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Refocusing its efforts on biotech, Lilly stops building insulin plant

Eli Lilly is stopping construction on a Virginia insulin plant and offering the employees there positions elsewhere in the company. (Donnie Biggs/Potomac News/Via associated press)

INDIANAPOLIS -- Eli Lilly & Co. said yesterday it will halt construction of a Virginia insulin plant as part of a shift in the drug maker's focus toward biotech products.

The Indianapolis company said it will stop building the Prince William County, Va., center because production can be handled by existing plants and a center being built in Italy. All 120 employees in Prince William will be given a chance to transfer or will receive severance packages.

The company also will offer exit packages to 250 of the 1,000 employees at its plant in Lafayette.

"Our commitment to insulin and to diabetes is unchanged and shouldn't be misinterpreted because of this," said Lilly spokesman Phil Belt.

Belt said added capacity and improvements in other plants, including ones in Italy, Indiana, and Puerto Rico, plus long-term expectations for insulin demand, prompted the decision to abandon the Virginia site.

Lilly introduced the first commercially available insulin in 1923, and its diabetes portfolio accounts for one-fifth of the company's revenue. Analysts have predicted that figure could more than double in the next four years.

Sales of Lilly diabetes products rose 9 percent to $712.4 million in the third quarter of 2005. The company will disclose fourth-quarter earnings on Jan. 31.

Scott Canute, Lilly's president of manufacturing operations, said the company expects worldwide demand for its insulin products to grow, but not at levels projected when plans for the Prince William site were made in 2003.

Lilly plans significant investments in its facilities in Kinsale, Ireland, and Indianapolis to meet production needs for the launch of one biotech product per year beginning in 2010. Biotech drugs, which include insulin, and biotech drug candidates make up about 30 percent of the company's portfolio. The expansions are part of a $1.5 billion investment in biotech at Lilly.

The buyouts at Tippecanoe Labs in Lafayette will be voluntary, Belt said. Up to 250 people will be offered the exit plans, no one will be forced to leave if fewer than 250 accept, he said.

The labs help make small molecule products that are usually taken as pills, such as Prozac and Zyprexa, he said.

The company said it plans to take about $155 million to $185 million in charges as a result of the shift. The charges will be split between the fourth quarter of 2006 and the first quarter of 2007.

The company also plans to add a new production line at its device assembly operation in Indianapolis. One of the first products made on that line will be Lilly's new pre-filled insulin pen, which is being reviewed by the FDA with an anticipated launch in the United States later this year.

Lilly shares rose 57 cents, or 1.1 percent, to close at $52.23 on the New York Stock Exchange.