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

Good afternoon, everyone. My name is Erin Wright, health care services analyst at Morgan Stanley. Happy to have everyone with us today and happy to have Elanco, and we'll help with us to. With them we have Jeff Simmons, President and CEO; as well as Todd Young, EVP and CFO. Thanks so much for coming.

Yes. Great. Good to be here.

Yes. First, some important disclosures. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative. And with that, I will hand it over to Jeff for some opening comments.

Great. Yes. We look forward to the dialogue. They had some great meetings. Thank you, Morgan Stanley and Erin, for all you do in Animal Health. So yes, just maybe at a high level, Elanco, we've been pretty consistent here over the last year and really on through even 2025, that there's 3 key drivers to our value, both internally, it's our focus points, and externally even to the investors. So it's all about growth, innovation, cash. We've had 4 consistent quarters after finishing the second quarter with growth. We've got a stabilizing base business. We've raised our guidance up to 3% to 4%, constant currency growth for this year coming up. So we're seeing, again, stabilizing base. We're seeing some nice growth from U.S. Farm Animal in our overall Farm Animal business. International pet is showing some nice growth here in the first half of the year. And I think innovation, all the innovation sales, we've raised our innovation guidance for the year, but innovation going into our portfolios has helped us stabilize our core. So a growing company, and we continue to see that being essential that with a stabilizing pace with all the innovation we have coming, that will be a positive. So on the innovation side, First of all, our existing innovation when we launched [ Aranozis ], Elanco when we came out post-Bayer,we said, hey, we've got a $600 million to $700 million of innovation by the end of 2025, and we've been charging down that path since anything launched early 2021. We just raised our guidance to $400 million to $450 million of innovation this year, on the road to $600 million to $700 million next year. And of that $400 million to $450 million, we've raised that would be $150 million jump from 2023. And we would see things like Experior and cattle that's starting to approach blockbuster status. Adtab, which is a parasiticide -- oral parasiticide in retail in Europe; our parvovirus, our first monoclonal antibody; and the Credelio family outside the U.S., especially in cats, are really driving that growth. So -- and then, hey, we've got 3 blockbusters over the next 3 quarters. We're launching Bovaer now; Zenrelia, our atopic dermatitis JAK product next quarter; and then we look for Credelio Quattro, the broad spectrum, and we'll get into all this in the first quarter of next year; and then our IL-31 next year. So 6 blockbusters when you look at what we have coming to the market and what we have now. And then on cash, Todd and team has done an amazing job of just the stand-ups behind us. The systems are behind us. So we put a lot of cash in the last couple of years into the standing up the separation and bringing Bayer in, that's now behind us. So free cash flow conversion went up significantly. We sold our aqua business to Merck. And so we paid down a little over 20% of our debt here in the first half of the year, and really moving our leverage target to headed to high, mid-4s this year, low 4s, high 3x levered at the end of next year. So, growth, innovation cash, a growing business, stabilizing base, historic innovation that we've got to launch well and a stronger balance sheet that really gives us a lot more ability to move forward and make the right investments. So that's where we are as a company.

Great. And another kind of bigger picture question, just how you think about the $600 million to $700 million of innovation? I mean that's a growth contribution, but at the same time, there's other drivers and underlying drivers across your business. I guess, does that get you to more consistent top line growth closer to industry average? Is it sort of low to mid-single-digit growth as we kind of more consistently exit sort of -- or see traction for some of these new products? Or is it higher than that?

Yes. No, we aren't giving guidance, but I do believe that it's going to help growth rates, it's going to help more stability, more consistent growth. You can see the impact of this, no question. It's also going to be everything with probably the exception of Bovaer initially is going to be accretive to our to our margins. So those are my thoughts. I don't know, Todd, anything you would add?

No, I agree. We've seen the benefits that innovation brings to the base portfolio. Certainly, Rumensin is going great. I mean it's back to almost 90% of where it was before generic entry because of the power of Experior. We're excited to expand the Experior label to be able to address hoppers at the end of this year, which expands that market by 30% to 40% of feedlot cattle. All of those things are going to help us continue to have positive top line growth, that with our fixed infrastructure costs being behind us, we'll be able to lead to better profitability growth.

Yes. Okay. So let's start with Zenrelia, since that's the topic of late. Can you provide an update on the exact timing around the admin review here where as we head into the end of the month? And then when we -- when we'll also see the head-to-head study data for the product?

