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ELANCO ANIMAL HEALTH 2500 Innovation Way Greenfield, IN 46140 USA 1.877.Elanco1 (1.877.352.6261) For additional information visit elanco.com Food and companionship enriching life. 2018 ANNUAL REPORT STOCK INFORMATION COMMON STOCK TRANSFER AGENT AND REGISTRAR Listed on the New York Stock Exchange – trading symbol ELAN. Communications concerning shareholder address changes, stock transfers, changes of ownership, lost stock certificates, payment SHAREHOLDERS OF RECORD of dividends, dividend check replacements, duplicate mailings or As of March 22, 2019, there were 365,702,757 shares outstanding. other account services should be directed to the following: CORPORATE INFORMATION MAILING ADDRESSES CORPORATE OFFICE Shareholder correspondence Overnight correspondence Targeted, Value-Generating Strategy Elanco Animal Health should be mailed to: should be sent to: 2500 Innovation Way Computershare Computershare Greenfield, IN 46140 USA C/O: Shareholder Services C/O: Shareholder Services 462 South 4th Street Phone: (877) 352-6261 PO Box 505000 Louisville, KY 40233-5000 Suite 1600 Louisville, KY 40202 ELANCO CONTACTS Toll Free: (800) 736-3001 Colleen Parr Dekker Darlene Quashie Henry Toll: 1 (781) 575-3100 Head, Global External Communications Head of Securities and Corporate Email: [email protected] Phone: 1 (317) 989-7011 Transactions, Legal Internet: www.computershare.com/investor Email: [email protected] Phone: 1 (317) 276-4606 Email: [email protected] Jim Greffet Head, Investor Relations ADJUSTED EBIT RECONCILIATION Phone: 1 (317) 383-9935 Email: [email protected] 2015 2016 2017 2018 Sales 2,909 2,914 2,889 3,067 The Customer FORWARD-LOOKING STATEMENTS The Elanco 2018 Annual Report contains forward-looking statements as GAAP Net Income (211) (48) (311) 87 defined by federal securities laws. Important factors that could cause future results to differ materially from those projected in the Adjustments to Net Income 420 381 561 345 forward-looking statements are discussed in Elanco's 2018 Form 10-K. Adjusted Net Income 1 209 333 251 432 EFFECT OF PRICE/RATE/VOLUME ON REVENUE Millions FY 2018 Taxes and Interest 111 124 151 117 REVENUE PRICE FX RATE VOLUME TOTAL CER* Adjusted EBIT 320 457 402 549 Core Revenue $2,972.9 3% 0% 5% 8% 8% ADJUSTED EBIT MARGIN 11% 16% 14% 18% 1 We define adjusted net income as net income (loss) excluding amortization of intangible assets, Strategic Exits 93.9 (0)% 0% (34)% (35)% (35)% purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets, facility exit costs and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations. TOTAL ELANCO $3,066.8 3% 0% 3% 6% 6% Note: Numbers may not add due to rounding; *CER = Constant exchange rate INNOVATION PORTFOLIO PRODUCTIVITY RECONCILIATION OF GAAP REPORTED TO NON-GAAP EPS FULL YEAR INCOME STATEMENT NOTES FULL-YEAR TARGETED APPROACH THREE CATEGORIES UNLOCKING VALUE 2018 NON-GAAP INFORMATION HAS BEEN ADJUSTED TO EXCLUDE: CREATING PORTFOLIO OF WHERE WE CAN WIN 2018 2017 Cost of sales consists of charges primarily associated with inventory adjustments 3% price growth for 2018 related to the suspension of commercial activities for Imrestor ($34.7 million), as well As Reported EPS $0.28 $(1.06) SUSTAINED INNOVATION 2018 Core Elanco1 revenue: as the closure of the Larchwood, IA facility ($3.9 million). Cost of sales 1 0.10 0.12 Asset impairments, restructuring and other special charges represents costs associated 11 newly launched products $2.97B, +8% with the suspension of Imrestor commercial activities: severance, company stand-up 3 sites exited in 2018 cost: facility closures ($47.7 million): asset impairments ($82.6 million): partially offset grew 91% in 2018 to $274M Amortization of intangible assets 0.54 0.60 (completed sale of sites in by a gain on the sale of our Cali, Columbia facility ($1.5 million). Asset impairments, restructuring and other Other-net, (income) expense consists of costs resulting from an increase in the Targeted Growth Categories Larchwood, IA; Cali, Colombia; 0.35 1.03 special charges 2 Aratana contingent consideration ($38.7 million) and expenses related to on-going 4th consecutive year with are 61% of Core Elanco sales and Sligo, Ireland) integration activities ($1.7 million). 3 multiple launches Other-net, (income) expense 0.11 (0.01) Income tax represents the income tax expense associated with the adjusted items. Provision for tax on income (0.16) (0.20) Interceptor® Plus achieved Announced international 2017 NON-GAAP INFORMATION HAS BEEN ADJUSTED TO EXCLUDE: Nutritional Health collaboration blockbuster status Total Adjustments to EPS $0.94 $1.54 Cost of sales represents charges entirely associated with the incremental purchase restructuring to streamline accounting charges related to inventory valuation due to inventory that was with Novozymes and create greater efficiency Impact of adjusted weighted shares subsequently sold. (0.04) 0.21 outstanding: basic and diluted Asset impairments, restructuring and other special charges primarily relate