US pharmaceutical giant Eli Lilly has announced it will slash 3,500 positions – about 8% of its global 42,000-strong workforce up to the end of 2017. The cuts, part of a scheme to achieve $500 million in annual savings from 2018 onward, come on top of an earlier round of job losses this year in the wake of a failed phase 3 trial for Alzheimer’s candidate solanezumab.

The wide-sweeping restructuring effort, the first to be launched by new CEO David A. Ricks, is said to be aimed at conserving resources to focus on drug development while also improving cost structure. About half the annualized savings will flow into cost structure improvement while the other half will be reinvested in the business.

Lilly said it expects the closures, severance expenses and the retirement program to cost $1.2 billion pretax and impact its previous EPS guidance for the year.

Alongside the retirement plan, other savings are expected to come from site or plant closures. Manufacture of animal health products will be moved from a plant at Larchwood, Iowa, to another site in Fort Dodge, Iowa. Additionally, R&D sites in  the US state of New Jersey and in Shanghai, China, are earmarked for closure as the company streamlines pharmaceutical R&D.

“We have an abundance of opportunities – eight medicines launched in the past four years and the potential for two more by the end of next year," said Ricks. “To fully realize these opportunities and invest in the next generation of new medicines, we are taking action to streamline our organization and reduce our fixed costs around the world.”

When fully realized, the scheme is expected to “accelerate progress towards our long-term goals of growing revenue, expanding operating margins and sustaining the flow of life-changing medicines from our pipeline.” Ricks said.