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Taurel to Retire As Eli Lilly CEO

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TOM MURPHY | December 18, 2007 10:22 AM EST | AP

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INDIANAPOLIS — The drugmaker Eli Lilly and Co. said Tuesday that Sidney Taurel will retire as chief executive on March 31 after nearly a decade in the post, and plans to step down as chairman at the end of 2008.

President and Chief Operating Officer John C. Lechleiter was named to take over as CEO on April 1.

Taurel, 58, has been Lilly's CEO since July 1998 and chairman since January 1999.

The retirement announcement didn't surprise Lehman Brothers analyst Tony Butler.

"He's still young for retirement age, but ... he has been CEO since '98," Butler said, adding that it was apparent Lechleiter would take over when the company promoted him to president and COO in 2005.

Lilly's shares rose 72 cents, or 1.4 percent, to $53.91 in morning trading Tuesday.

Lechleiter, 54, joined Lilly in 1979. He will continue as president besides his new role of CEO. He studied organic chemistry at Harvard, where he received a master's degree and a doctorate.

Butler said Lechleiter's chemistry background will reinforce the emphasis Lilly places on research and development to find new drug molecules.

Miller Tabak and Co. analyst Les Funtleyder said the company didn't "telegraph" that the retirement was coming, but he also wasn't surprised by the news.

The new CEO comes "highly regarded" by Wall Street, according to Funtleyder. But the analyst added that Lechleiter's reputation only helps so much.

"Ultimately, a lot of Lilly's fate lies in the hands of its scientists to bring out new drugs," he said. "Lechleiter could put together a good strategy, but they still need to bolster that pipeline somehow."

He said he wants to hear more about the new CEO's plans.

"They have the same problems as other pharma companies, they need to develop new drugs, and they need to defend their existing products," he said. "I mean its been difficult for many."

Taurel joined Lilly in 1971 as a marketing associate. He then served as the general manager of a Lilly affiliate in Brazil and as the London-based vice president of Lilly's European operations.

He later became an executive vice president of the company and president of the pharmaceutical division. In 1996, he was promoted to president and chief operating officer.

"I am grateful to have spent nearly 37 years with this great company, and deeply honored to have had the opportunity to lead it for the last 10," Taurel said in a statement. "John has been preparing for his new role as my successor for several years, and 2008 is the right time for him to assume his place as the leader of the company."

Taurel steered Lilly through the loss of patent protection for its then top-selling drug, Prozac, in 2000. The drug once topped $2 billion in annual sales but brought in only $285 million last year.

Before this, the pharmaceutical industry had never seen managed care's impact on a brand-name drug after it lost patent protection, Butler said.

"No management in the pharmaceutical industry would have been prepared for that, but Lilly somehow was," Butler said. "While they had a year down in revenue, they bounced back very quickly and were able to launch quite a few new drugs."

Earlier this month, Lilly issued a 2008 profit forecast above analyst expectations, predicting strong sales of antidepressant Cymbalta, erectile dysfunction treatment Cialis and diabetes drug Byetta. Lilly has said it plans to launch six new drugs or new formulations of existing drugs by 2011.

It also aims to have 10 drug compounds in late-stage clinical testing by 2011 and wants to launch two new compounds per year beginning in 2011, increasing to three per year by 2014. The forecast has been a boon to Lilly's shares, as most major pharmaceutical stocks have fallen as investors become apprehensive about expiring patents on blockbuster drugs which have driven profits for years.