After 37 years with the drugmaker, Sid Taurel, who is only 58, is saying farewell. He will give up his duties as chairman at the end of this month, and as ceo and a Lilly director on March 31. Replacing him as ceo will be John Lechleiter, a chemist by training who is currently president and chief operating officer. There’s no indication who will become chairman, however.

In a statement, Taurel says Lechleiter, 54, (in the photo at right) has been preparing to succeed him for “several years,” and that “2008 is the right time for him to assume his place as the leader of the company.” The reason Taurel cites for choosing now to retire is performance: “The company,” he says, “has executed very well over the past couple of years, exceeding both our and our shareholders’ expectations.”

In a recent investor note, Deutsche Bank analyst Barbara Ryan noted that Lilly exceeded earnings forecasts in each of the first three quarters of 2007, and also issued higher guidance for this year, citing strong sales of the Cymbalta antidepressant Cymbalta, the Cialis erectile dysfunction pill and the Byetta diabetes drug Byetta. Lilly also plans to launch six new drugs or new formulations of existing drugs by 2011.

However, stock performance is, well, relative. Two years ago, Lilly shares closed at $57.59, and yesterday’s closing price was $53.18. During the past eight months, the stock traded between approximately $49 and $60. Holding the stock for two years didn’t do much for you.

Moreover, Taurel exits at a difficult time. In particular, the prasugrel blood thinner, which Lilly hoped would provide entree to a huge market, suffered disappointing clinical trial results (back story). The blood thinner is all the more important because the drugmaker faces several patent expirations on key drugs.

“Lilly’s base business has struggled over the past few years with volume trends disappointing with several key brands. The outlook for many of these franchises is not likely to improve much,” Tim Anderson, an analyst with Sanford Bernstein, wrote in a recent investor note.

“Top-selling Zyprexa continues its downward drift…(and the) osteoporosis drug Evista could face increased pressure from generic Fosamax” in about three months. He adds that Zyprexa loses patent protection in 2011, and the Cymbalta antidepressant follows in 2013, “which will be another significant blow to the company,” Anderson continued.

Taurel has been the company’s chief executive officer since July 1998, and chairman since January 1, 1999. He joined Lilly in 1971 as a marketing associate in Eli Lilly International.

Lechleiter joined Lilly in 1979 as a senior organic chemist in process research and development, and he became a head in that department in 1982. Through a series of promotions in R&D, he later joined regulatory affairs, and subsequently was named executive director of drug development in 1991 and ascended to executive vp of pharmaceutical operations by 2004.

“My experience equips me to meet the company’s biggest challenge, which is to bring new molecules forward,” Lechleiter tells Reuters, adding that he intends to give his scientists the breathing space needed for invention. “As CEO, I will be careful to allow scientific leaders to carry out their functions without me trying to serve as their surrogate.”