Eli Lilly to lay off 8.5 percent of employees in bid to cut costs

By Dr. Ananya Mandal, MDSep 7 2017

Eli Lilly and Company announced yesterday that they have decided to lay off around 8.5 percent of their employees. The company was on its way to develop two potential major drugs over the past year but set backs have led to major financial losses, leading to this decision.

The major drug company based in Indianapolis will cut down around 3,500 positions around the world which would save the company around $500 million starting 2018. Lilly has about 41,000 workers globally, including more than 18,500 in the U.S. The company’s shares rose by 1.8 percent. Lilly expects charges of about $1.2 billion before tax, or $0.80 per share after tax.

A further decline in expenditure is expected from a voluntary early-retirement program that would be in place in the United States cutting down on further 2000 employees. The company in a bid to cut costs would also shut down its plant in Iowa and its research and development offices in Bridgewater, New Jersey and Shanghai, China. Lilly’s operating margins have been lagging behind compared to its rivals according to experts. It has been one of the largest makers of insulin and diabetes drugs. Now it is facing loss of patent rights too in the near future. There is intense competition from its rivals and also a spate of new drugs and better pricing from other companies in the treatment of diabetes. In May, the U.S. patent expired for the attention-deficit/hyperactivity disorder drug Strattera. Lilly’s another blockbuster drug Cialis for erectile dysfunction loses patent in November paving the way for generics.

In July this year, Lilly’s attempts at developing its experimental rheumatoid arthritis drug baricitinib suffered a setback after the U.S. Food and Drug Administration did not approve of the drug. The US FDA called for further clinical trials and studies before the drug could be approved. July this year, the company stated that there could be a multiple year delay in development of the drug as a result of these additional research that was mandated. Lilly was also developing an Alzheimer’s disease treatment solanezumab. This new drug was slated to be the first drug of its kind that would be effective in slowing the progression of the dreaded neurodegenerative disease. However the drug failed to show promise in clinical trials in November. This was another blow to the company’s financial health.

Eli Lilly is working towards the launch of two new medications come end of 2018. One of these would be useful in the treatment of breast cancer while the other would be useful in treatment of migraine headaches. The company’s new product abemaciclib is now under the FDA review for the treatment of advanced breast cancers.

President Donald Trump, has further urged the pharmaceutical industry to move the manufacturing jobs back to the US and has promised to lower the price of pharmaceuticals.