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What changed in Elanco Animal Health Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Elanco Animal Health Inc's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+454 added−446 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-25)

Top changes in Elanco Animal Health Inc's 2025 10-K

454 paragraphs added · 446 removed · 342 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

87 edited+21 added−21 removed45 unchanged
Biggest changeCertain environmental laws impose joint and several liability, without regard to fault, for clean-up costs related to the disposal or release of hazardous substances into the environment, including at third-party sites or offsite disposal locations, or at sites that are currently owned or operated (or were formerly owned or operated) where such a disposal or release occurred.
Biggest changeOur operations necessitate obtaining and complying with various permits, registrations and other authorizations from governmental authorities, which retain the power to modify or revoke government-issued authorizations or enforce compliance through fines and injunctions. Certain environmental laws impose joint and several liability, without regard to fault, for clean-up costs related to the disposal or release of hazardous substances into the environment.
Post-approval monitoring of products is required, with reports provided to the EPA and some state regulatory agencies. European Union (EU) The European Medicines Agency (EMA) is a centralized agency of the EU responsible for the scientific evaluation of many of the Veterinary Medicinal Products (VMP) developed by pharmaceutical companies for use in the EU.
Post-approval monitoring of products is required, with reports provided to the EPA and some state regulatory agencies. European Union The European Medicines Agency (EMA) is a centralized agency of the EU responsible for the scientific evaluation of many of the Veterinary Medicinal Products (VMP) developed by pharmaceutical companies for use in the EU.
Our regulatory function is Elanco's key interface with the relevant authorities and is responsible for applying for and obtaining the necessary registrations and post-approvals, extending them if appropriate (e.g., developing claims in additional species), updating (e.g., changes to shelf-life or manufacturing site) and ongoing monitoring of safety and efficacy through our global pharmacovigilance system.
Our regulatory function is our key interface with the relevant authorities and is responsible for applying for and obtaining the necessary registrations and post-approvals, extending them if appropriate (e.g., developing claims in additional species), updating (e.g., changes to shelf-life or manufacturing site) and ongoing monitoring of safety and efficacy through our global pharmacovigilance system.
To maintain supply of our products, we use a variety of techniques, including comprehensive quality and planning and inventory management systems. We generally seek to develop an appropriate inventory strategy to fill market demand until an alternative source of supply can be implemented, in the event a supplier becomes unable to provide the required materials or product.
To maintain supply of our products, we use a variety of techniques, including comprehensive quality and planning and inventory management systems. We seek to develop an appropriate inventory strategy to fill market demand until an alternative source of supply can be implemented, in the event a supplier becomes unable to provide the required materials or product.
Our farm animal portfolio of products for cattle (beef and dairy), swine and poultry is primarily focused on: 1) efficiency and performance; 2) disease prevention and treatment; 3) food safety; and 4) sustainability. Our products include medicated feed additives, injectable antibiotics, vaccines, insecticides and enzymes, among others.
Our farm animal portfolio of products for cattle (beef and dairy), poultry, swine and sheep is primarily focused on: 1) efficiency and performance; 2) disease prevention and treatment; 3) food safety; and 4) sustainability. Our products include medicated feed additives, injectable antibiotics, vaccines, insecticides and enzymes, among others.
Food and Drug Administration (FDA) completed its comprehensive, multi-year review of Bovaer ® (3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle. Producers began feeding the product to cattle in the U.S. during the third quarter of 2024.
Food & Drug Administration (FDA) completed its comprehensive, multi-year review of Bovaer ® (3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle. Producers began feeding the product to cattle in the U.S. during the third quarter of 2024.
Brazil The Ministry of Agriculture, Livestock Production and Supply (MAPA) is the regulatory body in Brazil that is responsible for the regulation and control of pharmaceuticals, biologicals and medicinal feed additives for animal use. MAPA’s regulatory activities are conducted through the Secretary of Agricultural Defense and its Livestock Products Inspection Department.
Brazil The Ministry of Agriculture, Livestock Production and Supply (MAPA) is the regulatory body in Brazil that is responsible for the regulation and control of pharmaceuticals, biologicals, pesticides and medicinal feed additives for animal use. MAPA’s regulatory activities are conducted through the Secretary of Agricultural Defense and its Livestock Products Inspection Department.
We believe we are an industry leader in animal health R&D, with a track record of successful product innovation, business development and commercialization. New product development and regulatory highlights during 2024 included the following: Bovaer : In May 2024, the U.S.
We believe we are an industry leader in animal health R&D, with a track record of successful product innovation, business development and commercialization. New product development and regulatory highlights during 2024 and 2025 included the following: Bovaer : In May 2024, the U.S.
Key farm animal products Rumensin ™ , Baytril ™ and Experior ® are used extensively in cattle, while our Maxiban ™ and Monteban ™ products are valuable offerings for the control and prevention of intestinal disease in poultry.
Key farm animal products Rumensin ™ and Experior ® are used extensively in cattle, while our Maxiban ™ and Monteban ™ products are valuable offerings for the control and prevention of intestinal disease in poultry.
Our primary competitors include animal health medicines and vaccines companies such as Zoetis Inc., Boehringer Ingelheim Vetmedica, Inc., the animal health division of Boehringer Ingelheim GmbH, and Merck Animal Health, the animal health division of Merck & Co., Inc.
Our primary competitors include animal health medicines and vaccines companies such as Zoetis Inc., Boehringer Ingelheim Animal Health GmbH, the animal health division of Boehringer Ingelheim GmbH, and Merck Animal Health, the animal health division of Merck & Co., Inc.
If the CVMP concludes that all requirements for quality, safety and efficacy are met and the product benefits outweigh the risks, it issues a positive opinion that is forwarded to the European Commission, which takes the final decision following the European comitology procedure. The centralized marketing authorization is valid in all of the EU and in Northern Ireland.
If the CVMP concludes that all requirements for quality, safety and efficacy are met and the product benefits outweigh the risks, it issues a positive opinion that is forwarded to the European Commission, which makes the final decision following the European comitology procedure. The centralized marketing authorization is valid in all of the EU and in Northern Ireland.
Our products are manufactured both at the sites listed above that are operated by us and across a network of approximately 130 contract manufacturing organizations (CMOs). Our external manufacturing team centrally governs and provides oversight to our global CMO relationships.
Our products are manufactured both at the sites listed above that are operated by us and across a network of approximately 140 contract manufacturing organizations (CMOs). Our external manufacturing team centrally governs and provides oversight to our global CMO relationships.
Additionally, as part of the drug experience report, we are required to submit all new information pertaining to the safety or effectiveness of a product, regardless of the source. U.S. Department of Agriculture (USDA). The regulatory body in the U.S. for veterinary biologicals is the USDA.
Additionally, as part of the drug experience report, we are required to submit all new information pertaining to the safety or effectiveness of a product, regardless of the source. USDA. The regulatory body in the U.S. for veterinary biologicals is the USDA.
Our reported revenue by geographic region was as follows: Products We have a diverse portfolio of products marketed under approximately 200 brands, including products for both pets and farm animals. Pet Health: Our pet health products help pets live longer, healthier and more active lives. Our global pet health portfolio is focused on parasiticides, vaccines and therapeutics.
Our reported revenue by geographic region was as follows: Products We have a diverse portfolio of products marketed under approximately 200 brands, including products for both pets and farm animals. Pet Health: Our pet health products help pets live longer, healthier and more active lives. Our global pet health portfolio is focused on parasiticides, dermatology, vaccines and pain/other therapeutics.
While many of the patents and patent applications in our portfolio are the result of our own work, others have been developed in collaboration with partners, acquired through business transactions 11 Table of Contents or licensed to us by third parties. A subset of our current products or product candidates are covered by patents and patent applications.
While many of the patents and patent applications in our portfolio are the result of our own work, others have been developed in collaboration with partners, acquired through business transactions or licensed to us by third parties. A subset of our current products or product candidates are covered by patents and patent applications.
We also continue to optimize our diverse Portfolio to grow, leveraging our deep, established customer relationships and expanding product offerings. We will also continue to drive geographic and channel expansion, to reach more of the world's animals. Further, we continue to focus on our strategic Productivity initiatives to improve earnings and cash flows.
We also continue to optimize our diverse Portfolio to grow, leveraging our deep, established customer relationships and expanding product offerings while continuing to drive geographic and channel expansion to reach more of the world's animals. Further, we continue to focus on our strategic Productivity initiatives to improve earnings and cash flows.
Most authorities also consider the standards set by international animal health entities, including the World Organization for Animal Health (WOAH), Codex Alimentarius and the International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH). Joint FAO/WHO Expert Committee on Food Additives.
Most authorities also consider the standards set by international animal health entities, including the World Organization for Animal Health (WOAH), Codex Alimentarius and the International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH). 13 Table of Contents Joint FAO/WHO Expert Committee on Food Additives.
In 2024, our top five selling products and/or product families were our Advantage Family (cats and dogs), Seresto (cats and dogs), Rumensin (cattle), Maxiban / Monteban (poultry) and our Credelio Family (cats and dogs).
In 2025, our top five selling products and/or product families were our Advantage Family (cats and dogs), Seresto (cats and dogs), our Credelio Family (cats and dogs), Rumensin (cattle) and Maxiban / Monteban (poultry).
We select CMOs based on several factors, including: (1) their ability to reliably supply products or materials that meet our quality standards at an optimized cost; (2) their access to specialty products and technologies; (3) capacity; (4) financial analyses; and (5) local presence.
We select CMOs based on several factors, including: (1) their ability to reliably supply products or materials that meet our quality standards at an optimized cost; (2) their access to specialty products and technologies; (3) capacity; (4) financial analyses; and (5) local 10 Table of Contents presence.
There are three organizations under the MARA that regulate animal health: 13 Table of Contents • The Institute of Veterinary Drug Control (IVDC) is responsible for the evaluation of new applications, renewals, variations, manufacturers, quality methods and tissue residue methods for pharmaceuticals, biologicals, disinfectants and medicinal feed additives. • The feed/feed additive office is responsible for the registration and renewal of feed and feed additives. • The pesticide bureau is responsible for the registration and renewal of pesticide products.
There are three organizations under the MARA that regulate animal health: • The Institute of Veterinary Drug Control (IVDC) is responsible for the evaluation of new applications, renewals, variations, manufacturers, quality methods and tissue residue methods for pharmaceuticals, biologicals, disinfectants and medicinal feed additives. • The feed/feed additive office is responsible for the registration and renewal of feed and feed additives. • The pesticide bureau under MARA, the Institute for the Control of Agrochemicals (ICAMA), is responsible for the registration and renewal of pesticide products.
For example, in 2024 approximately 70% and 55% of total annual revenue generated by our higher-margin parasiticide products Seresto and Advantage Family , respectively, occurred during the first half of the year, which is reflective of the flea and tick season in the Northern Hemisphere.
For example, in 2025 approximately 70% and 60% of total annual revenue generated by our higher-margin parasiticide products Seresto and Advantage Family , respectively, occurred during the first half of the year, which is reflective of the flea and tick season in the Northern Hemisphere.
The agency has a veterinary review section distinct from the medical review section for human products. The Committee for Veterinary Medicinal Products (CVMP) is responsible for scientific review of the submissions for VMP, including immunological products.
The agency has a veterinary review section distinct from the medical review section for human products. The Committee 12 Table of Contents for Veterinary Medicinal Products (CVMP) is responsible for scientific review of the submissions for VMP, including immunological products.
The introduction of Credelio Quattro ™ in January 2025 adds a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms and three different species of tapeworms. Cats, Dogs Drontal Family Family of injectable and oral tablet dewormers indicated for the removal of tapeworms, hookworms, roundworms and whipworms.
The introduction of Credelio Quattro in January 2025 added a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms, New World screwworm and three different species of tapeworms. Cats, Dogs Drontal Family Family of injectable and oral tablet dewormers indicated for the removal of tapeworms, hookworms, roundworms and whipworms.
Poultry A key element of our targeted value creation strategy is to drive revenue growth through portfolio development and product innovation. We continue to pursue the development of new chemical and biological molecules, as well as additional registrations and indications for current products.
In addition to supporting our existing product portfolio, a key element of our targeted value creation strategy is to drive revenue growth through portfolio development and product innovation. We continue to pursue the development of new chemical and biological molecules, as well as additional registrations and indications for current products.
Our Advantage Family of brands ( Advantage ™, K-9 Advantix ™, Advocate ™, AdTab ™, among others) and Seresto ™ products are over-the-counter treatments for the prevention and elimination of fleas and ticks and complement our prescription parasiticide products, which include our Credelio Family of brands ( Credelio ™, Credelio Cat ™, Credelio Plus ™), Interceptor Plus ™, Drontal Family of brands (Doncit ™, Drontal ™, Drontal Plus ™) and Trifexis ™.
Our Advantage Family of brands ( Advantage ™, K-9 Advantix ™, Advocate ™, AdTab ™, among others) and Seresto ™ products are over-the-counter treatments for the prevention and elimination of fleas and ticks and complement our prescription parasiticide products, which include our Credelio Family of brands ( Credelio ™, Credelio Cat ™, Credelio Plus ™, Credelio Quattro ™).
The U.S. is our largest market, accounting for 46% of our total revenue in 2024. By total revenue, China, Brazil and the United Kingdom (U.K.) are our largest markets outside the U.S.
The U.S. is our largest market, accounting for 47% of our total revenue in 2025. By total revenue, Brazil, the United Kingdom (U.K.) and China are our largest markets outside the U.S.
Information regarding our principal products and product families, those that represented approximately 1% or more of our revenue in 2024, is as follows: Pet Health Products Product Description Primary Species Advantage Family Family of topical applications that provide broad-spectrum protection against and treatment of fleas, ticks, mosquitoes, lice and biting flies.
Information regarding our principal products and product families, those that represented 1% or more of our total revenue in 2025, is as follows: 7 Table of Contents Pet Health Products Product Description Primary Species Advantage Family Family of oral and topical applications that provide broad-spectrum protection against and treatment of fleas, ticks, mosquitoes, lice and biting flies.
These products and product families combined to represent approximately 36% of our total revenue in 2024, with our largest product family, Advantage Family , representing approximately 10% of total revenue.
These products and product families combined to represent approximately 38% of our total revenue in 2025, with our largest product family, Advantage Family , representing approximately 10% of total revenue.
Seasonality While many of our products are sold consistently throughout the year, we do experience seasonality in our pet health business due to increased demand for certain parasiticide product offerings in the first half of the year.
We anticipate launching Befrena in the second quarter of 2026. Seasonality While many of our products are sold consistently throughout the year, we do experience seasonality in our pet health business due to increased demand for certain parasiticide product offerings in the first half of the year.
In addition, regulatory activities are conducted at a local level through the Federal Agriculture Superintendence. These activities include the inspection and licensing of both manufacturing and commercial establishments for veterinary products, as well as the submission, review and approval of pharmaceuticals, biologicals and medicinal feed additives.
In addition, regulatory activities are conducted at a State level through the Superintendencies of Agriculture and Livestock (SFA). These activities include the inspection and licensing of both manufacturing and commercial establishments for veterinary products, as well as the submission, review and approval of pharmaceuticals, biologicals and medicinal feed additives.
Our R&D team is a project driven organization, with our R&D projects executed and led by highly experienced individuals with deep technical knowledge and substantial experience in discovery research, clinical sciences, technological development and regulatory expertise across our pet health and farm animal product categories.
Research and Development Our R&D efforts focus on delivering consistent, high-impact innovation. Our R&D team is a project driven organization, with projects executed and led by highly experienced individuals with deep technical knowledge and substantial experience in discovery research, clinical sciences, technological development and regulatory expertise across our pet health and farm animal product categories.
We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, through a variety of means, including by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.
Our policy is to vigorously protect, enforce and defend our rights to our intellectual property, and we actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, through a variety of means, including by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.
We rely on patent, trademark, copyright and trade secret laws, as well as regulatory exclusivity periods and non-disclosure agreements to protect our intellectual property rights. Our policy is to vigorously protect, enforce and defend our rights to our intellectual property.
We rely on patent, trademark, copyright and trade secret laws, as well as regulatory exclusivity periods and non-disclosure agreements to protect our intellectual property rights.
Additionally, we employ various delivery strategies for products, including in-feed, injectable, oral and topical formulations developed in conjunction with our manufacturing team to assure reliable and consistent production that leverages the capabilities within our internal and external manufacturing network.
