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

Ladies and gentlemen, the program is about to begin. A reminder [Operator Instructions] At this time, it is my pleasure to turn the program over to your host, Michael Ryskin. Please go ahead.

Great. Thanks for joining us. My name is Mike Ryskin. I'm on the Bank of America Life Science Tools and Diagnostics and Animal Health team. And I'm pleased to host at our next session, Todd Young from Elanco. Todd, thanks so much for being here.

Thanks, Michael. Appreciate the opportunity, and I appreciate you hosting that we'll hold some apologies that I couldn't be there in person.

Well, it's virtual no matter what, so.

Is it? I didn't realize that. I thought I was just blowing you off. I'm sorry.

I mean it's definitely special in our hearts, but now it's virtual for everybody. So it makes it easier. You can be wherever you want for this, we're still bring it to you. it's going to be a similar format to our other sessions and be fireside Q&A. If you've got questions, sending via the portal or via Boomer chat or e-mail and we'll incorporate them.

I guess just to start things off, Todd, I just want to ask some news today over the wires in terms of an activist investor and you guys just put out your own press release about an hour ago in terms of your response. Anything any notable you want to call out there? Just sort of how would you address that situation?

Sure, Michael. Again, I'd refer everyone to the press release we put out at Elanco, we're focused on delivering on the key elements from our IPP strategy that we've talked about. It's innovation, it's growth, it's cash. That's the focus. That's where the team is putting all their effort. We're excited for 2024. We're excited to bring our next big 3 through the FDA approval process and launch Zenrelia, Credelio, Quattro and Bovaer and we'll continue to manage our expenses effectively, while investing behind the best opportunities we have to drive value for shareholders going forward.

Okay. That's a fair answer. I mean, I guess maybe somewhere along those lines, let me give you sort of our standard introductory question is you reported your earnings results just I guess it was 3 days ago, it feels like a lifetime ago. When you reported 4Q results 3 days ago, you provided an initial 2024 outlook. Just any key points you want to highlight sort of what you think are the main takeaways we should be focusing on?

2023 ended very positively for us on the top line, very pleased with 5% constant currency growth with real strength in our farm animal business as well as continued strength in the pet retail side. from an EBITDA and EPS standpoint, unfortunately, we had a few one-off items, primarily the 54% evaluation in Argentina. That pushed us lower in our guidance range. But again, overall, we feel good about how the team finished with respect to both the innovation that we're investing in as well as where we are from our portfolio and top line perspective and are excited for what we're going to bring to the table in 2024.

Okay. And then in terms of the guide for 2024, as you said, calling for 1% to 3% constant currency sales growth guide, but that's excluding the contribution for our fiscal year '24 launches. It's consistent with the framework you laid out at the end of 3Q, I think you said -- you just said we will see growth at new launches and then kind of quantify it a little bit more. Let's talk about price, 3% and then 2% to 3% from existing [indiscernible] So new '24 launches. Any particular areas where you're seeing the biggest price contribution? Sort of what's leading to deliver that 3% price after solid price gains in the last couple of years as well?

The team has really taken the need to be, I guess, a little more aggressive than the historical norm on price. Part of the reason it's a little slower in 2024 versus 2023 was we've taken a second half price increase in 2022 that annualized in and helped the 2023 price. So we continue to look to price the value to our portfolio. The innovation numbers and the price numbers aren't entirely mutually exclusive because those products that have been on the market, we also take price on those. And just so that we're clear on how the math works. But overall, we've continued to take price in the pet retail market. Though I will note that we've taken a different approach on Seresto this year with a lower average market price in general. So if you go to the Walmarts, the Amazons, Petco, PetSmart, you'll see kind of just under $60 for a Seresto collar versus historically, they've been at $67, $68 for an MSRP and then there'll be lots of promotions and different discounts around it. So that will be something that's impactful on price. All the elasticity research we have done would suggest we're going to get a better overall result by having this sub-$60 price every day than how it worked previously with the promotions. As we look across the international markets, we certainly -- every market is different, but yet we've got real competitive strengths especially on the farm animal side, and we've been taking more price in those markets as a result of those complete portfolios. So overall, places where it's the most difficult to take price is where the competitive innovation or generic launches happen, and that's certainly something that we've been managing through the last few years, and we've talked about that competition in the vet clinic. But overall, we feel good about the price guidance we've given and the overarching price for value ways our team executes against.

