Elanco Animal Health Incorporated · NYSE:ELAN
Elanco Animal Health — Merger or Acquisition (August 2019)
29 slides from Elanco Animal Health's merger presentation, Aug 20, 2019
Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation contains management’s statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “estimate”, “seek”, “intend”, “expect”, “believe”, “target”, “anticipate”, “plan” and similar expres
Slide 2: Strengthens and Accelerates IPP Strategy
Strengthens and Accelerates IPP Strategy Continues growth and innovation, accelerates margins Portfolio: Enhances Doubles Pet Business & Balances Mix, Emerging Markets, Grows Cattle Business Value Creation3 Revenue Growth4: Mid-single digit Productivity: Accelerates Reaching GM (60%) and EBITDA Marg
Slide 3: Acquisition Accelerates Our IPP Strategy
Acquisition Accelerates Expands Innovation Our IPP Strategy Transforms Portfolio • 8 key projects in development and 30+ lifecycle projects R&D Capabilities: Parasiticides, Dairy, complementary delivery technologies Investment scale to drive internal and external innovation Certain access rights to
Slide 4: Transaction Financial Summary
Transaction Financial Summary Transaction enterprise value of $7.6 billion1 70% cash and 30% stock to Bayer • • Purchase Price • • Committed financing for the cash consideration Purchase price financed by: • $2.3bn in Elanco shares issued to Bayer, subject to a 7.5% symmetrical collar centered on $3
Slide 5: Positions Elanco to Capitalize on Trends Shaping Industry
PositionsElancoto CORE TRENDS Capitalize onTrends Shaping Industry EMERGING COMPANION ANIMAL TRENDS Pet owners making more pet care decisions … while vet relationships remain central to pet health Animal Well-being Growing middle class worldwide ~15% e-commerce growth in U.S. … omnichannel presence
Slide 6: The Combination At A Glance
The Combination At A Glance ©2019 Elanco or its affiliates 7 ©2019 Elanco or its affiliates
Slide 7: Bringing Together a Legacy of Leadership in Animal Health
Bringing Together a Legacy of Leadership Animal Health ©2019 Elanco or its affiliates 8 1Represents revenue converted to USD using spot EUR/USD exchange rate as of 16-Aug-2019. 2018 Revenue $ 3.1bn $ 1.7bn1 2018 Gross Margin 50% 64% 2018 Adj. EBITDA Margin 21% 23% HeadquartersGreenfield, IN Monheim,
Slide 8: Doubles Pet Portfolio, Balances Mix, Increases Scale
Doubles Pet Portfolio, NORTH AMERICA Balances Mix, Increases Scale INTERNATIONAL than doubles CA International scale TOTAL Doubles CA revenue from ~$1bn to ~$2bn Diversifies geographic mix Leading Position in CA Alternative Channels More with immediate footprint in China Strengthens European CA Para
Slide 9: Accelerating Our Innovation, Portfolio and Productivity Strategy
Accelerating Our Innovation, Portfolio and Productivity Strategy ©2019 Elanco or its affiliates ©2019 Elanco or its affiliates
Slide 10: Portfolio Combines Veterinary Strength with E-Commerce & Retail Leadership
Portfolio Combines Veterinary Strengthwith E-Commerce &Retail Leadership Elanco ~15% annual growth in U.S. e-commerce sales Gain access to 1/3 of U.S. pet owners who do not visit the vet Meet pet owners where they choose to shop Bridge pet owners to vet through online capability creating improved ca
Slide 11: Bayer's Portfolio Combines Established Brands with Growth Drivers and Pipeline
Bayer’s Portfolio Combines Established Durable Brands with Recently Portfolio Launched Growth Drivers and Potential Pipeline Opportunities Access to Bayer R&D2 markets anc 12 1 LCM = Life Cycle Management. 2 Certain access rights to Bayer’s CropScience R&D pipeline and de-prioritized clinical Pharma
Slide 12: Complementary Portfolio Across Channels
EMENTARY O ACROSS NNELS bal market CAGR1 Combo VET PRESCRIBED “OUTSIDE THE VET” “OUTSIDE THE PET” (TOPICALS / COLLAR) Flea/Tick COMPL PORTFOLI “INSIDE THE PET”Portfolio (ORALS / INJECTIONS) Flea/Tick MODE CHA Combo$5.2B glo 6.4% Worms Elanco expands leadership into multiple sales channels, with a di
Slide 13: Advantage Family: Growth in International Markets
Portfolio Advantage Family1: Growth in International Markets, with Stabilization in North US Dosage Analysis America and Europe Europe & International Revenue2 mm of doses $mm | All Channels Vet Channel Alternative Channels 34.3 +3% 31.0 14.8 14.6 $114 FY 2016 FY 2018 H1 2018 H1 2019 HH1 2001188 HH1
Slide 14: Seresto: $300mm Revenue, #2 Fastest Growing Blockbuster in AH Industry
Portfolio Seresto: $300mm Revenue, #2 Fastest Growing Blockbuster in AH Industry Seresto Sales in $mm1 ~$300 Significant growth headroom: 1/3 of pet owners in U.S. still unaware Loyal and growing customer base: ~90%+ current users would re-buy +23% Omnichannel availability: #1 on Amazon, Expansion t
Slide 15: Taking Leadership Across Channels
