Lilly closes two animal health factories, citing no 'competitive business model'

Eli Lilly's ($LLY) $5.4 billion acquisition of Novartis Animal Health left it with excess manufacturing capacity that it has spent much of the past year trying to reconcile. Now two animal health factories are on the chopping block--one in Sligo, Ireland, and the other in Dundee, Scotland--the company confirmed after its fourth-quarter earnings call on Jan. 28.

The company said in its earnings report that it would be closing the Sligo plant, but a spokeswoman told FiercePharmaManufacturing in an email that Lilly's Elanco animal health unit would also be shuttering the Dundee facility. She said the company would first look for a buyer for that plant but would ultimately close it if no deal transpires.

"Unfortunately, cost reduction initiatives at Sligo, including a restructuring last year, have not been sufficient in establishing a competitive business model for the facility," the spokeswoman said. She expects about 100 employees will be affected by the Sligo closing and 30 by the potential closing of the Dundee site.

The Novartis ($NVS) acquisition, which closed a year ago, pushed Elanco's fourth-quarter sales up 28% year over year to $811.7 million, Lilly announced. But when the company included Novartis' fourth-quarter 2014 results in its animal health division, sales actually dropped 11%, driven by price and volume declines in products sold for food animals, as well as unfavorable foreign exchange rates, the company said.

For the full year, worldwide animal health sales came in at $3.2 billion, an increase of 36% over 2014. But sales declined 7% when Novartis Animal Health's 2014 revenues were counted.

The news about the shuttered factories comes just about a month after executives confirmed to investors they were separating Elanco's manufacturing facilities from the rest of the company. The news only fueled long-standing rumors that Lilly was prepping Elanco for a spinoff or sale. But the company continues to pooh-pooh the notion that it wants out of animal health.

During an investor meeting in Boston in December, Lilly estimated that Elanco would outpace the average 4% to 5% growth rate in animal health. Executives also predicted the company would launch 7 new animal health products by early 2017.

- read more at FiercePharmaManufacturing
- here's the earnings release

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