Elanco Animal Health announced a restructuring that will shift resources from its farm animal to pet health units, resulting in job cuts for about 420 employees, or 4% of the company’s global workforce.
The restructuring, announced February 26 during the company’s earnings conference call, comes as it drives adoption of its products and prepares to globalize products under regulatory review, Elanco said. The move is expected to result in net savings of US$20 million to US$25 million primarily in compensation and benefits in 2024, which is expected to be reinvested in areas with greater earnings potential, annualizing to US$30 million to US$35 million of savings in 2025 and beyond.
“The savings will be reinvested in areas with more significant value creation opportunity, specifically in pet health globally and livestock sustainability,” said Elanco President and CEO Jeff Simmons. “While we expect a limited amount of top-line headwind from the shift to distribution markets, we do not expect our restructuring efforts to have a meaningful downside to sales otherwise, notably in international farm animal markets where we expect to realize savings.”
Elanco expects to pay US$40 million to US$45 million in severance.
Financial results
Elanco’s revenue was up 5% in the fourth quarter of 2023 to US$1.04 billion, compared with the same period a year earlier.
Pet health revenue was US$416 million, a decrease of 1% on a reported and constant currency basis, with a 3% increase from price in the quarter.
Farm animal revenue was US$610 million, an increase of 10% on a reported and constant currency basis, with a 4% increase from price.
Gross profit was $519 million, or 50.1% of revenue in the fourth quarter of 2023.
For the full year, Elanco reported revenue of US$4.42 billion, up slightly from US4.41 billion for 2022.
"Elanco ended 2023 with momentum, returning to constant currency revenue growth for the full year and delivering 5% growth in the fourth quarter, primarily driven by our farm animal business, innovation revenue and price growth," Simmons said. “"As we look at 2024, we expect our existing portfolio to deliver constant currency revenue growth of 1% to 3%, with both pet health and farm animal expected to contribute to growth.”
In February, Elanco said it had entered into an agreement to sell its aqua business to Merck Animal Health for approximately US$1.3 billion in cash, which represents approximately 7.4 times the estimated 2023 revenue of the Elanco aqua business.
