Todd Young: Chris, with respect to the manufacturing slowdown, embedded in our guidance for 2024 is a 150 to 170 basis point headwind from those plant slowdowns.
Operator: Your next question comes from Steve Scala from TD Cowen. Please go ahead.
Chris: Hi, this is Chris on for Steve. Thanks for taking our questions. We had two. First on the new launches, are there any other gating factors for U.S. launch post FDA approval, like state-level approvals, building inventory, or contracting with distributors? Then second on the U.S. sales force, what sort of initial feedback have you received, and has that had any positive impact on the positioning of the company’s current portfolio? Thank you.
Jeff Simmons: Yes, thanks Chris. Real quick, as we’ve noted here on gating factors, we expect that upon approval, there’s typically a couple months before actually, you know, there is a launch, and that’s driven heavily by manufacturing, packaging, labeling, and that’s the typical gating factor. Then a lot of positive feedback, we had a tremendous interest and many, many applications and believe we selected a very experienced, strong sales force, and actually the transition has gone faster ad we don’t believe the distraction factor may be as high as we expected. We’re looking forward to that sales force with that added investment in the first half to help us ramp our existing sales here in the first half.
Operator: Your next question comes from the line of Neven Tai [ph] from BNP Paribas. Please go ahead.
Neven Tai: Hi, good morning. Thanks for taking my questions. My first one is you touched base on pricing for Zenrelia. Are you able to expand on general pricing strategy versus potential differentiation for Quattro, Bovaer and Zenrelia? My second question is just a clarification – does EPS guidance reflect the lower interest expenses resulting from the aqua sale? Thank you.
Todd Young: Let me take the first one, Neven, and welcome back to coverage. We have not reduced interest expense in our guidance for the aqua sale, so that interest expense is as if the aqua sale doesn’t happen. We’ll update all the guidance for aqua post conclusion of that sale on the quarterly call.
Jeff Simmons: Yes Neven, on all of our products, actually, we see the future blockbusters with the differentiation, with our portfolio, we intend to price for value. We see this in past innovations that have been launched and we believe that innovation will be rewarded, and that will be part of our offering.
Operator: Your next question comes from Nathan Rich from Goldman Sachs. Please go ahead.
Nathan Rich: Great, thanks for the questions. Just a few quick ones at the end here. Todd, you highlighted the $20 million to $25 million of investment in pet health in the first quarter. Can you give us a rough split between what’s related to the field force expansion versus what might be promotional dollars focused on parasiticides, just as we think about maybe what the underlying expense base goes up in 2024? Then on the OTC growth for ’24, anything more specific you could share on your expectations for Advantage and Ceresto here? Then lastly, Jeff, maybe just going back to your comments on having that fuller, more innovative portfolio in pet health with derm and parvo, could you maybe talk about what that means in the market and the flexibility that gives you? Is that better access to corporate accounts, the ability to use volume discounts? Just any additional color there would be great.
Todd Young: Sure Nate, thanks for the question. Yes, there’s about–the total investment for the sales force is about $20 million on a full year basis, so essentially that’s pretty–given it’s people, it’s pretty standard over the course of the year, so about 5 in Q1. Then the investments in pet heath are really about the promotional spend, and a lot of that is to drive AdTab, which we’re excited about. It’s the first oral parasiticide in the OTC market in Europe, and part of our oddity of first half-second half is the restructuring we announced today, that’s going to provide a lot of savings that we’re using to fund these incremental investments behind big opportunities, but that savings is more second half loaded, where with the northern hemisphere parasiticide season, we’ve really got to make the investments in the first half to drive the uptake of those products.
With respect to Ceresto and A-family, we’re not guiding by product today, but overall we are feeling good about the positioning of those in retail, and that’s a big place where we have leadership and we expect that leadership to continue.
Jeff Simmons: Then relative to just the overall portfolio, I would say no matter the segment, when you enter a clinic and have all four dimensions that I just mentioned, and derm will be the new one for us, it really puts us in a unique position as the next company to be able to do that, and that just gives that optionality to the vet. We’ll be looking at that against all segments, but I do think that will be a major factor and a major differentiator to most of the major animal health companies, to be able to have the breadth of the portfolio that we do have with the derm addition.
Katy Grissom: Thanks. We’ll take the last caller.
Operator: Your last question today comes from Brandon Vazquez from William Blair. Please go ahead.
Brandon Vazquez: Hey everyone. Thanks for taking the questions and sneaking me in. If I could just ask one–I’ll ask two upfront here first on the FDA conversation that you guys are having. I guess as you get closer to an approval here in first half ’24, that you’re reiterating, I think maybe I would have expected you could give a little bit more confidence or a little narrowing of the time frame. One, am I over-reading that? Is there anything going on in conversations? Do you guys feel more confident as you’re going through these discussions? Then maybe the second one is just highlight a couple key products within innovation, that bucket, that are driving growth into ’24. Thank you.
Jeff Simmons: Yes, let me take the second one first. There’s no question we’re excited about Experior. Experior exceeded our $70 million run rate, it ended the year at $54 million, and with that growth and that trajectory we see and a shortage of cattle numbers, Experior plays into all of that relative to the value proposition, and then of course parvo will be a driver. One we don’t talk as much about, but with this restructuring we’re really adding significant investment in AdTab in Europe that had a good strong finish to the year, so those would be the three key that I would point to. Look Brandon, I wouldn’t read into anything. Our confidence remains, our confidence in the differentiation remains. These are great assets. Our regulatory team is doing a great job and we’re in a very proactive, productive dialog with the CBM, and we’ll update you if anything does change.
Operator: Thank you. Ladies and gentlemen, I will now turn the conference over to Jeff Simmons for closing remarks.
Jeff Simmons: I know we’re on time here, but I just want to say to everybody, thank you for the time. I think 2023, the second half really marks progress and momentum – two quarters at 5% constant currency growth, we doubled our innovation, we increased our debt pay down beyond our expectations, and as you look to ’24, the priorities remain the same – sustained growth on the top line, innovation and bringing innovation forward, and cash. Against all of those metrics, we have inside the guide strong expectations to continue to make great progress. Thank you for your interest and your investment in Elanco. We look forward to a very exciting year and a year with high engagement with all of you.
Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.
