Pharmaceutical company Eli Lilly & Co. (NYSE: LLY) is planning to cut 5,500 jobs over the next few years and reorganize into five business units. The company is looking to reduce costs and accelerate how long it takes new drugs to get to market, especially as its top performers see their patents expire. This translates to a workforce reduction of close to 14% – to 35,000. This measure doesn't include new positions in emerging markets with high potential and Japan.

The company hopes to cut as much as possible through attrition and retirements – and it would not indicate how many other positions would have to be cut.

Eli Lilly's goal is to slash its annual cost by $1 billion during this restructuring. The new business units will be: cancer, diabetes, established markets, emerging markets and Elanco, which is its animal health business. This is a change from the existing functional model, which separates U.S. and global marketing for each drug in the company's portfolio. Through the new structure, Lilly says, drug development and marketing will be tied more closely.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable, global trend as a support. And with the aforementioned in mind, Eli Lilly & Co. (NYSE: LLY) is worth a review.

In general, analysts see a 5-7% revenue gain in FY2009 for Lilly, led by growth in sales of branded drugs Cymbalta, Humalog, Cialis, and Alimta. Meanwhile, sales of Zyprexa and Gemzar are likely to decline this year.

Shares of Eli Lilly & Co. (NYSE: LLY) are tanking after the drugmaker reported worse-than-expected first quarter earnings.

Net income more than doubled to $1.06 billion, or 97 cents a share, as sales of Cialis and Cymbalta climbed. Revenue rose 14% to $4.81 billion from $4.23 billion. Excluding one-time items profit was 92 cents, below the 96-average estimate of analysts surveyed by Thomson Financial. Revenue was expected at $4.83 billion. Thanks to a lower tax rate, company raised its 2008 forecast to $3.90 to $4.05, from $3.73 to $3.90.

"Following strong performance in 2007, Lilly continued to deliver solid financial results in the first quarter of 2008," commented John Lechleiter, the company's new chief executive officer, said in the earnings release. "Double-digit sales growth was once again primarily driven by volume. ...We also made appropriate investments in R&D to accelerate the progress of our mid-stage pipeline, resulting in six molecules advancing to the next stage on clinical development this past quarter, while at the same time delivering strong earnings per share growth for the quarter."

The earnings miss was due to a larger-than-expected charge for halting development of the AIR insulin inhaler. The $145.7 million, or 9 cents a share, was at least $25.7 million more than the Indianapolis-based company estimated when it abandoned the drug last month, according to Bloomberg.

Miller Tabak analyst Les Funleyder told the news service that "In the near term, our earnings picture isn't that bad for Lilly, but they have a Zyprexa problem. It is going off patent soon and Risperdal is going off patent in the second half of this year.''

Shares of Lilly fell $2.29, or 4.4%, to $49.78 in early trading.

MAJOR PAPERS:

• This year, the International Trade Commission is set to issue rulings on whether Samsung and Nokia Corporation (NYSE: NOK) have infringed patents from InterDigital Inc (NASDAQ: IDCC). If InterDigital, who licenses its patents to iPhone maker Apple Inc (NASDAQ: AAPL), wins, fees from the deals could double its revenue over the next few years, the Wall Street Journal contended.
• The Wall Street Journal also reported that Macy's Inc (NYSE: M) is among the retailers that include The Home Depot Inc (NYSE: HD) and Sears Holdings Corporation (NASDAQ: SHLD) to stop making its monthly disclosure of retail sales.

OTHER PAPERS:

• According to FDA commissioners, the New York Times reported that Baxter International Inc's (NYSE: BAX) critical blood thinner heparin, which has been linked to nearly 20 deaths and whose base was created in China, contained a "possibly counterfeit" ingredient that "mimicked the real drug."
• In his opening arguments in the state of Alaska's lawsuit against Eli Lilly & Company (NYSE: LLY), an attorney for the state alleged the drug maker failed to warn doctors and patients of dangerous side effects associated with its drug Zyprexa, the Associated Press reported.

Eli Lilly (NYSE: LLY), a company that makes money by treating depression, raised the spirits of Wall Street today, Eli Lilly exceeded analyst expectations for second quarter earnings and raised its projections for the rest of the year.

After backing out the acquisition cost of Hypnion Inc. and Ivy Animal Health, adjusted earning hit $0.90 per share, compared to expectations in the $0.80-0.82 range. The company also raised its 2007 year-end projection for adjusted earnings to $3.40-3.50, slightly above analyst expectations.

Strong quarterly earnings were attributed in part to the sales of anti-depressant drug Cymbalta, up 67% to over $500 million, Zyprexa, up 9% to $1.2 billion, and Cialis, that is still swelling worldwide. Recently announced results of studies that found little or no relationship between the SSRI class of antidepressants and birth defects have also strengthened the company's outlook.

However, many of the reservations Bloggingstocks' Victoria Erhart expressed a few months ago still remain valid, and the long-term health of the pharmaceutical company may be dependent on restocking a less than burgeoning drug pipeline.

The stock took a jump on news of the earnings report, up over $1, or more than 2%, in midday trading.