Additionally, we have expertise in employing various delivery strategies for products, including in-feed, injectable, oral and topical formulations developed in conjunction with our manufacturing team to assure reliable and consistent product supply that leverages the capabilities within our internal and external manufacturing network.
Additional reviews are ongoing in other key markets, including Europe, U.K. and Australia. Credelio Quattro : In October 2024, we received final approval from the FDA for Credelio Quattro , a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms and three different species of tapeworms.
Additional reviews are ongoing in other markets. Credelio Quattro : In October 2024, we received final FDA approval for Credelio Quattro , a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms and three different species of tapeworms.
While patents covering the active ingredient, grapiprant, expired in 2021 in all markets except Japan, patents covering the physical form of the active ingredient remain in force and will expire between 2026 and 2031, depending on jurisdiction.
While patents covering the active ingredient, grapiprant, have expired in most markets, patents covering the physical form of grapiprant remain in force and will expire between 2026 and 2031, depending on jurisdiction.
Additionally, nine Elanco Employee Resources Groups (ERGs) are essential to delivering our promise to employees to foster an inclusive culture and are key to the success of our IDEA strategy. ERGs are unique communities of employees from historically under-recognized groups, and their allies, offering support and professional development opportunities. Any employee is eligible to join any ERG. Total Rewards.
Additionally, eight Elanco Employee Resources Groups (ERGs) are essential to delivering our promise to employees to foster an inclusive culture and are key to the success of our human capital management strategy. ERGs are unique communities of employees and their allies, offering support and professional development opportunities. Any employee is eligible to join any ERG. Total Rewards.
We will provide any of the foregoing information without charge upon written request to Elanco’s Corporate Secretary, Elanco, 2500 Innovation Way, Greenfield, Indiana 46140. Information relating to shareholder services is also available on our website. Information contained on our website is not part of, or incorporated by reference, in this Form 10-K. 16 Table of Contents
We will provide any of the foregoing information without charge upon written request to Elanco’s Corporate Secretary, Elanco, 450 Elanco Circle, Indianapolis, Indiana 46221. Information relating to shareholder services is also available on our website. Information contained on our website is not part of, or incorporated by reference, in this Form 10-K. 15 Table of Contents
We also support the continued needs of our workforce through the evolution of our benefits, including paid time off and parental leave. Our Global IDEA Council is an employee-led and leadership-supported group that influences the strategic direction of IDEA efforts at Elanco and represents our sites and affiliates from around the world.
We also support the continued needs of our workforce through the evolution of our benefits, including paid time off and parental leave. We have also implemented an employee-led and leadership-supported council that influences the strategic direction of human capital management at Elanco and represents our sites and affiliates from around the world.
Credelio Quattro was launched, with the first commercial sale occurring in January 2025. Experior : In October 2024, we received multiple combination clearance approvals from the FDA for Experior to be used in combination with other farm animal products, allowing for broader use in heifers, which represent nearly 40% of the fed cattle population in the U.S.
Experior : In October 2024, we received multiple combination clearance approvals from the FDA for Experior to be used in combination with other farm animal products, allowing for broader use in heifers, which represent nearly 40% of the fed cattle population in the U.S.
We consistently innovate to improve the health of animals and to benefit our customers. Our focused strategy prioritizes certain assets, including late-stage potential blockbusters, while maximizing life cycle management and refilling the early-stage pipeline to achieve a consistent flow of innovation.
Our focused strategy prioritizes certain assets, including late-stage potential blockbusters, while maximizing life cycle management and refilling the early-stage pipeline to achieve a consistent flow of innovation.
However, various developments have led, and in the future may lead, to interruption or shortages in supply until we establish new sources, implement alternative processes, bring new manufacturing facilities online or pause or discontinue product sales in one or more markets.
However, various developments have led, and in the future may lead, to interruption or shortages in supply until we establish new sources, implement alternative processes, bring new manufacturing facilities online or pause or discontinue product sales in one or more markets. Pharmaceutical production processes are complex, highly regulated and can vary widely from product to product.
We focus our R&D investments on projects that target novel product introductions with new active ingredients, as well as products leveraging known active ingredients in new indications, presentations, combinations and species expansion. Our R&D efforts are balanced across species, development phases and technology platforms. We apply large and small molecule approaches for both farm animals and pets.
We focus R&D investments on projects that target novel product introductions with new active ingredients, as well as products leveraging known active ingredients in new indications, presentations, combinations and species expansion, applying large and small molecule approaches for both farm animals and pets.
Leadership and employees are encouraged to evaluate performance with these values and behavioral pillars in mind. Inclusion, Diversity, Equity and Accessibility (IDEA). Our comprehensive IDEA strategy includes talent acquisition efforts focused on attracting high-quality candidates from a variety of sources and learning, mentoring and development opportunities for all employees.
At Elanco, our culture drives employee performance, and our leadership and employees are encouraged to evaluate performance with these values and behavioral pillars in mind. Human Capital Management. Our comprehensive human capital management strategy includes talent acquisition efforts focused on attracting high-quality candidates from a variety of sources and learning, mentoring and development opportunities for all employees.
Zenrelia : We received final FDA approval for Zenrelia ® , a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, in September 2024. We launched Zenrelia shortly after final approval, with the first sales occurring in late September. We have also received approval for Zenrelia in Brazil, Canada and Japan.
Zenrelia : We received final FDA approval for Zenrelia , a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, in September 2024. We launched Zenrelia in the U.S. shortly after final approval and have also received approval for Zenrelia in Australia, Brazil, Canada, the European Union (EU), Japan and the U.K.
In addition, the World Organization for Animal Health is an associate member of VICH. Environmental, Health and Safety In addition to the laws and regulations discussed above, we are also subject to various federal, state, local and foreign laws and regulations, both within and outside the U.S., relating to environmental, health and safety (EHS) and sustainability matters.
In addition, the World Organization for Animal Health is an associate member of VICH. Environmental, Health and Safety We are subject to various federal, state, local and international laws and regulations concerning environmental, health, safety (EHS) and sustainability matters.
Other products are protected by patents that expire over the next several years. Below is a summary of our recent and upcoming key patent expirations: • Galliprant is protected by patents in the U.S., Europe, Canada, Japan and other key markets.
Below is a summary of our recent and upcoming key patent expirations: 11 Table of Contents • Galliprant is protected by patents in the U.S., Europe, Canada, Japan and other key markets.
Cats, Dogs Seresto Flea and tick collar with a patented low dose, slow-release technology that kills and repels fleas and ticks which may transmit vector-borne diseases and kills lice for up to 8 months. Cats, Dogs Trifexis Prevents heartworm disease, kills fleas, helps prevent flea infestations and also helps treat and control hookworms, roundworms and whipworms.
Cats, Dogs Seresto Flea and tick collar with a low dose, slow-release technology that kills and repels fleas and ticks which may transmit vector-borne diseases and kills lice for up to 8 months.
Raw Materials We purchase certain raw materials and active pharmaceutical ingredients (API) necessary for the commercial production of our products from a variety of third-party suppliers.
Raw Materials We purchase raw materials and active pharmaceutical ingredients (API) necessary for the commercial production of our products from a variety of third-party suppliers and CMOs. For key API supporting our highest value brands, we generally maintain dual sources.
Our product portfolio and certain product candidates enjoy the protection of approximately 6,700 patents and applications, filed in over 90 countries, with a concentration in our major markets as well as other markets with strong patent laws and protections.
Our product portfolio, including product candidates, has approximately 7 ,000 patents and applications, filed in over 95 countries, with a concentration in our major markets as well as other markets with strong patent laws and protections.
Poultry Baytril Injectable antibiotic active against bacterial respiratory disease pathogens. Baytril is a shared-class antibiotic. Cattle, Swine Catosal™ Injectable for prevention or treatment of deficiencies of vitamin B12 and phosphorus. Cattle Denagard™ Treats swine dysentery. Denagard is a shared-class antibiotic. Swine Experior Reduces ammonia gas emissions from an animal or its waste.
Cattle, Swine Catosal™ Injectable for prevention or treatment of deficiencies of vitamin B12 and phosphorus. Cattle Denagard™ Treats swine dysentery. Denagard is a shared-class antibiotic. Swine Experior Reduces ammonia gas emissions from an animal or its waste. Cattle Hemicell Enzyme supplement for poultry and swine feeds. Poultry, Swine Maxiban / Monteban Prevents coccidiosis in broiler chickens.
We have also entered into indemnification agreements in connection with certain of our past acquisitions, pursuant to which we are, or may be, indemnified for various environmental clean-ups. However, such indemnities are limited in both time and scope and may be further limited in the presence of new information or may not be available at all.
Conversely, we have also secured indemnification agreements from certain of our past acquisitions for various environmental clean-ups; however, these indemnities are limited in time and scope and may be further restricted by new information or may not be available at all.
All manufacturers of animal health biologicals must show their products to be pure, safe, effective and produced by a consistent method of manufacture as defined under the 12 Table of Contents Virus Serum Toxin Act. Post-approval monitoring of products is also required.
All manufacturers of animal health biologicals must show their products to be pure, safe, effective and produced by a consistent method of manufacture as defined under the Virus Serum Toxin Act. Post-approval monitoring of products is also required. Reports of product quality defects, adverse events or unexpected results are maintained and submitted in accordance with the agency requirements.
We also intend to continue our efficiency improvement programs in our manufacturing and supply chain organization. Our strong quality control and quality assurance programs are managed and coordinated globally and are in place at all internal manufacturing sites and external manufacturing hubs. We also regularly inspect and audit our internal sites and CMO locations.
Our external manufacturing team seeks to ensure that all CMOs we use adhere to our standards of manufacturing quality. Our strong quality control and quality assurance programs are managed and coordinated globally and are in place at all internal manufacturing sites and external manufacturing hubs. We also regularly inspect and audit our internal sites and CMO locations.
Dogs TruCan™ (vaccines) Includes multiple products that collectively protect against distemper, adenovirus, parvovirus, corona, parainfluenza, leptospira canicola and other diseases. Dogs Farm Animal Products Product Description Primary Species AviPro™ (vaccines) Includes multiple products that collectively protect against Newcastle disease, infectious bronchitis, fowl cholera, paramyxovirus Type 3, Bursal Disease, other diseases and foodborne pathogens like Salmonella.
Dogs Farm Animal Products Product Description Primary Species AviPro™ (vaccines) Includes multiple products that collectively protect against Newcastle disease, infectious bronchitis, fowl cholera, paramyxovirus Type 3, Bursal Disease, other diseases and foodborne pathogens like Salmonella. Poultry Baytril Injectable antibiotic active against bacterial respiratory disease pathogens. Baytril is a shared-class antibiotic.
In connection with past divestitures, we have undertaken certain indemnification obligations that may require us, in the future, to conduct or 14 Table of Contents finance environmental clean-ups at sites that we no longer own or operate.
We are actively monitoring and investigating such contamination at certain sites. Furthermore, in connection with past divestitures, we have assumed indemnification obligations that may require us to conduct or finance environmental clean-ups at sites we no longer own or operate.
We have continuously strengthened and expanded our three-pronged strategy: Innovation , Portfolio and Productivity , which remains our foundation for sustained growth and profitability. Over time, we expect to achieve revenue growth and improved profitability by delivering consistent, high-impact Innovation and prioritizing large market opportunities in major geographies.
Our foundation for sustained growth and profitability consists of a three-pronged strategy: Innovation , Portfolio and Productivity . We expect to continue to achieve revenue growth and improved profitability by delivering consistent, high-impact Innovation and prioritizing large market opportunities in major geographies. We consistently innovate to improve the health of animals and to benefit our customers.
Competition We face intense competition globally. Competition may vary depending on the particular region, species, product category or individual product. We compete principally on the basis of product quality, price, cost-effectiveness, promotional effectiveness, new product development and product differentiation.
Competition may vary depending on the particular region, species, product category or individual product. We compete principally on the basis of product quality, price, cost-effectiveness, promotional effectiveness, new product development and product differentiation. Some of our products may compete with other branded or generic products already on the market or that are later developed by competitors.
Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine, sheep and, prior to the divestiture of our aqua business in July 2024, aqua (collectively, farm animal).
Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine and sheep (collectively, farm animal). Our purpose – making life better for animals makes life better – inspires us to Go Beyond for animals, our customers, our people and society.
Regulatory Matters The sale of animal health products is governed by the laws and regulations specific to each country in which we sell our products. To maintain compliance with these regulatory requirements, we have established processes, systems and dedicated resources with end-to-end involvement from product concept to launch and maintenance in the market.
To maintain compliance with these regulatory requirements, we have established processes, systems and dedicated resources with end-to-end involvement from product concept to launch and maintenance in the market.
Barueri, Brazil Santa Clara, Mexico Clinton, Indiana Chengdu, China Manukau, New Zealand (1) Terre Haute, Indiana Wusi, China Banwol, South Korea Fort Dodge, Iowa Huningue, France Chungli, Taiwan Elwood, Kansas Cuxhaven, Germany Speke, United Kingdom (2) Kansas City, Kansas Kiel, Germany Winslow, Maine 10 Table of Contents (1) In October 2024, we entered into an agreement to sell our manufacturing facility in Manukau, New Zealand.
Barueri, Brazil Santa Clara, Mexico Clinton, Indiana Chengdu, China Banwol, South Korea Terre Haute, Indiana Wusi, China Chungli, Taiwan Fort Dodge, Iowa Huningue, France Speke, United Kingdom Elwood, Kansas Cuxhaven, Germany Kansas City, Kansas (1) Kiel, Germany Winslow, Maine (1) As part of the 2025 Restructuring Plan, we anticipate closing our Kansas City manufacturing facility by the end of 2026.
We seek to concentrate our resources on projects that match our strategy and where we can leverage our broad technical and commercial capabilities. In addition to supporting our existing product portfolio, new product innovation is a core part of our business strategy.
We seek to concentrate our resources on projects that match our strategy and where we can leverage our broad technical and commercial capabilities.
Certain Elanco products, both existing and new, may compete with other branded or generic products already on the market or that are later developed by competitors. When competitors introduce new products with ease-of-use, therapeutic or cost advantages, our products may become subject to decreased sales and/or price reductions.
When competitors introduce new products with ease-of-use, therapeutic or cost advantages, our products may become subject to decreased sales and/or price reductions.
In Europe, the formulation patents will expire in June 2025, but in some countries, including Spain, Italy and the U.K., supplementary protection certificates (SPCs) have been granted that expire in August 2026. • Patent coverage for Milbemax/Interceptor chewable products expired in July 2024 in Europe and other key markets.
In Europe, the formulation patents expired in June 2025, although in some countries, including Spain, Italy and the U.K., supplementary protection certificates (SPCs) have been granted that expire in August 2026. • Patent coverage for Interceptor Plus extends through October 2028 in the U.S. • The U.S. patent for Experior 's active ingredient, lubabegron, expired in April 2025.
Principal materials used in our manufacturing operations for key brands are typically available from more than one source; however, we may in some instances obtain certain raw or intermediate materials from only a single source. Our active ingredients for biologics are manufactured primarily in internal facilities, while chemically derived active ingredients are sourced from external partners.
In some instances, we may obtain certain raw or intermediate materials and API from only a single source; however, we utilize inventory management strategies to enable reliable supply. Our active ingredients for biologics are manufactured primarily in internal facilities, while chemically derived active ingredients are sourced from external partners. Competition We face intense competition globally.
Patents for individual products expire at different times based on the date of the patent filing (or occasionally, the date of patent grant) and the legal term of patents in the countries where such patents are obtained. Some of our principal products, including certain products within our Advantage Family , Rumensin and Maxiban / Monteban do not have patent protection.
Additionally, many of our vaccine products are based on proprietary or patented master seeds and formulations. Patents for individual products expire at different times based on the date of the patent filing (or occasionally, the date of patent grant) and the legal term of patents in the countries where such patents are obtained.
In addition, our sales and marketing organization provides enhanced value by supporting farm animal producers to maximize their yields and reduce their costs.
In addition, our sales and marketing organization provides enhanced value by supporting farm animal producers to maximize their yields and reduce their costs. Furthermore, our expertise and data analytics help our customers analyze large amounts of health and production data in order to improve production efficiency and business performance.
