Elanco Announces FDA Has Completed Review of Bovaer®, First-in-Class Methane-Reducing Feed Ingredient, for U.S. Dairy Industry

Rhea-AI Summary

Elanco Animal Health has announced the FDA's completion of a multi-year review of Bovaer, a methane-reducing feed ingredient for dairy cattle, confirming its safety and efficacy. Bovaer can reduce methane emissions by about 30%, creating new revenue streams for dairy farmers through carbon credits. Elanco has also expanded its agreement with dsm-firmenich to distribute Bovaer across North America, including Canada and Mexico. This innovation aims to support climate-neutral dairy farming and meet the increasing demand for sustainable products. Bovaer is expected to generate significant value for farmers and the environment, potentially addressing global warming concerns through reduced greenhouse gas emissions.

Positive

• FDA confirms Bovaer's safety and efficacy for lactating dairy cattle.
• Bovaer can reduce methane emissions by about 30%, equivalent to 1.2 metric tons of CO2e annually per cow.
• Elanco expects Bovaer's launch and carbon credit value addition in Q3.
• Agreement with dsm-firmenich expands Bovaer's distribution to Canada and Mexico.
• Bovaer could help dairy farmers earn up to $20 or more per cow annually through carbon credits.
• Bovaer supports climate-neutral dairy farming and helps meet consumer demand for sustainable products.
• The USDA awarded $89 million to support farms using Bovaer and similar technologies.
• Feeding Bovaer to one million cows could reduce emissions equivalent to removing 285,000 cars from the road annually.

Negative

• The cost of using Bovaer adds a few cents per gallon of milk, potentially impacting consumer prices.
• Uncertainty around the scalability and adoption rate of Bovaer among dairy farmers.
• Potential reliance on voluntary carbon markets may limit the financial benefits for some farmers.

Insights

Financial Analyst

The completion of the FDA review for Bovaer is significant as it opens up new revenue streams for Elanco in the U.S., Canada and Mexico. This can lead to a substantial increase in sales and market share in the animal health sector. Bovaer's approval could also enhance Elanco's brand reputation as a leader in sustainable animal health solutions. From a financial standpoint, investors should note the potential for this product to generate considerable revenue, especially if it gains widespread adoption among dairy farmers. Additionally, the partnership with dsm-firmenich and the anticipated launch in the third quarter provide a clear timeline for when revenue impacts might begin to materialize. Profitable carbon credits and increased dairy production efficiency could further boost financial performance.

Environmental Specialist

Bovaer’s ability to reduce methane emissions by about 30% per cow is a breakthrough in environmental technology. Methane is a potent greenhouse gas and reducing emissions from cattle can significantly impact global warming. This product aligns well with growing consumer demands for sustainable and eco-friendly food products. Moreover, the expanded distribution agreement highlights the potential for widespread environmental benefits across North America. The implications for climate change mitigation are considerable, given the scale of dairy farming in the U.S., Canada and Mexico. The strategic focus on sustainability can also enhance the public image of participating farms and food companies.

Market Research Analyst

The market potential for Bovaer is substantial given the increasing focus on sustainability among consumers and corporations. The mention of Fortune 500 companies setting climate commitment goals suggests a significant market for low-carbon dairy products. The ability to quantify and certify carbon credits through tools like UpLook and Athian further supports the marketability of Bovaer. This product not only meets consumer demand but also provides a financial incentive for dairy farmers to adopt sustainable practices. The expansion into Canada and Mexico opens additional markets, potentially accelerating adoption rates and market penetration. This aligns well with global trends towards environmental sustainability and corporate responsibility.

• Food and Drug Administration confirms Bovaer meets safety and efficacy requirements
• Elanco expects product launch and added carbon credit value to producers beginning in the third quarter
• Elanco announces agreement with dsm-firmenich to expand distribution of Bovaer across North America, adding both the Canada and Mexico markets

GREENFIELD, Ind., May 28, 2024 /PRNewswire/ -- Elanco Animal Health Incorporated (NYSE: ELAN) today announced the U.S. Food and Drug Administration (FDA) has completed its comprehensive, multi-year review of Bovaer® (3-NOP), a first-in-class methane-reducing feed ingredient, and determined the product meets safety and efficacy requirements for use in lactating dairy cattle.

"This monumental announcement has the ability to accelerate the opportunity for climate-neutral dairy farming while creating a new revenue stream for dairy farmers across the country," said Jeff Simmons, President and CEO, Elanco Animal Health. "We appreciate FDA's commitment to maintaining high standards for science-based review, while balancing the need to quickly bring solutions to the market. Bovaer represents another example of Elanco being a partner of choice in animal health, where the capabilities of our talented R&D, regulatory and commercial teams are delivering significant value.

