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Eli Lilly Prices Animal Health Unit IPO at $24 Per Share

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Eli Lilly & Company (LLY - Free Report) has priced the initial public offering of its Animal Health unit – Elanco - at $24 per share. The share price was above the expected range of $20-$23 per share.

With the IPO of 62.9 million shares of Elanco’s common stock, Lilly will raise up to $1.5 billion from the divestiture of a minority stake in the company. Lilly is expected to own a stake of approximately 82.3% in the new company, Elanco Animal Health Incorporated, giving the business a market capitalization of $8.55 billion. Elanco Animal Health is expected to start trading with the ticker symbol of ELAN on the New York Stock Exchange (NYSE) from Thursday.

So far this year, Lilly’s shares have outperformed the industry, rising 25.2% compared with a 6.3% increase for the industry.

 

 

Elanco filed a registration statement with the SEC for the Elanco IPO in August. In July, Lilly announced that it will establish Elanco as an independent publicly traded company via an IPO of only a minority stake of less than 20%. Lilly’s remaining ownership in Elanco is expected to be divested through a “tax-efficient transaction” by 2019. Lilly had been exploring strategic alternatives for this business including a sale, merger or creating a separate company through an initial public offer (IPO) for quite some time.

Elanco markets products for both food animals and companion animals. In 2017, the unit generated sales of more than $3.0 billion.

We remind investors that Pfizer (PFE - Free Report) spun off its Animal Health unit in early 2013, which started trading on NYSE under the name Zoetis, Inc. (ZTS - Free Report) . Zoetis’ stock price has almost tripled since it was separated from Pfizer.  It remains to be seen if Elanco follows suit.

Lilly currently carries a Zacks Rank #2 (Buy). Another large-cap pharma company with the same Zacks Rank is Novartis (NVS - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Novartis have gained 14.7% in the past three months. Its earnings estimates for 2018 have gone up 0.4% while that for 2019 have moved up 1.5% in the past 60 days.

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