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To accelerate its debt repayments, Greenfield-based Elanco Animal Health on Monday announced the $295 million cash sale of future U.S. royalty and milestone rights of flea and tick treatment lotilaner for human use.
That sale—made to funds affiliated with Blackstone Life Sciences and Blackstone Credit and Insurance—is for royalties associated with California-based Tarsus Pharmaceuticals’ Xdemvy. That medication is used to treat Demodex blepharitis, or DB, a common eyelid disease in people caused by Demodex mites, which are parasites that live in human hair follicles.
Elanco uses active ingredient lotilaner in its Credelio line of medications to treat fleas and ticks in dogs and cats.
The company in 2019 exclusively licensed lotilaner to Tarsus for exploration to treat several conditions in humans. In 2023, Xdemvy gained FDA approval as the first lotilaner-based product for human use.
“Elanco’s team of scientific experts is focused on identifying and developing molecules to generate high-impact innovation, not just in our own portfolio, but in adjacent industries to create broader value,” Elanco CEO Jeff Simmons said in a written statement. “As we continue to focus on launching our recent innovation and accelerating our core business sales growth in 2025, this transaction delivers incremental cash that advances our deleveraging goals making high 3x net leverage a real possibility by the end of 2025.”
This is the first time since Elanco went public in September 2018 that one of its animal treatments has been licensed for use in humans with FDA approval, according to the company.
Elanco said it has focused in recent years on key priorities of growth, innovation and cash creation to pay down debt.
The company said Monday’s agreement would help it reduce interest expenses by $10 million this year. But because the royalty agreement means Elanco is receiving money up front for future royalties, that is offset by about $10 million of royalties based on Elanco’s initial 2025 guidance.
The agreement announced Monday applies to certain tiered royalties on U.S. net sales Xdemvy from April 2025 through August 2033. Elanco retains rights to royalty payments outside the United States.
Elanco said the agreement will help it achieve an improved net leverage ratio. A lower net leverage ratio indicates that a company is more stable and better able to pay off its debt.
Elanco reported net debt of $3.88 billion as of the end of 2024. The company reports first-quarter earnings on Wednesday.
Editor’s note: This article has been updated to correct that Elanco did not adjust its earnings guidance. Instead, the company noted offsetting costs.
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