Yes. So we are in the 60-day administrative review for Zenrelia. We expect an approval by the end of this month. We don't have an exact timing of that. We do plan to have an earnings like call shortly after the approval, and we'll be launching the products simultaneously. So we have product supply ready to go. So all this will be moving. We'll also expect to be launching in Brazil, kind of in simultaneous time. During that call, we have an expectation of really sharing the details, sharing the science, sharing the label, sharing the head-to-head study that actually was part of the European submission. So against the market incumbent. We've been pretty open to share that we've got an efficacy differentiation, better performance, and we will show that. On the call, we'll have both Bobby Modi that leads U.S. Pet Health talking about the launch plans in detail as well as we'll have the appropriate scientists on there that we'll actually be able to articulate what we're going to be doing from the tech to tech launch plan. So we will have all of that shortly right after and we'll have that with sell-side analysts and be able to answer questions as well.

Okay. Great. We'll make sure to be on that. But Zenrelia's U.S. label obviously includes the box warning on safety. Can you provide, I guess, an update on how you're thinking that this impacts adoption in the U.S. versus kind of maybe your prior expectations? And that I think you've previously said that it limits treatment days by about 25%. Is that still how you're thinking about it? How did you get to the 25% number?

Yes, a lot there. So I think I come back and just anchor to a few things. First is we have a product here that as you look at the market today, we're excited about the derm market. The derm market is growing. It is growing in the U.S. It's growing globally. There's still millions of dogs that we believe are not. They're itching dogs that are actually not being administered by any of the current treatments today. And I think we and all the industry leaders believe this market is headed to be continuing to be -- it's the second biggest market, but one of the fastest-growing markets, the #1 reason people come to the vet clinic. So it's the U.S. and international. So -- and only innovation is going to make that with more noise and more innovation, it's going to make the market grow. So that's assumption one. Assumption two is 70% of veterinarians today are saying consistently in the market research, I want a second option on my shelf. And so that we see is very important. And that leads really to saying, hey, the most important thing is we want better efficacy, and we want better value. So we believe we've got better efficacy, and we're going to be able to provide better value and value. Todd can maybe articulate a little bit more how we're looking at that in detail. So then it gets to the safety piece, which as we've said, we've adjusted our launch plans, given the box label to do a tech to tech kind of on the ground with the veterinarians initially. And what that's going to entail is what vets want. Vets want KOL. They want to be able to have key opinion leaders talking to them. They want to have data and publish data, supporting what actually came and drove that label and how they can look at it and to be able to have vet to vet exchange. So we're going to be able to allow one-on-one vet exchange in a very quick, easy way. That's going to be our approach. The 25% is all around the vaccine response study and some assumptions made. And I really kind of hold until we get to that call, where we're going to be able to articulate specifically protocol use. So we have protocols that this product is going to be able to use, adherence with the label. Remember, when an FDA approves a product that is deemed safe and efficacious, when used with the label, we have a safe product that will come to the marketplace, and we'll have protocols that will be able to be used in chronic cases, acute cases and seasonal cases. So all itching dogs qualify for this product, and we'll have protocols that we'll be able to do that. So that's...

And then you've conducted these surveys, I guess, and you got to that 70% of veterinarians that won a second product on the shelf. But did that ensue the narrative around or assume the assumption around kind of a box warning and what was the feedback when you gave them, I guess, that question as well. I -- you surveyed your customer base...

Yes. Different market research. I mean, it's -- look, we've got to separate those. We've got to address the safety. We know the vet community wants an alternative. That's where the 70% comes from. And we know that they want better efficacy and better value. So we believe we have that. So what does that lead to? We need to address the safety, and we believe we can do that. And we're going to show how we're going to do that and show the data behind that and the strategy behind that upon this earnings call.

And when I think about a second product on the shelf, I also have to think about veterinarian's inventory, what they're holding in terms of the inventory at their clinic and do they want to have 2 different types of products? Do they have to have 2 different types of products to fully service the atopic dermatitis market? Or do they have to have 3 types of products, for instance, like an injectable as well? And so do they have to house both in clinic to fully service the market?

Again, we've seen -- typically, that's carried more than one product. Most of them carry more than one parasiticide, even though the parasiticides generally do the same thing pretty effectively. With respect to the derm, we think they're more than willing to have that additional product, especially given what we think is going to be a more efficacious and easy-to-use product, that will be able to address dogs that are both using Apoquel and Cytopoint. That will be what our goal is, is to get that clinic penetration to get that experience as early as we can as part of the launch because we think once that get that experience, we're going to be really pleased with the results for their patients.

