Lilly closes Novartis deal, creating second-largest animal health giant

Eli Lilly ($LLY) started the new year by announcing it has closed its $5.4 billion acquisition of Novartis Animal Health, in the process expanding its Elanco animal health unit to 17 manufacturing sites and 14 R&D centers. The deal makes Elanco the second-largest animal health company behind Zoetis ($ZTS). Furthermore, it better balances Lilly's product portfolio between products for food animals and those for pets, according to the company.

"As a top-tier animal health company, we are better positioned to help our customers respond to the changing external environment and meet increasing demands for animal protein, as well as growing desires for pet ownership," said Jeff Simmons, senior vice president of Lilly and president of Elanco Animal Health in a statement.

Lilly and Novartis ($NVS) struck their deal last April, and it was approved by the European Union in October. The U.S. Federal Trade Commission wouldn't green-light the acquisition until Lilly cast off Novartis' Sentinel heartworm products. So in late October, Lilly agreed to sell those products to French drugmaker Virbac.

Lilly funded the Novartis deal with $3.4 billion in cash and $2 billion in debt, and it closed the acquisition just two weeks after announcing its first quarterly dividend increase in years.

Last year was a challenging one for Lilly, which has suffered mightily from patent expirations on such blockbusters as antidepressant Cymbalta and osteoporosis drug Evista. The newly beefed-up Elanco division could help offset those losses. Investment newsletter Seeking Alpha predicts that Lilly stakeholders will continue to be rewarded with a dividend of at least 2.8% and share-price appreciation. And the newsletter notes that a Lilly insider recently bought $1 million shares of the company at $59 a share--a major vote of confidence in the company's future.

"The closing of the Elanco transaction and the building up of the company's animal health division is just a part of LLY's effort to move through the patent cliff issues stronger and more diversified," writes Seeking Alpha.

- here's the press release
- read more at Seeking Alpha
- here's the Associated Press' take

Special Report: Top 10 animal health companies - Elanco

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