Lilly Announces Manufacturing Changes

Insulin facility cancelled, bio-plans unveiled

By Joanna Cosgrove

After taking stock of its drug pipeline, Indianapolis, IN-based Eli Lilly and Co. has announced plans to streamline its global manufacturing operations. 

For starters, the company halted construction of its planned insulin manufacturing plant in Prince William County, VA, after deciding that expected growth demands would be better met by existing sites and by the company’s new insulin capacity currently under construction in Sesto, Italy. In addition, the assembly operation for Lilly's new Humalog MirioPen pre-filled insulin pen will take place at the company’s delivery device assembly operations in Indianapolis.

Edward Sagebiel, Lilly’s manager, corporate communications said there were two factors that prompted the company’s decision to close the Prince William site. “First, Lilly continues to expect growing worldwide demand for its insulin products and insulin delivery devices, but not at levels projected when plans for the Prince William site were put in place in 2003,” he said. “Second, other factors such as ongoing productivity gains, quality improvements and investments at existing sites currently manufacturing insulin products allow the company to meet expected demand.”

Lilly’s second strategic change will pare down some 250 of the 1,000 employees working at the company’s Tippecanoe manufacturing site in Lafayette, IN.

“Both of these decisions, along with the previously announced decision to close our manufacturing site in Basingstoke in the United Kingdom, are based on current capacity needs and an assessment of the future mix of products in our portfolio,” said Scott Canute, Lilly's president of manufacturing operations.

The company’s estimated restructuring and asset impairment charges will be approximately $155 to $185 million. These charges will be split between the fourth quarter of 2006 and the first quarter of 2007, and will result in a fourth quarter 2006 earnings per share charge of 5 cents.

And finally, the company announced that “significant new investments” would be made to expand its Kinsale, Ireland. The Indianapolis parenteral operation will also be expanded to convert the biotech active ingredients made in Kinsale into their final dosage form. Both expansions are part of a $1.5 billion investment in the company's biotechnology capabilities announced over the past five years. These investments include a newly completed biotech pilot manufacturing plant and a soon-to-be-completed biotech research laboratory, both located in Indianapolis.

Lilly has big plans on the upgraded facilities, since it expects to launch one biotech product per year, on average, beginning in 2010. Biotechnology-based programs and drug candidates now make up more than 30% of the company’s drug portfolio and pipeline.

Mr. Canute noted that these expansions come on the heels of the recently completed $1 billion expansion of its Puerto Rico manufacturing operations (August 2006), which includes new bulk capacity for Humalog insulin analog.

Mr. Sagebiel confirmed that the announced changes will “have no impact” on the company’s outsourcing strategy.