Additionally, we have products that offer treatment for otitis (ear infections) and treatments for certain cardiovascular and dermatology indications. 7 Table of Contents Farm Animal: Our farm animal products help farmers improve animal health and wellbeing and raise livestock more sustainably, delivering more food while using fewer resources and enhancing the integrity of the food supply.
Farm Animal: Our farm animal products help producers improve animal health and wellbeing and raise livestock more sustainably, delivering more food while using fewer resources and enhancing the integrity of the food supply.
Although our current reserves for environmental remediation obligations are not material, we could be subject to liability for the investigation and remediation of legacy environmental contamination caused by historical industrial activity at sites we own or on which we operate. We are also monitoring and investigating environmental contamination from past industrial activity at certain sites.
This liability may extend to both current or former Elanco owned or operated sites, as well as third-party or offsite disposal locations. While our current reserves for environmental remediation obligations are not material, we could be subject to potential liabilities for the investigation and remediation of legacy environmental contamination from historical industrial activity at sites we own or operate.
Cattle, Swine Rumensin Improves feed and milk production efficiency and increases rate of weight gain in cows. Also prevents and controls coccidiosis for cows, calves (excluding veal calves) and goats. Rumensin is an animal-only antibiotic and an ionophore. Cattle Surmax™ Prevents necrotic enteritis in broiler chickens. Surmax is an animal-only antibiotic.
Maxiban and Monteban are ionophores used as feed additives. Poultry Pulmotil™ Controls swine respiratory disease and bovine respiratory disease (BRD). Pulmotil is a shared-class antibiotic. Cattle, Swine Rumensin Improves feed and milk production efficiency and increases rate of weight gain in cows. Also prevents and controls coccidiosis for cows, calves (excluding veal calves) and goats.
We believe this approach allows us to consistently progress our multi-year innovation projects toward regulatory approvals, while ensuring clear visibility to the innovation portfolio composition, value and progress. As of December 31, 2024, we employed over 1,000 employees in our global R&D and Regulatory Affairs organizations.
We believe this approach allows us to consistently progress our multi-year innovation projects toward regulatory approvals, while ensuring clear visibility to the innovation portfolio composition, progress and value. Our R&D organization utilizes a fully integrated global network of labs, service centers and development sites supported by a network of third-party partners.
Portfolio investment decisions and prioritization are influenced by the probability of technical success, economic value, time to market, portfolio fit and balance. R&D expenses totaled $344 million in 2024, $327 million in 2023 and $321 million in 2022. Manufacturing and Supply Chain We have a global manufacturing network of 17 sites comprised of the following: International U.S.
Portfolio investment decisions and prioritization are influenced by the probability of technical success, economic value, time to market, portfolio fit and balance. Maximizing geographic coverage for new product innovations also remains a high priority. R&D expenses totaled $368 million in 2025, $344 million in 2024 and $327 million in 2023.
This acquisition also helped us expand our portfolio, creating a better balance between our pet health and farm animal products and between the United States (U.S.) and international markets, while also expanding our omnichannel presence in both the veterinary clinic and in retail markets, including e-commerce.
This acquisition enabled us to become a more diverse, durable and global company with greater reach and scale while also helping us expand our portfolio, creating a better balance between our pet health and farm animal products and between the United States (U.S.) and international markets.
We primarily sell our farm animal products to third-party distributors and directly to a diverse set of farm animal producers, including beef, dairy, pork and poultry operations. Our omnichannel presence allows us to sell into both the veterinary clinic and retail markets, including e-commerce.
Customers We primarily sell our pet health products to third-party distributors and retailers, as well as directly to veterinarians who typically then sell our products to pet owners. We primarily sell our farm animal products to third-party distributors and directly to a diverse set of farm animal producers, including beef, dairy, pork and poultry operations.
We have made, and intend to continue to make, necessary expenditures for compliance with applicable EHS laws and regulations. Human Capital Employees. As of December 31, 2024, we employed approximately 9,000 full time employees and approximately 450 fixed-duration employees, which are individuals hired for a pre-defined length of time (typically one to four years).
As of December 31, 2025, we employed approximately 9,400 full time employees and approximately 500 fixed-duration employees, which are individuals hired for a pre-defined length of time (typically one to four years). Approximately 30% of our global workforce is U.S.-based.
We advance this vision by offering a comprehensive portfolio of products in the pet health and farm animal product categories. Our reported revenue by product category was as follows: Contract manufacturing and other represents revenue from arrangements in which we manufacture products on behalf of a third party and royalty revenue. International Operations Our operations are conducted globally.
Commercial Operations We operate our business as a single segment within the animal health industry, offering a comprehensive portfolio of pet health and farm animal products. Our reported revenue by product category was as follows: 6 Table of Contents International Operations Our operations are conducted globally.
Sao Paulo, Brazil Monheim, Germany Fort Dodge, Iowa Shanghai, China Bangalore, India Greenfield, Indiana (R&D headquarters) Basel, Switzerland Our R&D efforts focus on products that prevent and treat disease, improve and extend quality of life, improve the type of care received by animals and reduce the environmental impact of raising livestock.
We prioritize our R&D efforts across species, development phases and technology platforms, focusing on products that prevent and treat disease, improve and extend quality of life, improve the type of care received by animals and/or reduce the environmental impact of raising livestock.
Our R&D organization utilizes a fully integrated global network of labs, service centers and development sites supported by a network of third-party partners. We also have a significant international regulatory operation that manages new product submissions and ensures ongoing compliance for our existing commercial portfolio.
We also have a significant international regulatory operation that manages new product submissions and ensures ongoing compliance for our existing commercial portfolio. As of December 31, 2025, we employed over 1,000 employees in our global R&D and Regulatory Affairs organizations.
Our second largest customer, which is also a third-party distributor, represented approximately 6% of revenue in 2024, while no other customer represented greater than 5% of revenue during 2024. Research and Development Our R&D efforts focus on delivering consistent, high-impact innovation.
Our largest customer, an affiliate of Cencora, Inc., is a third-party veterinary distributor and represented approximately 12% of our total revenue in 2025. Our second largest customer, which is also a third-party distributor, represented approximately 7% of revenue in 2025. No other customer represented greater than 5% of revenue during 2025.
We seek to file and maintain trademarks around the world based on commercial activities in most regions where we have, or desire to have, a business presence for a particular product. We currently maintain more than 12,800 trademark applications and registrations in major regions, primarily identifying products dedicated to the care of livestock and pets.
Coverage for Experior methods of use will expire in 2037 in the U.S. and 2035 in other key markets. We also seek to file and maintain trademarks around the world based on commercial activities in most of the regions where we have, or desire to have, a business presence for a particular product.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAt the same time, our competitors may incorporate AI into their operations more quickly than we do or with more successful outcomes, which would also harm our business. We also expect there will be new laws or regulations concerning the use of AI technology, which might be burdensome to comply with and may limit our ability to use this technology.
Biggest changeIf our use of AI, or AI use by third parties on our behalf, becomes controversial, we may experience reputational harm to our brand, competitive harm or legal liability. At the same time, our competitors may incorporate AI into their operations with more successful outcomes, which would also harm our business.
Sales of our farm animal products could be materially adversely affected by a general outbreak of infectious disease, or an outbreak of disease carried by farm animals, which could lead to the widespread death or precautionary destruction of farm animals as well as the reduced consumption and demand for animal-derived protein.
Sales of our farm animal products could be materially adversely affected by a general outbreak of infectious disease, or an outbreak of disease carried by farm animals, which could lead to the widespread death or precautionary destruction of farm animals as well as reduced consumption and demand for animal-derived protein.
In recent years, there has been a trend toward the concentration of veterinarians in large clinics and hospitals. We have also seen recent consolidation among farm animal producers, particularly swine and poultry producers, and among our distributors.
In recent years, there has been a trend toward the concentration of veterinarians in large clinics and hospitals, and we have also seen consolidation among farm animal producers, particularly swine and poultry producers, and among our distributors.
Further, minor deviations in our manufacturing or logistical processes, such as temperature excursions or improper package sealing, could result, and have in the past resulted in, delays, inventory shortages, unanticipated costs, product recalls, product liability and/or regulatory action.
Further, minor deviations in our manufacturing or logistical processes, such as temperature excursions or improper package sealing, could result in, and have in the past resulted in, delays, inventory shortages, unanticipated costs, product recalls, product liability and/or regulatory action.
Any disruption or failure in our AI systems or those of third parties on whom we rely could result in delays and operational challenges, and the various operational, compliance and reputational issues could materially adversely affect our business, financial condition and results of operations. We depend on sophisticated information technology (IT) and infrastructure.
Any disruption or failure in our AI systems or those of third parties on whom we rely could result in delays and operational challenges, and the various operational, compliance and reputational issues could materially adversely affect our business, financial condition and results of operations. We depend on sophisticated information technology (IT) systems and infrastructure.
A failure to comply with the covenants under the indenture that governs the senior unsecured notes and credit facilities, or any of our other existing or future indebtedness could result in an event of default, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations.
A failure to comply with the covenants under the indenture that governs our senior unsecured notes and credit facilities, or any of our other existing or future indebtedness, could result in an event of default, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations.
Our currently pending or future patent applications may not result in issued patents, or may not be approved on a timely basis, if at all. Similarly, any term extensions we seek may not be approved on a timely basis, if at all.
Our currently pending or future patent applications may not result in issued patents or may not be approved on a timely basis. Similarly, any term extensions we seek may not be approved on a timely basis, if at all.
We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, by generally requiring our employees, consultants, other advisors and other third parties to execute proprietary information and confidentiality agreements upon the commencement of their employment, engagement or other relationship.
We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, by generally requiring our employees, consultants and other advisors and third parties to execute proprietary information and confidentiality agreements upon the commencement of their employment, engagement or other relationship.
Counterfeit or illegally compounded products are frequently unsafe or ineffective and can be potentially life-threatening to animals. Our reputation and business could suffer harm as a result of counterfeit or illegally compounded products which are alleged to be equivalent and/or which are sold under our brand name(s).
Counterfeit or illegally compounded products are frequently unsafe or ineffective and can be potentially life-threatening to animals. Our reputation and business could suffer harm as a result of counterfeit or illegally compounded products which are alleged to be equivalent and/or are sold under our brand name(s).
Regulatory actions based on these types of safety, quality or efficacy concerns could impact all, or a significant portion, of a product’s sales. For example, in May 2024 the EMA's CVMP recommended suspending the marketing authorization for our Kexxtone ™ product for cattle, with the VMD (U.K.) similarly following this recommendation in July.
Regulatory actions based on these types of safety, quality or efficacy concerns could impact all, or a significant portion, of a product’s sales. For example, in May 2024 the EMA's CVMP recommended suspending the marketing authorization for our Kexxtone ™ product for cattle, with the VMD (U.K.) similarly following this recommendation in July 2024.
We are also exposed to the risk of rising interest rates to the extent we fund our operations with short-term or variable-rate borrowings. See Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further discussion around our exposure to changes in interest rates. We may be required to write down goodwill or identifiable intangible assets.
We are also exposed to the risk of rising interest rates to the extent we fund our operations with short-term or variable-rate borrowings. See Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk for further discussion around our exposure to changes in interest rates. We may be required to write down goodwill or other identifiable intangible assets.
Finally, as global security challenges increase, more countries may use sanctions and export controls as a method to deal with such insecurity, which could result in decreased markets for our products or make it more costly to supply our customers. We may incur substantial costs and receive adverse outcomes in litigation, regulatory investigations and other legal matters.
As global security challenges increase, more countries may use sanctions and export controls as a method to deal with such insecurity, which could result in decreased markets for our products or make it more costly to supply our customers. We may incur substantial costs and receive adverse outcomes in litigation, regulatory investigations and other legal matters.
Accordingly, unplanned plant shutdowns, manufacturing or quality assurance difficulties, failure or refusal of a supplier or CMO to supply contracted quantities or difficulties in predicting or variability in demand for our products have caused, and may in the future cause, interruption or higher costs in the supply of certain products, product shortages or pauses or discontinuations of product sales in one or more markets.
Accordingly, unplanned plant shutdowns, manufacturing or quality assurance difficulties, failure or refusal of a supplier or CMO to supply contracted quantities or variability and/or other difficulties in predicting demand for our products have caused, and may in the future cause, interruption or higher costs in the supply of certain products, product shortages or pauses or discontinuations of product sales in one or more markets.
We may be unable to achieve our goals and aspirations set forth in our ESG report(s), particularly with respect to the reduction of greenhouse gas (GHG) emissions, or otherwise meet the expectations of our stakeholders with respect to ESG matters. Regulatory agencies have shown concern over the impact of animal health products and farm animal operations on the environment.
We may be unable to achieve our aspirations set forth in our ESG report(s), particularly with respect to the reduction of greenhouse gas (GHG) emissions or otherwise meet the expectations of our stakeholders with respect to ESG matters. Regulatory agencies have shown concern over the impact of animal health products and farm animal operations on the environment.
Such shareholder activism could give rise to perceived uncertainties as to our future strategy, adversely affect our relationships with business partners and make it more difficult to attract and retain qualified personnel. Responding to unwanted stockholder activism has resulted in and could in the future result in substantial costs, including significant legal fees and other expenses.
Such shareholder activism could give rise to perceived uncertainties as to our future strategy, adversely affect our relationships with business partners and make it more difficult to attract and retain qualified personnel. Responding to unwanted shareholder activism has resulted in and could in the future result in substantial costs, including significant legal fees and other expenses.
There are also significant risks involved with such changes, including the potential for significant business disruption, diversion of management's time and attention from ongoing operations, loss of human capital talent, temporarily reduced productivity and the risk of failing to achieve some or all of the anticipated benefits of the restructuring or organizational changes.
There are also other significant risks involved with such changes, including the potential for significant business disruption, diversion of management's time and attention from ongoing operations, loss of human capital talent, temporarily reduced productivity and the risk of failing to achieve some or all of the anticipated benefits of the restructuring or organizational changes.
We commit substantial effort, funds and other resources to R&D, primarily through our own dedicated resources but also through collaborations with third parties. We also have acquired or partnered with a number of smaller animal health businesses, and we intend to continue to do so in the future.
We commit substantial effort, funds and other resources to R&D activities, primarily through our own dedicated resources but also through collaborations with third parties. We have also acquired or partnered with a number of smaller animal health businesses, and we intend to continue to do so in the future.
If our IT systems or our service providers' IT systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised. Our business may be negatively affected by weather conditions and the availability of natural resources.
If our IT systems or our service providers' IT systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised. Our business may be negatively affected by weather conditions, seasonality and the availability of natural resources.
There are two classes of antibiotics used in animal health: shared-class, or medically important, antibiotics, which are used to treat, control and/or prevent infectious diseases caused by pathogens that occur in both humans and animals; and animal-only antibiotics, which are used to treat, control and/or prevent infectious diseases in animals, and in some instances, promote animal growth performance.
There are two classes of antibiotics used in animal health: shared-class, or medically important, antibiotics, which are used to treat, control and/or prevent infectious diseases caused by pathogens that occur in both humans and animals; and animal-only, or non-medically important, antibiotics, which are used to treat, control and/or prevent infectious diseases in animals, and in some instances, promote animal growth performance.
We have pursued, and will continue to pursue, the registration of trademarks and service marks in the U.S. and internationally; however, enforcing rights against those who knowingly or unknowingly dilute or infringe our brands can be difficult.
Accordingly, we have pursued, and will continue to pursue, the registration of trademarks and service marks in the U.S. and internationally; however, enforcing rights against those who knowingly or unknowingly dilute or infringe our brands can be difficult.
Given the international nature of our supply chain, in certain instances we, our customers or other key business partners depend on suppliers and service providers based in China, Canada, Mexico and other foreign jurisdictions.
Given the international nature of our supply chain, in certain instances we, our customers or other key business partners depend on suppliers and service providers based in China, Canada, Europe, Mexico and other foreign jurisdictions.
The impact of changes in regulations and market preferences regarding the use of antibiotics and productivity products in farm animals could have a material adverse effect on our business, financial condition and results of operations.
However, the impact of changes in regulations and market preferences regarding the use of antibiotics and productivity products in farm animals could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, the use of our products for indications other than those for which our products have been approved may not be effective, which could harm our reputation and lead to an increased risk of litigation.
Furthermore, the use of our products for indications other than those for which they have been approved may not be effective, which could harm our reputation and lead to an increased risk of litigation.
We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign exchange rates.
