Elanco Animal Health, the former animal-health business of Eli Lilly and Company and now a stand-alone company, has agreed to sell two manufacturing sites in Shawnee, Kansas, and Speke, UK to Tris Pharmaceuticals, a Norwalk, Connecticut-based CDMO. Additionally, Elanco will cease operations of its regional manufacturing site in Belford Roxo, Brazil.

The sale of the Shawnee and Spekhie sites to TriRx includes the physical assets at both locations along with the transfer of approximately 600 employees, subject to necessary consultation based on local regulations. The companies have also entered into a long-term supply agreement for the facilities to continue to manufacture existing Elanco products.

The sale of the Shawnee facility is expected to close in the second half of 2021, and the sale of the Speke facility by early 2022.

For TriRx, the pending facility acquisitions adds to the company’s manufacturing network, which includes two facilities, respectively in Segré, France and Huntsville, Alabama. TriRx acquired the Segré facility from MSD Sante Animale, a division of Merck & Co., in 2020.

Elanco also announced that it is ceasing operations at the legacy Bayer Animal Health manufacturing site in Belford Roxo, Brazil and is transferring these operations to the company’s site in Santa Clara, Mexico, and a contract manufacturer in Brazil. Elanco gained the facility from its $6.89-billion acquisition of Bayer Animal Health in 2020. The Belford Roxo site, which currently supplies six smaller, regional products, is expected to be decommissioned in early 2022.

On a financial basis as a result of the sale of the facilities to TriRx, Elanco anticipates taking an impairment charge of $245 million to $305 million in the second quarter of 2021. The sale of the Shawnee facility is expected to reduce full-year 2021 revenue by $10 million to $20 million as a result of exiting third-party contract manufacturing operations.  

Elanco also updated its financial targets as a result of these transactions.  It expects to reach a gross margin of 60% by 2023, reduce annual capital expenditures by $25 million to $30 million, and improve working capital by approximately $75 million to $85 million.

Source: Elanco Animal Health