And based on the disclosure to date, it sounds like every dog, this can be used on. Like in terms of like every dog could use this product, but it depends on duration. And if I'm understanding it right, like what is the limitation? Is it 6 months? Is it 9 months? Is it just timing around vaccines? How do we think about that in educating the vet around timing and protocols around the product?

Yes. I think the best way to articulate that will be on our call that will be coming. But I think the most important is we will make this clearly to the label, how the vet can use it and then be able to provide the support to them with both data and key opinion leaders to be able to support their decisions. And given what we have as the profile of the product, we believe we're going to add a lot of value to the marketplace and expand the marketplace in doing so.

And do you think you can use it beyond kind of seasonal chronic?

Absolutely. I mean, again, the chronic dog is not on average 365 days a year. They're on less than that. So we very much view this as applicable to all dogs, over 1 year of age that are vaccinated.

Okay. And so is that holding kind of 2 different products on the shelves? Like how are you then thinking about price and price as a lever? And how should we think about that? And how willing are you to use that as a lever kind of from a competitive standpoint?

We've always said we'll price our products to their value, and we know that the box does change our perspective versus if we didn't have a box. Again, the first goal of getting early experience from vets, from pet owners. And so how we think about price on day 1 versus how we think about it 6 months in, 1 year in, will be different. We'll get into that more on this call. But certainly, we know that there's a goal to have some lower-priced alternatives in the derm market. At the same time, we've got a great product, and so we're not going to change this whole marketplace, either given the quality of the overall product we have.

We believe, as we've said, all market archetypes with good innovation in pet, when you bring a differentiated innovation, we see the market expanding in size. We see that. We'll hit new markets. But there's no question to Todd's point, that vets are going to want to be able to have not only the alternative, but to have the value options as you go forward. So that's -- and I think our data will support our approach. But as I've said, the most important thing we will do out of the gate, we will launch immediately with the product into the marketplace. And with that, we will have -- the incentives will be lined up to get more product into clinics to be able to get them to get it into pets for experience. With that and I think the value and the opportunity comes quite naturally.

Okay. Great. And I hate to belabor Zenrelia just because -- I mean it is an important part of the story. And the oral solid atopic dermatitis currently on the market about -- or nearly half of it goes online. How do you address that? How do you think about leveraging your relationships with the Chewys of the world and how you can kind of penetrate that arena as well?

Absolutely. Todd, you've been driving some of this?

Yes, it gets to -- it starts with the vet. You can't get it online until you get a prescribe from the vet clinic. So our focus really is getting it there in the prescription. We do have a great relationship with the online retailers, both through our [ Rx ] products as well as the OTC, so we fully expect to have an early presence in online channels as part of continuing to get that adoption.

Okay. One other question. How long will it take to get to blockbuster status for Zenrelia?

What we -- as I've said initially, we're going to make sure this is going to be the best launch Elanco's had globally. We're going to do this right. And so we can't give the specifics on that until we get into the marketplace. But we're confident. It's a blockbuster product even in the U.S. We're confident that we've got the right team in place. We've got the right strategy. We've got a product that's differentiated, and we've got the data to support that, and we will invest accordingly. And it all comes back to the first 2 metrics, our clinic penetration and then dog penetration and making sure that we've got the right support behind that. So as quickly as possible, and that will be our intent. We know how important this is. I mean we're entering a second largest pet market with a differentiated asset second to market and then one to follow with our IL-31 that will come in '25.

Okay. I'll skip the other 10 questions I have with Zenrelia and move to IL-31. And we'll stay on atopic dermatitis. An update on the time line for the IL-31 product with the USDA, it's fair to assume that this is a 2025 type of approval launch and or you scaled up from a manufacturing perspective and what has changed in terms of what the USDA is looking for?

Yes, nothing's changed. It's a USDA-approved product. It is a product, an IL-31 short-acting came from Kindred. It's differentiated. We believe at this state. And again, the USDA wanted more dogs, more reps, that's a requirement they had more for the class. We're conducting that and it's tracking for a 2025 approval. I will emphasize there's a lot of activity right now in Animal Health in the map space, in the monoclonal antibody space, and a lot of transactions. We are second to market. We've got our Parvo Monoclonal Antibody on the market today. We spent time even with our Board here in the last couple of weeks out in our manufacturing facility. We've got a CapEx plan that Todd and the team and Grace are working on. We will be ready from a manufacturing standpoint. I'm confident in that. And Ellen is doing a tremendous job with our team. We brought in even some key talent from human pharma and other areas to really drive our organic next-gen monoclonal antibodies that will be in both derm pain and some other areas as well. So we're second to market in mABs and we have no intention to do anything but to sustain some leadership in that space.

