of the key points that we're sharing with our investors this week. So we at Elanco, as you know, are building a leader in this attractive animal health industry. And since last year's JPMorgan conference, we've made significant progress and delivered many, I believe, proof points that demonstrate our strategy is working at Elanco. At our Investor Day that was in December of 2020, we shared our long-term algorithm for accelerated value creation. And we are delivering on our commitments for that for growth, for profitability and for innovation. And we've taken a number of key actions in the past year that we expect will further enable our progress and strengthen our ability to deliver on these commitments. Since Q4 of 2020, the first full quarter after closing the Bayer deal, we have delivered 4 consecutive quarters of outperformance on revenue, adjusted EBITDA and adjusted EPS. We remain confident in the most recent full year 2021 guidance ranges that we have shared, and we look forward to sharing our fourth quarter and full year results later in February. While we plan to give 2022 guidance at that time as well, we remain committed to continued revenue growth this year, driven by our durable global portfolio and our growth agenda, I want to emphasize, is working. In addition, we expect to deliver double-digit percentage adjusted EBITDA and adjusted EPS growth in 2022, aligned with our long-term algorithm and despite challenging external factors as well. So like others, we are planning for expected supply chain and inflationary pressures as well as challenges from COVID-19 and its variants. But very importantly, we expect to deliver our commitments and stay on our consistent trajectory even with these environmental challenges at play. The global animal health market, as you know, continues to show strong growth and durable underlying trends on both the pet health and farm animal side of the business. And on Slide 4 in our deck, we believe, just to kind of look at it at a high level, the $14 billion pet health market on the left side of the slide is poised to continue growing nicely in 2022, benefiting from the COVID era increase in pet ownership globally. While this trend is slowing, we expect it to persist. And I think that's good news. Our Elanco research suggests that there are several areas expected to drive continued growth. First, the overall pet experience. This is what I believe will be remembered in COVID 3, 4 years looking back, the pet experience has improved with omnichannel distribution, with vet clinic changes like curbside drop-off, hybrid work for pet owners, these changes have created an increased expectation of care, which we expect to drive continued increases in wellness spend, it will increase compliance and online purchasing. These are the underpinnings for the growth. For instance, in a December Elanco survey of U.S. pet owners, they found that 1/3 of the pet owners came back to us expecting to spend more on their pets in 2022 than in 2021. All of these items are expected to drive continued growth globally across all therapeutic areas. Now on the farm animal side, on the right side of the slide, this $22 billion market is also expected to grow in 2022 as the global economy continues to stabilize and adapt to COVID-19. We expect swine in China will continue to grow as producers rebuild the herd after the most recent African Swine Fever challenges. But currently, producer prices still remain low. Globally, we believe demand for animal protein, secondly, is being driven and is increasing, and it's being driven by GDP growth, primarily in the international markets and expanding protein diets primarily in the western markets. We also believe that international poultry is poised to continue its recovery after macroeconomic factors pressured price globally in the first half of 2021. On the beef side and the beef industry, we expect to see a stable market, some contraction we see between cattle on feed and processed cattle, probably days on feed cattle will come down, but higher exports. I mean, if African Swine Fever had any impact on the beef market is there's much more beef demand for exports in Asia, especially, that will be a persistent positive for the beef industry through 2022. An emerging trend across the farm animal sector also is an increased focus on environmental sustainability and livestock's potential positive role, not negative role, but a positive role in calling the climate with this increased focus on methane, creating an exciting new era of opportunity for the industry. And then finally, I think these opportunities are all balanced with labor, inflation and trade challenges, maybe a little high corn prices as well. And these in dealing with COVID daily in all of our lives. These are the issues that will be a backdrop, I think, for animal health as most all other industries. Overall, we believe animal health, and this is my summary at the bottom, it is a durable industry with diversity of pushes and pulls and growth is expected in 2022. Now while these trends create positive momentum for the industry, I still believe success requires several key factors. You need broad scale, you need robust portfolios, global reach to the end users, farmers and veterinarians and continued innovation as well as adding on value beyond product offerings. We believe this is what creates durable and consistent growth in Animal Health. If you move to Slide 5, this is really the Elanco summary. There's a lot going on in Elanco. So if you step back, this is what I would want you to see that we're doing. First, we are building a leading global animal health company that has scale, that has capabilities and the right diversity. In