Benzinga | Jun 9, 2021 01:33PM EDT

Elanco To Exit Three Manufacturing Sites To Streamline Footprint

* 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.