BI sells to Elanco to complete Sanofi swap
- In an effort to comply with regulators as part of its asset swap with Sanofi, Boehringer Ingelheim is selling off its Vetmedica cat, dog and rabies vaccine portfolio to Eli Lilly & Co's animal health subsidiary Elanco. The deal is expected to close in early 2017.
- Elanco gets eight new feline, canine and rabies vaccine product lines, pipeline assets and inventory, along with a fully-integrated manufacturing R&D site in Fort Dodge, Iowa.
- Boehringer Ingelheim gets $885 million and the go-ahead for an asset swap with Sanofi that gives BI the French company's Merial animal health business. The deal, which was announced in June, makes BI the second-largest animal health provider.
Back in June, Sanofi and Boehringer Ingelheim secured an asset swap, with Sanofi snagging Boehringer's €6.7 billion ($7.5 billion) consumer healthcare business along with a €4.7 billion ($5.3 billion) cash payment, and Boehringer Ingelheim getting its paws on Merial, Sanofi's €11.7 billion ($13.1 billion) animal health business. The Vetmedica vaccine sale was a required part of the acquisition of Merial to satisfy regulators.
"This agreement is an important step toward a successful acquisition of Merial," said Albrecht Kissel, president and CEO of Boehringer Ingelheim Vetmedica. "This was a highly complex decision from a business and from an emotional perspective. It was certainly not taken lightly particularly in view of the history and significant positive developments of this business over the past years."
Major asset swaps —one of a few unique deal structures the industry is trying —have become a way for pharma companies to bolster areas of strength and rid their portfolios of non-core assets. While these deals have not been frequent, those that have occurred had high pricetags and have drastically reshaped several big pharma companies.
This is the second time Lilly has participated in an asset swap that propped up its animal health offerings. It previously bought Novartis' animal health business as part of the Novartis-GlaxoSmithKline asset swap in 2014.
Elanco's current pet product line currently includes parasiticides, pain and dermatology medicines, and this adds vaccines and a pipeline of R&D projects. Boehringer Ingelheim Vetmedica launched two new vaccines in 2016, ULTRA Hybrid FVRCP (a feline core vaccine) and ULTRA Duramune Lyme ( a canine Lyme disease vaccine).
The additional products, according to analyst John Scotti at Evercore ISI, could fuel further revenue growth in this area for the company. Scotti reports that Lilly expects a potential $200 million of revenue from the already profitable vaccines business after the close in early 2017, keeping a margin target for Elanco of high 20s-30% by 2020.
Lilly Chairman and CEO John Lechleiter said in a press release that the planned acquisition of BI's U.S. feline, canine and rabies vaccines portfolio reaffirms Lilly's confidence in Elanco's growth potential.
"As a result of the acquisition, Elanco will bring greater value to customers by providing a suite of options for preventing common diseases in companion animals. Coupled with our robust food animal portfolio, this addition further strengthens Elanco's position in the global animal health business," Lechleiter added.
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