to severance, curtailment loss: special termination benefits ($162.0 million) associated ADJUSTED EPS $1.18 $0.69 2018 Approvals: Prevacent® PRRS, with the U.S. voluntary early retirement program: integration costs ($90.3 million) Narrowed CMOs by 18, ending 1 Charges associated with inventory adjustments related to the suspension of commercial associated with acquired businesses; facility exit costs ($31.8 million): asset Correlink™, Experior™, Credelio® activities of Imrestor and the closure of the Larchwood, IA facility (2018); and charges associated impairment costs ($110.6 million) primarily related to intangible asset impairments year with 100 with incremental purchase accounting related to inventory valuation due to inventory that was for marketed products and for acquired IPR&D assets; partially offset by a gain on for cats subsequently sold (2017). the disposal of two sites ($19.6 million) previously closed as part of our acquisition 2 Restructuring expenses associated with the suspension of Imrestor commercial activities, and integration of Novartis AH. severance, company stand up cost, facility closures and asset impairments (2018); and expenses Eliminated 310 SKUs associated with the U.S. voluntary early retirement program, integration costs associated with Other-net, (income) expense represents contingent consideration related to Aratana acquired businesses, facility exit costs, asset impairment costs, offset by the gain on the disposal ($4.7 million). 1. Core Elanco represents the long-term business minus strategic exits. of two sites (2017). Income tax represents the income tax expense associated with the adjusted items 3 Expenses resulting from an increase in the Aratana contingent consideration (2018 and 2017). and expense ($33.1 million) related to the U.S. tax reform My Fellow Shareholders 2018 was a remarkable year for Elanco Animal Health. We began to see the efforts of our strategic plan and transformation come to life, creating growth and earning our independence through a successful IPO. Most important is the impact Elanco has made in advancing the health of animals, people and the planet through our vision of Food and Companionship Enriching Life. As a society we've never faced greater challenges. Elanco is in a position to address a number of key issues – increasing social isolation, growing demand for protein, better nutrition and improving environmental sustainability. These growing human health and environmental concerns can be answered, in part, by the work of Elanco and advancements in making animals healthier. In fact, making this type of impact is so vital that our management team strives every day to deliver on the promises we've made to customers and employees. We promise to advocate for our customers while improving the health of animals and creating value through innovative products, expertise and service. And to our employees, we promise to foster an inclusive culture where they can make a difference, encouraging ownership, growth and well-being. JEFF SIMMONS President and CEO Elanco 2018 Annual Report | 1 Advocating for Customers ANIMALS ARE THE X-FACTOR Elanco believes animals will be the X-factor in some of our biggest global issues, including the physical and emotional health of people and the health of our environment. WHAT IS AN X-FACTOR? It’s that unexpected, game-changing These factors create strong underlying variable that unlocks solutions to fundamentals for our industry. A growing global population and strengthening middle class are complex issues. Animals will be an expected to drive a nearly 75 percent increase X-factor to society's biggest issues. in demand for protein – meat, milk, fish and eggs by 2050. Meanwhile, pet ownership and the Research shows that our increasing social amount we spend on our pets is also rising. In isolation increases likelihood of early death fact, U.S. dog ownership has reached a 20-year by 50 percent. Meanwhile, pets, our trusted high with more than 38 percent of homes having companions, can have significant physical, a dog. As we’ve improved the quality of care pets emotional and social benefits, ranging from receive, they’re also living longer, which means reducing blood pressure to minimizing anxiety. happier, healthier owners. But it poses a new People living alone can reduce their risk of death challenge as older pets face diseases of aging by 33 percent just by having a dog. And making similar to people. meat, milk, fish and eggs more available can improve physical and cognitive development, This is why Elanco's vision is Food and play a role in improving human health and Companionship Enriching Life. Over the past reduce obesity. Malnutrition costs $3.5 trillion 15 years we fed this vision by refocusing our per year to the global economy. Further, raising purpose not just on the lives of animals – but animals more sustainably can minimize our on the lives of the people animals impact. resource use. Elanco is in the people business.

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