But there was some better news -- and some bad news -- when Elanco announced its second-quarter results before the market opened on Tuesday. Here are the highlights from the animal health company's Q2 update.
By the numbers
Elanco reported revenue in the second quarter of $781.6 million. This reflected a 1% year-over-year increase. The consensus Wall Street analysts' estimate had been for Q2 revenue of $782.9 million.
The company announced second-quarter net income of $35.9 million, or $0.10 per share, on a generally accepted accounting principles (GAAP) basis. This was a significant improvement from the net loss of $62.8 million, or $0.21 per share, posted in the same period in 2018.
Elanco's non-GAAP adjusted net income in the second quarter totaled $101.6 million, or $0.28 per share. This reflected a small increase from the prior-year period adjusted net income of $98.8 million, or $0.27 per share. It also topped the consensus analysts' adjusted earnings per share (EPS) estimate of $0.26.
Behind the numbers
Currency fluctuations dinged Elanco's sales in the second quarter. On a constant-currency basis, the company's total revenue increased by 4% year over year.
Elanco continued to experience strong growth with its companion animal therapeutics unit, with sales jumping 22% over the prior-year period thanks to increased demand for products, including Galliprant. Two other units delivered lower growth, with companion animal disease prevention sales increasing 4% year over year and food animal future protein & health sales rising 2%.
However, Elanco's food animal ruminants and swine business didn't perform as well. Revenue for this unit fell 9% year over year. The company attributed this decline in part to softness in swine products due to African swine fever, especially in Asian markets. U.S. revenue for the unit was held back by lower sales of Rumensin. Elanco also encountered a headwind from a global supply disruption of some cattle products.
The company's bottom line improved significantly, driven in part by higher sales. Elanco's gross profit jumped by 26% year over year. This strong increase stemmed primarily from improvements in manufacturing productivity. Also, the prior-year period's gross margin was negatively affected by net inventory adjustments related to the suspension of commercialization of dairy cow clinical mastitis injection Imrestor and the closure of the company's Larchwood, Iowa, facility.
Elanco now anticipates revenue to be between $3.08 billion and $3.12 billion in full-year 2019. The upper end of this range is lower than the company's previous guidance of $3.14 million. The company also projected 2019 EPS of between $0.36 and $0.44, compared to the range of $0.36 to $0.48 provided in its previous outlook. Full-year adjusted EPS is now expected to come in between $1.04 and $1.10, compared to the prior guidance range of $1.02 to $1.12.
These revisions to full-year guidance stemmed in large part from the impact of African swine fever and what Elanco referred to as "anticipated supply disruptions of certain injectable cattle products." Elanco CEO Jeff Simmons, though, noted that the company is "pleased with our margin expansion progress and confident in the growth of our underlying business."