addition, since the Bayer acquisition at our Investor Day, I want you to hear that we are consistently growing and delivering. Importantly, we have taken added strategic actions as well in the past year to further strengthen the company, driving continued momentum moving forward on our commitments that we made at the Investor Day. We continue to advance our integration. If you look at the Bayer business in that first chart, which not only increased our scale and reach, but it also expanded Elanco's position as an omnichannel leader in pet health, it balanced our portfolio between pets and farm animal. And then since closing in August of 2020, we have grown and we have delivered against our expectations for 4 consecutive quarters, consistently exceeding expectations, and we remain confident and the full year guidance ranges that we've provided for 2021. In the past 18 months, we've executed as well a number of difficult yet strategic and proactive decisions from a position of strength, driven by our leadership team to transform and further strengthen the Elanco business. We believe our intentional transformation has the Elanco well positioned to grow, to innovate and to deliver increased value. In Q4 of 2021, we announced a restructuring that once fully realized, should deliver approximately $70 million in annual savings, with about $45 million of those savings being incremental to our $300 million value capture commitment associated with the Bayer acquisition. All of these actions are driving continued momentum towards achieving our Investor Day commitments. On Slide 6, you will see our history of transformation has resulted in a diverse product portfolio that serves our customers' most important challenges that helps enable durable revenue performance. And we believe our business is now is well balanced as it's ever been between the U.S. and international, farm animal and pet health. And we believe this diversity of portfolios, species and diversity of geography is a key factor driving our growth in 2021, and we expect the same for continued growth as a result in 2022. Moving to Slide 7. I'd like to highlight the key elements of the long-term growth algorithm and value algorithm that we introduced in December of 2020. Regarding growth, we expect to grow 3% to 4% on average annually, while growing adjusted EBITDA and adjusted EPS double digits on a percentage basis. That will increase free cash flow, which we intend to use primarily to delever. And in line with previous communications, we also expect to generate significant cash to reduce our net leverage to less than 3x by the end of the first quarter of 2024, while delivering on 60% gross margin and 31% EBITDA margin targets by 2023 and 2024, respectively. We remain confident in this trajectory and 2021 has enabled a great start with expected pro forma sales growth in our previously disclosed range, representing 7% growth or 6% in constant currency at the midpoint. On Slide 8, you will see the detailed revenue and adjusted EBITDA performance in each of the 4 quarters since our Investor Day, demonstrating our commitment to execution, excellence and consistent delivery. If you shift to Slide 9, briefly. You can see how the most recent full year guidance compares to our 2021 guidance. At the midpoint, we expect to exceed the expectations we set out for ourselves in December of 2020 across our key metrics. While we are still in the process of closing our books for the quarter, and for the year, based on what we know today, we remain confident in our most recent full year guidance ranges for 2021. On Slide 10, I'd like to provide and take just a couple of minutes here and provide additional detail on key actions that we have taken, again, to further strengthen and transform our company to further enable our 2021 performance and support delivery of our long-term targets. So a lot happening in Elanco, very much again from a position of strength. First and very importantly, we completed the full separation this year -- this past year from the Lilly IT systems and shared service centers. This is an area we'll continue to strengthen as we work now to combine the Elanco and Bayer ERP systems over the coming years. Second, we streamlined our manufacturing footprint with the planned exit of 3 sites. One item to note on this one is the removal of the contract manufacturing revenue from these [ plans ] will reduce Elanco revenue by approximately $25 million in 2022 compared to 2021. However, these manufacturing exits simplify our operating structure, while freeing up substantial working capital and saving future capital investment as we go forward. Additionally, we've simplified and focused our organization through a series of structural changes. These changes reduce complexity within the organization will be critical to help enable our EBITDA margin expansion. Importantly, we ensured stability and maintained engagement in 4 critical areas that drive value creation. This is important. In these 4 areas, we have watched engagement grow, stable or adding resources in the areas of sales, supply, late-stage pipeline and our systems. Stability in these areas has been a key driver of our strong 2021 performance to date, while doing the integration. We also made significant progress on the ESG front in 2021 with Elanco's healthy purpose, and the issuance of our first ESG summary. Also in December, we completed our first ESG road show and we're assessing the valuable feedback from our investors during that roadshow. With a growing focus, I would add also on our livestocks, potential opportunity, our customers to impact climate change, we believe helping our customers achieve their ESG agendas is