Okay. And then just on that point on Seresto, I want to make sure I understood it correctly. So is that -- in terms of net price, is it more or less the same net price? Or is there a decrease in the price as well, just the magnitude of this kind of things of that.

Yes. I mean at the end of the day, a lot of the gross to net investments would have come off against the sales and the like. So overall, we expect it to be pretty similar from a net pricing standpoint.

And I'm just curious...

Yes, we -- I think some of it -- some may or may not recall, last year with our ERP integration, we had net pricing, suspended for a big chunk of the first quarter. And so I don't want anyone to get overly excited about different price dynamics in quarter-to-quarter because there's a lot of different things that play in there, especially on the U.S. pet side because of the NAP pricing.

Okay. Okay. All right. Fair enough. That's a good distinction. Maybe let's pivot to what I'm pretty sure is going to be the #1 topic of discussion is innovation in new products. 2024 is a major year for your -- expected to be a major year for you. We've been waiting for a lot of this innovation for a long time. You've got Zinrelia, Credelio, Quattro, Bovaer. At this point in the game, sort of how much confidence do you have in that first half approval timing and the launch timing after that because we're essentially in March or 2 months through the year. So you're just getting closer and closer. So what's your thought process where we stand now?

As I think we've tried to represent here for a while, we feel good about a path to first half approval. We've put in packages that we feel the FDA can very much approve and we're having really good dialogue regarding all of the information in those packages with the FDA. It's regular dialogue. This isn't put something in and wait 6 months, it's regular, good interaction to make sure we're tracking and overall we understand the focus from the investor side on the timing and the launches. And I assure you, we have just as much focus internally to do that given how important it is to our total portfolios and the growth we're going to deliver this year. As you know, Michael, based on our guidance of 1% to 3% constant currency, we made the decision not to put the new launches in, but to make sure we assure the market that they will be accretive to EBITDA once launched, clearly be accretive to sales, but there will also be upside to the EBITDA guidance we gave because the sales force investments in the U.S. to drive greater share of voice, that's in the base P&L and a lot of the discretionary investments will happen later in the cycle as we get clinics to adopt the products. So overall, we feel very good on the base. We wanted to give that assurance with understanding how the business will continue to progress and then the upside that comes from these launches, we don't want anyone to think it's a function of not having confidence in those launches coming, but with a lot of engagement over the last year with investors. We have the clear feedback they'd rather us guide this way with upside to the numbers versus wondering what the relative risk was from a timing standpoint on the FDA.

Okay. Fair enough. And then in terms of -- you've also talked about a 2- to 4-month window between approval and launch, just given some of the final decisions about label and the initial packaging and manufacturing, things like that. How much of a lever is that to squeeze that to get that closer to 2 months versus 4 months? What are the factors that could play out that will be to one outcome versus the other just because it would have...

Okay. You froze there for a second, Michael. Hopefully, you can hear me.

Yes, I can. Sorry.

So again, we're obviously doing our best to tighten that cycle as much as possible. I said back in November just in trying to shape expectation for '24 that revenue contribution of these products would be primarily second half, that continues to be our position, and we'll do our best to move things as long as quickly as we can, but also need to do it well and making sure we get the most bang for our buck as we launch the products to get them off and uptake as good as we can do. So a lot of focus by the team on how to do the labeling on the balance sheet and then in Q4 when we had products in inventory. So we do have that. We've got positive cash inflow from inventory in Q4 despite building inventory for these new launches.

