February 7, 2024

By Lynda Kiernan-Stone, Global AgInvesting Media

After a year-long review process, Elanco Animal Health announced it has agreed to sell its aqua business to Merck Animal Health for approximately $1.3 billion in cash.

Generating about $175 million in revenue and an approximate $92 million in adjusted EBITDA, the business includes products aligned with both warm and cold water species. This divestiture includes current marketed brands, aqua R&D projects, the transfer of manufacturing sites in Prince Edward Island, Canada, and Dong Nai, Vietnam, and approximately 280 commercial and manufacturing employees. 

“A strategic decision resulting from a disciplined process over the last year, the sale of the aqua business allows us to prioritize our investments in larger markets with greater earnings potential over the medium and long term, while creating balance sheet flexibility,” said Jeff Simmons, president and CEO, Elanco Animal Health. 

Elanco explained that this deal is part of the company’s shift in focus and investment into its most high-value creation opportunities – notably in pet health and livestock sustainability. Within these spheres, the company has several advances and developments in the pipeline, including:

~ Targeted areas of focus on next generation products for pet parasiticides, dermatology, and pain, as well as livestock sustainability.

~ Expectations of U.S. approvals in the first half of 2024 for its Credelio Quattro™, Zenrelia™ and Bovaer® products. 

~ The pursuit of a portfolio of clinical development projects that the company expects to have differentiated profiles and significant potential in key markets with meaningful growth and earnings potential. 

~ And additional opportunistic pursuit of platform-aligned targets such as monoclonal antibodies and other major emerging spaces of high unmet needs. 

“We are focused on delivering consistent high impact innovation and continue to have confidence in our late-stage pipeline with six potential blockbuster products expected in the U.S. market by 2025,” said Simmons. “Further, we are advancing our next wave of development projects, which we believe will contribute meaningful growth for Elanco through the second half of the decade.”

“Importantly, the proceeds from this transaction combined with improved free cash flow from the business, will accelerate deleveraging with net debt to adjusted EBITDA expected in the high-3x to low-4x range by the end of 2025.”

Once closed, Elanco stated that it plans to use the capital gained through this transaction to pay down a portion of its Term Loan B debt, with expectations of ending the year with net debt to adjusted EBITDA in the mid-4X range, and in the high-3x to low-4x range by the end of 2025.

For Merck Animal Health, the addition of Elanco’s aqua business will expand its aqua portfolios and provide synergies that will boost its already impressive presence in the aqua space. Once closed, Merck Animal Health will gain control of products such as CLYNAV^®, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and IMVIXA^®, an anti-parasitic sea lice treatment. It also will add water treatment products for warm water aquaculture that will complement its warm water vaccine portfolio, and give it DNA-based vaccine technology with the potential to accelerate the development of novel vaccine solutions that rise to meet the needs of the aqua industry.

This is the latest in a string of acquisitions made by the company. In March 2019, Merck Animal Health acquired Norwegian fish health and welfare company Scan Aqua AS. One month later was the announcement of the completion of its acquisition of Antelliq Corporation, including BIOMARK, a passive integrated transponder (PIT) tagging and tracking technology for monitoring fish and wildlife. And in December 2019, Merck Animal health acquired Vaki, a tech company specializing in aquaculture and wild fish conservation monitoring equipment and real-time video monitoring technology for fish counting and size estimation for freshwater and salt water rearing, while also collecting and analyzing data for each stage of fish production.

“We are excited for the acquisition of Elanco’s aqua products, solutions as well as the capabilities and expertise the team brings to our business,” said Rick DeLuca, president, Merck Animal Health.

“We believe this acquisition, coupled with our commercial and scientific prowess, will deliver enhanced benefits for our aqua customers. The addition of this innovative portfolio of cold water and warm water aqua products across vaccines, anti-parasitic treatments, water supplements and nutrition, will establish Merck Animal Health as a leader in aqua.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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