Elanco shares fall 10% after company posts $49M loss

Shares in Elanco Animal Health Inc. fell about 10% in midday trading Thursday after the Greenfield-based company reported revenue and earnings that missed analyst expectations by a wide margin.

The company attributed the underperformance to the COVID-19 pandemic and said the poor first quarter has not slowed progress on its planned $7.6 billion acquisition of Bayer Animal Health.

“We remain encouraged by the regulatory and integration planning progress despite COVID-19 challenges, as well as Bayer’s strong financial performance in the first quarter,” Elanco CEO Jeff Simmons said in written remarks. “We continue to look toward a mid-2020 close.”

Elanco reported revenue of $657.7 million in the quarter, a drop of 10% from a year ago. The company said 9% of the revenue decline could be attributed to a “$60 million reduction in channel inventory driven by factors resulting from the COVID-19 pandemic.”

The company lost $49.1 million, or 12 cents per share, in the period, down from a profit of $31.5 million, or 9 cents per share, in the same quarter of 2019.

Adjusted income for the quarter was 13 cents per share, which fell short of analyst expectations of 24 cents per share, according to a consensus of analysts by Zack’s Equity Research.

“The COVID-19 virus and ensuing pandemic are impacting our lives and our industry,” Simmons said in a conference call with analysts and reporters. “From declining vet clinic visits and revenue to pressures and protein production and logistics, our customers began to feel the impacts in the second half of March.”

He said the pandemic has created “significant pressures” on working capital and liquidity. Customer demand has fallen, prompting distributors to reduce the level of inventories they hold. The company said it expects to further tighten inventories in the second quarter.

Shares in Elanco fell $2.25, or about 9.8%, to $20.68 in midday trading.