also a growing business opportunity for Elanco. We are working to create value as their lead partner on their journey to net 0 through both our technical expertise and the integration of sustainable solutions in our portfolio that help reduce their footprint. Over the last year, we've significantly strengthened our Board as well and the Board governance with the addition of shareholder representation to our Board, the expansion of the charter of our finance committee to also oversee operational synergy, capture and execution, and the addition of an innovation, science and technology committee, which provides oversight for our R&D investments. Additionally, in 2022, we expect to introduce an EVA-like metric into our short-term incentive compensation to drive capital optimization and further align employee and shareholder interest. This EVA-like metric has been shown to be correlated with total shareholder return. And finally, we launched 8 new products in major markets in 2021 and as we make progress towards also our innovation sales target going forward. Progressing the pipeline, let me just note, and increasing the probability of delivery has been a key focus. And as we turn to Slide 11 and look at innovation, I want to emphasize that we have grown, we have concentrated and we've progressed our pipeline. The scale of the R&D organization grew substantially with the addition of both Bayer and Kindred businesses. Kindred also, as you know, added 3 potential blockbusters in dermatology, which in addition to our own blockbuster are expected to launch by 2025. It's also expanded our capabilities to the monoclonal antibody space, both in research and in manufacturing. We have concentrated our investment as well and the second pillar here to focus on the delivery of our late-stage pet health blockbusters. We've also streamlined the structure of the organization and reduced the number of R&D sites from 9 to 6, consolidating efforts at strategically located centers of excellence. In 2022, we expect to launch 7 or more new products in major geographies. We shared this news yesterday primarily in pet health. These products will be portfolio enhancing and expected to be in areas such as pain, parvovirus, a parasiticide OTC product and pet vaccine. We're also progressing development milestones for our potential pet health blockbusters and continue to expect to deliver $600 million to $700 million of annualized innovation-related revenue by 2025. Finally, we've executed a smooth R&D transition to our new R&D leader, Dr. Ellen De Brabander, and look forward to further introducing her to you, the investment community this year. Turning to Slide 12. I think you can see this in context. We have seen and made several updated metrics here from the 2020 Investor Day disclosures. These are aligned with our focus on delivering late-stage pet health pipeline. We have significantly increased investment in pet health from 57% to 73% of our total variable spend expected in 2022 and a smaller yet important shift in project spend associated with late-stage development moving from 76% to an expected 81% in 2022. Moving to Slide 13. I want to highlight our growth agenda. And I will reiterate our long-term commitment of approximately 3% to 4% average annual revenue growth in constant currency. Over time, this growth will not be linear. But the drivers of growth that we laid out at our 2020 Investor Day still holds. We believe innovation products like 2021's launch of Experior and Credelio Plus from our pipeline and ZoaShield that we in-licensed will be long-term drivers of the top line. We also believe our focused brands like Galliprant, Credelio, Seresto and our poultry franchise will also grow on a global basis. while we continue to optimize our defend brands like Rumensin and the Advantage family. While we're not giving guidance until February, we expect sales growth to continue in 2022. And it will be driven by, one, these focused brands as well as our innovation brands, both from 2021 the 8 products and the 7 new products that we're adding this year. Our omnichannel leadership within pet health OTC those products globally, our poultry franchise, our value-based pricing that we expect will be higher than our recent historical average as well as growth that will be driven by China and Latin America. This will be partially offset by some continued competitive pressure in U.S. vet channel, parasiticides, some generic competition in certain farm animal markets and the exit of the portion of the contract manufacturing business that I just mentioned. Additionally, we expect FX or the impact of foreign exchange rates to be a headwind in 2022. I end really on Slide 14. Our IPP or Innovation Portfolio and Productivity strategy. This strategy, everyone, it is working. And we have continuously, since day 1, as we launched this company, we've continuously quarter-to-quarter strengthened and expanded this strategy to create value for our customers, our shareholders and society. In closing, after our Investor Day -- 1 year after Investor Day, we believe Elanco is a stronger, a more durable business, and we remain on track to deliver our commitments made to investors in December 2020 despite the macro headwinds of COVID inflation and supply chain disruptions. Our confidence comes from our track record of delivery, and the clear actions that we've taken over the past 4 quarters. We will issue 2022 financial guidance in February, but we're committed to revenue growth and double-digit percent adjusted EBITDA and adjusted EPS growth in 2022. Thank you for this opportunity, and I look forward to the Q&A session and the continued discussions with many of you throughout the week.

