NEW YORK (Reuters) -
Eli Lilly and Co (LLY.N) said on
Tuesday chief executive Sidney Taurel will retire on March 31,
turning the reins over to Chief Operating Officer John
Lechleiter as the drugmaker prepares for tough times ahead.

The appointment of Lechleiter, 54, comes ahead of looming
patent expirations on three of Lilly's top drugs. The
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earlier this month said the company will face
“its biggest challenge” ever as the drugs contend with cheaper
generics, but he said new Lilly products would help offset lost
revenue.

“My experience equips me to meet the company's biggest
challenge, which is to bring new molecules forward,” Lechleiter
said in an interview on Tuesday. He said he intends to give
Lilly scientists the breathing space needed for invention.

The 58-year-old Taurel's retirement and the selection of
Lechleiter to succeed him had been widely expected since
Lechleiter was promoted to COO in October 2005 and assumed ever
greater responsibility and a higher profile with the
Indianapolis-based company.

Lechleiter came to Lilly in 1979 as an organic chemist and
over the next 15 years took a number of senior executive roles
in research and development, including stints in England and
Europe. In 2004, the year before he became Taurel's top deputy,
he was named head of Lilly's pharmaceutical operations.

Lechleiter said Lilly's future success could hinge in part
on its ability to create medicines tailored for the genetic
makeup of patients, a discipline Lilly calls “tailored
therapeutics.”

“We want to make sure the right patients get the right dose
of the right medicine at the right time,” Lechleiter said.

Lehman Brothers analyst Tony Butler predicted Lechleiter
will continue Lilly's pattern of forging partnerships with
other drugmakers — the kinds of deals that have brought it the
widely used impotence treatment Cialis, and Byetta for diabetes
– while coaxing important new drugs from Lilly's laboratories.

HIS FORTE

“Understanding how to make a drug and how to deal with
regulators have been his forte and will serve him well as CEO,”
said Butler, who noted Lechleiter headed regulatory affairs for
Lilly in the mid-1990s before taking charge of pharmaceutical
operations.

“Over the last decade, Lilly has been one of the most
innovative companies, producing novel drugs and not losing
sight about the importance of research, and that's what John
brings to the table,” Butler said.

Taurel joined Lilly as a marketing associate in 1971 and
took the helm of the company in July 1998. He has been chairman
since early 1999. He will continue as board chairman until the
end of 2008, Lilly said.

Under Taurel, Lilly has been recognized for its research,
developing medicines that have become blockbuster products,
including schizophrenia treatment Zyprexa, generic cialis overnight

Cymbalta and chemotherapy agent Gemzar.

But Lechleiter acknowledged in an earlier Reuters interview
this month that it will be difficult for Lilly to make up the
revenue shortfall when those three drugs face patent
expirations between 2010 and 2012.

“There's no question we will face the biggest challenge of
our history at the beginning of the next decade, but we're
confident we can meet that challenge based on new products
being launched before and during that period,” he said.

Toward that end, Lechleiter said Lilly aims to launch two
new drugs per year, on average, beginning in 2011, increasing
to three per year by 2014. It aims to move at least 10
additional drugs into late-stage studies by 2011.

The company also has financial strength to license or buy
more drugs, said Lechleiter.

At a Lilly meeting with investors and analysts in New York
on December 6, Taurel remained largely out of the spotlight,
allowing Lechleiter to take the lead in describing company
strategy.

Lilly shares traded up almost 1 percent to $53.67 in
late-afternoon trading Tuesday on the New York Stock Exchange,
in line with gains for the drug sector.

(Reporting by Ransdell Pierson; Editing by Brian Moss and
John Wallace)