Elanco Announces Agreement to Acquire Kindred Biosciences

Bolt-on Acquisition Accelerates Elanco’s Expansion in Pet Health

Elanco to host conference call for investment community at 8:00 am Eastern Time  

  • Elanco will acquire all outstanding stock of Kindred Biosciences at a price of $9.25 per share, or approximately $440 million, a premium of 52% based on the 30-day average.
  • Transaction brings three potential blockbusters in the development phase, complements existing pipeline, and augments monoclonal antibody R&D capabilities.
  • Increasing Investor Day revenue from innovation expectation by $100 million, to $600 million to $700 million by 2025, with significant opportunity beyond the period.
  • Differentiated, disruptive portfolio in atopic dermatitis and other chronic unmet needs expected to unlock upside to Elanco’s long-term growth algorithm, with the potential to add a full percentage point of consistent annual revenue growth, starting in 2024, and expand the company’s margin over time.
  • Transaction and operating costs slightly dilutive to Elanco’s reported and adjusted earnings per share in 2021 and 2022; net leverage goal below 3x extended three months to the end of the first quarter of 2024.

GREENFIELD, Ind. and SAN FRANCISCO (June 16, 2021) – Elanco Animal Health Incorporated (NYSE: ELAN) and Kindred Biosciences, Inc. (KindredBio, NASDAQ: KIN) today announced the parties have entered into a definitive agreement for Elanco to acquire KindredBio, a biopharmaceutical company focused on developing novel pet therapeutics based on validated human targets. The acquisition further accelerates Elanco’s expansion in the attractive pet health market, particularly advancing Elanco’s presence in the fast-growing billion-dollar dermatology category.

KindredBio brings three potential dermatology blockbusters expected to launch through 2025, as well as a number of additional R&D programs for other chronic disorders and unmet needs, including canine parvovirus. KindredBio’s innovative pipeline – added to Elanco’s own organic efforts – meaningfully augments Elanco’s ability to launch products, gain share, and grow in the dermatology market through fully accretive revenue dollars. Elanco anticipates the combination will add approximately $100 million to its previously stated innovation revenue expectation of $500 million to $600 million by 2025, with significant opportunity beyond the period.

“This highly complementary combination is focused in one of the most exciting spaces in pet health, and one where we see a strategic imperative to build a differentiated competitive offering,” said Jeff Simmons, president and CEO of Elanco. “It further accelerates our mix shift into pet health and advances our IPP strategy. Ultimately, we believe the combination positions Elanco to bring innovative solutions to veterinarians and pet owners in areas of unmet or under-served medical needs, fueling continued growth in the exciting pet therapeutic category and creating sustainable long-term value for shareholders.” 

The acquisition agreement builds on Elanco’s existing relationship with KindredBio, which began with licensing the global commercial rights of KindredBio’s late-stage treatment for canine parvovirus, and continues Elanco’s proven approach as an innovation partner of choice.

“From the beginning, we have been focused at KindredBio on bringing the best medicines to our animal family members. With this transaction with Elanco, a widely respected leader in veterinary medicine with global reach, we will maximize the impact our innovative pipeline will have on improving the lives of pets,” said Richard Chin, CEO and co-founder of KindredBio.

“This announcement is validation of KindredBio’s achievements as one of the world’s first veterinary biopharmaceutical companies, recognizing our track record in drug development and remarkably talented team,” added Denise Bevers, Board director and co-founder of KindredBio. “KindredBio looks forward to continuing our mission to transform veterinary medicine as part of the Elanco family.”

The deal will expand Elanco’s omnichannel leadership complementing the company’s e-commerce and retail position by increasing its veterinary clinic presence in a leading therapeutic category and keeping the veterinarian at the center. This continues Elanco’s work to be a conduit for pet owners to the veterinarian. Dermatologic symptoms such as scratching and allergies are the number one reason pet owners visit the veterinarian today.

Transaction Details

Under the terms of the agreement, Elanco will acquire all outstanding stock of Kindred Biosciences at a price of $9.25 per share, or approximately $440 million, a premium of 52% based on the 30-day average. Elanco intends to fund the acquisition with pre-payable debt.  Elanco expects to extend its leverage objective of under three times net leverage to Adjusted EBITDA by three months, from the end of 2023 to the end of the first quarter of 2024.

Elanco expects to unlock upside to its long-term growth algorithm, with the potential to add a full percentage point of consistent annual revenue growth, starting in 2024, and further expand the company’s margin potential over time. Transaction and operating costs will be slightly dilutive to Elanco’s reported and adjusted earnings per share in 2021, with the impact expected to be concentrated in the fourth quarter, and also slightly dilutive to the full year 2022.

