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September 14, 2009
Eli Lilly & Co. will shed about 5,500 jobs, or 14 percent of its workforce, and cut $1 billion in costs as the drugmaker braces to lose patent protection on its top-selling Zyprexa antipsychotic.
Lilly plans to restructure its business around five units focused on oncology, diabetes, established markets, emerging markets and animal health, the Indianapolis-based company said today in a statement.
The reorganization is to help Lilly process its acquisition of ImClone Systems Inc. and help offset some of the losses the company expects starting 2011 from generic competition to Zyprexa, with $4.7 billion in 2009 sales, Chief Executive Officer John Lechleiter said in a telephone interview. Lilly is following Pfizer Inc. and Merck & Co. who have been cutting positions following acquisitions and breaking their business into smaller units.
“Lilly’s move is consistent with announcements by its major pharma peers and was to some degree inevitable given the company’s 2011-2014 patent cycle,” said Chris Schott, an analyst with JP Morgan Chase & Co.
Lilly’s global headcount will be lowered to 35,000 from 40,500 by the end of 2011, although some markets including Japan will add workers, according to a company statement.
“The major emphasis is to prepare us to enter what’s going to be a challenging period for the company, as we see patent expirations, and to speed up new products as we enter that period,” Lechleiter said.
Shares Rise
Lilly shares rose 31 cents to $33.13 at 4 p.m. in New York Stock Exchange composite trading.
Zyprexa accounted for almost a quarter of the Lilly’s 2009 sales. Lilly’s second-biggest seller, the antidepressant Cymbalta, and the osteoporosis medicine Evista will lose patent protection by 2014. These drugs, along with Zyprexa, generated $8.47 billion worldwide last year, or about 42 percent of Lilly’s revenue.
The company hasn’t said where the job cuts will come from.
“We’ll have more to say about that in coming months,” Lechleiter said.
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