Companywide Reorganization Aimed at Delivering More Value
to Customers
Company targets $1 billion in cost savings by end of 2011
Indianapolis, IN - Eli Lilly and Company
(NYSE: LLY) today unveiled a new operating model and announced a
series of changes to speed medicines from its pipeline to
patients. To help achieve this goal, the company will establish a
Development Center of Excellence to streamline and accelerate
late-stage development of new medicines, and will reorganize its
pharmaceutical business into four business units that will operate
alongside the Elanco animal health business unit. In addition, the
company has set a goal to significantly reduce its cost structure
by the end of 2011.
"We remain confident that continued focus on medical innovation
is the best way to ensure the long-term growth of our company,"
said John C. Lechleiter, Ph.D., chairman and chief executive
officer. "The changes we are announcing today will accelerate the
progress of the most exciting pipeline in our history, with more
than 60 molecules currently in clinical development. These changes
will also ensure that we meet the changing needs of our customers
and operate our business in a manner consistent with an
increasingly challenging environment. I have great confidence that
these changes will have a very positive impact on the company's
future."
To achieve these objectives, Lilly will:
- Establish the Development Center of Excellence (COE) to help
address the industry-wide challenge of a drug development process
that is increasingly complex, slow and expensive. The Development
COE will distinguish Lilly from its peers by using one common
operating system, one common set of priorities and a singular
focus to streamline the development of new medicines. The
ultimate goal of the Development COE is to accelerate the launch
of important Lilly molecules over the next decade and bring
innovative medicines to patients sooner.
- Organize the company around five global
business units: oncology, diabetes, established markets, emerging
markets, and Elanco animal health, thereby moving from a
predominantly functionally-oriented organization to a
business-unit structure.
- Streamline the organization and align
corporate and general and administrative functions to support the
business with a focus on improved quality, strong customer
service and reduced costs.
- Reduce the company's cost structure by $1
billion and lower global headcount to 35,000 by the end of 2011,
excluding strategic sales additions in high-growth emerging
markets and Japan.
Explaining the need for such changes, Lechleiter noted that the
global pharmaceutical industry is facing unprecedented challenges
- slowing innovation, rising costs, patent expiries and increased
generic competition, demands from payers to deliver greater value,
and health care reform. These forces are reducing industry growth
rates and profitability. Lilly faces these and its own challenges,
including a series of patent expirations for key products
beginning in late 2011.
"While our financial performance during the past few years has
been strong, we will soon enter the most challenging period in our
company's history. This calls for strong measures to speed our
output of new medicines, better meet the changing needs of our
customers and reduce our costs," Lechleiter said.
Among a number of growth options that could be considered,
Lechleiter said management is convinced that Lilly's promising
pipeline of early- and mid-stage molecules offers the best
possible opportunity for sustainable long-term growth.
"This is a pivotal moment for our company," said Lechleiter.
"The need for breakthrough medicines - to help aging populations,
to provide treatments and cures for deadly diseases, and to
improve on inadequate options for many diseases - has never been
greater. With the largest early- to mid-stage pipeline in our
history, the opportunities for Lilly have also never been greater.
The test for our company is to bring those medicines to patients
more efficiently and provide demonstrable value.
"While our structure and approach served us well in the past,
we must take measures now that will make us leaner, more focused,
more customer-oriented, and more competitive," said Lechleiter.
"The changes we're making will simplify our organization, clarify
accountability and authority, and speed decision making."
Lechleiter said the move to business units combined with a
lower cost structure will allow Lilly to deliver valued innovation
quicker and at less cost and thus provide greater value to
customers. The realigned organization will focus on speeding
delivery of innovative medicines to market; establishing
leadership positions in cancer and diabetes therapies; realizing
the opportunity for growth in emerging markets and the company's
animal health business; and introducing new products in the
company's largest base, the established markets.
Activities are currently under way to put the new operating
model in place, with the goal of transitioning to the new
organization on January 1, 2010. On December 10, 2009, at the
company's annual investment community day in New York City,
company leaders will present additional details of the changes
announced today.
"These changes will challenge us and require new ways of
thinking and acting," concluded Lechleiter. "Under this new
operating model, Lilly has the opportunity not only to better
navigate this uncertain, challenging time, but to emerge with
renewed strength and focus."
In connection with today's announcement, the company confirmed
its previous 2009 earnings per share guidance range of $4.14 to
$4.24 on a reported basis, or $4.20 to $4.30 on a pro forma
non-GAAP basis.
About Lilly
Lilly, a leading innovation-driven corporation, is developing a
growing portfolio of pharmaceutical products by applying the
latest research from its own worldwide laboratories and from
collaborations with eminent scientific organizations.
Headquartered in Indianapolis, Ind., Lilly provides answers -
through medicines and information - for some of the world's most
urgent medical needs. Additional information about Lilly is
available at www.lilly.com.
This press release contains forward-looking statements that are
based on management's current expectations, but actual results may
differ materially due to various factors. With respect to the
planned cost and headcount reductions, there can be no guarantees
that the company will be able to achieve the magnitude of
reductions planned. There are significant risks and uncertainties
in pharmaceutical research and development, and therefore there
can be no guarantees with respect to pipeline products that the
products will receive the necessary clinical and manufacturing
regulatory approvals or that they will prove to be commercially
successful. The company's results may also be affected by such
factors as competitive developments affecting current products;
rate of sales growth of recently launched products; the timing of
anticipated regulatory approvals and launches of new products;
regulatory actions regarding currently marketed products; other
regulatory developments and government investigations; patent
disputes and other litigation involving current and future
products; the impact of governmental actions regarding pricing,
importation, and reimbursement for pharmaceuticals; changes in tax
law; asset impairments and restructuring charges; acquisitions and
business development transactions; and the impact of exchange
rates and global macroeconomic conditions. For additional
information about the factors that affect the company's business,
please see the company's latest Form 10-Q filed July 2009. The
company undertakes no duty to update forward-looking statements.
Refer to:
Edward G. Sagebiel (317) 433-9899; egs@lilly.com (Media)
Mark E. Taylor (317) 276-5795; mark.taylor@lilly.com (Media)
Philip Johnson (317) 655-6874; johnson_philip_l@lilly.com
(Investors)
