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Following the acquisition of Bayer Animal Health, Elanco Animal Health Incorporated (NYSE: ELAN) has agreed to sell its sites in Shawnee, Kansas, and Speke, the U.K., to TriRx Pharmaceuticals, a Connecticut-based contract manufacturer with approximately 600 employees.
The financial terms of the deal were not disclosed.
A long-term supply pact has been signed for the facilities to continue to manufacture existing Elanco products.
The sale of the Shawnee and Speke facilities will complete by 1H of 2021 and early 2022, respectively.
The steps will accelerate the company's gross margin efforts, reduce annual capital expenditures by $25 million to $30 million, and improve working capital by approximately $75 million to $85 million by reducing inventory.
A related impairment charge of $245 million to $305 million will be incurred in Q2 2021, resulting in reducing Q2 and fiscal year 2021 GAAP EPS guidance by $0.43 to $0.54, with no change in adjusted EPS guidance.
The Shawnee facility closure is expected to reduce full-year 2021 revenue by $10 million to $20 million.
Additionally, Elanco will cease operations at the legacy Bayer Animal Health manufacturing site in Belford Roxo, Brazil.
The operations will be transferred to ELAN's site in Santa Clara, Mexico, and a contract manufacturer in Brazil.
The site will be decommissioned in early 2022.
Price Action: ELAN shares are up 1.80% at $33.96 during the market session on the last check Wednesday.
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