Okay. And then the other angle that you discussed on the 4Q call was sort of the ability to not just push the U.S. approvals, but some of the international approvals as well to sort of accelerate that opportunity. Anything in particular that you're doing that can drive upside there for these products?

Yes. I think we've -- everyone understand, we don't expect these products to have sales outside the U.S. in 2024. We're continuing to engage and get Zenrelia has been submitted in 9 other markets, and we'd love to have that as early in '25 as possible, but again, we'll give more clarity on '25 later on, certainly, Credelio had a good year in 2023. It continues to grow, and it has a lot of good coverage. So the bigger focus is Zinrelia going globally and then on Bovaer, we just have U.S. rights. So clearly, our goal there is to drive uptake in U.S. dairy.

Okay. All right. And I mean the other product that -- where there's a lot of focus is pavovirus. Actually, you already had some initial sales of that in 4Q that you recognized and talked a number of times in the past about sort of what the ramp there would look like and how it might be a slightly lower -- slower ramp, but you're still getting good feedback on that. So based on the early feedback you've got, any updates you want to say about the long-term opportunity there and how meaningful part of it could be both as a stand-alone product and sort of like cementing the entire portfolio?

Yes. We're thrilled with how parvovirus has gone. As we noted on the call, we've expanded the capacity of production. So we don't have a limitation on capacity like we did in 2023. Bobby and his team are really driving it. It was a big focal point at both VMX in Orlando as well as Western Vegas last week. We've gotten good uptake from general practitioner clinics. It hasn't just been in specialty or shelters. It's been a lot of GP clinics. And then you really get great feedback from use. And we've seen a lot of use in reordering rates being very high once that have used it because it's such a great product from an application standpoint to help puppies, we've had. So investor feedback, who's related to that who was showing videos to how quickly the response was for a puppy that have been infected with parvo, then they're bouncing around the next day after using the parvovirus therapy. So overall, we've said about 330,000 puppies a year in the U.S. So the addressable market is certainly there. We think as we globalize this product, it does have to be a $100 million plus product in total globally. And our goal here is to penetrate and get them inside the vet office, inside the freezer so that any puppy that comes in can be treated well quickly and save that puppy's life and also reduce the burden on that client. I mean I think the pallet of care, as a general matter, works, but you have to isolate the dog. You have to, at some level, isolate the person taking care of the dog because it can just impact so many dogs quickly inside of that clinic. It's 3 to 5 days. It's very costly. All of those things at the time when that practices are under pressure from a time and resource standpoint, and part of it just makes it easier and work so well that again, we wanted to move to standard of care and the team is working hard to do that. And as you mentioned on how does it help? It certainly opens up doors, right? We're not in every vet clinic with our products because it's a competitive marketplace. But because parvo is unique, it does open up doors. And again, the media coverage on saving puppy's lives has been very positive as well.

Okay. I kind of want to touch on that a little bit as well. There's a lot of focus on quantifying part specifically on quantifying Credelio, Quattro specifically and Zinrelia. But then there is the entire sort of like portfolio effect, and there is the argument that a lot of that clinics really prefer to only go with one or at most 2 vendors and really who has the broadest portfolio. So you take parvo, you take Zinrelia, you take Quattro, you go back a year versus you go forward a year, your portfolio is very different to the companion animal. In terms of the breadth of the portfolio, how innovative it is. Potentially, how differentiated it is. So can you talk about the uplift opportunity there for the rest of the business for -- maybe for older products that you normally wouldn't have seen growth maybe to get into the clinic. Are those conversations with the vets ongoing now? Are they waiting to see products approved just sort of like.

