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UPDATE 1-Lilly to cut 8 pct jobs as it works to reduce costs

(Adds background on job cuts)

Sept 7 (Reuters) - Eli Lilly and Co said on Thursday it would lay off about 8 percent of its employees as the drugmaker, which delayed development of a potential blockbuster rheumatoid arthritis drug earlier this year, works to cut costs.

Lilly said it would cut about 3,500 positions around the world, resulting in yearly savings of about $500 million, beginning in 2018.

It expects that most of the cuts will come from a voluntary early retirement program it is offering in the United States. It also is closing a plant in Iowa and research and development offices in New Jersey and China.

Lilly expects charges of about $1.2 billion pretax or $0.80 per share after tax.

Shares of Lilly rose 41 cents, or 0.5 percent, to $80.92. (Reporting by Divya Grover in Bengaluru; Editing by Shounak Dasgupta and Bill Trott)