ELAN 10-K & 10-Q changes, risk factors and insider trading

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 businessesbusinesses, producers of nutritional health products and companies that mainly produce generic products. Several start-up companies also compete in the animal health industry. 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. As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities. Further, consolidation in the animal health industry could result in existing competitors realizing additional efficiencies or improving portfolio bundling opportunities, thereby potentially increasing their market share and pricing power, which could lead to a decrease in our revenue and profitability. For example, many of our competitors have relationships with key distributors and, because of their size, an ability to offer attractive pricing incentives, which may negatively impact or hinder our relationships with these distributors. In addition to competition from established market participants,Additionally, new entrants to the animal health industry could substantially reduce our market share, render our products obsolete or disrupt our business model.

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. To the extent any of our competitors are more successful with respect to any key competitive factor, or we are forced to reduce, or are unable to raise, the price of any of our products in order to remain competitive, our business, financial condition and results of operations could be materially adversely affected.

Our future success depends on both our existing product portfolio and our ability to continue to identify and develop a pipeline of new products, including new products that we develop internallyinternally, with partners or through joint ventures and products we obtain through licenses or acquisitions. We commit substantial effort, funds and other resources to R&D,D activities, primarily through our own dedicated resources but also through collaborations with third parties. We have also have acquired or partnered with a number of smaller animal health businesses, and we intend to continue to do so in the future. There are significant risks and uncertainties involved with the execution of these partnerships, many of which are outside our control, including the inability to develop, license or otherwise acquire product candidatesproducts or productsproduct candidates. Clinical trials and insufficientprocedures accessare toinherently capitaluncertain, toand fundthere suchcan investments.be Weno alsoassurance cannotthat predictthese trials or procedures, whether anyperformed products,by onceus launched,or by contract research organizations (CROs) we hire, will be commercially successfulenrolled or willcompleted in a timely or cost-effective manner or result in a commercially viable product or indication. Furthermore, unfavorable or inconsistent clinical data from current or future clinical trials or procedures conducted by us, our competitors or third parties, or perceptions regarding this clinical data, could adversely affect our ability to obtain necessary approvals. Failure to achieve revenuepositive thatclinical istrial consistentand/or withtesting results could have a material adverse effect on our expectations.prospects.

The animal health industry is subject to regional and local trends and regulations and, as a result, products that are successful in some markets may not achieve similar success when introduced into other markets. 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. IfFor example, in December 2025, the U.S. Congress enacted legislation referred to as the BIOSECURE Act which bans U.S. domiciled entities from working with Biotechnology Companies of Concern (BCCs), such as certain Chinese-affiliated CROs. The BIOSECURE Act and/or similar legislation could prevent us from engaging capable CROs with ties to China and, if equivalent alternative CROs are not available, we are unable to generate commercially successful new products or expand the use of our existing products, our business, financial condition and results of operations could beincur materially adverselyhigher affected.costs for conducting R&D activities.

Lastly, newNew products may appear promising in development but fail to reach the market within the expected or optimal timeframe, orand at all. Wewe may be unable to predict with precision when, if or subject to what conditions any of our products now under development will be approved and/or launched, or if approved, whether limitations to a product or the specific circumstances for which a product is approved, will match our expectations. For example, in the second quarter of 2024, the FDA determined that our Zenrelia product label would be required to include a boxed warning on safety. WeWhile other regulatory bodies outside the U.S. have not required similar warnings, and while the FDA has since concluded that certain of the warning language may be removed, we believe the inclusion of this warning has slowed the initial product adoption curve,curve in the U.S., although the extentlong-term impact of any such effect cannot be definitelydefinitively determined.known. In addition, product extensions or additional indications may not be approved. Developing and commercializing new products subjects us to inherent risks and uncertainties, including (i) delayed or denied regulatory approvals, (ii) delays or challenges with producing products in accordance with regulatory requirements, on a commercial scale and at a reasonable cost; (iii) failure to accurately predict the market for new products; and (iv) efficacy and safety concerns, any of which could lead to a slower or more limited commercial adoption of one of our products than initially estimated. In addition, a failure to continue to identify and develop products, both internally and through external sources, could impact our future success. Once necessary regulatory approvals are obtained, thewe cannot predict whether our products, once launched, will be commercially successful or will achieve revenue consistent with our expectations. 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. If we are unable to successfullygenerate and bring acommercially productsuccessful 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.

In certain markets,markets we face increasing competition from generic alternatives to our products.products, Weand we depend on patents and related rights to enable our exclusive sale of certain products. Patents for individual products expire at different times based on a variety of factors, including the date of the patent filing (or sometimes the date of patent grant) and the legal term of patents in the jurisdictions where such patents are obtained. The extent of protection afforded by our patents varies from jurisdiction to jurisdiction and is limited by the scope of the claimed subject matter of our patents, the term of the patent and the availability and enforcement of legal remedies in the applicable jurisdiction. Some of our principal products, including certain products within our Advantage Family, Rumensin andRumensin, Maxiban / MontebanMonteban, and beginning in 2025 in certain markets, Seresto, do not have patent protection. Other products are protected by patents that expire over the next several years. For further information, see Item 1. Business – Intellectual Property. As the patents for a brand name 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 furtherexample, information,in seeJanuary "Item2026, 1.a Businesscompetitor –began Intellectualselling Property."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.