Your timing on the long-acting version of your injectable atopic dermatitis...

Yes, we've not given the timing on that and don't intend to at this point in time, but we have a long acting. And behind that, we've got a next gen as well that portfolio that Ellen is working on.

Including pain?

Yes. And derm. I'm answering the derm. So the first one is short-acting. It's differentiated to what's on the market today. We've got a long-acting following that as well as a portfolio of next-gen derm as well.

Okay. Switching gears to Quattro. I guess Quattro will be differentiated in then you previously disclosed in terms of the parasite coverage that you'll have in terms of protection, making it somewhat differentiated on the market, but what's the strategy in terms of taking share? What's the strategy from a price perspective, leveraging distribution? Like how are you thinking about the rollout strategy?

Yes. So just everybody, Credelio Quattro, again, is in administrative review as well, like Zenrelia. So that was expected a fourth quarter approval. So we know the label, we know what's -- it's in that administrative process. So a lot of stuff behind us here. So we're excited about it, and we intend to launch in Q1 of next year. So a couple of things that I think when you look at the strategy. First, the space overall. If you think U.S. parasiticides, you've got a $4 billion market in U.S. parasiticides. And Elanco has got about $300 million at this point in time. $1 billion of the $4 billion are the 2 broad spectrum products that have come to market, about 25% of the market. The last 12 months has been growing about 40%. But we're coming in with a product that is differentiated. One is we have first month protection on heartworm that's differentiated from one of the products. And then we have the broadest coverage against them both with tapeworms. So I think initially as notionally, we've got a smaller amount of product in that space at $300 million. So we expect less cannibalization. And then secondly is, hey, Zenrelia is going to help. We have a portfolio play. We've increased our sales force. We're going to use the share of voice. We're going to use both the vet clinic penetration as well as our digital and DTC capabilities and look forward to a Q1 launch in the biggest, fastest-growing space. And again, I think the Zenrelia at Q4 combined with Quattro Q1 will really put us in a good place.

And the manufacturing ramp there?

Yes, manufacturing ramp will be the same kind of supply chain as we have with Credelio now and [ others ]. But as I've said, post the approval to the actual launch, we will be scaling the actual manufacturing process and our process validation, which is common for active ingredients in one pill. So there'll be some steps that we need to take on that between the time we get the approval and the final launch that will be in Q1. That's the current...

It would be out by VMX?

We'll see, but our intention is to definitely take advantage of that opportunity in that show.

Yes. Thought I would ask. And then on -- you just mentioned the cannibalization. I mean a lot of that has already kind of played out. And so how much of there is left in terms of cannibalization that you would assume? Because there's also -- you can leverage selling a broader portfolio and a comprehensive portfolio in parasiticide. I mean, even your competitors do that today successfully. So how are you going to navigate that with the sales force and with kind of the various channels you play in?

Yes. I mean we agree. And to the extent a lot of Trifexis that's been on the market a long time, it used to be the market leader in oral is being cannibalized, we'd rather cannibalize it ourselves, then they continue to be cannibalized by the other broad spectrums in the marketplace. So we do expect there to continue to be separate therapies right? There's a lot of loyal Trifexis users. It will continue to be a key product. Similarly, Credelio, Interceptor Plus will get used. We don't expect it to be all only the complete combos. So again, that has declined. We've slowed that rate of decline as the notional size has gotten smaller. And then as we launch Credelio Quattro, just like we've done it with Credelio Plus internationally, we've continued to grow our business. And in the U.S. right now, Credelio is still growing, both for dogs and for cats. So that complete portfolio will have value, especially when we add derm to it. Again, we'll be -- they're neck in neck with Zoetis, but ahead of BI and Merck, right? We talk a lot just with Zoetis being the other public company, but we've got 2 big competitors as well where we're going to have a broader portfolio into that clinic.

Yes. And then talking about sort of that broader portfolio to in terms of what's next in parasiticides and a long-acting injectable product being worked on, I think, yourselves as well as a lot of others too, in the industry. But how do you think about the opportunity around that? It is a different type of practice protocol? It's a different type of product? Is it as quick of a rollout in terms of as you think of it being a game changer relative to the combination?

