ELANCO ANIMAL HEALTH INC

Intellectual Property. As the patents for a product expire, competitors may begin to introduce generic or other alternatives, and as a result, we may face competition from lower-priced alternatives to many of our products. Further, generic competitors have sold, and could in the future attempt to market and/or sell, competing products before our patent rights expire. For example, in January 2026, a competitor began selling a generic product competitive to our Seresto collar in the U.S., more than a year before certain relevant patent rights expire. If animal health customers increase their use of new or existing generic products, we may be forced to lower our prices and/or provide discounts or rebates in order to compete. In such event, our business, financial condition and results of operations could be materially adversely affected.

Regulatory restrictions and bans on the use of antibiotics and productivity products in farm animals, as well as changing market demand, may continue to negatively affect demand for certain of our farm animal products.

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. 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. 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. Further, a similar ban was also recently implemented in Vietnam in January 2026. Similar bans and restrictions in other countries could result in a material adverse effect on our sales of antibiotic products.

Globally, during 2025, our revenue from shared-class antibiotics represented 9% of total revenue, while our revenue from animal-only antibiotics represented 15% of total revenue. 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. 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. If there is an increased public perception that consumption of food derived from animals that utilize our products poses a risk to human health, there may be a further decline in the production of those food products and, in turn, demand for our products. 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.