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3,500 Job Cuts at Eli Lilly Signal Change in Focus

3,500 Job Cuts at Eli Lilly Signal Change in Focus

The company plans to focus on drug development for the chronic hepatitis B market, for which there are far fewer therapies.

Pharmaceutical company Eli Lilly has announced it will be implementing around 3,500 layoffs globally, in an effort to “streamline operations.” The move will free up about $500 million which the company plans to use to fund clinical development of the drugs in its pipeline.

“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 David A. Ricks, Lilly’s chairman and chief executive officer. “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.”

While site closures will factor into the planned layoffs, Lilly says that a US voluntary early retirement program will make up the bulk of the savings. As of September 7, the company has already started offering the program to select Lilly employees in the US, with the incentive for early retirement being “enhanced retirement benefits.”

According to Lilly, the majority of the voluntary early retirement program will be complete by the end of 2017. This will help the company gain access to some of the savings as early as 2018.

“The actions we are announcing today will result in a leaner, more nimble global organization and will accelerate progress towards our long-term goals of growing revenue, expanding operating margins and sustaining the flow of life-changing medicines from our pipeline,” said Ricks.

As part of the restructuring efforts, Lilly will move its Larchwood, Iowa animal health manufacturing plant to facility in Fort Dodge. Two R&D sites – one in New Jersey and another in Shanghai – will also close.

The layoffs and site closures are expected to have an effect on Lilly’s 2017 earnings. A $1.2 billion pre-tax charge will cover expenses related to severance packages and the early retirement program.