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-onlyanimal-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 leadcontribute 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.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.

TheGlobally, 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 will likelycould 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.

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. In addition, outbreaks of disease carried by farm animals may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our farm animal products due to reduced herd or flock sizes. In the past, outbreaks of various diseases such as African Swine Fever, avian influenza, foot-and-mouth disease, bovine spongiform encephalopathy (also known as BSE or “mad cow” disease) and porcine epidemic diarrhea virus (PEDV) have negatively impacted sales of our animal health products, and the discovery of additional cases of any of these, or other diseases, including New World screwworm, may result in additional restrictions on animal-derived protein, reduced herd or flock sizes or reduced demand for animal-derived protein, any of which may have a material adverse effect on our business, financial condition and results of operations.

Our R&D relies on evaluations of animals,animals whichand may become subject to bans, additional restrictive regulations or increased attention from activism movements.

We primarily sell our pet health products to third-party distributors and retailers, as well as directly to veterinarians. 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. In recent years, there has been a trend toward the concentration of veterinarians in large clinics and hospitals.hospitals, Weand we have also seen recent consolidation among farm animal producers, particularly swine and poultry producers, and among our distributors. Furthermore, we have seen the expansion of larger cross-border corporate customers and an increase in the consolidation of buying groups (cooperatives of veterinary practices that leverage volume to pursue discounts from manufacturers). If these trends toward consolidation continue, our customers could attempt to improve their profitability by leveraging their buying power to obtain favorable pricing. The resulting decrease in our prices could have a material adverse effect on our business, financial condition and results of operations.

In most markets, pet owners have historically purchased their animal health products directly from veterinarians. However, pet owners increasingly have the option to purchase animal health products from sources other than veterinarians, such as online retailers, “big-box” retail stores, specialty pet shops via telemedicine distributors,distributors or other distribution channels. This trend has been demonstrated by the significant shift away from the veterinarian distribution channel in the sale of flea and tick products and has been accelerated by the increased consumer preferences toward e-commerce in recent years. Pet owners alsomay couldcontinue to decrease their reliance on, and visits to, veterinarians as they rely more on internet-based animal health information and telemedicine. Because we market our pet health prescription products primarily through the veterinarian distribution channel, in the event of a significant decrease in visits to veterinarians by pet owners, our market share for such products could be reduced, materially adversely affecting our business, financial condition and results of operations.reduced.

LegislationFurther, legislation has been proposed in thecertain U.S. Congressstates, and in the future may be proposed in the U.S. Congress, other U.S. states or abroad in the future,abroad, that could impact the distribution channels for our pet health products. For example, such legislation may require veterinarians to provide pet owners with written prescriptions and disclosure that the pet owner may fill prescriptions through a third party, which may further reduce the number of pet owners who purchase their animal health products, or fill their prescriptions, directly from veterinarians. Many countries and states already have regulations requiring veterinarians to provide prescriptions to pet owners upon request. Legislation may also be advanced that would allow for greater access to pet health products via telemedicine channels, potentially impacting our mix of distribution. These changes could lead to increased use of generic alternatives to our products or the increased substitution of our pet health products with other animal health orproducts, humanincluding healthgeneric productsproducts, if such other products are deemed to be lower-cost alternatives. Many countries and states already have regulations requiring veterinarians to provide prescriptions to pet owners upon request.

If any of our top products experience issues, such as disruptive innovations or the introduction of more effective competitive products, negative publicity, changes in veterinarian or customer preferences, loss of patent protection, material product liability litigation, new or unexpected side effects, manufacturing disruptions and/or regulatory proceedings, our revenue could be negatively impacted, perhaps significantly. Our top five products and/or product families, Advantage Family, Seresto, Rumensin,Credelio Family, Rumensin and Maxiban / Monteban and Credelio Family represented approximately 36%38% of our total revenue in 2024,2025, with our largest product family, Advantage Family, representing approximately 10% of total revenue. Any issues with these top products could have a material adverse effect on our business, financial condition and results of operations.

From time to time, we evaluate potential acquisitions, divestitures or jointother venturessignificant 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. Accordingly, we may not be able to complete announced and signed transactions,transactions and therefore,therefore may not realize the anticipated benefits therefrom. In the event of a material acquisition or divestiture, we may be required to devote significant management attention and resources to integrating the portfolio and operations of an acquired company or carving out a divested business. Potential difficulties we could encounter in an integration or carve out process include:

•performance shortfalls atby our legacy or the acquired company as a result of the diversion of management’s attention from ongoing business activities.

For example, as a result of our acquisition of Bayer Animal Health, we integrated each business' distinct enterprise resource planning (ERP) systems into one primary platform, a process that was substantially completed in 2023. ERP integrations have inherent risks, which can complicate our business operations and potentially lead to breakdowns in data integrity and may preclude our ability to supply products for a period of time, as was the case with this aforementioned ERP integration in April 2023. 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. 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.

Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, increased amortization expenses related to acquired intangible assets and increased operating expenses, any of which could adversely affect our financial condition and results of operations. Furthermore, if we issue equity or debt securities to raise additional funds, our existing shareholders may experience significant dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing shareholders. Furthermore,In addition, if we sell a substantial number of shares of common stock in the public markets, the availability of those shares for sale could adversely affect the market price of our common stock. Such sales, or the perception in the market that holders of a large number of shares intend to sell shares, could depress the market price of our common stock could be negatively impacted and could impair our ability to raise future capital through the sale of additional equity securities.

We have, from time to time, restructured or made other adjustments to our workforce and manufacturing footprint. Execution of such organizational changes can involve significant costs, including expenses related to severance, asset impairments and other potential charges. For example, in 2024December 2025, we implementedinitiated athe 2025 Restructuring Plan to support margin expansion, optimize our manufacturing and R&D footprints and further invest in innovation. We incurred $155 million of pre-tax charges associated with this restructuring plan toin improve operational efficiencies and better align our organizational structure2025, with currentan businessadditional needs,$25 topmillion strategicto priorities$30 andmillion keyexpected growthto opportunitiesbe incurred in 2026 (see Note 5. Asset Impairment, Restructuring and Other Special Charges to the consolidated financial statements for further information).

There are significant costs involved with the execution of restructuring programs or other significant organizational changes, including expenses related to severance, asset impairments and other potential charges. 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 may need to implement additional restructuring plans or other strategic initiatives in the future in response to market or product changes, performance issues, changes in strategy, acquisitions and/or other internal or external considerations. If we are unable to successfully manage and implement any future restructuring plan,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.

Manufacturing problemschallenges 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. We own and operate 17 internal16 manufacturing sites across 10nine countries and also employ a network of approximately 130140 third-party CMOs. Many of our products involve complex manufacturing processes, are highly regulated and can be, ormay rely on,on inputs that are sole sourcedsole-sourced from certaina singular manufacturing sites.site. Shifting or adding manufacturing capacity can be a lengthy process requiring significant capital expenditures, process modifications and regulatory approvals. 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 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. Further, minor deviations in our manufacturing or logistical processes, such as temperature excursions or improper package sealing, could result,result in, and have in the past resulted in, delays, inventory shortages, unanticipated costs, product recalls, product liability and/or regulatory action. In addition, a number of factors could cause production interruptions, includingincluding, but not limited to:

These interruptions could result in launch delays, inventory shortages, recalls, unanticipated costs or issues with our agreements under which we supply third parties, which may materially adversely affect our business, financial condition and results of operations. Further, global transportation and logistics challenges, cost inflation and tight labor markets have caused, and in the future may cause, delays in and/or increased costs related to the distribution of our products, the construction or acquisition of manufacturing capacity, procurement activity and supplier or contract manufacturer arrangements. In addition, volatility in the overall demand for animal health products in different markets and distribution channels has had, and may continue to have, a number of impacts on our business, including increased costs and disruptions in the supply of our products. Our manufacturing network may be unable to meet the demand for our products, or we may have excess capacity if demand for our products changes. 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.

WeAs havepart alsoof inour regular and ongoing assessments of the past invested in,adequacy and willcost-effectiveness continueof our manufacturing capabilities, we may decide to invest in,in significant improvements to our existing manufacturing facilities and may also invest in new manufacturing plants in the future.facilities. For example, throughout 2025 we have recentlymade announcedsignificant acapital plannedinvestments $130in millionthe expansion of our biologics manufacturing facility in Elwood, KansasKansas, toas enablewell furtheras growthexpansion projects at other of our monoclonalglobal antibodymanufacturing portfolio.facilities. These types of projects are subject to risks of delay or cost overruns inherent in any large construction project and require licensing by or approvals from various regulatory authorities. The unpredictability of a product’s regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites and shifting customer demand (including as a result of market conditions or entry of branded or generic competition) increase the potential for capacity imbalances. In addition, construction of sites is expensive, and our ability to recover costs will depend on the market acceptance and success of the products produced at the new sites, which is uncertain. Significant cost overruns or delays in completing these projects could have a material adverse effect on our financial condition and results of operations.

We sell many of our products to distributors and retailers who, in turn, sell these products to third parties. 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 procedures and environmental factors beyond our control. These increases and decreases canmay lead, and have led, to variations in our quarterly and annual revenues. Failure to appropriately anticipate inventory levels in our distribution channels could materially adversely affect our financial condition and results of operations.

We use AI in multiple ways in our business and continue to expand theits use of AIuses in our operations.operations, as do third parties with whom we do business. Machine learning and AI are new and rapidly evolving technologies, and their use presents a number of operational, legal, ethical, compliance and reputational risks. AI algorithms are currently known to sometimes produce unexpected results or behave in unpredictable ways that can generate irrelevant, nonsensical, deficient, factually inaccurate or biased content and results. Accordingly, AI presents emerging operational, legal and ethical issues. If 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 more quickly than we do or with more successful outcomes, which would also harm our business. We also expect there willcould 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. We might not be able to attract and retain the talent necessary to support our AI technology initiatives and maintain our systems. 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.

