Shares of Elanco Animal Health Inc. have trended. to an 18-month high early Monday, after the company said it had agreed to sell its aquatic business to Merck Animal Health for $1.3 billion in cash in a move aimed at helping it focus on promising products. Pipeline products.
Elanco Elan Company, headquartered in Greenfield,
The company, which makes products to protect the health of farm animals and pets, said the amount is equal to about 7.4 times Elanco aqua's estimated 2023 revenue, which includes products across warm-water and cold-water species such as salmon vaccines.
The deal “allows us to prioritize our investments in larger markets with the potential to generate greater profits over the medium and long term, while creating balance sheet flexibility,” Jeff Simons, president and CEO of Elanco Animal Health, said in a statement.
The aqua business had revenue of approximately $175 million in 2023. The divestiture includes currently marketed brands; Water research and development projects; relocating manufacturing sites in Prince Edward Island, Canada, and Dong Nai, Vietnam; and approximately 280 commercial and manufacturing employees.
Elanco will use proceeds from the deal to pay down debt and reduce interest costs by about $65 million annually, or 11 cents in earnings per share.
The deal is expected to close approximately mid-year.
Elanco has six potential blockbuster products expected to hit the US market by 2025. It expects to receive approvals for Credelio Quattro, Zenrelia and Bovaer in the first half of 2024.
Credelio Quattro is a parasiticide for dogs, Zenrelia is a skin treatment for dogs, and Bovaer is a product that reduces methane in livestock.
“In addition, the company is opportunistically pursuing platform-compatible targets, such as monoclonal antibodies, and other key emerging areas with high unmet need,” the statement said.
Elanco will provide more details about the deal when it reports fourth-quarter earnings on February 26.
Elanco stock rose 6% pre-market and was up 6.2% in the past 12 months through Friday's close, while the S&P 500 SPX,
It rose by 19.9%.
