IPOs

Lilly’s Elanco Expects IPO to Raise $1.4B

The animal health spinoff is the second major industry player to go public, following Zoetis' successful offering.
Matthew HellerSeptember 6, 2018

The spin-off of Eli Lilly’s Elanco business expects to raise $1.4 billion from an initial public offering as it seeks to cash in on the growing market for animal health business.

Elanco Animal Health said in an amended prospectus filed Wednesday that it is offering 62.9 million shares at an estimated price of between $20 and $23 per share.

At the high end of the price range, the world’s fourth-largest supplier of animal health products would have a valuation of about $8 billion. It had revenue of $2.9 billion for the year ended Dec.  31, 2017, with particular strength in such products as medicinal feed additives.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

“We offer a diverse portfolio of more than 125 brands that make us a trusted partner to veterinarians and food animal producers in more than 90 countries,” the prospectus says.

Elanco’s only publicly-traded peer is industry leader Zoetis, a spin-off of Pfizer that raised $2.2 billion in its IPO and currently has a market capitalization of $43 billion. Zoetis’ shares have nearly tripled in value since Pfizer listed it about five years ago.

A BMO Market analyst told Reuters the brokerage had forecast Elanco’s valuation range to be between $12 billion and $13 billion, but given Zoetis’ performance, it expects strong demand for the IPO.

The strong growth of the animal health sector has made it appealing to investors. Global industry revenue is projected to grow at a compound annual rate of 5% from 2017 to 2023, according to Vetnosis.

In 2017, animal health medicines, vaccines and functional nutritionals represented an estimated global market of $34.3 billion.

“The relatively high price earnings ratio that this sector has reflects the low volatility of their future income and cash flow,” said Jay Ritter, an IPO expert and professor at the University of Florida. “It is a relatively safe sector for investors.”

Among the big industry players, Zoetis has a roughly 15% global market share, followed by Boehringer Ingelheim (14%), Merck (11%), and Elanco (8%).

“Based on industry projections, management expects functional nutritionals to grow faster than the medicines and vaccines market,” Elanco said.

4 Powerful Communication Strategies for Your Next Board Meeting