Simmons continued: "As global temperatures breach new thresholds, consumers demand more sustainable products and the farm economy battles profitability challenges, we are excited to bring Bovaer to the market as a potential solution. Bovaer will create value for farmers, while helping food companies meet consumer demands and deliver on their sustainability commitments. As animal, human and now environmental health continue to converge, Bovaer is one of the most significant innovations that considers this intersection and provides consumers, farmers and society what they want for our future."

Bovaer represents another blockbuster potential innovation in Elanco's portfolio and further accelerates livestock sustainability, the next billion-dollar plus market in animal health. This innovation is expected to accelerate market development and increase innovation in this space.

Bovaer works by suppressing the enzyme in the cow's rumen that forms methane. Feeding one tablespoon of Bovaer per lactating dairy cow per day can reduce methane emissions about 30% or about 1.2 metric tons of carbon dioxide equivalent (CO2e) emissions annually, while creating opportunity for dairy farmers to be financially rewarded for reducing their dairy's carbon footprint.ⁱ Feeding one million cows Bovaer would reduce emissions equivalent to removing more than 285,000 cars from the road for a year.ⁱⁱ Feeding Bovaer to cattle has proven to be safe for animals, producers and consumers.

Expanding Access Across North America 
Elanco and dsm-firmenich have agreed to expand Elanco's commercialization of Bovaer across North America. In addition to the U.S., Elanco will also now have the right to market Bovaer in Canada and Mexico, where the product is already available for use in beef and dairy cattle. This expanded agreement can accelerate the opportunity to make climate-neutral cattle farming in North America a reality this decade.

"We congratulate Elanco and the U.S. dairy sector, on this important milestone, and will support Elanco by providing initial supplies from Europe," said Dimitri de Vreeze, CEO at dsm-firmenich. "This strategic collaboration exemplifies how we can accelerate the expansion and adoption of Bovaer in North America to significantly decrease methane emissions on a large scale, and thereby support global efforts to combat climate change. Bovaer holds the key to a transformative shift in the global dairy sector, and launching this feed ingredient in the U.S. after years of dedicated research, trials, and industry collaboration is a testament to its global potential."

Simmons said, "We appreciate the work dsm-firmenich has invested in this revolutionary product and are pleased they've recognized Elanco as the global farm animal health leader and the right partner to bring this solution to farmers across North America."

Why Methane Matters
This announcement comes at a pivotal time. According to the United Nations, the world's population has until the year 2030 to curb greenhouse gas emissions (GHG) or deal with irreversible impacts to the planet.ⁱⁱⁱ In response, about two-thirds of all Fortune 500 companies have set significant climate commitment goals.^iv Reducing enteric methane emissions from cattle—naturally generated through the enteric fermentation process—represents a key opportunity. Methane lasts about a decade in the atmosphere and is 27x more potent than carbon dioxide at trapping heat—so smaller reductions create greater impact on temperature.^v By mitigating methane, the livestock industry can reduce the rate of climate warming and allow food companies and retailers to make meaningful progress toward their Scope 3 emissions goals.

"Reducing enteric methane is critical if we are to reach our climate goals," said Dr. Frank Mitloehner, CLEAR Center Director and University California Davis Professor and Cooperative Extension Air Quality Specialist. "It's exciting our farmers will have an important tool to do that, in Bovaer."

Creating New Revenue Streams for Farmers
Feeding Bovaer to cows provides a scalable and credible way for dairy farmers to benefit from being good stewards of the environment by being financially rewarded for implementing on-farm sustainability interventions.

"At an added cost of a few cents a gallon of milk, Bovaer can help food companies meet their climate commitments and consumer desire for more sustainable dairy products," said Katie Cook, Vice President, Livestock Sustainability and Farm Animal Marketing at Elanco. "Meanwhile, by engaging in voluntary carbon markets and securing USDA and state conservation programming, dairy producers have a scalable sustainability practice with the potential to create an annual return of $20 or more per lactating cow by feeding Bovaer^vi. Our goal is to make this opportunity a reality starting this summer, while creating a self-sustaining carbon inset market for American agriculture."