WeIn areaddition, continuingthe to enhance a numberimplementation of our business processes, including our financial reporting and supply chain processes and from whom we obtain IT systems. We have made, and will continue to make, significant configuration, process and data changes within many of thenew IT systems we use. If our IT systems and processes are not sufficient to support our business and financial reporting functions, or if we fail to properly implement our new business processes, our financial reporting may be delayedmore difficult, costly, or inaccuratetime-consuming than expected and cause disruptions in our operations and, asif anot result,properly implemented and maintained, negatively impact our business, financial condition and results of operations may be materially adversely affected.business. 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. 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 conditionsconditions, seasonality and the availability of natural resources.

The animal health industry and demand for many of our products in a particular region are affected by weather conditions, including those related to climate change, varying weather patterns and weather-related pressures from pests, such as ticks. As a result, we may experience regional and seasonal fluctuations in our results of operations. We also experience seasonality in our pet health business due to increased demand for certain parasiticide product offerings in the first half of the year. For example, in 20242025 approximately 70% and 55%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. As such, fluctuations in our revenue due to seasonality and/or weather or climate-related factors, many of which are beyond our control,factors may mean period-to-period comparisons of our results of operations will not necessarily be meaningful. In addition, veterinary hospitals and practitioners depend on visits from, and access to, the animals under their care. Veterinarians' patient volume and ability to operate could be adversely affected if they experience prolonged snow, ice or other severe weather conditions, particularly in regions not accustomed to sustained inclement weather.

•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.

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,personnel, particularly for certain highly technical specialties in geographic areas where we recruit. Due to this intense competition, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business, or to recruit or identify suitable replacement personnel. If we are unsuccessful in our recruitment and retention efforts, our business may be harmed. In addition, if we fail to effectively manage organizational and/or strategic changes, our financial condition, results of operations and reputation, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.

We had approximately $4.3$3.8 billion of outstanding indebtedness at December 31, 2024.2025, 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. Our ability to make scheduled payments or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions, and to certain financial, business, legislative, regulatory or other factors beyond our control. If our cash flows and capital resources are insufficient to fund our debt service obligations, or we are unable to access capital markets for additional financing on terms acceptable to us, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional debt or equity financing or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In such event, we may not be able to execute any such measures on commercially reasonable termsterms, or at allall, and,and even if successful, could still face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. Further, our debt instruments may restrict our ability to dispose of assets, the use of proceeds from those dispositions and/or our ability to raise debt or equity financing to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

Our high level of indebtedness could have other important consequences, includingincluding, but not limited to:

OurCertain of our credit facilities contain, and any other existing or future indebtedness of ours would likelymay contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

•substantially alter the businessesbusiness we conduct.

In addition, certain of our credit facilities require us to comply with a net total leverage ratioratio, andan a minimum fixed chargeinterest coverage ratio underand certainother circumstancescovenants specific to the underlying composition of our U.S. accounts receivables portfolio (see Note 8.7. Debt and Finance Lease Liability to the consolidated financial statements for further discussion and descriptions of debt covenants). As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. A failure to comply with the covenants under the indenture that governs theour senior unsecured notes and credit facilities, or any of our other existing or future indebtednessindebtedness, 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. In an event of default under our credit facilities, it is expected that the lenders:

Credit rating agencies continually revise their ratings for the companies they follow, including us. Credit rating agencies also evaluate our industry as a whole and may change their credit ratings for us based on their overall view of our industry. We cannot be sure that credit rating agencies will maintain their ratings for us or for certain of our debt. TheFor substantial indebtedness we incurred related to our acquisition of Bayer Animal Health had a negative impact on our credit ratings, leading to higher borrowing expenses. Additionally,example, S&P, Moody's and Fitch have downgraded our credit ratings in the past, most recently in 2023. Because the ratings of certain of our seniorSenior unsecuredNotes notesdue have2028 beenwere downgraded, we have been required to pay additional interest under these seniornotes, unsecuredand notes. Anyany further downgrades could result in requirements to pay additional interest under the 4.900% Senior Notes due 2028.interest. Moreover, any decision to downgrade our ratings could restrict our access to, and negatively impact the terms of, current or future financings and trade credit extended by our suppliers of raw materials or other vendors.

Certain of our credit facilities bear variable interest at the Term SOFR and Euro Interbank Offered Rate (EURIBOR) reference rate. Term SOFR measures the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions.rates. Our variable-rate indebtedness is exposed to the risk of rising interest rates. Additionally, the increased interest rate environment, particularly for long-term treasury rates, playedas a critical role in the goodwill impairment charge we recorded in 2023. Increasesincreases in Term SOFRSOFR, EURIBOR or other benchmark rates, including long-term treasury rates, wouldrates expose us to additional interest rate risk, additional expense and the potential for additional future impairments.expense. 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.

