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Lilly cutting 5,500 jobs before Zyprexa lapse



    By Ransdell Pierson

    NEW YORK (Reuters) - Eli Lilly and Co said on Monday it plans to cut 5,500 jobs, or 13.5 percent of its workforce, as it girds for generic competition by 2011 on its Zyprexa schizophrenia drug and Gemzar cancer treatment.

    The Indianapolis-based drugmaker, whose revenue outlook has also been dimmed by competition for its Byetta diabetes drug and safety concerns for its recently approved Effient blood clot preventer, said it aims to cut its annual costs by $1 billion by the end of 2011.

    The company aims to streamline its structure and shrink its workforce to 35,000, from its current strength of 40,500, by the end of 2011. But the new headcount does not include any new sales force additions in fast-growing emerging markets and Japan, Lilly said.

    Lilly's biggest challenges are the slated U.S. patent expirations on Gemzar, Zyprexa and anti-depressant Cymbalta, slated for late 2010, late 2011 and 2014, respectively. Cheaper generics are expected to wrest away the vast majority of their U.S. sales.

    That is a huge concern, given the fact that the trio are among Lilly's biggest products, with combined global annual revenue of more than $9 billion -- or about 43 percent of Lilly's total current annual sales.

    "We will soon enter the most challenging period in our company's history," said company Chief Executive John Lechleiter. "This calls for strong measures to speed our output of new medicines, better meet the changing needs of our customers and reduce our costs."

    Lilly, which stuck to a 2009 profit forecast of $4.20 to $4.30 per share, has previously said it expects double-digit compound annual growth of its earnings per share from 2007 to 2011.

    In an interview, Lechleiter said the cost-cutting and restructuring measures announced on Monday "will undoubtedly help us pull ahead," largely by speeding up launches of new medicines.

    Lilly's streamlining program is similar to one recently implemented by Pfizer Inc , the world's biggest drugmaker, which is battening down the hatches for the patent expiration -- also in 2011 -- on its Lipitor cholesterol fighter.

    Lilly said it will create a new organizational structure by January 1, with five global business units. They include oncology, diabetes, emerging markets, established markets and its Elanco animal health business.

    The company has a long-standing focus on diabetes and cancer, and both are hot areas because of the aging population and the hefty price tags of those drugs.

    Although they will not have their own dedicated business units, Lechleiter said neuroscience, cardiovascular, bone and autoimmune drugs will remain a company focus, and that Lilly will remain opportunistic about licensing or buying drugs in those and other areas.

    "We may sharpen up or reshape our focus to meet our needs and opportunities," he said, although diabetes and cancer drugs are being given priority status under the restructuring.

    Lechleiter said Lilly is not interested in moving into the generics business, an area that Pfizer and some other large drugmakers are beefing up largely in order to tap demand in emerging markets.

    He said the restructuring instead sends a clear message that Lilly is "redirecting its efforts to discovering innovative medicines."

    Company shares were up 0.8 percent at $33.08 in late-morning trading on the New York Stock Exchange.

    (Reporting by Ransdell Pierson, editing by Dave Zimmerman)