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Lilly axes 3,500 jobs in $500m-a-year cost-cutting drive

US drug maker to slash its workforce by 8.5%

Eli Lilly

US drug maker Eli Lilly has said it will slash its workforce by 8.5% and close some facilities in an attempt to trim $500m a year off its costs.

Some of the 3,500 job losses will come from voluntary (and sweetened) early retirement deals - particularly in the US - but the company is also planning to shut down an animal health manufacturing facility in Larchwood, Iowa, as well as an R&D unit in Bridgewater, New Jersey, and its Lilly China Research and Development Centre in Shanghai. Around 2,000 of the job reductions will affect its US workforce.

The decision comes in the wake of a couple of late-stage pipeline setbacks for Lilly, including a delay for rheumatoid arthritis drug baricitinib in the US and the demise of Alzheimer's disease candidate solanezumab, but the company insists its hand isn't being forced.

"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 the firm's chief executive David Ricks. "To fully realise these opportunities and invest in the next generation of new medicines, we are taking action to streamline our organisation and reduce our fixed costs around the world."

Lilly's first-half revenues rose 8% to $5.8bn thanks to surging sales of new drugs like diabetes therapy Trulicity (dulaglutide) and psoriasis drug Taltz (ixekizumab), and the company is hoping to add to its portfolio with new therapies for breast cancer (abemaciclib) and migraine (galcanezumab). The cost-cutting drive will allow it to increase its R&D investment as well as improve its cost structure.

It is still facing some big patent expiries however, and by the end of this year will have lost patent protection in its home market for attention-deficit hyperactivity disorder drug Strattera (atomoxetine) and erectile dysfunction therapy Cialis (tadalafil).

Lilly currently has about 41,241 workers globally, with more than 18,500 in the US. The cost of the headcount reduction and site closures will be around $1.2bn and will largely come in the last two quarters of 2017.

Lilly has previously said it intends to improve its margin to 50% or better by 2018, driven by sales growth and cost reductions. Ricks told investors last month that objective is "contingent on us continuing to drive a very deliberate productivity and cost containment agenda inside Lilly".

Article by
Phil Taylor

8th September 2017

From: Research

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