We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates.
Even if we are able to successfully configure and change our systems, all technology systems, even with implementation of security measures, are vulnerable to disability, failures and cybersecurity risks, including unauthorized access.
Even if we are able to successfully implement, configure and change our systems, all technology systems, even with implementation of security measures, are vulnerable to disability, failures and cybersecurity risks, including unauthorized access.
These impacts may include: • Reductions in demand or significant volatility in demand for one or more of our products, caused by, among other things: the temporary inability of our customers to purchase our products due to illness, quarantine, travel restrictions and/or financial hardship; decreased veterinary visits; farm animal processing plant shutdowns; shifts in demand by trading down to lower priced products; or stockpiling activity; • Inability to meet customer needs and achieve cost targets due to disruptions in our manufacturing and supply chains caused by labor constraints or an inability to obtain key raw materials, increased transportation costs or other manufacturing and distribution disruptions; 23 Table of Contents • Failure of third parties on which we rely, including our suppliers, CMOs, distributors, contractors and other external business partners, to meet their obligations, which may be caused by their own financial or operational challenges; • Limited ability to access the global financial market, which could negatively impact our short-term and long-term liquidity; or • Significant changes in the political environments in the markets in which we manufacture, sell or distribute our products, including lockdowns, import/export restrictions or other governmental mandates that limit or close operating and manufacturing facilities, restrict travel to perform necessary business functions or otherwise prevent us or our third-party partners, suppliers or customers from sufficiently staffing operations, including operations necessary for the production, distribution and sale of our products.
These impacts may include: • Reductions in demand or significant volatility in demand for one or more of our products, caused by, among other things: the temporary inability of our customers to purchase our products due to illness, quarantine, travel restrictions and/or financial hardship; decreased veterinary visits; farm animal processing plant shutdowns; shifts in demand by trading down to lower priced products; or stockpiling activity; • Inability to meet customer needs and achieve cost targets due to disruptions in our manufacturing and supply chains caused by labor constraints or an inability to obtain key raw materials, increased transportation costs or other manufacturing and distribution disruptions; • Failure of third parties on which we rely, including our suppliers, CMOs, distributors, contractors and other external business partners, to meet their obligations, which may be caused by their own financial or operational challenges; • Limited ability to access the global financial market, which could negatively impact our short-term and long-term liquidity; or • Significant changes in the political environments in the markets in which we manufacture, sell or distribute our products, including lockdowns, import/export restrictions or other governmental mandates that limit or close operating and manufacturing facilities, restrict travel or otherwise prevent us or our third-party partners, suppliers or customers from sufficiently staffing operations, including operations necessary for the production, distribution and sale of our products.
Foreign Corrupt Practices Act (the FCPA) and similar non-U.S. laws and regulations; • compliance with labor laws; • compliance with local, regional and global restrictions on banking and commercial activities in emerging markets; • burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to EHS requirements and those in emerging markets; • changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers, including the imposition of limits on our profitability; • political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts and the related government and other entity responses; • trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S.
Foreign Corrupt Practices Act (the FCPA) and similar non-U.S. laws and regulations; • compliance with labor laws; • compliance with local, regional and global restrictions on banking and commercial activities in emerging markets; • burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to EHS requirements and those in emerging markets; • changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers, including the imposition of limits on our profitability; 25 Table of Contents • political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts and the related government and other entity responses; • trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S.
Our high level of indebtedness could have other important consequences, including: • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements; • increasing our vulnerability to general adverse economic and industry conditions; • making us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • restricting us from making strategic acquisitions, engaging in development activities or exploiting business opportunities; and • limiting our flexibility in planning for and reacting to changes in the animal health industry.
Our high level of indebtedness could have other important consequences, including, but not limited to: • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements; • increasing our vulnerability to general adverse economic and industry conditions; • making us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • restricting us from making strategic acquisitions, engaging in development activities or exploiting business opportunities; and • limiting our flexibility in planning for and reacting to changes in the animal health industry.
Our operations could be limited or disrupted by any of the following: • volatility in financial markets; • compliance with governmental controls and sanctions; • difficulties enforcing contractual and intellectual property rights given variability in the laws of individual countries and their respective practices with respect to enforcement of contractual and intellectual property rights; • parallel trade in our products (importation of our products from EU countries where our products are sold at lower prices into EU countries where the products are sold at higher prices); • compliance with a wide variety of laws and regulations, such as the U.S.
Our operations could be limited or disrupted by any of the following: • volatility in financial markets; • compliance with governmental controls and sanctions; • difficulties enforcing contractual and intellectual property rights given variability in the laws of individual countries and their respective practices with respect to enforcement of contractual and intellectual property rights; • parallel trade in our products (importation of our products from EU countries where our products are sold at lower prices into EU countries where the products are sold at higher prices); • compliance with a wide variety of laws and regulations, including the U.S.
Competitive pressures could arise from, among other things, differences in safety and efficacy product profiles, limited demand growth or a significant number of additional competitive products being introduced into a particular market, price reductions by competitors, the ability of competitors to capitalize on their economies of scale, the ability of competitors to produce or otherwise procure animal health products at lower costs than we can and the ability of competitors to access more or newer technology than we can.
Competitive pressures could also arise from, among other things, differences in safety and efficacy product profiles, limited demand growth or a significant number of additional competitive products being introduced into a particular market, price reductions by competitors, generic competition, the ability of competitors to capitalize on their economies of scale, the ability of competitors to produce or otherwise procure animal health products at lower costs than we can and the ability of competitors to access more or newer technology than we can.
Manufacturing problems and capacity imbalances, including at our contract manufacturers, have caused, and may in the future cause, product launch delays, inventory shortages, recalls and/or unanticipated costs. In order to sell our products, we must be able to produce and ship sufficient quantities to our customers.
Manufacturing challenges and capacity imbalances, including at our contract manufacturers, have caused, and may in the future cause, product launch delays, inventory shortages, recalls and/or unanticipated costs. In order to sell our products, we must be able to produce and ship sufficient quantities to our customers.
Inventory levels at our distributors and retailers increase or decrease as a result of various factors, including end customer demand, new customer contracts, heightened competition, required minimum inventory levels, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, unexpected customer behavior, proactive measures taken by us in response to shifting market dynamics and procedures and environmental factors beyond our control.
Inventory levels at our distributors and retailers increase or decrease as a result of various factors, including new product launches, end customer demand, new customer contracts, heightened competition, required minimum inventory levels, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, unexpected customer behavior, proactive measures taken by us in response to shifting market dynamics and environmental factors beyond our control.
Despite our efforts to manage and limit these impacts, they will likely ultimately be dependent on factors beyond our control, including the duration and severity of any such outbreak, as well as third-party actions taken to contain its spread and mitigate its effects. A loss of key personnel or highly skilled employees could disrupt our operations.
Despite our efforts to manage and limit these impacts, they will likely ultimately be dependent on factors beyond our control, including the duration and severity of any such outbreak, as well as third-party actions taken to contain its spread and mitigate its effects. 22 Table of Contents A loss of key personnel or highly skilled employees could disrupt our operations.
If we are unable to successfully integrate or carve-out our systems to support critical business operations of acquired or divested businesses or to produce information for business decision-making activities, we could experience a material adverse impact on our business, including increased costs, data integrity and/or cybersecurity risks and an inability to timely and accurately report our financial results.
If we are unable to successfully integrate or carve-out our systems to support critical business operations of acquired or divested businesses or to 19 Table of Contents produce information for business decision-making activities, we could experience a material adverse impact on our business, including increased costs, data integrity and/or cybersecurity risks and an inability to timely and accurately report our financial results.
In addition, a number of factors could cause production interruptions, including: 21 Table of Contents • the failure of us or any of our CMOs, vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines; • mislabeling; • construction delays; • equipment malfunctions; • shortages of materials; • labor problems; • delays in receiving required governmental authorizations or regulatory approvals; • natural disasters and/or adverse weather conditions; • power outages; • criminal and terrorist activities; • changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and • the outbreak of any highly contagious diseases.
In addition, a number of factors could cause production interruptions, including, but not limited to: • the failure of us or any of our CMOs, vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines; • mislabeling; • construction delays; • equipment malfunctions; • shortages of materials; • labor problems; • delays in receiving required governmental authorizations or regulatory approvals; • natural disasters and/or adverse weather conditions; • power outages; • criminal and terrorist activities; 20 Table of Contents • changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and • the outbreak of any highly contagious diseases.
Department of the Treasury and the EU, in relation to our products or the products of farmers and other customers; • government limitations on foreign ownership; • government takeover or nationalization of business; • changes in tax laws and tariffs; • imposition of anti-dumping and countervailing duties or other trade-related sanctions; • costs and difficulties and compliance risks in staffing, managing and monitoring international operations, including in the use of overseas third-party goods and service providers; • corruption risk inherent in business arrangements and regulatory contacts with foreign government entities; • longer payment cycles in certain foreign countries and increased exposure to counterparty risk; and • additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
Department of the Treasury and the EU, in relation to our products or the products of farmers and other customers; • government limitations on foreign ownership; • government takeover or nationalization of business; • changes in tax laws and tariffs; • imposition of anti-dumping and countervailing duties or other trade-related sanctions; • costs and difficulties and compliance risks in staffing, managing and monitoring international operations, including in the use of overseas third-party goods and service providers; • corruption risk inherent in business arrangements and regulatory contacts with foreign government entities and in private business dealings in countries with a higher incidence of corruption; • longer payment cycles in certain foreign countries and increased exposure to counterparty risk; and • additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
Our failure, or the failure of third parties we rely on, including CMOs, to comply with applicable regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspection observation notices, warning letters or similar regulatory correspondence, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current products from the market and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.
The imposition of more restrictive regulations on our products, a failure by us, or third parties we rely on, including CMOs, to comply with applicable regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspection observation notices, warning letters or similar regulatory correspondence, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current products from the market and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.
The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. Several start-up companies also compete in the animal health industry.
The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses, producers of nutritional health products and companies that mainly produce generic products. Several start-up companies also compete in the animal health industry.
Potential difficulties we may encounter in the integration or carve out process include: • the inability to realize the anticipated value from various assets of the acquired company; • the potential for stranded costs, loss of scale and/or inefficiencies in a post-divestiture cost structure; • the inability to combine the business of an acquired company with ours in a manner that permits us to achieve the cost savings or other synergies anticipated as a result of the transaction or to achieve such cost savings or other anticipated synergies in a timely manner, which could result in us not realizing some anticipated benefits of the transaction in the time frame anticipated, or at all; 20 Table of Contents • the loss of key employees; • potential unknown liabilities and unforeseen increased expenses, delays or unfavorable conditions in connection with the closing of the transaction and the subsequent integration or carve out; and • performance shortfalls at our or the acquired company as a result of the diversion of management’s attention from ongoing business activities.
Potential difficulties we could encounter in an integration or carve out process include: • the inability to realize the anticipated value from various assets of the acquired company; • the potential for stranded costs, loss of scale and/or inefficiencies in a post-divestiture cost structure; • the inability to combine the business of an acquired company with ours in a manner that permits us to achieve the cost savings or other synergies anticipated as a result of the transaction or to achieve such cost savings or other anticipated synergies in a timely manner, which could result in us not realizing some anticipated benefits of the transaction in the time frame anticipated, or at all; • the loss of key employees; • potential unknown liabilities and unforeseen increased expenses, delays or unfavorable conditions in connection with the closing of the transaction and the subsequent integration or carve out; and • performance shortfalls by our legacy or the acquired company as a result of the diversion of management’s attention from ongoing business activities.
Any impairment of goodwill or other indefinite-lived intangible assets could have a material adverse effect on our results of operations in the period(s) when recognized. We rely on third parties to provide us with products and materials and are subject to increased material costs and potential disruptions in supply.
Any impairment of goodwill or other identifiable intangible assets could have a material adverse effect on our results of operations in the period(s) when recognized. We rely on third parties to provide us with products and materials and are subject to increased material costs and potential disruptions in supply.
Determining whether an impairment exists or may have occurred, and the amount of the potential impairment, involves qualitative criteria and quantitative data based on management’s estimates and assumptions, which require significant judgment and could change given a change in circumstances, future events or as new information becomes available.
Determining whether an impairment exists or may have occurred, and the amount of the potential impairment, involves qualitative criteria and quantitative data 24 Table of Contents based on management’s estimates and assumptions, which require significant judgment and could change given a change in circumstances, future events or as new information becomes available.
Further, the unavailability or delivery delays of raw materials has affected and could continue to affect our ability to ship the related products timely, more severely impacting high-volume or high-margin products. 26 Table of Contents Our operations are subject to the economic, political, legal and business environments of the countries in which we do business.
Further, the unavailability or delivery delays of raw materials has affected and could continue to affect our ability to ship the related products timely, more severely impacting high-volume or high-margin products. Our operations are subject to the economic, political, legal and business environments of the countries in which we do business.
To the extent future ERP or other integration or carve-out activities are required for future acquisitions, divestitures or joint ventures, we could be required to deploy significant resources and attention to these efforts.
To the extent integration or carve-out activities are required for future acquisitions, divestitures or joint ventures, we could be required to deploy significant resources and attention to these efforts.
Our future success depends partly on the continued service of our highly qualified and well-trained key research, engineering, sales, marketing, manufacturing, executive and administrative personnel. We face intense competition for these qualified personnel from our competitors and others, particularly for certain highly technical specialties in geographic areas where we recruit.
Our future success depends partly on the continued service of our highly qualified and well-trained key research, engineering, sales, marketing, manufacturing, executive and administrative personnel. We face intense competition for these qualified personnel, particularly for certain highly technical specialties in geographic areas where we recruit.
The resulting decrease in our prices could have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents For our pet health products, increased use of alternative distribution channels, or changes within existing distribution channels, could negatively impact our market share, margins and distribution of our products.
The resulting decrease in our prices could have a material adverse effect on our business, financial condition and results of operations. For our pet health products, increased use of alternative distribution channels, or changes within existing distribution channels, could negatively impact our market share, margins and distribution of our products.
These matters may include, among other things, allegations of violation of U.S. and/or foreign competition laws, labor laws, securities laws and regulations, consumer protection laws and environmental laws and regulations, as well as claims or litigation relating to product liability, intellectual property, securities, breach of contract, tort and tax liabilities.
These matters may include, among other things, allegations of violation of U.S. and/or foreign competition laws, labor laws, securities laws and regulations, consumer protection, data privacy and environmental laws and regulations, as well as claims or litigation relating to product liability, intellectual property, securities, breach of contract, tariff, tort and tax liabilities.
If we fail or are perceived to fail, in any number of ESG matters, such as environmental stewardship, IDEA, good corporate governance, workplace conduct and support for local communities, or to effectively respond to changes in, or new, legal, regulatory or reporting requirements concerning climate change or other sustainability concerns, we may be subject to regulatory fines and penalties, and our reputation may suffer.
If we fail or are perceived to fail, in any number of ESG matters, such as environmental stewardship, human capital management, good corporate governance, workplace conduct and support for local communities, or to effectively respond to changes in, or new, legal, regulatory or reporting requirements concerning climate change or other sustainability concerns, we may be subject to regulatory fines and penalties, and our reputation may suffer.
In addition, antibiotic resistance concerns will likely result in additional restrictions or bans, expanded regulations or public pressure to further reduce the use of antibiotics in farm animals, increased demand for antibiotic-free protein or changes in the market acceptance or regulatory treatment of ionophores, any of which could materially adversely affect our business, financial condition and results of operations.
In addition, antibiotic resistance concerns could result in additional restrictions or bans, expanded regulations or public pressure to further reduce the use of medically important antibiotics in farm animals, increased demand for antibiotic-free protein or changes in the market acceptance or regulatory treatment of ionophores, any of which could materially adversely affect our business, financial condition and results of operations.
In addition to the negative impact on our cash flows, if we are not able to effectively manage the purchase and production of our inventories to match the timing of customer demand, we may face increased costs and the potential for our inventories to become unusable or obsolete.
In addition to the negative impact on our cash flows, if we are unable to effectively manage the purchase and production of our inventories to match the timing of customer demand, we may face increased costs and the potential for our inventories to become unusable or obsolete.
Our R&D relies on evaluations of animals, which may become subject to bans, additional restrictive regulations or increased attention from activism movements.