At December 31, 2024,2025, the net carrying value of goodwill and other indefinite-livedidentifiable intangible assets on our consolidated balance sheet was $4,414$4,779 million and $291$3,408 million, respectively. Other indefinite-lived intangible assets primarily consist of in-process R&D (IPR&D) projects acquired as a part of past business combinations. Under accounting principles generally accepted in the United StatesU.S. (GAAP), we are required to annually assess our goodwill and other indefinite-lived assets for impairment, and more frequently whenever events or changes in circumstances indicate an impairment may have occurred. We are also required to assess the recoverability of our other identifiable intangible assets whenever events or changes in circumstances indicate the carrying amount may not be fully recoverable. 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. 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. Future changes in our discount rate or other significant assumptions, or the use of alternative estimates and assumptions, could expose us to further goodwill impairment losses. We have also incurred other intangible asset impairment charges in 2025 and 2024 (see Note 5. Asset Impairment, Restructuring and Other Special Charges to the consolidated financial statements for further information). 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 also rely on third parties to source many of our raw materials and to manufacture products that we distribute. Principal materials used in our manufacturing operations for key brands are typically available from more than one source; however, in certain instances we obtain raw or intermediate materials from a single source. 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. However, various developments have led, and may in the future lead, to interruption or shortages in supply (for example, the financial difficulties experienced in 2024 by our contract manufacturing supply partner, TriRx Speke. See "Item 1. Business – Manufacturing and Supply Chain" for further information) until we establish new sources, implement alternative processes, bring new manufacturing facilities online or pause or discontinue product sales in one or more markets. 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). Additionally, we have and may continue to experience cost increases for certain raw materials or other components required to manufacture our products due to increased shipping costs and other inflationary pressures. This may have a material adverse impact on our financial results if we cannot pass on such increases to our customers. 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.

•compliance with a wide variety of laws and regulations, such asincluding the U.S. Foreign Corrupt Practices Act (the FCPA) and similar non-U.S. laws and regulations;

•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;

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. Because our results are reported in U.S. dollars, 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 for reporting purposes. We are primarily exposed to foreign exchange rate risk with respect to net assets denominated in the Euro, British pound, Swiss franc, Brazilian real, Australian dollar, Japanese yen, Canadian dollardollar, Chinese yuan and ChinesePolish yuan.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. 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. Quantitative and Qualitative Disclosures About Market Risk for further discussion around our exposure to potential changes in foreign currency exchange rates.

We have certain defined benefit pension plans, predominantly in Germany and Switzerland (see Note 17. Retirement Benefits to the consolidated financial statements for additional discussion around our defined benefit plans). The funded status and net periodic pension cost for these plans can be materially affected by the discount rate used to measure pension obligations, the longevity and actuarial profile of our workforce, the level of plan assets available to fund those obligations and the actual and expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change in the expected rate of return on plan assets. As of December 31, 2024, for pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation was $334 million with plan assets of $165 million. Any changes in the discount rate could result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in the following years. Similarly, changes in the expected or actual return on plan assets can result in significant changes in the net periodic pension cost in the following years. In the event we need to make additional cash contributions to these plans, this will divert resources from our operations and may have a material adverse effect on our business, financial condition and results of operations.

We do not anticipate paying any dividends in the foreseeable future on our common stock. We intend to retain all future earnings for the operation and expansion of our business and the repayment of outstanding debt. Certain of our credit facilities contain restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to pay dividends or to make other restricted payments. As a result, capital appreciation, if any,appreciation of our common stockstock, if any, may be our shareholders' major source of gain for the foreseeable future. While we may change this policy at some point in the future, we cannot assuremake youany assurances we will make such a change.

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 operationoperations and financial position. 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, includingincluding, 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.

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 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. 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,swine and sheep and, prior to the divestiture of our aqua business in July 2024 (see below), aqua (collectively, farm animal). WithOur apurpose heritage– datingmaking backlife better for animals makes life better – inspires us to 1954,Go weBeyond consistentlyfor innovate to improve the health of animals and to benefitanimals, our customers while fostering an inclusive, cause-driven culture forcustomers, our employees. 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.society.

OurWith 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 brandsbrands, which helps make us a trusted partner to pet owners, veterinarians and farm animal producers. 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 ourOur omnichannel presence inextends to both the veterinary clinic and in retail markets, including e-commerce.

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 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 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 developmentdevelopment, regulatory and regulatoryproduct launch highlights duringthroughout 2024 includedand 2025 include the following:

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,approval with the first sales occurring in late September. Weand have also received approval for Zenrelia in Australia, Brazil, CanadaCanada, the EU, Japan and Japan.the U.K. Additional reviews are ongoing in other key markets, including Europe, U.K. and Australia.markets.

Credelio Quattro: In October 2024, we received final FDA 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 occurringlaunched in January 2025.2025, and in December 2025 we also received conditional approval for treatment of the New World screwworm. 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.

RestructuringAdditionally, Activities: Inin February 2024,2024 our Board of Directors authorized a separate restructuring plan (the restructuring2024 planRestructuring Plan) to improve operational efficiencies and better align our organizational structure with current business needs, top strategic priorities and key growth opportunities. Specifically, the restructuring2024 planRestructuring wasPlan intended to reallocatereallocated resources by shifting international resources from farm animal to pet health asin weanticipation plan forof the global launches of certainseveral potential blockbuster products. Further,The the2024 restructuringRestructuring planPlan also impacted how we operate in and sell into the Argentina market, among others, reducing our foreign currency exposure in those markets.others.