Yes. I think there's more segments than there's probably ever been in the pet market, both to the vet side and the pet owner. There's no question that -- there's already that technology out there today. And I would say that it's all about, I think, coverage matters, convenience matters, value overall, vets want to make money. Remember, this is critical to and a critical part of the equation when you think about launching. So I would say a factor that's becoming bigger and more important that COVID catalyze and accelerate it is convenience. So compliance is up in our industry. When you start thinking about everything from the drop shipping into making things just a lot easier and more convenient, that matters. And I think that injectables are good, but the more times and the more routines to go back is something that's a factor. So -- but it's something we're all working on. It's going to be part of the next generation, just like monoclonal antibodies, long-acting injectables, new therapeutic classes are all areas of where we're headed as an industry.

And then commercialization efforts as we kind of ramp up these new blockbuster products, and where are we at now in terms of the investments that you've already made, but also incremental cost. And then as we think about sort of the caveats to the label within Zenrelia, there's also incremental costs, but were some of that pushed out as well in terms of the ramp-up? Or was it a reallocation of what would have been DTC, more now focused on the vet clinic in terms of promotion or in terms of education? How do I think about that? Sorry, there's a lot in there.

We expanded our vet sales force, including technical vets managers on the ground reps at the start of this year by about 25%. So that's embedded in the base. They're all in their territories. They know their customers. And they've all been trained on Zenrelia and all the stuff we'll disclose on call. So that group is ready to go with the warning label. We do think that education becomes more important earlier than maybe we expected before the label surprise. So with that, that group is ready and they're going to be a key factor in driving this clinic penetration and then driving the experience for the vets. From a DTC standpoint, we still expect to use DTC with Zenrelia, but it's probably been phase shifted because we think clinic penetration will be slower, and therefore, you push DTC out. But it will still be a key component. So the sales force investment, it's there, it's in the base now, incremental investments will be some of the marketing efforts and continued education and then DTC when we decided to launch it. Similarly, with Quattro, we've got a sales force to do our complete portfolio. So Quattro will be more in terms of when DTC starts on that. But excited to be in the market with the products. And as we move forward and get more real clinic, real-world experience, we'll continue to adjust our plans.

Can you have those conversations with distributor partners already now, for instance, ahead of Zenrelia launch or ahead of Quattro launch or do you have to wait till everything is out there from a label and approval standpoint?

Well, there are certain levels of disclosure that can be shared. But I mean, we've had a long-standing relationship, and there's definitely opportunities and some of that can be assumed to be done at this stage, yes.

Okay. And then let's talk a little bit about near term then in terms of the guidance, what's implied for the second half in terms of top line growth? Can you parse out, there's a bunch of moving pieces because there's FX and the to aqua and some other things in there. So can you map out kind of how to think about the third quarter, fourth quarter from here?

So we've guided to the second half at 1% to 3% on a constant currency ex aqua basis. So that's the driver. That includes contributions from Zenrelia and Bovaer. It also includes the 2 different countries, where we've announced at the start of the year, we'd be taking down sales from that of about $50 million, which is a little more than 1%. There's a bigger impact than that in the second half than the first. We also had the recall of Kexxtone that impacts us in the second half. U.S. farm has been growing really well the last 4 quarters. That slows in Q4, as a lot of the vaccine resupply that has been driving some part of that growth is no longer additive. It's in line with where it would have been last year. But overall, we feel very good about the base business and all of our business is continuing to move forward on growth.

Okay. And then on Bovaer, I wanted to ask you kind of an update in terms of time line magnitude of contributions, kind of margin profile of that sort of -- that sort of offering and expectations in terms of the ramp, just given the adoption and the customer education needed around that type market?

