Drugmaker Eli Lilly will reorganize and cut 5,500 jobs

INDIANAPOLIS -- Facing huge financial pressures, drugmaker Eli Lilly said today that it plans to cut employees worldwide by 5,500, or about 13%, by the end of 2011, as part of a move to slash $1 billion in costs.

The cuts could include layoffs, and many of them could come from Indianapolis, where about 13,500 work at Lilly's lly corporate headquarters, laboratories and manufacturing plants.

The cost-cutting would be the most significant in Lilly's modern history, even larger than cuts in 2001. That's when the drugmaker lost its blockbuster drug, Prozac, which went generic sooner than expected and cut revenue by about one-third.

The cuts are intended to help Lilly deal with financial pressures on many fronts.

That includes the upcoming patent loss of several blockbuster drugs, anti-psychotic drug Zyprexa, starting in 2011. They account for about 70% of sales.

It also includes growing pressure from payers, including private insurers and the government, to hold down soaring health-care costs.

The cuts are part of a large restructuring effort the company is calling the most significant in its history.

The restructuring includes organizing the company around five global business units: oncology, diabetes, established markets, emerging markets and animal health.

"While our financial performance during the past few years has been strong, we will soon enter the most challenging period in our company's history," said John Lechleiter, Lilly's chairman and chief executive. "This calls for strong measures to speed our output of new medicines, better meet the changing needs of our customers and reduce our costs."

The company declined to say how many jobs might be lost in Indianapolis, the company's headquarters city since its founding 133 years ago.

But Lechleiter said Indianapolis could see a large portion of job cuts, because this is where the highest concentration of jobs is located.

As part of the restructuring, Lilly plans to set up what it is calling the Development Center of Excellence to speed development of new drugs.

The company has been beset by numerous delays and setbacks in launching new drugs, and said it hopes the new center will speed up cycles, reduce costs and get it closer to patients.