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.

Analyst upgrades:

• JPMorgan upgraded Franklin Resources (NYSE: BEN) to Overweight from Underweight to reflect performance and sales improvements, as well as benefits from the weakening U.S. dollar. The firm has a $94 target on the stock.
• Oppenheimer upgraded FormFactor (NASDAQ: FORM) to Outperform from Perform after channel checks indicated orders are recovering. The firm raised its target on shares to $30 from $22.
• KeyBanc upgraded Oshkosh (NYSE: OSK) to Buy from Hold citing the company's MRAP-ATV contract win, which they view as a "game changer." The firm has a $30 target on the stock.
• Novellus (NASDAQ: NVLS) was upgraded to Neutral from Underperform at Credit Suisse.
• Ternium (NYSE: TX) was upgraded to Buy from Neutral at Goldman.
• Cathay General (NASDAQ: CATY) was upgraded to Buy from Neutral at B. Riley.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Altria Group Inc. (NYSE: MO) Q4 profit rose on higher prices, and its forecast matched expectations.
• Amgen Inc. (NASDAQ: AMGN) Q4 earnings grew on cost cutting but revenue remained flat.
• Black & Decker Corp. (NYSE: BDK) shares tanked after the dismal Q4 report, and it announced job cuts.
• Carpenter Technology Corp. (NYSE: CRS) Q2 numbers resulted in a downgrade from one analyst.
• ConocoPhillips (NYSE: COP) reported a Q4 loss due to writedowns from recent acquisitions.
• DuPont (NYSE: DD) swung to a bigger-than-expected Q4 loss and its revenue fell as well.
• Eli Lilly & Co. (NYSE: LLY) swung to a Q4 loss on acquisition costs but reaffirmed its guidance.

Earlier today, pharmaceutical firm Eli Lilly (NYSE: LLY) announced that it suffered a fourth-quarter loss thanks to charges suffered when purchasing ImClone Systems. Excluding these charges, LLY tallied $1.07 per share in the quarter -- topping analysts' estimates for $1.05 per share. Taking the ImClone acquisition (which cost LLY $4.73 billion in charges) into account, LLY lost $3.31 per share during the quarter. Quarterly revenue checked in at $5.42 billion.

Lots of quarterly reports to come this week, and if you're one of those looking to earnings for signs of the direction of the markets or of the economy, well its going to be a rough week. Analysts surveyed by Thomson Reuters, by and large, expect earnings declines to be deeper and more numerous than earnings gains. And that's true across sectors: Caterpillar Inc. (NYSE: CAT), Amazon.com Inc. (NASDAQ: AMZN), U.S. Steel Corp. (NYSE: X), Wells Fargo & Co. (NYSE: WFC), New York Times Co. (NYSE: NYT), Starbucks Corp. (NASDAQ: SBUX), Boeing Co. (NYSE: BA), Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT), American Express Co. (NYSE: AXP), Altria Group Inc. (NYSE: MO), and Texas Instruments Inc. (NYSE: TXN) are all expected to post double-digit declines this week.

Even the petroleum industry is not immune, with Chevron Corp. (NYSE: CVX), Valero Energy Corp. (NYSE: VLO), ExxonMobil Corp. (NYSE: XOM), Murphy Oil Corp. (NYSE: MUR), ConocoPhillips (NYSE: COP), Occidental Petroleum Corp. (NYSE: OXY), and Hess Corp. (NYSE: HES) expected to report profits that were as much as 65.3% lower in the fourth quarter.

And analysts expect Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Tyson Foods Inc. (NYSE: TSN), DuPont (NYSE: DD), and Sun Microsystems Inc. (NASDAQ: JAVA) to have swung to losses for the most recent quarter, from profits in the same period a year ago. And Ford Motor Co. (NYSE: F) is expect to have deepened its net loss.

But not all is doom and gloom. There are some anticipated EPS gainers as well. Here's a closer look at a few of them.

Every time the FDA turns around, a few more people have died from the diabetes drug Byetta, a product developed and marketed by Eli Lilly (NYSE: LLY) and Amylin Pharmaceuticals (NASDAQ: AMLN). It has to make one wonder how the regulators spend their spare time.

According to The Wall Street Journal, the two companies "disclosed the deaths of four patients taking the diabetes drug Byetta that had been previously reported to regulators but not yet made public." The drug has already killed two people previously, at least.

