Eli Lilly and Co. and Health Care and Health Care Businesses and Health Care & Life Sciences and Health Care & Insurance and Pharmaceutical

Lilly's sales-force restructuring to affect 1,600-plus

May 6, 2013

Eli Lilly and Co.’s massive restructuring of its sales force will affect more employees than the Indianapolis-based drugmaker disclosed in early April.

Lilly will eliminate 1,624 positions from its U.S. sales force in July, according to a notice the company made to the Indiana Department of Workforce Development. The filing was dated April 26.

Those losing their jobs will have the opportunity to apply for as many as 560 sales positions within Lilly, the company said. Those who do not find new jobs by July 15 will be let go.

Among those affected are 379 workers on “fixed-duration” contracts that are scheduled to end during the first half of this year, anyway, Lilly said.

When Lilly first disclosed its planned sales force cuts on April 11, it said about 30 percent of its full-time U.S. sales positions would disappear. That statement referred to the estimated 700 full-time, permanent positions that will be cut.

But including the fixed-duration employees, Lilly is actually cutting its sales force by nearly 40 percent, Lilly spokesman Scott MacGregor said.

In April, the company said the layoffs would number “fewer than 1,000,” with less than 20 of those cuts occurring in Indiana.

In January, Lilly estimated that its sales force reductions would require severance payments of $26 million.

Lilly is slashing its sales force because its U.S. patents on two of its blockbuster drugs—the antidepressant Cymbalta and the osteoporosis drug Evista—are soon to expire. When that happens, cheaper generic copies of those drugs will steal their combined $4.7 billion in annual U.S. revenue.

“We’re just planning and expecting to lose that revenue and have had to make some changes in accordance with that,” MacGregor said in April.

The job cuts are primarily in Lilly’s Bio-Medicines division, which includes neuroscience, cardiovascular and osteoporosis drugs, the notice to the state said. 

Lilly had hoped that these cuts wouldn’t come. It had two neuroscience drugs in Phase 3 trials last year, both of which failed to meet their goals. One drug, mGlu 2/3, was supposed to be a new antipsychotic drug like Lilly’s former best-seller Zyprexa, but without Zyprexa’s side effects. Lilly halted studies of that drug when it proved ineffective.

The other drug was solanezumab, Lilly’s leading candidate to slow the effects of Alzheimer’s. That drug showed some encouraging signs, but regulators told Lilly it needs to conduct another clinical trial of the drug before they’ll consider approving it.

Lilly employs a total of 17,000 workers in the United States, with 11,000 in Indiana.

Other parts of Lilly’s business continue to grow, offsetting the impact of the patent expirations on Cymbalta and Evista. But Wall Street analysts still expect Lilly’s overall revenue to fall from $22.6 billion last year to as low as $20 billion next year.

Lilly’s revenue already declined from an all-time high of $24.3 billion in 2011, after the patent expirations of its blockbuster cancer drug Gemzar in 2010 and Zyprexa in 2011. Lilly has been furiously trying to launch new drugs to replace the roughly $10 billion it will lose from the patent expiration of these four drugs, but has largely been stymied in that quest so far.

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