Our R&D relies on evaluations of animals and may become subject to bans, additional restrictive regulations or increased attention from activism movements.
If we are unable to successfully manage and implement any future restructuring plan, we may not achieve or sustain the expected growth or cost savings benefits of these activities, or do so within the expected timeframe, and in such instance, our financial condition and results of operations could be materially adversely impacted.
If we are unable to successfully manage and implement any future restructuring plan or other significant organization change, we may not achieve or sustain the expected growth or cost savings benefits of these activities, or do so within the expected timeframe, and in such instance, our financial condition and results of operations could be materially adversely impacted.
Due principally to the sharp increase in long-term treasury rates in 2023, which led to an increased discount rate assumption relative to prior assessments, we recorded a $1,042 million pre-tax impairment charge.
For example, due principally to the sharp increase in long-term treasury rates in 2023, which led to an increased discount rate assumption relative to prior assessments, we recorded a $1,042 million pre-tax goodwill impairment charge.
In addition, products stolen or unlawfully diverted from inventory, warehouses, plants or while in transit; products which are not properly stored or which have an expired shelf life; and/or products which have been repackaged or relabeled and sold through unauthorized channels, could adversely impact animal health and safety, our reputation and our business.
In addition, products stolen or unlawfully diverted from inventory, warehouses, plants or while in transit; products which are not properly stored or which have an expired shelf life; and/or products which 30 Table of Contents have been repackaged or relabeled and sold through unauthorized channels, could adversely impact animal health and safety, our reputation and our business.
From time to time, we evaluate potential acquisitions, divestitures or joint ventures to further our strategic objectives. The completion of such transactions is often subject to conditions that may be outside our control, including obtaining the requisite approval of the shareholders of the target company and/or government antitrust/competition approvals.
From time to time, we evaluate potential acquisitions, divestitures or other significant transactions to further our strategic objectives. The completion of such transactions is often subject to conditions that may be outside our control, including obtaining the requisite approval of the shareholders of the target company and/or government antitrust/competition approvals.
Significant trade disruptions, or the establishment or increase of tariffs, trade protection measures or restrictions and/or any retaliatory actions from foreign governments, could result in lost 29 Table of Contents sales and increased costs.
Significant trade disruptions, or the establishment or increase of tariffs, trade protection measures or restrictions and/or any retaliatory actions from foreign governments, could result in lost sales and increased costs.
Given the volatility of exchange rates and despite the mitigating impact of foreign currency forward or option derivative contracts we enter into to reduce the effect of fluctuating currency exchange rates, there is no guarantee we will be able to effectively manage currency transaction and/or translation risks, which could adversely affect our results of operations. See Part II, Item 7A.
Given the volatility of exchange rates and despite the mitigating impact of foreign currency forward or option derivative contracts we enter into to reduce the effect of fluctuating currency exchange rates, there is no guarantee we will be able to effectively manage currency transaction and/or translation risks, which could adversely affect our results of operations.
Our trademarks and brands may provide us with a competitive advantage in the market as they may be known or trusted by consumers. In order to maintain the value of such brands, we must be able to enforce and defend our trademarks.
Our trademarks and brands provide us with a competitive advantage as they may be known or trusted by consumers, and in order to maintain the value of such brands, we must be able to enforce and defend our underlying intellectual property.
For example, in 2024 approximately 70% and 55% of the total revenue for our higher-margin parasiticide products Seresto and Advantage Family , respectively, was generated in the first half of the year, reflective of the flea and tick season in the Northern Hemisphere.
For example, in 2025 approximately 70% and 60% of the total revenue for our higher-margin parasiticide products Seresto and Advantage Family , respectively, was generated in the first half of the year, reflective of the flea and tick season in the Northern Hemisphere.
We are vigorously defending against the claims made in these and other lawsuits; however, the ultimate resolution cannot be predicted, and the claims raised in these lawsuits may result in further legal matters or actions against us, including, but not limited to, government enforcement actions or additional private litigation.
We are vigorously defending against the claims made in these and other lawsuits; however, their ultimate resolutions cannot be predicted with certainty, and the claims raised in these lawsuits may result in further legal matters or actions against us, including, but not limited to, government enforcement actions or additional private litigation.
In the event we are not able to 24 Table of Contents receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
In the event we are not able to receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
Any potential cyber breach could result in the unauthorized access, public disclosure, loss or theft of confidential data, or unauthorized access to, disruption of or interference with our operations that rely on information systems. Such breach could also have negative consequences, such as increased costs for security measures or remediation costs, and diversion of management attention (see Item 1C.
Any potential cyber breach could result in unauthorized access, public disclosure, loss or theft of confidential data, or disruption of or interference with our operations. Such breach could also have negative consequences, such as increased costs for security measures or remediation costs, and diversion of management attention. See Item 1C.
If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage of our R&D efforts or harm the value of our brands. Our long-term success depends on our ability to market innovative and competitive products.
If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage of our R&D efforts or harm the value of our brands. Our long-term success depends on our ability to market innovative and competitive products, many of which are based on or incorporate proprietary information.
Our credit facilities contain, and any other existing or future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • incur additional debt, guarantee indebtedness or issue certain preferred shares; • prepay, redeem or repurchase certain debt; • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments; • make loans or certain investments; • sell certain assets; • create liens on certain assets; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; and • substantially alter the businesses we conduct.
Certain of our credit facilities contain, and any future indebtedness of ours may contain, covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: 23 Table of Contents • incur additional debt, guarantee indebtedness or issue certain preferred shares; • pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments; • make loans or certain investments; • sell certain assets; • create liens on certain assets; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into certain transactions with our affiliates; and • substantially alter the business we conduct.
Once necessary regulatory approvals are obtained, the commercial success of any new product depends upon, among other things, its acceptance by veterinarians and end customers, and on our ability to successfully manufacture, market and distribute products in sufficient quantities to meet demand.
The commercial success of any new product depends upon, among other things, its acceptance by veterinarians and end customers, and on our ability to successfully manufacture, market and distribute products in sufficient quantities to meet demand.
We are primarily exposed to foreign exchange risk with respect to net assets denominated in the Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollar and Chinese yuan. To the extent revenue and expense transactions are not 27 Table of Contents denominated in the functional currency, we are also subject to the risk of transaction losses.
We are primarily exposed to foreign exchange rate risk with respect to the Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollar, Chinese yuan and Polish zloty. To the extent revenue and expense transactions are not denominated in the functional currency, we are also subject to the risk of transaction losses.
Any actual or perceived access, disclosure or other loss of information or any significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data, or our failure to comply with federal, state, local and foreign privacy laws or contractual obligations with customers, vendors, payment processors and other third parties, could result in legal claims or proceedings, liability under laws or contracts that protect the privacy of personal information, regulatory penalties, disruption of our operations and damage to our reputation, all of which could materially adversely affect our business, financial condition and results of operations.
Cybersecurity for further discussion of our risk management, strategy and governance policies and procedures related to cybersecurity. 31 Table of Contents Any actual or perceived access, disclosure or other loss of information or any significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data, or our failure to comply with federal, state, local and foreign privacy laws or contractual obligations with customers, vendors, payment processors and other third parties, could result in legal claims or proceedings, liability under laws or contracts that protect the privacy of personal information, regulatory penalties, disruption of our operations and damage to our reputation, all of which could materially adversely affect our business, financial condition and results of operations.
Concerns that the use of antibiotics in farm animal production may lead to increased antibiotic resistance of human pathogens have resulted in regulation and changing market demand. For example, in 2022 the EU began restricting the use of preventative antibiotics to farm animals through feed.
Concerns that the use of antibiotics in farm animal production may contribute to increased antibiotic resistance of human pathogens have resulted in regulation and changing market demand. For example, in 2022 the EU began restricting the use of preventative antibiotics to farm animals through feed, which has led to increased market demand for alternative antibiotic products.
We had approximately $4.3 billion of outstanding indebtedness at December 31, 2024. A significant amount of our cash flows from operations is dedicated to servicing this indebtedness and will not be available for other purposes, including our operating, investing or financing needs.
We had approximately $3.8 billion of outstanding indebtedness at December 31, 2025, excluding our finance lease liability. A significant amount of our cash flows from operations is dedicated to servicing this indebtedness and will not be available for other purposes, including our operating, investing or financing needs.
Furthermore, the timing and cost of our R&D may increase, and our R&D may become less predictable as, among other things, regulations applicable to our industry make it more time-consuming and/or costly to research, develop and register products.
Furthermore, the timing and cost of our R&D may increase, and our R&D may become less predictable as, among other things, regulations applicable to our industry may make it more time-consuming and/or costly to research, develop and register products. For example, in December 2025, the U.S.
In addition, if we are unable to maintain our existing license agreements or other agreements pursuant to which third parties grant us rights to intellectual property, including because such agreements terminate, our business, financial condition and results of operations could be materially adversely affected.
Also, if we are unable to maintain our existing license agreements or other agreements pursuant to which third parties grant us rights to intellectual property, our business, financial condition and results of operations could be materially adversely affected.
For example, in September 2024 one of our contract manufacturing supply partners, TriRx Speke, entered into trading administration, a formal insolvency process in the U.K. In November 2024, in an effort to minimize supply disruption, we acquired this manufacturing site from TriRx Speke for approximately $36 million (see Note 4.
For example, in September 2024 one of our contract manufacturing supply partners, TriRx Speke, entered into trading administration, a formal insolvency process in the U.K. In November 2024, we acquired this manufacturing site for approximately $36 million in an effort to minimize supply disruption (see Note 4. Acquisitions and Divestitures to the consolidated financial statements for further information).
More stringent regulation of the farm animal sector, including regarding the use of farm animal products, could have a material adverse effect on our business, financial condition and results of operations. Tariffs, trade protection measures or other modifications of foreign trade policy may harm us or our customers.
More stringent regulation of and/or decreased governmental financial support for the farm animal sector could have a material adverse effect on our business, financial condition and results of operations. Tariffs, trade protection measures or other modifications of foreign trade policy may harm us or our customers.
We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. We also face competition from producers of nutritional health products. These competitors may have access to greater financial, marketing, technical and other resources.
We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. These competitors may have access to greater financial, marketing, technical and other resources.
Introduction or acceptance of competing animal health products and innovation or disruptive protein alternatives could materially adversely affect our business, financial condition and results of operations. Generic products may be viewed as more cost-effective than our products. In certain markets, we face competition from generic alternatives to our products.
Introduction or acceptance of competing animal health products and innovation or disruptive protein alternatives could materially adversely affect our business, financial condition and results of operations. Generic products may be viewed as more cost-effective than our products.
If farm animal producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd or flock sizes or become less profitable and, as a result, they may reduce their use of our products, which may materially adversely affect our business, financial condition and results of operations.
If farm animal producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd or flock sizes or become less profitable and, as a result, they may reduce their use of our products.
In certain markets, including the U.S., sales of certain of our farm animal products have been negatively affected by changes in consumer sentiment for proteins and dairy products produced without the use of antibiotics or other products intended to increase animal production.
Our operational results have been, and may continue to be, affected by regulations and changing market demand. In certain markets, including the U.S., sales of certain of our farm animal products have been negatively affected by changes in consumer sentiment for proteins and dairy products produced without the use of antibiotics or other products intended to increase animal production.
Such liability could materially adversely affect our business, financial condition and results of operations. 33 Table of Contents Our failure to comply with the EHS laws and regulations to which we are subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures.
Our failure to comply with the EHS laws and regulations to which we are subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures.
If we are unable to successfully bring a product to market, our business, financial condition and results of operations could be materially adversely affected. Disruptive innovation and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein could negatively affect the markets for our products.
If we are unable to generate and bring commercially successful new products to market, or expand the use of our existing products, our business, financial condition and results of operations could be materially adversely affected. Disruptive innovation and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein could negatively affect the markets for our products.
Ionophores are a special class of animal-only antimicrobials, and because of their animal-only designation, mode of action and spectrum of activity, to date their use has not been materially impacted by regulations or changing market demand in many international markets.
In 2025, 89% of our revenue from animal-only antibiotics resulted from the sale of ionophores, which are a special class of animal-only antimicrobials. To date, because of their animal-only designation, mode of action and spectrum of activity, the use of ionophores has not been materially impacted by regulations or changing market demand in many international markets.
Our top five products and/or product families, Advantage Family, Seresto , Rumensin , Maxiban / Monteban and C redelio Family represented approximately 36% of our total revenue in 2024, with our largest product family, Advantage Family , representing approximately 10% of total revenue.
Our top five products and/or product families, Advantage Family, Seresto , Credelio Family , Rumensin and Maxiban / Monteban represented approximately 38% of our total revenue in 2025, with our largest product family, Advantage Family , representing approximately 10% of total revenue.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor more information on potential risks related to cybersecurity threats and incidents, please see "Item 1A.
Biggest changeFor the year ended December 31, 2025, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. For more information on potential risks related to cybersecurity threats and incidents, please see Item 1A.
Our information security governance oversees the process of coordinating the cybersecurity team(s) responsible for the mitigating of business risks posed by IT-related resources. Our governance framework of authority and accountability ensures prioritized initiatives have the required structure, sponsorship and funding to appropriately address the foreseen risks.
Our information security governance oversees the process of coordinating the cybersecurity team(s) responsible for the mitigating of business risks posed by IT-related resources. Our governance framework of authority and accountability ensures that prioritized initiatives have the required structure, sponsorship and funding to appropriately address the foreseen risks.
We have established an information security team which is structured into three areas, that all report directly to our Chief Information Security Officer (CISO): 1) Governance, Risk and Compliance; 2) Architecture; and 3) Operations (Detect and Respond).
We have established an information security team which is structured into three areas, all of which report directly to our Chief Information Security Officer (CISO): 1) Governance, Risk and Compliance; 2) Architecture; and 3) Operations (Detect and Respond).
Any incident deemed high severity would result in notification by the CISO to the Cyber Lead team to determine the appropriate actions to be taken. This determination would be made by the Cyber Lead team based on both qualitative and quantitative 35 Table of Contents factors regarding the extent and magnitude of the incident.
Any incident deemed high severity would result in notification by the CISO to the Cyber Lead team to determine the appropriate actions to be taken. This determination would be made by the Cyber Lead team based on both qualitative and quantitative factors regarding the extent and magnitude of the incident.
According to our ISIRP, our Board of Directors would also be notified of any high severity incidents deemed material, simultaneously with the notification to the Disclosure Committee, and would be kept apprised of actions taken in response to such incidents.
According to our ISIRP, our Board of Directors would also be notified of any high severity incidents deemed material, simultaneously with the notification to the Disclosure Committee, and would be kept apprised of actions taken in response to such incidents. 34 Table of Contents
Risk Factors – Breaches of our IT systems or improper disclosure of confidential company or personal data, or a failure to comply with privacy laws, regulations and our contractual obligations concerning data privacy or the security of certain information, could have a material adverse effect on our reputation and operations." Management’s Responsibilities Management is responsible for executing the Cybersecurity Risk Management, Strategy and Governance policies outlined above.
Risk Factors – Breaches of our IT systems or improper disclosure of confidential company or personal data, or a failure to comply with privacy laws, regulations and our contractual obligations concerning data privacy or the security of certain information, could have a material adverse effect on our reputation and operations.
Our information security team includes professionals with relevant industry, educational and cybersecurity experience. Governance, Risk and Compliance : Our approach to cybersecurity governance, risk and compliance is based on overarching guidelines, standards and best practices developed by the U.S. National Institute of Standards and Technology (NIST), a department of the U.S. Department of Commerce.
Governance, Risk and Compliance : Our approach to cybersecurity governance, risk and compliance is based on overarching guidelines, standards and best practices developed by the U.S. National Institute of Standards and Technology (NIST), a department of the U.S. Department of Commerce.
Where viable, IT services are individually secured and monitored at the source, following the principle of least privilege. Operations (Detect and Respond) : In the event of a cybersecurity incident, the Elanco Information Security Incident Response Plan (ISIRP) defines the roles, responsibilities, procedures and reporting processes required to respond effectively to cybersecurity incidents.
Operations (Detect and Respond) : In the event of a cybersecurity incident, the Elanco Information Security Incident Response Plan (ISIRP) defines the roles, responsibilities, procedures and reporting processes required to respond effectively to cybersecurity incidents.
Our risk management process assesses both the probable frequency and probable magnitude of future loss based on a variety of potential risks and cyber events.
