Elanco

A.1.1. Elanco continues to recognise the increased regulation of antibiotics, increased competition, and increasing market demand for products raised using fewer antibiotics as material risks to its business. Elanco does not disclose whether it has quantified the potential financial impacts of regulation and shifting consumer demand. Furthermore, Elanco has not yet recognised AMR as a material risk for its business. A.1.2. Positively, Elanco clearly discloses the steps it is taking to combat antimicrobial resistance in its public reporting. Such actions include helping farmers to make well-informed management decisions to reduce antibiotics use, promoting non-medically important antimicrobials as the first choice, expanding its range of alternatives to antibiotics, monitoring antibiotic susceptibility, and providing regular training and information on AMR. Antibiotics also form part of Elanco’s sustainability strategy, governed by the 2030 Healthy Purpose commitments and established in 2020. In the company’s 2021 ESG Report, Elanco had a qualitative commitment to be ‘a leading advocate for the responsible use of antimicrobials in animal health.’ The company does not refer to this statement in its 2022 ESG Report (although it is still stated in company reporting titled ‘Elanco Values Antibiotic Stewardship’) and has not disclosed how it tracks progress towards this commitment. However, the company does detail how its antibiotic stewardship initiatives align with the UN SDGs. The company ranks its degree of alignment with Target 3.9b as moderate. Concerningly, Elanco’s ‘Guiding Principles’, which outline the company’s definition of responsible antibiotic use for its key stakeholders still continues to classify prophylaxis as a responsible use practice. Prophylaxis is widely viewed as an unnecessary use of antibiotics and a driver of antibiotic overuse on farms. For this reason, in January 2022, the EU banned the prophylactic use of antibiotics on farms, instead requiring farmers to improve animal husbandry and welfare so that prophylactic use of antibiotics is not required to keep animals healthy. For these reasons, Elanco has been assessed as partial. A.1.3. Elanco provides a partial breakdown of its revenue from antibiotics in its 2023 Annual Report. The company noted an overall decline in recent years in total revenue from sales of shared-class antibiotics, driven by increased regulation in many of its markets. Globally during 2023, revenue from shared-class antibiotics decreased 7% in comparison to 2022 and represented 10% of total revenue, while the company’s revenue from animal-only antibiotics increased 6% in comparison to 2022 and represented 15% of total revenue. Note that in 2023, approximately 90% of the company’s revenue from animal-only antimicrobials resulted from the sale of ionophores. Furthermore, the company disclosed in its 2023 Annual Report that its ‘key farm animal products’ include Rumensin™, an animal-only antibiotic, and an ionophore, Baytril™, a shared-class antibiotic, and Maxiban™ and Monteban™, animal-only antibiotics and ionophores.

A.2.1. Elanco does not have a responsible sale and marketing policy explicitly outlining how antibiotics should be marketed and sold. The company does conduct regular reviews of promotional materials for compliance with local and regional requirements in the markets in which it sells animal products. Furthermore, Elanco's Healthy Purpose antibiotic commitment included two goals related to the marketing and sale of antibiotics “responsible use of antibiotics across our product portfolio and customers” and (ii) to “educate veterinarians and stakeholders about alternative treatments to reduce the need for shared-class antibiotics.” The company also discloses that it “promotes responsible antibiotic stewardship” and that it promotes best practices identified as per the EU Commission Guidelines for the “Prudent Use of Antimicrobials”. A.2.2. Elanco continues to focus on shifting its business away from shared-class antibiotics. The company discloses on its website that it has removed growth promotion from nearly 100 product labels globally. The company has also removed over-the-counter use from nearly 70 labels to require veterinarian oversight. While it appears that the company does not sell any antibiotics for growth promotion, it could clarify its disclosures further by explicitly stating that this equates to a global ban on growth promotion. Veterinary-only antibiotics, which include ionophores, are excluded from this work. The company provides no evidence that it has removed indications for prophylaxis from labels. A.2.3. The Nominating and Corporate Governance Committee provides oversight for Elanco’s sustainability program, which includes Elanco’s Healthy Purpose commitments. The sustainability program is led by the Global Head of ESG & Sustainability with oversight from the Healthy Purpose Steering Committee. Additionally, the company reports that its antimicrobial stewardship efforts are led by the joint efforts of its Executive Vice President of Innovation and Regulatory Affairs, as well as its Chief Medical Officer, who reports twice per year to the Innovation, Science and Technology Committee of the Board of Directors. The company does not explicitly state who is responsible for the sales and marketing of antibiotics. A.2.4. Elanco has not updated its reporting to provide any disclosure on whether sales incentives associated with the sale of antibiotics are driven by the volume of antibiotics sold.

