Eli Lilly to buy Novartis AG's animal health business for $5.4 bn

Eli Lilly and Co today struck a deal to buy Swiss drugmaker Novartis AG's animal health business for $5.4 billion in cash in order to strengthen and diversify its own animal health business, Elanco.

The deal comes two months after Elanco acquired Germany's privately-held Lohmann Animal Health, the poultry vaccine and feed additives unit of PHW Group, for a reported $535 million. (See: Eli Lilly's Elanco to buy Germany's Lohmann Animal Health)

In 2010, Elanco acquired the European rights to a portfolio of certain animal health products and animal vaccine manufacturing facility in Ireland of Pfizer, for an undisclosed sum.

Lilly said it plans to fund the Novartis AG's animal health unit deal with about $3.4 billion cash on hand and $2 billion through loans.

Post closing, Elanco will become the second-largest animal health company in terms of global revenue, strengthen its number two ranking in the US, and improve its position in Europe and the rest of the world, Indianapolis-based Eli Lilly said in a statement.

With a presence in around 40 countries and 2013 revenue of approximately $1.1 billion, Novartis Animal Health develops drugs to prevent and treat diseases in pets, farm animals and farmed fish.

The deal will give Lilly nine manufacturing sites, six research and development facilities, a global commercial infrastructure with a portfolio of approximately 600 products, a pipeline of more than 40 projects in development, and more than 3,000 employees.

Lilly, which expects to close the deal by the end of the first quarter of 2015, expects cost savings of about $200 million per year within three years of closing.

The acquisition will expand and complement Elanco's product portfolio, R&D and manufacturing capabilities, and commercial presence in key geographies.

It will also provides Elanco with a stronger commercial presence in the companion animal and swine markets, expands its presence in the equine and vaccines areas, and creates an entry into the aquaculture market.

"This deal creates a global animal health leader able to deliver even more innovation and value to our customers," said Jeff Simmons, senior vice president of Eli Lilly and president of Elanco Animal Health. 

"Combining these two great companies will enable us to provide more diversified brands, reach more market segments, expand our global footprint, and strengthen our pipeline, capabilities and expertise,'' he added. 

Elanco develops and markets products and services to improve animal health and protein production in more than 75 countries.

The Indiana-based company employs more than 3,000 people worldwide, and has offices in more than 40 countries.