Elanco Animal Health Shares Sink On Unexpected Label Update For Canine Dermatology Drug

Elanco Animal Health Incorporated ELAN stock is tumbling as the company released updates to the expected FDA approval timelines for Zenrelia and Credelio Quattro.

Zenrelia is a JAK Inhibitor that controls pruritus and atopic dermatitis in dogs.

For Zenrelia, the FDA confirmed that all major technical sections (Effectiveness, Safety and Chemistry, Manufacturing, and Controls (CMC)) are complete as of late June.

For the minor technical section for labeling, earlier this week, the company aligned with the FDA on the language and expects to receive the completion letter by mid-July.

The 60-day final administrative review will follow, placing expected approval late in the third quarter of 2024. The company anticipates a U.S. launch for Zenrelia in the fourth quarter of 2024.

Investors are reacting to the box-label warning on Zenrelia, which was possibly unexpected.

“However, we expect the U.S. label will include a boxed warning on safety based on the outcome of a trial with unvaccinated dogs dosed at 3x the label dose,” said Bobby Modi, Elanco Executive Vice President U.S. Pet Health and Global Digital Transformation.

“While we remain confident in Zenrelia’s blockbuster potential, we believe this warning will slow the product adoption curve in the U.S. and initially limit the number of expected treatment days by approximately 25%. We plan to conduct additional research to support an improved label over time.”

Zenrelia has also received its first approval in Brazil, with a launch planned for the fourth quarter of 2024. Additional reviews are ongoing in other markets, including Canada, Europe, and Japan.

Credelio Quattro is a broad-spectrum oral parasiticide covering fleas, ticks and internal parasites.

For Credelio Quattro, two of three major technical sections – Effectiveness and Safety – are complete. However, in June, the company received an incomplete letter for the CMC major technical section.

Elanco has submitted its response to the two questions in the letter, which did not require additional data generation.

The FDA has offered a shortened, 60-day review timeline for Elanco’s response.

Following this, the minor technical section reviews will be completed, including labeling. The product is then expected to go through the 60-day final administrative review, placing the expected approval in the fourth quarter of 2024, with U.S. launch expected in the first quarter of 2025.

Earlier, the company expected Full approval in the third quarter.

Elanco Animal Health has raised its Innovation Sales outlook from $375 million-$410 million to $400 million-$450 million in 2024 and expects Innovation Sales of $600 million-$700 million by the end of 2025.

William Blair says the focus will be on getting more information on the label and its impact on adoption, but this is a net negative for now.

The analyst notes that the underlying momentum of recently launched pipeline products appears to be trending well, with management increasing guidance for contributions to 2024.

The analyst maintains a Market Perform rating as it waits for final labeling and a better understanding of how meaningful these products can be to future growth.

Price Action: ELAN shares are down 22.80% at $13.88 at the last check on Thursday.