Eli Lilly and Co. (LLY) said it is considering an initial public offering, merger or sale of its Elanco animal health business as part of a strategic review for the unit, which is facing increasing competition.

The company expects to update investors on its decision regarding Elanco no later than the middle of 2018, Lilly said in a statement Tuesday, Oct. 24.

Lilly said worldwide animal health revenue totaled $741 million in the third quarter, which was a 5% increase over the same period last year and about 13% of total sales for the quarter.

At the same time, worldwide food animal revenue decreased 6% year-over-year to $488 million, driven "by market access and competitive pressures in U.S. cattle." Competitive pressure and lower realized prices are on track to continue for the rest of the year, Lilly said.

Lilly added in the Tuesday statement that it is considering its options, including a sale, for its Posilac dairy cow supplement. Posilac posted unexpected disappointing sales in the quarter, resulting in a $406 million charge for the company.

Lilly reported strong third quarter earnings early Tuesday despite the pressure on animal health, raising its projections for the entire year as newer drugs continue to succeed. Earnings of $1.05 per share topped the FactSet analyst expectation of $1.03 per share.

Lilly stock traded higher 2.66% to $89.50 premarket Tuesday.

Eli Lilly is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Cramer buys or sells LLY? Learn more now.

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