Portfolio TakingLeadership ALTERNATIVE CHANNELS LEADER Across Channels FIRST MOVER IN E-COMMERCE LEADING DIGITAL FOR COMPANION PARASITICIDES AND DTC MARKETING USA Italy UK #1 #1 #2 France Spain #1 #1 Amazon Rating leadership position Amazon, with more than 3x as many reviews as competitors Deep cust
Slide 16: Bayer Animal Health Leads in Attractive Value Segments
Bayer Animal Health Leadsin Attractive Value Segments Portfolio Across RangeofHealth Relative Sales and Global Industry Rank by Key Species (2018A) Challenges Leading Positions in Sub-Segments and Geographies (2018A) Segment Size1 Industry Position1 n.a. in the industry with Victrio ©2019 Elanco or
Slide 17: Expands Growth Portfolio & Development Projects
Portfolio Expands Growth Portfolio&Development Projects 17 GROWTH PORTFOLIO REVENUE COMBINED GROWTH ASSETS1 ($ in millions) $604 CAGR: +41% CA CAGR: FA 50+ DEVELOPMENT PROJECTS 2016 2017 2018 • Aligned with established platforms • Within 1 to 5 years of approval • Inclusive of recent Elanco acquisit
Slide 18: Expands Innovation
Innovation Expands Innovation Development pipeline with 8 key projects and 30+ lifecycle management projects Strengthens R&D Capabilities, particularly parasiticides and dairy in Complementary delivery technologies and (topical/collar/sterile injection/chewable) approaches Access to Bayer Crop Scien
Slide 19: Productivity Improves Elanco's Margin
Productivity Improves Elanco’sMargin Anticipated Delivery of 1,000 bps Expansion Trajectory Identified cost synergies: $275 – $300mm Key Areas of Identified Synergies Value chain, footprint and product mix of Adj. EBITDA Margin Expansion One Year Faster optimized across geographies to drive term cos
Slide 20: Compelling Value Proposition for Shareholders
Compelling Value Proposition for Shareholders ©2019 Elanco or its affiliates ©2019 Elanco or its affiliates
Slide 21: Key Components of Growth Agenda
Key Components of Growth Agenda COMPONENTS OF MID-SINGLE DIGIT GROWTH Seresto’s Continued Leadership and Growth 2018 REVENUE1 ($ in billions) $4.7 Bayer AH Growth of FA Products in Emerging Markets Pipeline Value from 8 Key Projects and 30 Life Cycle Management Opportunities Elanco Incremental Chann
Slide 22: Pro Forma Elanco Intends to Rapidly De-lever
ProForma Elanco Intends toRapidlyDe-lever Leverage 1 Pro Forma Transaction Financing ~5.0x Bridge facility fully committed by Goldman Sachs Issuance of ~$5-6bn of debt and equity prior to close • • Near-Term Focus on Rapid De-leveraging Expected free cash flow, Adj. EBITDA growth and synergies will
Slide 23: Proven Transformation
ProvenTransformation ACTIVELY BUILDING STANDALONE CAPABILITIES Track Record PLAN IN PLACE TO DELIVER OUR COMMITMENTS AND SEAMLESS INTEGRATION Standup efforts on schedule with cost expectations and in-line Run: Dedicated focus driving Core Elanco and our IPP agenda Creating “fit-for-purpose” organiza
Slide 24: Combination Strengthens Strategic Evolution & Accelerates Elanco's Growth
Combination Strengthens Strategic Evolution & AcceleratesElanco’s …Supporting Our Standalone Growth Targets $4.7bn PF Revenue Mid-Single Digit Revenue Growth Enhances Scale… Doubles Our Pet Portfolio & Rebalances Mix Expands CA Presence in Emerging Markets ~50/50 Companion/Food Animal >2X EM Presenc
Slide 25: Strengthens and Accelerates IPP Strategy
Strengthens and Accelerates IPP Strategy Continues growth and innovation, accelerates margins Portfolio: Enhances Doubles Pet Business & Balances Mix, Emerging Markets, Grows Cattle Business Value Creation3 Revenue Growth4: Mid-single digit Productivity: Accelerates Reaching GM (60%) and EBITDA Marg
Slide 26: ©2019 Elanco or its affiliates
©2019 Elanco or its affiliates
Slide 27: Our Commitments at IPO and Now
Our Commitments atIPO and Now 1 2 Our Commitments Now1 Our Commitments at IPO Components of Revenue Growth ~2% price; rest volume ~2% price; rest volume 60% from growth categories; 40% from Ruminants and Swine Portfolio Mix ~50% CA / ~50% FA Adding Seresto and complementary products to Elanco’s grow
Slide 28: Our Commitments at IPO and Now (Continued)
Our Commitments atIPO and Now (Continued) 1 2 Our Commitments at IPO Our Commitments Now1 commitments through 2020 commitments through 2020 from 2018-2022 – one year earlier, additional from 2018-2023 needed / third-party mitigates transition risk ©2019 Elanco or its affiliates 29 1Assumes transacti
Slide 29: Our Commitments at IPO and Now (Continued)
Our Commitments at IPO and Now (Continued) @ our commitments at PO © our commitments Now! wees WEIN sCUSiuy) m@ 85% of Elanco initiatives underway to deliver cost 100% of Elanco initiatives underway to deliver cost Initiatives ‘commitments through 2020 commitments through 2020 v 60% by 2022 v 'm 1,0
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