The following discussion and analysis of theour consolidated statementsresults of operations should be read along with the consolidated financial statements and the notes thereto included in Item 8. Financial Statements and Supplementary Data. For results of operations discussions related to the years ended December 31, 20232024 and 2022,2023, refer to Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 2023,2024, filed with the SEC on February 26,25, 2024.2025. Our results of operations for the periods presented below may not be comparable with prior periods or with our results of operations in the future due to many factors, including but not limited to the factors identified in the "Product Development and Regulatory Update" and "Other Key Trends and Factors Affecting Our Results of Operations" discussions above.

Further, increases or decreases in inventory levels in our distribution channels can positively or negatively impact our periodic revenue results,revenue, leading to variations in revenue.variations. 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 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.

The effects of price, foreign currency exchange rates, volume changes and the impact of the prior year divestiture of our aqua business on changes in revenue for the year ended December 31, 2024,2025, as compared to the prior year, were as follows:

R&D expenses increased $17$24 million, or 5%, in 20247%, compared to 2023,2024, primarily driven by higher employee-related expenses and timing of project costs.costs and the impact from foreign currency exchange rate movements.

Marketing, selling and administrative expenses increased $29$116 million, or 2%, in 20249%, compared to 2023,2024, primarily driven by higher advertising and employee-related expenses andstrategic investments supporting our global pet health business, partially offset by cost savings associated with the completion of our ERP system integration in the secondglobal quarterlaunches of 2023new products and theincreased restructuringselling plancosts, thatcorresponding wasto authorizedincreased and initiated in the first quarter of 2024.revenue.

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 restructuring2024 planRestructuring discussed above,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,TriRx the largest of which was a $12 million impairment of a contract asset related to a favorable supply agreement.Speke.

As discussed above, we recorded a pre-tax gain of $640 million on the divestiture of our aqua business during the third quarter ofin 2024. For additional information, see Note 4. Acquisitions, DivestituresAcquisitions and Other ArrangementsDivestitures to the consolidated financial statements.

TheIncome negativetax expense was $8 million in 2025 compared to $150 million in 2024. Our effective tax rate of (3.5)% in 20232025 differed from the statutory income tax rate primarily due to the recognitionjurisdictional ofearnings the goodwill impairment charge recognizedmix in 2023non-U.S. thatjurisdictions was non-deductible for income tax purposes in most of the impacted jurisdictions, as well asand an increase in our valuationreserve allowance,for primarilyuncertain attributabletax topositions, partially offset by the likelihoodtax benefit from the remeasurement of not realizing the benefit of U.S. federal and statecertain deferred tax assetspositions throughout the year due to pre-taxforeign losses.tax rate changes.

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. Our ability to use foreign cash to fund cash flow requirements in the U.S. may be impacted by local regulations and, to a lesser extent, the income taxes associated with transferring cash to the U.S. We intend to indefinitely reinvest substantially all foreign earnings for continued use in our foreign operations. As our business evolves, we may change that strategy, particularly to the extent we identify tax efficienttax-efficient reinvestment alternatives for our foreign earnings or change our cash management strategy.

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. As of December 31, 2024,2025, we had cash and cash equivalents of $468$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 ReceivablesReceivable Balances. As of December 31, 2024,2025, we had $125approximately $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.

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 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. 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, ourcustomers, customers,society and our people, and society.people.

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 in January 2025 and in December 2025 we also received conditional approval for treatment of the New World screwworm. InDuring Aprilthe 2026,current quarter, Credelio Quattro was launched in Australia, Canada and we received regulatory approval in Canada.Japan. Additional submissions have been made in other key markets, including the EU, JapanEU and 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. We anticipateinitiated launchingthe phased launch of Befrena induring the second quarter of 2026.

In connection with the 2025 Restructuring Plan, we incurred charges of $155 million in the fourth quarter of 2025. Expected pre-tax charges associated with the 2025 restructuringRestructuring planPlan total $25 million to $30 million in 2026, of which $14$17 million was incurred during the threesix months ended MarchJune 31,30, 2026, primarily related to the remaining shut-down costs for our Monheim, GermanyGermany, facility. The 2025 Restructuring Plan is expected to result in savings of approximately $25 million in 2026 and approximately $60 million in 2027.

Trade Environment and Other U.S. Government Initiatives: Changes to U.S. trade policy continued inthroughout the first quarterhalf of 2026. On February 20, 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not provide authority for the President to impose tariffs. Subsequently, new tariffs were imposed under Section 122 of the Trade Act of 1974.1974; Onhowever, Aprilthese 2,Section 2026,122 tariffs expired on July 24, 2026. Following this expiration, the PresidentU.S. issuedgovernment aimplemented proclamationnew tariffs under Section 232301 of the Trade Expansion Act of 19621974, imposingwhich tariffsspecifically ontarget certainproducts importedassociated patentedwith pharmaceuticalsforced andlabor active pharmaceutical ingredients. While this proclamation targets certain patented pharmaceutical products, it includes significant carve-outs, including for certain animal-health pharmaceutical products. These tariffs are not effective until the third quarter of 2026.concerns.