Great. Thanks for those comments, Jeff. I guess maybe to kick off the Q&A session, I want to touch a little bit more on supply chain and inflation. It seems like it's kind of top of mind in a lot of our conversations on Elanco. So just latest thinking in terms of the impact to your business here and how the organization is adapting to this kind of new environment we have with higher costs?

Yes. So I think like everybody, I mean, inflation, supply chain, the new variant here with COVID continues to persist, and yes, we are seeing an impact from them. But what we wanted to emphasize is starting yesterday is the reiteration that from our strategic actions that we've been taking throughout all of the last 4 quarters, we are committed to stay on the same trajectory. We're committed to our goals of the 31% EBITDA, 60% gross margin, even our innovation targets and our delevering. But -- and I think they're going to continue to persist. But I think a couple of things that hit me, Chris. One is our industry is durable. When you start to look at price elasticity and the pet experience, how vets have adapted to a COVID, more virtual. They're participating in omnichannel and retail and scripting. On the farm animal side, the workers in the packing plants to supply chains. I really believe is we look through the lens of our customers and our industry, it has adapted. And I've even seen over the last 60 days less of a reaction to what's coming in this next wave. I think on the Elanco side, what I remain confident with is not just the strategic actions, but we have a more diverse, durable Elanco, as I just highlighted in the presentation and one that's much more adaptive to change and a company-wide productivity agenda that's always working every quarter, making moves, puts us in a position of strength. So I think we're set up well. I do believe pricing is key as I mentioned, and we can talk some about that, but we will be taking appropriate and have already instituted a few key pricing on a value-based targeted basis. This industry has averaged 2% Elanco has and we will be taking price increases above industry and Elanco historical levels given the inflation.

