- Eli Lilly & Co. announced Thursday it will restructure its business, which includes laying off or giving out voluntary early retirement to 3,500 U.S. employees.
- The early retirement program, which will be completed by Dec. 31, will help the company save $500 million annually beginning in 2018. "In addition to the U.S. voluntary early retirement program, the company will determine where it needs to further reduce costs and improve efficiencies," said the company in a statement.
- The company will move production from its animal health manufacturing facility in Larchwood, Iowa, to an existing plant in Fort Dodge, Iowa. It will also close a development office in Bridgewater, New Jersey, and the Lilly China Research and Development Center in Shanghai, China.
After the blow up of its Alzheimer's disease drug solanezumab last November, and the delay of its highly anticipated rheumatoid arthritis drug baricitinib, Lilly is being forced to cut costs. While the drugmaker has been in a strong position the last few years — faring much better than other competitors with its diabetes franchise, the setbacks to these two programs are a major hit, particularly given the high R&D costs invested in each.
Lilly said in the Sept. 7 statement that it will take a pre-tax charge of $1.2 billion, or 80 cents per share after tax, due to the cuts and facility closures that will be reflected in the third and fourth quarters of this year.
"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 Lilly Chairman and CEO Dave Ricks. "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."
These aren't the first layoffs to hit Lilly employees since the failure of solanezumab; the company let go 500 employees in January.
Lilly has been hit by several major patent expiries over the last several years — a period the company dubbed its YZ years. This opened up several top drugs to competition, including the schizophrenia drug Zyprexa (olanzapine), the depression treatment Cymbalta (duloxetine), the erectile dysfunction drug Cialis (tadalafil), cancer drug Gemzar (gemcitabine) and ADHD med Strattera (atomoxetine). Even though Lilly shareholders had once written off the big pharma and were calling for it to be taken out, Lilly has clawed its way back.
The recent rejection for baricitinib seemed like it could be a huge problem for the company, but Lilly recently announced it expects to resubmit the drug by early 2018 — potentially minimizing a more lasting setback for the company's hopes there.