Lilly considering spinning out or entirely selling the animal health business

Eli Lilly released its Q3 financial results and the main point was the announcement that the company was evaluating "strategic alternatives" for its Elanco Animal Health unit.

Lilly considering spinning out or entirely selling the animal health business.

The company said an update on its decision will be provided by mid-2018, and this could cover spinning out the division or considering selling the business completely.

The decision only comes a few years after Lilly had acted to bolster the unit, by purchasing Novartis’ animal health unit back in 2015 and not long after it had closed a deal with Boehringer Ingelheim to take over its animal vaccines division.

However, with the business having grown to become one of the largest in the animal health business, the possibility of it becoming a standalone company could tempt Lilly. It generated global sales of $740.6 million in the quarter but its growth has been sluggish compared with the pharmaceutical side of the business.

It is also worth noting that Lilly has made concerted efforts to slim its operations globally of late; it revealed that it would cut 3,500 jobs just last month in order to save itself $500 million in annual costs.

David A. Ricks, Lilly's chairman and CEO, commented on the Elanco strategic review: "Today, we are also announcing a strategic review of our Elanco Animal Health business. Elanco has developed into a premier animal health company, and has been an important growth driver and source of revenue diversification for Lilly. Through acquisitions and organic growth, we've grown Elanco to a size and scale that now allows us to consider a variety of options to maximize future value."

The move is part of a larger industry-wide trend towards focusing on the pharmaceutical angle, by looking at shedding units that provide slower growth. With Novartis’s departing Jimenez discussing options to sell on its Alcon unit in its own Q3 results and, prior to this, Pfizer’s own mooted divestiture of its healthcare unit.

Except the possible sale of animal health unit, Lilly announced that it had gone beyond analysts’ expectations by a 9% of revenue growing across its business. It noted particularly the growth of its diabetes business, with Trulicity’s sales increasing to $528 million and Humalog unexpectedly to bring in $696 million.