Dairy farmers incorporate Bovaer into their rations and quantify the effect using carbon market-friendly tools like UpLook™ by Elanco, an insights-based engine designed to quantify greenhouse gas emissions reductions. The tool utilizes on-farm data and peer-reviewed science to identify key drivers of an operation's carbon footprint and track the progress of sustainability efforts. UpLook connects seamlessly to Athian, the first-of-its-kind livestock carbon inset marketplace. This seamless process allows farmers to quantify their emissions reduction efforts and certify carbon credits for sale. In addition to the carbon marketplace, the U.S. Department of Agriculture has awarded $89 million in funding to support farms using technologies like Bovaer to reduce their methane emissions.^vii

"Products like Elanco's Bovaer will allow U.S. farmers to be rewarded for participating in voluntary, producer-led sustainability efforts," said Gregg Doud, President and CEO, National Milk Producers Federation. "Consumers around the world are demanding lower-carbon foods. Bovaer is an innovation that can help U.S. dairy farmers remain globally competitive and maintain their role as leaders in more sustainable dairy production."

Greg Bethard, a dairy farmer from Kansas who has used UpLook to quantify his greenhouse gas emissions, expressed his excitement around today's announcement.

"Dairy producers have made great strides improving the sustainability of our operations," said Bethard, High Plains Ponderosa Dairy. "Today's announcement provides access to a product that has been extensively studied and shown to reduce emissions from dairy cows. Bovaer is a value-creation opportunity for dairies—it's about helping us provide product in a manner most of our consumers are wanting—a lower carbon footprint food."

ABOUT ELANCO
Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets, creating value for farmers, pet owners, veterinarians, stakeholders and society as a whole. With nearly 70 years of animal health heritage, we are committed to helping our customers improve the health of animals in their care, while also making a meaningful impact on our local and global communities. At Elanco, we are driven by our vision of Food and Companionship Enriching Life and our Elanco Healthy Purpose™ sustainability pillars – all to advance the health of animals, people, the planet and our enterprise. Learn more at www.elanco.com.

The label contains complete use information, including cautions and warnings. Always read, understand and follow the label and use directions.

Bovaer is a trademark of dsm-firmenich. Elanco is a trademark of Elanco or its affiliates. © 2024 Elanco or its affiliates.

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ⁱ Kebreab, E., Bannink, A., Pressman, E. M., Walker, N., Karagiannis, A., van Gastelen, S., & Dijkstra, J. (2023). A meta-analysis of effects of 3-nitrooxypropanol on methane production, yield, and intensity in dairy cattle. Journal of Dairy Science, 106(2), 927–936.
 https://doi.org/10.3168/jds.2022-22211 based on 60 ppm, 25 kg/d DMI, 30% NDF, and 305 day lactation results in a 31.6% or 1.2 MT reduction
ⁱⁱ Greenhouse Gas Equivalencies Calculator | US EPA
ⁱⁱⁱ Transforming our world: the 2030 Agenda for Sustainable Development | Department of Economic and Social Affairs
(un.org) at https://sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for%20Sustainable%20Development%20web.pdf
^iv Commitment issues: Markers of real climate action in the Fortune Global 500. 2023. Climate Impact Partners. Available at: https://www.climateimpact.com/news-insights/fortune-global-500-climate-commitments/
^v Intergovernmental Panel on Climate Change Sixth Assessment Report https://www.ipcc.ch/report/ar6/wg1/
^vi Assumes 1.2 mt of CO2e/cow/year abated, cumulative value of at least $170/mt of Co2 from USDA incentive plus carbon inset market value less product and other administrative fees
^vii Regional Conservation Partnership Program 2023 Awarded Projects | Natural Resources Conservation Service (usda.gov)

Media Contact: Season Solorio (765) 316-0233 season.solorio@elancoah.com
Investor Contact: Kathryn Grissom (317) 273-9284 kathryn.grissom@elancoah.com

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SOURCE Elanco Animal Health

FAQ

What is Bovaer?

Bovaer is a methane-reducing feed ingredient for lactating dairy cattle developed by Elanco.

How much can Bovaer reduce methane emissions?

Bovaer can reduce methane emissions by about 30% per cow, equivalent to 1.2 metric tons of CO2e annually.

When will Bovaer be available in the market?

Elanco expects Bovaer to launch in the third quarter of 2024.

How does Bovaer financially benefit dairy farmers?

Bovaer can help dairy farmers earn carbon credits, potentially adding $20 or more per cow annually.

What regions will Bovaer be available in?

Bovaer will be available in the U.S., Canada, and Mexico.

What is the environmental impact of Bovaer?

Feeding Bovaer to one million cows can reduce emissions equivalent to removing over 285,000 cars from the road annually.

Who collaborated with Elanco on Bovaer?

Elanco partnered with dsm-firmenich to expand Bovaer's distribution across North America.

What funding supports the use of Bovaer?

The USDA has awarded $89 million to support farms using technologies like Bovaer.