The Signal Insight
Elanco Animal Health, which has been supplying medicines for livestock for over seven decades, took its name from Eli Lilly & Co., but spun off from the pharma giant seven years ago. Jeff Simmons, who joined the company right out of college 35 years ago and has run it since 2008, admitted in an interview in the New York Stock Exchange that the intervening years have been tough.
Simmons’ dealmaking has transformed Elanco, building a market-leading pet division to balance out its longstanding farm business. But the debt required to fund that expansion weighed on the company, and a post-IPO fall in its stock attracted hedge funds and activist investors, one of which tried unsuccessfully to remove him last year.
After six quarters of revenue growth, and as it prepares to move into a new headquarters in downtown Indianapolis, Elanco is touting six “blockbuster” products and says it can consistently deliver mid-single digit increases in annual sales. It recently partnered with Medgene to commercialize a highly pathogenic avian influenza (HPAI) vaccine, aiming to combat the spread of bird flu in dairy cattle.
Simmons, raised on a farm in upstate New York, sees growth coming from AI-powered innovation, from the world’s growing love of dogs, from the Trump administration’s Make America Healthy Again agenda — and from his policy of shutting the whole company down for two weeks a year.
This interview has been condensed and edited for clarity.
Andrew Edgecliffe-Johnson: What has the Elanco story been since the IPO?
Jeff Simmons: Months after our IPO, Bayer decided to sell their animal health business. We were No. 4 in the market, they were No. 5, and this would make us No. 3. We knew as a board, if we didn’t acquire them, we would stand the risk of not having the scale and the global mix.
We paid $7 billion. Interest rates were low. COVID hit. Interest rates went up. We had a drug that could have been a $500 million product, and the FDA declined our package. I would say the vision was right … but it’s been a hard five years.
What’s moving the pet and farm markets now?
We’re pretty recession-proof on both sides. The willingness to spend on pets continues to grow, and the humanization of pets is globalizing. So we have almost eight out of 10 homes with a pet [in the US]. China is only two, so there’s a little more sensitivity to the economy. But as willingness to have kids is going down, willingness to have dogs and spend on those dogs is going up.
Farm is a little slower-growth, but it kind of grows with GDP and consumption. Meat consumption continues to climb, and MAHA — Make America Healthy Again — is going to be good for us. One gram of protein per pound of body fat is being recommended by this administration. That’s a lot of Fairlife milkshakes. The US dairy industry is adding $8 billion of capital into US dairy, because of cottage cheese, because of yogurt, because of these shakes. There’s a big trend here in terms of going back to animal-based proteins.
Given the headwinds you’ve faced, what have you had to do to keep people focused internally?
I’m pretty hands-on. This is my baby, and everybody matters. I like to know everybody’s name. I’m high-touch and high-transparency. I say, ‘let’s let the bad news travel as fast as the good news.’ I think this next generation wants reality, transparency, rawness. So it’s not canned presentations, it’s Q&A.
We’re at a six-year high on engagement for employees, and every quarter we get a manager survey so I can rate 1,000 supervisors from one to 1,000 on how well they’re doing with their teams. I think measurement matters as well.
This has not been an easy industry for competitors to get into. Is AI going to lower the barriers to entry?
I don’t know, but I do know this: You can’t stop this. This weekend, I sat in my chair watching college basketball. I had one area that I had to focus on, and in 30 minutes, I had produced a two-page document from my chair [with AI]. As the CEO, you’ve got to use this every day.
My leadership lesson from college basketball is this NIL situation [athletes getting the right to profit from the use of their name, image, and likeness]. It’s so interesting to watch the number of people that have resisted. It’s just like AI; you’ve got to accept it. When the rate of change on the outside is faster than the rate of change on the inside, the end is near.
How do you galvanize people?
We think about WOW, ways of working, and EVP, the employee value proposition. We already had a year-end holiday week. The greatest thing we’ve done in the last five years is we added a mid-year holiday, in addition to all your vacation. There is something about everyone taking a mental break at the same time. We give you two full weeks, weeks when customers don’t really want you calling on them anyway. We rest.
Everything needs duality. You need reality, you need resolve; you need motivation, you need a heart. I don’t need lots of activity. I need delivery. I think you should inspect what you expect, and for those that aren’t delivering, there are some ramifications; you can’t miss plan three years in a row. So it isn’t all warm and fuzzy.