Our risk management process assesses likelihood and impact based on a variety of potential risks and cyber events.
Our current CISO, who reports directly to our Chief Information Officer (CIO), has over 17 34 Table of Contents years of experience in various roles involving information technology governance and compliance, including cybersecurity, engineering and enterprise architecture, while our CIO has over 25 years of IT and cybersecurity experience.
Our current CISO, who reports directly to our Chief Financial Officer (CFO), has over 18 years of experience in various roles involving information technology governance and compliance, including cybersecurity, engineering and enterprise architecture. Our information security team includes professionals with relevant industry, educational and cybersecurity experience.
In the event an incident is escalated by the Cyber Lead team, the Disclosure Committee, led by our Chief Financial Officer and General Counsel, would evaluate all estimable quantitative and qualitative factors, to determine if a Current Report on Form 8-K would be required under Item 1.05, “Material Cybersecurity Incidents.” For the year ended December 31, 2024, we have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
In the event an incident is escalated by the Cyber Lead team, the Disclosure Committee, led by our Chief Financial Officer and General Counsel, would evaluate all estimable quantitative and qualitative factors to determine if a Current Report on Form 8-K would be required under Item 1.05, “Material Cybersecurity Incidents.” The ISIRP is reviewed and updated at least once annually.
Architecture : Our information security architecture is focused on designing IT-related solutions that are foundationally secure. Our information security architecture assumes that internal and external threats always exist, and that all networks are inherently hostile. Accordingly, all connections accessing business assets must first be authenticated and authorized.
We also engage an independent third party to conduct comprehensive assessments of our cybersecurity program approximately every 18 months. Architecture : Our information security architecture is focused on designing IT-related solutions that are foundationally secure. Our information security architecture assumes that internal and external threats always exist, and that all networks are inherently hostile.
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Accordingly, all connections accessing business assets must first be 33 Table of Contents authenticated and authorized. Where viable, IT services are individually secured and monitored at the source, following the principle of least privilege.
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Management’s Responsibilities Management is responsible for executing the Cybersecurity Risk Management, Strategy and Governance policies outlined above.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The address of our global headquarters is currently 2500 Innovation Way, Greenfield, IN 46140. We plan to relocate our global headquarters to a new office building in Indianapolis, Indiana, with occupancy expected in 2025. Our global manufacturing network is comprised of 17 manufacturing sites. Our largest manufacturing site is located in Clinton, Indiana.
Biggest changeITEM 2. PROPERTIES The address of our global headquarters is 450 Elanco Circle, Indianapolis, Indiana 46221. Our global manufacturing network is comprised of 16 manufacturing sites. Our largest manufacturing site is located in Clinton, Indiana. Our global manufacturing network is also supplemented by approximately 140 CMOs.
Our global manufacturing network is also supplemented by approximately 130 CMOs. We have R&D operations co-located with certain of our manufacturing sites to facilitate the efficient transfer of production processes from our laboratories to manufacturing. In addition, we maintain R&D operations at non-manufacturing locations in the U.S., Germany, Australia, Brazil, China, India and Switzerland.
We have R&D operations co-located with certain of our manufacturing sites to facilitate the efficient transfer of production processes from our laboratories to manufacturing. In addition, we maintain R&D operations at non-manufacturing locations in the U.S., Germany, Australia, Brazil, China, India and Switzerland. Our R&D headquarters is located in Indianapolis, Indiana.
We believe our existing properties, as supplemented by CMOs, are adequate for our current requirements and our operations in the near future.
We own or lease various additional properties for other business purposes, including office space, warehouses and logistics centers. We believe our existing properties, as supplemented by CMOs, are adequate for our current requirements and our operations in the near future.
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Our R&D headquarters is currently located in Greenfield, Indiana and will relocate to Indianapolis, Indiana when we relocate our global headquarters, expected in 2025. We own or lease various additional properties for other business purposes, including office space, warehouses and logistics centers.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On September 20, 2018, our common stock began trading on the New York Stock Exchange under the symbol “ELAN.” Holders There were 184 holders of record of our common stock as of February 20, 2025.
Biggest changeMARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On September 20, 2018, our common stock began trading on the New York Stock Exchange under the symbol “ELAN.” As of February 19, 2026, there were 167 holders of record of our common stock, which does not include the number of shareholders who hold shares of our common stock through banks, brokers or other financial institutions.
Performance Graph The following graph compares the return on Elanco's common stock with that of the S&P 500 Stock Index and the S&P 500 Pharmaceuticals Index over the five-year period ended on December 31, 2024. The graph assumes that $100 was invested on December 31, 2019, in Elanco common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index.
Performance Graph The following graph compares the return on Elanco's common stock with that of the S&P 500 Stock Index and the S&P 500 Pharmaceuticals Index over the five-year period ended on December 31, 2025. The graph assumes that $100 was invested on December 31, 2020, in Elanco common stock, the S&P 500 Index and the S&P 500 Pharmaceuticals Index.
This does not include the number of shareholders who hold shares of our common stock through banks, brokers or other financial institutions. Dividend Policy We do not anticipate paying dividends on our common stock in the foreseeable future; however, we may change our dividend policy at any time.
Dividend Policy We do not anticipate paying dividends on our common stock in the foreseeable future; however, we may change our dividend policy at any time.
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December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Elanco Animal Health Inc. $ 100.00 $ 104.14 $ 96.37 $ 41.49 $ 50.59 $ 41.12 S&P 500 Index 100.00 118.39 152.34 124.73 157.48 196.88 S&P 500 Pharmaceuticals Index 100.00 107.53 135.21 146.65 147.13 159.21 37 Table of Contents
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December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 Elanco Animal Health Inc. $ 100.00 $ 92.53 $ 39.84 $ 48.58 $ 39.49 $ 73.79 S&P 500 Index 100.00 128.68 105.35 133.02 166.30 193.55 S&P 500 Pharmaceuticals Index 100.00 125.75 136.84 136.84 148.07 183.44

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, (Dollars in millions) 2024 2023 % Change Revenue $ 4,439 $ 4,417 —% Costs, expenses and other: Cost of sales 2,003 1,931 4% % of revenue 45 % 44 % Research and development 344 327 5% % of revenue 8 % 7% Marketing, selling and administrative 1,314 1,285 2% % of revenue 30 % 29% Amortization of intangible assets 527 548 (4)% Asset impairment, restructuring and other special charges 150 127 18% Goodwill impairment — 1,042 NM Gain on divestiture (640) — NM Interest expense, net of capitalized interest 235 277 (15)% Other expense, net 18 75 (76)% Income (loss) before income taxes 488 (1,195) NM Income tax expense 150 36 NM Net income (loss) $ 338 $ (1,231) NM Certain amounts and percentages may reflect rounding adjustments.
Biggest changeYear Ended December 31, (Dollars in millions) 2025 2024 % Change Revenue $ 4,715 $ 4,439 6% Cost of sales 2,122 2,003 6% Gross profit 2,593 2,436 6% Research and development 368 344 7% Marketing, selling and administrative 1,430 1,314 9% Amortization of intangible assets 543 527 3% Asset impairment, restructuring and other special charges 237 150 58% Gain on divestiture — (640) NM Interest expense, net of capitalized interest 220 235 (6)% Other expense, net 19 18 6% (Loss) income before income taxes (224) 488 NM Income tax expense 8 150 (95)% Net (loss) income $ (232) $ 338 NM NM - Not meaningful Revenue Our products are sold in more than 90 countries, and as a result, a significant portion of our revenue is recorded in currencies other than the U.S. dollar.
We believe our primary sources of liquidity are sufficient to fund our short-term and long-term existing and planned capital requirements, which include working capital obligations, funding existing marketed and pipeline products, capital expenditures, business development in our targeted areas, short-term and long-term debt obligations, including both principal and interest payments, as well as interest rate swaps, operating lease payments, purchase obligations and costs associated with mergers, acquisitions, divestitures, business integrations and/or restructuring activities.
We believe our primary sources of liquidity are sufficient to fund our short-term and long-term existing and planned capital requirements, which include working capital obligations, funding existing marketed and pipeline products, capital expenditures, business development in our targeted areas, short-term and long-term debt obligations, including both principal and interest payments, as well as interest rate swaps, lease payments, purchase obligations and costs associated with mergers, acquisitions, divestitures, business integrations and/or restructuring activities.
Based on that qualitative assessment, if we conclude it is more likely than not that the fair value is less than its carrying value, we conduct a quantitative impairment test, which involves comparing the estimated fair value of our single reporting unit to its carrying value.
Based on this qualitative assessment, if we conclude it is more likely than not that the fair value is less than its carrying value, we conduct a quantitative impairment test, which involves comparing the estimated fair value of our single reporting unit to its carrying value.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction Management’s discussion and analysis of financial condition and results of operations (MD&A) is intended to assist the reader in understanding and assessing significant changes and trends related to our results of operation and financial position.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction Management’s discussion and analysis of financial condition and results of operations (MD&A) is intended to assist the reader in understanding and assessing significant changes and trends related to our results of operations and financial position.
Results of Operations The following discussion and analysis of the consolidated statements of operations should be read along with the consolidated financial statements and the notes thereto included in Item 8. Financial Statements and Supplementary Data .
Results of Operations The following discussion and analysis of our results of operations should be read along with the consolidated financial statements and the notes thereto included in Item 8. Financial Statements and Supplementary Data.
Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period.
Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of the financial statements and during the reporting period.
For significant acquisitions, we normally engage an independent valuation specialist to assist in valuing significant assets and liabilities. Divestitures Determining the gain or loss on the divestiture of a business under GAAP requires us to allocate a portion of our single reporting unit's goodwill to the divested business' carrying value (the disposal group).
For significant acquisitions, we normally engage an independent valuation specialist to assist in valuing significant assets and liabilities. 44 Table of Contents Divestitures Determining the gain or loss on the divestiture of a business under GAAP requires us to allocate a portion of our single reporting unit's goodwill to the divested business' carrying value (the disposal group).
Assets sold included inventories, real property and equipment, including our manufacturing sites in Canada and Vietnam, and certain intellectual property, technology and other intangible assets, including marketed products. 39 Table of Contents Along with these assets, approximately 280 commercial and manufacturing employees were transferred to Merck Animal Health as part of this divestiture.
Assets sold included inventories, real property and equipment, including our manufacturing sites in Canada and Vietnam, and certain intellectual property, technology and other intangible assets, including marketed products. Along with these assets, approximately 280 commercial and manufacturing employees were transferred to Merck Animal Health as part of this divestiture.
This can be a result of various factors, such as end customer demand, new customer contracts, heightened and generic competition, the need for certain inventory levels, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, unexpected customer behavior, proactive measures taken by us in response to shifting market dynamics, payment terms we extend, which are subject to internal policies, blackout shipping periods due to system downtime, implementations and integrations and procedures and environmental factors beyond our control.
This can be a result of various factors, such as end customer demand, new customer contracts, initial stocking of new products, heightened and generic competition, the need for certain inventory levels, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, unexpected customer behavior, proactive measures taken by us in response to 39 Table of Contents shifting market dynamics, payment terms we extend, which are subject to internal policies, blackout shipping periods due to system downtime, implementations and integrations and procedures and environmental factors beyond our control.
Our effective tax rate of 31% in 2024 differed from the statutory income tax rate primarily due to the income tax associated with the gain on the divestiture of our aqua business, jurisdictional earnings mix of income in higher tax jurisdictions and losses for which no tax benefit was recognized.
Our effective tax rate of 30.7% in 2024 differed from the statutory income tax rate primarily due to the income tax associated with the gain on the divestiture of our aqua business, jurisdictional earnings mix of income in higher tax jurisdictions and losses for which no tax benefit was recognized.
The following is a summary of accounting estimates that we consider critical to our consolidated financial statements. Revenue Recognition Our gross product revenue is subject to reductions that are generally estimated and recorded in the same period the revenue is recognized and primarily represent revenue incentives (rebates and discounts).
The following is a summary of accounting estimates that we consider critical to our consolidated financial statements. Revenue Recognition Our gross product revenue is subject to reductions, including revenue incentives (rebates and discounts), that are generally estimated and recorded in the same period the revenue is recognized.
As of December 31, 2024, we had $125 million in undrawn borrowing capacity on this facility. We also have the ability to access capital markets to obtain debt financing for longer-term funding, if required. Further, we believe we have sufficient cash flow and liquidity to remain in compliance with our debt covenants.
As of December 31, 2025, we had approximately $120 million in undrawn borrowing capacity on this facility. We also have the ability to access capital markets to obtain debt financing for longer-term funding, if required. Further, we believe we have sufficient cash flow and liquidity to remain in compliance with our debt covenants.
For results of operations discussions related to the years ended December 31, 2023 and 2022, refer to Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the SEC on February 26, 2024.
For results of operations discussions related to the years ended December 31, 2024 and 2023, refer to Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 2024 , filed with the SEC on February 25, 2025.
Income tax expense in 2024 included approximately $170 million related to income tax associated with the taxable gain on the divestiture of our aqua business.
Income tax expense in 2024 included $170 million associated with the taxable gain on the divestiture of our aqua business.
As of December 31, 2024, we had cash and cash equivalents of $468 million and unused borrowing capacity on our Revolving Credit Facility of approximately $750 million. In addition, our Securitization Facility provides for additional borrowing capacity based on our U.S. Net Eligible Receivables Balances.
As of December 31, 2025, we had cash and cash equivalents of $545 million and unused borrowing capacity on our Revolving Credit Facility of approximately $750 million. In addition, our Securitization Facility provides for additional borrowing capacity based on our U.S. Net Eligible Receivable Balances.
Investing Activities Cash provided by investing activities was $1,158 million for the year ended December 31, 2024, and was driven by cash proceeds of $1,294 million from the sale of our aqua business in July 2024, and to a lesser extent, the collection of a $66 million receivable related to the previous divestiture of our Shawnee and Speke facilities.
Cash provided by investing activities in 2024 was driven by the cash proceeds of $1,294 million from the sale of our aqua business and to a lesser extent, the collection of a $66 million receivable related to the previous divestiture of our Shawnee and Speke facilities.
We anticipate we will continue to record a valuation allowance against the losses until such time as we are able to determine it is “more likely than not” that the deferred tax asset will be realized. Recently Issued Accounting Pronouncements For discussion of our new accounting standards, see "Item 8. Financial Statements and Supplementary Data — Note 2.
We anticipate we will continue to record a valuation allowance against the losses until such time as we are able to determine it is “more likely than not” that the deferred tax assets will be realized. Recently Issued Accounting Pronouncements For discussion of our new accounting standards, see Note 2.
Significant management judgment was required in estimating the fair value of our single reporting unit, including, but not limited to, estimates and assumptions regarding future cash flows of our single reporting unit, revenue growth and other profitability measures, such as gross margin and earnings before interest, taxes, depreciation and amortization (EBITDA) margin and the determination of an appropriate discount rate.
Significant management estimates required in such an analysis include, but are not limited to, estimates and assumptions regarding future cash flows of our single reporting unit, revenue growth and other profitability measures, such as gross margin and earnings before interest, taxes, depreciation and amortization (EBITDA) margin and the determination of an appropriate discount rate.
Revenue to the consolidated financial statements for further discussion regarding our revenue recognition policy and quantitative information regarding our rebate programs, respectively. 45 Table of Contents Acquisitions and Divestitures Acquisitions We account for assets acquired and liabilities assumed in a business combination based on their respective fair values as of the acquisition date.
Summary of Significant Accounting Policies and Note 3. Revenue to the consolidated financial statements for further discussion regarding our revenue recognition policy and quantitative information regarding our global sales rebate programs, respectively. Acquisitions and Divestitures Acquisitions We account for assets acquired and liabilities assumed in a business combination based on their respective fair values as of the acquisition date.
Asset Impairment, Restructuring and Other Special Charges Year Ended December 31, (Dollars in millions) 2024 2023 % Change Asset impairment, restructuring and other special charges $ 150 $ 127 18 % Amounts recorded to asset impairment, restructuring and other special charges during the year ended December 31, 2024, included a $53 million impairment charge related to the write-off of a pet health IPR&D asset, $44 million of costs associated with the restructuring plan discussed above, $18 million of acquisition and divestiture-related charges, primarily associated with our aqua business divestiture, and $15 million of asset impairments tied to the financial difficulties of our former contract manufacturing supply partner, TriRx, the largest of which was a $12 million impairment of a contract asset related to a favorable supply agreement.
