ELANCO announced last week that it had acquired a minority interest in China Animal Healthcare (CAH), one of the leading animal drug manufacturers in China.
Calling the move a "long-term play," the company said its $100 million investment reinforces its commitment to help China in its efforts to ensure food safety and enhance food security and rural income.
Elanco's parent company, Eli Lilly & Co., moved to acquire the stake in CAH, potentially funding a proposed delisting of CAH shares on the Singapore Exchange Securities. Trading of CAH shares was halted April 9 while the two firms negotiated various aspects of the deal, and trade resumed following the April 11 announcement.
"We are committed to providing innovative solutions to enhance food production and companion animal care. In China, we are working with local stakeholders to improve the health and performance of animals and help to ensure a growing supply of safe, affordable and abundant food," Elanco president Jeff Simmons said. "Our sizable financial investment in China Animal Healthcare builds on our long-term commitment to China."
Under the terms of the deal, Lilly also executed three operational agreements covering the distribution, promotion and licensing of the company's products in China. The five-year distribution and promotion agreements grant CAH the non-exclusive right to distribute Lilly products in the country, while Lilly will promote and market CAH products to large-scale Chinese producers on a commission basis.
A separate 20-year licensing agreement grants Lilly rights to CAH technologies and patents in researching, developing, manufacturing and selling products under Lilly-owned brands outside China, while CAH retains the right to manufacture its products in-country and overseas under its own banner.
CAH manufacturers 14 proprietary product brand names for powdered, oral, injectable and biological drugs, with more than 500 types of treatment and non-treatment animal drugs distributed throughout China. Its network includes roughly 4,900 animal drug retailers and 32 large poultry corporations through the various provinces.
Simmons noted that in the next 40 years, Asia is expected to be home to an additional 750 million people, which will drive up demand for meat, milk and eggs. U.N. estimates suggest that by the end of the decade, approximately 25% of meat production growth will result from demand from China.
Elanco's commitments in China include a research and development hub in Shanghai, China, veterinary scholarships at four agricultural universities and support for hunger relief efforts in Hebei province facilitated by Heifer International.
While Elanco did not specifically address ongoing developments regarding China's de facto ban on ractopamine, Elanco president for U.S. operations Rob Aukerman did acknowledge that the CAH investment "is part of a long-term strategy that we hope will enhance relationships within the government -- and with other key stakeholders and influencers within China -- that will help us bring resolution and increased dialogue around issues such as this."
He noted that the trade situation relative to China and ractopamine is "ongoing" and that Elanco is dedicating significant resources to resolving the situation.
Editor's Note: Simmons spoke with Feedstuffs about Elanco's investment in China -- and the challenge of feeding 9 billion people by 2050 -- for the "Feedstuffs In Focus" podcast at Feedstuffs.com.