Great. And maybe just dig into that topic a little bit more. Where within the portfolio, are you able to pass on some of these higher costs flowing to the customer? And what part of the portfolio is that harder to do?

Yes. I think, first of all, compared to my years of the industry, we're a much more capable, even being an independent company to have access to the data. We've got more consultants and third parties out there. So you're able to have better data. Pricing, you've got to have systems and data to do it. You don't want to do it wrong. This is not a payer business like pharma, and it's not a CPG heavy, heavy brand business. It is a cash business with generics in the middle and some of it being industrial. So, I think pet first over farm animal, and then it's very much a value-based approach. I do believe that we'll start probably on the retail side as retail is seeing more of this from other segments. And then I believe you start to look at focused brands. It's all value based, right, Chris? So it's a lot about, "hey, where we're differentiated, where it's value-based defend category and our algorithm will be a little bit less as an example. So we'll have to manage that". On the farm animal side, it's a lot about, "hey, we've got a value-based approach", $7 to $6, $5 corn wherever it is around the world. We have much more of an economic equation there, but we do have the opportunity to take price where we have that value proposition. So it's a balancing by SQ, by country, with a much more sophisticated Elanco with systems and data to be able to do it.

And you mentioned historically maybe a 2% price increase on the portfolio. When you talk about the ability to take more price? Is that 4%, is that marginally higher? I mean any more color you can provide on what this could look like across the portfolio?

Yes. So we've instituted changes across the board. They will vary vastly, but again, with an industry that hasn't moved much from 2%, I don't think you can expect this to be some sizable 2x, 3x, but I do believe that incremental. And when you look at a growth algorithm like we have, this will be beneficial to us as we're offsetting other challenges as well. So more to come quarter-to-quarter on this as we're starting to get better data with the Elanco plus Bayer systems.

Okay. And then just on -- can you elaborate a little bit more on the organizational changes you announced in December? I know you've been doing a bigger restructuring. But that program, in particular, I guess, how much of that was opportunistic versus how much of that was in response to either change that you're seeing in the market or performance you weren't happy with in the parts of the business? Just a little bit more color on what drove that?

Yes. Thanks for the question. So look, I mean, first of all, I want to really emphasize that this is -- this was very much, as I said in my comments, a position of strength proactive by the management team. We are constantly looking at, hey, how do we take -- we've got 2 divisions coming out of Bayer and Lilly coming together, how do we take cost out. The other thing that's happened, Chris, is we did firewall off these 4 areas: sales, supply, late-stage pipeline and systems. We had to make sure that they were rightly resourced to keep us competitive. I think '21 results showed that, that worked really well. We're adding. We're adding reps in China in certain parts of our pet business. We're adding where we need to on our systems. So those 4 areas, I would say, are a little bit firewalled off. But when we stepped back and we looked at this last restructuring, we have moved through the integration and we're now transitioning to operating. So from integrating to operating, and so we said, "hey, Europe plus international takes out cost and actually simplifies the organization". We'll be marketing closer to the customers, bringing it in, where a Seresto marketing person is right up in that customer versus in a centralized. It's more efficient. It actually serves customers better as examples, moving out microbiome with a heavier focus on derm and late-stage pet. So these things allowed us to put money where we had to, and we reinvested. We did create $70 million of annualized kind of savings, $45 million, as we've noted, will be incremental to the $300 million of synergy, and we've reinvested in some kind of key areas, China, Digital, adding reps and places where we need to as well as our focused brands.

Okay. And then on that reinvestment you mentioned China and Digital, et cetera, how quickly do you expect to get returns on those investments? Are these things that you'll be able to see within a quarter or 2? or are these longer-term kind of initiatives, I guess?

Yes. So I think it's a combination of both as we sometimes adding reps in markets, you can start to see returns by the second half of the year if you're placing them in the beginning. Focused brands will be definitely some will be shorter-term campaigns or incenting distribution. So you'll definitely see that in the year. There's other things like we've put a pretty significant investment in digital and even capabilities in China to move pet retail, that will take some time. But again, when we're looking at -- I want to emphasize, this isn't long, long term. Elanco is very focused internally on Elanco 2025. What we're going to do over the next 3 to 4 years, it will be in that window, no question. But there will be a few that will be a little longer term over 2 years.

Okay. Great. On the pipeline, I think you mentioned 7 launches in '22. Can you just give us a framework of how to think about what those assets can contribute? I think last year, you had originally 7 maybe turned into 8 and ends up being almost $100 million I think $65 million to $80 million of contribution, [ apologies ] if I'm misquoting that number. Is this a similar magnitude kind of a new class of launches coming this year and I think blockbusters in there? Just a little more color of how to think about that?