“Kindred Biosciences’ monoclonal antibody pipeline and capabilities are additive and complementary to what we’ve built within Elanco,” said Aaron Schacht, executive vice president Innovation, Regulatory and Business Development at Elanco. “This combination will bolster our opportunity for leadership in atopic dermatitis and allow us to deliver innovation of novel biologic therapeutics to treat other unmet disease challenges in pets.”

Elanco expects the transaction to close in the third quarter of 2021, subject to customary closing conditions, including approval by KindredBio’s shareholders and clearance under the Hart-Scott-Rodino Antitrust Improvements Act. KindredBio’s Board approved the proposed acquisition.

Elanco also reaffirmed second quarter 2021 revenue guidance of $1,225 million to $1,255 million, and full year 2021 revenue guidance of $4,670 million to $4,710 million.

Goldman Sachs is acting as financial advisors to Elanco and Covington & Burling LLP is acting as legal counsel. Barclays is acting as financial advisor to KindredBio and Morrison & Foerster LLP is acting as legal counsel.

Conference Call and Webcast

Elanco will host a conference call for the investment community today at 8:00 am Eastern Time to discuss the announcement. Investors, media and general public can access a live webcast of the conference call through the link posted on Elanco’s website at https://investor.elanco.com/events-and-presentations/default.aspx. A replay will also be available on the website shortly following the call.

About Elanco

Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and delivering products and services to prevent and treat disease in farm animals and pets, creating value for farmers, pet owners, veterinarians, stakeholders, and society as a whole. With nearly 70 years of animal health heritage, we are committed to helping our customers improve the health of animals in their care, while also making a meaningful impact on our local and global communities. At Elanco, we are driven by our vision of Food and Companionship Enriching Life and our Elanco Healthy Purpose™ Sustainability Pledges –all to advance the health of animals, people, and the planet. Learn more at elanco.com.

About Kindred Biosciences

Kindred Biosciences is a biopharmaceutical company developing innovative biologics focused on saving and improving the lives of pets. Its mission is to bring to pets the same kinds of safe and effective medicines that human family members enjoy. The Company’s strategy is to identify targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated targets for dogs and cats. KindredBio has a deep pipeline of novel biologics in development across many therapeutic classes, alongside state-of-the-art biologics manufacturing capabilities and a broad intellectual property portfolio.

For more information, visit: www.kindredbio.com

Important Information for Investors and Stockholders

This communication does not constitute a solicitation of any vote or approval in connection with the proposed acquisition of Kindred Biosciences, Inc. (“KindredBio”) by Elanco Animal Health Incorporated (“Elanco” and such proposed acquisition, the “Merger”). KindredBio intends to file with the SEC and mail to its stockholders a definitive proxy statement in connection with the proposed Merger. BEFORE MAKING ANY VOTING DECISION, KINDREDBIO’S STOCKHOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE PROXY STATEMENT (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT KINDREDBIO AND THE PROPOSED MERGER. The proposals for the Merger will be made solely through the proxy statement. Investors and stockholders may obtain copies of the proxy statement and other documents filed with the SEC by KindredBio (when they became available) free of charge from the SEC’s website at www.sec.gov or by accessing KindredBio’s website at www.kindredbio.com. In addition, a copy of the proxy statement (when it becomes available) may be obtained free of charge from Investor Relations at Kindred Biosciences, Inc., 1555 Bayshore Highway, Suite 200, Burlingame, CA 94010.  Copies of the documents filed with the SEC by Elanco (when they become available) may be obtained free of charge from the SEC’s website at www.sec.gov or by accessing Elanco’s website at www.elanco.com.

Participants in the Merger Solicitation

Elanco, KindredBio, and certain of their directors, executive officers and employees may be considered participants in the solicitation of proxies from KindredBio’s stockholders with respect to the proposed transactions. Information regarding the persons who may, under the SEC rules, be deemed participants in the solicitation of KindredBio’s stockholders in connection with the proposed Merger and a description of their direct and indirect interests therein, by security holdings or otherwise, will be set forth in the definitive proxy statement that KindredBio intends to file with the SEC when it becomes available. Information about Elanco’s directors and executive officers is set forth in Elanco’s definitive proxy statement for its 2021 Annual Meeting of Shareholders, which was filed with the SEC on March 25, 2021. Information about KindredBio’s directors and executive officers is set forth in KindredBio’s definitive proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on April 29, 2021. These documents may be obtained as indicated above.