As disclosed in Item 1A, "Risk Factors – Tariffs, trade protection measures or other modifications of foreign trade policy may harm us or our customers", of our 2025 Form 10-K, our business is subject to risks related to, among other factors, tariffs, trade and monetary policies and economic conditions and events. We do not believe the previously enacted tariffs had a material impact on our results of operations for the threesix months ended MarchJune 31,30, 2026. However, while animal-health pharmaceutical products are largely exempt from the U.S. tariffs imposed to date, it remains uncertain if this will continue to be the case, and pharmaceutical products are not exempt from all tariffs imposed outside of the U.S. Following the February 2026 U.S. Supreme Court ruling, we filed for refunds of certain IEEPA tariffs previously paid. While the timing and extent of any recoveries remain uncertain, we do not believe the impact of these potential refunds will be material to our business or financial statements.

Sale of Future Revenue: In May 2025, we executed a Purchase and Sale Agreement (PSA) with affiliates of Blackstone, pursuant to which we received proceeds of $295 million in exchange for the rights to the proceeds from qualifying future royalties and sales milestone payments owed to us by Tarsus based on their net sales of XDEMVY® (lotilaner ophthalmic solution) 0.25%, a medical treatment for Demodex blepharitis in humans. These net proceeds were utilized to repay previously outstanding debt. See Note 10. Liability for Sale of Future Revenue to the condensed consolidated financial statements for further information.

Acquisition and Integration: On April 30, 2026, we completed the previously announced acquisition of AHV International B.V. (AHV),AHV, along with selected assets of AHV's affiliates necessary for the on-goingongoing operations of the business. AHV is an innovative, farm animal health company incorporated in the Netherlands focused on solutions to improve animal welfare and productivity, while reducing the need for antibiotics. The acquisition of AHV is expected to accelerate our strategy to grow our industry leadership in farm animal products, particularly for cattle, by expanding our product portfolio, primarily throughout Europe and the U.S. We expect AHV to contribute modestly to revenue in 2026, with a more meaningful impact beginning in 2027 as we integrate the business and realize commercial synergies. This transaction was funded utilizing cash on hand and by borrowing $50 million on our Securitization Facility. This acquisition is not expected to materially affect our deleveraging timeline or overall liquidity position.

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. Because of this, our revenue is influenced by changes in foreign currency exchange rates. During the threesix months ended MarchJune 31,30, 2026 and 2025, approximately 54% and 52%, respectively,52% of our revenue was denominated in foreign currencies, respectively.currencies.

Our revenue by product category for the three and six months ended MarchJune 31,30, 2026 and 2025, waswere as follows:

(1)Represents revenue from arrangements in which we manufacture products on behalf of a third party and royalty revenue. Royalty revenue sold to a third party in May 2025 totaled $9 million and $4 million for the three months ended MarchJune 31,30, 2026.2026 and 2025, respectively, and $18 million and $4 million for the six months ended June 30, 2026 and 2025, respectively. While we are no longer entitled to these royalties, we are required under GAAP to continue recognizing them as revenue. See Note 10. Liability for Sale of Future Revenue for additional information.

The effects of price, foreign currency exchange rates and volume on changes in revenue for the three and six months ended MarchJune 31,30, 2026, compared to three and six months ended MarchJune 31,30, 2025, were as follows:

Pet health revenue increased $75 million, or 12%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, driven primarily by higher volumes, increased pricing and the impacts from foreign currency exchange rate movements and increased pricing.movements. Higher volumes were primarily driven by new products, led by Zenrelia and AdTab,Credelio and higher parasiticide sales,Quattro, including increasedadoption purchasesof those products by a couple new corporate retail customers.

FarmPet animalhealth revenue increased $96$150 million, or 18%,12%, for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily driven by increasedhigher volumes across all species,volumes, the impacts from foreign currency exchange rate movements and an increase inincreased pricing. Higher volumes were primarily driven by new products, led by RumensinZenrelia, inCredelio U.S. cattleQuattro and strengthAdTab. inA poultryportion salesof globally.the higher volumes were attributable to adoption of Credelio Quattro and Zenrelia by new customers.

Gross profit increased $101$85 million and $186 million for the three and six months ended MarchJune 31,30, 2026, drivenrespectively, largelycorresponding by theto increased revenue discussed above.revenues. Gross margin percentage (gross profit as a percentage of total revenue) remained flatincreased compared to 57% for the three months ended MarchJune 31,30, 2025, and was impacteddriven by favorable product mix and pricing, partially offset by higher inventory costs.

Research and development expenses increased $3 million for the threesix months ended MarchJune 31,30, 2026, as compared to the same period in the prior year. The increase was primarily driven by foreign currency exchange rate movements.

Marketing, selling and administrative expenses increased $40$49 million and $89 million for the three and six months ended MarchJune 31,30, 2026, as compared to the same period in the prior year. ThisIncreases increase waswere driven by higher compensation expense, foreign currency exchange rate movements and strategic investments in the global launches of new products, partially offset by decreases in certain general and administrative expenses.

