July 22nd, 2013 // 1:20 pm @ jmpickett
A few months after it announced plans to lay off 1700 sales reps, Eli Lilly is going to suspend pay raises for the vast majority of employees in 2014, including executives and managers. It also is going to cut employee bonuses that are supposed to be paid out in 2015. This cost cutting move is supposed to save $400 million in the next three years.
This move is being made as Lilly is dealing with a high degree of competition from cheaper generic drugs. The patient on the antidepressant Cymbalta is going to expire in December. That drug had $4 billion in sales in 2012. Then next year, the patent on Evista, a $1 billion a year osteoporosis drug, is going to expire in March of next year. Also, the patent on the antipsychotic Zyprexa expired last year.
The CEO of Eli Lilly, John Lechleiter, stated that the cost cutting is needed to deal with the impact of the expirations of several patents and to provide support for the company’s phase III drugs that are in the pipeline. He stated that the financial situation mandates that Lilly take the proper financial actions today and to secure the future of the company.
An Eli Lilly spokesman stated that the decision is essential. Eli Lilly is still confident in the future but there is no doubt that it is facing financial challenges. The firm expects that it will lose about 20% of global revenue next year due to the expiration of two patents. Eli Lilly is taking a number of actions to cut costs and become leaner, and the pay freezes are a large part of that.
The only employees that may be exempt from pay freezes and cuts in bonuses are some employees based overseas.