Cautionary Statement Regarding Forward-Looking Statements

Statements included in this press release that are not a description of historical facts are forward-looking statements. Words or phrases such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or similar expressions are intended to identify forward-looking statements, and are based on our current beliefs and expectations. These forward-looking statements include, without limitation, statements regarding the proposed acquisition of KindredBio, the expected timetable for completing the transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the combined businesses and any other statements regarding events or developments that Elanco believes or anticipates will or may occur in the future. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements. These factors include risks and uncertainties related to, among other things: uncertainties as to the timing of the Merger; the possibility that competing acquisition proposals will be made; the inability to complete the Merger due to the failure to obtain KindredBio’s stockholder adoption of the Merger Agreement or the failure to satisfy other conditions to completion of the Merger, including required regulatory approvals; the failure of the transaction to close for any other reason; the effects of disruption caused by the transaction making it more difficult to maintain relationships with employees, collaborators, customers, vendors and other business partners; the risk that stockholder litigation in connection with the Merger may result in significant costs of defense, indemnification and liability; diversion of management’s attention from ongoing business concerns and other risks and uncertainties that may affect future results of the combined company, including the risks described in the section entitled “Risk Factors” in Elanco’s and KindredBio’s Annual Reports on Form 10-K for the year ended December 31, 2020 and Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021. All forward-looking statements are qualified in their entirety by this cautionary statement and neither Elanco nor KindredBio undertake any obligation to revise or update this press release to reflect events or circumstances after the date hereof, except as required by law.

KindredBio Contact: Katja Buhrer, 917-969-3438, katja.buhrer@kindredbio.com
Elanco Investor Contact: Tiffany Kanaga, 302-897-0668, tiffany.kanaga@elancoah.com 
Elanco Media Contact: Colleen Parr Dekker, 317-989-7011, colleen.dekker@elancoah.com 

Kindred Biosciences Announces Positive Results from Pivotal Efficacy Study of Parvovirus Monoclonal Antibody for the Prevention of Deaths in Dogs Infected by Parvovirus

  • Study demonstrated 100% survival in dogs treated with KIND-030, even in the absence of any supportive care, versus 43% survival in dogs treated with placebo

San Francisco, California (June 2, 2021) – Kindred Biosciences, Inc. (NASDAQ: KIN), a biopharmaceutical company focused on saving and improving the lives of pets, today announced positive results from a pivotal efficacy study of KIND-030 in dogs infected by parvovirus. The primary endpoint was survival and the results showed 100% survival in the treated group versus 43% survival in the placebo group.

KIND-030, a monoclonal antibody targeting canine parvovirus (CPV), is partnered with Elanco Animal Health (NYSE: ELAN).

In this randomized, blinded, placebo-controlled study, KIND-030 was administered to dogs after they tested positive for CPV infection. The primary endpoint of the study was met. The parvovirus challenge resulted in 57% mortality rate in the control dogs compared to 0% mortality rate in the KIND-030 treated dogs. The dogs did not receive any supportive care or other treatments.

“Parvovirus is a devastating disease currently without any available treatment,” said KindredBio’s Chief Executive Officer, Richard Chin, M.D. “With 100% efficacy, we believe KIND-030 has the potential to revolutionize the care of these dogs. Instead of a lengthy and expensive hospitalization that is frequently ineffective and can leave the dog with permanent disabilities, the infected dogs can now be treated with a single injection without need for additional supportive care or hospitalization.”

“We are excited to partner with KindredBio on this revolutionary treatment that can significantly improve the health and well-being of dogs,” said Jeff Simmons, president and CEO of Elanco Animal Health. “With our significant global reach and access to veterinarians and pet owners around the world, Elanco looks forward to leveraging our capabilities and skilled team of experts to advance and commercialize this novel treatment for pets globally.”

With this positive study, KIND-030 has now demonstrated efficacy in both indications being pursued: prophylactic therapy to prevent clinical signs of canine parvovirus infection, and treatment of established parvovirus infection. Results from the pivotal efficacy study for the therapeutic claim are expected to be submitted to the United States Department of Agriculture (USDA) in June, with possible approval by year-end 2021.

CPV is the most significant and contagious viral cause of enteritis in dogs, especially puppies, with mortality rates as high as 91% if untreated. There are currently no Food and Drug Administration or USDA approved treatments for CPV, nor any other available treatment. Veterinary intervention is limited to supportive care, which can cost owners up to thousands of dollars per puppy, with an average cost of $1,200.

Canine parvovirus is most often seen in puppies less than 6 months of age, but can occur in unvaccinated dogs of any age. Clinical signs often include depression, not eating, vomiting, and profuse diarrhea which is often blood tinged[1]. Banfield estimates that there are approximately 250,000 parvo cases in the U.S. each year, excluding emergency hospitals, shelters, specialty hospitals, or undiagnosed cases[2]

KIND-030 binds to critical portions of the virus, preventing the virus from entering into cells.