Amortization of intangible assets increased $10$3 million and $13 million for the three and six months ended MarchJune 31,30, 2026, as compared to the same period in the prior year. The increase was primarily driven by changes in foreign currency exchange rates.

Asset impairment, restructuring and other special charges increased $7$8 million and $15 million for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in the prior year. Amounts recorded to asset impairment, restructuring and other special charges during the three months ended MarchJune 31,30, 2026, primarily related to the 2025 Restructuring Plan ($3 million) as well as costs associated with our acquisition of AHV ($2 million). Amounts recorded during the six months ended June 30, 2026, also included $15 million of non-cash shut-down costs for the animal studies portion of our R&D facilities in Monheim, Germany.Germany, recorded during the first quarter of 2026. Amounts recorded in 2025 primarily consistedrelated ofto upfront payments made in relation to new licensing arrangements.

Interest expense, net of capitalized interest increased $17$11 million and $28 million for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same period in the prior year. TheThese increaseincreases waswere principally due to imputed interest on our liability for sale of future revenue of $14$15 million and $29 million for the three and six months ended MarchJune 31,30, 2026 (see Note 10. Liability for Sale of Future Revenue to the condensed consolidated financial statements for further information), respectively, as well as interest expense related to our corporate headquarters finance lease, partially offset by lower average debt balances.

Other (Income) Expense, Net

Other expense,income, net for the three months ended MarchJune 31,30, 20262026, primarily consisted of foreign currency exchange gains. Other expense, net for the six months ended June 30, 2026, was negatively impacted by currency translation losses reclassified from accumulated other comprehensive loss to the condensed consolidated statements of operations in conjunction with the substantial liquidation of a dormant legal entity, a litigation settlement and mark-to-market adjustments on equity investments. Other expense, net for the three and six months ended MarchJune 31,30, 2025 primarily consisted of foreign currency exchange losses.

Income Tax Expense (Benefit)

jurisdictionalWe mixrecognized income tax expense of projected$2 earningsmillion and $14 million for the accrualthree ofmonths globalended minimumJune taxes30, under2026 currentand law.2025, respectively. Our effective tax rate of (12.2)%3.3% for the three months ended MarchJune 31,30, 2026, differed from the statutory income tax rate primarily due to the tax impact from the jurisdictional mix of projected earnings. Our effective tax rate of 55.4% for the three months ended June 30, 2025, differed from the statutory income tax rate primarily due to the tax impact from the jurisdictional mix of projected income and losses in non-U.S. jurisdictions and the utilizationimpacts of netdiscrete operatingtax lossesexpenses andduring the second quarter of 2025, including the remeasurement of certain deferred tax positions due to a valuationforeign allowancetax releaserate in the U.S.change.

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. As of March 31, 2026, we had cash and cash equivalents of $428 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. After borrowing $50 million on April 22, 2026 in connection with the AHV acquisition (see Note 4. Acquisitions and Divestitures for further information), we had approximately $134 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.

The following table provides a summary of cash flows from operating, investing and financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025:

Cash provided by operating activities was $13$290 million for the threesix months ended MarchJune 31,30, 2026, compared to cash usedprovided inby operating activities of $4$233 million for the threesix months ended MarchJune 31,30, 2025. The $57 million increase in cash provided by operating activities was primarily driven by an increase in non-cashcash expenses relative to net income,earnings, partially offset by changes in working capital.

Cash used for investing activities was $60$170 million for the threesix months ended MarchJune 31,30, 2026, compared to cash used for investing activities of $58$114 million for the threesix months ended MarchJune 31, 2025. Cash used for investing activities during the three months ended March 31, 2026, largely consisted of $51 million of net purchases of property and equipment and software, which was $14 million lower than for the three months ended March 31,30, 2025. This increase was primarily driven by $76 million paid in April 2026 in relation to our acquisition of AHV (see Note 4. Acquisitions and Divestitures for further information), partially offset by a $38 million decrease in purchases of property and equipmentequipment. primarilyThis relateddecrease relates to the timing of spending for the ongoing expansion of our monoclonal antibody manufacturing facility in Elwood, Kansas, as well as capital projects at our Fort Dodge, Iowa, and Huningue, France, manufacturing facilities.

For a complete description of our existing debt and available credit facilities as of MarchJune 31,30, 2026 and December 31, 2025, see Note 7. Debt and Finance Lease Liability within Item 8, “Financial Statements and Supplementary Data,” of Part II of our 2025 Form 10-K. New developments are discussed in Note 7. Debt and Finance Lease Liability of this Form 10-Q.

While we believe our critical accounting estimates to be reasonable based on all relevant information available, given their inherent uncertainty, if our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. We regularly evaluate our estimates and assumptions and adjust them when facts and circumstances indicate the need for change, and such changes generally would be reflected in our condensed consolidated financial statements in the period they are determined. We apply estimation methodologies consistently from year to year. Our critical accounting estimates are summarized in Item 7, "Management's Discussion & Analysis of Results of Financial Condition and Results of Operations," of our 2025 Form 10-K. There were no significant changes or developments in the application of our critical accounting estimates during the threesix months ended MarchJune 31,30, 2026.