Lilly and Amylin said they were a bit slow coming forward with the news because they wanted to "provide context" and "avoid confusion" in the future. That is double talk for the two companies not wanting to say anything at all. Dead is dead and there is no way of getting around that.

Why the FDA has allowed the drug to stay on the market is anyone's guess.

Douglas A. McIntyre is an editor at 247wallst.com.

When should the FDA pull a drug off the market? When one person dies from side-effects? How about two or three?

Eli Lilly (NYSE: LLY) and Amylin Pharmaceuticals (NASDAQ: AMLN) produce a highly successful diabetes drug called Byetta. According to The Wall Street Journal, "The Food and Drug Administration on Monday said it has received six new reports of patients developing a dangerous form of pancreatitis while taking Byetta."

Two of the patients died.

The drug makers said that the poor results were very rare. The people who got sick probably view it a little differently.

There have been questions for some time about whether the FDA does an effective job of regulating drug companies. The problems with Byetta say that the answer is "no." A drug, which causes even one death, yet stays on the market speaks volumes about how the consumer's interests are cast aside.

Douglas A. McIntyre is an editor at 247wallst.com.

If you were looking for help from the economic front or from the oil patch today to help out the market, that wasn't in the cards. Home prices plunged by a record 15.3% from may 2007 to May 2008. Consumer confidence also came in at a 16-year low. From bottom to top to bottom we had more than a 150 point trading range in the DJIA today. These are the unofficial closing levels:

• DJIA 11810.04 (-32.89)
• S&P 500 1314.54 (-3.46)
• NASDAQ 2368.28 (-17.46)
• 10YR T-Note 4.105% (-0.063%)
• 52-week lows
• Top 10 Analyst Calls

Eastman Kodak Co. (NYSE: EK) saw a sharp rise with shares up 15% at $4.20 late in the day after the company announced a large IRS refund and a $1 billion buyback to retire close to half of its stock.

Eli Lilly & Co. (NYSE: LLY) hit the 52-week low list and a multi-year low earlier today before recovering list after the FDA delayed a decision on its anti-clot blood thinning drug, with shares down some 1.5% at $46.87 in the final minutes today.

Kroger Co. (NYSE: KR) saw shares rise a sharp 7% with shares at $27.88 in the final minutes today after the company raised guidance.

Reliance Steel (NYSE: RS) saw shares up after the company raised its own guidance again. Its shares were only up 0.5% at $73.85 in the final minutes of the trading day. Shares were up over 5% at the start.

United Parcel Service Inc. (NYSE: UPS) saw a drop after the company came clean and fessed up that high fuel prices and low demand for premium delivery services were hurting business domestically and abroad. Shares were down 6% at $62.26 late in the day.

"You can invest for all the right reasons and still get the wrong result," notes long-standing turnaround stock expert George Putnam, referring to the poor performance of the pharmaceutical sector in recent years.

Here, in his industry-leading The Turnaround Letter, he offers a fascinating review of 10 leading drug stocks which he now believes offer a combination of growth potential at "pretty cheap" valuations. Here is his overview.

"In 2000 and 2001, when the Internet boom was becoming a bust, many smart investors turned away from technology stocks and put their money into drug stocks. How could you go wrong with the big pharmaceutical companies?

"Demand for their products was growing as the population aged. These companies had huge research
and development programs that seemed to keep cranking out new blockbuster drugs. And most of them had great balance sheets, with many paying handsome dividends.

"Much of this reasoning has been borne out in the intervening years. Many large drug manufacturers have rung up substantial revenue gains over the last decade. So what's happened to the big drug stocks? With few exceptions they have gone sideways or down – in some cases down a lot.

• AFLAC Inc. (NYSE: AFL) reported better-than-expected earnings for the first quarter.
• Ambac Financial Group Inc. (NYSE: ABK) posted a wider-than-expected loss; shares hit new low.
• Amdocs Ltd. (NYSE: DOX) beat Q2 estimates on strength in the managed services businesses.
• Amphenol Corp. (NYSE: APH) beat expectations in the first quarter and raised its guidance.
• Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) posted a larger-than-estimated Q1 loss.
• Aptar Group Inc. (NYSE: ATR) posted record Q1 results and raised its Q2 guidance.
• Bank of America (NYSE: BAC) Q1 earnings plunged on further housing-related write-downs.
• Brinker International Inc. (NYSE: EAT) narrowly beat earnings expectations on cost cutting.
• Bristol-Myers Squibb Co. (NYSE: BMY) beat analysts' estimates for the first quarter.
• Credit Suisse Group (NYSE: CS) reported a wider-than-forecast loss on subprime-related write-downs.
• Cree Inc. (NYSE: CREE) earnings slipped while revenues soared 29%.
• Eli Lilly & Co. (NYSE: LLY) reported worse-than-expected Q1 earnings on discontinued product charge.
• Gannet Inc. (NYSE: GCI) beat low expectations as earnings and revenue continue slump.
• Hasbro Inc. (NYSE: HAS) posted better-than-expected Q1 earnings on international strength.
• JAKKS Pacific Inc. (NASDAQ: JAKK) missed Q1 expectations on restructuring and litigation costs.
• Kimberly-Clark Corp. (NYSE: KMB) beat EPS estimates by a penny, as revenue jumped 10%.

