Pharmaceutical company Eli Lilly and Co. (LLY, Financial) announced Thursday it plans to streamline operations by cutting around 3,500 jobs globally, which equates to 8% of its workforce, and closing several facilities.
Motivated by expiring patents, the company plans to focus more resources on developing new medicines and reducing costs.
Chairman and CEO David A. Ricks said the company has several opportunities from which to benefit, including eight new medications launched over the past four years and two potential new drugs by the end of next year.
"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," Ricks said.
The Indianapolis-based company said a majority of the job cuts will be among its U.S. workers who qualify for a voluntary early retirement program. Employees who participate will receive enhanced retirement benefits.
The remainder of the job cuts will come from site closures. Eli Lilly is moving production from a manufacturing facility in Larchwood, Iowa, to an existing plant in Fort Dodge, Iowa. In addition, the company is closing research and development facilities in New Jersey and Shanghai. Any additional cuts will be made where necessary. Ricks reassured the changes will be implemented “with fairness and the utmost respect for our Lilly colleagues while we remain a vibrant, thriving competitor."
The company projects approximately $500 million in annualized savings from these efforts, which are expected to be realized in 2018. Additionally, it expects to incur $1.2 billlion, or 80 cents per share, in charges in the third and fourth quarters.
“The actions we are announcing today will result in a leaner, more nimble global organization and will accelerate progress toward our long-term goals of growing revenue, expanding operating margins and sustaining the flow of life-changing medicines from our pipeline," Ricks said.
Disclosure: I do not own any stocks mentioned.