Yes. So again, we'll give a little more color in February when we guide for 2022, Chris. But I do think just to anchor everyone as pipelines, we shared kind of historical transparency last December. And what I would say is to anchor on a few things. First of all, as 2021 was our starting year. We're headed to $600 million to $700 million by 2025. We stand by that commitment. And the growth algorithm, that's about 2%, 2% to 3%. There is definitely, as you know, not a linear line here, and it will be a combination of portfolio-enhancing products, like a few we announced yesterday that can be anywhere, $10 million, $25 million, $50 million. Maybe there's a surprise in there becomes a blockbuster, with blockbusters had a combination between pet [indiscernible] OTC and farm animal. So what I would tell you is look for 8 from last year, and there will be attrition and some getting bigger and some smaller, but look at Credelio Plus, Experior and ZoaShield, as I mentioned, to be bigger contributors than they were last year this year and then look for these to continue to build on. And the four I mentioned will be strong enhancing products parvo, new market, new opportunity, but some complexity. We got work to do there. Pet vaccine going into our large pet, I think it's the largest pet vaccine U.S. portfolio. And then more OTC Para. As we said, one parasiticide per year as an example, and building out the largest pain portfolio. Today, Elanco has got the largest pain portfolio, and we're adding a pain product that we'll put more color to. So numbers and more details of products will come starting in February.

Okay. And then I think you said in the presentation and the press release that your blockbuster assets are still on track. When do we think about the next kind of wave of blockbusters coming from Elanco? Is that something that we can think about in '23? Or is that more at the tail end of that kind of window of time to get to the $600 million to $700 million?

Yes. Look for us as we get closer to regulatory events from submissions to approvals to highlight. As we've highlighted, we're excited about our late stage, especially pet blockbusters and Para [ and derm ], as you know, as well as even in wellness and vaccines. There are some real opportunities across the gamut as we've highlighted, and we'll tell more as we go forward. What I will highlight is they will be significant contributors as we look to that $600 million to $700 million during the period. Competitive reasons will hold there. But again, nice progress in 2021. I like, Chris, where our pipeline is going. The transition was extremely positive with Aaron taking our microbiome assets out and really allowing Ellen and her leadership team. As you saw in the doughnut chart a concentrated investment on late stage on these. So nice progress and more to come on information on that as we go forward.

Okay. Great. A couple of questions on parasiticides. Just update competitive landscape and just the Trio launch. As you kind of think about what just happened over the last year -- 1.5 year. Any surprises on that front in terms of the impact to Elanco or has it been largely as expected?

Yes. I think the trends are largely to be expected. As we've said, new innovation comes in. It usually takes some of the legacy brands. As we've talked about and highlighted Trifexis is probably a smaller product now than it was 3 years ago. So when you look at impact, I think that's -- so that's a Defend brand that I think has had a little larger impact because of this launch. While in that same category, Advantage has done better and Rumensin has done better. So that's why I'm a strong believer this growth algorithm is working in Elanco and it outperformed in year 1, as you know, in 2021. But I would say, holistically, globally, international, we are very competitive with Credelio Plus against any product that's out there today, and we've got omnichannel and retail. So internationally very strong. In the U.S., again, we're very strong with Seresto, Advantage and our moves on the retail side. We also are expanding. We expect this to be a very good year for Seresto as we're investing, we're putting it in more channels, and we're globalizing that brand. So our expectation is to be a very good year for Seresto. We're putting Seresto in the vet clinics to a buy sell for the first time. And then on the same side, we are -- Credelio and Interceptor Plus today, offers the best 2-product solution. And for full coverage, you need a 2-product solution with any product. And we believe that tapeworm coverage as an example, is critical and Interceptors Plus is a lead product for that solution. So we're competitive, new innovation, no question, creating dynamics in the marketplace, pushes and pulls. That's one we got to watch going forward that will impact. We'll stay competitive. We won't grow share in every category. But holistically, we're well positioned.

Great. And then maybe just one more on the parasiticides side front. As we think about a U.S. triple, I'm guessing there's not a lot you can say competitively on that front. But as I think about kind of the second, third, fourth players coming to market, if those companies are all coming in a relatively short window of time, does it matter what order you are there? Or is it more just over time needing to have a triple and the -- whether your second, third or fourth doesn't matter quite as much? Just any perspective you might have.

