Deal makes Elanco second-largest animal drug company

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Elanco logoElanco Animal Health in August announced it had agreed to buy Bayer's animal health unit for $7.6 billion, making Elanco the world's second-largest animal drug manufacturer.

Although still subject to regulatory approval, the purchase would double Elanco's companion animal business, balance its food animal and companion animal segments, and expand the company's presence in e-commerce and retail stores.

"This combination will join two complementary animal health–focused entities previously under the human pharma umbrella into a dedicated company focused on delivering for farmers, veterinarians and pet owners," Elanco President and CEO Jeffrey Simmons said in a statement.

"We look forward to adding Bayer Animal Health's employees' breadth of expertise. Ultimately, we believe these increased capabilities and knowledge will allow us to better support the veterinarian, creating a bridge between the pet owner and the veterinarian where relationships don't exist today."

Global sales of vaccines, medicines, and medical devices for companion animals have exceeded about $8 billion annually, with an additional $14 billion in sales of vaccines and medicines for livestock. Zoetis is the world's largest company in the animal health sector, with revenue of close to $6 billion as of 2018.

Bayer has been selling off assets since the German company's $63 billion purchase of Monsanto last year and in preparation for a potential settlement of lawsuits over an alleged cancer-causing effect of Monsanto's weedkiller Roundup.

Elanco and Bayer expect to close the deal later next year following approvals from regulatory and government agencies around the world, Bob Jones, president of Brakke Consulting, noted in a Brakke newsletter.

"Elanco is now balanced between companion animal and farm animal sales, and Bayer gets to focus on its pharmaceutical and crop chemical and seed business," Jones said. "Elanco can work on deleveraging and Bayer can work on its legal issues with Roundup."