July 17 (Bloomberg) -- Eli Lilly & Co., the maker of an experimental Alzheimer’s drug in late-stage testing, will freeze pay this year for most workers, including executives, a spokesman said.
The pay freeze will save $400 million through 2016, said Ed Sagebiel, a spokesman for the Indianapolis-based company. Lilly won’t give pay raises to executives, supervisors or most workers. Some bonuses will also be reduced. The company had 38,350 workers in 2012, according to data compiled by Bloomberg.
The drugmaker is reducing expenses and counting on experimental Alzheimer’s and diabetes drugs to revive growth as it loses revenue from top products to generic competitors. Cymbalta, a depression pill that at $5 billion a year is the drugmaker’s biggest seller, loses patent protection in December. Zyprexa, an anti-psychotic, had peak sales of $5.03 billion in 2010, the year before it lost patent protection.
“This is a difficult, but necessary decision,” Sagebiel said in an e-mail. “While we remain confident in our future, we continue to face the most significant challenges in our history.
Lilly expects a 20 percent reduction in revenue in 2014 because of the expiration of the Cymbalta and Evista patents in the U.S., he said. Evista, used in the treatment of osteoporosis as well as breast cancer, loses protection next year. It generated more than $1 billion in 2012.
‘‘This action is necessary to withstand the impact of upcoming patent expirations and to support the launch of our large phase III pipeline,’’ Chief Executive Officer John Lechleiter, 59, said in a letter to employees today, a copy of which was obtained by Bloomberg. ‘‘The current situation requires us to take the appropriate action now to secure our company’s future. We can’t allow ourselves to let up and fail to make the tough choices.”
Lechleiter hasn’t received a pay raise since 2010, according to data compiled by Bloomberg.
The company is scheduled to report second-quarter earnings on July 24. Lilly shares fell less than 1 percent to $50.67 at the close in New York. The company has gained 2.7 percent this year, compared with a 21 percent increase in the Standard & Poor’s 500 Pharmaceuticals Index of 13 drugmakers.
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