B.1.1. Elanco has not provided any updates to its disclosure to demonstrate how it ensures that antibiotics are being manufactured in a responsible way within its own operations and throughout its supply chain to minimise the risk of antibiotic residues being discharged into the environment. Previously, Elanco stated that the company takes all necessary steps to ensure alignment with national laws and regulations. The Global Quality Assurance Team tracks violations of current Good Manufacturing Practice (cGMP) standards, as outlined by the World Health Organisation (WHO). Relating to waste management and disposal, the company’s Health, Safety and Environment (HSE) function is responsible for managing environment-related risks and has oversight of all manufacturing of pharmaceutical products. Elanco’s Planet Pledge addresses pharmaceutical effluent specifically, and efforts to improve responsible resource management are governed by the Planet Pledge working group and HSE leadership track. There is evidence the company is looking to better manage waste containing active pharmaceutical ingredients (APIs). At its manufacturing site in Shawnee, Kansas, Elanco has installed an on-site wastewater treatment system to virtually eliminate discharge of APIs. It would be useful to understand if this plant manufactures antibiotics and whether Elanco applies any specific requirements for their manufacture. B.1.2. Key contract manufacturing organisations (CMOs) and third-party suppliers are required to comply with the Pharmaceutical Supply Chain Initiative (PSCI) principles for responsible supply chain management in their facilities. This is a comprehensive list of requirements for companies; however, antibiotics are not explicitly included. Suppliers are also subject to Elanco’s Business Partner Code of Conduct and the company assesses compliance at regular intervals, although the frequency is not defined. Issues that are identified during audits are addressed and required actions are tracked to completion. In 2020, Elanco led two PSCI technical committees to build audit capability in India and China. B.1.3. All business areas are expected to comply with Elanco’s HSE policy and associated standards. The Manufacturing Policy Lead team and Audit Committee of the Board are notified where instances of non-compliance with standards are found. CMOs are managed by an external manufacturing network that provides oversight and ensures compliance with quality standards. For CMOs and third-party suppliers, the company does not mention whether corrective action plans are established to ensure the correct actions are being taken or what happens in cases of non-compliance. Cases of non-compliance are not reported in annual reporting for the company’s own operations or within the company’s supply chain. B.1.4. Elanco discloses in its 2023 Annual Report that it has 20 owned manufacturing sites and 140 CMOs globally.

C.1.1. In a first for the industry, in its 2021 Annual Report, Elanco provides a definition for alternatives to antibiotics from the European Medicines Agency (EMA): “a veterinary medicinal product the use of which provides an alternative treatment approach to the use of antimicrobials in animals or that reduces the need for the use of antimicrobials by preventing or controlling infectious disease.” However, this definition was not repeated in the company’s 2023 Annual Report. It is, therefore, unclear if this definition is used by the company when classifying products and if the company is tracking internally the proportion of its products that would qualify as alternatives under this definition. Tracking this information would allow the company to estimate the amount of antibiotic use ‘saved’ by these products. C.1.2. Elanco provides clear evidence that its portfolio includes alternatives to antibiotics such as vaccines and nutritional health products. For example, in 2022, Elanco received approval for its salmonella vaccine, AviPro™ Salmonella Duo in Thailand, which the company plans to expand to other jurisdictions such as France. Consistent with previous disclosure, the company does not provide any detailed disclosure around its portfolio breakdown and does not clarify how, or if, Elanco is assessing the efficacy of the products it advertises as alternatives to antibiotics. C.1.3. Elanco has not updated its disclosure to provide details on its revenue from alternatives to antibiotics.