No. I think I guess, the benefit of being a public company is the vets have a good understanding of what you're talking about and their investors as well. So you have a lot of understanding that we're bringing these products. There's a lot of discussions. As you know, our reps can't promote something that hasn't been approved yet. So it really happens through the general knowledge and awareness. The corporate clinics, especially are very well aware of what's coming in the portfolios you have. As we've talked, right, we have -- in the U.S., we have vaccines. We have the therapeutics like Nocita, like Bexacat, like Zorbium, Galliprant. And then we have the parasiticide portfolio with Trifexis, Credelio, Interceptor Plus, Credelio cat. So we've got 3 of the 4 big categories. What we have in that is derm. And either is Merck or BI. And so when you're giving kind of volume discounts to vet clinics to your very point, they want to be efficient in how they operate. It will be very helpful to have the dermatology side with Zinrelia and in 2025, our IL-31 monoclonal antibody. So that then provides an alternative to Zoetis, but also puts us in a differentiated portfolio compared to Merck and BI from a competitive set. So overall, we're excited by our innovation for what it can do to treat puppies and dogs, but also what it does for that complete portfolio. We've really seen it on the Farm Animal side and then in growing in Q4. It's had generic competition now for a number of years. But from a feedlot operator standpoint, as Experior has been ramping, we can offer a complete portfolio that makes it very hard for the generic competition. As a result, it's bringing back from medicine to growth. For us, that's kind of prove that the portfolio side of our IPP strategy is a key element to drive success going forward.

Okay. That's really helpful. Wrapping absolutely new innovation focus. I really want to touch on differentiation. That's a topic you've been very [indiscernible] about for at least 6 months now. We've had a really wide range of feedback from vets. And obviously, they don't know what your differentiation is. But we've had varying feedback on whether they're even looking for it, whether it's even necessary or whether it's possible. So sort of what's been your experience with that? Is there an advantage to it from a market access perspective, is there an advantage to it from a branding and conversation perspective, right? So where is the value from differentiation coming if the vets are saying it may not even be necessary?

Yes. I think we've been focused groups with small groups of that under NDA. We've gotten good feedback on that. And again, that gives us confidence that the differentiation we're talking about has value. Clearly, we haven't gotten approved yet. We've not launched yet to see how it does respond practically in the marketplace. But overall, with Zinrelia, we feel like the market research we've done is certainly helped on that front, Michael. Credelio Quattro is going to have the broadest coverage. Tapeworms are a real element as the diagnostic companies have been ramping up their diagnostics and showing more prevalence of tapeworm. We think why would you not want the broadest coverage to protect your dog and with the single pill. So we do think the differentiation and the complete portfolio will be difference makers for us and we're happy to and excited to prove that once we get launched.

Okay. And a couple of questions from investors come in. I want to throw in here before I move on. One is on the point of communication going forward in terms of approval with these products. I mean the FDA usually puts out a press release you can find the filings on their website once there is approval. But is there a plan to provide updates intra-quarter from you? Or is it really just going to be earnings calls for the next 4, 6 months.

From a dollar and cents perspective, it will be on earnings calls. From the standpoint of approvals, I think we're going to be excited to share that news publicly. And as you said, the FDA is going to share it, like, we don't want you guys to have all the search and the FDA website to find things. We'll try to make sure, we make it ...

We've all got the word set up. So people will know.

Due to technology.

Okay. All right. No, that's helpful. And another question coming in I want to throw in. This is more on the livestock side, on the Bovaer and Experior side. So how has the Athian been progressing, have CPG companies and farmers been happy with participating in the inset market. Are there any competitors to Athian in North America? And how are the economics trending?

