The world's eleventh largest drugmaker wants to cut development costs from $1.1bn (€876m) per drug to $800m, and out of its four plants - in Indianapolis, Puerto Rico, Spain and the UK - the Basingstoke site was selected for its excess manufacturing capacity and the fact that it does not make the full line of Lilly's dry products.
The facility employs 445 staff and 111 contractors and makes four of Lilly's key drugs, Cialis, Evista, Strattera and its bestseller Zyprexa.
Two of the drugs are clearly not to blame for the closure as Cialis, an erectile dysfunction drug, posted a year-on-year rise in sales of 48.3 per cent to $223m in the first quarter of 2006, while Strattera, a drug for attention deficit hyperactivity disorder, brought in $152m, an increase of 27 per cent.
But Zyprexa, a treatment for severe mental illness which dominates the global anti-psychotic market, has suffered over recent quarters from the negative impact of its link to severe weight gain in certain patients and the virtual saturation of the US market, recording a 3 per cent drop in sales in Q1 of 2006.
As for osteoporosis treatment Evista, its sales fell by 6 per cent to $149.1m, though Lilly plans to file a New Drug Application (NDA) for a new indication of the drug after studies showed it reduces the risk of invasive breast cancer in menopausal women.
The company stressed it is too early too say how production in the other three sites will pan out but it is looking to increase manufacturing there in the short term and also transfer equipment from the Basingstoke site.
"The decision to close the site was based on two goals, to operate as effectively as possible and reduce excess capacity," Lilly spokesman Phil Belt told In-PharmaTechnologist.com.
"There will be a period of consultation with staff but we are looking to conclude all operations by early 2008."
Employees at the site, the majority of whom will be made redundant as only 100 could be eligible for early retirement, heard the news at 10am yesterday.
Lilly's biotechnology manufacturing facility at Speke on Merseyside and a research facility in Windlesham in Surrey will not be affected.
However, the company will close two research and development sites at Hamburg in Germany and Mont-Saint-Guibert in Belgium, resulting in the loss of another 450 jobs.
The sector's lower research and development productivity has limited its average sales growth to about six to six percent, compared with double-digit growth in earlier years, so drugmakers are likely to continue to relentlessly look for savings anywhere they can, including in manufacturing.