C.2.1. Elanco is investing in alternatives to antibiotics and has committed to future spending. In 2020, Elanco committed to investing $3.5 billion by 2030 into innovation, covering products to reduce the need for shared-class antibiotics. It is unclear exactly how much will be spent directly on R&D into alternatives. Furthermore, by 2030, Elanco has made a high-level commitment to expand the availability of vaccines, nutritional health products, and diagnostics in underserved markets that rely on MIAs. Note that the company has not provided evidence of how it is doing this or how successful the company’s efforts have been. C.2.2. In January 2023, Elanco acquired NutriQuest, an agriculture service provider, which the company reported has helped further its efforts to explore innovative antibiotic alternatives. NutriQuest offers research-based feed and protein technologies, probiotics, and other preventative animal health solutions. C.2.3. Elanco has not updated its disclosure to share details about marketing spend. The company disclosed that it is working with veterinarians and stakeholders to communicate about pharmaceuticals, vaccines, and nutritional health products that potentially reduce the need for shared-class antibiotics in animals.

D.1.1. Elanco continues to be engaged in a wide range of stewardship initiatives focused on increasing the responsible use of antibiotics globally: • Elanco disclosed in its 2022 ESG Report that it collaborates with the Global Salmon Initiative (GSI) in the development of educational programs that promote improvements in aquaculture practices and a reduced need for antibiotics. These best practices, combined with improved feed ingredients, have reduced average antibiotic use in salmon farming by 48% since 2013. Note that as Elanco announced the sale of its Aqua Business to Merck in February 2024, it is unclear if this initiative will still continue. • Elanco’s Chief Medical Officer provides regular training and information to regulatory agencies on AMR and is actively involved in university-level research on antimicrobial stewardship. Sample 2022 publications led by the Chief Medical Officer focus on aligning antibiotic policies at an international level, responsible antibiotic use in animal agriculture and veterinary medicine, and antimicrobial resistance monitoring in E. coli isolated from healthy food animals. Although there is evidence of Elanco’s stewardship activities throughout its reporting, the company has not provided an update to its Antibiotics Stewardships Milestones since 2021, as published in its Antimicrobial Stewardship Issue brief. D.1.2. The company is part of several initiatives focused on improving surveillance of antibiotic use and AMR: • Elanco is part of Centre for European Studies of Animal Health (CEESA) which is an antibiotic resistance monitoring programme in the EU that has been running since 1999. Elanco also encourages farmers to log antibiotic use on farms. • Established the Clinical and Laboratory Standards Institute (CLSI) Veterinary Antimicrobial Susceptibility subcommittee that is responsible for helping veterinarians select the most appropriate antibiotic to treat sick animals.

D.2.1. Elanco provides an overview of the company’s approach to engagements with governments and policymakers around the world in a publicly available document, ‘Public Policy Advocacy and Political Contributions Disclosure’. The company did not share information on the key issues lobbied on or positions taken. On political contributions in the US, the company states: ‘Elanco’s political contributions are aligned with the interests and values of our company and our customers – contributions are extended to candidates who support sound policies that are intended to benefit the health of animals and the people that care for them.’ No changes have been made to the document since last year’s company assessment to provide clarity on how Elanco approaches lobbying and political expenditure regarding regulation relating to antibiotics and AMR.

E.1. Elanco did not acknowledge or provide a written response to the questions in the engagement letter sent in July 2023. It also declined to attend a FAIRR-facilitated engagement call with investors.