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How Elanco, Eli Lilly’s Animal Health Segment, Performed in 2Q

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Animal health segment

Eli Lilly’s (LLY) animal health company, Elanco, reported an increase of 2% in revenues to $860 million in 2Q16, as compared to $841 million in 2Q15. This segment contributed ~15.9% of total revenues for Lilly and deals with products for companion animals, as well as food and other products.

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Reported revenues for animal health segment

US animal health sales increased ~8% to $444.5 million during 2Q16, while animal health sales outside the US markets decreased 3% to $415.3 million, mainly driven by the inclusion of revenues from Novartis (NVS) Animal Health. The US revenues increased due to the strong performance of new products including Interceptor Plus, Osurnia, and the wholesaler buying pattern for the US markets. For international revenues, the companion animal products were exposed to generic competition, and the negative impact of foreign exchange further affected revenues during 2Q16.

Companion animal products

The companion animal products segment reported a growth in revenues of $309.8 million in 2Q16. This was mainly driven by an increase of 32% in the US sales of companion animal products due to the launch of new products including Interceptor Plus and Osurnia, substantially offset by the 8% decline in sales of companion animal products outside the US markets.

Food and other products

The revenues for food and other products were $550 million in 2Q16. The revenues fell due to a 6% decline in US sales. Also, for outside the US markets, the company reported a 3% growth in the international sales, which was more than offset by a 4% negative impact of foreign exchange.

Other companies like Zoetis (ZTS), the animal health arm of Pfizer (PFE), Merck and Company (MRK), and Merial, a Sanofi (SNY) company, compete with Lilly on certain product mixes. Investors can consider ETFs like the Healthcare Select Sector SPDR (XLV), which holds ~3.0% of its total assets in Lilly, ~7.3% of its total assets in Pfizer (PFE), ~5.4% of its total assets in Merck, and ~0.8% of its total assets in Zoetis (ZTS) in order to divest the risk.

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