September 7, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Indianapolis – Eli Lilly and Company announced it plans to cut 3,500 jobs.
The majority of the job cuts will be in the U.S., and include voluntary early retirement programs. The company expects annualized savings of about $500 million in 2018. The cuts and reorganization is part of a productivity plan to improve fixed costs.
“We have an abundance of opportunities—eight medicines launched in the past four years and the potential for two more by the end of next year,” said David Ricks, Lilly’s chairman and chief executive officer, in a statement. “To fully realize these opportunities and invest in the next generation of new medicines, we are taking action to streamline our organization and reduce our fixed costs around the world.”
The job cuts will also involve specific site closures. Lilly plans to move production from its Larchwood, Iowa animal health manufacturing plant to one in Fort Dodge, Iowa. It plans to close a research-and-development site in Bridgewater, NJ, and the Lilly China Research and Development Center in Shanghai, China. It will also consolidate work to its existing shared services center.
The cuts amount to 8.5 percent of the company’s workforce. In June 2017, Lilly reported it had about 41,000 employees.
A big part of what’s affecting the company is challenges to the diabetes market. Three out of Lilly’s 10 top drugs are for diabetes, and the company has focused its efforts there as some of its other big drugs lost patent protection. However, in the U.S. and elsewhere pricing pressures are upping the competition.
“That was on the mind as they made these changes,” Mark Taylor, a company spokesperson, told BloombergTechnology.
Approximately 2,000 of the job cuts will be in the U.S. Lilly expects charges of $1.2 billion, or 80 cents per share, in this second half of this year as a result.
In 2016, Lilly cut 500 jobs after an Alzheimer’s drug failed in clinical trial. It’s also laid off sales staff as some of its drugs lost patent protection.
Also, in April 2017, Lilly and Incyte Corporation ’s New Drug Application (NDA) for baricitinib for rheumatoid arthritis was rejected by the U.S. Food and Drug Administration (FDA).
Taylor indicated that half of the $500 million in savings would be invested in research and development. The rest will be used to reduce operating expenses to 50 percent of revenue or less by 2018.
“The commitment and perseverance of our people, who never give up on our mission of tackling hard-to-treat diseases, make up our legacy of more than 140 years,” Ricks said in a statement. “We will implement changes with fairness and the utmost respect for our Lilly colleagues, while we remain a vibrant, thriving competitor.”
Lilly indicates it has the possibility of launching two new drugs by the end of this year. Its drug abemaciclib for advanced breast cancer is currently under review by the FDA. And its tanezumab for chronic osteoarthritis and chronic low back pain was granted Fast Track status.
In July, at its second-quarter earnings report, Lilly reported revenue of $5.8 billion, up from $5.4 billion in the same quarter in 2016. Ricks, at the time, stated, “Lilly delivered strong revenue growth in the second quarter, building on the momentum of Trulicity, Taltz and the other new products in our portfolio. To deliver on our mission and maximize our opportunity, we have four key priorities—launching with excellence, replenishing the pipeline, driving productivity, and building talent and capability in our core areas of focus.”
As part of a new framework for decision-making, the company was prioritizing the development of seven drug candidates. It was also planning to get rid of seven Phase II candidates and partner for another 10 of its mid-stage cancer drugs.
