“In this time of uncertainty, the health and well-being of our employees, customers, animals and the communities where we operate are our top priority,” said Jeff Simmons, Elanco president and CEO. “Our team is actively undertaking precautionary measures to keep our employees safe, while continuing to provide our customers with the products they need. Such an unprecedented time underscores the critical importance of a safe, affordable food supply, particularly meat, milk and eggs, and the role of healthy pets, bringing much needed companionship to families everywhere.”
Simmons continued, “I remain confident in Elanco’s long-term strategy and our ability to deliver on the commitments to our stakeholders. The underlying industry fundamentals remain strong and the diversity of the global Elanco business across farm animals and pets provides durability and balance. We are resolute in our acquisition of Bayer AG’s animal health business as it adds to our leadership position in animal health for the long-term.”
As the situation around the COVID-19 pandemic is rapidly evolving, Elanco is withdrawing its previously announced 2020 revenue and earnings per share guidance. Elanco is monitoring several global dynamics, from changing foreign currency rates and a dynamic animal protein market to declining veterinary clinic visits, the growing use of direct-to-consumer shipping, and sales through ecommerce and other alternative channels. The company is confident in its working capital and liquidity levels, while continuing to actively monitor the changing environment across the world. Elanco will provide an update on its Q1 earnings call in early May, based on information available at that time.
The Elanco team remains focused and in execution mode, even as much of the employee base moves to remote working. The manufacturing plants and R&D labs are operational, and the company is closely monitoring distribution logistics. At this time, Elanco has not experienced any supply disruption and critical projects in the pipeline continue to advance. The U.S. Department of Homeland Security and most other countries globally have deemed manufacturing and distribution of animal medicines as essential critical infrastructure and workforce. However, in an effort to support public health and slow the spread of the disease, Elanco moved its non-business critical work force to remote working globally, with the exception of China, which has begun to return to work. Elanco also removed sales representatives from the field in many countries, including the U.S. along with its companion animal distribution partners. However, the Elanco team continues to collaborate with customers via webinars, teleconference and video conferences and other remote options.
Much like the human health system, the American Veterinary Medical Association, along with industry organizations across Europe and other countries, has recommended limiting patient care to acutely ill animals and emergencies, rescheduling annual exams and elective procedures. This guidance increases the importance of telemedicine, direct shipment and alternative channels, while underscoring the significance and value of Elanco’s pending acquisition of Bayer AG’s animal health business.
Elanco is executing its omnichannel approach with respect to companion animal health and determining the best methods for reaching pet owners and veterinarians. The company continues to assess the best strategy to strengthen its long-term competitive commercial position and go-to-market mix, with the goal of reaching pet owners where they wish to shop and enhancing our partnership with veterinarians to provide the best care for pets.
Update on Pending Acquisition of Bayer AG’s Animal Health Business
Elanco’s excitement related to the addition of Bayer AG’s animal health business is unabated by the COVID-19 situation as it confirms the value of diversifying our companion animal business into the over-the-counter (OTC) market. Likewise, the expanded global scale puts Elanco in a stronger position to weather tough business environments over the long-term as the combined company focuses on innovating to meet unmet needs of animals for veterinarians, farmers and pet owners across the globe.
The pending acquisition continues to advance toward a mid-year 2020 closing. Elanco has received regulatory clearance in China, Colombia, Turkey and the Ukraine, and is continuing to collaborate with other key jurisdictions. Elanco has signed agreements to divest certain products it anticipates will be necessary to complete these reviews. Further, Elanco has fully secured financing to complete the transaction through its completed equity issuance and pricing of its Term Loan B earlier in the first quarter. Given the recent decline in interest rates, Elanco entered into derivative transactions to swap a portion of its floating interest rate on the $4.275 billion Term Loan B to a fixed rate obligation. These derivative transactions provide greater certainty on the Term Loan B interest expense. Elanco’s first significant obligation after completing the acquisition is its $500 million in senior notes due August 27, 2021.
Both Bayer and Elanco continue to collaborate virtually, making significant progress toward Day 1 readiness, integration planning and value capture.
Finally, Elanco will continue to monitor the rapidly evolving environment and assess impact throughout our business.
Elanco (NYSE: ELAN) is a global animal health company that develops products and knowledge services to prevent and treat disease in food animals and pets in more than 90 countries. With a 65-year heritage, we rigorously innovate to improve the health of animals and benefit our customers, while fostering an inclusive, cause-driven culture for more than 5,800 employees. At Elanco, we’re driven by our vision of food and companionship enriching life - all to advance the health of animals, people and the planet. Learn more at www.elanco.com.