Well, I think no question, our isoxazoline is an example today, Credelio is the second fastest-growing class globally. I think, Chris and was a third or fourth to the market, depending on which category or market. So I think what's important is you need omnichannel, you need closest to the vet clinics. You need constant innovation. We're bringing an OTC para. You need constant innovation back what I mentioned, and you need to have that global reach and scale. I think that's the most important. And then absolutely. I mean innovation, I want to be very clear to everybody out there driving our late-stage pipeline and bringing across the board, pet blockbusters is important. Derm for us, we're not in that market of any significance that will also be a key driver as well. And I like where our pipelines progress to and the impact it's going to have on us over the next 3 to 4 years, starting in 2022.

Great. Just 1 more on the pet side. Advantage has performed really nicely as we've -- post the acquisition. I guess was there any COVID kind of angle for that performance? Or is this more just the way you're promoting the brand, the opportunities you're seeing out there? And I guess the part of the question is how sustainable is the performance we're seeing from that franchise?

Well, first of all, in our diligence, and there was a lot of critique early on before Bayer was purchased, and we saw in the diligence, the significance of how well known this brand is. I mean it's brand awareness is one of the highest in all of animal health and the global opportunity and the erosion was a lot in the vet clinic. So we do see it as a Defend brand. We don't see this as a major growth driver with the SKUs as they are. But I will say, yes, we saw a COVID pop and then we've seen our initiatives, our dedicated investment that maybe Bayer corporate wouldn't have done across manufacturing across markets like China that's done really well and look for us to use that brand as we bring products to the market as well as life cycle management. So again, it belongs in the Defend category for what we see over the medium term with the current SKUs. But I think it does show that a dedicated focus on this brand and brand awareness matters in animal health.

Okay. Great. On the farm animal side, can you just elaborate on cattle on the outlook for that market, both U.S. and ex U.S.? It seems like there's maybe very different dynamics, depending where you look. So just any more color you can provide on how to think about that?

Yes, I'll speak because our heavy laser focus right now is on beef more than dairy. I think you're going to see a really good couple of year run, as you know, with cattle on feed continuing to grow I think behind that is exports. I had to point out 1 thing. As I think about confined beef anywhere from Australia to even parts of Brazil to mostly here in the U.S. and Canada, it's a lot about the backdrop of, as I mentioned, ASF kind of opened up Asian diets to beef and exports have been significant, and they're quite premium for our customers. So I do see, though, and we see as we talk to people and study the markets is there will be some retracting from the drought, less mother cows, you're going to see cattle on feed come down some, but you're going to see demand and prices, I think, holds. So it should be a valuable market, might be a little smaller on cattle numbers, but it will be very value-based driven. So -- and we're excited about what is our Bayer portfolio has been added there. Our new addition to Experior and Increxxa, Beef was a significant contributor to growth in '21, and we see it as a key growth driver, especially with Experior in '22.

Great. And maybe just in the last minute here or so. I know you touched on some of these in the presentations, but just pushes and pulls we should be keeping in mind as we think about 2022, what are the things you highlight there?

Very high level. I go back to the growth algorithm, what's critical, right? I mean because I think the EBITDA, there are controllables, we're executing they're done. So I think focus brands, innovation brands, both from last year and this year, absolutely critical poultry globally. We see a backdrop that's a little more positive going into poultry. We're leaders in poultry. OTC, I think overall, China, Latin America and price. They're the pushes. That's what's going to drive the growth. It drives that and all the changes we've made, the double-digit EBITDA that we talked about. I think the pulls, Chris, would be U.S. parasiticide competition in that market. I think farm animals, certain generic markets, I wouldn't say that as broad-based as it used to be, but there's some targeted markets. FX will be down. And then the CMO business that I mentioned that won't be in '22 that was in '21. So those are the pushes and pulls, but durable growth from our durable global portfolio going into '22 and double-digit EBITDA and EPS growth going into '22 and more detail in our February earnings.

Great. Well, it's probably out of time here, Jeff, appreciate all the comments today, and thanks for the presentation.

Thank you, Chris.