Fitch assigns BB+ to Elanco

Fitch Ratings said it assigned an expected BB+ issuer default rating to Elanco Animal Health Inc., the animal health segment of Eli Lilly and Co. (A/stable).

Upon completion of the spin-off and debt issuance, Elanco’s stand-alone BB+ issuer default rating will reflect its competitive position in the animal health business and financial policies consistent with an investment-grade profile, the agency said.

Fitch said the positive outlook reflects a view that, should Elanco execute on its revenue growth and margin expansion initiatives, it will be able to reduce leverage within a reasonable time frame.

The agency said it expects the animal health category will benefit from long-term demand growth with the feed animal segment supported by population growth and increasing global protein consumption and the companion animal segment supported by growing consumer expenditures.

Fitch said it also expects revenues to be fairly durable relative to broader corporate industrial companies given the products benefit from some level of differentiation and patent exclusivity and durable relative to pharmaceutical companies given the more fragmented, and notably, private pay customer base.

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