Lilly's Big Red Arrow of Doom: 7,500 Layoffs, $1B in Cuts to Come

Eli Lilly (LLY) described its strategy for surviving a reduction of $7 billion in revenue through 2014 with a simple, if depressing, graphic: A big, red, downward pointing arrow with the label "$1 billion." Lilly CFO Derica Rice told analysts he intends to cut that much from the company's expenses in 2011 order to maintain R&D spending:

Although Lilly will lose exclusive patent rights to sell the antispychotic Zyprexa, the antidepressant Cymbalta, the osteoporosis drug Evista, and the chemotherapy brand Gemzar, the company has ruled out acquiring or merging its way out of trouble:

Instead, it intends to chop away at its own workforce, cutting $1 billion in expenses this year. Most of those cuts will come in the form of layoffs, as this chart of Lilly's historic layoff strategy -- 7,500 total job losses so far -- indicates:

Lilly wants those cost-savings to fund R&D, which it says will reach 25 percent of revenues. Lilly has come up with a cute nickname for this hellish period, "YZ." After years YZ -- now through 2014 -- the company believes its late stage pipeline of new drugs will kick in, and all will be well.

Related:

• Lilly CEO Supports Endless Government Spending on Drugs Even If They Don't Work
• Drugmaker Lilly Is Sinking -- but Its CEO Rejects an M&A Life Raft
• Patent Cliff Losses Mean Eli Lilly Must Acquire or Be Acquired
• Off a Cliff: $100 Billion in Revenues Will Disappear From Drug Business by 2013