Yes. So it's a little early given the Bovaer will be the biggest driver. I mean we mentioned we have proven the protocol. And that -- but it's been less of an uptake there, just given it's just not the same focus area for the consumer goods. Again, just recently saw a panel with the Nestle leader on it for North America on the ESG. They're all about getting inset value. When you have the offset value, it doesn't really give you that same ability to think about it through the entire supply chain. And so the inset market is very exciting to them for that very reason of it gets towards their goals to really improve the environmental impact of all the different milk products they use and the commitments they've made to get those reductions down. They know they need to do it on the arm. And again, we're going to provide the best product to do that. And Nestle is buying milk from cows that have used Bovaer in Europe and Brazil and other markets. So they're very familiar and excited by the technology and the U.S. dairies the most efficient dairy operations in the world, and that will come with it. So we're excited. There are other platforms with carbon credits besides Athian. The Athian is the one that's been set up and is actively working to certify protocols and provide all the technology from an end to end for the data to make sure it's all good and validated. And so again, it isn't the only one that we expect it will be -- the primary one is the big item for the insight credits is Nestle needs to be able to track it down to the milk sheds they're buying milk from in order to get those credits to be very much viewed as part of their supply chain. And so again, that's part of all the technology and the work that's been done to set it up. So very excited. It will be great to get this over the finish line in the U.S. given it's been approved in so many markets around the world. And it's a permanent reduction. It stops methane from ever being produced versus trying to sequester it after the fact this just stops the dairy cow from producing as much methane that 30% reduction in one cow can likely do about 1 metric ton of carbon reduction in the year.

Okay. All right. That's really helpful. I've got a couple more coming real quick before we move on, going back to Zinrelia. So -- and it's very similar questions. So if Zinrelia is differentiated and the team have indicated they will price comparable to expectations on its differentiation, does that imply the Zinrelia price at a premium to the products on the market?

We haven't given our pricing strategy other than to say we're going to price for value as the questioner asked, we're excited to get the product on and start helping dogs that need relief from the pruritus.

Okay. All right. So we'll stay tuned for that. Again, on the new products, I want to ask a little bit clarifying question. You talked on Monday of the fact that it's going to be accretive to revenues, but it's also going to be EBITDA additive once they come online in the second half. And I think a lot of that is tied to as we talked about, you already have a lot of the costs invested in terms of the sales force and things like that, right? But you're also going to have relatively modest revenue contributions in the second half of the year. And I'm not going to ask you to quantify it, but just thinking that products are just being launched, right? Normally, you see margins expand meaningfully as volumes ramp just from volume leverage. So is that reasonable to assume here in this case as well is that as you go from $10 million $30 million to $100 million to $200 million for some of these products, you have some nice margin leverage there as well.

It's certainly a fair assumption, Michael. I think both Zinrelia and Credelio Quattro are pretty high gross margin to begin with, even at the lower volumes, just given the nature of their production. In the case of Credelio Quattro, right, it's already something that we're essentially producing in separate parts today with volumes of API. So it's already kind of part and parcel of things we've done to improve Credelio gross margins over time by reducing the cost of the API through better chemistry and the like. So again, it will get better over time. Don't get me wrong, but it's better than the corporate average at the start. Similarly Zinrelia, the efficiency, the JAK production makes that above our corporate gross margins from the start. Bovaer is different because we're bringing a couple of years earlier than expected given the regulatory framework and the process that is being and to make it. It will be lower than the corporate gross margin average, but it's very efficient because of just our connection into rumensin at the dairies already and the fact that it will be going to dairies that are using rumensin getting back to our portfolio and the overall demand for the product. So again, yes, over time, with scale, margins will improve, but that's sort of the expected profile at the start.

Okay. Okay. And then pivoting a little bit to some of the capital deployment and the rest of the P&L. The other big announcement for you guys in January, I believe it was January, February was the Aqua sale [indiscernible] So that was a little bit of a surprising move, but a lot of moving pieces to that. So could you walk us through that decision, the pros and cons, obviously, and why you think it was the right time to pull the trigger on that.

Sure. So as we looked at our overall strategic plan and started last spring, when we look across our portfolio, the biggest opportunities for us and where the biggest investments are in our pipeline are really in pet health and livestock sustainability as well as poultry where we've got really good installed base globally. There's a lot of synergy within the manufacturing, API, sales force, country management between pigs, poultry, cattle, dairy, sheep, as well as on the pet side, where dogs and cats together. Those are the big notional markets. Aqua then is the unique one. The salmon business is very concentrated for us. Almost all the revenue for salmon is in either Chile or Norway. And then on the shrimp side, it was very much part of China and Southeast Asia markets, primarily Vietnam. So the relative connection in and the synergistic value of these portfolios, much less on the aqua side, but very good business. And we love our aqua business and it was not an easy decision to say, okay, would we sell it? And then it became, well, at a price, yes, we'll be willing to sell it. So we ran a process and used your banking colleagues on the other side of that, well, you guys can't talk about it. It help us execute on that process.

