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Eli Lilly to buy European rights to Pfizer animal products

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Elanco, the animal health division of Eli Lilly and Co., announced Monday morning that Lilly has signed an agreement to acquire the European rights to certain Pfizer Inc. animal health products.

Those products include vaccines, parasiticides and feed additives used in both the production animal and companion animal markets. The products have been marketed by both New York-based Pfizer and New Jersey-based Wyeth, which Pfizer acquired in October.

Under the terms of the agreement, Lilly also will purchase a biological manufacturing facility in Sligo, Ireland. In return, Pfizer will receive an undisclosed upfront payment from Lilly.

Both companies also have signed manufacturing supply agreements, to ensure an uninterrupted supply of products to customers, Lilly said. Closing of the transaction is contingent upon clearance from European regulatory authorities and other conditions.

Additional terms of the transaction were not disclosed.

The addition of the portfolio of products and of the manufacturing facility is a natural fit for Elanco and positions it well for future growth, Elanco President Jeff Simmons said in a prepared statement.

“Through this acquisition, we will expand and diversify our European presence with new market-leading products, augment our growing portfolio of companion animal medicines, and acquire new biologic and vaccine capabilities,” he said.

Elanco’s revenue has been growing about 10 percent each year, reaching $1.2 billion in 2009, or about 5.5 percent of Lilly’s nearly $22 billion in annual revenue.

But the drug maker is counting on its animal health division to grow even more to help fill the revenue gap that will begin to widen in October 2011. That’s when Lilly’s bestselling drug, the antipsychotic Zyprexa, will lose its patent protection and face competition from generic versions.

In the ensuing three years, the patents on four more Lilly drugs will expire, which could cause the company to lose half of its current revenue.

Meanwhile, Lilly has few drugs in its late-stage pipeline to try to offset the sales shortfall. So growth in animal health becomes increasingly important.

Lilly began making animal health acquisitions in 2007, when it bought Ivy Animal Health, a Kansas-based developer of pharmaceuticals for animals. And, in 2008, Lilly paid $300 million to acquire Posilac, a controversial hormone, also known as rBGH, given to cows to increase their milk production.

Pfizer paid about $68 billion for Wyeth in a deal that closed last October. As part of the deal, Pfizer was required by the regulators to divest some of its overlapping animal health business in certain markets.
 

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