Multinational animal health product manufacturer Elanco is to cease operations at three of its sites, including one in the UK.

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The move is part of Elanco’s rationalisation process following its acquisition of Bayer Animal Health last year, the first major deal since Elanco’s flotation from parent Eli Lilly & Co in 2019.

Elanco has agreed to sell its facilities at Speke in the UK and Shawnee in the US state of Kansas as going concerns to contract manufacturer TriRx Pharmaceuticals, to include the transfer of 600 employees. The companies have reached a long-term supply agreement for the two factories to continue to manufacture existing Elanco products.

Shawnee was Bayer Animal Health’s US headquarters for many years, while the Speke facility near Liverpool was first established to make penicillin during the second world war – the world’s largest penicillin factory at the time – before Eli Lilly bought it in the 1960s. Elanco is also to close its regional manufacturing site in Belford Roxo, Brazil.

The changes are expected to improve company margins by reducing annual capital expenditure by $25-$30 million while improving working capital by $75-$85m by reducing inventories. But there will be a one-off impairment charge of $245-$305m.

“Completing this evaluation and taking decisive action to streamline our footprint less than a year after closing our acquisition of Bayer Animal Health was critical to accelerate and strengthen our margin expansion efforts and increase our agility and optionality, while enhancing our value creation opportunity and long-term competitiveness,” comments Elanco president and chief executive Jeff Simmons.

“It is clear that pursuing avenues for full capacity is best for the future of the Shawnee and Speke plants and the teams based there. TriRx is well positioned to improve site utilisation and create opportunity for the employees, while becoming an important long-term manufacturing partner for Elanco.”