Since Eli Lilly ($LLY) closed its $5.4 billion deal last year to buy Novartis Animal Health, Lilly has been doing an in-depth evaluation of its global manufacturing operations. The conclusions it has reached are bad news for more than 100 workers at plants in Ireland and Scotland.
Lilly said in its earnings report today that its Elanco animal health operation will close a plant in Sligo, Ireland. But spokeswoman Kerri McGrath says the cuts at Elanco also include a plant in Dundee, Scotland.
"The global evaluation has also resulted in the decision to exit ownership of our manufacturing operations in Dundee, Scotland," McGrath said today in an email. "Unfortunately, cost reduction initiatives at Sligo, including a restructuring last year, have not been sufficient in establishing a competitive business model for the facility."
She said the Sligo plant has about 100 employees and it is expected that the majority of those will leave in the second quarter of 2016. McGrath said a small number of employees will be kept on into 2017 to handle the "decommissioning activities." Lilly is taking a charge of about $100 million in Q1 2016 to cover the costs of closing the plant.
McGrath said the company will be looking to find a buyer for the Dundee site. If a buyer can't be found, then Elanco will transfer production to other sites and the plant will be closed, a move that would take about two years. About 30 employees could be affected by a closure.
Over the coming months, one of our top priorities will be to seek a buyer for ongoing manufacturing operations at the site. The site will operate as normal during this time--continuing to deliver a safe, high-quality, reliable supply to customers. If efforts to find a suitable buyer are unsuccessful, we will commence the transfer of product supply to other manufacturing sites, leading to a site closure. If this were to occur, the company anticipates the transition of production would take approximately two years to complete.
As part of the announcement, some global support roles at Dundee will transition out of the site in 2016 and would not be part of a potential site sale. This transition, affecting about 30 positions, will commence shortly.
Last year, Elanco put on the block a former Novartis ($NVS) vaccine plant it picked up in the Novartis deal. The Swiss drugmaker had intended to turn the former Chiron plant into an animal health facility but didn't get that done before deciding to unload its animal health operations. Elanco quickly determined it did not need the 78,198-square-foot biologics plant and said it would sell or close it.
- here's the earnings release
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