Eli Lilly and Company (NYSE:LLY) has announced an agreement to acquire Novartis Animal Health for approximately $5.4 billion to strengthen and diversify Lilly’s own animal health business, Elanco.

Upon completion of the acquisition, Elanco will be the second-largest animal health company in terms of global revenue.

Lilly will acquire Novartis Animal Health’s nine manufacturing sites, six dedicated research and development facilities, a global commercial infrastructure with a portfolio of approximately 600 products, a robust pipeline with more than 40 projects in development, and an experienced team of more than 3,000 employees.

By improving efficiencies and reducing costs across both Elanco and Novartis Animal Health, Lilly expects to achieve estimated cost savings of approximately $200 million per year within three years of deal closing, equating to more than 10% of operating expenses from the combined animal health businesses.

John C Lechleiter – Lilly’s chairman, president and chief executive officer – said the acquisition of Novartis Animal Health validates Lilly’s commitment to Elanco as a key component of Lilly’s business going forward.

He said: “Animal health continues to represent an attractive growth opportunity for Lilly. We intend to keep Elanco and to take advantage of the substantial synergies between our animal health and human health businesses.

“Significant investments in our animal health business in recent years have enabled Elanco to double its revenue since 2008, leading the industry in growth. Global trends suggest continued sustained demand for animal health products in the years ahead.

Through this acquisition, which moves Elanco to top-tier in the industry, we intend to create value for our shareholders by adding to our promising pipeline of innovative animal health assets, increasing sales through a larger commercial footprint, and improving efficiencies and lowering costs.”

Investors, media and the general public can access a live webcast of the conference call through a link that will be posted on the investor section of Lilly’s website at www.lilly.com

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