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This Day That Year: Elanco Animal Health

elanco sept20 lt

Shares of Elanco Animal Health Inc. (ELAN) are down nearly 28 percent from a high of $37.61 recorded on September 27, 2018.

It was on this day last year, i.e. September 20, 2018, that Elanco went public on the New York Stock Exchange by setting a public offering at $24 per share.

Elanco is a global animal health company developing innovative solutions that protect and enhance animal health. The Company's products are marketed under more than 125 brands in over 90 countries, and fall under four categories:

-- Companion Animal Disease Prevention (CA Disease Prevention): includes parasiticides and vaccine products for canines and felines.
-- Companion Animal Therapeutics (CA Therapeutics): includes products for the treatment of pain, osteoarthritis, otitis, cardiovascular and dermatology indications in canines and felines.
-- Food Animal Future Protein & Health (FA Future Protein & Health): includes vaccines, antibiotics, parasiticides and other products used in poultry and aquaculture production, as well as functional nutritional health products, including enzymes, probiotics, and prebiotics.
-- Food Animal Ruminants & Swine (FA Ruminants & Swine): includes vaccines, antibiotics, implants, parasiticides and other products used in ruminants (e.g., cattle, sheep and goats) and swine production.
-- FA Ruminants & Swine category is the major contributor to the Company's total revenue, followed by FA Future Protein & Health, CA Disease Prevention and CA Therapeutics.

Of late, sales in the Ruminants & Swine category have been on the decline due to various factors, say, competitive headwinds for Ractopamine based products, softness in swine products due to African Swine Fever, particularly in Asia, and the continued implementation of antimicrobial policies in certain Asian countries, among others. Sales in this category were $1.31 billion in 2016, and it declined to $1.175 billion in 2017 and $1.174 billion in 2018.

However, the other three categories of products have reported a year-over-year increase in sales since 2016.

The core revenue from the 4 categories totaled $2.82 billion in 2016; $2.75 billion in 2017; $2.97 billion in 2018, and $1.46 billion in the first half of 2019.

Looking ahead to full-year 2019, the Company expects core revenue to range between $3.00 billion and $3.04 billion.

Besides the core revenue, there is one more revenue stream for the Company, which goes by the name Strategic Exits. Revenue from Strategic Exits was $89.5 million in 2016; $143.8 million in 2017; $93.9 million in 2018, and $50 million in the first half of 2019. (Strategic Exits are businesses Elanco has exited or has made the decision to exit).

Seeking to double its Companion Animal business, Elanco entered into an agreement with Bayer AG last month to acquire its animal health business in a transaction valued at US$7.6 billion. The transaction is expected to close in mid-2020, subject to regulatory approvals and other customary closing conditions. This is the third acquisition deal to be signed this year.

In August, Elanco acquired Montreal-based Prevtec Microbia Inc., a biotechnology startup specializing in the development of vaccines that help prevent bacterial diseases in food animals, and in the previous month, the Company acquired Aratana Therapeutics, a pet therapeutics company.

As Elanco embarks on its journey as the second largest animal health leader, following the acquisition of Bayer's Animal Health business, it is confident of continuing to deliver mid-single-digit revenue growth.

ELAN has thus far hit a low of $25.51 and a high of $37.61. The stock closed Thursday's (Sep.19, 2019) trading at $27.13, down 1.27%.

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