No comment.

Yes, exactly. And so we're very pleased. Merck is, obviously, a very good company in the space, understands it. It has synergies in the market already there. Obviously a vaccine leader. And so they got to a price point where we said we'll give up this asset because, again, just from a notional standpoint, for us, our aqua business last year had just under $200 million in revenue on the $4.4 billion total base. So it's just -- notionally, it's just not going to grow at the same level as what we can see happen from these other opportunities we have in our pipeline. So we went with greater focus allocate capital to the places that are going to drive the biggest value over the next 5, 10 years for us. And then certainly reducing our debt load and getting our leverage down faster was something that we know was appealing to shareholders and investors and we've heard that. And so you combine all of that together and made the choice to pull the trigger.

Okay. And the net impact is going to be, again, your current guide -- this is if the deal didn't happen, your current guidance still has aqua in it and still has the higher debt in it. But what you said at the time of the announcement was you can have an $0.11 benefit from interest expense but offset by a $0.14 reduction in the operating income, correct?

Yes. No, and that's on an annualized basis. So just based on the '23 numbers again. So -- but yes, that's the part of the EPS dilution because of the higher interest rate environment is less impactful than the EBITDA reduction that comes with a good business that got the valuation it did.

Yes, it allows you to get closer to that 4.0 leverage and then eventually go back under that, what you think is sort of the sweet point you're shooting for?

No. As you saw on the CapEx increase we have in 2024, the success and our excitement in our portfolio and the additional monoclonal antibodies that will be coming out, does require us to have higher CapEx investment, because we need to build that in order to sustain the pipeline that's coming. And so all of those things factor into how we look at where to invest capital in this case, getting the debt down and then also having flexibility on investing behind our pipeline from a production standpoint is a positive as well.

Okay. And then the other bit of news is somewhat related to that or similar -- along a similar vein, was the restructuring you announced again, earlier this week, some cost savings this year, some cost savings longer term. Walk us through that? Why is that the right move now? And you've taken a number of cost actions over the last couple of years, you keep finding more. So sort of what's the thought process on moves like that going forward?

Yes. So we continue to always evaluate our returns on our investments and where we can invest and get the greatest value moving forward. I mean because you're aware, Michael, and certainly all the investors are aware we're very excited about the pet health and the opportunities that are in front of us. But it does require us to have a greater investment. The sales force investment at $20 million, investing more behind [indiscernible] and that opportunity. And then I think everyone is generally aware of the inflation, and we've got great people that we need to pay. And with that, we've got raises and comp increases that come with it. So we didn't want to have -- I think we've guided 2% to 4% OpEx growth in 2024. The restructuring allows it to be at 2% to 4% versus being at 4% to 6%. And so this is not that we like to get rid of people, but we also understand the market changes. And so as we look at opportunities to be more B2B on swine in Europe and to look differently at the Farm Animal business as it evolves, it became all right. We can cover and not impact our revenue growth in those markets by having 2 to 3 less sales reps. The savings on that then can be invested behind pet health. And at some level, in the case of those international moves, it's really taking down some fixed people cost to get discretionary dollars to invest behind our brands. Now the downside. From a timing standpoint is with European time lines. Most of those savings will be in the second half of the year. The Northern Hemisphere parasiticide market, especially on retail makes us make these investments now. So that gets into some of the disconnect on the guidance pattern from Q1 through Q4. It's just we'll get the savings. They just come in the second half of the year. We're making a lot of the investments here in the first half of the year. But -- and then we finished our ERP implementation, April of last year or a few dollars still being spent to finalize at all, but we've got one invoice going to customers. We've got better efficiencies. And so we're taking the opportunity to continue to look at higher cost western locations and opportunities to move into shared service centers and Poland and Bengaluru and Kuala Lumpur and Guadalajara. So these are things we're always looking at because of the nature of the people and severance costs, there's a cash cost to do it, but there is a return that comes with it as we don't have those jobs moving forward.