Amounts recorded to asset impairment, restructuring and other special charges during the year ended December 31, 2024, included a $53 million impairment charge related to the write-off of a pet health IPR&D asset, $44 million of costs associated with the 2024 Restructuring Plan, $18 million of acquisition and divestiture-related charges, primarily associated with our aqua business divestiture, and $15 million of asset impairments tied to the financial difficulties of our former contract manufacturing supply partner, TriRx Speke.
We recorded a pre-tax gain on divestiture of $640 million, while income tax expense associated with this gain was approximately $170 million, a majority of which is payable in 2025. See Note 4. Acquisitions, Divestitures and Other Arrangements to the consolidated financial statements for further information.
We recorded a pre-tax gain on divestiture of $640 million in 2024. Income tax expense associated with this gain on divestiture was $170 million. See Note 4. Acquisitions and Divestitures to the consolidated financial statements for further information.
For the years ended December 31, 2024 and 2023, approximately 53% and 51%, respectively, of our revenue was denominated in foreign currencies. Further, increases or decreases in inventory levels in our distribution channels can positively or negatively impact our periodic revenue results, leading to variations in revenue.
Because of this, our revenue is influenced by changes in foreign currency exchange rates. For the years ended December 31, 2025 and 2024, approximately 51% and 53%, respectively, of our revenue was denominated in foreign currencies. Further, increases or decreases in inventory levels in our distribution channels can positively or negatively impact our periodic revenue, leading to variations.
When required, a comparison of fair value to the carrying amount of our reporting unit is performed to determine the amount of impairment, if any. We begin by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value.
We begin by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value.
This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in Item 8 of Part II of this Form 10-K. Certain statements in this Item 7 of Part II of this Form 10-K constitute forward-looking statements. Various risks and uncertainties, including those discussed in "Forward-Looking Statements and Risk Factor Summary" and Item 1A.
This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in Item 8 of Part II of this Form 10-K. Certain statements in this Item 7 of Part II of this Form 10-K constitute forward-looking statements.
Credelio Quattro : In October 2024, we received final approval from the FDA for Credelio Quattro , a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms and three different species of tapeworms. Credelio Quattro was launched, with the first commercial sale occurring in January 2025.
Credelio Quattro : In October 2024, we received final FDA approval for Credelio Quattro , a monthly chewable tablet for dogs that protects against fleas, ticks, heartworms, roundworms, hookworms and three different species of tapeworms. Credelio Quattro was launched in January 2025, and in December 2025 we also received conditional approval for treatment of the New World screwworm.
Our revenue by product category for the years ended December 31, 2024 and 2023, was as follows: Revenue % of Total Revenue (Dollars in millions) 2024 2023 2024 2023 $ Change % Change Pet Health $ 2,143 $ 2,104 48 % 48 % $ 39 2 % Farm Animal 2,250 2,271 51 % 51 % (21) (1) % Contract Manufacturing and Other (1) 46 42 1 % 1 % 4 10 % Total $ 4,439 $ 4,417 100 % 100 % $ 22 — % Note: Numbers may not add due to rounding (1) Represents revenue from arrangements in which we manufacture products on behalf of a third party and royalty revenue.
Our revenue by product category for the years ended December 31, 2025 and 2024, was as follows: Revenue % of Total Revenue (Dollars in millions) 2025 2024 2025 2024 $ Change % Change Pet Health $ 2,300 $ 2,143 49 % 48 % $ 157 7 % Farm Animal 2,362 2,250 50 % 51 % 112 5 % Contract Manufacturing and Other (1) 53 46 1 % 1 % 7 15 % Total $ 4,715 $ 4,439 100 % 100 % $ 276 6 % Note: Numbers may not add due to rounding (1) Represents revenue from arrangements in which we manufacture products on behalf of a third party and royalty revenue.
The effects of price, foreign currency exchange rates, volume changes and the impact of the divestiture of our aqua business on changes in revenue for the year ended December 31, 2024, as compared to the prior year, were as follows: (Dollars in millions) Revenue Price FX Rate Volume Divestiture Total Pet Health $ 2,143 3% —% (1)% —% 2% Farm Animal 2,250 2% (1)% 2% (4)% (1)% Contract Manufacturing and Other 46 10% Total $ 4,439 3% (1)% —% (2)% —% Pet health revenue increased $39 million, or 2%, driven by a 3% increase in pricing, partially offset by slightly lower volumes.
The effects of price, foreign currency exchange rates, volume and the impact of the prior year divestiture of our aqua business on changes in revenue for the year ended December 31, 2025, as compared to the prior year, were as follows: (Dollars in millions) Revenue Price FX Rate Volume Divestiture Total Pet Health $ 2,300 2% —% 5% —% 7% Farm Animal 2,362 2% 1% 6% (4)% 5% Contract Manufacturing and Other 53 15% Total $ 4,715 2% 1% 5% (2)% 6% Pet health revenue increase d $157 million, or 7%, compared to 2024, driven by higher volumes and a 2% increase in pricing.
Income Tax Expense Year Ended December 31, (Dollars in millions) 2024 2023 % Change Income tax expense 150 36 NM Effective tax rate 31 % (3) % Income tax expense was $150 million in 2024 compared to $36 million in 2023.
Income Tax Expense Year Ended December 31, (Dollars in millions) 2025 2024 % Change Income tax expense $ 8 $ 150 (95)% Effective tax rate (3.5) % 30.7 % Income tax expense was $8 million in 2025 compared to $150 million in 2024.
These fair value estimates require significant judgment with respect to future revenues and earnings before interest and taxes (EBIT) margins, use of working capital, the selection of appropriate discount rates, product mix, income tax rates and other assumptions and estimates.
These fair value estimates require significant judgment with respect to future revenue and earnings before interest and taxes (EBIT) margins, use of working capital, the selection of appropriate discount rates, product mix, income tax rates and other assumptions and estimates. Such estimates and assumptions are determined based upon our business plans and, when applicable, the perspectives of market participants.
Such estimates and assumptions are determined based upon our business plans and, when applicable, market participants' views of us and similar companies. We often utilize an income approach, which is a valuation technique that provides an estimate of fair value based on market participant expectations of the cash flows an asset would generate over its remaining useful life.
We often utilize an income approach, which is a valuation technique that provides an estimate of fair value based on market participant expectations of the cash flows an asset would generate over its remaining useful life.
Our future growth and success depend on both our pipeline of new products, including new products we develop internally, develop with partners or that we obtain through licenses or acquisitions, and the life cycle management of our existing products.
We continue to pursue the development of new chemical and biological molecules, as well as additional registrations and indications for current products. Our future growth and success depend on both our pipeline of new products, including new products we develop internally, with partners or obtain through licenses or acquisitions, and the life cycle management of our existing products.
Goodwill and Intangibles to the consolidated financial statements. 42 Table of Contents Gain on divestiture Year Ended December 31, (Dollars in millions) 2024 2023 % Change Gain on divestiture $ (640) $ — NM As discussed above, we recorded a pre-tax gain of $640 million on the divestiture of our aqua business during the third quarter of 2024.
Gain on Divestiture Year Ended December 31, (Dollars in millions) 2025 2024 % Change Gain on divestiture $ — $ (640) NM As discussed above, we recorded a pre-tax gain of $640 million on the divestiture of our aqua business in 2024. For additional information, see Note 4. Acquisitions and Divestitures to the consolidated financial statements.
As a significant portion of our business is conducted internationally, we hold a significant portion of cash outside the U.S. We monitor and adjust the amount of foreign cash based on projected cash flow requirements.
Liquidity and Capital Resources Our primary sources of liquidity are cash on hand, cash flows from operations and funds available under our credit facilities. As a significant portion of our business is conducted internationally, we hold a significant portion of cash outside the U.S. We monitor and adjust the amount of foreign cash based on projected cash flow requirements.
As market conditions change, we will continue to monitor our liquidity position. However, a challenging economic environment or an economic downturn may impact our liquidity or ability to obtain future financing. See "Item 1A.
However, a challenging economic environment or an economic downturn may impact our liquidity or ability to obtain future financing. See Item 1A. Risk Factors — We have substantial indebtedness.
For estimates related to revenue incentives, we use our historical experience with similar incentives programs, current sales data and estimates of inventory levels at our channel distributors to estimate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary.
In making these estimates and assumptions, we use our historical experience with similar incentives programs, current sales data and contract information and estimates of inventory levels at our channel distributors, among other factors, to estimate the impact of such programs on revenue.
Under current tax laws, the valuation allowance will not limit our ability to utilize U.S. deferred tax assets provided we can generate sufficient future taxable income in the U.S.
Accordingly, we have recorded valuation allowances of $207 million and $218 million as of December 31, 2025 and 2024, respectively, against these deferred tax assets. Under current tax laws, the valuation allowance will not limit our ability to utilize U.S. deferred tax assets provided we can generate sufficient future taxable income in the U.S.
Asset Impairment, Restructuring and Other Special Charges to the consolidated financial statements for further information on these acquisition and integration activities. Restructuring Activities: In February 2024, our Board of Directors authorized a restructuring plan (the restructuring plan) to improve operational efficiencies and better align our organizational structure with current business needs, top strategic priorities and key growth opportunities.
Additionally, in February 2024 our Board of Directors authorized a separate restructuring plan (the 2024 Restructuring Plan) to improve operational efficiencies and better align our organizational structure with business needs, top strategic priorities and key growth opportunities.
Risk Factors - We have substantial indebtedness." Cash Flows The following table provides a summary of cash flows from operating, investing and financing activities for the years ended December 31, 2024 and 2023: (in millions) Net cash provided by (used for): 2024 2023 $ Change Operating activities $ 541 $ 271 $ 270 Investing activities 1,158 (169) 1,327 Financing activities (1,492) (83) (1,409) Effect of exchange rate changes on cash and cash equivalents (91) (12) (79) Net increase in cash and cash equivalents $ 116 $ 7 $ 109 Operating Activities Cash provided by operating activities increased $270 million to $541 million for the year ended December 31, 2024, compared to $271 million for the year ended December 31, 2023.
Cash Flows The following table provides a summary of cash flows from operating, investing and financing activities for the years ended December 31, 2025 and 2024: (in millions) Net cash provided by (used for): 2025 2024 $ Change Operating activities $ 560 $ 541 $ 19 Investing activities (279) 1,158 (1,437) Financing activities (275) (1,492) 1,217 Effect of exchange rate changes on cash and cash equivalents 71 (91) 162 Net increase in cash and cash equivalents $ 77 $ 116 $ (39) Operating activities Cash provided by operating activities increased $19 million compared to 2024.
As a result, we have concluded that it is “more likely than not” that a portion of the U.S. deferred assets will not be utilized, and have recorded valuation allowances of $218 million and $289 million, respectively, against these deferred tax assets.
As of December 31, 2025 and 2024, we had consolidated valuation allowances of $246 million and $269 million, respectively. In recent years we have incurred pre-tax losses in the U.S., and as a result we have concluded that it is “more likely than not” that a portion of our U.S. deferred tax assets will not be utilized.
Specifically, the restructuring plan was intended to reallocate resources by shifting international resources from farm animal to pet health as we plan for the global launches of certain potential blockbuster products. Further, the restructuring plan impacted how we operate in and sell into the Argentina market, among others, reducing our foreign currency exposure in those markets.
Specifically, the 2024 Restructuring Plan reallocated resources by shifting international resources from farm animal to pet health in anticipation of the global launches of several potential blockbuster products. The 2024 Restructuring Plan also impacted how we operate in and sell into the Argentina market, among others. See Note 5.
We estimated the fair value of our single reporting unit using the income approach.
In determining the relative fair value of our single reporting unit, we typically utilize an income approach.
Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine, sheep and, prior to the divestiture of our aqua business in July 2024 (see below), aqua (collectively, farm animal).
Our diverse, durable product portfolio is sold in more than 90 countries and serves animals across many species, primarily: dogs and cats (collectively, pet health) and cattle, poultry, swine and sheep (collectively, farm animal). Our purpose – making life better for animals makes life better – inspires us to Go Beyond for animals, our customers, our people and society.
Interest Expense, Net of Capitalized Interest Year Ended December 31, (Dollars in millions) 2024 2023 % Change Interest expense, net of capitalized interest $ 235 $ 277 (15) % Interest expense, net of capitalized interest decreased $42 million in 2024 compared to 2023, primarily due to lower average outstanding debt balances given our debt repayment activity in the current year (see Note 8.
Interest Expense, Net of Capitalized Interest Year Ended December 31, (Dollars in millions) 2025 2024 % Change Interest expense, net of capitalized interest $ 220 $ 235 (6) % Interest expense, net of capitalized interest decreased $15 million compared to 2024. This decrease was driven by lower average outstanding debt balances during the current year.
Other Key Trends and Factors Affecting Our Results of Operations Aqua Business Divestiture: On July 9, 2024, we closed the sale of our aqua business to a subsidiary of Merck Animal Health, for $1,294 million in cash.
Leases to the consolidated financial statements for further information. Aqua Business Divestiture: On July 9, 2024, we closed the sale of our aqua business to a subsidiary of Merck Animal Health, for $1,294 million in cash proceeds, which was paid at closing.
Description of Indebtedness For a complete description of our debt and available credit facilities as of December 31, 2024, see Note 8. Debt to the consolidated financial statements.
We anticipate capital expenditures in 2026 to be approximately $175 million to $200 million. Description of Indebtedness For a complete description of our debt and available credit facilities as of December 31, 2025, see Note 7. Debt and Finance Lease Liability to the consolidated financial statements.
“Risk Factors,” may cause our actual results, financial position and cash flows to differ materially from these forward-looking statements. Business Overview Elanco is a global leader in animal health, dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets.
Business Overview Elanco is a global leader in animal health, dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets.
We believe we are an industry leader in animal health R&D, with a track record of successful product innovation, business development and commercialization. New product development and regulatory highlights during 2024 included the following: Bovaer : In May 2024, the FDA completed its comprehensive, multi-year review of Bovaer (3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle.
New product development, regulatory and product launch highlights throughout 2024 and 2025 include the following: Bovaer : In May 2024, the FDA completed its comprehensive, multi-year review of Bovaer (3-NOP), a first-in-class methane-reducing feed ingredient for use in lactating dairy cattle. Producers began feeding the product to cattle in the U.S. during the third quarter of 2024.
We operate our business in a single segment, directed at advancing the well-being of animals, people and the planet, enabling us to realize our vision of Food and Companionship Enriching Life. Our diverse product portfolio of approximately 200 brands helps make us a trusted partner to pet owners, veterinarians and farm animal producers.
With a heritage dating back to 1954, we operate our business in a single segment within the animal health industry, offering a diverse product portfolio of approximately 200 brands, which helps make us a trusted partner to pet owners, veterinarians and farm animal producers.
While we believe the estimates and assumptions underlying our annual goodwill impairment review in the fourth quarter of 2024 were reasonable in view of all available information, these assumptions are subject to change in future periods because of, among other things, reductions in our estimates of future cash flows, revenue growth or other profitability measures, and/or an increase in the discount rate, which is highly correlated with long-term 46 Table of Contents treasury rates.
These estimates and assumptions are subject to change due to, among other factors, changes in our estimates of future cash flows, revenue growth or other profitability measures and/or changes in the discount rate, which is highly correlated with long-term treasury rates.
Our products are generally sold worldwide to third-party distributors and independent retailers and directly to farm animal producers and veterinarians. In recent years, we have expanded our omnichannel presence in both the veterinary clinic and in retail markets, including e-commerce.
Our products are generally sold worldwide to third-party distributors and independent retailers and directly to farm animal producers and veterinarians. Our omnichannel presence extends to both the veterinary clinic and retail markets, including e-commerce. Product Development and Regulatory Update A key element of our targeted value creation strategy is to drive revenue growth through portfolio development and product innovation.
Summary of Significant Accounting Policies." 47 Table of Contents
Summary of Significant Accounting Policies to the consolidated financial statements . 45 Table of Contents
Producers began feeding the product to cattle in the U.S. during the third quarter of 2024. Zenrelia : We received final FDA approval for Zenrelia , a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, in September 2024. We launched Zenrelia shortly after final approval, with the first sales occurring in late September.
