On Monday, Elanco Animal Health (NYSE:ELAN) shares saw its price target lowered by Piper Sandler from $19.00 to $16.00, while the firm kept a Neutral stance on the stock. The adjustment comes after Piper Sandler conducted interviews with three veterinary professionals to gauge the potential impact of Elanco's new product label on prescribing habits.
The consensus from the interviews suggests that the new label may lead to a roughly 20% discount on the product and a slower adoption rate among veterinarians, who may require time to build confidence in the product.
Piper Sandler anticipates that at the product's peak, there might be a modest 5-10% decline in unit volume. However, due to the lower price, the impact on margins could be more significant than initially expected.
The firm projects a total impact of 25-35% on peak sales for Elanco, coupled with a more gradual increase in sales. In response to these insights, Piper Sandler has revised its model, leading to the updated price target of $16. This reflects the anticipated challenges in the product's market performance and the potential financial implications for Elanco.
The maintained Neutral rating indicates that Piper Sandler does not see significant positive or negative catalysts that could drive Elanco's stock performance markedly above or below its current level in the near term. The firm's revised price target and outlook are based on the expected impact of the new product label on Elanco's sales trajectory and profit margins.
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