On April 28, 2021 KindredBio announced acceptance of the parvovirus antibody prophylaxis study data and approval of the efficacy indication by the USDA Center for Veterinary Biologics. The pivotal efficacy data for the prophylactic indication demonstrated that 0% of the KIND-030 treated dogs developed parvovirus infection while 100% of the placebo-control dogs developed the disease, and also showed 100% survival rate in KIND-030.

Regulatory approval and review timeline are subject to the typical risks inherent in such a process. The results of the pivotal efficacy study for the therapeutic claim stated in this press release have not been reviewed by the USDA Center for Veterinary Biologics.

About Kindred Biosciences

Kindred Biosciences is a biopharmaceutical company developing innovative biologics focused on saving and improving the lives of pets. Its mission is to bring to pets the same kinds of safe and effective medicines that human family members enjoy. The Company’s strategy is to identify targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated targets for dogs and cats. KindredBio has a deep pipeline of novel biologics in development across many therapeutic classes, alongside state-of-the-art biologics manufacturing capabilities and a broad intellectual property portfolio.

For more information, visit: www.kindredbio.com

Forward-Looking Statements 

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to, statements regarding our expectations about the trials, regulatory approval, manufacturing, distribution and commercialization of our current and future product candidates, and statements regarding our anticipated revenues, expenses, margins, profits and use of cash.

These forward-looking statements are based on our current expectations. These statements are not promises or guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements. These risks include, but are not limited to, the following: our limited operating history and expectations of losses for the foreseeable future; the absence of significant revenue from our products and our product candidates for the foreseeable future; the likelihood that our revenue will vary from quarter to quarter; our potential inability to obtain any necessary additional financing; our substantial dependence on the success of our products and our lead product candidates which may not be successfully commercialized even if they are approved for marketing; the effect of competition; our potential inability to obtain regulatory approval for our existing or future product candidates; our dependence on third parties to conduct some of our development activities; our dependence upon third-party manufacturers for supplies related to  our products and our product candidates and the potential inability of these manufacturers to deliver a sufficient  amount of supplies on a timely basis; the uncertain effect of the COVID-19 pandemic on our business, results of operations and financial condition; uncertainties regarding the outcomes of trials regarding our product candidates; our potential failure to attract and retain senior management and key scientific personnel; uncertainty about our ability to enter into satisfactory agreements with third-party licensees of our biologic products and uncertainty about the amount of revenue that we will receive from such agreements; our significant costs of operating as a public company; potential cyber-attacks on our information technology systems or on our third-party providers’ information technology systems, which could disrupt our operations; our potential inability to repay the secured indebtedness that we have incurred from third-party lenders, and the restrictions on our business activities that are contained in our loan agreement with these lenders; the risk that our 2020 strategic realignment and restructuring plans will result in unanticipated costs or revenue shortfalls; uncertainty about the amount of royalties that we will receive from the sale of Mirataz® to Dechra Pharmaceuticals PLC; the risk that the revenue from our delivery of services or products under any contract may be less than we anticipate if the other party to the contract exercises its right to terminate the contract prior to the completion of the contract or if such party is unable or unwilling to satisfy its payment obligations under the contract; our potential inability to obtain and maintain patent protection and other intellectual property protection for our products and our product candidates; potential claims by third parties alleging our infringement of their patents and other intellectual property rights; our potential failure to comply with regulatory requirements, which are subject to change on an ongoing basis; the potential volatility of our stock price; and the significant control over our business by our principal stockholders and management. 

For a further description of these risks and other risks that we face, please see the risk factors described in our filings with the U.S. Securities and Exchange Commission (the SEC), including the risk factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q filed with the SEC. As a result of the risks described above and in our filings with the SEC, actual results may differ materially from those indicated by the forward-looking statements made in this press release. Forward-looking statements contained in this press release speak only as of the date of this press release and we undertake no obligation to update or revise these statements, except as may be required by law.

Contacts

For investor inquiries: 
Katja Buhrer
Katja.buhrer@kindredbio.com 
(917) 969-3438

[1] American Kennel Club Canine Health Foundation. Canine Parvovirus Information for Dog Owners. June 2018. Available from: http://www.akcchf.org/canine-health/top-health-concerns/current-topics-in-infectious-disease/AKC-CHF-Canine-Parvovirus-Fact-Sheet.pdf [Access Date: Sept. 14, 2020].

[2] 2014 Banfield State of Pet Health report compiled from the medical data of 2.3 million dogs treated at Banfield Pet Hospitals 2013.