Elanco (ELAN) Price Target Raised at Citi Ahead of Investor Day

November 17, 2020 5:16 AM EST
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Price: $36.47 -0.38%

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(Updated - November 17, 2020 9:09 AM EST)

(updated to add analyst comments)

Citi analyst Navann Ty raised the price objective on Elanco Animal Health (NYSE: ELAN) to $35.00 per share (from $32.00) ahead of Investor Day.

The company is expected to announce the launching of five new products by the end of 2021E and 25 by 2024E. Investors will be looking towards Investor Day, which is due in mid-December for more details.

“At a minimum, we will look out for a blockbuster product candidate (>$100mn in potential sales) that will compete in a large market (e.g., parasiticides, atopic dermatitis, or pain).

Management also indicated it will provide more details on its long-term margin expansion and its 2020-2021E guidance,” Ty wrote in today’s note.

The analyst also took note of Sachem Head investment in the company. Last month, Sachem acquired a $1.2 billion stake in Elanco with an aim to push for changes at the company.

“We view positively Sachem Head’s involvement in Elanco (~5.9% of the outstanding Elanco shares), which may help Elanco to improve its top-line growth closer to the industry level and execute on its margin expansion program and synergies. Its role in Elanco may be similar to Sachem Head & Pershing Square’s past involvement in Zoetis, we think.”

Finally, Ty adds that Bayer may not take its option to sell up to 50% of its stake in Elanco immediately.

“Bayer commented it intends to divest the stake in Elanco “in due course”. The intention to divest the Elanco stake is consistent with Bayer’s deleveraging priority, in our view. Bayer management also previously commented it will monetize the shares under the right market conditions. We believe Bayer has flexibility regarding the timing of the monetization, having an adequate liquidity and good access to debt capital markets,” Ty concludes.

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