Eli Lilly to cut 5,500 jobs

The drugmaker will eliminate the positions by 2011 as part of a reorganization plan that aims to save $1 billion.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Julianne Pepitone, CNNMoney.com staff reporter

Doctor shortage: Who should fill it?
The U.S. health care system is struggling with a shortage of primary care physicians. CNNMoney.com asked readers -- especially those who are medical professionals -- to weigh in on who can help solve the problem. Here are some responses:
Photos
Sick pay: 9 stories of health costs
From $10,000 deductibles to no coverage at all, CNNMoney.com readers and viewers reveal their battle with the rising costs of health insurance.
How has Wall Street responded to last year's collapse of Lehman Brothers?
  • Made significant changes
  • Some reform, but more needed
  • Business as usual
  • It's gotten worse

NEW YORK (CNNMoney.com) -- Eli Lilly and Co. will cut 5,500 jobs as part of a restructuring plan to save $1 billion, the drugmaker said Monday.

The job cuts will be complete by 2011, according to a press release. Eli Lilly (LLY, Fortune 500), based in Indianapolis, currently employs 40,500 people.

At 10:45 a.m. ET on Monday, Lilly was up 28 cents to trade at $33.10.

"We remain confident that continued focus on medical innovation is the best way to ensure the long-term growth of our company," said chief executive John Lechleiter, in a written statement.

The pharmaceutical industry "is facing unprecedented challenges," according to Lechleiter, who cited "slowing innovation, rising costs, patent expiries and increased generic competition, demands from payers to deliver greater value, and health care reform."

Restructuring has been common in the pharmaceutical sector over the last few years, noted Miller Tabak & Co. analyst Les Funtleyder.

"This isn't a big surprise, given the environment," Funtleyder said. "It's a good short-term fix to preserve cash, but the labs have to kick out new drugs in order for them to make money."

Patent expirations loom

In addition to universal pressures on pharma, Lilly also "faces .. its own challenges," the release said, including patent expirations for some of its main products beginning in late 2011.

"It's inevitable, but they know to the minute when these patents are expiring," Funtleyder said. "What they announced today is an acknowledgement of that, but there's not much else [Lilly] can do besides acquire some smaller companies, be bought out themselves or cut costs."

Lilly also announced it established a Development Center of Excellence, geared to streamline new medicines. The company has more than 60 molecules currently in clinical development, and said the reorganization should "help accelerate the progress of the...pipeline," Lechleiter said.

As part of the changes, the company will now be structured around five global business units: oncology, diabetes, established markets, emerging markets and animal health.

"From one point of view, the stock is inexpensive," Funtleyder said. "But those patent cliffs are pretty near term without much to offset it, so we're cautious."

Further clarity on Lilly's plans could help push shares a bit higher, but they will likely trade in a range close to current levels, Funtleyder said.

"They call it a 'new structure,' but nobody in pharma has truly figured out the new structure," Funtleyder said. "Nobody's found the magic bullet. Innovation is hard." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 10 food trends could dominate 2015 So long, kale. Here's what's expected to shake up the food industry next year. More
Beyond Russia: Geopolitical hot spots in 2015 Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.