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Lilly's Taurel: Latest CEO In Pharma's "Retirement" Club

Tuesday, 18 Dec 2007 | 11:29 AM ET
Eli Lilly
CNBC.com
Eli Lilly

Eli Lilly announced this morning that Chairman and CEO Sidney Taurel is retiring as CEO on March 31st next year. He will stay on as Chairman and on April Fool's Day Chief Operating Officer John Lechleiter will take over as CEO. Investors, at least in early trading, seem to like the choice.

In a press release Taurel is quoted as saying that it's the right time for him to go. He cites several reasons for his decision including this one: "…I and the senior leadership team have laid out a vision for the company that will guide Lilly for many years to come, and this gives me great confidence about Lilly's future success."

But in a research note to clients this morning, Miller Tabak Healthcare Analyst Les Funtleyder isn't so sure. He writes, "Lechleiter is well thought of on the street, but he still must contend with the problems that all other big pharma CEOs must deal with, relatively shallow pipelines and pressures from payors to use low cost alternatives." That means insurers who are pushing to switch patients from expensive brand-name drugs to much cheaper generics. Funtleyder has a Neutral rating on LLY.

And speaking of other big pharma CEOs, it's worth pointing out that Taurel is just the latest departure in what amounts to a changing of the guard in the sector over the past couple of years or so.

Some were pushed out, others have left or are leaving on their own accord. Ray Gilmartin at Merck: Gone. Hank McKinnell at Pfizer: Gone. Peter Dolan at Bristol-Myers Squibb: Gone. JP Garnier at GlaxoSmithKline: Retiring. Wyeth's Bob Essner: Retiring. Franz Humer at Roche: Retiring. Sanofi-Aventis CEO Jean-Francois Dehecq: Retired. Sir Tom McKillop at AstraZeneca: Retired. I think I got 'em all. That's a big club.

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As for Lilly and Lechleiter, I wonder if he will maintain the status quo or put a new strategy in place. Lilly has not been as acquisitive as some of its competitors. It did buy its Cialis partner Icos, but Taurel has consistently answered my persistent questions about a possible purchase of the company's diabetes drug partner, Amylin Pharmaceuticals , by saying he's happy with the current relationship.

With Lilly's insulin business under competitive pressure, a looming patent expiration on its blockbuster antipsychotic drug Zyprexa, questionable prospects for LLY's experimental bloodthinner and a promising once-a-week version of the LLY-AMLN drug, Byetta, in the late-stage pipeline perhaps Lechleiter will make a move.

Questions? Comments? Pharma@cnbc.com

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