Lilly Cuts Costs As It Launches New Products

US drug company Eli Lilly is initiating a three-year strategic campaign to save $190 million a year in purchases of raw materials and services and to improve quality and service from its vendors. "Our purchases of raw materials and services amount to 57 cents out of every dollar we spend, so this initiative is aimed at the key element in the cost of the products we sell," commented Michael Eagle, vice president of manufacturing.

The global scale of the initiative will leverage purchases for operations around the world, said the firm. Previously, many supply purchases were made by individual sites using different suppliers, price structures and other factors. Teams are being assembled for most of the 66 categories that products and services are being put into, a process that will continue into 1997.

Jami Rubin and Glen Novarro of Schroder Wertheim are estimating earnings per share in the second quarter of 1996 at 62 cents for Eli Lilly, an increase of 15%. They say that launch costs for new products have weighed down the second quarter. The new products are key to replacing the company's aging portfolio.