Eli Lilly and Company recently announced an agreement to purchase Novartis Animal Health for approximately $5.4 billion in an all-cash transaction that will help 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, as well as solidifying its number two ranking in the U.S., and improve its position in Europe and the rest of the world.

With a presence in approximately 40 countries and a revenue for 2013 of approximately $1.1 billion, Novartis Animal Health is focused on developing better ways to prevent and treat diseases in pets, farm animals and farmed fish.

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 the board for 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, Ph.D., Lilly’s chairman, president and chief executive officer said that the acquisition of Novartis Animal Health validates Lilly’s commitment to Elanco as a key component of Lilly’s business going forward.

He added that animal health continues to represent an attractive growth opportunity for Lilly, and that the company intends to keep Elanco, and to take advantage of the substantial synergies between their animal health and their human health businesses. Significant investments in the animal health business in recent years have enabled Elanco to double its revenue since 2008, leading the industry in growth.  

The acquisition will greatly expand and complement Elanco’s product portfolio, R&D and manufacturing capabilities, and commercial presence in key geographies. In particular, it provides Elanco with a greater commercial presence in the companion animal and swine markets, expands Elanco’s presence in the equine and vaccines areas, and creates an entry into the aquaculture market.