Lilly reorganization to cut 5,500 positions over 2 years

Eli Lilly and Co. will cut 5,500 jobs by the end of 2011 as it tries to cut $1 billion in expenses before it loses the
revenue from its bestselling drug, Zyprexa.

Lilly officials broke the news to the company’s 40,500 global
employees at 8:30 a.m. Lilly CEO John Lechleiter said he did not know how many of those cuts would occur in central Indiana.
But with about 13,000 employees in the Indianapolis area, he acknowledged the largest chunk of reductions would likely come
here.

The job cuts represent a 13.5-percent reduction to Lilly’s total work force, which if applied locally
at the same percentage would eliminate roughly 1,700 area jobs.

The job cuts will be made after Lilly restructures
the company into five business units, with the goal of bringing new medicines to market faster.

Lilly faces the
patent expiration of Zyprexa in November 2011, after which it will lose most of the drug’s $4.7 billion in annual sales
to cheaper generic versions. Also, patents will expire on four other blockbuster drugs by 2014.

The units will
be in animal health, cancer, diabetes, emerging markets and established markets, which will include the U.S and Europe, as
well as Lilly’s bestselling drugs.

Lilly will also launch a new drug development initiative, called the
Development Center of Excellence, to speed up drug development in its later stages.

The leaders of those new
units, which will launch Jan. 1, will be:

— Cancer: John Johnson, CEO of ImClone Systems, which Lilly bought
in 2008.

— Diabetes: Enrique Conterno, president of Lilly USA.

—
Animal health: Jeff Simmons, who already leads this unit, called Elanco.

— Emerging
markets: Jacques Tapiero, president of Lilly’s intercontinental region.

— Established
markets: Bryce Carmine, Lilly’s executive vice president of global marketing and sales.

— Development Center of Excellence: Dr. Tim Garnett, Lilly’s chief medical officer, and
Thomas Verhoeven, Lilly’s senior vice president for global product development.

Lilly CEO
John Lechleiter said the changes would help Lilly get through lean years and respond to the increasing pressures it faces
from health care reform and pricing demands from governments and insurers across the globe.

"We’re going
to see better decision-making, much more opportunity seeking," Lechleiter said, adding that Lilly would be "a company
that is more focused and competitive than ever."