Elanco Closes Acquisition of Kindred Biosciences
Elanco Animal Health Incorporated today announced it has closed the acquisition of Kindred Biosciences. The transaction advances Elanco’s access to the fast-growing $1+ billion dermatology market, complementing the company’s existing pipeline and increasing R&D capability in biologics and monoclonal antibodies.
The acquisition brings three potential dermatology blockbusters expected to launch through 2025, as well as additional R&D programs for other chronic disorders and unmet needs. The transaction also builds on the existing relationship between Elanco and KindredBio, including the prior licensing of the global commercial rights of KindredBio’s late-stage treatment for canine parvovirus. In June, KindredBio announced positive results from a pivotal efficacy study for that treatment showing 100 percent survival in the treated group versus 43 percent in the placebo, with licensure expected in 2022.
Elanco anticipates the KindredBio acquisition will add approximately $100 million to its innovation revenue expectation, bringing the total to $600 million to $700 million by 2025, with significant opportunity beyond the period. The accretive revenue is expected to unlock upside to Elanco’s long-term growth algorithm, with the potential to add a full percentage point of consistent annual revenue growth, starting in 2024 and expand the company’s gross margin over time.
“The addition of KindredBio strengthens and accelerates Elanco’s Innovation, Portfolio and Productivity (IPP) strategy and positions Elanco to deliver solutions for veterinarians and pet owners in areas of unmet or under-served medical needs,” said Jeff Simmons, Elanco president and CEO. “The combination further shifts our mix into the attractive pet health sector with up to four launches from our combined pipeline by 2025 in the rapidly expanding dermatology category, which is expected to fuel continued growth and create sustainable long-term value for shareholders.”
Elanco acquired all outstanding stock of Kindred Biosciences at a price of $9.25 per share or approximately $444 million. Elanco utilized its revolving credit facility and cash on hand to finance the acquisition, after having refinanced the company’s $500 million of Senior Notes due August 27, 2021. Elanco’s year-end net leverage target remains approximately 5.5x, with a goal of below 3x at the end of the first quarter of 2024.
Goldman Sachs acted as financial advisors to Elanco and Covington & Burling LLP was legal counsel. Barclays acted as financial advisor to KindredBio and Morrison & Foerster LLP was legal counsel.