Elanco seeks to expand global presence, market with Bayer tie-up

By Aerin Einstein-Curtis contact

- Last updated on GMT

© GettyImages/marchmeena29
© GettyImages/marchmeena29

Related tags: Feed additives, Research, Cattle, Aquaculture

Elanco Animal Health looks to expand its animal health product range, innovation, development capabilities and presence in emerging markets with proposed Bayer animal health buy.

The Indiana-based animal health company announced Tuesday [Aug. 20] that it had entered into an agreement with Bayer AG to acquire the company’s animal health business for $7.6bn. The deal remains subject to regulatory approval and the closing process.

The acquisition would be funded through a 70% cash to 30% Elanco stock split with the cash portion being funded through a blend of debt and equity, said Jeffrey Simmons, president and CEO of Elanco on a conference call about the proposed deal. If concluded, the arrangement would make Elanco the second largest animal health company globally in terms of global revenues.

“This acquisition strengthens and accelerates our focused innovation, portfolio and productivity strategy, it doubles our pet business, balances our portfolio mix, expands our pipeline, delivers significant financial benefits and positions Elanco to capitalize on important trends shaping in the industry,”​ he said.

The move is also intended to help Elanco execute its current strategy and respond to emerging market trends, he said. Adding, “We have a very attractive asset in Bayer animal health that is actionable now – we don’t have the luxury to wait and see – we don’t need to do a deal like this to achieve the midterm goals we’ve set out, but we’re convinced that this is the right move to position Elanco for the long term​.

Once completed, the agreement is anticipated to double Elanco’s companion animal business and boost its product line for livestock along with expanding its international portfolio, according to company information.

Animal nutrition and research highlights

The addition of Bayer's animal health products, knowledge and research is expected to increase the size of Elanco’s companion animal portfolio and bring new products and market space for livestock, said Simmons. It is also anticipated to expand the company’s relationships with livestock producers, veterinarians, pet owners, while expanding company e-commerce offerings and abilities.

The livestock space is expected to continue growing based on the supply and demand projections for protein, he said. However, that understanding also highlights the increasing role of emerging markets.

The agreement provides Elanco a “comprehensive portfolio​” in emerging markets and brings the company important products for cattle and warm water aquaculture production, he said. It is expected to bolster company presence in the livestock sector in Japan, Mexico, China and globally.

“High growth local brands in local markets… these will be the engines that continue to lead revenue growth,”​ he added.

Bayer has a balanced portfolio in livestock products that augments Elanco’s current offerings, said Simmons. “Within each species, Bayer has leading positions across a number of sub-segments and geographies, which expand and diversify our offerings,”​ he added.

“In cattle and dairy strength is in external parasiticides and ketosis control, swine benefits from injectable antibiotics and coccidiosis control, and in aqua, we now have a more complete portfolio where Elanco plays in more cold-water species like salmon and Bayer brings products for warm-water species like shrimp,” ​he said. “Portfolios matter in this business and to have the breadth of products to address farmer needs is a critical element of sustained success.”

However, the acquisition is also anticipated to expand the company’s “pipeline of development projects” ​along with bringing access to new technologies, modalities and dosing and delivery platforms, he said. “It also increases our R&D scale and expands our external network to include a negotiated access to Bayer R&D,”​ he added.

“We add eight key development projects and more than 30 lifecycle [projects], we also gain increased R&D scale, which gives us greater degrees of freedom [and] we bolster our R&D capabilities by adding new delivery platforms and technologies,” ​Simmons said. “We gain certain access to Bayer’s crop science R&D and deprioritized clinical pharma assets [and] finally, the move accelerates our productivity agenda.”

Previous development

However, the proposed acquisition of Bayer’s animal health business is not the only development effort that Elanco has made this year.

In March, Elanco announced that its separation​ from former parent company Eli Lilly and Company had been completed – that effort started in 2017. The change provided Elanco the opportunity to move forward as an animal health-focused company.

Additionally, earlier this summer, Elanco announced a partnership​ with AgBiome, Inc. to research potential novel probiotic, gut health products for swine and address antibiotic stewardship.

The collaboration is focused on combining Elanco’s work in animal health and interest in reducing the reliance on antibiotic use in livestock production, with AgBiome’s microbial strain library.

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