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Lilly looks to leave behind animal health business

Published on 25/10/17 at 10:26am

Eli Lilly released its Q3 financials and the major talking point was the announcement that the business was reviewing “strategic alternatives” for its Elanco Animal Health unit.

The company said it would provide an update on its decision by mid-2018, and this could involve spinning out the business or looking at selling the division entirely.

The decision only comes a few years after Lilly had acted to bolster the unit, by purchasing Novartis’ animal health unit back in 2015 and not long after it had closed a deal with Boehringer Ingelheim to take over its animal vaccines division.

However, with the business having grown to become one of the largest in the animal health business, the possibility of it becoming a standalone company could tempt Lilly. It generated global sales of $740.6 million in the quarter but its growth has been sluggish compared with the pharmaceutical side of the business.

It is also worth noting that Lilly has made concerted efforts to slim its operations globally of late; it revealed that it would cut 3,500 jobs just last month in order to save itself $500 million in annual costs.

David A. Ricks, Lilly's chairman and CEO, commented on the Elanco strategic review: “Today, we are also announcing a strategic review of our Elanco Animal Health business. Elanco has developed into a premier animal health company, and has been an important growth driver and source of revenue diversification for Lilly. Through acquisitions and organic growth, we've grown Elanco to a size and scale that now allows us to consider a variety of options to maximize future value.”

The move is part of a larger industry-wide trend towards focusing on the pharmaceutical angle, by looking at shedding units that provide slower growth. With Novartis’s departing Jimenez discussing options to sell on its Alcon unit in its own Q3 results and, prior to this, Pfizer’s own mooted divestiture of its healthcare unit.

Other than the potential sale of animal health unit, Lilly announced that it had beaten analysts’ expectations by revenue growing across its business by 9%. It noted particular successes in growing its diabetes business, with Trulicity’s sales growing to $528 million and Humalog beating expectations to bring in $696 million.

Ben Hargreaves

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