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.

• 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.

The earnings crunch is in full swing, and here are a few of the highlights of this past week's earnings coverage from BloggingStocks:

• Allegheny Technologies Inc. (NYSE: ATI) posted lower fourth-quarter profits but record full-year sales.
• Amazon.com Inc. (NASDAQ: AMZN) posted strong results and offered bullish guidance (see transcript).
• Concur Technologies Inc. (NASDAQ: CNQR) revenue soared and it offered revised guidance.
• Countrywide Financial Corp. (NYSE: CFC) posted a bigger-than-expected loss for the fourth-quarter.
• Eli Lilly & Co. (NYSE: LLY) beat earnings expectations but fell short of revenue estimates.
• EMC Corp. (NYSE: EMC) beat estimates but shares were dragged down by VMware results.
• Google Inc. (NASDAQ: GOOG) shocked investors and missed earnings expectations (see transcript).
• Intuitive Surgical Inc. (NASDAQ: ISRG) beat estimates as revenue soared.
• Lazard Ltd. (NYSE: LAZ) sidestepped the subprime mess and fourth-quarter earnings soared.
• MBIA Inc. (NYSE: MBI) reported a $2.3 million loss due to mortgage write downs.
• Merck & Co. (NYSE: MRK) posted a $1.6 million loss and lowered its full-year guidance.
• Monster Worldwide Inc. (NASDAQ: MNST) posted strong results despite weakness in North America.
• ScanSource Inc. (NASDAQ: SCSC) beat earnings estimates but matched revenue forecasts.
• Somanetics Corp. (NASDAQ: SMTS) beat estimates and offered revised guidance.
• Symantec Corp. (NASDAQ: SYMC) beat expectations on revenue growth from overseas.
• UBS (NYSE: UBS) reported a record loss for the fourth quarter due to the subprime crisis.
• VMware Inc. (NYSE: VMW) missed revenue forecasts, sending shares tumbling.
• Yahoo! Inc. (NASDAQ: YHOO) posted unimpressive results, but beat earnings expectations (see transcript).

For additional BloggingStocks earnings highlights, see Exxon, Boeing, Halliburton, Sony, UPS, Honda, and others and McDonald's, Kraft, P&G, Verizon, MasterCard, 3M, and others.

After hitting a one-year high of $61.00 in April, the stock hit a one-year low of $49.09 in November. LLY opened this morning at $52.92. So far today the stock has hit a low of $52.02 and a high of $52.92. As of 12:00, LLY is trading at $52.45, up $1.05 (2.0%). The chart for LLY looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just three months as long as LLY is above $45 at April expiration. Lilly would have to fall by more than 14% before we would start to lose money.

The earnings season crunch continues, and among companies scheduled to report earnings tomorrow are Eli Lilly and Co. (NYSE: LLY), Dow Chemical Co. (NYSE: DOW), and US Steel Corp. (NYSE: X). Here is a quick peek at each of them.

Eli Lilly hasn't missed quarterly earnings expectations in the past three years. When it reported third-quarter 2007 results back in October, its earnings per share of 90 cents beat the consensus estimate of analysts polled by Thomson Financial by seven cents, as well as the actual 80 cents per share in the same period of the previous year. For the current quarter, analysts expect earnings of 89 cents per share, or $3.54 per share for the full year. That's up from $3.18 in 2006.

But Eli Lilly's 8.3% earnings per share growth forecast for the next year is less than the industry average. The analysts' consensus recommendation has been to hold Eli Lilly for the past six months. Shares have fallen recently to about two bucks above the 52-week low of $49.09 back in November.

For drug company news that could influence the earnings results, see BloggingStocks' Eli Lilly coverage.