A lot of -- I think this is our long-term runway and tailwind for Farm Animal. As farms, I think start with cattle, but the whole idea of methane reduction in dairy and beef cattle is a $1 billion to $2 billion market. It will create another income stream for dairy farms and beef farms. I mean ultimately, a cattle farm has to be on a path to climate-neutral where they're capturing as much emissions as they're giving, and they've got to make money doing that. And we believe that the value chain is already stepping up to want to do that. So I think that's kind of the higher-level mission. We think of Bovaer can be $200 million, even just in U.S. dairy alone. We're seeing some of the value of that already with Experior and Rumensin on both beef with Experior, Rumensin and beef and dairy. So then as you start to think about Bovaer, what is critical is really we're building a capability, and that's why we're really excited about the medium- and long-term future of Farm Animal is if you think about 3 kind of keys to the value chain of an inset market, one is the dairy farms. But we've got a proprietary database called UpLook, which actually gets loaded into a dairy farm that measures emissions. So they can actually say, if I put an intervention in like Bovaer, that can impact 1 ton of carbon per dairy cow per year, and that has a value. We've got that on about 500,000 dairy cows headed to 1 million of the 9 million dairy cows in America, which actually is independently certified from environmental NGOs that allow them to do that. The second is dairy processors. They're lined up, you've got USDA. They're the ones that get the USDA incentives to pass to the dairy farms. We've got the 7 major dairy processors all lined up to do that. The next is the actual CPG company. So you think about the major dairy CPGs, they're at the table now contracting with the independent people to actually buy the carbon. So I would say we plan to put Bovaer into dairy cattle, and start to actually prove out this inset market this month here in September, and that's tracking nicely. What will drive the inflection point will be the CPG companies' contracts that go into 2025 to actually go. The dairy farmer demand is probably beyond what we can supply our expectations. The dairy processes are all a go. And the USDA incentives are in place. It's the contracting with the CPG companies. And it's not an ESG movement. It's not -- well, this is a Scope 3. This is about, hey, a couple pennies per gallon on a $4 gallon of milk that turns into $20 a cow for their dairy farms. So it's economically sustainable. So look for September, making it happen. Q4 will begin to start to scale and then it will be a 2025 key revenue driver, not as much margin as we know until we get the new manufacturing.

And just thinking about all these different kind of moving pieces, you have Zenrelia, you have Quattro, you have Bovaer and then the other innovation pieces that you're driving. You have the base business that there's some moving pieces there as well. But what's the update in terms of your long-term vision of the mix of this business, longer term in terms of livestock versus companion? And then also then inherently kind of how much more skewed are you towards those higher growth, higher margin segments and that long-term margin target you have in your mind at this point?

Maybe a couple of things on the vision, and I'll give the margin question to Todd. but just at the very highest level. When we came out independent and we acquired Bayer, the goal was to be an independent company -- the second independent company that can reach the world's animals. We've set up the supply chain. We've got the SAP in place to bring a flow of innovation. We now got 6 blockbusters between what we have now and what we're going to have by the end of next year, contributing to major margin expansion, that's a key player. And then to establish leadership and look at Animal Health in these segments, Farm Animal, we expect that to continue to be, whether that's 45%, 50%, but it's going to be a key contributor, and we're leading there. Livestock sustainability is key. Pet retail. Pet retail is a key part of our business, and we're leaders in pet retail. And then you've got PetVet is where we're going to be adding this for dimensional offer and bringing it. So the vision has become a reality. We're now an execution story. That's kind of the -- that's the vision and the numbers and the strategy.

Yes. I think overall, this innovation is going to drive the top line. We're going to become a consistent top line grower, and then we're going to leverage that to higher profitability, as I said before. As you get bigger stand-alone products, and that's why we're so excited about the big spaces we're in, $200 million, $300 million products are always a lot more profitable than $30 million products. And that's where Credelio Quattro is going into the biggest product area in Pet Health; Zenrelia going into the derm, bringing IL-31 short-acting, long-acting this next generation. We do see that continue to grow in the high-margin pet business, that will help us increase profitability over the years to come.

Okay. Okay. Great. And then just lastly here in the last minute, I didn't talk about it just like underlying industry fundamentals in terms of Pet Health versus livestock. Anything that you -- we should be thinking about as you're thinking about your business into 2025? I know a lot of it is focused on innovation right now, but underlying demand trends across each of those segments?

I think we've diversified our business with the omnichannel approach on pet. We got good diversity and durability in the portfolio. We like the compliance, the spend, the resiliency of spend on the pet side continues to be quite strong, that's a positive. I think poultry is pretty resilient. We're pretty -- in a good position there. And I think cattle overall, even though the numbers are down, are strong. What are the pulls against? I think China is still a challenge, and will be a challenge. I think just the fundamentals in the marketplace, both on the pet side. And then I think global pigs is going through a little bit of -- China has got its own issues, the U.S. has an oversupply of meat and low feed costs, which doesn't bode well. So those would be the 2 poles that I would see overall.

Okay. Great. Thanks so much. I appreciate the time.

Okay. Thanks, Erin.

Thank you.