December 9, 2015
By Mark Terry, BioSpace.com Breaking News Staff
In Tuesday’s conference call, Indianapolis-based Eli Lilly & Co. indicated it is splitting its animal health drugs manufacturing facilities from its human drug manufacturing plants.
BloombergBusiness speculates that this is a move that might eventually lead to spinning off the division. For the moment, however, company representatives insist that the rationale is that animal and human drugs have different manufacturing requirements. Prior to this, the company’s strategy for the animal health division, Elanco, focused on the advantages, such as access to experimental human drugs that might be usable in animals.
“We couldn’t have been more clear today on the value and the synergy we see as being part of Lilly,” Elanco spokeswoman Colleen Parr Dekker told Bloomberg.
In June, Lilly indicated it did not have plans to spin off Elanco. At the time, Elanco spokeswoman Lauren Zierke told Bloomberg, “We continue to believe Lilly’s model for running Elanco is the best one for creating strong business and shareholder value. Furthermore, we expect Elanco to be an important driver of growth for Lilly in the coming year.”
Spinning off animal health divisions is not unprecedented. In mid-2015 Pfizer Inc. spun off its animal health division, Zoetis . Zoetis is one of the largest developers and manufacturers of animal health medications and vaccines worldwide, with 2014 revenues of $4.8 billion. It employs about 10,000 people and sells products in more than 120 countries.
Paris-based Sanofi is also considering spinning off its Merial animal health division, as well as its bio-surgery and renal units, and potentially its nutritional, health and beauty supplements unit, Oenobiol, as part of major restructuring.
Although not specifically animal-related, Germany-based Bayer AG recently completely restructured its company, unloading its MaterialScience unit so its remaining units, HealthCare and CropScience, could better focus on life sciences. The MaterialScience unit was renamed Covestro.
According to Bloomberg, Lilly began splitting off Elanco manufacturing in January. The unit’s head of manufacturing, Steve Jenison, at Tuesday’s conference call, indicated that he now reports directly to Jeffrey Simmons, president of Elanco, rather than to Lilly’s general head of manufacturing.
This occurred after Lilly wrapped up its acquisition of Novartis AG ’s animal health unit, which it acquired for $5.4 billion. That acquisition included 17 manufacturing plants. At the time of the acquisition, John Lechleiter, Lilly’s chairman, president, and chief executive officer, said in a statement, “Animal health continues to represent an attractive growth opportunity for Lilly. We intend to keep Elanco and to take advantage of the substantial synergies between our animal health and human health businesses. Significant investments in our animal health business in recent years have enabled Elanco to double its revenue since 2008, leading the industry in growth. Global trends suggest continued sustained demand for animal health products in the years ahead.”
Last year, Elanco brought in $2.35 billion in drug sales for livestock and pets, accounting for about 12 percent of Lilly’s total revenue. In Tuesday’s call, the company indicated that it expects Elanco to grow by about 5 percent by 2017, higher than the industry average of 4 percent.