Zenrelia : We received final FDA approval for Zenrelia , a JAK inhibitor targeting control of pruritus and atopic dermatitis in dogs, in September 2024. We launched Zenrelia in the U.S. shortly after final approval and have also received approval for Zenrelia in Australia, Brazil, Canada, the EU, Japan and the U.K. Additional reviews are ongoing in other markets.
For additional information regarding our asset impairment, restructuring and other special charges, see Note 5. Asset Impairment, Restructuring and Other Special Charges to the consolidated financial statements.
Asset Impairment, Restructuring and Other Special Charges to the consolidated financial statements for further information on the 2025 and 2024 Restructuring Plans. Trade Environment and Other U.S.
These proceeds from investing activities were partially offset by $147 million of net purchases of property and equipment and software and $36 million of cash paid for the acquisition of the Speke facility (see Note 4. Acquisitions, Divestitures and Other Arrangements to the consolidated financial statements for additional information on current and prior year acquisition and divestiture activities).
These proceeds from investing activities were partially offset by $147 million of net purchases of property and equipment and software and $36 million of cash paid for the acquisition of Speke. Financing activities Cash used for financing activities was $275 million for the year ended December 31, 2025, compared to $1,492 million for the year ended December 31, 2024.
Deferred Tax Asset Valuation Allowances We maintain valuation allowances unless it is more likely than not that all of the deferred tax asset will be realized. Changes in valuation allowances are typically included in our tax provision in the period of change.
Changes in valuation allowances are typically included in our tax provision in the period of change.
Purchase obligations consist of open purchase orders as of December 31, 2024, and contractual payment obligations with significant vendors which are noncancelable and not contingent. These obligations are primarily short-term in nature. See Note 13. Leases to the consolidated financial statements for further discussion regarding our contractual obligations related to leases, including for our new corporate headquarters in Indianapolis, Indiana.
These obligations are primarily short-term in nature. See Note 7. Debt and Finance Lease Liability and Note 13. Leases to the consolidated financial statements for further discussion regarding our contractual obligations related to our long-term debt and leases.
Although the amounts recorded for revenue reductions are dependent on estimates and assumptions, historically our adjustments to actual results have not been material. The sensitivity of our estimates can vary by program, type of customer and geographic location.
The sensitivity of our estimates can vary by program, type of customer and geographic location, although historically our adjustments to actual results have not been material. Nonetheless, if any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. See Note 2.
Amounts recorded for revenue reductions can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. See Note 2.
Amounts recorded for revenue incentives can result from a complex series of judgments about future events and uncertainties and can rely on management's estimates and assumptions.
In 2024, we repaid $1,600 million of term loan debt, $200 million, net on our Revolving Credit Facility and $25 million, net on our Securitization Facility. These debt repayments were partially offset by proceeds of $350 million from the issuance of our Incremental Term Facility due 2031 in August 2024.
These debt repayments were partially offset by proceeds of $350 million from the issuance of our Incremental Term Facility due 2031 in August 2024. Capital Expenditures Capital expenditures, which we define as cash paid for property and equipment and software, were $276 million during 2025, an increase of $129 million compared to 2024.
While we believe the estimates and assumptions underlying our fair value estimates were reasonable in view of all available information, significant changes to any of these significant judgments could have resulted in a different amount of goodwill allocated to our aqua business disposal group, and if so, would have impacted the amount of the pre-tax gain recognized.
Significant changes to any of these estimates could result in a different amount of goodwill being allocated to a disposal group, and consequently, would impact the amount of any pre-tax gain or loss recognized.
We have also received approval for Zenrelia in Brazil, Canada and Japan. Additional reviews are ongoing in other key markets, including Europe, U.K. and Australia.
Regulatory approval was received in February 2026 in Australia and additional submissions have now been made in other key markets, including Canada, the EU, Japan and the U.K.
Amortization of Intangible Assets Year Ended December 31, (Dollars in millions) 2024 2023 % Change Amortization of intangible assets $ 527 $ 548 (4) % Amortization of intangible assets decreased $21 million in 2024 compared to 2023.
Amortization of Intangible Assets Year Ended December 31, (Dollars in millions) 2025 2024 % Change Amortization of intangible assets $ 543 $ 527 3 % Amortization of intangible assets increased $16 million compared to 2024, p rimarily driven by the impact from foreign currency exchange rate movements.
Contractual Obligations Our contractual obligations and commitments as of December 31, 2024, are primarily comprised of long-term debt obligations, operating leases, including a 25-year lease commitment that will commence in 2025 for our new corporate headquarters in Indianapolis, Indiana, and purchase obligations. Our long-term debt obligations are comprised of our expected principal and interest obligations.
Contractual Obligations Our contractual obligations and commitments as of December 31, 2025, are primarily comprised of long-term debt obligations, including both expected principal and interest obligations, leases and purchase obligations. Purchase obligations consist of open purchase orders as of December 31, 2025, and contractual payment obligations with significant vendors which are noncancelable and not contingent.
Other Expense, Net Year Ended December 31, (Dollars in millions) 2024 2023 % Change Other expense, net $ 18 $ 75 (76) % Other expense, net for the year ended December 31, 2024, primarily consisted of foreign currency exchange losses and an $8 million write-down of the retained equity interest in our previously divested BiomEdit R&D platform (see Note 4.
Other expense, net for the year ended December 31, 2024, also included an $8 million write-down of the retained equity interest in a previous divestiture.
Cash used for investing activities of $169 million during the year ended December 31, 2023, primarily related to $140 million of cash paid for property and equipment and software and $19 million paid for our acquisitions of NutriQuest and NutriQuest Brazil. 44 Table of Contents Financing Activities Cash used for financing activities was $1,492 million for the year ended December 31, 2024, compared to $83 million for the year ended December 31, 2023.
Investing activities Cash used for investing activities was $279 million for the year ended December 31, 2025, compared to cash provided by investing activities of $1,158 million for the year ended December 31, 2024.
Volume increases of non-aqua products were driven by strength in U.S. cattle, led by Experior and Rumensin , and strength in poultry sales globally, partially offset by weakness in global swine markets, volume declines associated with our previous strategic decisions to change how we operate in and sell into certain international markets, including Argentina, and the impact from the European recall of Kexxtone , which occurred during the second quarter of 2024.
These increases were partially offset by the impact of the divestiture of our aqua business in July 2024, which generated revenue of $81 million during 2024. Higher volumes of our non-aqua products were led by Experior in U.S. cattle, and to a lesser degree, strength in poultry sales globally.
These increases were due to a combination of inflation, planned reduced throughput at certain manufacturing sites and product mix associated with the divestiture of our aqua business, partially offset by increased pricing. 41 Table of Contents Research and Development Year Ended December 31, (Dollars in millions) 2024 2023 % Change Research and development $ 344 $ 327 5 % % of revenue 8 % 7 % R&D expenses increased $17 million, or 5%, in 2024 compared to 2023, primarily driven by higher employee-related expenses and timing of project costs.
Research and Development Year Ended December 31, (Dollars in millions) 2025 2024 % Change Research and development $ 368 $ 344 7 % % of revenue 8 % 8 % R&D expenses increased $24 million, or 7%, compared to 2024, primarily driven by higher employee-related expenses and project costs and the impact from foreign currency exchange rate movements. 40 Table of Contents Marketing, Selling and Administrative Year Ended December 31, (Dollars in millions) 2025 2024 % Change Marketing, selling and administrative $ 1,430 $ 1,314 9 % % of revenue 30 % 30 % Marketing, selling and administrative expenses increased $116 million, or 9%, compared to 2024, primarily driven by stra tegic investments in the global launches of new products and increased selling costs, corresponding to increased revenue.
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With a heritage dating back to 1954, we consistently innovate to improve the health of animals and to benefit our customers while fostering an inclusive, cause-driven culture for our employees.
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Various risks and uncertainties, including, but not limited to those discussed in "Forward-Looking Statements and Risk Factor Summary" and Item 1A. Risk Factors, may cause our actual results, financial position and cash flows to differ materially from these forward-looking statements.
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Product Development and Regulatory Update A key element of our targeted value creation strategy is to drive revenue growth through portfolio development and product innovation. We continue to pursue the development of new chemical and biological molecules, as well as additional registrations and indications for current products.
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We partner with farmers, pet owners, veterinarians and society to create value and help our customers improve the health of animals in their care, while also making a meaningful impact on the communities we serve.
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We utilized a vast majority of these proceeds to repay previously outstanding term loan debt, thereby reducing our leverage and expected future interest expense. Our aqua business included products across both warm-water and cold-water species and generated revenue of $81 million in 2024, through the divestiture date, and $175 million in 2023.
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We believe we are an industry leader in animal health R&D, with a track record of successful product innovation, business development and commercialization.
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Strategically, this divestiture has allowed us to prioritize our investments in larger markets with greater long-term earnings potential.
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AdTab : In April 2025, AdTab , a chewable flea and tick treatment for dogs and cats, was approved and launched in the U.K. Befrena : In December 2025, we received final approval from the USDA for Befrena , a new anti-IL31 monoclonal antibody injection targeting canine allergic and atopic dermatitis.
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Acquisition and Integration Activity: In November 2024, we acquired a manufacturing facility in Speke, U.K., including its workforce and related assets such as inventory and property and equipment, from a former contract manufacturing supply partner, TriRx Speke Ltd (TriRx Speke), for $36 million.
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We anticipate launching Befrena in the second quarter of 2026. 37 Table of Contents Other Key Trends and Factors Affecting Our Results of Operations Restructuring Activities: In December 2025, our Board of Directors authorized a restructuring plan (the 2025 Restructuring Plan) to support margin expansion, optimize our global footprint and further invest in innovation.
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In 2023, we acquired certain U.S. marketed products, pipeline products, inventory and an assembled workforce from NutriQuest, LLC (NutriQuest) and certain assets including inventory and distribution rights for certain marketed products from NutriQuest Nutricao Animal Ltda (NutriQuest Brazil).
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Specifically, the 2025 Restructuring Plan targeted an expected 2026 closure of the animal studies portion of our R&D facilities in Monheim, Germany, while also expanding our R&D organization in Indianapolis, Indiana, among other changes to our R&D organization.
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Additionally, we successfully completed the integration of the Bayer Animal Health business into our ERP system, including the build out of processes and systems to support our global organization. See Note 4. Acquisitions, Divestitures and Other Arrangements and Note 5.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe also held forward-starting interest rate swap agreements with a combined notional amount of $850 million, which will become effective in 2026. When including the variable-rate converted to fixed-rate through the use of interest rate swaps, as of December 31, 2024, approximately 82% of our long-term indebtedness bore interest at a fixed rate.
Biggest changeInterest Risk At December 31, 2025, we have outstanding interest rate swap agreements with a combined notional amount of $2,300 million that had the economic effect of modifying this amount of our variable-rate debt to fixed-rate. We also have forward-starting interest rate swap agreements with a combined notional amount of $850 million , which will become effective in August 2026.
We frequently enter into foreign exchange forward or option contracts to reduce the effect of fluctuating currency exchange rates. Gains and losses on these instruments are recorded within other expense, net, and offset, in part, the impact of currency fluctuations on the underlying foreign currency denominated assets and liabilities.
We frequently enter into foreign exchange forward or option contracts to reduce the effect of fluctuating currency exchange rates. Gains and losses on these instruments are recorded within other expense, net, and offset, in part, the impact of currency rate fluctuations on the underlying foreign currency denominated assets and liabilities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Exchange Risk We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Exchange Risk We operate on a global basis and are exposed to the risk that our revenue, earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates.
We are exposed to foreign currency exchange risk as the functional currency financial statements of non-U.S. subsidiaries are translated to U.S. dollars. We are also subject to foreign currency transaction gains and losses to the extent revenue and expense transactions are not denominated in the functional currency of a subsidiary.
We are exposed to foreign currency exchange rate risk as the functional currency financial statements of non-U.S. subsidiaries are translated to U.S. dollars. We are also subject to foreign currency transaction gains and losses to the extent revenue and expense transactions are not denominated in the functional currency of a subsidiary.
We are primarily exposed to foreign currency exchange risk with respect to net assets denominated in the Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollar and Chinese yuan. Additionally, we generally identify hyperinflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%.
We are primarily exposed to foreign currency exchange rate risk with respect to net assets denominated in the Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollar, Chinese yuan and Polish zloty. Additionally, we generally identify hyperinflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%.
A hypothetical 10 percent adverse change in exchange rates applied to the fair values of our outstanding foreign exchange forward and option contracts as of December 31, 2024, would result in an additional unrealized loss of approximately $55 million.
A hypothetical 10 percent adverse change in exchange rates applied to the fair values of our outstanding foreign exchange forward and option contracts as of December 31, 2025, would result in an additional unrealized loss o f approximately $65 million .
During the years ended December 31, 2024 and 2023, revenue in Argentina and Turkey each represented less than 1% of our consolidated revenue, and assets held in Argentina and Turkey at December 31, 2024 and 2023, each represented less than 1% of our consolidated assets.
During the years ended December 31, 2025 and 2024, revenue in Turkey represented less than 1% of our consolidated revenue, while assets held in Turkey at December 31, 2025 and 2024, also represented less than 1% of our consolidated assets.
In spite of this, and while the application of hyperinflationary accounting for our subsidiaries in Argentina and Turkey did not have a material impact on our business duri ng the year ended December 31, 2024 , we may in the future incur significant currency devaluations, which could have a material adverse impact on our results of operations.
While the application of hyperinflationary accounting did not have a material impact on our business duri ng either the year ended December 31, 2025 or 2024 , we may in the future incur significant currency devaluations, which could have a material adverse impact on our results of operations.
We have applied hyperinflationary accounting for our Argentina and Turkey subsidiaries since 2018 and 2022, respectively, and as a result, have changed their functional currencies to the U.S. dollar.
We have applied hyperinflationary accounting for our subsidiary in Turkey since 2022 and, prior to its substantial liquidation in 2024, for our subsidiary in Argentina since 2018. As a result, we have changed these subsidiaries' functional currencies to the U.S. dollar.
We estimate that a hypothetical 1.0% increase in the applicable Term SOFR benchmark rates throughout 2024 would have resulted in an increase in our interest expense, net of capitalized interest, of approximately $12 million. 48 Table of Contents
We estimate that a hypothetical 1.0% increase in the applicable Term SOFR and EURIBOR benchmark rates throughout 2025 would have resulted in increased interest expense of approximately $7 million . 46 Table of Contents
If the U.S. dollar were to weaken against the Swiss franc by 10%, the amount of unrealized loss recorded in CTA related to these cross-currency fixed interest rate swaps as of December 31, 2024, would increase by approximately $125 million.
As of December 31, 2025, these instruments have generated net losses of approximately $155 million, and we estimate that if the U.S. dollar were to weaken against the Swiss franc by an additional 10%, the amount of unrealized loss recorded in CTA related to these cross-currency interest rate swaps would increase approximately $140 million further .
We also have a series of cross-currency fixed interest rate swaps to help mitigate the impact of currency fluctuations on our operations in Switzerland. Gains or losses related to these instruments due to spot rate fluctuations are recorded as cumulative translation adjustments (CTA) as a component of other comprehensive income (loss).
We also have a series of cross-currency interest rate swaps to help mitigate the impact of currency rate fluctuations on our operations in Switzerland with tenors in August and November of 2026 and February of 2027.
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In February 2024 our Board of Directors authorized a restructuring plan that, among other strategic decisions, resulted in a change in how we operate in and sell into the Argentina market, reducing our foreign currency exposure with respect to the Argentine peso.
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Gains and losses from these instruments are not included within our determination of net income, but rather are recorded as a cumulative translation adjustment (CTA) within other comprehensive income (loss). Nonetheless, these instruments do present settlement exposure to the extent they remain in a loss position at maturity.
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Gains and losses will remain in accumulated other comprehensive income (loss) until either the sale or substantial liquidation of the hedged subsidiary.
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When including the variable-rate debt converted to fixed-rate through the use of interest rate swaps, as of December 31, 2025, approximately 80% of our long-term indebtedness, excluding our finance lease liability, bore interest at a fixed rate.
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This hypothetical unrealized loss would be expected to be offset by a corresponding foreign currency translation gain from our investment in our Swiss subsidiary. Interest Risk At December 31, 2024, we held interest rate swap agreements with a notional value of $2,800 million that had the economic effect of modifying this amount of our variable-rate debt to fixed-rate.

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