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Lilly to cut 5,500 jobs in major restructuring

Published on 30/09/09 at 01:16pm

 

Lilly's chief executive has unveiled a major restructuring which will see it shed 5,500 jobs, helping to cut costs and become more efficient across all departments.

Chief executive John Lechleiter announced the plans on 14 September, which will help soften the blow from the imminent patent expiry of Zyprexa, its biggest earner.

The company is to create a Development Centre of Excellence, which it hopes will streamline and accelerate late-stage development of new medicines, and will also reorganise its pharma business into four separate units, with its Elanco animal health business unit completing the new organisation.

The new business units combined with a lower cost structure will allow Lilly to deliver valued innovation quicker and at less cost and thus provide greater value to customers.

The realigned organisation will focus on speeding delivery of innovative medicines to market; establishing leadership positions in cancer and diabetes therapies; realising the opportunity for growth in emerging markets and the company's animal health business; and introducing new products in the company's largest base, the established markets.

"This is a pivotal moment for our company," said Lechleiter. "The need for breakthrough medicines - to help ageing populations, to provide treatments and cures for deadly diseases, and to improve on inadequate options for many diseases - has never been greater."

He noted that the company now had its largest early- to mid-stage pipeline in its history, and that Lilly would try to bring those medicines to patients more efficiently and demonstrate value.

"While our structure and approach served us well in the past, we must take measures now that will make us leaner, more focused, more customer-oriented, and more competitive," said Lechleiter.

"The changes we're making will simplify our organization, clarify accountability and authority, and speed decision making."

The company has already begun work on reorganising itself, with the goal of moving over to the new system from 1 January, 2010.

Further details are to be made public on 10 December, at the company's annual investment community day in New York City.

Streamlining

The company hopes the Development Centre of Excellence (COE) will help the industry-wide challenge of a drug development process that is increasingly complex, slow and expensive.

It says the Development COE will distinguish Lilly from its peers by using one common operating system, one common set of priorities and a singular focus to streamline the development of new medicines.

The ultimate goal of the Development COE is to accelerate the launch of important Lilly molecules over the next decade and bring innovative medicines to patients sooner.

The company will be re-organised around five global business units: oncology, diabetes, established markets, emerging markets, and Elanco animal health. Lilly says this signals a move from being a predominantly functionally-orientated organisation to a business-unit structure.

Lilly hopes this will streamline the organisation and align corporate and general and administrative functions to support the business with a focus on improved quality, strong customer service and reduced costs.

The re-organisation will reduce the company's cost structure by $1 billion and lower its global headcount to 35,000 by the end of 2011, excluding strategic sales additions in high-growth emerging markets and Japan.

"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.

"This calls for strong measures to speed our output of new medicines, better meet the changing needs of our customers and reduce our costs," Lechleiter said.

Lilly acquired ImClone in October last year for $6.5 billion, helping it to boost its presence in biotech and oncology.

Lechleiter indicated that further large scale mergers and acquisitions had been discounted, saying instead that its own pipeline of early- and mid-stage molecules offered the best possible opportunity for sustainable long-term growth.

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