Corporate Finance

Eli Lilly to Spin Off Animal-Health Business

Eli Lilly reported a quarterly loss of $260 million and announced plans for an IPO of Elanco by the end of 2018.
William SprouseJuly 24, 2018
Eli Lilly to Spin Off Animal-Health Business

Eli Lilly announced it plans to file an initial public offering for its animal-health business, Elanco, by the end of the year. The pharmaceutical company said it wants to sell a stake of less than 20% in Elanco, which had $3.1 billion in sales last year, down 2% from the previous year.

Elanco has been part of Eli Lilly since 1954 and is estimated to be worth around $13 billion, according to a note from investment bank BMO Capital Markets. It brought in $792 million of revenue in the second quarter, up 0.9% from a year ago.

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Eli Lilly made the announcement ahead of the release of its second-quarter earnings, in which it reported total revenue of $6.4 billion, up 9% from a year ago and ahead of Wall Street’s estimates. The company reported a net loss of $260 million on business development transactions. Stripping out the transaction costs, the company said it earned $1.55 billion, or $1.50 per share.

Profits were helped by demand for Eli Lilly’s diabetes drugs, Trulicity and Humalog.

Eli Lilly does not plan to increase U.S. list prices for the rest of the year. “We remain focused on driving revenue growth through volume, not price,” Chief Executive Officer Dave Ricks said.

Pfizer, Merck, and Novartis have also said they would not raise drug prices this year, in response to pressure from the Trump Administration.

Eli Lilly also announced that it had approved a plan to buy back $8 billion in stock.

Eli Lilly has been exploring options for the Elanco business since the fall of 2017. Ricks has said that Eli Lilly depended more on Elanco in the past for revenue, but its human-drug business is now in a better place.

The company plans to file with the SEC in the coming weeks and complete the initial public offering of a 20% stake in Elanco in the second half of 2018.

Eli Lilly said it also wants to divest its remaining ownership stake in Elanco.

Image: Getty