The rationalization scheme will also result in a reduction of head count – by 20% – of senior management at the company.
A producer of medicines, vaccines, and other products, for livestock and pets, Elanco said the workforce reduction program is required to reduce complexity and focus investments in priority areas that drive growth and innovation.
The Indiana-headquartered company says the move stems from its US$7bn acquisition of Bayer Animal Health, which was completed in August 2020
As part of the senior management reduction, executive committee members, Racquel Harris Mason, executive vice president and chief marketing officer, Dirk Ehle, executive vice president and president Elanco Europe, and Joyce Lee, executive vice president and president US Pet Health and Commercial Operations will exit the company on December 31, 2021.
“While actions that impact our team are always difficult, it is imperative that we simplify our organization and focus on delivering customer value to meet our commitments to improve our profitability, even in the midst of increasing inflationary and supply chain costs,” said Todd Young, executive vice president and CFO, Elanco Animal Health.
Elanco's Board of Directors authorized the restructuring plan on Monday, November 29, as per an SEC filing. The job losses are expected to incur severance costs of between US$86m to US$94m in the fourth quarter of 2021.
But the restructuring initiative is expected to help offset higher costs pressures and maintain Elanco’s current growth path to 60% adjusted gross margin by 2023.
Compensation and benefit savings from the rationalization program are expected to be roughly US$60m in 2022 and about US$70m annually, once fully implemented.
Elanco outlined how a percentage of those savings will likely be reinvested in key growth areas, including advancing leadership in digital capabilities, driving focus brands, supporting product launches, and increasing investment in the rapidly growing Chinese market.