Eli Lilly's $5.4B acquisition will boost Elanco

Eli Lilly grabbed a share of a multi-billion global pharmaceutical deal this morning, propelling its animal health unit to the No. 2 position in the world.

Lilly will pay $5.4 billion to acquire Novartis Animal Health to strengthen Elanco, its animal health business. When the deal is done, Elanco will be the second-largest animal health company in terms of global revenue, Indianapolis-based Lilly said in a news release.

The acquisition will give Lilly a presence in approximately 40 countries and 2013 revenue of approximately $1.1 billion. Novartis Animal Health is focused on pets, farm animals and farmed fish. Lilly will acquire Novartis Animal Health's nine manufacturing sites, six dedicated research and development facilities, a global commercial infrastructure with a portfolio of approximately 600 products, a pipeline with more than 40 projects in development, and an experienced team of more than 3,000 employees, Lilly said in a news release.

"Significant investments in our animal health business in recent years have enabled Elanco to double its revenue since 2008, leading the industry in growth," Lilly CEO John Lechleiter said. "Global trends suggest continued sustained demand for animal health products in the years ahead."

Lilly was a partner in a mega-pharma deal revealed overnight.

Swiss pharmaceutical giant Novartis AG kicked off a series of multibillion-dollar deals Tuesday with other major pharmaceutical companies that it said would reduce sales but boost profitability, while affecting some 15,000 of its employees globally.

The Basel, Switzerland-based company said it has agreed to buy GlaxoSmithKline plc's cancer-drug business for $14.5 billion, plus up to $1.5 billion more if certain milestones are met, and to divest most of its vaccines business to GSK for $7.1 billion, plus royalties.

The two drugmakers also are creating a new consumer health care business through a joint venture. It combines Novartis' over-the-counter drug business with GSK's consumer business to create a new entity that would generate $10 billion a year in revenue. Novartis would own 36.5 percent of the new business, focusing on pain management, coughs and colds and dermatology.

All the deals between Novartis and GSK are timed to close simultaneously.

In a statement, Novartis CEO Joseph Jimenez said the deals mark "a transformational moment" for the company by refocusing its business around three core strengths: innovative drugs, eye care and generics.

"They also improve our financial strength, and are expected to add to our growth rates and margins immediately," he said.

The oncology business that Novartis is picking up from GSK had revenue of $1.6 billion and a 20 percent growth rate last year, Jimenez told reporters in a conference call.

And the Swiss company said its flu business, which is not part of the sale to U.K.-based GSK, would be divested in another pending deal, but it did not provide more specifics.

Taken together, the deals will reduce Novartis' sales by about $4 billion, from $60 billion down to $56 billion, Jimenez said, but the company's "absolute profit goes up and that's partly because we're acquiring the oncology products and we are divesting products that have lower profit."

The transactions affect some 15,000 of the company's 135,000 employees globally, he said, and "they will move with the divestitures or into that joint venture."

Jimenez, however, said Novartis won't fire anyone. All Novartis employees whose units are being sold off "will be fully transferred to the new owners," he said.

Associated Press contributed to this story.