Okay. All right. Yes. I think that's an important point there is that these savings are being reinvested just reinvested into different areas. Growth areas companion animal...

And again, we feel like we would have made those investments anyway because of the importance of driving those businesses. And so while, yes, they're being reinvested. It's a reinvestment. We would have done it anyway because we think they'll drive good capital returns from those investments across the pet health franchise. And so this is a net savings relative to -- what I wouldn't want to have done is not eliminate certain places where we don't get a right return and then not invest in order to keep our SG&A at 2% to 4%. So.

Okay. All right. A fair point. I want to ask a little bit of a big picture question for you, if I may. Elanco has been sort of transforming itself more or less since the IPO. There was the initial post-IPO period in separation from Eli Lilly, then there was the Bayer transaction. You talked about the ERP and then '23, '24, obviously, a lot of focus on the new products coming to market. So it's been this multiyear transformation which has made a little bit more difficult to sort of go in what the underlying profile of the company looks like, right? Because at any given year, it's meaningfully different in the last couple of years. So where I was kind of going with that and the question on the restructuring and the cost savings there is that if we look ahead to -- exiting 2024 and exiting 2025, let's say, these products are approved and are on the market. You've divested aqua, is there a point a year or 2 from now where Elanco is a little bit more of a steady business? Or are there additional major efforts we should look for in the future? Or is this sort of like the last little push and where in the last stages of this multiyear process.

We're going to react to the macro environment that's in front of us. And if we need to make changes in that environment for farming in Western Europe or different headwinds in certain markets, volatility and emerging markets where you can't trust the stability of the currencies, we're always going to have the right to do that. I think fundamentally, the innovation from our organic work that Ellen and her team are doing is going to be what drives us as we launch those well across Ramiro, Jose and Bobby's works. And so we will continue to work within that context of the value creation here is very much going to come from our pipeline, our ability to continue to manage expenses efficiently. And capital allocated to the places we think the biggest growth is going to come from. So that certainly is the plan, and the team is entirely behind it and feeling very good about what we're set up to do over the next few years.

All right. Well said. Yes, I think where I was going with that, and we've got a couple of questions on this coming over time is you did have long-term targets out there previously, you obviously spend them a couple of years ago because of a number of different factors, both internal and external. So there was a little bit of a question of once we're through these products and we're through the near-term market uncertainty, when would those come back and how would those come back. But again, a lot of it is probably tied to underlying market and things outside of control.

Yes. I mean, again, we're going to keep delivering on what we have in front of us. I think we've been very transparent on a lot of what we have and what we expect right now as we go towards that $600 million to $700 million of innovation sales by 2025, $350 million to $400 million this year plus the big 3 coming on and then continuing to scale those up again, we've seen it with the uptake in Experior, a great year in 2023, continues to be a product that's unmatched with respect to impacting the feedlot and continuing with the cattle herds and so, that then bringing back rumensin to grow. Those are all things that the team is looking to execute on with our strategy. And again, we'll continue to do it. We'll do our best to be as simple and easy to understand as we can. And a credit to Cadia and Scot, the quality of the slides they do to make it hopefully is easy for everyone to follow the moving parts because -- we know with the ERP implementation last year and what Aqua will mean from an exit, it's not as clean as it might be for some others.

I guess that's a great way to end it. We're out of time. Thanks so much, Todd. It was a pleasure chatting with you and helpful as well.

Great, Michael. Thank you, and thanks BofA for hosting us.