Bayer, Elanco could lock up animal health merger next week

When rumors emerged nearly a year ago that Bayer might be planning to exit the animal-health business, Eli Lilly spinoff Elanco was not at the top of any market-watchers list of potential buyers especially not after it became clear that several private equity players were interested in the asset. Turns out Elanco was interested, and the two companies could announce an agreement to merge as soon as next week, Reuters reports, citing unnamed sources. Elanco would pay for the deal partly in stock, and it could be aiming to time the announcement with its quarterly report next week, the sources said. A spokesperson for Elanco declined to comment to FiercePharma. A spokesperson for Bayer said in an email that the company is “on track” to exit animal health. “Following a strategic review of exit options, the primary focus is on a sale. However, Bayer also continues to consider all value-maximizing options,” he said. Although combining two companies would create an animal-health giant rivaling Pfizer spinoff Zoetis and Merck’s animal health business, Elanco isn’t in the best shape financially to execute a big deal. It did pull off an upsized $1.5 billion initial public offering last September, but it’s still carrying a lot of debt—$2.5 billion, according to its most recent annual report. The report warned that Elanco may not be able to generate enough cash to service that debt.