Elanco stock plummeted Thursday after the company announced a pair of delays and a surprise box warning for its new eczema treatment for dogs.
The company now expects it eczema drug Zenrelia to gain Food and Drug Administration approval in the third quarter and for its parasiticide, Ceredelio Quattro, to win approval in the fourth quarter. Both are one-quarter delays, William Blair analyst Brandon Vazquez said in a report.
Also, unexpectedly Elanco Animal Health now expects the FDA to include a safety warning on the label for Zenrelia. This is "based on the outcome of a trial with unvaccinated dogs dosed at three times the label dose," Bobby Modi, executive vice president of U.S. pet health and global digital transformation, said in a statement.
Modi expects the label to slow adoption and limit treatment days by 25% in the U.S.
"Management reiterated its expectation for differentiation around (effectiveness) and convenience, but also expects a safety warning label that will slow the product adoption curve in the U.S.," William Blair's Vazquez said. "While moving the product forward is a positive, we believe the update on a label warning pushes Zenrelia updates to a net negative."
On the stock market today, Elanco stock plunged 20.6% to 14.27. Shares undercut their 200-day line, according to MarketSurge.
Elanco Stock: 2024 Guidance Boosted
Despite the delays, Elanco still plans to deliver $600 million to $700 million in innovation sales by the end of 2025. The company defines these as revenue from new products, life cycle management and geographic expansions as well as business development transactions.
Elanco also raised its innovation sales guidance to $400 million to $450 million.
"In our view, there is of course some level of uncertainty embedded — particularly about Zenrelia timing — but management's raise of expectations is somewhat encouraging nonetheless," Vazquez said.
He has a market perform rating on Elanco stock.
Shares rank in the top 6% of all stocks, according to IBD Digital's Relative Strength Rating. This 1-99 score pits a stock's 12-month performance against all other stocks. Elanco stock has a lower Composite Rating of 61, however. This puts Elanco's technical and fundamental performance above 61% of stocks.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
