Hoping to curb costs and accelerate their drug pipeline, Pharma giant Eli Lilly and Company announced yesterday that it plans to reorganize into five business units by year’s end and slash 5,500 jobs over the next two years.

“We will soon enter the most challenging period in our company’s history,” said John Lechleiter, Lilly’s chairman and chief executive officer. “This calls for strong measures to speed our output of new medicines, better meet the changing needs of our customers and reduce our costs,” (press release).

The new business units — oncology, diabetes, established markets, emerging markets, and Elanco animal health — will be united by a “development center of excellence” that will standardize operating procedures across the board. The center will help accelerate the launch of Lilly’s more than 60 molecules that are currently in clinical development, the company says.

Reducing the Indianapolis, Indiana-based company’s headcount by 14% down to a more slender 35,000 should save $1 billion by the end of 2011, according to company predictions.

The announcement comes as Lilly faces looming holes in its portfolio. The antipsychotic drug Zyprexa will lose patent protection starting in 2011, and three other top-selling meds — Cymbalta, Gemzar, and Humalog — will go off-patent in 2013. Lilly’s last newly approved drug was the blood thinner Effient, which was the first drug given the go ahead in since 2005 (NY Times).