EXOME

all the information, none of the junk | biotech • healthcare • life sciences

Elanco IPO Raises $1.5B as the Animal Health Biz Spins Off from Lilly

Xconomy Indiana — 

Elanco is now a standalone company after raising $1.5 billion in its stock market debut.

Greenfield, IN-based Elanco (NYSE: ELAN) sold 62.9 million shares at $24 apiece, which topped the $20 to $23 range it had initially targeted. Investors showed their appetite for the animal health company, driving its stock price up more than 39 percent after its shares began trading Thursday.

The IPO for Greenfield, IN-based Elanco completes the spinoff of the company from pharmaceuticals giant Eli Lilly (NYSE: LLY), its parent since 1954. Last year, Lilly announced a strategic review to determine whether to keep its animal health business, sell it, or break it out as a separate company. In July, Lilly announced Elanco would spin off and be supported by a public stock offering. In August, Elanco formally filed for an IPO.

The Elanco IPO continues the streak of life science companies that have gone public in 2018. According to IPO research firm Renaissance Capital, 178 companies have filed for IPOs so far this year, already a nearly 36 percent increase over all of 2017. A total of 52 of the IPOs this year have been for companies working in in some aspect of healthcare, the most of any sector.

Elanco, whose portfolio includes vaccines and nutritional supplements for animals, as well as pet products, reported $310.7 million in 2017 revenue. Lilly CEO David Ricks has said that spinning off Elanco would give it the best opportunity to expand, while also allowing Lilly to focus on growing its pharmaceuticals business. Though Elanco is now an independent company, its former parent still owns a majority stake—82.3 percent, according to the prospectus. Elanco says in its filing that the money raised from the IPO will be go to Lilly as payment for the animal health business.

The Elanco IPO could bring additional benefits to Lilly shareholders. According to Elanco’s filing, Lilly plans to make distributions to its shareholders, which could come in the form of dividend payments or offers to exchange Lilly shares for shares in Elanco. Lilly has said it expects these distributions would be tax-free to its shareholders.

In spinning off Elanco, Lilly aims to replicate the success that rival Pfizer (NYSE: PFE) had when it broke out its animal health business as an independent company. Shares of that business, Zoetis (NYSE: ZTE), have more than tripled in value since its 2013 IPO.

Photo by Flickr user U.S. Department of Agriculture via a Creative Commons license