Eli Lilly Plans to Trim 4,000 Jobs Worldwide : Restructuring: The drug maker will also drop cancer diagnosis and treatment research at its San Diego subsidiary.
In the latest in a series of major cutbacks in the pharmaceuticals industry, Eli Lilly & Co. on Monday said it will slash its worldwide employment by 4,000 positions over the next few years, mainly through early retirements.
Indianapolis-based Lilly joins other drug industry giants such as Merck & Co., Marion Merrill Dow Inc. and Johnson & Johnson, which have been forced to cut their payrolls. Anticipation of health care reform and other market pressures have squeezed profits in one of the nation’s most profitable industries. Analysts have estimated that restructuring will cost the $60-billion-a-year drug industry roughly 20% of its jobs over the next several years.
“We believe a slimmed-down Lilly will be even better positioned to take advantage of its many global opportunities during this time of fundamental change in its markets,” said Randall L. Tobias, chief executive of Lilly since June.
The company said about 2,000, or 10%, of current positions will be eliminated through voluntary early retirements, normal attrition and “very selective hiring.”
Another 2,000 consultants and other temporary workers will also be dropped, the company said. The early-retirement program will not affect Lilly’s operations in California, a company spokesman said.
In a separate announcement Monday, Lilly said it is getting out of its cancer treatment and diagnosis programs at Hybritech Inc., a San Diego-based subsidiary of its medical devices and diagnostic division. Hybritech employs about 1,000 people, about 150 of whom work in two divisions that are being eliminated, a Lilly spokesman said.
The news was welcomed by investors, who saw it as a sign that Lilly will gain profitability. Lilly’s stock surged $3.50 a share, or 7%, to $53.625 a share on the New York Stock Exchange.
“As Lilly operates its businesses more efficiently, many additional employees will be redeployed from their current positions in order to perform tasks that are most critical to the company’s success, including some now being done by non-Lilly personnel,” the company said.
Lilly said it is sharply cutting staff at its London headquarters and Vienna regional office, but will continue to expand drug operations in Europe and elsewhere.
“These actions are the first in what we expect to be a series of decisions that will help us achieve stronger long-term growth . . . “ Tobias said.
Kristine Bryan, vice president of S.G. Warburg & Co., a New York investment bank, said the Lilly decision is similar to downsizing elsewhere in the industry due to slowing sales.
“It’s time for all pharmaceutical companies to do this,” she said. “With the appointment of Tobias as chairman, one would expect there to be some changes.
“The pharmaceutical industry was built in an era of prosperity from the mid-1980s to the ‘90s. You end up having a relatively high head count compared to what’s needed,” she said.
Lilly acquired Hybritech in 1986 for $495 million, which, at the time, made it one of San Diego’s biotechnology success stories. But Hybritech “has been a disappointment from the day they purchased it,” said Evan Sturza, editor of Sturza’s Medical Investment Letter in New York.
David W. Pomfret, a Lilly spokesman, said Hybritech employees whose positions are eliminated will be offered jobs at other company facilities. Those who do not accept other jobs will be laid off.
Both Hybritech divisions were dedicated to research in the diagnosis and treatment of colon and other cancers.
Hybritech said it will seek parties interested in licensing the divisions’ technology.
“While we continue to believe that our efforts may be important to the future diagnosis and treatment of cancer, we are no longer able to justify the continued financial investment in our cancer therapeutic efforts,” the company said in a statement. “Without a commitment to therapeutic research, a continued investment in imaging--particularly the investment to create the infrastructure necessary to build an imaging business--cannot be sustained.”
The technologies Hybritech is abandoning involved so-called radioimmune therapy and in vivo imaging, which involves using antibodies to find cancerous tissue and allow doctors to view a tumor or other area of the body.
Besides Hybritech, Lilly’s medical devices and diagnostics division operates six other companies in California: Ivac Corp. and Pacific Biotech Inc., both in San Diego; Origin Medsystems Inc. in Menlo Park; Heart Rhythm Technologies Inc. in Temecula; Advanced Cardiovascular Systems Inc. in Santa Clara, and Devices for Vascular Intervention Inc. in Redwood City.
Pomfret said the medical devices division will not be affected by the job-reduction program.
Associated Press contributed to this report.
