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On the Call: Eli Lilly CFO Rice on Restructuring

From Associated Press (April 18, 2011)

Eli Lilly and Co. is poised to meet or exceed its goals of cutting annual costs by $1 billion and eliminating 5,500 jobs, Chief Financial Officer Derica Rice said following the drug maker's first-quarter earnings report Monday.

The Indianapolis company said in 2009 it would reduce its work force by nearly 14 percent, to 35,000 from 40,500, by the end of 2011. That total excludes hirings in high-growth emerging markets and Japan. The company had 38,165 employees worldwide at the end of March.

Lilly also said it would reorganize into five business units, as it looks to speed up drug development. The U.S. patent protecting the company's top-seller, the antipsychotic Zyprexa, expires later this year, and Lilly also will lose patent protection for other key drugs in the next few years.

The drug maker recorded a $76.3 million charge in this year's first quarter tied to severance costs from the restructuring, as it earned $1.06 billion, or 95 cents per share, on $5.84 billion in revenue.

Chief Financial Officer Derica Rice updated analysts on the plan during a conference call.

QUESTION: Can you give us a little more flavor on what's going on in the restructuring? How much has been done so far?

RESPONSE: We are very much on track to achieve that ($1 billion cost savings goal). In fact, I anticipate that we're going to exceed that goal for the year. And in addition to that, on the head count front ... we're about 75 percent of our way to that goal, as well, so both of those we anticipate meeting by the end of the year, if not exceeding.

Posted: April 2011