Eli Lilly's ($LLY) CEO John Lechleiter was out for a couple of months as he dealt with some heart issues. He recently returned, and guess what he brought with him? More bad news for employees.
The Indianapolis drugmaker, which just let 40% of its U.S. sales force go, has told everyone left standing there will be no pay raises this year, according to Bloomberg. The Wall Street Journal reported that Lilly will also reduce bonuses paid in 2015. The company told Bloomberg it expects to save about $400 million through 2016. All workers, including execs, will see their pay frozen. Only some workers who live outside of the country will be spared the freeze. The company last year had more than 38,500 employees.
The actions are being taken ahead of the patent losses on antidepressant Cymbalta, its best-selling drug, and Evista, a drug for osteoporosis and breast cancer. Spokesman Ed Sagebiel told Bloomberg that the company expects to lose 20% of its global revenue in 2014 with the loss of patents on those two products. "While we've taken many actions to reduce costs and become a leaner organization, we must do more," he said.
Cymbalta last year brought in just shy of $5 billion, $4 billion of that in the U.S., but it will lose patent protection at the end of 2013. It was slated to go off patent June 30, but Lilly last year won a 6-month extension after testing the drug for treating depression in adolescents through the FDA pediatric-exclusivity program. The blockbuster Evista will go off patent next year.
Lilly's first-quarter earnings actually beat Wall Street forecasts, but much of that occurred from cost cuts. About 1,000 sales folks were told in April they were being let go; their last day was Monday.
Lilly is trying to overcome its problems with new drugs but keeps falling short. Late-stage drugs for Alzheimer's disease and rheumatoid arthritis fell short in key trials, and the company scrapped a schizophrenia program. Lilly has made a huge bet on insulin, and there is some upbeat news from that area. It has four new products in development, including one that could give Sanofi's ($SNY) Lantus a run for its money. It is expanding the sales force in that treatment area, and it is investing about $320 million in a new insulin plant.
Lechleiter left about two month ago for surgery on a dilated aorta, handing over the reins to CFO Derica Rice. He returned to Lilly this month "with renewed energy and enthusiasm," according to the company.
- read the Bloomberg story
- more from The Wall Street Journal (sub. req.)