Eli Lilly and Co. will finalize the divestiture of its 80.2% stake in Elanco Animal Health Inc., which was spun off from Lilly in 2018, through a share exchange offer.

Indianapolis-based Lilly decided to focus on its human pharmaceutical business, separating Elanco through a NYSE IPO, which raised about $1.7 billion. Lilly retained the 80.2% ownership in Elanco following the IPO's completion in September 2018.

"We were encouraged by the demand for the IPO and have been pleased with Elanco's performance," said Lilly Chairman and CEO David Ricks in a Feb. 8 press release. "It's the right time to finalize the separation, let Elanco chart its future as a standalone company, and focus Lilly on our core mission to create human medicines that make life better for people around the world."

In the exchange offer, Lilly shareholders can exchange their shares for Elanco's common stock at a 7% discount, subject to an upper limit of 4.5262 Elanco shares per one common stock of Lilly. The completion of the exchange offer is subject to certain conditions, including at least 146.645 million Elanco shares being distributed in exchange for Lilly's shares.

Goldman Sachs & Co. LLC, J.P. Morgan and Morgan Stanley will be dealer managers for the exchange offer.

Elanco on Feb. 6 reported non-GAAP net income of $105.4 million for the fourth quarter of 2018, an increase of 148% from $42.5 million in the prior-year period.

In a Feb. 8 note, Moody's called the divestiture of Elanco a credit negative for Lilly, because the sale will reduce the pharmaceutical giant's scale and diversity. The share exchange offer will not, however, impact Lilly's ratings, Moody's added.